N-CSRS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number			811-03980
Morgan Stanley Institutional Fund Trust
(Exact name of registrant as specified in charter)
522 FIFTH AVENUE NEW YORK, NY					10036
(Address of principal executive offices)					(Zip code)
RONALD E. ROBISON 522 FIFTH AVENUE NEW YORK, NY 10036
(Name and address of agent for service)
Registrant’s telephone number, including area code:				1-800-221-6726
Date of fiscal year end:	9/30
Date of reporting period:		3/31/08

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 Shareholders.

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

Morgan Stanley Investment Management

Morgan Stanley
Institutional Fund Trust

Advisory Portfolios

Advisory

Advisory II

Advisory III

Advisory IV

March 31, 2008

Semi-Annual Report

2008 Semi-Annual Report

March 31, 2008

Table of Contents

Shareholders’ Letter	2
Expense Examples	3
Portfolios of Investments
Advisory Portfolios:
Advisory	5
Advisory II	12
Advisory III	18
Advisory IV	19
Statements of Assets and Liabilities	20
Statements of Operations	21
Statements of Changes in Net Assets	22
Statement of Cash Flows	23
Financial Highlights	24
Notes to Financial Statements	28
U.S. Privacy Policy	35
Trustee and Officer Information	37

This report is authorized for distribution only when preceded or accompanied by prospectuses of the Morgan Stanley Institutional Fund Trust. 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 1 (800) 548-7786. Please read the prospectus carefully before you invest or send money. There is no assurance that a Fund will achieve its investment objective. Funds are 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 Funds. Please see the prospectus for more complete information on investment risks.

1

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Shareholders’ Letter

Dear Shareholders:

We are pleased to present to you the Morgan Stanley Institutional Fund Trust’s (the “Fund”) Semi-Annual Report for the six months ended March 31, 2008. Our Fund currently consists of 19 portfolios. The Fund’s portfolios, together with the portfolios of the Morgan Stanley Institutional Fund, Inc., 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; investment grade and high yield).

Sincerely,

Ronald E. Robison

President and Principal Executive Officer

April 2008

2

2008 Semi-Annual Report

March 31, 2008  (unaudited)

Expense Examples

Expense Examples

As a shareholder of the Portfolio, you may incur ongoing costs, including management fees and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended March 31, 2008 and held for the entire six-month period.

Actual Expenses

The first line of the tables 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.

Please note that the Advisory Portfolio II commenced operations on March 11, 2008, however, expenses did not begin accruing until March 12, 2008; therefore, “Actual Expenses Paid During Period” reflect activity from March 12, 2008 through March 31, 2008.

Please note that “Expenses Paid During Period” are grossed up to reflect Portfolio expenses prior to the effect of Expense Offset (See Note E 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 second line of the tables 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 while the Advisory Portfolio II commenced operations on March 11, 2008, the “Hypothetical Expenses Paid During the Period” reflect projected activity for the full six month period for the purposes of comparability. This projection assumes that the annualized expense ratio for the period was in effect during the period from October 1, 2007 through March 31, 2008.

	Beginning Account Value		Ending Account Value		Expenses Paid During Period*
	October 1, 2007		March 31, 2008		October 1, 2007 — March 31, 2008
Advisory Portfolio
Class I
Actual	$	1,000.00	$	904.60	$	0.24
Hypothetical (5% average annual return before expenses)	1,000.00		1,024.75		0.25

* Expenses are equal to Class I’s annualized net expense ratio of 0.05%, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

	Beginning		Ending Account Value		Expenses Paid During Period*
	Account Value		March 31, 2008		March 12, 2008 — March 31, 2008
Advisory Portfolio II
Class I
Actual	$	1,000.00	$	998.80	$	0.00
Hypothetical (5% average annual return before expenses)	1,000.00		1,025.00		0.00

* Expenses are equal to Class I’s annualized net expense ratio of 0.00%, multiplied by the average account value over the period, multiplied by 20/366 (to reflect the actual days in the period for the actual example) and multiplied by 183/366 (to reflect the one-half year period).

3

2008 Semi-Annual Report

March 31, 2008  (unaudited)

Expense Examples (cont’d)

	Beginning Account Value October 1, 2007		Ending Account Value March 31, 2008		Expenses Paid During Period* October 1, 2007 — March 31, 2008
Advisory Portfolio III
Class I
Actual	$	1,000.00	$	1,015.50	$	0.00	**
Hypothetical (5% average annual return before expenses)	1,000.00		1,025.00		0.00		**

* Expenses are equal to Class I’s annualized net expense ratio of less than 0.005%, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

**Amount is less than $0.005.

	Beginning Account Value October 1, 2007		Ending Account Value March 31, 2008		Expenses Paid During Period* October 1, 2007 — March 31, 2008
Advisory Portfolio IV
Class I
Actual	$	1,000.00	$	1,025.10	$	0.41
Hypothetical (5% average annual return before expenses)	1,000.00		1,024.60		0.40

* Expenses are equal to Class I’s annualized net expense ratio of 0.08%, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

4

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Advisory Portfolio

	Face  Amount		Value
	(000)		(000)
Fixed Income Securities (140.5%)
Agency Adjustable Rate Mortgages (5.5%)
Federal Home Loan Mortgage Corp.,
3.54%, 5/1/34	$	1,129	$	1,172
5.59%, 11/1/36	6,013		6,116
5.61%, 4/1/37	17,690		17,988
5.73%, 1/1/37	9,841		10,001
5.97%, 1/1/37	7,469		7,623
Federal National Mortgage Association,
4.88%, 5/1/35	2,136		2,169
4.98%, 3/1/37	2,938		2,973
5.69%, 6/1/34	10		11
5.81%, 5/1/37	8,713		8,920
5.97%, 4/1/37	15,618		16,015
6.76%, 4/1/36	14,125		14,454
Government National Mortgage Association,
5.13%, 10/20/25 - 12/20/27	2,681		2,680
5.63%, 7/20/25 - 9/20/27	1,958		1,972
6.38%, 5/20/24 - 2/20/28	11,827		12,116
			104,210
Agency Fixed Rate Mortgages (76.0%)
Federal Home Loan Mortgage Corp.,
Conventional Pools:
8.00%, 7/1/08	@—		@—
9.00%, 10/1/16	11		12
9.50%, 10/1/16 - 3/1/20	467		520
10.00%, 1/1/09 - 12/1/20	1,045		1,213
10.25%, 1/1/09 - 12/1/11	4		6
10.50%, 11/1/08 - 12/1/20	487		557
11.00%, 2/1/11 - 9/1/20	307		354
11.25%, 6/1/10 - 12/1/15	5		5
11.50%, 12/1/09 - 9/1/19	201		223
11.75%, 8/1/14 - 4/1/15	31		36
12.00%, 10/1/09 - 7/1/20	218		253
12.50%, 10/1/09 - 6/1/15	13		18
13.00%, 9/1/10 - 12/1/13	1		1
13.50%, 2/1/10	@—		@—
Gold Pools:
5.50%, 12/1/36 - 11/1/37	53,976		54,568
6.00%, 10/1/28 - 10/1/37	8,881		9,121
6.50%, 5/1/21 - 11/1/33	2,822		2,948
7.00%, 12/1/26 - 11/1/32	8,479		8,987
7.50%, 2/1/23 - 1/1/34	17,290		18,723
8.00%, 5/1/20 - 12/1/31	7,951		8,638
8.50%, 10/1/10 - 7/1/31	18,546		20,591
9.00%, 10/1/17 - 1/1/31	1,548		1,719
9.50%, 11/1/16 - 12/1/22	679		755
10.00%, 6/1/17 - 4/1/25	407		467
10.50%, 7/1/19 - 3/1/21	137		164
11.00%, 7/1/17 - 9/1/20	124		136
11.50%, 1/1/16 - 6/1/20	79		88
12.00%, 6/1/20	130		139
12.50%, 7/1/19	4		4
April TBA:
5.00%, 4/15/38		(i)131,025		129,735
5.50%, 4/15/37	(i)259,550		262,105
6.00%, 4/15/37	(i)249,500		255,855
6.50%, 4/15/37	(i)34,375		35,659
Federal National Mortgage Association,
Conventional Pools:
4.50%, 8/1/18	189		189
5.50%, 3/1/17	194		199
6.00%, 4/1/13 - 10/1/32	346		360
6.50%, 6/1/15 - 4/1/34	31,848		33,209
7.00%, 12/1/12 - 4/1/36	52,379		55,705
7.50%, 10/1/12 - 8/1/37	42,980		46,197
8.00%, 4/1/09 - 4/1/33	27,575		29,943
8.50%, 4/1/09 - 5/1/32	25,306		27,909
9.00%, 6/1/18 - 4/1/26	625		687
9.50%, 7/1/16 - 4/1/30	3,229		3,595
10.00%, 9/1/10 - 11/1/25	3,025		3,547
10.50%, 10/1/11 - 6/1/27	838		984
10.75%, 10/1/11	2		2
11.00%, 10/1/13 - 7/1/25	205		235
11.50%, 8/1/11 - 8/1/25	421		482
12.00%, 1/1/13 - 5/1/20	135		152
12.50%, 2/1/11 - 9/1/15	203		239
April TBA:
4.50%, 4/25/23	(i)63,400		63,063
5.00%, 4/25/23 - 4/25/38	(i)143,800		143,554
5.50%, 4/25/37	(i)102,325		103,300
6.50%, 4/25/38	(i)28,575		29,597
7.00%, 4/25/38	(i)29,625		31,097
Government National Mortgage Association,
Various Pools:
5.50%, 12/15/32	17		18
6.50%, 10/15/10	11		11
7.00%, 7/15/31	80		85
8.50%, 7/15/16 - 3/15/20	880		961
9.00%, 11/15/16 - 11/15/24	4,965		5,447
9.50%, 7/15/09 - 10/15/24	11,639		12,926
10.00%, 11/15/09 - 2/15/26	17,921		21,431
10.50%, 10/15/13 - 4/15/25	4,057		4,882
11.00%, 12/15/09 - 4/15/21	4,606		5,372
11.50%, 3/15/10 - 11/15/19	311		369
12.00%, 11/15/12 - 5/15/16	655		773
12.50%, 5/15/10 - 4/15/19	47		56
13.00%, 1/15/11 - 10/15/13	20		24
13.50%, 5/15/10 - 5/15/13	21		25
			1,440,225
Asset Backed Corporate (0.0%)
Bear Stearns Asset Backed Securities Trust,
2.80%, 9/25/34	(h)8		8

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

5

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio

		Face Amount			Value
	(000)				(000)
Collateralized Mortgage Obligations — Agency Collateral Series (1.8%)
Federal Home Loan Mortgage Corp.,
Inv FI IO
3.13%, 3/15/24	$		20,881		$	1,800
3.58%, 12/15/23	1,886				404
5.13%, 3/15/32	95				11
5.18%, 6/15/28 - 3/15/32	1,837				80
5.68%, 9/15/30	1,169				133
5.73%, 10/15/29	10				@—
Inv Fl IO REMIC
4.68%, 8/15/30	44				4
IO
5.00%, 6/15/17	171				14
5.50%, 1/15/29 - 8/15/30	5,246				222
6.00%, 5/1/31	746				147
6.50%, 4/1/28 - 5/15/33	1,228				245
7.00%, 6/1/30 - 3/1/32	2,644				655
7.50%, 4/1/28 - 9/1/30	1,391				390
8.00%, 10/15/12 - 6/1/31	4,314				1,118
IO PAC
1.00%, 2/15/27	2,480				23
6.00%, 4/15/32	255				18
7.00%, 9/15/27	31				8
IO REMIC
4.13%, 6/17/27	(h)92				9
10.00%, 5/1/20 - 6/1/20	38				7
PAC
8.55%, 1/15/21	19				20
9.50%, 4/15/20	71				75
9.60%, 4/15/20	67				73
9.90%, 10/15/19	314				340
10.00%, 5/15/20 - 6/15/20	306				333
Federal National Mortgage Association,
Conventional Pools:
3.03%, 12/25/08	(h)@—				@—
7.00%, 9/25/32	3,904				4,138
Inv Fl IO
2.97%, 8/25/34	200,435				6,490
3.79%, 7/25/34	15,193				1,250
4.73%, 2/17/31	452				45
5.22%, 7/18/27	414				31
5.59%, 10/25/28	1,515				84
5.73%, 11/18/30	664				73
5.78%, 10/18/30	205				21
5.83%, 3/18/30	3				@—
5.89%, 7/25/30 - 8/25/30	1,438				153
5.99%, 10/25/29	234				9
Inv Fl IO REMIC
47.98%, 9/25/20	80				140
59.63%, 9/25/22	132				203
IO
5.00%, 2/25/15	100				1
5.50%, 3/25/17	172				8
6.00%, 8/25/32 - 7/25/33	11,118				1,930
6.50%, 2/1/32 - 6/25/33	12,366				2,666
7.00%, 4/1/32 - 5/25/33				9,631		1,846
7.50%, 4/1/27 - 1/1/32	3,289				883
8.00%, 4/1/24 - 12/25/30	13,335				3,357
8.50%, 10/1/24 - 10/1/25	2,543				753
9.00%, 11/1/26	1,315				341
9.50%, 9/1/18	@—				@—
461.28%, 12/25/21	(h)@—				1
807.24%, 6/25/21	@—				@—
IO PAC
8.00%, 8/18/27 - 9/18/27	4,139				773
1,008.12%, 9/25/20	@—				4
1,156.92%, 7/25/21	@—				2
IO REMIC PAC
8.00%, 8/18/27	616				112
PAC
8.50%, 9/25/20	31				34
8.75%, 11/25/19	4				5
Government National Mortgage Association,
Inv Fl IO
5.13%, 9/16/27	158				20
5.18%, 4/16/29	6,102				503
5.61%, 5/20/31	1,480				219
5.73%, 12/16/29	433				66
5.78%, 8/16/29	7,846				1,137
					33,427
Collateralized Mortgage Obligation — Non Agency Collateral Series (21.2%)
Banc of America Commercial Mortgage, Inc.,
5.49%, 2/10/51	7,825				7,605
5.66%, 6/10/49	(h)20,820				20,597
5.69%, 4/10/49	(h)710				706
5.75%, 2/10/51	(h)16,815				16,757
Bank of America Funding Corp.,
IO
3.88%, 9/20/35	40,408				1,319
Bear Stearns Commercial Mortgage Securities,
5.69%, 6/11/50	(h)15,809				15,595
Citigroup Commercial Mortgage Trust,
5.43%, 10/15/49	9,745				9,575
5.70%, 12/10/49	(h)14,005				13,927
Citigroup/Deutsche Bank Commercial Mortgage Trust,
5.89%, 11/15/44	(h)11,785				11,775
Commercial Mortgage Pass Through Certificates,
5.82%, 12/10/49	(h)18,190				18,221
Countrywide Alternative Loan Trust,
IO
0.55%, 11/20/35	146,323				4,630
0.95%, 3/20/46	17,024				741
2.18%, 3/20/46	70,831				3,113
2.40%, 12/20/46	162,176				7,885
2.56%, 2/25/37	91,594				3,950
2.83%, 2/20/47	78,887				3,832
3.91%, 12/20/35	(e)(h)102,526				4,021
Countrywide Home Loan Mortgage Pass Through Trust,
IO
0.84%, 2/25/35	38,140				1,049

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

6

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio

	Face Amount (000)		Value (000)
Collateralized Mortgage Obligation — Non Agency Collateral Series (cont’d)
Credit Suisse Mortgage Capital Certificates,
5.72%, 6/15/39	$	(h)8,160	$	8,119
Greenpoint Mortgage Funding Trust,
2.77%, 4/25/47	(h)16,576		12,585
2.78%, 1/25/37	(h)20,593		18,285
2.80%, 3/25/47	(h)22,959		17,457
IO
0.58%, 6/25/45	36,302		1,044
Greenwich Capital Commercial Funding Corp.,
5.44%, 3/10/39	11,120		10,843
5.74%, 12/10/49	13,235		13,094
GS Mortgage Securities Corp.,
IO
4.01%, 8/25/35	(e)(h)37,009		983
GS Mortgage Securities Corp. II,
5.80%, 8/10/45	(h)20,670		20,683
Harborview Mortgage Loan Trust,
IO
3.60%, 5/19/35	(h)75,337		2,126
3.83%, 1/19/36	(h)29,864		980
3.93%, 3/19/37	(h)61,476		2,423
4.01%, 10/20/45	(h)47,879		1,933
PO
1/19/36 - 10/20/45	1,408		303
Indymac Index Mortgage Loan Trust,
IO
3.32%, 7/25/35	(h)55,439		1,821
PO
7/25/35	@—		@—
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.44%, 6/12/47	14,595		14,205
5.75%, 2/12/49	(h)9,565		9,518
5.79%, 2/12/51	(h)10,030		9,960
5.82%, 6/15/49	(h)20,605		20,627
Kidder Peabody Mortgage Assets Trust,
IO
9.50%, 4/22/18	18		4
Lehman Brothers Commercial Conduit Mortgage Trust,
5.94%, 7/15/44(h)	13,720		13,870
Lehman Brothers-UBS Commercial Mortgage Trust,
5.43%, 2/15/40	3,445		3,352
5.86%, 7/15/40	(h)14,520		14,510
5.87%, 9/15/45	(h)14,505		14,482
Lehman Structured Securities Corp.,
IO
7.00%, 10/26/29	(e)13,590		713
Wachovia Bank Commercial Mortgage Trust,
5.34%, 12/15/43	10,575		10,217
5.68%, 5/15/46	(c)13,660		13,473
5.74%, 6/15/49	(h)10,330		10,257
5.90%, 2/15/51	(h)8,610		8,695
			401,860
Mortgages — Other (36.0%)
Alliance Bancorp Trust,
2.84%, 7/25/37		(h)10,516		8,012
American Express Co.,
9.63%, 12/1/12	(d)(k)65		65
American Home Mortgage Assets,
2.72%, 3/25/47	(h)19,700		15,020
2.79%, 10/25/46	(h)12,038		9,207
2.83%, 5/25/46 - 9/25/46	(h)28,729		18,255
2.84%, 6/25/47	(h)14,874		9,792
2.90%, 6/25/47	(h)14,304		7,028
3.01%, 10/25/46	(h)3,678		920
American Home Mortgage Investment Trust,
2.79%, 3/25/46 - 5/25/47	(h)26,998		19,493
2.90%, 9/25/45	(h)1,773		1,365
3.32%, 11/25/45	(h)2,675		1,012
American Housing Trust,
9.55%, 9/25/20	414		413
Bear Stearns Mortgage Funding Trust,
2.76%, 12/25/46	(h)26,464		20,154
2.78%, 10/25/36	(h)705		535
2.80%, 9/25/36	(h)15,544		11,818
2.85%, 7/25/36	(h)17,465		10,288
California Federal Savings & Loan Association,
8.80%, 1/25/14	(d)(k)1		1
Countrywide Alternative Loan Trust,
2.74%, 4/25/47	(h)18,495		14,051
2.75%, 3/20/46	(h)9,355		7,109
2.77%, 5/25/47	(h)12,050		9,164
2.78%, 6/25/47	(h)24,029		18,297
2.79%, 12/20/46	(h)3,532		1,695
2.80%, 11/20/35	(h)4,226		3,912
2.82%, 9/20/46	(h)7,082		3,441
2.83%, 11/20/35	(h)4,083		3,443
2.84%, 12/20/46	(h)10,849		5,247
2.87%, 12/25/46	(h)9,037		4,414
2.89%, 8/25/45	(h)2,134		2,089
2.93%, 12/20/35	(h)8,189		5,484
3.12%, 7/25/46	(h)5,022		816
3.23%, 3/25/47	(h)1,848		277
3.40%, 6/25/46	(h)6,186		959
3.54%, 11/20/35	(h)9,460		3,027
3.85%, 6/25/47	(h)1,815		408
5.62%, 12/20/46	(h)3,666		1,866
5.78%, 2/25/36	(h)16,684		10,845
6.37%, 11/25/35	(h)9,783		7,435
Countrywide Home Loan Mortgage Pass Through Trust,
2.90%, 4/25/46	(h)11,591		7,282
Deutsche ALT-A Securities Inc., Alternate Loan Trust,
2.75%, 2/25/47	(h)21,583		14,969
5.16%, 2/25/47	(h)7,959		4,377
Deutsche ALT-A Securities, Inc., NIM Trust,
6.75%, 2/25/47	(e)1,793		1,756

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

7

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio

	Face Amount		Value
	(000)		(000)
Mortgages — Other (cont’d)
Downey Savings & Loan Association Mortgage Loan Trust,
2.74%, 3/19/37	$	(h)2,951	$	1,794
2.76%, 10/19/36	(h)20,099		15,288
5.27%, 4/19/46	(h)14,795		11,097
Gemsco Mortgage Pass Through Certificate,
8.70%, 11/25/10	(d)(k)4		4
GSR Mortgage Loan Trust,
2.79%, 8/25/46	(h)17,783		13,560
Harborview Mortgage Loan Trust,
2.69%, 3/19/37	(h)21,626		16,394
2.71%, 3/19/38	(h)17,935		13,619
2.74%, 11/19/36	(h)21,791		16,610
2.75%, 1/19/38	(h)18,777		14,298
2.77%, 11/19/36	(h)19,877		15,167
2.79%, 7/19/46	(h)12,358		7,748
2.80%, 3/19/36	(h)11,118		8,384
2.85%, 8/21/36 - 7/19/45	(h)18,324		11,967
2.94%, 11/19/35	(h)7,729		5,273
Harborview NIM Corp.,
6.41%, 3/19/37 - 3/19/38	(e)843		837
Impac CMB Trust,
3.44%, 9/25/34	(h)56		49
Indymac Index Mortgage Loan Trust,
2.83%, 9/25/46	(h)10,654		6,689
2.88%, 7/25/35	(h)2,471		1,786
Lehman XS Trust,
2.87%, 11/25/35	(h)13,722		10,899
3.01%, 8/25/46	(h)9,187		3,955
3.60%, 3/25/47	(h)7,851		2,399
Luminent Mortgage Trust,
2.83%, 5/25/46	(h)8,993		5,781
Mastr Adjustable Rate Mortgages Trust,
2.85%, 4/25/46	(h)7,953		4,965
3.25%, 4/25/46	(h)4,409		617
3.35%, 4/25/46	(h)2,275		284
3.80%, 5/25/47	(h)4,188		586
Residential Accredit Loans, Inc.,
2.74%, 2/25/37	(h)18,168		13,866
2.75%, 2/25/37	(h)7,055		5,291
2.76%, 2/25/37 - 3/25/47	(h)27,777		21,704
2.80%, 3/25/47 - 5/25/47	(h)32.291		21,728
2.83%, 6/25/46	(h)18,013		11,293
2.86%, 2/25/46 - 5/25/47	(h)21,351		13,482
2.87%, 2/25/46	(h)4,459		3,111
2.90%, 6/25/37	(h)8,849		4,464
Ryland Acceptance Corp. IV,
6.65%, 7/1/11	108		108
Structured Asset Mortgage Investments, Inc.,
2.79%, 2/25/36	(h)7,557		5,646
2.80%, 10/25/36	(h)11,144		8,478
2.83%, 8/25/36 - 7/25/46	(h)44,615		27,638
2.87%, 4/25/36	(h)16,982		10,876
2.88%, 7/25/46	(h)4,861		2,449
2.90%, 5/25/46		(h)4,861		2,395
2.91%, 2/25/36	(h)20,687		12,862
3.13%, 12/25/35	(h)5,830		2,507
Washington Mutual Inc.,
2.83%, 7/25/47	(h)798		497
2.85%, 12/25/45	(h)2,723		2,626
2.86%, 10/25/45	(h)1,426		1,408
2.87%, 4/25/45	(h)6,473		4,417
2.89%, 8/25/45	(h)632		624
2.95%, 6/25/46	(h)2,600		1,544
2.96%, 7/25/45	(h)5,529		3,849
5.27%, 4/25/46 - 5/25/46	(h)35,233		21,693
5.29%, 8/25/46	(h)16,976		12,392
Zuni Mortgage Loan Trust,
2.73%, 8/25/36	(h)9,141		8,671
			681,410
Total Fixed Income Securities (Cost $3,009,883)			2,661,140

	Shares
Preferred Stock (0.8%)
Mortgages — Other
Home Ownership Funding Corp.,
13.33% (Cost $13,650)	(e)93,475	14,327
Short-Term Investments (12.7%)
Securities held as Collateral on Loaned Securities (0.9%)
Investment Company (0.2%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)4,780,686	4,781

	Face
	Amount
	(000)
Short-Term Debt (0.7%)
Alliance & Leicester plc,
3.08%, 9/2/08	$	(h)425	425
Bancaja,
4.04%, 11/12/08	(h)212		212
Bank of New York Co., Inc.,
3.07%, 8/8/08	(h)212		212
BASF AG,
3.89%, 8/19/08	(h)212		212
CAM US Finance S.A. Unipersonal,
4.71%, 7/25/08	(h)849		849
Canadian Imperial Bank of Commerce, New York,
2.42%, 7/28/08	(h)425		425
CIT Group Holdings,
3.97%, 5/19/08	(h)764		764
Citigroup Global Markets Holdings, Inc.,
3.01%, 4/1/08	2,951		2,951
First Tennessee Bank,
2.84%, 8/15/08	(h)212		212
2.85%, 8/15/08	(h)849		849
Goldman Sachs Group, Inc.,
2.89%, 9/12/08	(h)212		212

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

8

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio

	Face
	Amount		Value
	(000)		(000)
Short-Term Debt (cont’d)
HSBC Finance Corp.,
3.10%, 8/5/08	$	(h)212	$	212
IBM Corp.,
3.09%, 9/8/08	(h)849		849
Macquarie Bank Ltd.,
2.62%, 8/20/08	(h)425		425
Metropolitan Life Global Funding,
2.59%, 8/21/08	(h)637		637
National Bank of Canada,
3.11%, 4/2/08	(h)849		849
National Rural Utilities Cooperative Finance Corp.,
3.13%, 9/2/08	(h)849		849
Nationwide Building Society,
2.75%, 7/28/08	(h)493		493
Unicredito Italiano Bank (Ireland) plc,
2.84%, 8/14/08	(h)467		467
3.09%, 8/8/08	(h)297		297
			12,401
			17,182

	Shares
Investment Company (11.1%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)210,432,222	210,432

	Face
	Amount
	(000)
U.S. Treasury Security (0.7%)
U.S. Treasury Bill
0.73%, 4/10/08	$	(j)(r)13,835	13,832
Total Short-Term Investments (Cost $241,439)			241,446
Total Investments (154.0%) (Cost $3,264,972) — Including $16,995 of Securities Loaned			2,916,913
Liabilities in Excess of Other Assets (-54.0%)			(1,022,952		)
Net Assets (100%)			$	1,893,961

(c)	All or a portion of security on loan at March 31, 2008.
(d)	Security was valued at fair value — At March 31, 2008, the Portfolio held $70,000 of fair valued securites, representing less than 0.05% of net assets.
(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(i)	Security is subject to delayed delivery.
(j)	All or a portion of the security was pledged to cover margin requirements for futures contracts.
(k)	Security has been deemed illiquid at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
@	Face Amount/Value is less than $500.
Inv Fl	Inverse Floating Rate — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at March 31, 2008.
IO	Interest Only
PAC	Planned Amortization Class
PO	Principal Only
REMIC	Real Estate Mortgage Investment Conduit
TBA	To Be Announced

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

9

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
EuroDollar CME	435	$	106,281	Jun-08	$	2,782
EuroDollar CME	434	106,227		Sep-08	2,943
EuroDollar CME	426	104,200		Dec-08	2,838
EuroDollar CME	457	111,754		Mar-09	3,106
EuroDollar CME	485	118,375		Jun-09	2,183
U.S. Treasury 2 yr. Note	240	51,518		Jun-08	(4		)
Short:
EuroDollar CME	80	19,429		Dec-09	(365		)
EuroDollar CME	105	25,448		Mar-10	(445		)
EuroDollar CME	33	7,980		Jun-10	(128		)
EuroDollar CME	14	3,378		Sep-10	(49		)
EuroDollar CME	121	29,471		Sep-10	(609		)
Swap Future 10 Yr. (U.S. Dollar)	175	20,150		Jun-08	(104		)
U.S. Treasury 5 yr. Note	340	38,840		Jun-08	(306		)
U.S. Treasury 10 yr. Note	3,207	381,483		Jun-08	(12,054		)
U.S. Treasury Long Bond	1,703	203,311		Jun-08	(5,094		)
					$	(5,306	)

CME Chicago Mercantile Exchange

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	215,576	$	2,833
	3 Month LIBOR	Pay	5.59		2/19/18	105,396		2,245
	3 Month LIBOR	Pay	5.47		2/25/18	13,295		222
	3 Month LIBOR	Receive	5.82		2/12/23	276,912		(2,777		)
	3 Month LIBOR	Receive	6.03		2/19/23	136,051		(2,204		)
	3 Month LIBOR	Receive	5.88		2/25/23	17,223		(206		)
Citigroup	3 Month LIBOR	Receive	5.07		11/9/09	9,065		(979		)
	3 Month LIBOR	Pay	5.37		5/23/17	76,990		10,196
	3 Month LIBOR	Receive	5.29		9/28/17	63,605		(6,446		)
	3 Month LIBOR	Receive	5.00		11/13/17	16,589		(1,677		)
	3 Month LIBOR	Pay	4.47		1/10/18	45,324		1,490
Deutsche Bank	3 Month LIBOR	Pay	5.35		5/24/17	88,835		11,615
	3 Month LIBOR	Pay	5.39		5/25/17	113,522		15,207
	3 Month LIBOR	Pay	5.43		5/29/17	197,220		26,996
Goldman Sachs	3 Month LIBOR	Pay	5.57		2/27/18	110,319		2,216
	3 Month LIBOR	Pay	5.63		2/28/18	219,290		4,934
	3 Month LIBOR	Receive	6.04		2/25/23	281,353		(4,592		)
	3 Month LIBOR	Receive	5.96		2/27/23	141,411		(2,004		)
JPMorgan Chase	3 Month LIBOR	Pay	5.37		5/23/17	38,314		5,083
	3 Month LIBOR	Pay	5.34		5/24/17	77,474		10,072
	3 Month LIBOR	Pay	5.09		9/11/17	114,821		9,852
	3 Month LIBOR	Pay	5.16		9/20/17	49,645		4,579

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

10

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio

Interest Rate Swap Contracts (cont’d)

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
JPMorgan Chase (cont’d)	3 Month LIBOR	Receive	5.23	%	9/27/17	$	60,190	$	(5,438)
	3 Month LIBOR	Receive	5.30		9/28/17	60,432		(6,182)
	3 Month LIBOR	Pay	5.25		10/11/17	33,328		4,063
	3 Month LIBOR	Receive	5.01		11/13/17	31,606		(3,247		)
	3 Month LIBOR	Pay	4.24		1/22/18	35,323		(466		)
	3 Month LIBOR	Receive	4.52		2/19/18	27,315		(1,024		)
	3 Month LIBOR	Pay	4.48		2/25/18	46,533		1,596
	3 Month LIBOR	Receive	3.96		3/20/18	40,000		410
Lehman Brothers	3 Month LIBOR	Pay	5.40		5/25/17	58,649		7,927
								$	84,294

LIBOR — London Inter Bank Offer Rate

Total Return Swap Contracts

The Portfolio had the following total return swap agreement(s) open at period end:

						Unrealized
				Notional		Appreciation
			Termination	Amount		(Depreciation)
Swap Counterparty	Pay	Receive	Date	(000)		(000)
Bank of America	Monthly Duration Adjusted Return	CMBS AAA 10yr. Index	2/12/18	$	26,952	$	665

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by investment type, as a percentage of total investments.

*    Investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

11

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Advisory Portfolio II

	Face Amount		Value
	(000)		(000)
Fixed Income Securities (146.3%)
Agency Adjustable Rate Mortgages (5.7%)
Federal Home Loan Mortgage Corp.,
3.54%, 5/1/34	$	738	$	766
5.59%, 11/1/36	3,937		4,005
5.61%, 4/1/37	11,586		11,781
5.73%, 1/1/37	6,445		6,549
5.97%, 1/1/37	4,887		4,988
Federal National Mortgage Association,
4.88%, 5/1/35	1,397		1,419
4.98%, 3/1/37	1,926		1,949
5.69%, 6/1/34	7		7
5.81%, 5/1/37	5,707		5,843
5.97%, 4/1/37	10,224		10,484
6.76%, 4/1/36	9,248		9,463
Government National Mortgage Association,
5.13%, 10/20/25 - 12/20/27	1,755		1,754
5.63%, 7/20/25 - 9/20/27	1,282		1,292
6.38%, 5/20/24 - 2/20/28	7,767		7,955
			68,255
Agency Fixed Rate Mortgages (79.2%)
Federal Home Loan Mortgage Corp.,
Conventional Pools:
8.00%, 7/1/08	@—		@—
9.00%, 10/1/16	7		8
9.50%, 10/1/16 - 3/1/20	305		341
10.00%, 1/1/09 - 12/1/20	686		796
10.25%, 1/1/09 - 12/1/11	3		3
10.50%, 11/1/08 - 12/1/20	317		364
11.00%, 2/1/11 - 9/1/20	202		232
11.25%, 6/1/10 - 12/1/15	3		3
11.50%, 12/1/09 - 9/1/19	129		144
11.75%, 8/1/14	1		1
12.00%, 10/1/09 - 7/1/20	142		166
12.50%, 10/1/09 - 6/1/15	9		11
13.00%, 9/1/10 - 12/1/13	1		1
13.50%, 2/1/10	@—		@—
Gold Pools:
5.50%, 12/1/36 - 11/1/37	35,312		35,698
6.00%, 10/1/28 - 10/1/37	5,816		5,973
6.50%, 5/1/21 - 11/1/33	1,848		1,930
7.00%, 8/1/27 - 11/1/32	5,535		5,867
7.50%, 2/1/23 - 10/1/32	11,281		12,208
8.00%, 5/1/20 - 12/1/31	5,204		5,652
8.50%, 10/1/10 - 7/1/31	12,139		13,479
9.00%, 10/1/17 - 1/1/31	1,012		1,125
9.50%, 11/1/16 - 12/1/22	445		495
10.00%, 6/1/17 - 4/1/25	266		306
10.50%, 7/1/19 - 3/1/21	90		107
11.00%, 8/1/19 - 9/1/20	81		89
11.50%, 1/1/16 - 6/1/20	52		58
12.00%, 6/1/20	85		91
12.50%, 7/1/19	2		3
April TBA
5.00%, 4/15/38		(i)85,725		84,881
5.50%, 4/15/37	(i)169,950		171,623
6.00%, 4/15/37	(i)163,400		167,562
6.50%, 4/15/37	(i)22,525		23,366
Federal National Mortgage Association,
Conventional Pools:
4.50%, 8/1/18	122		122
5.50%, 3/1/17	127		131
6.00%, 4/1/13 - 1/1/29	160		165
6.50%, 6/1/15 - 4/1/34	20,878		21,779
7.00%, 12/1/12 - 6/1/35	34,222		36,399
7.50%, 10/1/12 - 8/1/37	28,091		30,177
8.00%, 4/1/09 - 4/1/33	18,022		19,555
8.50%, 4/1/09 - 5/1/32	16,565		18,263
9.00%, 6/1/18 - 4/1/26	409		450
9.50%, 7/1/16 - 4/1/30	2,114		2,353
10.00%, 9/1/10 - 11/1/25	1,980		2,320
10.50%, 10/1/11 - 6/1/27	549		646
10.75%, 10/1/11	1		1
11.00%, 10/1/13 - 7/1/25	134		154
11.50%, 8/1/11 - 8/1/25	276		315
12.00%, 1/1/13 - 5/1/20	88		99
12.50%, 2/1/11 - 9/1/15	133		156
April TBA
4.50%, 4/25/23	(i)41,500		41,280
5.00%, 4/25/23 - 4/25/38	(i)94,150		93,989
5.50%, 4/25/37	(i)66,975		67,613
6.50%, 4/25/38	(i)18,725		19,395
7.00%, 4/25/38	(i)19,400		20,364
Government National Mortgage Association,
Various Pools:
5.50%, 12/15/32	11		12
6.50%, 10/15/10	7		7
7.00%, 7/15/31	52		56
8.50%, 7/15/16 - 3/15/20	575		631
9.00%, 11/15/16 - 11/15/24	3,251		3,566
9.50%, 7/15/09 - 10/15/24	7,619		8,463
10.00%, 11/15/09 - 2/15/26	11,738		14,033
10.50%, 4/15/13 - 4/15/25	2,653		3,194
11.00%, 12/15/09 - 4/15/21	3,011		3,517
11.50%, 3/15/10 - 11/15/19	204		241
12.00%, 11/15/12 - 5/15/16	427		505
12.50%, 5/15/10 - 4/15/19	32		37
13.00%, 1/15/11 - 10/15/13	13		16
13.50%, 5/15/10 - 5/15/13	14		16
			942,603
Asset Backed Corporate (0.0%)
Bear Stearns Asset Backed Securities Trust,
2.80%, 9/25/34	(h)5		5
Collateralized Mortgage Obligations — Agency Collateral Series (1.8%)
Federal Home Loan Mortgage Corp.,
Inv FI IO
3.13%, 3/15/24	13,671		1,178
3.58%, 12/15/23	1,235		264

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

12

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio II

		Face
		Amount			Value
		(000)			(000)
Collateralized Mortgage Obligations — Agency Collateral Series (cont’d)
5.13%, 3/15/32	$			62	$	7
5.18%, 6/15/28 - 3/15/32	1,202				52
5.68%, 9/15/30	766				87
5.73%, 10/15/29	6				@—
Inv FI IO REMIC
4.68%, 8/15/30	28				3
IO
4.13%, 6/17/27	60				6
5.00%, 6/15/17	112				9
5.50%, 1/15/29 - 8/15/30	3,435				145
6.00%, 5/1/31	489				96
6.50%, 4/1/28 - 5/15/33	804				160
7.00%, 6/1/30 - 3/1/32	1,731				429
7.50%, 4/1/28 - 9/1/30	912				256
8.00%, 10/15/12 - 6/1/31	2,825				732
IO PAC
1.00%, 2/15/27	1,624				15
6.00%, 4/15/32	168				12
7.00%, 9/15/27	20				5
IO REMIC
10.00%, 5/1/20 - 6/1/20	25				4
PAC
8.55%, 1/15/21	12				13
9.50%, 4/15/20	46				49
9.60%, 4/15/20	44				47
9.90%, 10/15/19	206				223
10.00%, 5/15/20 - 6/15/20	200				219
Federal National Mortgage Association,
Conventional Pools:
3.03%, 12/25/08	(h)@—				@—
7.00%, 9/25/32	2,603				2,759
Inv FI IO
2.97%, 8/25/34	131,235				4,249
3.79%, 7/25/34	9,947				819
4.73%, 2/17/31	296				29
5.22%, 7/18/27	271				20
5.59%, 10/25/28	992				55
5.73%, 11/18/30	435				48
5.78%, 10/18/30	134				14
5.83%, 3/18/30	2				@—
5.89%, 7/25/30 - 8/25/30	941				100
5.99%, 10/25/29	153				6
Inv FI IO REMIC
47.98%, 9/25/20	56				97
59.63%, 9/25/22	86				133
IO
5.00%, 2/25/15	66				1
5.50%, 3/25/17	113				5
6.00%, 8/25/32 - 7/25/33	7,278				1,264
6.50%, 6/1/31 - 6/25/33	8,098				1,746
7.00%, 4/1/32 - 5/25/33	6,306				1,209
7.50%, 4/1/27 - 1/1/32	2,154				579
8.00%, 2/1/23 - 12/1/31	8,731				2,197
8.50%, 10/1/24 - 10/1/25	1,665				493
9.00%, 11/1/26			861			223
9.50%, 9/1/18	@—				@—
461.28%, 12/25/21	@—				@—
807.24%, 6/25/21	@—				@—
IO PAC
8.00%, 8/18/27 - 9/18/27	2,710				507
1,156.92%, 7/25/21	@—				2
IO REMIC PAC
8.00%, 8/18/27	403				74
PAC
8.50%, 9/25/20	21				22
8.75%, 11/25/19	3				3
Government National Mortgage Association,
Inv FI IO
5.13%, 9/16/27	103				13
5.18%, 4/16/29	3,995				330
5.61%, 5/20/31	969				143
5.73%, 12/16/29	283				43
5.78%, 8/16/29	5,137				744
					21,938
Collateralized Mortgage Obligation — Non Agency Collateral Series (22.1%)
Banc of America Commercial Mortgage, Inc.,
5.49%, 2/10/51	5,125				4,981
5.66%, 6/10/49	(h)13,630				13,484
5.69%, 4/10/49	(h)465				463
5.75%, 2/10/51	(h)11,010				10,972
Banc of America Funding Corp.,
IO
3.88%, 9/20/35	26,457				864
Bear Stearns Commercial Mortgage Securities,
5.69%, 6/11/50	(h)10,350				10,210
Citigroup Commercial Mortgage Trust,
5.43%, 10/15/49	6,380				6,269
5.70%, 12/10/49	(h)9,170				9,119
Citigroup/Deutsche Bank Commercial Mortgage Trust,
5.89%, 11/15/44	(h)7,715				7,709
Commercial Mortgage Pass Through Certificates,
5.82%, 12/10/49	(h)11,910				11,930
Countrywide Alternative Loan Trust,
IO
0.55%, 11/20/35	95,805				3,031
0.95%, 3/20/46	11,227				488
2.18%, 3/20/46	46,377				2,038
2.40%, 12/20/46	106,187				5,163
2.56%, 2/25/37	59,974				2,586
2.83%, 2/20/47	51,653				2,509
3.91%, 12/20/35	(e)(h)67,131				2,633
Countrywide Home Loan Mortgage Pass Through Trust,
IO
0.84%, 2/25/35	24,971				687
Credit Suisse Mortgage Capital Certificates,
5.72%, 6/15/39	(h)5,340				5,313

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

13

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio II

	Face Amount (000)			Value (000)
Collateralized Mortgage Obligation — Non Agency Collateral Series (cont’d)
Greenpoint Mortgage Funding Trust,
2.77%, 4/25/47	$	(h)10,856		$	8,242
2.78%, 1/25/37	(h)13,486			11,974
2.80%, 3/25/47	(h)15,034			11,431
IO
0.58%, 6/25/45	23,769			683
Greenwich Capital Commercial Funding Corp.,
5.44%, 3/10/39	7,280			7,099
5.74%, 12/10/49	8,665			8,573
GS Mortgage Securities Corp.,
IO
4.01%, 8/25/35	(e)(h)24,232			644
GS Mortgage Securities Corp. II,
5.80%, 8/10/45	(h)13,530			13,538
Harborview Mortgage Loan Trust,
IO
3.60%, 5/19/35	(h)49,328			1,392
3.83%, 1/19/36	(h)19,553			642
3.93%, 3/19/37	(h)40,250			1,587
4.01%, 10/20/45	(h)31,347			1,266
PO
1/19/36 - 10/20/45	944			202
Indymac Index Mortgage Loan Trust,
IO
3.32%, 7/25/35	(h)36,300			1,192
PO
7/25/35	@—			@—
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.44%, 6/12/47	9,555			9,300
5.75%, 2/12/49	(h)6,260			6,229
5.79%, 2/12/51	(h)6,570			6,524
5.82%, 6/15/49	(h)13,495			13,509
Kidder Peabody Mortgage Assets Trust,
IO
9.50%, 4/22/18	11			2
Lehman Brothers Commercial Conduit Mortgage Trust,
5.94%, 7/15/44	(h)8,980			9,078
Lehman Brothers-UBS Commercial Mortgage Trust,
5.43%, 2/15/40	2,255			2,194
5.86%, 7/15/40	(h)9,505			9,499
5.87%, 9/15/45	(h)9,495			9,480
Lehman Structured Securities Corp.,
IO
7.00%, 10/26/29	(e)8,898			467
Wachovia Bank Commercial Mortgage Trust,
5.34%, 12/15/43	6,925			6,690
5.68%, 5/15/46	8,940			8,818
5.74%, 6/15/49	(h)6,760			6,712
5.90%, 2/15/51	(h)5,640			5,696
				263,112
Mortgages — Other (37.5%)
Alliance Bancorp Trust,
2.84%, 7/25/37	(h)6,888			5,248
American Home Mortgage Assets,
2.72%, 3/25/47			(h)12,902		9,837
2.79%, 10/25/46	(h)7,879			6,026
2.83%, 5/25/46 - 9/25/46	(h)18,814			11,955
2.84%, 6/25/47	(h)9,735			6,409
2.90%, 6/25/47	(h)9,363			4,601
3.01%, 10/25/46	(h)2,405			601
American Home Mortgage Investment Trust,
2.79%, 3/25/46 - 5/25/47	(h)17,676			12,762
2.90%, 9/25/45	(h)1,161			894
3.32%, 11/25/45	(h)1,750			662
American Housing Trust,
9.55%, 9/25/20	271			270
Bear Stearns Mortgage Funding Trust,
2.76%, 12/25/46	(h)17,326			13,195
2.78%, 10/25/36	(h)463			351
2.80%, 9/25/36	(h)10,176			7,736
2.85%, 7/25/36	(h)11,433			6,735
Countrywide Alternative Loan Trust,
2.74%, 4/25/47	(h)12,110			9,200
2.75%, 3/20/46	(h)6,125			4,654
2.77%, 5/25/47	(h)7,891			6,001
2.78%, 6/25/47	(h)15,733			11,980
2.79%, 12/20/46	(h)2,315			1,111
2.80%, 11/20/35	(h)2,767			2,561
2.82%, 9/20/46	(h)4,634			2,252
2.83%, 11/20/35	(h)2,673			2,254
2.84%, 12/20/46	(h)7,105			3,437
2.87%, 12/25/46	(h)5,917			2,890
2.89%, 10/25/35	(h)1,397			1,368
2.93%, 12/20/35	(h)5,364			3,592
3.12%, 7/25/46	(h)3,290			535
3.23%, 3/25/47	(h)1,210			181
3.40%, 6/25/46	(h)4,050			628
3.54%, 11/20/35	(h)6,191			1,981
3.85%, 6/25/47	(h)1,185			267
5.62%, 12/20/46	(h)2,398			1,221
5.78%, 2/25/36	(h)10,922			7,099
6.37%, 11/25/35	(h)6,405			4,868
Countrywide Home Loan Mortgage Pass Through Trust,
2.90%, 4/25/46	(h)7,588			4,767
Deutsche ALT-A Securities, Inc., Alternate Loan Trust,
2.75%, 2/25/47	(h)14,132			9,802
5.16%, 2/25/47	(h)5,211			2,866
Deutsche ALT-A Securities, Inc., NIM Trust,
6.75%, 2/25/47	(e)1,174			1,150
Downey Savings & Loan Association Mortgage Loan Trust,
2.74%, 4/19/38	(h)1,930			1,173
2.76%, 11/19/37	(h)13,160			10,010
5.27%, 4/19/47	(h)9,685			7,264
GSR Mortgage Loan Trust,
2.79%, 8/25/46	(h)11,642			8,878

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

14

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio II

	Face Amount (000)		Value (000)
Mortgages — Other (cont’d)
Harborview Mortgage Loan Trust,
2.69%, 4/19/38	$	(h)14,161	$	10,735
2.71%, 3/19/38	(h)11,739		8,914
2.74%, 11/19/36	(h)14,267		10,875
2.75%, 1/19/38	(h)12,293		9,360
2.77%, 11/19/36	(h)13,016		9,932
2.79%, 7/19/46	(h)8,090		5,072
2.80%, 3/19/37	(h)7,278		5,488
2.85%, 8/21/36 - 7/19/45	(h)11,997		7,835
2.94%, 11/19/35	(h)5,059		3,451
Harborview NIM Corp.,
6.41%, 3/19/37 - 3/19/38	(e)553		549
Impac CMB Trust,
3.44%, 9/25/34	(h)36		32
Indymac Index Mortgage Loan Trust,
2.83%, 9/25/46	(h)6,975		4,378
2.88%, 7/25/35	(h)1,620		1,170
Lehman XS Trust,
2.87%, 12/25/35	(h)8,984		7,136
3.01%, 8/25/46	(h)6,011		2,588
3.60%, 3/25/47	(h)5,140		1,571
Luminent Mortgage Trust,
2.83%, 5/25/46	(h)5,890		3,786
Mastr Adjustable Rate Mortgages Trust,
2.85%, 4/25/46	(h)5,207		3,251
3.25%, 4/25/46	(h)2,885		404
3.35%, 4/25/46	(h)1,490		186
3.80%, 5/25/47	(h)2,740		384
Residential Accredit Loans, Inc.,
2.74%, 3/25/37	(h)11,900		9,082
2.75%, 2/25/37	(h)4,622		3,466
2.76%, 2/25/37 - 3/25/47	(h)18,188		14,211
2.80%, 3/25/47 - 5/25/47	(h)21,147		14,229
2.83%, 6/25/46	(h)11,792		7,393
2.86%, 2/25/46 - 5/25/47	(h)13,979		8,827
2.87%, 2/25/46	(h)2,920		2,037
2.90%, 5/25/47	(h)5,795		2,923
Ryland Acceptance Corp. IV,
6.65%, 7/1/11	71		71
Structured Asset Mortgage Investments, Inc.,
2.79%, 2/25/36	(h)4,948		3,696
2.80%, 10/25/36	(h)7,298		5,552
2.83%, 8/25/36 - 7/25/46	(h)29,210		18,095
2.87%, 4/25/36	(h)11,118		7,120
2.88%, 7/25/46	(h)3,181		1,602
2.90%, 5/25/46	(h)3,181		1,568
2.91%, 2/25/36	(h)13,543		8,421
3.13%, 12/25/35	(h)3,819		1,642
Washington Mutual, Inc.,
2.83%, 7/25/47	(h)524		327
2.85%, 12/25/45	(h)1,782		1,719
2.86%, 10/25/45	(h)933		922
2.87%, 4/25/45	(h)4,237		2,891
2.89%, 8/25/45	(h)414		408
2.95%, 6/25/46		(h)1,700		1,010
2.96%, 7/25/45	(h)3,620		2,520
5.27%, 4/25/46 - 5/25/46	(h)20,368		14,203
5.29%, 8/25/46	(h)11,125		8,121
Zuni Mortgage Loan Trust,
2.73%, 8/25/36	(h)5,986		5,678
			446,103
Total Fixed Income Securities (Cost $1,755,307)			1,742,016

	Shares
Preferred Stock (0.8%)
Mortgages — Other (0.8%)
Home Ownership Funding Corp.,
13.33%, (Cost $8,916)	(e)60,000	9,196
Short-Term Investments (9.1%)
Investment Company (8.3%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)99,505,526	99,506

	Face
	Amount
	(000)
U.S. Treasury Security (0.8%)
U.S. Treasury Bill,
0.73%, 4/10/08	$	(j)(r)9,055	9,053
Total Short-Term Investments (Cost $108,557)			108,559
Total Investments (156.2%) (Cost $1,872,780)			1,859,771
Liabilities in Excess of Other Assets (-56.2%)			(668,886		)
Net Assets (100%)			$	1,190,885

(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(i)	Security is subject to delayed delivery.
(j)	All or a portion of the security was pledged to cover margin requirements for futures contracts.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
@	Face Amount/Value is less than $500.
Inv Fl	Inverse Floating Rate — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at March 31, 2008.
IO	Interest Only
PAC	Planned Amortization Class
PO	Principal Only
REMIC	Real Estate Mortgage Investment Conduit
TBA	To Be Announced

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

15

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (con’t)

Advisory Portfolio II

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
EuroDollar CME	331	$	80,872	Jun-08	$	1,848
EuroDollar CME	330	80,772		Sep-08	1,958
EuroDollar CME	325	79,495		Dec-08	1,887
EuroDollar CME	345	84,365		Mar-09	2,056
EuroDollar CME	364	88,843		Jun-09	1,451
Short:
EuroDollar CME	34	8,281		Sep-09	(171		)
EuroDollar CME	6		1,457	Dec-09		(27	)
EuroDollar CME	68	16,481		Mar-10	(288		)
EuroDollar CME	22	5,320		Jun-10	(85		)
EuroDollar CME	9	2,172		Sep-10	(32		)
U.S. Treasury 5 yr. Note	205	23,418		Jun-08	(212		)
U.S. Treasury 10 yr. Note	2,370	281,919		Jun-08	(8,642		)
U.S. Treasury Long Bond	1,212	143,982		Jun-08	(3,473		)
					$	(3,730	)

CME       Chicago Mercantile Exchange

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

								Unrealized
						Notional		Appreciation
	Floating Rate	Pay/Receive	Fixed		Termination	Amount		(Depreciation)
Swap Counterparty	Index	Floating Rate	Rate		Date	(000)		(000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	141,149	$	1,955
	3 Month LIBOR	Pay	5.59		2/19/18	69,009		968
	3 Month LIBOR	Pay	5.47		2/25/18	8,705		121
	3 Month LIBOR	Receive	5.82		2/12/23	181,308		(1,866		)
	3 Month LIBOR	Receive	6.03		2/19/23	89,079		(941		)
	3 Month LIBOR	Receive	5.88		2/25/23	11,277		(117		)
Citigroup	3 Month LIBOR	Receive	5.07		11/9/09	5,935		(159		)
	3 Month LIBOR	Pay	5.37		5/23/17	50,410		1,341
	3 Month LIBOR	Receive	5.29		9/28/17	41,645		(1,123		)
	3 Month LIBOR	Receive	5.00		11/13/17	10,861		(290		)
	3 Month LIBOR	Pay	4.47		1/10/18	29,676		780
Deutsche Bank	3 Month LIBOR	Pay	5.35		5/24/17	58,165		1,544
	3 Month LIBOR	Pay	5.39		5/25/17	74,328		1,977
	3 Month LIBOR	Pay	5.43		5/29/17	129,130		3,444
Goldman Sachs	3 Month LIBOR	Pay	5.57		2/27/18	72,231		1,006
	3 Month LIBOR	Pay	5.63		2/28/18	143,580		2,009
	3 Month LIBOR	Receive	6.04		2/25/23	184,217		(1,945		)
	3 Month LIBOR	Receive	5.96		2/27/23	92,589		(969		)
JPMorgan Chase	3 Month LIBOR	Pay	5.37		5/23/17	25,086		667
	3 Month LIBOR	Pay	5.34		5/24/17	50,726		1,346
	3 Month LIBOR	Pay	5.09		9/11/17	75,179		1,986
	3 Month LIBOR	Pay	5.16		9/20/17	32,505		887
	3 Month LIBOR	Receive	5.23		9/27/17	39,410		(1,466		)
	3 Month LIBOR	Receive	5.30		9/28/17	39,568		(1,067		)
	3 Month LIBOR	Pay	5.25		10/11/17	21,822		590
	3 Month LIBOR	Receive	5.01		11/13/17	20,694		(553		)
	3 Month LIBOR	Pay	4.24		1/22/18	23,128		(590		)

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

16

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Advisory Portfolio II

Interest Rate Swap Contracts (cont’d)

The Portfolio had the following interest rate swap agreement(s) open at period end:

								Unrealized
						Notional		Appreciation
	Floating Rate	Pay/Receive	Fixed		Termination	Amount		(Depreciation)
Swap Counterparty	Index	Floating Rate	Rate		Date	(000)		(000)
JPMorgan Chase (cont’d)	3 Month LIBOR	Receive	4.52	%	2/19/18	$	17,885	$	(480	)
	3 Month LIBOR	Pay	4.48		2/25/18	30,467		800
Lehman Brothers	3 Month LIBOR	Pay	5.40		5/25/17	38,401		1,022
								$	10,877

LIBOR — London Inter Bank Offer Rate

Total Return Swap Contracts

The Portfolio had the following total return swap agreement(s) open at period end:

							Unrealized
					Notional		Appreciation
				Termination	Amount		(Depreciation)
Swap Counterparty	Pay	Receive		Date	(000)		(000)
Bank of America	Monthly Duration Adjusted Return	CMBS AAA 10yr	Index	7/31/08	$	17,647	$	1,095

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by investment type, as a percentage of total investments.

*    Investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

17

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Advisory Portfolio III

		Face
		Amount	Value
		(000)	(000)
Fixed Income Securities (24.1%)
Argentina (4.7%)
Government of Argentina,
8.28%, 12/31/33	$	(d)11,171	$	7,736
France (5.2%)
Government of France B.T.A.N.,
3.00%, 7/12/08	EUR	5,500	8,656
Mexico (9.4%)
Mexican Bonos,
9.50%, 12/18/14	MXN	148,305	15,493
United Kingdom (4.8%)
United Kingdom Treasury GILT,
5.75%, 12/7/09	GBP	3,850	7,880
Total Fixed Income Securities (Cost $38,556)			39,765

	Shares
Short-Term Investment (70.0%)
Investment Company (70.0%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class (Cost $115,161)	(p)115,161,419	115,161
Total Investments (94.1%) (Cost $153,717)		154,926
Other Assets in Excess of Liabilities (5.9%)		9,648
Net Assets (100%)		$	164,574

(d)	Security was valued at fair value — At March 31, 2008, the Portfolio held $7,736,000 of fair valued securites, representing 4.7% of net assets.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
EUR	Euro
GBP	British Pound
MXN	Mexican Peso

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)
EUR	5,100	$	8,052	4/2/08	USD	8,052	$	8,052	$	@—
EUR	10,850	17,113		4/30/08	USD	15,982	15,982		(1,131		)
EUR	42,024	66,236		5/14/08	USD	61,209	61,209		(5,027		)
GBP	3,935	7,797		4/24/08	USD	7,677	7,677		(120		)
USD	8,045	8,045		4/30/08	EUR	5,100	8,044		(1		)
USD	60,387	60,387		5/14/08	JPY	6,450,000	64,875		4,488
		$	167,630				$	165,839	$	(1,791	)

JPY — Japanese Yen

USD — United States Dollar

@  Value is less than $500.

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
Euro—Schatz 2 yr. (Germany)	617	$	101,797	Jun-08	$	(630	)

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by country and/or investment type, as a percentage of total investments.

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

18

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Advisory Portfolio IV

	Face
	Amount		Value
	(000)		(000)
Fixed Income Securities (92.5%)
United States (92.5%)
U.S. Treasury Notes,
2.63%, 3/15/09	$	250	$	253
4.50%, 2/15/09	250		256
4.75%, 12/31/08	250		256
4.88%, 6/30/09	250		260
Total Fixed Income Securities (Cost $1,025)			1,025

	Shares
Short-Term Investment (31.7%)
Investment Company (31.7%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class (Cost $351)	(p)350,753	351
Total Investments (124.2%) (Cost $1,376)		1,376
Liabilities in Excess of Other Assets (-24.2%)		(268		)
Net Assets (100%)		$	1,108

(p)See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.

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)
EUR	273	$	431	4/3/08	USD	432	$	432	$	1
EUR	271	427		4/30/08	USD	399	399		(28		)
USD	428	428		4/30/08	EUR	271	427		(1		)
		$	1,286				$	1,258	$	(28	)

EUR — Euro

USD — United States Dollar

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by country and/or investment type, as a percentage of total investments.

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

19

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Assets and Liabilities

	Advisory Portfolio (000)			Advisory Portfolio II^ (000)			Advisory Portfolio III (000)			Advisory Portfolio IV (000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Cost:	$	3,049,759		$	1,773,274		$	38,556		$	1,025
Investment in Security of Affiliated Issuer, at Cost:	215,213			99,506			115,161			351
Total Investments in Securities, at Cost:	3,264,972			1,872,780			153,717			1,376
Foreign Currency, at Cost:	—			—			8,062			245
Investments in Securities of Unaffiliated Issuers, at Value:(1)	2,701,700			1,760,265			39,765			1,025
Investment in Security of Affiliated Issuer, at Value:	215,213			99,506			115,161			351
Total Investments in Securities, at Value:	2,916,913			1,859,771			154,926			1,376
Cash	2,953			3,197			—			—
Foreign Currency, at Value:	—			—			8,053			245
Receivable for Investments Sold	545			5			—			186
Unrealized Appreciation on Foreign Currency Exchange Contracts	—			—			4,488			1
Unrealized Appreciation on Swap Agreements	122,201			23,538			—			—
Interest Receivable	9,961			6,030			1,249			10
Due from Broker	—			—			2,109			101
Receivable from Affiliate	41			5			30			@—
Due from Adviser	504			64			51			17
Other Assets	54			62			3			@—
Total Assets	3,053,172			1,892,672			170,909			1,936
Liabilities:
Collateral on Securities Loaned, at Value	17,182			—			—			—
Payable for Delayed Delivery Commitments	1,033,579			676,726			—			—
Payable for Investments Purchased	—			—			—			776
Due to Broker	70,776			13,369			—			—
Unrealized Depreciation on Foreign Currency Exchange Contracts	—			—			6,279			29
Unrealized Depreciation on Swap Agreements	37,242			11,566			—			—
Payable for Offering Cost	—			66			—			—
Payable for Administration Fees	158			52			11			@—
Payable for Custodian Fees	14			2			16			2
Payable for Trustees’ Fees and Expenses	131			@—			3			1
Other Liabilities	129			6			26			20
Total Liabilities	1,159,211			701,787			6,335			828
Net Assets	$	1,893,961		$	1,190,885		$	164,574		$	1,108
Net Assets Consist Of:
Paid-in Capital	$	2,744,501		$	1,192,657		$	169,889		$	1,087
Undistributed (Distributions in Excess of) Net Investment Income	13,362			4,498			(1,185		)	(7		)
Accumulated Net Realized Gain (Loss)	(595,496		)	(1,503		)	(2,931		)	56
Unrealized Appreciation (Depreciation) on:
Investments	(348,059		)	(13,009		)	1,209			@—
Foreign Currency Exchange Contracts and Translations	—			—			(1,778		)	(28		)
Futures Contracts	(5,306		)	(3,730		)	(630		)	—
Swap Agreements	84,959			11,972			—			—
Net Assets	$	1,893,961		$	1,190,885		$	164,574		$	1,108
CLASS I:
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	231,280,792			145,620,412			48,888,952			88,416
Net Asset Value, Offering and Redemption Price Per Share	$	8.19		$	8.18		$	3.37		$	12.54

(1)	Including:
	Securities on Loan, at Value:	$	16,995	$	—	$	—	$	—
^	The Advisory Portfolio II commenced operations on March 11, 2008.
@	Amount is less than $500.

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

20

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Operations

For the Six Months Ended March 31, 2008

	Advisory Portfolio (000)			Advisory Portfolio II^ (000)			Advisory Portfolio III (000)			Advisory Portfolio IV (000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers	$	617		$	150		$	—		$	—
Dividends from Security of Affiliated Issuer	4,706			152			2,557			11
Interest from Securities of Unaffiliated Issuers	93,129			4,196			1,694			9
Total Investment Income	98,452			4,498			4,251			20
Expenses:
Investment Advisory Fees (Note B)	5,866			246			322			2
Administration Fees (Note C)	1,253			52			69			@—
Custodian Fees (Note E)	99			2			2			@—
Professional Fees	52			5			13			11
Trustees’ Fees and Expenses	27			1			1			@—
Transfer Agency Fees	6			@—			2			1
Offering Cost Fee	—			4			—			—
Shareholder Reporting Fees	47			1			5			1
Registration Fees	8			@—			11			13
Other Expenses	56			@—			6			3
Total Expenses	7,414			311			431			31
Waiver of Investment Advisory Fees (Note B)	(5,866		)	(246		)	(322		)	(2		)
Expenses Reimbursed by Adviser (Note B)	(580		)	(64		)	(51		)	(29		)
Rebate from Morgan Stanley Affiliated Cash Sweep (Note F)	(115		)	(1		)	(56		)	@(—		)
Expense Offset (Note E)	(81		)	—			(2		)	@(—		)
Net Expenses	772			—			—			@—
Net Investment Income	97,680			4,498			4,251			20
Realized Gain (Loss):
Investments Sold	(153,336		)	(2,876		)	(5,557		)	@—
Foreign Currency Transactions	—			—			1,843			55
Futures Contracts	(86,434		)	973			783			1
Swap Agreements	26,493			400			—			—
Net Realized Gain (Loss)	(213,277		)	(1,503		)	(2,931		)	56
Change in Unrealized Appreciation (Depreciation):
Investments	(233,787		)	(13,009		)	901			(42		)
Foreign Currency Exchange Contracts and Translations	—			—			937			(10		)
Futures Contracts	(22,603		)	(3,730		)	(507		)	1
Swap Agreements	55,800			11,972			—			—
Net Change in Unrealized Appreciation (Depreciation)	(200,590		)	(4,767		)	1,331			(51		)
Total Net Realized Gain (Loss) and Change in Unrealized Appreciation (Depreciation)	(413,867		)	(6,270		)	(1,600		)	5
Net Increase (Decrease) in Net Assets Resulting from Operations	$	(316,187	)	$	(1,772	)	$	2,651		$	25

^ The Advisory Portfolio II commenced operations on March 11, 2008.

@ Amount is less than $500.

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

21

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets

	Advisory Portfolio						Advisory Portfolio II^				Advisory Portfolio III							Advisory Portfolio IV
	Six Months Ended March 31, 2008 (unaudited) (000)			Year Ended September 30, 2007 (000)				Period Ended March 31, 2008 (unaudited) (000)				Six Months Ended March 31, 2008 (unaudited) (000)			Year Ended September 30, 2007 (000)				Six Months Ended March 31, 2008 (unaudited) (000)			Year Ended September 30, 2007 (000)
Increase (Decrease) in Net Assets Operations:																								.
Net Investment Income (Loss)	$	97,680		$	169,409			$	4,498			$	4,251		$	8,093			$	20		$	47
Net Realized Gain (Loss)	(213,277		)	27,075				(1,503		)		(2,931		)	(2,508		)		56			(14		)
Net Change in Unrealized Appreciation (Depreciation)	(200,590		)	(45,020		)		(4,767		)		1,331			(2,924		)		(51		)	15
Net Increase (Decrease) in Net Assets Resulting from Operations	(316,187		)	151,464				(1,772		)		2,651			2,661				25			48
Distributions from and/or in Excess of:
Class I:
Net Investment Income	(84,188		)	(205,869		)		—				(1,753		)	(7,273		)		(17		)	(36		)
Net Realized Gain	—			—				—				(2,447		)	(415		)		—			—
Return of Capital	—			(12,396		)		—				—			—				—			—
Total Distributions	(84,188		)	(218,265		)		—				(4,200		)	(7,688		)		(17		)	(36		)
Capital Share Transactions:(1)
Class I:
Subscribed	649,841			578,396				1,198,195				4,814			16,569				167			—
Distributions Reinvested	74,282			190,371				—				3,999			6,901				17			34
Redeemed	(1,657,866		)	(650,927		)		(5,538		)		(13,271		)	(12,372		)		—			(198		)
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions	(933,743		)	117,840				1,192,657				(4,458		)	11,098				184			(164		)
Total Increase (Decrease) in Net Assets	(1,334,118		)	51,039				1,190,885				(6,007		)	6,071				192			(152		)
Net Assets:
Beginning of Period	3,228,079			3,177,040				@—				$	170,581		164,510				916			1,068
End of Period	$	1,893,961		$	3,228,079			$	1,190,885			$	164,574		$	170,581			$	1,108		$	916
Undistributed (Distributions in Excess of) Net Investment Income Included in End of Period Net Assets	$	13,362		$	(130	)		$	4,498			$	(1,185	)	$	(3,683	)		$	(7	)	$	(10	)

(1)   Capital Share Transactions:
Class I:
Shares Subscribed	72,700		62,148		146,300		1,431		4,753		13	—
Shares Issued on Distributions Reinvested	8,172		20,429		—		1,189		1,976		1	3
Shares Redeemed	(197,026	)	(69,823	)	(680	)	(3,931	)	(3,508	)	—	(16	)
Net Increase (Decrease) in Class I Shares Outstanding	(116,154	)	12,754		145,620		(1,311	)	3,221		14	(13	)

^ The Advisory Portfolio II commenced operations on March 11, 2008.

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

22

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statement of Cash Flows

For the Six Months Ended March 31, 2008

	Advisory Portfolio (000)			Advisory Portfolio II^ (000)
Cash Flows From Operating Activities:
Proceeds from Sales and Maturities of Investments	$	3,655,953		$	47,264
Purchases of Investments	(2,831,670		)	(451,187		)
Proceeds from Sales of Delayed Delivery Commitments	7,610,763			—
Purchases of Delayed Delivery Commitments	(7,578,075		)	(676,726		)
Net (Increase) Decrease in Short-Term Investments	123,641			(108,557		)
Net Realized Gain (Loss) on Futures Contracts	(86,434		)	973
Net Realized Gain (Loss) on Swap Agreements	26,493			400
Net Investment Income	97,680			4,498
Adjustments to Reconcile Net Investment Income to Net Cash Provided by Operating Activities:
Net (Increase) Decrease in Receivables Related to Operations	3,906			(6,161		)
Net Increase (Decrease) in Payables Related to Operations	(156		)	126
Accretion/Amortization of Discounts and Premiums	1,076			(90		)
Net Cash Provided by Operating Activities	1,023,177			(1,189,460		)
Cash Flows from Financing Activities:
Proceeds from Portfolio Shares Sold	649,841			1,198,195
Payment on Portfolio Shares Redeemed	(1,664,366		)	(5,538		)
Cash Dividends and Distributions Paid	(9,906		)	—
Net Cash Used in Financing Activities	(1,024,431		)	1,192,657
Net Increase (Decrease) in Cash	(1,254		)	3,197
Cash at Beginning of Period	4,207			—
Cash at End of Period	$	2,953		$	3,197

^ The Advisory Portfolio II commenced operations on March 11, 2008.

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

23

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Advisory Portfolio

	Class I
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	9.29		$	9.49		$	9.84		$	10.03		$	10.11		$	10.74
Income from Investment Operations:
Net Investment Income†	0.28			0.51			0.33			0.36			0.21			0.23
Net Realized and Unrealized Gain (Loss) on Investments	(1.15		)	(0.06		)	0.11			0.07			0.21			0.22
Total from Investment Operations	(0.87		)	0.45			0.44			0.43			0.42			0.45
Distributions from and/or in Excess of:
Net Investment Income	(0.23		)	(0.61		)	(0.63		)	(0.62		)	(0.50		)	(0.51		)
Net Realized Gain	—			—			—			—			—			(0.57		)
Return of Capital	—			(0.04		)	(0.16		)	—			—			—
Total Distributions	(0.23		)	(0.65		)	(0.79		)	(0.62		)	(0.50		)	(1.08		)
Net Asset Value, End of Period	$	8.19		$	9.29		$	9.49		$	9.84		$	10.03		$	10.11
Total Return+	(9.54		)%++	4.88		%	4.76		%	4.44		%	4.30		%	4.42		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,893,961		$	3,228,079		$	3,177,040		$	3,298,677		$	3,760,527		$	5,716,522
Ratio of Expenses to Average Net Assets(1)	0.05		%‡*	0.07		%‡	0.08		%	0.08		%	0.08		%	0.08		%
Ratio of Net Investment Income to Average Net Assets (1)	6.25		%‡*	5.42		%‡	3.41		%	3.66		%	2.09		%	2.24		%
Portfolio Turnover Rate^	237		%++	218		%	230		%	240		%	512		%	120		%

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.46	%‡*	0.47	%‡	0.48	%	0.47	%	0.49	%	0.49	%
Net Investment Income to Average Net Assets	5.83	%‡*	5.02	%‡	3.01	%	3.27	%	1.68	%	1.83	%

†	Per share amount is based on average shares outstanding.
+	Calculated based on the net asset value as of the last business day of the period.
‡:	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity
	Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.01%.
^	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of the portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio’s turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
++	Not Annualized
*	Annualized

The accompanying notes are an integral part of the financial statements

24

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Advisory Portfolio II

	Class I
Selected Per Share Data and Ratios	Period from March 11, 2008^ to March 31, 2008 (unaudited)
Net Asset Value, Beginning of Period	$	8.19
Income from Investment Operations:
Net Investment Income†	0.03
Net Realized and Unrealized Gain (Loss) on Investments	(0.04		)
Total from Investment Operations	(0.01		)
Net Asset Value, End of Period	$	8.18
Total Return+	(0.12		)%++
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,190,885
Ratio of Expenses to Average Net Assets (1)	0.00		%‡*
Ratio of Net Investment Income to Average Net Assets (1)	6.86		%‡*
Portfolio Turnover Rate	0		%++**

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.47	%‡*
Net Investment Income to Average Net Assets	6.39	%‡*

^	Commencement of operations.
†	Per share amount is based on average shares outstanding.
+	Calculated based on the net asset value as of the last business day of the period.
‡	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by less than 0.005%
++	Not Annualized
*	Annualized
**	Amount is less than 0.5%.

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

25

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Advisory Portfolio III

	Class I
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	3.40		$	3.50		$	3.41		$	3.34		$	3.29		$	4.17
Income (Loss) from Investment Operations:
Net Investment Income†	0.08			0.17			0.18			0.08			0.06			0.06
Net Realized and Unrealized Gain (Loss) on Investments	(0.02		)	(0.11		)	(0.01		)††	0.06			0.01			0.01
Total from Investment Operations	0.06			0.06			0.17			0.14			0.07			0.07
Distributions from and/or in Excess of:
Net Investment Income	(0.04		)	(0.15		)	(0.08		)	(0.07		)	(0.02		)	(0.34		)
Net Realized Gain	(0.05		)	(0.01		)	—			(0.00		)#	(0.00		)#	(0.61		)
Total Distributions	(0.09		)	(0.16		)	(0.08		)	(0.07		)	(0.02		)	(0.95		)
Net Asset Value, End of Period	$	3.37		$	3.40		$	3.50		$	3.41		$	3.34		$	3.29
Total Return+	1.55		%++	1.77		%	4.93		%	4.30		%	2.15		%	1.88		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	164,574		$	170,581		$	164,510		$	5,188		$	101,210		$	157,665
Ratio of Expenses to Average Net Assets (1)	0.00		%‡*	0.11		%‡	0.15		%	0.15		%	0.15		%	0.22		%
Ratio of Net Investment Income to Average Net Assets (1)	4.96		%‡*	4.85		%‡	5.18		%	2.45		%	1.91		%	1.86		%
Portfolio Turnover Rate	0		%++**	69		%	11		%	7		%	10		%	13		%

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.44	%‡*	0.49	%‡	0.63	%	0.57	%	0.53	%	0.54	%
Net Investment Income to Average Net Assets	4.52	%‡*	4.47	%‡	4.70	%	2.03	%	1.53	%	1.47	%

†	Per share amount is based on average shares outstanding.
††	The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Portfolio.
#	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
‡	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.06% and 0.03%, for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
++	Not Annualized
*	Annualized
**	Amount is less than 0.5%.

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

26

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Advisory Portfolio IV

	Class I
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	12.46		$	12.30		$	12.00		$	11.84		$	11.63		$	11.60
Income (Loss) from Investment Operations:
Net Investment Income†	0.25			0.55			0.49			0.29			0.22			0.24
Net Realized and Unrealized Gain (Loss) on Investments	0.06			0.03			0.02			0.07			0.05			(0.01		)
Total from Investment Operations	0.31			0.58			0.51			0.36			0.27			0.23
Distributions from and/or in Excess of:
Net Investment Income	(0.23		)	(0.42		)	(0.21		)	(0.20		)	(0.06		)	(0.20		)
Net Realized Gain	—			—			—			—			(0.00		)#	—
Total Distributions	(0.23		)	(0.42		)	(0.21		)	(0.20		)	(0.06		)	(0.20		)
Net Asset Value, End of Period	$	12.54		$	12.46		$	12.30		$	12.00		$	11.84		$	11.63
Total Return+	2.51		%++	4.82		%	4.30		%	3.11		%	2.35		%	1.96		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,108		$	916		$	1,068		$	1,285		$	25,671		$	26,874
Ratio of Expenses to Average Net Assets (1)	0.07		%‡*	0.13		%‡	0.15		%	0.15		%	0.15		%	0.22		%
Ratio of Net Investment Income to Average Net Assets (1)	4.06		%‡*	4.46		%‡	4.04		%	2.41		%	1.92		%	2.08		%
Portfolio Turnover Rate	88		%++	12		%	91		%	15		%	11		%	50		%

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	6.22	%‡*	6.16	%‡	5.36	%	0.81	%	0.62	%	1.23	%
Net Investment Income (Loss) to Average Net Assets	(2.09	)%‡*	(1.57	)%‡	(1.17	)%	1.75	%	1.45	%	1.00	%

†	Per share amount is based on average shares outstanding.
#	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
‡	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.06% and 0.02%, for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
++	Not Annualized
*	Annualized

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

27

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements

Morgan Stanley Institutional Fund Trust (“MSIFT”) or the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Fund is comprised of nineteen active portfolios. The accompanying financial statements and financial highlights are those of the Advisory Portfolio, Advisory Portfolio II, Advisory Portfolio III (formerly Advisory Global Fixed Income Portfolio) and Advisory Portfolio IV (formerly Advisory Global Fixed Income Portfolio II) (each referred to as a “Portfolio” or together as “Portfolios”) only. For the purposes of the 1940 Act, the Advisory Portfolio II, Advisory Portfolio III and Advisory Portfolio IV are considered non-diversified funds; the Advisory Portfolio is considered a diversified fund. Effective January 2, 2008, Institutional Class shares of the Portfolio were renamed Class I shares. Effective March 11, 2008, the Advisory Portfolio II commenced operations. The financial statements of the remaining portfolios are presented separately.

A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles. Such policies are consistently followed by the Fund in the preparation of its financial statements. U.S. generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

1. Security Valuation: Bonds and other fixed income securities may be valued according to the broadest and most representative market. In addition, bonds and other fixed income securities may be valued on the basis of prices provided by a pricing service. The prices provided by a pricing service take into account broker dealer market price quotations for institutional size trading in similar groups of securities, security quality, maturity, coupon and other security characteristics as well as any developments related to the specific securities. Debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost, if it approximates market value. Equity securities listed on a U.S. exchange are valued at the latest quoted sales price on the valuation date. Equity securities listed or traded on NASDAQ, for which market quotations are available, are valued at the NASDAQ Official Closing Price. Securities listed on a foreign exchange are valued at their closing price, except as noted below. Unlisted and listed equity securities not traded on the valuation date for which market quotations are readily available, are valued at the mean between the current bid and asked prices obtained from reputable brokers.

All other securities and investments for which market values are not readily available, including restricted securities, and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures adopted by the Board of Trustees (the “Trustees”), although the actual calculations may be done by others. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer’s financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.

Most foreign markets close before the New York Stock Exchange (NYSE). Occasionally, developments that could affect the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If these developments are expected to materially affect the value of the securities, the valuations may be adjusted to reflect the estimated fair value as of the close of the NYSE, as determined in good faith under procedures established by the Trustees.

2. Futures: Financial futures contracts (secured by cash and securities deposited with brokers as “initial margin”) are valued based upon their quoted daily settlement prices; changes in initial settlement value (represented by cash paid to or received from brokers as “variation margin”) are accounted for as unrealized appreciation (depreciation). When futures contracts are closed, the difference between the opening value at the date of purchase and the value at closing is recorded as realized gain or loss in the Statements of Operations. “Due from (to) Broker” includes initial margin and variation margin, as stated in the Statements of Assets and Liabilities.

Futures contracts may be used by each Portfolio in order to hedge against unfavorable changes in the value of securities or to attempt to realize profits from the value of the related securities.

Futures contracts involve market risk that may exceed the amounts recognized in the Statements of Assets and Liabilities. Risks arise from the possible movements in the prices of securities relating to these instruments. The change in value of futures contracts primarily corresponds with the value of their related securities, but may not precisely correlate with the change in value of such securities. In addition, there is the risk that a Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market.

28

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

3. Securities Sold Short: Each Portfolio may sell securities short. A short sale is a transaction in which the Portfolio sells securities it may or may not own, but has borrowed, in anticipation of a decline in the market price of the securities. The Portfolio is obligated to replace the borrowed securities at their market price at the time of replacement. The Portfolio may have to pay a premium to borrow the securities as well as pay any dividends or interest payable on the securities until they are replaced. The Portfolio’s obligation to replace the securities borrowed in connection with a short sale will generally be secured by collateral deposited with the broker that consists of cash, U.S. government securities or other liquid high grade debt obligations. In addition, the Portfolio will either place in a segregated account with its custodian or denote on its custody records an amount of cash, U.S. government securities or other liquid high grade debt obligations equal to the difference, if any, between (1) the market value of the securities sold at the time they were sold short and (2) any cash, U.S. government securities or other liquid high grade debt obligations deposited as collateral with the broker in connection with the short sale (not including the proceeds of the short sale). Short sales by the Portfolios involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security because losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested.

4. Swap Agreements: Each Portfolio may enter into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument. Cash collateral for swap agreements, if applicable, is deposited with the broker serving as counterparty to the agreement, and is included in “Due from (to) Broker” on the Statements of Assets and Liabilities. The following summarizes swaps entered into by the Portfolios:

Credit Default Swaps: Credit default swaps involve commitments to pay a fixed rate in exchange for payment if a credit event affecting a third party (the referenced company) occurs. Credit events may include a failure to pay interest, bankruptcy, or restructuring. The Portfolio accrues for interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) of swap contracts on the Statements of Assets and Liabilities. Once interim payments are settled in cash, the net amount is recorded within realized gain (loss) on swaps on the Statements of Operations. Credit default swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statements of Operations.

Interest Rate Swaps: Interest rate swaps involve the exchange of commitments to pay and receive interest based on a notional principal amount. The Portfolio accrues for interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) of swap contracts on the Statements of Assets and Liabilities. Once interim payments are settled in cash, the net amount is recorded within realized gain (loss) on swaps on the Statements of Operations. In a zero-coupon interest rate swap, payments only occur at maturity, at which time one counterparty pays the total compounded fixed rate over the life of the swap and the other pays the total compounded floating rate that would have been earned had a series of LIBOR investments been rolled over through the life of the swap. The Portfolio amortizes its interest payment obligation over the life of the swap. The amortized portion of this payment is recorded within realized gain (loss) on the Statements of Operations. The unamortized portion of this payment is included in “Due from (to) Broker” on the Statements of Assets and Liabilities. Interest rate swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statements of Operations.

Total Return Swaps: Total return swaps involve commitments to pay interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Portfolio will receive a payment from or make a payment to the counterparty, respectively. Total return swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statements of Operations. Periodic payments received or made at the end of each measurement period, but prior to termination, are recorded as realized gains or losses in the Statements of Operations.

Realized gains or losses on maturity or termination of swaps are presented in the Statements of Operations. Because there is no organized market for these swap agreements, the unrealized gain (loss) reported in the Statements of Assets and Liabilities may differ from that which would be realized in the event the Portfolio terminated its position in the agreement. Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of the agreements and are generally limited to the amount of net interest payments to be received, if

29

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

any, at the date of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the related amounts shown in the Statements of Assets and Liabilities.

5. Structured Investments: Each Portfolio may invest in structured investments whose values are linked either directly or inversely to changes in foreign currencies, interest rates, commodities, indices, or other underlying instruments. A Portfolio uses these securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets that might be difficult to invest in through conventional securities. Structured investments may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment.

6.Delayed Delivery Commitments: Each Portfolio may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Liquid securities or cash is designated in an amount at least equal to these commitments. Securities held for this purpose cannot be sold while this strategy is outstanding, unless replaced with other assets. As a result, there is a possibility that as designated assets reach certain levels, a Portfolio may lose some flexibility in managing its investments, responding to shareholder redemption requests, or meeting other current obligations. Such transactions may give rise to a form of leverage. This can cause a Portfolio to be more volatile than if it had not been leveraged, as leverage tends to exaggerate the effect of any increase or decrease in the value of the Portfolio’s securities.

7. Foreign Currency Translation and Foreign Currency Exchange Contracts: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the bid prices of such currencies against U.S. dollars quoted by a bank. Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on a Portfolio’s books and the U.S. dollar equivalent of amounts actually received or paid.

A foreign currency exchange contract is an agreement between two parties to buy or sell currency at a set price on a future date. Each Portfolio may enter into foreign currency exchange contracts to protect securities and related receivables and payables against future changes in foreign exchange rates and, in certain situations, to gain exposure to foreign currencies. Certain Portfolios may also enter into cross currency hedges which involve the sale of one currency against the positive exposure to a different currency. Cross currency hedges may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies. Fluctuations in the value of such contracts are recorded as unrealized appreciation or depreciation; realized gains or losses, which are disclosed in the Statements of Operations, include net gains or losses on contracts which have been terminated by settlements. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and are generally limited to the amount of unrealized gain on the contract, if any, at the date of default. Risks may also arise from unanticipated movements in the value of the foreign currency relative to the U.S. dollar.

The Advisory Portfolio III’s and Advisory Portfolio IV’s net assets include foreign denominated securities and currency. The net assets of these Portfolios are presented at the foreign exchange rates and market values at the close of the period. The Portfolios do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of the securities held at period end. Similarly, the Portfolios do not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, the component of realized and unrealized foreign currency gains (losses) representing foreign exchange changes on investments is included in the reported net realized and unrealized gains (losses) on investment transactions and balances. Changes in currency exchange rates will affect the value of and investment income from such securities and currency.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibly lower level of governmental supervision, relative currency valuation fluctuation, regulation of foreign securities markets and the possibility of political or economic instability.

8. Purchased and Written Options: Certain Portfolios may write covered call and put options on portfolio securities and other financial instruments. Premiums are received and are recorded as liabilities. The liabilities are subsequently adjusted to reflect the current value of the options written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or

30

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

off-set against the proceeds or amount paid on the transaction to determine the net realized gain or loss. By writing a covered call option, a Portfolio, in exchange for the premium, foregoes the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase. By writing a put option, a Portfolio, in exchange for the premium, accepts the risk of having to purchase a security at an exercise price that is above the current market price.

Certain Portfolios may purchase call and put options on their portfolio securities or other financial instruments. Each Portfolio may purchase call options to protect against an increase in the price of the security or financial instrument it anticipates purchasing. Each Portfolio may purchase put options on securities which it holds or other financial instruments to protect against a decline in the value of the security or financial instrument or to close out covered written put positions. Risks may arise from an imperfect correlation between the change in market value of the securities held by the Portfolio and the prices of options relating to the securities purchased or sold by the Portfolio and from the possible lack of a liquid secondary market for an option. The maximum exposure to loss for any purchased option is limited to the premium initially paid for the option.

At March 31, 2008, the Portfolios did not have any outstanding options written.

9. New Accounting Pronouncements: 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. As of March 31, 2008, the Adviser does not believe the adoption of SFAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period.

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

10. Other: Security transactions are accounted for on the date the securities are purchased or sold. Costs used in determining realized gains and losses on the sale of investment securities are those of specific securities sold.

Discounts and premiums on securities purchased are accreted/amortized over their respective lives. Most expenses of the Fund can be directly attributed to a particular Portfolio. Expenses which cannot be directly attributed are apportioned among the Portfolios on the basis of their relative net assets.

B. Investment Advisory Fees. Morgan Stanley Investment Management Inc. (the “Adviser” or “MS Investment Management”), a wholly-owned subsidiary of Morgan Stanley, performs investment advisory services at a fee calculated by applying a quarterly rate based on an annual percentage rate of 0.375% to each Portfolio’s average daily net assets for the quarter.

The Adviser has voluntarily agreed to waive its advisory fee and/or reimburse all expenses for each Portfolio, other than fees paid on behalf of each Portfolio to the Trustees and after giving effect to custody fee offsets.

Fee waivers and/or expense reimbursements are voluntary and may be commenced or terminated at any time. For the six months ended March 31, 2008, the Portfolios had advisory fees waived and/or certain expenses reimbursed as follows:

Portfolio	Advisory Fees Waived and/or Reimbursed (000)
Advisory	$	6,446
Advisory II	310
Advisory III	373
Advisory IV	31

Morgan Stanley Investment Management Limited (“MSIM Limited”) serves as Sub-Adviser to the Advisory Portfolio III and the Advisory Portfolio IV. MSIM Limited is a wholly-owned subsidiary of Morgan Stanley. Under an Investment Sub-Advisory Agreement with the Adviser, MSIM Limited, subject to the control and supervision of the Fund, its Officers, Trustees and the Adviser, and in accordance with the investment objectives, policies and restrictions of these Portfolios, makes certain day-to-day investment decisions for these Portfolios and places certain of the Portfolios’ purchase and sales orders. The Adviser pays MSIM Limited on a monthly basis a portion of the net advisory fees the Adviser receives from these Portfolios. Effective January 31, 2008,

31

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

Sub-Advisory Agreement was terminated with respect to Advisory Portfolio III and Advisory Portfolio IV.

C. Administration Fees. MS Investment Management (the “Administrator”) also provides the Fund with administration services pursuant to an administration agreement for an annual fee, accrued daily and paid monthly, of 0.08% of each Portfolio’s average daily net assets.

Under an agreement between the Administrator and JPMorgan Investor Services Co. (“JPMIS”), a corporate affiliate of JPMorgan Chase Bank, N.A., JPMIS provides certain administrative services to the Fund. For such services, the Administrator pays JPMIS a portion of the fee the Administrator receives from the Fund.

D. Distributor. Morgan Stanley Distribution, Inc. (“MSDI” or the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor for the Fund.

E. Custodian Fees. JPMorgan Chase Bank, N.A. (the “Custodian”) serves as Custodian for the Fund in accordance with a custodian agreement. The Custodian holds cash, securities, and other assets of the Fund as required by the 1940 Act.

The Fund has entered into an arrangement with its Custodian whereby credits realized on uninvested cash balances were used to offset a portion of each applicable Portfolio’s expenses.

These custodian credits are shown as “Expense Offset” on the Statements of Operations.

F. Portfolio Investment Activity.

1. Security Transactions: For the six months ended March 31, 2008, purchases and sales of investment securities other than long-term U.S. government securities and short-term investments were:

Portfolio	Purchases (000)		Sales (000)
Advisory	$	9,934,362	$	10,761,050
Advisory II	1,804,639		4,041
Advisory III	236		19,924
Advisory IV	1,025		427

For the six months ended March 31, 2008, purchases and sales of long-term U.S. government securities were:

Portfolio	Purchases (000)		Sales (000)
Advisory IV	$	260	$	427

2. Transactions with Affiliates: The Portfolios invest in the Institutional Class of portfolios within the Morgan Stanley Institutional Liquidity Funds (the “Liquidity Funds”), an open-end management investment company managed by the Adviser, both directly, and as a portion of the securities held as collateral on loaned securities. A summary of the Portfolios’ transactions in the shares of the Liquidity Funds during the six months ended March 31, 2008 is set forth below:

	Market Value September 30, 2007		Purchases at Cost		Sales Proceeds		Dividend Income		Market Value March 31, 2008
Portfolios	(000)		(000)		(000)		(000)		(000)
Advisory	$	331,395	$	1,066,124	$	1,182,306	$	4,706	$	215,213
Advisory II	—		162,471		62,965		152		99,506
Advisory III	105,856		26,272		16,967		2,557		115,161
Advisory IV	408		708		765		11		351

Investment Advisory fees paid by the Portfolios are reduced by an amount equal to their pro-rata share of the advisory and administration fees paid by the Liquidity Funds (“Rebate”). For the six months ended March 31, 2008, advisory fees paid were reduced as follows:

	Rebate
Portfolio	(000)
Advisory	$	115
Advisory II	1
Advisory III	56
Advisory IV	@—

@ Amount is less than $500.

G. Securities Lending. Certain Portfolios may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Portfolio. Portfolios that lend securities receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked to market daily, by the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.

32

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and high-quality short-term investments. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is included in the Portfolios’ Statements of Operations in interest income. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.

The value of loaned securities and related collateral outstanding at March 31, 2008 are as follows:

	Value of
	Loaned		Value of
	Securities		Collateral
Portfolio	(000)		(000)
Advisory	$	16,995	$	17,182

The following Portfolio had income from securities lending (after rebates to borrowers and allocation to the securities lending agent):

	Net Interest
	Earned by
	Portfolio
Portfolio	(000)
Advisory	$	39

H. Federal Income Taxes. It is each Portfolio’s intention to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for Federal income taxes is required in the financial statements. Each Portfolio files tax returns with the U.S. Internal Revenue Service and various states. Generally, the tax authorities can examine all tax returns filed for the last three years.

Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recognized on the accrual basis. Dividends from net investment income, if any, are declared and paid quarterly for the Advisory Portfolio III and Advisory Portfolio IV and monthly for the Advisory Portfolio and Advisory Portfolio II. Net realized capital gains, if any, are distributed at least annually.

The Portfolios adopted the provisions of the FASB Interpretation number 48 Accounting for Uncertainty in Income Taxes “the Interpretation”), on March 31, 2008. The Interpretation is to be applied to all open tax years as of the date of effectiveness. As of March 31, 2008, this did not result in an impact to the Portfolios’ financial statements.

The tax character of distributions paid may differ from the character of distributions shown on the Statements of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal 2007 and 2006 were as follows:

	2007 Distributions						2006 Distributions
	Paid From:						Paid From:
					Long-						Long-
					Term						Term
	Ordinary		Return of		Capital		Ordinary		Return of		Capital
	Income		Capital		Gain		Income		Capital		Gain
Portfolio	(000)		(000)		(000)		(000)		(000)		(000)
Advisory	$	205,869	$	12,396	$	—	$	205,755	$	54,511	$	—
Advisory III	7,688		—		—		652		—		—
Advisory IV	36		—		—		21		—		—

The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from U.S. generally accepted accounting principles. The book/tax differences are either considered temporary or permanent in nature.

Temporary differences are generally due to differing book and tax treatments in the timing of the recognition of gains or losses on securities, forwards and futures, including Post- October Losses.

Permanent differences are generally due to swap transactions, paydown adjustments, foreign futures transactions, foreign currency transactions and investment in certain foreign fixed income securities. These resulted in the following reclassifications among the Portfolios’ components of net assets at September 30, 2007:

	Undistributed
	(Distributions
	in Excess of)			Accumu-
	Net			lated Net
	Investment			Realized			Paid-in
	Income (Loss)			Gain (Loss)			Capital
Portfolio	(000)			(000)			(000)
Advisory	$	59,661		$	(40,023	)	$	(19,638	)
Advisory III	(5,402		)	5,402			—
Advisory IV	(13		)	13			—

At September 30, 2007, the components of distributable earnings on a tax basis were as follows:

	Undistributed
	Ordinary Income
Portfolio	(000)
Advisory III	$	2,447
Advisory IV	14

33

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

At March 31, 2008, cost, unrealized appreciation, unrealized depreciation and net unrealized appreciation (depreciation) of securities for Federal income tax purposes were:

	Cost		Appreciation		Depreciation			Net Appreciation (Depreciation)
Portfolio	(000)		(000)		(000)			(000)
Advisory	$	3,264,972	$	45,658	$	(393,717	)	$	(348,059	)
Advisory II	1,872,780		32,818		(45,827		)	(13,009		)
Advisory III	153,717		2,469		(1,260		)	1,209
Advisory IV	1,376		@—		(@—		)	@—

@ Amount is less than $500.

At September 30, 2007, the following Portfolios had available for Federal income tax purposes unused capital losses, which will expire on the indicated dates:

	Expiration Date September 30, (000)
Portfolio	2012		2013		2014		2015		Total
Advisory	$	152,714	$	62,736	$	19,857	$	61,283	$	296,590
Advisory IV	—		—		—		@—		@—

@ Amount is less than $500.

To the extent that capital loss carryforwards are used to offset any future capital gains realized during the carryforwards period as provided by U.S. Federal income tax regulations, no capital gains tax liability will be incurred by a portfolio for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.

During the year ended September 30, 2007, the Advisory Portfolio III utilized capital loss carryforwards for U.S. Federal income tax purposes of approximately $32,000.

Under current tax law, certain capital and net foreign exchange losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended September 30, 2007, the Advisory Portfolio elected to defer capital losses and Advisory Portfolio III elected todefer currency losses occurring between November 1, 2006 and September 30, 2007 up to approximately $51,061,000 and $3,080,000, respectively.

For the six months ended March 31, 2008, the Advisory Portfolio realized losses from in-kind redemptions of approximately $29,041,000. The losses are not taxable income to the Advisory Portfolio.

I. Contractual Obligations. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

J. Other. At March 31, 2008, the Advisory Portfolio, Advisory Portfolio II, Advisory Portfolio III and Advisory Portfolio IV each had otherwise unaffiliated record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Portfolios. The aggregate percentage of such owners was 14.4%, 55.6%, 31.6% and 95.6%, respectively.

34

2008 Semi-Annual Report

March 31, 2008

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

POLICY CONCERNING CUSTOMER INFORMATION

Morgan Stanley Institutional Fund Trust (the “Fund”) is required by federal law to provide you with a copy of their Privacy Policy (the “Policy”) annually. The following Policy applies to current and former individual clients of the Fund. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders. Please note that this Policy may be amended at any time, and that you will be informed of any changes to this Policy as required by law.

THE FUND RESPECTS YOUR PRIVACY

The Fund appreciates that you have provided your personal financial information and strive to maintain the privacy of such information. This Policy describes, and is designed to help you understand, what non-public personal information the Fund may collect about you, why the Fund collects it, and when the Fund may share it with others. Throughout this Policy, the non-public information that personally identifies you or your accounts is referred to as “personal information.”

1. WHAT PERSONAL INFORMATION DOES THE FUND COLLECT ABOUT YOU?

To serve you better and manage your investment, it is important that the Fund collects and maintains accurate information about you. The Fund obtains this information from applications and other forms you submit, from your dealings with the Fund, and from third parties and other sources.

For example:

·The Fund collects information such as your name, address, e-mail address, and telephone/fax numbers through applications and other forms you may submit.

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

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

2. WHEN DOES THE FUND DISCLOSE PERSONAL INFORMATION COLLECTED ABOUT YOU?

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

a.     Information the Fund discloses to affiliated companies:

The Fund does not disclose personal information collected about you to affiliated companies except to enable them to provide services on their behalf or as otherwise required or permitted by law.

b.     Information the Fund discloses to third parties:

The Fund does not disclose personal information collected about you to non-affiliated third parties except to enable them to provide services on the Fund’s behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where the Fund may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to protect against fraud, for institutional risk control or to respond to judicial process. When the Fund shares personal information with these third parties, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose.

35

2008 Semi-Annual Report

March 31, 2008

An Important Notice Concerning Our U.S. Privacy Policy (cont’d)

3. HOW DOES THE FUND PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION COLLECTED ABOUT YOU?

The Fund and/or its service providers maintain physical, electronic and procedural security measures to help safeguard the personal information collected about you. The Fund and its service providers have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on the Fund’s behalf may also receive personal information, and they are required to adhere to confidentiality standards with respect to such information.

If you have any questions regarding this Policy, please contact a Fund representative at (800) 548-7786.

© 2008 Morgan Stanley Institutional Fund Trust

36

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Trustee and Officer Information

Trustees

Michael E. Nugent

Frank L. Bowman

Michael Bozic

Kathleen A. Dennis

James F. Higgins

Dr. Manuel H. Johnson

Joseph J. Kearns

Michael F. Klein

W. Allen Reed

Fergus Reid

Officers

Michael E. Nugent

Chairman of the Board and Trustee

Ronald E. Robison

President and Principal Executive Officer

Dennis F. Shea

Vice President

Amy R. Doberman

Vice President

Carsten Otto

Chief Compliance Officer

Stefanie V. Chang Yu

Vice President

Mary E. Mullin

Secretary

James W. Garrett

Treasurer and Chief Financial Officer

Investment Adviser and Administrator

Morgan Stanley Investment Management Inc.
522 Fifth Avenue

New York, NY 10036

Distributor

Morgan Stanley Distribution, Inc.
One Tower Bridge

100 Front Street, Suite 1100

West Conshohocken, PA 19428-2899

Custodian

JPMorgan Chase Bank, N.A.
270 Park Avenue

New York, NY 10017

Legal Counsel

Clifford Chance US LLP
31 West 52^nd Street

New York, NY 10019-6131

Independent Registered Public Accounting Firm

Ernst & Young LLP

200 Clarendon Street
Boston, MA 02116-5072

Reporting to Shareholders

Each Morgan Stanley Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports within 60 days of the end of the Fund’s second and fourth fiscal quarters. The semi-annual 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 semi-annual and annual reports to Fund shareholders. 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. 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 website, 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 1(800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC’s email address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102.

Proxy Voting Policies and Procedures and Proxy Voting Record

You may obtain a copy of the Fund’s Proxy Voting Policy and Procedures and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll-free 1(800) 548-7786. This information is also available on the SEC’s website at http://www.sec.gov.

This report is authorized for distribution only when preceded or accompanied by the prospectus of the Morgan Stanley Institutional Fund Trust which describes in detail each Investment Portfolio’s investment policies, risks, fees and expenses. Please read the prospectus carefully before you invest or send money. For additional information, including information regarding the investments comprising the Portfolio, please call 1(800) 548-7786.

37

Printed in U.S.A.

This Report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
Investment Adviser: (610) 940-5000 • MSIF Trust (800) 548-7786

© 2008 Morgan Stanley

IFTAPSAN 3/08

IU08-02833P-Y03/08

Morgan Stanley Investment Management

Morgan Stanley
Institutional Fund Trust

Balanced Portfolio

Balanced

Equity Portfolios

Equities Plus

Mid Cap Growth

U.S. Mid Cap Value

U.S. Small Cap Value

Value

Fixed Income Portfolios

Core Fixed Income

Core Plus Fixed Income

High Yield

Intermediate Duration

International Fixed Income

Investment Grade Fixed Income

Limited Duration

Long Duration Fixed Income

Municipal

March 31, 2008

Semi-Annual Report

2008 Semi-Annual Report

March 31, 2008

Table of Contents

Shareholders’ Letter	2
Expense Examples	3
Portfolios of Investments
Balanced Portfolio:
Balanced	7
Equity Portfolios:
Equities Plus	22
Mid Cap Growth	26
U.S. Mid Cap Value	28
U.S. Small Cap Value	29
Value	31
Fixed Income Portfolios:
Core Fixed Income	33
Core Plus Fixed Income	44
High Yield	56
Intermediate Duration	66
International Fixed Income	75
Investment Grade Fixed Income	79
Limited Duration	90
Long Duration Fixed Income	97
Municipal	103
Statements of Assets & Liabilities	113
Statements of Operations	121
Statements of Changes in Net Assets	124
Statements of Cash Flows	134
Financial Highlights	135
Notes to Financial Statements	158
U.S. Privacy Policy	168
Trustee and Officer Information	170

This report is authorized for distribution only when preceded or accompanied by prospectuses of the Morgan Stanley Institutional Fund Trust. 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 1 (800) 548-7786. Please read the prospectus 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/msim. There is no assurance that a Fund will achieve its investment objective. Funds are 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 Funds. Please see the prospectus for more complete information on investment risks.

1

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Shareholders’ Letter

Dear Shareholders:

We are pleased to present to you the Morgan Stanley Institutional Fund Trust’s (the “Fund”) Semi-Annual Report for the six months ended March 31, 2008. Our Fund currently consists of 19 portfolios. The Fund’s portfolios, together with the portfolios of the Morgan Stanley Institutional Fund, Inc., 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; investment grade and high yield).

Sincerely,

Ronald E. Robison

President and Principal Executive Officer

April 2008

2

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Expense Examples

Expense Examples

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

The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended March 31, 2008 and held for the entire six-month period.

Actual Expenses

The first line of the tables 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.

Please note that the Class H shares of International Fixed Income, Investment Grade Fixed Income and Municipal Portfolios commenced operations on January 2, 2008, however, expenses did not begin accruing until January 3, 2008; therefore, “Actual Expenses Paid During Period” reflect activity from January 3, 2008 through March 31, 2008.

Please note that “Expenses Paid During Period” are grossed up to reflect Portfolio expenses prior to the effect of Expense Offset (See Note E 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 second line of the tables 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 while the Class H shares of International Fixed Income, Investment Grade Fixed Income and Municipal Portfolios commenced operations on January 2, 2008, the “Hypothetical Expenses Paid During the Period” reflect projected activity for the full six month period for the purposes of comparability. This projection assumes that the annualized expense ratio for the Class H shares was in effect during the period from October 1, 2007 through March 31, 2008.

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.

	Beginning Account Value October 1, 2007		Ending Account Value March 31, 2008		Expenses Paid During Period* October 1, 2007 — March 31, 2008
Balanced Portfolio
Class I
Actual	$	1,000.00	$	947.00	$	2.77
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.15		2.88
Investment Class
Actual	1,000.00		946.30		3.50
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.40		3.64
Class P
Actual	1,000.00		945.80		3.99
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.90		4.14

* Expenses are equal to Class I’s, Investment Class’ and Class P’s annualized net expense ratios of 0.57%, 0.72% and 0.82%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

3

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Expense Examples (cont’d)

	Beginning Account Value October 1, 2007		Ending Account Value March 31, 2008		Expenses Paid During Period* October 1, 2007 — March 31, 2008
Equities Plus Portfolio
Class I
Actual	$	1,000.00	$	695.20	$	2.50
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.05		2.98
Class P
Actual	1,000.00		694.90		3.56
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.80		4.24

* Expenses are equal to Class I’s and Class P’s annualized net expense ratios of 0.59% and 0.84%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

Mid Cap Growth Portfolio
Class I
Actual	$	1,000.00	$	873.00	$	2.90
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.90		3.13
Class P
Actual	1,000.00		872.30		4.07
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.65		4.39

* Expenses are equal to Class I’s and Class P’s annualized net expense ratios of 0.62% and 0.87%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

U.S. Mid Cap Value Portfolio
Class I
Actual	$	1,000.00	$	873.90	$	4.17
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.55		4.50
Investment Class
Actual	1,000.00		873.20		4.87
Hypothetical (5% average annual return before expenses)	1,000.00		1,019.80		5.25
Class P
Actual	1,000.00		872.60		5.34
Hypothetical (5% average annual return before expenses)	1,000.00		1,019.30		5.76

* Expenses are equal to Class I’s, Investment Class’ and Class P’s annualized net expense ratios of 0.89%, 1.04% and 1.14%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

U.S. Small Cap Value Portfolio
Class I
Actual	$	1,000.00	$	885.30	$	3.77
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.00		4.04
Class P
Actual	1,000.00		884.30		4.99
Hypothetical (5% average annual return before expenses)	1,000.00		1,019.70		5.35

* Expenses are equal to Class I’s and Class P’s annualized net expense ratios of 0.80% and 1.06%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

Value Portfolio
Class I
Actual	$	1,000.00	$	846.00	$	3.00
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.75		3.29
Class P
Actual	1,000.00		844.60		4.15
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.50		4.55

* Expenses are equal to Class I’s and Class P’s annualized net expense ratios of 0.65% and 0.90%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

Core Fixed Income Portfolio
Class I
Actual	$	1,000.00	$	976.50	$	2.42
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.55		2.48
Class P
Actual	1,000.00		975.20		3.65
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.30		3.74

* Expenses are equal to Class I’s and Class P’s annualized net expense ratios of 0.49% and 0.74%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

4

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Expense Examples (cont’d)

	Beginning Account Value October 1, 2007		Ending Account Value March 31, 2008		Expenses Paid During Period* October 1, 2007 — March 31, 2008
Core Plus Fixed Income Portfolio
Class I
Actual	$	1,000.00	$	966.50	$	2.21
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.75		2.28
Investment Class
Actual	1,000.00		965.70		2.95
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.00		3.03
Class P
Actual	1,000.00		965.20		3.44
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.50		3.54

* Expenses are equal to Class I’s, Investment Class’ and Class P’s annualized net expense ratios of 0.45%, 0.60% and 0.70%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

High Yield Portfolio
Class I
Actual	$	1,000.00	$	970.30	$	3.45
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.50		3.54
Class P
Actual	1,000.00		968.80		4.73
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.20		4.85

* Expenses are equal to Class I’s and Class P’s annualized net expense ratios of 0.70% and 0.96%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

Intermediate Duration Portfolio
Class I
Actual	$	1,000.00	$	996.00	$	2.50
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.50		2.53
Investment Class
Actual	1,000.00		994.30		3.24
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.75		3.29
Class P
Actual	1,000.00		994.80		3.79
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.20		3.84

* Expenses are equal to Class I’s, Investment Class’ and Class P’s annualized net expense ratios of 0.50%, 0.65% and 0.76%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

International Fixed Income Portfolio
Class I
Actual	$	1,000.00	$	1,140.70	$	3.26
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.95		3.08
Class P
Actual	1,000.00		1,149.00		4.62
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.70		4.34

	Beginning Account Value	Ending Account Value March 31, 2008	Expenses Paid During Period* January 3, 2008 — March 31, 2008
International Fixed Income Portfolio (cont’d)
Class H
Actual	1,000.00	1,087.20	2.39
Hypothetical (5% average annual return before expenses)	1,000.00	1,020.30	4.75

* Expenses are equal to Class I’s, Class P’s and Class H’s annualized net expense ratios of 0.61%, 0.86%, and 0.94%, respectively, multiplied by the average account value over the period, multiplied by 183/366 for Class I and Class P (to reflect the one-half year period) and multiplied by 89/366 for Class H (to reflect the actual days in the period).

	Beginning Account Value October 1, 2007		Ending Account Value March 31, 2008		Expenses Paid During Period* October 1, 2007 — March 31, 2008
Investment Grade Fixed Income Portfolio
Class I
Actual	$	1,000.00	$	976.50	$	2.47
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.50		2.53
Class P
Actual	1,000.00		975.90		3.21
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.75		3.29

5

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Expense Examples (cont’d)

	Beginning Account Value		Ending Account Value March 31, 2008		Expenses Paid During Period* January 3, 2008 — March 31, 2008
Investment Grade Fixed Income Portfolio (cont’d)
Class H
Actual	$	1,000.00	$	1,087.20	$	2.13
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.80		4.24

* Expenses are equal to Class I’s, Class P’s and Class H’s annualized net expense ratios of 0.50%, 0.65%, and 0.84%, respectively, multiplied by the average account value over the period, multiplied by 183/366 for Class I and Class P (to reflect the one-half year period) and multiplied by 89/366 for Class H (to reflect the actual days in the period).

	Beginning Account Value October 1, 2007		Ending Account Value March 31, 2008		Expenses Paid During Period* October 1, 2007 — March 31, 2008
Limited Duration Portfolio
Class I
Actual	$	1,000.00	$	922.80	$	2.02
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.90		2.12
Class P
Actual	1,000.00		921.80		3.27
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.60		3.44

* Expenses are equal to Class I’s and Class P’s annualized net expense ratios of 0.43% and 0.68%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

Long Duration Fixed Income Portfolio
Class I
Actual	$	1,000.00	$	1,066.10	$	2.48
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.60		2.43
Class P
Actual	1,000.00		1,064.80		3.77
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.35		3.69

* Expenses are equal to Class I’s and Class P’s annualized net expense ratios of 0.48% and 0.73%, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

Municipal Portfolio
Class I
Actual	$	1,000.00	$	999.30	$	2.50
Hypothetical (5% average annual return before expenses)	1,000.00		1,022.50		2.53
Class P
Actual	1,000.00		998.30		3.75
Hypothetical (5% average annual return before expenses)	1,000.00		1,021.25		3.79

	Beginning Account Value		Ending Account Value March 31, 2008		Expenses Paid During Period * January 3, 2008 — March 31, 2008
Municipal Portfolio (cont’d)
Class H
Actual	$	1,000.00	$	989.40	$	2.03
Hypothetical (5% average annual return before expenses)	1,000.00		1,020.80		4.24

* Expenses are equal to Class I’s, Class P’s and Class H’s annualized net expense ratios of 0.50%, 0.75%, and 0.84%, respectively, multiplied by the average account value over the period, multiplied by 183/366 for Class I and Class P (to reflect the one-half year period) and multiplied by 89/366 for Class H (to reflect the actual days in the period).

6

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Balanced Portfolio

	Face Amount (000)		Value (000)
Fixed Income Securities (26.1%)
Agency Adjustable Rate Mortgages (1.0%)
Federal Home Loan Mortgage Corp.,
Conventional Pools:
5.60%, 1/1/37	$	296	$	301
5.70%, 1/1/37	442		451
5.83%, 10/1/36	332		340
5.85%, 4/1/37	298		305
Federal National Mortgage Association,
Conventional Pools:
5.11%, 11/1/35	288		293
6.74%, 5/1/36	444		458
6.80%, 7/1/36	346		356
6.81%, 8/1/36	252		258
Government National Mortgage Association,
5.13%, 11/20/25 - 12/20/27	101		101
6.38%, 2/20/25 - 1/20/28	411		421
			3,284
Agency Fixed Rate Mortgages (9.5%)
Federal Home Loan Bank Discount Note,
Zero Coupon, 4/18/08	500		500
Federal Home Loan Mortgage Corp.,
Conventional Pools:
10.00%, 9/1/17	15		17
10.50%, 8/1/19 - 12/1/19	54		65
11.00%, 5/1/20 - 9/1/20	28		32
12.00%, 3/1/15	23		28
Gold Pools:
5.50%, 1/1/37 - 5/1/37	3,795		3,836
6.00%, 11/1/36 - 8/1/37	1,790		1,838
7.50%, 8/1/20 - 11/1/32	383		413
8.00%, 2/1/21 - 8/1/31	334		363
9.50%, 12/1/22	27		30
10.00%, 12/1/19	29		34
April TBA
5.00%, 4/15/38	(i)2,750		2,723
5.50%, 4/15/37	(i)3,900		3,938
6.00%, 4/15/37	(i)3,650		3,743
6.50%, 4/15/37	(i)600		622
Federal National Mortgage Association,
Conventional Pools:
5.00%, 4/1/37	954		945
6.50%, 4/1/32 - 7/1/32	284		296
7.00%, 3/1/18 - 10/1/34	1,061		1,126
7.50%, 12/1/29 - 9/1/35	798		861
8.00%, 2/1/30 - 5/1/32	359		389
8.50%, 6/1/30 - 12/1/30	239		264
9.50%, 11/1/20 - 4/1/30	226		252
10.00%, 1/1/10 - 1/1/20	26		31
10.50%, 12/1/16 - 4/1/22	128		148
11.50%, 11/1/19	2		2
12.50%, 9/1/15	11		13
April TBA
4.50%, 4/25/23	(i)1,400		1,393
5.00%, 4/25/23 - 4/25/38	(i)2,350		2,353
5.50%, 4/25/37	(i)3,825		3,861
6.50%, 4/25/38	(i)1,100		1,139
7.00%, 4/25/38	(i)475		499
Government National Mortgage Association,
Various Pools:
9.50%, 10/15/18 - 11/15/21	80		89
10.00%, 11/15/09 - 12/15/21	243		291
10.50%, 2/15/20 - 12/15/20	42		51
11.00%, 1/15/19	48		57
			32,242
Asset Backed Corporates (2.7%)
Ace Securities Corp.,
2.92%, 5/25/34	(h)53		45
American Express Credit Account Master Trust,
2.82%, 10/15/12	(h)325		319
Argent Securities, Inc.,
2.65%, 10/25/36	(h)245		240
Bear Stearns Asset Backed Securities Trust,
2.70%, 1/25/37	(h)188		168
2.80%, 9/25/34	(h)5		5
2.82%, 3/25/35	(h)22		22
Capital Auto Receivables Asset Trust,
2.83%, 11/15/11	(h)400		395
2.88%, 7/15/10 - 5/15/11	(h)1,100		1,089
Carrington Mortgage Loan Trust,
2.72%, 2/25/35	(h)268		253
Citibank Credit Card Issuance Trust,
2.59%, 3/22/12	(h)400		393
5.65%, 9/20/19	250		244
Countrywide Asset Backed Certificates,
2.75%, 5/25/36	(h)72		71
First Franklin Mortgage Loan Asset Backed Certificates,
2.65%, 7/25/36 - 3/25/37	(h)444		428
2.67%, 2/25/36	(h)54		54
2.72%, 10/25/35	(h)22		22
Ford Credit Auto Owner Trust,
2.83%, 4/15/10	(h)722		720
Fremont Home Loan Owner Trust,
2.65%, 10/25/36	(h)263		254
GSAMP Trust,
2.67%, 1/25/37	(h)197		184
2.72%, 3/25/47	(h)331		308
MBNA Master Credit Card Trust,
7.80%, 10/15/12	900		971
RAAC Series,
2.70%, 9/25/45	(h)12		12
Residential Asset Mortgage Products, Inc.,
2.67%, 8/25/36	(h)216		210

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

7

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

	Face Amount (000)		Value (000)
Asset Backed Corporates (cont’d)
Residential Asset Securities Corp.,
2.71%, 2/25/30	$	(h)262	$	245
Securitized Asset Backed Receivables LLC Trust,
2.71%, 2/25/37	(h)307		272
2.73%, 5/25/37	(h)311		292
SLM Student Loan Trust,
3.32%, 10/27/14	(h)340		339
Soundview Home Equity Loan Trust,
2.68%, 1/25/37 - 6/25/37	(h)432		410
2.71%, 2/25/37	(h)299		279
Structured Asset Securities Corp.,
2.69%, 2/25/37 - 6/25/37	(h)538		503
2.72%, 1/25/37	(e)(h)246		221
Terwin Mortgage Trust,
2.71%, 4/25/37	(e)(h)114		112
TXU Electric Delivery Transition Bond Co. LLC,
4.81%, 11/17/14	100		102
			9,182
Collateralized Mortgage Obligations — Agency Collateral Series (0.1%)
Federal Home Loan Mortgage Corp.,
Inv FI IO
5.73%, 10/15/29	19		@—
IO
5.00%, 6/15/17	215		17
6.50%, 3/15/33	138		26
7.50%, 12/1/29	91		27
8.00%, 1/1/28 - 6/1/31	27		7
Federal National Mortgage Association,
Inv FI IO
4.73%, 2/17/31	348		35
5.83%, 3/18/30	7		@—
IO
3.34%, 3/25/36	1,525		49
5.00%, 2/25/15	70		1
6.00%, 8/25/32 - 7/25/33	128		18
6.50%, 6/1/31 - 6/25/33	270		57
7.00%, 4/25/33	89		15
8.00%, 4/1/24 - 12/1/31	328		85
9.00%, 11/1/26	36		9
IO PAC
8.00%, 8/18/27	74		14
Government National Mortgage Association,
Inv FI IO
5.18%, 4/16/29	185		15
5.78%, 8/16/29	104		11
			386
Collateralized Mortgage Obligation — Non Agency Collateral Series (2.7%)
Banc of America Commercial Mortgage, Inc.,
5.41%, 9/10/47	300		295
5.66%, 6/10/49	(h)350		346
5.69%, 4/10/49	(h)300		299
5.75%, 2/10/51	(h)375		374
Bear Stearns Commercial Mortgage Securities,
5.69%, 6/11/50	(h)300		296
5.71%, 6/11/40	(c)(h)250		249
Bear Stearns Structured Products, Inc.,
IO
2.11%, 6/26/36	(e)5,738		72
2.22%, 1/27/37	(e)3,951		47
2.29%, 1/27/37	(e)5,056		56
2.43%, 1/27/37	(e)7,255		91
3.18%, 4/25/37	(e)6,249		156
Citigroup Commercial Mortgage Trust,
5.43%, 10/15/49	325		319
5.70%, 12/10/49	(h)300		298
Citigroup/Deutsche Bank Commercial Mortgage Trust,
5.89%, 11/15/44	(h)300		300
Commercial Mortgage Pass Through Certificates,
5.82%, 12/10/49	(h)275		275
Countrywide Alternative Loan Trust,
IO
2.09%, 5/25/47	(e)1,920		52
2.18%, 3/20/46	1,594		70
2.40%, 12/20/46	3,279		159
2.56%, 2/25/37	1,812		78
2.86%, 3/20/47	2,902		150
3.68%, 12/20/35	(e)(h)1,687		58
3.78%, 2/25/47	(e)3,755		79
3.91%, 12/20/35	(e)(h)2,279		89
Countrywide Home Loan Mortgage Pass Through Trust,
IO
0.84%, 2/25/35	1,264		35
Credit Suisse Mortgage Capital Certificates,
5.72%, 6/15/39	(h)300		299
Greenpoint Mortgage Funding Trust,
IO
1.30%, 8/25/45 - 10/25/45	2,006		69
Greenwich Capital Commercial Funding Corp.,
5.44%, 3/10/39	300		293
5.74%, 12/10/49	(c)300		297
GS Mortgage Securities Corp. II,
5.80%, 8/10/45	(h)425		425
Harborview Mortgage Loan Trust,
IO
3.34%, 6/19/35	(h)1,208		35
3.60%, 5/19/35	(h)1,640		46
3.93%, 3/19/37	(h)1,536		61
PO
3/19/37	1		1
Indymac Index Mortgage Loan Trust,
IO
3.32%, 7/25/35	(h)1,076		35
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.44%, 6/12/47	325		316
5.75%, 2/12/49	(h)300		299
5.82%, 6/15/49	(h)450		451

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

8

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

	Face
	Amount		Value
	(000)		(000)
Collateralized Mortgage Obligation — Non Agency Collateral Series (cont’d)
Lehman Brothers Commercial Conduit Mortgage Trust,
5.94%, 7/15/44	$	(h)300	$	303
Lehman Brothers-UBS Commercial Mortgage Trust,
5.43%, 2/15/40	200		195
5.86%, 7/15/40	(h)300		300
5.87%, 9/15/45	(h)375		374
Residential Accredit Loans, Inc.,
Zero Coupon, 3/25/47	(e)2,184		53
Zero Coupon, 5/25/47	(e)4,334		108
Wachovia Bank Commercial Mortgage Trust,
5.34%, 12/15/43	200		193
5.68%, 5/15/46	(c)350		345
5.74%, 6/15/49	(h)300		298
5.90%, 2/15/51	(h)300		303
			9,342
Finance (1.4%)
AIG SunAmerica Global Financing VI,
6.30%, 5/10/11	(e)265		279
American General Finance Corp.,
4.63%, 5/15/09 - 9/1/10	80		79
AXA Financial, Inc.,
6.50%, 4/1/08	60		60
Bank of America Corp.,
5.75%, 12/1/17	140		145
Bank of New York Mellon Corp. (The),
4.50%, 4/1/13	60		60
Bear Stearns Cos. Inc. (The),
5.55%, 1/22/17	(c)125		112
7.25%, 2/1/18	75		78
Capmark Financial Group, Inc.,
5.88%, 5/10/12	(e)100		63
6.30%, 5/10/17	(c)(e)45		27
Catlin Insurance Co., Ltd.,
7.25%	(e)(h)(o)100		84
Citigroup, Inc.,
5.88%, 5/29/37	85		74
Countrywide Home Loans, Inc.,
3.25%, 5/21/08	(c)95		93
Credit Suisse New York,
6.00%, 2/15/18	200		200
Farmers Insurance Exchange,
8.63%, 5/1/24	(e)290		307
General Electric Capital Corp.,
4.25%, 12/1/10	(c)80		82
Goldman Sachs Group, Inc. (The),
6.15%, 4/1/18	150		150
6.75%, 10/1/37	140		131
HSBC Finance Corp.,
5.88%, 2/1/09	345		348
JPMorgan Chase & Co.,
7.00%, 11/15/09	255		266
Lehman Brothers Holdings, Inc.,
5.75%, 1/3/17	85		77
6.50%, 7/19/17	105		100
6.88%, 7/17/37	175		152
Mantis Reef Ltd.,
4.69%, 11/14/08	(e)200		201
MBNA Corp.,
3.53%, 5/5/08	(h)140		140
Nationwide Building Society,
4.25%, 2/1/10	(e)155		159
Platinum Underwriters Finance, Inc.,
7.50%, 6/1/17	100		101
Prudential Financial, Inc.,
6.63%, 12/1/37	40		40
SLM Corp.,
4.00%, 1/15/10	120		101
Two-Rock Pass Through Trust,
4.04%	(e)(h)(o)100		40
Unicredit Luxembourg Finance S.A.,
3.77%, 10/24/08	(e)(h)230		230
Wachovia Capital Trust Ill,
5.80%	(h)(o)265		189
Washington Mutual Preferred Funding LLC,
6.67%	(e)(h)(o)100		54
Washington Mutual, Inc.,
8.25%, 4/1/10	175		152
Wells Fargo & Co.,
5.63%, 12/11/17	155		159
World Financial Properties,
6.91%, 9/1/13	(e)221		211
Xlliac Global Funding,
4.80%, 8/10/10	(e)155		155
			4,899
Industrials (1.5%)
Amgen, Inc.,
5.85%, 6/1/17	35		35
Archer-Daniels-Midland Co.,
5.45%, 3/15/18	70		71
ArvinMeritor, Inc.,
8.75%, 3/1/12	100		92
AT&T Corp.,
8.00%, 11/15/31	160		188
AT&T, Inc.,
6.15%, 9/15/34	70		67
Biogen Idec, Inc.,
6.88%, 3/1/18	90		91
Brookfield Asset Management, Inc.,
5.80%, 4/25/17	50		45
7.13%, 6/15/12	125		125
Comcast Cable Communications LLC,
6.75%, 1/30/11	40		42
ConAgra Foods, Inc.,
7.00%, 10/1/28	45		46
8.25%, 9/15/30	55		63
Consumers Energy Co.,
4.00%, 5/15/10	30		30

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

9

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

	Face
	Amount		Value
	(000)		(000)
Industrials (cont’d)
4.80%, 2/17/09	$	80	$	81
Cooper Industries, Inc.,
5.25%, 11/15/12	105		109
CVS Caremark Corp.,
5.75%, 8/15/11 - 6/1/17	65		68
CVS Lease Pass Through,
6.04%, 12/10/28	(e)131		125
Daimler Finance North America LLC,
8.50%, 1/18/31	65		75
Delhaize America, Inc.,
9.00%, 4/15/31	139		168
Echostar DBS Corp.,
6.38%, 10/1/11	145		140
FBG Finance Ltd.,
5.13%, 6/15/15	(e)115		114
Fiserv, Inc.,
6.80%, 11/20/17	105		109
France Telecom S.A.,
8.50%, 3/1/31	120		149
General Electric Co.,
5.25%, 12/6/17	325		325
Hewlett-Packard Co.,
5.50%, 3/1/18	35		36
Home Depot, Inc. (The),
2.93%, 12/16/09	(h)170		162
5.40%, 3/1/16	80		75
Honeywell International, Inc.,
5.30%, 3/1/18	45		46
Hospira, Inc.,
3.18%, 3/30/10	(h)150		146
Husky Oil Co.,
8.90%, 8/15/28	(h)65		66
ICI Wilmington, Inc.,
4.38%, 12/1/08	65		65
Interpublic Group of Cos., Inc.,
6.25%, 11/15/14	70		57
Koninklijke Philips Electronics N.V.,
5.75%, 3/11/18	105		107
Kroger Co. (The),
6.40%, 8/15/17	35		37
LG Electronics, Inc.,
5.00%, 6/17/10	(e)80		79
Macy’s Retail Holdings, Inc.,
6.63%, 9/1/08	35		35
Marathon Oil Co.,
5.90%, 3/15/18	50		50
6.00%, 10/1/17	60		61
Medco Health Solutions, Inc.,
7.13%, 3/15/18	65		67
MGM Mirage,
6.00%, 10/1/09	(c)65		65
Miller Brewing Co.,
4.25%, 8/15/08	(e)110		111
Pilgrim’s Pride Corp.,
7.63%, 5/1/15	60		58
Sprint Capital Corp.,
8.75%, 3/15/32	80		68
Systems 2001 AT LLC,
6.66%, 9/15/13	(e)143		143
Telecom Italia Capital S.A.,
4.00%, 1/15/10	155		152
Telefonica Europe B.V.,
8.25%, 9/15/30	125		146
Time Warner, Inc.,
3.30%, 11/13/09	(h)210		201
Union Pacific Corp.,
5.45%, 1/31/13	165		170
UnitedHealth Group, Inc.,
6.00%, 2/15/18	95		93
Verizon Communications, Inc.,
5.50%, 2/15/18	105		102
Viacom, Inc.,
6.88%, 4/30/36	110		106
Weatherford International Ltd.,
6.00%, 3/15/18	(c)50		50
Wyeth,
5.45%, 4/1/17	45		46
5.50%, 2/15/16	20		20
Yum! Brands, Inc.,
8.88%, 4/15/11	90		99
			5,077
Mortgages — Other (5.4%)
Alliance Bancorp Trust,
2.84%, 7/25/37	(h)393		300
American Home Mortgage Assets,
2.72%, 3/25/47	(h)425		324
2.79%, 10/25/46 - 6/25/47	(h)1,064		809
2.83%, 9/25/46	(h)361		221
2.90%, 6/25/47	(h)212		104
American Home Mortgage Investment Trust,
2.79%, 3/25/46 - 5/25/47	(h)958		675
Banc of America Funding Corp.,
2.89%, 9/20/35	(h)116		78
Bear Stearns Mortgage Funding Trust,
2.76%, 12/25/46	(h)499		380
2.85%, 7/25/36	(h)364		214
Country Wide Alternative Loan Trust,
2.76%, 2/25/47	(c)(h)265		202
2.79%, 10/25/46 - 11/25/46	(h)537		408
2.80%, 11/20/35	(h)91		84
2.83%, 6/25/47	(h)524		324
2.84%, 12/20/46	(h)239		116
2.85%, 3/20/46	(h)230		156
2.87%, 7/25/46	(h)227		146
2.88%, 5/20/46	(h)198		123
2.91%, 7/25/46	(h)130		65

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

10

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

	Face Amount (000)				Value (000)
Mortgages — Other (cont’d)
3.10%, 6/25/47	$	(h)236			$	113
5.78%, 2/25/36	(h)397				258
Countrywide Home Loan Mortgage Pass Through Trust,
2.90%, 3/25/35	(h)29				25
Deutsche ALT-A Securities, Inc., Alternate Loan Trust,
2.75%, 2/25/47	(h)471				327
5.16%, 2/25/47	(h)176				97
Deutsche ALT-A Securities, Inc., NIM Trust,
6.75%, 2/25/47	(e)63				62
Downey Savings & Loan Association Mortgage Loan Trust,
2.76%, 10/19/37	(h)387				294
5.27%, 4/19/47	(h)352				264
Federal Home Loan Mortgage Corp.,
3.16%, 5/15/37	(h)2,472				2,373
Federal National Mortgage Association,
2.66%, 12/25/36	(h)234				224
PAC
8.50%, 9/25/20	14				15
Greenpoint Mortgage Funding Trust,
2.78%, 1/25/37	(h)341				303
2.80%, 3/25/47	(h)540				410
2.89%, 2/25/36	(h)271				200
2.92%, 3/25/36	(h)292				181
Harborview Mortgage Loan Trust,
2.65%, 1/19/38	(h)88				83
2.71%, 3/19/38	(h)337				256
2.74%, 11/19/36	(h)411				313
2.75%, 1/19/38	(h)456				347
2.76%, 9/19/36 - 3/19/38	(h)397				278
2.77%, 11/19/36	(h)408				312
2.79%, 7/19/46	(h)279				175
2.81%, 10/19/37	(h)292				180
2.85%, 7/19/45	(h)87				62
2.85%, 7/21/36	(h)358				231
2.94%, 11/19/35	(h)164				112
Harborview NIM Corp.,
6.41%, 3/19/37 - 3/19/38	(e)29				29
Indymac Index Mortgage Loan Trust,
2.70%, 2/25/37	(h)339				292
2.72%, 7/25/46	(h)405				388
2.85%, 6/25/47	(h)382				240
Luminent Mortgage Trust,
2.84%, 4/25/36	(h)213				162
2.85%, 5/25/36	(h)190				119
Mastr Adjustable Rate Mortgages Trust,
2.71%, 5/25/47	(h)139				136
Residential Accredit Loans, Inc.,
2.76%, 2/25/37 - 3/25/47	(h)1,092				871
2.79%, 12/25/36	(h)388				294
2.80%, 5/25/47	(h)753				567
2.83%, 8/25/46	(h)186				113
2.86%, 2/25/46	(h)92				60
2.87%, 2/25/46	(h)105				74
Ryland Acceptance Corp. IV,
6.65%, 7/1/11	2				2
Structured Asset Mortgage Investments, Inc.,
2.78%, 9/25/47	(h)566				413
2.79%, 2/25/36	(h)88				66
2.80%, 10/25/36	(h)289				220
2.83%, 8/25/36 - 7/25/46	(h)763				473
2.87%, 4/25/36	(h)343				220
2.88%, 7/25/36	(h)178				90
Washington Mutual Alternative Mortgage Pass Through Certificates,
2.79%, 7/25/46	(h)130				99
2.88%, 6/25/46	(h)188				91
5.27%, 4/25/46	(h)622				393
Washington Mutual Mortgage Pass Through Certificates,
2.85%, 11/25/45 - 1/25/47	(h)327				251
2.86%, 10/25/45	(h)29				29
2.87%, 4/25/45	(h)134				91
2.89%, 8/25/45	(h)13				13
Zuni Mortgage Loan Trust,
2.73%, 8/25/36	(h)178				169
					18,189
Sovereign (0.3%)
Government of Argentina,
8.28%, 12/31/33	(d)120				83
Government of Japan,
1.00%, 6/15/09	JPY			85,000	857
United Mexican States,
9.50%, 12/18/14	MXN			2,090	218
					1,158
U.S. Treasury Securities (1.1%)
U.S. Treasury Bonds,
5.38%, 2/15/31	$		(c)2,350		2,719
6.13%, 8/15/29	(c)725				908
					3,627
Utilities (0.4%)
Appalachian Power Co.,
5.65%, 8/15/12	35				36
Arizona Public Service Co.,
5.80%, 6/30/14	110				108
CenterPoint Energy Resources Corp.,
6.25%, 2/1/37	35				33
7.88%, 4/1/13	20				22
Colorado Interstate Gas Co.,
6.80%, 11/15/15	90				93
Consolidated Natural Gas Co.,
6.25%, 11/1/11	45				48
Detroit Edison Co. (The),
6.13%, 10/1/10	75				80
Entergy Gulf States, Inc.,
3.48%, 12/1/09	(h)75				73

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

11

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

	Face Amount (000)		Value (000)
Utilities (cont’d)
3.60%, 6/1/08	$	45	$	45
3.74%, 12/8/08	(e)(h)105		105
Equitable Resources, Inc.,
6.50%, 4/1/18	45		45
Kinder Morgan Finance Co.,
5.70%, 1/5/16	(c)125		119
NiSource Finance Corp.,
3.66%, 11/23/09	(h)85		83
7.88%, 11/15/10	95		103
Ohio Edison Co.,
6.40%, 7/15/16	55		57
Ohio Power Co.,
6.00%, 6/1/16	110		111
Peco Energy Co.,
5.35%, 3/1/18	55		56
Plains All American Pipeline, LP,
6.70%, 5/15/36	110		106
Texas Eastern Transmission, LP,
7.00%, 7/15/32	70		75
Union Electric Co.,
6.40%, 6/15/17	100		105
			1,503
Total Fixed Income Securities (Cost $96,408)			88,889
	Shares
Common Stocks (49.5%)
Aerospace & Defense (1.4%)
Boeing Co.	10,850		807
General Dynamics Corp.	5,600		467
Honeywell International, Inc.	11,500		649
L-3 Communications Holdings, Inc.	2,100		230
Lockheed Martin Corp.	4,350		432
Northrop Grumman Corp.	4,500		350
Precision Castparts Corp.	2,400		245
Raytheon Co.	5,750		371
Rockwell Collins, Inc.	3,800		217
United Technologies Corp.	14,500		998
			4,766
Air Freight & Logistics (0.6%)
C.H. Robinson Worldwide, Inc.	18,469		1,005
Expeditors International Washington, Inc.	16,187		731
FedEx Corp.	1,250		116
United Parcel Service, Inc., Class B	4,600		336
			2,188
Airlines (0.0%)
Southwest Airlines Co.	4,050		50
Auto Components (0.0%)
Johnson Controls, Inc.	300		10
Automobiles (0.0%)
Ford Motor Co.	(a)900		5
General Motors Corp.	200		4
			9
Beverages (1.1%)
Anheuser-Busch Cos., Inc.	11,838		562
Coca-Cola Co. (The)	30,380		1,849
PepsiCo., Inc.	20,325		1,467
			3,878
Biotechnology (0.9%)
Amgen, Inc.	(a)16,700		698
Biogen Idec, Inc.	(a)4,700		290
Celgene Corp.	(a)6,100		374
Genzyme Corp.	(a)4,100		305
Gilead Sciences, Inc.	(a)14,200		732
Illumina, Inc.	(a)6,993		531
			2,930
Capital Markets (1.0%)
Bank of New York Mellon Corp. (The)	5,660		236
Charles Schwab Corp. (The)	11,751		221
Franklin Resources, Inc.	13,192		1,279
Goldman Sachs Group, Inc. (The)	4,870		805
Lehman Brothers Holdings, Inc.	6,974		263
Merrill Lynch & Co., Inc.	8,370		341
Northern Trust Corp.	670		45
State Street Corp.	2,880		228
			3,418
Chemicals (1.2%)
Dow Chemical Co. (The)	900		33
E.I. Du Pont de Nemours & Co.	900		42
Monsanto Co.	35,368		3,944
PPG Industries, Inc.	300		18
Praxair, Inc.	300		25
Tronox, Inc., Class B	207		1
			4,063
Chemicals — Specialty (0.0%)
Ecolab, Inc.	300		13
Commercial Banks (1.0%)
Ameriprise Financial, Inc.	2,060		107
Axis Bank Ltd. GDR	693		13
Bank Pekao S.A.	6,203		551
BB&T Corp.	2,100		67
Fifth Third Bancorp.	2,400		50
HDFC Bank India Ltd. ADR	1,000		98
ICICI Bank Ltd. ADR	700		27
KeyCorp.	2,000		44
Komercni Banka A.S.	2,718		650
National City Corp.	3,900		39
PNC Financial Services Group, Inc.	1,200		79
Powszechna Kasa	32,473		659
Regions Financial Corp.	3,200		63
State Bank of India Ltd. GDR	612		54
SunTrust Banks, Inc.	1,200		66
U.S. Bancorp.	6,100		197
Wachovia Corp.	5,900		159
Wells Fargo & Co.	11,100		323
			3,246

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

12

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

		Value
	Shares	(000)
Commercial Services & Supplies (0.3%)
ACCO Brands Corp.	(a)376	$	5
Corporate Executive Board Co.	12,419	503
Monster Worldwide, Inc.	(a)15,195	368
		876
Communications Equipment (1.7%)
Cisco Systems, Inc.	(a)94,912	2,286
Corning, Inc.	15,300	368
Juniper Networks, Inc.	(a)6,000	150
Motorola, Inc.	20,700	193
QUALCOMM, Inc.	15,900	652
Research In Motion Ltd.	(a)18,678	2,096
		5,745
Computers & Peripherals (1.8%)
Apple Computer, Inc.	(a)16,567	2,378
Dell, Inc.	(a)23,100	460
EMC Corp.	(a)21,000	301
Hewlett-Packard Co.	24,500	1,119
International Business Machines Corp.	13,300	1,531
Sun Microsystems, Inc.	(a)10,100	157
		5,946
Construction & Engineering (0.1%)
Fluor Corp.	1,400	197
Larsen & Toubro Ltd. GDR	1,335	101
		298
Construction Materials (0.5%)
Cemex S.A.B. de C.V. ADR	(a)38,060	994
Ambuja Cements Ltd. GDR	12,516	38
Martin Marietta Materials, Inc.	6,854	728
Vulcan Materials Co.	100	6
		1,766
Consumer Finance (0.5%)
American Express Co.	37,569	1,642
Capital One Financial Corp.	2,073	102
SLM Corp.	(a)300	5
		1,749
Distributors (0.3%)
Li & Fung Ltd.	256,000	958
Diversified Consumer Services (0.0%)
Apollo Group, Inc., Class A	(a)200	9
Diversified Financial Services (1.7%)
Bank of America Corp.	30,771	1,167
Brookfield Asset Management, Inc., Class A	74,832	2,008
Citigroup, Inc.	36,745	787
CME Group, Inc.	1,471	690
JPMorgan Chase & Co.	23,468	1,008
Moody’s Corp.	2,740	95
		5,755
Diversified Telecommunication Services (0.8%)
AT&T, Inc.	49,720	1,904
Sprint Nextel Corp.	22,600	151
Tata Communications Ltd. ADR	1,200	30
Verizon Communications, Inc.	20,800	758
		2,843
Electric Utilities (1.2%)
American Electric Power Co., Inc.	6,400	266
CEZ 2	10,955	837
Consolidated Edison, Inc.	4,100	163
Edison International	5,600	274
Entergy Corp.	3,300	360
Exelon Corp.	8,700	707
FirstEnergy Corp.	5,400	371
FPL Group, Inc.	5,700	358
PPL Corp.	6,600	303
Progress Energy, Inc.	3,600	150
Southern Co. (The)	8,600	306
		4,095
Electrical Equipment (0.2%)
Emerson Electric Co.	12,500	643
Electronic Equipment & Instruments (0.1%)
Agilent Technologies, Inc.	(a)4,000	120
Tyco Electronics Ltd.	5,600	192
		312
Energy Equipment & Services (0.9%)
Baker Hughes, Inc.	3,400	233
Halliburton Co.	10,600	417
National Oilwell Varco, Inc.	(a)4,000	233
Noble Corp.	4,100	204
Schlumberger Ltd.	13,200	1,148
Smith International, Inc.	2,600	167
Transocean, Inc.	(a)3,600	487
Weatherford International Ltd.	(a)4,000	290
		3,179
Food & Staples Retailing (1.3%)
Costco Wholesale Corp.	6,900	448
CVS Caremark Corp.	21,600	875
Kroger Co. (The)	9,900	251
Safeway, Inc.	6,900	203
SYSCO Corp.	11,800	342
Wal-Mart, Inc.	32,800	1,728
Walgreen Co.	14,200	541
		4,388
Food Products (0.8%)
Archer-Daniels-Midland Co.	12,002	494
ConAgra Foods, Inc.	8,311	199
General Mills, Inc.	6,267	375
Heinz (H.J.) Co.	5,159	242
Kellogg Co.	4,393	231
Kraft Foods, Inc., Class A	25,848	802
Sara Lee Corp.	8,878	124
W.M. Wrigley Jr. Co.	3,771	237
		2,704
Gas Utilities (0.1%)
Sempra Energy	4,300	229

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

13

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

	Shares	Value (000)
Health Care Equipment & Supplies (1.3%)
Bard (C.R.), Inc.	2,800	$	270
Baxter International, Inc.	12,200	705
Becton Dickinson & Co.	3,700	318
Boston Scientific Corp.	(a)29,300	377
Covidien Ltd.	9,400	416
Gen-Probe, Inc.	(a)5,874	283
Medtronic, Inc.	20,900	1,011
St. Jude Medical, Inc.	(a)6,100	264
Stryker Corp.	5,000	325
Zimmer Holdings, Inc.	(a)5,400	420
		4,389
Health Care Providers & Services (1.0%)
Aetna, Inc.	8,900	375
Cardinal Health, Inc.	8,300	436
CIGNA Corp.	5,700	231
Express Scripts, Inc.	(a)5,200	334
Humana, Inc.	(a)2,800	126
McKesson Corp.	6,300	330
Medco Health Solutions, Inc.	(a)10,300	451
UnitedHealth Group, Inc.	25,800	886
WellPoint, Inc.	(a)8,700	384
		3,553
Hotels Restaurants & Leisure (1.2%)
Carnival Corp.	800	32
Marriott International, Inc., Class A	700	24
McDonald’s Corp.	1,700	95
Starbucks Corp.	(a)61,981	1,085
Starwood Hotels & Resorts Worldwide, Inc.	14,022	726
Wynn Resorts Ltd.	20,556	2,069
Yum! Brands, Inc.	900	33
		4,064
Household Durables (0.1%)
Fortune Brands, Inc.	4,100	285
Household Products (1.2%)
Colgate Palmolive Co.	7,192	560
Kimberly-Clark Corp.	7,300	471
Procter & Gamble Co.	44,980	3,152
		4,183
Independent Power Producers & Energy Traders (0.1%)
AES Corp. (The)	(a)10,800	180
Constellation Energy Group, Inc.	2,900	256
		436
Industrial Conglomerates (1.9%)
3M Co.	10,400	823
General Electric Co.	140,700	5,207
Textron, Inc.	3,400	189
Tyco International Ltd.	8,125	358
		6,577
Information Technology Services (0.6%)
Automatic Data Processing, Inc.	2,800	119
Broadridge Financial Solutions	525	9
Electronic Data Systems Corp.	2,800	47
Infosys Technology Ltd. ADR	3,300	118
MasterCard, Inc., Class A	5,905	1,317
Metavante Technologies, Inc.,	(a)223	4
Paychex, Inc.	1,700	58
Total System Services, Inc.	1,171	28
Visa, Inc., Class A	(a)4,013	250
Western Union Co. (The)	2,800	60
		2,010
Insurance (1.9%)
ACE Ltd.	3,130	172
Aflac, Inc.	3,760	244
Allstate Corp. (The)	5,140	247
AMBAC Financial Group, Inc.	450	3
American International Group, Inc.	22,430	970
AON Corp.	3,000	121
Berkshire Hathaway, Inc., Class B	(a)311	1,391
Chubb Corp.	3,700	183
Genworth Financial, Inc.	5,000	113
Hartford Financial Services Group, Inc.	4,100	311
Lincoln National Corp.	3,159	164
Loews Corp.	32,268	1,298
Marsh & McLennan Cos., Inc.	4,540	111
Metlife, Inc.	6,590	397
Principal Financial Group	2,670	149
Progressive Corp. (The)	7,240	116
Prudential Financial, Inc.	4,200	329
Travelers Cos., Inc. (The)	5,798	277
		6,596
Internet & Catalog Retail (0.8%)
Amazon.com, Inc.	(a)36,010	2,568
Internet Software & Services (1.9%)
Baidu.com ADR	(a)2,689	644
eBay, Inc.	(a)70,932	2,117
Google, Inc., Class A	(a)6,569	2,893
Tencent Holdings Ltd.	95,000	541
Yahoo!, Inc.	(a)4,000	116
		6,311
Machinery (1.1%)
Caterpillar, Inc.	9,900	775
Cummins, Inc.	4,600	215
Danaher Corp.	4,000	304
Deere & Co.	6,400	515
Eaton Corp.	4,300	343
Illinois Tool Works, Inc.	8,000	386
Ingersoll-Rand Co., Ltd., Class A	7,000	312
ITT Corp.	4,600	238
Paccar, Inc.	7,455	335
Parker Hannifin Corp.	3,650	253
Tata Motors Ltd. ADR	2,400	38
		3,714
Media (1.6%)
CBS Corp., Class B	8,600	190
Central European Media Enterprises Ltd., Class A	(a)6,600	562
Clear Channel Communications, Inc.	5,700	167

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

14

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

	Shares	Value (000)
Media (cont’d)
Comcast Corp., Class A	28,200	$	545
CTC Media, Inc.	(a)23,100	641
DIRECTV Group Inc., (The)	(a)9,100	226
International Game Technology	500	20
McGraw-Hill Cos., Inc. (The)	2,900	107
News Corp. Inc, Class A	23,900	448
Omnicom Group, Inc.	4,300	190
Time Warner, Inc.	35,500	498
TVN S.A.	57,749	596
Viacom, Inc., Class B	(a)7,100	281
Walt Disney Co.	26,000	816
		5,287
Metals & Mining (0.5%)
Air Products & Chemicals, Inc.	200	18
Alcoa, Inc.	800	29
Allegheny Technologies, Inc.,	100	7
Freeport-McMoRan Copper & Gold, Inc., Class B	300	29
Mechel Steel Group ADR	6,700	762
Newmont Mining Corp.	400	18
Nucor Corp.	8,960	607
Sterlite Industries India Ltd. ADR	(a)2,800	50
United States Steel Corp.	100	13
		1,533
Multi-Utilities (0.6%)
Ameren Corp.	3,600	159
Dominion Resources, Inc.	11,000	449
Duke Energy Corp.	18,728	334
PG&E Corp.	3,400	125
Public Service Enterprise Group, Inc.	7,400	297
Veolia Environment ADR	5,583	391
Williams Cos., Inc.	8,300	274
		2,029
Multiline Retail (0.2%)
Sears Holdings Corp.	(a)7,806	797
Office Electronics (0.1%)
Xerox Corp.	12,400	186
Oil & Gas Exploration & Production (0.0%)
Noble Energy, Inc.,	2,300	167
Oil, Gas & Consumable Fuels (5.6%)
Anadarko Petroleum Corp.	6,000	378
Apache Corp.	4,100	495
Chesapeake Energy Corp.	6,300	291
Chevron Corp.	23,700	2,023
ConocoPhillips	18,800	1,433
Consol Energy, Inc.	2,500	173
Devon Energy Corp.	5,200	543
El Paso Corp.	9,500	158
EOG Resources, Inc.	3,100	372
Exxon Mobil Corp.	59,300	5,016
Hess Corp.	3,400	300
Marathon Oil Corp.	7,900	360
Murphy Oil Corp.	2,200	181
OAO Gazprom (Registered) ADR	32,937	1,681
Occidental Petroleum Corp.	9,100	666
Peabody Energy Corp.	3,200	163
Southwestern Energy Co.	(a)28,690	967
Spectra Energy Corp.	6,000	136
Ultra Petroleum Corp.	(a)39,451	3,057
Valero Energy Corp.	7,300	358
XTO Energy, Inc.	6,200	384
		19,135
Personal Products (0.1%)
Avon Products, Inc.	6,690	265
Pharmaceuticals (3.4%)
Abbott Laboratories	24,200	1,335
Allergan, Inc.	16,600	936
Bristol-Myers Squibb Co.	30,500	650
Dr Reddys Laboratories Ltd. ADR	2,000	29
Eli Lilly & Co.	13,100	676
Forest Laboratories, Inc.	(a)5,900	236
Johnson & Johnson	41,600	2,698
Merck & Co., Inc.	32,300	1,226
Pfizer, Inc.	103,000	2,156
Schering-Plough Corp.	23,900	344
Thermo Fisher Scientific, Inc.	(a)8,300	472
Wyeth	20,600	860
		11,618
Road & Rail (0.1%)
Burlington Northern and Santa Fe Railway Co.	1,400	129
CSX Corp.	2,500	140
Norfolk Southern Corp.	1,550	84
Union Pacific Corp.	1,050	132
		485
Semiconductors & Semiconductor Equipment (1.2%)
Applied Materials, Inc.	24,563	479
Broadcom Corp., Class A	(a)9,130	176
Intel Corp.	103,850	2,200
MEMC Electronic Materials, Inc.,	(a)3,800	269
NVIDIA Corp.	(a)11,300	224
Texas Instruments, Inc.	26,078	737
		4,085
Software (0.5%)
Adobe Systems, Inc.	(a)1,900	68
Electronic Arts, Inc.	(a)1,200	60
Microsoft Corp.	26,400	749
Oracle Corp.	(a)13,100	256
Symantec Corp.	(a)3,600	60
VMware, Inc., Class A	(a)9,226	395
		1,588
Specialty Retail (0.3%)
Abercrombie & Fitch Co., Class A	12,735	931
Textiles, Apparel & Luxury Goods (0.4%)
Coach, Inc.	(a)33,427	1,008
Nike, Inc., Class B	7,000	476
		1,484

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

15

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

		Value
	Shares	(000)
Thrifts & Mortgage Finance (0.0%)
Fannie Mae	2,900	$	76
Freddie Mac	2,100	53
Washington Mutual, Inc.	2,800	29
		158
Tobacco (1.1%)
Altria Group, Inc.	46,091	1,023
ITC Ltd. GDR	14,728	76
Philip Morris Finance Ltd.	(a)46,091	2,331
Reynolds American, Inc.	3,500	207
		3,637
Transportation Infrastructure (0.2%)
China Merchants Holdings International Co. Ltd.	126,000	603
Wireless Telecommunication Services (1.0%)
America Movil S.A. de C.V., Series L ADR	20,126	1,282
American Tower Corp., Class A	(a)3,800	149
China Mobile Ltd. ADR	10,123	759
Mobile Telesystems OJSC ADR	7,400	561
Vimpel-Communications ADR	18,200	544
		3,295
Total Common Stocks (Cost $154,572)		168,035
Investment Companies (5.0%)
Aeroplan Income Fund	35,618	633
iShares MSCI EMU Index Fund	100	11
iShares MSCI Hong Kong Index Fund	84,200	1,511
iShares MSCI United Kingdom Index Fund	77,800	1,677
Morgan Stanley Institutional Fund, Inc. — Emerging Markets Portfolio, Class I	(p)294,848	8,616
StreetTRACKS Gold Trust	48,600	4,393
Total Investment Companies (Cost $17,768)		16,841
Preferred Stocks (0.0%)
Mortgages — Other (0.0%)
Harborview NIM Corp., 3.15%	(e)215,892	70
Home Ownership Funding Corp., 13.33%	(e)500	77
Total Preferred Stocks (Cost $261)		147
Short-Term Investments (24.3%)
Securities held as Collateral on Loaned Securities (1.3%)
Investment Company (0.4%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)1,226,384	1,226

	Face
	Amount
	(000)
Short-Term Debt (0.9%)
Alliance & Leicester plc,
3.08%, 9/2/08	$	(h)109	109
Bancaja,
4.04%, 11/12/08	(h)54		54
Bank of New York Co., Inc.,
3.07%, 8/8/08	(h)55		55
BASF AG,
3.89%, 8/19/08		(h)54		54
CAM US Finance S.A. Unipersonal,
4.71%, 7/25/08	(h)218		218
Canadian Imperial Bank of Commerce, New York,
2.42%, 7/28/08	(h)109		109
CIT Group Holdings,
3.97%, 5/19/08	(h)196		196
Citigroup Global Markets Holdings, Inc.,
3.01%, 4/1/08	757		757
First Tennessee Bank,
2.84%, 8/15/08	(h)54		54
2.85%, 8/15/08	(h)218		218
Goldman Sachs Group, Inc.,
2.89%, 9/12/08	(h)55		55
HSBC Finance Corp.,
3.10%, 8/5/08	(h)55		55
IBM Corp.,
3.09%, 9/8/08	(h)218		218
Macquarie Bank Ltd.,
2.62%, 8/20/08	(h)109		109
Metropolitan Life Global Funding,
2.59%, 8/21/08	(h)163		163
National Bank of Canada,
3.11%, 4/2/08	(h)218		218
National Rural Utilities Cooperative Finance Corp.,
3.13%, 9/2/08	(h)218		218
Nationwide Building Society,
2.75%, 7/28/08	(h)126		126
Unicredito Italiano Bank (Ireland) plc,
2.84%, 8/14/08	(h)120		120
3.09%, 8/8/08	(h)76		76
			3,182
			4,408

	Shares
Investment Company (22.9%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)77,904,778	77,905

	Face
	Amount
	(000)
U.S. Treasury Security (0.1%)
U.S. Treasury Bill,
0.73%, 4/10/08	$	(j)(r)210	210
Total Short-Term Investments (Cost $82,523)			82,523
Total Investments (104.9%) (Cost $351,532) — Including $5,253 of Securities Loaned			(s)356,435
Liabilities in Excess of Other Assets (-4.9%)			(16,710		)
Net Assets (100%)			$	339,725

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

16

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

(a)	Non-income producing security.
(c)	All or a portion of security on loan at March 31, 2008.
(d)	Security was valued at fair value — At March 31, 2008, the Portfolio held $83,000 of fair valued securities, representing less than 0.05% of net assets.
(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(i)	Security is subject to delayed delivery.
(j)	All or a portion of the security was pledged to cover margin requirements for futures contracts.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The interest rate shown is the rate in effect at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Fund, Inc. — Emerging Markets Portfolio — Class I and Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
(s)	The approximate market value and percentage of the investments, $7,357,000 and 2.1%, 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.
@	Value is less than $500.
ADR	American Depositary Receipt
GDR	Global Depositary Receipt
Inv Fl	Inverse Floating Rate — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at March 31, 2008.
IO	Interest Only
JPY	Japanese Yen
MXN	Mexican Peso
PAC	Planned Amortization Class
PO	Principal Only
TBA	To Be Announced

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)
EUR	551	$	869	5/14/08	USD	803	$	803	$	(66	)
USD	3,443	3,443		6/12/08	AUD	3,806	3,445		2
USD	10,703	10,703		7/16/08	CNY	74,294	10,962		259
USD	17,056	17,056		7/16/08	CNY	117,968	17,407		351
USD	3,660	3,660		6/12/08	EUR	2,397	3,772		112
USD	7,268	7,268		6/12/08	JPY	748,646	7,541		273
		$	42,999				$	43,930	$	931

AUD — Australian Dollar

CNY — Chinese Renminbi

EUR — Euro

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:
Australian Dollar 10 yr. Bond	38	$	25,121	Jun-08	$	(12	)
British Pound Long Gilt	24	5,301		Jun-08	140
Dow Jones Euro Stoxx 50 Index	9	504		Jun-08	@—
EuroDollar CME	6	1,466		Jun-08	44
EuroDollar CME	7	1,713		Sep-08	55
EuroDollar CME	7	1,712		Dec-08	54
EuroDollar CME	9	2,201		Mar-09	70
EuroDollar CME	10	2,441		Jun-09	51
Hong Kong Dollar H-Shares	41	3,152		Apr-08	195
Japanese Yen 10 yr. Mini JGB	6	846		Jun-08	8
MSCI Singapore	15	810		Apr-08	(@—		)
S&P 500 Emini (U.S. Dollar)	365	24,163		Jun-08	525
SGX CNX Nifty	374	3,527		Apr-08	(91		)
U.S. Treasury 2 yr. Note	2	429		Jun-08	2
U.S. Treasury 5 yr. Note	109	12,451		Jun-08	176
U.S. Treasury 10 yr. Note	130	15,464		Jun-08	568
U.S. Treasury Long Bond	12	1,426		Jun-08	47
Short:
EuroDollar CME	7	1,705		Sep-09	(35		)
EuroDollar CME	6	1,457		Dec-09	(27		)
EuroDollar CME	7	1,697		Mar-10	(30		)
EuroDollar CME	5	1,209		Jun-10	(19		)
EuroDollar CME	4	965		Sep-10	(14		)
EuroDollar CME	3	722		Dec-10	(9		)
Russell Mini Index	49	3,381		Jun-08	(190		)
S&P Mid 400 Emini	44	3,439		Jun-08	(162		)
Japanese Yen Topix Index	2	244		Jun-08	3

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

17

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

Futures Contracts (cont’d):

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

	Number of Contracts	Value (000)		Expiration Date	Net Unrealized Appreciation (Depreciation) (000)
U.S. Treasury 2 yr. Note	31	$	6,654	Jun-08	$	(5	)
U.S. Treasury 10 yr. Note	117	13,918		Jun-08	(388		)
U.S. Treasury Long Bond	15	1,782		Jun-08	(44		)
10 yr. Swap	5	576		Jun-08	(14		)
					$	898

CME       Chicago Mercantile Exchange

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Bank of America	Buy	$	50	1.57	%	3/20/18	$	(1	)
Carnival Corp, 6.65%, 1/15/28
Bank of America	Buy	70		0.70		3/20/13	(1		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	45		0.82		3/20/18	(1		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	65		1.03		3/20/18	2
Nordstrom, Inc., 6.95%, 3/15/28
Bank of America	Buy	25		1.08		3/20/18	1
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	65		1.12		3/20/18	2
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	55		0.80		3/20/18	3
Textron Financial Corp., 5.13%, 2/3/11
Bank of America	Buy	220		1.19		3/20/12	(3		)
The Gap, Inc., 8.80%, 12/15/08
Bank of America	Buy	75		1.25		3/20/13	(1		)
Yum! Brands, Inc., 8.88%, 4/15/11
Citigroup	Buy	45		0.82		3/20/18	@—
Eaton Corp., 7.65%, 11/15/29
Citigroup	Buy	85		0.62		3/20/13	1
Textron Financial Corp., 7.65%, 11/15/29
Citigroup	Buy	50		0.72		3/20/13	@—
Textron Financial Corp., 7.65%, 11/15/29
Citigroup	Buy	225		0.43		3/20/12	5
Tyco International Ltd., Zero Coupon, 11/17/20
Citigroup	Buy	430		0.43		3/20/12	9
Tyco International Ltd., Zero Coupon, 11/17/20
Credit Suisse	Buy	110		1.00		3/20/15	1
Arrow Electronics, Inc., 6.88%, 6/1/18
Goldman Sachs	Buy	40		0.50		3/20/18	@—
American Standard, Inc., 7.63%, 2/15/10
Goldman Sachs	Buy	85		3.05		3/20/13	(1		)
AvalonBay Communities, Inc., 6.13%, 11/1/12

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

18

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Goldman Sachs	Buy	$	175	0.59	%	3/20/13	$	(@—	)
Coca-Cola Enterprise, Inc., 6.13%, 8/15/11
Goldman Sachs	Buy	185		0.22		3/20/12	3
Dell Inc., 7.10%, 4/15/28
Goldman Sachs	Sell	95		0.60		12/20/12	(1		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Sell	185		0.80		12/20/17	(1		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Sell	180		1.40		12/20/12	(4		)
Dow Jones CDX North America Investment Grade High Volatility Index, Series 9
Goldman Sachs	Sell	380		1.40		12/20/12	(7		)
Dow Jones CDX North America Investment Grade High Volatility Index, Series 9
Goldman Sachs	Sell	180		1.40		12/20/12	(4		)
Dow Jones CDX North America Investment Grade High Volatility Index, Series 9
Goldman Sachs	Sell	175		1.40		12/20/12	(4		)
Dow Jones CDX North America Investment Grade High Volatility Index, Series 9
Goldman Sachs	Buy	40		0.97		3/20/18	(@—		)
Eaton Corp., 7.65%, 11/15/29
Goldman Sachs	Buy	55		0.47		3/20/18	1
Goodrich Corp., 7.63%, 12/15/12
Goldman Sachs	Buy	120		0.15		12/20/11	11
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	250		0.16		12/20/11	23
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	50		3.33		3/20/13	@—
ProLogis, 5.50%, 3/1/13
Goldman Sachs	Buy	65		1.08		3/20/18	2
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	30		1.24		3/20/18	1
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	100		1.05		3/20/13	2
Textron Financial Corp., 5.13%, 2/3/11
Goldman Sachs	Buy	370		0.10		3/20/12	7
The Chubb Corp., 6.00%, 11/15/11
Goldman Sachs	Buy	350		0.12		12/20/11	15
The Hartford Financial Services Group, Inc., 4.75%, 3/1/14
JPMorgan Chase	Sell	380		0.60		12/20/12	(1		)
Dow Jones CDX North America Investment Grade Index, Series 9
JPMorgan Chase	Buy	35		0.60		3/20/13	@—
Eaton Corp., 7.65%, 11/15/29
JPMorgan Chase	Buy	55		1.07		3/20/18	1
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	55		1.15		3/20/18	1
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	45		0.58		3/20/13	(@—		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	65		0.63		3/20/13	(@—		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29

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

19

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
JPMorgan Chase	Buy	$	55	4.95	%	3/20/13	$	(6	)
SLM Corp., 5.13%, 8/27/12
Lehman Brothers	Sell	185		0.60		12/20/12	(3		)
Dow Jones CDX North America Investment Grade Index, Series 9
Lehman Brothers	Sell	85		0.60		12/20/12	(1		)
Dow Jones CDX North America Investment Grade Index, Series 9
Lehman Brothers	Buy	1,450		0.75		12/20/11	116
Dow Jones CDX North America Investment Grade High Volatility Index, Series 7
Lehman Brothers	Buy	65		0.45		3/20/18	1
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	45		0.46		3/20/18	1
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	175		0.20		12/20/11	2
Union Pacific Corp., 6.13%, 1/15/12
Merrill Lynch	Buy	75		1.50		3/20/18	(1		)
Carnival Corp, 6.65%, 1/15/28
Merrill Lynch	Buy	45		1.57		3/20/18	(1		)
Carnival Corp, 6.65%, 1/15/28
Merrill Lynch	Buy	30		1.60		3/20/18	(1		)
Carnival Corp, 6.65%, 1/15/28
Merrill Lynch	Buy	80		0.92		3/20/18	(@—		)
Eaton Corp., 7.65%, 11/15/29
Merrill Lynch	Buy	55		5.00		3/20/13	(6		)
SLM Corp., 5.13%, 8/27/12
UBS	Buy	100		0.50		3/20/13	1
American Standard, Inc., 7.63%, 2/15/10
UBS	Buy	105		0.60		3/20/18	1
American Standard, Inc., 7.63%, 2/15/10
UBS	Buy	85		1.78		3/20/13	1
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	85		1.73		3/20/18	2
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	40		1.00		3/20/13	1
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	40		1.01		3/20/13	1
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	95		1.06		3/20/13	(@—		)
Textron Financial Corp., 5.13%, 2/3/11
							$	169

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	5,180	$	68
	3 Month LIBOR	Pay	5.59		2/19/18	2,550		54
	3 Month LIBOR	Receive	5.82		2/12/23	6,650		(67		)
	3 Month LIBOR	Receive	6.03		2/19/23	3,295		(53		)

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

20

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Balanced Portfolio

Interest Rate Swap Contracts (cont’d)

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Citigroup	3 Month LIBOR	Pay	5.33	%	5/22/17	$	1,150	$	138
	3 Month LIBOR	Pay	5.37		5/23/17	1,850		227
	3 Month LIBOR	Pay	5.44		5/29/17	1,495		192
	3 Month LIBOR	Receive	5.29		9/28/17	700		(71		)
	3 Month LIBOR	Receive	5.00		11/13/17	450		(41		)
	3 Month LIBOR	Receive	4.73		12/27/17	1,075		(72		)
	3 Month LIBOR	Pay	4.47		1/10/18	800		26
Deutsche Bank	3 Month LIBOR	Pay	5.39		5/25/17	4,175		519
	3 Month LIBOR	Pay	5.43		5/29/17	2,750		350
Goldman Sachs	3 Month LIBOR	Pay	5.34		5/24/17	4,250		512
	3 Month LIBOR	Pay	5.57		2/27/18	2,585		52
	3 Month LIBOR	Pay	5.63		2/28/18	5,110		115
	3 Month LIBOR	Receive	6.04		2/25/23	6,555		(107		)
	3 Month LIBOR	Receive	5.96		2/27/23	3,315		(47		)
JPMorgan Chase	3 Month LIBOR	Pay	5.37		5/23/17	650		80
	3 Month LIBOR	Pay	5.09		9/11/17	2,550		219
	3 Month LIBOR	Pay	5.16		9/20/17	1,050		97
	3 Month LIBOR	Receive	5.23		9/27/17	1,200		(116		)
	3 Month LIBOR	Receive	5.30		9/28/17	1,400		(143		)
	3 Month LIBOR	Pay	5.25		10/11/17	1,250		141
	3 Month LIBOR	Receive	5.02		11/13/17	700		(65		)
	3 Month LIBOR	Pay	4.48		1/8/18	1,000		33
	3 Month LIBOR	Pay	4.24		1/22/18	800		(11		)
	3 Month LIBOR	Receive	4.52		2/19/18	800		(30		)
	3 Month LIBOR	Receive	4.62		2/22/18	1,000		(46		)
								$	1,954

LIBOR — London Inter Bank Offer Rate

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

* Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are in the category labeled “Other.”

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

21

2008 Semi-Annual Report

March 31, 2008 (Unaudited)

Portfolio of Investments

Equities Plus Portfolio

	Face Amount (000)		Value (000)
Fixed Income Securities (85.7%)
Agency Adjustable Rate Mortgages (17.0%)
Federal National Mortgage Association,
6.37%, 7/1/35 - 3/1/36	$	1,110	$	1,139
6.80%, 7/1/36	1,576		1,615
6.81%, 8/1/36	612		627
			3,381
Collateralized Mortgage Obligations — Non Agency Collateral Series (12.5%)
Bear Stearns Structured Products, Inc.,
IO
2.11%, 6/26/36	(e)6,774		85
2.22%, 1/27/37	1,627		20
2.29%, 1/27/37	(e)1,926		21
2.43%, 1/27/37	2,700		34
3.18%, 5/25/37	(e)9,145		229
Countrywide Alternative Loan Trust,
IO
0.84%, 10/25/35	2,712		80
0.91%, 9/25/35	3,320		86
2.40%, 12/20/46	5,985		291
2.83%, 2/20/47	10,933		531
2.86%, 3/20/47	8,061		417
4.15%, 8/25/46	(h)1,827		81
6.40%, 7/20/46	1,198		56
Countrywide Home Loan Mortgage Pass Through Trust,
IO
0.34%, 2/25/35	1,211		29
2.46%, 9/25/34	(h)1,122		19
2.72%, 2/25/35	(h)1,239		24
Harborview Mortgage Loan Trust,
IO
4.06%, 7/19/46	(h)967		39
PO
7/19/47	@—		@—
Harborview NIM Corp.,
IO
3.15%, 12/15/36	(e)(h)154		50
Residential Accredit Loans, Inc.,
Zero Coupon, 3/25/47	(e)807		20
Zero Coupon, 5/25/47	(e)4,737		118
Washington Mutual, Inc.,
IO
0.62%, 9/25/46	3,580		37
0.66%, 1/25/45	4,307		73
0.68%, 7/25/46	8,337		87
1.25%, 6/25/46	2,908		62
			2,489
Finance (0.8%)
Capmark Financial Group, Inc.,	(e)40		25
5.88%, 5/10/12
6.30%, 5/10/17	(e)20		12
Popular North America, Inc.,
5.65%, 4/15/09	55		55
Wachovia Capital Trust III,
5.80%		(h)(o)85		61
			153
Industrials (0.6%)
Telecom Italia Capital S.A.,
4.00%, 11/15/08	65		64
Viacom, Inc.,
5.75%, 4/30/11	(c)60		61
			125
Mortgages — Other (54.6%)
American Home Mortgage Assets,
2.91%, 10/25/46	(h)279		139
Bear Stearns Mortgage Funding Trust,
2.81%, 12/25/36	(h)745		568
Countrywide Alternative Loan Trust,
2.79%, 11/25/46	(h)701		536
2.82%, 3/20/47	(h)313		150
2.83%, 7/25/46	(h)792		495
2.84%, 12/20/46	(h)279		135
2.92%, 11/20/35	(h)571		399
5.78%, 2/25/36	(h)485		315
6.37%, 11/25/35	(h)438		333
Deutsche ALT-A Securities, Inc., Alternate Loan Trust,
5.16%, 2/25/47	(h)88		48
Downey Savings & Loan Association Mortgage Loan Trust,
2.74%, 3/19/37	(h)813		495
Federal Home Loan Mortgage Corp.,
3.48%, 10/15/22	(h)39		38
3.53%, 3/15/22 - 10/15/22	(h)98		98
Federal National Mortgage Association,
3.18%, 12/25/21	(h)67		66
3.22%, 11/25/20	(h)17		17
3.37%, 10/25/22	(h)41		41
GS Mortgage Securities Corp.,
6.25%, 8/25/46	(e)30		29
Harborview Mortgage Loan Trust,
2.77%, 11/19/36	(h)223		170
2.89%, 9/19/35	(h)617		479
2.90%, 1/19/36	(h)430		280
Harborview NIM Corp.,
6.41%, 12/19/36 - 3/19/38	(e)70		70
Lehman XS Trust,
2.94%, 2/25/46	(h)594		372
Luminent Mortgage Trust,
2.80%, 10/25/46	(h)712		542
2.83%, 5/25/46	(h)558		359
2.84%, 4/25/36 - 5/25/36	(h)1,168		815
2.88%, 2/25/46	(h)605		389
Mastr Adjustable Rate Mortgages Trust,
2.85%, 4/25/46	(h)492		307
Novastar Mortgage Backed Notes,
2.84%, 9/25/46	(h)549		347
Residential Accredit Loans, Inc.,
2.80%, 1/25/37	(h)819		519

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

22

2008 Semi-Annual Report

March 31, 2008 (Unaudited)

Portfolio of Investments (cont’d)

Equities Plus Portfolio

	Face
	Amount		Value
	(000)		(000)
Mortgages — Other (cont’d)
2.83%, 5/25/46	$	(h)807	$	490
2.87%, 2/25/46	(h)620		385
Sharp SP I, LLC Net Interest Margin Trust,
7.00%, 10/25/46	(e)43		43
Structured Asset Mortgage Investments, Inc.,
2.83%, 6/25/36	(h)569		359
2.87%, 4/25/36	(h)554		355
Washington Mutual, Inc.,
2.88%, 6/25/46	(h)78		38
2.90%, 10/25/46	(h)80		39
2.94%, 11/25/45	(h)414		290
2.96%, 10/25/45	(h)368		253
5.27%, 4/25/46	(h)134		74
			10,877
Utilities (0.2%)
Kinder Morgan Finance Co.,
5.70%, 1/5/16	(c)40		38
Total Fixed Income Securities (Cost $22,600)			17,063

	Shares
Short-Term Investments (12.1%)
Securities held as Collateral on Loaned Securities (0.5%)
Investment Company (0.1%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)28,422		28
	Face
	Amount
	(000)
Short-Term Debt (0.4%)
Alliance & Leicester plc,
3.08%, 9/2/08	$	(h)2	2
Bancaja,
4.04%, 11/12/08	(h)1		1
Bank of New York Co., Inc.,
3.07%, 8/8/08	(h)1		1
BASF AG,
3.89%, 8/19/08	(h)1		1
CAM US Finance S.A. Unipersonal,
4.71%, 7/25/08	(h)5		5
Canadian Imperial Bank of Commerce, New York,
2.42%, 7/28/08	(h)3		3
CIT Group Holdings,
3.97%, 5/19/08	(h)5		5
Citigroup Global Markets Holdings, Inc.,
3.01%, 4/1/08	18		18
First Tennessee Bank,
2.84%, 8/15/08	(h)1		1
2.85%, 8/15/08	(h)5		5
Goldman Sachs Group, Inc.,
2.89%, 9/12/08	(h)1		1
HSBC Finance Corp.,
3.10%, 8/5/08	(h)1		1
IBM Corp.,
3.09%, 9/8/08		(h)5		5
Macquarie Bank Ltd.,
2.62%, 8/20/08	(h)3		3
Metropolitan Life Global Funding,
2.59%, 8/21/08	(h)4		4
National Bank of Canada,
3.11%, 4/2/08	(h)5		5
National Rural Utilities Cooperative Finance Corp.,
3.13%, 9/2/08	(h)5		5
Nationwide Building Society,
2.75%, 7/28/08	(h)3		3
Unicredito Italiano Bank (Ireland) plc,
2.84%, 8/14/08	(h)2		2
3.09%, 8/8/08	(h)3		3
			74
			102

	Shares
Investment Company (11.6%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)2,319,523	2,320
Total Short-Term Investments (Cost $2,422)		2,422
Total Investments (97.8%) (Cost $25,022) — Including $101 of Securities Loaned		19,485
Other Assets in Excess of Liabilities (2.2%)		430
Net Assets (100%)		$	19,915

(c)	All or a portion of security on loan at March 31, 2008.
(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The interest rate shown is the rate in effect at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
@	Face Amount/Value is less than $500.
IO	Interest Only
PO	Principal Only

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

23

2008 Semi-Annual Report

March 31, 2008 (Unaudited)

Portfolio of Investments (cont’d)

Equities Plus Portfolio

Futures Contracts:

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

	Number				Net Unrealized Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
EuroDollar CME	23	$	5,614	Jun-09	$	117
S&P 500 Index	63	20,853		Jun-08	463
U.S. Treasury 5 yr. Note	9	1,028		Jun-08	12
5 yr. Swap	12	1,343		Jun-08	7
Short:
EuroDollar CME	13	3,176		Jun-08	(69		)
EuroDollar CME	12	2,937		Sep-08	(66		)
EuroDollar CME	9	2,201		Dec-08	(48		)
EuroDollar CME	6	1,467		Mar-09	(33		)
EuroDollar CME	8	1,949		Sep-09	(40		)
EuroDollar CME	6	1,457		Dec-09	(27		)
EuroDollar CME	7		1,697	Mar-10		(30	)
EuroDollar CME	5	1,209		Jun-10	(19		)
EuroDollar CME	5	1,206		Sep-10	(18		)
EuroDollar CME	4	963		Dec-10	(13		)
S&P 500 Emini	8	530		Jun-08	(8		)
U.S. Treasury 2 yr. Note	43	9,230		Jun-08	(26		)
U.S. Treasury 10 yr. Note	54	6,423		Jun-08	(185		)
U.S. Treasury Long Bond	5	594		Jun-08	(12		)
10 yr. Swap	6	691		Jun-08	(17		)
					$	(12	)

CMEChicago Mercantile Exchange

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

		Notional					Unrealized Appreciation
	Buy/Sell	Amount		Pay/Receive		Termination	(Depreciation)
Swap Counterparty and Reference Obligation	Protection	(000)		Fixed Rate		Date	(000)
Goldman Sachs General Motors Acceptance Corp., 6.88%, 8/28/12	Sell	$	65	3.08	%	6/20/11	$	(15	)
Goldman Sachs
Eli Lilly Co., 6.57%, 1/1/16	Buy	15		0.33		3/20/13	@—
UBS
Eli Lilly Co., 6.57%, 1/1/16	Buy	50		0.30		3/20/13	@—
							$	(15	)

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Receive	5.82	%	2/12/23	$	1,985	$	(20	)
	3 Month LIBOR	Pay	5.37		2/12/18	1,550		21
Citigroup	3 Month LIBOR	Pay	4.95		11/06/17	2,100		186
Goldman Sachs	3 Month LIBOR	Pay	6.06		2/19/23	1,010		(17		)
	3 Month LIBOR	Pay	5.62		2/19/18	780		17
	3 Month LIBOR	Pay	5.63		2/28/18	1,625		37
	3 Month LIBOR	Receive	6.04		2/25/23	2,085		(34		)
JPMorgan Chase	3 Month LIBOR	Pay	5.38		5/24/17	3,600		445
								$	635

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

24

2008 Semi-Annual Report

March 31, 2008 (Unaudited)

Portfolio of Investments (cont’d)

Equities Plus Portfolio

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

*Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

25

2008 Semi-Annual Report

March 31, 2008 (Unaudited)

Portfolio of Investments

Mid Cap Growth Portfolio

	Shares	Value (000)
Common Stocks (96.8%)
Auto & Transportation (5.4%)
C.H. Robinson Worldwide, Inc.	1,638,897	$	89,156
Expeditors International Washington, Inc.	1,515,106	68,452
UAL Corp.	880,653	18,960
		176,568
Consumer Discretionary (36.1%)
Abercrombie & Fitch Co.	1,252,102	91,579
Apollo Group, Inc., Class A	(a)690,434	29,827
Choice Hotels International, Inc.	950,395	32,418
Coach, Inc.	(a)1,779,900	53,664
Corporate Executive Board Co.	1,159,577	46,940
Ctrip.com International Ltd. ADR	1,325,464	70,276
Discovery Holding Co., Class A	(a)2,224,800	47,210
Focus Media Holding Ltd. ADR	(a)763,531	26,838
Grupo Televisa S.A. ADR	2,194,521	53,195
Iron Mountain, Inc.	(a)1,545,798	40,871
Lamar Advertising Co., Class A	(a)1,017,052	36,543
Leucadia National Corp.	1,891,465	85,532
Li & Fung Ltd.	20,434,000	76,457
Lululemon Athletica, Inc.	(a)1,150,936	32,721
Marriott International, Inc., Class A	1,441,959	49,546
Monster Worldwide, Inc.	(a)1,591,992	38,542
Morningstar, Inc.	(a)740,351	45,420
New Oriental Education & Technology Group ADR	(a)505,727	32,801
Priceline.com, Inc.	(a)574,003	69,374
Starbucks Corp.	(a)4,196,463	73,438
Wynn Resorts Ltd.	1,430,675	143,983
		1,177,175
Energy (13.2%)
Questar Corp.	962,674	54,449
Range Resources Corp.	622,087	39,471
Southwestern Energy Co.	(a)3,907,696	131,650
Ultra Petroleum Corp.	(a)2,670,073	206,931
		432,501
Financial Services (8.0%)
Alleghany Corp.	(a)108,311	36,988
Brookfield Asset Management, Inc., Class A	1,369,569	36,746
Calamos Asset Management, Inc., Class A	1,147,705	18,685
Covanta Holding Corp.	(a)1,284,915	35,335
Forest City Enterprises, Inc., Class A	1,248,021	45,927
GLG Partners, Inc.	(a)2,585,558	30,691
IntercontinentalExchange, Inc.	(a)435,303	56,807
		261,179
Health Care (9.4%)
Allergan, Inc.	769,252	43,378
Gen-Probe, Inc.	(a)963,735	46,452
Illumina, Inc.	(a)1,317,479	99,997
Stericycle, Inc.	(a)905,605	46,639
Techne Corp.	(a)1,059,559	71,372
		307,838
Materials & Processing (6.7%)
Aecom Technology Corp.	(a)936,928	24,369
Grupo Aeroportuario del Pacifico S.A. de C.V. ADR	1,086,852		48,908
Martin Marietta Materials, Inc.	796,374	84,551
Mohawk Industries, Inc.	(a)418,148	29,944
Texas Industries, Inc.	498,442	29,961
		217,733
Producer Durables (4.3%)
Gafisa S.A. ADR	(a)1,332,920	44,466
Nalco Holding Co.	3,039,976	64,295
NVR, Inc.	(a)53,773	32,129
		140,890
Technology (12.6%)
Akamai Technologies, Inc.	(a)1,073,245	30,223
Alibaba.com Ltd.	(a)19,519,600	40,920
Baidu.com ADR	(a)317,152	75,999
Equinix, Inc.	(a)490,913	32,641
IHS, Inc., Class A	(a)847,287	54,489
NHN Corp.	(a)233,546	54,628
Salesforce.com, Inc.	(a)947,550	54,835
Tencent Holdings Ltd.	11,715,400	66,690
		410,425
Utilities (1.1%)
NII Holdings, Inc.	(a)1,171,928	37,244
Total Common Stocks (Cost $3,058,547)		3,161,553
Investment Company (2.5%)
Aeroplan Income Fund(Cost $73,098)	4,524,395	80,443
Short-Term Investment (0.7%)
Investment Company (0.7%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class(Cost $21,290)	(p)21,289,641	21,290
Total Investments (100.0%) (Cost $3,152,935)		(s)3,263,286
Other Assets in Excess of Liabilities (0.0%)		1,098
Net Assets (100%)		$	3,264,384

(a)	Non-income producing security.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(s)	The approximate market value and percentage of the investments, $238,695,000 and 7.3%, 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

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

26

2008 Semi-Annual Report

March 31, 2008 (Unaudited)

Portfolio of Investments (cont’d)

Mid Cap Growth Portfolio

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)
HKD	14,557	$	1,870	4/1/08	USD	1,870	$	1,870	$	@—
USD	762	762		4/1/08	HKD	5,930	762		@—
		$	2,632				$	2,632	$	@—

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

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

*Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

27

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

U.S. Mid Cap Value Portfolio

	Shares	Value (000)
Common Stocks (95.3%)
Consumer Discretionary (8.4%)
Apollo Group, Inc., Class A	(a)44,971	$	1,943
Macy’s, Inc.	112,800	2,601
Newell Rubbermaid, Inc.	140,410	3,211
Office Depot, Inc.	(a)279,040	3,084
Orbitz Worldwide, Inc.	(a)317,025	2,184
		13,023
Consumer Staples (8.9%)
ConAgra Foods, Inc.	203,050	4,863
Estee Lauder Cos., Inc. (The)	104,030	4,770
Rite Aid Corp.	(a)1,432,290	4,211
		13,844
Energy (8.5%)
El Paso Corp.	250,830	4,174
Hess Corp.	52,720	4,649
Newfield Exploration Co.	(a)83,680	4,422
		13,245
Financials (19.0%)
ACE Ltd.	81,280	4,475
Allied World Assurance Holdings Ltd.	51,418	2,041
Aspen Insurance Holdings Ltd.	160,380	4,231
CIT Group, Inc.	165,700	1,964
Hudson City Bancorp, Inc.	334,530	5,915
Invesco Ltd.	146,823	3,577
Marsh & McLennan Cos., Inc.	171,968	4,187
Northern Trust Corp.	45,576	3,029
		29,419
Health Care (10.5%)
Affymetrix, Inc.	(a)182,260	3,173
Beckman Coulter, Inc.	80,480	5,195
Healthsouth Corp.	(a)251,268	4,470
Owens & Minor, Inc.	88,520	3,482
		16,320
Industrials (11.4%)
Avery Dennison Corp.	65,000	3,201
Goodrich Corp.	59,130	3,400
Pentair, Inc.	136,920	4,368
Pitney Bowes, Inc.	110,510	3,870
Tata Motors Ltd. ADR	178,416	2,787
		17,626
Information Technology (11.3%)
Diebold, Inc.	159,200	5,978
Flextronics International Ltd.	(a)376,087	3,532
Perot Systems Corp.	(a)284,530	4,279
Zebra Technologies Corp.	(a)113,592	3,785
		17,574
Materials (7.6%)
Domtar Corp.	(a)707,900	4,835
International Flavors & Fragrances, Inc.	74,330	3,274
Valspar Corp.	183,510	3,641
		11,750
Utilities (9.7%)
American Electric Power Co., Inc.	101,090		4,208
DPL, Inc.	143,940	3,691
NRG Energy, Inc.	(a)78,400	3,057
Wisconsin Energy Corp.	91,540	4,027
		14,983
Total Common Stocks (Cost $158,060)		147,784
Investment Company (1.9%)
Market Vectors Gold Miners ETF(Cost $2,732)	61,600	2,941
Short-Term Investment (3.2%)
Investment Company (3.2%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class (Cost $4,970)	(p)4,970,195	4,970
Total Investments (100.4%) (Cost $165,762)		155,695
Liabilities in Excess of Other Assets (-0.4%)		(555		)
Net Assets (100%)		$	155,140

(a)	Non-income producing security.
(p)	See Note F within the Notes to Financial Statements regardinginvestment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
ADR	American Depositary Receipt

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

*Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

28

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

U.S. Small Cap Value Portfolio

		Value
	Shares	(000)
Common Stocks (94.6%)
Autos & Transportation (3.8%)
AAR Corp.	(a)513,371	$	13,999
Forward Air Corp.	215,600	7,641
Pacer International, Inc.	500,300	8,220
		29,860
Consumer Discretionary (18.2%)
AFC Enterprises, Inc.	(a)632,600	5,687
Brink’s Co. (The)	244,200	16,405
Central Garden & Pet Co.	(a)352,064	1,623
Cenveo, Inc.	(a)878,909	9,193
Chemed Corp.	17,700	747
Consolidated Graphics, Inc.	(a)210,400	11,793
Denny’s Corp.	(a)2,665,180	7,942
Dolan Media Co.	(a)152,800	3,073
IKON Office Solutions, Inc.	1,111,363	8,446
Lin TV Corp., Class A	(a)554,000	5,324
Maidenform Brands, Inc.	(a)272,919	4,441
MAXIMUS, Inc.	905,670	33,247
Sinclair Broadcast Group, Inc., Class A	764,700	6,814
Stage Stores, Inc.	592,800	9,603
Tween Brands, Inc.	(a)289,300	7,157
Viad Corp.	311,900	11,232
		142,727
Energy — Other (2.7%)
Exterran Holdings, Inc.	(a)85,055	5,489
St. Mary Land & Exploration Co.	180,960	6,967
Superior Energy Services, Inc.	(a)217,030	8,599
		21,055
Financial Services (15.2%)
AerCap Holdings N.V.	(a)545,100	9,583
Amtrust Financial Services, Inc.	479,884	7,779
Anthracite Capital, Inc. REIT	410,300	2,708
Argo Group International Holdings Ltd.	(a)280,700	9,970
Conseco, Inc.	(a)1,080,400	11,020
Employers Holdings, Inc.	526,645	9,764
Integra Bank Corp.	223,100	3,614
LaSalle Hotel Properties REIT	227,700	6,542
Max Capital Group Ltd.	515,840	13,510
MB Financial, Inc.	136,300	4,195
National Financial Partners Corp.	158,700	3,566
Platinum Underwriters Holdings Ltd.	321,500	10,436
ProAssurance Corp.	(a)242,018	13,028
Provident New York Bancorp., Inc.	523,400	7,066
United America Indemnity Ltd., Class A	(a)350,388	6,749
		119,530
Health Care (8.5%)
Allscripts Healthcare Solutions, Inc.	(a)432,050	4,459
Apria Healthcare Group, Inc.	(a)362,430	7,158
Bio-Rad Laboratories, Inc., Class A	(a)123,234	10,962
Perrigo Co.	295,783	11,160
PharMerica Corp.	(a)383,200	6,349
Sciele Pharma, Inc.	(a)858,241	16,736
Valeant Pharmaceuticals International	(a)796,700		10,222
		67,046
Materials & Processing (15.4%)
Acuity Brands, Inc.	90,460	3,885
Aecom Technology Corp.	(a)205,800	5,353
Albany International Corp., Class A	346,600	12,526
CIRCOR International, Inc.	188,866	8,735
Corn Products International, Inc.	383,100	14,228
Cytec Industries, Inc.	200,500	10,797
Dayton Superior Corp.	(a)717,400	2,116
Hercules, Inc.	683,235	12,496
Polypore International, Inc.	(a)247,784	5,127
Rock-Tenn Co., Class A	584,000	17,503
Silgan Holdings, Inc.	171,400	8,507
Stantec, Inc.	(a)246,006	7,196
Zep, Inc.	787,630	12,775
		121,244
Producer Durables (11.4%)
ACCO Brands Corp.	(a)770,067	10,450
Actuant Corp., Class A	322,500	9,743
Belden, Inc.	595,298	21,026
Cognex Corp.	478,700	10,450
General Cable Corp.	(a)75,700	4,472
Moog, Inc., Class A	(a)259,200	10,941
MTC Technologies, Inc.	(a)546,027	12,984
TAL International Group, Inc.	395,602	9,324
		89,390
Technology (16.3%)
Adtran, Inc.	217,300	4,020
Cirrus Logic, Inc.	(a)1,055,747	7,095
DRS Technologies, Inc.	465,800	27,147
Electronics for Imaging	(a)1,021,700	15,244
Epicor Software Corp.	(a)429,200	4,807
Gartner, Inc.	(a)548,500	10,608
Microsemi Corp.	(a)217,400	4,957
MSC.Software Corp.	(a)1,027,820	13,351
Ness Technologies, Inc.	(a)711,102	6,748
Syniverse Holdings, Inc.	(a)806,150	13,430
Tekelec	(a)1,077,100	13,410
Zebra Technologies Corp.	(a)211,000	7,031
		127,848
Utilities (3.1%)
Avista Corp.	553,721	10,831
Portland General Electric Co.	346,000	7,802
UGI Corp.	246,600	6,145
		24,778
Total Common Stocks (Cost $718,557)		743,478
Investment Company (1.0%)
iShares Russell 2000 Value Index Fund (Cost $8,364)	119,800	7,855

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

29

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

U.S. Small Cap Value Portfolio

		Value
	Shares	(000)
Short-Term Investment (4.8%)
Investment Company (4.8%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class (Cost $37,955)	(p)37,955,288	$	37,955
Total Investments (100.4%) (Cost $764,876)		789,288
Liabilities in Excess of Other Assets (-0.4%)		(3,435		)
Net Assets (100%)		$	785,853

(a)	Non-income producing security.
(p)	See Note F within the Notes to Financial Statements regardinginvestment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
REIT	Real Estate Investment Trust

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

*       Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

30

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Value Portfolio

			Value
	Shares		(000)
Common Stocks (99.2%)
Consumer Discretionary (14.4%)
Comcast Corp., Class A	428,400		$	8,285
Home Depot, Inc.	52,100		1,457
J.C. Penney Co., Inc.	41,900		1,580
Liberty Media Corp. - Entertainment, Class A	(a)135,200		3,061
Liberty Media Corp. - Interactive, Class A	(a)154,900		2,500
Live Nation, Inc.	(a)1		@—
Lowe’s Cos., Inc.	68,700		1,576
Macy’s, Inc.	63,300		1,460
News Corp., Inc., Class B	(c)182,700		3,479
Time Warner, Inc.	479,300		6,720
Viacom, Inc., Class B	(a)228,850		9,067
			39,185
Consumer Staples (21.6%)
Altria Group, Inc.	75,500		1,676
Anheuser-Busch Cos., Inc.	55,750		2,645
Cadbury Schweppes plc ADR	(c)160,900		7,115
Coca-Cola Co. (The)	113,900		6,933
CVS Caremark Corp.	118,700		4,809
Kimberly-Clark Corp.	70,400		4,544
Kraft Foods, Inc., Class A	204,250		6,334
Philip Morris Institutional, Inc.	(a)75,500		3,819
Procter & Gamble Co.	36,500		2,558
Sara Lee Corp.	68,200		953
Unilever N.V. (NY shares)	214,500		7,235
Wal-Mart Stores, Inc.	195,900		10,320
			58,941
Financials (25.5%)
Aflac, Inc.	22,100		1,435
American International Group, Inc.	61,300		2,651
Bank of America Corp.	245,900		9,322
Bank of New York Mellon Corp. (The)	116,146		4,847
Barclays plc ADR	12,700		460
Berkshire Hathaway, Inc., Class B	(a)550		2,460
Chubb Corp.	139,480		6,901
Citigroup, Inc.	283,000		6,062
Fannie Mae	(c)24,500		645
Freddie Mac	(c)84,700		2,145
Genworth Financial, Inc.	41,900		949
Hartford Financial Services Group, Inc.	21,600		1,637
JPMorgan Chase & Co.	108,700		4,669
Merrill Lynch & Co., Inc.	50,500		2,057
MetLife, Inc.	52,000		3,133
PNC Financial Services Group, Inc.	45,600		2,990
Torchmark Corp.	32,700		1,966
Travelers Cos., Inc. (The)	46,615		2,230
U.S. Bancorp	59,400		1,922
Wachovia Corp.	(c)235,100		6,348
Wells Fargo & Co.	170,000		4,947
			69,776
Health Care (15.1%)
Abbott Laboratories	63,900		3,524
Boston Scientific Corp.	(a)166,800		2,147
Bristol-Myers Squibb Co.	357,400		7,612
Cardinal Health, Inc.	73,700		3,870
Eli Lilly & Co.	72,300		3,730
GlaxoSmithKline plc ADR	38,400		1,629
Pfizer, Inc.	224,600		4,701
Roche Holding A.G. ADR	10,100		954
Schering-Plough Corp.	252,600		3,640
UnitedHealth Group, Inc.	29,100		1,000
WellPoint, Inc.	(a)18,600		821
Wyeth	185,600		7,751
			41,379
Industrials (2.1%)
General Electric Co.	98,000		3,627
Southwest Airlines Co.	168,300		2,087
			5,714
Information Technology (6.5%)
Alcatel-Lucent ADR	160,200		923
Computer Sciences Corp.	(a)24,627		1,005
Dell, Inc.	(a)120,900		2,408
Flextronics International Ltd.	(a)66,600		625
Hewlett-Packard Co.	42,300		1,931
Intel Corp.	75,200		1,593
International Business Machines Corp.	34,800		4,007
KLA-Tencor Corp.	25,200		935
Microsoft Corp.	43,800		1,243
Telefonaktiebolaget LM Ericsson ADR	37,100		729
Texas Instruments, Inc.	32,600		922
Western Union Co. (The)	66,200		1,408
			17,729
Materials (8.9%)
Alcoa, Inc.	43,300		1,561
E.I. Du Pont de Nemours & Co.	157,600		7,369
International Paper Co.	466,723		12,695
Rohm & Haas Co.	52,400		2,834
			24,459
Telecommunication Services (5.1%)
AT&T, Inc.	138,400		5,301
Verizon Communications, Inc.	234,000		8,529
			13,830
Total Common Stocks (Cost $276,505)			271,013
Short-Term Investments (3.2%)
Securities held as Collateral on Loaned Securities (2.1%)
Investment Company (0.6%)
Morgan Stanley InstitutionalLiquidity Money Market Portfolio— Institutional Class	(p)1,540,114		1,540
	Face
	Amount
	(000)
Short-Term Debt (1.5%)
Alliance & Leicester plc,
3.08%, 9/2/08	$	(h)137	137

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

31

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Value Portfolio

	Face
	Amount		Value
	(000)		(000)
Short-Term Debt (cont’d)
Bancaja,
4.04%, 11/12/08	$	(h)68	$	68
Bank of New York Co., Inc.,
3.07%, 8/8/08	(h)68		68
BASF AG,
3.89%, 8/19/08	(h)68		68
CAM US Finance S.A. Unipersonal,
4.71%, 7/25/08	(h)274		274
Canadian Imperial Bank of Commerce, New York,
2.42%, 7/28/08	(h)137		137
CIT Group Holdings,
3.97%, 5/19/08	(h)246		246
Citigroup Global Markets Holdings, Inc.,
3.01%, 4/1/08	950		950
First Tennessee Bank,
2.84%, 8/15/08	(h)68		68
2.85%, 8/15/08	(h)274		274
Goldman Sachs Group, Inc.,
2.89%, 9/12/08	(h)68		68
HSBC Finance Corp.,
3.10%, 8/5/08	(h)68		68
IBM Corp.,
3.09%, 9/8/08	(h)274		274
Macquarie Bank Ltd.,
2.62%, 8/20/08	(h)137		137
Metropolitan Life Global Funding,
2.59%, 8/21/08	(h)205		205
National Bank of Canada,
3.11%, 4/2/08	(h)274		274
National Rural Utilities Cooperative Finance Corp.,
3.13%, 9/2/08	(h)274		274
Nationwide Building Society,
2.75%, 7/28/08	(h)159		159
Unicredito Italiano Bank (Ireland) plc,
2.84%, 8/14/08	(h)150		150
3.09%, 8/8/08	(h)96		96
			3,995
			5,535

	Shares
Investment Company (1.1%)
Morgan Stanley Institutional Liquidity Government Portfolio — Institutional Class	(p)3,120,384	3,120
Total Short-Term Investments (Cost $8,655)		8,655
Total Investments (102.4%) (Cost $285,160) — Including $5,490 of Securities Loaned		279,668
Liabilities in Excess of Other Assets (-2.4%)		(6,503		)
Net Assets (100%)		$	273,165

(a)	Non-income producing security.
(c)	All or a portion of security on loan at March 31, 2008.
(h)	Variable/Floating Rate Security — Interest rate changes on theseinstruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Government Portfolio — Institutional Class and Morgan Stanley Institutional Liquidity Money Market Portfolio —Institutional Class.
@	Value is less than $500.
ADR	American Depositary Receipt

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

*Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

32

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Core Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Fixed Income Securities (117.2%)
Agency Adjustable Rate Mortgages (3.6%)
Federal Home Loan Mortgage Corp.,
Conventional Pools:
5.61%, 4/1/37	$	1,397	$	1,420
5.70%, 1/1/37	1,888		1,929
5.83%, 10/1/36	1,329		1,359
5.97%, 1/1/37	753		768
Federal National Mortgage Association,
2.66%, 12/25/36	(h)1,042		1,000
Conventional Pools:
5.24%, 3/1/37	1,246		1,266
6.74%, 5/1/36	980		1,011
6.80%, 7/1/36	1,970		2,020
Government National Mortgage Association,
5.13%, 10/20/27 - 12/20/27	23		23
5.63%, 8/20/25 - 9/20/27	172		174
6.38%, 2/20/25 - 1/20/28	628		643
			11,613
Agency Fixed Rate Mortgages (42.7%)
Federal Home Loan Bank Discount Note,
Zero Coupon, 4/18/08	9,200		9,192
Federal Home Loan Mortgage Corp.,
5.13%, 11/17/17	(c)1,350		1,451
Conventional Pools:
5.00%, 4/15/38	11,600		11,486
5.50%, 4/15/37	16,250		16,410
6.00%, 4/1/35	15,400		15,792
10.00%, 10/1/12 - 11/1/20	17		20
11.50%, 8/1/19	19		23
Gold Pools:
5.50%, 5/1/37 - 10/1/37	15,965		16,140
6.00%, 8/1/37	7,864		8,073
6.50%, 2/1/29	82		86
7.50%, 2/1/30 - 6/1/32	459		498
8.00%, 10/1/29 - 6/1/31	382		418
8.50%, 8/1/30 - 7/1/31	172		190
10.00%, 6/1/17 - 3/1/21	62		69
Federal National Mortgage Association,
April TBA
4.50%, 4/25/23	(i)6,000		5,968
5.00%, 4/25/23	(i)9,950		9,962
5.50%, 4/25/37	(i)15,800		15,950
6.50%, 4/25/38	(i)2,400		2,486
7.00%, 4/25/38	(i)2,850		2,992
Conventional Pools:
5.00%, 8/1/37	4,178		4,139
5.50%, 4/1/34	426		432
6.50%, 7/1/29 - 2/1/33	1,702		1,778
7.00%, 3/1/29 - 10/1/34	6,439		6,826
7.50%, 7/1/29 - 9/1/35	2,454		2,649
8.00%, 4/1/25 - 6/1/32	1,750		1,897
8.50%, 5/1/23 - 5/1/32	1,217		1,341
9.00%, 4/1/26	296		325
9.50%, 2/1/20 - 8/1/21	138		155
10.00%, 8/1/18 - 2/1/25	24		28
10.50%, 1/1/10 - 10/1/18	28		32
11.00%, 9/1/19 - 9/1/20	34		41
11.50%, 11/1/19	33		39
Government National Mortgage Association,
Various Pools:
9.00%, 11/15/17	30		33
9.50%, 12/15/17 - 12/15/21	196		216
10.00%, 9/15/18 - 7/15/22	204		243
10.50%, 11/15/14 - 2/15/25	344		418
11.00%, 12/15/09 - 7/15/20	36		43
11.50%, 4/15/13 - 8/15/13	24		29
12.00%, 12/15/12 - 3/15/14	7		8
			137,878
Asset Backed Corporates (17.2%)
American Express Credit Account Master Trust,
2.82%, 10/15/12	(h)1,425		1,400
Argent Securities, Inc.,
2.64%, 10/25/36	(h)1,087		1,063
Banc of America Securities Auto Trust,
3.99%, 8/18/09	138		138
Bayview Financial Acquisition Trust,
2.79%, 11/28/36	(h)434		427
Bear Stearns Asset Backed Securities, Inc.,
2.70%, 1/25/37	(h)810		724
2.80%, 9/25/34	(h)22		22
2.82%, 3/25/35	(h)66		65
Capital Auto Receivables Asset Trust,
2.83%, 11/15/11	(h)1,600		1,578
2.88%, 7/15/10	(h)2,175		2,148
4.05%, 7/15/09	101		101
4.98%, 5/15/11	2,275		2,301
5.03%, 10/15/09	829		834
5.31%, 10/20/09	(e)2,700		2,716
Capital One Auto Finance Trust,
5.07%, 7/15/11	978		961
Caterpillar Financial Asset Trust,
5.57%, 5/25/10	1,052		1,063
CIT Equipment Collateral,
5.07%, 2/20/10	1,250		1,261
Citibank Credit Card Issuance Trust,
2.59%, 3/22/12	(h)1,725		1,695
Citicorp Residential Mortgage Securities, Inc.,
2.68%, 9/25/36	(h)601		590
CNH Equipment Trust,
4.27%, 1/15/10	413		414
5.20%, 6/15/10	825		833
Countrywide Asset Backed Certificates,
2.75%, 7/25/25	(h)211		208
DaimlerChrysler Auto Trust,
4.04%, 9/8/09	121		121
Fieldstone Mortgage Investment Corp.,
2.67%, 11/25/36	(h)1,391		1,315

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

33

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Asset Backed Corporates (cont’d)
First Franklin Mortgage Loan Asset Backed Certificates,
2.65%, 7/25/36	$	(h)749	$	725
2.67%, 2/25/36	(h)247		245
2.72%, 10/25/35	(h)61		60
Ford Credit Auto Owner Trust,
2.83%, 4/15/10	(h)3,008		2,999
5.26%, 10/15/10	2,150		2,174
Fremont Home Loan Owner Trust,
2.65%, 10/25/36	(h)1,354		1,305
GE Equipment Small Ticket, LLC,
4.38%, 7/22/09	(e)278		279
4.88%, 10/22/09	(e)571		571
GS Auto Loan Trust,
5.37%, 12/15/10	2,090		2,113
GSAMP Trust,
2.67%, 1/25/37	(h)814		761
Harley-Davidson Motorcycle Trust,
3.76%, 12/17/12	1,279		1,282
4.07%, 2/15/12	967		972
Hertz Vehicle Financing, LLC,
4.93%, 2/25/10	(e)825		815
Honda Auto Receivables Owner Trust,
3.87%, 4/20/09	165		165
4.85%, 10/19/09	504		507
Hyundai Auto Receivables Trust,
3.98%, 11/16/09	244		245
Long Beach Mortgage Loan Trust,
2.69%, 1/25/36	(h)21		21
MBNA Master Credit Card Trust USA,
7.80%, 10/15/12	1,480		1,597
National City Auto Receivables Trust,
2.88%, 5/15/11	437		437
Nationstar Home Equity Loan Trust,
2.67%, 9/25/36	(h)424		415
Nissan Auto Receivables Owner Trust,
3.99%, 7/15/09	304		304
Novastar Home Equity Loan,
2.67%, 11/25/36	(h)542		535
RAAC Series,
2.70%, 9/25/45	(h)38		38
Residential Asset Mortgage Products, Inc.,
2.67%, 6/25/29	(h)907		883
Residential Asset Securities Corp.,
2.68%, 10/25/36	(h)610		591
Securitized Asset Backed Receivables, LLC Trust,
2.68%, 11/25/36	(h)1,225		1,120
2.71%, 2/25/37	(h)1,381		1,223
2.73%, 5/25/37	(h)1,329		1,245
SLM Student Loan Trust,
3.32%, 10/25/14	(h)1,461		1,455
Soundview Home Equity Loan Trust,
2.68%, 1/25/37	(h)701		669
2.71%, 2/25/37	(h)1,156		1,078
Structured Asset Securities Corp.,
2.69%, 6/25/37	(h)1,222		1,112
Terwin Mortgage Trust,
2.71%, 4/25/37	(e)(h)480		474
TXU Electric Delivery Transition Bond Co.,
4.81%, 11/17/14	300		307
USAA Auto Owner Trust,
3.90%, 7/15/09	13		13
Volkswagen Auto Loan Enhanced Trust,
4.80%, 7/20/09	289		290
Wachovia Auto Owner Trust,
4.06%, 9/21/09	115		115
			51,118
Collateralized Mortgage Obligations — Agency Collateral Series (4.3%)
Federal Home Loan Mortgage Corp.,
Inv Fl IO
3.13%, 3/15/24	(h)440		38
Inv Fl IO PAC
5.73%, 10/15/29	(h)17		@—
IO
5.00%, 12/15/16	888		50
6.00%, 5/1/31	577		113
6.50%, 4/1/28 - 5/15/33	1,084		229
8.00%, 1/1/28 - 6/1/31	64		17
Federal National Mortgage Association,
5.00%, 6/25/35	760		761
Inv FI IO
4.73%, 2/17/31	(h)308		31
5.60%, 10/25/28	(h)297		16
IO
3.34%, 3/25/36	4,410		143
6.00%, 8/25/32 - 11/25/32	818		58
6.50%, 2/25/33 - 5/25/33	1,410		275
7.00%, 4/25/33	510		84
8.00%, 4/1/24 - 12/1/31	448		116
9.00%, 11/1/26	28		7
IO PAC
8.00%, 8/18/27	26		5
Government National Mortgage Association,
Inv Fl IO
4.76%, 9/16/31	(h)59		6
5.13%, 12/16/25 - 9/16/27	(h)563		74
5.78%, 8/16/29	(h)360		49
5.96%, 9/20/30	(h)67		8
			2,080
Collateralized Mortgage Obligations — Non Agency Collateral Series (6.8%)
Banc of America Commercial Mortgage, Inc.,
5.66%	(h)(o)1,450		1,434
5.69%	(h)(o)900		896
5.75%	(h)(o)1,625		1,619
Bear Stearns Commercial Mortgage Securities,
5.71%, 6/11/40	(c)(h)1,575		1,568

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

34

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Collateralized Mortgage Obligations — Non Agency Collateral Series (cont’d)
Citigroup Commercial Mortgage Trust,
5.70%	$	(h)(o)1,225	$	1,218
Commercial Mortgage Pass Through Certificates,
5.82%	(h)(o)1,150		1,152
Countrywide Alternative Loan Trust,
IO
0.91%, 9/25/35	7,871		204
2.17%, 3/20/46	4,588		202
2.40%, 12/20/46	14,388		699
2.56%, 2/25/37	5,133		221
2.83%, 2/20/47	8,607		418
2.86%, 3/20/47	12,494		647
3.68%, 12/20/35	(e)(h)4,919		168
3.91%, 12/20/35	(e)(h)6,603		259
4.15%, 8/25/46	(h)3,612		160
Greenpoint Mortgage Funding Trust,
IO
1.30%, 8/25/45 - 10/25/45	6,126		212
GS Mortgage Securities Corp. II,
5.80%, 8/10/45	(h)1,775		1,776
Harborview Mortgage Loan Trust,
IO
3.34%, 6/19/35	(h)3,323		96
3.60%, 5/19/35	(h)4,696		132
3.93%, 3/19/37	(h)4,402		174
4.06%, 7/19/46	(h)7,907		319
PO
3/19/37	4		3
7/19/47	@—		@—
Indymac Index Mortgage Loan Trust,
IO
3.32%, 7/25/35	(h)3,181		104
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.44%, 6/12/47	725		706
5.82%	(h)(o)1,850		1,852
Lehman Brothers Commercial Conduit Mortgage Trust,
5.94%, 7/15/44	(h)1,250		1,264
Lehman Brothers-UBS Commercial Mortgage Trust,
5.43%, 2/15/40	500		487
Wachovia Bank Commercial Mortgage Trust,
5.34%, 12/15/43	900		870
5.90%, 2/15/51	(h)950		959
Washington Mutual, Inc.,
IO
0.62%, 9/25/46	45,065		470
			20,289
Finance (7.0%)
AIG SunAmerica Global Financing VI,
6.30%, 5/10/11	(e)1,185		1,246
American General Finance Corp.,
4.63%, 5/15/09 - 9/1/10	790		787
AXA Financial, Inc.,
6.50%, 4/1/08	230		230
Bank of America Corp.,
5.75%, 12/1/17	545		565
Bank of New York Mellon Corp. (The),
4.50%, 4/1/13	235		237
Bear Stearns Co., Inc. (The),
6.40%, 10/2/17	450		445
7.25%, 2/1/18	355		367
Capmark Financial Group, Inc.,
5.88%, 5/10/12	(e)435		276
6.30%, 5/10/17	(e)180		108
Catlin Insurance Co., Ltd.,
7.25%	(e)(h)(o)555		464
CIT Group, Inc.,
4.75%, 8/15/08	215		198
Citigroup, Inc.,
5.88%, 5/29/37	340		296
Countrywide Home Loans, Inc.,
3.25%, 5/21/08	(c)380		373
Credit Suisse/New York,
6.00%, 2/15/18	800		800
Equitable Resources, Inc.,
6.50%, 4/1/18	85		86
Farmers Exchange Capital,
7.05%, 7/15/28	(e)165		152
Farmers Insurance Exchange,
8.63%, 5/1/24	(e)475		502
General Electric Capital Corp.,
4.25%, 12/1/10	(c)230		236
4.75%, 9/15/14	(c)60		61
5.88%, 2/15/12	50		53
Goldman Sachs Group, Inc. (The),
6.15%, 4/1/18	600		600
6.75%, 10/1/37	590		551
HSBC Finance Corp.,
4.13%, 12/15/08	100		100
5.88%, 2/1/09	290		292
6.38%, 10/15/11	570		586
6.75%, 5/15/11	235		244
8.00%, 7/15/10	150		159
Huntington National Bank (The),
4.38%, 1/15/10	250		247
iStar Financial, Inc.,
3.34%, 3/9/10	(h)705		558
JPMorgan Chase & Co.,
6.00%, 2/15/09	635		645
Lehman Brothers Holdings, Inc.,
5.75%, 1/3/17	350		317
6.50%, 7/19/17	450		428
6.88%, 7/17/37	740		643
Mantis Reef Ltd.,
4.69%, 11/14/08	(e)400		403
MBNA Corp.,
3.53%, 5/5/08	(h)615		615

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

35

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Finance (cont’d)
Nationwide Building Society,
4.25%, 2/1/10	$	(e)615	$	630
Platinum Underwriters Finance, Inc.,
7.50%, 6/1/17	265		267
Popular North American, Inc.,
5.65%, 4/15/09	310		308
Prudential Financial, Inc.,
6.63%, 12/1/37	225		223
Sovereign Bancorp, Inc.,
2.83%, 3/23/10	(h)935		896
Two-Rock Pass Through Trust,
4.04%	(e)(h)(o)315		126
Unicredit Luxembourg Finance S.A.,
3.77%, 10/24/08	(e)(h)985		984
Wachovia Capital Trust III,
5.80%	(h)(o)1,125		802
Washington Mutual Preferred Funding, LLC,
6.67%	(e)(h)(o)300		162
Washington Mutual, Inc.,
8.25%, 4/1/10	(c)664		578
Wells Fargo & Co.,
5.63%, 12/11/17	640		656
World Financial Properties,
6.91%, 9/1/13	(e)125		120
6.95%, 9/1/13	(e)508		492
Xlliac Global Funding,
4.80%, 8/10/10	(e)630		631
			20,745
Industrials (6.1%)
America West Airlines, Inc.,
7.10%, 4/2/21	566		563
Amgen, Inc.,
5.85%, 6/1/17	135		135
Archer-Daniels-Midland Co.,
5.45%, 3/15/18	290		292
AT&T Corp.,
8.00%, 11/15/31	205		240
AT&T, Inc.,
6.15%, 9/15/34	250		241
6.30%, 1/15/38	655		636
Biogen Idec, Inc.,
6.88%, 3/1/18	360		364
Brookfield Asset Management, Inc.,
5.80%, 4/25/17	215		194
7.13%, 6/15/12	520		520
Burlington Northern Santa Fe Corp.,
6.13%, 3/15/09	260		265
Comcast Cable Communications, Inc.,
7.13%, 6/15/13	175		186
Comcast Cable Communications, LLC,
6.75%, 1/30/11	(c)265		276
ConAgra Foods, Inc.,
7.00%, 10/1/28	120		122
8.25%, 9/15/30	(c)285		328
Consumers Energy Co.,
4.80%, 2/17/09	380		383
Cooper Industries, Inc.,
5.25%, 11/15/12	295		306
CVS/Caremark Corp.,
5.75%, 8/15/11 - 6/1/17	275		284
6.04%, 12/10/28	(e)578		553
DaimlerChrysler N.A. Holding Corp.,
8.50%, 1/18/31	265		304
FBG Finance Ltd.,
5.13%, 6/15/15	(e)490		486
Federated Department Stores, Inc.,
6.63%, 9/1/08	(c)120		121
France Telecom S.A.,
8.50%, 3/1/31	505		627
General Electric Co.,
5.25%, 12/6/17	1,405		1,406
Hewlett Packard Co.,
5.50%, 3/1/18	140		144
Home Depot, Inc.,
2.93%, 12/16/09	(h)710		677
5.40%, 3/1/16	345		325
Honeywell International, Inc.,
5.30%, 3/1/18	185		190
ICI Wilmington, Inc.,
4.38%, 12/1/08	300		302
Koninklijke Philips Electronics N.V.,
5.75%, 3/11/18	440		449
Kroger Co. (The),
5.00%, 4/15/13	(c)150		151
LG Electronics, Inc.,
5.00%, 6/17/10	(e)210		208
Marathon Oil Corp.,
5.90%, 3/15/18	195		196
6.00%, 10/1/17	255		259
Medco Health Solutions, Inc.,
7.13%, 3/15/18	270		277
Miller Brewing Co.,
4.25%, 8/15/08	(e)475		477
Sprint Capital Corp.,
8.75%, 3/15/32	325		275
Systems 2001 Asset Trust, LLC,
6.66%, 9/15/13	(e)334		334
Telecom Italia Capital S.A.,
4.00%, 11/15/08 - 1/15/10	650		639
Telefonica Europe B.V.,
8.25%, 9/15/30	525		615
Textron Financial Corp.,
5.13%, 2/3/11	550		572
Time Warner, Inc.,
3.30%, 11/13/09	(h)895		857
UnitedHealth Group, Inc.,
6.00%, 2/15/18	330		324

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

36

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Industrials (cont’d)
Valero Energy Corp.,
3.50%, 4/1/09	$	345	$	343
Verizon Communications, Inc.,
5.50%, 2/15/18	430		420
Viacom, Inc.,
6.88%, 4/30/36	475		459
Weatherford International Ltd.,
6.00%, 3/15/18	(c)190		191
Wyeth,
5.45%, 4/1/17	190		194
5.50%, 2/15/16	70		71
Yum! Brands, Inc.,
8.88%, 4/15/11	380		419
			18,200
Mortgages — Other (22.5%)
American Home Mortgage Assets,
2.72%, 3/25/47	(h)1,812		1,382
2.83%, 9/25/46	(h)1,084		664
2.86%, 10/25/46	(h)1,972		1,233
2.90%, 6/25/47	(h)943		463
2.92%, 10/25/46	(h)1,043		521
American Home Mortgage Investment Trust,
2.79%, 3/25/46 - 5/25/47	(h)3,812		2,580
Banc of America Funding Corp.,
2.89%, 9/20/35	(h)333		222
Bear Stearns Mortgage Funding Trust,
2.74%, 8/25/36	(h)1,812		1,373
2.76%, 12/25/36	(h)1,902		1,448
2.77%, 3/25/37	(h)1,665		1,191
2.78%, 10/25/36	(h)1,649		1,250
2.80%, 9/25/36	(h)1,932		1,469
2.85%, 7/25/36	(h)1,136		669
Countrywide Alternative Loan Trust,
2.76%, 7/25/46	(h)305		273
2.77%, 5/25/47	(h)1,875		1,426
2.80%, 11/20/35	(h)261		241
2.82%, 3/20/47	(h)802		385
2.84%, 12/20/46	(h)997		482
2.85%, 3/20/46 - 10/25/46	(h)2,523		1,649
2.89%, 6/25/47	(h)1,350		1,023
2.92%, 11/20/35	(h)628		439
2.93%, 12/20/35	(h)1,656		1,109
5.78%, 2/25/36	(h)783		509
Deutsche ALT-A Securities, Inc. Alternate Loan Trust,
2.75%, 2/25/47	(h)1,962		1,361
5.16%, 2/25/47	(h)768		422
Deutsche ALT-A Securities, Inc. NIM Trust,
6.75%, 2/25/47	(e)352		344
Downey Savings & Loan Association Mortgage Loan Trust,
2.70%, 4/19/38	(h)1,514		1,142
2.76%, 10/19/36	(h)1,583		1,204
5.27%, 4/19/46	(h)995		746
Gemsco Mortgage Pass Through Certificates,
8.70%, 11/25/10	(d)(k)1		1
Greenpoint Mortgage Funding Trust,
2.77%, 4/25/47	(h)1,942		1,475
2.78%, 1/25/37	(h)1,410		1,252
2.92%, 3/25/36	(h)824		512
3.01%, 9/25/46	(h)600		281
GS Mortgage Securities Corp.,
6.25%, 1/25/37	(e)108		107
GSR Mortgage Loan Trust,
2.86%, 8/25/46	(h)1,914		1,235
Harborview Mortgage Loan Trust,
2.65%, 1/19/38	(h)341		321
2.69%, 3/19/37	(h)2,016		1,528
2.71%, 3/19/38	(h)1,416		1,075
2.74%, 11/19/36	(h)1,725		1,315
2.75%, 1/19/38	(h)1,964		1,496
2.76%, 9/19/36 - 3/19/38	(h)1,828		1,287
2.79%, 7/19/46	(h)893		560
2.81%, 10/19/37	(h)893		551
2.84%, 11/19/36	(h)1,671		1,136
2.85%, 7/21/36 - 7/19/45	(h)1,709		1,119
2.94%, 11/19/35	(h)469		320
3.26%, 1/19/36	(h)394		161
Harborview NIM Corp.,
6.41%, 3/19/37 - 3/19/38	(e)130		129
Indymac Index Mortgage Loan Trust,
2.72%, 7/25/46	(h)1,254		1,201
2.81%, 11/25/36	(h)1,465		1,114
2.82%, 4/25/46	(h)1,651		1,253
Lehman XS Trust,
3.00%, 11/25/46	(h)450		193
3.01%, 8/25/46	(h)776		334
Luminent Mortgage Trust,
2.80%, 10/25/46	(h)1,026		782
2.83%, 5/25/46	(h)720		463
2.84%, 4/25/36	(h)626		475
2.96%, 7/25/36	(h)398		172
Mastr Adjustable Rate Mortgages Trust,
2.85%, 4/25/46	(h)627		392
3.00%, 1/25/47	(h)700		155
3.45%, 5/25/47	(h)400		68
3.70%, 5/25/47	(h)900		178
Residential Accredit Loans, Inc.,
2.76%, 3/25/47	(h)2,680		2,199
2.79%, 12/25/36	(h)1,553		1,176
2.80%, 6/25/37	(h)823		621
2.86%, 2/25/46 - 5/25/47	(h)1,526		974
2.87%, 2/25/46	(h)303		211
2.90%, 6/25/37	(h)870		439
3.00%, 10/25/45	(h)1,248		839
Structured Asset Mortgage Investments, Inc.,
2.79%, 2/25/36	(h)247		184

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

37

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Mortgages — Other (cont’d)
2.80%, 10/25/36	$	(h)1,778	$	1,353
2.83%, 7/25/36 - 8/25/36	(h)4,291		2,660
2.87%, 4/25/36	(h)1,002		642
Washington Mutual Alternative Mortgage Pass-Through Certificates,
2.89%, 11/25/46	(h)604		304
5.27%, 4/25/46	(h)857		625
5.29%, 8/25/46	(h)1,002		732
Washington Mutual, Inc.,
2.83%, 7/25/47	(h)2,576		1,605
2.85%, 11/25/45 - 12/25/45	(h)378		360
2.86%, 10/25/45	(h)87		86
2.89%, 8/25/45	(h)39		38
2.95%, 6/25/46	(h)300		178
5.27%, 5/25/46	(h)675		372
Zuni Mortgage Loan Trust,
2.73%, 8/25/36	(h)544		516
			65,975
U.S. Treasury Securities (5.5%)
U.S. Treasury Bonds,
5.38%, 2/15/31	(c)6,650		7,693
6.13%, 8/15/29	(c)7,000		8,767
			16,460
Utilities (1.5%)
Appalachian Power Co.,
5.65%, 8/15/12	150		154
Arizona Public Service Co.,
5.80%, 6/30/14	500		491
Carolina Power & Light Co.,
5.13%, 9/15/13	340		357
CenterPoint Energy Resources Corp.,
6.25%, 2/1/37	135		126
7.88%, 4/1/13	85		95
Consolidated Natural Gas Co.,
6.25%, 11/1/11	175		185
Detroit Edison Co.,
6.13%, 10/1/10	295		313
Entergy Gulf States, Inc.,
3.48%, 12/1/09	(h)155		152
3.60%, 6/1/08	320		319
NiSource Finance Corp.,
3.66%, 11/23/09	(h)240		233
Ohio Edison Co.,
6.40%, 7/15/16	225		232
Ohio Power Co.,
6.00%, 6/1/16	460		463
Peco Energy Co.,
5.35%, 3/1/18	230		234
Plains All American Pipeline, LP,
6.70%, 5/15/36	465		450
Public Service Electric & Gas Co.,
5.00%, 1/1/13	230		236
Texas Eastern Transmission, LP,
7.00%, 7/15/32	280		299
			4,339
Total Fixed Income Securities (Cost $377,790)			348,697

	Shares
Preferred Stock (0.1%)
Mortgage — Other (0.1%)
Home Ownership Funding Corp.,
13.33% (Cost $457)	(e)2,975	456
Short-Term Investments (12.8%)
Securities held as Collateral on Loaned Securities (3.6%)
Investment Company (1.0%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class
	(p)2,956,355	2,956

	Face
	Amount
	(000)
Short-Term Debt (2.6%)
Alliance & Leicester plc,
3.08%, 9/2/08	$	(h)263	263
Bancaja,
4.04%, 11/12/08	(h)131		131
Bank of New York Co., Inc.,
3.07%, 8/8/08	(h)131		131
BASF AG,
3.89%, 8/19/08	(h)131		131
CAM US Finance S.A. Unipersonal,
4.71%, 7/25/08	(h)525		525
Canadian Imperial Bank of Commerce, New York,
2.42%, 7/28/08	(h)263		263
CIT Group Holdings,
3.97%, 5/19/08	(h)473		473
Citigroup Global Markets Holdings, Inc.,
3.01%, 4/1/08	1,825		1,825
First Tennessee Bank,
2.84%, 8/15/08	(h)131		131
2.85%, 8/15/08	(h)525		525
Goldman Sachs Group, Inc.,
2.89%, 9/12/08	(h)131		131
HSBC Finance Corp.,
3.10%, 8/5/08	(h)131		131
IBM Corp.,
3.09%, 9/8/08	(h)525		525
Macquarie Bank Ltd.,
2.62%, 8/20/08	(h)263		263
Metropolitan Life Global Funding,
2.59%, 8/21/08	(h)394		394
National Bank of Canada,
3.11%, 4/2/08	(h)525		525
National Rural Utilities Cooperative Finance Corp.,
3.13%, 9/2/08	(h)525		525

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

38

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Short-Term Debt (cont’d)
Nationwide Building Society,
2.75%, 7/28/08	$	(h)305	$	305
Unicredito Italiano Bank (Ireland) plc,
2.84%, 8/14/08	(h)183		183
3.09%, 8/8/08	(h)289		289
			7,669
			10,625

	Shares
Investment Company (7.3%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)21,674,952	21,675

	Face
	Amount
	(000)
U.S. Treasury Securities (1.9%)
U.S. Treasury Bills,
0.73%, 4/10/08	$	(j)(r)705	705
1.02%, 8/21/08	(c)5,000		4,972
			5,677
Total Short-Term Investments (Cost $37,981)			37,977
Total Investments (130.1%) (Cost $416,228) — Including $22,297 of Securities Loaned			387,130
Liabilities in Excess of Other Assets (-30.1%)			(89,644		)
Net Assets (100%)			$	297,486

(c)	All or a portion of security on loan at March 31, 2008.
(d)	Security was valued at fair value — At March 31, 2008, the Portfolio held $1,000 of fair valued securities, representing less than 0.05% of net assets.
(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(i)	Security is subject to delayed delivery.
(j)	All or a portion of the security was pledged to cover margin requirements for futures contracts.
(k)	Security has been deemed illiquid at March 31, 2008.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The interest rate shown is the rate in effect at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
@	Face Amount/Value is less than $500.
Inv Fl	Inverse Floating Rate — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at March 31, 2008.
IO	Interest Only
PO	Principal Only
PAC	Planned Amortization Class
TBA	To Be Announced

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
EuroDollar CME	16	$	3,909	Jun-08	$	103
EuroDollar CME	18	4,406		Sep-08	123
EuroDollar CME	19	4,647		Dec-08	128
EuroDollar CME	21	5,135		Mar-09	143
EuroDollar CME	23	5,614		Jun-09	117
U.S. Treasury 5 yr. Note	361	41,239		Jun-08	565
Short:
EuroDollar CME	17	4,141		Sep-09	(86		)
EuroDollar CME	14	3,400		Dec-09	(64		)
EuroDollar CME	10	2,424		Mar-10	(42		)
EuroDollar CME	4	968		Jun-10	(15		)
EuroDollar CME	2	483		Sep-10	(7		)
EuroDollar CME	1	241		Dec-10	(3		)
U.S. Treasury 2 yr. Note	8	1,717		Jun-08	(4		)
U.S. Treasury 10 yr. Note	453	53,886		Jun-08	(1,485		)
U.S. Treasury Long Bond	85	10,098		Jun-08	(230		)
					$	(757	)

CME       Chicago Mercantile Exchange

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

39

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Bank of America	Buy	$	275	0.70	%	3/20/13	$	(3	)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	180		0.82		3/20/18	(3		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	300		1.03		3/20/18	7
Nordstrom, Inc., 6.95%, 3/15/28
Bank of America	Buy	90		1.08		3/20/18	3
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	270		1.12		3/20/18	9
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	220		0.80		3/20/18	13
Textron Financial Corp., 5.13%, 2/3/11
Bank of America	Buy	380		1.18		3/20/13	(2		)
Yum! Brands, 8.88%, 4/15/11
Citigroup	Buy	195		0.82		3/20/18	2
Eaton Corp., 7.65%, 11/15/29
Citigroup	Buy	340		0.62		3/20/13	2
Textron Financial Corp., 5.13%, 2/3/11
Citigroup	Buy	275		0.72		3/20/13	1
Textron Financial Corp., 5.13%, 2/3/11
Citigroup	Buy	1,500		0.43		3/20/12	30
Tyco International Ltd., Zero Coupon, 11/17/20
Credit Suisse	Buy	450		1.00		3/20/15	2
Arrow Electronics, Inc., 6.88%, 6/1/2015
Credit Suisse	Buy	385		1.06		3/20/13	(1		)
Textron Financial Corp., 5.13%, 2/3/11
Goldman Sachs	Buy	355		3.05		3/20/13	(4		)
AvalonBay Communities, Inc., 6.13%, 11/1/12
Goldman Sachs	Buy	735		0.59		3/20/13	(2		)
Coca-Cola Enterprises, Inc., 6.13%, 8/15/11
Goldman Sachs	Buy	780		0.22		3/20/12	14
Dell, Inc., 7.10%, 4/15/28
Goldman Sachs	Buy	245		0.47		3/20/18	3
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Sell	390		0.60		12/20/12	(3		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Sell	760		0.80		12/20/17	(3		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Buy	200		0.97		3/20/18	(1		)
Eaton Corp., 7.65%, 11/15/29
Goldman Sachs	Buy	150		0.33		3/20/13	1
Eli Lilly Co., 6.57%, 1/1/15
Goldman Sachs	Buy	510		0.15		12/20/11	47
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	1,050		0.16		12/20/11	97
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	205		3.33		3/20/13	2
ProLogis, 5.50%, 3/1/13
Goldman Sachs	Buy	265		1.08		3/20/18	10
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	130		1.24		3/20/18	3
Sealed Air Corp., 5.63%, 7/15/13

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

40

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Goldman Sachs	Buy	$	420	1.05	%	3/20/13	$	9
Textron Financial Corp., 5.13%, 2/3/11
Goldman Sachs	Buy	1,550		0.10		3/20/12	28
The Chubb Corp., 6.00%, 11/15/11
Goldman Sachs	Buy	1,600		0.12		12/20/11	70
The Hartford Financial Services Group, Inc.,  4.75%, 3/1/14
JPMorgan Chase	Sell	1,595		0.60		12/20/12	(5		)
Dow Jones CDX North America Investment Grade Index, Series 9
JPMorgan Chase	Buy	120		0.60		3/20/13	1
Eaton Corp., 7.65%, 11/15/29
JPMorgan Chase	Buy	220		1.07		3/20/18	4
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	220		1.15		3/20/18	3
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	200		0.58		3/20/13	@—
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	255		0.63		3/20/13	(1		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	1,300		0.65		3/20/11	(6		)
Tyco International Ltd., 2.75%, 1/15/18
Lehman Brothers	Sell	1,145		0.60		12/20/11	(20		)
Dow Jones CDX North America Investment Grade Index, Series 9
Lehman Brothers	Buy	245		0.45		3/20/18	3
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	175		0.46		3/20/18	2
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	800		0.20		12/20/11	9
Union Pacific Corp., 6.13%, 1/15/12
Merrill Lynch	Buy	210		1.50		3/20/18	(2		)
Carnival Corp., 6.55%, 1/15/28
Merrill Lynch	Buy	385		1.57		3/20/18	(6		)
Carnival Corp., 6.55%, 1/15/28
Merrill Lynch	Buy	145		1.60		3/20/18	(2		)
Carnival Corp., 6.55%, 1/15/28
Merrill Lynch	Buy	275		0.92		3/20/18	@—
Eaton Corp., 7.65%, 11/15/29
UBS	Buy	600		0.30		3/20/13	4
Eli Lilly Co., 6.57%, 1/1/15
UBS	Buy	170		1.73		3/20/18	4
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	170		1.78		3/20/13	2
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	225		1.00		3/20/13	5
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	150		1.01		3/20/13	4
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	385		1.06		3/20/13	(1		)
Textron Financial Corp., 5.13%, 2/3/11
							$	329

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

41

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	21,785	$	286
	3 Month LIBOR	Pay	5.59		2/19/18	10,745		229
	3 Month LIBOR	Receive	5.82		2/12/23	27,980		(280		)
	3 Month LIBOR	Receive	6.03		2/19/23	13,870		(225		)
Citigroup	3 Month LIBOR	Pay	5.33		5/22/17	7,800		937
	3 Month LIBOR	Pay	5.37		5/23/17	7,800		958
	3 Month LIBOR	Pay	5.34		5/24/17	6,800		818
	3 Month LIBOR	Pay	5.24		9/27/17	5,000		487
	3 Month LIBOR	Receive	5.29		9/28/17	6,000		(608		)
	3 Month LIBOR	Receive	5.00		11/13/17	2,000		(184		)
	3 Month LIBOR	Receive	4.73		12/27/17	4,275		(286		)
	3 Month LIBOR	Pay	4.47		1/10/18	4,000		132
Deutsche Bank	3 Month LIBOR	Pay	5.39		5/25/17	17,600		2,189
	3 Month LIBOR	Pay	5.43		5/29/17	12,075		1,538
Goldman Sachs	3 Month LIBOR	Pay	5.57		2/27/18	10,875		218
	3 Month LIBOR	Pay	5.63		2/28/18	21,380		481
	3 Month LIBOR	Receive	6.04		2/25/23	27,435		(448		)
	3 Month LIBOR	Receive	5.96		2/27/23	13,955		(198		)
JPMorgan Chase	3 Month LIBOR	Pay	5.37		5/23/17	7,800		960
	3 Month LIBOR	Pay	5.34		5/24/17	4,550		549
	3 Month LIBOR	Pay	5.45		5/29/17	11,425		1,473
	3 Month LIBOR	Pay	5.44		8/20/17	2,300		266
	3 Month LIBOR	Pay	5.09		9/11/17	10,800		926
	3 Month LIBOR	Receive	5.23		9/27/17	5,100		(495		)
	3 Month LIBOR	Receive	5.30		9/28/17	5,550		(568		)
	3 Month LIBOR	Pay	5.25		10/11/17	5,500		619
	3 Month LIBOR	Receive	5.01		11/13/17	3,000		(280		)
	3 Month LIBOR	Pay	4.48		1/8/18	3,500		117
	3 Month LIBOR	Pay	4.24		1/22/18	3,475		(47		)
	3 Month LIBOR	Receive	4.52		2/19/18	3,500		(129		)
	3 Month LIBOR	Receive	4.62		2/22/18	4,500		(208		)
								$	9,227

LIBOR — London Inter Bank Offer Rate

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

42

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Fixed Income Portfolio

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

*Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

43

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Core Plus Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Fixed Income Securities (120.8%)
Agency Adjustable Rate Mortgages (4.4%)
Federal Home Loan Mortgage Corp.,
5.31%, 4/1/37	$	10,510	$	10,693
5.61%, 3/1/37	10,962		11,138
5.70%, 1/1/37	15,087		15,410
5.83%, 10/1/36	11,772		12,039
Federal National Mortgage Association,
4.73%, 6/1/36	10,605		10,664
6.76%, 5/1/36	13,219		13,527
6.80%, 7/1/36	12,699		13,008
6.81%, 4/1/36 - 8/1/36	10,370		10,620
Government National Mortgage Association,
5.13%, 10/20/25 - 12/20/27	1,424		1,423
5.63%, 7/20/25 - 9/20/27	930		936
6.38%, 1/20/25 - 1/20/28	8,488		8,696
			108,154
Agency Fixed Rate Mortgages (45.9%)
Federal Home Loan Mortgage Corp.,
Conventional Pools:
10.00%, 10/1/10 - 11/1/20	1,017		1,206
10.50%, 8/1/09 - 10/1/20	197		223
11.00%, 12/1/10 - 9/1/20	248		284
11.25%, 10/1/11 - 12/1/15	115		128
11.50%, 1/1/11 - 12/1/11	2		2
11.75%, 4/1/19	7		8
12.00%, 10/1/09 - 2/1/15	9		10
13.00%, 6/1/19	3		3
14.75%, 3/1/10	1		1
Gold Pools:
5.50%, 1/1/37 - 10/1/37	123,977		125,333
6.00%, 12/1/36 - 8/1/37	60,183		61,799
6.50%, 3/1/16 - 8/1/33	1,457		1,526
7.00%, 2/1/28 - 7/1/32	1,801		1,912
7.50%, 8/1/17 - 10/1/32	10,045		10,860
8.00%, 11/1/25 - 12/1/31	2,917		3,168
8.50%, 3/1/20 - 8/1/31	6,108		6,782
9.00%, 7/1/17	427		468
9.50%, 1/1/21 - 12/1/22	455		506
10.00%, 6/1/17 - 3/1/21	343		408
10.50%, 11/1/15 - 4/1/21	147		168
April TBA
5.00%, 4/15/38	(i)92,900		91,985
5.50%, 4/15/37	(i)136,050		137,389
6.00%, 4/1/37	(i)127,450		130,696
6.50%, 4/15/37	(i)31,200		32,365
Federal National Mortgage Association,
Conventional Pools:
5.00%, 4/1/36 - 11/1/37	34,108		33,790
5.50%, 6/1/35 - 8/1/37	816		825
6.50%, 11/1/23 - 1/1/34	23,831		24,871
7.00%, 11/1/13 - 4/1/36	48,458		51,453
7.50%, 11/1/22 - 8/1/37	33,886		36,364
8.00%, 2/1/12 - 10/1/32	18,164		19,710
8.50%, 1/1/15 - 5/1/32	15,973		17,621
9.00%, 12/1/08 - 1/1/22	688		751
9.50%, 11/1/13 - 4/1/30	3,975		4,405
10.00%, 9/1/10 - 10/1/25	694		809
10.50%, 5/1/12 - 7/1/25	559		661
11.00%, 7/1/20 - 11/1/20	80		93
11.50%, 1/1/13 - 2/1/20	154		182
12.00%, 11/1/15	166		190
12.50%, 9/1/15 - 2/1/16	18		22
April TBA
4.50%, 4/25/23	(i)49,300		49,038
5.00%, 4/25/23 - 4/25/38	(i)81,950		82,048
5.50%, 4/25/37	(i)132,700		133,965
6.50%, 4/25/38	(i)27,950		28,950
7.00%, 4/25/38	(i)24,350		25,560
Government National Mortgage Association,
Various Pools:
9.00%, 12/15/21 - 11/15/24	1,794		1,970
9.50%, 8/15/09 - 12/15/19	1,636		1,816
10.00%, 11/15/09 - 1/15/26	11,163		13,379
10.50%, 9/15/15 - 4/15/25	1,263		1,526
11.00%, 12/15/09 - 2/15/25	2,690		3,177
11.50%, 4/15/13 - 4/20/19	80		96
12.00%, 3/15/11 - 11/15/19	1,360		1,624
12.50%, 6/15/10	5		6
			1,142,132
Asset Backed Corporates (12.9%)
ACE Securities Corp.,
2.92%, 5/25/34	(h)1,861		1,563
American Express Credit Account Master Trust,
2.82%, 10/15/12	(h)13,950		13,706
Argent Securities, Inc.,
2.65%, 10/25/36	(h)8,823		8,626
Bear Stearns Asset Backed Securities, Inc.,
2.70%, 1/25/37	(h)7,718		6,900
2.80%, 9/25/34	(h)253		252
2.82%, 3/25/35	(h)773		770
Capital Auto Receivables Asset Trust,
2.83%, 11/15/11	(h)14,725		14,523
2.88%, 7/15/10 - 5/15/11	(h)37,625		37,270
Capital One Multi-Asset Execution Trust,
5.75%, 7/15/20	13,450		12,845
Carrington Mortgage Loan Trust,
2.72%, 2/25/37	(h)7,508		7,079
Citibank Credit Card Issuance Trust,
2.59%, 3/22/12	(h)15,075		14,816
Citicorp Residential Mortgage Securities, Inc.,
2.68%, 9/25/36	(h)41		40
Citigroup Mortgage Loan Trust, Inc.,
2.67%, 1/25/37	(h)9,812		9,151
3.01%, 10/25/34	(h)34		32
Conti Mortgage Home Equity Loan Trust,
8.10%, 8/15/25	85		78

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

44

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Asset Backed Corporates (cont’d)
Countrywide Asset Backed Certificates,
2.75%, 5/25/36	$	(h)2,391	$	2,356
First Franklin Mortgage Loan Asset Backed Certificates,
2.65%, 7/25/36	(h)5,135		4,969
2.67%, 2/25/36	(h)1,833		1,816
2.72%, 10/25/35	(h)609		606
Ford Credit Auto Owner Trust,
2.83%, 4/15/10	(h)24,207		24,130
Fremont Home Loan Owner Trust,
2.65%, 10/25/36	(h)9,753		9,404
GSAMP Trust,
2.67%, 1/25/37	(h)6,880		6,430
2.72%, 3/25/47	(h)11,884		11,057
Lehman XS Trust,
2.90%, 2/25/46	(h)7,887		4,987
Long Beach Mortgage Loan Trust,
2.69%, 1/25/46	(h)2		2
MBNA Master Credit Card Trust USA,
5.90%, 8/15/11	19,530		20,029
7.80%, 10/15/12	15,505		16,734
Nationstar Home Equity Loan Trust,
2.67%, 9/25/36	(h)30		29
Novastar Home Equity Loan,
2.67%, 11/25/36	(h)25		25
RAAC Series,
2.70%, 9/25/45	(h)422		420
Residential Asset Mortgage Products, Inc.,
2.67%, 8/25/36	(h)7,917		7,705
2.69%, 10/25/36	(h)6,373		6,078
Securitized Asset Backed Receivables LLC Trust,
2.68%, 11/25/36	(h)10,494		9,591
2.71%, 2/25/37	(h)6,884		6,098
2.73%, 5/25/37	(h)11,147		10,448
SLM Student Loan Trust,
3.32%, 10/27/14	(h)13,627		13,562
Soundview Home Equity Loan Trust,
2.71%, 2/25/37	(h)11,816		11,023
Structured Asset Investment Loan Trust,
2.67%, 3/25/36	(h)3		3
Structured Asset Securities Corp.,
2.69%, 2/25/37	(h)9,408		9,066
Terwin Mortgage Trust,
2.71%, 4/25/37	(e)(h)2,992		2,955
TXU Electric Delivery Transition Bond Co. LLC,
4.81%, 11/17/14	3,115		3,192
Washington Mutual Asset Backed Certificates,
2.71%, 4/25/37	(h)10,402		9,627
			319,993
Collateralized Mortgage Obligations — Agency Collateral Series (0.8%)
Federal Home Loan Mortgage Corp.,
Inv Fl IO REMIC
4.68%, 8/15/30	189		18
IO
6.00%, 5/1/31	6,028		1,185
7.50%, 12/1/29	345		101
8.00%, 1/1/28 - 6/1/31	2,404		633
Federal National Mortgage Association,
Inv Fl IO
3.79%, 7/25/34	7,318		602
5.59%, 10/25/28	4,733		261
5.78%, 10/18/30	2,203		226
5.89%, 7/25/30	3,671		466
Inv Fl IO REMIC
47.98%, 9/25/20	46		81
59.63%, 9/25/22	83		128
IO
2.97%, 8/25/34	136,342		4,415
3.34%, 3/25/36	51,149		1,656
6.50%, 9/1/29 - 2/1/32	7,315		1,563
7.00%, 4/1/32	4,552		1,188
8.00%, 4/1/24 - 12/1/31	8,040		2,076
8.50%, 10/1/25	250		74
9.00%, 11/1/26	396		103
IO PAC REMIC
6.00%, 8/25/32 - 7/25/33	4,058		646
6.50%, 2/25/33 - 6/25/33	15,398		3,023
8.00%, 9/18/27	1,343		251
Government National Mortgage Association,
Inv Fl IO
5.33%, 5/16/31	5,782		774
5.38%, 8/16/31	1,943		232
5.78%, 8/16/29	296		44
			19,746
Collateralized Mortgage Obligations — Non Agency Collateral Series (12.9%)
Banc of America Commercial Mortgage, Inc.,
5.41%, 9/10/47	9,470		9,322
5.49%, 2/10/51	10,300		10,011
5.66%, 6/10/49	(h)15,000		14,839
5.69%, 4/10/49	(h)8,525		8,482
5.75%, 2/10/51	(h)13,800		13,753
Bear Stearns Commercial Mortgage Securities,
5.71%, 6/11/40	(c)(h)7,925		7,889
Bear Stearns Structured Products, Inc.,
IO
1.37%, 3/27/36	(e)90,435		181
2.11%, 6/26/36	(e)203,429		2,543
2.22%, 5/27/36	(e)133,582		1,002
2.29%, 1/27/37	(e)165,710		1,823
2.43%, 1/27/37	164,223		2,053
3.18%, 4/25/37	(e)245,381		6,135
Citigroup Commercial Mortgage Trust,
5.70%, 12/10/49	(h)11,950		11,884
Citigroup/Deutsche Bank Commercial Mortgage Trust,
5.89%, 11/15/44	(h)10,650		10,641
Commercial Mortgage Pass Through Certificates,
5.82%, 12/10/49	(h)11,975		11,995

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

45

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Collateralized Mortgage Obligation — Non Agency Collateral Series (cont’d)
Countrywide Alternative Loan Trust,
Zero Coupon, 2/24/47 - 5/25/47	$	(e)196,930	$	4,463
IO
2.18%, 3/20/46	52,586		2,311
2.40%, 12/20/46	121,334		5,899
2.56%, 2/25/37	60,046		2,589
2.86%, 3/20/47	104,065		5,388
3.68%, 12/20/35	(e)(h)53,033		1,814
3.91%, 12/20/35	(e)(h)77,006		3,020
Credit Suisse Mortgage Capital Certificates,
5.72%, 6/15/39	(h)10,815		10,761
Greenpoint Mortgage Funding Trust,
IO
1.30%, 8/25/45 - 10/25/45	72,897		2,520
Greenwich Capital Commercial Funding Corp.,
5.74%, 12/10/49	(c)7,350		7,272
GS Mortgage Securities Corp.,
IO
4.01%, 8/25/35	(e)(h)21,921		582
GS Mortgage Securities Corp. II,
5.80%, 8/10/45	(h)16,125		16,135
Harborview Mortgage Loan Trust,
IO
3.34%, 6/19/35	(h)41,800		1,207
3.60%, 5/19/35	(h)52,983		1,495
3.93%, 3/19/37	(h)49,822		1,964
PO
3/19/37	43		33
Indymac Index Mortgage Loan Trust,
IO
3.32%, 7/25/35	(h)37,423		1,229
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.44%, 6/12/47	10,700		10,414
5.75%, 2/12/49	(h)13,400		13,334
5.82%, 6/15/49	(h)15,650		15,667
Kidder Peabody Mortgage Assets Trust,
IO
9.50%, 4/22/18	3		1
Lehman Brothers Commercial Conduit Mortgage Trust,
5.94%, 7/15/44	(h)10,575		10,690
Lehman Brothers-UBS Commercial Mortgage Trust,
5.16%, 2/15/31	9,525		9,291
5.43%, 2/15/40	7,425		7,224
5.86%, 7/15/40	(h)11,500		11,492
5.87%, 9/15/45	(h)13,975		13,953
Residential Accredit Loans, Inc.,
Zero Coupon, 3/25/47 - 5/25/47	(e)257,147		6,370
Wachovia Bank Commercial Mortgage Trust,
5.34%, 12/15/43	7,725		7,463
5.68%, 5/15/46	(c)12,000		11,836
5.74%, 6/15/49	(h)10,575		10,500
5.90%, 2/15/51	(h)10,550		10,655
			320,125
Finance (6.5%)
AIG SunAmerica Global Financing VI,
6.30%, 5/10/11	(e)9,957		10,471
American General Finance Corp.,
4.63%, 5/15/09 - 9/1/10	2,415		2,399
AXA Financial, Inc.,
6.50%, 4/1/08	5,450		5,450
Bank of America Corp.,
5.75%, 12/1/17	4,725		4,899
Bank of New York Mellon Corp. (The),
4.50%, 4/1/13	1,865		1,880
Bear Stearns Cos., Inc. (The),
5.55%, 1/22/17	(c)4,265		3,814
7.25%, 2/1/18	2,620		2,712
Capmark Financial Group, Inc.,
5.88%, 5/10/12	(e)3,680		2,333
6.30%, 5/10/17	(e)1,495		898
Catlin Insurance Co., Ltd.,
7.25%	(e)(h)(o)4,980		4,163
Citigroup, Inc.,
5.88%, 5/29/37	2,815		2,453
Countrywide Home Loans, Inc.,
3.25%, 5/21/08	(c)3,040		2,981
Credit Suisse (NY),
6.00%, 2/15/18	6,580		6,576
Farmers Exchange Capital,
7.05%, 7/15/28	(e)100		92
Farmers Insurance Exchange,
8.63%, 5/1/24	(e)6,970		7,374
General Electric Capital Corp.,
4.25%, 12/1/10	(c)2,180		2,236
Goldman Sachs Group, Inc. (The),
6.15%, 4/1/18	4,920		4,922
6.75%, 10/1/37	4,765		4,447
HSBC Finance Corp.,
4.13%, 12/15/08	10		10
5.88%, 2/1/09	9,960		10,037
6.38%, 10/15/11	60		62
6.75%, 5/15/11	735		763
8.00%, 7/15/10	1,100		1,161
JPMorgan Chase & Co.,
6.00%, 2/15/09	7,660		7,780
Lehman Brothers Holdings, Inc.,
5.75%, 1/3/17	2,775		2,511
6.50%, 7/19/17	3,645		3,467
6.88%, 7/17/37	6,060		5,269
Mantis Reef Ltd.,
4.69%, 11/14/08	(e)4,615		4,650
MBNA Corp.,
3.53%, 5/5/08	(c)(h)4,775		4,779
MetLife, Inc.,
6.13%, 12/1/11	45		48
Nationwide Building Society,
4.25%, 2/1/10	(e)5,000		5,119

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

46

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Finance (cont’d)
Platinum Underwriters Finance, Inc.,
7.50%, 6/1/17	$	3,015	$	3,033
Prudential Financial, Inc.,
6.63%, 12/1/37	1,840		1,823
SLM Corp.,
4.00%, 1/15/10	(c)3,595		3,023
Two-Rock Pass Through Trust,
6.44%	(e)(h)(o)2,930		1,172
Unicredit Luxembourg Finance S.A.,
3.77%, 10/24/08	(e)(h)8,220		8,213
Wachovia Capital Trust Ill,
5.80%	(h)(o)9,055		6,456
Washington Mutual Bank/Henderson N.V.,
5.50%, 1/15/13	25		20
Washington Mutual Preferred Funding LLC,
6.67%	(e)(h)(o)1,300		703
Washington Mutual, Inc.,
8.25%, 4/1/10	5,330		4,639
Wells Fargo & Co.,
5.63%, 12/11/17	5,230		5,359
World Financial Properties,
6.91%, 9/1/13	(e)1,003		959
6.95%, 9/1/13	(e)6,330		6,129
Xlliac Global Funding,
4.80%, 8/10/10	(e)5,360		5,370
			162,655
Industrials (7.3%)
America West Airlines, Inc.,
7.10%, 4/2/21	43		43
Amgen, Inc.,
5.85%, 6/1/17	1,085		1,086
Archer-Daniels-Midland Co.,
5.45%, 3/15/18	2,330		2,347
ArvinMeritor, Inc.,
8.75%, 3/1/12	(c)2,915		2,682
AT&T Corp.,
8.00%, 11/15/31	(c)5,300		6,211
AT&T, Inc.,
6.15%, 9/15/34	3,110		2,997
Biogen Idec, Inc.,
6.88%, 3/1/18	2,910		2,945
Brookfield Asset Management, Inc.,
5.80%, 4/25/17	1,605		1,451
7.13%, 6/15/12	4,680		4,676
Comcast Cable Communications LLC,
6.75%, 1/30/11	(c)2,515		2,616
7.13%, 6/15/13	1,000		1,064
ConAgra Foods, Inc.,
7.00%, 10/1/28	1,505		1,529
8.25%, 9/15/30	1,920		2,212
Consumers Energy Co.,
4.00%, 5/15/10	1,410		1,413
4.80%, 2/17/09	2,100		2,114
Cooper Industries, Inc.,
5.25%, 11/15/12	3,490		3,621
CVS Caremark Corp.,
5.75%, 8/15/11 - 6/1/17	2,275		2,348
CVS Lease Pass Through,
6.04%, 12/10/28	(e)4,826		4,610
Daimler Finance North America LLC,
7.20%, 9/1/09	25		26
8.50%, 1/18/31	2,320		2,659
Delhaize America, Inc.,
9.00%, 4/15/31	4,841		5,842
Echostar DBS Corp.,
6.38%, 10/1/11	4,850		4,668
6.63%, 10/1/14	545		497
FBG Finance Ltd.,
5.13%, 6/15/15	(e)3,825		3,795
Fiserv, Inc.,
6.80%, 11/20/17	3,620		3,747
France Telecom S.A.,
8.50%, 3/1/31	4,130		5,131
General Electric Co.,
5.25%, 12/6/17	12,215		12,221
Hewlett-Packard Co.,
5.50%, 3/1/18	1,135		1,165
Home Depot, Inc. (The),
2.93%, 12/16/09	(h)5,975		5,700
5.40%, 3/1/16	2,815		2,650
Honeywell International, Inc.,
5.30%, 3/1/18	1,495		1,535
Hospira, Inc.,
3.18%, 3/30/10	(h)5,425		5,279
Husky Oil Co.,
8.90%, 8/15/28	(h)2,210		2,243
ICI Wilmington, Inc.,
4.38%, 12/1/08	2,040		2,051
Interpublic Group of Cos. Inc.,
6.25%, 11/15/14	2,365		1,919
Koninklijke Philips Electronics N.V.,
5.75%, 3/11/18	3,560		3,634
Kroger Co. (The),
6.40%, 8/15/17	1,080		1,142
LG Electronics, Inc.,
5.00%, 6/17/10	(e)2,765		2,739
Macy’s Retail Holdings, Inc.,
6.63%, 9/1/08	1,080		1,085
Marathon Oil Corp.,
5.90%, 3/15/18	1,565		1,576
6.00%, 10/1/17	2,040		2,073
Medco Health Solutions, Inc.,
7.13%, 3/15/18	2,160		2,217
MGM Mirage,
6.00%, 10/1/09	(c)2,075		2,070
Miller Brewing Co.,
4.25%, 8/15/08	(e)3,885		3,901

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

47

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Industrials (cont’d)
Pilgrim’s Pride Corp.,
7.63%, 5/1/15	$	2,540	$	2,457
Sprint Capital Corp.,
8.75%, 3/15/32	2,655		2,248
Systems 2001 Asset Trust LLC,
6.66%, 9/15/13	(e)4,936		4,936
Telecom Italia Capital S.A.,
4.00%, 11/15/08 - 1/15/10	5,345		5,246
Telefonica Europe B.V.,
8.25%, 9/15/30	(c)4,380		5,129
Time Warner, Inc.,
3.30%, 11/13/09	(h)7,390		7,079
Union Pacific Corp.,
5.45%, 1/31/13	6,135		6,320
UnitedHealth Group, Inc.,
6.00%, 2/15/18	3,500		3,435
Verizon Communications, Inc.,
5.50%, 2/15/18	3,470		3,386
Verizon New England, Inc.,
6.50%, 9/15/11	2,100		2,196
Viacom, Inc.,
6.88%, 4/30/36	3,720		3,593
Weatherford International Ltd.,
6.00%, 3/15/18	(c)1,530		1,541
Wyeth,
5.45%, 4/1/17	1,510		1,541
5.50%, 2/15/16	595		608
Yum! Brands, Inc.,
8.88%, 4/15/11	3,140		3,463
			180,708
Mortgages — Other (23.1%)
American Express Co.,
9.63%, 12/1/12	(d)(k)19		19
American Home Mortgage Assets,
2.72%, 3/25/47	(h)13,985		10,663
2.79%, 10/25/46 - 6/25/47	(h)38,630		29,391
2.83%, 5/25/46 - 9/25/46	(h)18,603		11,609
2.84%, 6/25/47	(h)3,253		2,141
2.90%, 6/25/47	(h)8,211		4,034
American Home Mortgage Investment Trust,
2.79%, 3/25/46 - 5/25/47	(h)30,284		21,510
American Housing Trust,
9.55%, 9/25/20	27		27
Banc of America Funding Corp.,
2.89%, 9/20/35	(h)3,671		2,454
Bear Stearns Mortgage Funding Trust,
2.77%, 3/25/37	(h)9,700		6,938
2.80%, 9/25/36	(h)90		68
2.81%, 12/25/36	(h)16,248		12,384
2.85%, 7/25/36	(h)11,906		7,013
Bear Stearns Structured Products, Inc.,
6.50%, 3/27/36 - 5/27/36	(e)459		455
Countrywide Alternative Loan Trust,
2.69%, 5/20/46	(h)38		34
2.77%, 5/25/47	(h)15,745		11,973
2.79%, 10/25/46	(h)15,508		11,715
2.80%, 11/20/35	(h)2,892		2,677
2.81%, 5/20/46	(h)13,320		8,325
2.83%, 11/20/35 - 6/25/47	(h)26,284		16,855
2.84%, 12/20/46	(h)8,373		4,050
2.87%, 7/25/46	(h)81		52
2.90%, 5/25/47	(h)4,227		2,039
3.10%, 6/25/47	(h)8,419		4,041
5.78%, 2/25/36	(h)13,671		8,886
Countrywide Home Loan Mortgage Pass Through Trust,
2.87%, 4/25/46	(h)6,820		4,273
2.90%, 4/25/46	(h)60		38
Deutsche ALT-A Securities, Inc., Alternate Loan Trust,
2.75%, 2/25/47	(h)16,718		11,595
5.16%, 2/25/47	(h)6,431		3,537
Deutsche ALT-A Securities, Inc., NIM Trust,
6.75%, 2/25/47	(e)1,984		1,943
Downey Savings & Loan Association Mortgage Loan Trust,
2.76%, 11/19/37	(h)13,013		9,898
5.27%, 4/19/47	(h)8,553		6,415
Federal Home Loan Mortgage Corp.,
3.27%, 10/15/36	(h)5,202		5,045
PAC
9.50%, 4/15/20	3		3
Federal National Mortgage Association,
Conventional Pool:
7.00%, 9/25/32	2,978		3,157
Greenpoint Mortgage Funding Trust,
2.77%, 4/25/47	(h)13,594		10,322
2.92%, 3/25/36	(h)10,160		6,315
GSR Mortgage Loan Trust,
2.79%, 8/25/46	(h)106		81
2.86%, 8/25/46	(h)14,837		9,569
Harborview Mortgage Loan Trust,
2.65%, 1/19/38	(h)2,817		2,654
2.69%, 4/19/38	(h)10,133		7,682
2.71%, 3/19/38	(h)11,240		8,535
2.74%, 11/19/36	(h)18,850		14,369
2.75%, 1/19/38	(h)15,932		12,131
2.76%, 10/19/37 - 3/19/38	(h)17,785		12,298
2.77%, 11/19/36	(h)14,331		10,935
2.79%, 7/19/46	(h)9,377		5,879
2.80%, 11/19/36 - 3/19/37	(h)5,009		3,020
2.81%, 10/19/37	(h)11,384		7,018
2.85%, 8/21/36	(h)12,008		7,749
2.90%, 1/19/36	(h)43		28
2.94%, 11/19/35	(h)5,157		3,518
Harborview NIM Corp.,
6.41%, 3/19/37 - 3/19/38	(e)1,136		1,127
Indymac Index Mortgage Loan Trust,
2.70%, 2/25/37	(h)11,340		9,789
2.72%, 7/25/46	(h)13,002		12,445

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

48

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

	Face Amount				Value
	(000)				(000)
Mortgages — Other (cont’d)
2.81%, 11/25/36	$		(h)16,145		$	12,274
2.85%, 6/25/47	(h)87				55
2.88%, 7/25/35	(h)2,794				2,019
2.98%, 10/25/36	(h)6,801				4,659
Luminent Mortgage Trust,
2.80%, 10/25/46	(h)12,595				9,593
2.82%, 12/25/36	(h)16,591				10,390
2.84%, 4/25/36	(h)7,053				5,357
2.88%, 2/25/46	(h)60				39
Mastr Adjustable Rate Mortgages Trust,
2.71%, 5/25/47	(h)3,186				3,124
2.85%, 4/25/46	(h)49				31
5.27%, 4/25/46	(h)3,467				1,560
Mid-State Trust,
8.33%, 4/1/30	68				72
Pelican Homestead Savings Association,
9.36%, (expired maturity)	(d)(k)18				18
Residential Accredit Loans, Inc.,
2.74%, 3/25/37	(h)12,589				9,608
2.76%, 2/25/37 - 3/25/47	(h)38,058				30,537
2.79%, 12/25/36	(h)14,093				10,673
2.80%, 5/25/47	(h)27,351				20,617
2.83%, 6/25/46	(h)1,533				961
2.86%, 2/25/46	(h)3,683				2,410
2.87%, 2/25/46	(h)3,162				2,206
Ryland Acceptance Corp. IV,
6.65%, 7/1/11	156				156
Structured Adjustable Rate Mortgage Loan Trust,
2.90%, 9/25/34	(h)946				865
Structured Asset Mortgage Investments, Inc.,
2.79%, 2/25/36	(h)4,565				3,411
2.80%, 10/25/36	(h)83				63
2.83%, 8/25/36 - 7/25/46	(h)24,485				15,194
2.86%, 5/25/46	(h)4,185				2,629
2.87%, 4/25/36	(h)12,015				7,694
2.88%, 7/25/46	(h)9,275				4,672
Washington Mutual Alternative Mortgage Pass Through Certificates,
2.79%, 7/25/46	(h)475				363
2.80%, 12/25/46	(h)11,633				7,008
2.89%, 11/25/46	(h)6,276				3,156
2.90%, 10/25/46	(h)8,675				4,230
5.27%, 4/25/46	(h)9,896				7,224
5.29%, 8/25/46	(h)10,021				7,315
Washington Mutual, Inc.,
2.85%, 11/25/45 - 12/25/45	(h)4,666				4,427
2.86%, 10/25/45	(h)966				955
2.87%, 4/25/45	(h)40				27
2.89%, 8/25/45	(h)421				415
2.96%, 7/25/45	(h)28				20
5.27%, 5/25/46	(h)5,966				3,281
Zuni Mortgage Loan Trust,
2.73%, 8/25/36	(h)5,747			5,452
				575,481
Sovereign (1.7%)
Government of Argentina,
8.28%, 12/31/33	(d)4,202			2,910
Government of Japan,
1.00%, 6/15/09	JPY		3,020,000	30,457
United Mexican States,
9.50%, 12/18/14	MXN		75,635	7,901
				41,268
U.S. Treasury Securities (3.2%)
U.S. Treasury Bonds,
4.50%, 2/15/36	$	(c)34,250		35,392
5.38%, 2/15/31	(c)38,800			44,887
				80,279
Utilities (2.1%)
Appalachian Power Co.,
5.65%, 8/15/12	1,395				1,436
Arizona Public Service Co.,
5.80%, 6/30/14	3,935				3,863
CenterPoint Energy Resources Corp.,
6.25%, 2/1/37	1,130				1,057
7.88%, 4/1/13	730				812
Colorado Interstate Gas Co.,
6.80%, 11/15/15	3,030				3,139
Consolidated Natural Gas Co.,
6.25%, 11/1/11	1,760				1,861
Detroit Edison Co.,
6.13%, 10/1/10	2,590				2,745
Entergy Gulf States, Inc.,
3.48%, 12/1/09	(h)1,995				1,953
3.60%, 6/1/08	1,705				1,701
3.74%, 12/8/08	(e)(h)4,225				4,237
Equitable Resources, Inc.,
6.50%, 4/1/18	1,985				1,999
Kinder Morgan Finance Co.,
5.70%, 1/5/16	(c)3,970				3,781
NiSource Finance Corp.,
3.66%, 11/23/09	(h)2,785				2,704
7.88%, 11/15/10	3,590				3,905
Ohio Edison Co.,
6.40%, 7/15/16	2,370				2,446
Ohio Power Co.,
6.00%, 6/1/16	3,605				3,627
Peco Energy Co.,
5.35%, 3/1/18	1,830				1,859
Plains All American Pipeline LP,
6.70%, 5/15/36	3,635				3,516
Public Service Electric & Gas Co.,
5.00%, 1/1/13	20				21
Texas Eastern Transmission LP,
7.00%, 7/15/32	2,295				2,453

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

49

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Utilities (cont’d)
Union Electric Co.,
6.40%, 6/15/17	$	3,495	$	3,679
			52,794
Total Fixed Income Securities (Cost $3,270,691)			3,003,335

	Shares
Preferred Stocks (0.5%)
Mortgages — Other (0.5%)
Harborview NIM Corp.,	(e)4,959,963	1,607
Home Ownership Funding Corp., 13.33%	(e)64,625	9,905
Total Preferred Stocks (Cost $12,753)		11,512
Short-Term Investments (9.7%)
Securities held as Collateral on Loaned Securities (3.3%)
Investment Company (0.9%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)22,854,194	22,854

	Face Amount
	(000)
Short-Term Debt (2.4%)
Alliance & Leicester plc,
3.08%, 9/2/08	$	(h)2,030	2,030
Bancaja,
4.04%, 11/12/08	(h)1,015		1,015
Bank of New York Co., Inc.,
3.07%, 8/8/08	(h)1,015		1,015
BASF AG,
3.89%, 8/19/08	(h)1,015		1,015
CAM US Finance S.A. Unipersonal,
4.71%, 7/25/08	(h)4,059		4,059
Canadian Imperial Bank of Commerce, New York,
2.42%, 7/28/08	(h)2,030		2,030
CIT Group Holdings,
3.97%, 5/19/08	(h)3,653		3,653
Citigroup Global Markets Holdings, Inc.,
3.01%, 4/1/08	14,104		14,104
First Tennessee Bank,
2.84%, 8/15/08	(h)1,015		1,015
2.85%, 8/15/08	(h)4,059		4,059
Goldman Sachs Group, Inc.,
2.89%, 9/12/08	(h)1,015		1,015
HSBC Finance Corp.,
3.10%, 8/5/08	(h)1,015		1,015
IBM Corp.,
3.09%, 9/8/08	(h)4,059		4,059
Macquarie Bank Ltd.,
2.62%, 8/20/08	(h)2,030		2,030
Metropolitan Life Global Funding,
2.59%, 8/21/08	(h)3,045		3,045
National Bank of Canada,
3.11%, 4/2/08	(h)4,059		4,059
National Rural Utilities Cooperative Finance Corp.,
3.13%, 9/2/08	(h)4,059		4,059
Nationwide Building Society,
2.75%, 7/28/08	(h)2,354		2,354
Unicredito Italiano Bank (Ireland) plc,
2.84%, 8/14/08	(h)2,233		2,233
3.09%, 8/8/08	(h)1,421		1,421
			59,285
			82,139

	Shares
Investment Company (6.1%)
Morgan Stanley Institutional Liquidity
Money Market Portfolio
— Institutional Class	(p)151,789,913	151,790

	Face Amount
	(000)
U.S. Treasury Security (0.3%)
U.S. Treasury Bill,
0.73%, 4/10/08	$	(c)(j)(r)7,850	7,848
Total Short-Term Investments (Cost $241,774)			241,777
Total Investments (131.0%) (Cost $3,525,218) — Including $106,380 of Securities Loaned			3,256,624
Liabilities in Excess of Other Assets (-31.0%)			(770,393		)
Net Assets (100%)			$	2,486,231

(c)	All or a portion of security on loan at March 31, 2008.
(d)	Security was valued at fair value — At March 31, 2008, the Portfolio held $2,947,000 of fair valued securities, representing 0.12% of net assets.
(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(i)	Security is subject to delayed delivery.
(j)	All or a portion of the security was pledged to cover margin requirements for futures contracts.
(k)	Security has been deemed illiquid at March 31, 2008.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The interest rate shown is the rate in effect at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
Inv Fl	Inverse Floating Rate — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at March 31, 2008.
IO	Interest Only
JPY	Japanese Yen
MXN	Mexican Peso
PAC	Planned Amortization Class
PO	Principal Only
REMIC	Real Estate Mortgage Investment Conduit
TBA	To Be Announced

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

50

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income 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)
EUR	19,754	$	31,136	5/14/08	USD	28,773	$	28,773	$	(2,363	)

EUR	— Euro
USD	— United States Dollar

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
EuroDollar CME	232	$	56,683	Jun-08	$	1,720
EuroDollar CME	262	64,128		Sep-08	2,054
EuroDollar CME	257	62,862		Dec-08	1,986
EuroDollar CME	322	78,741		Mar-09	2,504
EuroDollar CME	354	86,403		Jun-09	1,803
U.S. Treasury 5 yr. Note	3,017	344,645		Jun-08	4,718
U.S. Treasury Long Bond	3	356		Jun-08	(3		)
Short:
EuroDollar CME	253		61,621	Sep-09		(1,272	)
EuroDollar CME	214	51,973		Dec-09	(978		)
EuroDollar CME	245	59,379		Mar-10	(1,039		)
EuroDollar CME	193	46,670		Jun-10	(746		)
EuroDollar CME	169	40,778		Sep-10	(592		)
EuroDollar CME	142	34,188		Dec-10	(448		)
U.S. Treasury 2 yr. Note	1,415	303,739		Jun-08	(249		)
U.S. Treasury 10 yr. Note	3,941	468,794		Jun-08	(13,201		)
U.S. Treasury Long Bond	144	17,107		Jun-08	(2		)
10 yr. Swap	150	17,271		Jun-08	(420		)
					$	(4,165	)

CME — Chicago Mercantile Exchange

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation)  (000)
Bank of America	Buy	$	2,215	0.70	%	3/20/13	$	(22	)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	1,425		0.82		3/20/18	(26		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	2,200		1.03		3/20/18	51
Nordstrom, Inc., 6.95%, 3/15/28
Bank of America	Buy	700		1.08		3/20/18	26
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	2,200		1.12		3/20/18	74
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	1,785		0.80		3/20/18	108
Textron Financial Corp., 5.13%, 2/3/11
Bank of America	Buy	7,950		1.19		03/20/12	(100		)
The Gap, Inc., 8.80%, 12/15/08
Bank of America	Buy	2,475		1.25		3/20/13	(25		)
Yum! Brands, Inc., 8.88%, 4/15/11
Citigroup	Buy	1,560		0.82		3/20/18	13
Eaton Corp., 7.65%, 11/15/29

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

51

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation)  (000)
Citigroup	Buy	$	2,755	0.62	%	3/20/13	$	20
Textron Financial Corp., 7.65%, 11/5/29
Citigroup	Buy	2,195		0.72		3/20/13	6
Textron Financial Corp., 7.65%, 11/5/29
Citigroup	Buy	8,000		0.43		03/20/12	160
Tyco International Ltd., Zero Coupon, 11/17/20
Credit Suisse	Buy	3,615		1.00		3/20/15	18
Arrow Electronics, Inc., 6.88%, 6/1/18
Goldman Sachs	Buy	1,065		0.50		3/20/18	8
American Standard, Inc., 7.63%, 2/15/10
Goldman Sachs	Buy	2,840		3.05		11/1/12	(29		)
AvalonBay Communities, Inc., 6.13%, 11/1/12
Goldman Sachs	Buy	1,680		1.57		3/20/18	(25		)
Carnival Corp., 6.65%, 1/15/28
Goldman Sachs	Buy	5,960		0.59		3/20/13	(13		)
Coca-Cola Enterprises, Inc., 6.13%, 8/15/11
Goldman Sachs	Buy	6,650		0.22		03/20/12	119
Dell, Inc., 7.10%, 4/15/28
Goldman Sachs	Buy	53,000		0.75		12/20/11	4,235
Dow Jones CDX North America Investment Grade High Volatility Index, Series 7
Goldman Sachs	Sell	3,140		0.60		12/20/12	(28		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Sell	6,180		0.80		12/20/17	(24		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Sell	31,245		1.40		12/20/12	(612		)
Dow Jones CDX North America Investment Grade High Volatility Index, Series 9
Goldman Sachs	Buy	1,600		0.97		3/20/18	(7		)
Eaton Corp., 7.65%, 11/15/29
Goldman Sachs	Buy	1,195		0.33		3/20/13	6
Eli Lilly Co., 6.57%, 1/1/16
Goldman Sachs	Buy	1,700		0.47		3/20/18	18
Goodrich Corp., 7.63%, 12/15/12
Goldman Sachs	Buy	4,240		0.15		12/20/11	393
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	8,800		0.16		12/20/11	815
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	1,660		3.33		3/20/13	12
ProLogis, 5.50%, 3/1/13
Goldman Sachs	Buy	2,095		1.08		3/20/18	76
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	1,015		1.24		3/20/18	25
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	3,050		1.05		3/20/13	68
Textron Financial Corp., 5.13%, 2/3/11
Goldman Sachs	Buy	13,200		0.10		03/20/12	239
The Chubb Corp., 6.00%, 11/15/11
Goldman Sachs	Buy	13,000		0.12		12/20/11	568
The Hartford Financial Services Group, Inc., 4.75%, 3/1/14
Goldman Sachs	Buy	7,800		0.80		03/20/11	(66		)
Tyco International Ltd., 6.38%, 10/15/11
JPMorgan Chase	Sell	13,005		0.60		12/20/12	(40		)
Dow Jones CDX North America Investment Grade Index, Series 9

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

52

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation)  (000)
JPMorgan Chase	Buy	$	965	0.60	%	3/20/13	$	8
Eaton Corp., 7.65%, 11/15/29
JPMorgan Chase	Buy	1,770		1.07		3/20/18	36
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	1,770		1.15		3/20/18	25
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	1,500		0.58		3/20/13	(5		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	2,075		0.63		3/20/13	(13		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	1,745		4.95		3/20/13	(199		)
SLM Corp., 5.13%, 8/27/12
JPMorgan Chase	Buy	5,390		0.65		03/20/11	(33		)
Tyco International Ltd., 2.75%, 1/15/18
Lehman Brothers	Sell	9,285		0.60		12/20/12	(162		)
Dow Jones CDX North America Investment Grade Index, Series 9
Lehman Brothers	Buy	1,955		0.45		3/20/18	24
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	1,400		0.46		3/20/18	16
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	6,500		0.20		12/20/11	74
Union Pacific Corp., 6.13%, 1/15/12
Merrill Lynch	Buy	2,465		1.50		3/20/18	(22		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	1,390		1.57		3/20/18	(20		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	920		1.60		3/20/18	(12		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	2,215		0.92		3/20/18	@—
Eaton Corp., 7.65%, 11/15/29
Merrill Lynch	Buy	1,745		5.00		3/20/13	(196		)
SLM Corp., 5.13%, 8/27/12
UBS	Buy	3,330		0.50		3/20/13	24
American Standard, Inc., 7.63%, 2/15/10
UBS	Buy	3,495		0.60		3/20/18	25
American Standard, Inc., 7.63%, 2/15/10
UBS	Buy	4,880		0.30		3/20/13	30
Eli Lilly Co., 6.57%, 1/1/16
UBS	Buy	2,740		1.73		3/20/18	55
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	2,740		1.78		3/20/13	32
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	2,120		1.00		3/20/13	51
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	1,065		1.01		3/20/13	26
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	3,110		1.06		3/20/13	(10		)
Textron Financial Corp., 5.13%, 2/3/11
							$	5,795

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

53

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)  (000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	177,355	$	2,330
	3 Month LIBOR	Pay	5.59		2/19/18	87,430		1,862
	3 Month LIBOR	Receive	5.82		2/12/23	227,815		(2,285		)
	3 Month LIBOR	Receive	6.03		2/19/23	112,840		(1,828		)
Citigroup	3 Month LIBOR	Pay	5.33		5/22/17	38,500		4,623
	3 Month LIBOR	Pay	5.37		5/23/17	65,500		8,045
	3 Month LIBOR	Pay	5.41		5/25/17	26,200		3,312
	3 Month LIBOR	Pay	5.44		5/29/17	33,500		4,299
	3 Month LIBOR	Receive	5.29		9/28/17	45,000		(4,561		)
	3 Month LIBOR	Receive	5.00		11/13/17	15,000		(1,378		)
	3 Month LIBOR	Receive	4.73		12/27/17	35,600		(2,384		)
	3 Month LIBOR	Pay	4.47		1/10/18	32,000		1,055
Deutsche Bank	3 Month LIBOR	Pay	5.35		5/24/17	75,500		9,152
	3 Month LIBOR	Pay	5.39		5/25/17	95,775		11,913
	3 Month LIBOR	Pay	5.43		5/29/17	101,350		12,911
Goldman Sachs	3 Month LIBOR	Pay	5.57		2/27/18	88,355		1,775
	3 Month LIBOR	Pay	5.63		2/28/18	174,355		3,923
	3 Month LIBOR	Receive	6.04		2/25/23	223,685		(3,651		)
	3 Month LIBOR	Receive	5.96		2/27/23	113,395		(1,607		)
JPMorgan Chase	3 Month LIBOR	Pay	5.37		5/23/17	22,700		2,794
	3 Month LIBOR	Pay	5.34		5/24/17	50,000		6,024
	3 Month LIBOR	Pay	5.09		9/11/17	88,500		7,591
	3 Month LIBOR	Pay	5.16		9/20/17	37,000		3,413
	3 Month LIBOR	Receive	5.23		9/27/17	46,000		(4,464		)
	3 Month LIBOR	Receive	5.30		9/28/17	47,000		(4,808		)
	3 Month LIBOR	Pay	5.25		10/11/17	44,000		4,949
	3 Month LIBOR	Receive	5.01		11/13/17	25,000		(2,337		)
	3 Month LIBOR	Pay	4.48		1/8/18	33,000		1,098
	3 Month LIBOR	Pay	4.24		1/22/18	27,625		(371		)
	3 Month LIBOR	Receive	4.52		2/19/18	33,000		(1,218		)
	3 Month LIBOR	Receive	4.62		2/22/18	34,500		(1,598		)
Lehman Brothers	3 Month LIBOR	Pay	5.34		5/24/17	24,500		2,944
	3 Month LIBOR	Pay	5.40		5/25/17	25,000		3,139
								$	64,662

LIBOR — London Inter Bank Offer Rate

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

54

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Core Plus Fixed Income Portfolio

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

*Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

55

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

High Yield Portfolio

	Face Amount			Value
	(000)			(000)
Fixed Income Securities (95.9%)
Broadcasting (1.0%)
Lin Television Corp.,
6.50%, 5/15/13	$	1,045		$	975
Univision Communications, Inc., PIK,
9.75%, 3/15/15	(c)(e)710			433
				1,408
Cable (4.3%)
Cablevision Systems Corp.,
9.65%, 4/1/09	(h)1,550			1,546
Charter Communications Holdings I LLC,
11.00%, 10/1/15	(c)652			456
Charter Communications Holdings II LLC,
10.25%, 9/15/10	485			444
DirecTV Holdings LLC/Direct TV Financing Co.,
6.38%, 6/15/15	120			113
Echostar DBS Corp.,
6.38%, 10/1/11	1,605			1,545
Intelsat Corp.,
9.00%, 8/15/14	307			311
Intelsat Subsidiary Holding Co., Ltd.,
8.63%, 1/15/15	(c)1,345			1,362
Virgin Media Finance plc,
8.75%, 4/15/14	(c)230			208
9.13%, 8/15/16	(c)145			130
				6,115
Chemicals (6.1%)
Berry Plastics Holding Corp.,
8.88%, 9/15/14	(c)1,805			1,584
Innophos Holdings, Inc.,
9.50%, 4/15/12	(e)600			564
Innophos, Inc.,
8.88%, 8/15/14	1,050			1,024
Koppers, Inc.,
9.88%, 10/15/13	490			517
Koppers Industry, Inc.,
Zero Coupon, 11/15/14	(g)1,155			1,008
Nalco Co.,
7.75%, 11/15/11	975			992
Rockwood Specialties Group, Inc.,
7.63%, 11/15/14	EUR		700	1,028
Terra Capital, Inc.,
7.00%, 2/1/17	$	1,080		1,070
Westlake Chemical Corp.,
6.63%, 1/15/16	1,130			994
				8,781
Collateralized Mortgage Obligations — Non Agency Collateral Series (1.4%) Bear Stearns Structured Products, Inc.,
IO
2.11%, 6/26/36	(e)14,703			184
2.29%, 1/27/37	(e)14,688			161
2.43%, 1/27/37	(e)20,247			253
3.18%, 5/25/37	18,399			460
Countrywide Alternative Loan Trust,
13.50%, 2/25/47	(e)11,616			244
Harborview NIM Corp.,
3.15%, 12/15/36	(e)(h)709			230
Residential Accredit Loans, Inc.,
IO
Zero Coupon, 3/25/47 - 5/25/47	(e)18,702			464
				1,996
Consumer Products (1.6%)
Jarden Corp.,
7.50%, 5/1/17	(c)1,375			1,210
Oxford Industries, Inc.,
8.88%, 6/1/11	1,145			1,094
				2,304
Diversified Media (3.9%)
CanWest MediaWorks, Inc.,
8.00%, 9/15/12	1,552			1,482
Dex Media West LLC/Dex Media Finance Co.,
9.88%, 8/15/13	1,030			899
Idearc, Inc.,
8.00%, 11/15/16	2,760			1,801
Interpublic Group of Cos., Inc.,
6.25%, 11/15/14	750			608
Valassis Communications, Inc.,
8.25%, 3/1/15	(c)1,010			836
				5,626
Energy (8.1%)
Chaparral Energy, Inc.,
8.50%, 12/1/15	1,505			1,317
8.88%, 2/1/17	(c)240			209
Chesapeake Energy Corp.,
6.63%, 1/15/16	(c)1,025			1,010
7.50%, 9/15/13	560			580
Cie Generale de Geophysique S.A.,
7.50%, 5/15/15	(c)760			775
Cimarex Energy Co.,
7.13%, 5/1/17	330			329
Helix Energy Solutions Group, Inc.,
9.50%, 1/15/16	(e)835			839
Hilcorp Energy I, LP/Hilcorp Finance Co.,
7.75%, 11/1/15	(e)1,765			1,663
Kinder Morgan Finance Co. ULC,
5.70%, 1/5/16	(c)1,315			1,253
Massey Energy Co.,
6.88%, 12/15/13	1,540			1,498
OPTI Canada, Inc.,
8.25%, 12/15/14	1,425			1,418

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

56

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

	Face
	Amount			Value
	(000)			(000)
Energy (cont’d)
Pacific Energy Partners, LP/Pacific Energy Finance Corp.,
7.13%, 6/15/14	$	665		$	704
				11,595
Financial (2.4%)
Capmark Financial Group, Inc.,
5.88%, 5/10/12	(e)2,650			1,681
6.30%, 5/10/17	(e)120			72
GrafTech Finance, Inc.,
10.25%, 2/15/12	254			264
Realogy Corp.,
10.50%, 4/15/14	(c)1,085			735
Washington Mutual Preferred Funding LLC,
9.75%	(e)(h)(o)800			613
				3,365
Food & Drug (3.5%)
CA FM Lease Trust,
8.50%, 7/15/17	(e)929			1,068
Delhaize America, Inc.,
9.00%, 4/15/31	772			932
Rite Aid Corp.,
8.13%, 5/1/10	(c)1,715			1,681
SUPERVALU, Inc.,
7.50%, 5/15/12 - 11/15/14	1,295			1,321
				5,002
Food & Tobacco (3.7%)
Constellations Brands, Inc.,
7.25%, 5/15/17	825			804
Michael Foods, Inc.,
8.00%, 11/15/13	1,170			1,147
Pilgrim’s Pride Corp.,
7.63%, 5/1/15	1,890			1,829
Smithfield Foods, Inc.,
7.00%, 8/1/11	(c)160			158
7.75%, 5/15/13	520			517
8.00%, 10/15/09	(c)885			903
				5,358
Forest Products (5.9%)
Crown Americas LLC/Crown Americas Capital Corp.,
7.63%, 11/15/13	965			989
Crown European Holdings S.A.,
6.25%, 9/1/11	EUR		520	786
Georgia Pacific Corp.,
7.13%, 1/15/17	$	(e)1,110		1,032
Glatfelter,
7.13%, 5/1/16	205			202
Graham Packaging Co., Inc.,
8.50%, 10/15/12	(c)615			557
9.88%, 10/15/14	(c)910			769
Graphic Packaging International Corp.,
9.50%, 8/15/13	(c)1,745			1,684
Owens-Illinois, Inc.,
7.35%, 5/15/08	60			60
7.50%, 5/15/10	(c)2,280			2,343
				8,422
Gaming & Leisure (5.7%)
Harrah’s Operating Co., Inc.,
5.38%, 12/15/13	(c)2,735			1,778
Host Hotels & Resorts LP,
6.38%, 3/15/15	(c)1,700			1,590
Isle of Capri Casinos, Inc.,
7.00%, 3/1/14	(c)2,620			1,880
Las Vegas Sands Corp.,
6.38%, 2/15/15	1,340			1,189
Station Casinos, Inc.,
6.00%, 4/1/12	(c)970			800
6.88%, 3/1/16	(c)1,580			928
				8,165
Health Care (11.2%)
Community Health Systems, Inc.,
8.88%, 7/15/15	770			777
DaVita, Inc.,
6.63%, 3/15/13	1,170			1,141
Fisher Scientific International, Inc.,
6.13%, 7/1/15	885			883
FMC Finance III S.A.,
6.88%, 7/15/17	(c)1,420			1,427
Fresenius Medical Care Capital Trust,
7.38%, 6/15/11	EUR		450	728
7.88%, 6/15/11	$	465		485
HCA, Inc.,
5.75%, 3/15/14	625			519
6.25%, 2/15/13	2,215			1,938
6.50%, 2/15/16	565			479
9.13%, 11/15/14	210			217
Ivacare Corp.,
9.75%, 2/15/15	235			237
LVB Acquisition Merger Sub, Inc., PIK,
10.38%, 10/15/17	(e)460			479
Medco Health Solutions, Inc.,
7.13%, 3/15/18	525			539
National Mentor Holdings, Inc.,
11.25%, 7/1/14	975			1,004
Omnicare, Inc.,
6.75%, 12/15/13	(c)1,615			1,449
Sun Healthcare Group, Inc.,
9.13%, 4/15/15	(c)775			752
Tenet Healthcare Corp.,
7.38%, 2/1/13	1,735			1,557
9.88%, 7/1/14	425			413

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

57

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

	Face
	Amount					Value
	(000)					(000)
Health Care (cont’d)
Warner Chilcott Corp.,
8.75%, 2/1/15	$	945				$	950
						15,974
Housing (1.0%)
Nortek, Inc.,
8.50%, 9/1/14	(c)1,780					1,326
Pulte Homes, Inc.,
6.38%, 5/15/33	160					126
						1,452
Information Technology (3.1%)
Freescale Semiconductor, Inc.,
10.13%, 12/15/16	(c)1,650					1,122
Iron Mountain, Inc.,
8.63%, 4/1/13	1,585					1,608
SunGard Data Systems, Inc.,
9.13%, 8/15/13	990					1,005
Vangent, Inc.,
9.63%, 2/15/15	775					626
						4,361
Manufacturing (2.3%)
Baldor Electric Co.,
8.63%, 2/15/17	460					458
Johnsondiversey, Inc.,
9.63%, 5/15/12	(c)1,695					1,678
9.63%, 5/15/12	EUR		55			81
Propex Fabrics, Inc.,
10.00%, 12/1/12	$	(b)1,210				151
RBS Global Inc./Rexnord Corp.,
8.88%, 9/1/16	1,000					890
						3,258
Metals (1.1%)
Foundation PA Coal Co.,
7.25%, 8/1/14	(c)575					572
Freeport-McMoRan Copper & Gold, Inc.,
8.38%, 4/1/17	910					968
						1,540
Mortgages - Other (1.7%)
American Home Mortgage Assets,
2.90%, 6/25/47	(h)589					289
2.91%, 10/25/46	(h)538					268
Countrywide Alternative Loan Trust,
2.82%, 3/20/47	(h)645					310
3.11%, 10/25/46	(h)600					60
3.30%, 2/25/36	(h)448					190
Greenpoint Mortgage Funding Trust,
3.01%, 9/25/46	(h)425					199
Harborview Mortgage Loan Trust,
3.15%, 8/21/36	(h)575					115
3.26%, 1/19/36	(h)935					382
Lehman XS Trust,
3.60%, 3/25/47	(h)1,000					306
Luminent Mortgage Trust,
2.96%, 7/25/36	(h)722					312
						2,431
Retail (1.8%)
Brown Shoe Co., Inc.,
8.75%, 5/1/12	(c)1,145					1,139
Phillips - Van Heusen Corp.,
7.25%, 2/15/11	1,400					1,400
						2,539
Services (1.5%)
Allied Waste North America, Inc.,
6.38%, 4/15/11	1,460					1,444
Aramark Corp.,
6.74%, 2/1/15	(h)85					75
8.50%, 2/1/15	(c)175					176
Aramark Services, Inc.,
5.00%, 6/1/12	(c)595					521
						2,216
Sovereign (0.7%)
Mexican Bonos,
9.50%, 12/18/14	MXN				9,120	953
Telecommunications (3.9%)
Axtel SAB de CV,
11.00%, 12/15/13	$	(c)938				1,022
Citizens Communications Co.,
6.25%, 1/15/13	535					487
Esprit Telecom Group plc,
10.88%, 6/15/08	(b)(d)(k)965					—
11.00%, 6/15/08	EUR		(b)(d)(k)2,608			—
Exodus Communications, Inc.,
11.63%, 7/15/10	$	(b)(c)(d)(k)3,885				—
Nordic Telephonen Co. Holdings A.p.S.,
8.88%, 5/1/16	(e)465					453
Qwest Communications International, Inc.,
9.06%, 2/15/09	(h)1,007					1,002
Qwest Corp.,
5.63%, 11/15/08	355					355
Rhythms Netconnections, Inc.,
12.75%, 4/15/09	(b)(d)(k)433					—
13.88%, 5/15/08	(b)(d)(k)12,869					—
14.00%, 2/15/10	(b)(d)(k)11,487					—
TDC A/S,
6.50%, 4/19/12	EUR		380			572
Wind Acquisition Finance S.A.,
10.75%, 12/1/15	$			(c)(e)1,170		1,199
Windstream Corp.,
8.13%, 8/1/13	490					484
						5,574
Transportation (8.8%)
ArvinMeritor, Inc.,
8.75%, 3/1/12	1,440					1,325

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

58

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

	Face
	Amount		Value
	(000)		(000)
Transportation (cont’d)
Asbury Automotive Group, Inc.,
7.63%, 3/15/17	$	555	$	441
CHC Helicopter Corp.,
7.38%, 5/1/14	2,080		2,083
Ford Motor Credit Co.,
7.25%, 10/25/11	1,875		1,541
Ford Motor Credit Co. LLC,
7.00%, 10/1/13	2,955		2,308
General Motors Acceptance Corp.,
6.88%, 9/15/11 - 8/28/12	2,510		1,920
General Motors Corp.,
8.38%, 7/15/33	(c)1,370		973
Sonic Automotive, Inc.,
8.63%, 8/15/13	(c)1,410		1,311
United Auto Group, Inc.,
7.75%, 12/15/16	(c)790		687
			12,589
Utilities (9.5%)
AES Corp. (The),
7.75%, 3/1/14	525		531
8.88%, 2/15/11	243		256
9.38%, 9/15/10	396		421
Dynegy Holdings, Inc.,
7.75%, 6/1/19	1,100		1,034
Equitable Resources, Inc.,
6.50%, 4/1/18	435		438
Intergen N.V.,
9.00%, 6/30/17	(e)1,125		1,181
Ipalco Enterprises, Inc.,
8.38%, 11/14/08	640		651
8.63%, 11/14/11	730		772
NRG Energy, Inc.,
7.38%, 1/15/17	1,200		1,170
Ormat Funding Corp.,
8.25%, 12/30/20	1,458		1,472
Reliant Energy, Inc.,
7.88%, 6/15/17	(c)1,035		1,035
Texas Competitive Electric Holdings Co. LLC,
10.25%, 11/1/15	(c)(e)2,280		2,283
Williams Cos., Inc.,
7.88%, 9/1/21	2,160		2,352
			13,596
Wireless Communications (1.7%)
American Tower Corp.,
7.13%, 10/15/12	355		365
7.50%, 5/1/12	1,475		1,515
Rural Cellular Corp.,
8.25%, 3/15/12	500		515
			2,395
Total Fixed Income Securities (Cost $173,456)			137,015
Bank Loans (1.5%)
Consumer Products (0.2%)
Bausch & Lomb, Inc.,
Zero Coupon, 4/26/15	25		24
5.95%, 4/26/15	225		218
Energy (0.7%)
Sandridge Energy,
8.63%,4/1/15	970		959
Information Technology (0.6%)
First Data Corp.,
5.35%, 9/24/14	975		880
5.45%, 9/24/14	70		63
Total Bank Loans (Cost $2,234)			2,144

	Shares
Common Stocks (0.0%)
Telecommunications (0.0%)
Viatel Holding Bermuda Ltd.	(a)7,617	@—
XO Holdings, Inc.	(a)(c)6,978	9
		9
Utilities (0.0%)
PNM Resources, Inc.	(a)854	11
Total Common Stocks (Cost $10,800)		20

	No. of
	Warrants
Warrants (0.0%)
Telecommunications (0.0%)
XO Holdings, Inc., Series A, expiring 1/16/10	(a)(c)13,962	1
XO Holdings, Inc., Series B, expiring 1/16/10	(a)(c)10,470	1
XO Holdings, Inc., Series C, expiring 1/16/10	(a)(c)10,471	@—
		2
Utilities (0.0%)
SW Acquisition, LP, expiring 4/1/11	(a)(d)(k)1	—
Total Warrants (Cost $@—)		2

	Shares
Short-Term Investments (22.0%)
Securities held as Collateral on Loaned Securities (19.8%)
Investment Company (5.5%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)7,889,150	7,889

	Face
	Amount
	(000)
Short-Term Debt (14.3%)
Alliance & Leicester plc,
3.08%, 9/2/08	$	(h)701	701

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

59

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

	Face
	Amount		Value
	(000)		(000)
Short-Term Debt (cont’d)
Bancaja,
4.04%, 11/12/08	$	(h)350	$	350
Bank of New York Co., Inc.,
3.07%, 8/8/08	(h)350		350
BASF AG,
3.89%, 8/19/08	(h)350		350
CAM US Finance S.A. Unipersonal,
4.71%, 7/25/08	(h)1,401		1,401
Canadian Imperial Bank of Commerce, New York,
2.42%, 7/28/08	(h)701		701
CIT Group Holdings,
3.97%, 5/19/08	(h)1,261		1,261
Citigroup Global Markets Holdings, Inc.,
3.01%, 4/1/08	4,869		4,869
First Tennessee Bank,
2.84%, 8/15/08	(h)350		350
2.85%, 8/15/08	(h)1,401		1,401
Goldman Sachs Group, Inc.,
2.89%, 9/12/08	(h)350		350
HSBC Finance Corp.,
3.10%, 8/5/08	(h)350		350
IBM Corp.,
3.09%, 9/8/08	(h)1,402		1,402
Macquarie Bank Ltd.,
2.62%, 8/20/08	(h)701		701
Metropolitan Life Global Funding,
2.59%, 8/21/08	(h)1,051		1,051
National Bank of Canada,
3.11%, 4/2/08	(h)1,401		1,401
National Rural Utilities Cooperative Finance Corp.,
3.13%, 9/2/08	(h)1,401		1,401
Nationwide Building Society,
2.75%, 7/28/08	(h)813		813
Unicredito Italiano Bank (Ireland) plc,
2.84%, 8/14/08	(h)771		771
3.09%, 8/8/08	(h)491		491
			20,465
			28,354

	Shares
Investment Company (1.1%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)1,594,936	1,595

	Face
	Amount
	(000)
U.S. Treasury Security (1.1%)
U.S. Treasury Bill
0.73%, 4/10/08	$	(j)(r)1,535	1,535
			3,130
Total Short-Term Investments (Cost $31,484)			31,484
Total Investments (119.4%) (Cost $217,974) — Including $27,639 of Securities Loaned			170,665
Liabilities in Excess of Other Assets (-19.4%)			(27,743		)
Net Assets (100%)			$	142,922

(a)	Non-income producing security.
(b)	Issuer is in default.
(c)	All or a portion of security on loan at March 31, 2008.
(d)	Security was valued at fair value — At March 31, 2008, the Portfolio
	held fair valued securities, each valued at less than $500,
	representing less than 0.05% of net assets.
(e)	144A security — Certain conditions for public sale may exist. Unless
	otherwise noted, these securities are deemed to be liquid.
(g)	Step Bond — Coupon rate increases in increments to maturity. Rate
	disclosed is as of March 31, 2008. Maturity date disclosed is the
	ultimate maturity date.
(h)	Variable/Floating Rate Security — Interest rate changes on these
	instruments are based on changes in a designated base rate. The
	rates shown are those in effect on March 31, 2008.
(j)	All or a portion of the security was pledged to cover margin
	requirements for futures contracts.
(k)	Security has been deemed illiquid at March 31, 2008.
(o)	Perpetual — Security does not have a predetermined maturity date.
	Rate for this security is fixed for a period of time then reverts to a
	floating rate. The Interest rate shown is the rate in effect at March
	31, 2008.
(p)	See note F within the Notes to Financial Statements regarding
	investment in Morgan Stanley Institutional Liquidity Money Market
	Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
@	Face Amount/Value is less than $500.
EUR	Euro
IO	Interest Only
MXN	Mexican Peso
PIK	Payment-in-kind

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)
EUR	2,111	$	3,330	4/30/08	USD	3,110	$	3,110	$	(220	)

USD — United States Dollar

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
U.S. Treasury 2yr. Note	34	$	7,298	Jun-08	$	40
U.S. Treasury 5yr. Note	19	2,170		Jun-08	39

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

60

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

Futures Contracts: (cont’d):

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Short:
EuroDollar CME	16	$	3,909	Jun-08	$	(85	)
EuroDollar CME	14	3,349		Sep-08	(77		)
EuroDollar CME	9	2,172		Sep-10	(32		)
EuroDollar CME	14	3,424		Dec-08	(75		)
EuroDollar CME	11	2,690		Mar-09	(60		)
EuroDollar CME	10	2,441		Jun-09	(53		)
EuroDollar CME	9	2,192		Sep-09	(45		)
EuroDollar CME	9	2,185		Dec-09	(41		)
EuroDollar CME	12	2,908		Mar-10	(51		)
EuroDollar CME	10	2,418		Jun-10	(39		)
EuroDollar CME	8	1,926		Dec-10	(25		)
U.S. Treasury 10yr. Note	215	25,575		Jun-08	(742		)
U.S. Treasury Long Bond	39	4,633		Jun-08	(101		)
					$	(1,347	)

CME       Chicago Mercantile Exchange

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Bank of America	Buy	$	860	1.57	%	3/20/18	$	(13	)
Carnival Corp., 6.65%, 1/15/28
Bank of America	Buy	605		0.70		3/20/13	(6		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	415		0.82		3/20/18	(8		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	580		1.03		3/20/18	14
Nordstrom, Inc., 6.95%, 3/15/28
Bank of America	Buy	420		1.34		3/20/13	@—
Pactiv Corp., 8.13%, 6/15/17
Bank of America	Buy	690		0.80		3/20/18	42
Textron Financial Corp., 5.13%, 2/3/11
Bank of America	Buy	280		1.08		3/20/18	10
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	400		1.12		3/20/18	13
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	365		2.25		3/20/18	3
Toll Brothers Finance Corp., 6.88%, 11/15/12

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

61

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Bank of America	Buy	$	735	2.90	%	11/15/12	$	4
Toll Brothers Finance Corp., 6.88%, 11/15/12
Citigroup	Buy	1,120		0.82		3/20/18	9
Eaton Corp., 7.65%, 11/15/29
Citigroup	Buy	675		0.62		3/20/13	5
Textron Financial Corp., 7.65%, 11/15/29
Citigroup	Buy	565		0.72		3/20/13	2
Textron Financial Corp., 7.65%, 11/15/29
Credit Suisse	Buy	1,150		0.18		7/25/45	(52		)
ABX HE-AAA 06-1 Index
Credit Suisse	Buy	920		1.00		3/20/15	5
Arrow Electronics, Inc., 6.88%, 6/1/18
Credit Suisse	Buy	1,165		1.11		3/20/13	(6		)
Arrow Electronics, Inc., 6.88%, 6/1/18
Credit Suisse	Buy	735		1.05		3/20/13	7
Nordstrom, Inc., 6.95%, 3/15/28
Credit Suisse	Buy	1,415		1.40		3/20/13	13
Nordstrom, Inc., 6.95%, 3/15/28
Credit Suisse	Buy	1,270		1.38		3/20/13	(2		)
Pactiv Corp., 8.13%, 6/15/17
Credit Suisse	Buy	630		8.10		3/20/13	(30		)
PMI Group, Inc., 6.00%, 9/15/16
Deutsche Bank	Buy	755		5.00		6/20/13	(5		)
Dow Jones CDX North American Investment Grade, Series 9
Deutsche Bank	Buy	740		8.15		3/20/13	(54		)
MGIC Investment Corp., 6.00%, 9/15/16
Deutsche Bank	Buy	1,270		1.35		3/20/13	@—
Pactiv Corp., 8.13%, 6/15/17
Goldman Sachs	Buy	265		0.50		3/20/18	2
American Standard, Inc., 7.63%, 2/15/10
Goldman Sachs	Buy	110		0.60		3/20/18	1
American Standard, Inc., 7.63%, 2/15/10
Goldman Sachs	Buy	1,425		3.05		3/20/13	(15		)
AvalonBay Communities, 6.13%, 11/1/12
Goldman Sachs	Buy	70		1.60		3/20/18	(1		)
Carnival Corp., 6.65%, 1/15/28
Goldman Sachs	Buy	1,465		0.59		3/20/13	(3		)
Coca-Cola Enterprises, Inc., 6.13%, 8/15/11
Goldman Sachs	Sell	1,620		1.40		12/20/12	15
Dow Jones CDX North American Investment Grade High Volatility Index, Series 9
Goldman Sachs	Buy	430		0.97		3/20/18	(2		)
Eaton Corp., 7.65%, 11/15/29
Goldman Sachs	Buy	410		0.47		3/20/18	4
Goodrich Corp., 7.63%, 12/15/12
Goldman Sachs	Buy	775		2.45		12/20/12	7
Merrill Lynch & Co., 5.00%, 1/15/15
Goldman Sachs	Buy	730		1.05		6/20/13	40
Nordstrom, Inc., 6.95%, 3/15/28
Goldman Sachs	Buy	625		3.33		3/20/13	5
ProLogis, 5.50%, 3/1/13
Goldman Sachs	Buy	510		1.08		3/20/18	19
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	250		1.24		3/20/18	6
Sealed Air Corp., 5.63%, 7/15/13

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

62

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Goldman Sachs	Buy	$	915	2.32	%	3/20/18	$	(47	)
Simon Property Group LP, 6.35%, 8/28/12
Goldman Sachs	Buy	1,150		2.37		3/20/18	(64		)
Simon Property Group LP, 6.35%, 8/28/12
Goldman Sachs	Buy	1,195		1.05		3/20/13	27
Textron Financial Corp., 5.13%, 2/3/11
Goldman Sachs	Buy	1,000		0.80		3/20/11	(9		)
Tyco International Ltd., 6.38, 10/15/11
JPMorgan Chase	Buy	240		0.60		3/20/13	2
Eaton Corp., 7.65%, 11/15/09
JPMorgan Chase	Buy	740		2.30		3/20/13	11
Merrill Lynch & Co., 5.00%, 1/15/15
JPMorgan Chase	Buy	460		1.07		3/20/18	9
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	460		1.15		3/20/18	6
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	380		0.58		3/20/13	(1		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	505		0.63		3/20/13	(3		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	1,000		0.65		3/20/11	(5		)
Tyco International Ltd., 2.75%, 1/15/18
JPMorgan Chase	Buy	415		4.95		3/20/13	(47		)
SLM Corp., 5.13%, 8/27/12
Lehman Brothers	Buy	1,150		0.18		7/25/45	(63		)
ABX HE-AAA 06-1 Index
Lehman Brothers	Buy	160		1.04		3/20/18	1
Arrow Electronics, Inc., 6.88%, 6/1/18
Lehman Brothers	Buy	2,140		1.40		3/20/13	(1		)
Arrow Electronics, Inc., 6.88%, 6/1/18
Lehman Brothers	Buy	1,305		0.64		3/20/13	(6		)
Coca-Cola Enterprises, Inc., 6.13%, 8/15/11
Lehman Brothers	Sell	6,138		3.75		12/20/12	(288		)
Dow Jones CDX North American High Yield, Series 9
Lehman Brothers	Buy	475		0.45		3/20/18	6
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	340		0.46		3/20/18	4
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	830		2.15		3/20/13	(25		)
MetLife, Inc., 5.00%, 6/15/15
Merrill Lynch	Buy	840		1.50		3/20/18	(7		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	710		1.57		3/20/18	(10		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	465		1.60		3/20/18	(6		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Sell	2,615		1.40		12/20/12	74
Dow Jones CDX North American Investment Grade High Volatility Index, Series 9
Merrill Lynch	Buy	530		0.92		3/20/18	@—
Eaton Corp., 7.65%, 11/15/29
Merrill Lynch	Buy	1,395		1.25		3/20/13	(9		)
Eaton Corp., 7.38%, 11/15/31
Merrill Lynch	Buy	415		5.00		3/20/13	(47		)
SLM Corp., 5.13%, 8/27/12

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

63

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Amount	Notional Protection (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Merrill Lynch	Buy	$	1,345	0.60	%	3/20/13	$	(5	)
The Walt Disney Co., 5.63%, 9/15/16
Merrill Lynch	Buy	2,135		0.77		3/20/13	@—
The Walt Disney Co., 5.63%, 9/15/16
Merrill Lynch	Buy	2,135		0.77		3/20/13	(1		)
The Walt Disney Co., 5.63%, 9/15/16
UBS	Buy	805		0.50		3/20/13	6
American Standard, Inc., 7.63%, 2/15/10
UBS	Buy	845		0.60		3/20/18	6
American Standard, Inc., 7.63%, 2/15/10
UBS	Buy	340		1.73		3/20/18	7
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	340		1.78		3/20/18	4
Martin Marietta Materials Inc., 6.88%, 4/1/11
UBS	Buy	715		1.00		3/20/13	17
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	485		1.01		3/20/13	12
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	1,180		1.06		3/20/13	(4		)
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	1,125		2.90		3/20/13	7
Toll Brothers Finance Corp., 6.88%, 11/15/12
							$	(420	)

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

								Unrealized
						Notional		Appreciation
	Floating Rate	Pay/Receive	Fixed		Termination	Amount		(Depreciation)
Swap Counterparty	Index	Floating Rate	Rate		Date	(000)		(000)
Bank of America	3 Month LIBOR	Pay	5.55	%	2/22/18	$	9,925	$	195
	3 Month LIBOR	Receive	5.96		2/22/23	12,665		(179		)
	3 Month LIBOR	Receive	6.04		3/7/23	12,750		(209		)
	3 Month LIBOR	Pay	5.64		3/7/23	9,915		224
JPMorgan Chase	3 Month LIBOR	Pay	5.43		8/20/17	13,400		1,531
	3 Month LIBOR	Pay	5.36		8/24/17	10,500		1,139
	3 Month LIBOR	Pay	4.92		12/18/17	6,800		567
	3 Month LIBOR	Pay	4.82		12/19/17	3,200		243
								$	3,511

LIBOR — London Inter Bank Offer Rate

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

64

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

High Yield Portfolio

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

* Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

65

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Intermediate Duration Portfolio

	Face
	Amount		Value
	(000)		(000)
Fixed Income Securities (75.1%)
Agency Adjustable Rate Mortgages (1.6%)
Federal Home Loan Mortgage Corp.,
5.31%, 4/1/37	$	501	$	510
5.70%, 1/1/37	844		862
Federal National Mortgage Association,
5.49%, 4/1/37	670		684
Government National Mortgage Association,
5.13%, 11/20/25 - 11/20/27	46		46
5.63%, 7/20/25 - 9/20/27	40		40
6.38%, 3/20/25 - 1/20/28	131		134
			2,276
Agency Fixed Rate Mortgages (5.9%)
Federal Home Loan Bank Discount Note,
Zero Coupon, 4/18/08	4,300		4,296
Federal Home Loan Mortgage Corp.,
Conventional Pools:
11.00%, 7/1/13	3		3
Gold Pools:
7.00%, 6/1/28 - 6/1/32	92		98
7.50%, 8/1/30 - 1/1/31	101		109
8.00%, 6/1/30 - 9/1/31	361		392
8.50%, 7/1/30 - 7/1/31	70		78
9.50%, 12/1/22	16		18
10.00%, 6/1/17	15		17
Federal National Mortgage Association,
Conventional Pools:
6.50%, 7/1/30 - 5/1/33	353		369
7.00%, 1/1/32 - 11/1/34	1,434		1,526
7.50%, 8/1/29 - 3/1/32	712		768
8.00%, 10/1/30 - 9/1/31	121		131
8.50%, 8/1/30	6		6
9.50%, 12/1/17 - 12/1/21	334		370
10.00%, 7/1/18 - 5/1/22	11		12
Government National Mortgage Association,
Various Pools:
9.50%, 11/15/16 - 12/15/21	107		120
10.00%, 4/15/16 - 3/15/25	188		225
10.50%, 1/15/18 - 2/15/18	26		31
11.00%, 3/15/10 - 6/15/20	70		81
11.50%, 6/15/13	3		4
12.00%, 5/15/14	7		8
			8,662
Asset Backed Corporates (18.1%)
Argent Securities, Inc.,
2.65%, 10/25/36	(h)503		491
Bayview Financial Acquisition Trust,
2.79%, 11/28/36	(h)207		203
Bear Stearns Asset Backed Securities Trust,
2.70%, 1/25/37	(h)452		404
2.80%, 9/25/34	(h)18		18
Capital Auto Receivables Asset Trust,
2.88%, 7/15/10	(h)1,000		987
4.05%, 7/15/09	91		91
4.98%, 5/15/11	1,075		1,087
5.31%, 10/20/09	(e)1,250		1,258
Capital One Auto Finance Trust,
5.07%, 7/15/11	469		461
Caterpillar Financial Asset Trust,
5.57%, 5/25/10	648		656
CIT Equipment Collateral,
5.07%, 2/20/10	600		605
Citibank Credit Card Issuance Trust,
2.59%, 3/22/12	(h)900		885
Citigroup Mortgage Loan Trust, Inc.,
2.67%, 8/25/36 - 1/25/37	(h)675		638
CNH Equipment Trust,
4.27%, 1/15/10	590		592
5.20%, 6/15/10	393		396
Credit-Based Asset Servicing & Securitization LLC,
2.66%, 6/25/36	(h)149		147
2.67%, 1/25/37	(h)737		711
Ford Credit Auto Owner Trust,
5.26%, 10/15/10	1,000		1,011
Fremont Home Loan Trust,
2.65%, 10/25/36	(h)514		496
GE Equipment Small Ticket LLC,
4.38%, 7/22/09	(e)365		366
4.88%, 10/22/09	(e)882		882
GS Auto Loan Trust,
5.37%, 12/15/10	840		850
GSAMP Trust,
2.67%, 6/25/36 - 1/25/37	(h)1,282		1,226
Harley-Davidson Motorcycle Trust,
2.76%, 5/15/11	434		432
3.76%, 12/17/12	402		403
4.07%, 2/15/12	989		994
4.41%, 6/15/12	1,451		1,462
Hertz Vehicle Financing LLC,
4.93%, 2/25/10	(e)1,325		1,310
Honda Auto Receivables Owner Trust,
4.85%, 10/19/09	762		766
Hyundai Auto Receivables Trust,
3.98%, 11/16/09	251		251
Nationstar Home Equity Loan Trust,
2.67%, 9/25/36	(h)197		193
Nissan Auto Receivables Owner Trust,
3.99%, 7/15/09	295		296
5.44%, 4/15/10	1,032		1,042
Residential Asset Mortgage Products, Inc.,
2.69%, 10/25/36	(h)359		342
Residential Asset Securities Corp.,
2.68%, 10/25/36	(h)265		257

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

66

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Intermediate Duration Portfolio

	Face
	Amount		Value
	(000)		(000)
Asset Backed Corporates (cont’d)
Securitized Asset Backed Receivables LLC Trust,
2.68%, 11/25/36	$	(h)639	$	584
2.73%, 5/25/37	(h)623		584
SLM Student Loan Trust,
3.32%, 10/27/14	(h)479		476
Soundview Home Equity Loan Trust,
2.68%, 1/25/37 - 6/25/37	(h)906		860
Structured Asset Securities Corp.,
2.69%, 6/25/37	(h)631		574
Terwin Mortgage Trust,
2.71%, 4/25/37	(e)(h)224		222
3.07%, 12/25/34	(h)151		147
TXU Electric Delivery Transition Bond Co., LLC,
4.81%, 11/17/14	175		179
Volkswagen Auto Loan Enhanced Trust,
4.80%, 7/20/09	419		421
Wachovia Auto Owner Trust,
4.06%, 9/21/09	105		105
Whole Auto Loan Trust,
2.58%, 3/15/10	40		40
			26,401
Collateralized Mortgage Obligations — Agency Collateral Series (0.3%)
Federal Home Loan Mortgage Corp.,
Inv Fl IO
5.18%, 3/15/32	413		48
Federal Home Loan Mortgage Corp.,
IO
5.00%, 9/15/14	147		1
6.00%, 5/1/31	206		41
6.50%, 4/1/28 - 8/1/28	465		108
7.00%, 2/15/32	74		13
8.00%, 1/1/28 - 6/1/31	16		4
IO PAC
6.00%, 4/15/32	212		15
Federal National Mortgage Association,
Inv Fl IO
6.00%, 5/25/33	395		74
IO
6.00%, 6/25/33	213		40
6.50%, 6/1/31	133		31
7.00%, 4/25/33	252		42
8.00%, 5/1/30	9		2
9.00%, 11/1/26	30		8
IO PAC
8.00%, 8/18/27	30		6
Government National Mortgage Association,
Inv Fl IO
5.13%, 12/16/25 - 9/16/27	(h)246		32
5.18%, 5/16/32	(h)85		9
			474
Collateralized Mortgage Obligations — Non Agency Collateral Series (1.6%)
Countrywide Alternative Loan Trust,
IO
2.40%, 12/20/46	5,780		281
2.56%, 2/25/37	8,680		374
2.86%, 3/20/47	4,897		254
3.68%, 12/20/35	(e)(h)7,260		248
3.91%, 12/20/35	(e)(h)9,760		383
Harborview Mortgage Loan Trust,
IO
3.34%, 6/19/35	(h)6,689		193
3.60%, 5/19/35	(h)8,045		227
3.93%, 3/19/37	(h)7,439		293
PO
3/19/37	6		5
			2,258
Finance (11.0%)
AIG SunAmerica Global Financing VI,
6.30%, 5/10/11	(e)610		642
American General Finance Corp.,
4.63%, 5/15/09	755		749
AXA Financial, Inc.,
6.50%, 4/1/08	295		295
Bank of America Corp.,
3.38%, 2/17/09	245		245
Bank of New York Mellon Corp. (The),
4.50%, 4/1/13	160		161
Bank One Corp.,
6.00%, 2/17/09	455		462
Bear Stearns Cos., Inc. (The),
6.40%, 10/2/17	425		420
7.25%, 2/1/18	255		264
Capmark Financial Group, Inc.,
5.88%, 5/10/12	(e)195		124
6.30%, 5/10/17	(e)85		51
Catlin Insurance Co., Ltd.,
7.25%	(e)(h)(o)250		209
CIT Group, Inc.,
4.75%, 8/15/08	100		92
Citigroup, Inc.,
6.13%, 11/21/17	445		445
Countrywide Home Loans, Inc.,
3.25%, 5/21/08	237		232
Credit Suisse Group,
6.00%, 2/15/18	640		640
Farmers Insurance Exchange,
8.63%, 5/1/24	(e)300		317
General Electric Capital Corp.,
2.93%, 3/12/10	(h)515		512
4.75%, 9/15/14	95		96
Goldman Sachs Group, Inc. (The),
6.15%, 4/1/18	170		170
6.25%, 9/1/17	670		676

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

67

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Intermediate Duration Portfolio

	Face Amount (000)		Value (000)
Finance (cont’d)
HSBC Finance Corp.,
4.13%, 12/15/08	$	90	$	90
6.40%, 6/17/08	270		271
6.75%, 5/15/11	285		296
Huntington National Bank (The),
4.38%, 1/15/10	300		296
iStar Financial, Inc.,
3.34%, 3/9/10	(h)320		253
John Hancock Global Funding II,
7.90%, 7/2/10	(e)715		797
JPMorgan Chase & Co.,
6.00%, 2/15/09	275		279
Lehman Brothers Holdings, Inc.,
5.75%, 1/3/17	695		629
6.50%, 7/19/17	420		400
Mantis Reef Ltd.,
4.69%, 11/14/08	(e)255		257
MBNA Corp.,
3.53%, 5/5/08	(h)625		626
Nationwide Building Society,
4.25%, 2/1/10	(e)345		353
Popular North America, Inc.,
5.65%, 4/15/09	155		154
Pricoa Global Funding I,
3.90%, 12/15/08	(e)795		798
Sovereign Bancorp, Inc.,
2.83%, 3/23/10	(h)425		407
Two-Rock Pass Through Trust,
4.04%	(e)(h)(o)290		116
Unicredit Luxembourg Finance S.A.,
3.77%, 10/24/08	(e)(h)470		470
Wachovia Capital Trust Ill,
5.80%	(h)(o)515		367
Washington Mutual Preferred Funding LLC,
6.67%	(e)(h)(o)300		162
Washington Mutual, Inc.,
8.25%, 4/1/10	365		318
Wells Fargo & Co.,
5.63%, 12/11/17	555		569
World Financial Properties,
6.91%, 9/1/13	(e)765		731
6.95%, 9/1/13	(e)185		180
Xlliac Global Funding,
4.80%, 8/10/10	(e)395		396
			16,017
Industrials (8.4%)
America West Airlines, Inc.,
7.10%, 4/2/21	228		227
American Honda Finance Corp.,
3.85%, 11/6/08	(e)325		326
Amgen, Inc.,
5.85%, 6/1/17	100		100
Archer-Daniels-Midland Co.,
5.45%, 3/15/18	210		212
AT&T, Inc.,
5.10%, 9/15/14	605		602
5.30%, 11/15/10	160		166
Biogen Idec, Inc.,
6.88%, 3/1/18	265		268
Brookfield Asset Management, Inc.,
5.80%, 4/25/17	30		27
7.13%, 6/15/12	300		300
Burlington Northern Santa Fe Corp.,
6.13%, 3/15/09	140		143
Comcast Cable Communications LLC,
6.75%, 1/30/11	235		245
Comcast Corp.,
6.50%, 1/15/15	75		77
Consumers Energy Co.,
4.00%, 5/15/10	100		100
4.80%, 2/17/09	185		186
Cooper Industries, Inc.,
5.25%, 11/15/12	225		233
CVS Caremark Corp.,
5.75%, 6/1/17 - 8/15/11	130		134
CVS Pass-Through Trust,
6.04%, 12/10/28	(e)204		195
Deutsche Telekom International Finance B.V.,
8.00%, 6/15/10	435		466
FBG Finance Ltd.,
5.13%, 6/15/15	(e)255		253
FedEx Corp.,
5.50%, 8/15/09	145		149
France Telecom S.A.,
7.75%, 3/1/11	290		315
General Electric Co.,
5.25%, 12/6/17	915		915
Hewlett-Packard Co.,
5.50%, 3/1/18	110		113
Home Depot, Inc. (The),
2.93%, 12/16/09	(h)330		315
5.40%, 3/1/16	240		226
Honeywell International, Inc.,
5.30%, 3/1/18	130		133
ICI Wilmington, Inc.,
4.38%, 12/1/08	190		191
Koninklijke Philips Electronics N.V.,
5.75%, 3/11/18	345		352
Kroger Co. (The),
5.00%, 4/15/13	100		101
LG Electronics, Inc.,
5.00%, 6/17/10	(e)165		163
Marathon Oil Corp.,
5.90%, 3/15/18	130		131
6.00%, 10/1/17	210		213

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

68

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Intermediate Duration Portfolio

	Face
	Amount		Value
	(000)		(000)
Industrials (cont’d)
Macy’s Retail Holdings, Inc.,
5.95%, 11/1/08	$	295	$	296
6.30%, 4/1/09	265		265
6.63%, 9/1/08	80		80
Medco Health Solutions, Inc.,
7.13%, 3/15/18	200		205
Miller Brewing Co.,
4.25%, 8/15/08	(e)280		281
Sara Lee Corp.,
2.75%, 6/15/08	380		379
Sprint Nextel Corp.,
6.00%, 12/1/16	240		187
Systems 2001 Asset Trust LLC,
6.66%, 9/15/13	(e)225		225
Telecom Italia Capital S.A.,
4.00%, 1/15/10	335		329
4.95%, 9/30/14	50		46
Textron Financial Corp.,
5.13%, 2/3/11	95		99
Time Warner, Inc.,
3.30%, 11/13/09	(h)445		426
UnitedHealth Group, Inc.,
6.00%, 2/15/18	185		182
Valero Energy Corp.,
3.50%, 4/1/09	205		204
Verizon Communications, Inc.,
5.50%, 2/15/18	305		298
Verizon Global Funding Corp.,
7.25%, 12/1/10	140		150
Verizon New England, Inc.,
6.50%, 9/15/11	200		209
Viacom, Inc.,
5.75%, 4/30/11	300		303
Weatherford International Ltd.,
6.00%, 3/15/18	145		146
Wyeth,
5.45%, 4/1/17	120		122
5.50%, 2/15/16	45		46
Yum! Brands, Inc.,
8.88%, 4/15/11	190		210
			12,265
Mortgages — Other (22.2%)
Alliance Bancorp.,
2.84%, 7/25/37	(h)787		599
American Home Mortgage Assets,
2.72%, 3/25/47	(h)828		631
2.79%, 6/25/47	(h)1,084		821
2.90%, 6/25/47	(h)448		220
American Home Mortgage Investment Trust,
2.79%, 3/25/46 - 5/25/47	(h)1,526		1,099
2.98%, 3/25/46	(h)350		158
3.32%, 11/25/45	(h)375		142
Banc of America Funding Corp.,
2.89%, 9/20/35	(h)249		167
Bear Stearns Mortgage Funding Trust,
2.76%, 12/25/46	(h)951		724
2.77%, 3/25/37	(h)975		698
2.78%, 10/25/36	(h)802		608
2.80%, 9/25/36	(h)899		683
Citigroup Mortgage Loan Trust, Inc.,
2.68%, 1/25/37	(h)363		327
Countrywide Alternative Loan Trust,
2.74%, 4/25/47	(h)827		628
2.79%, 11/25/46	(h)510		390
2.80%, 11/20/35	(h)358		331
2.82%, 3/20/47	(h)332		160
2.83%, 6/25/47	(h)874		541
2.84%, 12/20/46	(h)478		231
2.89%, 6/25/47	(h)879		666
2.93%, 12/20/35	(h)777		521
Countrywide Home Loan Mortgage Pass Through Trust,
2.87%, 4/25/35	(h)957		719
2.90%, 3/25/35	(h)114		99
Deutsche ALT-A Securities, Inc., Alternate Loan Trust,
2.75%, 2/25/47	(h)883		612
5.16%, 2/25/47	(h)285		157
Deutsche ALT-A Securities, Inc., NIM Trust,
6.75%, 2/25/47	(e)162		159
Downey Savings & Loan Association Mortgage Loan Trust,
2.70%, 4/19/38	(h)723		545
Federal National Mortgage Association,
2.66%, 12/25/36	(h)485		466
5.00%, 6/25/35	1,126		1,127
Greenpoint Mortgage Funding Trust,
2.77%, 4/25/47	(h)971		737
2.80%, 3/25/47	(h)736		559
2.92%, 3/25/36	(h)1,369		851
3.01%, 9/25/46	(h)300		140
GS Mortgage Securities Corp.,
6.25%, 1/25/37	(e)48		48
GSR Mortgage Loan Trust,
2.86%, 8/25/46	(h)709		457
Harborview Mortgage Loan Trust,
2.65%, 1/19/38	(h)165		155
2.69%, 3/19/37	(h)971		736
2.71%, 3/19/38	(h)697		529
2.74%, 11/19/36	(h)821		626
2.75%, 1/19/38	(h)893		680
2.80%, 3/19/36	(h)1,156		872
2.85%, 7/19/45	(h)312		222
2.94%, 11/19/35	(h)598		408
Harborview NIM Corp.,
6.41%, 3/19/37	(e)50		50
Indymac Index Mortgage Loan Trust,
2.70%, 2/25/37	(h)635		548

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

69

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Intermediate Duration Portfolio

	Face Amount (000)		Value (000)
Mortgages — Other (cont’d)
2.81%, 11/25/36	$	(h)625	$	475
2.82%, 4/25/46	(h)630		478
3.10%, 1/25/35	(h)289		205
Luminent Mortgage Trust,
2.84%, 4/25/36 - 10/25/46	(h)1,714		1,215
Mastr Adjustable Rate Mortgages Trust,
2.71%, 5/25/47	(h)271		266
3.00%, 1/25/47	(h)400		88
Residential Accredit Loans, Inc.,
2.76%, 1/25/37 - 3/25/47	(h)2,155		1,701
2.79%, 12/25/36	(h)754		571
2.80%, 5/25/47	(h)376		284
2.86%, 2/25/46 - 5/25/47	(h)1,686		978
2.87%, 2/25/46	(h)488		340
2.90%, 6/25/37	(h)353		178
Structured Adjustable Rate Mortgage Loan Trust,
2.94%, 8/25/35	(h)567		445
Structured Asset Mortgage Investments, Inc.,
2.78%, 9/25/47	(h)1,084		792
2.80%, 10/25/36	(h)827		629
2.83%, 7/25/36	(h)1,151		713
Washington Mutual, Inc.,
2.85%, 11/25/45 - 12/25/45	(h)557		529
2.86%, 10/25/45	(h)120		118
2.87%, 4/25/45	(h)649		443
2.89%, 8/25/45	(h)49		48
2.95%, 6/25/46	(h)175		104
			32,447
Sovereign (0.4%)
Province of Quebec Canada,
6.13%, 1/22/11	550		598
U.S. Treasury Securities (3.9%)
U.S. Treasury Bond,
4.50%, 2/15/36	1,100		1,137
U.S. Treasury Note,
3.88%, 2/15/13	4,325		4,616
			5,753
Utilities (1.7%)
Appalachian Power Co.,
3.60%, 5/15/08	355		355
Arizona Public Service Co.,
5.80%, 6/30/14	330		324
Carolina Power & Light Co.,
5.13%, 9/15/13	245		257
CenterPoint Energy Resources Corp.,
7.88%, 4/1/13	100		111
Columbus Southern Power Co.,
4.40%, 12/1/10	100		101
Consolidated Natural Gas Co.,
6.25%, 11/1/11	160		169
Detroit Edison Co. (The),
6.13%, 10/1/10	155		164
Entergy Gulf States, Inc.,
3.48%, 12/1/09	(h)215		210
Equitable Resources, Inc.,`
6.50%, 4/1/18	80		81
NiSource Finance Corp.,
3.66%, 11/23/09	(h)165		160
Ohio Edison Co.,
6.40%, 7/15/16	110		114
Ohio Power Co.,
6.00%, 6/1/16	190		191
Peco Energy Co.,
5.35%, 3/1/18	140		142
Public Service Electric & Gas Co.,
5.00%, 1/1/13145	149		149
			2,528
Total Fixed Income Securities (Cost $122,316)			109,679

	Shares
Preferred Stock (0.1%)
Mortgages — Other (0.1%)
Home Ownership Funding Corp.,
3.33% (Cost $89)	(e)650	100
Short-Term Investments (24.8%)
Investment Company (9.9%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)14,403,005	14,403

	Face
	Amount
	(000)
U.S. Treasury Securities (14.9%)
U.S. Treasury Bills
0.73%, 4/10/08	$	(j)(r)850	850
1.12%, 4/24/08	800		800
1.14%, 4/17/08	5,500		5,497
1.18%, 4/15/08	7,500		7,496
1.42%, 8/21/08	7,200		7,160
			21,803
Total Short-Term Investments (Cost $36,206)			36,206
Total Investments (100.0%) (Cost $158,611)			145,985
Liabilities in Excess of Other Assets (0.0%)			(33		)
Net Assets (100%)			$	145,952

(e)	144A Security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(j)	All or a portion of the security was pledged to cover margin requirements for futures contracts.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The Interest rate shown is the rate in effect at March 31, 2008.

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

70

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Intermediate Duration Portfolio

(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
Inv Fl	Inverse Floating Rate — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at March 31, 2008.
IO	Interest Only
PAC	Planned Amortization Class
PO	Principal Only

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:
U.S. Treasury
2 yr. Note	158	$	33,916	Jun-08	$	206
U.S. Treasury
5 yr. Note	291	33,242		Jun-08	446
10 yr. Swap	14	1,612		Jun-08	7
Short:
EuroDollar
CME	11	2,688		Jun-08	(58		)
EuroDollar
CME	11	2,692		Sep-08	(61		)
EuroDollar
CME	12	2,935		Dec-08	(65		)
EuroDollar
CME	11	2,690		Mar-09	(60		)
EuroDollar
CME	11	2,685		Jun-09	(58		)
EuroDollar
CME	11	2,679		Sep-09	(55		)
EuroDollar
CME	6	1,457		Dec-09	(27		)
EuroDollar
CME	5	1,212		Mar-10	(21		)
EuroDollar
CME	1	242		Jun-10	(4		)
EuroDollar
CME	1	241		Sep-10	(4		)
U.S. Treasury
10 yr. Note	147	17,486		Jun-08	(439		)
U.S. Treasury
Long Bond	77	9,147		Jun-08	(202		)
					$	(395	)

CME Chicago Mercantile Exchange

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Bank of America	Buy	$	165	1.57	%	3/20/18	$	(2	)
Carnival Corp., 6.65%, 1/15/28
Bank of America	Buy	240		0.70		3/20/13	(2		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	170		0.82		3/20/18	(3		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	225		1.03		3/20/18	5
Nordstrom, Inc., 6.95%, 3/15/28
Bank of America	Buy	90		1.08		3/20/18	3
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	130		1.12		3/20/18	4
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	180		0.80		3/20/18	11
Textron Financial Corp., 5.13%, 2/3/11
Bank of America	Buy	190		1.18		3/20/13	(1		)
Yum! Brands, Inc., 8.88%, 4/15/11
Citigroup	Buy	165		0.82		3/20/18	1
Eaton Corp., 7.65%, 11/15/29

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

71

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Intermediate Duration Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Citigroup	Buy	$	260	0.62	%	3/20/13	$	2
Textron Financial Corp., 7.65%, 11/5/29
Citigroup	Buy	210		0.72		3/20/13	1
Textron Financial Corp., 7.65%, 11/5/29
Citigroup	Buy	200		0.43		3/20/12	4
Tyco International Ltd., Zero Coupon, 11/17/20
Credit Suisse	Buy	360		1.00		3/20/15	2
Arrow Electronics, Inc., 6.88%, 6/1/18
Goldman Sachs	Buy	275		3.05		3/20/13	(3		)
AvalonBay Communities, Inc., 6.13%, 11/1/12
Goldman Sachs	Buy	570		0.59		3/20/13	(1		)
Coca-Cola Enterprise, Inc., 6.13%, 8/15/11
Goldman Sachs	Buy	350		0.22		3/20/12	6
Dell Inc., 7.10%, 4/15/28
Goldman Sachs	Sell	270		0.60		12/20/12	(2		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Sell	505		0.80		12/20/17	(3		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Buy	160		0.97		3/20/18	(1		)
Eaton Corp., 7.65%, 11/15/29
Goldman Sachs	Buy	115		0.33		3/20/13	1
Eli Lilly Co., 6.57%, 1/1/16
Goldman Sachs	Buy	150		0.47		3/20/18	2
Goodrich Corp., 7.63%, 12/15/12
Goldman Sachs	Buy	250		0.15		12/20/11	23
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	500		0.16		12/20/11	46
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	160		3.33		3/20/13	1
ProLogis, 5.50%, 3/1/13
Goldman Sachs	Buy	205		1.08		3/20/18	7
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	100		1.24		3/20/18	2
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	320		1.05		3/20/13	7
Textron Financial Corp., 5.13%, 2/3/11
Goldman Sachs	Buy	730		0.10		3/20/12	13
The Chubb Corp., 6.00%, 11/15/11
Goldman Sachs	Buy	750		0.12		12/20/11	33
The Hartford Financial Services Group, Inc., 4.75%, 3/1/14
JPMorgan Chase	Buy	95		0.60		3/20/13	1
Eaton Corp., 7.65%, 11/15/29
JPMorgan Chase	Sell	1,265		0.60		12/20/12	(4		)
Dow Jones CDX North America Investment Grade Index, Series 9
JPMorgan Chase	Buy	185		1.07		3/20/18	4
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	185		1.15		3/20/18	3
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	150		0.58		3/20/13	(1		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	195		0.63		3/20/13	(1		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	1,100		0.65		03/20/11	(5		)
Tyco International Ltd., 2.75%, 1/15/18

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

72

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Intermediate Duration Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Lehman Brothers	Buy	$	210	0.45	%	3/20/18	$	3
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	75		0.46		3/20/18	1
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Sell	600		0.60		12/20/12	(11		)
Dow Jones CDX North America Investment Grade Index, Series 9
Lehman Brothers	Sell	330		0.60		12/20/12	(5		)
Dow Jones CDX North America Investment Grade Index, Series 9
Lehman Brothers	Buy	375		0.20		12/20/11	4
Union Pacific Corp., 6.13%, 1/15/12
Merrill Lynch	Buy	100		1.50		3/20/18	(1		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	140		1.57		3/20/18	(2		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	135		1.60		3/20/18	(2		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	200		0.92		3/20/18	(@—		)
Eaton Corp., 7.65%, 11/15/29
UBS	Buy	460		0.30		3/20/13	3
Eli Lilly Co., 6.57%, 1/1/16
UBS	Buy	130		1.78		3/20/13	2
Martin Marietta Materials, Inc.,6.88%, 4/1/11
UBS	Buy	130		1.73		3/20/18	3
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	310		1.06		3/20/13	(1		)
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	100		1.00		3/20/13	2
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	155		1.01		3/20/13	4
Textron Financial Corp., 5.13%, 2/3/11
							$	153

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	10,090	$	132
	3 Month LIBOR	Pay	5.59		2/19/18	5,005		107
	3 Month LIBOR	Receive	5.82		2/12/23	12,965		(130		)
	3 Month LIBOR	Receive	6.03		2/19/23	6,460		(105		)
Citigroup	3 Month LIBOR	Pay	5.45		8/9/17	10,000		1,166
	3 Month LIBOR	Pay	5.24		9/27/17	12,200		1,189
Deutsche Bank	3 Month LIBOR	Pay	5.39		5/25/17	14,250		1,772
	3 Month LIBOR	Pay	5.43		5/29/17	2,250		287
Goldman Sachs	3 Month LIBOR	Pay	5.57		2/27/18	5,075		102
	3 Month LIBOR	Pay	5.63		2/28/18	10,030		226
	3 Month LIBOR	Receive	6.04		2/25/23	12,870		(210		)
	3 Month LIBOR	Receive	5.96		2/27/23	6,515		(92		)
JPMorgan Chase	3 Month LIBOR	Pay	5.45		5/29/17	2,250		290
	3 Month LIBOR	Pay	5.09		9/11/17	5,150		442
								$	5,176

LIBOR — London Inter Bank Offer Rate

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

73

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Intermediate Duration Portfolio

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

* Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are in the category labeled “Other.”

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

74

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

International Fixed Income Portfolio

	Face Amount (000)				Value (000)
Fixed Income Securities (92.8%)
Argentina (0.2%)
Government of Argentina,
8.28%, 12/31/33	$	(d)819			$	567
Australia (0.6%)
Queensland Treasury Corp.,
6.00%, 10/14/15	AUD			1,000	879
Telstra Corp. Ltd.,
6.38%, 6/29/11	EUR			300	490
					1,369
Austria (5.6%)
Republic of Austria,
4.30%, 7/15/14	6,900				11,169
Oesterreichische Kontrollbank AG,
1.80%, 3/22/10	JPY			180,000	1,843
					13,012
Belgium (4.7%)
Government of Belgium,
3.00%, 3/28/10	EUR			7,000	10,905
Bermuda (0.2%)
Adecco Financial Service Bermuda Ltd.,
Zero Coupon, 8/26/13	CHF			345	353
Brazil (1.4%)
Republic of Brazil,
10.00%, 1/1/14	BRL			6,300	3,215
Canada (4.6%)
Bombardier, Inc.,
7.25%, 11/15/16	EUR			250	376
Government of Canada,
4.00%, 9/1/10 - 6/1/16	CAD			8,500	8,598
Quebec Province,
1.60%, 5/9/13	JPY			180,000	1,862
					10,836
Cayman Islands (0.3%)
MBNA America European Structured Offerings,
5.13%, 4/19/08	EUR			511	807
Denmark (1.2%)
Kingdom of Denmark,
4.00%, 11/15/15	DKK			13,000	2,746
France (7.5%)
Compagnie de Financement Foncier,
1.25%, 12/1/11	JPY			400,000	4,054
Compagnie Generale des Etablissements Michelin,
6.38%, 12/3/33	EUR			(h)300	453
Crown European Holdings S.A.,
6.25%, 9/1/11	295				446
Dexia Municipal Agency,
3.50%, 9/21/09	1,500				2,344
Europcar Groupe S.A.,
7.84%, 5/15/13	(h)350				399
France Telecom S.A.,
8.13%, 1/28/33	120				233
Government of France O.A.T.,
3.25%, 4/25/16			1,450		$	2,172
5.50%, 4/25/29	4,250				7,486
					17,587
Germany (11.0%)
Bundesrepublik Deutschland,
4.25%, 7/4/14	2,350				3,819
4.25%, 7/4/17	1,500				2,435
5.50%, 1/4/31	1,800				3,211
6.25%, 1/4/24	5,500				10,502
Kreditanstalt fuer Wiederaufbau,
1.75%, 3/23/10	JPY		130,000		1,331
2.05%, 9/21/09	440,000				4,495
					25,793
Greece (2.1%)
Government of Greece,
5.25%, 5/18/12	EUR		3,000		4,940
Ireland (0.2%)
Smurfit Kappa Funding plc,
7.75%, 4/1/15	360				526
Italy (3.2%)
Italy Buoni Poliennali Del Tesoro,
4.00%, 4/15/12	3,500				5,539
Republic of Italy,
0.65%, 3/20/09	JPY		190,000		1,903
					7,442
Japan (21.0%)
Development Bank of Japan,
1.60%, 6/20/14	600,000				6,261
1.75%, 3/17/17	250,000				2,574
Government of Japan,
0.60%, 3/20/10	250,000				2,509
1.00%, 12/20/12	300,000				3,047
1.20%, 6/20/11	570,000				5,816
1.70%, 6/20/33	440,000				3,876
1.90%, 6/20/16	1,140,000				12,228
2.40%, 3/20/34	430,000				4,371
2.50%, 9/20/36	230,000				2,366
Japan Finance Corp. for Municipal Enterprises,
1.55%, 2/21/12	530,000				5,491
Sharp Corp.,
Zero Coupon, 9/30/13	60,000				603
					49,142
Luxembourg (0.9%)
Fiat Finance & Trade Ltd.,
6.63%, 2/15/13	EUR		300		461
Gaz Capital S.A.,
4.56%, 12/9/12	170				243
Hellas Telecommunications Luxembourg II,
10.58%, 1/15/15	(h)150				171
Lighthouse International Co., S.A.,
8.00%, 4/30/14	160				198

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

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

International Fixed Income Portfolio

	Face Amount (000)			Value (000)
Luxembourg (cont’d)
Telecom Italia Finance S.A.,
7.75%, 1/24/33	EUR		315	$	495
Wind Acquisition Finance S.A.,
9.75%, 12/1/15	300			471
				2,039
Mexico (0.9%)
Mexican Bonos,
9.50%, 12/18/14	MXN		21,000	2,194
Multi-Country (3.6%)
European Investment Bank,
1.25%, 9/20/12	JPY		250,000	2,554
2.15%, 1/18/27	40,000			419
Inter-American Development Bank,
1.90%, 7/8/09	545,000			5,544
				8,517
Netherlands (6.4%)
ABN Amro Bank N.V.,
1.88%, 10/27/10	EUR		250	388
Fresenius Finance B.V.,
5.00%, 1/31/13	165			251
Government of Netherlands,
4.00%, 1/15/37	6,900			9,784
5.00%, 7/15/12	1,750			2,900
Impress Holdings B.V.,
7.70%, 9/15/13	(h)155			226
Linde Finance B.V.,
4.75%, 4/24/17	300			443
OI European Group B.V.,
6.88%, 3/31/17	350			522
Telefonica Europe B.V.,
5.88%, 2/14/33	320			486
				15,000
Norway (0.8%)
Kingdom of Norway,
5.50%, 5/15/09	NOK		9,400	1,854
Poland (0.5%)
Poland Government Bond,
5.25%, 10/25/17	PLN		3,000	1,281
Spain (4.3%)
Government of Spain,
5.15%, 7/30/09	EUR		5,200	8,351
5.40%, 7/30/11	1,000			1,653
				10,004
Sweden (0.7%)
Government of Sweden,
4.50%, 8/12/15	SEK		5,700	996
Stena AB,
6.13%, 2/1/17	EUR		150	194
Telefonaktiebolaget LM Ericsson,
6.75%, 11/28/10	230			365
				1,555
United Kingdom (8.5%)
Allied Domecq Financial Services plc,
6.63%, 4/18/11	GBP		190	370
BAA plc,
4.50%, 2/15/18	EUR		500	632
British Telecommunications plc,
7.38%, 2/15/11	220			363
EUR Capital S.P.V. Ltd.,
6.28%, 12/31/49	(h)315			398
FCE Bank plc,
7.13%, 1/15/13	550			687
Imperial Tobacco Finance plc,
4.38%, 11/22/13	500			714
Ineos Group Holdings plc,
7.88%, 2/15/16	200			231
Rexam plc,
6.75%, 6/29/67	(h)600			699
United Kingdom Treasury Bond,
4.00%, 9/7/16	GBP		6,500	12,727
4.25%, 6/7/32	800			1,536
4.75%, 6/7/10	800			1,616
				19,973
United States (2.4%)
Chesapeake Energy Corp.,
6.25%, 1/15/17	EUR		165	236
Countrywide Financial Corp.,
4.77%, 11/23/10	(h)400			461
General Motors Acceptance Corp.,
5.38%, 6/6/11	370			405
Lucent Technologies, Inc.,
2.88%, 6/15/23	$	658		586
Omnicom Group, Inc.,
Zero Coupon, 7/31/32	400			403
Washington Mutual Preferred Funding LLC,
9.75%	(e)(h)(o)900			690
WDAC Subsidiary Corp.,
8.50%, 12/1/14	EUR		170	196
WM Covered Bond Program,
3.88%, 9/27/11	1,500			2,275
Wyeth,
3.58%, 1/15/24	$	(h)390		393
				5,645
Total Fixed Income Securities (Cost $193,317)				217,302

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

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

International Fixed Income Portfolio

	Shares	Value (000)
Short-Term Investment (3.8%)
Investment Company (3.8%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class (Cost $8,950)	(p)8,949,943	$	8,950
Total Investments (96.6%) (Cost $202,267)		226,252
Other Assets In Excess of Liabilities (3.4%)		8,068
Net Assets (100%)		$	234,320

(d)	Security was valued at fair value — At March 31, 2008, the Portfolio held $567,000 of fair valued securities, representing less than 0.24% of net assets.
(e)	144A security — Certain Conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The interest rate shown is the rate in effect at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
AUD	Australian Dollar
BRL	Brazilian Real
CAD	Canadian Dollar
CHF	Swiss Franc
DKK	Danish Krone
EUR	Euro
GBP	British Pound
JPY	Japanese Yen
MXN	Mexican Peso
NOK	Norwegian Krone
PLN	Polish Zloty
SEK	Swedish Krona

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)
ARS	2,810	$	885	4/22/08	USD	876	$	876	$	(9	)
AUD	500	457		4/10/08	USD	445	445		(12		)
AUD	2,600	2,376		4/10/08	USD	2,436	2,436		60
BRL	2,800	1,595		4/22/08	USD	1,649	1,649		54
CAD	2,225	2,167		4/10/08	USD	2,221	2,221		54
CAD	3,205	3,122		4/10/08	USD	3,202	3,202		80
CAD	600	585		4/10/08	USD	595	595		10
CAD	1,125	1,096		4/10/08	USD	1,105	1,105		9
CAD	510	497		4/10/08	USD	498	498		1
CAD	6,315	6,141		7/10/08	USD	6,349	6,349		208
CHF	375	378		4/11/08	USD	339	339		(39		)
CHF	1,225		1,234	4/11/08	USD	1,119	1,119		(115		)
CHF	2,690	2,709		4/11/08	USD	2,664	2,664		(45		)
DKK	10,650	2,254		4/11/08	USD	2,099	2,099		(155		)
DKK	2,400	506		7/11/08	USD	494	494		(12		)
EUR	2,618	4,131		4/16/08	USD	3,895	3,895		(236		)
EUR	210	331		4/16/08	USD	308	308		(23		)
EUR	2,580	4,071		4/16/08	USD	3,775	3,775		(296		)
EUR	680	1,073		4/16/08	USD	986	986		(87		)
EUR	300	473		4/16/08	USD	446	446		(27		)
EUR	460	726		4/16/08	USD	673	673		(53		)
EUR	1,575	2,485		4/16/08	USD	2,297	2,297		(188		)
EUR	425	671		4/16/08	USD	617	617		(54		)
EUR	200	316		4/16/08	USD	290	290		(26		)
EUR	750	1,184		4/16/08	USD	1,099	1,099		(85		)
EUR	1,500	2,367		4/16/08	USD	2,319	2,319		(48		)
EUR	300	474		4/16/08	USD	459	459		(15		)
GBP	4,100	8,128		4/18/08	USD	7,991	7,991		(137		)
GBP	701	1,389		4/18/08	USD	1,366	1,366		(23		)
GBP	490	971		4/18/08	USD	956	956		(15		)
GBP	350	689		7/18/08	USD	687	687		(2		)
HUF	287,000	1,735		4/16/08	USD	1,674	1,674		(61		)
HUF	3,000	18		4/16/08	USD	17	17		(1		)
JPY	327,349	3,287		4/15/08	USD	3,009	3,009		(278		)
JPY	155,000	1,556		4/15/08	USD	1,454	1,454		(102		)
JPY	170,000	1,707		4/15/08	USD	1,602	1,602		(105		)
JPY	1,607,651	16,142		4/15/08	USD	16,171	16,171		29
MXN	27,450	2,576		4/10/08	USD	2,506	2,506		(70		)
MXN	10,325	958		7/10/08	USD	946	946		(12		)
NOK	6,280	1,232		4/11/08	USD	1,127	1,127		(105		)
NOK	11,930	2,341		4/11/08	USD	2,262	2,262		(79		)
NZD	2,900	2,277		4/10/08	USD	2,211	2,211		(66		)
PLN	9,975	4,478		4/16/08	USD	4,137	4,137		(341		)
SEK	4,350	732		4/11/08	USD	677	677		(55		)
SEK	3,535	595		4/11/08	USD	579	579		(16		)
SGD	4,350	3,162		4/15/08	USD	3,154	3,154		(8		)
TWD	9,375	310		4/22/08	USD	293	293		(17		)
USD	224	224		4/22/08	ARS	710	224		@—
USD	150	150		4/22/08	ARS	475	150		@—
USD	157	157		4/22/08	ARS	500	157		@—
USD	1,661	1,661		4/10/08	AUD	1,900	1,735		74
USD	1,050	1,050		4/10/08	AUD	1,200	1,096		46
USD	2,405	2,405		7/10/08	AUD	2,600	2,344		(61		)
USD	1,340	1,340		4/10/08	CAD	1,350	1,315		(25		)
USD	6,361	6,361		4/10/08	CAD	6,315	6,152		(209		)
USD	1,617	1,617		4/11/08	CHF	1,790	1,802		185

The accompanying notes are an integral part of the financial statements.
	77

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

International Fixed Income Portfolio

Foreign Currency Exchange Contract Information (cont’d):

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)
USD	2,285	$	2,285	4/11/08	CHF	2,500	$	2,517	$	232
USD	2,663	2,663		7/11/08	CHF	2,690	2,708		45
USD	1,169	1,169		4/16/08	CZK	20,300	1,270		101
USD	233	233		4/11/08	DKK	1,200	254		21
USD	1,390	1,390		4/11/08	DKK	7,050	1,492		102
USD	497	497		4/11/08	DKK	2,400	508		11
USD	13,168	13,168		4/16/08	EUR	8,855	13,973		805
USD	3,792	3,792		4/16/08	EUR	2,550	4,024		232
USD	2,098	2,098		4/16/08	EUR	1,420	2,241		143
USD	1,134	1,134		4/16/08	EUR	780	1,230		96
USD	408	408		4/16/08	EUR	275	434		26
USD	948	948		4/16/08	EUR	650	1,025		77
USD	1,262	1,262		4/16/08	EUR	850	1,342		80
USD	3,070	3,070		4/16/08	EUR	2,025	3,195		125
USD	1,159	1,159		4/16/08	EUR	745	1,176		17
USD	1,603	1,603		4/18/08	GBP	825	1,636		33
USD	5,686	5,686		4/18/08	GBP	2,875	5,700		14
USD	403	403		4/18/08	GBP	200	397		(6		)
USD	1,106	1,106		4/16/08	HUF	190,000	1,148		42
USD	567	567		4/16/08	HUF	100,000	604		37
USD	11,989	11,989		4/15/08	JPY	1,305,000	13,103		1,114
USD	459	459		4/15/08	JPY	50,000	502		43
USD	1,064	1,064		4/15/08	JPY	115,000	1,155		91
USD	1,121	1,121		4/15/08	JPY	120,000	1,205		84
USD	2,169	2,169		4/15/08	JPY	230,000	2,309		140
USD	472	472		4/15/08	JPY	50,000	502		30
USD	3,407	3,407		4/15/08	JPY	350,000	3,511		104
USD	386	386		4/15/08	JPY	40,000	401		15
USD	16,246	16,246		7/15/08	JPY	1,607,651	16,218		(28		)
USD	1,564	1,564		4/10/08	MXN	17,125	1,607		43
USD	960	960		4/10/08	MXN	10,325	970		10
USD	1,064	1,064		4/22/08	MYR	3,450	1,078		14
USD	2,149	2,149		4/22/08	MYR	7,025	2,196		47
USD	1,190	1,190		4/11/08	NOK	6,400	1,256		66
USD	2,227	2,227		4/11/08	NOK	11,810	2,317		90
USD	2,243	2,243		7/11/08	NOK	11,930	2,321		78
USD	2,212	2,212		4/10/08	NZD	2,900	2,277		65
USD	7,693	7,693		4/16/08	PLN	18,550	8,327		634
USD	1,248	1,248		4/11/08	SEK	7,885	1,326		78
USD	576	576		7/11/08	SEK	3,535	592		16
USD	3,057	3,057		4/15/08	SGD	4,350	3,162		105
USD	3,163	3,163		7/15/08	SGD	4,350	3,172		9
USD	294	294		4/22/08	TWD	9,375	310		16
USD	1,157	1,157		4/22/08	TWD	35,100	1,161		4
		$	226,303				$	228,901	$	2,598

ARS	— Argentine Peso
CZK	— Czech Republic Koruny
HUF	— Hungarian Forint
MYR	— Malaysian Ringgit
NZD	— New Zealand Dollar
SGD	— Singapore Dollar
TWD	— Taiwan Dollar
USD	— United States Dollar
@	Value is less than $500.

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:
British Pound Long Gilt	23	$	5,081	Jun-08	$	92
Euro-Schatz	30	4,950		Jun-08	(30		)
Euro-Bobl	7	1,220		Jun-08	(11		)
Euro-Bund	15	2,747		Jun-08	(20		)
Japanese Yen 10 yr. Bond	3	4,229		Jun-08	56
					$	87

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by country and/or investment type, as a percentage of total investments.

*Countries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

	The accompanying notes are an integral part of the financial statements.
78

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Investment Grade Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Fixed Income Securities (126.1%)
Agency Adjustable Rate Mortgages (4.3%)
Federal Home Loan Mortgage Corp.,
Conventional Pools:
4.76%, 7/1/35	$	2,120	$	2,128
5.61%, 4/1/37	2,231		2,268
5.70%, 1/1/37	3,154		3,221
5.83%, 10/1/36	2,363		2,416
5.97%, 1/1/37	1,247		1,272
Federal National Mortgage Association,
6.74%, 5/1/36	2,313		2,386
6.80%, 7/1/36	2,359		2,421
6.81%, 8/1/36	1,747		1,790
Government National Mortgage Association,
5.13%, 11/20/25 - 12/20/27	370		369
5.63%, 7/20/25	29		30
6.38%, 2/20/25 - 2/20/28	1,612		1,651
			19,952
Agency Fixed Rate Mortgages (50.5%)
Federal Home Loan Bank Discount Note,
Zero Coupon, 4/18/08	11,000		10,991
Federal Home Loan Bank System,
5.00%, 11/17/17	(c)2,100		2,260
Federal Home Loan Mortgage Corp.,
Conventional Pools:
10.00%, 9/1/17 - 11/1/20	28		31
10.25%, 7/1/09	1		1
11.00%, 1/1/16	10		10
13.00%, 9/1/10	@—		@—
Gold Pools:
5.50%, 5/1/37 - 10/1/37	25,778		26,059
6.00%, 2/1/32 - 9/1/37	11,963		12,281
6.50%, 7/1/25 - 3/1/32	378		397
7.00%, 2/1/26	22		23
7.50%, 5/1/16 - 6/1/32	2,976		3,222
8.00%, 11/1/29 - 10/1/31	458		497
8.50%, 12/1/30	112		124
10.00%, 10/1/19 - 1/1/21	50		58
10.50%, 3/1/16	23		24
April TBA
5.00%, 4/15/38	(i)18,350		18,169
5.50%, 4/15/37	(i)25,200		25,448
6.00%, 4/1/35	(i)25,000		25,637
6.50%, 4/15/32	(i)4,100		4,253
Federal National Mortgage Association,
Conventional Pools:
5.00%, 1/1/37 - 10/1/37	6,668		6,606
6.00%, 10/1/31 - 12/1/31	123		127
6.50%, 6/1/26 - 9/1/32	1,259		1,314
7.00%, 11/1/25 - 12/1/34	18,493		19,594
7.50%, 5/1/23 - 9/1/35	5,083		5,488
8.00%, 2/1/12 - 4/1/32	2,292		2,483
8.50%, 4/1/30 - 5/1/32	1,981		2,185
9.00%, 2/1/17	71		79
9.50%, 8/1/22	91		100
10.00%, 5/1/22	91		105
10.50%, 12/1/17 - 10/1/18	29		35
11.00%, 4/1/21	25		28
11.25%, 8/1/13	12		13
11.50%, 1/1/17 - 11/1/19	22		25
April TBA
4.50%, 4/25/20	(i)9,800		9,748
5.00%, 4/1/20 - 4/25/36	(i)16,225		16,245
5.50%, 4/1/34	(i)26,150		26,399
6.50%, 4/1/34	(i)7,100		7,354
7.00%, 4/25/37	(i)3,000		3,149
Government National Mortgage Association,
Various Pools:
9.00%, 11/15/17	156		171
9.50%, 12/15/17 - 9/15/22	585		650
10.00%, 11/15/09 - 2/15/25	926		1,103
10.50%, 3/15/19	4		5
11.00%, 3/15/10 - 2/15/16	115		137
11.50%, 1/20/18	2		2
			232,630
Asset Backed Corporates (19.1%)
American Express Credit Account Master Trust,
2.82%, 10/15/12	(h)2,375		2,333
Argent Securities, Inc.,
2.65%, 10/25/36	(h)1,835		1,794
Banc of America Securities Auto Trust,
3.99%, 8/18/09	295		295
Bear Stearns Asset Backed Securities Trust,
2.70%, 1/25/37	(h)1,338		1,196
2.80%, 9/25/34	(h)49		49
2.82%, 3/25/35	(h)144		143
Capital Auto Receivables Asset Trust,
2.83%, 11/15/11	(h)2,500		2,466
2.88%, 7/15/10	(h)3,550		3,505
4.05%, 7/15/09	203		203
4.98%, 5/15/11	3,825		3,869
5.31%, 10/20/09	(e)4,600		4,628
Capital One Auto Finance Trust,
5.07%, 7/15/11	1,650		1,622
Carrington Mortgage Loan Trust,
2.72%, 2/25/37	(h)1,931		1,820
Caterpillar Financial Asset Trust,
5.57%, 5/25/10	2,243		2,268
Citibank Credit Card Issuance Trust,
2.59%, 3/22/12	(h)2,900		2,850
CNH Equipment Trust,
4.27%, 1/15/10	1,050		1,052
5.20%, 6/15/10	1,395		1,407
Countrywide Asset Backed Certificates,
2.75%, 5/25/36	(h)469		462
DaimlerChrysler Auto Trust,
4.04%, 9/8/09	241		242
First Franklin Mortgage Loan Asset Backed Certificates,
2.65%, 7/25/36	(h)1,119		1,083

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

79

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Asset Backed Corporates (cont’d)
2.67%, 2/25/36	$	(h)356	$	353
2.72%, 10/25/35	(h)122		122
Ford Credit Auto Owner Trust,
2.83%, 4/15/10	(h)4,886		4,870
5.05%, 3/15/10	917		924
5.26%, 10/15/10	4,000		4,044
Fremont Home Loan Owner Trust,
2.65%, 10/25/36	(h)2,256		2,176
GE Equipment Small Ticket LLC,
4.38%, 7/22/09	(e)653		656
4.88%, 10/22/09	(e)1,276		1,277
GS Auto Loan Trust,
5.37%, 12/15/10	3,066		3,100
GSAMP Trust,
2.67%, 1/25/37	(h)1,339		1,252
2.72%, 3/25/47	(h)2,278		2,119
Harley-Davidson Motorcycle Trust,
3.76%, 12/17/12	2,778		2,783
4.07%, 2/15/12	1,978		1,987
Hertz Vehicle Financing LLC,
4.93%, 2/25/10	(e)1,825		1,804
Honda Auto Receivables Owner Trust,
3.87%, 4/20/09	333		334
4.85%, 10/19/09	1,110		1,115
Hyundai Auto Receivables Trust,
3.98%, 11/16/09	565		566
Indymac Residential Asset Backed Trust,
2.73%, 4/25/37	(h)1,618		1,559
Long Beach Mortgage Loan Trust,
2.69%, 1/25/46	(h)45		45
MBNA Master Credit Card Trust,
5.90%, 8/15/11	940		964
7.80%, 10/15/12	2,715		2,930
Merrill Auto Trust Securitization,
4.10%, 8/25/09	305		306
National City Auto Receivables Trust,
2.88%, 5/15/11	856		856
Nationstar Home Equity Loan Trust,
2.67%, 9/25/36	(h)626		613
Nissan Auto Receivables Owner Trust,
3.99%, 7/15/09	624		626
RAAC Series,
2.70%, 9/25/45	(h)76		76
Residential Asset Mortgage Products, Inc.,
2.67%, 8/25/36	(h)1,531		1,490
2.69%, 10/25/36	(h)1,270		1,211
Residential Asset Securities Corp.,
2.71%, 4/25/37	(h)1,795		1,682
Securitized Asset Backed Receivables LLC Trust,
2.71%, 2/25/37	(h)2,416		2,140
2.73%, 5/25/37	(h)2,159		2,024
SLM Student Loan Trust,
3.32%, 10/27/14	(h)1,776		1,768
Soundview Home Equity Loan Trust,
2.71%, 2/25/37	(h)2,092		1,952
Structured Asset Securities Corp.,
2.69%, 6/25/37	(h)2,301		2,094
Terwin Mortgage Trust,
2.71%, 4/25/37	(e)(h)781		771
3.07%, 12/25/34	(h)410		399
TXU Electric Delivery Transition Bond Co., LLC,
4.81%, 11/17/14	700		717
USAA Auto Owner Trust,
3.90%, 7/15/09	29		29
Volkswagen Auto Loan Enhanced Trust,
4.80%, 7/20/09	621		624
Wachovia Auto Owner Trust,
4.06%, 9/21/09	237		238
			87,883
Collateralized Mortgage Obligations — Agency Collateral Series (0.6%)
Federal Home Loan Mortgage Corp.,
Inv Fl IO
3.13%, 3/15/24	2,201		190
5.18%, 3/15/32	432		49
IO
6.00%, 5/1/31	900		177
6.50%, 4/1/28 - 5/15/33	1,678		355
8.00%, 1/1/28 - 6/1/31	167		45
IO PAC
6.00%, 4/15/32	1,172		84
PAC
10.00%, 6/15/20	12		13
Federal National Mortgage Association,
Inv Fl IO
5.59%, 10/25/28	285		16
5.72%, 5/18/27	629		89
5.94%, 10/25/30	176		19
IO
6.00%, 8/25/32 - 11/25/32	1,266		88
6.50%, 2/25/33 - 6/25/33	4,359		859
7.00%, 4/25/33	636		105
7.50%, 11/1/29	870		242
8.00%, 4/1/24 - 12/1/31	693		178
9.00%, 11/1/26	75		20
Government National Mortgage Association,
Inv Fl IO
5.78%, 8/16/29	439		56
			2,585
Collateralized Mortgage Obligations — Non Agency Collateral Series (7.3%)
Banc of America Commercial Mortgage, Inc.,
5.66%, 6/10/49	(h)2,350		2,325
5.69%, 4/10/49	(h)1,475		1,468
5.75%, 2/10/51	(h)2,650		2,641
Bear Stearns Commercial Mortgage Securities,
5.71%, 6/11/40	(c)(h)2,700		2,688
Citigroup Commercial Mortgage Trust,
5.70%, 12/10/49	(h)1,950		1,939

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

80

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Collateralized Mortgage Obligations — Non Agency Collateral Series (cont’d)
Commercial Mortgage Pass Through Certificates,
5.82%, 12/10/49	$	(h)1,850	$	1,853
Countrywide Alternative Loan Trust,
IO
2.17%, 3/20/46	10,153		446
2.40%, 12/20/46	24,328		1,183
2.56%, 2/25/37	11,322		488
2.83%, 2/20/47	14,502		705
2.86%, 3/20/47	20,353		1,054
3.68%, 12/20/35	(e)(h)10,825		370
3.91%, 12/20/35	(e)(h)14,569		571
Greenpoint Mortgage Funding Trust,
IO
1.30%, 8/25/45 - 10/25/45	13,997		482
GS Mortgage Securities Corp.,
IO
4.01%, 8/25/35	(e)(h)4,920		131
GS Mortgage Securities Corp. II,
5.80%, 8/10/45	(h)2,900		2,902
Harborview Mortgage Loan Trust,
IO
3.34%, 6/19/35	(h)7,638		221
3.60%, 5/19/35	(h)10,462		295
3.93%, 3/19/37	(h)9,760		385
4.06%, 7/19/47	17,005		687
PO
3/19/37 - 7/19/47	9		6
Indymac Index Mortgage Loan Trust,
IO
3.32%, 7/25/35	(h)7,110		233
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.44%, 6/12/47	1,200		1,168
5.75%, 2/12/49	(h)1,050		1,045
5.82%, 6/15/49	(h)3,025		3,028
Lehman Brothers Commercial Conduit Mortgage Trust,
5.94%, 7/15/44	(h)2,050		2,072
Lehman Brothers-UBS Commercial Mortgage Trust,
5.43%, 2/15/40	800		778
5.86%, 7/17/40	(h)850		849
Wachovia Bank Commercial Mortgage Trust,
5.34%, 12/15/43	1,475		1,425
			33,438
Finance (8.0%)
AIG SunAmerica Global Financing VI,
6.30%, 5/10/11	(e)1,910		2,009
American General Finance Corp.,
4.63%, 9/1/10	915		912
AXA Financial, Inc.,
6.50%, 4/1/08	760		760
Bank of America Corp.,
5.75%, 12/1/17	895		928
Bank of New York Mellon Corp. (The),
4.50%, 4/1/13	365		368
Bank One Corp.,
6.00%, 2/17/09	1,350		1,371
Bear Stearns Cos., Inc. (The),
6.40%, 10/2/17	730		722
7.25%, 2/1/18	560		580
Capmark Financial Group, Inc.,
5.88%, 5/10/12	(e)715		453
6.30%, 5/10/17	(e)295		177
Catlin Insurance Co., Ltd.,
7.25%	(e)(h)(o)925		773
CIT Group, Inc.,
4.75%, 8/15/08	490		451
Citicorp,
6.38%, 11/15/08	(c)705		719
Citigroup, Inc.,
5.88%, 5/29/37	560		488
Countrywide Home Loans, Inc.,
3.25%, 5/21/08	(c)660		647
Credit Suisse First Boston, New York,
6.00%, 2/15/18	1,270		1,269
Farmers Exchange Capital,
7.05%, 7/15/28	(e)675		621
Farmers Insurance Exchange,
8.63%, 5/1/24	(e)725		767
General Electric Capital Corp.,
4.25%, 12/1/10	(c)445		456
Goldman Sachs Group, Inc. (The),
6.15%, 4/1/18	905		905
6.75%, 10/1/37	965		901
HSBC Finance Corp.,
4.13%, 12/15/08	450		450
5.88%, 2/1/09	345		348
6.38%, 10/15/11	688		708
6.40%, 6/17/08	465		467
6.75%, 5/15/11	365		379
Huntington National Bank,
4.38%, 1/15/10	520		514
iStar Financial, Inc.,
3.34%, 3/9/10	(h)1,175		930
JPMorgan Chase & Co.,
6.00%, 2/15/09	640		650
Lehman Brothers Holdings, Inc.,
5.75%, 1/3/17	525		475
6.50%, 7/19/17	720		685
6.88%, 7/17/37	1,210		1,052
Mantis Reef Ltd.,
4.69%, 11/14/08	(e)1,100		1,108
MBNA Corp.,
3.53%, 5/5/08	(h)995		996
Nationwide Building Society,
4.25%, 2/1/10	(e)1,065		1,090

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

81

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Finance (cont’d)
Platinum Underwriters Finance, Inc.,
7.50%, 6/1/17	$	550	$	553
Popular North America, Inc.,
5.65%, 4/15/09	455		453
Prudential Finance, Inc.,
6.63%, 12/1/37	365		362
Sovereign Bancorp, Inc.,
2.83%, 3/23/10	(h)1,540		1,475
Two-Rock Pass Through Trust,
4.04%	(e)(h)(o)645		258
Unicredit Luxembourg Finance S.A.,
3.77%, 10/24/08	(e)(h)1,665		1,664
Wachovia Capital Trust Ill,
5.80%	(h)(o)1,790		1,276
Washington Mutual Bank/Henderson N.V.,
5.50%, 1/15/13	170		135
Washington Mutual Preferred Funding LLC,
6.67%	(e)(h)(o)300		162
Washington Mutual, Inc.,
8.25%, 4/1/10	(c)920		801
Wells Fargo & Co.,
5.63%, 12/11/17	1,040		1,066
World Financial Properties,
6.91%, 9/1/13	(e)1,595		1,525
Xlliac Global Funding,
4.80%, 8/10/10	(e)1,110		1,112
			36,971
Industrials (6.8%)
America West Airlines, Inc.,
7.10%, 4/2/21	1,084		1,078
Amgen,
5.85%, 6/1/17	210		210
Archer-Daniels-Midland Co.,
5.45%, 3/15/18	460		463
AT&T Corp.,
8.00%, 11/15/31	250		293
AT&T, Inc.,
6.15%, 9/15/34	545		525
6.30%, 1/15/38	1,035		1,004
Biogen Idec, Inc.,
6.88%, 3/1/18	570		577
Brookfield Asset Management, Inc.,
5.80%, 4/25/17	340		307
7.13%, 6/15/12	865		864
Burlington Northern Santa Fe Corp.,
6.13%, 3/15/09	540		551
Comcast Cable Communications LLC,
6.75%, 1/30/11	440		458
7.13%, 6/15/13	145		154
Comcast Corp.,
6.50%, 1/15/15	150		154
ConAgra Foods, Inc.,
7.00%, 10/1/28	280		284
8.25%, 9/15/30	365		421
Consumers Energy Co.,
4.80%, 2/17/09	625		629
Cooper Industries, Inc.,
5.25%, 11/15/12	660		685
CVS Caremark Corp.,
5.75%, 8/15/11 - 6/1/17	460		475
CVS Pass-Through Trust,
6.04%, 12/10/28	(e)923		882
Daimler Finance North America LLC,
8.50%, 1/18/31	430		493
FBG Finance Ltd.,
5.13%, 6/15/15	(e)795		789
France Telecom S.A.,
8.50%, 3/1/31	790		981
General Electric Co.,
5.25%, 12/6/17	2,415		2,416
Hewlett Packard Co.,
5.50%, 3/1/18	225		231
Home Depot, Inc.,
2.93%, 12/16/09	(h)1,155		1,102
5.40%, 3/1/16	555		522
Honeywell International, Inc.,
5.30%, 3/1/18	290		298
ICI Wilmington, Inc.,
4.38%, 12/1/08	505		508
Koninklijke Philips Electronics N.V.,
5.75%, 3/11/18	705		720
Kroger Co. (The),
5.00%, 4/15/13	(c)230		232
LG Electronics, Inc.,
5.00%, 6/17/10	(e)520		515
Macy’s Retail Holdings, Inc.,
6.30%, 4/1/09	370		370
Marathon Oil Co.,
5.90%, 3/15/18	295		297
6.00%, 10/1/17	405		412
Medco Health Solutions, Inc.,
7.13%, 3/15/18	420		431
Miller Brewing Co.,
4.25%, 8/15/08	(e)800		803
Sprint Capital Corp.,
8.75%, 3/15/32	530		449
Systems 2001 Asset Trust LLC,
6.66%, 9/15/13	(e)1,061		1,061
Telecom Italia Capital S.A.,
4.00%, 1/15/10	1,100		1,080
Telefonica Europe B.V.,
8.25%, 9/15/30	885		1,036
Textron Financial Corp.,
5.13%, 2/3/11	750		781

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

82

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Industrials (cont’d)
Time Warner, Inc.,
3.30%, 11/13/09	$	(h)1,580	$	1,514
UnitedHealth Group, Inc.,
6.00%, 2/15/18	530		520
Valero Energy Corp.,
3.50%, 4/1/09	575		572
Verizon Communications, Inc.,
5.50%, 2/15/18	685		668
Verizon New England, Inc.,
6.50%, 9/15/11	610		638
Viacom, Inc.,
6.88%, 4/30/36	755		729
Weatherford International Ltd.,
6.00%, 3/15/18	(c)300		302
Wyeth,
5.45%, 4/1/17	300		306
5.50%, 2/15/16	115		117
Yum! Brands, Inc.,
8.88%, 4/15/11	610		673
			31,580
Mortgages - Other (24.3%)
Alliance Bancorp,
2.84%, 7/25/37	(h)2,802		2,135
American Home Mortgage Assets,
2.72%, 3/25/47	(h)3,043		2,320
2.79%, 10/25/46 - 6/25/47	(h)7,297		5,551
2.83%, 9/25/46	(h)2,365		1,449
2.90%, 6/25/47	(h)1,509		741
2.92%, 10/25/46	(h)1,553		776
American Home Mortgage Investment Trust,
2.79%, 3/25/46	(h)3,726		2,325
Banc of America Funding Corp.,
2.89%, 9/20/35	(h)715		478
Bear Stearns Mortgage Funding Trust,
2.74%, 3/25/37	(h)3,019		2,289
2.76%, 12/25/46	(h)2,377		1,810
2.80%, 9/25/36	(h)2,336		1,776
2.85%, 7/25/36	(h)2,499		1,472
California Federal Savings & Loan Association,
8.80%, 1/25/14	(d)(k)1		1
Countrywide Alternative Loan Trust,
2.79%, 10/25/46 - 11/25/46	(h)4,598		3,490
2.80%, 11/20/35	(h)594		550
2.82%, 3/20/47	(h)1,056		507
2.84%, 12/20/46	(h)1,615		781
2.85%, 3/20/46	(h)1,469		996
2.87%, 7/25/46	(h)1,428		916
2.89%, 6/25/47	(h)2,207		1,672
2.90%, 5/25/47	(h)867		418
2.92%, 11/20/35	(h)1,427		998
2.93%, 12/20/35	(h)2,163		1,448
5.78%, 2/25/36	(h)1,698		1,104
Deutsche ALT-A Securities, Inc., Alternate Loan Trust,
2.75%, 2/25/47	(h)3,277		2,273
5.16%, 2/25/47	(h)1,251		688
Deutsche ALT-A Securities, Inc., NIM Trust,
6.75%, 2/25/47	(e)586		574
Downey Savings & Loan Association Mortgage Loan Trust,
2.70%, 4/19/38	(h)2,486		1,874
2.76%, 11/19/37	(h)2,687		2,044
5.27%, 4/19/46	(h)2,219		1,664
Federal National Mortgage Association,
2.66%, 12/25/36	(h)1,707		1,638
7.00%, 9/25/32	546		579
Greenpoint Mortgage Funding Trust,
2.77%, 4/25/47	(h)3,690		2,802
2.78%, 1/25/37	(h)3,299		2,929
2.80%, 3/25/47	(h)3,483		2,648
2.92%, 3/25/36	(h)1,775		1,103
3.01%, 9/25/46	(h)900		421
GS Mortgage Securities Corp. II,
6.25%, 1/25/37	(e)179		177
GSR Mortgage Loan Trust,
2.79%, 8/25/46	(h)2,482		1,892
Harborview Mortgage Loan Trust,
2.65%, 1/19/38	(h)572		539
2.69%, 4/19/38	(h)1,906		1,445
2.71%, 3/19/38	(h)2,248		1,707
2.74%, 11/19/36	(h)2,916		2,223
2.75%, 1/19/38	(h)3,135		2,387
2.76%, 10/19/37 - 3/19/38	(h)3,040		2,141
2.79%, 7/19/46	(h)1,916		1,201
2.81%, 10/19/37	(h)1,949		1,201
2.84%, 11/19/36	(h)2,766		1,880
2.85%, 8/21/36 - 7/19/45	(h)3,044		2,001
2.94%, 11/19/35	(h)1,078		736
3.26%, 1/19/36	(h)689		282
Harborview NIM Corp.,
6.41%, 3/19/37 - 3/19/38	(e)214		212
Indymac Index Mortgage Loan Trust,
2.70%, 2/25/37	(h)2,623		2,265
2.72%, 7/25/46	(h)2,663		2,549
2.81%, 11/25/36	(h)1,810		1,376
2.98%, 10/25/36	(h)1,324		907
3.10%, 2/25/35	(h)36		26
Lehman XS Trust,
3.00%, 11/25/46	(h)800		343
3.01%, 8/25/46	(h)1,302		561
Luminent Mortgage Trust,
2.84%, 4/25/36	(h)1,394		1,058
2.96%, 7/25/36	(h)622		269
Mastr Adjustable Rate Mortgages Trust,
2.71%, 5/25/47	(h)970		951
2.85%, 4/25/46	(h)1,414		883
3.00%, 1/25/47	(h)1,225		271
3.45%, 5/25/47	(h)660		112
3.70%, 5/25/47	(h)1,500		298

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

83

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Mortgages - Other (cont’d)
Residential Accredit Loans, Inc.,
2.76%, 3/25/47	$	(h)4,467	$	3,665
2.79%, 12/25/36	(h)2,398		1,816
2.80%, 5/25/47	(h)1,364		1,028
2.83%, 5/25/46	(h)1,510		917
2.86%, 2/25/46 - 5/25/47	(h)2,679		1,713
2.87%, 2/25/46	(h)659		460
2.90%, 5/25/47	(h)1,270		641
Ryland Acceptance Corp. IV,
6.65%, 7/1/11	20		20
Structured Asset Mortgage Investments, Inc.,
2.79%, 2/25/36	(h)536		400
2.80%, 10/25/36	(h)2,150		1,636
2.83%, 8/25/36 - 7/25/46	(h)4,525		2,808
2.87%, 4/25/36	(h)2,241		1,435
2.88%, 7/25/46	(h)1,784		898
Washington Mutual, Inc.,
2.85%, 11/25/45 - 12/25/45	(h)829		787
2.86%, 10/25/45	(h)197		195
2.89%, 8/25/45	(h)90		89
2.95%, 6/25/46	(h)525		312
5.27%, 4/25/46	(h)1,882		1,374
5.29%, 8/25/46	(h)2,088		1,524
Zuni Mortgage Loan Trust,
2.73%, 8/25/36	(h)1,173		1,112
			111,963
U.S. Treasury Securities (3.5%)
U.S. Treasury Bonds,
4.50%, 2/15/36	(c)8,250		8,525
5.38%, 2/15/31	(c)6,650		7,693
			16,218
Utilities (1.7%)
Appalachian Power Co.,
5.65%, 8/15/12	255		262
Arizona Public Service Co.,
5.80%, 6/30/14	745		731
Carolina Power & Light Co.,
5.13%, 9/15/13	760		798
CenterPoint Energy Resources Corp.,
6.25%, 2/1/37	225		211
7.88%, 4/1/13	135		150
Consolidated Natural Gas Co.,
6.25%, 11/1/11	355		375
Detroit Edison Co.,
6.13%, 10/1/10	480		509
Entergy Gulf States, Inc.,
3.48%, 12/1/09	(h)455		446
3.60%, 6/1/08	345		344
Equitable Resources, Inc.,
6.50%, 4/1/18	135		136
NiSource Finance Corp.,
3.66%, 11/23/09	(h)535		520
Ohio Edison Co.,
6.40%, 7/15/16	465		480
Ohio Power Co.,
6.00%, 6/1/16	740		744
Peco Energy Co.,
5.35%, 3/1/18	355		361
Plains All American Pipeline, LP,
6.70%, 5/15/36	750		726
Public Service Electric & Gas Co.,
5.00%, 1/1/13	580		596
Texas Eastern Transmission LP,
7.00%, 7/15/32	425		454
			7,843
Total Fixed Income Securities (Cost $625,397)			581,063

	Shares
Preferred Stock (0.2%)
Mortgages — Other (0.2%)
Home Ownership Funding Corp.,
13.33% (Cost $1,110)	(e)7,150	1,096
Short-Term Investments (7.2%)
Securities held as Collateral on Loaned Securities (2.5%)
Investment Company (0.7%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)3,199,659	3,200

	Face
	Amount
	(000)
Short-Term Debt (1.8%)
Alliance & Leicester plc,
3.08%, 9/2/08	$	(h)284	284
Bancaja,
4.04%, 11/12/08	(h)142		142
Bank of New York Co., Inc.,
3.07%, 8/8/08	(h)142		142
BASF AG,
3.89%, 8/19/08	(h)142		142
CAM US Finance S.A. Unipersonal,
4.71%, 7/25/08	(h)568		568
Canadian Imperial Bank of Commerce, New York,
2.42%, 7/28/08	(h)284		284
CIT Group Holdings,
3.97%, 5/19/08	(h)512		512
Citigroup Global Markets Holdings, Inc.,
3.01%, 4/1/08	1,975		1,975
First Tennessee Bank,
2.84%, 8/15/08	(h)142		142
2.85%, 8/15/08	(h)568		568
Goldman Sachs Group, Inc.,
2.89%, 9/12/08	(h)142		142
HSBC Finance Corp.,
3.10%, 8/5/08	(h)142		142
IBM Corp.,
3.09%, 9/8/08	(h)568		568

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

84

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

	Face
	Amount		Value
	(000)		(000)
Short-Term Debt (cont’d)
Macquarie Bank Ltd.,
2.62%, 8/20/08	$	(h)284	$	284
Metropolitan Life Global Funding,
2.59%, 8/21/08	(h)426		426
National Bank of Canada,
3.11%, 4/2/08	(h)568		568
National Rural Utilities Cooperative Finance Corp.,
3.13%, 9/2/08	(h)569		569
Nationwide Building Society,
2.75%, 7/28/08	(h)330		330
Unicredito Italiano Bank (Ireland) plc,
2.84%, 8/14/08	(h)313		313
3.09%, 8/8/08	(h)199		199
			8,300
			11,500

	Shares
Investment Company (4.3%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)19,824,723	19,825

	Face
	Amount
	(000)
U.S. Treasury Security (0.4%)
U.S. Treasury Bill,
0.73%, 4/10/08	$	(c)(j)(r)1,800	1,799
Total Short-Term Investments (Cost $33,124)			33,124
Total Investments (133.5%) (Cost $659,631)  — Including $22,071 of Securities Loaned			615,283
Liabilities in Excess of Other Assets (-33.5%)			(154,288		)
Net Assets (100%)			$	460,995

(c)	All or a portion of security on loan at March 31, 2008.
(d)	Security was valued at fair value — At March 31, 2008, the Portfolio held $1,000 of fair valued securities, representing less than 0.05% of net assets.
(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(i)	Security is subject to delayed delivery.
(j)	All or a portion of the security was pledged to cover margin requirements for futures contracts.
(k)	Security has been deemed illiquid at March 31, 2008.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The interest rate shown is the rate in effect at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
@	Face Amount/Value is less than $500.
Inv Fl	Inverse Floating Rate — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at March 31, 2008.
IO	Interest Only
PAC	Planned Amortization Class
PO	Principal Only
TBA	To Be Announced

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
U.S. Treasury 2 yr. Note	68	$	14,597	Jun-08	$	61
U.S. Treasury 5 yr. Note	500	57,117		Jun-08	798
Short:
EuroDollar CME	16	3,909		Jun-08	(85		)
EuroDollar CME	16	3,916		Sep-08	(88		)
EuroDollar CME	15	3,669		Dec-08	(81		)
EuroDollar CME	11	2,690		Mar-09	(60		)
EuroDollar CME	8	1,953		Jun-09	(42		)
EuroDollar CME	29	7,063		Sep-09	(146		)
EuroDollar CME	22	5,343		Dec-09	(101		)
EuroDollar CME	18	4,363		Mar-10	(76		)
EuroDollar CME	7	1,693		Jun-10	(27		)
EuroDollar CME	3	724		Sep-10	(11		)
EuroDollar CME	2	482		Dec-10	(6		)
U.S. Treasury 10 yr. Note	715	85,051		Jun-08	(2,462		)
U.S. Treasury Long Bond	53	6,296		Jun-08	(125		)
10 yr. Swap	20	2,303		Jun-08	(61		)
					$	(2,512	)

CME  — Chicago Mercantile Exchange

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

85

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Bank of America	Buy	$	330	1.57	%	3/20/18	$	(5	)
Carnival Corp., 6.65%, 1/15/28
Bank of America	Buy	440		0.70		3/20/13	(4		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	280		0.82		3/20/18	(5		)
Goodrich Corp., 7.63%, 12/15/12
Bank of America	Buy	500		1.03		3/20/18	12
Nordstrom, Inc., 6.95%, 3/15/28
Bank of America	Buy	150		1.08		3/20/18	5
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	430		1.12		3/20/18	14
Sealed Air Corp., 5.63%, 7/15/13
Bank of America	Buy	355		0.80		3/20/18	21
Textron Financial Corp., 5.13%, 2/3/11
Bank of America	Buy	610		1.18		3/20/13	(4		)
Yum! Brands, Inc., 8.88%, 4/15/11
Citigroup	Buy	310		0.82		3/20/18	3
Eaton Corp., 7.65%, 11/15/29
Citigroup	Buy	545		0.62		3/20/13	4
Textron Financial Corp., 7.65%, 11/15/29
Citigroup	Buy	440		0.72		3/20/13	1
Textron Financial Corp., 7.65%, 11/15/29
Citigroup	Buy	1,600		0.43		3/20/12	32
Tyco International Ltd., Zero Coupon, 11/17/20
Credit Suisse	Buy	715		1.00		3/20/15	4
Arrow Electronics, Inc., 6.88%, 6/1/18
Goldman Sachs	Buy	560		3.05		3/20/13	(6		)
AvalonBay Communities, Inc., 6.13%, 11/1/12
Goldman Sachs	Buy	1,175		0.59		3/20/13	(3		)
Coca-Cola Enterprises, Inc., 6.13%, 8/15/11
Goldman Sachs	Buy	1,300		0.22		3/20/12	23
Dell, Inc., 7.10% 4/15/28
Goldman Sachs	Sell	625		0.60		12/20/12	(6		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Sell	1,220		0.80		12/20/17	(5		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Buy	305		0.97		3/20/18	(1		)
Eaton Corp., 7.65%, 11/15/29
Goldman Sachs	Buy	245		0.33		3/20/13	1
Eli Lilly, Co., 6.57%, 1/1/16
Goldman Sachs	Buy	385		0.47		3/20/18	4
Goodrich Corp., 7.63%, 12/15/12
Goldman Sachs	Buy	850		0.15		12/20/11	79
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	1,750		0.16		12/20/11	162
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	330		3.33		3/20/13	2
ProLogis, 5.50%, 3/1/13
Goldman Sachs	Buy	420		1.08		3/20/18	15
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	205		1.24		3/20/18	5
Sealed Air Corp., 5.63%, 7/15/13
Goldman Sachs	Buy	700		1.05		3/20/13	16
Textron Financial Corp., 5.13%, 2/3/11
Goldman Sachs	Buy	2,600		0.10		3/20/12	47
The Chubb Corp., 6.00%, 11/15/11

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

86

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Goldman Sachs	Buy	$	2,600	0.12	%	12/20/11	$	114
The Hartford Financial Services Group, Inc., 4.75%, 3/1/14
Goldman Sachs	Buy	1,500		0.80		3/20/11	(13		)
Tyco International Ltd., 6.38%, 10/15/11
JPMorgan Chase	Sell	2,555		0.60		12/20/12	(8		)
Dow Jones CDX North America Investment Grade Index, Series 9
JPMorgan Chase	Buy	195		0.60		3/20/13	2
Eaton Corp., 7.65%, 11/15/29
JPMorgan Chase	Buy	350		1.07		3/20/18	7
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	350		1.15		3/20/18	5
Nordstrom, Inc., 6.95%, 3/15/28
JPMorgan Chase	Buy	300		0.58		3/20/13	(1		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	410		0.63		3/20/13	(2		)
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	1,500		0.65		3/20/11	(7		)
Tyco International Ltd., 2.75%, 1/15/18
Lehman Brothers	Sell	1,230		0.60		12/20/12	(22		)
Dow Jones CDX North America Investment Grade Index, Series 9
Lehman Brothers	Sell	600		0.60		12/20/12	(9		)
Dow Jones CDX North America Investment Grade Index, Series 9
Lehman Brothers	Buy	390		0.45		3/20/18	5
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	280		0.46		3/20/18	3
Goodrich Corp., 7.63%, 12/15/12
Lehman Brothers	Buy	1,300		0.20		12/20/11	15
Union Pacific Corp., 6.30%, 1/15/12
Merrill Lynch	Buy	330		1.50		3/20/18	(3		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	275		1.57		3/20/18	(4		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	225		1.60		3/20/18	(3		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	440		0.92		3/20/18	(@—		)
Eaton Corp., 7.65%, 11/15/29
UBS	Buy	965		0.30		3/20/13	6
Eli Lilly, Co., 6.57%, 1/1/16
UBS	Buy	270		1.73		3/20/18	5
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	270		1.78		3/20/13	3
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	310		1.00		3/20/13	8
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	270		1.01		3/20/13	7
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	615		1.06		3/20/13	(2		)
Textron Financial Corp., 5.13%, 2/3/11
							$	517

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

87

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	34,895	$	458
	3 Month LIBOR	Pay	5.59		2/19/18	17,175		366
	3 Month LIBOR	Receive	5.82		2/12/23	44,825		(450		)
	3 Month LIBOR	Receive	6.03		2/19/23	22,170		(359		)
Citigroup	3 Month LIBOR	Pay	5.33		5/22/17	12,800		1,537
	3 Month LIBOR	Pay	5.37		5/23/17	12,800		1,572
	3 Month LIBOR	Pay	5.34		5/24/17	11,000		1,323
	3 Month LIBOR	Pay	5.24		9/27/17	8,000		780
	3 Month LIBOR	Receive	5.29		9/28/17	9,000		(912		)
	3 Month LIBOR	Receive	5.00		11/13/17	3,000		(276		)
	3 Month LIBOR	Receive	4.73		12/27/17	6,725		(450		)
	3 Month LIBOR	Pay	4.47		1/10/18	6,000		198
Deutsche Bank	3 Month LIBOR	Pay	5.39		5/25/17	28,700		3,570
	3 Month LIBOR	Pay	5.43		5/29/17	19,625		2,500
Goldman Sachs	3 Month LIBOR	Pay	5.57		2/27/18	17,355		349
	3 Month LIBOR	Pay	5.63		2/28/18	34,080		767
	3 Month LIBOR	Receive	6.04		2/25/23	43,725		(714		)
	3 Month LIBOR	Receive	5.96		2/27/23	22,275		(316		)
JPMorgan Chase	3 Month LIBOR	Pay	5.37		5/23/17	12,800		1,575
	3 Month LIBOR	Pay	5.34		5/24/17	2,650		321
	3 Month LIBOR	Pay	5.45		5/29/17	19,625		2,531
	3 Month LIBOR	Pay	5.44		8/20/17	3,700		427
	3 Month LIBOR	Pay	5.09		9/11/17	17,500		1,501
	3 Month LIBOR	Receive	5.23		9/27/17	8,300		(805		)
	3 Month LIBOR	Receive	5.30		9/28/17	9,000		(921		)
	3 Month LIBOR	Pay	5.25		10/11/17	8,500		956
	3 Month LIBOR	Receive	5.01		11/13/17	5,000		(467		)
	3 Month LIBOR	Pay	4.24		1/22/18	5,350		(72		)
	3 Month LIBOR	Receive	4.52		2/19/18	5,500		(203		)
	3 Month LIBOR	Receive	4.62		2/22/18	6,700		(310		)
								$	14,476

LIBOR — London Inter Bank Offer Rate

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

88

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Investment Grade Fixed Income Portfolio

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

* Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

89

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Limited Duration Portfolio

	Face Amount		Value
	(000)		(000)
Fixed Income Securities (90.4%)
Agency Adjustable Rate Mortgages (4.2%)
Federal Home Loan Mortgage Corp.,
4.34%, 10/1/33	$	4,624	$	4,735
4.38%, 7/1/35	5,773		5,807
5.45%, 7/1/34	827		842
Federal National Mortgage Association,
4.58%, 5/1/35	5,326		5,395
4.72%, 9/1/35	4,352		4,407
5.33%, 5/1/35	3,010		3,059
5.51%, 7/1/34	671		676
5.55%, 4/1/35	1,216		1,220
5.69%, 6/1/34	360		365
5.96%, 2/1/35	688		697
6.37%, 3/1/36	4,876		4,989
6.81%, 8/1/36	4,954		5,075
Government National Mortgage Association,
5.13%, 12/20/25 - 12/20/27	109		109
5.63%, 7/20/27 - 9/20/27	112		113
6.38%, 1/20/25 - 1/20/28	461		472
			37,961
Agency Fixed Rate Mortgages (1.7%)
Federal Home Loan Mortgage Corp.,
Conventional Pools:
10.00%, 3/1/11 - 10/1/20	87		101
11.00%, 5/1/20	5		6
11.50%, 1/1/18	11		12
Gold Pools:
6.50%, 9/1/19 - 11/1/29	193		203
7.00%, 3/1/32	3		3
7.50%, 11/1/19 - 11/1/32	2,329		2,519
8.50%, 8/1/28	44		49
10.00%, 10/1/21	7		8
10.50%, 1/1/19 - 10/1/20	16		19
11.50%, 8/1/10	5		6
12.00%, 6/1/15	18		21
Federal National Mortgage Association,
Conventional Pools:
6.50%, 3/1/18 - 10/1/32	2,802		2,929
7.00%, 5/1/26 - 12/1/34	3,627		3,851
7.50%, 9/1/29 - 7/1/32	3,412		3,677
8.00%, 12/1/29 - 8/1/31	195		212
9.50%, 11/1/20	24		27
10.00%, 8/1/16 - 9/1/16	24		28
10.50%, 12/1/16	11		12
11.00%, 7/1/20	6		7
11.50%, 11/1/19	21		24
12.50%, 2/1/15	16		19
Government National Mortgage Association,
Various Pools:
9.00%, 11/15/16 - 1/15/17	89		98
9.50%, 12/15/17 - 12/15/21	184		206
10.00%, 11/15/09 - 7/15/22	450		537
10.50%, 8/15/21	25		30
11.00%, 1/15/10 - 1/15/21	184		216
11.50%, 2/15/13 - 11/15/19	113		132
			14,952
Asset Backed Corporates (21.0%)
ACE Securities Corp.,
5.30%, 9/25/33	(h)472		288
Aegis Asset Backed Securities Trust,
4.60%, 6/25/34	(h)1,225		390
Ameriquest Mortgage Securities, Inc.,
3.75%, 8/25/34	(h)3,074		2,010
Amortizing Residential Collateral Trust,
6.35%, 1/25/33	(h)122		6
BA Credit Card Trust,
3.04%, 4/16/12	(h)12,325		12,192
Capital Auto Receivables Asset Trust,
2.88%, 7/15/10	(h)3,000		2,962
4.05%, 7/15/09	396		396
4.98%, 5/15/11	9,700		9,812
5.02%, 9/15/11	5,250		5,352
5.31%, 10/20/09	(e)10,400		10,463
5.38%, 7/15/10	9,100		9,268
Capital One Auto Finance Trust,
5.07%, 7/15/11	3,729		3,665
Caterpillar Financial Asset Trust,
5.57%, 5/25/10	6,134		6,201
Chase Issuance Trust,
4.96%, 9/17/12	10,225		10,543
CIT Equipment Collateral,
5.07%, 2/20/10	4,675		4,715
CNH Equipment Trust,
5.20%, 6/15/10	3,282		3,310
5.40%, 10/17/11	3,000		3,055
Countrywide Asset Backed Certificates,
4.37%, 10/25/35	(h)1,533		1,525
Credit Based Asset Servicing and Securitization LLC,
2.64%, 7/25/36	(h)2,087		2,050
DaimlerChrysler Auto Trust,
5.00%, 2/8/12	8,825		9,039
Ford Credit Auto Owner Trust,
2.85%, 8/15/11	(h)5,700		5,593
5.05%, 3/15/10	2,463		2,481
5.26%, 10/15/10	6,300		6,370
5.40%, 8/15/11	8,950		9,202
GE Equipment Small Ticket LLC,
4.38%, 7/22/09	(e)1,306		1,312
4.88%, 10/22/09	(e)3,310		3,312
Harley-Davidson Motorcycle Trust,
2.76%, 5/15/11	1,544		1,537
3.56%, 2/15/12	2,598		2,600
3.76%, 12/17/12	6,926		6,940
4.07%, 2/15/12	4,816		4,838
4.41%, 6/15/12	5,242		5,283
Hertz Vehicle Financing LLC,
4.93%, 2/25/10	(e)4,550		4,497

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

90

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Limited Duration Portfolio

	Face Amount		Value
	(000)		(000)
Asset Backed Corporates (cont’d)
Home Equity Asset Trust,
4.70%, 8/25/34	$	(h)341	$	161
Honda Auto Receivables Owner Trust,
4.85%, 10/19/09	3,116		3,132
Hyundai Auto Receivables Trust,
5.04%, 1/17/12	8,400		8,511
Long Beach Mortgage Loan Trust,
2.69%, 1/25/46	(h)135		135
MBNA Credit Card Master Note Trust,
4.30%, 2/15/11	295		296
National City Auto Receivables Trust,
2.88%, 5/15/11	2,193		2,192
Nationstar Home Equity Loan Trust,
2.66%, 6/25/37	(h)4,080		3,850
New Century Home Equity Loan Trust,
4.46%, 8/25/35	(g)762		755
Nissan Auto Receivables Owner Trust,
5.03%, 5/16/11	7,125		7,281
Park Place Securities, Inc.,
4.45%, 10/25/34	(h)3,125		2,179
Soundview Home Equity Loan Trust,
2.66%, 6/25/36	(h)50		50
USAA Auto Owner Trust,
4.90%, 2/15/12	8,900		9,051
Whole Auto Loan Trust,
2.58%, 3/15/10	338		338
			189,138
Collateralized Mortgage Obligations — Agency Collateral Series (0.9%)
Federal Home Loan Mortgage Corp.,
7.50%, 9/15/29	3,470		3,678
PAC
3.50%, 5/15/22	762		762
Federal National Mortgage Association,
PAC
5.50%, 1/25/24	1,384		1,390
6.50%, 6/25/35	2,087		2,199
			8,029
Collateralized Mortgage Obligation — Non Agency Collateral Series (2.1%)
Citigroup Commercial Mortgage Trust,
5.62%, 12/10/49	(h)2,554		2,535
Countrywide Alternative Loan Trust,
IO
2.18%, 3/20/46	24,340		1,070
2.56%, 2/25/37	19,172		827
Greenpoint Mortgage Funding Trust,
IO
1.30%, 8/25/45 - 10/25/45	31,615		1,094
GS Mortgage Securities Corp.,
IO
4.01%, 8/25/35	(e)(h)13,591		361
Harborview Mortgage Loan Trust,
IO
3.34%, 6/19/35	(h)18,039		521
3.60%, 5/19/35	(h)20,561		580
3.83%, 1/19/36	(h)26,802		880
3.93%, 3/19/37	(h)23,478		925
3.98%, 1/19/36	(h)11,549		430
4.06%, 7/19/47	(h)41,378		1,671
PO
3/19/37	20		16
7/19/47	@—		@—
Indymac Index Mortgage Loan Trust,
IO
3.32%, 7/25/35	(h)16,840		553
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.65%, 6/15/49	5,230		5,230
Washington Mutual, Inc.,
IO
0.51%, 6/25/44	7,854		170
0.55%, 7/25/44	14,078		300
0.57%, 10/25/44	19,969		420
0.91%, 3/25/47	110,979		1,645
			19,228
Finance (12.4%)
Allstate Life Global Funding Trusts,
4.50%, 5/29/09	690		698
American General Finance Corp.,
4.63%, 5/15/09 - 9/1/10	1,485		1,476
AXA Financial, Inc.,
6.50%, 4/1/08	870		870
Bank of America Corp.,
3.38%, 2/17/09	3,095		3,097
Bank of Scotland plc,
5.63%, 7/20/09	(e)5,400		5,543
Bank One Corp.,
6.00%, 2/17/09	664		675
Capital One Financial Corp.,
3.27%, 9/10/09	(h)3,240		2,936
Capmark Financial Group, Inc.,
5.88%, 5/10/12	(e)2,065		1,309
CIT Group, Inc.,
4.75%, 8/15/08	2,270		2,090
Citicorp,
6.38%, 11/15/08	1,055		1,076
Citigroup, Inc.,
3.63%, 2/9/09	2,655		2,649
4.63%, 8/3/10	1,120		1,120
Countrywide Home Loans, Inc.,
3.25%, 5/21/08	2,515		2,467
Credit Suisse USA, Inc.,
6.13%, 11/15/11	1,040		1,100
Goldman Sachs Group, Inc. (The),
6.88%, 1/15/11	2,550		2,724
Hartford Financial Services Group, Inc.,
5.55%, 8/16/08	3,700		3,723

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

91

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Limited Duration Portfolio

	Face Amount		Value
	(000)		(000)
Finance (cont’d)
HSBC Finance Corp.,
4.13%, 12/15/08	$	760	$	759
5.88%, 2/1/09	1,580		1,592
6.38%, 10/15/11	285		293
6.40%, 6/17/08	1,470		1,477
6.75%, 5/15/11	630		654
International Lease Finance Corp.,
4.63%, 6/2/08	4,015		4,015
iStar Financial, Inc.,
3.34%, 3/9/10	(h)2,380		1,883
John Hancock Financial Services, Inc.,
5.63%, 12/1/08	3,365		3,428
John Hancock Global Funding II,
7.90%, 7/2/10	(e)625		696
JPMorgan Chase & Co.,
6.00%, 2/15/09	805		818
6.75%, 2/1/11	2,600		2,763
7.00%, 11/15/09	315		329
Lehman Brothers Holdings, Inc.,
2.65%, 12/23/08	(h)2,130		2,071
2.81%, 12/23/10	(h)1,155		986
Mantis Reef Ltd.,
4.69%, 11/14/08	(e)2,350		2,368
MBNA Corp.,
3.53%, 5/5/08	(h)1,605		1,606
Mellon Funding Corp.,
6.40%, 5/14/11	2,465		2,620
Metropolitan Life Global Funding I,
4.63%, 8/19/10	(e)4,310		4,440
Monumental Global Funding II,
4.38%, 7/30/09	(e)2,335		2,350
Popular North America, Inc.,
5.65%, 4/15/09	2,245		2,234
Pricoa Global Funding I,
3.90%, 12/15/08	(e)2,930		2,941
Prudential Funding LLC,
6.60%, 5/15/08	(e)1,970		1,976
Santander Central Hispano Issuance Ltd.,
7.63%, 11/3/09	3,900		4,173
SLM Corp.,
4.00%, 1/15/10	3,375		2,838
Sovereign Bancorp, Inc.,
2.83%, 3/23/10	(h)3,160		3,027
Suntrust Bank,
4.55%, 5/25/09	4,238		4,275
Unicredit Luxembourg Finance S.A.,
3.77%, 10/24/08	(e)(h)4,310		4,306
Wachovia Capital Trust Ill,
5.80%	(h)(o)3,170		2,260
Wachovia Corp.,
3.63%, 2/17/09	1,030		1,027
Washington Mutual, Inc.,
4.00%, 1/15/09	1,130		1,017
8.25%, 4/1/10	2,233		1,944
Wells Fargo & Co.,
3.12%, 8/15/08	2,638		2,628
Wells Fargo Bank N.A.,
6.45%, 2/1/11	2,380		2,533
World Financial Properties,
6.91%, 9/1/13	(e)2,232		2,134
6.95%, 9/1/13	(e)688		666
Xlliac Global Funding,
4.80%, 8/10/10	(e)2,485		2,490
			111,170
Industrials (9.0%)
American Honda Finance Corp.,
3.85%, 11/6/08	(e)2,650		2,655
AT&T, Inc.,
3.20%, 2/5/10	(h)3,145		3,117
5.30%, 11/15/10	600		623
BAE Systems Holdings, Inc.,
4.75%, 8/15/10	(e)2,200		2,281
British Telecommunications plc,
8.63%, 12/15/10	1,400		1,541
Brookfield Asset Management, Inc.,
8.13%, 12/15/08	2,555		2,624
Burlington Northern Santa Fe Corp.,
6.13%, 3/15/09	3,165		3,227
Comcast Cable Communications, Inc.,
6.88%, 6/15/09	1,110		1,147
Comcast Corp.,
5.85%, 1/15/10	900		925
ConocoPhillips,
8.75%, 5/25/10	2,900		3,238
Consumers Energy Co.,
4.80%, 2/17/09	2,345		2,361
COX Communications, Inc.,
4.63%, 1/15/10	1,600		1,601
CVS/Caremark Corp.,
4.00%, 9/15/09	2,710		2,712
Daimler Finance North America LLC,
3.30%, 3/13/09	(h)2,425		2,394
4.05%, 6/4/08	1,140		1,140
8.00%, 6/15/10	85		91
Deutsche Telekom International Finance B.V.,
8.00%, 6/15/10	2,245		2,403
Federated Department Stores, Inc.,
6.30%, 4/1/09	790		790
6.63%, 9/1/08	1,790		1,799
FedEx Corp.,
5.50%, 8/15/09	2,100		2,151
Home Depot, Inc.,
2.93%, 12/16/09	(h)2,425		2,313
Hospira, Inc.,
3.18%, 3/30/10	(h)2,130		2,073

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

92

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Limited Duration Portfolio

	Face Amount		Value
	(000)		(000)
Industrials (cont’d)
ICI Wilmington, Inc.,
4.38%, 12/1/08	$	1,070	$	1,076
J.C. Penney Corp., Inc.,
7.38%, 8/15/08	2,610		2,632
Kraft Foods, Inc.,
4.00%, 10/1/08	910		909
4.13%, 11/12/09	2,560		2,566
Miller Brewing Co.,
4.25%, 8/15/08	(e)3,095		3,108
Oracle Corp.,
5.00%, 1/15/11	1,540		1,581
Safeway, Inc.,
7.50%, 9/15/09	1,585		1,665
Sara Lee Corp.,
2.75%, 6/15/08	2,770		2,766
Sealed Air Corp.,
6.95%, 5/15/09	(e)440		454
Sprint Nextel Corp.,
3.07%, 6/28/10	(h)2,515		2,146
Telecom Italia Capital S.A.,
4.00%, 1/15/10	385		378
4.88%, 10/1/10	2,400		2,365
Time Warner, Inc.,
3.30%, 11/13/09	(h)3,310		3,171
UnitedHealth Group, Inc.,
3.16%, 3/2/09	(h)1,090		1,078
4.13%, 8/15/09	1,065		1,056
Valero Energy Corp.,
3.50%, 4/1/09	3,280		3,260
Verizon Global Funding Corp.,
7.25%, 12/1/10	1,140		1,225
Viacom, Inc.,
3.15%, 6/16/09	(h)1,270		1,245
5.75%, 4/30/11	2,145		2,169
Yum! Brands, Inc.,
7.65%, 5/15/08	3,110		3,127
			81,183
Mortgages — Other (34.0%)
American Home Mortgage Assets,
2.83%, 5/25/46	(h)4,962		3,191
2.84%, 6/25/47	(h)8,038		5,292
2.86%, 10/25/46	(h)7,349		4,598
2.90%, 6/25/47	(h)3,135		1,540
2.92%, 10/25/46	(h)3,149		1,573
American Home Mortgage Investment Trust,
2.79%, 5/25/47	(h)8,031		6,118
3.02%, 3/25/46	(h)2,693		1,142
4.34%, 2/25/44	(h)637		639
Banc of America Funding Corp.,
6.21%, 9/20/46	(h)6,297		6,106
Banc of America Mortgage Securities, Inc.,
4.37%, 1/25/35	(h)4,357		4,203
5.64%, 7/25/34	(h)754		732
Bear Stearns Mortgage Funding Trust,
2.78%, 10/25/36	(h)5,955		4,516
2.81%, 12/25/46	(h)6,633		4,162
Citigroup Mortgage Loan Trust, Inc.,
5.74%, 9/25/34	(h)2,034		2,021
5.95%, 8/25/34	(h)1,065		1,023
Countrywide Alternative Loan Trust,
2.79%, 11/25/46	(h)4,108		3,141
2.81%, 5/20/46 - 2/25/47	(h)8,840		5,656
2.83%, 11/20/35 - 8/25/46	(h)9,645		6,516
2.85%, 9/25/47	(h)5,143		3,908
2.92%, 11/20/35	(h)6,249		4,371
3.00%, 2/25/35 - 4/25/35	(h)8,026		6,234
3.10%, 5/25/35	(h)6,286		5,281
5.78%, 2/25/36	(h)2,734		1,777
5.83%, 11/25/35	(h)4,699		3,571
Countrywide Home Loan Mortgage Pass Through Trust,
2.87%, 4/25/46	(h)3,454		2,164
4.55%, 11/20/34	(h)2,463		2,174
Downey Savings & Loan Association Mortgage Loan Trust,
2.70%, 4/19/38	(h)5,174		3,902
2.76%, 11/19/37	(h)5,743		4,368
2.81%, 3/19/45	(h)2,948		2,265
2.86%, 8/19/45	(h)5,453		3,726
2.93%, 10/19/45	(h)5,453		3,459
5.27%, 4/19/47	(h)5,294		3,970
First Horizon Alternative Mortgage Securities,
3.10%, 4/25/35	(h)6,567		6,397
6.00%, 2/25/37	7,324		6,591
First Horizon Asset Securities, Inc.,
5.11%, 10/25/34	(h)1,245		1,182
5.67%, 6/25/34	(h)457		441
Greenpoint Mortgage Funding Trust,
2.83%, 1/25/37	(h)6,370		4,607
6.33%, 3/25/36	(h)3,800		2,756
GS Mortgage Securities Corp.,
6.25%, 1/25/37 - 8/25/46	(e)616		609
GSR Mortgage Loan Trust,
2.86%, 8/25/46	(h)5,389		3,475
Harborview Mortgage Loan Trust,
2.76%, 10/19/37 - 3/19/38	(h)9,146		6,282
2.79%, 7/19/46	(h)4,651		2,916
2.80%, 11/19/36	(h)7,351		4,418
2.81%, 1/19/38	(h)7,797		4,953
2.92%, 2/19/36	(h)4,259		3,013
2.94%, 11/19/35	(h)2,215		1,511
3.14%, 6/20/35	(h)1,615		849
6.33%, 10/19/35 - 1/19/36	(h)13,683		10,946
Harborview NIM Corp.,
6.41%, 12/19/36 - 3/19/38	(e)823		819
Indymac Index Mortgage Loan Trust,
2.85%, 6/25/47	(h)6,559		4,128
3.35%, 7/25/34	(h)1,232		636
Lehman XS Net Interest Margin Notes,
6.50%, 4/28/46	(e)158		156

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

93

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Limited Duration Portfolio

	Face Amount		Value
	(000)		(000)
Mortgages - Other (cont’d)
Lehman XS Trust,
2.90%, 2/25/46	$	(h)3,929	$	2,484
Luminent Mortgage Trust,
2.80%, 10/25/46	(h)5,230		3,983
2.83%, 7/25/36 - 5/25/46	(h)7,780		5,045
2.85%, 5/25/36	(h)3,501		2,197
Mastr Adjustable Rate Mortgages Trust,
3.70%, 5/25/47	(h)2,750		546
Merrill Lynch Mortgage Investors, Inc.,
5.75%, 7/25/34	(h)593		575
Novastar Mortgage Backed Notes,
2.84%, 9/25/46	(h)4,136		2,617
Residential Accredit Loans, Inc.,
2.76%, 1/25/37	(h)5,781		4,336
2.77%, 3/25/37	(h)6,236		3,845
2.79%, 12/25/36 - 2/25/37	(h)14,167		9,490
2.80%, 1/25/37	(h)7,283		4,610
2.83%, 5/25/46 - 6/25/46	(h)14,311		8,835
2.86%, 2/25/46 - 5/25/47	(h)10,966		6,198
2.87%, 2/25/46	(h)7,308		4,659
2.90%, 5/25/47	(h)2,563		1,293
3.00%, 10/25/45	(h)4,525		3,041
Sharp SP I , LLC Net Interest Margin Trust,
7.00%, 10/25/46	(e)137		136
Structured Asset Mortgage Investments, Inc.,
2.79%, 2/25/36 - 2/25/37	(h)6,806		4,411
2.80%, 10/25/36	(h)6,409		4,876
2.81%, 1/25/37	(h)6,200		3,875
2.87%, 4/25/36	(h)5,312		3,402
2.91%, 2/25/36	(h)2,654		1,661
Washington Mutual, Inc.,
2.80%, 12/25/46 - 2/25/47	(h)11,305		6,854
2.89%, 8/25/45	(h)181		179
2.96%, 7/25/45 - 10/25/45	(h)5,743		3,976
5.27%, 4/25/46 - 5/25/46	(h)12,105		7,837
5.29%, 8/25/46	(h)5,010		3,658
5.31%, 7/25/46	(h)5,932		3,678
5.33%, 8/25/46	(h)8,184		5,074
Wells Fargo Mortgage Backed Securities Trust,
3.46%, 9/25/34	(h)982		982
4.11%, 6/25/35	(h)7,181		6,641
4.57%, 12/25/34	(h)5,317		4,915
7.03%, 7/25/34	(h)160		156
			306,089
U.S. Treasury Security (1.4%)
U.S. Treasury Note,
5.13%, 6/30/11	11,000		12,123
Utilities (3.7%)
Columbus Southern Power Co.,
4.40%, 12/1/10	1,750		1,763
Detroit Edison Co. (The),
6.13%, 10/1/10	2,100		2,226
Dominion Resources, Inc.,
5.69%, 5/15/08	(g)2,340		2,345
Enbridge Energy Partners LP,
4.00%, 1/15/09	3,520		3,544
Entergy Gulf States, Inc.,
3.48%, 12/1/09	(h)1,225		1,199
3.60%, 6/1/08	585		584
3.74%, 12/8/08	(e)(h)1,170		1,173
Enterprise Products Operating LP,
7.50%, 2/1/11	1,455		1,564
Keyspan Corp.,
4.90%, 5/16/08	1,300		1,302
NiSource Finance Corp.,
3.66%, 11/23/09	(h)1,145		1,112
Ohio Power Co.,
4.83%, 4/5/10	(h)2,025		1,975
Pacific Gas & Electric Co.,
3.60%, 3/1/09	2,110		2,105
Peco Energy Co.,
3.50%, 5/1/08	2,940		2,940
Public Service Co. of Colorado,
6.88%, 7/15/09	870		901
Sempra Energy,
4.75%, 5/15/09	3,025		3,053
Southwestern Public Service Co.,
6.20%, 3/1/09	2,260		2,308
Texas-New Mexico Power Co.,
6.25%, 1/15/09	2,700		2,753
			32,847
Total Fixed Income Securities (Cost $947,977)			812,720

	Shares
Preferred Stock (0.0%)
Mortgages — Other (0.0%)
Home Ownership Funding Corp., 13.33% (Cost $246)	(e)1,800	276
Short-Term Investments (9.2%)
Investment Company (9.0%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)81,359,000	81,359

	Face
	Amount
	(000)
U.S. Treasury Security (0.2%)
U.S. Treasury Bill,
0.73%, 4/10/08	$	(j)(r)1,429	1,430
Total Short-Term Investments (Cost $82,788)			82,789
Total Investments (99.6%) (Cost $1,031,011)			895,785
Other Assets in Excess of Liabilities (0.4%)			3,534
Net Assets (100%)			$	899,319

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

94

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Limited Duration Portfolio

(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(g)	Step Bond — Coupon rate increases in increments to maturity. Rate disclosed is as of March 31, 2008. Maturity date disclosed is the ultimate maturity date.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(j)	All or a portion of the security was pledged to cover margin requirements for futures contracts.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The interest rate shown is the rate in effect at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.
@	Face Amount/Value is less than $500.
IO	Interest Only
PAC	Planned Amortization Class
PO	Principal Only

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:
U.S. Treasury	649	$	139,312	Jun-08	$	873
2 yr. Note
U.S. Treasury	250	28,559		Jun-08	119
5 yr. Note
Short:
U.S. Treasury
10 yr. Note	86	10,230		Jun-08	(301		)
U.S. Treasury
Long Bond	134	15,919		Jun-08	(270		)
					$	421

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate	Termination Date	Unrealized Appreciation (Depreciation) (000)
Citigroup
Tyco International Ltd., Zero Coupon, 11/17/20	Buy	$	4,170	0.43%	3/20/12	$	84
Goldman Sachs
Dow Jones CDX North America Investment Grade Index, Series 8	Sell	8,000		0.35	6/20/12	(275		)
						$	(191	)

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Pay	5.56	%	2/19/18	$	22,335	$	448
	3 Month LIBOR	Receive	6.00		2/19/23	28,925		(439		)
Citigroup	3 Month LIBOR	Pay	2.90		2/28/10	20,500		167
Deutsche Bank	3 Month LIBOR	Pay	4.55		10/23/09	21,200		956
	3 Month LIBOR	Pay	4.43		11/8/09	21,000		937
Goldman Sachs	3 Month LIBOR	Pay	5.07		10/5/08	11,000		281
	3 Month LIBOR	Pay	4.64		9/11/09	21,200		690
	3 Month LIBOR	Receive	0.60		12/20/12	7,900		(32		)
	3 Month LIBOR	Pay	5.63		2/28/18	22,335		503
	3 Month LIBOR	Receive	6.04		2/25/23	28,925		(472		)
JPMorgan Chase	3 Month LIBOR	Pay	5.23		9/22/08	11,000		142
	3 Month LIBOR	Pay	5.20		10/13/08	13,500		374

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

95

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Limited Duration Portfolio

Interest Rate Swap Contracts (cont’d)

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
JPMorgan Chase (cont’d)	3 Month LIBOR	Pay	4.96	%	3/12/09	$	21,500	$	523
	3 Month LIBOR	Pay	5.39		6/6/09	21,200		1,047
	3 Month LIBOR	Pay	5.49		6/14/09	21,300		1,091
	3 Month LIBOR	Pay	5.36		6/28/09	21,300		1,066
	3 Month LIBOR	Pay	5.33		6/30/09	10,700		284
	3 Month LIBOR	Pay	5.36		7/13/09	21,350		830
	3 Month LIBOR	Pay	5.08		8/1/09	22,000		835
	3 Month LIBOR	Pay	4.79		9/20/09	21,100		758
	3 Month LIBOR	Pay	4.78		10/18/09	21,000		1,039
	3 Month LIBOR	Pay	4.35		10/29/09	21,300		920
	3 Month LIBOR	Pay	4.14		12/12/09	21,000		831
	3 Month LIBOR	Pay	3.99		12/14/09	22,000		806
	3 Month LIBOR	Pay	2.79		2/4/10	20,500		116
								$	13,701

LIBOR — London Inter Bank Offer Rate

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

*Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

96

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Long Duration Fixed Income Portfolio

	Face Amount			Value
	(000)			(000)
Fixed Income Securities (72.1%)
Agency Fixed Rate Mortgages (7.2%)
Federal Home Loan Mortgage Corp.,
6.75%, 3/15/31	$	815		$	1,026
Federal National Mortgage Association,
Conventional Pools:
5.00%, 6/25/35	295			296
7.25%, 5/15/30	645			853
				2,175
Finance (10.4%)
Abbey National plc,
7.95%, 10/26/29	50			54
Allstate Corp., (The),
5.95%, 4/1/36	40			36
Bank of America N.A.,
6.00%, 10/15/36	365			350
Bank One Corp.,
8.00%, 4/29/27	250			283
BB&T Corp.,
5.25%, 11/1/19	90			82
Bear Stearns Cos., Inc. (The),
7.25%, 2/1/18	150			155
Capmark Financial Group, Inc.,
6.30%, 5/10/17	15			9
Catlin Insurance Co., Ltd.,
7.25%	(h)(o)100			84
Citigroup, Inc.,
5.85%, 12/11/34	325			283
Credit Suisse/New York,
6.00%, 2/15/18	130			130
Farmers Exchange Capital,
7.05%, 7/15/28	100			92
General Electric Capital Corp.,
6.75%, 3/15/32	230			246
Goldman Sachs Group, Inc. (The),
6.13%, 2/15/33	50			46
6.75%, 10/1/37	165			154
HSBC Holdings plc,
6.50%, 5/2/36	235			228
iStar Financial, Inc.,
6.07%, 3/9/10	(h)95			75
John Deere Capital Corp.,
5.41%, 4/15/08	(h)130			130
Lehman Brothers Holdings, Inc.,
6.875%, 7/17/37	225			196
Merrill Lynch & Co., Inc.,
6.11%, 1/29/37	100			79
MetLife, Inc.,
5.70%, 6/15/35	25			22
Nationwide Building Society,
4.25%, 2/1/10	105			108
Platinum Underwriters Finance, Inc.,
7.50%, 6/1/17	15			15
Popular North America, Inc.,
5.65%, 4/15/09			50			50
Prudential Financial, Inc.,
5.90%, 3/17/36	30			27
6.63%, 12/1/37	5			5
Sovereign Bancorp, Inc.,
5.44%, 3/23/10	(h)105			101
Travelers Cos., Inc. (The),
6.75%, 6/20/36	25			25
Washington Mutual Preferred Funding II,
6.67%	(h)(o)100			54
WellPoint, Inc.,
6.38%, 6/15/37	25			22
				3,141
Industrials (16.1%)
Alcan, Inc.,
6.13%, 12/15/33	25			24
America West Airlines, Inc.,
7.10%, 4/2/21	79			78
Anadarko Petroleum Corp.,
6.45%, 9/15/36	40			41
Apache Corp.,
6.00%, 1/15/37	25			25
Archer-Daniels-Midland Co.,
5.45%, 3/15/18	5			5
6.45%, 1/15/38	15			15
6.63%, 5/1/29	35			36
AT&T Corp.,
8.00%, 11/15/31	395			463
BellSouth Corp.,
6.55%, 6/15/34	80			79
Biogen Idec, Inc.,
6.88%, 3/1/18	70			71
Boeing Co.,
6.13%, 2/15/33	50			53
Bristol-Myers Squibb Co.,
5.88%, 11/15/36	40			39
Burlington Northern Santa Fe Corp.,
6.15%, 5/1/37	40			39
Canadian Natural Resources Ltd.,
6.25%, 3/15/38	15			14
6.45%, 6/30/33	40			40
Caterpillar, Inc.,
6.05%, 8/15/36	35			36
Coca-Cola Enterprises, Inc.,
6.95%, 11/15/26	70			79
Comcast Corp.,
6.45%, 3/15/37	155			147
6.95%, 8/15/37	60			60
ConAgra Foods, Inc.,
8.25%, 9/15/30	80			92

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

97

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Long Duration Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
Industrials (cont’d)
ConocoPhillips Holding Co.,
6.95%, 4/15/29	$	105	$	120
CVS Caremark Corp.,
5.75%, 8/15/11	25		26
CVS Lease Pass Through,
6.04%, 12/10/28	126		121
Daimler Finance North America LLC,
8.50%, 1/18/31	135		155
Devon Financing Corp.,
7.88%, 9/30/31	45		56
Diageo Capital plc,
5.88%, 9/30/36	30		29
Eli Lilly & Co.,
5.55%, 3/15/37	45		43
EnCana Corp.,
6.50%, 2/1/38	40		40
6.63%, 8/15/37	30		31
France Telecom S.A.,
8.50%, 3/1/31	110		137
Hess Corp.,
7.13%, 3/15/33	45		50
Hewlett Packard Co.,
5.50%, 3/1/18	30		31
HJ Heinz Finance Co.,
6.75%, 3/15/32	30		30
Home Depot, Inc.,
5.82%, 12/16/09	(h)40		38
5.88%, 12/16/36	70		57
Honeywell International, Inc.,
5.30%, 3/1/18	40		41
IBM Corp.,
5.88%, 11/29/32	50		49
JC Penney Corp., Inc.,
7.40%, 4/1/37	35		32
Kellogg Co.,
7.45%, 4/1/31	35		41
Koninklijke Philips Electronics NV,
6.88%, 3/11/38	75		80
Kroger Co. (The),
6.90%, 4/15/38	25		26
Lockheed Martin Corp.,
6.15%, 9/1/36	60		62
Lowe’s Cos, Inc.,
6.65%, 9/15/37	25		25
Macy’s Retail Holdings, Inc.,
6.38%, 3/15/37	40		32
Medco Health Solutions, Inc.,
7.13%, 3/15/18	55		56
Merck & Co., Inc.,
5.75%, 11/15/36	35		35
News America, Inc.,
6.40%, 12/15/35	115		112
Nexen, Inc.,
6.40%, 5/15/37		50		48
Norfolk Southern Corp.,
7.05%, 5/1/37	45		49
Northrop Grumman Systems Corp.,
7.75%, 2/15/31	55		68
Petro-Canada,
5.95%, 5/15/35	55		50
Proctor & Gamble Co.,
5.55%, 3/5/37	65		65
Raytheon Co.,
7.00%, 11/1/28	25		28
Schering-Plough Corp.,
6.55%, 9/15/37	80		77
Sprint Capital Corp.,
6.13%, 11/15/08	80		79
8.75%, 3/15/32	90		76
Suncor Energy, Inc.,
6.50%, 6/15/38	25		25
Telecom Italia Capital S.A.,
7.20%, 7/18/36	125		118
Telefonica Europe B.V.,
8.25%, 9/15/30	130		152
Time Warner Cable, Inc.,
6.55%, 5/1/37	40		38
6.55%, 5/1/37	5		5
Time Warner, Inc.,
7.70%, 5/1/32	210		222
United Technologies Corp.,
6.05%, 6/1/36	50		52
UnitedHealth Group, Inc.,
6.875%, 2/15/38	50		48
Valero Energy Corp.,
3.50%, 4/1/09	50		50
6.63%, 6/15/37	45		43
Verizon Communications, Inc.,
5.85%, 9/15/35	135		123
Viacom, Inc.,
6.88%, 4/30/36	120		116
Wal-Mart Stores, Inc.,
5.25%, 9/1/35	150		133
6.50%, 8/15/37	10		11
Weatherford International Ltd.,
6.50%, 8/1/36	55		53
7.00%, 3/15/38	25		25
Wyeth,
5.95%, 4/1/37	40		39
6.50%, 2/1/34	40		42
XTO Energy, Inc.,
6.75%, 8/1/37	25		27
			4,853
U.S. Treasury Securities (33.5%)
U.S. Treasury Bonds,
4.50%, 2/15/36	925		956

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

98

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Long Duration Fixed Income Portfolio

	Face Amount		Value
	(000)		(000)
U.S. Treasury Securities (cont’d)
5.38%, 2/15/31	$	1,200	$	1,388
6.13%, 11/15/27	500		621
6.38%, 8/15/27	2,000		2,546
6.63%, 2/15/27	3,500		4,555
			10,066
Utilities (4.9%)
Arizona Public Service Co.,
5.50%, 9/1/35	85		67
Carolina Power & Light Co.,
6.13%, 9/15/33	40		41
CenterPoint Energy Resources Corp.,
6.25%, 2/1/37	25		23
Consolidated Edison Co. of New York, Inc.,
5.85%, 3/15/36	40		38
Consumer’s Energy Co.,
4.40%, 8/15/09	55		55
5.65%, 4/15/20	40		40
Detroit Edison Co.,
6.35%, 10/15/32	70		71
Duke Energy Ohio, Inc.,
5.40%, 6/15/33	45		38
Enterprise Products Operating LP,
6.65%, 10/15/34	40		39
6.88%, 3/1/33	70		70
Equitable Resources, Inc.,
6.50%, 4/1/18	50		50
Florida Power & Light Co.,
5.63%, 4/1/34	40		39
5.85%, 2/1/33	10		10
Keyspan Corp.,
5.80%, 4/1/35	50		45
Kinder Morgan Energy Partners LP,
6.50%, 2/1/37	65		61
Northern States Power Co.,
6.25%, 6/1/36	35		36
Ohio Edison Co.,
6.88%, 7/15/36	70		69
Ohio Power Co.,
6.60%, 2/15/33	110		108
Pacific Gas & Electric Co.,
6.05%, 3/1/34	40		39
Pacificorp,
5.75%, 4/1/37	40		38
6.25%, 10/15/37	45		46
Plains All American Pipeline, LP/PAA Finance Corp.,
6.70%, 5/15/36	85		82
Public Service Co. of Colorado,
6.25%, 9/1/37	75		78
Public Service Electricity & Gas Co.,
5.80%, 5/1/37	65		63
Southern California Edison Co.,
5.55%, 1/15/37	40		38
Texas Eastern Transmission LP,
7.00%, 7/15/32		45		48
TransCanada Pipelines Ltd.,
6.20%, 10/15/37	75		73
Virginia Electric & Power Co.,
6.00%, 1/15/36	65		64
			1,469
Total Fixed Income Securities (Cost $21,186)			21,704

	Shares
Short-Term Investments (28.2%)
Investment Company (9.3%)
Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class	(p)2,786,481	2,786

	Face Amount
	(000)
U.S. Treasury Securities (18.9)%
U.S. Treasury Bills,
0.73%, 4/10/08	$	(j)(r)110	110
1.12%, 4/24/08	500		500
1.14%, 4/17/08	2,900		2,899
1.23%, 5/22/08	2,200		2,196
			5,705
Total Short-Term Investments (Cost $8,488)			8,491
Total Investments (100.3%) (Cost $29,674)			30,195
Liabilities in Excess of Other Assets (-0.3%)			(96		)
Net Assets (100.0%)			$	30,099

(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(j)	All or a portion of the securities was pledged to cover margin requirements for futures contracts.
(o)	Perpetual — Security does not have a predetermined maturity date. Rate for this security is fixed for a period of time then reverts to a floating rate. The interest rate shown is the rate in effect at March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class.
(r)	Rate shown is the yield to maturity at March 31, 2008.

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

99

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Long Duration Fixed Income Portfolio

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:
U.S. Treasury
2 yr. Note	2	$	429	Jun-08	$	2
U.S. Treasury
5 yr. Note	8		914	Jun-08		14
U.S. Treasury
Long Bond	15		1,782	Jun-08		44
Short:
10 yr. Swap	2		230	Jun-08		(6	)
U.S. Treasury
10 yr. Note	55		6,542	Jun-08		(198	)
					$	(144	)

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Bank of America	Buy	$	45	1.57	%	3/20/18	$	(1	)
Carnival Corp., 6.65%, 1/15/28
Bank of America	Buy	145		0.82		3/20/18	(3		)
Goodrich Corp., 7.63%, 12/15/12
Citigroup	Buy	40		0.82		3/20/18	@—
Eaton Corp., 7.65%, 11/15/29
Goldman Sachs	Buy	145		0.59		3/20/13	@—
Coca-Cola Enterprises, Inc., 6.13%, 8/15/11
Goldman Sachs	Buy	65		0.22		3/20/12	1
Dell, Inc., 7.10%, 4/15/28
Goldman Sachs	Sell	145		0.80		12/20/17	(1		)
Dow Jones CDX North America Investment Grade Index, Series 9
Goldman Sachs	Buy	180		0.97		3/20/18	(1		)
Eaton Corp., 7.65%, 11/15/29
Goldman Sachs	Buy	125		0.39		3/20/12	11
Motorola, Inc., 6.50%, 9/1/25
Goldman Sachs	Buy	80		1.05		3/20/13	2
Textron Financial Corp., 5.13%, 2/3/11
Goldman Sachs	Buy	125		0.11		3/20/12	2
The Chubb Corp., 6.00%, 11/15/11
Goldman Sachs	Buy	125		0.11		3/20/12	6
The Hartford Financial Services Group, Inc., 4.75%, 3/1/14
Goldman Sachs	Buy	230		0.44		3/20/12	4
Tyco International Ltd., 6.38%, 10/15/11
Goldman Sachs	Buy	65		0.26		3/20/12	1
Union Pacific Corp., 6.13%, 1/15/12
JPMorgan Chase	Buy	40		0.58		3/20/13	@—
Pepsi Bottling Group, Inc., 7.00%, 3/1/29
JPMorgan Chase	Buy	50		0.63		3/20/13	@—
Pepsi Bottling Group, Inc., 7.00%, 3/1/29

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

100

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Long Duration Fixed Income Portfolio

Credit Default Swap Contracts (cont’d)

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Merrill Lynch	Buy	$	40	1.50	%	3/20/18	$	@—
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	20		1.60		3/20/18	@—
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	40		1.57		3/20/18	(1		)
Carnival Corp., 6.65%, 1/15/28
Merrill Lynch	Buy	60		0.92		3/20/18	@—
Eaton Corp., 7.65%, 11/15/29
Merrill Lynch	Buy	135		1.25		3/20/13	(1		)
Eaton Corp., 7.38%, 11/15/31
UBS	Buy	35		1.73		3/20/18	1
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	35		1.78		3/20/13	@—
Martin Marietta Materials, Inc., 6.88%, 4/1/11
UBS	Buy	50		1.00		3/20/13	1
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	25		1.01		3/20/13	1
Textron Financial Corp., 5.13%, 2/3/11
UBS	Buy	100		1.06		3/20/13	@—
Textron Financial Corp., 5.13%, 2/3/11
							$	22

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	1,980	$	26
	3 Month LIBOR	Receive	5.82		2/12/23	2,545		(25		)
Citigroup	3 Month LIBOR	Pay	5.44		5/29/17	1,875		241
	3 Month LIBOR	Pay	5.46		8/07/17	1,000		117
Deutsche Bank	3 Month LIBOR	Pay	5.39		5/25/17	2,925		364
	3 Month LIBOR	Pay	5.45		8/09/17	1,300		152
Goldman Sachs	3 Month LIBOR	Pay	5.63		2/28/18	1,945		44
	3 Month LIBOR	Receive	6.04		2/25/23	2,495		(41		)
JPMorgan Chase	3 Month LIBOR	Pay	5.45		5/29/17	1,850		239
	3 Month LIBOR	Pay	5.09		9/11/17	1,450		124
	3 Month LIBOR	Pay	5.42		9/21/37	1,000		127
								$	1,368

LIBOR — London Inter Bank Offer Rate

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

101

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Long Duration Fixed Income Portfolio

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

* Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled “Other”.

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

102

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments

Municipal Portfolio

	Face
	Amount		Value
	(000)		(000)
Fixed Income Securities (92.1%)
Collateralized Mortgage Obligations — Agency Collateral Series (0.2%)
Federal Home Loan Mortgage Corp.,
IO
6.50%, 3/15/33	$	493	$	93
IO PAC
6.00%, 4/15/32	1,163		83
Federal National Mortgage Association,
Inv Fl IO
6.39%, 3/25/23	468		61
IO
3.34%, 3/25/36	11,269		365
6.00%, 5/25/33	1,193		225
6.00%, 6/25/33 - 8/25/35	2,710		878
6.50%, 5/25/33 - 6/1/31	1,316		273
7.00%, 4/1/32 - 4/25/33	561		103
Government National Mortgage Association,
Inv Fl IO
5.13%, 12/16/25	289		38
5.18%, 5/16/32	195		21
5.73%, 4/16/19 - 12/16/29	690		96
			2,236
Collateralized Mortgage Obligations — Non-Agency Collateral Series (3.0%)
Bear Stearns Structured Products, Inc.,
IO
2.11%, 6/26/36	(e)74,252		928
2.20%, 1/27/37	43,113		517
2.29%, 1/27/37	(e)50,805		559
2.43%, 1/27/37	73,901		924
3.18%, 5/25/37	(e)79,888		1,997
Countrywide Alternative Loan Trust,
2.09%, 5/25/47	(e)16,997		457
2.82%, 3/20/47	(h)2,034		976
2.84%, 12/20/46	(h)2,931		1,418
2.88%, 5/20/46	(h)2,562		1,592
3.10%, 6/25/47	(h)3,193		1,533
3.78%, 2/25/47	(e)35,787		752
IO
2.17%, 3/20/46	11,422		502
2.40%, 12/20/46	30,149		1,466
2.56%, 2/25/37	12,228		527
2.86%, 3/20/47	28,535		1,478
3.68%, 12/20/35	(e)(h)11,407		390
3.91%, 12/20/35	(e)(h)15,340		602
4.15%, 8/25/46	(h)9,611		426
Countrywide Home Loan Mortgage Pass Through Trust,
2.97%, 4/25/46	(h)1,726		1,223
IO
0.51%, 10/25/34	(h)6,766		119
Deutsche ALT-A Securities, Inc., Alternate Loan Trust,
5.16%, 2/25/47	(h)2,261		1,243
Greenpoint Mortgage Funding Trust,
IO
1.13%, 6/25/45	8,662		284
1.30%, 8/25/45	7,735		251
Harborview Mortgage Loan Trust,
IO
3.34%, 6/19/35	(h)8,199		237
3.60%, 5/19/35	(h)10,911		308
3.93%, 3/19/37	(h)10,579		417
4.06%, 7/19/46	(h)18,717		756
PO
3/19/37 - 7/19/47	9		7
Harborview NIM Corp.,
3.15%, 10/20/45	(e)(h)1,974		640
Indymac Index Mortgage Loan Trust,
IO
3.32%, 7/25/35	(h)10,993		361
Residential Accredit Loans Inc.,
Zero Coupon, 3/25/47 - 8/25/47	(e)220,477		3,458
WaMu Mortgage Pass Through Certificates,
2.85%, 1/25/47	(h)2,281		1,493
IO
0.40%, 4/25/45	70,243		1,436
Washington Mutual Alternative Mortgage Pass-Through Certificates,
2.88%, 6/25/46	(h)2,803		1,362
2.90%, 10/25/46	(h)2,805		1,368
			32,007
Industrials (0.1%)
Echostar DBS Corp.,
6.38%, 10/1/11	580		558
6.63%, 10/1/14	20		18
Pilgrim’s Pride Corp.,
7.63%, 5/1/15	730		706
			1,282
Municipal Bonds (88.8%)
Alameda, CA Unified School District, General Obligation Bonds (FSA),
Zero Coupon, 8/1/33	9,915		2,435
Alamo Community College District, TX, General Obligation Bonds (FSA),
5.00%, 2/15/13 - 2/15/14	4,880		5,313
Alaska Railroad Corp., Revenue Bonds,
5.00%, 8/1/15	2,680		2,874
Aldine Independent School District, General Obligation Bonds (PSFG),
5.00%, 2/15/13	3,040		3,300
Allegheny County, PA, Hospital Development Authority, Revenue Bonds, University of Pittsburgh Medical Center,
5.00%, 9/1/18	3,000		3,103
Allegheny County, PA Industrial Development Authority, Revenue Bonds,
4.75%, 12/1/32	525		533
Amarillo, TX, General Obligation Bonds (MBIA),
5.00%, 5/15/13	1,020		1,109
Austin, TX, Convention Enterprises, Inc., Revenue Bonds,
6.70%, 1/1/28	400		442

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

103

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

	Face
	Amount		Value
	(000)		(000)
Municipal Bonds (cont’d)
Badger Tobacco Asset Securitization Corp., WI, Revenue Bonds,
6.13%, 6/1/27	$	1,070	$	1,073
Berks County, PA, General Obligation Bonds (FGIC),
Zero Coupon, 5/19/19 - 11/15/20	2,250		1,286
Brandon School District, MI, General Obligation Bonds (FSA),
5.00%, 5/1/16 - 5/1/19	4,230		4,591
Brunswick County, NC, General Obligation Bonds (FGIC),
5.00%, 5/1/17	1,700		1,816
Buckeye Tobacco Settlement Financing Authority,
5.38%, 6/1/24	10,950		10,498
Butler & Sedgwick Counties, KS, Unified School District General Obligation Bonds (FSA),
5.85%, 9/1/17	1,375		1,486
California State Department of Water Resources, Power Supply, Revenue Bonds,
5.00%, 5/1/22	4,800		4,949
California State Department of Water Resources Power Supply, Revenue Bonds (MBIA),
5.25%, 5/1/12	2,200		2,367
California State, General Obligation Bonds,
5.25%, 2/1/14	1,375		1,481
California State Public Works Board, Revenue Bonds,
5.25%, 6/1/13	1,150		1,241
5.50%, 6/1/15	1,275		1,410
Camden, AL, Industrial Development Board, Revenue Bonds,
6.13%, 12/1/24	625		626
Carbon County, PA, Industrial Development Authority, Revenue Bonds,
6.65%, 5/1/10	190		193
Carrollton, TX, General Obligation Bonds (FSA),
5.13%, 8/15/16	1,470		1,563
Center Township, PA, Sewer Authority, Revenue Bonds (MBIA),
Zero Coupon, 4/15/17	615		426
Chandler, AZ, Industrial Development Authority, Revenue Bonds,
4.38%, 12/1/35	(h)1,400		1,449
Chelsea, MA Lease Revenue Bonds, Series B, SAVRS (FSA),
3.67%, 6/13/23	(h)4,950		4,950
Cherokee County, GA, School Systems, General Obligation Bonds (MBIA),
5.00%, 8/1/13	1,000		1,096
Chicago, IL, Board of Education, General Obligation Bonds (FSA),
5.00%, 12/1/17	1,010		1,107
Chicago, IL, General Obligation Bonds (FGIC),
Zero Coupon, 1/1/19	4,000		2,350
Children’s Trust Fund, Revenue Bonds,
5.38%, 5/15/33	1,820		1,730
5.75%, 7/1/20	600		628
Citizens Property Insurance Corp., FL, Revenue Bonds (MBIA),
5.00%, 3/1/12	3,000		3,197
City of Cleveland, OH, Revenue Bonds,
5.00%, 1/1/17	3,250		3,533
City of Houston, TX, (MBIA),
5.00%, 3/1/16	1,000		1,093
City of Seattle, WA, Revenue Bonds,
5.00%, 2/1/18 - 2/1/19	4,890		5,197
City of Tallahassee, FL, Revenue Bonds (MBIA),
5.00%, 10/1/11	2,470		2,653
Clark County, NV, School District, General Obligation Bonds (AMBAC),
4.50%, 6/15/11	14,000		14,774
Clark County, WA, School District No. 117, Camas, General Obligation Bonds (FSA),
5.00%, 12/1/13	1,500		1,645
Clark County, WA School District No. 114, Evergreen General Obligation Bonds (FSA),
5.00%, 6/1/13	2,500		2,724
Clear Creek, TX, Independent School District (PSFG),
5.65%, 2/15/19	1,000		1,060
Coachella Valley, Unified School District, CA, General Obligation Bonds (FGIC),
Zero Coupon, 8/1/30	1,000		274
Colorado E470 Public Highway Authority, Revenue Bonds (MBIA),
Zero Coupon, 9/1/29	18,900		5,284
Colorado Educational & Cultural Facilities Authority, Revenue Bonds (MBIA),
4.38%, 3/1/14	1,400		1,452
4.50%, 3/1/15	1,600		1,658
4.60%, 3/1/16	1,000		1,034
Colorado Health Facilities Authority, Revenue Bonds,
Zero Coupon, 7/15/20	1,000		564
Commerce, CA, Energy Authority Revenue Bonds (MBIA),
5.25%, 7/1/09	1,355		1,397
Commonwealth of Pennsylvania, General Obligation Bonds,
5.00%, 8/1/18	17,720		19,242
Cook County, IL, School District, General Obligation Bonds (MBIA),
Zero Coupon, 12/1/22	4,125		1,891
Council Rock, PA, School District, General Obligation Bonds (MBIA),
5.00%, 11/15/19	1,285		1,389
County of Bexar, TX, General Obligation Bonds (FSA),
5.00%, 6/15/12 - 6/15/14	2,640		2,873
County of Craven, NC, COP (MBIA),
5.00%, 6/1/11	1,730		1,831
County of King, WA, General Obligation Bonds,
5.00%, 1/1/18	2,500		2,708
County of Miami-Dade, FL, Revenue Bonds (FGIC),
5.00%, 8/1/11 - 8/1/13	15,480		16,434
County of Monroe, FL, Infrastructure Sales Surtax, Revenue Bonds (MBIA),
5.00%, 4/1/18	2,445		2,606
County of Osceola, FL, Revenue Bonds (AMBAC),
5.00%, 10/1/12 - 10/1/13	5,070		5,447
County of Riverside, CA, COP (AMBAC),
5.00%, 11/1/14	3,500		3,858

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

104

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

	Face
	Amount		Value
	(000)		(000)
Municipal Bonds (cont’d)
County of St. Lucie, FL, Transportation Revenue Bonds (AMBAC),
5.00%, 8/1/13	$	1,000	$	1,078
Cowlitz County, WA, Public Utility District No. 1 (FGIC),
5.00%, 9/1/11	2,445		2,581
Cranberry Township, PA, General Obligation Bonds (FGIC),
4.80%, 12/1/18	1,310		1,348
Crandall, TX, Independent School District, General Obligation Bonds (PSFG),
Zero Coupon, 8/15/19 - 8/15/21	4,315		2,345
Crisp County Development Authority, Revenue Bonds,
5.55%, 2/1/15	200		207
Crowley, TX, Independent School District, General Obligation Bonds (PSFG),
5.00%, 8/1/10 - 8/1/11	3,350		3,563
Crown Point, IN, Multi-School Building Corp., Revenue Bonds (MBIA),
Zero Coupon, 1/15/24	5,200		2,256
Cypress-Fairbanks, Texas, Independent School District, General Obligation Bonds (PSFG),
4.80%, 2/15/19	1,650		1,723
Dallas, TX, Area Rapid Transit Revenue Bonds (AMBAC),
5.00%, 12/1/11	1,915		2,067
Dallas, TX, Water & Sewer Systems (AMBAC),
5.00%, 10/1/13	10,000		10,917
Dallas, TX, Waterworks & Sewer Systems, Revenue Bonds (AMBAC),
5.00%, 10/1/12	5,000		5,421
Delta County, MI, Economic Development Corp., Revenue Bonds,
6.30%, 4/15/27	450		506
Denton, TX, Independent School District, General Obligation Bonds (PSFG),
5.00%, 8/15/12	1,905		2,066
Denton, TX, Utility System Revenue Bonds (AMBAC),
5.00%, 12/1/16	1,865		1,992
Director of the State of Nevada Department of Business & Industry, Revenue Bonds,
5.63%, 12/1/26	(h)1,100		1,042
Director of the State of Nevada Department of Business & Industry Revenue Bonds (AMBAC),
Zero Coupon, 1/1/21 - 1/1/23	3,845		1,532
District of Columbia, General Obligation Bonds (FSA),
5.00%, 6/1/16 - 6/1/18	11,480		12,379
Dover, PA, Area School District, General Obligation Bonds (FGIC),
5.00%, 4/1/16	1,000		1,049
Duncanville, TX, Independent School District, General Obligation Bonds (PSFG),
Zero Coupon, 2/15/22	4,000		1,976
Eagle, IN, Union Middle School Building, Revenue Bonds (AMBAC),
4.90%, 7/5/16	1,000		1,048
5.00%, 7/5/17	1,500		1,579
Eanes, TX, Independent School District, General Obligation Bonds (PSFG),
4.80%, 8/1/19	1,365		1,405
East Porter County, IN, School Building Corp., Revenue Bonds (MBIA),
4.70%, 7/15/12	1,025		1,044
Edgewood, TX, Independent School District (PSFG),
4.75%, 8/15/16	1,310		1,399
4.85%, 8/15/17	880		925
Elizabeth Forward, PA, School District (MBIA),
Zero Coupon, 9/1/11	1,250		1,123
Erie County, NY, Industrial Development Agency, Revenue Bonds (FSA),
5.00%, 5/1/14 - 5/1/15	5,925		6,444
Essex County, NJ, Utility Authority, Revenue Bonds (FSA),
4.80%, 4/1/14	1,005		1,020
Eureka, CA, Union School District, General Obligation Bonds (MBIA),
Zero Coupon, 8/1/28 - 8/1/30	5,090		1,498
Everett, WA, Water & Sewer Revenue Bonds (MBIA),
5.00%, 7/1/13	1,630		1,778
Florida Municipal Loan Council, Revenue Bonds (MBIA),
5.00%, 10/1/11 - 10/1/13	3,850		4,126
Florida State, Board of Education, General Obligation Bonds,
5.00%, 6/1/26 - 6/1/27	5,370		5,437
Fontana, CA, Unified School District, General Obligation Bonds (FSA),
zero coupon, 8/1/30 - 8/1/32	20,050		5,372
Fort Wayne Hospital Authority, IN, Revenue Bonds (MBIA),
4.70%, 11/15/11	1,100		1,138
Frisco, TX, Independent School District, General Obligation Bonds (PSFG),
Zero Coupon, 8/15/20 - 8/15/22	6,260		3,224
Geneva, IL, Industrial Development, Revenue Bonds (FSA),
4.80%, 5/1/19	1,705		1,754
Georgetown County, SC, Pollution Control Facility, Revenue Bonds,
5.13%, 2/1/12	725		735
Gilliam County, OR, Solid Waste Disposal, Revenue Bonds,
4.88%, 7/1/38	1,400		1,405
Girard Area, PA, School District, General Obligation Bonds (FGIC),
Zero Coupon, 10/1/18 - 10/1/19	950		622
Grand Prairie, TX, Independent School District, General Obligation Bonds (PSFG),
Zero Coupon, 2/15/14	2,240		1,779
Grapevine, TX, Certificates of Obligation, General Obligation Bonds (FGIC),
5.75%, 8/15/17	1,000		1,077
Greenville, MI, Public School, General Obligation Bonds (FSA/Q-SBLF),
5.00%, 5/1/16 - 5/1/18	2,645		2,885
Greenwood Fifty School Facilities Inc., SC, Installment Purchase Revenue Bonds (AGC),
5.00%, 12/1/11	1,000		1,078

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

105

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

	Face
	Amount		Value
	(000)		(000)
Municipal Bonds (cont’d)
Gulf Coast Waste Disposal Authority, TX, Revenue Bonds,
4.55%, 4/1/12	$	830	$	820
Hampton Roads, VA, Sanitation District, Wastewater Revenue Bonds,
5.00%, 4/1/27 - 4/1/28	5,910		6,002
Harris County, TX, Health Facilities Development Corp., Thermal Utilities, Revenue Bonds (AGC),
5.25%, 11/15/24 - 11/15/25	7,480		7,751
Harris County, TX, Hospital District, Revenue Bonds (MBIA),
5.00%, 2/15/11	345		362
Harvey County, KS, Unified School District No. 373 Newton Refunding and Improvement (MBIA),
5.00%, 9/1/19	2,630		2,750
Hawaii State, COP, General Obligation Bonds (AMBAC),
4.80%, 5/1/12	1,275		1,298
5.00%, 4/1/13	8,290		9,014
Houston, TX, Community College Revenue Bonds,
4.00%, 4/15/11 - 4/15/12	2,865		2,974
Houston, TX, General Obligation Bonds (MBIA),
5.00%, 3/1/12	3,400		3,662
Houston, TX, Independent School District, General Obligation Bonds (PSFG),
5.00%, 2/15/13 - 2/15/28	13,745		14,329
Houston, TX, Revenue Bonds (MBIA),
5.25%, 5/15/11	2,000		2,131
Houston, TX, Utility System, Revenue Bonds (FGIC),
5.00%, 11/15/13	1,000		1,069
Houston, TX, Water & Sewer System, Revenue Bonds (FSA),
Zero Coupon, 12/1/25	12,350		4,953
Humble, TX, Independent School District, General Obligation Bonds (AGC),
5.00%, 2/15/27 - 2/15/28	5,355		5,404
Idaho Housing & Finance Association, Grant - Revenue Anticipation - Federal Highway Trust, Revenue Bonds (AGC),
5.25%, 7/15/25 - 7/15/26	8,450		8,752
Illinois Development Finance Authority, Gas Supply, Revenue Bonds,
3.75%, 2/1/33	(h)5,150		5,066
Illinois Development Finance Authority, Revenue Bonds (FGIC),
Zero Coupon, 12/1/09	2,000		1,912
Illinois Health Facilities Authority Revenue Bonds (MBIA),
5.00%, 11/15/12	1,000		1,012
Illinois Health Facilities Authority Revenue Bonds SAVRS (AMBAC),
4.00%, 9/16/24	(h)12,200		12,200
Illinois Municipal Electric Agency, Revenue Bonds (FGIC),
5.00%, 2/1/13 - 2/1/15	2,065		2,197
Indiana Port Commission, Revenue Bonds,
4.10%, 5/1/12	3,450		3,485
Indiana State Development Finance Authority, Revenue Bonds,
4.70%, 10/1/31	(h)100		97
Indiana State University, Revenue Bonds (FGIC),
5.20%, 10/1/12	1,640		1,656
Indiana Transportation Finance Authority, Highway Revenue Bonds (AMBAC),
Zero Coupon, 12/1/16	1,695		1,157
Intermountain Power Agency, UT, Power Supply Revenue Bonds,
Zero Coupon, 7/1/17	1,750		1,184
Iowa Finance Authority, Private University, Revenue Bonds (CIFG),
5.00%, 4/1/13	1,210		1,277
Iredell County, NC, COP, Irdell County School Project,
5.13%, 6/1/27	1,650		1,671
Irving, TX, Independent School District General Obligation Bonds (PSFG),
Zero Coupon, 2/15/13	1,945		1,628
Judson, Texas, Independent School District, General Obligation Bonds (PSFG),
5.00%, 2/1/13	1,000		1,085
Kane & De Kalb Counties, IL, Community Unit School District General Obligation Bonds (AMBAC),
Zero Coupon, 12/1/09	725		694
Kentucky Asset Liability Commission, KY, Revenue Bonds (MBIA),
5.00%, 9/1/11 - 9/1/14	17,810		19,181
King County, WA, General Obligation Bonds (MBIA),
5.00%, 12/1/19	1,075		1,109
King County, WA, School District No. 414 Lake Washington (FSA),
5.00%, 12/1/16 - 12/1/19	15,680		17,083
Lake County, IL, Community Consolidated School District, General Obligation Bonds (FGIC),
Zero Coupon, 12/1/19 - 12/1/21	12,775		6,695
Lakeview, MI, Public School District, General Obligation Bonds (Q-SBLF),
5.00%, 5/1/16	1,060		1,135
Lamar, TX, Consolidated Independent School District, General Obligation Bonds (PSFG),
5.00%, 2/15/12	1,000		1,076
Lancaster, TX, Independent School District, General Obligation Bonds (FSA),
Zero Coupon, 2/15/09	1,795		1,761
Las Vegas, NV, Water District, General Obligation Bonds,
5.00%, 6/1/18	4,695		5,125
Lewisville, TX, Independent School School District, General Obligation Bonds (FGIC),
4.00%, 8/15/10	4,905		5,070
Lexington County, SC, Revenue Bonds,
5.00%, 11/1/16	165		171
Long Beach, CA, Community College District, General Obligation Bonds (FGIC),
Zero Coupon, 5/1/14	2,465		1,941
Long Island, NY, Power Authority Electric System, Revenue Bonds (FSA),
Zero Coupon, 6/1/16	3,700		2,641
Louisiana Correctional Facilities Corp., LA, Revenue Bonds (AMBAC),
5.00%, 9/1/12	1,230		1,317

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

106

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

	Face Amount		Value
	(000)		(000)
Municipal Bonds (cont’d)
Louisiana Local Government Environmental Facilities, Community Development Authority, Revenue Bonds, Bossier City Public Improvement Projects (AMBAC),
5.00%, 11/1/13	$	1,320	$	1,426
5.00%, 11/1/15	(e)1,200		1,300
Louisiana Offshore Terminal Authority, LA, Revenue Bonds,
4.30%, 10/1/37	(h)2,600		2,660
Lubbock, TX, General Obligation Bonds (FSA),
5.00%, 2/15/11 - 2/15/14	3,160		3,400
Madera, CA, Unified School District, General Obligation Bonds (FGIC),
Zero Coupon, 8/1/26 - 8/1/28	7,000		2,348
Madison & Jersey Counties, IL, Unit School District, General Obligation Bonds (FSA),
Zero Coupon, 12/1/20	2,900		1,567
Maricopa County, AZ, Pollution Control,
2.90%, 6/1/35	(h)1,600		1,613
4.00%, 1/1/38	(h)350		358
Maryland State Department of Transportation, Construction Transportation, Revenue Bonds,
5.00%, 2/15/18	5,100		5,571
Maryland State Economic Development Corp., Revenue Bonds,
7.50%, 12/1/14	350		383
Massachusetts State Development Finance Agency, Resource Recovery, Waste Management Inc. Project, Revenue Bonds,
6.90%, 12/1/29	(h)250		261
Massachusetts State Health & Educational Facilities Authority, Revenue Bonds (AMBAC),
4.80%, 7/1/12	1,665		1,697
Maury County, TN, Industrial Development Board, Solid Waste Disposal Revenue Bonds,
6.30%, 8/1/18	1,075		1,155
Memphis-Shelby County Sports Authority Inc., Revenue Bonds, Memphis Arena Project (MBIA),
5.00%, 11/1/13	1,410		1,521
Memphis-Shelby County, TN, Airport Authority Special Facilities, Revenue Bonds, Federal Express Corp.,
5.00%, 9/1/09	850		870
Merced City, CA, School District, General Obligation Bonds (MBIA),
Zero Coupon, 8/1/28 - 8/1/29	4,665		1,392
Merrillville, IN, Multi School Building Corp., Revenue Bonds (State Aid Withholding),
5.00%, 1/15/17 - 7/15/17	2,545		2,667
Metropolitan Pier & Exposition Authority, IL Dedicated State Tax Revenue Bonds (MBIA),
Zero Coupon, 6/15/20 12/15/23	5,175		2,685
Miami-Dade County, FL, School Board, COP, General Obligation Bonds (FGIC),
5.00%, 5/1/11 - 5/1/13	15,005		15,871
Michigan City, IN, Area-Wide School Building Corp., Revenue Bonds (FGIC),
Zero Coupon, 1/15/17 - 1/15/20	6,750		4,148
Michigan State Building Authority, Revenue Bonds (MBIA),
5.25%, 10/1/10 - 10/1/11	3,000		3,191
Michigan State Strategic Fund, Michigan House of Representatives Facilities Project, Revenue Bonds,
5.25%, 10/15/23	1,485		1,559
Michigan State Strategic Fund, Solid Waste Management Project, Revenue Bonds (GTY AGMT),
4.63%, 12/1/12	275		275
Midland, TX Independent School District, General Obligation Bonds (FGIC),
5.95%, 3/1/18	1,225		1,308
Milwaukee, WI, Sewer Revenue Bonds (AMBAC),
4.88%, 6/1/19	2,070		2,128
Monmouth County, NJ, Improvement Authority, Revenue Bonds (AMBAC),
5.00%, 12/1/16 - 12/1/17	3,010		3,286
Montour, PA, School District, General Obligation Bonds (MBIA),
Zero Coupon, 1/1/13	300		252
Morton Grove, IL, General Obligation Bonds (FGIC),
4.50%, 12/1/13	1,480		1,489
Mount San Antonio, CA, Community College District, General Obligation Bonds (MBIA),
Zero Coupon, 8/1/16 - 8/1/17	27,555		18,536
Nassau County, NY, Improvement Bonds, General Obligation Bonds (FSA),
6.00%, 3/1/17	1,275		1,360
Nebraska Public Power District, Revenue Bonds (FSA),
5.00%, 1/1/11 - 1/1/13	9,360		10,015
New Jersey Economic Development Authority, Revenue Bonds,
Zero Coupon, 4/1/12	625		552
New Jersey State Educational Facilities Authority, Rowan University, Revenue Bonds (AGC),
5.00%, 7/1/27	2,405		2,432
New Mexico Finance Authority, Revenue Bonds,
5.00%, 6/1/25 - 6/1/27	5,115		5,206
New Mexico Finance Authority Revenue Bonds (MBIA),
5.00%, 6/15/12 - 6/15/15	7,115		7,757
New Orleans, LA, Audubon Commission, General Obligation Bonds (FSA),
5.00%, 10/1/13	1,695		1,838
New York City, NY, Industrial Development Agency, Revenue Bonds (FSA),
6.00%, 11/1/15	1,360		1,380
New York Power Authority (MBIA),
5.00%, 11/15/14 - 11/15/15	11,360		12,523
New York State Dormitory Authority, Revenue Bonds (FSA),
5.10%, 2/15/11	1,250		1,271
Noblesville, IN, High School Building Corp., Revenue Bonds (AMBAC),
Zero Coupon, 2/15/19	1,850		1,087
5.00%, 1/10/12 - 7/10/13	4,880		5,292
North Carolina Infrastructure Finance Corp., Certificate of Participation General Obligation Bonds (FSA),
5.00%, 5/1/13 - 5/1/14	8,440		9,201
North Carolina Infrastructure Finance Corp., COP, General Obligation Bonds (AMBAC),
5.00%, 6/1/15	3,750		4,098

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

107

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

		Face Amount			Value
		(000)			(000)
Municipal Bonds (cont’d)
North Carolina Infrastructure Finance Corp., COP, General Obligation Bonds (FSA),
5.00%, 5/1/12		$	5,675		$	6,128
North Carolina Municipal Power Agency, Electric Revenue Bonds,
6.63%, 1/1/10		850			896
North Side, IN, High School Building Corp., Revenue Bonds (FSA),
5.25%, 7/15/13		2,910			3,232
North Slope Borough, AK, General Obligation Bonds (MBIA),
Zero Coupon, 6/30/12		2,900			2,492
North Texas Tollway Authority, Revenue Bonds (AGC),
Zero Coupon, 1/1/34 - 1/1/36		41,900			9,201
Northwest Allen County, Middle School Building Corp. (FSA),
5.00%, 7/15/16 - 7/15/19		4,595			4,953
Norwalk-La Mirada, CA, Unified School District, General Obligation Bonds (FGIC),
Zero Coupon, 8/1/25		8,900			3,365
Ohio State, Solid Waste Revenue Bonds,
4.25%, 4/1/33		(h)700			646
Okemos, MI, Public School District, General Obligation Bonds (MBIA),
Zero Coupon, 5/1/15		900			672
Ouachita Parish, LA, West Ouachita Parish School District, Revenue Bonds (MBIA),
4.70%, 9/1/14		1,020			1,045
Pajaro Valley, CA, Unified School District, Certificates Partnership, General Obligation Bonds (FSA),
Zero Coupon, 8/1/27		2,220			776
Palm Beach County School Board, FL COP, General Obligation Bonds (FGIC),
5.00%, 8/1/11 - 8/1/12		7,770			8,255
Palm Beach County School Board, FL Certificate of Participation General Obligation Bonds (MBIA),
5.00%, 8/1/12 - 8/1/13		7,280			7,804
Palomar Pomerado Health (MBIA),
Zero Coupon, 8/1/16 - 8/1/19		11,170			6,977
Pearland, TX, Independent School District, General Obligation Bonds (PSFG),
4.88%, 2/15/19		1,425			1,529
Penn Hills Municipality, PA, General Obligation Bonds,
Zero Coupon, 6/1/12 - 12/1/13		2,115			1,758
Pennsylvania Convention Center Authority, Revenue Bonds (FGIC),
6.70%, 9/1/16		500			574
Pennsylvania State Financing Authority, Aliquippa School District, Revenue Bonds (State Aid Withholding),
Zero Coupon, 6/1/12		685			598
Pennsylvania State Public School Building Authority, Marple Newtown School District Project, Revenue Bonds (MBIA),
4.60%, 3/1/15		1,065			1,130
4.70%, 3/1/16		715			761
Pennsylvania State Higher Education, Facilities Authority Revenue, SAVRS, St. Joseph’s University (XLCA),
Zero Coupon, 7/15/36		(h)13,425			13,425
Philadelphia Authority for Industrial Development (FGIC),
5.00%, 10/1/11 - 2/15/15	20,190			21,474
Philadelphia, PA, Water & Wastewater, Revenue Bonds (AMBAC),
5.00%, 8/1/11 - 8/1/13	8,005			8,565
Piedmont, SC, Municipal Power Agency, Revenue Bonds (AMBAC),
Zero Coupon, 1/1/31 - 1/1/32	22,300			5,646
Pittsburgh, PA, Stadium Authority Lease Revenue Bonds,
6.50%, 4/1/11	105			111
Pittsburgh, PA, Urban Redevelopment Authority (FGIC),
Zero Coupon, 9/1/26	10,000			3,540
Pittsburgh, PA, Water & Sewer Authority, Water & Sewer System, Revenue Bonds (FGIC),
5.00%, 9/1/13	1,000			1,094
Regional Transportation District, CO, Certificate Participation (AMBAC),
5.00%, 12/1/12 - 12/1/13	14,085			15,155
Rescue Union School District, CA, General Obligation Bonds (MBIA),
Zero Coupon, 9/1/27	2,000			677
Richardson, TX, Hotel Occupancy, Certificates of Obligation, General Obligation Bonds (FGIC),
5.75%, 2/15/17	1,405			1,493
Richland County, SC, Revenue Bonds,
6.10%, 4/1/23	725			713
Rincon Valley, CA, Union School District, General Obligation Bonds (FGIC),
Zero Coupon, 8/1/32 - 8/1/35	9,675			2,182
Riverside, CA, Electric Revenue Bonds (MBIA),
5.00%, 10/1/11 - 10/1/12	3,380			3,618
Robinson Township, PA, Municipal Authority, Revenue Bonds,
6.90%, 5/15/18	45			52
Saginaw, MI, Hospital Financing Authority, Revenue Bonds (MBIA),
5.38%, 7/1/19	1,265			1,300
Sam Rayburn, TX, Municipal Power Agency, Revenue Bonds,
6.00%, 10/1/21	650			661
San Antonio County, TX, Parking System, Revenue Bonds (AMBAC),
5.50%, 8/15/17	700			729
Sanger, TX, Independent School District, General Obligation Bonds (PSFG),
Zero Coupon, 2/15/19 - 2/15/22	4,265			2,296
Santa Ana, CA, Unified School District, General Obligation Bonds (FGIC),
Zero Coupon, 8/1/19 - 8/1/20	5,475			3,037
Scranton-Lackawanna, PA, Health & Welfare Authority, Revenue Bonds,
6.63%, 7/1/09	35			36
Seminole County, FL, School Board, COP (AMBAC),
5.00%, 7/1/11 - 7/1/12	6,750			7,185
Spokane County, WA, General Obligation Bonds (MBIA),
5.00%, 12/1/11	1,000			1,079

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

108

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

	Face Amount		Value
	(000)		(000)
Municipal Bonds (cont’d)
Spooner, WI, Area School District, (AGC),
4.75%, 10/1/24	$	1,000	$	1,004
Spring, TX Independent School District, General Obligation Bonds (PSFG),
5.00%, 8/15/19	1,760		1,815
State of Mississippi, General Obligation Bonds,
5.00%, 12/1/15 - 12/1/17	19,705		21,676
State of Nevada, General Obligation Bonds (FGIC),
5.00%, 12/1/11 - 12/1/13	13,360		14,473
State of North Carolina, Revenue Bonds (MBIA),
5.00%, 3/1/13	5,120		5,571
State of Texas, Transportation Communications - Mobility Fund, General Obligation Bonds,
5.00%, 4/1/18	4,000		4,361
Steel Valley, PA, Allegheny County School District, General Obligation Bonds,
Zero Coupon, 11/1/11 - 11/1/17	1,820		1,486
Tallahassee Blueprint 2000 Intergovernmental Agency, Revenue Bonds (MBIA),
5.00%, 10/1/11 - 10/1/14	7,505		8,024
Texas State Turnpike Authority, Revenue Bonds (AMBAC),
Zero Coupon, 8/15/18	5,700		3,450
Tobacco Securitization Authority of Northern California, Asset Backed Revenue Bonds, Series A-1,
4.75%, 6/1/23	5,960		5,544
Tobacco Settlement Authority of Washington, Asset Backed Revenue Bonds,
6.50%, 6/1/26	895		908
Tobacco Settlement Financing Corp., LA, Asset Backed Revenue Bonds,
5.50%, 5/15/30	1,350		1,276
Tobacco Settlement Financing Corp., NJ, Asset Backed Revenue Bonds,
4.38%, 6/1/19	325		326
Tobacco Settlement Financing Corp., RI, Asset Backed Revenue Bonds,
6.00%, 6/1/23	1,575		1,539
Toledo-Lucas County, OH, Port Authority, Revenue Bonds,
6.45%, 12/15/21	900		957
Traverse City, MI, Public Schools (FSA),
5.00%, 5/1/16 - 5/1/19	7,840		8,522
Triborough Bridge & Tunnel Authority, NY, Revenue Bonds (Go of Auth),
4.75%, 11/15/29	2,770		2,708
Union Elementary School District, CA, General Obligation Bonds (MBIA),
Zero Coupon, 9/1/27 - 9/1/28	8,000		2,692
University of Arkansas, Revenue Bonds (FSA),
4.90%, 12/1/19	2,315		2,497
University of Cincinnati, OH, General Obligation Bonds (MBIA),
5.00%, 6/1/19	3,475		3,714
University of Massachusetts Building Authority, Revenue Bonds (AMBAC),
5.25%, 11/1/11	2,100		2,256
University of Southern Indiana, IN, Revenue Bonds (AMBAC),
5.00%, 10/1/09	1,095		1,139
University of Utah, COP, General Obligation Bonds (AMBAC),
5.00%, 12/1/11 - 12/1/13	4,040		4,384
Upper Darby Township, PA, General Obligation Bonds (AMBAC),
Zero Coupon, 7/15/11	525		472
Utah County, UT Environmental Improvement, Revenue Bonds,
5.05%, 11/1/17	170		175
Vancouver, WA, Water & Sewer Revenue Bonds (MBIA),
4.60%, 6/1/13	1,000		1,002
Victor Elementary School District, CA, General Obligation Bonds (FGIC),
Zero Coupon, 2/1/30	2,100		584
Virginia State Peninsula Regional Jail Authority, Revenue Bonds (MBIA),
5.00%, 10/1/12 - 10/1/13	2,705		2,911
Warren, MI, Consolidated School District, General Obligation Bonds (Q-SBLF),
4.15%, 5/1/14	1,000		1,039
Washington State Health Care Facilities, (Children Hospital), Revenue Bonds (FSA),
4.70%, 10/1/11	1,075		1,097
Washington State Health Care Facilities, (Providence Health), Revenue Bonds,
5.25%, 10/1/33	3,000		3,019
Washington State Health Care Facilities Authority, Revenue Bonds (AMBAC),
5.13%, 11/15/11	1,000		1,021
Washington State Motor Vehicle Fuel Facilities, General Obligation Bonds (AMBAC),
Zero Coupon, 6/1/14 - 6/1/16	8,160		6,116
Washington State Recreational Facilities, General Obligation Bonds (FGIC),
Zero Coupon, 1/1/17	6,900		4,683
Washoe County, NV, General Obligation Bonds (FSA),
Zero Coupon, 7/1/18	4,235		2,665
Washoe County, NV, School District, School Improvement, General Obligation Bonds,
4.75%, 6/1/26	1,405		1,395
5.00%, 6/1/28	2,250		2,277
Wayne State University, MI, Revenue Bonds (FGIC),
5.00%, 11/15/30	6,130		6,145
West Contra Costa, CA, Unified School District, General Obligation Bonds (FGIC),
Zero Coupon, 8/1/25 - 8/1/27	23,200		8,115
West Ottawa Public School District, MI ,General Obligation Bonds (Q-SBLF),
5.00%, 5/1/21	850		926
West Virginia School Building Authority (FGIC),
5.00%, 7/1/11 - 7/1/12	8,135		8,628
West Virginia University Revenue Bonds (AMBAC),
Zero Coupon, 4/1/22 - 4/1/24	2,000		907
Westfield High School Building Corp., IN, Revenue Bonds (FSA),
5.00%, 1/10/13	1,285		1,392

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

109

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

	Face
	Amount		Value
	(000)		(000)
Municipal Bonds (cont’d)
Will County, IL, Community High School District No. 210, Lincoln Way School Building, General Obligation Bonds (FGIC),
5.00%, 1/1/11	$	1,155	$	1,214
William S Hart Union High School District, CA, General Obligation Bonds (FSA),
Zero Coupon, 9/1/21 - 9/1/28	18,290		8,493
Winnebago County, IL, School District, General Obligation Bonds (FSA),
Zero Coupon, 1/1/14	3,600		2,866
Wisconsin State Health & Educational Facilities Authority, Revenue Bonds (AMBAC),
5.63%, 2/15/12	1,000		1,090
Yosemite, CA, Community College District, General Obligation Bonds (FSA),
Zero Coupon, 8/1/22 - 8/1/25	11,455		4,947
Ypsilanti, MI, School District, General Obligation Bonds (FGIC),
4.70%, 5/1/12	1,115		1,135
			931,508
Total Fixed Income Securities (Cost $973,332)			967,033

	Shares
Preferred Stocks (3.1%)
Finance (3.1%)
ABN AMRO North America Capital Funding Trust I	(e)5,875	5,895
Citigroup Inc.,	121,000	2,909
Freddie Mac	108,800	2,964
Goldman Sachs Group, Inc.,	121,000	2,153
International Lease Finance Corp.,	31	3,095
Lehman Brothers Holdings, Inc.,	103,500	2,130
Pitney Bowes International Holdings, Inc.,	34	3,304
US Bancorp,	275,400	5,639
WachoviaCorp.,	2,565,000	2,528
Washington Mutual Preferred Funding II LLC,	(e)1,800,000	1,379
Total Preferred Stocks (Cost $34,189)		31,996

Short-Term Investments (7.4%)
Investment Companies (7.4%)
Dreyfus Tax Exempt Cash Management Fund	11,742,790	11,743
Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio — Institutional Class	(p)66,227,050	66,227
Total Short-Term Investments (Cost $77,970)		77,970
Total Investments (102.6%) (Cost $1,085,491)		1,076,999
Liabilities in Excess of Other Assets (-2.6%)		(27,481		)
Net Assets (100%)		$	1,049,518

(e)	144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(h)	Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2008.
(p)	See Note F within the Notes to Financial Statements regarding investment in Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio — Institutional Class.
AGC	Assured Guaranty Corp.
AMBAC	Ambac Assurance Corp.
CIFG	CDC IXIS Financial Guarantee
COP	Certificate of Participation
FGIC	Financial Guaranty Insurance Co.
FSA	Financial Security Assurance Inc.
GTY AGMT	Guaranty Agreement
Inv Fl	Inverse Floating Rate — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at March 31, 2008.
IO	Interest Only
MBIA	MBIA Insurance Corp.
PAC	Planned Amortization Class
PO	Principal Only
PSFG	Permanent School Fund Guaranteed
SAVRS	Semi-Annual Variable Rate Security
Q-SBLF	Qualified State Bond Loan Fund
XLCA	XL Capital Assurance

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
Long:
U.S. Treasury
5 yr. Note	68	$	7,768	Jun-08	$	10
5 yr. Swap	1,580	176,861		Jun-08	892
10 yr. Swap	933	107,426		Jun-08	2,489
Short:
EuroDollar
CME	142	34,694		Jun-08	(760		)
EuroDollar
CME	131	32,064		Sep-08	(732		)
EuroDollar
CME	128	31,309		Dec-08	(696		)
EuroDollar
CME	110	26,899		Mar-09	(608		)
EuroDollar
CME	80	19,526		Jun-09	(428		)
EuroDollar
CME	75	18,267		Sep-09	(377		)
EuroDollar
CME	65	15,786		Dec-09	(297		)
EuroDollar
CME	75	18,177		Mar-10	(318		)
EuroDollar
CME	58	14,025		Jun-10	(224		)
EuroDollar
CME	50	12,064		Sep-10	(175		)

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

110

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March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

Futures Contracts:

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

					Net
					Unrealized
	Number				Appreciation
	of	Value		Expiration	(Depreciation)
	Contracts	(000)		Date	(000)
EuroDollar CME	42	$	10,112	Dec-10	$	(133	)
U.S. Treasury  2 yr. Note	233	50,015		Jun-08	20
U.S. Treasury  10 yr. Note	1,381	164,274		Jun-08	(2,488		)
10 yr. swap	180	20,725		Jun-08	(156		)
U.S. Treasury  Long Bond	481	57,141		Jun-08	10
					$	(3,971)

CME Chicago Mercantile Exchange

Credit Default Swap Contracts

The Portfolio had the following credit default swap agreement(s) open at period end:

Swap Counterparty and Reference Obligation	Buy/Sell Protection	Notional Amount (000)		Pay/Receive Fixed Rate		Termination Date	Unrealized Appreciation (Depreciation) (000)
Goldman Sachs
Eli Lilly Co., 6.57%, 1/1/16	Buy	$	470	0.33	%	3/20/13	$	2
JPMorgan Chase
General Motors Acceptance Corp., 6.88%, 8/28/12	Sell	1,000		4.15		12/20/10	(193		)
UBS
Eli Lilly Co., 6.57%, 1/1/16	Buy	2,040		0.30		3/20/13	12
							$	(179)

Interest Rate Swap Contracts

The Portfolio had the following interest rate swap agreement(s) open at period end:

Swap Counterparty	Floating Rate Index	Pay/Receive Floating Rate	Fixed Rate		Termination Date	Notional Amount (000)		Unrealized Appreciation (Depreciation) (000)
Bank of America	3 Month LIBOR	Pay	5.37	%	2/12/18	$	68,410	$	899
	3 Month LIBOR	Receive	5.82		2/12/23	87,875		(881		)
Goldman Sachs	3 Month LIBOR	Pay	5.62		2/19/18	34,405		768
	3 Month LIBOR	Pay	5.63		2/28/18	69,280		1,559
	3 Month LIBOR	Pay	6.06		2/19/23	44,515		(753		)
	3 Month LIBOR	Receive	6.04		2/25/23	88,885		(1,451		)
JPMorgan Chase	3 Month LIBOR	Receive	5.62		5/11/27	84,000		(2,040		)
Lehman Brothers	3 Month LIBOR	Receive	5.10		2/2/15	65,000		4,248
								$	2,349

LIBOR — London Inter Bank Offer Rate

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

111

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Portfolio of Investments (cont’d)

Municipal Portfolio

Graphic Presentation of Portfolio Holdings

The following graph depicts the Portfolio’s holdings by industry and/or investment type, as a percentage of total investments.

* Industries and/or investment types which do not appear in the above graph, as well as those which represent less than 5% of total    investments, if applicable, are included in the category labeled “Other”.

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

112

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Assets and Liabilities

				Equities			Mid Cap			U.S. Mid
	Balanced			Plus			Growth			Cap Value
	Portfolio			Portfolio			Portfolio			Portfolio
	(000)			(000)			(000)			(000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Cost:	$	260,892		$	22,674		$	3,131,645		$	160,792
Investment in Securities of Affiliated Issuer(s), at Cost:	90,640			2,348			21,290			4,970
Total Investments in Securities, at Cost:	351,532			25,022			3,152,935			165,762
Foreign Currency, at Cost:	3,544			—			@—			—
Investments in Securities of Unaffiliated Issuers, at Value:(1)	268,688			17,137			3,241,996			150,725
Investment in Securities of Affiliated Issuer(s), at Value:	87,747			2,348			21,290			4,970
Total Investments in Securities, at Value:	356,435			19,485			3,263,286			155,695
Foreign Currency, at Value:	3,545			—			@—			—
Cash	—			—			1			—
Due from Broker	2,279			—			—			—
Receivable for Portfolio Shares Sold	116			—			5,287			82
Receivable for Investments Sold	2,008			—			3,204			386
Unrealized Appreciation on Swap Agreements	3,041			706			—			—
Unrealized Appreciation on Foreign Currency Exchange Contracts	997			—			@—			—
Receivable from Affiliate	49			1			23			1
Dividends Receivable	198			2			729			155
Interest Receivable	701			168			412			15
Foreign Withholding Tax Reclaim Receivable	@—			—			—			—
Due from Adviser	—			7			—			—
Other Assets	5			@—			38			2
Total Assets	369,374			20,369			3,272,980			156,336
Liabilities:
Collateral on Securities Loaned, at Value:	4,408			102			—			—
Payable for Delayed Delivery Commitments	19,861			—			—			—
Payable for Investments Purchased	286			—			1,108			811
Due to Broker	—			205			—			—
Unrealized Depreciation on Foreign Currency Exchange Contracts	66			—			@—			—
Unrealized Depreciation on Swap Agreements	918			86			—			—
Payable for Portfolio Shares Redeemed	3,586			—			2,392			16
Payable for Investment Advisory Fees	397			—			4,131			287
Payable for Administration Fees	23			1			222			11
Payable for Custodian Fees	10			2			29			3
Payable for Trustees’ Fees and Expenses	7			—			22			21
Bank Overdraft	6			27			—			—
Payable for Shareholder Servicing Fees — Investment Class	1			—			—			@—
Payable for Shareholder Servicing Fees — Class P	7			@—			304			5
Other Liabilities	73			31			388			42
Total Liabilities	29,649			454			8,596			1,196
Net Assets	$	339,725		$	19,915		$	3,264,384		$	155,140
Net Assets Consist Of:
Paid-in Capital	$	331,950		$	29,818		$	3,551,842		$	301,735
Undistributed (Distributions in Excess of) Net Investment Income	3,984			414			(27		)	309
Accumulated Net Realized Gain (Loss)	(5,064		)	(5,388		)	(397,780		)	(136,837		)
Unrealized Appreciation (Depreciation) on:
Investments	4,903			(5,537		)	110,351			(10,067		)
Foreign Currency Exchange Contracts and Translations	931			—			(2		)	—
Futures Contracts	898			(12		)	—			—
Swap Agreements	2,123			620			—			—
Net Assets	$	339,725		$	19,915		$	3,264,384		$	155,140

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

113

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Statements of Assets and Liabilities (cont’d)

			Equities		Mid Cap		U.S. Mid
	Balanced		Plus		Growth		Cap Value
	Portfolio		Portfolio		Portfolio		Portfolio
	(000)		(000)		(000)		(000)
CLASS I:
Net Assets	$	300,169	$	19,548	$	1,844,804	$	128,138
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	21,880,544		2,992,136		63,038,814		4,051,586
Net Asset Value, Offering and Redemption Price Per Share	$	13.72	$	6.53	$	29.26	$	31.63
INVESTMENT CLASS:
Net Assets	$	4,941	$	—	$	—	$	2,207
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	360,698		—		—		70,171
Net Asset Value, Offering and Redemption Price Per Share	$	13.70	$	—	$	—	$	31.45
CLASS P:
Net Assets	$	34,615	$	367	$	1,419,580	$	24,795
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	2,528,323		56,130		49,797,804		788,054
Net Asset Value, Offering and Redemption Price Per Share	$	13.69	$	6.53	$	28.51	$	31.46
(1) Including:
Securities on Loan, at Value:	$	5,253	$	101	$	—	$	—

@  Amount is less than $500.

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

114

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Assets and Liabilities

	U.S. Small				Core Fixed		Core Plus Fixed
	Cap Value		Value		Income		Income
	Portfolio		Portfolio		Portfolio		Portfolio
	(000)		(000)		(000)		(000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Cost:	$	726,921	$	280,500	$	391,597	$	3,350,574
Investments in Securities of Affiliated Issuer(s), at Cost:	37,955		4,660		24,631		174,644
Total Investments in Securities, at Cost:	764,876		285,160		416,228		3,525,218
Foreign Currency, at Cost:	—		—		—		@—
Investments in Securities of Unaffiliated Issuers, at Value:(1)	751,333		275,008		362,499		3,081,980
Investments in Securities of Affiliated Issuer(s), at Value:	37,955		4,660		24,631		174,644
Total Investments in Securities, at Value:	789,288		279,668		387,130		3,256,624
Foreign Currency, at Value:	—		—		—		@—
Cash	@—		109		328		1,107
Receivable for Portfolio Shares Sold	245		362		81		1,320
Interest Receivable	131		28		1,647		16,626
Unrealized Appreciation on Swap Agreements	—		—		13,577		104,636
Receivable for Investments Sold	1,730		1,071		4,946		3,684
Receivable from Affiliate	12		2		8		41
Dividends Receivable	868		577		—		—
Other Assets	12		9		6		58
Total Assets	792,286		281,826		407,723		3,384,096
Liabilities:
Collateral on Securities Loaned, at Value:	—		5,535		10,625		82,139
Payable for Delayed Delivery Commitments	—		—		79,336		697,466
Payable for Investments Purchased	4,259		109		6,216		12,208
Unrealized Depreciation on Foreign Currency Exchange Contracts	—		—		—		2,363
Unrealized Depreciation on Swap Agreements	—		—		4,021		34,179
Due to Broker	—		—		9,243		64,627
Payable for Portfolio Shares Redeemed	623		2,404		409		2,156
Payable for Investment Advisory Fees	1,268		433		283		2,137
Payable for Administration Fees	53		21		21		171
Payable for Custodian Fees	6		@—		3		25
Payable for Trustees’ Fees and Expenses	17		24		4		81
Payable for Shareholder Servicing Fees — Investment Class	—		5		—		18
Payable for Shareholder Servicing Fees — Class P	12		29		3		28
Other Liabilities	195		101		73		267
Total Liabilities	6,433		8,661		110,237		897,865
Net Assets	$	785,853	$	273,165	$	297,486	$	2,486,231
Net Assets Consist Of:
Paid-in Capital	$	759,513	$	280,992	$	313,376	$	2,725,669
Undistributed (Distributions in Excess of) Net Investment Income	861		1,718		3,770		36,193
Accumulated Net Realized Gain (Loss)	1,067		(4,053)		639		(70,980)
Unrealized Appreciation (Depreciation) on:
Investments	24,412		(5,492)		(29,098)		(268,594)
Foreign Currency Exchange Contracts and Translations	—		—		—		(2,349)
Futures Contracts	—		—		(757)		(4,165)
Swap Agreements	—		—		9,556		70,457
Net Assets	$	785,853	$	273,165	$	297,486	$	2,486,231

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

115

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Assets and Liabilities (cont’d)

	U.S. Small				Core Fixed		Core Plus Fixed
	Cap Value		Value		Income		Income
	Portfolio		Portfolio		Portfolio		Portfolio
	(000)		(000)		(000)		(000)
CLASS I:
Net Assets	$	724,824	$	139,395	$	284,186	$	2,211,583
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	33,090,317		9,629,250		27,709,136		204,757,700
Net Asset Value, Offering and Redemption Price Per Share	$	21.90	$	14.48	$	10.26	$	10.80
INVESTMENT CLASS:
Net Assets	$	—	$	—	$	—	$	142,525
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	—		—		—		13,198,771
Net Asset Value, Offering and Redemption Price Per Share	$	—	$	—	$	—	$	10.80
CLASS P:
Net Assets	$	61,029	$	133,770	$	13,300	$	132,123
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	2,800,541		9,254,486		1,304,386		12,249,678
Net Asset Value, Offering and Redemption Price Per Share	$	21.79	$	14.45	$	10.20	$	10.79
(1) Including:
Securities on Loan, at Value:	$	—	$	5,490	$	22,297	$	106,380

@  Amount is less than $500.

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

116

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Assets and Liabilities

	High Yield Portfolio (000)			Intermediate Duration Portfolio (000)			International Fixed Income Portfolio (000)			Investment Grade Fixed Income Portfolio (000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Cost:	$	208,490		$	144,208		$	193,317		$	636,606
Investments in Securities of Affiliated Issuer(s), at Cost:	9,484			14,403			8,950			23,025
Total Investments in Securities, at Cost:	217,974			158,611			202,267			659,631
Foreign Currency, at Cost:	@—			—			367			—
Investments in Securities of Unaffiliated Issuers, at Value:(1)	161,181			131,582			217,302			592,258
Investments in Securities of Affiliated Issuer(s), at Value:	9,484			14,403			8,950			23,025
Total Investments in Securities, at Value:	170,665			145,985			226,252			615,283
Foreign Currency, at Value:	@—			—			366			—
Cash	—			300			—			4
Due from Broker	—			—			2,132			—
Interest Receivable	3,283			765			3,141			2,826
Unrealized Appreciation on Foreign Currency Exchange Contracts	—			—			5,945			—
Unrealized Appreciation on Swap Agreements	4,324			5,917			—			21,361
Receivable from Affiliate	1			7			2			9
Receivable for Investments Sold	2,572			385			—			13,964
Receivable for Portfolio Shares Sold	43			—			322			208
Other Assets	3			3			3			11
Total Assets	180,891			153,362			238,163			653,666
Liabilities:
Collateral on Securities Loaned, at Value:	28,354			—			—			11,500
Payable for Delayed Delivery Commitments	1,010			—			—			133,645
Payable for Investments Purchased	—			1,583			—			14,519
Due to Broker	3,754			5,036			—			14,223
Unrealized Depreciation on Foreign Currency Exchange Contracts	220			—			3,347			—
Unrealized Depreciation on Swap Agreements	1,233			588			—			6,368
Payable for Portfolio Shares Redeemed	3,096			—			180			11,815
Payable for Investment Advisory Fees	157			140			212			478
Payable for Administration Fees	10			10			16			33
Payable for Custodian Fees	3			2			7			4
Payable for Trustees’ Fees and Expenses	20			1			1			13
Bank Overdraft	3			—			—			—
Payable for Shareholder Servicing Fees — Investment Class	—			18			—			—
Payable for Shareholder Servicing Fees — Class P	1			@—			@—			@—
Payable for Shareholder Servicing Fees — Class H	—			—			@—			@—
Other Liabilities	108			32			80			73
Total Liabilities	37,969			7,410			3,843			192,671
Net Assets	$		142,922	$		145,952	$		234,320	$		460,995
Net Assets Consist Of:
Paid-in Capital	$		706,185	$		158,261	$		204,218	$		486,600
Undistributed (Distributions in Excess of) Net Investment Income	2,668			584			(6,034)			6,429
Accumulated Net Realized Gain (Loss)	(520,153)			(5,201)			9,303			(167)
Unrealized Appreciation (Depreciation) on:
Investments	(47,309)			(12,626)			23,985			(44,348)
Foreign Currency Exchange Contracts and Translations	(213)			—			2,761			—
Futures Contracts	(1,347)			(395)			87			(2,512)
Swap Agreements	3,091			5,329			—			14,993
Net Assets	$		142,922	$		145,952	$		234,320	$		460,995

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

117

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Assets and Liabilities (cont’d)

	High Yield Portfolio (000)		Intermediate Duration Portfolio (000)		International Fixed Income Portfolio (000)		Investment Grade Fixed Income Portfolio (000)
CLASS I:
Net Assets	$	137,718	$	3,739	$	232,847	$	459,919
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	14,107,490		379,640		19,832,764		43,258,196
Net Asset Value, Offering and Redemption Price Per Share	$	9.76	$	9.85	$	11.74	$	10.63
INVESTMENT CLASS:
Net Assets	$	—	$	142,196	$	—	$	—
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	—		14,489,361		—		—
Net Asset Value, Offering and Redemption Price Per Share	$	—	$	9.81	$	—	$	—
CLASS P:
Net Assets	$	5,204	$	17	$	1,364	$	981
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	530,807		1,733		115,169		92,371
Net Asset Value, Offering and Redemption Price Per Share	$	9.80	$	9.85	$	11.84	$	10.62
CLASS H:
Net Assets	$	—	$	—	$	109	$	95
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	—		—		9,183		8,969
Net Asset Value and Redemption Price Per Share	$	—	$	—	$	11.84	$	10.62
Maximum Sales Charge (3.50% of Offering Price)	$	—	$	—	$	0.43	$	0.39
Maximum Offering Price Per Share	$	—	$	—	$	12.27	$	11.01
(1) Including:
Securities on Loan, at Value:	$	27,639	$	—	$	—	$	22,071

@   Amount is less than $500.

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

118

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Assets and Liabilities

	Limited Duration Portfolio (000)			Long Duration Fixed Income Portfolio (000)			Municipal Portfolio (000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Cost:	$	949,652		$	26,888		$	1,019,264
Investments in Securities of Affiliated Issuer(s), at Cost:	81,359			2,786			66,227
Total Investments in Securities, at Cost:	1,031,011			29,674			1,085,491
Investments in Securities of Unaffiliated Issuers, at Value:	814,426			27,409			1,010,772
Investments in Securities of Affiliated Issuer(s), at Value:	81,359			2,786			66,227
Total Investments in Securities, at Value:	895,785			30,195			1,076,999
Cash	—			@—			—
Interest Receivable	5,243			254			10,483
Unrealized Appreciation on Swap Agreements	14,728			1,464			7,488
Receivable for Investments Sold	472			—			16,244
Receivable for Portfolio Shares Sold	276			—			1,412
Receivable from Affiliate	17			2			14
Dividends Receivable	10			—			204
Other Assets	17			1			14
Total Assets	916,548			31,916			1,112,858
Liabilities:
Payable for Delayed Delivery Commitments	—			—			51,430
Payable for Investments Purchased	114			317			45
Due to Broker	13,255			1,384			3,435
Unrealized Depreciation on Swap Agreements	1,218			74			5,318
Payable for Portfolio Shares Redeemed	1,500			—			1,820
Payable for Investment Advisory Fees	746			7			941
Payable for Administration Fees	64			2			71
Payable for Custodian Fees	5			1			6
Payable for Trustees’ Fees and Expenses	2			—			—
Bank Overdraft	114			—			178
Payable for Shareholder Servicing Fees — Class P	@—			@—			7
Payable for Shareholder Servicing Fees — Class H	—			—			@—
Other Liabilities	211			32			89
Total Liabilities	17,229			1,817			63,340
Net Assets	$		899,319	$		30,099	$		1,049,518
Net Assets Consist Of:
Paid-in Capital	$		1,033,718	$		28,163	$		1,050,155
Undistributed (Distributions in Excess of) Net Investment Income	5,677			318			5,461
Accumulated Net Realized Gain (Loss)	(18,781)			(149)			4,195
Unrealized Appreciation (Depreciation) on:
Investments	(135,226)			521			(8,492)
Futures Contracts	421			(144)			(3,971)
Swap Agreements	13,510			1,390			2,170
Net Assets	$		899,319	$		30,099	$		1,049,518

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

119

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Assets and Liabilities (cont’d)

	Limited Duration Portfolio (000)		Long Duration Fixed Income Portfolio (000)		Municipal Portfolio (000)
CLASS I:
Net Assets	$	898,833	$	29,563	$	1,010,489
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	97,544,036		2,756,278		80,993,386
Net Asset Value, Offering and Redemption Price Per Share	$	9.21	$	10.73	$	12.48
CLASS P:
Net Assets	$	486	$	536	$	36,897
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	52,756		50,000		2,956,712
Net Asset Value, Offering and Redemption Price Per Share	$	9.21	$	10.72	$	12.48
CLASS H:
Net Assets	$	—	$	—	$	2,132
Shares Outstanding (unlimited number of shares authorized, no par value) (not in 000)	—		—		170,859
Net Asset Value and Redemption Price Per Share	$	—	$	—	$	12.48
Maximum Sales Charge (3.50% of Offering Price)	$	—	$	—	$	0.45
Maximum Offering Price Per Share	$	—	$	—	$	12.93

@   Amount is less than $500.

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

120

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Operations

For the Six Months Ended March 31, 2008

	Balanced Portfolio (000)			Equities Plus Portfolio (000)			Mid Cap Growth Portfolio (000)			U.S. Mid Cap Value Portfolio (000)			U.S. Small Cap Value Portfolio (000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers†	$	1,349		$	39		$	14,395		$	1,244		$	3,613
Dividends from Securities of Affiliated Issuer(s)	3,952			53			2,335			126			1,156
Interest from Securities of Unaffiliated Issuers	2,547			967			32			@—			4
Total Investment Income	7,848			1,059			16,762			1,370			4,773
Expenses:
Investment Advisory Fees (Note B)	823			47			8,319			599			2,679
Administration Fees (Note C)	146			10			1,329			67			325
Custodian Fees (Note E)	30			2			122			7			15
Shareholder Reporting Fees	49			5			436			12			179
Professional Fees	20			23			24			17			19
Shareholder Servicing Fees — Investment Class Shares (Note D)	4			—			—			2			—
Shareholder Servicing Fees — Class P Shares (Note D)	41			@—			1,914			29			72
Transfer Agency Fees	6			3			31			7			8
Trustees’ Fees and Expenses	3			@—			25			2			7
Registration Fees	30			25			88			25			46
Other Expenses	6			2			34			4			12
Total Expenses	1,158			117			12,322			771			3,362
Waiver of Investment Advisory Fees (Note B)	—			(42		)	—			—			—
Rebate from Morgan Stanley Affiliated Cash Sweep (Note F)	(73		)	(1		)	(56		)	(3		)	(28		)
Expense Offset (Note E)	(2		)	@—			(13		)	@—			(1		)
Net Expenses	1,083			74			12,253			768			3,333
Net Investment Income (Loss)	6,765			985			4,509			602			1,440
Realized Gain (Loss):
Investments Sold	23,156			29			71,130			2,348			15,845
Foreign Currency Transactions	851			—			(7		)	—			—
Futures Contracts	(4,900		)	(4,067		)	—			—			—
Swap Agreements	(120		)	(66		)	—			—			—
Net Realized Gain (Loss)	18,987			(4,104		)	71,123			2,348			15,845
Change in Unrealized Appreciation (Depreciation):
Investments	(49,290		)	(4,905		)	(546,826		)	(25,524		)	(117,892		)
Foreign Currency Exchange Contracts and Translations	863			—			(4		)	—			—
Futures Contracts	387			(1,041		)	—			—			—
Securities Sold Short	—			(26		)	—			—			—
Swap Agreements	1,631			521			—			—			—
Net Change in Unrealized Appreciation (Depreciation)	(46,409		)	(5,451		)	(546,830		)	(25,524		)	(117,892		)
Total Net Realized Gain (Loss) and Change in Unrealized Appreciation (Depreciation)	(27,422		)	(9,555		)	(475,707		)	(23,176		)	(102,047		)
Net Increase (Decrease) in Net Assets Resulting from Operations	$	(20,657	)	$	(8,570	)	$	(471,198	)	$	(22,574	)	$	(100,607	)

†     Net of $65 and $327 Foreign Withholding Tax for the Balanced and Mid Cap Growth Portfolios, respectively.

@   Amount is less than $500.

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

121

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Operations

For the Six Months Ended March 31, 2008

	Value Portfolio (000)			Core Fixed Income Portfolio (000)			Core Plus Fixed Income Portfolio (000)			High Yield Portfolio (000)			Intermediate Duration Portfolio (000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers	$	5,557		$	15		$	323		$	—		$	3
Dividends from Securities of Affiliated Issuers	176			543			3,312			159			640
Interest from Securities of Unaffiliated Issuers	48			8,504			83,220			7,830			3,359
Total Investment Income	5,781			9,062			86,855			7,989			4,002
Expenses:
Investment Advisory Fees (Note B)	1,098			605			4,327			366			284
Administration Fees (Note C)	176			129			1,055			70			60
Custodian Fees (Note E)	2			10			119			12			6
Shareholder Reporting Fees	74			57			282			110			3
Professional Fees	26			16			37			21			15
Shareholder Servicing Fees — Investment Class Shares (Note D)	48			—			113			—			110
Shareholder Servicing Fees — Class P Shares (Note D)	205			16			172			7			@—
Transfer Agency Fees	9			4			16			7			4
Trustees’ Fees and Expenses	5			4			20			2			1
Registration Fees	26			24			43			21			20
Other Expenses	6			8			47			5			2
Total Expenses	1,675			873			6,231			621			505
Waiver of Investment Advisory Fees (Note B)	—			(49		)	—			—			—
Rebate from Morgan Stanley Affiliated Cash Sweep (Note F)	(5		)	(13		)	(82		)	(4		)	(15		)
Expense Offset (Note E)	—			(3		)	(27		)	(6		)	(2		)
Net Expenses	1,670			808			6,122			611			488
Net Investment Income (Loss)	4,111			8,254			80,733			7,378			3,514
Realized Gain (Loss):
Investments Sold	(595		)	3,029			17,902			(2,856		)	465
Foreign Currency Transactions	—			—			2,753			(221		)	—
Futures Contracts	—			319			(3,815		)	(793		)	2,659
Swap Agreements	—			(205		)	(4,122		)	988			(216		)
Net Realized Gain (Loss)	(595		)	3,143			12,718			(2,882		)	2,908
Change in Unrealized Appreciation (Depreciation):
Investments	(73,508		)	(24,746		)	(217,350		)	(10,239		)	(10,951		)
Foreign Currency Exchange Contracts and Translations	—			—			(1,252		)	(92		)	—
Futures Contracts	—			(1,671		)	(14,542		)	(1,524		)	(817		)
Swap Agreements	—			7,505			53,799			2,515			4,613
Net Change in Unrealized Appreciation (Depreciation)	(73,508		)	(18,912		)	(179,345		)	(9,340		)	(7,155		)
Total Net Realized Gain (Loss) and Change in Unrealized Appreciation (Depreciation)	(74,103		)	(15,769		)	(166,627		)	(12,222		)	(4,247		)
Net Increase (Decrease) in Net Assets Resulting from Operations	$	(69,992	)	$	(7,515	)	$	(85,894	)	$	(4,844	)	$	(733	)

@   Amount is less than $500.

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

122

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Operations

For the Six Months Ended March 31, 2008

	International Fixed Income Portfolio			Investment Grade Fixed Income Portfolio			Limited Duration Portfolio			Long Duration Fixed Income Portfolio			Municipal Portfolio
	(000)			(000)			(000)			(000)			(000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers	$	—		$	36		$	227		$	—		$	1,767
Dividends from Securities of Affiliated Issuer	144			620			1,205			93			507
Interest from Securities of Unaffiliated Issuers	3,753			14,200			27,172			606			23,610
Total Investment Income	3,897			14,856			28,604			699			25,884
Expenses:
Investment Advisory Fees (Note B)	418			974			1,542			52			1,865
Administration Fees (Note C)	89			208			412			11			398
Custodian Fees (Note E)	17			14			28			2			47
Shareholder Reporting Fees	77			41			184			@—			70
Professional Fees	26			28			17			19			40
Shareholder Servicing Fees — Class P Shares (Note D)	2			2			1			1			19
Shareholder Servicing Fees — Class H Shares (Note D)	—			@—			—			—			1
Transfer Agency Fees	6			8			5			3			10
Trustees’ Fees and Expenses	2			4			8			@—			7
Registration Fees	44			39			—			13			80
Other Expenses	6			9			16			@—			20
Total Expenses	687			1,327			2,213			101			2,557
Waiver of Investment Advisory Fees (Note B)	—			—			—			(31		)	(18		)
Waiver of Shareholder Servicing Fees - Class P Shares (Note D)	—			(1		)	—			—			—
Rebate from Morgan Stanley Affiliated Cash Sweep (Note F)	(4		)	(15		)	(30		)	(2		)	(19		)
Expense Offset (Note E)	(1		)	(7		)	(6		)	@—			(33		)
Net Expenses	682			1,304			2,177			68			2,487
Net Investment Income (Loss)	3,215			13,552			26,427			631			23,397
Realized Gain (Loss):
Investments Sold	680			4,916			387			569			(109		)
Foreign Currency Transactions	8,610			—			—			—			—
Futures Contracts	113			835			9,216			(541		)	2,267
Swap Agreements	—			185			(2,936		)	(83		)	(1,691		)
Net Realized Gain (Loss)	9,403			5,936			6,667			(55		)	467
Change in Unrealized Appreciation (Depreciation):
Investments	15,115			(39,112		)	(118,438		)	141			(25,779		)
Foreign Currency Exchange Contracts and Translations	1,603			—			—			—			—
Futures Contracts	111			(3,768		)	(886		)	(164		)	(79		)
Swap Agreements	—			11,628			10,786			1,161			(1,771		)
Net Change in Unrealized Appreciation (Depreciation)	16,829			(31,252		)	(108,538		)	1,138			(27,629		)
Total Net Realized Gain (Loss) and Change in Unrealized Appreciation (Depreciation)	26,232			(25,316		)	(101,871		)	1,083			(27,162		)
Net Increase (Decrease) in Net Assets Resulting from Operations	$	29,447		$	(11,764	)	$	(75,444	)	$	1,714		$	(3,765	)

@   Amount is less than $500.

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

123

2008 Semi-Annual Report

March 31, 2008

Statement of Changes in Net Assets

	Balanced						Equities Plus						Mid Cap Growth
	Portfolio						Portfolio						Portfolio
	Six Months Ended			Year Ended			Six Months Ended			Year Ended			Six Months Ended			Year Ended
	March 31, 2008			September 30,			March 31, 2008			September 30,			March 31, 2008			September 30,
	(unaudited)			2007			(unaudited)			2007			(unaudited)			2007
	(000)			(000)			(000)			(000)			(000)			(000)
Increase (Decrease) in Net Assets Operations:
Net Investment Income (Loss)	$	6,765		$	7,323		$	985		$	1,720		$	4,509		$	11,060
Net Realized Gain (Loss)	18,987			21,721			(4,104		)	2,287			71,123			321,805
Net Change in Unrealized Appreciation (Depreciation)	(46,409		)	24,512			(5,451		)	(32		)	(546,830		)	402,601
Net Increase (Decrease) in Net Assets Resulting from Operations	(20,657		)	53,556			(8,570		)	3,975			(471,198		)	735,466
Distributions from and/or in Excess of:
Class I:
Net Investment Income	(4,673		)	(5,256		)	(1,054		)	(1,664		)	(8,685		)	(4,826		)
Net Realized Gain	—			—			(2,246		)	(919		)	—			—
Investment Class:
Net Investment Income	(68		)	(79		)	—			—			—			—
Class P:
Net Investment Income	(405		)	(570		)	(20		)	(31		)	(4,529		)	(2,109		)
Net Realized Gain	—			—			(43		)	(18		)	—			—
Total Distributions	(5,146		)	(5,905		)	(3,363		)	(2,632		)	(13,214		)	(6,935		)
Capital Share Transactions:(1)
Class I:
Subscribed	59,830			77,419			761			1,548			614,625			481,835
Distributions Reinvested	4,668			5,249			2,835			119			8,283			4,628
Redeemed	(52,009		)	(70,685		)	(47		)	(1,369		)	(160,146		)	(215,062		)
Investment Class:
Subscribed	117			227			—			—			—			—
Distributions Reinvested	68			79			—			—			—			—
Redeemed	—			—			—			—			—			—
Class P:
Subscribed	6,841			3,482			—			@—			435,343			530,183
Distributions Reinvested	405			570			54			—			4,487			2,084
Redeemed	(1,565		)	(14,546		)	—			@—			(321,292		)	(386,812		)
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions	18,355			1,795			3,603			298			581,300			416,856
Redemption Fees	1			@—			—			—			74			29
Total Increase (Decrease) in Net Assets	(7,447		)	49,446			(8,330		)	1,641			96,962			1,145,416
Net Assets:
Beginning of Period	347,172			297,726			28,245			26,604			3,167,422			2,022,006
End of Period	$	339,725		$	347,172		$	19,915		$	28,245		$	3,264,384		$	3,167,422
Undistributed (Distributions in Excess of) Net Investment Income Included in End of Period Net Assets	$	3,984		$	2,365		$	414		$	503		$	(27	)	$	8,678

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

124

2008 Semi-Annual Report

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Statements of Changes in Net Assets (cont’d)

		Balanced				Equities Plus				Mid Cap Growth
		Portfolio				Portfolio				Portfolio
		Six Months Ended		Year Ended		Six Months Ended		Year Ended		Six Months Ended		Year Ended
		March 31, 2008		September 30,		March 31, 2008		September 30,		March 31, 2008		September 30,
		(unaudited)		2007		(unaudited)		2007		(unaudited)		2007
		(000)		(000)		(000)		(000)		(000)		(000)
(1)	Capital Share Transactions:
	Class I:
	Shares Subscribed	4,079		5,641		94		147		19,003		16,515
	Shares Issued on Distributions Reinvested	320		396		321		12		250		170
	Shares Redeemed	(3,674	)	(5,202	)	(5	)	(129	)	(5,124	)	(7,503	)
	Net Increase (Decrease) in Class I Shares Outstanding	725		835		410		30		14,129		9,182
	Investment Class:
	Shares Subscribed	8		17		—		—		—		—
	Shares Issued on Distributions Reinvested	5		6		—		—		—		—
	Shares Redeemed	—		—		—		—		—		—
	Net Increase (Decrease) in Investment Class Shares Outstanding	13		23		—		—		—		—
	Class P:
	Shares Subscribed	484		257		—		@—		13,896		18,457
	Shares Issued on Distributions Reinvested	28		43		6		—		139		79
	Shares Redeemed	(110	)	(1,098	)	—		@—		(10,603	)	(13,766	)
	Net Increase (Decrease) in Class P Shares Outstanding	402		(798	)	6		—		3,432		4,770

@   Amount is less than $500 and/or shares are less than 500.

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

125

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets

	U.S. Mid Cap Value						U.S. Small Cap Value						Value
	Portfolio						Portfolio						Portfolio
	Six Months Ended			Year Ended			Six Months Ended			Year Ended			Six Months Ended			Year Ended
	March 31, 2008			September 30,			March 31, 2008			September 30,			March 31, 2008			September 30,
	(unaudited)			2007			(unaudited)			2007			(unaudited)			2007
	(000)			(000)			(000)			(000)			(000)			(000)
Increase (Decrease) in Net Assets Operations:
Net Investment Income (Loss)	$	602		$	1,234		$	1,440		$	1,814		$	4,111		$	10,653
Net Realized Gain (Loss)	2,348			33,277			15,845			97,626			(595		)	30,107
Net Change in Unrealized Appreciation (Depreciation)	(25,524		)	762			(117,892		)	46,261			(73,508		)	20,120
Net Increase (Decrease) in Net Assets Resulting from Operations	(22,574		)	35,273			(100,607		)	145,701			(69,992		)	60,880
Distributions from and/or in Excess of:
Class I:
Net Investment Income	(1,056		)	(909		)	(1,818		)	(2,134		)	(3,049		)	(6,009		)
Net Realized Gain	—			—			(92,501		)	(78,066		)	(15,671		)	(28,754		)
Investment Class:
Net Investment Income	(23		)	(15		)	—			—			(766		)	(1,395		)
Net Realized Gain	—			—			—			—			(4,055		)	(7,060		)
Class P:
Net Investment Income	(146		)	(68		)	(2		)	(17		)	(1,876		)	(3,507		)
Net Realized Gain	—			—			(6,696		)	(2,990		)	(10,869		)	(18,579		)
Total Distributions	(1,225		)	(992		)	(101,017		)	(83,207		)	(36,286		)	(65,304		)
Capital Share Transactions:(1)
Class I:
Subscribed	13,510			31,116			99,122			96,672			10,958			52,456
Distributions Reinvested	1,041			871			94,108			79,964			18,515			29,227
Redeemed	(17,980		)	(28,642		)	(90,737		)	(142,380		)	(123,565		)	(101,463		)
Investment Class:
Subscribed	281			781			—			—			1,552			21,832
Distributed Reinvested	23			14			—			—			4,820			8,455
Redeemed	(1,282		)	(420		)	—			—			(74,700		)	(12,859		)
Class P:
Subscribed	14,391			6,308			21,539			35,582			9,679			28,458
Distributions Reinvested	145			67			6,698			3,006			12,738			21,997
Redeemed	(4,112		)	(5,194		)	(12,975		)	(8,277		)	(48,797		)	(36,838		)
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions	6,017			4,901			117,755			64,567			(188,800		)	11,265
Redemption Fees	2			1			9			16			15			4
Total Increase (Decrease) in Net Assets	(17,780		)	39,183			(83,860		)	127,077			(295,063		)	6,845
Net Assets:
Beginning of Period	172,920			133,737			869,713			742,636			568,228			561,383
End of Period	$	155,140		$	172,920		$	785,853		$	869,713		$	273,165		$	568,228
Undistributed (Distributions in Excess of) Net Investment Income Included in End of Period Net Assets	$	309		$	932		$	861		$	1,241		$	1,718		$	3,298

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

126

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets (cont’d)

		U.S. Mid Cap Value				U.S. Small Cap Value				Value
		Portfolio				Portfolio				Portfolio
		Six Months Ended		Year Ended		Six Months Ended		Year Ended		Six Months Ended		Year Ended
		March 31, 2008		September 30,		March 31, 2008		September 30,		March 31, 2008		September 30,
		(unaudited)		2007		(unaudited)		2007		(unaudited)		2007
		(000)		(000)		(000)		(000)		(000)		(000)
(1)	Capital Share Transactions:
	Class I:
	Shares Subscribed	393		917		4,160		3,507		676		2,850
	Shares Issued on Distributions Reinvested	30		27		4,049		3,048		1,145		1,636
	Shares Redeemed	(529	)	(842	)	(3,863	)	(5,128	)	(7,659	)	(5,481	)
	Net Increase (Decrease) in Class I Shares Outstanding	(106	)	102		4,346		1,427		(5,838	)	(995	)
	Investment Class:
	Shares Subscribed	8		23		—		—		93		1,167
	Shares Issued on Distributions Reinvested	1		1		—		—		297		472
	Shares Redeemed	(40	)	(12	)	—		—		(4,876	)	(701	)
	Net Increase (Decrease) in Investment Class Shares Outstanding	(31	)	12		—		—		(4,486	)	938
	Class P:
	Shares Subscribed	420		186		916		1,294		606		1,535
	Shares Issued on Distributions Reinvested	4		2		290		115		788		1,232
	Shares Redeemed	(123	)	(155	)	(529	)	(298	)	(2,977	)	(1,998	)
	Net Increase (Decrease) in Class P Shares Outstanding	301		33		677		1,111		(1,583	)	769

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

127

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets

	Core Fixed Income Portfolio						Core Plus Fixed Income Portfolio						High Yield Portfolio
	Six Months Ended			Year Ended			Six Months Ended			Year Ended			Six Months Ended March			Year Ended
	March 31, 2008			September 30,			March 31, 2008			September 30,			31, 2008			September 30,
	(unaudited)			2007			(unaudited)			2007			(unaudited)			2007
	(000)			(000)			(000)			(000)			(000)			(000)
Increase (Decrease) in Net Assets Operations:
Net Investment Income (Loss)	$	8,254		$	15,105		$	80,733		$	134,127		$	7,378		$	16,021
Net Realized Gain (Loss)	3,143			1,740			12,718			26,876			(2,882		)	3,429
Net Change in Unrealized Appreciation (Depreciation)	(18,912		)	(2,198		)	(179,345		)	(39,195		)	(9,340		)	(3,562		)
Net Increase (Decrease) in Net Assets Resulting from Operations	(7,515		)	14,647			(85,894		)	121,808			(4,844		)	15,888
Distributions from and/or in Excess of:
Class I:
Net Investment Income	(7,613		)	(14,770		)	(47,011		)	(133,961		)	(8,970		)	(16,292		)
Net Realized Gain	—			—			—			—			—			—
Investment Class:
Net Investment Income	—			—			(2,905		)	(7,932		)	—			—
Class P:
Net Investment Income	(283		)	(485		)	(2,552		)	(6,885		)	(239		)	(336		)
Net Realized Gain	—			—			—			—			—			—
Total Distributions	(7,896		)	(15,255		)	(52,468		)	(148,778		)	(9,209		)	(16,628		)
Capital Share Transactions:(1)
Class I:
Subscribed	21,631			41,762			187,534			438,720			6,434			20,986
Distributions Reinvested	7,604			14,751			44,348			122,810			8,936			15,674
Redeemed	(38,417		)	(47,805		)	(264,247		)	(484,513		)	(57,938		)	(68,050		)
Investment Class:
Subscribed	—			—			—			11,086			—			—
Distributions Reinvested	—			—			2,901			7,922			—			—
Redeemed	—			—			(3,199		)	(9,737		)	—			(897		)
Class P:
Subscribed	4,548			4,246			17,782			28,336			3,802			9,539
Distributions Reinvested	283			485			2,542			6,837			224			289
Redeemed	(2,668		)	(2,725		)	(18,533		)	(22,769		)	(7,440		)	(5,294		)
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions	(7,019		)	10,714			(30,872		)	98,692			(45,982		)	(27,753		)
Redemption Fees	@—			1			18			@—			@—			1
Total Increase (Decrease) in Net Assets	(22,430		)	10,107			(169,216		)	71,722			(60,035		)	(28,492		)
Net Assets:
Beginning of Period	319,916			309,809			2,655,447			2,583,725			202,957			231,449
End of Period	$	297,486		$	319,916		$	2,486,231		$	2,655,447		$	142,922		$	202,957
Undistributed (Distributions in Excess of) Net Investment Income Included in End of Period Net Assets	$	3,770		$	3,412		$	36,193		$	7,928		$	2,668		$	4,499

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

128

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets (cont’d)

	Core Fixed Income Portfolio				Core Plus Fixed Income Portfolio				High Yield Portfolio
	Six Months Ended		Year Ended		Six Months Ended		Year Ended		Six Months Ended March		Year Ended
	March 31, 2008		September 30,		March 31, 2008		September 30,		31, 2008		September 30,
	(unaudited)		2007		(unaudited)		2007		(unaudited)		2007
	(000)		(000)		(000)		(000)		(000)		(000)
(1) Capital Share Transactions†:
Class I:
Shares Subscribed	2,020		3,916		16,517		38,659		635		1,969
Shares Issued on Distributions Reinvested	712		1,388		3,928		10,875		879		1,496
Shares Redeemed	(3,633	)	(4,477	)	(23,407	)	(42,714	)	(5,769	)	(6,427	)
Net Increase (Decrease) in Class I Shares Outstanding	(901	)	827		(2,962	)	6,820		(4,255	)	(2,962	)
Investment Class**:
Shares Subscribed	—		—		—		965		—		—
Shares Issued on Distributions Reinvested	—		—		257		701		—		—
Shares Redeemed	—		—		(284	)	(858	)	—		(83	)
Net Increase (Decrease) in Investment Class Shares Outstanding	—		—		(27	)	808		—		(83	)
Class P:
Shares Subscribed	427		400		1,564		2,496		375		906
Shares Issued on Distributions Reinvested	27		46		225		606		22		28
Shares Redeemed	(252	)	(257	)	(1,642	)	(2,011	)	(717	)	(495	)
Net Increase (Decrease) in Class P Shares Outstanding	202		189		147		1,091		(320	)	439

* *	On October 3, 2006, the Investment Class for the High Yield Portfolio was fully liquidated, however, this Class is still active.
†	Capital share transactions prior to November 13, 2006 for the High Yield Portfolio have been restated to reflect the effect of a reverse stock split as described in the Notes to Financial Statements.
@	Amount is less than $500.

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

129

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets

	Intermediate Duration Portfolio						International Fixed Income Portfolio						Investment Grade Fixed Income Portfolio
	Six Months Ended			Year Ended			Six Months Ended			Year Ended			Six Months Ended March			Year Ended
	March 31, 2008			September 30,			March 31, 2008			September 30,			31, 2008			September 30,
	(unaudited)			2007			(unaudited)			2007			(unaudited)			2007
	(000)			(000)			(000)			(000)			(000)			(000)
Increase (Decrease) in Net Assets Operations:
Net Investment Income (Loss)	$	3,514		$	6,711		$	3,215		$	5,442		$	13,552		$	24,583
Net Realized Gain (Loss)	2,908			261			9,403			3,296			5,936			2,731
Net Change in Unrealized Appreciation (Depreciation)	(7,155		)	(19		)	16,829			8,895			(31,252		)	(2,620		)
Net Increase (Decrease) in Net Assets Resulting from Operations	(733		)	6,953			29,447			17,633			(11,764		)	24,694
Distributions from and/or in Excess of:
Class I:
Net Investment Income	(112		)	(404		)	(13,054		)	(4,284		)	(11,978		)	(27,708		)
Net Realized Gain	—			—			(292		)	(929		)	—			—
Investment Class:
Net Investment Income	(3,748		)	(6,675		)	—			—			—			—
Class P#:
Net Investment Income	(1		)	—			(73		)	—			(26		)	(36		)
Net Realized Gain	—			—			(2		)	—			—			—
Class H##:
Net Investment Income	—			—			—			—			—			—
Net Realized Gain	—			—			—			—			—			—
Total Distributions	(3,861		)	(7,079		)	(13,421		)	(5,213		)	(12,004		)	(27,744		)
Capital Share Transactions:(1)
Class I:
Subscribed	—			32			26,045			49,671			45,453			107,207
Distributions Reinvested	109			344			13,059			4,988			11,675			26,867
Redeemed	(3,252		)	(2,166		)	(35,573		)	(49,334		)	(93,000		)	(137,208		)
Investment Class:
Subscribed	—			10,912			—			—			—			—
Distributions Reinvested	3,747			6,675			—			—			—			—
Redeemed	(2,829		)	(7,938		)	—			—			—			—
Class P#:
Subscribed	1			118			42			1,224			56			560
Distributions Reinvested	1			—			75			—			26			34
Redeemed	(103		)	—			(82		)	—			(228		)	(190		)
Class H##:
Subscribed	—			—			100			—			100			—
Distributions Reinvested	—			—			—			—			—			—
Redeemed	—			—			—			—			—			—
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions	(2,326		)	7,977			3,666			6,549			(35,918		)	(2,730		)
Redemption Fees	—			—			@—			—			@—			3
Total Increase (Decrease) in Net Assets	(6,920		)	7,851			19,692			18,969			(59,686		)	(5,777		)
Net Assets:
Beginning of Period	152,872			145,021			214,628			195,659			520,681			526,458
End of Period	$	145,952		$	152,872		$	234,320		$	214,628		$	460,995		$	520,681
Undistributed (Distributions in Excess of) Net Investment Income (Loss) Included in End of Period Net Assets	$	584		$	931		$	(6,034	)	$	3,878		$	6,429		$	4,881

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

130

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets (cont’d)

	Intermediate Duration Portfolio				International Fixed Income Portfolio				Investment Grade Fixed Income Portfolio
	Six Months Ended		Year Ended		Six Months Ended		Year Ended		Six Months Ended March		Year Ended
	March 31, 2008		September 30,		March 31, 2008		September 30,		31, 2008		September 30,
	(unaudited)		2007		(unaudited)		2007		(unaudited)		2007
	(000)		(000)		(000)		(000)		(000)		(000)
(1) Capital Share Transactions:
Class I:
Shares Subscribed	—		3		2,349		4,809		4,091		9,721
Shares Issued on Distributions Reinvested	11		34		1,251		483		1,055		2,443
Shares Redeemed	(322	)	(214	)	(3,218	)	(4,752	)	(8,497	)	(12,398	)
Net Increase (Decrease) in Class I Shares Outstanding	(311	)	(177	)	382		540		(3,351	)	(234	)
Investment Class:
Shares Subscribed	—		1,086		—		—		—		—
Shares Issued on Distributions Reinvested	368		664		—		—		—		—
Shares Redeemed	(281	)	(791	)	—		—		—		—
Net Increase (Decrease) in Investment Class Shares Outstanding	87		959		—		—		—		—
Class P#:
Shares Subscribed	@—		12		3		112		5		50
Shares Issued on Distributions Reinvested	@—		—		7		—		2		3
Shares Redeemed	(10	)	—		(7	)	—		(20	)	(17	)
Net Increase (Decrease) in Class P Shares Outstanding	(10	)	12		3		112		(13	)	36
Class H##:
Shares Subscribed	—		—		9		—		9		—
Shares Issued on Distributions Reinvested	—		—		—		—		—		—
Shares Redeemed	—		—		—		—		—		—
Net Increase (Decrease) in Class H Shares Outstanding	—		—		9		—		9		—

#	The Intermediate Duration and International Fixed Income Portfolios’ Class P commenced operations on September 28, 2007.
##	The International Fixed Income and Investment Grade Fixed Income Portfolios’ Class H commenced operations on January 2, 2008.
@	Amount is less than $500 and/or shares are less than 500.

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

131

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets

	Limited Duration Portfolio						Long Duration Fixed Income Portfolio						Municipal Portfolio
	Six Months Ended March 31, 2008 (unaudited) (000)			Year Ended September 30, 2007 (000)			Six Months Ended March 31, 2008 (unaudited) (000)			Year Ended September 30, 2007 (000)			Six Months Ended March 31, 2008 (unaudited) (000)			Year Ended September 30, 2007 (000)
Increase (Decrease) in Net Assets Operations:
Net Investment Income (Loss)	$	26,427		$	52,817		$	631		$	1,215		$	23,397		$	29,606
Net Realized Gain (Loss)	6,667			(2,961		)	(55		)	(104		)	467			14,019
Net Change in Unrealized Appreciation (Depreciation)	(108,538		)	(5,270		)	1,138			(349		)	(27,629		)	(13,378		)
Net Increase (Decrease) in Net Assets Resulting from Operations	(75,444		)	44,586			1,714			762			(3,765		)	30,247
Distributions from and/or in Excess of:
Class I:
Net Investment Income	(26,648		)	(54,837		)	(667		)	(1,050		)	(21,096		)	(31,533		)
Net Realized Gain	—			—			—			(79		)	(3,409		)	—
Class P#:
Net Investment Income	(18		)	—			—			(20		)	(280		)	@—
Net Realized Gain	—			—			—			(1		)	(35		)	—
Class H##:
Net Investment Income	—			—			(13		)	—			(8		)	—
Net Realized Gain	—			—			—			—			—			—
Total Distributions	(26,666		)	(54,837		)	(680		)	(1,150		)	(24,828		)	(31,533		)
Capital Share Transactions:(1)
Class I:
Subscribed	52,119			133,490			3,252			@—			237,885			387,749
Distributions Reinvested	26,647			54,830			—			—			23,954			30,637
Redeemed	(136,032		)	(197,885		)	—			@—			(160,240		)	(142,622		)
Class P#:
Subscribed	151			1,020			—			—			29,055			9,935
Distributions Reinvested	18			—			—			@—			315			@—
Redeemed	(645		)	@—			—			@—			(1,608		)	@—
Class H##:
Subscribed	—			—			—			—			2,165			—
Distributions Reinvested	—			—			—			—			7			—
Redeemed	—			—			—			—			(1		)	—
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions	(57,742		)	(8,545		)	3,252			—			131,532			285,699
Redemption Fees	—			@—			—			—			1			3
Total Increase (Decrease) in Net Assets	(159,852		)	(18,796		)	4,286			(388		)	102,940			284,416
Net Assets:
Beginning of Period	1,059,171			1,077,967			25,813			26,201			946,578			662,162
End of Period	$	899,319		$	1,059,171		$	30,099		$	25,813		$	1,049,518		$	946,578
Undistributed (Distributions in Excess of) Net Investment Income Included in End of Period Net Assets	$	5,677		$	5,916		$	318		$	367		$	5,461		$	3,448

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

132

2008 Semi-Annual Report

March 31, 2008

Statements of Changes in Net Assets (cont’d)

	Limited Duration Portfolio				Long Duration Fixed Income Portfolio		Municipal Portfolio
	Six Months Ended March 31, 2008 (unaudited) (000)		Year Ended September 30, 2007 (000)		Six Months Ended March 31, 2008 (unaudited) (000)	Year Ended September 30, 2007 (000)	Six Months Ended March 31, 2008 (unaudited) (000)		Year Ended September 30, 2007 (000)
(1)Capital Share Transactions:
Class I:
Shares Subscribed	5,164		12,988		306	@—	18,644		30,350
Shares Issued on Distributions Reinvested	2,628		5,344		—	—	1,885		2,397
Shares Redeemed	(13,591	)	(19,255	)	—	@—	(12,618	)	(11,154	)
Net Increase (Decrease) in Class I Shares Outstanding	(5,799	)	(923	)	306	@—	7,911		21,593
Class P#:
Shares Subscribed	15		100		—	—	2,283		776
Shares Issued on Distributions Reinvested	2		—		—	—	25		@—
Shares Redeemed	(64	)	—		—	—	(127	)	@—
Net Increase (Decrease) in Class P Shares Outstanding	(47	)	100		—	—	2,181		776
Class H##:
Shares Subscribed	—		—		—	—	170		—
Shares Issued on Distributions Reinvested	—		—		—	—	1		—
Shares Redeemed	—		—		—	—	(@—	)	—
Net Increase (Decrease) in Class H Shares Outstanding	—		—		—	—	171		—

#	The Limited Duration and Municipal Portfolios’ Class P commenced operations on September 28, 2007 and June 20, 2007, respectively.
##	The Municipal Portfolio’s Class H commenced operations on January 2, 2008.
@	Amount is less than $500 and/or shares are less than 500.

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

133

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Statements of Cash Flows

For the Six Months Ended March 31, 2008

	Core Fixed Income Portfolio (000)			Core Plus Fixed Income Portfolio (000)			Investment Grade Fixed Income Portfolio (000)
Cash Flows From Operating Activities:
Proceeds from Sales and Maturities of Investments	$	220,529		$	1,762,396		$	366,844
Purchases of Investments	(237,445		)	(2,050,134		)	(387,898		)
Proceeds from Sales of Delayed Delivery Commitments	305,704			2,870,248			518,237
Purchases of Delayed Delivery Commitments	(279,248		)	(2,651,805		)	(475,949		)
Net (Increase) Decrease in Short-Term Investments	(2,876		)	74,114			816
Net Realized Gain (Loss) on Foreign Currency Transactions	—			2,753			—
Net Realized Gain (Loss) on Futures Contracts	319			(3,815		)	835
Net Realized Gain (Loss) on Swap Agreements	(205		)	(4,122		)	185
Net Investment Income	8,254			80,733			13,552
Adjustments to Reconcile Net Investment Income to Net Cash Provided by Operating Activities:
Net (Increase) Decrease in Receivables Related to Operations	(11		)	(146		)	(142		)
Net Increase (Decrease) in Payables Related to Operations	(6		)	(103		)	(33		)
Accretion/Amortization of Discounts and Premiums	(8		)	2,774			248
Net Cash Provided (Used) in Operating Activities	15,007			82,893			36,695
Cash Flows from Financing Activities:
Proceeds from Portfolio Shares Sold	26,418			210,431			46,288
Payment on Portfolio Shares Redeemed	(41,094		)	(290,016		)	(82,687		)
Cash Dividends and Distributions Paid	(9		)	(2,677		)	(303		)
Net Cash Provided (Used) by Financing Activities	(14,685		)	(82,262		)	(36,702		)
Net Increase (Decrease) in Cash	322			631			(7		)
Cash at Beginning of Period	6			476			11
Cash at End of Period	$	328		$	1,107		$	4

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

134

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Balanced Portfolio

	Class I
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and  Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	14.69		$	12.63		$	11.95		$	10.90		$	10.15		$	8.78
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.27			0.32			0.25			0.24			0.18			0.21
Net Realized and Unrealized Gain (Loss) on Investments	(1.04		)	2.00			0.72			1.09			0.78			1.47
Total from Investment Operations	(0.77		)	2.32			0.97			1.33			0.96			1.68
Distributions from and/or in Excess of:
Net Investment Income	(0.20		)	(0.26		)	(0.29		)	(0.28		)	(0.21		)	(0.31		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	13.72		$	14.69		$	12.63		$	11.95		$	10.90		$	10.15
Total Return+	(5.30		)%‡	18.57		%	8.21		%	12.33		%	9.49		%	19.48		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	300,169		$	310,886		$	256,754		$	236,730		$	203,889		$	262,960
Ratio of Expenses to Average Net Assets	0.57		%*++	0.61		%++	0.60		%	0.62		%	0.62		%	0.60		%
Ratio of Net Investment Income (Loss) Net Assetsto Average	3.73		%*++	2.35		%++	2.02		%	2.11		%	1.67		%	2.17		%
Portfolio Turnover Rate#	82		%‡	60		%	71		%	111		%	208		%	84		%

	Investment Class
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and  Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	14.67		$	12.61		$	11.93		$	10.89		$	10.13		$	8.76
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.25			0.30			0.23			0.22			0.17			0.18
Net Realized and Unrealized Gain (Loss) on Investments	(1.03		)	2.00			0.72			1.08			0.78			1.48
Total from Investment Operations	(0.78		)	2.30			0.95			1.30			0.95			1.66
Distributions from and/or in Excess of:
Net Investment Income	(0.19		)	(0.24		)	(0.27		)	(0.26		)	(0.19		)	(0.29		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	13.70		$	14.67		$	12.61		$	11.93		$	10.89		$	10.13
Total Return+	(5.37		)%‡	18.43		%	8.07		%	12.09		%	9.43		%	19.28		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	4,941		$	5,103		$	4,102		$	3,706		$	3,117		$	8,209
Ratio of Expenses to Average Net Assets	0.72		%*++	0.76		%++	0.75		%	0.77		%	0.77		%	0.75		%
Ratio of Net Investment Income (Loss) to Average Net Assets	3.55		%*++	2.21		%++	1.87		%	1.95		%	1.59		%	2.02		%
Portfolio Turnover Rate#	82		%‡	60		%	71		%	111		%	208		%	84		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.04% and less than 0.005% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfoliosecurities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

135

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Balanced Portfolio

	Class P
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and  Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	14.66		$	12.61		$	11.93		$	10.88		$	10.13		$	8.77
Income (Loss) from Investment Operations	0.24			0.29			0.22			0.22			0.15			0.18
Net Investment Income (Loss)†
Net Realized and Unrealized Gain (Loss) on Investments	(1.02		)	1.98			0.72			1.08			0.78			1.46
Total from Investment Operations	(0.78		)	2.27			0.94			1.30			0.93			1.64
Distributions from and/or in Excess of:
Net Investment Income	(0.19		)	(0.22		)	(0.26		)	(0.25		)	(0.18		)	(0.28		)
Redemption Fees	0.00		††	0.00††			0.00††			—			—			—
Net Asset Value, End of Period	$	13.69		$	14.66		$	12.61		$	11.93		$	10.88		$	10.13
Total Return+	(5.42		)%‡	18.23		%	7.96		%	12.05		%	9.27		%	19.12		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	34,615		$	31,183		$	36,870		$	37,863		$	57,322		$	59,254
Ratio of Expenses to Average Net Assets	0.82		%*++	0.87		%++	0.85		%	0.87		%	0.87		%	0.85		%
Ratio of Net Investment Income (Loss) to Average  Net Assets	3.41		%*++	2.11		%++	1.77		%	1.90		%	1.42		%	1.92		%
Portfolio Turnover Rate#	82		%‡	60		%	71		%	111		%	208		%	84		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.04% and less than 0.005% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfoliosecurities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

136

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Equities Plus Portfolio

	Class I
Selected Per Share Data and Ratios	Six Months Ended March 31, 2008  (unaudited)			Year Ended  September 30,  2007			Period from  April 26, 2006^  to September  30, 2006
Net Asset Value, Beginning of Period	$	10.73		$	10.22		$	10.00
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.35			0.65			0.21
Net Realized and Unrealized Gain (Loss) on Investments	(3.27		)	0.87			0.07
Total from Investment Operations	(2.92		)	1.52			0.28
Distributions from and/or in Excess of:
Net Investment Income	(0.41		)	(0.65		)	(0.06		)
Net Realized Gain	(0.87		)	(0.36		)	—
Total from Investment Operations	(1.28		)	(1.01		)	(0.06		)
Net Asset Value, End of Period	$	6.53		$	10.73		$	10.22
Total Return+	(30.48		)%‡	15.54		%	2.93		%‡
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	19,548		$	27,709		$	26,093
Ratio of Expenses to Average Net Assets (1)	0.59		%*++	0.60		%++	0.60		%*
Ratio of Net Investment Income (Loss) to Average Net Assets (1)	7.88		%*++	6.23		%++	4.97		%*
Portfolio Turnover Rate	4		%‡	47		%	9		%‡

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.93	%*++	0.86	%++	1.06	%*
Net Investment Income (loss) to Average Net Assets	7.54	%* ++	5.96	%++	4.53	%*

	Class P
Selected Per Share Data and Ratios	Six Months Ended March 31, 2008  (unaudited)			Year Ended  September 30, 2007			Period from  April 26, 2006^  to September  30, 2006
Net Asset Value, Beginning of Period	$	10.72		$	10.22		$	10.00
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.34			0.63			0.20
Net Realized and Unrealized Gain (Loss) on Investments	(3.26		)	0.85			0.08
Total from Investment Operations	(2.92		)	1.48			0.28
Distributions from and/or in Excess of:
Net Investment Income	(0.40		)	(0.62		)	(0.06		)
Net Realized Gain	(0.87		)	(0.36		)	—
Total from Investment Operations	(1.27		)	(0.98		)	(0.06		)
Net Asset Value, End of Period	$	6.53		$	10.72		$	10.22
Total Return+	(30.51		)%‡	15.26		%	2.79		%‡
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	367		$	536		$	511
Ratio of Expenses to Average Net Assets (2)	0.84		%*++	0.85		%++	0.85		%*
Ratio of Net Investment Income (Loss) to Average Net Assets (2)	7.62		%*++	5.97		%++	4.71		%*
Portfolio Turnover Rate	4		%‡	47		%	9		%‡

(2) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	1.18	%*++	1.11	%++	1.31	%*
Net Investment Income (loss) to Average Net Assets	7.28	%*++	5.70	%++	4.26	%*

^	Commencement of operations
†	Per share amount is based on average shares outstanding.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio – InstitutionalClass during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.01% and less than 0.005% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
‡	Not Annualized
*	Annualized

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

137

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Mid Cap Growth Portfolio

	Class I
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	33.68		$	25.21		$	23.54		$	18.52		$	15.42		$	11.65
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.06			0.17			0.09			(0.03		)	(0.04		)	(0.05		)
Net Realized and Unrealized Gain (Loss) on Investments	(4.32		)	8.42			1.58			5.05			3.14			3.82
Total from Investment Operations	(4.26		)	8.59			1.67			5.02			3.10			3.77
Distributions from and/or in Excess of:
Net Investment Income	(0.16		)	(0.12		)	—			—			—			—
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	29.26		$	33.68		$	25.21		$	23.54		$	18.52		$	15.42
Total Return+	(12.70		)%‡	34.24		%	7.05		%^^	27.11		%	20.10		%	32.36		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,844,804		$	1,647,326		$	1,001,395		$	755,313		$	589,479		$	559,760
Ratio of Expenses to Average Net Assets	0.62		%*++	0.63		%++	0.63		%	0.62		%	0.63		%	0.64		%
Ratio of Net Investment Income (Loss) to Average Net Assets	0.38		%*++	0.57		%++	0.37		%	(0.12		)%	(0.23		)%	(0.37		)%
Portfolio Turnover Rate	23		%‡	64		%	65		%	115		%	147		%	180		%

	Class P
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	32.78		$	24.54		$	22.97		$	18.12		$	15.13		$	11.45
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.02			0.09			0.03			(0.08		)	(0.08		)	(0.08		)
Net Realized and Unrealized Gain (Loss) on Investments	(4.20		)	8.20			1.54			4.93			3.07			3.76
Total from Investment Operations	(4.18		)	8.29			1.57			4.85			2.99			3.68
Distributions from and/or in Excess of:
Net Investment Income	(0.09		)	(0.05		)	—			—			—			—
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	28.51		$	32.78		$	24.54		$	22.97		$	18.12		$	15.13
Total Return+	(12.77		)%‡	33.89		%	6.79		%^^	26.77		%	19.76		%	32.14		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,419,580		$	1,520,096		$	1,020,611		$	936,566		$	728,058		$	531,571
Ratio of Expenses to Average Net Assets	0.87		%*++	0.88		%++	0.88		%	0.87		%	0.88		%	0.89		%
Ratio of Net Investment Income (Loss) to Average Net Assets	0.14		%*++	0.31		%++	0.10		%	(0.37		)%	(0.48		)%	(0.62		)%
Portfolio Turnover Rate	23		%‡	64		%	65		%	115		%	147		%	180		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by less than 0.005%.
^^	The Adviser fully reimbursed the Portfolio for losses incurred resulting from the disposal of investments in violation of restrictions. The impact of this reimbursement is not reflected in the total return shown above. With this reimbursement, the total returns for Class I and Class P would have been 7.09% and 6.84%, respectively.
‡	Not Annualized
*	Annualized

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

138

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

U.S. Mid Cap Value Portfolio

	Class I
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	36.46		$	29.09		$	25.65		$	21.13		$	18.07		$	13.50
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.13			0.27			0.20			0.11			0.12			0.02
Net Realized and Unrealized Gain (Loss) on Investments	(4.71		)	7.32			3.44			4.50			2.99			4.55
Total from Investment Operations	(4.58		)	7.59			3.64			4.61			3.11			4.57
Distributions from and/or in Excess of:
Net Investment Income	(0.25		)	(0.22		)	(0.20		)	(0.09		)	(0.05		)	—
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	31.63		$	36.46		$	29.09		$	25.65		$	21.13		$	18.07
Total Return+	(12.61		)%‡	26.19		%	14.27		%	21.86		%	17.23		%	33.85		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	128,138		$	151,610		$	118,005		$	128,084		$	246,694		$	441,775
Ratio of Expenses to Average Net Assets	0.89		%*++	0.89		%++	0.90		%	0.87		%	0.90		%	0.88		%
Ratio of Net Investment Income (Loss) to Average Net Assets	0.76		%*++	0.80		%++	0.74		%	0.49		%	0.57		%	0.13		%
Portfolio Turnover Rate	26		%‡	87		%	66		%	72		%	146		%	138		%

	Investment Class
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	36.27		$	28.94		$	25.51		$	21.00		$	17.95		$	13.43
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.10			0.22			0.13			0.08			0.08			(0.01		)
Net Realized and Unrealized Gain (Loss) on Investments	(4.68		)	7.27			3.46			4.47			2.99			4.53
Total from Investment Operations	(4.58		)	7.49			3.59			4.55			3.07			4.52
Distributions from and/or in Excess of:
Net Investment Income	(0.24		)	(0.16		)	(0.16		)	(0.04		)	(0.02		)	—
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	31.45		$	36.27		$	28.94		$	25.51		$	21.00		$	17.95
Total Return+	(12.68		)%‡	26.01		%	14.10		%	21.67		%	17.09		%	33.66		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	2,207		$	3,649		$	2,588		$	5,611		$	8,886		$	13,004
Ratio of Expenses to Average Net Assets	1.04		%*++	1.04		%++	1.05		%	1.02		%	1.05		%	1.03		%
Ratio of Net Investment Income (Loss) to Average Net Assets	0.60		%*++	0.66		%++	0.50		%	0.33		%	0.42		%	(0.02		)%
Portfolio Turnover Rate	26		%‡	87		%	66		%	72		%	146		%	138		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by less than 0.005%.
‡	Not Annualized
*	Annualized

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

139

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

U.S. Mid Cap Value Portfolio

	Class P
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	36.26		$	28.94		$	25.48		$	20.99		$	17.95		$	13.44
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.09			0.19			0.13			0.04			0.07			(0.02		)
Net Realized and Unrealized Gain (Loss) on Investments	(4.69		)	7.28			3.43			4.47			2.97			4.53
Total from Investment Operations	(4.60		)	7.47			3.56			4.51			3.04			4.51
Distributions from and/or in Excess of:
Net Investment Income	(0.20		)	(0.15		)	(0.10		)	(0.02		)	(0.00		)††	—
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	31.46		$	36.26		$	28.94		$	25.48		$	20.99		$	17.95
Total Return+	(12.74		)%‡	25.87		%	14.02		%	21.52		%	16.95		%	33.56		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	24,795		$	17,661		$	13,144		$	25,943		$	55,340		$	84,733
Ratio of Expenses to Average Net Assets	1.14		%*++	1.14		%++	1.15		%	1.12		%	1.15		%	1.13		%
Ratio of Net Investment Income (Loss) to Average Net Assets	0.53		%*++	0.56		%++	0.48		%	0.18		%	0.32		%	(0.12		)%
Portfolio Turnover Rate	26		%‡	87		%	66		%	72		%	146		%	138		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by less than 0.005%.
‡	Not Annualized
*	Annualized

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

140

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

U.S. Small Cap Value Portfolio

	Class I
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	28.19		$	26.22		$	24.41		$	22.26		$	18.19		$	14.04
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.05			0.06			0.09			0.30			0.04			0.03
Net Realized and Unrealized Gain (Loss) on Investments	(3.10		)	4.89			3.04			3.93			4.06			4.18
Total from Investment Operations	(3.05		)	4.95			3.13			4.23			4.10			4.21
Distributions from and/or in Excess of:
Net Investment Income	(0.06		)	(0.08		)	(0.17		)	(0.01		)	(0.03		)	(0.06		)
Net Realized Gain	(3.18		)	(2.90		)	(1.15		)	(2.07		)	—			—
Total Distributions	(3.24		)	(2.98		)	(1.32		)	(2.08		)	(0.03		)	(0.06		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	21.90		$	28.19		$	26.22		$	24.41		$	22.26		$	18.19
Total Return+	(11.47		)%‡	19.74		%	13.42		%	19.83		%	22.57		%	30.09		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	724,824		$	810,194		$	716,208		$	355,671		$	382,898		$	536,620
Ratio of Expenses to Average Net Assets	0.80		%*++	0.84		%++	0.81		%	0.82		%	0.90		%	0.89		%
Ratio of Net Investment Income (Loss) to Average Net Assets	0.37		%*++	0.23		%++	0.35		%	1.29		%	0.18		%	0.21		%
Portfolio Turnover Rate	25		%‡	46		%	51		%	61		%	104		%	159		%

	Class P
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	28.03		$	26.09		$	24.29		$	22.20		$	18.16		$	14.01
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.02			0.00		††	0.02			0.24			(0.02		)	(0.01		)
Net Realized and Unrealized Gain (Loss) on Investments	(3.08		)	4.86			3.04			3.92			4.06			4.18
Total from Investment Operations	(3.06		)	4.86			3.06			4.16			4.04			4.17
Distributions from and/or in Excess of:
Net Investment Income	(0.00		)††	(0.02		)	(0.11		)	—			—			(0.02		)
Net Realized Gain	(3.18		)	(2.90		)	(1.15		)	(2.07		)	—			—
Total Distributions	(3.18		)	(2.92		)	(1.26		)	(2.07		)	—			(0.02		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	21.79		$	28.03		$	26.09		$	24.29		$	22.20		$	18.16
Total Return+	(11.57		)%‡	19.45		%	13.13		%	19.49		%	22.30		%	29.76		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	61,029		$	59,519		$	26,428		$	25,860		$	22,530		$	64,391
Ratio of Expenses to Average Net Assets	1.05		%*++	1.09		%++	1.06		%	1.07		%	1.15		%	1.14		%
Ratio of Net Investment Income (Loss) to Average Net Assets	0.12		%*++	(0.01)		%++	0.08		%	1.06		%	(0.07		)%	(0.04		)%
Portfolio Turnover Rate	25		%‡	46		%	51		%	61		%	104		%	159		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.01% and less than 0.005% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
‡	Not Annualized
*	Annualized

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

141

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Value Portfolio

	Class I
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	18.46		$	18.67		$	17.89		$	16.44		$	13.64		$	10.65
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.16			0.35			0.37			0.33			0.27			0.19
Net Realized and Unrealized Gain (Loss) on Investments	(2.88		)	1.60			2.11			1.40			2.79			2.99
Total from Investment Operations	(2.72		)	1.95			2.48			1.73			3.06			3.18
Distributions from and/or in Excess of:
Net Investment Income	(0.20		)	(0.37		)	(0.38		)	(0.28		)	(0.26		)	(0.19		)
Net Realized Gain	(1.06		)	(1.79		)	(1.32		)	—			—			—
Total Distributions	(1.26		)	(2.16		)	(1.70		)	(0.28		)	(0.26		)	(0.19		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	14.48		$	18.46		$	18.67		$	17.89		$	16.44		$	13.64
Total Return+	(15.40		)%‡	10.95		%	14.68		%	10.55		%	22.56		%	30.19		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	139,395		$	285,533		$	307,331		$	293,426		$	275,494		$	363,636
Ratio of Expenses to Average Net Assets	0.64		%*++	0.63		%++	0.65		%	0.60		%	0.63		%	0.63		%
Ratio of Net Investment Income (Loss) to Average Net Assets	1.97		%*++	1.90		%++	2.07		%	1.88		%	1.75		%	1.57		%
Portfolio Turnover Rate	6		%‡	28		%	26		%	38		%	95		%	65		%

	Class P
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	18.43		$	18.64		$	17.86		$	16.42		$	13.62		$	10.63
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.14			0.31			0.33			0.29			0.23			0.16
Net Realized and Unrealized Gain (Loss) on Investments	(2.88		)	1.60			2.10			1.38			2.79			2.99
Total from Investment Operations	(2.74		)	1.91			2.43			1.67			3.02			3.15
Distributions from and/or in Excess of:
Net Investment Income	(0.18		)	(0.33		)	(0.33		)	(0.23		)	(0.22		)	(0.16		)
Net Realized Gain	(1.06		)	(1.79		)	(1.32		)	—			—			—
Total Distributions	(1.24		)	(2.12		)	(1.65		)	(0.23		)	(0.22		)	(0.16		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	14.45		$	18.43		$	18.64		$	17.86		$	16.42		$	13.62
Total Return+	(15.54		)%‡	10.69		%	14.38		%	10.24		%	22.28		%	29.87		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	133,770		$	199,754		$	187,718		$	1,113,274		$	943,182		$	622,230
Ratio of Expenses to Average Net Assets	0.89		%*++	0.88		%++	0.87		%	0.85		%	0.88		%	0.88		%
Ratio of Net Investment Income (Loss) to Average Net Assets	1.74		%*++	1.65		%++	1.84		%	1.63		%	1.50		%	1.32		%
Portfolio Turnover Rate	6		%‡	28		%	26		%	38		%	95		%	65		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Government Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by less than 0.005%.
‡	Not Annualized
*	Annualized

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

142

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Core Fixed Income Portfolio

	Class I
	Six Months Ended  March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.77		$	10.80		$	11.09		$	11.26		$	11.26		$	11.46
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.27			0.52			0.40			0.40			0.33			0.32
Net Realized and Unrealized Gain (Loss) on Investments	(0.51		)	(0.02		)	0.00		††	0.07			0.14			0.19
Total from Investment Operations	(0.24		)	0.50			0.40			0.47			0.47			0.51
Distributions from and/or in excess of:
Net Investment Income	(0.27		)	(0.53		)	(0.57		)	(0.45		)	(0.47		)	(0.51		)
Net Realized Gain	—			—			(0.12		)	(0.19		)	—			(0.20		)
Total Distributions	(0.27		)	(0.53		)	(0.69		)	(0.64		)	(0.47		)	(0.71		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	10.26		$	10.77		$	10.80		$	11.09		$	11.26		$	11.26
Total Return+	(2.35		)%‡	4.76		%	3.79		%	4.35		%	4.33		%	4.61		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	284,186		$	308,111		$	299,997		$	220,350		$	226,555		$	320,036
Ratio of Expenses to Average Net Assets (2)	0.49		%*++	0.49		%++	0.50		%	0.50		%	0.50		%	0.50		%
Ratio of Net Investment Income (Loss) to Average Net Assets (2)	5.14		%*++	4.83		%++	3.71		%	3.62		%	2.94		%	2.82		%
Portfolio Turnover Rate#	140		%‡	107		%	139		%	236		%	371		%	109		%
(2) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.52		%*++	0.54		%++	0.56		%	0.53		%	0.52		%	0.51		%
Net Investment Income (Loss) to Average Net Assets	5.10		%*++	4.78		%++	3.65		%	3.59		%	2.92		%	2.81		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by 0.01%.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

143

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Core Fixed Income Portfolio

	Class P
	Six Months Ended  March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.71		$	10.74		$	11.03		$	11.21		$	11.22		$	11.42
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.26			0.49			0.37			0.37			0.30			0.29
Net Realized and Unrealized Gain (Loss) on Investments	(0.52		)	(0.02		)	0.01			0.06			0.14			0.19
Total from Investment Operations	(0.26		)	0.47			0.38			0.43			0.44			0.48
Distributions from and/or in excess of:
Net Investment Income	(0.25		)	(0.50		)	(0.55		)	(0.42		)	(0.45		)	(0.48		)
Net Realized Gain	—			—			(0.12		)	(0.19		)	0.00			(0.20		)
Total Distributions	(0.25		)	(0.50		)	(0.67		)	(0.61		)	(0.45		)	(0.68		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	10.20		$	10.71		$	10.74		$	11.03		$	11.21		$	11.22
Total Return+	(2.48		)%‡	4.53		%	3.55		%	4.01		%	4.12		%	4.28		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	13,300		$	11,805		$	9,812		$	9,954		$	9,564		$	10,585
Ratio of Expenses to Average Net Assets (1)	0.74		%*++	0.74		%++	0.75		%	0.75		%	0.75		%	0.75		%
Ratio of Net Investment Income (Loss) to Average Net Assets (1)	4.88		%*++	4.58		%++	3.43		%	3.37		%	2.69		%	2.57		%
Portfolio Turnover Rate#	140		%‡	107		%	139		%	236		%	371		%	109		%

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.77	%*++	0.79	%++	0.81	%	0.78	%	0.77	%	0.76	%
Net Investment Income (Loss) to Average Net Assets	4.85	%*++	4.54	%++	3.37	%	3.34	%	2.67	%	2.56	%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.01%.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

144

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Core Plus Fixed Income Portfolio

	Class I
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	11.40		$	11.52		$	11.69		$	11.69		$	11.71		$	11.82
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.35			0.58			0.48			0.47			0.38			0.40
Net Realized and Unrealized Gain (Loss) on Investments	(0.72		)	(0.05		)	(0.02		)	0.08			0.17			0.31
Total from Investment Operations	(0.37		)	0.53			0.46			0.55			0.55			0.71
Distributions from and/or in Excess of:
Net Investment Income	(0.23		)	(0.65		)	(0.63		)	(0.55		)	(0.57		)	(0.67		)
Net Realized Gain	—			—			—			—			—			(0.15		)
Total Distributions	(0.23		)	(0.65		)	(0.63		)	(0.55		)	(0.57		)	(0.82		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	10.80		$	11.40		$	11.52		$	11.69		$	11.69		$	11.71
Total Return+	(3.35		)%‡	4.77		%	4.13		%	4.84		%	4.80		%	6.24		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	2,211,583		$	2,367,043		$	2,314,052		$	2,102,609		$	2,120,149		$	2,600,453
Ratio of Expenses to Average Net Assets	0.44		%*++	0.44		%++	0.44		%	0.45		%	0.50		%	0.50		%
Ratio of Net Investment Income (Loss) to Average Net Assets	6.15		%*++	5.10		%++	4.24		%	4.04		%	3.29		%	3.39		%
Portfolio Turnover Rate#	143		%‡	139		%	142		%	180		%	334		%	92		%

	Investment Class
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	11.39		$	11.52		$	11.68		$	11.69		$	11.71		$	11.81
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.34			0.56			0.45			0.45			0.36			0.37
Net Realized and Unrealized Gain (Loss) on Investments	(0.71		)	(0.06		)	(0.00		)††	0.07			0.17			0.33
Total from Investment Operations	(0.37		)	0.50			0.45			0.52			0.53			0.70
Distributions from and/or in Excess of:
Net Investment Income	(0.22		)	(0.63		)	(0.61		)	(0.53		)	(0.55		)	(0.65		)
Net Realized Gain	—			—			—			—			—			(0.15		)
Total Distributions	(0.22		)	(0.63		)	(0.61		)	(0.53		)	(0.55		)	(0.80		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	10.80		$	11.39		$	11.52		$	11.68		$	11.69		$	11.71
Total Return+	(3.43		)%‡	4.52		%	4.04		%	4.61		%	4.73		%	6.07		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	142,525		$	150,671		$	142,990		$	310,592		$	146,146		$	114,509
Ratio of Expenses to Average Net Assets	0.59		%*++	0.59		%++	0.59		%	0.60		%	0.65		%	0.65		%
Ratio of Net Investment Income (Loss) to Average Net Assets	6.00		%*++	4.97		%++	3.96		%	3.89		%	3.14		%	3.24		%
Portfolio Turnover Rate#	143		%‡	139		%	142		%	180		%	334		%	92		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.01% and less than 0.005% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

145

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Core Plus Fixed Income Portfolio

	Class P
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	11.38		$	11.50		$	11.67		$	11.68		$	11.70		$	11.81
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.33			0.55			0.46			0.44			0.35			0.36
Net Realized and Unrealized Gain (Loss) on Investments	(0.71		)	(0.05		)	(0.03		)	0.07			0.17			0.32
Total from Investment Operations	(0.38		)	0.50			0.43			0.51			0.52			0.68
Distributions from and/or in Excess of:
Net Investment Income	(0.21		)	(0.62		)	(0.60		)	(0.52		)	(0.54		)	(0.64		)
Net Realized Gain	—			—			—			—			—			(0.15		)
Total Distributions	(0.21		)	(0.62		)	(0.60		)	(0.52		)	(0.54		)	(0.79		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	10.79		$	11.38		$	11.50		$	11.67		$	11.68		$	11.70
Total Return+	(3.48		)%‡	4.42		%	3.97		%	4.49		%	4.57		%	5.99		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	132,123		$	137,733		$	126,683		$	112,716		$	114,841		$	211,260
Ratio of Expenses to Average Net Assets	0.69		%*++	0.69		%++	0.69		%	0.70		%	0.75		%	0.75		%
Ratio of Net Investment Income (Loss) to Average Net Assets	5.90		%*++	4.84		%++	4.00		%	3.79		%	3.04		%	3.14		%
Portfolio Turnover Rate#	143		%‡	139		%	142		%	180		%	334		%	92		%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.01% and less than 0.005% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

146

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

High Yield Portfolio

	Class I^^
	Six Months Ended
	March 31, 2008  (unaudited)			Year Ended September 30,
Selected Per Share Data and Ratios				2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.56		$	10.60		$	10.80		$	11.18		$	10.60		$	8.82
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.43			0.79			0.76			0.80			0.84			0.86
Net Realized and Unrealized Gain (Loss) on Investments	(0.74		)	(0.11		)	(0.16		)	(0.30		)	0.40			1.54
Total from Investment Operations	(0.31		)	0.68			0.60			0.50			1.24			2.40
Distributions from and/or in Excess of:
Net Investment Income	(0.49		)	(0.72		)	(0.80		)	(0.88		)	(0.66		)	(0.62		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	9.76		$	10.56		$	10.60		$	10.80		$	11.18		$	10.60
Total Return+	(2.97		)%‡	7.38		%	6.03		%	4.63		%	12.11		%	28.68		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	137,718		$	193,934		$	226,162		$	195,880		$	314,440		$	330,990
Ratio of Expenses to Average Net Assets	0.70		%*++	0.68		%++	0.61		%	0.62		%	0.61		%	0.61		%
Ratio of Net Investment Income (Loss) to Average Net Assets	8.48		%*++	7.51		%++	7.23		%	7.37		%	7.70		%	9.05		%
Portfolio Turnover Rate	14		%‡	40		%	58		%	55		%	89		%	97		%

	Class P^^
	Six Months Ended March 31, 2008 (unaudited)
				Year Ended September 30,
Selected Per Share Data and Ratios				2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.60		$	10.64		$	10.84		$	11.20		$	10.62		$	8.80
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.42			0.78			0.74			0.78			0.80			0.84
Net Realized and Unrealized Gain (Loss) on Investments	(0.75		)	(0.12		)	(0.18		)	(0.28		)	0.42			1.56
Total from Investment Operations	(0.33		)	0.66			0.56			0.50			1.22			2.40
Distributions from and/or in Excess of:
Net Investment Income	(0.47		)	(0.70		)	(0.76		)	(0.86		)	(0.64		)	(0.58		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	9.80		$	10.60		$	10.64		$	10.84		$	11.20		$	10.62
Total Return+	(3.12		)%‡	7.26		%	5.51		%	4.52		%	11.86		%	28.54		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	5,204		$	9,023		$	4,391		$	6,349		$	17,923		$	13,936
Ratio of Expenses to Average Net Assets	0.95		%*++	0.93		%++	0.86		%	0.87		%	0.86		%	0.86		%
Ratio of Net Investment Income (Loss) to Average Net Assets	8.16		%*++	7.31		%++	7.00		%	7.11		%	7.45		%	8.80		%
Portfolio Turnover Rate	14		%‡	40		%	58		%	55		%	89		%	97		%

^^	On November 13, 2006, the Portfolio effected a reverse stock split as described in the Notes to Financial Statements. Per share data prior to this date has been restated to give effect to the reverse stock split.
†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by less than 0.005%.
‡	Not Annualized
*	Annualized

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

147

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Intermediate Duration Portfolio

	Class I
	Six Months Ended March 31, 2008 (unaudited)
				Year Ended September 30,
Selected Per Share Data and Ratios				2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.16		$	10.17		$	10.22		$	10.40		$	10.49		$	10.71
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.24			0.48			0.42			0.37			0.32			0.28
Net Realized and Unrealized Gain (Loss) on Investments	(0.28		)	0.01			(0.08		)	(0.16		)	(0.01		)	0.14
Total from Investment Operations	(0.04		)	0.49			0.34			0.21			0.31			0.42
Distributions from and/or in Excess of:
Net Investment Income	(0.27		)	(0.50		)	(0.39		)	(0.36		)	(0.40		)	(0.36		)
Net Realized Gain	—			—			—			(0.03		)	—			(0.28		)
Total Distributions	(0.27		)	(0.50		)	(0.39		)	(0.39		)	(0.40		)	(0.64		)
Net Asset Value, End of Period	$	9.85		$	10.16		$	10.17		$	10.22		$	10.40		$	10.49
Total Return+	(0.40		)%‡	4.87		%	3.33		%	2.22		%	3.06		%	4.12		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	3,739		$	7,015		$	8,823		$	9,393		$	18,828		$	23,991
Ratio of Expenses to Average Net Assets	0.50		%*++	0.54		%++	0.50		%	0.50		%	0.53		%	0.54		%
Ratio of Net Investment Income (Loss) to Average Net Assets	4.79		%*++	4.71		%++	4.20		%	3.59		%	3.07		%	2.63		%
Portfolio Turnover Rate#	28		%‡	89		%	70		%	146		%	211		%	89		%

	Investment Class
	Six Months Ended March 31, 2008 (unaudited)
				Year Ended September 30,
Selected Per Share Data and Ratios				2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.12		$	10.13		$	10.19		$	10.37		$	10.46		$	10.68
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.24			0.46			0.39			0.33			0.30			0.26
Net Realized and Unrealized Gain (Loss) on Investments	(0.29		)	0.02			(0.07		)	(0.13		)	(0.01		)	0.15
Total from Investment Operations	(0.05		)	0.48			0.32			0.20			0.29			0.41
Distributions from and/or in Excess of:
Net Investment Income	(0.26		)	(0.49		)	(0.38		)	(0.35		)	(0.38		)	(0.35		)
Net Realized Gain	—			—			—			(0.03		)	—			(0.28		)
Total Distributions	(0.26		)	(0.49		)	(0.38		)	(0.38		)	(0.38		)	(0.63		)
Net Asset Value, End of Period	$	9.81		$	10.12		$	10.13		$	10.19		$	10.37		$	10.46
Total Return+	(0.57		)%‡	4.84		%	3.19		%	1.99		%	2.86		%	3.97		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	142,196		$	145,739		$	136,198		$	304,844		$	138,813		$	99,441
Ratio of Expenses to Average Net Assets	0.65		%*++	0.69		%++	0.65		%	0.65		%	0.68		%	0.69		%
Ratio of Net Investment Income (Loss) to Average Net Assets	4.65		%*++	4.58		%++	3.87		%	3.22		%	2.92		%	2.48		%
Portfolio Turnover Rate#	28		%‡	89		%	70		%	146		%	211		%	89		%

†	Per share amount is based on average shares outstanding.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, for the six months ended March 31, 2008, the expenses as a percentage of its net assets were effected by approximately 0.02%. For the year ended September 30, 2007, the expenses as a percentage of its net assets were affected by less than 0.005% and approximately 0.01% for Class I and Investment Class, respectively.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

148

2008 Semi-Annual Report

March 31, 2008

Financial Highlights

Intermediate Duration Portfolio

	Class P
Selected Per Share Data and Ratios	Six Months Ended  March 31, 2008  (unaudited)			Period from  September 28,  2007^ to  September 30,  2007
Net Asset Value, Beginning of Period	$	10.16		$	10.15
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.23			0.00		††
Net Realized and Unrealized Gain (Loss) on Investments	(0.29		)	0.01
Total from Investment Operations	(0.06		)	0.01
Distributions from and/or in Excess of:
Net Investment Income	(0.25		)	—
Net Realized Gain	—			—
Total Distributions	(0.25		)	—
Net Asset Value, End of Period	$	9.85		$	10.16
Total Return+	(0.52		)%‡	—
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	17		$	118
Ratio of Expenses to Average Net Assets	0.75		%*++	1.17		%*++
Ratio of Net Investment Income (Loss) to Average Net Assets	4.55		*++	4.49		%*++
Portfolio Turnover Rate	28		%‡	89		%

^	Commencement of operations
†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.02% and 0.21% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
‡	Not Annualized
*	Annualized

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

149

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Financial Highlights

International Fixed Income Portfolio

	Class I
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007				2006				2005				2004				2003
Net Asset Value, Beginning of Period	$	10.97		$	10.35			$	10.81			$	11.24			$	11.92			$	9.88
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.16			0.28				0.21				0.25				0.28				0.38
Net Realized and Unrealized Gain (Loss) on Investments	1.30			0.61				(0.11			)	0.01				0.63				1.66
Total from Investment Operations	1.46			0.89				0.10				0.26				0.91				2.04
Distributions from and/or in Excess of:
Net Investment Income	(0.67		)	(0.22			)	(0.51			)	(0.69			)	(1.59			)	—
Net Realized Gain	(0.02		)	(0.05			)	(0.05			)	—				—				—
Total Distributions	(0.69		)	(0.27			)	(0.56			)	(0.69			)	(1.59			)	—
Redemption Fee	0.00		††	—				—				—				—				—
Net Asset Value, End of Period	$	11.74		$		10.97		$		10.35		$		10.81		$		11.24		$		11.92
Total Return+	14.07		%‡	8.76			%	1.12			%	1.81			%	7.95			%	20.65			%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	232,847		$		213,392		$		195,659		$		157,911		$		154,111		$		114,932
Ratio of Expenses to Average Net Assets	0.61		%*++	0.60			%++	0.60			%	0.55			%	0.56			%	0.56			%
Ratio of Net Investment Income (Loss) to Average Net Assets	2.89		%*++	2.66			%++	2.02			%	2.17			%	2.52			%	3.51			%
Portfolio Turnover Rate	52		%‡	82			%	69			%	38			%	15			%	41			%

	Class P
Selected Per Share Data and Ratios	Six Months Ended March 31, 2008 (unaudited)			Period from September 28, 2007^ to September 30, 2007
Net Asset Value, Beginning of Period	$	11.08		$	10.97
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.15			0.00		††
Net Realized and Unrealized Gain (Loss) on Investments	1.30			0.11
Total from Investment Operations	1.45			0.11
Distributions from and/or in Excess of:
Net Investment Income	(0.67		)	—
Net Realized Gain	(0.02		)	—
Total Distributions	(0.69		)	—
Redemption Fee	0.00		††	—
Net Asset Value, End of Period	$	11.84		$	11.08
Total Return+	14.90		%‡	—
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,364		$	1,236
Ratio of Expenses to Average Net Assets	0.86		%*++	1.45%		*++
Ratio of Net Investment Income (Loss) to Average Net Assets	2.60		%*++	1.39%		*++
Portfolio Turnover Rate	52		%‡	82		%

^	Commencement of operations
†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, for the six months ended March 31, 2008, the expenses as a percentage of its net assets were affected by less than 0.005%. For the year and/or period ended September 30, 2007, the expenses as a percentage of its net assets were effected by less than 0.005% and approximately 0.03% for Class I and Class P, respectively.
‡	Not Annualized
*	Annualized

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

150

2008 Semi-Annual Report

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Financial Highlights

International Fixed Income Portfolio

	Class H
Selected Per Share Data and Ratios	Period from January 2, 2008^ to March 31, 2008 (unaudited)
Net Asset Value, Beginning of Period	$	10.89
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.07
Net Realized and Unrealized Gain (Loss) on Investments	0.88
Total from Investment Operations	0.95
Distributions from and/or in Excess of:
Net Investment Income	—
Net Realized Gain	—
Total Distributions	—
Redemption Fee	0.00		††
Net Asset Value, End of Period	$	11.84
Total Return+	8.72		%‡
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	109
Ratio of Expenses to Average Net Assets	0.94		%*++
Ratio of Net Investment Income (Loss) to Average Net Assets	2.52		%*++
Portfolio Turnover Rate	52		%‡

^	Commencement of operations
†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by less than 0.005%.
‡	Not Annualized
*	Annualized

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

151

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Financial Highlights

Investment Grade Fixed Income Portfolio

	Class I
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	11.15		$	11.22		$	11.42		$	11.57		$	11.54		$	11.57
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.29			0.52			0.41			0.42			0.34			0.34
Net Realized and Unrealized Gain (Loss) on Investments	(0.55		)	0.01			(0.00		)††	0.06			0.14			0.23
Total from Investment Operations	(0.26		)	0.53			0.41			0.48			0.48			0.57
Distributions from and/or in Excess of:
Net Investment Income	(0.26		)	(0.60		)	(0.56		)	(0.49		)	(0.45		)	(0.55		)
Net Realized Gain	—			—			(0.05		)	(0.14		)	—			(0.05		)
Total Distributions	(0.26		)	(0.60		)	(0.61		)	(0.63		)	(0.45		)	(0.60		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	10.63		$	11.15		$	11.22		$	11.42		$	11.57		$	11.54
Total Return+	(2.35		)%‡	4.82		%	3.65		%	4.39		%	4.36		%	4.36		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	459,919		$	519,504		$	525,680		$	499,534		$	527,837		$	569,593
Ratio of Expenses to Average Net Assets	0.50		%*++	0.50		%++	0.50		%	0.50		%	0.50		%	0.51		%
Ratio of Net Investment Income (Loss) to Average Net Assets	5.22		%*++	4.74		%++	3.66		%	3.67		%	2.94		%	2.96		%
Portfolio Turnover Rate#	157		%‡	124		%	154		%	240		%	332		%	81		%

	Class P
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	11.14		$	11.21		$	11.42		$	11.56		$	11.53		$	11.57
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.28			0.51			0.39			0.41			0.32			0.32
Net Realized and Unrealized Gain (Loss) on Investments	(0.55		)	0.00		††	(0.01		)	0.06			0.14			0.22
Total from Investment Operations	(0.27		)	0.51			0.38			0.47			0.46			0.54
Distributions from and/or in Excess of:
Net Investment Income	(0.25		)	(0.58		)	(0.54		)	(0.47		)	(0.43		)	(0.53		)
Net Realized Gain	—			—			(0.05		)	(0.14		)	—			(0.05		)
Total Distributions	(0.25		)	(0.58		)	(0.59		)	(0.61		)	(0.43		)	(0.58		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	10.62		$	11.14		$	11.21		$	11.42		$	11.56		$	11.53
Total Return+	(2.41		)%‡	4.56		%	3.59		%	4.23		%	4.10		%	4.87		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	981		$	1,177		$	778		$	1,190		$	1,400		$	1,581
Ratio of Expenses to Average Net Assets (1)	0.65		%*++	0.65		%++	0.65		%	0.65		%	0.65		%	0.66		%
Ratio of Net Investment Income (Loss) to Average Net Assets (1)	5.07		%*++	4.59		%++	3.46		%	3.55		%	2.79		%	2.81		%
Portfolio Turnover Rate#	157		%‡	124		%	154		%	240		%	332		%	81		%

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.75	%*++	0.75	%++	0.75	%	0.75	%	0.75	%	0.76	%
Net Investment Income (Loss) to Average Net Assets	4.97	%*++	4.49	%++	3.36	%	3.45	%	2.69	%	2.71	%

†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by 0.01% and less than 0.005% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

152

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Financial Highlights

Investment Grade Fixed Income Portfolio

	Class H
	Period from
	January 2,
	2008^
	to March 31,
Selected Per Share Data and Ratios	2008
Net Asset Value, Beginning of Period	$	11.15
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.13
Net Realized and Unrealized Gain (Loss) on Investments	(0.66		)
Total from Investment Operations	(0.53		)
Redemption Fees	0.00		††
Net Asset Value, End of Period	$	10.62
Total Return+	8.72		%‡
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	95
Ratio of Expenses to Average Net Assets	0.83		%*++
Ratio of Net Investment Income (Loss) to Average Net Assets	4.67		%*++
Portfolio Turnover Rate#	157		%‡

^	Commencement of operations.
†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by 0.01%.
‡	Not Annualized
*	Annualized

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

153

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Financial Highlights

Limited Duration Portfolio

	Class I
	Six Months Ended
	March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.24		$	10.34		$	10.34		$	10.50		$	10.65		$	10.69
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.26			0.51			0.41			0.30			0.25			0.23
Net Realized and Unrealized Gain (Loss) on Investments	(1.03		)	(0.08		)	(0.02		)	(0.15		)	(0.10		)	0.05
Total from Investment Operations	(0.77		)	0.43			0.39			0.15			0.15			0.28
Distributions from and/or in Excess of:
Net Investment Income	(0.26		)	(0.53		)	(0.39		)	(0.31		)	(0.28		)	(0.27		)
Net Realized Gain	—			—			—			—			(0.02		)	(0.05		)
Total Distributions	(0.26		)	(0.53		)	(0.39		)	(0.31		)	(0.30		)	(0.32		)
Redemption Fees	—			0.00		††	—			—			—			—
Net Asset Value, End of Period	$	9.21		$	10.24		$	10.34		$	10.34		$	10.50		$	10.65
Total Return+	(7.72		)%‡	4.26		%	3.88		%	1.44		%	1.47		%	2.65		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	898,833		$	1,058,151		$	1,077,967		$	1,069,956		$	957,367		$	622,801
Ratio of Expenses to Average Net Assets	0.43		%*++	0.45		%++	0.42		%	0.42		%	0.42		%	0.43		%
Ratio of Net Investment Income (Loss) to Average Net Assets	5.15++		%*++	4.94		%++	3.96		%	2.92		%	2.36		%	2.17		%
Portfolio Turnover Rate#	7		%‡	56		%	64		%	66		%	135		%	68		%

	Class P
Selected Per Share Data and Ratios	Six Months Ended March 31, 2008 (unaudited)			Period from September 28, 2007^ to September 30, 2007
Net Asset Value, Beginning of Period	$	10.24		$	10.24
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.24			0.00		††
Net Realized and Unrealized Gain (Loss) on Investments	(1.02		)	(0.00		)††
Total from Investment Operations	(0.78		)	0.00		††
Distributions from and/or in Excess of:
Net Investment Income	(0.25		)	—
Redemption Fees	—			0.00		††
Net Asset Value, End of Period	$	9.21		$	10.24
Total Return+	(7.82		)%‡	—
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	486		$	1,020
Ratio of Expenses to Average Net Assets	0.68		%*++	0.59		%*++
Ratio of Net Investment Income (Loss) to Average Net Assets	4.87		%*++	5.38		%*++
Portfolio Turnover Rate	7		%‡	56		%

^	Commencement of operations
†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, for the six months ended March 31, 2008, the expenses as a percentage of its net assets were approximately 0.01%. For the year and/or period ended September 30, 2007 the expenses as a percentage of its net assets were effected by less than 0.005% for Class I and by approximately 0.06% for Class P, respectively.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the year ended September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

154

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Financial Highlights

Long Duration Fixed Income Portfolio

	Class I
Selected Per Share Data and Ratios	Six Months Ended March 31, 2008 (unaudited)			Year EndedSeptember 30, 2007			Period from July 21, 2006^ to September 30, 2006
Net Asset Value, Beginning of Period	$	10.33		$	10.48		$	10.00
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.24			0.49			0.09
Net Realized and Unrealized Gain (Loss) on Investments	0.43			(0.18		)	0.39
Total from Investment Operations	0.67			0.31			0.48
Distributions from and/or in excess of:
Net Investment Income	(0.27		)	(0.43		)	—
Net Realized Gain	—			(0.03		)	—
Total Distributions	(0.27		)	(0.46		)	—
Net Asset Value, End of Period	$	10.73		$	10.33		$	10.48
Total Return+	6.61		%‡	3.06		%	4.80		%‡
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	29,563		$	25,297		$	25,677
Ratio of Expenses to Average Net Assets (1)	0.48		%*++	0.50		%++	0.50		%*
Ratio of Net Investment Income (Loss) to Average Net Assets (1)	4.53		%* ++	4.73		%++	4.66		%*
Portfolio Turnover Rate	36		%‡	49		%	7		%‡

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.70	%*++	0.94	%++	1.52	%*
Net Investment Income (Loss) to Average Net Assets	4.31	%*++	4.29	%++	3.64	%*

	Class P
Selected Per Share Data and Ratios	Six Months Ended March 31, 2008 (unaudited)			Year Ended September 30, 2007			Period from July 21, 2006^ to September 30, 2006
Net Asset Value, Beginning of Period	$	10.32		$	10.48		$	10.00
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.23			0.46			0.09
Net Realized and Unrealized Gain (Loss) on Investments	0.43			(0.19		)	0.39
Total from Investment Operations	0.66			0.27			0.48
Distributions from and/or in excess of:
Net Investment Income	(0.26		)	(0.40		)	—
Net Realized Gain	—			(0.03		)	—
Total Distributions	(0.26		)	(0.43		)	—
Net Asset Value, End of Period	$	10.72		$	10.32		$	10.48
Total Return+	6.48		%‡	2.72		%	4.80		%‡
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	536		$	516		$	524
Ratio of Expenses to Average Net Assets (2)	0.73		%*++	0.75		%++	0.75		%*
Ratio of Net Investment Income (Loss) to Average Net Assets (2)	4.29		%*++	4.48		%++	4.40		%*
Portfolio Turnover Rate	36		%‡	49		%	7		%‡

(2) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.95	%*++	1.19	%++	1.77	%*
Net Investment Income (Loss) to Average Net Assets	4.07	%*++	4.04	%++	3.39	%*

^	Commencement of operations
†	Per share amount is based on average shares outstanding.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were affected by approximately 0.02% and less than 0.005% for the six months ended March 31, 2008 and for the year ended September 30, 2007, respectively.
‡	Not Annualized
*	Annualized

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

155

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Financial Highlights

Municipal Portfolio

	Class I
	Six Months Ended March 31, 2008			Year Ended September 30,
Selected Per Share Data and Ratios	(unaudited)			2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	12.82		$	12.86		$	12.66		$	12.66		$	12.53		$	12.49
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.30			0.49			0.39			0.40			0.38			0.50
Net Realized and Unrealized Gain (Loss) on Investments	(0.31		)	(0.01		)	0.29			0.02			0.14			(0.01		)
Total from Investment Operations	(0.01		)	0.48			0.68			0.42			0.52			0.49
Distributions from and/or in Excess of:
Net Investment Income	(0.28		)	(0.52		)	(0.48		)	(0.42		)	(0.39		)	(0.45		)
Net Realized Gain	(0.05		)	—			—			—			—			—
Total Distributions	(0.33		)	(0.52		)	(0.48		)	(0.42		)	(0.39		)	(0.45		)
Redemption Fees	0.00		††	0.00		††	0.00		††	—			—			—
Net Asset Value, End of Period	$	12.48		$	12.82		$	12.86		$	12.66		$	12.66		$	12.53
Total Return+	(0.07		)%‡	3.76		%	5.53		%	3.38		%	4.02		%	4.19		%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,010,489		$	936,633		$	662,162		$	509,039		$	368,686		$	313,999
Ratio of Expenses to Average Net Assets (1)	0.50		%*++	0.50		%++	0.49		%	0.50		%	0.50		%	0.50		%
Ratio of Net Investment Income (Loss) to Average Net Assets (1)	4.71		%*++	3.80		%++	3.09		%	3.12		%	3.01		%	4.01		%
Portfolio Turnover Rate#	34		%‡	29		%	43		%	34		%	105		%	47		%

(1) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	N/A	N/A	N/A	N/A	0.51	%	0.51	%
Net Investment Income (Loss) to Average Net Assets	N/A	N/A	N/A	N/A	3.00	%	4.00	%

	Class P
Selected Per Share Data and Ratios	Six Months Ended March 31, 2008 (unaudited)			Period from June 20, 2007^ to September 30, 2007
Net Asset Value, Beginning of Period	$	12.82		$	12.69
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.30			0.24
Net Realized and Unrealized Gain (Loss) on Investments	(0.32		)	0.02
Total from Investment Operations	(0.02		)	0.26
Distributions from and/or in Excess of:
Net Investment Income	(0.27		)	(0.13		)
Net Realized Gain	(0.05		)	—
Total Distributions	(0.32		)	(0.13		)
Redemption Fees	0.00		††	0.00		††
Net Asset Value, End of Period	$	12.48		$	12.82
Total Return+	(0.17		)%‡	2.02		%‡
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	36,897		$	9,945
Ratio of Expenses to Average Net Assets (2)	0.74		%*++	0.73		%*++
Ratio of Net Investment Income (Loss) to Average Net Assets (2)	4.67		%*++	6.66		%*++
Portfolio Turnover Rate	34		%‡	29		%

(2)Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets	0.76	%*++	0.99	%*++
Net Investment Income (Loss) to Average Net Assets	4.65	%*++	6.41	%*++

^	Commencement of operations
†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Tax Exempt Portfolio — Institutional Class during the period. As a result of such rebate, for the six months ended March 31, 2008, the expenses as a percentage of its net assets were effected by less than 0.005%. For the year and/or period ended September 30, 2007, the expenses as a percentage of its net assets were effected by less than 0.005% for Class I and by approximately 0.02% for Class P, respectively.
#	The Portfolio’s turnover rate is calculated by dividing the lesser of purchases and sales of securities for a fiscal year by the average monthly value of portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The Portfolio turnover rate reflects mortgage pool forward commitments as purchases and sales, which was not the case prior to the September 30, 2004. The inclusion of such securities caused the reported turnover rate to be higher during the period than in previous fiscal years.
‡	Not Annualized
*	Annualized

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

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Financial Highlights

Municipal Portfolio

	Class H
Selected Per Share Data and Ratios	Period from January 2, 2008^ to March 31, 2008
Net Asset Value, Beginning of Period	$	12.70
Income (Loss) from Investment Operations
Net Investment Income (Loss)†	0.14
Net Realized and Unrealized Gain (Loss) on Investments	(0.27		)
Total from Investment Operations	(0.13		)
Distributions from and/or in Excess of:
Net Investment Income	(0.09		)
Net Realized Gain	—
Total Distributions	(0.09		)
Redemption Fees	(0.00		)††
Net Asset Value, End of Period	$	12.48
Total Return+	(1.06		)‡
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	2,132
Ratio of Expenses to Average Net Assets	0.83		%*++
Ratio of Net Investment Income (Loss) to Average Net Assets	4.64		%*++
Portfolio Turnover Rate	34		%‡

^	Commencement of operations
†	Per share amount is based on average shares outstanding.
††	Amount is less than $0.005 per share.
+	Calculated based on the net asset value as of the last business day of the period.
++	Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Tax Exempt Portfolio — Institutional Class during the period. As a result of such rebate, the expenses as a percentage of its net assets were effected by approximately 0.01%.
‡	Not Annualized
*	Annualized

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

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Notes to Financial Statements

Morgan Stanley Institutional Fund Trust (“MSIFT” or the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Fund is comprised of nineteen active portfolios. The accompanying financial statements and financial highlights are those of the Balanced, Equities Plus, Mid Cap Growth, U.S. Mid Cap Value, U.S. Small Cap Value, Value, Core Fixed Income, Core Plus Fixed Income, High Yield, Intermediate Duration, International Fixed Income, Investment Grade Fixed Income, Limited Duration, Long Duration Fixed Income and Municipal Portfolios, all of which except the International Fixed Income Portfolio are considered diversified for purposes of the 1940 Act (each referred to as a “Portfolio”). The financial statements of the remaining portfolios of the Fund are presented separately.

The Fund offers up to four different classes of shares for certain Portfolios — Class I shares, Investment Class shares, Class P shares and Class H shares. Effective January 2, 2008, Institutional Class shares and Adviser Class shares of the Portfolios were renamed Class I shares and Class P shares, respectively. Each class of shares has identical voting rights (except shareholders of each Class have exclusive voting rights regarding any matter relating solely to that particular Class of shares), dividend, liquidation and other rights, except each class bears different shareholder service fees as described in Note D. Effective January 2, 2008, the Class H shares commenced operations for the International Fixed Income, Investment Grade Fixed Income and Municipal Portfolios.

A.  Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles. Such policies are consistently followed by the Fund in the preparation of the financial statements. U.S. generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

1.    Security Valuation: Bonds and other fixed income securities may be valued according to the broadest and most representative market. In addition, bonds and other fixed income securities may be valued on the basis of prices provided by a pricing service. The prices provided by a pricing service take into account broker dealer market price quotations for institutional size trading in similar groups of securities, security quality, maturity, coupon and other security characteristics as well as any developments related to the specific securities. Debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost, if it approximates market value. Equity securities listed on a U.S. exchange are valued at the latest quoted sales price on the valuation date. Equity securities listed or traded on NASDAQ, for which market quotations are available, are valued at the NASDAQ Official Closing Price. Securities listed on a foreign exchange are valued at their closing price, except as noted below. Unlisted and listed equity securities not traded on the valuation date, for which market quotations are readily available, are valued at the mean between the current bid and asked prices obtained from reputable brokers.

All other securities and investments for which market values are not readily available, including restricted securities, and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures adopted by the Board of Trustees (the “Trustees”), although the actual calculations may be done by others. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer’s financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.

Most foreign markets close before the New York Stock Exchange (NYSE). Occasionally, developments that could affect the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If these developments are expected to materially affect the value of the securities, the valuations may be adjusted to reflect the estimated fair value as of the close of the NYSE, as determined in good faith under procedures established by the Trustees.

2.    Futures: Financial futures contracts (secured by cash and securities deposited with brokers as “initial margin”) are valued based upon their quoted daily settlement prices; changes in initial settlement value (represented by cash paid to or received from brokers as “variation margin”) are accounted for as unrealized appreciation (depreciation). When futures contracts are closed, the difference between the opening value at the date of purchase and the value at closing is recorded as realized gain or loss in the Statements of Operations. “Due from (to) Broker” includes initial margin and variation margin, as stated in the Statements of Assets and Liabilities.

Futures contracts may be used by each Portfolio in order to hedge against unfavorable changes in the value of securities or to attempt to realize profits from the value of the related securities.

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Futures contracts involve market risk that may exceed the amounts recognized in the Statements of Assets and Liabilities. Risks arise from the possible movements in the prices of securities relating to these instruments. The change in value of futures contracts primarily corresponds with the value of their related securities, but may not precisely correlate with the change in value of such securities. In addition, there is the risk that a Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market.

3.    Securities Sold Short: Each Portfolio may sell securities short. A short sale is a transaction in which the Portfolio sells securities it may or may not own, but has borrowed, in anticipation of a decline in the market price of the securities. The Portfolio is obligated to replace the borrowed securities at their market price at the time of replacement. The Portfolio may have to pay a premium to borrow the securities as well as pay any dividends or interest payable on the securities until they are replaced. The Portfolio’s obligation to replace the securities borrowed in connection with a short sale will generally be secured by collateral deposited with the broker that consists of cash, U.S. government securities or other liquid high grade debt obligations. In addition, the Portfolio will either place in a segregated account with its custodian or denote on its custody records an amount of cash, U.S. government securities or other liquid high grade debt obligations equal to the difference, if any, between (1) the market value of the securities sold at the time they were sold short and (2) any cash, U.S. government securities or other liquid high grade debt obligations deposited as collateral with the broker in connection with the short sale (not including the proceeds of the short sale). Short sales by the Portfolios involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security because losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested.

4.    Swap Agreements: Each Portfolio (other than the Mid Cap Growth Portfolio) may enter into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument. Cash collateral for swap agreements, if applicable, is deposited with the broker serving as counter-party to the agreement, and is included in “Due from (to) Broker” on the Statements of Assets and Liabilities. The following summarizes swaps entered into by the Portfolios:

Credit Default Swaps: Credit default swaps involve commitments to pay a fixed rate in exchange for payment if a credit event affecting a third party (the referenced company) occurs. Credit events may include a failure to pay interest, bankruptcy, or restructuring. The Portfolio accrues for interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) of swap contracts on the Statements of Assets and Liabilities. Once interim payments are settled in cash, the net amount is recorded within realized gain (loss) on swaps on the Statements of Operations. Credit default swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statements of Operations.

Interest Rate Swaps: Interest rate swaps involve the exchange of commitments to pay and receive interest based on a notional principal amount. The Portfolio accrues for interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) of swap contracts on the Statements of Assets and Liabilities. Once interim payments are settled in cash, the net amount is recorded within realized gain (loss) on swaps on the Statements of Operations. In a zero-coupon interest rate swap, payments only occur at maturity, at which time one counterparty pays the total compounded fixed rate over the life of the swap and the other pays the total compounded floating rate that would have been earned had a series of LIBOR investments been rolled over through the life of the swap. The Portfolio amortizes its interest payment obligation over the life of the swap. The amortized portion of this payment is recorded within realized gain (loss) on the Statements of Operations. The unamortized portion of this payment is included in “Due from (to) Broker” on the Statements of Assets and Liabilities. Interest rate swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statements of Operations.

Total Return Swaps: Total return swaps involve commitments to pay interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Portfolio will receive a payment from or make a payment to the counterparty, respectively. Total return swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statements of Operations. Periodic payments received or made at the end of each measurement period, but prior to termination, are recorded as realized gains or losses in the Statements of Operations.

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Notes to Financial Statements (cont’d)

Realized gains or losses on maturity or termination of swaps are presented in the Statements of Operations. Because there is no organized market for these swap agreements, the unrealized gain (loss) reported in the Statements of Assets and Liabilities may differ from that which would be realized in the event the Portfolio terminated its position in the agreement. Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of the agreements and are generally limited to the amount of net interest payments to be received, if any, at the date of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the related amounts shown in the Statements of Assets and Liabilities.

5.    Structured Investments: Certain Portfolios may invest in structured investments whose values are linked either directly or inversely to changes in foreign currencies, interest rates, commodities, indices, equity securities or other underlying instruments. A Portfolio uses these securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets that might be difficult to invest in through conventional securities. Structured investments may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment.

6.    Delayed Delivery Commitments: Each Portfolio may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Liquid securities or cash is designated in an amount at least equal to these commitments. Securities held for this purpose cannot be sold while this strategy is outstanding, unless replaced with other assets. As a result, there is a possibility that as designated assets reach certain levels, a Portfolio may lose some flexibility in managing its investments, responding to shareholder redemption requests, or meeting other current obligations. Such transactions may give rise to a form of leverage. This can cause a Portfolio to be more volatile than if it had not been leveraged, as leverage tends to exaggerate the effect of any increase or decrease in the value of the Portfolio’s securities.

7.    Foreign Currency Translation and Foreign Currency Exchange Contracts: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the bid prices of such currencies against U.S. dollars quoted by a bank. Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on a Portfolio’s books and the U.S. dollar equivalent of amounts actually received or paid.

A foreign currency exchange contract is an agreement between two parties to buy or sell currency at a set price on a future date. Each Portfolio (except the Core Fixed Income and Long Duration Fixed Income Portfolios) may enter into foreign currency exchange contracts to protect securities and related receivables and payables against future changes in foreign exchange rates and, in certain situations, to gain exposure to foreign currencies. Certain Portfolios may also enter into cross currency hedges which involve the sale of one currency against the positive exposure to a different currency. Cross currency hedges may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies. Fluctuations in the value of such contracts are recorded as unrealized appreciation or depreciation; realized gains or losses, which are disclosed in the Statements of Operations, include net gains or losses on contracts which have been terminated by settlements. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and are generally limited to the amount of unrealized gain on the contract, if any, at the date of default. Risks may also arise from unanticipated movements in the value of the foreign currency relative to the U.S. dollar.

Certain Portfolios’ net assets include foreign denominated securities and currency. The net assets of these Portfolios are presented at the foreign exchange rates and market values at the close of the period. The Portfolios do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of the securities held at period end. Similarly, the Portfolios do not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, the components of realized and unrealized foreign currency gains (losses) representing foreign exchange changes on investments is included in the reported net realized and unrealized gains (losses) on investment transactions and balances. Changes in currency exchange rates will affect the value of and investment income from such securities and currency.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of,

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Notes to Financial Statements (cont’d)

among other factors, the possibly lower level of governmental supervision, relative currency valuation fluctuation, regulation of foreign securities markets and the possibility of political or economic instability.

8.    Purchased and Written Options: Certain Portfolios may write covered call and put options on portfolio securities and other financial instruments. Premiums are received and are recorded as liabilities. The liabilities are subsequently adjusted to reflect the current value of the options written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the net realized gain or loss. By writing a covered call option, a Portfolio, in exchange for the premium, foregoes the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase. By writing a put option, a Portfolio, in exchange for the premium, accepts the risk of having to purchase a security at an exercise price that is above the current market price.

Certain Portfolios may purchase call and put options on their portfolio securities or other financial instruments. Each Portfolio may purchase call options to protect against an increase in the price of the security or financial instrument it anticipates purchasing. Each Portfolio may purchase put options on securities which it holds or other financial instruments to protect against a decline in the value of the security or financial instrument or to close out covered written put positions. Risks may arise from an imperfect correlation between the change in market value of the securities held by the Portfolio and the prices of options relating to the securities purchased or sold by the Portfolio and from the possible lack of a liquid secondary market for an option. The maximum exposure to loss for any purchased option is limited to the premium initially paid for the option.

9.    Redemption Fees: Shares of the Balanced, Equities Plus, Mid Cap Growth, U.S. Mid Cap Value, Value, Core Fixed Income, Core Plus Fixed Income, Intermediate Duration, Investment Grade Fixed Income, Limited Duration, Long Duration Fixed Income and Municipal Portfolios redeemed within seven days (30 days with respect to the U.S. Small Cap Value, High Yield and International Fixed Income Portfolios) of purchase may be subject to a 2% redemption fee, payable to the Portfolio. The redemption fee is designed to protect each Portfolio and its shareholders from the effects of short-term trading. These fees, if any, are included on the Statements of Changes in Net Assets.

10.  New Accounting Pronouncements: 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. As of March 31, 2008, the Adviser does not believe the adoption of SFAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period.

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

11.  Other: Security transactions are accounted for on the date the securities are purchased or sold. Costs used in determining realized gains and losses on the sale of investment securities are those of specific securities sold.

Discounts and premiums on securities purchased are accreted/amortized over their respective lives. Most expenses of the Fund can be directly attributed to a particular Portfolio. Expenses which cannot be directly attributed are apportioned among the Portfolios on the basis of their relative net assets. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.

B.    Investment Advisory Fees. Morgan Stanley Investment Management Inc. (the “Adviser” or “MS Investment Management”), a wholly-owned subsidiary of Morgan Stanley, performs investment advisory services at a fee calculated by applying a quarterly rate based on the annual percentage rate

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listed below, to each Portfolio’s average daily net assets for the quarter.

Portfolio	Advisory Fee
Balanced	0.450%
Equities Plus	0.375%
Mid Cap Growth	0.500%
U.S. Mid Cap Value	0.720% first $1 billion
	0.650% over $1 billion
U.S. Small Cap Value	0.670% first $500 million
	0.645% next $500 million
	0.620% over $1 billion
Value	0.500% first $1 billion
	0.450% next $1 billion
	0.400% next $1 billion
	0.350% over $3 billion
Core Fixed Income	0.375%
Core Plus Fixed Income	0.375% first $1 billion
	0.300% over $1 billion
High Yield	0.420% first $500 million
	0.345% next $250 million
	0.295% next $250 million
	0.270% next $1 billion
	0.245% next $1 billion
	0.220% over $3 billion
Intermediate Duration	0.375%
International Fixed Income	0.375%
Investment Grade Fixed Income	0.375%
Limited Duration	0.300%
Long Duration Fixed Income	0.375%
Municipal	0.375%

With respect to certain portfolios, the Adviser has voluntarily agreed to reduce the fees payable to it and, if necessary, reimburse the Portfolios for certain expenses, after giving effect to custody fee offsets, so that annual operating expenses will not exceed voluntary expense limitations established for each class of shares as presented in the table below.

	Voluntary Expense Limitations
	Investment
Portfolio	Class I		Class		Class P		Class H
Equities Plus	0.600	%	—	%	0.850	%	—	%
Core Fixed Income	0.500		0.500		0.750		—
Long Duration Fixed Income	0.500		—		0.750		—
Municipal	0.500		—		0.750		0.750	*

*Excluding transfer agency fees. 

Fee waivers and/or expense reimbursements are voluntary and may be commenced or terminated at any time. For the six months ended March 31, 2008, the Portfolios had advisory fees waived and/or certain expenses reimbursed as follows:

	Advisory Fees Waived
	and/or Reimbursed
Portfolio	(000)
Equities Plus	$	42
Core Fixed Income	49
Long Duration Fixed Income	31
Municipal	18

Morgan Stanley Investment Management Limited (“MSIM Limited”) serves as Sub-Adviser to the International Fixed Income Portfolio. MSIM Limited is a wholly-owned subsidiary of Morgan Stanley. Under an Investment Sub-Advisory Agreement with the Adviser, MSIM Limited, subject to the control and supervision of the Fund, its Officers, Trustees and the Adviser, and in accordance with the investment objectives, policies and restrictions of the Portfolio, makes certain day-to-day investment decisions for the Portfolio and places certain of the Portfolio’s purchase and sales orders. The Adviser pays MSIM Limited on a monthly basis a portion of the net advisory fees the Adviser receives from the Portfolio.

C.    Administration Fees. MS Investment Management (the “Administrator”) also provides the Fund with administration services pursuant to an administration agreement for an annual fee, accrued daily and paid monthly, of 0.08% of each Portfolio’s average daily net assets.

Under an agreement between the Administrator and JPMorgan Investor Services Co. (“JPMIS”), a corporate affiliate of JPMorgan Chase Bank, N.A., JPMIS provides certain administrative services to the Fund. For such services, the Administrator pays JPMIS a portion of the fee the Administrator receives from the Fund.

D.   Shareholder Servicing Fees. Morgan Stanley Distribution, Inc. (“MSDI” or the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor for the Fund.

Pursuant to a Shareholder Service Plan, each Portfolio pays the Distributor a shareholder servicing fee, accrued daily and paid monthly, at an annual rate of up to 0.15% of the Portfolio’s average daily net assets attributable to Investment Class shares. Pursuant to separate Shareholder Service Plans, each Portfolio may pay to the Distributor and other affiliated and unaffiliated broker-dealers, financial institutions and/or inter-mediaries a service fee, accrued daily and paid monthly, at an annual rate of up to 0.25% of the Portfolio’s average daily net assets attributable to Class P and Class H shares, respectively. The shareholder servicing fee is used to support the expenses associated with servicing and maintaining accounts. The Distributor has voluntarily agreed to waive 0.10% of the 0.25% shareholder servicing fee it is entitled to receive from the Class P shares’ average daily net assets for the Investment Grade Fixed Income Portfolio.

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E. Custodian Fees.  JPMorgan Chase Bank, N.A. (the “Custodian”) serves as Custodian for the Fund in accordance with a custodian agreement. The Custodian holds cash, securities, and other assets of the Fund as required by the 1940 Act.

The Fund has entered into an arrangement with its Custodian whereby credits realized on uninvested cash balances were used to offset a portion of each applicable Portfolio’s expenses. These custodian credits are shown as “Expense Offset” on the Statements of Operations.

F.  Portfolio Investment Activity

1. Security Transactions: For the six months ended March 31, 2008, purchases and sales of investment securities other than long-term U.S. government securities and short-term investments were:

	Purchases		Sales
Portfolio	(000)		(000)
Balanced	$	230,423	$	238,830
Equities Plus	870		2,372
Mid Cap Growth	1,436,859		749,841
U.S. Mid Cap Value	46,577		42,066
U.S. Small Cap Value	228,333		197,046
Value	24,336		229,105
Core Fixed Income	497,195		456,664
Core Plus Fixed Income	4,546,601		4,053,360
High Yield	20,171		56,170
Intermediate Duration	14,316		22,826
International Fixed Income	108,301		116,512
Investment Grade Fixed Income	838,945		778,106
Limited Duration		67,149		140,574
Long Duration Fixed Income	3,729		1,981
Municipal	396,529		331,411

For the six months ended March 31, 2008, purchases and sales of long-term U.S. government securities were:

	Purchases		Sales
Portfolio	(000)		(000)
Balanced	$	4,430	$	17,710
Core Fixed Income	25,037		40,839
Core Plus Fixed Income	141,287		298,240
High Yield	2,228		2,258
Intermediate Duration	18,221		18,622
International Fixed Income	1,485		1,499
Investment Grade Fixed Income	34,506		67,109
Long Duration Fixed Income	4,235		9,233

2. Transactions with Affiliates: The Portfolios invest in the Institutional Class of portfolios within the Morgan Stanley Institutional Liquidity Funds (the ‘‘Liquidity Funds’’), an open-end management investment company managed by the Adviser, both directly, and as a portion of the securities held as collateral on loaned securities.  A summary of the Portfolio’s transactions in the shares of the Liquidity Funds during the six months ended March 31, 2008 is set forth below:

	Market Value		Purchases		Sales		Dividend		Market Value
	September 30, 2007		at Cost		Proceeds		Income		March 31, 2008
Portfolio	(000)		(000)		(000)		(000)		(000)
Balanced	$	48,557	$	145,194	$	114,620	$	2,127	$	79,131
Equities Plus	3,938		21,479		23,069		53		2,348
Mid Cap Growth	166,488		689,607		834,805		2,335		21,290
U.S. Mid Cap Value	4,405		42,771		42,206		126		4,970
U.S. Small Cap Value	47,310		127,366		136,721		1,156		37,955
Value	10,961		115,380		121,681		176		4,660
Core Fixed Income	32,976		109,600		117,945		543		24,631
Core Plus Fixed Income	230,945		773,780		830,081		3,312		174,644
High Yield	10,943		81,545		83,004		159		9,484
Intermediate Duration	27,993		34,588		48,178		640		14,403
International Fixed Income	5,845		54,454		51,349		144		8,950
Investment Grade Fixed Income	31,654		131,970		140,599		620		23,025
Limited Duration	65,597		146,863		131,101		1,205		81,359
Long Duration Fixed Income	1,103		15,440		13,757		93		2,786
Municipal	12,492		395,306		341,571		507		66,227

163

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

Investment advisory fees paid by the Portfolios are reduced by an amount equal to their pro-rata share of the advisory and administration fees paid by the Liquidity Funds (“Rebate”). For the six months ended March 31, 2008, advisory fees paid were reduced as follows:

Portfolio	Rebate (000)
Balanced	$	73
Equities Plus	1
Mid Cap Growth	56
U.S. Mid Cap Value	3
U.S. Small Cap Value	28
Value	5
Core Fixed Income	13
Core Plus Fixed Income	82
High Yield	4
Intermediate Duration	15
International Fixed Income	4
Investment Grade Fixed Income	15
Limited Duration	30
Long Duration Fixed Income	2
Municipal	19

The Balanced Portfolio invests in Morgan Stanley Institutional Fund, Inc. Emerging Markets Portfolio — Class I, an open-end management investment company advised by an affiliate of the Adviser. The Morgan Stanley Institutional Fund, Inc. Emerging Market Portfolio — Class I was acquired at a cost of $11,170,000. During the six months ended March 31, 2008, the Portfolio had purchased 57,369 shares of the investment for a realized loss of $80,767.

A summary of the Balanced Portfolio’s transactions in shares of the affiliated issuer during the six months ended March 31, 2008 is as follows:

Market Value September 30, 2007 (000)		Purchases at Cost (000)		Sales Proceeds (000)		Dividend Income (000)		Market Value March 31, 2008 (000)
$	—	$	13,365	$	1,775	$	1,825	$	8,616

During the six months ended March 31, 2008, the following Portfolios paid brokerage commissions to Morgan Stanley & Co., an affiliated broker/dealer.

	Broker Commissions
Portfolio	(000)
Balanced	$	2
Mid Cap Growth	131
U.S. Mid Cap Value	3
U.S. Small Cap Value	2
Value	@—

@ Amount is less than $500.

G. Securities Lending. Certain Portfolios may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Portfolio. Portfolios that lend securities receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked to market daily, by the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.

Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and high-quality short-term investments. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is included in the Portfolios’ Statements of Operations in interest income. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.

The value of loaned securities and related collateral outstanding at March 31, 2008 are as follows:

Portfolio	Value of Loaned Securities (000)		Value of Collateral (000)
Balanced	$	5,253	$	5,339
Equities Plus	101		102
Value	5,490		5,535
Core Fixed Income	22,297		22,737
Core Plus Fixed Income	106,380		108,208
High Yield	27,639		28,354
Investment Grade Fixed Income	22,071		22,509

The following Portfolios had income from securities lending (after rebates to borrowers and allocation to the securities lending agent):

	Net Interest Earned
	by Portfolio
Portfolio	(000)
Balanced	$	23
Equities Plus	@—
Value	42
Core Fixed Income	56
Core Plus Fixed Income	306
High Yield	112
Investment Grade Fixed Income	54

@ Amount is less than $500.

164

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

H. Federal Income Taxes. It is each Portfolio’s intention to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for Federal income taxes is required in the financial statements. Each Portfolio files tax returns with the U.S. Internal Revenue Service and various states. Generally, the tax authorities can examine all tax returns filed for the last three years.

Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recognized on the accrual basis. Dividends from net investment income, if any, are declared and paid quarterly except for those of the Intermediate Duration, Limited Duration and Municipal Portfolios which are declared and paid monthly and those of the Mid Cap Growth, U.S. Mid Cap Value and U.S. Small Cap Value Portfolios which are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.

The Portfolios adopted the provisions of the FASB Interpretation number 48 Accounting for Uncertainty in Income Taxes “the Interpretation”), on March 31, 2008. The Interpretation is to be applied to all open tax years as of the date of effectiveness. As of March 31, 2008, this did not result in an impact to the Portfolios’ financial statements.

The tax character of the Municipal Portfolio’s ordinary income distributions include tax exempt as well as taxable components. The undistributed ordinary income for the Municipal Portfolio includes tax exempt as well as taxable components.

The tax character for distributions paid may differ from the character of distributions shown on the Statements of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal 2007 and 2006 were as follows:

	2007 Distributions Paid From:						2006 Distributions Paid From:
					Long-						Long-
			Tax-		term				Tax-		term
	Ordinary		Exempt		Capital		Ordinary		Exempt		Capital
	Income		Income		Gain		Income		Income		Gain
Portfolio	(000)		(000)		(000)		(000)		(000)		(000)
Balanced	$	5,905	$	—	$	—	$	6,745	$	—	$	—
Equities Plus	2,025		—		607		150		—		—
Mid Cap Growth	6,935		—		—		—		—		—
U.S. Mid Cap Value	992		—		—		1,077		—		—
U.S. Small Cap Value	19,628		—		63,579		9,470		—		29,317
Value	16,197		—		49,107		21,148		—		105,355
Core Fixed Income	15,255		—		—		13,189		—		1,081
Core Plus Fixed Income		148,778		—		—		137,775		—		—
High Yield	16,628		—		—		17,160		—		—
Intermediate Duration	7,079		—		—		10,476		—		—
International Fixed Income	5,213		—		—		7,333		—		161
Investment Grade Fixed Income	27,744		—		—		26,432		—		287
Limited Duration	54,837		—		—		44,031		—		—
Long Duration Fixed Income	1,102		—		48		—		—		—
Municipal	25,018		6,515		—		2,236		19,656		—

The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from U.S. generally accepted accounting principles. The book/tax differences are either considered temporary or permanent in nature.

Temporary differences are generally due to differing book and tax treatments in the timing of the recognition of gains or losses on securities, options, swaps, forwards and futures, including Post October losses.

Permanent differences are generally due to REIT adjustments, foreign currency transactions, foreign futures transactions, swap transactions, distribution reclass, paydown adjustments, non-deductible organization costs and expiration of capital loss carryforward. These resulted in the following reclassifications among the Portfolios’components of net assets at September 30, 2007:

	Accumulated Undistributed (Distributions in Excess of) Net Investment			Accumulated
	Income			Net Realized			Paid-in
	(Loss)			Gain (Loss)			Capital
Portfolio	(000)			(000)			(000)
Balanced	$	825		$	(585	)	$	(240	)
Equities Plus	53			(6		)	(47		)
Mid Cap Growth	(87		)	87			—
U.S. Mid Cap Value	(@—		)	@—			—
U.S. Small Cap Value	(358		)	396			(38		)
Value	(@—		)	@—			—
Core Fixed Income	1,709			(615		)	(1,094		)
Core Plus Fixed Income	20,712			(12,508		)	(8,204		)
High Yield	360			7,307			(7,667		)
Intermediate Duration	177			71			(248		)

165

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

Portfolio	Accumulated Undistributed (Distributions in Excess of) Net Investment Income (Loss) (000)			Accumulated Net Realized Gain (Loss) (000)			Paid-in Capital (000)
International Fixed Income	$	2,911		$	(2,911	)	$	—
Investment Grade Fixed Income	4,957			(2,936		)	(2,021		)
Limited Duration	(907		)	2,201			(1,294		)
Long Duration Fixed Income	(3		)	92			(89		)
Municipal	3,457			(3,261		)	(196		)

@ Amount is less than $500.

At September 30, 2007, the components of distributable earnings on a tax basis were as follows:

Portfolio	Undistributed Ordinary Income (000)		Tax-Exempt Income (000)		Undistributed Long-Term Capital Gain (000)
Balanced	$	2,497	$	—	$	—
Equities Plus	1,396		—		1,126
Mid Cap Growth	8,804		—		—
U.S. Mid Cap Value	953		—		—
U.S. Small Cap Value	30,913		—		55,446
Value	6,334		—		24,662
Core Fixed Income	3,688		—		—
Core Plus Fixed Income	10,349		—		—
High Yield	5,234		—		—
Intermediate Duration	935		—		—
International Fixed Income	9,885		—		—
Investment Grade Fixed Income	4,903		—		—
Limited Duration	5,938		—		—
Long Duration Fixed Income	406		—		—
Municipal	1,997		2,751		1,358

At March 31, 2008, cost, unrealized appreciation, unrealized depreciation and net unrealized appreciation (depreciation) of securities for Federal income tax purposes were:

								Net Unrealized
								Appreciation
	Cost		Appreciation		Depreciation			(Depreciation)
Portfolio	(000)		(000)		(000)			(000)
Balanced	$	351,532	$	27,797	$	(22,894	)	$	4,903
Equities Plus	25,022		324		(5,861		)	(5,537		)
Mid Cap Growth	3,152,935		476,608		(366,257		)	110,351
U.S. Mid Cap Value	165,762		8,914		(18,981		)	(10,067		)
U.S. Small Cap Value	764,876		91,151		(66,739		)	24,412
Value	285,160		28,881		(34,373		)	(5,492		)
Core Fixed Income	416,228		4,684		(33,782		)	(29,098		)
Core Plus Fixed Income	3,525,218		46,007		(314,601		)	(268,594		)
High Yield	217,974		1,803		(49,112		)	(47,309		)
Intermediate Duration	158,611		1,114		(13,740		)	(12,626		)
International Fixed Income	202,267		24,812		(827		)	23,985
Investment Grade Fixed Income	659,631		7,719		(52,067		)	(44,348		)
Limited Duration	1,031,011		6,652		(141,878		)	(135,226		)
Long Duration Fixed Income	29,674		1,004		(483		)	521
Municipal	1,085,491		24,465		(32,957		)	(8,492		)

At September 30, 2007, the following Portfolios had available for Federal income tax purposes unused capital losses, which will expire on the indicated dates:

	Expiration Date September 30,
	(000)
Portfolio	2008		2009		2010		2011
Balanced	$	—	$	—	$	—	$	21,499
Mid Cap Growth	—		—		165,460		303,325
U.S. Mid Cap Value	—		—		—		139,180
Core Fixed Income	—		—		—		—
Core Plus Fixed Income	—		—		—		36,930
High Yield	12,236		26,962		20,212		183,778
Intermediate Duration	—		—		—		—
Investment Grade Fixed Income	—		—		—		—
Limited Duration	—		—		—		—

	Expiration Date September 30,
	(000)
Portfolio	2012		2013		2014		2015		Total
Balanced	$	—	$	—	$	—	$	—	$	21,499
Mid Cap Growth	—		—		—		—		468,785
U.S. Mid Cap Value	—		—		—		—		139,180
Core Fixed Income	—		—		489		—		489
Core Plus Fixed Income	—		—		7,135		15,680		59,745
High Yield	205,458		11,840		874		737		462,097
Intermediate Duration	—		673		1,559		5,324		7,556
Investment Grade Fixed Income	—		—		607		12		619
Limited Duration	—		8,253		8,229		7,068		23,550

In addition to the $462,097,000 in unused capital losses attributed to the High Yield Portfolio in the table above, approximately $54,190,000 has been brought forward as a result of the Portfolio’s merger with the MSIF Inc. High Yield II Portfolio. The utilization of the capital loss carryforward in subsequent years may be limited pursuant to sections 382 and 383 of the Internal Revenue Code. This acquired capital loss carryforward is expected to expire between 2007-2014.

To the extent that capital loss carryforwards are used to offset any future capital gains realized during the carryforward period as provided by U.S. Federal income tax regulations, no capital gains tax liability will be incurred by a portfolio for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.

166

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Notes to Financial Statements (cont’d)

During the year ended September 30, 2007, the following Portfolios utilized capital loss carryforwards for U.S. Federal income tax purposes of approximately:

Portfolio	Capital Loss Carryforward Utilized (000)
Balanced	$	20,215
Mid Cap Growth	321,771
U.S. Mid Cap Value	33,211
Core Fixed Income	96
Municipal	943

Under current tax law, certain capital and net foreign exchange losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended September 30, 2007, the following Portfolios elected to defer capital and currency losses occurring between November 1, 2006 and September 30, 2007 up to the following amounts:

	Post-October
Portfolio	Capital Losses (000)		Currency Losses (000)
Mid Cap Growth	$	—	$	86
Core Fixed Income	606		—
Core Plus Fixed Income	745		1,820
High Yield	—		635
Investment Grade Fixed Income	2,778		—
Long Duration Fixed Income	27		—

I. Contractual Obligations. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

J. Other. The High Yield Portfolio’s net assets are substantially comprised of high yield fixed income securities. The financial condition of an issuer of these securities and general economic and industry specific conditions may affect an issuer’s ability to make payments of income and principal on these securities and ultimately impact their valuation.

A portion of the securities of the Municipal Portfolio are insured by certain companies specializing in the insurance of municipal debt obligations. At March 31, 2008, approximately 73% of the net assets of the Municipal Portfolio are covered by such insurance. Listed below are the insurers that insure obligations constituting more than 10% of the Portfolio’s net assets:

	% of
	Portfolio’s
Insurers	Net Assets
MBIA	16.5	%
FGIC	15.7
FSA	15.5
AMBAC	14.7

At March 31, 2008, certain Portfolios had otherwise unaffiliated record owners of 10% or greater. Investment activities of these shareholders could have a material impact on these Portfolios. These Portfolios and the aggregate percentage of such owners was as follows:

	Percentage of Ownership
Portfolio	Class I		Investment Class		Class P
Balanced	84.1	%	98.6	%	85.9	%
Mid Cap Growth	29.5		—		64.2
U.S. Mid Cap Value	61.9		85.7		75.8
U.S. Small Cap Value	15.0		—		67.1
Value	63.3		—		93.4
Core Fixed Income	—		—		96.3
Core Plus Fixed Income	25.1		96.5		88.3
High Yield	—		—		77.3
Intermediate Duration	89.4		100.0		—
International Fixed Income	11.7		—		—
Investment Grade Fixed Income	23.0		—		—
Long Duration Fixed Income	11.1		—		—
Municipal	33.6		—		27.0

K. Reverse Stock Split. After the close of business on November 10, 2006, High Yield Portfolio effected a 1 for 2 reverse stock split for the shares of the Portfolio. All transactions in capital stock and per share data prior to November 13, 2006 have been restated to give effect to the reverse stock split. The reverse stock split had no impact on the overall value of a shareholder’s investment in the Portfolio.

L. Subsequent Event. The Trustees of the Fund approved adding Class L shares to International Fixed Income, Investment Grade Fixed Income and Municipal Portfolios.

167

2008 Semi-Annual Report

March 31, 2008

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

POLICY CONCERNING CUSTOMER INFORMATION

Morgan Stanley Institutional Fund Trust (the “Fund”) is required by federal law to provide you with a copy of their Privacy Policy (the “Policy”) annually. The following Policy applies to current and former individual clients of the Fund. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders. Please note that this Policy may be amended at any time, and that you will be informed of any changes to this Policy as required by law.

THE FUND RESPECTS YOUR PRIVACY

The Fund appreciates that you have provided your personal financial information and strive to maintain the privacy of such information. This Policy describes, and is designed to help you understand, what non-public personal information the Fund may collect about you, why the Fund collects it, and when the Fund may share it with others. Throughout this Policy, the non-public information that personally identifies you or your accounts is referred to as “personal information.”

1.WHAT PERSONAL INFORMATION DOES THE FUND COLLECT ABOUT YOU?

To serve you better and manage your investment, it is important that the Fund collects and maintains accurate information about you. The Fund obtains this information from applications and other forms you submit, from your dealings with the Fund, and from third parties and other sources.

For example:

·The Fund collects information such as your name, address, e-mail address, and telephone/fax numbers through applications and other forms you may submit.

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

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

2.WHEN DOES THE FUND DISCLOSE PERSONAL INFORMATION COLLECTED ABOUT YOU?

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

a.Information the Fund discloses to affiliated companies:

The Fund does not disclose personal information collected about you to affiliated companies except to enable them to provide services on their behalf or as otherwise required or permitted by law.

b.Information the Fund discloses to third parties:

The Fund does not disclose personal information collected about you to non-affiliated third parties except to enable them to provide services on the Fund’s behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where the Fund may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to protect against fraud, for institutional risk control or to respond to judicial process. When the Fund shares personal information with these third parties, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose.

168

2008 Semi-Annual Report

March 31, 2008

An Important Notice Concerning Our U.S. Privacy Policy (cont’d)

3. HOW DOES THE FUND PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION COLLECTED ABOUT YOU?

The Fund and/or its service providers maintain physical, electronic and procedural security measures to help safeguard the personal information collected about you. The Fund and its service providers have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on the Fund’s behalf may also receive personal information, and they are required to adhere to confidentiality standards with respect to such information.

If you have any questions regarding this Policy, please contact a Fund representative at (800) 548-7786.

© 2008 Morgan Stanley Institutional Fund Trust

169

2008 Semi-Annual Report

March 31, 2008 (unaudited)

Trustee and Officer Information

Trustees	Officers
Michael E. Nugent	Michael E. Nugent
Frank L. Bowman	Chairman of the Board and Trustee
Michael Bozic	Ronald E. Robison
Kathleen A. Dennis	President and Principal Executive Officer
James F. Higgins	Dennis F. Shea
Dr. Manuel H. Johnson	Vice President
Joseph J. Kearns	Amy R. Doberman
Michael F. Klein	Vice President
W. Allen Reed	Carsten Otto
Fergus Reid	Chief Compliance Officer
Investment Adviser and Administrator	Stefanie V. Chang Yu
Morgan Stanley Investment Management Inc.	Vice President
522 Fifth Avenue	Mary E. Mullin
New York, NY 10036	Secretary
Distributor	James W. Garrett
Morgan Stanley Distribution, Inc.	Treasurer and Chief Financial Officer
One Tower Bridge
100 Front Street, Suite 1100
West Conshohocken, PA 19428-2899
Custodian
JPMorgan Chase Bank, N.A.
270 Park Avenue
New York, NY 10017
Legal Counsel
Clifford Chance US LLP 31
West 52nd Street
New York, NY 10019-6131
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072

Reporting to Shareholders

Each Morgan Stanley Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports within 60 days of the end of the Fund’s second and fourth fiscal quarters. The semi-annual 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 semi-annual and annual reports to Fund shareholders and makes these reports available on its public website, 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 website. 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 website, 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 1(800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC’s email address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102.

Proxy Voting Policies and Procedures and Proxy Voting Record

You may obtain a copy of the Fund’s Proxy Voting Policy and Procedures and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll-free 1(800) 548-7786 or by visiting our website at www.morganstanley.com/im. This information is also available on the SEC’s website at http://www.sec.gov.

This report is authorized for distribution only when preceded or accompanied by the prospectus of the Morgan Stanley Institutional Fund Trust which describes in detail each Investment Portfolio’s investment policies, risks, fees and expenses. Please read the prospectus carefully before you invest or send money. For additional information, including information regarding the investments comprising the Portfolio, please visit our website at www.morganstanley.com/im or call 1(800) 548-7786.

170

Printed in U.S.A.

This Report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
Investment Adviser: 1(610) 940-5000 • MSIF Trust 1(800) 548-7786

© 2008 Morgan Stanley

IFEQFISAN 3/08

IU08-02832P-Y03/08

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. Schedule of Investments

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 to annual 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 registrants has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) Morgan Stanley Institutional Fund Trust

By:	/s/ Ronald E. Robison
Name:	Ronald E. Robison
Title:	Principal Executive Officer
Date:	May 20, 2008

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.

By:	/s/ Ronald E. Robison
Name:	Ronald E. Robison
Title:	Principal Executive Officer
Date:	May 20, 2008

By:	/s/ James Garrett
Name:	James Garrett
Title:	Principal Financial Officer
Date:	May 20, 2008

EX-99.CERT

Exhibit 99.CERT

I, James Garrett, certify that:

1.I have reviewed this report on Form N-CSR of Morgan Stanley Institutional Fund Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control  over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:  May 20, 2008

/s/James Garrett

James Garrett

Principal Financial Officer

I, Ronald E. Robison, certify that:

1.I have reviewed this report on Form N-CSR of Morgan Stanley Institutional Fund Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control  over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:  May 20, 2008

/s/Ronald E. Robison

Ronald E. Robison

Principal Executive Officer

EX-99.906CERT

Exhibit 99.906.CERT

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Name of Issuer: Morgan Stanley Institutional Fund Trust

In connection with the Report on Form N-CSR (the “Report”) of the above-named issuer for the period ended March 31, 2008 that is accompanied by this certification, the undersigned hereby certifies that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date: May 20, 2008	/s/James Garrett
	James Garrett
	Principal Financial Officer

A signed original of this written statement required by Section 906 has been provided to Morgan Stanley Institutional Fund Trust and will be retained by Morgan Stanley Institutional Fund Trust and furnished to the Securities and Exchange Commission or its staff upon request.  This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report.

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Name of Issuer: Morgan Stanley Institutional Fund Trust

In connection with the Report on Form N-CSR (the “Report”) of the above-named issuer for the period ended March 31, 2008 that is accompanied by this certification, the undersigned hereby certifies that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date: May 20, 2008	/s/Ronald E. Robison
	Ronald E. Robison
	Principal Executive Officer

A signed original of this written statement required by Section 906 has been provided to Morgan Stanley Institutional Fund Trust and will be retained by Morgan Stanley Institutional Fund Trust and furnished to the Securities and Exchange Commission or its staff upon request.  This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report.