0000912057-01-535333.txt : 20011019 0000912057-01-535333.hdr.sgml : 20011019 ACCESSION NUMBER: 0000912057-01-535333 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20011012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY VARIABLE INVESTMENT SERIES CENTRAL INDEX KEY: 0000716716 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133178476 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03692 FILM NUMBER: 1758361 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER STREET 2: 70TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123921600 MAIL ADDRESS: STREET 1: TWO WORLD TRADE CENTER STREET 2: 70TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER VARIABLE INVESTMENT SERIES DATE OF NAME CHANGE: 19930209 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES DATE OF NAME CHANGE: 19980622 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN VARIABLE INVESTMENT SERIES DATE OF NAME CHANGE: 19920703 N-30D 1 a2055816zn-30d.txt N-30D MORGAN STANLEY VARIABLE INVESTMENT SERIESSEMI-ANNUAL REPORT SEMI-ANNUAL REPORT JUNE 30, 2001 Morgan Stanley Variable Investment Series TABLE OF CONTENTS Letter to the Shareholders.................................. 1 Fund Performance............................................ 19 Portfolio of Investments: Money Market............................................ 21 Short-Term Bond......................................... 23 Quality Income Plus..................................... 27 High Yield.............................................. 32 Utilities............................................... 41 Income Builder.......................................... 44 Dividend Growth......................................... 48 Capital Growth.......................................... 51 Global Dividend Growth.................................. 55 European Growth......................................... 61 Pacific Growth.......................................... 66 Equity.................................................. 74 S&P 500 Index........................................... 79 Competitive Edge "Best Ideas"........................... 91 Aggressive Equity....................................... 95 Information............................................. 100 Strategist.............................................. 104 Financial Statements: Statements of Assets and Liabilities.................... 114 Statements of Operations................................ 117 Statements of Changes in Net Assets..................... 120 Notes to Financial Statements............................... 132 Financial Highlights........................................ 146
Morgan Stanley Variable Investment Series Two World Trade Center LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 New York, New York 10048 Dear Shareholder: U.S. economic growth decelerated through the end of 2000 and continued slowing during the first half of 2001. Much of the weakness was centered in the industrial sector, especially in the telecommunications and technology industries, which enjoyed exceptional growth over the previous several years. According to the National Association of Purchasing Managers, the industrial contraction was particularly severe during the first quarter of 2001, and manufacturing conditions remained negative through the end of June. Consumer spending, which accounts for about two-thirds of the gross domestic product of the United States, held up remarkably well, but also decelerated. Consumer confidence dropped to its lowest level in some four years. U.S. monetary and fiscal policies in the six-month period ended June 30, 2001, were aimed at stimulating economic growth. The Federal Reserve Board cut the benchmark federal funds rate by 275 basis points (2.75 percent) during the period. This was the Fed's most aggressive monetary policy adjustment since 1984. As for fiscal policy, Congress passed reductions in personal tax rates that included rebate checks scheduled to be sent out during the third quarter of this year. Equity Market Overview The six-month period ended June 30, 2001, was mixed for equity investors. January and April were the only positive months for growth investors, led by sharp advances in technology. Within the large-capitalization arena, value outperformed growth by a margin of 8 percent. Within small caps, value stocks outperformed their growth counterparts by a 12-percent margin. Preannouncements around the second-quarter earnings season dominated investor sentiment in May and June. While there was negative news from the technology sector -- most notably within telecommunications, not all the bad news was in technology. Merrill Lynch surprised the markets with a negative profit warning late in June. Among the 948 companies preannouncing earnings, 67 percent of the reports were negative, slightly improved from 69 percent in the first quarter. Fixed-Income Overview The U.S. Treasury market responded positively to the slowing economy in January and February of this year. Since then, the Fed's easing has continued to pull short-term interest rates lower; but expectations for an economic recovery have led to rising long-term rates. Consequently, the yield on the two-year Treasury note fell to 4.24 percent at the end of June from 5.10 percent six months earlier. The yields on 10- and 30-year Treasuries both increased by some 30 basis points, ending the period at 5.41 percent and 5.76 percent, respectively. At the beginning of the period, yields on GNMAs and other mortgage-backed securities were near their highest levels relative to Treasury yields in 15 years. As the period progressed, Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED mortgage-backed securities performed relatively well. Mortgage yields remained attractive as the period drew to a close. International Overview European stock markets continued to trend down in sympathy with U.S. stock markets during the period under review. Early on, European companies seemed to shrug off economic concerns and returned strong first-quarter results. By the second quarter, however, it became increasingly apparent that neither European companies nor European economies would remain immune from the problems being experienced in the global economy. Across many sectors, there is now a noticeable slowdown in activity, which is being reflected in a steady stream of profit warnings and preannouncements of weak first-half numbers. The European Central Bank does not seem to be responding to this weakening in European economies and is sending out no firm signals that it is prepared to reduce interest rates further. Given this uncertainty, the euro remains weak against the U.S. dollar. During the first half of 2001, Japanese equities experienced high volatility, declining more than 8 percent as a result of global and domestic concerns. In May, Japanese equities rallied on investor optimism that newly elected Prime Minister Koizumi would gain enough political support for policies to rescue Japan's fragile economy. By the end of June, Japanese equities retreated to their pre-election levels, lacking direction in the face of a confluence of events including investors' concerns about Koizumi's reforms, lack of positive news on individual stocks, a weakening domestic economy and the poor outlook for the U.S. economy. In addition, the Japanese markets were reeling from the pressure of companies unwinding their cross-share holdings. The Asia ex-Japan region declined nearly 6 percent because of concerns over slowing economic growth and diminishing corporate profits. The prolonged weakness in global demand, specifically for technology-related products, continues to pressure export-oriented economies. Disappointing economic news from Europe and Japan reduced expectations of an imminent global economic recovery and added to regional concerns over a possible recession and earnings downgrades. Aggressive Equity Portfolio For the six-month period ended June 30, 2001, Aggressive Equity Portfolio's Class X shares posted a total return of -21.17 percent compared to -6.69 percent for the Standard & Poor's 500 Stock Index 2 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED (S&P 500)(1) and -12.48 percent for the Nasdaq composite. For the same period, the Portfolio's Class Y shares returned -21.24 percent. The performance of the two share classes varies because each has different expenses. Given our outlook for a slowing economy, we positioned the Portfolio away from economically sensitive groups that we believed would more likely experience a deceleration in earnings and toward industries with more stable earnings growth. Historically, in our experience, this has been the strategy that has worked at this stage of the economy. This time around, however, while our economic outlook was correct and economically sensitive groups did have the worst earnings growth, sector leadership did not reflect this scenario. Instead, relative valuations played the more significant role. Because many cyclicals, including basic commodities, capital goods and consumer cyclicals, had long underperformed, their valuations became deeply undervalued and, apparently, too compelling for investors to resist. These factors contributed to the Portfolio's underperformance relative to its benchmark index. Another reason for the divergence in sector performance from the historical pattern is that the order of this economic cycle was reversed. Typically, it is the consumer that leads the economy down, pulling capital goods and basic materials with it. This time, commodity industries peaked in 1998, two years ahead of the rest of the economy. Next, the prospects for capital goods companies, particularly technology firms, began to plummet in 2000. This in turn began to slow consumer spending late in 2000. Unusually, while consumer spending on big-ticket items has slowed, it has held together impressively. This is particularly true relative to past recessions. Behind this is the fact that corporations have been slower to terminate employees, given that demographics have limited the availability of labor. In our view, the key as to whether consumer spending will finally break, taking real estate with it, will be the direction of unemployment. If unemployment soars, the last economic support will fall. There is growing evidence that the U.S. economy is stabilizing and could begin to recover at the end of the year. Europe and the rest of the world are likely to follow suit, probably within two quarters. However, it appears that the recovery could be subpar, as consumer-spending growth has stayed above historic trendline levels, suggesting that this area, which accounts for two-thirds of the economy, will experience only an anemic recovery. The free fall in technology earnings should begin to abate as earnings comparisons become --------------------- (1)The Standard & Poor's 500 Index (S&P 500-Registered Trademark-) is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity and industry group representation. The Index does not include any expenses, fees or charges. The Index is unmanaged and should not be considered an investment. 3 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED much more easily made in December and inventory levels more normalized by year-end. However, the technology sector, which accounted for one-third of the growth in the economy in the latter part of the 1990s, is also likely to stage a slow comeback, as excess capacity will overhang for at least another year. Nevertheless, consumer and technology stocks could rally in anticipation of a normal recovery in these two sectors. Basic infrastructure and all its suppliers, an area that has been underinvested in during the last 10 years, may emerge as one of the leading growth sectors as the economy bottoms. Capital spending in the United States has been dominated by technology over the last 10 years. As a result, basic investments in energy exploration, utility production and transportation construction have been neglected. Additionally, commodity companies around the world have shown much more financial and capital discipline this time around. Insufficient rain in many of the significant commodity and agriculture production areas of the world may also reduce the supply and availability of basic materials needed for the infrastructure build-out that has begun as well as global grain inventories. We anticipate that the Portfolio will increasingly be oriented toward this new area of growth for the economy. Capital Growth Portfolio For the six-month period ended June 30, 2001, Capital Growth Portfolio's Class X shares produced a total return of -15.09 percent versus -6.69 percent for the S&P 500. For the same period, the Portfolio's Class Y shares returned -15.20 percent. The performance of the two share classes varies because each has different expenses. The Portfolio's performance suffered on both an absolute and a relative basis when the Fed made its first interest-rate cut of 2001 in early January. Since that time we have been repositioning the Portfolio in consideration of the Fed's current, more-accommodative interest-rate policy. Because we believe that the stock market has begun a bottoming process, we reduced some of the Portfolio's positions in the energy, financial services and consumer sectors, investing the proceeds in more-cyclical areas, including, selectively, the technology sector. The Portfolio continues to invest in companies across the market-cap spectrum. At the end of June, the Portfolio had 20.5 percent of its assets in financial services, 20.5 percent in health care, 20.5 percent in capital goods and basic industry combined, 18.5 percent in technology, 17 percent in the consumer sector and 3 percent in energy. The Portfolio's 10 largest holdings on June 30 were Apple Computer, Cendant, UnumProvident, Fifth Third Bancorp, Lincare Holdings, Tenet Healthcare, Citrix Systems, Golden West Financial, Microsoft and Advance PCS. 4 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED Competitive Edge -- "Best Ideas" Portfolio For the six-month period ended June 30, 2001, Competitive Edge -- "Best Ideas" Portfolio's Class X shares posted a total return of -15.41 percent versus -10.66 percent for the Morgan Stanley Capital International (MSCI) World Index.(2) For the same period, the Portfolio's Class Y shares returned -15.50 percent. The performance of the two share classes varies because each has different expenses. A concentration in large-capitalization global growth stocks, as well as a number of U.S. technology stocks and euro-based telecommunications companies, led to the Portfolio's underperformance relative to the MSCI World Index. The Portfolio invests primarily in stocks compiled by the Morgan Stanley Equity Research department that are believed to demonstrate a long-term sustainable "competitive edge" versus other players in the global arena. As of June 30, 2001, approximately 99 percent of the Portfolio's assets were invested in 40 equity positions throughout the world. The remaining 1 percent was held in cash equivalents. The Portfolio's 10 largest positions were Microsoft, AOL Time Warner, General Electric, Clear Channel Communications, News Corporation Preference shares, Diageo PLC, United Technologies, Groupe Danone, Johnson & Johnson and Suez. Dividend Growth Portfolio For the six-month period ended June 30, 2001, Dividend Growth Portfolio's Class X shares posted a total return of 1.31 percent versus -6.69 percent for the S&P 500. For the same period, the Portfolio's Class Y shares returned 1.13 percent. The performance of the two share classes varies because each has different expenses. The Portfolio's performance outpaced that of the S&P 500, due in part to its underexposure to high technology and stocks with high price-to-earnings ratios, many of which underperformed during the period. Instead, the Portfolio's screening process led to overweightings in basic materials, capital goods, --------------------- (2) The Morgan Stanley Capital International (MSCI) World Index measures performance from a diverse range of global stock markets including securities representative of the market structure of 22 developed market countries in North America, Europe, and the Asia/Pacific region. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. "Net dividends" reflects a reduction in dividends after taking into account withholding of taxes by certain foreign countries represented in the Index. The Index does not include any expenses, fees or charges. The Index is unmanaged and should not be considered an investment. 5 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED energy and utilities, which enjoy strong cash flows and attractive dividend yields, many of these sectors having had positive earnings compared with year-ago results. On June 30, 2001, the Portfolio was relatively fully invested. In an effort to maintain the Portfolio's stated intention of focusing on its investment in traditional companies with an e-commerce strategy, the managers took steps to restructure the Portfolio accordingly. Portfolio transactions during the period included a reallocation of assets to reflect a more accurate use of the dividend growth discipline. As a result, holdings in Ryder and Aetna were liquidated. At the end of June, the Portfolio was invested in 72 common stocks spread among 36 different industry groups. Equity Portfolio For the six-month period ended June 30, 2001, Equity Portfolio's Class X shares posted a total return of -18.70 percent versus -6.69 percent for the S&P 500. For the same period, the Portfolio's Class Y shares returned -18.83 percent. The performance of the two share classes varies because each has different expenses. The Portfolio's performance lagged that of its benchmark primarily because of its exposure to health care and technology. Typically, we would have expected health care to outperform at this point in the economic cycle due to its steady earnings growth. It did not this time, as value stocks outperformed growth stocks. Investments in certain areas of consumer cyclicals, including retailing and media, were beneficial to the Portfolio's relative performance. On June 30, 2001, the Portfolio's 10 largest holdings were Microsoft, AOL Time Warner, Genzyme, Verisign, Baxter International, Ebay, Clear Channel Communications, Veritas Software, Hershey Foods and Fifth Third Bancorp. We continue to expect modest improvement in economic growth and earnings toward the end of 2001. We are using a barbell approach in managing the Portfolio, focusing on consumer cyclical stocks that may benefit as the U.S. economy improves as well as steady growth companies that can produce earnings increases in a difficult environment. European Growth Portfolio For the six-month period ended June 30, 2001, European Growth Portfolio's Class X shares produced a total return of -14.46 percent versus -10.66 percent for the MSCI World Index and -17.54 percent for 6 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED the MSCI Europe Index(3). For the same period, the Portfolio's Class Y shares returned -14.57 percent. The performance of the two share classes varies because each has different expenses. During the period, the Portfolio maintained its concentration in mid- and large-capitalization growth stocks, continuing to use a bottom-up investment process. In this environment Morgan Stanley Investment Management Inc., the Portfolio's sub-advisor, remained skeptical of many of the more highly valued growth issues, preferring instead to invest in more-defensive growth areas, including food, beverage and tobacco manufacturers. The sub-advisor added a number of new stock names to the Portfolio during the period, including the Swiss lock manufacturer Kaba Holding, the German telecommunications company Deutsche Telekom and the high-quality French food retailer Carrefour. After a difficult period for the company following its acquisition of Promodes, a competitor in France, the sub-advisor considers Carrefour capable of regaining lost market share and rebuilding profitability. As of June 30, 2001, the Portfolio's regional weightings were 46.8 percent in the eurozone (the 11 countries that have adopted the euro as a common currency), 36.7 percent in the United Kingdom, 9 percent in Switzerland and 4.5 percent in Sweden, with the remainder in cash and other assets. Morgan Stanley Investment Management believes that the outlook for European equities is mixed. In the short term, the sub-advisor is concerned that economic weakness in the United States and Latin America may continue to affect European markets. Indeed, the United Kingdom and the eurozone economies are already beginning to show signs of weakening. On the other hand, any acceleration of this process of economic deterioration in Europe and the United Kingdom may prompt the central banks in some countries to react with further interest-rate cuts, and any such moves could stimulate stock markets. Another issue of note for the U.S.-dollar-based investor in the European markets is the continued strength of the dollar against the euro. Toward the end of 2000 the euro rallied somewhat, but that run proved short-lived. It remains to be seen whether the euro will be able to achieve sustained strength in this environment. --------------------- (3)The Morgan Stanley Capital International (MSCI) Europe Index measures the performance for a diverse range of global stock markets within Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland, Ireland, Portugal, and the United Kingdom. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. "Net dividends" reflects reduction in dividends after taking into account withholding of taxes by certain foreign countries represented in the Index. The Index does not include any expenses, fees or charges. The Index is unmanaged and should not be considered an investment. 7 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED Global Dividend Growth Portfolio For the six-month period ended June 30, 2001, Global Dividend Growth Portfolio's Class X shares produced a total return of -3.72 percent versus -10.66 percent for the MSCI World Index. For the same period, the Portfolio's Class Y shares returned -3.81 percent. The performance of the two share classes varies because each has different expenses. Consistent with our expectation of continued weakness in the U.S. equity markets, we are targeting just 33 percent of the Portfolio's net assets toward U.S. equities. This level of exposure, a significant underweighting relative to that of the MSCI World Index (53.3 percent), has helped protect investors from the extreme volatility in the U.S. equity markets of late. Japan's economic growth is still anemic, constrained in part by its dependence on high-priced imported oil. Even as the price of oil has declined, however, the economy there has struggled to find the confidence it once had. We are currently targeting 10 percent of the Portfolio's net assets toward Japan, slightly lower than that market's 10.7 percent weighting in the MSCI World Index. European markets underperformed the U.S. market during the period, with the MSCI Europe Index down 18.2 percent. While the Portfolio's limited exposure to technology and telecommunications helped its relative performance considerably, its overweighted stance in Europe detracted from its return. We are currently targeting 34 percent of the Fund's net assets toward continental European markets and 11.0 percent toward the United Kingdom, versus the MSCI World Index's weightings of 21.1 percent and 9.8 percent, respectively. Hong Kong and Singapore are the only Asian markets outside Japan that the Portfolio has exposure to. Over the last six months, the region has given back some of the strong gains it made following the Asian currency crisis more than two years ago. The Portfolio is currently targeting 4.0 percent of net assets toward investments in Hong Kong and Singapore, versus a 1.3 percent weighting for those two markets combined in the MSCI World Index. At current prices, an Asian recovery seems well discounted, but we remain optimistic about further strength in economic activity, corporate profits and thus share prices. The Portfolio also remains exposed to the resource-oriented markets of Australia (4.0 percent) and Canada (3.0 percent), where economic fundamentals continue to be strong. During this period, we liquidated positions in Qantas Airways, Seat-Pagine Gialle, Portugal Telecom, British Telecom, Telus Corporation, Massey Energy and Agilent Technologies. 8 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED High Yield Portfolio For the six-month period ended June 30, 2001, High Yield Portfolio's Class X shares posted a total return of -16.93 percent versus 3.93 percent for the Lehman Brothers U.S. Corporate High Yield Index.(4) For the same period, the Portfolio's Class Y shares returned -17.04 percent. The performance of the two share classes varies because each has different expenses. The Portfolio's underperformance relative to its benchmark resulted primarily from the poor performance of its core holdings in the B-rated sector in general and its telecommunications and technology holdings in particular. While some sectors of the high-yield market improved during the period, B-rated securities continued to experience difficulty. Moreover, the telecommunications and technology industry sectors, which collectively are both the market's and the Portfolio's largest weightings, remained under pressure as companies announced shortfalls in their sales and income projections and as credit remained restrictive. Against this backdrop, default levels increased for both the market and the Portfolio. As previously announced, a new investment team assumed responsibility for the Portfolio in early January. The team immediately undertook a rigorous review of the high-yield component's holdings. Based on their bottom-up analysis, the new management team redeployed a portion of the Portfolio's assets into securities that they believe offer better investment potential. The team also retained a number of securities that they consider to have good recovery value. In each instance the team took account of the need to balance the risks inherent in the high-yield market with the Portfolio's investment objectives. Income Builder Portfolio For the six-month period ended June 30, 2001, Income Builder Portfolio's Class X shares posted a total return of 4.90 percent versus -6.69 percent for the S&P 500. For the same period, the Portfolio's Class Y shares returned 4.81 percent. The performance of the two share classes varies because each has different expenses. --------------------- (4) The Lehman Brothers U.S. Corporate High Yield Index tracks the performance of all below-investment-grade securities that have at least $100 million in outstanding issuance, a maturity greater than one year, and are issued in fixed-rate U.S. dollar denominations. The Index does not include any expenses, fees or charges. The Index is unmanaged and should not be considered an investment. 9 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED The Portfolio's outperformance relative to its benchmark can be attributed largely to its lack of exposure to technology stocks, which generally pay little if any dividends. Because the Portfolio's primary objective is to provide reasonable income, these stocks are typically not included among its holdings. The Portfolio's value-oriented style of stock selection also benefited its performance relative to the S&P 500. During the period, consumer cyclicals, communication services and energy stocks were positive contributors to the Portfolio's performance, while investments in health care and utilities had a negative effect. We continue to remain positive about energy, as we believe that group can continue to provide stable returns in a slower economic growth scenario. On June 30, 2001, the Portfolio's large-cap stock segment was relatively fully invested, as it has been since its inception. Portfolio transactions during the period included the purchase of Burlington Resources, Pitney Bowes, Sears and Sprint and the elimination of AT&T, Ryder and Supervalu. Information Portfolio For the six-month period ended June 30, 2001, Information Portfolio's Class X shares posted a total return of -34.05 percent versus -6.69 percent for the S&P 500 and -12.48 percent for the Nasdaq composite. For the same period, the Portfolio's Class Y shares returned -34.17 percent. The performance of the two share classes varies because each has different expenses. This period was characterized by deteriorating fundamentals in the technology sector, with companies slashing their information technology budgets and consumers feeling the pressure of a weakening economy. The decline in demand reverberated through the entire food chain, putting pressure on everyone from systems manufacturers to component suppliers. We believe this slowdown is temporary and have shifted our focus to determining which companies are best poised to recuperate. In the meantime, we have drastically decreased the Portfolio's exposure to more-volatile areas such as communications equipment and e-commerce, while increasing its exposure to more-established sectors like cable and media. As the Portfolio enters the second half of the year, there is still a high degree of uncertainty regarding the duration and magnitude of the current slowdown. Concerns that the U.S. weakness is spreading internationally have made investors in technology skeptical. Although the strength of the entire technology industry is in question, we believe that many individual companies are still capable of achieving above-average growth. 10 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED Money Market Portfolio As of June 30, 2001, the Money Market Portfolio had net assets in excess of $489 million with an average life of 69 days. For the six-month period ended June 30, 2001, the Portfolio's Class X shares produced a total return of 2.47 percent. For the seven-day period ended that same date, the Portfolio's Class X shares provided an effective yield of 3.85 percent and a current yield of 3.78 percent, while its 30-day moving average yield for June was 3.96 percent. For the same six-month period, the Portfolio's Class Y shares produced a total return of 2.34 percent. For the seven-day period ended June 30, 2001, the Portfolio's Class Y shares provided an effective yield of 3.59 percent and a current yield of 3.53 percent, while its 30-day moving average yield for June was 3.70 percent. The performance of the Portfolio's two share classes varies because each has different expenses. On June 30, 2001, approximately 48 percent of the Portfolio was invested in high-quality commercial paper, 40 percent in federal agency obligations and the remaining 12 percent in short-term bank notes and certificates of deposit issued by financially strong commercial banks. At the end of the fiscal period, approximately 80 percent of the Portfolio's holdings were due to mature in less than four months. We believe that the Portfolio is well positioned for stability of value with a high degree of liquidity.(5) As always, we attempt to operate the Portfolio in a conservative manner without the use of derivatives or structured notes that might fluctuate excessively with changing interest rates. The Portfolio continues to serve as a useful investment for liquidity, preservation of capital and a yield that reflects prevailing money market conditions. The jury remains out on whether the sharply lower levels of short-term interest rates and the tax cuts enacted by Congress will prove sufficient to reverse the softening pace of economic activity. Factory payroll counts contracted for 11 consecutive months through June 2001, and May's capacity utilization report registered its lowest level since 1983. We anticipate that the Fed could take further steps to reduce short-term rates during the upcoming months. However, the Portfolio is positioned to be able to reflect changing levels of money market rates in either direction during the months ahead. --------------------- (5) An investment in the Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Portfolio. 11 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED Pacific Growth Portfolio For the six-month period ended June 30, 2001, Pacific Growth Portfolio's Class X shares produced a total return of -12.11 percent compared to -10.66 percent for the MSCI World Index. For the same period, the Portfolio's Class Y shares returned -12.13 percent. The performance of the two share classes varies because each has different expenses. On a country allocation basis, the Portfolio's overweighted positions in Hong Kong and Singapore, coupled with an underweighted stance in Australia, detracted from its relative performance. The Portfolio's stock selection in South Korea, India and Australia had a negative impact. Conversely, individual stocks in Taiwan, Japan and Singapore contributed positively to its performance. The Portfolio's underweighting in the Japanese banking sector proved beneficial, given that bank valuations suffered from investors' fears of an increase in nonperforming loans. Both the decline in the Nasdaq composite and downward earnings revisions for technology, media and telecommunications companies globally affected the Portfolio negatively because of its significant exposure to the technology hardware sector in Japan. In Japan, Morgan Stanley Investment Management Inc., the Portfolio's sub-advisor, trimmed the Portfolio's exposure to Ricoh, Kyocera and Nintendo, which have recently outperformed, and added a new position in Mitsubishi on expectations of future earnings growth. The Portfolio continued to be overweighted in select technology, chemicals and digital-related companies. The sub-advisor believes that the Portfolio may benefit from its blue-chip holdings and its positions in value-oriented and economically sensitive sectors should Japanese companies accelerate the pace at which they are pursuing corporate restructuring and industrial realignment. During the first half of 2001, the sub-advisor increased the Portfolio's position in China, which was already an overweighting, in consideration of that nation's low dependence on exports and its relatively strong domestic economy. The sub-advisor also added to the Portfolio's holdings in Taiwan, though still maintaining an underweighted stance there. In Singapore the Portfolio reduced its exposure to information technology stocks, as the sub-advisor feels that the medium-term prospects for those companies do not justify their current valuations. The Portfolio maintained its underweighting in Malaysia by selling stocks that recently outperformed and that no longer offered attractive relative valuations. 12 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED In Australia, we reduced our exposure to telecoms, which have outperformed, and used the proceeds to purchase more-attractive telecoms in Singapore. The sub-advisor eliminated the Portfolio's investments in Thailand because of a perceived deterioration in fundamentals, specifically the continuing deceleration in economic growth led by contracting exports and slumping domestic demand. Quality Income Plus Portfolio For the six-month period ended June 30, 2001, Quality Income Plus Portfolio's Class X shares posted a total return of 3.79 percent versus 3.62 percent for the Lehman Brothers Aggregate Index.(6) For the same period, the Portfolio's Class Y shares returned 3.68 percent. The performance of the two share classes varies because each has different expenses. At the beginning of the period, yields for most U.S. fixed-income securities were the most generous relative to U.S. Treasury and agency securities than they have been in more than 15 years. This represented an unusual opportunity to build positions in investment-grade corporate securities and mortgage-backed securities. Consequently, the Portfolio's managers increased corporate and other non-U.S. government investments to 69.0 percent of the Portfolio and repositioned the corporate portion of the Portfolio to take advantage of what we deemed to be the best values within the investment-grade universe. We also invested 22.8 percent of the Portfolio in mortgage-backed securities. The remainder of the Portfolio was invested in U.S. Treasury notes (7.0 percent) and U.S. government agencies (1.2 percent). Although yields on nongovernment securities fell relative to government securities during the period, they remained historically generous and continued to offer good value for investors. S&P 500 Index Portfolio For the six-month period ended June 30, 2001, S&P 500 Index Portfolio's Class X shares produced a total return of -6.88 percent compared to -6.69 percent for the S&P 500. For the same period, the Portfolio's Class Y shares returned -7.00 percent. The performance of the two share classes varies because each has different expenses. --------------------- (6) The Lehman Brothers Aggregate Index tracks the performance of all U.S. government agency and Treasury securities, investment-grade corporate debt securities, agency mortgage-backed securities, asset-backed securities and commercial mortgage-based securities. The Index does not include any expenses, fees or charges. The Index is unmanaged and should not be considered an investment. 13 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED The Portfolio seeks to deliver investment performance that corresponds before expenses to the total return of the S&P 500 by investing in substantially all the stocks that comprise the S&P 500 in approximately the same weightings as they are represented in the Index. Defensive sectors in the market continued to lead the Index during the period, with consumer cyclicals posting the best performance, up nearly 7.3 percent. Technology was the worst-performing sector, with a total return of -16.3 percent that accounted for -3.5 percent of the Index's return. As of June 30, 2001, the top five positions in the S&P 500 were General Electric (4.11 percent), Microsoft (3.32 percent), Exxon Mobil (2.56 percent), Citigroup (2.26 percent) and Pfizer (2.15 percent). After a choppy first half of the year, the bearish sentiment that has overshadowed the market has yet to subside. However, we believe that the six interest-rate cuts in as many months may help reaccelerate the economy. With recent economic events casting both hope for recovery and fear of recession over the overall market, it remains to be seen whether the market can officially move into recovery territory. We are cautiously optimistic on the market in the near future, taking into consideration the potential benefit of the imminent tax refund and falling energy costs amid a docile inflation environment. Short-Term Bond Portfolio For the six-month period ended June 30, 2001, Short-Term Bond Portfolio's Class X shares posted a total return of 2.50 percent compared to 5.11 percent for the Lehman Brothers U.S. Credit Index (1-5 Year).(7) For the same period, the Portfolio's Class Y shares returned 2.29 percent. The performance of the two share classes varies because each has different expenses. The Portfolio's underperformance relative to its benchmark resulted primarily from not being well positioned in January when the Fed started cutting rates. As previously announced, a new investment team assumed responsibility for the Portfolio in early January and began to reposition the Portfolio at that time. At the beginning of the period, yields for most U.S. fixed-income securities were the most generous relative to U.S. Treasury and agency securities than they have been in more than 15 years. This represented an unusual opportunity to build positions in investment-grade corporate securities and mortgage-backed securities. Consequently, we increased corporate and other non-U.S. government investments to --------------------- (7) The Lehman Brothers U.S. Credit Index (1-5 Year) includes U.S. corporate and specified foreign debentures and secured notes with maturities of one to five years. The Index does not include any expenses, fees or charges. The Index is unmanaged and should not be considered an investment. 14 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED 29.0 percent of the Portfolio. We also reduced the government agency portion to 13.5 percent of the Portfolio as agencies became relatively fully priced. At the end of the period, the remaining 57.5 percent of the Portfolio was invested in U.S. Treasury notes (42.6 percent) and cash equivalents (14.9 percent). We expect to use these investments as a source of liquidity for building the nongovernment position as opportunities arise. Although yields on nongovernment securities fell relative to government securities during the period, they remained historically generous and continued to offer good value for investors. Strategist Portfolio For the six-month period ended June 30, 2001, Strategist Portfolio's Class X shares posted a total return of -6.72 percent versus -6.69 percent for the S&P 500 and 3.51 percent for the Lehman Brothers U.S. Government/Credit Index.(8) For the same period, the Portfolio's Class Y shares returned -6.84 percent. The performance of the two share classes varies because each has different expenses. Our decision to keep the Portfolio relatively underweighted in bonds in the first quarter of 2001 hindered its return. In April, however, we increased the Portfolio's bond allocation, leading to an improvement in performance relative to the benchmarks during the latter part of the period. Within the Portfolio's equity portion, overweighted sectors as of June 30, 2001, included health care, basic materials, transportation and consumer cyclicals. Industrials, consumer staples and financials were all roughly market weighted, while utilities, energy and technology were underweighted. At the end of June, the Portfolio's asset allocation target stood at 55 percent of its assets in equities, a neutral weighting versus an average balanced fund, with 20 percent in bonds, an underweighted position, and an above-average 25 percent in cash. The fixed-income portion held 162 issues on June 30, 2001, with 51.8 percent in corporate debt, 32.5 percent in mortgage-backed securities and 15.4 percent in U.S. government-issued and government-agency bonds, with the remainder in cash. Its average duration, a measurement of bond price volatility relative to interest-rate movement, was 5.4 years. --------------------- (8) The Lehman Brothers U.S. Government/Credit Index (formerly the Lehman Brothers Government/Corporate Index) tracks the performance of government and corporate obligations, including U.S. government agency and Treasury securities and corporate and Yankee bonds. The Index does not include any expenses, fees or charges. The Index is unmanaged and should not be considered an investment. 15 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED Utilities Portfolio For the six-month period ended June 30, 2001, the Utilities Portfolio's Class X shares provided a total return of -10.74 percent versus -6.69 percent for the broad-based S&P 500 Index. For the same period, the Portfolio's Class Y shares returned -10.86 percent. The performance of the Portfolio's two share classes varies because of differing expenses. While weakness across all of the Portfolio's primary investment segments contributed to its underperformance relative to its broad-based S&P benchmark, the natural gas sector, which declined more than 19 percent during the period (as measured by the AMEX Natural Gas Index), was a significant detractor from the Portfolio's performance. During the six-month period ended June 30, 2001, the stock market -- prompted by a rapidly slowing economy and disappointing corporate earnings -- experienced a high degree of volatility. Within this difficult investment environment, utilities stocks in general, and the Utilities Portfolio in particular, were further hindered by the poor performance of the telecommunications sector and the uncertainties associated with the California power crisis. Within this period, news stories depicting electricity shortages and rolling blackouts in California kept investors focused on that state's ongoing power crisis, which resulted in part from a flawed deregulation plan. The dysfunctional electric market created serious financial challenges for both Edison International and PG&E, California's largest utilities companies, with the latter filing for bankruptcy protection. Although the Portfolio avoided both companies, instead favoring financially strong companies with growing merchant energy businesses and positive earnings growth momentum, the events in California raised concern over possible industry reregulation, which negatively affected the share price performance of many electric companies. Particularly hard hit were independent power producers (IPPs) operating in the state. On a more comforting note, nationwide electricity demand remains strong, which was underscored by the fact that many power companies posted record earnings results during the period. Within the natural gas sector, a meaningful downtrend in gas prices was evident during the second quarter of 2001, primarily due to extremely mild weather patterns. As a result, natural gas stocks lagged those of other utility companies during this period, and several companies experienced significant share price erosion as a result of their exposure to the California crisis. Incremental demand from new power generation facilities and more-seasonal summer weather should help foster a firmer pricing environment as we enter the winter heating season. Despite the poor performance of natural gas stocks, however, it's important to note that many gas companies posted solid financial results as a result of healthy merchant energy activities such as the trading and marketing of gas and electric power. 16 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED Telecommunications stocks lagged the overall market because of a significant slowdown in economic growth, fears of bandwidth oversupply and the financial difficulties of many emerging carriers. Given this difficult environment, the Portfolio focused on stocks of financially solid companies, including the Regional Bell Operating Companies (RBOCS) and major cable companies. Both groups have historically performed well during periods of slower economic growth and are, we believe, well positioned to reap the potential rewards of a wide array of new service offerings. On June 30, 2001, 88 percent of the Portfolio's net assets were allocated to utility and utility-related equities, 7 percent to high-quality fixed-income securities and 5 percent were in cash and cash equivalents. Within the equity component, 52 percent was allocated to electric power, 29 percent to telecommunications and 19 percent to energy and other utility-related industries. Adding a further degree of diversification to the Fund's portfolio were selective international holdings (4 percent of its net assets), which focused on the telecommunications sector. On June 30, 2001, the Fund's fixed-income portion remained well diversified with a weighted average credit rating of Baa1 and BBB+, as measured by Moody's Investors Service Inc. and Standard & Poor's, respectively. Going forward, we will continue to monitor the California situation closely and seek to make investments prudently with an eye toward seeking attractive total returns and managing risk. Despite the near-term challenges facing California, we believe that the fundamentals remain attractive for many power and gas companies, and in our view it appears that the market has over-reacted on the downside. During the second half of 2001, we anticipate a potential recovery in the market value of both sectors as issues are resolved and investor confidence returns. Within the Portfolio, we currently anticipate building prudently and systematically upon its telecom services component as fundamentals strengthen and investor sentiment improves. As we enter the second half of the fiscal year, we believe that the Portfolio remains well structured to meet its long-term objectives of capital appreciation and current income. 17 Morgan Stanley Variable Investment Series LETTER TO THE SHAREHOLDERS / / JUNE 30, 2001 CONTINUED Looking Ahead We believe that the United States is entering a period of moderate economic growth with inflation remaining at acceptable levels. We anticipate that the Fed will continue to pursue an accommodative monetary policy in hopes of maintaining suitable growth and avoiding a recession. We appreciate your ongoing support of Morgan Stanley Variable Investment Series and look forward to continuing to serve your investment needs. Very truly yours, [/S/ CHARLES A. FIUMEFREDDO] [/S/ MITCHELL M. MERIN] Charles A. Fiumefreddo Mitchell M. Merin CHAIRMAN OF THE BOARD PRESIDENT 18 Morgan Stanley Variable Investment Series FUND PERFORMANCE / / JUNE 30, 2001
AVERAGE ANNUAL TOTAL RETURNS(1) ---------------------------------------------------------------------------------- DATE OF SINCE CLASS X 1 YEAR 5 YEARS 10 YEARS INCEPTION INCEPTION ------- --------- ------- -------- --------- --------- Aggressive Equity........ (24.89)% -- -- 05/04/99 5.89% Capital Growth........... (16.75) 11.88% 11.25% -- -- Competitive Edge Fund "Best Ideas"............ (28.12) -- -- 05/18/98 (4.37) Dividend Growth.......... 17.26 10.94 13.01 -- -- Equity................... (23.65) 15.99 17.36 -- -- European Growth.......... (18.78) 11.59 15.81 -- -- Global Dividend Growth... (0.51) 8.05 -- 02/23/94 9.53 High Yield............... (41.83) (9.33) 2.19 -- -- Income Builder........... 9.56 -- -- 01/21/97 8.24 Information.............. -- -- -- 11/06/00 (38.60) Money Market............. 5.63 5.26 4.71 -- -- Pacific Growth........... (37.59) (12.04) -- 02/23/94 (7.69) Quality Income Plus...... 11.76 7.04 7.99 -- -- S&P 500 Index............ (15.12) -- -- 05/18/98 4.24 Short-Term Bond.......... 5.97 -- -- 05/04/99 4.59 Strategist............... (5.92) 11.74 10.76 -- -- Utilities................ (7.96) 11.24 12.21 -- --
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH LESS THAN THEIR ORIGINAL COST. PERFORMANCE FOR CLASS Y SHARES WILL VARY FROM THE PERFORMANCE OF CLASS X SHARES DUE TO DIFFERENCES IN EXPENSES. ----------------------- (1) FIGURE ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS FOR THE UNDERLYING FUND BASED ON NET ASSET VALUE (NAV). IT DOES NOT REFLECT THE DEDUCTION OF INSURANCE EXPENSES, AN ANNUAL CONTRACT MAINTENANCE FEE, OR SURRENDER CHARGES. 19 Morgan Stanley Variable Investment Series FUND PERFORMANCE / / JUNE 30, 2001, CONTINUED
AVERAGE ANNUAL TOTAL RETURNS(1) ---------------------------------------------------- SINCE CLASS Y 1 YEAR INCEPTION* ------- --------- ---------- Aggressive Equity........ (25.07)% (21.90) Capital Growth........... (16.94) (16.11) Competitive Edge Fund "Best Ideas"............ (28.28) (26.83) Dividend Growth.......... 16.97 8.28 Equity................... (23.85) (20.82) European Growth.......... (19.01) (19.70) Global Dividend Growth... (0.78) (3.52) High Yield............... (42.13) (39.90) Income Builder........... 9.30 5.54 Information.............. -- (38.71) Money Market............. 5.37 5.41 Pacific Growth........... (37.68) (33.78) Quality Income Plus...... 11.43 11.47 S&P 500 Index............ (15.30) (15.11) Short-Term Bond.......... 5.66 5.79 Strategist............... (6.11) (6.43) Utilities................ (8.14) (8.46)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH LESS THAN THEIR ORIGINAL COST. PERFORMANCE FOR CLASS Y SHARES WILL VARY FROM THE PERFORMANCE OF CLASS X SHARES DUE TO DIFFERENCES IN EXPENSES. ----------------------- (1) FIGURE ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS FOR THE UNDERLYING FUND BASED ON NET ASSET VALUE (NAV). IT DOES NOT REFLECT THE DEDUCTION OF INSURANCE EXPENSES, AN ANNUAL CONTRACT MAINTENANCE FEE, OR SURRENDER CHARGES. * THE INCEPTION DATE FOR EACH PORTFOLIO WAS JUNE 5, 2000, WITH THE EXCEPTION OF INFORMATION, WHICH COMMENCED OPERATIONS ON NOVEMBER 6, 2000. 20 Morgan Stanley Variable Investment Series - Money Market PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
ANNUALIZED PRINCIPAL YIELD AMOUNT IN ON DATE OF MATURITY THOUSANDS PURCHASE DATE VALUE --------------------------------------------------------------------------------------------- COMMERCIAL PAPER (46.8%) FINANCE - CONSUMER (11.6%) $23,400 American Express Credit Corp......................... 3.87 - 3.97% 07/03/01 - 09/27/01 $ 23,243,497 22,800 New Center Asset Trust........ 3.77 - 4.94 07/09/01 - 10/09/01 22,666,619 11,000 Wells Fargo Financial Inc..... 4.54 - 4.59 08/03/01 - 08/17/01 10,944,670 ------------ 56,854,786 ------------ FINANCE - CORPORATE (0.7%) 3,500 Ciesco, L.P................... 4.71 7/13/01 3,494,123 ------------ FINANCIAL CONGLOMERATES (4.7%) 23,500 General Electric Capital Corp......................... 3.73 - 4.49 09/28/01 - 11/08/01 23,213,488 ------------ INDUSTRIAL CONGLOMERATES (1.4%) 7,000 Minnesota Mining & Manufacturing Co............. 4.09 07/19/01 6,985,037 ------------ INSURANCE (4.9%) 18,000 American General Corp......... 3.67 - 4.18 07/31/01 - 09/12/01 17,912,327 6,000 American General Finance Corp......................... 3.98 07/27/01 5,982,225 ------------ 23,894,552 ------------ INTEGRATED OIL (3.5%) 7,227 BP Amoco Capital PLC.......... 4.14 07/02/01 7,225,338 10,000 Texaco Inc.................... 3.77 08/22/01 - 08/30/01 9,940,783 ------------ 17,166,121 ------------ INTERNATIONAL BANKS (15.3%) 12,000 A N Z (DE) Inc................ 3.80 - 3.89 08/29/01 - 09/10/01 11,916,380 22,300 Abbey National North America Corp......................... 4.63 - 4.88 08/01/01 - 08/09/01 22,193,475 11,000 Deutsche Bank Financial Inc.......................... 3.65 - 4.71 07/27/01 - 09/21/01 10,932,611 6,000 Dresdner U.S. Finance Inc..... 4.64 07/10/01 5,992,350 3,600 Halifax PLC................... 3.59 10/12/01 3,563,080 3,300 KFW International Finance Inc.......................... 4.90 08/08/01 3,282,840 11,000 Societe Generale N.A. Inc..... 3.58 - 3.79 09/06/01 - 09/25/01 10,914,491 6,000 Toronto-Dominion Holdings (USA) Inc.................... 3.94 08/20/01 5,966,850 ------------ 74,762,077 ------------ INVESTMENT BANKS/BROKERS (4.7%) 23,000 Goldman Sachs Group Inc....... 3.97 - 4.27 07/18/01 - 08/10/01 22,925,971 ------------ TOTAL COMMERCIAL PAPER (COST $229,296,155)................................................ 229,296,155 ------------ U.S. GOVERNMENT AGENCIES (39.0%) 18,720 Federal Farm Credit Banks..... 3.69 - 3.86 09/14/01 - 11/30/01 18,483,082 17,500 Federal Home Loan Banks....... 3.87 - 5.97 07/20/01 - 11/19/01 17,363,286
SEE NOTES TO FINANCIAL STATEMENTS 21 Morgan Stanley Variable Investment Series - Money Market PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
ANNUALIZED PRINCIPAL YIELD AMOUNT IN ON DATE OF MATURITY THOUSANDS PURCHASE DATE VALUE --------------------------------------------------------------------------------------------- $65,700 Federal Home Loan Mortgage Corp......................... 3.52 - 6.11% 07/06/01 - 01/03/02 $ 65,015,611 91,269 Federal National Mortgage Assoc........................ 3.57 - 6.87 07/05/01 - 01/25/02 90,261,194 ------------ TOTAL U.S. GOVERNMENT AGENCIES (COST $191,123,173)................................................ 191,123,173 ------------ CERTIFICATES OF DEPOSIT (10.4%) 18,000 Chase Manhattan Bank (USA), N.A.......................... 3.64 - 3.95 08/21/01 - 09/17/01 18,000,000 11,000 Firstar Bank N.A.............. 3.98 - 4.00 08/13/01 - 08/14/01 11,000,000 16,000 Harris Trust & Savings Bank... 4.23 - 4.62 07/11/01 - 07/26/01 16,000,000 6,000 LaSalle Bank N.A.............. 4.67 07/30/01 6,000,000 ------------ TOTAL CERTIFICATES OF DEPOSIT (COST $51,000,000)................................................. 51,000,000 ------------ SHORT-TERM BANK NOTE (1.3%) 6,000 Bank of America, N.A. (COST $6,000,000)............ 4.70 07/17/01 6,000,000 ------------
TOTAL INVESTMENTS (COST $477,419,328)(A)....... 97.5% 477,419,328 OTHER ASSETS IN EXCESS OF LIABILITIES................... 2.5 12,339,985 ----- ------------ NET ASSETS.................... 100.0% $489,759,313 ===== ============
--------------------- (A) COST IS THE SAME FOR FEDERAL INCOME TAX PURPOSES. SEE NOTES TO FINANCIAL STATEMENTS 22 Morgan Stanley Variable Investment Series - Short-Term Bond PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE --------------------------------------------------------------------------------------------- U.S. GOVERNMENT & AGENCY OBLIGATIONS (55.3%) $ 200 Federal Farm Credit Banks..... 5.875% 07/02/01 $ 200,012 75 Federal Home Loan Banks....... 4.875 01/22/02 75,285 2,430 Federal National Mortgage Assoc........................ 5.50 - 6.29 02/11/02 - 02/15/06 2,449,060 8,250 U.S. Treasury Notes........... 5.75 - 7.50 08/31/01 - 08/15/10 8,618,923 ----------- TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $11,381,934)................................................. 11,343,280 ----------- CORPORATE BONDS (23.5%) AEROSPACE & DEFENSE (1.1%) 160 Lockheed Martin Corp.......... 6.50 04/15/03 162,915 65 Raytheon Co................... 8.20 03/01/06 67,268 ----------- 230,183 ----------- ALUMINUM (0.1%) 20 Alcoa Inc..................... 7.25 08/01/05 21,038 ----------- APPEREL/FOOTWEAR RETAIL (0.2%) 50 Gap Inc....................... 5.625 05/01/03 50,255 ----------- AUTO PARTS: O.E.M. (0.2%) 40 TRW Inc....................... 7.625 03/15/06 41,222 ----------- BROADCASTING (0.5%) 100 Clear Channel Communications Corp......................... 7.25 09/15/03 102,955 ----------- CABLE/SATELLITE (0.8%) 165 TCI Communications Inc........ 6.375 05/01/03 167,236 ----------- DEPARTMENT STORES (0.2%) 40 May Department Stores Co...... 6.875 11/01/05 40,947 ----------- DISCOUNT STORES (0.3%) 50 Target Corp................... 7.50 08/15/10 53,036 ----------- DRUGSTORE CHAINS (0.5%) 115 CVS Corp...................... 5.625 03/15/06 112,749 ----------- ELECTRIC UTILITIES (0.5%) 15 American Electric Power (Series A)................... 6.125 05/15/06 14,805 90 DTE Energy Co................. 6.45 06/01/06 90,373 ----------- 105,178 ----------- ENVIROMENTAL SERVICES (0.3%) 60 USA Waste Services Inc........ 7.125 10/01/07 59,827 ----------- FINANCE/RENTAL/LEASING (3.4%) 100 Associates Corp. of North America...................... 6.50 07/15/02 101,872 195 Ford Motor Credit Co.......... 6.875 02/01/06 197,621 180 Household Finance Corp........ 6.50 01/24/06 182,471
SEE NOTES TO FINANCIAL STATEMENTS 23 Morgan Stanley Variable Investment Series - Short-Term Bond PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE --------------------------------------------------------------------------------------------- $ 100 IBM Credit Corp............... 7.00 % 01/28/02 $ 101,283 110 MBNA America Bank N.A......... 6.50 06/20/06 108,587 ----------- 691,834 ----------- FINANCIAL CONGLOMERATES (1.0%) 85 American Express Co........... 6.875 11/01/05 88,477 45 CIT Group Inc................. 5.625 05/17/04 45,011 70 CIT Group Inc................. 5.75 05/10/06 69,329 ----------- 202,817 ----------- FOOD RETAIL (0.4%) 80 Safeway Inc................... 6.15 03/01/06 79,710 ----------- FOODS: MAJOR DIVERSIFIED (1.0%) 95 Kellogg Co. - 144A*........... 6.00 04/01/06 94,301 100 Unilever Capital Corp......... 6.75 11/01/03 103,692 ----------- 197,993 ----------- GAS DISTRIBUTORS (0.9%) 110 NiSource Finance Corp......... 7.625 11/15/05 115,051 60 Ras Laffan Liquid Natural Gas Co. Ltd. - 144A*................. 7.628 09/15/06 60,611 ----------- 175,662 ----------- HOME BUILDING (0.2%) 30 Centex Corp................... 9.75 06/15/05 32,532 ----------- HOME IMPROVEMENT CHAINS (0.2%) 40 Lowe's Companies Inc.......... 7.50 12/15/05 42,009 ----------- INDUSTRIAL CONGLOMERATES (0.2%) 35 Tyco International Group S.A. (Luxemburg).................. 6.375 02/15/06 35,325 ----------- INTEGRATED OIL (0.7%) 140 Conoco Inc.................... 5.90 04/15/04 141,114 ----------- INVESTMENT BANKS/BROKERS (0.3%) 55 Goldman Sachs Group Inc....... 7.625 08/17/05 58,051 ----------- LIFE/HEALTH INSURANCE (1.1%) 30 American General Finance Corp......................... 6.75 11/15/04 30,867 100 John Hancok Global Funding - 144A*........................ 5.625 06/27/06 98,285 100 Prudential Insurance Co - 144A*........................ 6.375 07/23/06 100,536 ----------- 229,688 ----------- MAJOR BANKS (2.8%) 45 Bank of America Corp.......... 7.40 01/15/11 46,834 160 Bank One Corp................. 6.50 02/01/06 162,138 100 First Union Corp.............. 8.00 11/15/02 104,230
SEE NOTES TO FINANCIAL STATEMENTS 24 Morgan Stanley Variable Investment Series - Short-Term Bond PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE --------------------------------------------------------------------------------------------- $ 110 Fleet Financial Group, Inc................... 8.125% 07/01/04 $ 117,881 140 Wells Fargo & Co.............. 5.90 05/21/06 139,822 ----------- 570,905 ----------- MAJOR TELECOMMUNICATIONS (1.2%) 125 Telus Corp.................... 7.50 06/01/07 128,280 60 WorldCom, Inc................. 6.50 05/15/04 60,005 65 WorldCom, Inc................. 6.25 08/15/03 65,404 ----------- 253,689 ----------- MANAGED HEALTH CARE (1.0%) 105 Aetna Inc..................... 7.375 03/01/06 103,997 65 United Health Group Inc....... 7.50 11/15/05 67,830 30 WellPoint Health Network...... 6.375 06/15/06 29,782 ----------- 201,609 ----------- MEDIA CONGLOMERATES (1.6%) 140 Viacom Inc. - 144A*........... 6.40 01/30/06 141,942 200 Walt Disney Co................ 5.50 12/29/06 196,400 ----------- 338,342 ----------- MOTOR VEHICLES (0.3%) 65 DaimlerChrysler North American Holdings Co.................. 6.40 05/15/06 64,490 ----------- OIL & GAS PIPELINES (0.4%) 80 Williams Companies, Inc....... 6.50 08/01/06 78,978 ----------- PHARMACEUTICALS: MAJOR (0.3%) 70 American Home Products Corp......................... 6.25 03/15/06 70,195 ----------- RAILROADS (0.4%) 85 Union Pacific Corp............ 5.84 05/25/04 85,145 ----------- SAVINGS BANKS (0.4%) 85 Washington Mutual, Inc........ 6.25 05/15/06 85,035 ----------- SPECIALTY TELECOMMUNICATIONS (0.3%) 50 Qwest Capital Funding......... 7.75 08/15/06 52,287 ----------- TELECOMMUNICATION EQUIPMENT (0.2%) 50 Nortel Networks Ltd........... 6.125 02/15/06 43,058 ----------- WIRELESS COMMUNICATIONS (0.5%) 55 AT&T Wireless Group - 144A*... 7.35 03/01/06 55,859 70 Nextel Communications Inc..... 9.375 11/15/09 55,300 ----------- 111,159 ----------- TOTAL CORPORATE BONDS (COST $4,826,034).................................................. 4,826,253 -----------
SEE NOTES TO FINANCIAL STATEMENTS 25 Morgan Stanley Variable Investment Series - Short-Term Bond PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE --------------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES (3.6%) FINANCE/RENTAL/LEASING $ 100 Connecticut RRB Special....... 5.36 % 03/30/07 $ 100,027 155 Daimler Chrysler Auto Trust... 6.82 09/06/04 159,311 120 Ford Credit Auto Owner Trust........................ 6.74 06/15/04 123,262 80 Honda Auto Receivables Owner Trust........................ 6.62 07/15/04 81,925 49 NewCourt Equipment Trust Securities................... 5.45 10/15/02 48,873 160 Nissan Auto Receivables Owner Trust........................ 6.72 08/16/04 163,699 55 Residential Funding Mortgage Securities................... 7.39 04/25/11 56,100 ----------- TOTAL ASSET-BACKED SECURITIES (COST $734,741).................................................... 733,197 ----------- FOREIGN GOVERNMENT OBLIGATION (0.8%) ELECTRIC UTILITIES 160 Hydro-Quebec (COST $159,621).............. 5.50 04/11/06 157,368 ----------- COLLATERALIZED MORTGAGE OBLIGATION (0.7%) 151 Federal Home Loan Mortgage Corp. (COST $151,218).............. 3.955 10/25/24 151,239 ----------- SHORT-TERM INVESTMENT (A) (14.6%) U.S. GOVERNMENT AGENCY 3,000 Federal Home Loan Banks (COST $2,999,671)............ 3.94 07/02/01 2,999,343 ----------- TOTAL INVESTMENTS (COST $20,253,219)(B)....................... 98.5% 20,210,680 OTHER ASSETS IN EXCESS OF LIABILITIES........ 1.5 301,737 --------------------- ----------- NET ASSETS................................... 100.0% $20,512,417 ===================== ===========
--------------------- * RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS. (A) PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $30,798, AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $73,337, RESULTING IN NET UNREALIZED DEPRECIATION OF $42,539. SEE NOTES TO FINANCIAL STATEMENTS 26 Morgan Stanley Variable Investment Series - Quality Income Plus PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE -------------------------------------------------------------------------------------- CORPORATE BONDS (56.7%) AEROSPACE & DEFENSE (2.3%) $ 5,000 Boeing Co..................... 7.95 % 08/15/24 $ 5,624,500 2,760 Systems 2001 Asset Trust - 144A*........................ 6.664 09/15/13 2,800,848 1,650 Systems 2001 Asset Trust - 144A*........................ 7.156 12/15/11 1,682,588 ------------ 10,107,936 ------------ AIR FREIGHT/COURIERS (1.1%) 4,708 Federal Express Corp.......... 7.50 01/15/18 4,832,310 ------------ AIRLINES (2.1%) 4,616 America West Airlines (Class A).................... 6.85 07/02/09 4,598,718 1,790 America West Airlines - 144A*........................ 7.10 04/02/21 1,787,351 3,000 Continental Airlines, Inc..... 7.056 09/15/09 3,028,320 ------------ 9,414,389 ------------ APPAREL/FOOTWEAR RETAIL (0.5%) 2,260 Gap Inc....................... 5.625 05/01/03 2,271,503 ------------ COMPUTER PROCESSING HARDWARE (0.6%) 3,000 Hewlett-Packard Co............ 7.15 06/15/05 3,101,550 ------------ DISCOUNT STORES (0.7%) 1,195 Target Corp................... 6.35 01/15/11 1,179,800 2,235 Wal-Mart Stores, Inc.......... 7.49 06/21/07 2,381,964 ------------ 3,561,764 ------------ DRUGSTORES CHAINS (0.4%) 1,725 CVS Corp...................... 5.625 03/15/06 1,691,242 ------------ ELECTRIC UTILITIES (3.1%) 2,000 Allegheny Energy Inc.......... 7.75 08/01/05 2,077,320 5,000 Consolidated Edison Co........ 7.50 09/01/10 5,071,550 3,500 Oklahoma Gas & Electric Co.... 6.50 07/15/17 3,549,595 2,500 Public Service Electric & Gas Co........................... 6.75 03/01/06 2,522,850 1,000 Tampa Electric Co............. 7.75 11/01/22 988,180 ------------ 14,209,495 ------------ ELECTRONIC DISTRIBUTORS (1.1%) 5,000 Avnet Inc..................... 7.875 02/15/05 4,988,000 ------------ FINANCIAL CONGLOMERATES (1.7%) 2,025 Citigroup Inc................. 7.25 10/01/10 2,101,788 5,000 General Electric Capital Corp......................... 7.375 01/19/10 5,353,700 ------------ 7,455,488 ------------
SEE NOTES TO FINANCIAL STATEMENTS 27 Morgan Stanley Variable Investment Series - Quality Income Plus PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE -------------------------------------------------------------------------------------- FINANCE/RENTAL/LEASING (2.0%) $ 3,000 Ford Capital B.V.............. 9.50 % 06/01/10 $ 3,415,530 5,000 Household Finance Corp........ 8.00 05/09/05 5,331,400 ------------ 8,746,930 ------------ FOOD: MAJOR DIVERSIFIED (0.7%) 3,000 Unilever Capital Corp......... 7.125 11/01/10 3,135,360 ------------ GAS DISTRIBUTORS (0.2%) 1,000 Keyspan Corp.................. 7.625 11/15/10 1,056,250 ------------ HOME IMPROVEMENT CHAINS (1.1%) 5,000 Home Depot Real Estate Funding Corp. II - 144A*............. 5.95 10/15/08 4,728,150 ------------ HOUSEHOLD/PERSONAL CARE (0.4%) 1,660 International Flavors & Fragrances, Inc. - 144A*..... 6.45 05/15/06 1,656,464 ------------ INDUSTRIAL CONGLOMERATES (0.3%) 1,500 Hutchison Whampoa Finance Co. Ltd.......................... 7.50 08/01/27 1,423,950 ------------ INTEGRATED OIL (2.0%) 3,000 BP Amaco PLC (United Kingdom)..................... 5.90 04/15/09 2,926,590 5,000 Murphy Oil Corp............... 7.05 05/01/29 4,758,300 1,000 Texaco Capital Inc............ 9.75 03/15/20 1,307,620 ------------ 8,992,510 ------------ INVESTMENT BANKS/BROKERS (1.9%) 4,275 Goldman Sachs Group Inc....... 6.875 01/15/11 4,249,564 3,750 Lehman Brothers Holdings, Inc................ 8.75 03/15/05 4,057,200 ------------ 8,306,764 ------------ LIFE/HEALTH INSURANCE (1.8%) 4,300 John Hancock.................. 7.375 02/15/24 4,225,997 3,485 Prudential Insurance Co. - 144A*........................ 8.30 07/01/25 3,659,599 ------------ 7,885,596 ------------ MAJOR BANKS (6.8%) 1,275 Bank One Corp................. 8.00 04/29/27 1,355,657 1,525 BankAmerica Corp.............. 7.40 01/15/11 1,587,174 5,000 First Bank System Inc......... 7.625 05/01/05 5,289,200 5,000 First Union National Bank..... 7.80 08/18/10 5,313,800 3,000 Mellon Bank N.A............... 7.625 09/15/07 3,237,720 3,000 State Street Boston Corp...... 7.65 06/15/10 3,191,130 5,000 State Street Boston Corp...... 5.95 09/15/03 5,097,250 5,000 Wells Fargo & Co.............. 7.55 06/21/10 5,296,150 ------------ 30,368,081 ------------
SEE NOTES TO FINANCIAL STATEMENTS 28 Morgan Stanley Variable Investment Series - Quality Income Plus PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE -------------------------------------------------------------------------------------- MAJOR TELECOMMUNICATIONS (6.7%) $ 5,000 British Telecommunications PLC (United Kingdom)............. 8.125% 12/15/10 $ 5,284,700 2,000 Deutsche Telekom International Finance Corp................. 8.25 06/15/30 2,041,400 1,000 GTE Corp...................... 7.90 02/01/27 1,014,980 3,000 Verizon Global Funding Corp - 144A*........................ 7.75 12/01/30 3,079,680 2,000 WorldCom, Inc................. 8.00 05/15/06 2,065,100 16,745 WorldCom, Inc................. 8.25 05/15/31 16,462,512 ------------ 29,948,372 ------------ MANAGED HEALTH CARE (0.5%) 1,000 Kaiser Foundation Health Plan, Inc.................... 9.55 07/15/05 1,101,390 960 WellPoint Health Network...... 6.375 06/15/06 953,011 ------------ 2,054,401 ------------ MEDIA CONGLOMERATES (1.0%) 4,515 Viacom Inc. - 144A*........... 6.625 05/15/11 4,429,621 ------------ MEDICAL SPECIALTIES (0.9%) 4,000 Becton Dickinson & Co......... 8.70 01/15/25 4,201,080 ------------ MOTOR VEHICLES (1.6%) 2,100 Daimler Chrysler North American Holdings Co......... 8.00 06/15/10 2,185,260 5,000 Ford Motor Co................. 7.45 07/16/31 4,796,000 ------------ 6,981,260 ------------ MULTI-LINE INSURANCE (2.5%) 375 Farmers Exchange Capital - 144A*........................ 8.625 05/01/24 395,119 720 Farmers Exchange Capital - 144A*........................ 7.05 07/15/28 640,800 4,900 Hartford Financial Services Group, Inc................... 7.90 06/15/10 5,245,989 5,000 Nationwide Financial Services, Inc................ 8.00 03/01/27 4,723,150 ------------ 11,005,058 ------------ OIL & GAS PRODUCTION (0.5%) 2,000 Anadarko Petroleum Corp....... 7.73 09/15/96 2,114,020 ------------ PHARMACEUTICALS: MAJOR (2.8%) 1,855 American Home Products Corp......................... 6.70 03/15/11 1,841,681 5,000 Johnson & Johnson............. 8.72 11/01/24 5,470,600 441 Marion Merrell Corp........... 9.11 08/01/05 477,373 5,000 Merck & Co. Inc............... 5.95 12/01/28 4,495,350 ------------ 12,285,004 ------------ PRECIOUS METALS (1.1%) 5,000 Barrick Gold Corp............. 7.50 05/01/07 5,105,550 ------------
SEE NOTES TO FINANCIAL STATEMENTS 29 Morgan Stanley Variable Investment Series - Quality Income Plus PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE -------------------------------------------------------------------------------------- PROPERTY-CASUALTY INSURERS (1.7%) $ 3,000 Everest Reinsurance Holdings Corp......................... 8.50 % 03/15/05 $ 3,202,020 5,000 Progressive Corp.............. 6.625 03/01/29 4,406,400 ------------ 7,608,420 ------------ RAILROADS (1.0%) 4,250 Burlington Northern Santa Fe Corp......................... 7.97 01/01/15 4,449,913 ------------ REGIONAL BANKS (0.5%) 2,000 M&T Bank Corp................. 8.00 10/01/10 2,122,760 ------------ SAVINGS BANKS (1.6%) 7,025 Washington Mutual, Inc........ 6.875 06/15/11 6,967,114 ------------ TELECOMMUNICATION EQUIPMENT (0.3%) 1,894 Nortel Networks Ltd........... 6.125 02/15/06 1,495,616 ------------ TOBACCO (1.2%) 5,000 Philip Morris Companies, Inc............... 7.125 10/01/04 5,148,200 ------------ TRUCKS/CONSTRUCTION/FARM MACHINERY (0.8%) 3,000 Caterpillar Inc............... 9.375 08/15/11 3,594,240 ------------ WIRELESS COMMUNICATIONS (1.2%) 5,000 Vodafone AirTouch PLC (United Kingdom)..................... 7.75 02/15/10 5,251,750 ------------ TOTAL CORPORATE BONDS (COST $247,389,477)......................................... 252,696,111 ------------ U.S. GOVERNMENT & AGENCY OBLIGATIONS (31.0%) 4 Federal Home Loan Mortgage Corp......................... 11.50 05/01/19 5,010 33,425 Federal Home Loan Mortgage Corp......................... 8.00 ** 34,532,257 893 Federal Home Loan Mortgage Corp. PC Gold................ 8.50 01/01/22 - 12/01/24 937,882 19,881 Federal National Mortgage Assoc........................ 6.50 05/01/31 19,551,872 1,217 Federal National Mortgage Assoc........................ 7.00 11/01/26 - 05/01/29 1,221,887 1,769 Federal National Mortgage Assoc........................ 7.50 06/01/28 - 09/01/29 1,803,447 5,013 Federal National Mortgage Assoc........................ 8.00 07/01/29 - 03/01/30 5,176,503 272 Federal National Mortgage Assoc........................ 9.00 06/01/21 - 02/01/25 284,353 8,503 Government National Mortgage Assoc........................ 6.00 04/15/28 - 12/15/28 8,226,985 18,044 Government National Mortgage Assoc........................ 6.50 08/15/27 - 07/15/29 17,841,214 14 Government National Mortgage Assoc........................ 7.50 04/15/24 - 09/15/27 14,078 9,601 Government National Mortgage Assoc........................ 8.00 10/15/24 - 11/15/29 9,945,890 1,214 Government National Mortgage Assoc........................ 8.50 01/15/17 - 03/01/28 1,267,872 1,114 Government National Mortgage Assoc........................ 9.00 07/15/24 - 10/15/24 1,169,517 103 Government National Mortgage Assoc........................ 10.00 05/15/16 - 04/15/19 108,949 5,000 Tennessee Valley Authority.... 7.85 06/15/44 5,213,900 3,000 U.S. Treasury Note............ 7.00 07/15/06 3,253,050
SEE NOTES TO FINANCIAL STATEMENTS 30 Morgan Stanley Variable Investment Series - Quality Income Plus PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE -------------------------------------------------------------------------------------- $21,000 U.S. Treasury Note............ 7.50 % 11/15/01 - 02/15/05 $ 22,406,040 15,000 U.S. Treasury Note Strips..... 0.00 02/15/19 - 08/15/19 5,072,100 ------------ TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $137,165,302)......................................... 138,032,806 ------------ FOREIGN GOVERNMENT OBLIGATIONS (3.9%) 5,000 Hydro-Quebec.................. 9.50 11/15/30 6,499,200 5,000 Manitoba (Province of)........ 7.75 07/17/16 5,535,950 5,000 Province of New Brunswick..... 7.625 06/29/04 5,297,350 ------------ TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST $15,896,050).......................................... 17,332,500 ------------ ASSET-BACKED SECURITIES (1.0%) FINANCE/RENTAL/LEASING (0.6%) 2,600 Connecticut RRB Special....... 6.21 12/30/11 2,574,585 ------------ FINANCIAL CONGLOMERATES (0.4%) 1,800 American Express Credit Account...................... 5.53 10/15/08 1,782,000 ------------ TOTAL ASSET-BACKED SECURITIES (COST $4,399,134)........................................... 4,356,585 ------------ SHORT-TERM INVESTMENT (A) (8.5%) U.S. GOVERNMENT AGENCY 37,800 Federal National Mortgage Assoc. (COST $37,795,863)........... 3.94 07/02/01 37,795,863 ------------ TOTAL INVESTMENTS (COST $442,645,826)(B)................. 101.1% 450,213,865 LIABILITIES IN EXCESS OF OTHER ASSETS... (1.1) (4,769,073) ------------------- ------------ NET ASSETS.............................. 100.0% $445,444,792 =================== ============
--------------------- * RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS. ** SECURITY WAS PURCHASED ON A FORWARD COMMITMENT BASIS WITH AN APPROXIMATE PRINCIPAL AMOUNT AND NO DEFINITE MATURITY DATE; THE ACTUAL PRINCIPAL AMOUNT AND MATURITY DATE WILL BE DETERMINED UPON SETTLEMENT. PC PARTICIPATION CERTIFICATE. (A) PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $10,290,847 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $2,722,808, RESULTING IN NET UNREALIZED APPRECIATION OF $7,568,039. SEE NOTES TO FINANCIAL STATEMENTS 31 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ------------------------------------------------------------------------------------- CORPORATE BONDS (94.9%) ADVERTISING/MARKETING SERVICES (3.1%) $ 1,477 Interep National Radio Sales, Inc. (Series B).............. 10.00% 07/01/08 $ 1,240,680 6,405 Next Generation Network, Inc. (Series C)................... 14.00+ 02/01/03 1,921,500 ------------ 3,162,180 ------------ AEROSPACE & DEFENSE (1.0%) 1,300 Loral Space & Communications Ltd.......................... 9.50 01/15/06 975,000 ------------ AIRLINES (0.9%) 1,030 Air Canada - 144A* (Canada)... 10.25 03/15/11 942,450 ------------ ALTERNATIVE POWER GENERATION (0.7%) 680 AES Corp. (The)............... 8.875 02/15/11 663,000 ------------ AUTO PARTS: O.E.M. (1.8%) 470 Hayes Lammerz International, Inc. (Series B).............. 9.125 07/15/07 352,500 650 Hayes Lemmerz International, Inc. (Series B).............. 8.25 12/15/08 455,000 455 Lear Corp. (Series B)......... 8.11 05/15/09 452,042 515 TRW Inc....................... 7.625 03/15/06 530,738 ------------ 1,790,280 ------------ BROADCAST/MEDIA (2.9%) 3,890 Tri-State Outdoor Media Group, Inc.......................... 11.00 05/15/08 2,917,500 ------------ BROADCASTING (2.2%) 350 Radio One, Inc. - 144A*....... 8.875 07/01/11 350,000 600 Salem Communication Holdings Corp. - 144A*................ 9.00 07/01/11 594,000 365 XM Satellite Radio Holdings Inc.......................... 14.00 03/15/10 219,000 1,060 Young Broadcasting Inc. - 144A*........................ 10.00 03/01/11 1,022,900 ------------ 2,185,900 ------------ CABLE/SATELLITE TV (10.6%) 1,250 Adelphia Communications Corp. (Series B)................... 10.50 07/15/04 1,262,500 500 Adelphia Communications Corp. (Series B)................... 7.75 01/15/09 437,500 3,750 Australis Holdings Ltd. (Australia) (a)(b)........... 15.00 11/01/02 375 1,100 British Sky Broadcasting Group PLC (United Kingdom)......... 6.875 02/23/09 1,012,451 900 British Sky Broadcasting Group PLC (United Kingdom)......... 8.20 07/15/09 894,708 1,400 Callahan Nordrhein Westfalen - 144A* (Germany).............. 14.00 07/15/10 1,190,000 2,075 Charter Communications Holding, Inc. - 144A*........ 11.75++ 05/15/11 1,203,500 685 CSC Holdings Inc. - 144A*..... 7.625 04/01/11 652,134 3,000 Knology Holdings, Inc......... 11.875++ 10/15/07 930,000 1,795 NTL Communications Corp. (Series B)................... 11.875 10/01/10 1,202,650 705 Ono Finance PLC (United Kingdom) - 144A*++........... 14.00 02/15/11 620,400 880 Telewest Communications PLC (United Kingdom)............. 9.875 02/01/10 743,600
SEE NOTES TO FINANCIAL STATEMENTS 32 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ------------------------------------------------------------------------------------- $ 1,335 United Pan-Europe Communications NV (Series B) (Netherlands)................ 10.875% 08/01/09 $ 480,600 ------------ 10,630,418 ------------ CASINO/GAMING (3.0%) 4,485 Aladdin Gaming Holdings/Capital Corp. (Series B)................... 13.50++ 03/01/10 1,076,400 675 International Game Technology................... 8.375 05/15/09 691,875 7,210 Resort At Summerlin (Series B) (a)(b)....................... 13.00 12/15/07 72,101 250 Station Casinos, Inc.......... 8.375 02/15/08 251,250 850 Station Casinos, Inc.......... 9.875 07/01/10 879,750 ------------ 2,971,376 ------------ CELLULAR TELEPHONE (3.6%) 915 American Cellular Corp. - 144A*........................ 9.50 10/15/09 850,950 800 Dobson/Sygnet Communications............... 12.25 12/15/08 720,000 5,500 Dolphin Telecom PLC (Series B) (United Kingdom)............. 14.00++ 05/15/09 110,000 5,130 McCaw International Ltd....... 13.00++ 04/15/07 1,333,800 925 Nextel Communications, Inc.... 9.95++ 02/15/08 582,750 ------------ 3,597,500 ------------ CHEMICALS: SPECIALTY (0.2%) 175 Millennium America, Inc. - 144A*........................ 9.25 06/15/08 175,000 ------------ COMMERCIAL PRINTING/FORMS (0.6%) 2,500 Premier Graphics Inc. (a)(b)....................... 11.50 12/01/05 75,000 520 Quebecor Media, Inc. - 144A* (Canada)..................... 11.125 07/15/11 518,700 ------------ 593,700 ------------ CONSUMER/BUSINESS SERVICES (4.2%) 500 Anacomp, Inc. (b)............. 10.875 04/01/04 90,000 1,800 Anacomp, Inc. (Series B) (b).......................... 10.875 04/01/04 324,000 5,690 Comforce Corp. (Series B)..... 15.00+ 12/01/09 2,560,331 1,350 MDC Communication Corp. (Canada)..................... 10.50 12/01/06 1,242,000 ------------ 4,216,331 ------------ CONTAINERS/PACKAGING (1.9%) 1,010 Berry Plastics Corp........... 12.25 04/15/04 1,020,100 1,645 Owens-Illinois, Inc........... 7.80 05/15/18 937,650 ------------ 1,957,750 ------------ DIVERSIFIED MANUFACTURING (3.2%) 800 Eagle-Picher Industries, Inc.......................... 9.375 03/01/08 540,000 4,525 Jordan Industries, Inc. (Series B)................... 11.75++ 04/01/09 2,715,000 ------------ 3,255,000 ------------
SEE NOTES TO FINANCIAL STATEMENTS 33 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ------------------------------------------------------------------------------------- DRUGSTORE CHAINS (0.7%) $ 1,000 Rite Aid Corp................. 7.70% 02/15/27 $ 750,000 ------------ ELECTRIC UTILITIES (0.9%) 530 Mirant Americas - 144A*....... 7.625 05/01/06 533,646 410 PG&E National Energy Group - 144A*........................ 10.375 05/16/11 413,034 ------------ 946,680 ------------ ELECTRONIC DISTRIBUTORS (0.7%) 610 BRL Universal Equipment Corp......................... 8.875 02/15/08 628,300 6,000 CHS Electronics, Inc. (a)(b)....................... 9.875 04/15/05 120,000 ------------ 748,300 ------------ ELECTRONIC EQUIPMENT/INSTRUMENTS (0.8%) 1,620 High Voltage Engineering, Inc.......................... 10.75 08/15/04 777,600 ------------ ELECTRONICS/APPLIANCES (0.1%) 12,000 International Semi-Tech Microelectronics, Inc. (Canada) (a)(b).............. 11.50 08/15/03 60,000 ------------ ENGINEERING & CONSTRUCTION (1.1%) 525 Encompass Services Corp. - 144A*........................ 10.50 05/01/09 498,750 1,500 Metromedia Fiber Network, Inc.......................... 10.00 12/15/09 615,000 ------------ 1,113,750 ------------ ENVIRONMENTAL SERVICES (2.8%) 1,675 Allied Waste North America, Inc. - 144A*................. 8.875 04/01/08 1,727,344 1,100 Waste Management, Inc......... 7.375 08/01/10 1,101,650 ------------ 2,828,994 ------------ FOOD DISTRIBUTORS (0.7%) 800 Volume Services America, Inc.......................... 11.25 03/01/09 752,000 ------------ FOOD RETAIL (0.9%) 865 Delhaize America, Inc. - 144A*........................ 9.00 04/15/31 937,037 ------------ FOOD: MEAT/FISH/DAIRY (0.6%) 550 Michael Foods, Inc. - 144A*... 11.75 04/01/11 563,750 ------------ FOREST PRODUCTS (1.1%) 1,050 Tembec Industries, Inc. - 144A* (Canada)............... 8.50 02/01/11 1,071,000 ------------ HOME BUILDING (4.0%) 765 Beazer Homes USA, Inc......... 8.625 05/15/11 761,175 1,110 Centex Corp................... 7.875 02/01/11 1,104,328 655 Schuler Homes, Inc. - 144A*... 9.375 07/15/09 655,000
SEE NOTES TO FINANCIAL STATEMENTS 34 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ------------------------------------------------------------------------------------- $ 315 Schuler Homes, Inc. - 144A*... 10.50% 07/15/11 $ 315,788 1,170 Toll Corp..................... 8.25 02/01/11 1,134,900 ------------ 3,971,191 ------------ HOSPITAL/NURSING MANAGEMENT (3.0%) 675 HCA Inc....................... 8.75 09/01/10 718,875 1,200 HCA Inc....................... 7.875 02/01/11 1,206,000 1,050 Tenet Healthcare Corp......... 8.625 01/15/07 1,097,250 ------------ 3,022,125 ------------ HOTELS/RESORTS/CRUISELINES (0.9%) 3,000 Epic Resorts LLC (Series B)... 13.00 06/15/05 900,000 ------------ HOUSEHOLD/PERSONAL CARE (2.4%) 2,419 J.B. Williams Holdings, Inc.......................... 12.00 03/01/04 2,370,620 ------------ INDUSTRIAL SPECIALTIES (0.8%) 800 International Wire Group, Inc.......................... 11.75 06/01/05 816,000 ------------ INTERNET SOFTWARE/SERVICES (0.9%) 1,125 Exodus Communications Inc..... 11.625 07/15/10 399,375 1,270 Globix Corp................... 12.50 02/01/10 368,300 1,700 PSINet, Inc. (a)(b)........... 11.00 08/01/09 110,500 ------------ 878,175 ------------ MANAGED HEALTH CARE (1.6%) 1,280 Aetna, Inc.................... 7.875 03/01/11 1,249,830 365 Health Net, Inc. - 144A*...... 8.375 04/15/11 353,470 ------------ 1,603,300 ------------ MEDIA CONGLOMERATES (0.4%) 435 Nextmedia Operating, Inc. - 144A*........................ 10.75 07/01/11 435,000 ------------ MEDICAL SPECIALTIES (0.1%) 5,100 MEDIQ/PPN Life Support Services, Inc. (b)........... 11.00 06/01/08 51,000 ------------ MEDICAL/NURSING SERVICES (0.8%) 850 Fresenius Medical Care - 144A*........................ 7.875 06/15/11 828,750 ------------ MISCELLANEOUS COMMERCIAL SERVICES (0.3%) 250 Advanstar Communications, Inc. (Series B)................... 12.00 02/15/11 251,250 ------------ MOVIES/ENTERTAINMENT (1.0%) 910 Alliance Atlantis Communications, Inc. (Canada)..................... 13.00 12/15/09 960,050 ------------ OFFICE EQUIPMENT/SUPPLIES (3.6%) 6,500 Mosler, Inc. (b).............. 11.00 04/15/03 3,575,000 ------------ OIL & GAS PRODUCTION (1.2%) 1,250 Chesapeake Energy Corp. - 144A*........................ 8.125 04/01/11 1,175,000 ------------
SEE NOTES TO FINANCIAL STATEMENTS 35 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ------------------------------------------------------------------------------------- OILFIELD SERVICES/EQUIPMENT (0.2%) $ 185 Key Energy Services, Inc. - 144A*........................ 8.375% 03/01/08 $ 185,463 ------------ OTHER CONSUMER SPECIALTIES (1.1%) 1,360 Samsonite Corp................ 10.75 06/15/08 1,135,600 ------------ OTHER METALS/MINERALS (0.5%) 520 Phelps Dodge Corp............. 8.75 06/01/11 513,146 ------------ PUBLISHING: BOOKS/MAGAZINES (0.8%) 855 PRIMEDIA, Inc. - 144A*........ 8.875 05/15/11 803,700 ------------ REAL ESTATE DEVELOPMENT (0.5%) 545 Blum CB Corp. - 144A*......... 11.25 06/15/11 534,100 ------------ RESTAURANTS (1.6%) 20,351 American Restaurant Group Holdings, Inc. - 144A* (c)... 0.00 12/15/05 1,017,565 5,000 FRD Acquisition Corp. (a)(b)....................... 12.50 07/15/04 550,000 ------------ 1,567,565 ------------ RETAIL - SPECIALTY (0.8%) 775 Pantry, Inc................... 10.25 10/15/07 751,750 ------------ SERVICES TO THE HEALTH INDUSTRY (0.6%) 550 Omnicare, Inc. - 144A*........ 8.125 03/15/11 566,500 ------------ SPECIALTY TELECOMMUNICATIONS (9.7%) 6,500 Birch Telecom Inc............. 14.00 06/15/08 3,250,000 1,800 DTI Holdings, Inc. (Series B)........................... 12.50++ 03/01/08 504,000 3,000 Esprit Telecom Group PLC (United Kingdom) (b)......... 11.50 12/15/07 60,000 1,800 Esprit Telecom Group PLC (United Kingdom) (b)......... 10.875 06/15/08 36,000 16,520 Firstworld Communications, Inc.......................... 13.00++ 04/15/08 1,321,600 585 Global Crossing Holdings, Ltd. (Bermuda).................... 9.50 11/15/09 447,525 1,000 Global Crossing Holdings, Ltd. - 144A* (Bermuda)............ 8.70 08/01/07 765,000 2,500 GT Group Telecom Inc. (Canada)..................... 13.25++ 02/01/10 825,000 195 McLeodUSA Inc................. 11.375 01/01/09 122,850 1,150 McLeodUSA, Inc................ 11.50 05/01/09 741,750 1,135 Pac-West Telecom Inc. (Series B)........................... 13.50 02/01/09 510,750 1,950 Primus Telecommunication Group, Inc. (Series B)....... 9.875 05/15/08 429,000 1,300 Versatel Telecom International NV (Netherlands)............. 13.25 05/15/08 494,000 3,031 Viatel Inc. (a)(b)............ 11.25 04/15/08 60,620 800 Viatel Inc. (a)(b)............ 11.50 03/15/09 16,000 3,410 World Access, Inc (a)(b)(c)... 13.25 01/15/08 68,200 1,300 Worldwide Fiber Inc. (Canada)..................... 12.00 08/01/09 19,500 ------------ 9,671,795 ------------
SEE NOTES TO FINANCIAL STATEMENTS 36 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ------------------------------------------------------------------------------------- TELECOMMUNICATIONS (4.7%) $ 1,000 Covad Communications Group, Inc.......................... 12.50% 02/15/09 $ 160,000 5,500 e. Spire Communications, Inc. (a)(b)....................... 13.75 07/15/07 1,100,000 2,925 Focal Communications, Corp. (Series B)................... 12.125++ 02/15/08 643,500 1,300 Hyperion Telecommunication, Inc. (Series B).............. 12.25 09/01/04 1,040,000 1,000 MGC Communications, Inc....... 13.00 04/01/10 280,000 800 NEXTLINK Communications, Inc.......................... 9.00 03/15/08 208,000 875 NEXTLINK Communications, Inc.......................... 10.75 06/01/09 280,000 5,400 Rhythms Netconnections, Inc.......................... 12.75 04/15/09 567,000 1,200 Startec Global Communications Corp......................... 12.00 05/15/08 36,000 560 Talton Holdings, Inc. (Series B)........................... 11.00 06/30/07 355,600 3,600 WinStar Communications, Inc. (a).......................... 14.75++ 04/15/10 27,000 1,000 WinStar Communications, Inc. (a)(b)....................... 12.75 04/15/10 15,000 ------------ 4,712,100 ------------ TRUCKS/CONSTRUCTION/FARM MACHINERY (1.1%) 1,415 J.B. Poindexter & Co., Inc.... 12.50 05/15/04 1,132,000 ------------ WHOLESALE DISTRIBUTORS (0.4%) 415 Burhmann US Inc............... 12.25 11/01/09 410,850 ------------ WIRELESS COMMUNICATIONS (1.6%) 930 AMSC Acquisition Co., Inc. (Series B)................... 12.25 04/01/08 204,600 19,000 CellNet Data Systems, Inc. (a)(b)....................... 14.00++ 10/01/07 95,000 3,000 Globalstar LP/Capital Corp. (b).......................... 10.75 11/01/04 165,000 3,300 Orbcomm Global LP/Capital Corp. (Series B) (a)(b)...... 14.00 08/15/04 99,000 4,500 USA Mobile Communications Holdings, Inc................ 14.00 11/01/04 990,000 ------------ 1,553,600 ------------ TOTAL CORPORATE BONDS (COST $234,590,170)........................................ 94,958,126 ------------
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NUMBER OF SHARES THOUSANDS RATE DATE VALUE COMMON STOCKS (D) (0.3%) APPAREL/FOOTWEAR RETAIL (0.0%) 1,310,596 County Seat Store Corp. (c)............. 11,795 ----------- CASINO/GAMING (0.0%) 2,000 Fitzgerald Gaming Corp.................. 2 ----------- ENTERTAINMENT & LEISURE (0.0%) 444,351 Premier Holdings Inc. (c)............... 444 ----------- FOOD: SPECIALTY/CANDY (0.0%) 2,375 SFAC New Holdings Inc. (c).............. 594
SEE NOTES TO FINANCIAL STATEMENTS 37 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE -- ---------------------------------------------------------------- 436 SFFB Holdings, Inc. (c)................. $ 4 120,000 Specialty Foods Acquisition Corp. - 144A*.................................. 1,200 ----------- 1,798 ----------- HOTELS/RESORTS/CRUISELINES (0.0%) 71,890 Vagabond Inns, Inc. (Class D) (a)....... 72 ----------- MEDICAL/NURSING SERVICES (0.0%) 418,663 Raintree Healthcare Corp. (c)........... 3,768 ----------- MOTOR VEHICLES (0.0%) 87 Northern Holdings Industrial Corp. * (c).................................... -- ----------- RESTAURANTS (0.0%) 7,750 American Restaurant Group Holdings, Inc. - 144A*................................ 1,938 ----------- SPECIALTY TELECOMMUNICATIONS (0.1%) 33,335 Versatel Telecom International NV (ADR) (Netherlands).......................... 94,671 15,710 World Access, Inc (c)................... 801 ----------- 95,472 ----------- TELECOMMUNICATION EQUIPMENT (0.0%) 196,000 FWT Inc. (c)............................ 1,960 ----------- TEXTILES (0.0%) 298,461 U.S. Leather, Inc. (c).................. 2,985 ----------- WIRELESS COMMUNICATIONS (0.2%) 809,424 Arch Wireless, Inc. (c)................. 133,555 38,444 Vast Solutions, Inc. (Class B1) (c)..... 385 38,444 Vast Solutions, Inc. (Class B2) (c)..... 384 38,444 Vast Solutions, Inc. (Class B3) (c)..... 384 ----------- 134,708 ----------- TOTAL COMMON STOCKS (COST $65,945,728)..................... 254,942 -----------
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PRINCIPAL COUPON MATURITY AMOUNT IN RATE DATE THOUSANDS ------ -------- CONVERTIBLE BONDS (0.0%) HOTELS/RESORTS/CRUISELINES (0.0%) $ 742 Premier Cruises Ltd. (COST $742,000).............. 10.00+% 08/15/05 74 -----------
SEE NOTES TO FINANCIAL STATEMENTS 38 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- PREFERRED STOCKS (0.5%) RESTAURANTS (0.2%) 2,218 American Restaurant Group Holdings, Inc. (Series B)............................. $ 221,800 ------------ TELECOMMUNICATION EQUIPMENT (0.3%) 1,960,000 FWT Inc. (Series A) (c)(d).............. 303,800 ------------ TOTAL PREFERRED STOCKS (COST $9,991,277)...................... 525,600 ------------
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EXPIRATION NUMBER OF DATE WARRANTS ---------- WARRANTS (D) (0.1%) ADVERTISING/MARKETING SERVICES (0.0%) 12,524 Next Generation Network, Inc. - 144A*............................. 02/01/08 125 ----------- AEROSPACE & DEFENSE (0.0%) 1,500 Sabreliner Corp. - 144A*........... 04/15/03 15,000 ----------- BROADCASTING (0.0%) 640 XM Satellite Radio Holdings Inc. - 144A*............................. 03/15/10 12,800 ----------- CASINO/GAMING (0.0%) 83,500 Aladdin Gaming Enterprises, Inc. - 144A*............................. 03/01/10 835 6,000 Resort At Summerlin - 144A*........ 12/15/07 60 ----------- 895 ----------- CONSUMER/BUSINESS SERVICES (0.0%) 42,250 Comforce Corp. - 144A*............. 12/01/09 423 ----------- HOTELS/RESORTS/CRUISELINES (0.0%) 3,000 Epic Resorts LLC - 144A*........... 06/15/05 30 ----------- INTERNET SOFTWARE/SERVICES (0.0%) 16,520 Verado Holdings Inc. - 144A*....... 04/15/08 165 ----------- OIL & GAS PRODUCTION (0.0%) 39,665 Gothic Energy Corp. - 144A*........ 05/01/05 40 ----------- RESTAURANTS (0.0%) 1,500 American Restaurant Group Holdings, Inc. - 144A*...................... 08/15/08 15 ----------- SPECIALTY TELECOMMUNICATIONS (0.1%) 6,500 Birch Telecom Inc. - 144A*......... 06/15/08 650 2,500 GT Group Telecom Inc. - 144A* (Canada).......................... 02/01/10 68,750 ----------- 69,400 ----------- TELECOMMUNICATIONS (0.0%) 1,200 Startec Global Communications Corp. - 144A*........................... 05/15/08 36 -----------
SEE NOTES TO FINANCIAL STATEMENTS 39 Morgan Stanley Variable Investment Series - High Yield PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF EXPIRATION WARRANTS DATE VALUE -- ----------------------------------------------------------------------- WIRELESS COMMUNICATIONS (0.0%) 1,000 Motient Corp. - 144A*.............. 04/01/08 $ 500 ----------- TOTAL WARRANTS (COST $730,818)............................... 99,429 -----------
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PRINCIPAL COUPON MATURITY AMOUNT IN RATE DATE THOUSANDS ------- -------- SHORT-TERM INVESTMENT (1.7%) REPURCHASE AGREEMENT $ 1,744 The Bank of New York (dated 06/29/01; proceeds $1,744,303)(e) (COST $1,743,740)............ 3.875% 07/02/01 1,743,740 -----------
TOTAL INVESTMENTS (COST $313,743,733)(F)....... 97.5% 97,581,911 OTHER ASSETS IN EXCESS OF LIABILITIES................... 2.5 2,502,512 ----- ----------- NET ASSETS.................... 100.0% $100,084,423 ===== ===========
--------------------- ADR AMERICAN DEPOSITORY RECEIPT. * RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS. + PAYMENT-IN-KIND SECURITY. ++ CURRENTLY A ZERO COUPON BOND AND WILL PAY INTEREST AT THE RATE SHOWN AT A FUTURE SPECIFIED DATE. ++ CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT; BONDS WITH ATTACHED WARRANTS. (A) ISSUER IN BANKRUPTCY. (B) NON-INCOME PRODUCING SECURITY; BOND IN DEFAULT. (C) ACQUIRED THROUGH EXCHANGE OFFER. (D) NON-INCOME PRODUCING SECURITIES. (E) COLLATERALIZED BY $1,662,573 FEDERAL HOME LOAN MORTGAGE CORP. 6.875% DUE 09/15/10 VALUED AT $1,778,625. (F) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $838,436 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $217,000,258, RESULTING IN NET UNREALIZED DEPRECIATION OF $216,161,822. SEE NOTES TO FINANCIAL STATEMENTS 40 Morgan Stanley Variable Investment Series - Utilities PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMMON STOCKS (88.2%) ELECTRIC UTILITIES (45.7%) 313,050 AES Corp.*.............................. $ 13,476,803 110,000 Allegheny Energy, Inc................... 5,307,500 205,000 Calpine Corp.*.......................... 7,749,000 145,000 Capstone Turbine Corp.*................. 3,261,050 205,865 Cinergy Corp............................ 7,194,982 185,000 CMS Energy Corp......................... 5,152,250 125,000 Consolidated Edison, Inc................ 4,975,000 200,000 Constellation Energy Group.............. 8,520,000 307,500 DPL, Inc................................ 8,905,200 165,000 DTE Energy Co........................... 7,662,600 252,432 Duke Energy Corp........................ 9,847,372 220,000 Energy East Corp........................ 4,600,200 200,000 Entergy Corp............................ 7,678,000 104,000 Exelon Corp............................. 6,668,480 170,000 FPL Group, Inc.......................... 10,235,700 145,000 General Electric Co..................... 7,068,750 135,000 GPU, Inc................................ 4,745,250 239,367 Mirant Corp.*........................... 8,234,225 305,000 Montana Power Co.*...................... 3,538,000 200,000 Northeast Utilities..................... 4,150,000 190,000 NRG Energy, Inc.*....................... 4,195,200 195,000 Pinnacle West Capital Corp.............. 9,243,000 100,000 PPL Corp................................ 5,500,000 150,000 Public Service Company of New Mexico.... 4,815,000 175,000 Public Service Enterprise Group, Inc.... 8,557,500 200,000 Reliant Energy, Inc..................... 6,442,000 215,000 SCANA Corp.............................. 6,106,000 285,000 Southern Co. (The)...................... 6,626,250 221,500 TXU Corp................................ 10,674,085 200,000 Wisconsin Energy Corp................... 4,754,000 267,250 Xcel Energy, Inc........................ 7,603,263 ------------ 213,486,660 ------------ ENERGY (16.6%) 168,625 Burlington Resources, Inc............... 6,736,569 277,000 Dynegy, Inc. (Class A).................. 12,880,500 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 200,460 El Paso Corp............................ $ 10,532,168 196,500 Enron Corp.............................. 9,628,500 150,000 KeySpan Corp............................ 5,472,000 100,000 Kinder Morgan, Inc...................... 5,025,000 280,000 NiSource Inc............................ 7,652,400 155,000 Questar Corp............................ 3,837,800 200,000 UtiliCorp United, Inc................... 6,110,000 290,000 Williams Companies, Inc................. 9,555,500 ------------ 77,430,437 ------------ TELECOMMUNICATIONS (25.9%) 171,932 ALLTEL Corp............................. 10,532,554 100,000 Amdocs Ltd.*............................ 5,385,000 175,000 AOL Time Warner Inc.*................... 9,275,000 335,634 AT&T Corp............................... 7,383,948 170,000 BCE, Inc. (Canada)...................... 4,471,000 130,000 BroadWing Inc........................... 3,178,500 268,750 CenturyTel, Inc......................... 8,143,125 125,000 Charter Communications, Inc. (Class A)*............................. 2,918,750 140,000 Nextel Communications, Inc. (Class A)*............................. 2,450,000 401,691 Qwest Communications International, Inc.................................... 12,801,892 258,946 SBC Communications, Inc................. 10,373,377 215,000 Sprint Corp. (FON Group)................ 4,592,400 100,000 Sprint Corp. (PCS Group)*............... 2,415,000 160,000 Telefonos de Mexico S.A. (Series L) (ADR) (Mexico)......................... 5,614,400 100,000 Telephone & Data Systems, Inc........... 10,875,000 221,120 Verizon Communications Inc.............. 11,829,920 230,000 Vodafone Group PLC (ADR) (United Kingdom)............................... 5,140,500 236,163 WorldCom Group*......................... 3,532,998 ------------ 120,913,364 ------------ TOTAL COMMON STOCKS (COST $265,870,663).................... 411,830,461 ------------
SEE NOTES TO FINANCIAL STATEMENTS 41 Morgan Stanley Variable Investment Series - Utilities PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- CORPORATE BONDS (6.0%) ELECTRIC UTILITIES (3.2%) $ 1,300 American Electric Power 6.125% due 05/15/06........................... $ 1,283,061 400 Consumers Energy Co. 6.875% due 03/01/18........................... 365,300 705 DTE Energy Co. 7.05% due 06/01/11....... 707,369 1,670 Exelon Corp. 6.75% due 05/01/11......... 1,643,898 3,000 Indianapolis Power Co. 7.05% due 02/01/24........................... 2,657,760 1,695 MidAmerican Funding LLC 6.75% due 03/01/11........................... 1,653,778 1,595 Mirant Americas -144A** 7.625% due 05/01/06........................... 1,605,974 1,290 NRG Energy, Inc. 7.75% due 04/01/11..... 1,307,273 150 PG&E National Energy Group - 144A** 10.375% due 05/16/11.... 151,110 1,305 Progress Energy, Inc. 7.10% due 03/01/11........................... 1,320,151 1,740 PSEG Energy Holdings 9.125% due 02/10/04........................... 1,815,359 330 South Carolina Electric & Gas Co. 7.50% due 06/15/05........................... 345,863 ------------ 14,856,896 ------------ ENERGY (1.4%) 500 CMS Panhandle Holding Co. 7.00% due 07/15/29........................... 426,665 1,000 Coastal Corp. 7.75% due 10/15/35........ 974,840 845 NiSource Finance Corp. 7.875% due 11/15/10........................... 894,982 410 Oxymar -144A** 7.50% due 02/15/16....... 334,150 2,000 Panhandle Eastern Corp. 8.625% due 04/15/25........................... 2,128,620 PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 635 Petrozuata Finance, Inc. (Venezuela) - 144A** 8.22% due 04/01/17.............. $ 495,846 455 RAS Laffan Liquid Natural Gas - 144A** 8.294% due 03/15/14.................... 431,986 1,100 Williams Companies, Inc. - 144A** 7.50% due 01/15/31........................... 1,036,398 ------------ 6,723,487 ------------ TELECOMMUNICATIONS (1.4%) 710 AT&T Wireless Services Inc. - 144A** 7.875% due 03/01/11.................... 711,037 845 BellSouth Telecommunications Inc. - 6.375% due 06/01/28.................... 752,185 675 British Telecom PLC (United Kingdom) 8.625% due 12/15/30.................... 728,993 720 Deutsche Telekom International Finance Corp. (Netherlands) 8.25% due 06/15/30........................... 734,904 750 GTE Corp. 7.90% due 02/01/27............ 761,235 1,150 Qwest Capital Funding 7.90% due 08/15/10........................... 1,183,695 390 Telus Corp. 8.00% due 06/01/11.......... 396,852 1,110 WorldCom, Inc. 8.25% due 05/15/31....... 1,091,274 ------------ 6,360,175 ------------ TOTAL CORPORATE BONDS (COST $28,329,002)..................... 27,940,558 ------------ U.S. GOVERNMENT & AGENCY OBLIGATIONS (0.9%) 2,500 Tennesse Valley Authority 6.00% due 09/24/02........................... 2,550,775
SEE NOTES TO FINANCIAL STATEMENTS 42 Morgan Stanley Variable Investment Series - Utilities PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 1,800 U.S Treasury Note 15.75% due 11/15/01........................... $ 1,878,192 ------------ TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $4,424,624)...................... 4,428,967 ------------ SHORT-TERM INVESTMENT (A) (4.7%) U.S. GOVERNMENT AGENCY (4.7%) 21,900 Federal National Mortgage Assoc. 3.94% due 07/02/01 (COST $21,897,603)..................... 21,897,603 ------------
TOTAL INVESTMENTS (COST $320,521,892)(B)................. 99.8% 466,097,589 OTHER ASSETS IN EXCESS OF LIABILITIES... 0.2 946,458 ------ ------------ NET ASSETS.............................. 100.0% $467,044,047 ====== ============
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. ** RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS. (A) PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $157,296,953 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $11,721,256, RESULTING IN NET UNREALIZED APPRECIATION OF $145,575,697. SEE NOTES TO FINANCIAL STATEMENTS 43 Morgan Stanley Variable Investment Series - Income Builder PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ---------------------------------------------------------------- COMMON STOCKS (52.8%) AUTO PARTS: O.E.M. (2.6%) 55,000 Delphi Automotive Systems Corp.......... $ 876,150 12,500 Johnson Controls, Inc................... 905,875 ----------- 1,782,025 ----------- BEVERAGES: ALCOHOLIC (1.2%) 20,000 Anheuser-Busch Companies, Inc........... 824,000 ----------- CHEMICALS: MAJOR DIVERSIFIED (0.5%) 11,000 Dow Chemical Co......................... 365,750 ----------- DEPARTMENT STORES (1.4%) 22,000 Sears, Roebuck & Co..................... 930,820 ----------- ELECTRIC UTILITIES (4.1%) 12,000 Dominion Resources, Inc................. 721,560 13,000 FPL Group, Inc.......................... 782,730 18,000 Reliant Energy, Inc..................... 579,780 25,000 TECO Energy, Inc........................ 762,500 ----------- 2,846,570 ----------- ELECTRICAL PRODUCTS (1.1%) 12,000 Emerson Electric Co..................... 726,000 ----------- ELECTRONIC EQUIPMENT/ INSTRUMENTS (1.2%) 22,000 Rockwell International Corp............. 838,640 ----------- ELECTRONICS/APPLIANCES (1.3%) 14,500 Whirlpool Corp.......................... 906,250 ----------- FINANCE/RENTAL/LEASING (1.2%) 10,000 Fannie Mae.............................. 851,500 ----------- FINANCIAL CONGLOMERATES (1.3%) 20,000 J.P. Morgan Chase & Co.................. 892,000 ----------- FOOD: MAJOR DIVERSIFIED (1.2%) 45,000 Sara Lee Corp........................... 852,300 ----------- FOOD: MEAT/FISH/DAIRY (1.3%) 45,000 Conagra Foods Inc....................... 891,450 ----------- NUMBER OF SHARES VALUE ---------------------------------------------------------------- HOUSEHOLD/PERSONAL CARE (1.4%) 21,665 Estee Lauder Companies, Inc. (The) (Class A).............................. $ 933,762 ----------- INDUSTRIAL CONGLOMERATES (1.2%) 23,000 Honeywell International, Inc............ 804,770 ----------- INDUSTRIAL MACHINERY (0.9%) 14,506 Ingersoll-Rand Co....................... 597,647 ----------- INDUSTRIAL SPECIALTIES (0.6%) 8,000 PPG Industries, Inc..................... 420,560 ----------- LIFE/HEALTH INSURANCE (1.4%) 18,000 Lincoln National Corp................... 931,500 ----------- MAJOR BANKS (3.4%) 15,000 Bank of America Corp.................... 900,450 22,000 FleetBoston Financial Corp.............. 867,900 14,625 WestPac Banking Corp. Ltd. (ADR) (Australia)............................ 535,275 ----------- 2,303,625 ----------- MAJOR TELECOMMUNICATIONS (2.4%) 40,000 Sprint Corp. (FON Group)................ 854,400 15,000 Verizon Communications Inc.............. 802,500 ----------- 1,656,900 ----------- MOTOR VEHICLES (1.2%) 33,000 Ford Motor Co........................... 810,150 ----------- MOVIES/ENTERTAINMENT (1.3%) 43,018 Six Flags, Inc.*........................ 905,099 ----------- OFFICE EQUIPMENT/ SUPPLIES (1.3%) 22,000 Pitney Bowes, Inc....................... 926,640 ----------- OIL & GAS PRODUCTION (2.3%) 20,000 Burlington Resources, Inc............... 799,000 12,000 Kerr-McGee Corp......................... 795,240 ----------- 1,594,240 ----------- OIL REFINING/MARKETING (2.6%) 21,000 Ashland, Inc............................ 842,100
SEE NOTES TO FINANCIAL STATEMENTS 44 Morgan Stanley Variable Investment Series - Income Builder PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ---------------------------------------------------------------- 20,000 Ultramar Diamond Shamrock Corp.......... $ 945,000 ----------- 1,787,100 ----------- PHARMACEUTICALS: MAJOR (2.3%) 12,000 Merck & Co., Inc........................ 766,920 23,000 Schering-Plough Corp.................... 833,520 ----------- 1,600,440 ----------- PUBLISHING: BOOKS/ MAGAZINES (0.6%) 15,240 Reader's Digest Assoc., Inc. (The) (Class A).............................. 438,150 ----------- REAL ESTATE INVESTMENT TRUSTS (9.0%) 20,000 Archstone Communities Trust............. 515,600 10,000 Avalonbay Communities, Inc.............. 467,500 10,000 Boston Properties, Inc.................. 409,000 20,000 Duke Realty Corp........................ 497,000 16,000 Equity Office Properties Trust.......... 506,080 7,000 Equity Residential Properties Trust..... 395,850 14,000 First Industrial Realty Trust, Inc...... 449,960 6,000 General Growth Properties, Inc.......... 236,160 20,000 Healthcare Realty Trust, Inc............ 526,000 17,000 Mack-Cali Realty Corp................... 484,160 20,000 Reckson Associates Realty Corp.......... 460,000 8,000 Rouse Co. (The)......................... 229,200 18,000 Simon Property Group, Inc............... 539,460 11,000 Vornado Realty Trust.................... 429,440 ----------- 6,145,410 ----------- SAVINGS BANKS (1.3%) 24,000 Washington Mutual, Inc.................. 901,200 ----------- TOBACCO (1.2%) 16,000 Philip Morris Companies, Inc............ 812,000 ----------- NUMBER OF SHARES VALUE ---------------------------------------------------------------- WIRELESS COMMUNICATIONS (0.0%) 688 Leap Wireless International, Inc.*...... $ 20,846 ----------- TOTAL COMMON STOCKS (COST $32,350,702)..................... 36,297,344 ----------- CONVERTIBLE PREFERRED STOCKS (12.1%) AUTO PARTS: O.E.M. (0.0%) 12,000 BTI Capital Trust $3.25 - 144A**........ 1,500 ----------- CONTAINERS/PACKAGING (2.1%) 36,000 Sealed Air Corp. (Series A) $2.00....... 1,438,200 ----------- ELECTRIC UTILITIES (2.0%) 53,000 Duke Energy Corp. $17.02 (Units)++...... 1,359,450 ----------- INVESTMENT BANKS/ BROKERS (0.2%) 15,940 Merrill Lynch & Co., Inc. $2.39 (exchangeable into IMC Global, Inc. common stock).......................... 159,400 ----------- MAJOR BANKS (1.4%) 30,200 National Australia Bank, Ltd. $1.97 (Australia) (Units)++.................. 940,730 ----------- OIL REFINING/MARKETING (0.8%) 50,000 Tesoro Petroleum Corp. $1.16............ 532,665 ----------- PULP & PAPER (1.0%) 18,400 Georgia-Pacific Corp. $6.17 (Units)++... 696,440 ----------- RAILROADS (1.5%) 22,400 Union Pacific Capital Trust $3.13....... 1,061,536 ----------- REAL ESTATE INVESTMENT TRUSTS (1.0%) 9,000 Equity Residential Properties Trust (Series E) $1.75....................... 281,250 13,000 SL Green Realty Corp. $2.00............. 414,700 ----------- 695,950 -----------
SEE NOTES TO FINANCIAL STATEMENTS 45 Morgan Stanley Variable Investment Series - Income Builder PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ---------------------------------------------------------------- REGIONAL BANKS (1.7%) 30,000 CNB Capital Trust I $1.50............... $ 1,170,000 ----------- TOOLS/HARDWARE (0.4%) 19,400 Metromedia International Group, Inc. $3.63.................................. 291,000 ----------- TOTAL CONVERTIBLE PREFERRED STOCKS (COST $9,823,641)...................... 8,346,871 ----------- PRINCIPAL AMOUNT IN THOUSANDS --------- CORPORATE BONDS (29.8%) CONVERTIBLE BONDS (13.0%) CABLE/SATELLITE TV (0.6%) $ 445 EchoStar Communications Corp. 4.875% due 01/07/07........................... 428,010 ----------- ELECTRONIC EQUIPMENT/ INSTRUMENTS (2.3%) 2,000 SCI Systems, Inc. 3.00% due 03/15/07.... 1,592,260 ----------- ELECTRONIC PRODUCTION EQUIPMENT (1.5%) 960 Photronics Inc. 6.00% due 06/01/04...... 1,012,301 ----------- HOSPITAL/NURSING MANAGEMENT (0.1%) 120 Emeritus Corp. - 144A** 6.25% due 01/01/06........................... 34,558 ----------- INDUSTRIAL MACHINERY (0.3%) 200 Thermo Fibertek, Inc. - 144A** 4.50% due 07/15/04........................... 179,262 ----------- INFORMATION TECHNOLOGY SERVICES (1.5%) 1,750 Aether Systems, Inc. 6.00% due 03/22/05........................... 1,034,670 ----------- PRINCIPAL AMOUNT IN THOUSANDS VALUE ---------------------------------------------------------------- INTERNET SOFTWARE/ SERVICES (2.3%) $5,000 AT Home Corp. 0.525% due 12/28/18....... $ 1,604,100 ----------- MAJOR TELECOMMUNICATIONS (3.0%) 800 Bell Atlantic Financial Service - 144A** (exchangeable into Cable & Wireless Communications common stock) 4.25% due 09/15/05........................... 786,000 1,300 Bell Atlantic Financial Service - 144A** (exchangeable into Telecom Corporation of New Zealand common stock) 5.75% due 04/01/03........................... 1,304,875 ----------- 2,090,875 ----------- TELECOMMUNICATION EQUIPMENT (1.4%) 1,100 RF Micro Systems Deviices - 144A** 3.75% due 08/15/05........................... 959,519 ----------- TOTAL CONVERTIBLE BONDS (COST $10,496,097)..................... 8,935,555 ----------- NON-CONVERTIBLE BONDS (16.8%) ADVERTISING/MARKETING SERVICES (4.6%) 1,000 Lamar Media Corp. 9.625% due 12/01/06........................... 1,050,000 2,000 Outdoor Systems, Inc. 8.875% due 06/15/07........................... 2,125,000 ----------- 3,175,000 ----------- CHEMICALS: SPECIALTY (2.2%) 1,875 Huntsman Polymers Corp. 11.75% due 12/01/04........................... 1,500,000 ----------- HOME FURNISHINGS (1.1%) 1,237 Dan River, Inc. 10.125% due 12/15/03.... 742,200 -----------
SEE NOTES TO FINANCIAL STATEMENTS 46 Morgan Stanley Variable Investment Series - Income Builder PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ---------------------------------------------------------------- MAJOR TELECOMMUNICATIONS (1.8%) $1,150 Sprint Spectrum L.P. 11.00% due 08/15/06........................... $ 1,219,794 ----------- MISCELLANEOUS COMMERCIAL SERVICES (2.3%) 1,500 Iron Mountain, Inc. 10.125% due 10/01/06........................... 1,590,000 ----------- OTHER METALS/MINERALS (3.8%) 2,500 Cyprus Amax Minerals Inc. 10.125% due 04/01/02........................... 2,571,750 ----------- TRUCKS/CONSTRUCTION/FARM MACHINERY (1.0%) 700 Navistar International Corp. - 144A** 9.375% due 06/01/06.................... 705,250 ----------- TOTAL NON-CONVERTIBLE BONDS (COST $12,513,039)..................... 11,503,994 ----------- TOTAL CORPORATE BONDS (COST $23,009,136)..................... 20,439,549 ----------- PRINCIPAL AMOUNT IN THOUSANDS VALUE ---------------------------------------------------------------- SHORT-TERM INVESTMENT (A) (7.4%) U.S. GOVERNMENT AGENCY $5,100 Federal National Mortgage Assoc 3.94% due 07/02/01 (COST $5,099,442)...................... $ 5,099,442 -----------
TOTAL INVESTMENTS (COST $70,282,921)(B).................. 102.1% 70,183,206 LIABILITIES IN EXCESS OF OTHER ASSETS... (2.1) (1,426,647) ------ ----------- NET ASSETS.............................. 100.0% $68,756,559 ====== ===========
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. ** RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS. ++ CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT; BONDS WITH ATTACHED WARRANTS. (A) SECURITY WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $5,951,842 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $6,051,557, RESULTING IN NET UNREALIZED DEPRECIATION OF $99,715. SEE NOTES TO FINANCIAL STATEMENTS 47 Morgan Stanley Variable Investment Series - Dividend Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ------------------------------------------------------------------- COMMON STOCKS (99.6%) AEROSPACE & DEFENSE (1.4%) 540,000 Goodrich Corp........................... $ 20,509,200 -------------- ALUMINUM (2.7%) 490,000 Alcan Aluminium, Ltd. (Canada).......... 20,589,800 520,000 Alcoa, Inc.............................. 20,488,000 -------------- 41,077,800 -------------- APPAREL/FOOTWEAR (1.3%) 525,000 VF Corp................................. 19,099,500 -------------- AUTO PARTS: O.E.M. (5.9%) 950,000 Dana Corp............................... 22,173,000 1,420,000 Delphi Automotive Systems Corp.......... 22,620,600 305,000 Johnson Controls, Inc................... 22,103,350 535,000 TRW Inc................................. 21,935,000 -------------- 88,831,950 -------------- BEVERAGES: NON-ALCOHOLIC (2.6%) 430,000 Coca-Cola Co............................ 19,350,000 460,000 PepsiCo, Inc............................ 20,332,000 -------------- 39,682,000 -------------- CHEMICALS: MAJOR DIVERSIFIED (2.8%) 600,000 Dow Chemical Co......................... 19,950,000 460,000 Du Pont (E.I.) de Nemours & Co., Inc.... 22,190,400 -------------- 42,140,400 -------------- COMPUTER PROCESSING HARDWARE (2.9%) 760,000 Hewlett-Packard Co...................... 21,736,000 195,000 International Business Machines Corp.... 22,035,000 -------------- 43,771,000 -------------- DEPARTMENT STORES (1.5%) 535,000 Sears, Roebuck & Co..................... 22,635,850 -------------- DISCOUNT STORES (1.3%) 565,000 Target Corp............................. 19,549,000 -------------- NUMBER OF SHARES VALUE ------------------------------------------------------------------- ELECTRIC UTILITIES (6.5%) 305,000 Dominion Resources, Inc................. $ 18,339,650 300,000 Exelon Corp............................. 19,236,000 360,000 FPL Group, Inc.......................... 21,675,600 590,000 GPU, Inc................................ 20,738,500 555,000 Reliant Energy, Inc..................... 17,876,550 -------------- 97,866,300 -------------- ELECTRONICS/ APPLIANCES (1.4%) 345,000 Whirlpool Corp.......................... 21,562,500 -------------- FINANCE/RENTAL/ LEASING (4.5%) 260,000 Fannie Mae.............................. 22,139,000 335,000 Household International, Inc............ 22,344,500 385,000 Providian Financial Corp................ 22,792,000 -------------- 67,275,500 -------------- FINANCIAL CONGLOMERATES (2.7%) 410,000 Citigroup, Inc.......................... 21,664,400 430,000 J.P. Morgan Chase & Co.................. 19,178,000 -------------- 40,842,400 -------------- FOOD DISTRIBUTORS (2.8%) 1,250,000 Supervalu, Inc.......................... 21,937,500 770,000 SYSCO Corp.............................. 20,905,500 -------------- 42,843,000 -------------- FOOD: MAJOR DIVERSIFIED (1.3%) 220,000 Quaker Oats Company (The)............... 20,075,000 -------------- FOREST PRODUCTS (1.4%) 385,000 Weyerhaeuser Co......................... 21,163,450 -------------- HOUSEHOLD/PERSONAL CARE (4.2%) 480,000 Avon Products, Inc...................... 22,214,400 340,000 Kimberly-Clark Corp..................... 19,006,000 340,000 Procter & Gamble Co. (The).............. 21,692,000 -------------- 62,912,400 --------------
SEE NOTES TO FINANCIAL STATEMENTS 48 Morgan Stanley Variable Investment Series - Dividend Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (6.7%) 425,000 General Electric Co..................... $ 20,718,750 510,000 Honeywell International, Inc............ 17,844,900 180,000 Minnesota Mining & Manufacturing Co..... 20,538,000 400,000 Tyco International Ltd. (Bermuda)....... 21,800,000 275,000 United Technologies Corp................ 20,146,500 -------------- 101,048,150 -------------- INDUSTRIAL SPECIALTIES (1.4%) 400,000 PPG Industries, Inc..................... 21,028,000 -------------- INFORMATION TECHNOLOGY SERVICES (1.4%) 330,000 Electronic Data Systems Corp............ 20,625,000 -------------- INTEGRATED OIL (4.1%) 400,000 BP Amoco PLC (ADR) (United Kingdom)..... 19,940,000 242,000 Exxon Mobil Corp........................ 21,138,700 350,000 Royal Dutch Petroleum Co. (ADR) (Netherlands).......................... 20,394,500 -------------- 61,473,200 -------------- LIFE/HEALTH INSURANCE (4.3%) 760,000 Aegon N.V. (ARS) (Netherlands).......... 21,584,000 442,500 Jefferson-Pilot Corp.................... 21,381,600 430,000 Lincoln National Corp................... 22,252,500 -------------- 65,218,100 -------------- MAJOR BANKS (2.9%) 360,000 Bank of America Corp.................... 21,610,800 830,000 KeyCorp................................. 21,621,500 -------------- 43,232,300 -------------- MAJOR TELECOMMUNICATIONS (1.4%) 405,000 Verizon Communications Inc.............. 21,667,500 -------------- NUMBER OF SHARES VALUE ------------------------------------------------------------------- MOTOR VEHICLES (4.3%) 450,000 DaimlerChrysler AG (Germany)............ $ 20,745,000 840,000 Ford Motor Co........................... 20,622,000 355,000 General Motors Corp..................... 22,844,250 -------------- 64,211,250 -------------- OFFICE EQUIPMENT/ SUPPLIES (1.5%) 530,000 Pitney Bowes, Inc....................... 22,323,600 -------------- OIL & GAS PIPELINES (2.6%) 355,000 El Paso Corp............................ 18,651,700 410,000 Enron Corp.............................. 20,090,000 -------------- 38,741,700 -------------- OIL & GAS PRODUCTION (1.3%) 300,000 Kerr-McGee Corp......................... 19,881,000 -------------- OIL REFINING/ MARKETING (2.8%) 565,000 Sunoco, Inc............................. 20,695,950 700,000 USX-Marathon Group...................... 20,657,000 -------------- 41,352,950 -------------- OTHER METALS/ MINERALS (1.2%) 450,000 Phelps Dodge Corp....................... 18,675,000 -------------- PHARMACEUTICALS: MAJOR (5.4%) 350,000 American Home Products Corp............. 20,454,000 385,000 Bristol-Myers Squibb Co................. 20,135,500 445,000 Pharmacia Corp.......................... 20,447,750 535,000 Schering-Plough Corp.................... 19,388,400 -------------- 80,425,650 -------------- PULP & PAPER (2.6%) 540,000 International Paper Co.................. 19,278,000 730,000 Mead Corp............................... 19,812,200 -------------- 39,090,200 --------------
SEE NOTES TO FINANCIAL STATEMENTS 49 Morgan Stanley Variable Investment Series - Dividend Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- RAILROADS (2.8%) 685,000 Burlington Northern Santa Fe Corp....... $ 20,666,450 595,000 CSX Corp................................ 21,562,800 -------------- 42,229,250 -------------- RECREATIONAL PRODUCTS (1.5%) 465,000 Eastman Kodak Co........................ 21,706,200 -------------- SEMICONDUCTORS (1.4%) 705,000 Intel Corp.............................. 20,621,250 -------------- TRUCKS/CONSTRUCTION/FARM MACHINERY (2.8%) 410,000 Caterpillar, Inc........................ 20,520,500 560,000 Deere & Co.............................. 21,196,000 -------------- 41,716,500 -------------- TOTAL COMMON STOCKS (COST $1,303,014,679).................. 1,497,104,050 --------------
TOTAL INVESTMENTS (COST $1,303,014,679)(a)............... 99.6% 1,497,104,050 OTHER ASSETS IN EXCESS OF LIABILITIES... 0.4 6,170,600 ------ -------------- NET ASSETS.............................. 100.0% $1,503,274,650 ====== ==============
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. ARS AMERICAN REGISTERED SHARES. (A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $252,681,908 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $58,592,537, RESULTING IN NET UNREALIZED APPRECIATION OF $194,089,371. SEE NOTES TO FINANCIAL STATEMENTS 50 Morgan Stanley Variable Investment Series - Capital Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMMON STOCKS (88.9%) AEROSPACE & DEFENSE (1.2%) 90,000 BE Aerospace, Inc.*..................... $ 1,714,500 ------------ ALUMINUM (2.8%) 50,000 Alcan Inc. (Canada)..................... 2,101,000 50,000 Alcoa, Inc.............................. 1,970,000 ------------ 4,071,000 ------------ APPAREL/FOOTWEAR (1.6%) 7,500 Jones Apparel Group, Inc.*.............. 324,000 35,000 Polo Ralph Lauren Corp.*................ 903,000 35,000 Reebok International Ltd.*.............. 1,118,250 ------------ 2,345,250 ------------ APPAREL/FOOTWEAR RETAIL (1.1%) 35,000 Abercrombie & Fitch Co. (Class A)*...... 1,557,500 ------------ BEVERAGES: NON-ALCOHOLIC (0.3%) 10,000 Pepsi Bottling Group, Inc. (The)........ 401,000 ------------ BIOTECHNOLOGY (0.2%) 5,000 IDEC Pharmaceuticals Corp.*............. 338,450 ------------ BROADCASTING (1.6%) 100,000 Radio One, Inc. (Class A)*.............. 2,300,000 ------------ CABLE/SATELLITE TV (2.7%) 95,000 AT&T Corp. - Liberty Media Group (Class A)*............................. 1,661,550 50,000 Comcast Corp. (Class A Special)*........ 2,170,000 ------------ 3,831,550 ------------ COMPUTER COMMUNICATIONS (1.5%) 25,000 Brocade Communications Systems, Inc.*... 1,099,750 55,000 Cisco Systems, Inc.*.................... 1,001,000 ------------ 2,100,750 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMPUTER PROCESSING HARDWARE (2.8%) 125,000 Apple Computer, Inc.*................... $ 2,906,250 25,000 Dell Computer Corp.*.................... 648,750 25,000 Sun Microsystems, Inc.*................. 393,000 ------------ 3,948,000 ------------ CONSTRUCTION MATERIALS (0.5%) 12,500 Vulcan Materials Co..................... 671,875 ------------ DEPARTMENT STORES (2.0%) 40,000 Federated Department Stores, Inc.*...... 1,700,000 45,000 Penney (J.C.) Co., Inc.................. 1,186,200 ------------ 2,886,200 ------------ ELECTRONIC COMPONENTS (0.5%) 7,500 NVIDIA Corp.*........................... 695,625 ------------ ELECTRONIC PRODUCTION EQUIPMENT (3.4%) 15,000 Applied Materials, Inc.*................ 736,500 5,000 Brooks Automation, Inc.*................ 230,500 30,000 Lam Research Corp.*..................... 889,500 40,000 LTX Corp.*.............................. 1,022,400 9,000 Novellus Systems, Inc.*................. 511,110 45,000 Teradyne, Inc.*......................... 1,489,500 ------------ 4,879,510 ------------ ENVIRONMENTAL SERVICES (1.9%) 65,000 Republic Services, Inc.*................ 1,290,250 45,000 Waste Management, Inc................... 1,386,900 ------------ 2,677,150 ------------ FINANCE/RENTAL/ LEASING (3.8%) 45,000 AmeriCredit Corp.*...................... 2,337,750 35,000 Household International, Inc............ 2,334,500 30,000 IndyMac Bancorp, Inc.*.................. 804,000 ------------ 5,476,250 ------------
SEE NOTES TO FINANCIAL STATEMENTS 51 Morgan Stanley Variable Investment Series - Capital Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- FINANCIAL CONGLOMERATES (1.0%) 100,000 Conseco, Inc.*.......................... $ 1,365,000 ------------ FINANCIAL PUBLISHING/ SERVICES (1.3%) 60,000 SunGard Data Systems Inc.*.............. 1,800,600 ------------ FOOD RETAIL (0.9%) 50,000 Kroger Co.*............................. 1,250,000 ------------ GAS DISTRIBUTORS (0.6%) 9,000 Dynegy, Inc. (Class A).................. 418,500 15,000 Equitable Resources, Inc................ 499,650 ------------ 918,150 ------------ HOSPITAL/NURSING MANAGEMENT (1.8%) 50,000 Tenet Healthcare Corp.*................. 2,579,500 ------------ INDUSTRIAL CONGLOMERATES (1.0%) 20,000 United Technologies Corp................ 1,465,200 ------------ INDUSTRIAL MACHINERY (0.9%) 40,000 Flowserve Corp.*........................ 1,230,000 ------------ INFORMATION TECHNOLOGY SERVICES (2.6%) 70,000 Citrix Systems, Inc.*................... 2,443,000 25,000 PeopleSoft, Inc.*....................... 1,230,750 ------------ 3,673,750 ------------ INSURANCE BROKERS/ SERVICES (0.1%) 7,600 Willis Group Holdings Ltd.*............. 134,900 ------------ INTEGRATED OIL (0.6%) 10,000 Chevron Corp............................ 905,000 ------------ INTERNET SOFTWARE/ SERVICES (0.8%) 85,000 Earthlink, Inc.*........................ 1,198,500 ------------ INVESTMENT BANKS/ BROKERS (1.1%) 20,000 Lehman Brothers Holdings, Inc........... 1,555,000 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- LIFE/HEALTH INSURANCE (1.8%) 80,000 UnumProvident Corp...................... $ 2,569,600 ------------ MAJOR BANKS (2.6%) 40,000 Bank of America Corp.................... 2,401,200 35,000 Bank One Corp........................... 1,253,000 ------------ 3,654,200 ------------ MANAGED HEALTH CARE (1.6%) 135,000 Caremark Rx, Inc.*...................... 2,220,750 ------------ MEDICAL DISTRIBUTORS (4.1%) 30,000 AmeriSource Health Corp. (Class A)*..... 1,659,000 50,000 Henry Schein, Inc.*..................... 2,003,000 60,000 McKesson HBOC, Inc...................... 2,227,200 ------------ 5,889,200 ------------ MEDICAL SPECIALTIES (2.3%) 45,000 Cooper Companies, Inc................... 2,313,000 15,000 St. Jude Medical, Inc.*................. 900,000 ------------ 3,213,000 ------------ MEDICAL/NURSING SERVICES (2.3%) 100,000 Lincare Holdings, Inc.*................. 3,001,000 11,600 Unilab Corp.*........................... 292,320 ------------ 3,293,320 ------------ METAL FABRICATIONS (0.7%) 25,000 Shaw Group Inc. (The)*.................. 1,002,500 ------------ MISCELLANEOUS COMMERCIAL SERVICES (2.1%) 40,000 Sabre Holdings Corp. (Class A)*......... 2,000,000 40,000 Sylvan Learning Systems, Inc.*.......... 972,000 ------------ 2,972,000 ------------ OIL & GAS PRODUCTION (1.0%) 80,000 Ocean Energy, Inc....................... 1,396,000 ------------
SEE NOTES TO FINANCIAL STATEMENTS 52 Morgan Stanley Variable Investment Series - Capital Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- OIL REFINING/ MARKETING (0.5%) 10,000 Sunoco, Inc............................. $ 366,300 10,000 Valero Energy Corp...................... 367,800 ------------ 734,100 ------------ OTHER CONSUMER SERVICES (3.3%) 175,000 Cendant Corp.*.......................... 3,412,500 20,000 eBay, Inc.*............................. 1,369,800 ------------ 4,782,300 ------------ PACKAGED SOFTWARE (3.9%) 20,000 Autodesk, Inc........................... 746,000 100,000 Compuware Corp.*........................ 1,399,000 35,000 Microsoft Corp.*........................ 2,541,000 50,000 Oracle Corp.*........................... 950,000 ------------ 5,636,000 ------------ PHARMACEUTICALS: GENERIC DRUGS (1.6%) 12,500 IVAX Corp.*............................. 487,500 30,000 Watson Pharmaceuticals, Inc.*........... 1,849,200 ------------ 2,336,700 ------------ PULP & PAPER (1.2%) 50,000 Georgia-Pacific Group................... 1,692,500 ------------ RAILROADS (1.6%) 65,000 CSX Corp................................ 2,355,600 ------------ RECREATIONAL PRODUCTS (1.3%) 100,000 Mattel, Inc.*........................... 1,892,000 ------------ REGIONAL BANKS (2.4%) 50,000 Fifth Third Bancorp..................... 3,002,500 20,000 Hibernia Corp. (Class A)................ 356,000 ------------ 3,358,500 ------------ RESTAURANTS (0.5%) 15,000 CEC Entertainment, Inc.*................ 740,250 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- SAVINGS BANKS (3.8%) 35,000 Charter One Financial, Inc.............. $ 1,116,500 50,000 Golden West Financial Corp.............. 3,212,000 30,000 Washington Mutual, Inc.................. 1,126,500 ------------ 5,455,000 ------------ SEMICONDUCTORS (0.4%) 20,000 Advanced Micro Devices, Inc.*........... 577,600 ------------ SERVICES TO THE HEALTH INDUSTRY (4.3%) 40,000 AdvancePCS*............................. 2,562,000 10,000 Laboratory Corp. of America Holdings*... 769,000 70,000 Omnicare, Inc........................... 1,414,000 55,000 Quintiles Transnational Corp.*.......... 1,388,750 ------------ 6,133,750 ------------ SPECIALTY INSURANCE (0.9%) 22,500 Ambac Financial Group, Inc.............. 1,309,500 ------------ SPECIALTY STORES (1.5%) 15,000 Borders Group, Inc.*.................... 336,000 75,000 Toys 'R' Us, Inc.*...................... 1,856,250 ------------ 2,192,250 ------------ STEEL (0.7%) 75,000 AK Steel Holding Corp................... 940,500 ------------ TOBACCO (0.7%) 20,000 Philip Morris Companies, Inc............ 1,015,000 ------------ TRUCKS/CONSTRUCTION/FARM MACHINERY (1.2%) 35,000 Caterpillar, Inc........................ 1,751,750 ------------ TOTAL COMMON STOCKS (COST $115,701,512).................... 127,084,080 ------------
SEE NOTES TO FINANCIAL STATEMENTS 53 Morgan Stanley Variable Investment Series - Capital Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- SHORT-TERM INVESTMENT (A) (10.5%) U.S. GOVERNMENT AGENCY $15,000 Federal National Mortgage Assoc. 3.94% due 07/02/01 (COST $14,998,358)..................... $ 14,998,358 ------------
TOTAL INVESTMENTS (COST $130,699,870)(B)................. 99.4% 142,082,438 OTHER ASSETS IN EXCESS OF LIABILITIES... 0.6 813,569 ------ ------------ NET ASSETS.............................. 100.0% $142,896,007 ====== ============
--------------------------------------------------- * NON-INCOME PRODUCING SECURITY. (A) SECURITY WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $13,013,868 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $1,631,300, RESULTING IN NET UNREALIZED APPRECIATION OF $11,382,568. SEE NOTES TO FINANCIAL STATEMENTS 54 Morgan Stanley Variable Investment Series - Global Dividend Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMMON STOCKS AND WARRANTS (95.5%) AUSTRALIA (4.0%) CONTAINERS/PACKAGING 825,000 Amcor Ltd............................... $ 2,786,457 ------------ MAJOR BANKS 350,000 Australia & New Zealand Banking Group Ltd.................................... 3,018,547 175,000 Commonwealth Bank of Australia.......... 3,049,083 ------------ 6,067,630 ------------ MAJOR TELECOMMUNICATIONS 725,000 Telstra Corp., Ltd...................... 1,990,035 ------------ OIL & GAS PRODUCTION 725,000 Santos Ltd.............................. 2,400,619 ------------ TOTAL AUSTRALIA......................... 13,244,741 ------------ BELGIUM (0.8%) FINANCIAL CONGLOMERATES 105,000 Fortis (B Shares)....................... 2,543,027 ------------ CANADA (2.5%) ALUMINUM 50,000 Alcan Aluminium Ltd..................... 2,107,419 ------------ FINANCIAL CONGLOMERATES 130,000 EdperBrascan Corp. (Class A)............ 2,234,657 ------------ MAJOR BANKS 70,000 Toronto-Dominion Bank................... 1,786,880 ------------ OIL & GAS PIPELINES 80,000 Enbridge Inc............................ 2,176,917 ------------ TOTAL CANADA............................ 8,305,873 ------------ FINLAND (1.2%) INFORMATION TECHNOLOGY SERVICES 90,000 Tietoenator Oyj......................... 2,011,476 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- TELECOMMUNICATION EQUIPMENT 80,000 Nokia Oyj............................... $ 1,819,932 ------------ TOTAL FINLAND........................... 3,831,408 ------------ FRANCE (6.0%) AUTOMOTIVE AFTERMARKET 70,000 Compagnie Generale des Etablissements Michelin (B Shares).................... 2,222,992 ------------ CONSTRUCTION MATERIALS 30,000 Lafarge S.A............................. 2,574,894 ------------ CONTAINERS/PACKAGING 17,000 Compagnie de Saint-Gobain............... 2,318,679 ------------ MAJOR BANKS 32,000 BNP Paribas S.A......................... 2,795,502 42,000 Societe Generale (A Shares)............. 2,496,627 ------------ 5,292,129 ------------ MISCELLANEOUS MANUFACTURING 70,000 Compagnie Generale d'Industrie et de Participations......................... 2,126,030 60,000 Compagnie Generale d'Industrie et de Participations (Warrants)*............. 43,850 ------------ 2,169,880 ------------ MULTI-LINE INSURANCE 45,000 Assurances Generales de France.......... 2,512,434 ------------ OIL REFINING/MARKETING 20,000 TotalFinaElf S.A........................ 2,811,138 ------------ TOTAL FRANCE............................ 19,902,146 ------------ GERMANY (5.2%) APPAREL/FOOTWEAR 42,000 Adidas-Salomon AG....................... 2,555,518 ------------
SEE NOTES TO FINANCIAL STATEMENTS 55 Morgan Stanley Variable Investment Series - Global Dividend Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- CHEMICALS: MAJOR DIVERSIFIED 70,000 BASF AG................................. $ 2,754,202 60,000 Bayer AG................................ 2,345,448 ------------ 5,099,650 ------------ INDUSTRIAL CONGLOMERATES 50,000 E. ON AG................................ 2,608,886 100,000 MAN AG.................................. 2,175,488 36,000 Siemens AG.............................. 2,187,385 ------------ 6,971,759 ------------ MOTOR VEHICLES 55,000 DaimlerChrylser AG...................... 2,533,254 ------------ TOTAL GERMANY........................... 17,160,181 ------------ HONG KONG (1.9%) ELECTRIC UTILITIES 570,000 CLP Holdings Ltd........................ 2,389,524 ------------ REAL ESTATE DEVELOPMENT 180,000 Cheung Kong (Holdings) Ltd.............. 1,961,463 235,000 Sun Hung Kai Properties Ltd............. 2,116,425 ------------ 4,077,888 ------------ TOTAL HONG KONG......................... 6,467,412 ------------ IRELAND (0.9%) MAJOR BANKS 250,000 Allied Irish Banks PLC.................. 2,889,320 ------------ ITALY (2.6%) MAJOR BANKS 175,000 San Paolo - IMI SpA..................... 2,251,545 550,000 Unicredito Italiano SpA................. 2,369,667 ------------ 4,621,212 ------------ MAJOR TELECOMMUNICATIONS 465,000 Telecom Italia SpA...................... 2,228,685 ------------ WIRELESS COMMUNICATIONS 550,000 Telecom Italia Mobile SpA............... 1,752,713 ------------ TOTAL ITALY............................. 8,602,610 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- JAPAN (10.2%) BEVERAGES: ALCOHOLIC 270,000 Kirin Brewery Co., Ltd.................. $ 2,295,985 ------------ DEPARTMENT STORES 155,000 Marui Co., Ltd.......................... 2,236,115 ------------ ELECTRICAL PRODUCTS 175,000 Matsushita Electric Works, Ltd.......... 2,022,521 ------------ ELECTRONIC COMPONENTS 32,000 TDK Corp................................ 1,490,102 ------------ ELECTRONIC EQUIPMENT/ INSTRUMENTS 20,000 Kyocera Corp............................ 1,763,244 100,000 Matsushita Electric Industrial Co., Ltd.................................... 1,564,479 140,000 NEC Corp................................ 1,890,679 ------------ 5,218,402 ------------ ELECTRONICS/APPLIANCES 160,000 Sharp Corp.............................. 2,180,011 32,000 Sony Corp............................... 2,103,070 ------------ 4,283,081 ------------ FINANCE/RENTAL/LEASING 25,000 Acom Co., Ltd........................... 2,206,059 ------------ MOTOR VEHICLES 50,000 Honda Motor Co.......................... 2,196,041 60,000 Toyota Motor Corp....................... 2,111,084 ------------ 4,307,125 ------------ PHARMACEUTICALS: MAJOR 40,500 Takeda Chemical Industries, Ltd......... 1,882,664 ------------ PHARMACEUTICALS: OTHER 90,000 Taisho Pharmaceutical Co., Ltd.......... 1,691,512 ------------ RECREATIONAL PRODUCTS 12,000 Nintendo Co., Ltd....................... 2,183,217 ------------ TOBACCO 320 Japan Tobacco, Inc...................... 2,205,658 ------------
SEE NOTES TO FINANCIAL STATEMENTS 56 Morgan Stanley Variable Investment Series - Global Dividend Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- WIRELESS COMMUNICATIONS 120 NTT DoCoMo, Inc......................... $ 2,087,040 ------------ TOTAL JAPAN............................. 34,109,481 ------------ NETHERLANDS (4.0%) CHEMICALS: SPECIALTY 75,000 DSM NV.................................. 2,619,509 ------------ ELECTRONIC EQUIPMENT/ INSTRUMENTS 90,000 Koninklijke (Royal) Philips Electronics NV..................................... 2,394,651 ------------ FINANCIAL CONGLOMERATES 40,000 ING Groep NV............................ 2,624,182 ------------ FINANCIAL PUBLISHING/ SERVICES 105,000 Wolters Kluwer NV....................... 2,833,021 ------------ FOOD: MAJOR DIVERSIFIED 45,000 Unilever NV............................. 2,707,463 ------------ TOTAL NETHERLANDS....................... 13,178,826 ------------ SINGAPORE (0.9%) AIRLINES 240,000 Singapore Airlines Ltd.................. 1,657,895 ------------ MAJOR BANKS 200,000 DBS Group Holdings Ltd.................. 1,469,298 ------------ TOTAL SINGAPORE......................... 3,127,193 ------------ SPAIN (2.2%) ELECTRIC UTILITIES 190,000 Iberdrola S.A........................... 2,446,149 ------------ MAJOR BANKS 275,000 Banco Santander Central Hispano, S.A.... 2,500,537 ------------ OIL REFINING/MARKETING 150,000 Repsol-YPF, S.A......................... 2,485,665 ------------ TOTAL SPAIN............................. 7,432,351 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- SWEDEN (2.7%) ELECTRONICS/APPLIANCES 175,000 Electrolux AB (Series B)................ $ 2,425,631 ------------ ENGINEERING & CONSTRUCTION 248,000 Skanska AB (B Shares)................... 2,352,551 ------------ INDUSTRIAL MACHINERY 115,000 Sandvik AB (B Shares)................... 2,319,488 ------------ REGIONAL BANKS 350,000 Nordea AB............................... 1,998,526 ------------ TOTAL SWEDEN............................ 9,096,196 ------------ SWITZERLAND (6.1%) CHEMICALS: AGRICULTURAL 2,500 Syngenta AG*............................ 131,652 ------------ FOOD: MAJOR DIVERSIFIED 16,300 Nestle S.A. (Registered Shares)......... 3,469,825 ------------ MAJOR BANKS 22,500 UBS AG (Registered Shares).............. 3,228,615 ------------ MAJOR TELECOMMUNICATIONS 15,000 Swisscom AG (Registered Shares)......... 3,577,598 ------------ OTHER CONSUMER SPECIALTIES 1,300 Compagnie Financiere Richemont AG (Series A)............................. 3,332,405 ------------ PHARMACEUTICALS: MAJOR 92,000 Novartis AG (Registered Shares)......... 3,334,968 ------------ PROPERTY - CASUALTY INSURERS 1,600 Swiss Re (Registered Shares)............ 3,202,675 ------------ TOTAL SWITZERLAND....................... 20,277,738 ------------ UNITED KINGDOM (11.2%) AEROSPACE & DEFENSE 550,000 BAE Systems PLC......................... 2,647,881 ------------ AIRLINES 495,000 British Airways PLC..................... 2,407,589 ------------
SEE NOTES TO FINANCIAL STATEMENTS 57 Morgan Stanley Variable Investment Series - Global Dividend Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- APPAREL/FOOTWEAR RETAIL 225,000 Next PLC................................ $ 2,958,586 ------------ BEVERAGES: ALCOHOLIC 240,000 Diageo PLC.............................. 2,646,821 ------------ CONSTRUCTION MATERIALS 365,000 Hanson PLC.............................. 2,701,645 ------------ ELECTRIC UTILITIES 275,000 PowerGen PLC............................ 2,795,634 285,000 United Utilities PLC.................... 2,713,946 ------------ 5,509,580 ------------ ELECTRONIC COMPONENTS 850,000 Cookson Group PLC....................... 1,562,359 ------------ FINANCIAL CONGLOMERATES 150,000 HSBC Holdings PLC....................... 1,769,163 ------------ HOTELS/RESORTS/CRUISELINES 250,000 Bass PLC................................ 2,626,319 ------------ MAJOR BANKS 120,000 Royal Bank of Scotland Group PLC........ 2,658,697 ------------ MOVIES/ENTERTAINMENT 850,000 Rank Group PLC.......................... 2,595,920 ------------ STEEL 2,450,000 Corus Group PLC......................... 2,104,413 ------------ TOBACCO 325,000 British American Tobacco PLC............ 2,481,395 ------------ WATER UTILITIES 235,000 Severn Trent PLC........................ 2,475,385 ------------ TOTAL UNITED KINGDOM.................... 37,145,753 ------------ UNITED STATES (33.1%) ALUMINUM 82,000 Alcoa, Inc.............................. 3,230,800 ------------ AUTO PARTS: O.E.M. 10,474 Visteon Corp............................ 192,512 ------------ CHEMICALS: MAJOR DIVERSIFIED 100,000 Dow Chemical Co......................... 3,325,000 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMPUTER PROCESSING HARDWARE 220,000 Compaq Computer Corp.................... $ 3,407,800 115,000 Hewlett-Packard Co...................... 3,289,000 32,000 International Business Machines Corp.... 3,616,000 ------------ 10,312,800 ------------ DEPARTMENT STORES 82,000 Sears, Roebuck & Co..................... 3,469,420 ------------ DISCOUNT STORES 100,000 Target Corp............................. 3,460,000 ------------ ELECTRIC UTILITIES 55,000 FPL Group, Inc.......................... 3,311,550 105,000 GPU, Inc................................ 3,690,750 ------------ 7,002,300 ------------ ENGINEERING & CONSTRUCTION 65,000 Fluor Corp.............................. 2,934,750 ------------ FINANCIAL CONGLOMERATES 66,006 Citigroup, Inc.......................... 3,487,757 ------------ FOOD RETAIL 110,000 Albertson's, Inc........................ 3,298,900 ------------ INDUSTRIAL CONGLOMERATES 85,000 Honeywell International, Inc............ 2,974,150 30,000 Minnesota Mining & Manufacturing Co..... 3,423,000 ------------ 6,397,150 ------------ INFORMATION TECHNOLOGY SERVICES 55,000 Electronic Data Systems Corp............ 3,437,500 ------------ INTEGRATED OIL 36,000 Chevron Corp............................ 3,258,000 ------------ MAJOR BANKS 57,000 Bank of America Corp.................... 3,421,710 135,000 KeyCorp................................. 3,516,750 ------------ 6,938,460 ------------
SEE NOTES TO FINANCIAL STATEMENTS 58 Morgan Stanley Variable Investment Series - Global Dividend Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- MAJOR TELECOMMUNICATIONS 75,000 SBC Communications, Inc................. $ 3,004,500 140,000 Sprint Corp. (FON Group)................ 2,990,400 62,000 Verizon Communications Inc.............. 3,317,000 ------------ 9,311,900 ------------ MOTOR VEHICLES 125,854 Ford Motor Co........................... 3,089,716 ------------ OIL REFINING/MARKETING 90,000 Ashland, Inc............................ 3,609,000 115,000 USX-Marathon Group...................... 3,393,650 ------------ 7,002,650 ------------ OTHER METALS/MINERALS 77,000 Phelps Dodge Corp....................... 3,195,500 ------------ PACKAGED SOFTWARE 105,000 Computer Associates International, Inc.................................... 3,780,000 ------------ PHARMACEUTICALS: MAJOR 55,000 Bristol-Myers Squibb Co................. 2,876,500 ------------ PULP & PAPER 90,000 International Paper Co.................. 3,213,000 ------------ RECREATIONAL PRODUCTS 75,000 Eastman Kodak Co........................ 3,501,000 ------------ SAVINGS BANKS 88,000 Washington Mutual, Inc.................. 3,304,400 ------------ SEMICONDUCTORS 115,000 Intel Corp.............................. 3,363,750 ------------ TOBACCO 70,000 Philip Morris Companies, Inc............ 3,552,500 ------------ TRUCKS/CONSTRUCTION/FARM MACHINERY 83,000 Deere & Co.............................. 3,141,550 ------------ TOTAL UNITED STATES..................... 110,077,815 ------------ TOTAL COMMON STOCKS AND WARRANTS (COST $305,603,495).................... 317,392,071 ------------ PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- SHORT-TERM INVESTMENT (A) (4.1%) U.S. GOVERNMENT AGENCY $ 13,800 Federal National Mortgage Assoc. 3.94% due 07/02/01 (COST $13,798,490)..................... $ 13,798,490 ------------
TOTAL INVESTMENTS (COST $319,401,985)(B)................. 99.6% 331,190,561 OTHER ASSETS IN EXCESS OF LIABILITIES... 0.4 1,269,394 ------ ------------ NET ASSETS.............................. 100.0% $332,459,955 ====== ============
--------------------------------------------------- * NON-INCOME PRODUCING SECURITY. (A) SECURITY WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $43,474,501 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $31,685,925, RESULTING IN NET UNREALIZED APPRECIATION OF $11,788,576. SEE NOTES TO FINANCIAL STATEMENTS 59 Morgan Stanley Variable Investment Series - Global Dividend Growth SUMMARY OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
PERCENT OF INDUSTRY VALUE NET ASSETS ------------------------------------------------------------------ Aerospace & Defense..................... $ 2,647,881 0.8% Airlines................................ 4,065,484 1.2 Aluminum................................ 5,338,219 1.6 Apparel/Footwear........................ 2,555,519 0.8 Apparel/Footwear Retail................. 2,958,586 0.9 Auto Parts: O.E.M....................... 192,512 0.1 Automotive Aftermarket.................. 2,222,992 0.7 Beverages: Alcoholic.................... 4,942,805 1.5 Chemicals: Agricultural................. 131,652 0.0 Chemicals: Major Diversified............ 8,424,650 2.5 Chemicals: Specialty.................... 2,619,509 0.8 Computer Processing Hardware............ 10,312,800 3.1 Construction Materials.................. 5,276,539 1.6 Containers/Packaging.................... 5,105,137 1.5 Department Stores....................... 5,705,534 1.7 Discount Stores......................... 3,460,000 1.0 Electric Utilities...................... 17,347,552 5.2 Electrical Products..................... 2,022,521 0.6 Electronic Components................... 3,052,461 0.9 Electronic Equipment/ Instruments....... 7,613,053 2.3 Electronics/Appliances.................. 6,708,712 2.0 Engineering & Construction.............. 5,287,301 1.6 Finance/Rental/Leasing.................. 2,206,059 0.7 Financial Conglomerates................. 12,658,785 3.8 Financial Publishing/Services........... 2,833,021 0.9 Food Retail............................. 3,298,900 1.0 Food: Major Diversified................. 6,177,287 1.9 Hotels/Resorts/Cruiselines.............. 2,626,319 0.8 Industrial Conglomerates................ 13,368,909 4.0 Industrial Machinery.................... 2,319,488 0.7 Information Technology Services......... 5,448,977 1.6 Integrated Oil.......................... 3,258,000 1.0 Major Banks............................. 37,452,779 11.3 Major Telecommunications................ 17,108,219 5.1 PERCENT OF INDUSTRY VALUE NET ASSETS ------------------------------------------------------------------ Miscellaneous Manufacturing............. $ 2,169,879 0.7% Motor Vehicles.......................... 9,930,095 3.0 Movies/Entertainment.................... 2,595,920 0.8 Multi-Line Insurance.................... 2,512,434 0.8 Oil & Gas Pipelines..................... 2,176,918 0.7 Oil & Gas Production.................... 2,400,619 0.7 Oil Refining/Marketing.................. 12,299,453 3.7 Other Consumer Specialties.............. 3,332,405 1.0 Other Metals/Minerals................... 3,195,500 1.0 Packaged Software....................... 3,780,000 1.1 Pharmaceuticals: Major.................. 8,094,132 2.4 Pharmaceuticals: Other.................. 1,691,512 0.5 Property - Casualty Insurers............ 3,202,675 1.0 Pulp & Paper............................ 3,213,000 1.0 Real Estate Development................. 4,077,888 1.2 Recreational Products................... 5,684,217 1.7 Regional Banks.......................... 1,998,526 0.6 Savings Banks........................... 3,304,400 1.0 Semiconductors.......................... 3,363,750 1.0 Steel................................... 2,104,413 0.6 Telecommunication Equipment............. 1,819,932 0.5 Tobacco................................. 8,239,553 2.5 Trucks/Construction/Farm Machinery...... 3,141,550 0.9 U.S. Government Agency.................. 13,798,490 4.1 Water Utilities......................... 2,475,385 0.7 Wireless Communications................. 3,839,753 1.2 ------------ -------- $331,190,561 99.6% ============ ========
PERCENT OF TYPE OF INVESTMENT VALUE NET ASSETS ------------------------------------------------------------------ Common Stocks........................... $317,348,221 95.5% Short-Term Investment................... 13,798,490 4.1 Warrants................................ 43,850 0.0 ------------ -------- $331,190,561 99.6% ============ ========
SEE NOTES TO FINANCIAL STATEMENTS 60 Morgan Stanley Variable Investment Series - European Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMMON STOCKS (97.0%) FINLAND (3.2%) TELECOMMUNICATION EQUIPMENT 576,480 Nokia Oyj............................... $ 13,114,428 ------------ FRANCE (14.9%) ADVERTISING/MARKETING SERVICES 142,100 JC Decaux S.A.*......................... 1,907,954 ------------ ELECTRONICS/APPLIANCES 43,082 Thomson Multimedia*..................... 1,391,221 ------------ FOOD RETAIL 48,300 Carrefour S.A........................... 2,565,334 ------------ MAJOR BANKS 94,820 BNP Paribas S.A......................... 8,283,422 ------------ MULTI-LINE INSURANCE 408,184 AXA..................................... 11,672,336 ------------ OIL REFINING/MARKETING 37,712 TotalFinaElf S.A........................ 5,300,682 ------------ PHARMACEUTICALS: MAJOR 212,456 Aventis S.A............................. 17,025,404 34,820 Sanofi-Synthelabo S.A................... 2,293,228 ------------ 19,318,632 ------------ SEMICONDUCTORS 180,740 STMicroelectronics NV................... 6,297,307 ------------ WATER UTILITIES 85,800 Vivendi Environnement................... 3,624,497 ------------ TOTAL FRANCE............................ 60,361,385 ------------ GERMANY (3.4%) CHEMICALS: MAJOR DIVERSIFIED 129,136 Bayer AG................................ 5,048,030 ------------ MAJOR BANKS 58,530 Deutsche Bank AG (Registered Shares).... 4,197,954 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- MAJOR TELECOMMUNICATIONS 202,700 Deutsche Telekom AG..................... $ 4,592,304 ------------ TOTAL GERMANY........................... 13,838,288 ------------ GREECE (0.9%) MAJOR BANKS 125,920 National Bank of Greece S.A............. 3,743,098 ------------ ITALY (8.1%) CONSUMER SUNDRIES 282,482 Luxottica Group SpA (ADR) (Italy)....... 4,519,712 ------------ INTEGRATED OIL 660,190 ENI SpA................................. 8,078,824 ------------ MAJOR BANKS 2,274,100 Banca Intesa SpA........................ 8,058,651 1,604,820 Unicredito Italiano SpA................. 6,914,345 ------------ 14,972,996 ------------ MAJOR TELECOMMUNICATIONS 563,260 Telecom Italia SpA...................... 5,073,778 ------------ TOTAL ITALY............................. 32,645,310 ------------ NETHERLANDS (13.3%) APPAREL/FOOTWEAR 70,660 Gucci Group NV.......................... 5,845,563 ------------ ELECTRONIC EQUIPMENT/ INSTRUMENTS 398,405 Koninklijke (Royal) Philips Electronics NV..................................... 10,600,457 ------------ ELECTRONIC PRODUCTION EQUIPMENT 122,040 ASML Holding NV*........................ 2,747,267 ------------ FINANCIAL CONGLOMERATES 282,270 Fortis (NL) NV.......................... 6,889,154 99,700 ING Groep NV............................ 6,540,775 ------------ 13,429,929 ------------ FOOD RETAIL 293,113 Koninklijke Ahold NV.................... 9,216,235 ------------
SEE NOTES TO FINANCIAL STATEMENTS 61 Morgan Stanley Variable Investment Series - European Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- INTEGRATED OIL 155,230 Royal Dutch Petroleum Co................ $ 8,967,544 ------------ PERSONNEL SERVICES 320,400 Vedior NV............................... 2,913,352 ------------ TOTAL NETHERLANDS....................... 53,720,347 ------------ PORTUGAL (0.3%) MAJOR TELECOMMUNICATIONS 194,000 Portugal Telecom, S.A. (Registered Shares)................................ 1,358,456 ------------ SPAIN (2.7%) MAJOR TELECOMMUNICATIONS 413,652 Telefonica S.A. *....................... 5,118,153 ------------ MISCELLANEOUS COMMERCIAL SERVICES 942,500 Amadeus Global Travel Distribution S.A. (A Shares)............................. 5,726,696 ------------ TOTAL SPAIN............................. 10,844,849 ------------ SWEDEN (4.5%) INDUSTRIAL MACHINERY 490,191 Assa Abloy AB (Series B)................ 7,020,142 ------------ MAJOR BANKS 249,200 Svenska Handelsbanken AB (A Shares)..... 3,568,853 ------------ REGIONAL BANKS 1,305,170 Nordea AB............................... 7,452,619 ------------ TOTAL SWEDEN............................ 18,041,614 ------------ SWITZERLAND (9.0%) CHEMICALS: AGRICULTURAL 90,928 Syngenta AG*............................ 4,788,351 ------------ ELECTRICAL PRODUCTS 15,240 Kaba Holding AG (Registered B Shares)... 3,014,879 ------------ FOOD: MAJOR DIVERSIFIED 63,120 Nestle S.A. (Registered Shares)......... 13,436,523 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- MAJOR BANKS 14,120 UBS AG (Registered Shares).............. $ 2,026,135 ------------ OTHER CONSUMER SPECIALTIES 2,609 Compagnie Financiere Richemont AG (Series A)............................. 6,687,880 ------------ PHARMACEUTICALS: MAJOR 120,020 Novartis AG (Registered Shares)......... 4,350,683 28,000 Roche Holdings AG....................... 2,020,618 ------------ 6,371,301 ------------ TOTAL SWITZERLAND....................... 36,325,069 ------------ UNITED KINGDOM (36.7%) ADVERTISING/MARKETING SERVICES 647,990 WPP Group PLC........................... 6,413,351 ------------ BEVERAGES: ALCOHOLIC 851,870 Allied Domecq PLC....................... 5,338,764 705,870 Diageo PLC.............................. 7,784,631 ------------ 13,123,395 ------------ CATALOG/SPECIALTY DISTRIBUTION 540,400 Great Universal Stores PLC.............. 4,649,375 ------------ FINANCIAL CONGLOMERATES 564,400 Lloyds TSB Group PLC.................... 5,677,807 ------------ FOOD RETAIL 1,466,244 Tesco PLC............................... 5,317,559 ------------ FOOD: SPECIALTY/CANDY 1,159,300 Cadbury Schweppes PLC................... 7,859,649 ------------ GAS DISTRIBUTORS 1,644,376 Lattice Group PLC....................... 3,690,911 ------------ INTEGRATED OIL 1,154,960 BP PLC.................................. 9,544,873 ------------ INVESTMENT MANAGERS 195,500 Amvescap PLC............................ 3,413,756 ------------ MAJOR BANKS 313,660 Barclays PLC............................ 9,667,948 ------------
SEE NOTES TO FINANCIAL STATEMENTS 62 Morgan Stanley Variable Investment Series - European Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- MAJOR TELECOMMUNICATIONS 1,124,550 British Telecommunications PLC.......... $ 7,107,306 ------------ MISCELLANEOUS COMMERCIAL SERVICES 2,754,200 Rentokil Initial PLC.................... 9,384,934 ------------ PHARMACEUTICALS: MAJOR 102,534 AstraZeneca PLC......................... 4,749,917 859,061 GlaxoSmithKline PLC..................... 24,292,527 ------------ 29,042,444 ------------ PUBLISHING: BOOKS/ MAGAZINES 1,135,401 Reed International PLC.................. 10,113,664 ------------ REGIONAL BANKS 954,210 Egg PLC*................................ 2,138,415 ------------ RESTAURANTS 281,671 Compass Group PLC....................... 2,266,069 ------------ WIRELESS COMMUNICATIONS 8,463,653 Vodafone Group PLC...................... 18,847,645 ------------ TOTAL UNITED KINGDOM.................... 148,259,101 ------------ TOTAL COMMON STOCKS (COST $376,133,728).................... 392,251,945 ------------ PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- SHORT-TERM INVESTMENT (A) (2.7%) U.S. GOVERNMENT AGENCY $ 11,000 Federal Home Loan Mortgage Corp. 3.75% due 07/02/01 (COST $10,998,854)..................... $ 10,998,854 ------------
TOTAL INVESTMENTS (COST $387,132,582)(B)................. 99.7% 403,250,799 OTHER ASSETS IN EXCESS OF LIABILITIES... 0.3 959,916 ------ ------------ NET ASSETS.............................. 100.0% $404,210,715 ====== ============
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. (A) SECURITY WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $42,151,711 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $26,033,494, RESULTING IN NET UNREALIZED APPRECIATION OF $16,118,217. SEE NOTES TO FINANCIAL STATEMENTS 63 Morgan Stanley Variable Investment Series - European Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 2001: UNREALIZED CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/ TO DELIVER FOR DATE (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------- EUR 3,497,122 $ 2,972,554 07/02/2001 $ 699 EUR 8,578,351 CHF 13,100,000 07/03/2001 11,207 CHF 7,600,000 EUR 4,986,549 07/03/2001 1,823 CHF 5,500,000 EUR 3,616,993 07/03/2001 8,377 GBP 6,000,000 EUR 9,870,694 07/03/2001 (94,742) SEK 45,000,000 EUR 4,988,355 07/03/2001 94,570 SEK 22,000,000 EUR 2,383,170 07/03/2001 (994) GBP 1,500,000 EUR 2,496,463 07/03/2001 778 SEK 27,000,000 EUR 2,980,396 07/03/2001 46,021 GBP 2,900,000 EUR 4,726,129 07/03/2001 (83,781) EUR 10,202,310 SEK 94,000,000 07/03/2001 (12,467) EUR 17,284,361 GBP 10,400,000 07/03/2001 15,382 GBP 10,400,000 EUR 17,275,030 08/02/2001 (15,841) SEK 94,000,000 EUR 10,204,082 08/02/2001 12,444 -------- Net unrealized depreciation................................................. $(16,524) ========
CURRENCY ABBREVIATIONS: GBP British Pound. EUR Euro. SEK Swedish Krona. CHF Swiss Franc.
SEE NOTES TO FINANCIAL STATEMENTS 64 Morgan Stanley Variable Investment Series - European Growth SUMMARY OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
PERCENT OF INDUSTRY VALUE NET ASSETS ------------------------------------------------------------------ Advertising/Marketing Services.......... $ 8,321,305 2.1% Apparel/Footwear........................ 5,845,563 1.4 Beverages: Alcoholic.................... 13,123,395 3.3 Catalog/Specialty Distribution.......... 4,649,375 1.2 Chemicals: Agricultural................. 4,788,351 1.2 Chemicals: Major Diversified............ 5,048,030 1.2 Consumer Sundries....................... 4,519,712 1.1 Electrical Products..................... 3,014,879 0.7 Electronic Equipment/Instruments........ 10,600,457 2.6 Electronic Production Equipment......... 2,747,267 0.7 Electronics/Appliances.................. 1,391,221 0.3 Financial Conglomerates................. 19,107,735 4.7 Food Retail............................. 17,099,128 4.2 Food: Major Diversified................. 13,436,523 3.3 Food: Specialty/Candy................... 7,859,649 1.9 Gas Distributors........................ 3,690,911 0.9 Industrial Machinery.................... 7,020,142 1.7 Integrated Oil.......................... 26,591,242 6.6 Investment Managers..................... 3,413,756 0.8 Major Banks............................. 46,460,406 11.5 Major Telecommunications................ 23,249,997 5.8 Miscellaneous Commercial Services....... 15,111,630 3.7 Multi-Line Insurance.................... 11,672,336 3.0 Oil Refining/Marketing.................. 5,300,682 1.3 Other Consumer Specialties.............. 6,687,880 1.7 Personnel Services...................... 2,913,352 0.7 Pharmaceuticals: Major.................. 54,732,377 13.5 Publishing: Books/Magazines............. 10,113,664 2.5 Regional Banks.......................... 9,591,034 2.4 Restaurants............................. 2,266,069 0.6 Semiconductors.......................... 6,297,307 1.6 Telecommunication Equipment............. 13,114,428 3.2 U.S. Government Agency.................. 10,998,854 2.7 Water Utilities......................... 3,624,497 0.9 Wireless Communications................. 18,847,645 4.7 ------------ -------- $403,250,799 99.7% ============ ========
PERCENT OF TYPE OF INVESTMENT VALUE NET ASSETS ------------------------------------------------------------------ Common Stocks........................... $392,251,945 97.0% Short-Term Investment................... 10,998,854 2.7 ------------ -------- $403,250,799 99.7% ============ ========
SEE NOTES TO FINANCIAL STATEMENTS 65 Morgan Stanley Variable Investment Series - Pacific Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ------------------------------------------------------------------- COMMON AND PREFERRED STOCKS AND RIGHTS (92.0%) AUSTRALIA (7.9%) AIRLINES 105,800 Qantas Airways Ltd...................... $ 188,927 ------------ BEVERAGES: ALCOHOLIC 90,900 Foster's Brewing Group Ltd.*............ 254,147 ------------ ELECTRONIC EQUIPMENT/ INSTRUMENTS 63,731 ERG Ltd................................. 46,822 ------------ MAJOR BANKS 10,800 Commonwealth Bank of Australia.......... 188,172 26,850 National Australia Bank Ltd............. 480,173 43,850 Westpac Banking Corp., Ltd.............. 323,458 ------------ 991,803 ------------ MAJOR TELECOMMUNICATIONS 127,900 Telstra Corp. Ltd....................... 351,070 ------------ MARINE SHIPPING 7,631 Lang Corporation Ltd.................... 42,819 ------------ MEDIA CONGLOMERATES 70,100 News Corp., Ltd. (The).................. 644,450 ------------ MEDICAL/NURSING SERVICES 16,950 Sonic Healthcare Ltd.................... 68,405 ------------ MISCELLANEOUS COMMERCIAL SERVICES 8,000 Brambles Industries Ltd................. 195,917 ------------ OTHER METALS/MINERALS 45,662 BHP Billiton Ltd........................ 242,053 48,635 BHP Billiton Ltd........................ 264,262 28,650 Rio Tinto Ltd........................... 499,032 ------------ 1,005,347 ------------ PHARMACEUTICALS: OTHER 9,650 CSL Ltd................................. 234,848 ------------ PRECIOUS METALS 145,400 Normandy Mining Ltd..................... 91,987 ------------ NUMBER OF SHARES VALUE ------------------------------------------------------------------- REAL ESTATE DEVELOPMENT 14,850 Lend Lease Corp., Ltd................... $ 95,085 ------------ TOTAL AUSTRALIA......................... 4,211,627 ------------ CHINA (0.7%) AIRLINES 140,000 China Southern Airlines Co., Ltd. (Class H)*............................. 43,524 ------------ MAJOR TELECOMMUNICATIONS 86,000 China Unicom Ltd.*...................... 149,392 ------------ OIL & GAS PRODUCTION 434,000 China Petroleum & Chemical Corp. (Class H).............................. 86,797 ------------ PACKAGED SOFTWARE 89,000 Travelsky Technology Ltd................ 90,137 ------------ TOTAL CHINA............................. 369,850 ------------ HONG KONG (11.8%) AIRLINES 35,000 Cathay Pacific Airways, Ltd............. 47,114 ------------ APPAREL/FOOTWEAR 83,000 Esprit Holdings Ltd..................... 90,977 92,000 Giordano International Ltd.............. 47,473 ------------ 138,450 ------------ BROADCASTING 35,000 Television Broadcasts Ltd............... 147,174 ------------ COAL 206,000 Yanzhou Coal Mining Co., Ltd. (Class H).............................. 95,073 ------------ COMPUTER PROCESSING HARDWARE 153,000 Legend Holdings Ltd..................... 84,833 ------------ ELECTRIC UTILITIES 22,000 CLP Holdings Ltd........................ 92,227 ------------ ENGINEERING & CONSTRUCTION 79,000 New World Development Co., Ltd.......... 96,214 ------------
SEE NOTES TO FINANCIAL STATEMENTS 66 Morgan Stanley Variable Investment Series - Pacific Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- FOOD DISTRIBUTORS 48,000 China Resources Enterprise Ltd.......... $ 80,920 ------------ GAS DISTRIBUTORS 174,220 Hong Kong & China Gas Co., Ltd.......... 217,767 ------------ INDUSTRIAL CONGLOMERATES 108,900 Hutchison Whampoa Ltd................... 1,099,429 68,700 Swire Pacific Ltd. (Class A)............ 355,817 ------------ 1,455,246 ------------ INDUSTRIAL SPECIALTIES 139,000 China Merchants Holdings International Co., Ltd............................... 103,355 ------------ INVESTMENT BANKS/BROKERS 28,000 Hong Kong Exchanges & Clearing Ltd...... 49,896 ------------ MAJOR BANKS 25,100 Hang Seng Bank Ltd...................... 257,426 ------------ MISCELLANEOUS COMMERCIAL SERVICES 53,000 Cosco Pacific Ltd....................... 34,992 138,000 Greencool Technology Holdings Ltd....... 54,844 ------------ 89,836 ------------ MISCELLANEOUS MANUFACTURING 157,400 Johnson Electric Holdings Ltd........... 213,894 ------------ MOTOR VEHICLES 172,000 Brilliance China Automotive Holdings Ltd.................................... 41,896 224,500 Denway Motors Ltd.*..................... 80,587 ------------ 122,483 ------------ OIL & GAS PRODUCTION 223,000 CNOOC Ltd.*............................. 212,985 ------------ REAL ESTATE DEVELOPMENT 45,000 Amoy Properties, Ltd.................... 51,921 53,000 Cheung Kong (Holdings) Ltd.............. 577,542 NUMBER OF SHARES VALUE ------------------------------------------------------------------- 16,000 Henderson Land Development Co., Ltd..... $ 70,766 47,000 Hong Kong Land Holdings Ltd............. 84,600 108,000 Sino Land Co., Ltd...................... 44,998 46,100 Sun Hung Kai Properties Ltd............. 415,180 13,000 Wharf (Holdings) Ltd. (The)............. 26,999 ------------ 1,272,006 ------------ REGIONAL BANKS 16,000 Bank of East Asia Ltd................... 37,127 ------------ SPECIALTY TELECOMMUNICATIONS 52,500 Asia Satellite Telecommunications Holdings Ltd........................... 90,862 ------------ WHOLESALE DISTRIBUTORS 42,000 Citic Pacific Ltd....................... 130,033 155,600 Li & Fung Ltd........................... 255,334 ------------ 385,367 ------------ WIRELESS COMMUNICATIONS 184,200 China Mobile Ltd.*...................... 970,555 17,500 SmarTone Telecommunications Holdings Ltd.................................... 19,967 ------------ 990,522 ------------ TOTAL HONG KONG......................... 6,280,777 ------------ INDIA (2.5%) ELECTRICAL PRODUCTS 19,200 Bharat Heavy Electricals Ltd............ 71,924 30,500 Sterlite Industries Ltd.*............... 66,389 ------------ 138,313 ------------ INFORMATION TECHNOLOGY SERVICES 15,000 Digital Equipment Ltd................... 158,680 4,700 HCL Technologies Ltd.................... 29,259
SEE NOTES TO FINANCIAL STATEMENTS 67 Morgan Stanley Variable Investment Series - Pacific Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- 3,200 Infosys Technologies Ltd................ $ 255,602 9,600 SSI Limited............................. 62,464 ------------ 506,005 ------------ MAJOR TELECOMMUNICATIONS 20,170 Videsh Sanchar Nigam Ltd................ 136,915 ------------ MOTOR VEHICLES 17,500 Hero Honda Motors Ltd................... 53,719 ------------ OIL REFINING/MARKETING 7,800 Bharat Petroleum Corp., Ltd............. 31,124 8,000 Hindustan Petroleum Corp., Ltd.......... 26,859 ------------ 57,983 ------------ PHARMACEUTICALS: GENERIC DRUGS 4,550 Dr. Reddy's Laboratories Ltd............ 155,588 ------------ PHARMACEUTICALS: OTHER 1,400 Cipla Ltd.*............................. 33,991 ------------ SPECIALTY TELECOMMUNICATIONS 29,700 Mahanagar Telephone Nigam Ltd........... 79,627 ------------ TELECOMMUNICATION EQUIPMENT 10,100 Sterlite Optical Technologies Ltd.*..... 72,753 ------------ TOBACCO 5,000 ITC Ltd................................. 80,160 ------------ TOTAL INDIA............................. 1,315,054 ------------ INDONESIA (0.0%) INVESTMENT TRUSTS/MUTUAL FUNDS 500,000 Batavia Investment Fund Ltd.*........... - ------------ JAPAN (51.6%) AUTO PARTS: O.E.M. 30,000 NIFCO Inc............................... 309,930 ------------ NUMBER OF SHARES VALUE ------------------------------------------------------------------- BUILDING PRODUCTS 65,000 Sanwa Shutter Corp...................... $ 181,815 ------------ CHEMICALS: SPECIALTY 116,000 Daicel Chemical Industries Ltd.......... 405,354 90,000 Denki Kagaku Kogyo Kabushiki Kaisha..... 305,121 74,000 Kaneka Corp............................. 669,600 106,000 Mitsubishi Chemical Corp................ 283,754 58,000 Shin-Etsu Polymer Co., Ltd.............. 279,843 ------------ 1,943,672 ------------ COMMERCIAL PRINTING/FORMS 38,000 Dai Nippon Printing Co., Ltd............ 463,541 14,000 Nissha Printing Co., Ltd................ 100,537 ------------ 564,078 ------------ COMPUTER PERIPHERALS 31,000 Mitsumi Electric Co., Ltd............... 577,663 ------------ COMPUTER PROCESSING HARDWARE 63,000 Fujitsu Ltd............................. 661,457 ------------ ELECTRIC UTILITIES 13,000 Tokyo Electric Power Co................. 336,539 ------------ ELECTRICAL PRODUCTS 39,000 Furukawa Electric Co.................... 311,012 ------------ ELECTRONIC COMPONENTS 11,000 TDK Corp................................ 512,223 ------------ ELECTRONIC DISTRIBUTORS 19,000 Ryosan Co., Ltd......................... 281,109 ------------ ELECTRONIC EQUIPMENT/ INSTRUMENTS 21,000 Canon, Inc.............................. 848,281 8,500 Kyocera Corp............................ 749,379 49,000 Matsushita Electric Industrial Co., Ltd.................................... 766,595 50,000 NEC Corp................................ 675,242 41,000 Ricoh Co., Ltd.......................... 883,946 141,000 Toshiba Corp............................ 744,722 ------------ 4,668,165 ------------
SEE NOTES TO FINANCIAL STATEMENTS 68 Morgan Stanley Variable Investment Series - Pacific Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- ELECTRONICS/APPLIANCES 9,400 Aiwa Co., Ltd........................... $ 47,463 9,400 Aiwa Co., Ltd. (Rights)................. 8,287 59,000 Casio Computer Co., Ltd................. 342,831 13,900 Rinnai Corp............................. 270,714 13,000 Sony Corp............................... 854,372 ------------ 1,523,667 ------------ FINANCE/RENTAL/LEASING 29,700 Hitachi Capital Corp.................... 711,734 ------------ FOOD RETAIL 17,000 FamilyMart Co., Ltd..................... 277,270 ------------ FOOD: MEAT/FISH/DAIRY 23,000 Nippon Meat Packers, Inc................ 278,537 ------------ FOOD: SPECIALTY/CANDY 18,000 House Foods Corp........................ 196,922 ------------ HOME BUILDING 60,000 Sekisui Chemical Co., Ltd............... 248,137 49,000 Sekisui House Ltd....................... 415,893 ------------ 664,030 ------------ HOME FURNISHINGS 6,000 Sangetsu Co., Ltd....................... 88,868 ------------ INDUSTRIAL CONGLOMERATES 87,000 Hitachi Ltd............................. 854,172 ------------ INDUSTRIAL MACHINERY 81,000 Amada Co., Ltd.......................... 409,642 80,000 Daifuku Co., Ltd........................ 396,249 34,000 Daikin Industries Ltd................... 629,478 24,300 Fuji Machine Manufacturing Co., Ltd..... 445,023 58,000 Minebea Co., Ltd........................ 381,646 105,000 Tsubakimoto Chain Co.................... 339,144 ------------ 2,601,182 ------------ INDUSTRIAL SPECIALTIES 30,000 Fujitec Co., Ltd........................ 139,938 30,000 Lintec Corp............................. 276,028 ------------ 415,966 ------------ NUMBER OF SHARES VALUE ------------------------------------------------------------------- MAJOR BANKS 16 Mitsubishi Tokyo Financial Group, Inc.................................... $ 133,365 ------------ MAJOR TELECOMMUNICATIONS 120 Nippon Telegraph & Telephone Corp....... 625,150 ------------ MARINE SHIPPING 18,000 Mitsubishi Logistics Corp............... 163,886 ------------ METAL FABRICATIONS 126,000 Mitsubishi Heavy Industries, Ltd........ 574,609 ------------ MISCELLANEOUS MANUFACTURING 40,000 Kurita Water Industries Ltd............. 550,132 ------------ MOTOR VEHICLES 102,000 Nissan Motor Co., Ltd................... 703,871 45,000 Suzuki Motor Corp....................... 598,702 21,300 Toyota Motor Corp....................... 749,435 ------------ 2,052,008 ------------ PHARMACEUTICALS: MAJOR 27,000 Sankyo Co., Ltd......................... 486,896 ------------ PHARMACEUTICALS: OTHER 17,000 Ono Pharmaceutical Co., Ltd............. 539,553 20,000 Yamanouchi Pharmaceutical Co., Ltd...... 561,032 ------------ 1,100,585 ------------ REAL ESTATE DEVELOPMENT 42,000 Mitsubishi Estate Co., Ltd.............. 386,102 ------------ RECREATIONAL PRODUCTS 19,000 Fuji Photo Film Co., Ltd................ 819,267 5,600 Nintendo Co., Ltd....................... 1,018,835 38,000 Yamaha Corp............................. 382,832 ------------ 2,220,934 ------------ SEMICONDUCTORS 3,500 Rohm Co. Ltd............................ 543,640 ------------ WHOLESALE DISTRIBUTORS 30,000 Mitsubishi Corp......................... 241,645
SEE NOTES TO FINANCIAL STATEMENTS 69 Morgan Stanley Variable Investment Series - Pacific Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- 36,000 Nagase & Co., Ltd....................... $ 174,561 16,000 Nissei Sangyo Co., Ltd.................. 212,231 ------------ 628,437 ------------ TOTAL JAPAN............................. 27,425,755 ------------ MALAYSIA (0.8%) MAJOR BANKS 84,000 Malayan Banking Berhad.................. 227,654 ------------ TOBACCO 20,400 British American Tobacco (Malaysia) Berhad................................. 186,528 ------------ TOTAL MALAYSIA.......................... 414,182 ------------ SINGAPORE (4.4%) AEROSPACE & DEFENSE 68,000 Singapore Technologies Engineering Ltd.................................... 96,184 ------------ AIRLINES 37,000 Singapore Airlines Ltd.................. 255,592 ------------ ELECTRONIC COMPONENTS 33,600 Venture Manufacturing Ltd............... 222,895 ------------ FINANCIAL CONGLOMERATES 53,000 Keppel Corp., Ltd....................... 105,186 ------------ MAJOR BANKS 69,182 DBS Group Holdings Ltd.................. 508,245 ------------ MAJOR TELECOMMUNICATIONS 74,000 Singapore Telecommunications Ltd........ 77,083 ------------ MARINE SHIPPING 110,000 Sembcorp Logistics Ltd.*................ 140,515 ------------ MISCELLANEOUS COMMERCIAL SERVICES 19,000 SIA Engineering Co...................... 14,688 ------------ MISCELLANEOUS MANUFACTURING 44,000 Omni Industries Ltd..................... 97,456 ------------ NUMBER OF SHARES VALUE ------------------------------------------------------------------- PUBLISHING: NEWSPAPERS 17,019 Singapore Press Holdings Ltd............ $ 186,612 ------------ REAL ESTATE DEVELOPMENT 53,000 Capitaland Ltd.......................... 72,643 25,400 City Developments Ltd................... 98,174 ------------ 170,817 ------------ REGIONAL BANKS 37,086 Overseas - Chinese Banking Corp., Ltd.................................... 241,954 29,544 Overseas Union Bank Ltd................. 153,065 14,000 United Overseas Bank Ltd................ 88,268 ------------ 483,287 ------------ TOTAL SINGAPORE......................... 2,358,560 ------------ SOUTH KOREA (6.4%) ADVERTISING/MARKETING SERVICES 1,010 Cheil Communications, Inc............... 87,590 ------------ ELECTRIC UTILITIES 10,060 Korea Electric Power Corp............... 186,840 ------------ ELECTRONIC COMPONENTS 1,466 Samsung Electro Mechanics Co., Ltd...... 52,542 ------------ ELECTRONICS/APPLIANCES 7,890 Humax Co., Ltd.......................... 115,655 ------------ ENGINEERING & CONSTRUCTION 7,380 LG Construction Co., Ltd................ 61,170 ------------ FOOD: SPECIALTY/CANDY 2,240 Tong Yang Confectionery Corp............ 38,164 ------------ HOUSEHOLD/PERSONAL CARE 2,410 LG Household & Health Care Ltd.*........ 54,470 ------------ INDUSTRIAL MACHINERY 11,650 Hyundai Mobis........................... 125,173 ------------ INVESTMENT BANKS/BROKERS 3,270 Samsung Securities Co., Ltd............. 92,855 ------------
SEE NOTES TO FINANCIAL STATEMENTS 70 Morgan Stanley Variable Investment Series - Pacific Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- MAJOR BANKS 19,378 Kookmin Bank............................ $ 259,514 ------------ MAJOR TELECOMMUNICATIONS 980 Korea Telecom Corp...................... 39,110 4,200 Korea Telecom Corp. (ADR)............... 92,316 ------------ 131,426 ------------ MOTOR VEHICLES 14,910 Hyundai Motor Co., Ltd.................. 323,832 ------------ REGIONAL BANKS 3,523 H&CB.................................... 78,679 9,100 Hana Bank............................... 66,347 1,960 Kookmin Credit Card Co., Ltd............ 55,656 27,460 Shinhan Bank............................ 281,344 ------------ 482,026 ------------ SEMICONDUCTORS 4,447 Samsung Electronics Co., Ltd............ 655,276 1,220 Samsung Electronics Ltd. (Pref.)........ 75,372 ------------ 730,648 ------------ STEEL 3,190 Pohang Iron & Steel Co., Ltd............ 254,612 ------------ WIRELESS COMMUNICATIONS 2,010 KT Freetel*............................. 57,847 2,540 SK Telecom Co., Ltd..................... 373,300 ------------ 431,147 ------------ TOTAL SOUTH KOREA....................... 3,427,664 ------------ TAIWAN (5.7%) CHEMICALS: SPECIALTY 21,000 Nan Ya Plastic Corp..................... 21,195 ------------ COMPUTER COMMUNICATIONS 5,200 Ambit Microsystems Corp................. 21,717 ------------ COMPUTER PERIPHERALS 47,000 Hon Hai Precison Industry Co., Ltd...... 246,723 ------------ NUMBER OF SHARES VALUE ------------------------------------------------------------------- COMPUTER PROCESSING HARDWARE 47,500 Asustek Computer, Inc................... $ 200,442 66,000 Compal Electronics, Inc................. 70,824 20,000 Quanta Computer Inc..................... 67,865 ------------ 339,131 ------------ ELECTRONIC EQUIPMENT/ INSTRUMENTS 54,000 Delta Electronics, Inc.................. 133,121 ------------ ELECTRONIC PRODUCTION EQUIPMENT 5,660 ASE Test Ltd. *......................... 72,391 ------------ FOOD RETAIL 31,000 President Chain Store Corp.............. 66,981 ------------ FOOD: SPECIALTY/CANDY 175,000 Uni-President Enterprises Corp.......... 73,593 ------------ LIFE/HEALTH INSURANCE 45,000 Cathay Life Insurance Co., Ltd.......... 54,162 ------------ PROPERTY - CASUALTY INSURERS 76,000 Fubon Insurance Co...................... 62,819 ------------ REGIONAL BANKS 101,000 Bank Sinopac............................ 46,575 163,000 Chinatrust Commercial Bank.............. 113,930 100,000 Taipei Bank............................. 54,234 167,000 Taishin International Bank*............. 76,041 ------------ 290,780 ------------ SEMICONDUCTORS 16,000 Elan Microelectronics Corp.............. 30,859 6,000 Faraday Technology Corp................. 47,506 7,500 Macronix International Co., Ltd.*....... 7,939 60,690 Pro Mos Technologies Inc.*.............. 46,116 8,000 Realtek Semiconductor Corp.............. 36,195 227,000 Siliconware Precision Industries Co.*... 128,379 7,000 SunPlus Technology Co................... 29,640
SEE NOTES TO FINANCIAL STATEMENTS 71 Morgan Stanley Variable Investment Series - Pacific Growth PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- 353,000 Taiwan Semiconductor Manufacturing Co. Ltd. *................................. $ 655,220 263,000 United Microelectronics Corp.*.......... 348,582 96,600 Winbond Electronics Corp................ 80,967 ------------ 1,411,403 ------------ STEEL 182,000 China Steel Corp........................ 90,789 ------------ TEXTILES 75,000 Far Eastern Textile Ltd................. 41,763 85,320 Formosa Chemical & Fiber Corp........... 59,635 ------------ 101,398 ------------ WIRELESS COMMUNICATIONS 42,607 Taiwan Cellular Corp.*.................. 55,483 ------------ TOTAL TAIWAN............................ 3,041,686 ------------ UNITED KINGDOM (0.1%) FINANCIAL CONGLOMERATES 4,200 HSBC Holdings PLC....................... 49,536 ------------ UNITED STATES (0.1%) MEDICAL SPECIALTIES 9,600 ResMed Inc.*............................ 50,831 ------------ TOTAL COMMON AND PREFERRED STOCKS AND RIGHTS (COST $54,294,626)..................... 48,945,522 ------------ PRINCIPAL AMOUNT IN THOUSANDS VALUE ------------------------------------------------------------------- SHORT-TERM INVESTMENT (A) (33.9%) U.S. GOVERNMENT AGENCY $ 18,000 Federal National Mortgage Assoc. 3.94% due 07/02/01 (COST $17,998,030)..................... $ 17,998,030 ------------
TOTAL INVESTMENTS (COST $72,292,656)(B).................. 125.9% 66,943,552 LIABILITIES IN EXCESS OF OTHER ASSETS... (25.9) (13,760,185) ------ ------------ NET ASSETS.............................. 100.0% $ 53,183,367 ====== ============
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. (A) PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $3,187,532 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $8,536,636, RESULTING IN NET UNREALIZED DEPRECIATION OF $5,349,104.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 2001: UNREALIZED CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/ TO DELIVER FOR DATE (DEPRECIATION) --------------------------------------------------------------------------------------------------------------- $ 16,231 AUD 31,340 07/02/01 $(241) SGD 72,794 $ 39,931 07/02/01 22 SGD 18,311 $ 10,047 07/03/01 8 ----- Net unrealized depreciation............................................. $(211) =====
CURRENCY ABBREVIATIONS: AUD Australian Dollar. SGD Singapore Dollar.
SEE NOTES TO FINANCIAL STATEMENTS 72 Morgan Stanley Variable Investment Series - Pacific Growth SUMMARY OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
PERCENT OF INDUSTRY VALUE NET ASSETS ----------------------------------------------------------------- Advertising/Marketing Services.......... $ 87,590 0.2% Aerospace & Defense..................... 96,184 0.2 Airlines................................ 535,157 1.0 Apparel/Footwear........................ 138,450 0.3 Auto Parts: O.E.M....................... 309,930 0.6 Beverages: Alcoholic.................... 254,147 0.5 Broadcasting............................ 147,174 0.3 Building Products....................... 181,815 0.3 Chemicals: Specialty.................... 1,964,867 3.7 Coal.................................... 95,073 0.2 Commercial Printing/ Forms.............. 564,078 1.1 Computer Communications................. 21,717 0.0 Computer Peripherals.................... 824,386 1.5 Computer Processing Hardware............ 1,085,421 2.0 Electric Utilities...................... 615,606 1.2 Electrical Products..................... 449,325 0.8 Electronic Components................... 787,660 1.5 Electronic Distributors................. 281,109 0.5 Electronic Equipment/ Instruments....... 4,848,108 9.1 Electronic Production Equipment......... 72,391 0.1 Electronics/Appliances.................. 1,639,322 3.1 Engineering & Construction.............. 157,384 0.3 Finance/Rental/Leasing.................. 711,734 1.3 Financial Conglomerates................. 154,722 0.3 Food Distributors....................... 80,920 0.2 Food Retail............................. 344,251 0.6 Food: Meat/Fish/Dairy................... 278,537 0.5 Food: Specialty/Candy................... 308,679 0.6 Gas Distributors........................ 217,767 0.4 Home Building........................... 664,030 1.2 Home Furnishings........................ 88,868 0.2 Household/Personal Care................. 54,470 0.1 Industrial Conglomerates................ 2,309,418 4.3 Industrial Machinery.................... 2,726,355 5.1 Industrial Specialties.................. 519,321 1.0 Information Technology Services......... 506,005 1.0 Investment Banks/Brokers................ 142,751 0.3 Investment Trusts/Mutual Funds.......... - 0.0 Life/Health Insurance................... 54,162 0.1 PERCENT OF INDUSTRY VALUE NET ASSETS ----------------------------------------------------------------- Major Banks............................. $ 2,378,007 4.5% Major Telecommunications................ 1,471,036 2.8 Marine Shipping......................... 347,220 0.7 Media Conglomerates..................... 644,450 1.2 Medical Specialties..................... 50,831 0.1 Medical/Nursing Services................ 68,405 0.1 Metal Fabrications...................... 574,609 1.1 Miscellaneous Commercial Services....... 300,441 0.6 Miscellaneous Manufacturing............. 861,482 1.6 Motor Vehicles.......................... 2,552,042 4.8 Oil & Gas Production.................... 299,782 0.6 Oil Refining/Marketing.................. 57,983 0.1 Other Metals/Minerals................... 1,005,347 1.9 Packaged Software....................... 90,137 0.2 Pharmaceuticals: Generic Drugs.......... 155,588 0.3 Pharmaceuticals: Major.................. 486,896 0.9 Pharmaceuticals: Other.................. 1,369,424 2.6 Precious Metals......................... 91,987 0.2 Property - Casualty Insurers............ 62,819 0.1 Publishing: Newspapers.................. 186,612 0.4 Real Estate Development................. 1,924,010 3.6 Recreational Products................... 2,220,934 4.2 Regional Banks.......................... 1,293,220 2.4 Semiconductors.......................... 2,685,691 5.0 Specialty Telecommunications............ 170,489 0.3 Steel................................... 345,401 0.6 Telecommunication Equipment............. 72,753 0.1 Textiles................................ 101,398 0.2 Tobacco................................. 266,688 0.5 U.S. Government Agency.................. 17,998,030 33.9 Wholesale Distributors.................. 1,013,804 1.9 Wireless Communications................. 1,477,152 2.7 ----------- -------- $66,943,552 125.9% =========== ========
PERCENT OF TYPE OF INVESTMENT VALUE NET ASSETS ----------------------------------------------------------------- Common Stocks........................... $48,861,862 91.9% Preferred Stocks........................ 75,372 0.1 Rights.................................. 8,288 0.0 Short-Term Investment................... 17,998,030 33.9 ----------- -------- $66,943,552 125.9% =========== ========
SEE NOTES TO FINANCIAL STATEMENTS 73 Morgan Stanley Variable Investment Series - Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ------------------------------------------------------------------- COMMON STOCKS (93.1%) ADVERTISING/MARKETING SERVICES (1.5%) 175,000 Lamar Advertising Co.*.................. $ 7,700,000 223,500 TMP Worldwide, Inc.*.................... 13,211,085 -------------- 20,911,085 -------------- AEROSPACE & DEFENSE (1.0%) 91,000 General Dynamics Corp................... 7,080,710 195,000 Lockheed Martin Corp.................... 7,224,750 -------------- 14,305,460 -------------- ALUMINUM (1.0%) 357,040 Alcoa, Inc.............................. 14,067,376 -------------- APPAREL/FOOTWEAR (2.0%) 272,900 Coach, Inc.*............................ 10,383,845 31,400 Nike, Inc. (Class B).................... 1,318,486 176,000 Polo Ralph Lauren Corp.*................ 4,540,800 196,600 Reebok International Ltd.*.............. 6,281,370 184,600 Vans, Inc.*............................. 4,338,100 -------------- 26,862,601 -------------- APPAREL/FOOTWEAR RETAIL (2.6%) 230,200 Abercrombie & Fitch Co. (Class A)*...... 10,243,900 250,100 AnnTaylor Stores Corp.*................. 8,953,580 136,700 Children's Place Retail Stores, Inc. (The)*................................. 3,663,560 433,300 Gap, Inc. (The)......................... 12,565,700 -------------- 35,426,740 -------------- BEVERAGES: ALCOHOLIC (1.4%) 156,700 Anheuser-Busch Companies, Inc........... 6,456,040 314,400 Constellation Brands Inc. (Class A)*.... 12,890,400 -------------- 19,346,440 -------------- BEVERAGES: NON-ALCOHOLIC (0.3%) 107,900 PepsiCo, Inc............................ 4,769,180 -------------- NUMBER OF SHARES VALUE ------------------------------------------------------------------- BIOTECHNOLOGY (8.5%) 94,600 Abgenix, Inc.*.......................... $ 4,257,000 82,400 Alkermes, Inc.*......................... 2,892,240 16,400 Amgen Inc.*............................. 995,152 63,400 Cephalon, Inc.*......................... 4,469,700 116,100 CuraGen Corp.*.......................... 4,226,040 70,400 CV Therapeutics, Inc.*.................. 4,012,800 58,300 Enzon, Inc.*............................ 3,643,750 312,000 Genzyme Corp. (General Division)*....... 19,032,000 266,500 Gilead Sciences, Inc.*.................. 15,507,635 65,600 ICOS Corp.*............................. 4,198,400 135,000 IDEC Pharmaceuticals Corp.*............. 9,138,150 223,300 Invitrogen Corp.*....................... 16,032,940 215,000 MedImmune, Inc.*........................ 10,148,000 195,000 Myriad Genetics, Inc.*.................. 12,347,380 52,000 Scios, Inc.*............................ 1,300,520 63,000 Vertex Pharmaceuticals, Inc.*........... 3,118,500 -------------- 115,320,207 -------------- BROADCASTING (3.0%) 274,000 Clear Channel Communications, Inc.*..... 17,179,800 178,200 Emmis Broadcasting Corp. (Class A)*..... 5,479,650 230,500 Univision Communications, Inc. (Class A)*............................. 9,860,790 166,000 USA Networks, Inc.*..................... 4,679,540 83,700 Westwood One, Inc.*..................... 3,084,345 -------------- 40,284,125 -------------- CABLE/SATELLITE TV (3.3%) 327,470 Adelphia Communications Corp. (Class A)*............................. 13,426,270 601,900 Charter Communications, Inc. (Class A)*............................. 14,054,365 287,400 Comcast Corp. (Class A Special)*........ 12,473,160 119,800 Cox Communications, Inc. (Class A)*..... 5,307,140 -------------- 45,260,935 --------------
SEE NOTES TO FINANCIAL STATEMENTS 74 Morgan Stanley Variable Investment Series - Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- COMPUTER COMMUNICATIONS (0.9%) 264,000 Brocade Communications Systems, Inc.*.................................. $ 11,613,360 -------------- COMPUTER PERIPHERALS (0.5%) 101,100 Lexmark International, Inc.*............ 6,798,975 -------------- COMPUTER PROCESSING HARDWARE (1.5%) 170,300 Hewlett-Packard Co...................... 4,870,580 71,000 International Business Machines Corp.... 8,023,000 501,500 Sun Microsystems, Inc.*................. 7,883,580 -------------- 20,777,160 -------------- CONTRACT DRILLING (0.6%) 112,500 ENSCO International Inc................. 2,632,500 138,200 Nabors Industries, Inc.*................ 5,141,040 48,000 Rowan Companies, Inc.*.................. 1,060,800 -------------- 8,834,340 -------------- DEPARTMENT STORES (0.2%) 51,300 Federated Department Stores, Inc.*...... 2,180,250 -------------- ELECTRIC UTILITIES (0.3%) 140,000 Mirant Corp.*........................... 4,816,000 -------------- ELECTRONIC PRODUCTION EQUIPMENT (3.0%) 235,600 Amkor Technology, Inc.*................. 5,206,760 239,400 KLA-Tencor Corp.*....................... 13,997,718 180,100 Novellus Systems, Inc.*................. 10,227,879 236,000 Photronics, Inc.*....................... 6,055,760 171,200 Teradyne, Inc.*......................... 5,666,720 -------------- 41,154,837 -------------- FINANCE/RENTAL/ LEASING (1.1%) 106,100 Freddie Mac............................. 7,427,000 109,000 Household International, Inc............ 7,270,300 -------------- 14,697,300 -------------- NUMBER OF SHARES VALUE ------------------------------------------------------------------- FINANCIAL CONGLOMERATES (0.5%) 140,000 Citigroup, Inc.......................... $ 7,397,600 -------------- FINANCIAL PUBLISHING/ SERVICES (0.5%) 39,400 Moody's Corp............................ 1,319,900 178,000 SunGard Data Systems Inc.*.............. 5,341,780 -------------- 6,661,680 -------------- FOOD: MEAT/FISH/ DAIRY (0.8%) 151,000 Dreyer's Grand Ice Cream, Inc........... 4,212,900 131,000 Suiza Foods Corp.*...................... 6,956,100 -------------- 11,169,000 -------------- FOOD: SPECIALTY/ CANDY (1.2%) 267,300 Hershey Foods Corp...................... 16,495,083 -------------- HOME IMPROVEMENT CHAINS (0.6%) 106,600 Lowe's Companies, Inc................... 7,733,830 -------------- HOSPITAL/NURSING MANAGEMENT (2.3%) 243,600 HCA-The Healthcare Corp................. 11,008,284 347,200 Health Management Associates, Inc. (Class A)*............................. 7,305,088 162,100 Province Healthcare Co.*................ 5,720,509 55,700 Tenet Healthcare Corp.*................. 2,873,563 136,800 Triad Hospitals, Inc.*.................. 4,031,496 -------------- 30,938,940 -------------- HOUSEHOLD/PERSONAL CARE (0.5%) 114,000 Procter & Gamble Co. (The).............. 7,273,200 -------------- INDUSTRIAL CONGLOMERATES (0.2%) 35,900 United Technologies Corp................ 2,630,034 -------------- INFORMATION TECHNOLOGY SERVICES (1.1%) 295,300 PeopleSoft, Inc.*....................... 14,537,619 --------------
SEE NOTES TO FINANCIAL STATEMENTS 75 Morgan Stanley Variable Investment Series - Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- INSURANCE BROKERS/ SERVICES (0.1%) 72,400 Willis Group Holdings Ltd.*............. $ 1,285,100 -------------- INTEGRATED OIL (1.1%) 170,200 Chevron Corp............................ 15,403,100 -------------- INTERNET SOFTWARE/ SERVICES (3.7%) 75,400 Interwoven, Inc.*....................... 1,274,260 86,600 Quest Software, Inc.*................... 3,269,150 362,600 RealNetworks, Inc.*..................... 4,260,550 176,400 Siebel Systems, Inc.*................... 8,273,160 312,500 VeriSign, Inc.*......................... 18,753,125 464,200 Vignette Corp.*......................... 4,117,454 508,700 Yahoo! Inc.*............................ 10,168,913 -------------- 50,116,612 -------------- INVESTMENT BANKS/ BROKERS (1.3%) 7,570 Goldman Sachs Group, Inc. (The)......... 649,506 84,800 Legg Mason, Inc......................... 4,219,648 159,600 Lehman Brothers Holdings, Inc........... 12,408,900 -------------- 17,278,054 -------------- INVESTMENT MANAGERS (0.3%) 168,000 W.P. Stewart & Co. Ltd.................. 4,116,000 -------------- LIFE/HEALTH INSURANCE (0.4%) 174,300 UnumProvident Corp...................... 5,598,516 -------------- MAJOR BANKS (1.9%) 122,100 Bank of America Corp.................... 7,329,663 188,000 Bank of New York Co., Inc............... 9,024,000 134,900 PNC Financial Services Group, Inc....... 8,875,071 -------------- 25,228,734 -------------- MAJOR TELECOMMUNICATIONS (1.2%) 242,400 SBC Communications, Inc................. 9,710,544 NUMBER OF SHARES VALUE ------------------------------------------------------------------- 124,000 Verizon Communications Inc.............. $ 6,634,000 -------------- 16,344,544 -------------- MANAGED HEALTH CARE (0.7%) 368,600 First Health Group Corp.*............... 8,890,632 -------------- MEDIA CONGLOMERATES (2.6%) 602,000 AOL Time Warner Inc.*................... 31,906,000 61,500 Viacom, Inc. (Class B) (Non-Voting)*.... 3,182,625 -------------- 35,088,625 -------------- MEDICAL DISTRIBUTORS (0.8%) 136,300 Andrx Group *........................... 10,495,100 -------------- MEDICAL SPECIALTIES (2.4%) 370,200 Baxter International, Inc............... 18,139,800 231,600 Biomet, Inc............................. 11,130,696 21,400 Urologix, Inc.*......................... 391,834 38,600 Varian Medical Systems, Inc.*........... 2,759,900 -------------- 32,422,230 -------------- METAL FABRICATIONS (0.1%) 43,000 Shaw Group Inc. (The)*.................. 1,724,300 -------------- MISCELLANEOUS COMMERCIAL SERVICES (0.9%) 215,000 CheckFree Corp.*........................ 7,540,050 85,000 Sabre Holdings Corp. (Class A)*......... 4,250,000 -------------- 11,790,050 -------------- MOVIES/ ENTERTAINMENT (0.4%) 180,200 Fox Entertainment Group, Inc. (Class A)*............................. 5,027,580 --------------
SEE NOTES TO FINANCIAL STATEMENTS 76 Morgan Stanley Variable Investment Series - Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- MULTI-LINE INSURANCE (0.7%) 85,500 American International Group, Inc....... $ 7,353,000 27,900 Loews Corp.............................. 1,797,597 -------------- 9,150,597 -------------- OIL & GAS PIPELINES (0.8%) 212,000 El Paso Corp............................ 11,138,480 -------------- OIL & GAS PRODUCTION (0.7%) 175,900 Anardarko Petroleum Corp................ 9,503,877 -------------- OILFIELD SERVICES/ EQUIPMENT (2.4%) 395,800 BJ Services Co.*........................ 11,232,804 139,000 Hanover Compressor Co.*................. 4,599,510 35,100 National-Oilwell, Inc.*................. 940,680 322,000 Weatherford International, Inc.*........ 15,456,000 -------------- 32,228,994 -------------- OTHER CONSUMER SERVICES (3.1%) 261,600 eBay, Inc.*............................. 17,916,984 91,600 Expedia, Inc. (Class A)*................ 4,268,560 280,000 Homestore.com, Inc.*.................... 9,788,800 318,900 Travelocity.com Inc.*................... 9,790,230 -------------- 41,764,574 -------------- PACKAGED SOFTWARE (8.2%) 156,000 Mercury Interactive Corp.*.............. 9,344,400 792,000 Microsoft Corp.*........................ 57,499,200 687,700 Oracle Corp.*........................... 13,066,300 196,400 QLogic Corp.*........................... 12,657,980 60,300 Rational Software Corp.*................ 1,691,415 253,300 VERITAS Software Corp.*................. 16,852,049 -------------- 111,111,344 -------------- PHARMACEUTICALS: GENERIC DRUGS (0.4%) 143,800 IVAX Corp.*............................. 5,608,200 -------------- NUMBER OF SHARES VALUE ------------------------------------------------------------------- PHARMACEUTICALS: MAJOR (2.3%) 200,000 American Home Products Corp............. $ 11,688,000 288,726 AstraZeneca PLC (ADR) (United Kingdom)............................... 13,497,940 42,700 Aventis SA (ADR) (France)............... 3,411,303 62,200 Bristol-Myers Squibb Co................. 3,253,060 -------------- 31,850,303 -------------- PHARMACEUTICALS: OTHER (2.7%) 48,800 Aviron*................................. 2,781,600 232,587 Biovail Corp. (Canada)*................. 10,117,535 54,800 Forest Laboratories, Inc.*.............. 3,890,800 167,900 King Pharmaceuticals, Inc.*............. 9,024,625 25,700 Medicis Pharmaceutical Corp. (Class A)*............................. 1,362,100 120,900 Salix Pharmaceuticals, Ltd. (Virgin Islands)*.............................. 2,980,185 105,650 Teva Pharmaceutical Industries Ltd. (ADR) (Israel)......................... 6,581,995 -------------- 36,738,840 -------------- PROPERTY - CASUALTY INSURERS (2.2%) 266,000 Allstate Corp. (The) (Note 4)........... 11,701,340 114,800 Everest Re Group, Ltd. (Bermuda)........ 8,587,040 67,000 Progressive Corp. (The)................. 9,057,730 -------------- 29,346,110 -------------- RAILROADS (0.4%) 244,600 Norfolk Southern Corp................... 5,063,220 -------------- RECREATIONAL PRODUCTS (0.2%) 114,400 Mattel, Inc.*........................... 2,164,448 -------------- REGIONAL BANKS (1.2%) 267,800 Fifth Third Bancorp..................... 16,081,390 -------------- RESTAURANTS (1.7%) 215,300 BUCA, Inc.*............................. 4,682,775
SEE NOTES TO FINANCIAL STATEMENTS 77 Morgan Stanley Variable Investment Series - Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ------------------------------------------------------------------- 60,600 CEC Entertainment, Inc.*................ $ 2,990,610 171,300 Darden Restaurants, Inc................. 4,779,270 231,800 McDonald's Corp......................... 6,272,508 140,800 Outback Steakhouse, Inc.*............... 4,055,040 -------------- 22,780,203 -------------- SEMICONDUCTORS (3.1%) 229,200 Advanced Micro Devices, Inc.*........... 6,619,296 238,300 Intel Corp.............................. 6,970,275 171,600 Marvell Technology Group Ltd. (Bermuda)*............................. 4,616,040 325,000 Micron Technology, Inc.*................ 13,357,500 190,100 Texas Instruments, Inc.................. 5,988,150 101,300 Xilinx, Inc.*........................... 4,177,612 -------------- 41,728,873 -------------- SERVICES TO THE HEALTH INDUSTRY (0.9%) 110,000 AdvancePCS*............................. 7,045,500 79,700 Covance Inc.*........................... 1,805,205 45,000 Laboratory Corp. of America Holdings*... 3,460,500 -------------- 12,311,205 -------------- SPECIALTY INSURANCE (2.2%) 73,500 MBIA, Inc............................... 4,092,480 108,000 MGIC Investment Corp.................... 7,845,120 120,000 PMI Group, Inc. (The)................... 8,719,200 226,000 Radian Group, Inc....................... 9,141,700 -------------- 29,798,500 -------------- SPECIALTY STORES (1.0%) 41,400 Bed Bath & Beyond Inc.*................. 1,242,000 495,000 Toys 'R' Us, Inc.*...................... 12,251,250 -------------- 13,493,250 -------------- STEEL (0.1%) 28,500 Nucor Corp.............................. 1,393,365 -------------- TELECOMMUNICATION EQUIPMENT (0.2%) 45,000 Comverse Technology, Inc.*.............. 2,592,900 -------------- NUMBER OF SHARES VALUE ------------------------------------------------------------------- TRUCKS/CONSTRUCTION/FARM MACHINERY (0.3%) 84,000 Caterpillar, Inc........................ $ 4,204,200 -------------- TOTAL COMMON STOCKS (COST $1,204,056,542).................. 1,263,125,407 -------------- PRINCIPAL AMOUNT IN THOUSANDS --------- SHORT-TERM INVESTMENTS (6.2%) U.S. GOVERNMENT AGENCY(A) (6.2%) $83,400 Federal National Mortgage Assoc. 3.94% due 07/02/01 (COST $ 83,390,873).................... 83,390,873 -------------- REPURCHASE AGREEMENT (0.0%) 130 The Bank of New York 3.875% due 07/02/01 (dated 06/29/01; proceeds $130,027)(b) (COST $129,985)........................ 129,985 -------------- TOTAL SHORT-TERM INVESTMENTS (COST $83,520,858)...................... 83,520,858 --------------
TOTAL INVESTMENTS (COST $1,287,577,400)(C)............... 99.3% 1,346,646,265 OTHER ASSETS IN EXCESS OF LIABILITIES... 0.7 9,713,360 ------ -------------- NET ASSETS.............................. 100.0% $1,356,359,625 ====== ==============
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. (A) PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) COLLATERALIZED BY $131,547 FEDERAL NATIONAL MORTGAGE ASSOC. 5.90% DUE 04/10/06 VALUED AT $132,585. (C) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $112,685,940 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $53,617,075, RESULTING IN NET UNREALIZED APPRECIATION OF $59,068,865. SEE NOTES TO FINANCIAL STATEMENTS 78 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMMON STOCKS (93.6%) ADVERTISING/MARKETING SERVICES (0.3%) 6,857 Interpublic Group of Companies, Inc..... $ 201,253 3,386 Omnicom Group, Inc...................... 291,196 1,946 TMP Worldwide, Inc.*.................... 115,028 ------------ 607,477 ------------ AEROSPACE & DEFENSE (0.9%) 15,947 Boeing Co............................... 886,653 3,673 General Dynamics Corp................... 285,796 1,889 Goodrich Corp........................... 71,744 7,939 Lockheed Martin Corp.................... 294,140 1,559 Northrop Grumman Corp................... 124,876 6,497 Raytheon Co............................. 172,495 2,572 Textron, Inc............................ 141,563 ------------ 1,977,267 ------------ AGRICULTURAL COMMODITIES/ MILLING (0.1%) 11,554 Archer-Daniels-Midland Co............... 150,202 ------------ AIR FREIGHT/COURIERS (0.1%) 5,612 FedEx Corp.*............................ 225,602 ------------ AIRLINES (0.2%) 2,809 AMR Corp.*.............................. 101,489 2,249 Delta Air Lines, Inc.................... 99,136 13,922 Southwest Airlines Co................... 257,418 1,226 US Airways Group, Inc.*................. 29,792 ------------ 487,835 ------------ ALTERNATIVE POWER GENERATION (0.1%) 5,459 Calpine Corp.*.......................... 206,350 ------------ ALUMINUM (0.4%) 5,837 Alcan Inc. (Canada)..................... 245,271 15,778 Alcoa, Inc.............................. 621,653 ------------ 866,924 ------------ APPAREL/FOOTWEAR (0.2%) 3,090 Cintas Corp............................. 142,912 960 Liz Claiborne, Inc...................... 48,432 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 4,957 Nike, Inc. (Class B).................... $ 208,144 1,070 Reebok International Inc. (United Kingdom)*.............................. 34,186 2,047 VF Corp................................. 74,470 ------------ 508,144 ------------ APPAREL/FOOTWEAR RETAIL (0.4%) 15,711 Gap, Inc. (The)......................... 455,619 7,794 Limited, Inc. (The)..................... 128,757 2,446 Nordstrom, Inc.......................... 45,373 5,125 TJX Companies, Inc. (The)............... 163,334 ------------ 793,083 ------------ AUTO PARTS: O.E.M. (0.2%) 2,704 Dana Corp............................... 63,111 10,234 Delphi Automotive Systems Corp.......... 163,028 1,259 Eaton Corp.............................. 88,256 1,588 Johnson Controls, Inc................... 115,082 2,283 TRW Inc................................. 93,603 2,393 Visteon Corp............................ 43,983 ------------ 567,063 ------------ AUTOMOTIVE AFTERMARKET (0.0%) 1,326 Cooper Tire & Rubber Co................. 18,829 2,902 Goodyear Tire & Rubber Co. (The)........ 81,256 ------------ 100,085 ------------ BEVERAGES: ALCOHOLIC (0.4%) 16,407 Anheuser-Busch Companies, Inc........... 675,968 1,251 Brown-Forman Corp. (Class B)............ 79,989 682 Coors (Adolph) Co. (Class B)............ 34,223 ------------ 790,180 ------------ BEVERAGES: NON-ALCOHOLIC (1.6%) 45,468 Coca Cola Co............................ 2,046,060 7,682 Coca-Cola Enterprises Inc............... 125,601
SEE NOTES TO FINANCIAL STATEMENTS 79 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 2,629 Pepsi Bottling Group, Inc. (The)........ $ 105,423 26,760 PepsiCo, Inc............................ 1,182,792 ------------ 3,459,876 ------------ BIOTECHNOLOGY (0.8%) 19,068 Amgen Inc.*............................. 1,157,046 2,717 Biogen, Inc.*........................... 147,696 3,462 Chiron Corp.*........................... 176,562 3,889 MedImmune, Inc.*........................ 183,561 ------------ 1,664,865 ------------ BROADCASTING (0.4%) 10,739 Clear Channel Communications, Inc.*..... 673,335 3,809 Univision Communications, Inc. (Class A)*............................. 162,949 ------------ 836,284 ------------ BUILDING PRODUCTS (0.1%) 8,406 Masco Corp.............................. 209,814 ------------ CABLE/SATELLITE TV (0.3%) 17,274 Comcast Corp. (Class A Special)*........ 749,692 ------------ CASINO/GAMING (0.0%) 2,143 Harrah's Entertainment, Inc.*........... 75,648 ------------ CHEMICALS: MAJOR DIVERSIFIED (0.8%) 16,406 Dow Chemical Co......................... 545,499 19,062 Du Pont (E.I.) de Nemours & Co., Inc.... 919,551 1,408 Eastman Chemical Co..................... 67,063 1,974 Hercules Inc.*.......................... 22,306 4,025 Rohm & Haas Co.......................... 132,422 ------------ 1,686,841 ------------ CHEMICALS: SPECIALTY (0.2%) 4,167 Air Products & Chemicals, Inc........... 190,640 2,390 Engelhard Corp.......................... 61,638 569 FMC Corp.*.............................. 39,011 919 Great Lakes Chemical Corp............... 28,351 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 2,936 Praxair, Inc............................ $ 137,992 1,383 Sigma-Aldrich Corp...................... 53,411 ------------ 511,043 ------------ COMMERCIAL PRINTING/ FORMS (0.0%) 1,292 Deluxe Corp............................. 37,339 2,146 Donnelley (R.R.) & Sons Co.............. 63,736 ------------ 101,075 ------------ COMPUTER COMMUNICATIONS (1.2%) 5,188 Avaya Inc.*............................. 71,076 3,451 Cabletron Systems, Inc.*................ 78,855 133,786 Cisco Systems, Inc.*.................... 2,434,905 ------------ 2,584,836 ------------ COMPUTER PERIPHERALS (0.7%) 40,340 EMC Corp.*.............................. 1,171,877 2,344 Lexmark International Group, Inc.*...... 157,634 5,951 Network Appliance, Inc.*................ 81,529 1,684 QLogic Corp.*........................... 108,534 ------------ 1,519,574 ------------ COMPUTER PROCESSING HARDWARE (3.6%) 6,380 Apple Computer, Inc.*................... 148,335 30,874 Compaq Computer Corp.................... 478,238 47,545 Dell Computer Corp.*.................... 1,233,793 5,904 Gateway, Inc.*.......................... 97,121 35,514 Hewlett-Packard Co...................... 1,015,700 31,759 International Business Machines Corp.... 3,588,767 1,764 NCR Corp.*.............................. 82,908 10,367 Palm, Inc.*............................. 62,928 59,532 Sun Microsystems, Inc................... 935,843 ------------ 7,643,633 ------------ CONSTRUCTION MATERIALS (0.0%) 1,848 Vulcan Materials Co..................... 99,330 ------------
SEE NOTES TO FINANCIAL STATEMENTS 80 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- CONSUMER SUNDRIES (0.0%) 1,161 American Greetings Corp. (Class A)...... $ 12,771 ------------ CONTAINERS/PACKAGING (0.1%) 511 Ball Corp............................... 24,303 961 Bemis Company, Inc...................... 38,603 2,901 Pactiv Corp.*........................... 38,873 1,529 Sealed Air Corp.*....................... 56,955 891 Temple-Inland, Inc...................... 47,481 ------------ 206,215 ------------ CONTRACT DRILLING (0.2%) 2,685 Nabors Industries, Inc.*................ 99,882 2,451 Noble Drilling Corp.*................... 80,270 1,724 Rowan Companies, Inc.*.................. 38,100 5,813 Transocean Sedco Forex Inc.............. 239,786 ------------ 458,038 ------------ DATA PROCESSING SERVICES (0.8%) 11,411 Automatic Data Processing, Inc.......... 567,127 3,991 Concord EFS, Inc.*...................... 207,572 7,161 First Data Corp......................... 460,094 2,273 Fiserv, Inc.*........................... 145,427 6,824 Paychex, Inc............................ 272,960 ------------ 1,653,180 ------------ DEPARTMENT STORES (0.5%) 1,554 Dillard's, Inc. (Class A)............... 23,730 3,613 Federated Department Stores, Inc.*...... 153,552 6,089 Kohl's Corp.*........................... 381,963 5,464 May Department Stores Co................ 187,197 4,808 Penney (J.C.) Co., Inc.................. 126,739 6,005 Sears, Roebuck & Co..................... 254,072 ------------ 1,127,253 ------------ DISCOUNT STORES (2.4%) 2,071 Big Lots, Inc.*......................... 28,331 8,226 Costco Wholesale Corp.*................. 337,924 6,043 Dollar General Corp..................... 117,838 8,956 Kmart Corp.*............................ 102,725 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 16,434 Target Corp............................. $ 568,616 81,726 Wal-Mart Stores, Inc.................... 3,988,229 ------------ 5,143,663 ------------ DRUGSTORE CHAINS (0.4%) 7,189 CVS Corp................................ 277,495 691 Longs Drug Stores Corp.................. 14,891 18,607 Walgreen Co............................. 635,429 ------------ 927,815 ------------ ELECTRIC UTILITIES (2.4%) 9,726 AES Corp. (The)*........................ 418,704 2,279 Allegheny Energy, Inc................... 109,962 2,508 Ameren Corp............................. 107,092 5,889 American Electric Power Co., Inc........ 271,895 2,907 Cinergy Corp............................ 101,600 2,413 CMS Energy Corp......................... 67,202 3,877 Consolidated Edison, Inc................ 154,305 2,993 Constellation Energy Group, Inc......... 127,502 4,522 Dominion Resources, Inc................. 271,908 3,013 DTE Energy Co........................... 139,924 14,110 Duke Energy Corp........................ 550,431 5,956 Edison International*................... 66,409 4,030 Entergy Corp............................ 154,712 5,860 Exelon Corp............................. 375,743 4,094 FirstEnergy Corp........................ 131,663 3,215 FPL Group, Inc.......................... 193,575 2,184 GPU, Inc................................ 76,768 6,206 Mirant Corp.*........................... 213,486 2,929 Niagara Mohawk Holdings Inc.*........... 51,814 7,077 PG & E Corp.*........................... 79,262 1,549 Pinnacle West Capital Corp.............. 73,423 2,668 PPL Corp................................ 146,740 3,767 Progress Energy, Inc.................... 169,214 3,802 Public Service Enterprise Group, Inc.... 185,918 5,437 Reliant Energy, Inc..................... 175,126 12,522 Southern Co. (The)...................... 291,136
SEE NOTES TO FINANCIAL STATEMENTS 81 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 4,696 TXU Corp................................ $ 226,300 6,273 Xcel Energy, Inc........................ 178,467 ------------ 5,110,281 ------------ ELECTRICAL PRODUCTS (0.4%) 3,565 American Power Conversion Corp.*........ 56,149 1,711 Cooper Industries, Inc.................. 67,738 7,832 Emerson Electric Co..................... 473,836 3,572 Molex Inc............................... 130,485 752 National Service Industries, Inc........ 16,973 1,438 Power-One, Inc.*........................ 23,928 1,063 Thomas & Betts Corp..................... 23,460 ------------ 792,569 ------------ ELECTRONIC COMPONENTS (0.2%) 3,496 Jabil Circuit, Inc.*.................... 107,887 5,844 Sanmina Corp.*.......................... 136,808 11,941 Solectron Corp.*........................ 218,520 ------------ 463,215 ------------ ELECTRONIC EQUIPMENT/ INSTRUMENTS (0.5%) 8,349 Agilent Technologies, Inc.*............. 271,342 24,060 JDS Uniphase Corp.*..................... 306,765 1,845 PerkinElmer, Inc........................ 50,793 3,343 Rockwell International Corp............. 127,435 4,141 Symbol Technologies, Inc................ 91,930 1,710 Tektronix, Inc.*........................ 46,426 3,314 Thermo Electron Corp.*.................. 72,974 12,691 Xerox Corp.*............................ 121,453 ------------ 1,089,118 ------------ ELECTRONIC PRODUCTION EQUIPMENT (0.5%) 14,863 Applied Materials, Inc.*................ 729,773 3,389 KLA-Tencor Corp.*....................... 198,155 2,604 Novellus Systems, Inc.*................. 147,881 3,186 Teradyne, Inc.*......................... 105,457 ------------ 1,181,266 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- ELECTRONICS/APPLIANCE STORES (0.2%) 3,827 Best Buy Co., Inc.*..................... $ 243,091 3,802 Circuit City Stores, Inc.-Circuit City Group.................................. 68,436 3,390 RadioShack Corp......................... 103,395 ------------ 414,922 ------------ ELECTRONICS/ APPLIANCES (0.1%) 1,391 Maytag Corp............................. 40,701 1,217 Whirlpool Corp.......................... 76,062 ------------ 116,763 ------------ ENGINEERING & CONSTRUCTION (0.0%) 1,449 Fluor Corp.............................. 65,422 ------------ ENVIRONMENTAL SERVICES (0.2%) 3,606 Allied Waste Industries, Inc.*.......... 67,360 11,434 Waste Management, Inc................... 352,396 ------------ 419,756 ------------ FINANCE/RENTAL/ LEASING (2.0%) 3,809 Capital One Financial Corp.............. 228,540 2,165 Countrywide Credit Industries, Inc...... 99,330 18,285 Fannie Mae.............................. 1,556,968 12,660 Freddie Mac............................. 886,200 8,478 Household International, Inc............ 565,483 15,570 MBNA Corp............................... 513,031 5,218 Providian Financial Corp................ 308,906 1,103 Ryder System, Inc....................... 21,619 2,979 USA Education Inc....................... 217,467 ------------ 4,397,544 ------------ FINANCIAL CONGLOMERATES (3.7%) 24,185 American Express Co..................... 938,378 91,919 Citigroup, Inc.......................... 4,857,000 6,175 Conseco, Inc.*.......................... 84,289
SEE NOTES TO FINANCIAL STATEMENTS 82 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 5,630 Hancock (John) Financial Services , Inc.*.................................. $ 226,664 36,288 J.P. Morgan Chase & Co.................. 1,618,445 5,948 State Street Corp....................... 294,367 ------------ 8,019,143 ------------ FINANCIAL PUBLISHING/ SERVICES (0.2%) 2,617 Equifax, Inc............................ 95,992 3,568 McGraw-Hill Companies, Inc. (The)....... 236,023 2,879 Moody's Corporation..................... 96,446 ------------ 428,461 ------------ FOOD DISTRIBUTORS (0.2%) 2,420 Supervalu, Inc.......................... 42,471 12,294 SYSCO Corp.............................. 333,782 ------------ 376,253 ------------ FOOD RETAIL (0.5%) 7,400 Albertson's, Inc........................ 221,926 14,820 Kroger Co.*............................. 370,500 9,238 Safeway Inc.*........................... 443,424 2,568 Winn-Dixie Stores, Inc.................. 67,102 ------------ 1,102,952 ------------ FOOD: MAJOR DIVERSIFIED (1.0%) 7,464 Campbell Soup Co........................ 192,198 5,202 General Mills, Inc...................... 227,744 6,374 Heinz (H.J.) Co......................... 260,633 7,419 Kellogg Co.............................. 215,151 2,415 Quaker Oats Company (The)............... 220,369 5,663 Ralston-Ralston Purina Group............ 170,003 14,378 Sara Lee Corp........................... 272,319 10,448 Unilever N.V. (Netherlands)............. 622,387 ------------ 2,180,804 ------------ FOOD: MEAT/FISH/DAIRY (0.1%) 9,818 ConAgra, Inc............................ 194,495 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- FOOD: SPECIALTY/CANDY (0.2%) 2,498 Hershey Foods Corp...................... $ 154,152 4,129 Wrigley (Wm.) Jr. Co.................... 193,444 ------------ 347,596 ------------ FOREST PRODUCTS (0.1%) 1,908 Louisiana-Pacific Corp.................. 22,381 3,925 Weyerhaeuser Co......................... 215,757 ------------ 238,138 ------------ GAS DISTRIBUTORS (0.4%) 5,959 Dynegy, Inc. (Class A).................. 277,093 2,510 KeySpan Corp............................ 91,565 2,093 Kinder Morgan, Inc...................... 105,173 825 Nicor Inc............................... 32,158 3,775 NiSource Inc............................ 103,171 1,078 ONEOK, Inc.............................. 21,237 651 Peoples Energy Corp..................... 26,170 3,765 Sempra Energy........................... 102,935 ------------ 759,502 ------------ HOME BUILDING (0.0%) 1,084 Centex Corp............................. 44,173 809 KB HOME................................. 24,408 770 Pulte Corp.............................. 32,825 ------------ 101,406 ------------ HOME FURNISHINGS (0.1%) 3,587 Leggett & Platt, Inc.................... 79,022 4,874 Newell Rubbermaid, Inc.................. 122,337 1,059 Tupperware Corp......................... 24,812 ------------ 226,171 ------------ HOME IMPROVEMENT CHAINS (1.2%) 42,657 Home Depot, Inc. (The).................. 1,985,683 7,030 Lowe's Companies, Inc................... 510,026 ------------ 2,495,709 ------------ HOSPITAL/NURSING MANAGEMENT (0.4%) 9,826 HCA-The Healthcare Corp................. 444,037
SEE NOTES TO FINANCIAL STATEMENTS 83 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 1,881 Manor Care, Inc.*....................... $ 59,722 5,927 Tenet Healthcare Corp.*................. 305,774 ------------ 809,533 ------------ HOTELS/RESORTS/ CRUISELINES (0.3%) 10,688 Carnival Corp........................... 328,122 6,742 Hilton Hotels Corp...................... 78,207 4,456 Marriott International, Inc. (Class A).............................. 210,947 3,633 Starwood Hotels & Resorts Worldwide, Inc.................................... 135,438 ------------ 752,714 ------------ HOUSEHOLD/PERSONAL CARE (1.7%) 1,035 Alberto-Culver Co. (Class B)............ 43,511 4,337 Avon Products, Inc...................... 200,716 4,323 Clorox Co............................... 146,334 10,256 Colgate-Palmolive Co.................... 605,001 19,276 Gillette Co............................. 558,811 1,751 International Flavors & Fragrances, Inc.................................... 44,003 9,728 Kimberly-Clark Corp..................... 543,795 23,675 Procter & Gamble Co. (The).............. 1,510,465 ------------ 3,652,636 ------------ INDUSTRIAL CONGLOMERATES (6.0%) 181,571 General Electric Co.**.................. 8,851,586 14,793 Honeywell International, Inc............ 517,607 1,607 ITT Industries, Inc..................... 71,110 7,237 Minnesota Mining & Manufacturing Co..... 825,742 35,400 Tyco International Ltd. (Bermuda)....... 1,929,300 8,605 United Technologies Corp................ 630,402 ------------ 12,825,747 ------------ INDUSTRIAL MACHINERY (0.3%) 5,556 Illinois Tool Works Inc................. 351,695 2,923 Ingersoll-Rand Co....................... 120,428 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 1,118 McDermott International, Inc.*.......... $ 13,025 2,136 Parker-Hannifin Corp.................... 90,652 ------------ 575,800 ------------ INDUSTRIAL SPECIALTIES (0.2%) 2,332 Ecolab, Inc............................. 95,542 861 Millipore Corp.......................... 53,365 3,078 PPG Industries, Inc..................... 161,810 2,864 Sherwin-Williams Co..................... 63,581 ------------ 374,298 ------------ INFORMATION TECHNOLOGY SERVICES (0.5%) 3,376 Citrix Systems, Inc.*................... 117,822 3,082 Computer Sciences Corp.*................ 106,637 8,553 Electronic Data Systems Corp............ 534,562 5,374 PeopleSoft, Inc.*....................... 264,562 2,247 Sapient Corp.*.......................... 21,908 5,789 Unisys Corp.*........................... 85,156 ------------ 1,130,647 ------------ INSURANCE BROKERS/ SERVICES (0.3%) 4,787 AON Corp................................ 167,545 5,036 Marsh & McLennan Companies, Inc......... 508,636 ------------ 676,181 ------------ INTEGRATED OIL (4.8%) 1,629 Amerada Hess Corp....................... 131,623 11,726 Chevron Corp............................ 1,061,203 11,419 Conoco, Inc. (Class B).................. 330,009 63,062 Exxon Mobil Corp........................ 5,508,466 4,675 Phillips Petroleum Co................... 266,475 39,196 Royal Dutch Petroleum Co. (ADR) (Netherlands).......................... 2,283,951 10,071 Texaco, Inc............................. 670,729 ------------ 10,252,456 ------------ INTERNET SOFTWARE/ SERVICES (0.3%) 5,001 BroadVision, Inc.*...................... 25,005
SEE NOTES TO FINANCIAL STATEMENTS 84 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 8,283 Siebel Systems, Inc.*................... $ 388,473 10,363 Yahoo! Inc.*............................ 207,156 ------------ 620,634 ------------ INVESTMENT BANKS/ BROKERS (1.4%) 1,920 Bear Stearns Companies, Inc. (The)...... 113,222 4,506 Lehman Brothers Holdings, Inc........... 350,341 15,342 Merrill Lynch & Co., Inc................ 909,014 20,341 Morgan Stanley Dean Witter & Co. (Note 4)..................................... 1,306,502 25,337 Schwab (Charles) Corp................... 387,656 ------------ 3,066,735 ------------ INVESTMENT MANAGERS (0.2%) 4,835 Franklin Resources, Inc................. 221,298 4,009 Stilwell Financial, Inc................. 134,542 2,249 T. Rowe Price Group Inc................. 84,090 ------------ 439,930 ------------ LIFE/HEALTH INSURANCE (0.8%) 9,612 AFLAC, Inc.............................. 302,682 9,124 American General Corp................... 423,810 2,781 Jefferson-Pilot Corp.................... 134,378 3,433 Lincoln National Corp................... 177,658 13,705 MetLife, Inc.*.......................... 424,581 2,293 Torchmark Corp.......................... 92,202 4,412 UnumProvident Corp...................... 141,713 ------------ 1,697,024 ------------ MAJOR BANKS (4.0%) 29,300 Bank of America Corp.................... 1,758,879 13,445 Bank of New York Co., Inc............... 645,360 21,302 Bank One Corp........................... 762,612 7,444 BB&T Corp............................... 273,195 3,262 Comerica, Inc........................... 187,891 17,938 First Union Corp........................ 626,754 19,798 FleetBoston Financial Corp.............. 781,031 4,588 Huntington Bancshares, Inc.............. 75,014 7,760 KeyCorp................................. 202,148 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 8,723 Mellon Financial Corp................... $ 401,258 10,981 National City Corp...................... 337,995 5,283 PNC Financial Services Group, Inc....... 347,569 6,214 SouthTrust Corp......................... 161,564 5,337 SunTrust Banks, Inc..................... 345,731 3,845 Wachovia Corp........................... 273,572 31,371 Wells Fargo & Co........................ 1,456,556 ------------ 8,637,129 ------------ MAJOR TELECOMMUNICATIONS (4.3%) 5,723 ALLTEL Corp............................. 350,591 63,071 AT&T Corp............................... 1,387,562 34,258 BellSouth Corp.......................... 1,379,570 61,564 SBC Communications, Inc................. 2,466,254 16,201 Sprint Corp. (FON Group)................ 346,053 49,440 Verizon Communications Inc.............. 2,645,040 52,792 WorldCom Group*......................... 789,768 ------------ 9,364,838 ------------ MANAGED HEALTH CARE (0.4%) 2,600 Aetna Inc.*............................. 67,262 2,737 CIGNA Corp.............................. 262,259 3,107 Humana, Inc.*........................... 30,604 5,798 UnitedHealth Group Inc.................. 358,027 1,157 Wellpoint Health Networks, Inc.*........ 109,036 ------------ 827,188 ------------ MEDIA CONGLOMERATES (3.3%) 80,989 AOL Time Warner Inc.*................... 4,292,417 38,203 Disney (Walt) Co. (The)*................ 1,103,685 32,541 Viacom, Inc. (Class B) (Non-Voting)*.... 1,683,997 ------------ 7,080,099 ------------ MEDICAL DISTRIBUTORS (0.4%) 8,150 Cardinal Health, Inc.................... 562,350 5,206 McKesson HBOC, Inc...................... 193,247 ------------ 755,597 ------------
SEE NOTES TO FINANCIAL STATEMENTS 85 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- MEDICAL SPECIALTIES (1.3%) 3,860 Applera Corp. - Applied Biosystems Group.................................. $ 103,255 919 Bard (C.R.), Inc........................ 52,337 980 Bausch & Lomb, Inc...................... 35,515 10,828 Baxter International, Inc.*............. 530,572 4,709 Becton, Dickinson & Co.................. 168,535 3,271 Biomet, Inc............................. 157,204 7,338 Boston Scientific Corp.*................ 124,746 5,612 Guidant Corp.*.......................... 202,032 22,093 Medtronic, Inc.......................... 1,016,499 2,245 Pall Corp............................... 52,825 1,567 St. Jude Medical, Inc.*................. 94,020 3,585 Stryker Corp.*.......................... 196,637 ------------ 2,734,177 ------------ METAL FABRICATIONS (0.0%) 1,097 Timken Co. (The)........................ 18,583 ------------ MISCELLANEOUS COMMERCIAL SERVICES (0.1%) 3,123 Convergys Corp.*........................ 94,471 2,429 Sabre Holdings Corp. (Class A)*......... 121,450 ------------ 215,921 ------------ MISCELLANEOUS MANUFACTURING (0.1%) 1,092 Crane Co................................ 33,852 2,605 Danaher Corp............................ 145,880 3,716 Dover Corp.............................. 139,907 ------------ 319,639 ------------ MOTOR VEHICLES (0.8%) 33,444 Ford Motor Co........................... 821,050 10,028 General Motors Corp..................... 645,302 5,528 Harley-Davidson, Inc.................... 260,258 ------------ 1,726,610 ------------ MULTI-LINE INSURANCE (2.0%) 42,610 American International Group, Inc....... 3,664,460 4,333 Hartford Financial Services Group, Inc. (The).................................. 296,377 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 3,605 Loews Corp.............................. $ 232,270 2,335 Safeco Corp............................. 68,883 ------------ 4,261,990 ------------ OFFICE EQUIPMENT/ SUPPLIES (0.1%) 2,015 Avery Dennison Corp..................... 102,866 4,511 Pitney Bowes, Inc....................... 190,003 ------------ 292,869 ------------ OIL & GAS PIPELINES (0.7%) 9,307 El Paso Corp............................ 488,990 13,638 Enron Corp.............................. 668,262 8,858 Williams Companies, Inc. (The).......... 291,871 ------------ 1,449,123 ------------ OIL & GAS PRODUCTION (0.5%) 4,581 Anardarko Petroleum Corp................ 247,511 2,292 Apache Corp.*........................... 116,319 3,866 Burlington Resources, Inc............... 154,447 2,366 Devon Energy Corp....................... 124,215 2,113 EOG Resources, Inc...................... 75,117 1,732 Kerr-McGee Corp......................... 114,780 6,772 Occidental Petroleum Corp............... 180,067 4,449 Unocal Corp............................. 151,933 ------------ 1,164,389 ------------ OIL REFINING/ MARKETING (0.2%) 1,276 Ashland, Inc............................ 51,168 1,533 Sunoco Inc.............................. 56,154 2,822 Tosco Corp.............................. 124,309 5,641 USX-Marathon Group...................... 166,466 ------------ 398,097 ------------ OILFIELD SERVICES/ EQUIPMENT (0.5%) 6,135 Baker Hughes Inc........................ 205,523 7,843 Halliburton Co.......................... 279,211 10,479 Schlumberger Ltd........................ 551,719 ------------ 1,036,453 ------------
SEE NOTES TO FINANCIAL STATEMENTS 86 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- OTHER CONSUMER SERVICES (0.2%) 1,670 Block (H.&R.), Inc...................... $ 107,799 15,571 Cendant Corp.*.......................... 303,635 ------------ 411,434 ------------ OTHER CONSUMER SPECIALTIES (0.0%) 2,797 Fortune Brands, Inc..................... 107,293 ------------ OTHER METALS/MINERALS (0.1%) 3,324 Inco Ltd. (Canada)*..................... 57,372 1,439 Phelps Dodge Corp....................... 59,719 ------------ 117,091 ------------ PACKAGED SOFTWARE (5.0%) 4,371 Adobe Systems, Inc...................... 205,437 985 Autodesk, Inc........................... 36,741 4,453 BMC Software, Inc.*..................... 100,371 10,534 Computer Associates International, Inc.................................... 379,224 6,723 Compuware Corp.*........................ 94,055 3,814 Intuit Inc.*............................ 152,522 1,510 Mercury Interactive Corp.*.............. 90,449 98,382 Microsoft Corp.*........................ 7,142,533 5,805 Novell, Inc.*........................... 33,030 102,613 Oracle Corp.*........................... 1,949,647 4,829 Parametric Technology Corp.*............ 67,558 7,264 VERITAS Software Corp.*................. 483,274 ------------ 10,734,841 ------------ PERSONNEL SERVICES (0.0%) 3,212 Robert Half International, Inc.*........ 79,947 ------------ PHARMACEUTICALS: GENERIC DRUGS (0.1%) 1,935 Watson Pharmaceuticals, Inc.*........... 119,273 ------------ PHARMACEUTICALS: MAJOR (8.5%) 28,312 Abbott Laboratories..................... 1,359,259 24,027 American Home Products Corp............. 1,404,138 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 35,525 Bristol-Myers Squibb Co................. $ 1,857,958 55,353 Johnson & Johnson....................... 2,767,632 20,544 Lilly (Eli) & Co........................ 1,520,256 41,915 Merck & Co., Inc........................ 2,678,788 115,395 Pfizer, Inc............................. 4,621,570 23,781 Pharmacia Corp.......................... 1,092,737 26,744 Schering-Plough Corp.................... 969,203 ------------ 18,271,541 ------------ PHARMACEUTICALS: OTHER (0.3%) 2,405 Allergan, Inc........................... 205,628 3,220 Forest Laboratories, Inc.*.............. 228,620 3,133 King Pharmaceuticals, Inc.*............. 168,399 ------------ 602,647 ------------ PRECIOUS METALS (0.1%) 7,239 Barrick Gold Corp. (Canada)............. 109,671 2,631 Freeport-McMoRan Copper & Gold, Inc. (Class B)*............................. 29,073 4,813 Homestake Mining Co.*................... 37,301 3,573 Newmont Mining Corp..................... 66,494 5,989 Placer Dome Inc. (Canada)............... 58,692 ------------ 301,231 ------------ PROPERTY - CASUALTY INSURERS (0.6%) 13,242 Allstate Corp. (The) (Note 4)........... 582,516 3,203 Chubb Corp. (The)....................... 248,008 2,938 Cincinnati Financial Corp............... 116,051 1,350 Progressive Corp. (The)................. 182,507 3,920 St. Paul Companies, Inc................. 198,705 ------------ 1,327,787 ------------ PUBLISHING: BOOKS/ MAGAZINES (0.1%) 1,339 Harcourt General, Inc................... 77,916 902 Meredith Corp........................... 32,301 ------------ 110,217 ------------ PUBLISHING: NEWSPAPERS (0.4%) 1,582 Dow Jones & Co., Inc.................... 94,461
SEE NOTES TO FINANCIAL STATEMENTS 87 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 4,836 Gannett Co., Inc........................ $ 318,692 1,338 Knight-Ridder, Inc...................... 79,343 2,911 New York Times Co. (The) (Class A)...... 122,262 5,455 Tribune Co.............................. 218,255 ------------ 833,013 ------------ PULP & PAPER (0.3%) 1,050 Boise Cascade Corp...................... 36,929 4,130 Georgia-Pacific Group................... 139,801 8,829 International Paper Co.................. 315,195 1,812 Mead Corp............................... 49,178 517 Potlatch Corp........................... 17,790 1,842 Westvaco Corp........................... 44,742 2,054 Willamette Industries, Inc.............. 101,673 ------------ 705,308 ------------ RAILROADS (0.3%) 7,161 Burlington Northern Santa Fe Corp....... 216,047 3,901 CSX Corp................................ 141,372 7,032 Norfolk Southern Corp................... 145,562 4,531 Union Pacific Corp...................... 248,797 ------------ 751,778 ------------ RECREATIONAL PRODUCTS (0.2%) 1,601 Brunswick Corp.......................... 38,472 5,302 Eastman Kodak Co........................ 247,497 3,152 Hasbro, Inc............................. 45,546 7,876 Mattel, Inc.*........................... 149,014 ------------ 480,529 ------------ REGIONAL BANKS (1.1%) 6,770 AmSouth Bancorporation.................. 125,177 10,520 Fifth Third Bancorp..................... 631,726 4,070 Northern Trust Corp..................... 254,375 4,159 Regions Financial Corp.................. 133,088 5,302 Synovus Financial Corp.................. 166,377 34,840 U.S. Bancorp............................ 794,004 2,514 Union Planters Corp..................... 109,610 1,690 Zions Bancorporation.................... 99,710 ------------ 2,314,067 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- RESTAURANTS (0.5%) 2,158 Darden Restaurants, Inc................. $ 60,208 23,641 McDonald's Corp.*....................... 639,725 6,949 Starbucks Corp.*........................ 159,827 2,685 Tricon Global Restaurants, Inc.*........ 117,872 2,078 Wendy's International, Inc.............. 53,072 ------------ 1,030,704 ------------ SAVINGS BANKS (0.4%) 3,779 Charter One Financial, Inc.............. 120,550 2,900 Golden West Financial Corp.............. 186,296 16,043 Washington Mutual, Inc.................. 602,415 ------------ 909,261 ------------ SEMICONDUCTORS (3.3%) 6,287 Advanced Micro Devices, Inc.*........... 181,569 7,070 Altera Corp.*........................... 205,030 6,578 Analog Devices, Inc.*................... 284,499 5,493 Applied Micro Circuits Corp.*........... 94,480 4,754 Broadcom Corp. (Class A)*............... 203,281 4,517 Conexant Systems, Inc.*................. 40,427 122,929 Intel Corp.............................. 3,595,673 5,810 Linear Technology Corp.................. 256,918 6,606 LSI Logic Corp.*........................ 124,193 6,001 Maxim Integrated Products, Inc.*........ 265,304 10,898 Micron Technology, Inc.*................ 447,908 3,170 National Semiconductor Corp.*........... 92,310 31,733 Texas Instruments, Inc.................. 999,590 3,351 Vitesse Semiconductor Corp.*............ 70,505 6,080 Xilinx, Inc.*........................... 250,739 ------------ 7,112,426 ------------ SERVICES TO THE HEALTH INDUSTRY (0.1%) 7,123 Healthsouth Corp.*...................... 113,754 5,386 IMS Health Inc.......................... 153,501 2,131 Quintiles Transnational Corp.*.......... 53,808 ------------ 321,063 ------------
SEE NOTES TO FINANCIAL STATEMENTS 88 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- SPECIALTY INSURANCE (0.2%) 1,934 Ambac Financial Group, Inc.............. $ 112,559 2,710 MBIA, Inc............................... 150,893 1,958 MGIC Investment Corp.................... 142,229 ------------ 405,681 ------------ SPECIALTY STORES (0.3%) 2,047 AutoZone, Inc.*......................... 76,763 5,276 Bed Bath & Beyond Inc.*................. 158,280 5,439 Office Depot, Inc.*..................... 56,457 8,341 Staples, Inc.*.......................... 133,373 2,668 Tiffany & Co............................ 96,635 3,611 Toys 'R' Us, Inc.*...................... 89,372 ------------ 610,880 ------------ SPECIALTY TELECOMMUNICATIONS (0.6%) 2,577 CenturyTel, Inc......................... 78,083 4,816 Citizens Communications Co.*............ 57,936 16,204 Global Crossing Ltd. (Bermuda)*......... 140,003 30,367 Qwest Communications International, Inc.................................... 967,796 ------------ 1,243,818 ------------ STEEL (0.1%) 1,466 Allegheny Technologies Inc.............. 26,520 1,418 Nucor Corp.............................. 69,326 1,623 USX-U.S. Steel Group.................... 32,703 1,561 Worthington Industries, Inc............. 21,230 ------------ 149,779 ------------ TELECOMMUNICATION EQUIPMENT (1.5%) 14,287 ADC Telecommunications, Inc.*........... 94,294 1,488 Andrew Corp.*........................... 27,454 3,128 Comverse Technology, Inc.*.............. 180,235 17,002 Corning Inc............................. 284,103 62,256 Lucent Technologies Inc................. 385,987 40,145 Motorola, Inc........................... 664,801 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 58,242 Nortel Networks Corp. (Canada)*......... $ 529,420 13,842 QUALCOMM Inc.*.......................... 809,480 2,977 Scientific-Atlanta, Inc................. 120,866 7,480 Tellabs, Inc.*.......................... 144,214 ------------ 3,240,854 ------------ TOBACCO (1.0%) 40,199 Philip Morris Companies, Inc............ 2,040,099 2,985 UST, Inc................................ 86,147 ------------ 2,126,246 ------------ TOOLS/HARDWARE (0.1%) 1,486 Black & Decker Corp..................... 58,638 1,052 Snap-On, Inc............................ 25,416 1,554 Stanley Works (The)..................... 65,082 ------------ 149,136 ------------ TRUCKS/CONSTRUCTION/FARM MACHINERY (0.3%) 6,275 Caterpillar, Inc........................ 314,064 747 Cummins Engine Co., Inc................. 28,909 4,291 Deere & Co.............................. 162,414 1,086 Navistar International Corp.*........... 30,549 1,399 PACCAR, Inc............................. 71,937 ------------ 607,873 ------------ WHOLESALE DISTRIBUTORS (0.1%) 3,144 Genuine Parts Co........................ 99,036 1,736 Grainger (W.W.), Inc.................... 71,454 ------------ 170,490 ------------ WIRELESS COMMUNICATIONS (0.3%) 13,984 Nextel Communications, Inc. (Class A)*............................. 244,720 17,127 Sprint Corp. (PCS Group)*............... 413,617 ------------ 658,337 ------------ TOTAL COMMON STOCKS (COST $211,530,175).................... 201,634,726 ------------
SEE NOTES TO FINANCIAL STATEMENTS 89 Morgan Stanley Variable Investment Series - S & P 500 Index PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- SHORT-TERM INVESTMENT (A) (6.4%) U.S. GOVERNMENT AGENCY $13,700 Federal National Mortgage Assoc. 3.94% due 07/02/01 (COST $13,698,501)(B).................. $ 13,698,501 ------------
TOTAL INVESTMENTS (COST $225,228,676)(B)................. 100.0% 215,333,227 LIABILITIES IN EXCESS OF OTHER ASSETS... 0.0 (26,052) ------ ------------ NET ASSETS.............................. 100.0% $215,307,175 ====== ============
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. ** SOME OF THIS SECURITY IS SEGREGATED IN CONNECTION WITH OPEN FUTURES CONTRACTS. (A) PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $23,253,572 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $33,149,021, RESULTING IN NET UNREALIZED DEPRECIATION OF $9,895,449. FUTURES CONTRACTS OPEN AT JUNE 30, 2001:
UNDERLYING NUMBER OF FACE AMOUNT CONTRACTS LONG/SHORT DESCRIPTION, DELIVERY MONTH, AND YEAR AT VALUE -------------------------------------------------------------------------------------------------------------------- 43 Long S&P 500 Index September/2001 $13,240,775 NUMBER OF UNREALIZED CONTRACTS LOSS --------------------- ------------- 43 $(615,174)
SEE NOTES TO FINANCIAL STATEMENTS 90 Morgan Stanley Variable Investment Series - Competitive Edge "Best Ideas" PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMMON AND PREFERRED STOCKS (98.7%) AUSTRALIA (3.0%) MEDIA CONGLOMERATES 220,000 News Corporation Ltd. (Pref.)........... $ 1,770,087 ----------- FINLAND (2.4%) PULP & PAPER 50,000 UPM-Kymmene Oyj......................... 1,418,741 ----------- FRANCE (10.6%) ENGINEERING & CONSTRUCTION 50,000 Suez S.A................................ 1,614,620 ----------- FOOD: MAJOR DIVERSIFIED 12,000 Groupe Danone........................... 1,653,031 ----------- MULTI-LINE INSURANCE 51,000 AXA..................................... 1,458,385 ----------- OIL REFINING/MARKETING 10,000 Total Fina Elf S.A...................... 1,405,569 ----------- TOTAL FRANCE............................ 6,131,605 ----------- GERMANY (2.7%) MOTOR VEHICLES 47,100 Bayerische Motoren Werke (BMW) AG....... 1,556,995 ----------- JAPAN (4.8%) ELECTRONIC EQUIPMENT/ INSTRUMENTS 86,900 Matsushita Electric Industrial Co., Ltd.................................... 1,359,532 ----------- ELECTRONICS/APPLIANCES 22,310 Sony Corp............................... 1,466,234 ----------- TOTAL JAPAN............................. 2,825,766 ----------- NETHERLANDS (2.5%) BEVERAGES: ALCOHOLIC 36,250 Heineken NV............................. 1,467,254 ----------- NUMBER OF SHARES VALUE ----------------------------------------------------------------- SWEDEN (1.7%) LIFE/HEALTH INSURANCE 109,100 Skandia Forsakrings AB.................. $ 1,004,789 ----------- SWITZERLAND (2.1%) PHARMACEUTICALS: MAJOR 34,500 Novartis AG (Registered Shares)......... 1,250,613 ----------- UNITED KINGDOM (5.4%) BEVERAGES: ALCOHOLIC 158,000 Diageo PLC.............................. 1,742,490 ----------- INTEGRATED OIL 28,000 BP Amoco PLC (ADR)...................... 1,395,800 ----------- TOTAL UNITED KINGDOM.................... 3,138,290 ----------- UNITED STATES (63.5%) AIR FREIGHT/COURIERS 39,000 FedEx Corp.*............................ 1,567,800 ----------- BEVERAGES: NON-ALCOHOLIC 24,500 PepsiCo, Inc............................ 1,082,900 ----------- BROADCASTING 28,500 Clear Channel Communications, Inc.*..... 1,786,950 ----------- COMPUTER COMMUNICATIONS 80,000 Cisco Systems, Inc.*.................... 1,456,000 ----------- COMPUTER PERIPHERALS 51,000 EMC Corp.*.............................. 1,481,550 ----------- DATA PROCESSING SERVICES 26,000 Automatic Data Processing, Inc.......... 1,292,200 ----------- DISCOUNT STORES 30,000 Wal-Mart Stores, Inc.................... 1,464,000 ----------- ELECTRICAL PRODUCTS 22,500 Emerson Electric Co..................... 1,361,250 ----------- FINANCIAL CONGLOMERATES 30,000 American Express Co..................... 1,164,000
SEE NOTES TO FINANCIAL STATEMENTS 91 Morgan Stanley Variable Investment Series - Competitive Edge "Best Ideas" PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 21,000 Citigroup, Inc.......................... $ 1,109,640 26,000 State Street Corp....................... 1,286,740 ----------- 3,560,380 ----------- INDUSTRIAL CONGLOMERATES 38,000 General Electric Co..................... 1,852,500 22,500 United Technologies Corp................ 1,648,350 ----------- 3,500,850 ----------- MAJOR BANKS 32,000 Bank of New York Co., Inc............... 1,536,000 ----------- MEDIA CONGLOMERATES 36,500 AOL Time Warner Inc.*................... 1,934,500 ----------- MEDICAL SPECIALTIES 33,200 Medtronic, Inc.......................... 1,527,532 ----------- OIL & GAS PIPELINES 25,500 Enron Corp.............................. 1,249,500 ----------- OILFIELD SERVICES/EQUIPMENT 35,000 Halliburton Co.......................... 1,246,000 22,400 Schlumberger Ltd........................ 1,179,360 ----------- 2,425,360 ----------- PACKAGED SOFTWARE 27,000 Microsoft Corp.*........................ 1,960,200 ----------- PHARMACEUTICALS: MAJOR 24,000 American Home Products Corp............. 1,402,560 33,000 Johnson & Johnson....................... 1,650,000 30,900 Schering-Plough Corp.................... 1,119,816 ----------- 4,172,376 ----------- RESTAURANTS 55,000 McDonald's Corp......................... 1,488,300 ----------- NUMBER OF SHARES VALUE ----------------------------------------------------------------- TELECOMMUNICATION EQUIPMENT 108,000 Lucent Technologies Inc................. $ 669,600 95,000 Motorola, Inc........................... 1,573,200 ----------- 2,242,800 ----------- TOTAL UNITED STATES..................... 37,090,448 ----------- TOTAL COMMON AND PREFERRED STOCKS (COST $69,976,266)..................... 57,654,588 ----------- PRINCIPAL AMOUNT IN THOUSANDS ---------- SHORT-TERM INVESTMENT (1.3%) REPURCHASE AGREEMENT $ 749 The Bank of New York 3.875% due 07/02/01 (dated 06/29/01; proceeds $749,373) (a) (COST $749,131)........................ 749,131 -----------
TOTAL INVESTMENTS (COST $70,725,397)(B).................. 100.0% 58,403,719 OTHER ASSETS IN EXCESS OF LIABILITIES... 0.0 2,883 ------ ----------- NET ASSETS.............................. 100.0% $58,406,602 ====== ===========
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. (A) COLLATERALIZED BY $714,260 FEDERAL HOME LOAN MORTGAGE CORP. 6.875% DUE 09/15/10 VALUED AT $764,118. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $1,548,134 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $13,869,812 RESULTING IN NET UNREALIZED DEPRECIATION OF $12,321,678. SEE NOTES TO FINANCIAL STATEMENTS 92 Morgan Stanley Variable Investment Series - Competitive Edge "Best Ideas" PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 2001: CONTRACTS IN EXCHANGE DELIVERY UNREALIZED TO DELIVER FOR DATE DEPRECIATION ----------------------------------------------------------------------------------------------------------------------- EUR 45,154 $ 38,191 07/03/01 $ (181) EUR 116,363 $ 98,414 07/05/01 (471) EUR 358,196 $302,944 07/05/01 (1,451) ------- Total unrealized depreciation................................................................. $(2,103) =======
CURRENCY ABBREVIATION: ----------------------- EUR Euro. SEE NOTES TO FINANCIAL STATEMENTS 93 Morgan Stanley Variable Investment Series - Competitive Edge "Best Ideas" SUMMARY OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
PERCENT OF INDUSTRY VALUE NET ASSETS ----------------------------------------------------------------- Air Freight/Couriers.................... $ 1,567,800 2.7% Beverages: Alcoholic.................... 3,209,744 5.5 Beverages: Non-Alcoholic................ 1,082,900 1.9 Broadcasting............................ 1,786,950 3.1 Computer Communications................. 1,456,000 2.5 Computer Peripherals.................... 1,481,550 2.5 Data Processing Services................ 1,292,200 2.2 Discount Stores......................... 1,464,000 2.5 Electrical Products..................... 1,361,250 2.3 Electronic Equipment/Instruments........ 1,359,532 2.3 Electronics/Appliances.................. 1,466,234 2.5 Engineering & Construction.............. 1,614,620 2.8 Financial Conglomerates................. 3,560,380 6.1 Food: Major Diversified................. 1,653,031 2.8 Industrial Conglomerates................ 3,500,850 6.1 Integrated Oil.......................... 1,395,800 2.4 Life/Health Insurance................... 1,004,789 1.7 Major Banks............................. 1,536,000 2.6 Media Conglomerates..................... 3,704,587 6.3 Medical Specialties..................... 1,527,532 2.6 Motor Vehicles.......................... 1,556,995 2.7 Multi-Line Insurance.................... 1,458,385 2.5 Oil & Gas Pipelines..................... 1,249,500 2.1 Oil Refining/Marketing.................. 1,405,569 2.4 Oilfield Services/Equipment............. 2,425,360 4.2 Packaged Software....................... 1,960,200 3.4 Pharmaceuticals: Major.................. 5,422,989 9.3 Pulp & Paper............................ 1,418,741 2.4 Restaurants............................. 1,488,300 2.5 Telecommunication Equipment............. 2,242,800 3.8 Repurchase Agreement.................... 749,131 1.3 ----------- -------- $58,403,719 100.0% =========== ========
PERCENT OF TYPE OF INVESTMENT VALUE NET ASSETS ----------------------------------------------------------------- Common Stocks........................... $55,884,501 95.7% Preferred Stock......................... 1,770,087 3.0 Short-Term Investment................... 749,131 1.3 ----------- -------- $58,403,719 100.0% =========== ========
SEE NOTES TO FINANCIAL STATEMENTS 94 Morgan Stanley Variable Investment Series - Aggressive Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMMON STOCKS (94.3%) ADVERTISING/MARKETING SERVICES (1.5%) 13,900 Lamar Advertising Co.*.................. $ 611,600 8,900 Omnicom Group, Inc...................... 765,400 4,200 TMP Worldwide, Inc.*.................... 248,262 ------------ 1,625,262 ------------ AEROSPACE & DEFENSE (0.3%) 4,400 General Dynamics Corp................... 342,364 ------------ ALUMINUM (1.5%) 13,100 Alcan Inc. (Canada)..................... 550,462 27,310 Alcoa, Inc.............................. 1,076,014 ------------ 1,626,476 ------------ APPAREL/FOOTWEAR (0.6%) 15,900 Coach, Inc.*............................ 604,995 2,200 Polo Ralph Lauren Corp.*................ 56,760 ------------ 661,755 ------------ APPAREL/FOOTWEAR RETAIL (2.1%) 31,700 Abercrombie & Fitch Co. (Class A)*...... 1,410,650 15,800 AnnTaylor Stores Corp.*................. 565,640 7,100 Children's Place Retail Stores, Inc. (The)*................................. 190,280 4,200 Gap, Inc. (The)......................... 121,800 ------------ 2,288,370 ------------ BEVERAGES: ALCOHOLIC (0.9%) 16,660 Anheuser-Busch Companies, Inc........... 686,392 7,700 Constellation Brands Inc. (Class A)*.... 315,700 ------------ 1,002,092 ------------ BIOTECHNOLOGY (6.3%) 14,900 Abgenix, Inc.*.......................... 670,500 6,700 Alkermes, Inc.*......................... 235,170 6,700 Amgen Inc.*............................. 406,556 5,000 Cephalon, Inc.*......................... 352,500 4,300 CV Therapeutics, Inc.*.................. 245,100 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 6,600 Enzon, Inc.*............................ $ 412,500 21,600 Genzyme Corp. (General Division)*....... 1,317,600 20,600 Gilead Sciences, Inc.*.................. 1,198,714 3,600 ICOS Corp.*............................. 230,400 19,290 IDEC Pharmaceuticals Corp.*............. 1,305,740 300 MedImmune, Inc.*........................ 14,160 5,300 Myriad Genetics, Inc.*.................. 335,595 4,600 Vertex Pharmaceuticals, Inc.*........... 227,700 ------------ 6,952,235 ------------ BROADCASTING (2.5%) 16,100 Clear Channel Communications, Inc.*..... 1,009,470 5,500 Entercom Communications Corp.*.......... 294,855 18,300 Univision Communications, Inc. (Class A)*............................. 782,874 13,100 USA Networks, Inc.*..................... 369,289 6,800 Westwood One, Inc.*..................... 250,580 ------------ 2,707,068 ------------ CABLE/SATELLITE TV (3.0%) 8,600 Adelphia Communications Corp. (Class A)*............................. 352,600 36,900 Charter Communications, Inc. (Class A)*............................. 861,615 28,200 Comcast Corp. (Class A Special)*........ 1,223,880 19,370 Cox Communications, Inc. (Class A)*..... 858,091 ------------ 3,296,186 ------------ CHEMICALS: SPECIALTY (0.2%) 5,600 Sigma-Aldrich Corp...................... 216,272 ------------ COMPUTER COMMUNICATIONS (1.2%) 18,200 Brocade Communications Systems, Inc.*... 800,618 29,300 Cisco Systems, Inc.*.................... 533,260 ------------ 1,333,878 ------------
SEE NOTES TO FINANCIAL STATEMENTS 95 Morgan Stanley Variable Investment Series - Aggressive Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMPUTER PROCESSING HARDWARE (2.1%) 14,200 International Business Machines Corp.... $ 1,604,600 43,900 Sun Microsystems, Inc.*................. 690,108 ------------ 2,294,708 ------------ CONTRACT DRILLING (0.5%) 15,050 ENSCO International Inc................. 352,170 8,900 Pride International, Inc.*.............. 169,100 ------------ 521,270 ------------ DATA PROCESSING SERVICES (1.2%) 8,500 Bisys Group, Inc. (The)*................ 501,500 12,600 First Data Corp......................... 809,550 ------------ 1,311,050 ------------ DISCOUNT STORES (0.9%) 10,100 BJ's Wholesale Club, Inc.*.............. 537,926 21,900 Kmart Corp.*............................ 251,193 4,500 Target Corp............................. 155,700 ------------ 944,819 ------------ ELECTRIC UTILITIES (1.3%) 12,800 Constellation Energy Group, Inc......... 545,280 8,080 Duke Energy Corp........................ 315,201 9,140 Exelon Corp............................. 586,057 ------------ 1,446,538 ------------ ELECTRONIC PRODUCTION EQUIPMENT (2.4%) 5,700 Amkor Technology, Inc.*................. 125,970 21,850 KLA-Tencor Corp.*....................... 1,277,569 21,210 Novellus Systems, Inc.*................. 1,204,516 ------------ 2,608,055 ------------ ELECTRONICS/APPLIANCE STORES (0.5%) 8,500 Best Buy Co., Inc.*..................... 539,920 ------------ ELECTRONICS/ APPLIANCES (0.4%) 7,200 Sony Corp. (ADR) (Japan)................ 473,760 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- ENGINEERING & CONSTRUCTION (0.4%) 4,300 Fluor Corp.............................. $ 194,145 3,100 Jacobs Engineering Group, Inc.*......... 202,213 ------------ 396,358 ------------ ENVIRONMENTAL SERVICES (1.2%) 24,300 Allied Waste Industries, Inc.*.......... 453,924 29,500 Waste Management, Inc................... 909,190 ------------ 1,363,114 ------------ FINANCE/RENTAL/ LEASING (4.4%) 24,330 Fannie Mae.............................. 2,071,699 25,370 Freddie Mac............................. 1,775,900 4,500 Household International, Inc............ 300,150 6,900 MBNA Corp............................... 227,355 5,800 USA Education Inc....................... 423,400 ------------ 4,798,504 ------------ FINANCIAL CONGLOMERATES (1.2%) 24,093 Citigroup, Inc.......................... 1,273,074 ------------ FINANCIAL PUBLISHING/ SERVICES (0.7%) 9,600 Moody's Corp............................ 321,600 15,000 SunGard Data Systems Inc.*.............. 450,150 ------------ 771,750 ------------ FOOD: MAJOR DIVERSIFIED (0.3%) 6,100 Unilever N.V. (Netherlands)............. 363,377 ------------ FOOD: MEAT/FISH/DAIRY (0.2%) 7,500 Dreyer's Grand Ice Cream, Inc........... 209,250 ------------ FOOD: SPECIALTY/CANDY (0.2%) 3,600 Hershey Foods Corp...................... 222,156 ------------ HOME IMPROVEMENT CHAINS (0.8%) 12,400 Lowe's Companies, Inc................... 899,620 ------------
SEE NOTES TO FINANCIAL STATEMENTS 96 Morgan Stanley Variable Investment Series - Aggressive Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- HOSPITAL/NURSING MANAGEMENT (3.4%) 22,700 Beverly Enterprises, Inc.*.............. $ 242,890 25,000 HCA-The Healthcare Corp................. 1,129,750 28,400 Health Management Associates, Inc. (Class A)*............................. 597,536 6,800 Manor Care, Inc.*....................... 215,900 5,300 Province Healthcare Co.*................ 187,037 21,600 Tenet Healthcare Corp.*................. 1,114,344 7,500 Triad Hospitals, Inc.*.................. 221,025 ------------ 3,708,482 ------------ HOUSEHOLD/PERSONAL CARE (0.1%) 2,300 Procter & Gamble Co. (The).............. 146,740 ------------ INDUSTRIAL CONGLOMERATES (0.2%) 2,900 United Technologies Corp................ 212,454 ------------ INFORMATION TECHNOLOGY SERVICES (1.4%) 4,500 Electronic Data Systems Corp............ 281,250 25,960 PeopleSoft, Inc.*....................... 1,278,011 ------------ 1,559,261 ------------ INSURANCE BROKERS/ SERVICES (0.1%) 5,900 Willis Group Holdings Ltd.*............. 104,725 ------------ INTERNET SOFTWARE/ SERVICES (1.8%) 1,100 RealNetworks, Inc.*..................... 12,925 21,800 Siebel Systems, Inc.*................... 1,022,420 13,100 VeriSign, Inc.*......................... 786,131 21,600 Vignette Corp.*......................... 191,592 ------------ 2,013,068 ------------ INVESTMENT BANKS/ BROKERS (1.0%) 14,420 Lehman Brothers Holdings, Inc........... 1,121,155 ------------ INVESTMENT MANAGERS (0.4%) 12,500 Federated Investors, Inc. (Class B)..... 402,500 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- LIFE/HEALTH INSURANCE (0.3%) 11,240 AFLAC, Inc.............................. $ 353,948 ------------ MAJOR BANKS (2.9%) 19,000 Bank of America Corp.................... 1,140,570 20,700 Bank of New York Co., Inc............... 993,600 5,700 Bank One Corp........................... 204,060 13,100 BB&T Corp............................... 480,770 5,700 PNC Financial Services Group, Inc....... 375,003 ------------ 3,194,003 ------------ MEDIA CONGLOMERATES (2.4%) 49,200 AOL Time Warner Inc.*................... 2,607,600 ------------ MEDICAL DISTRIBUTORS (2.0%) 9,800 AmeriSource Health Corp. (Class A)*..... 541,940 8,400 Andrx Group *........................... 646,800 9,450 Cardinal Health, Inc.................... 652,050 10,600 McKesson HBOC, Inc...................... 393,472 ------------ 2,234,262 ------------ MEDICAL SPECIALTIES (2.1%) 31,480 Baxter International, Inc............... 1,542,520 12,600 Biomet, Inc............................. 605,556 3,000 Varian Medical Systems, Inc.*........... 214,500 ------------ 2,362,576 ------------ MEDICAL/NURSING SERVICES (0.6%) 10,200 Lincare Holdings, Inc.*................. 306,102 10,300 Renal Care Group, Inc.*................. 338,767 ------------ 644,869 ------------ METAL FABRICATIONS (0.1%) 3,500 Shaw Group Inc. (The)*.................. 140,350 ------------ MOTOR VEHICLES (0.3%) 4,500 General Motors Corp..................... 289,575 ------------ MOVIES/ENTERTAINMENT (0.4%) 16,100 Fox Entertainment Group, Inc. (Class A)*............................. 449,190 ------------ OILFIELD SERVICES/ EQUIPMENT (2.0%) 18,500 BJ Services Co.*........................ 525,030
SEE NOTES TO FINANCIAL STATEMENTS 97 Morgan Stanley Variable Investment Series - Aggressive Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 13,200 Grant Prideco, Inc.*.................... $ 230,868 6,100 Hanover Compressor Co.*................. 201,849 11,000 Oceaneering International, Inc.*........ 228,250 2,800 Smith International, Inc.*.............. 167,720 17,500 Weatherford International, Inc.*........ 840,000 ------------ 2,193,717 ------------ OTHER CONSUMER SERVICES (1.9%) 24,400 Cendant Corp.*.......................... 475,800 15,800 eBay, Inc.*............................. 1,082,142 6,700 Expedia, Inc. (Class A)*................ 312,220 6,500 Travelocity.com Inc.*................... 199,550 ------------ 2,069,712 ------------ PACKAGED SOFTWARE (5.8%) 51,200 Microsoft Corp.*........................ 3,717,120 51,000 Oracle Corp.*........................... 969,000 6,100 QLogic Corp.*........................... 393,145 8,900 Rational Software Corp.*................ 249,645 22,600 SAP AG (ADR) (Germany).................. 793,034 3,400 VERITAS Software Corp.*................. 226,202 ------------ 6,348,146 ------------ PHARMACEUTICALS: GENERIC DRUGS (0.4%) 11,600 IVAX Corp.*............................. 452,400 ------------ PHARMACEUTICALS: MAJOR (2.7%) 8,490 Abbott Laboratories..................... 407,605 21,610 American Home Products Corp............. 1,262,888 5,100 Bristol-Myers Squibb Co................. 266,730 10,200 Johnson & Johnson....................... 510,000 13,790 Pfizer, Inc............................. 552,290 ------------ 2,999,513 ------------ PHARMACEUTICALS: OTHER (2.3%) 7,600 Aviron*................................. 433,200 9,320 Forest Laboratories, Inc.*.............. 661,720 20,400 King Pharmaceuticals, Inc.*............. 1,096,500 NUMBER OF SHARES VALUE ----------------------------------------------------------------- 5,400 Teva Pharmaceutical Industries Ltd. (ADR) (Israel)......................... $ 336,420 ------------ 2,527,840 ------------ PROPERTY - CASUALTY INSURERS (4.7%) 13,500 ACE, Ltd. (Bermuda)..................... 527,715 35,800 Allstate Corp. (The) (Note 4)........... 1,574,842 13,500 Everest Re Group, Ltd. (Bermuda)........ 1,009,800 10,500 PartnerRe Ltd. (Bermuda)................ 581,700 5,400 Progressive Corp. (The)................. 730,026 13,900 St. Paul Companies, Inc................. 704,591 ------------ 5,128,674 ------------ RAILROADS (0.8%) 11,700 CSX Corp................................ 424,008 20,000 Norfolk Southern Corp................... 414,000 ------------ 838,008 ------------ RECREATIONAL PRODUCTS (1.7%) 6,500 Activision, Inc.*....................... 255,125 14,100 Electronic Arts Inc.*................... 816,390 27,800 Mattel, Inc.*........................... 525,976 4,500 THQ, Inc.*.............................. 268,335 ------------ 1,865,826 ------------ REGIONAL BANKS (1.3%) 24,200 Fifth Third Bancorp..................... 1,453,210 ------------ RESTAURANTS (0.8%) 8,000 Darden Restaurants, Inc................. 223,200 15,100 McDonald's Corp......................... 408,606 8,400 Outback Steakhouse, Inc.*............... 241,920 ------------ 873,726 ------------ SAVINGS BANKS (0.5%) 8,300 Golden West Financial Corp.............. 533,192 ------------ SEMICONDUCTORS (4.4%) 13,800 Advanced Micro Devices, Inc.*........... 398,544 800 Infineon Technologies AG (ADR) (Germany).............................. 18,760 41,800 Intel Corp.............................. 1,222,650 10,100 Intersil Holding Corp. (Class A)*....... 367,640
SEE NOTES TO FINANCIAL STATEMENTS 98 Morgan Stanley Variable Investment Series - Aggressive Equity PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- 23,500 Linear Technology Corp.................. $ 1,039,170 16,300 Marvell Technology Group Ltd. (Bermuda)*............................. 438,470 26,400 Micron Technology, Inc.*................ 1,085,040 3,300 STMicroelectronics NV (Switzerland)..... 112,200 4,800 Texas Instruments, Inc.................. 151,200 ------------ 4,833,674 ------------ SERVICES TO THE HEALTH INDUSTRY (1.7%) 7,800 AdvancePCS*............................. 499,590 14,800 Laboratory Corp. of America Holdings*... 1,138,120 3,500 Quest Diagnostics Inc.*................. 261,975 ------------ 1,899,685 ------------ SPECIALTY INSURANCE (1.7%) 3,000 MGIC Investment Corp.................... 217,920 9,600 PMI Group, Inc. (The)................... 697,536 12,300 XL Capital Ltd. (Class A) (Bermuda)..... 1,009,830 ------------ 1,925,286 ------------ SPECIALTY STORES (1.7%) 18,400 Barnes & Noble, Inc.*................... 724,040 3,400 Bed Bath & Beyond Inc.*................. 102,000 40,400 Toys 'R' Us, Inc.*...................... 999,900 ------------ 1,825,940 ------------ STEEL (0.3%) 6,800 Nucor Corp.............................. 332,452 ------------ TELECOMMUNICATION EQUIPMENT (0.8%) 3,300 Comverse Technology, Inc.*.............. 190,146 7,698 Nokia Corp. (ADR) (Finland)............. 169,664 13,600 RF Micro Devices, Inc.*................. 364,480 4,700 Scientific-Atlanta, Inc................. 190,820 ------------ 915,110 ------------ TOBACCO (0.6%) 12,100 Philip Morris Companies, Inc............ 614,075 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- TOOLS/HARDWARE (0.2%) 5,400 Stanley Works (The)..................... $ 226,152 ------------ TOTAL COMMON STOCKS (COST $98,987,132)..................... 103,890,377 ------------ PRINCIPAL AMOUNT IN THOUSANDS --------- U.S. GOVERNMENT OBLIGATION (2.0%) $2,180 U.S. Treasury Bond 6.125% due 11/15/27 (COST $2,259,607)...................... 2,246,883 ------------ SHORT-TERM INVESTMENT (5.0%) REPURCHASE AGREEMENT 5,472 The Bank of New York 3.875% due 07/02/01 (dated 06/29/01; proceeds $5,474,065)(a) (COST $5,472,298)...................... 5,472,298 ------------
TOTAL INVESTMENTS (COST $106,719,037)(B)................. 101.3% 111,609,558 LIABILITIES IN EXCESS OF OTHER ASSETS... (1.3) (1,406,162) ------ ------------ NET ASSETS.............................. 100.0% $110,203,396 ====== ============
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. (A) COLLATERALIZED BY $5,217,575 FEDERAL HOME LOAN MORTGAGE CORP. 6.875% DUE 09/15/10 VALUED AT $5,581,777. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $8,081,374 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $3,190,853, RESULTING IN NET UNREALIZED APPRECIATION OF $4,890,521. SEE NOTES TO FINANCIAL STATEMENTS 99 Morgan Stanley Variable Investment Series - Information PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ---------------------------------------------------------------- COMMON STOCKS (66.3%) AEROSPACE & DEFENSE (3.6%) 2,100 General Dynamics Corp................... $ 163,401 1,500 Goodrich Corp........................... 56,970 1,700 Northrop Grumman Corp................... 136,170 ----------- 356,541 ----------- BROADCASTING (0.9%) 2,100 Univision Communications, Inc. (Class A)*............................. 89,838 ----------- CABLE/SATELLITE TV (8.3%) 3,900 Adelphia Communications Corp. (Class A)*............................. 159,900 6,400 Charter Communications, Inc. (Class A)*............................. 149,440 6,400 Comcast Corp. (Class A Special)*........ 277,760 5,600 Cox Communications, Inc. (Class A)*..... 248,080 ----------- 835,180 ----------- COMPUTER COMMUNICATIONS (2.8%) 3,200 3Com Corp.*............................. 15,200 900 Brocade Communications Systems, Inc.*... 39,591 4,300 Cisco Systems, Inc.*.................... 78,260 400 Emulex Corp.*........................... 16,160 900 Extreme Networks, Inc.*................. 26,550 1,100 Finisar Corp.*.......................... 20,548 900 Foundry Networks, Inc.*................. 17,982 1,100 Juniper Networks, Inc.*................. 34,210 600 McDATA Corp. (Class A)*................. 10,530 1,100 McDATA Corp. (Class B)*................. 24,024 ----------- 283,055 ----------- COMPUTER PERIPHERALS (0.7%) 1,300 EMC Corp.*.............................. 37,765 2,100 Network Appliance, Inc.*................ 28,770 ----------- 66,535 ----------- NUMBER OF SHARES VALUE ---------------------------------------------------------------- COMPUTER PROCESSING HARDWARE (4.7%) 2,100 Compaq Computer Corp.................... $ 32,529 3,900 Dell Computer Corp.*.................... 101,205 1,700 International Business Machines Corp.... 192,100 1,700 NCR Corp.*.............................. 79,900 4,300 Sun Microsystems, Inc.*................. 67,596 ----------- 473,330 ----------- DATA PROCESSING SERVICES (0.4%) 600 Affiliated Computer Services, Inc. (Class A)*............................. 43,146 ----------- ELECTRONIC COMPONENTS (1.9%) 1,700 Anaren Microwave Inc.*.................. 34,000 400 Cree Research, Inc.*.................... 10,458 1,700 Flextronics International, Ltd. (Singapore)*........................... 44,387 600 NVIDIA Corp.*........................... 55,650 3,700 Read-Rite Corp.*........................ 19,425 1,300 Sanmina Corp.*.......................... 30,433 ----------- 194,353 ----------- ELECTRONIC DISTRIBUTORS (0.4%) 1,000 CDW Computer Centers, Inc.*............. 39,710 ----------- ELECTRONIC EQUIPMENT/ INSTRUMENTS (1.7%) 3,400 JDS Uniphase Corp.*..................... 43,350 1,700 Newport Corp............................ 45,050 1,800 PerkinElmer, Inc........................ 49,554 1,100 Tektronix, Inc.*........................ 29,865 ----------- 167,819 ----------- ELECTRONIC PRODUCTION EQUIPMENT (2.9%) 2,100 Applied Materials, Inc.*................ 103,110 1,500 ASM Lithography Holding NV (Netherlands)*......................... 33,375 400 AXT, Inc.*.............................. 10,680 900 Lam Research Corp.*..................... 26,685
SEE NOTES TO FINANCIAL STATEMENTS 100 Morgan Stanley Variable Investment Series - Information PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ---------------------------------------------------------------- 1,100 Novellus Systems, Inc.*................. $ 62,469 1,300 Veeco Instruments, Inc.*................ 51,675 ----------- 287,994 ----------- FINANCIAL PUBLISHING/ SERVICES (1.9%) 6,400 SunGard Data Systems Inc.*.............. 192,064 ----------- INDUSTRIAL CONGLOMERATES (2.7%) 3,700 United Technologies Corp................ 271,062 ----------- INFORMATION TECHNOLOGY SERVICES (0.2%) 400 PeopleSoft, Inc.*....................... 19,692 ----------- INTERNET SOFTWARE/ SERVICES (3.7%) 600 Agile Software Co.*..................... 10,200 2,100 Art Technology Group, Inc.*............. 12,180 1,700 BEA Systems, Inc.*...................... 52,207 1,000 Business Objects S.A. (ADR) (France)*... 23,600 1,100 Check Point Software Technologies Ltd. (Israel)*.............................. 55,627 1,300 KPMG Consulting, Inc.*.................. 19,955 2,600 Openwave Systems Inc.*.................. 90,220 900 Siebel Systems, Inc.*................... 42,210 1,100 VeriSign, Inc.*......................... 66,011 ----------- 372,210 ----------- MAJOR TELECOMMUNICATIONS (2.5%) 3,400 SBC Communications, Inc................. 136,204 2,100 Verizon Communications Inc.............. 112,350 ----------- 248,554 ----------- MANAGED HEALTH CARE (0.1%) 300 Rightchoice Managed Care, Inc.*......... 13,320 ----------- MEDIA CONGLOMERATES (1.9%) 2,600 AOL Time Warner Inc.*................... 137,800 1,700 Disney (Walt) Co. (The)................. 49,113 ----------- 186,913 ----------- NUMBER OF SHARES VALUE ---------------------------------------------------------------- OILFIELD SERVICES/ EQUIPMENT (3.1%) 2,400 Baker Hughes Inc........................ $ 80,400 3,000 Schlumberger Ltd........................ 157,950 2,600 Veritas DGC Inc.*....................... 72,150 ----------- 310,500 ----------- PACKAGED SOFTWARE (3.7%) 600 E.piphany, Inc.*........................ 6,096 400 i2 Technologies, Inc.*.................. 7,920 499 IONA Technologies PLC (ADR) (Ireland)*............................. 19,211 1,700 Mercury Interactive Corp.*.............. 101,830 1,700 Micromuse Inc.*......................... 47,583 250 Microsoft Corp.*........................ 18,150 1,100 Oracle Corp.*........................... 20,900 1,100 QLogic Corp.*........................... 70,895 1,000 TIBCO Software, Inc.*................... 12,770 900 VERITAS Software Corp.*................. 59,877 ----------- 365,232 ----------- PHARMACEUTICALS: MAJOR (1.4%) 900 Merck & Co., Inc........................ 57,519 2,100 Pfizer, Inc............................. 84,105 ----------- 141,624 ----------- SEMICONDUCTORS (9.4%) 4,300 Advanced Micro Devices, Inc.*........... 124,184 6,700 Agere Systems, Inc. (Class A)*.......... 50,250 1,700 Analog Devices, Inc.*................... 73,525 3,200 Applied Micro Circuits Corp.*........... 55,040 1,700 Broadcom Corp. (Class A)*............... 72,692 1,100 Exar Corp.*............................. 21,736 3,200 Intel Corp.............................. 93,600 1,100 Linear Technology Corp.................. 48,642 900 Marvell Technology Group Ltd. (Bermuda)*............................. 24,210 1,300 Maxim Integrated Products, Inc.*........ 57,473 1,700 Micron Technology, Inc.*................ 69,870 1,300 PMC - Sierra, Inc.*..................... 40,391 3,200 Texas Instruments, Inc.................. 100,800
SEE NOTES TO FINANCIAL STATEMENTS 101 Morgan Stanley Variable Investment Series - Information PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ---------------------------------------------------------------- 400 TranSwitch Corp.*....................... $ 4,300 2,600 Vitesse Semiconductor Corp.*............ 54,704 1,300 Xilinx, Inc.*........................... 53,612 ----------- 945,029 ----------- SPECIALTY TELECOMMUNICATIONS (1.4%) 4,300 Qwest Communications International, Inc.................................... 137,041 ----------- TELECOMMUNICATION EQUIPMENT (4.7%) 1,100 CIENA Corp.*............................ 41,800 1,700 Comverse Technology, Inc.*.............. 97,954 550 Corning Inc............................. 9,191 100 Corvis Corp.*........................... 439 4,300 Lucent Technologies Inc................. 26,660 2,100 Motorola, Inc........................... 34,776 900 New Focus, Inc.*........................ 7,425 4,300 Nokia Corp. (ADR) (Finland)............. 94,772 3,200 Nortel Networks Corp. (Canada)*......... 29,088 400 ONI Systems Corp.*...................... 11,160 2,100 Research In Motion Ltd. (Canada)*....... 67,725 1,300 Scientific-Atlanta, Inc................. 52,780 ----------- 473,770 ----------- WIRELESS COMMUNICATIONS (1.3%) 1,700 Nextel Communications, Inc. (Class A)*............................. 29,750 4,300 Vodafone Group PLC (ADR) (United Kingdom)............................... 96,105 ----------- 125,855 ----------- TOTAL COMMON STOCKS (COST $7,958,126)...................... 6,640,367 ----------- PRINCIPAL AMOUNT IN THOUSANDS VALUE ---------------------------------------------------------------- CONVERTIBLE BONDS (7.5%) COMPUTER COMMUNICATIONS (0.8%) $ 85 Juniper Networks, Inc. 4.75% 03/15/07......................... $ 59,704 35 Redback Networks, Inc. 5.00% 04/01/07......................... 20,956 ----------- 80,660 ----------- ELECTRONIC COMPONENTS (1.2%) 100 NVIDIA Corp. 4.75% 10/15/07......................... 123,004 ----------- ELECTRONIC PRODUCTION EQUIPMENT (0.8%) 180 Celestica, Inc. (Canada) 0.00% 08/01/20......................... 79,987 ----------- PACKAGED SOFTWARE (2.6%) 165 i2 Technologies, Inc. 5.25% 12/15/06......................... 145,522 125 Mercury Interactive Corp. 4.75% 07/01/07......................... 109,219 ----------- 254,741 ----------- SEMICONDUCTORS (1.6%) 55 Analog Devices, Inc. 4.75% 10/01/05......................... 50,520 120 TranSwitch Corp. 4.50% 09/12/05......................... 84,514 33 Vitesse Semiconductor Corp. 4.00% 03/15/05......................... 26,876 ----------- 161,910 ----------- TELECOMMUNICATION EQUIPMENT (0.5%) 65 ONI Systems Corp. 5.00% 10/15/05......................... 50,456 ----------- TOTAL CONVERTIBLE BONDS (COST $712,329)........................ 750,758 -----------
SEE NOTES TO FINANCIAL STATEMENTS 102 Morgan Stanley Variable Investment Series - Information PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ---------------------------------------------------------------- SHORT-TERM INVESTMENT (A) (25.0%) U.S. GOVERNMENT AGENCY $2,500 Federal National Mortgage Assoc. 3.94% due 07/02/01 (COST $2,499,726)...................... $ 2,499,726 -----------
TOTAL INVESTMENTS (COST $11,170,181)(B).................. 98.8% 9,890,851 OTHER ASSETS IN EXCESS OF LIABILITIES... 1.2 119,337 ------ ----------- NET ASSETS.............................. 100.0% $10,010,188 ====== ===========
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. (A) PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $218,052 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $1,497,382, RESULTING IN NET UNREALIZED DEPRECIATION OF $1,279,330. SEE NOTES TO FINANCIAL STATEMENTS 103 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED)
NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMMON STOCKS (52.8%) AEROSPACE & DEFENSE (0.9%) 83,000 Lockheed Martin Corp.................... $ 3,075,150 89,000 Raytheon Co............................. 2,362,950 ------------ 5,438,100 ------------ AIRLINES (2.0%) 150,000 AMR Corp.*.............................. 5,419,500 150,000 Continental Airlines, Inc. (Class B)*............................. 7,387,500 ------------ 12,807,000 ------------ APPAREL/FOOTWEAR RETAIL (1.9%) 302,825 Gap, Inc. (The)......................... 8,781,925 50,000 Payless ShoeSource, Inc.*............... 3,235,000 ------------ 12,016,925 ------------ AUTOMOTIVE AFTERMARKET (0.4%) 100,000 Goodyear Tire & Rubber Co. (The)........ 2,800,000 ------------ BEVERAGES: NON-ALCOHOLIC (0.2%) 34,000 PepsiCo, Inc............................ 1,502,800 ------------ BIOTECHNOLOGY (1.9%) 79,400 Applera Corp. - Celera Genomics Group*................................. 3,149,004 72,000 COR Therapeutics, Inc.*................. 2,196,000 111,300 Enzon, Inc.*............................ 6,956,250 ------------ 12,301,254 ------------ CABLE/SATELLITE TV (1.0%) 77,900 Adelphia Communications Corp. (Class A)*............................. 3,193,900 68,000 Comcast Corp. (Class A Special)*........ 2,951,200 ------------ 6,145,100 ------------ CHEMICALS: MAJOR DIVERSIFIED (1.0%) 200,800 Dow Chemical Co......................... 6,676,600 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- COMPUTER PROCESSING HARDWARE (1.2%) 153,000 Compaq Computer Corp.................... $ 2,369,970 352,400 Sun Microsystems, Inc.*................. 5,539,728 ------------ 7,909,698 ------------ DEPARTMENT STORES (0.4%) 341,000 Sacks, Inc.*............................ 3,273,600 ------------ DISCOUNT STORES (1.1%) 169,000 Costco Wholesale Corp.*................. 6,942,520 ------------ ELECTRIC UTILITIES (0.9%) 100,000 Dominion Resources, Inc................. 6,013,000 ------------ ELECTRONIC PRODUCTION EQUIPMENT (0.4%) 20,000 Novellus Systems, Inc.*................. 1,135,800 35,000 Teradyne, Inc.*......................... 1,158,500 ------------ 2,294,300 ------------ ENVIRONMENTAL SERVICES (2.9%) 300,000 Allied Waste Industries, Inc.*.......... 5,604,000 100,000 Waste Connections, Inc.*................ 3,600,000 300,000 Waste Management, Inc................... 9,246,000 ------------ 18,450,000 ------------ FINANCIAL CONGLOMERATES (1.5%) 173,000 Hancock (John) Financial Services , Inc.................................. 6,964,980 55,000 J.P. Morgan Chase & Co.................. 2,453,000 ------------ 9,417,980 ------------ FOOD: MAJOR DIVERSIFIED (3.1%) 158,800 General Mills, Inc...................... 6,952,264 385,000 Kellogg Co.............................. 11,165,000 50,000 Kraft Foods Inc. (Class A)*............. 1,550,000 ------------ 19,667,264 ------------ FOOD: MEAT/FISH/ DAIRY (0.2%) 25,000 Dean Foods Co........................... 1,005,000 ------------
SEE NOTES TO FINANCIAL STATEMENTS 104 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
NUMBER OF SHARES VALUE ----------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (1.4%) 177,600 General Electric Co..................... $ 8,658,000 ------------ INTEGRATED OIL (1.8%) 200,000 Phillips Petroleum Co................... 11,400,000 ------------ INTERNET SOFTWARE/ SERVICES (0.3%) 35,000 Siebel Systems, Inc.*................... 1,641,500 ------------ INVESTMENT BANKS/ BROKERS (1.6%) 167,600 Merrill Lynch & Co., Inc................ 9,930,300 ------------ MAJOR BANKS (2.6%) 197,500 Mellon Financial Corp................... 9,085,000 159,700 Wells Fargo & Co........................ 7,414,871 ------------ 16,499,871 ------------ MANAGED HEALTH CARE (1.8%) 220,000 Oxford Health Plans, Inc.*.............. 6,292,000 86,000 UnitedHealth Group Inc.................. 5,310,500 ------------ 11,602,500 ------------ MEDIA CONGLOMERATES (1.1%) 135,800 AOL Time Warner Inc.*................... 7,197,400 ------------ MEDICAL SPECIALTIES (0.9%) 120,000 Baxter International, Inc............... 5,880,000 ------------ MULTI-LINE INSURANCE (1.4%) 105,000 American International Group, Inc....... 9,030,000 ------------ OIL & GAS PRODUCTION (1.2%) 114,000 Kerr-McGee Corp......................... 7,554,780 ------------ OILFIELD SERVICES/ EQUIPMENT (1.4%) 11,500 Schlumberger Ltd........................ 605,475 136,000 Smith International, Inc.*.............. 8,146,400 ------------ 8,751,875 ------------ PACKAGED SOFTWARE (0.9%) 78,500 Microsoft Corp.*........................ 5,699,100 ------------ NUMBER OF SHARES VALUE ----------------------------------------------------------------- PHARMACEUTICALS: MAJOR (4.7%) 90,000 American Home Products Corp............. $ 5,259,600 242,874 Johnson & Johnson....................... 12,143,700 315,200 Pfizer, Inc............................. 12,623,760 ------------ 30,027,060 ------------ PRECIOUS METALS (1.5%) 251,000 Barrick Gold Corp. (Canada)............. 3,802,650 150,000 Newmont Mining Corp..................... 2,791,500 293,000 Placer Dome Inc. (Canada)............... 2,871,400 ------------ 9,465,550 ------------ PROPERTY - CASUALTY INSURERS (2.1%) 124,000 ACE, Ltd. (Bermuda)..................... 4,847,160 200,000 Allstate Corp. (The).................... 8,798,000 ------------ 13,645,160 ------------ REGIONAL BANKS (0.4%) 64,000 Union Planters Corp..................... 2,790,400 ------------ SAVINGS BANKS (2.1%) 203,700 Golden West Financial Corp.............. 13,085,688 ------------ SEMICONDUCTORS (1.6%) 450,000 Agere Systems, Inc. (Class A)*.......... 3,375,000 173,000 Micron Technology, Inc.................. 7,110,300 ------------ 10,485,300 ------------ SPECIALTY STORES (2.1%) 439,600 Bed Bath & Beyond Inc.*................. 13,188,000 ------------ TELECOMMUNICATION EQUIPMENT (0.9%) 52,000 Nokia Corp. (ADR) (Finland)............. 1,146,080 110,000 ONI Systems Corp.*...................... 3,069,000 30,000 Sonus Networks Inc.*.................... 700,800 60,000 Sycamore Networks, Inc.*................ 559,200 ------------ 5,475,080 ------------ TOTAL COMMON STOCKS (COST $251,045,816).................... 336,668,705 ------------
SEE NOTES TO FINANCIAL STATEMENTS 105 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- U.S. GOVERNMENT & AGENCY OBLIGATIONS (14.6%) $ 4,000 Federal Home Loan Mortgage Corp. 5.125% due 10/15/08.................... $ 3,809,400 9,293 Federal Home Loan Mortgage Corp. 7.00% due 05/01/31..................... 9,382,720 2,000 Federal Home Loan Mortgage Corp. 7.125% due 02/15/05.................... 2,119,380 2,000 Federal Home Loan Mortgage Corp. 7.375% due 05/15/03.................... 2,098,680 11,890 Federal Home Loan Mortgage Corp. 8.00% due 01/01/30..................... 12,283,818 4,000 Federal National Mortgage Assoc. 5.625% due 05/14/04.................... 4,064,000 9,492 Federal National Mortgage Assoc. 6.50% due 05/01/31..................... 9,334,492 3,950 Federal National Mortgage Assoc. 6.625% due 11/15/10.................... 4,077,230 18,511 Federal National Mortgage Assoc. 7.00% due 05/01/31..................... 18,580,824 2,000 Federal National Mortgage Assoc. 7.25% due 05/15/30..................... 1,620,630 5,316 Federal National Mortgage Assoc. 7.50% due 01/01/30..................... 5,419,009 3,345 Federal National Mortgage Assoc. 7.50% due 01/01/31..................... 3,409,746 4,800 Federal National Mortgage Assoc. 8.00% due 07/01/31..................... 4,956,000 PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 4,200 U.S. Treasury Bond 6.25% due 08/15/23..................... $ 4,372,578 5,745 U.S. Treasury Bond 8.75% due 08/15/20..................... 7,611,033 ------------ TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $92,769,930)..................... 93,139,540 ------------ CORPORATE BONDS (14.2%) AEROSPACE & DEFENSE (0.8%) 1,000 Boeing Capital Corp. 6.35% due 11/15/07..................... 1,010,650 1,000 Raytheon Co. 6.15% due 11/01/08..................... 919,530 1,000 Raytheon Co. 6.45% due 08/15/02..................... 1,001,940 1,395 Systems 2001 Assets Trust 6.664% due 09/15/13.................... 1,415,646 155 United Technologies Corp. 6.70% due 08/01/28..................... 147,692 ------------ 4,495,458 ------------ AIRLINES (0.1%) 795 AmericaWest Airlines - 144A** 7.10% due 04/02/21..................... 793,823 ------------ ALTERNATIVE POWER GENERATION (0.1%) 750 MidAmerican Funding LLC 6.75% due 03/01/11..................... 731,760 ------------ AUTO PARTS: O.E.M. (0.1%) 530 TRW Inc. 7.625% due 03/15/06.................... 546,197 ------------ CABLE/SATELLITE TV (0.2%) 1,006 Continental Cablevision Inc. 8.50% due 09/15/01..................... 1,011,734 ------------ COMPUTER PROCESSING HARDWARE (0.2%) 1,500 Hewlett-Packard Co. 7.15% due 06/15/05..................... 1,550,775 ------------
SEE NOTES TO FINANCIAL STATEMENTS 106 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- DEPARTMENT STORES (0.1%) $ 710 Federated Department Stores, Inc. 6.90% due 04/01/29..................... $ 643,430 ------------ DISCOUNT STORES (0.4%) 650 Target Corp. 6.35% due 01/15/11..................... 641,732 135 Target Corp. 7.50% due 08/15/10..................... 143,197 1,475 Wal-Mart Stores, Inc. 7.55% due 02/15/30..................... 1,606,865 ------------ 2,391,794 ------------ DRUGSTORE CHAINS (0.1%) 805 CVS Corp. 5.625% due 03/15/06.................... 789,246 ------------ ELECTRIC UTILITIES (0.5%) 160 American Electric Power (Series A) 6.125% due 05/15/06.................... 157,915 2,000 Arizona Public Service Co. 5.875% due 02/15/04.................... 1,991,040 430 DTE Energy Co. 7.05% due 06/01/11..................... 431,445 95 Exelon Corp. 6.75% due 05/01/11..................... 93,515 530 Progress Energy, Inc. 7.10% due 03/01/11..................... 536,153 ------------ 3,210,068 ------------ ENVIRONMENTAL SERVICES (0.1%) 650 USA Waste Services, Inc. 7.125% due 10/01/07.................... 648,128 ------------ FINANCE/RENTAL/ LEASING (0.8%) 1,660 Ford Motor Credit Corp. 7.375% due 10/28/09.................... 1,684,834 1,000 Household Finance Corp. 7.875% due 03/01/07.................... 1,069,500 PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 410 Household Finance Corp. 8.00% due 07/15/10..................... $ 437,905 425 MBNA America Bank N.A. 6.50% due 06/20/06..................... 419,539 1,500 Norwest Financial, Inc. 6.375% due 07/16/02.................... 1,525,635 ------------ 5,137,413 ------------ FINANCIAL CONGLOMERATES (0.7%) 1,500 Associates Corporation of North America 6.10% due 01/15/05..................... 1,506,150 885 AXA Financial Inc. 6.50% due 04/01/08..................... 870,672 405 Chase Manhattan Corp. 6.00% due 02/15/09..................... 388,022 1,465 Citigroup Inc. 7.25% due 10/01/10..................... 1,520,553 ------------ 4,285,397 ------------ FOOD RETAIL (0.6%) 420 Ahold Finance USA Inc. 8.25% due 07/15/10..................... 452,327 1,075 Albertson's Inc. 7.45% due 08/01/29..................... 1,013,317 1,550 Kroger Co. 6.80% due 04/01/11..................... 1,533,601 115 Safeway Inc. 6.50% due 03/01/11..................... 112,408 270 Safeway Inc. 7.25% due 02/01/31..................... 262,510 410 Safeway Inc. 7.50% due 09/15/09..................... 427,458 ------------ 3,801,621 ------------ FOOD: MAJOR DIVERSIFIED (0.4%) 1,000 Bestfoods 6.625% due 04/15/28.................... 936,100 520 Kellog Co. - 144A** 6.60% due 04/01/11..................... 507,879
SEE NOTES TO FINANCIAL STATEMENTS 107 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 1,000 Unilever Capital Corp. 7.125% due 11/01/10.................... $ 1,045,120 ------------ 2,489,099 ------------ GAS DISTRIBUTORS (0.3%) 465 CMS Panhandle Holding Co. 7.00% due 07/15/29..................... 396,798 470 Nisource Finance Corp. 7.875% due 11/15/10.................... 497,800 660 Ras Laffan Natural Gas - 144A** 8.294% due 03/15/14.................... 626,617 170 Ras Laffan Natural Gas Co. Ltd. - 144A** 7.628% due 09/15/06.................... 171,732 ------------ 1,692,947 ------------ HOME BUILDING (0.1%) 380 Centex Corp. 7.875% due 02/01/11.................... 378,058 ------------ HOME IMPROVEMENT CHAINS (0.2%) 230 Lowe's Companies, Inc. 6.50% due 03/15/29..................... 204,178 885 Lowe's Companies, Inc. 8.25% due 06/01/10..................... 965,208 ------------ 1,169,386 ------------ HOSPITAL/NURSING MANAGEMENT (0.1%) 200 Columbia/HCA Healthcare Corp. 9.00% due 12/15/14........................... 215,914 600 Manor Care Inc. - 144A** 8.00% due 03/01/08..................... 602,910 ------------ 818,824 ------------ HOTELS/RESORTS/ CRUISELINES (0.2%) 115 Hyatt Equities LLC - 144A** 9.25% due 05/15/05..................... 121,526 PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 1,165 Marriott International - 144A** 7.00% due 01/15/08........................... $ 1,156,577 ------------ 1,278,103 ------------ HOUSEHOLD/PERSONAL CARE (0.4%) 655 International Flavors & Fragrances, Inc. 6.45% due 05/15/06..................... 653,605 1,000 Proctor & Gamble Co. 6.45% due 01/15/26..................... 954,640 1,000 Proctor & Gamble Co. 6.60% due 12/15/04..................... 1,032,510 ------------ 2,640,755 ------------ INDUSTRIAL CONGLOMERATES (0.9%) 2,000 General Electric Capital Corp. 6.80% due 11/01/05..................... 2,088,580 1,000 Honeywell International, Inc. 7.50% due 03/01/10..................... 1,057,760 1,000 Honeywell, Inc. 6.625% due 06/15/28.................... 936,050 600 Hutchison Whampoa 7.50% due 08/01/27..................... 569,580 605 Tyco International Groups S.A. (Luxemburg) 6.375% due 02/15/06.................... 610,620 465 United Technologies Corp. 7.125% due 11/15/10.................... 485,720 ------------ 5,748,310 ------------ INTEGRATED OIL (0.2%) 1,525 Conoco Inc. 6.95% due 04/15/29..................... 1,469,764 ------------ INVESTMENT BANKS/ BROKERS (0.6%) 930 Goldman Sachs Group Inc. 6.875% due 01/15/11.................... 924,467 2,000 KFW International Finance Co. 7.125% due 02/15/05........................... 2,096,400
SEE NOTES TO FINANCIAL STATEMENTS 108 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 1,000 Lehman Brothers Holdings Corp. 7.875% due 08/15/10........................... $ 1,053,220 ------------ 4,074,087 ------------ LIFE/HEALTH INSURANCE (0.5%) 550 American General Corp. 7.50% due 07/15/25..................... 577,555 565 John Hancock 7.375% due 02/15/24.................... 555,276 500 Metropolitan Life Insurance Co. 7.80% due 11/01/25........................... 505,730 470 Nationwide Mutual Insurance 7.50% due 02/15/24..................... 423,771 1,375 Prudential Insurance Co. 8.30% due 07/01/25..................... 1,443,888 ------------ 3,506,220 ------------ MAJOR BANKS (0.5%) 495 Bank America Corp. 7.40% due 01/15/11..................... 515,181 500 Bank One Corp. 7.625% due 08/01/05.................... 529,705 200 BankOne Corp. 6.00% due 02/17/09..................... 190,466 1,000 First Union Corp. 6.00% due 10/30/08..................... 948,780 980 Wells Fargo & Co. 5.90% due 05/21/06..................... 978,755 ------------ 3,162,887 ------------ MAJOR TELECOMMUNICATIONS (0.7%) 255 AT & T Corp. 6.50% due 03/15/29..................... 216,722 405 BellSouth Telecommunications Inc. 6.375% due 06/01/28.................... 360,515 615 British Telecom PLC (United Kingdom) 8.625% due 12/15/30.................... 664,194 PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 660 Deutsche Telekom International Finance Corp. (Netherlands) 8.00% due 06/15/10..................... $ 681,133 480 Telus Corp. 8.00% due 06/01/11..................... 488,434 2,000 WorldCom, Inc. 7.375% due 01/15/06.................... 2,021,000 ------------ 4,431,998 ------------ MANAGED HEALTH CARE (0.3%) 1,570 Aetna, Inc. 7.875% due 03/01/11.................... 1,532,995 440 Wellpoint Health Network 6.375% due 06/15/06.................... 436,797 ------------ 1,969,792 ------------ MEDIA CONGLOMERATES (0.7%) 1,000 News America Holdings, Inc. 7.75% due 12/01/45..................... 913,460 2,000 Time Warner Inc. 9.15% due 02/01/23..................... 2,304,120 1,400 Walt Disney Co. 5.50% due 12/29/06..................... 1,374,800 ------------ 4,592,380 ------------ MOTOR VEHICLES (0.2%) 1,000 DaimlerChrysler North American Holdings Co. 8.50% due 01/18/31..................... 1,059,410 295 Ford Motor Co. 7.45% due 07/16/31..................... 282,964 ------------ 1,342,374 ------------ MOVIES/ ENTERTAINMENT (0.3%) 1,900 Paramount Communications, Inc. 7.50% due 01/15/02..................... 1,927,683 ------------
SEE NOTES TO FINANCIAL STATEMENTS 109 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- MULTI-LINE INSURANCE (0.4%) $ 1,030 AIG SunAmerica Global Finance - 144A** 6.30% due 05/10/11..................... $ 1,015,003 515 Farmers Exchange Capital - 144A** 7.05% due 07/15/28..................... 458,350 895 Hartford Financial Services Group Inc. 7.90% due 06/15/10..................... 958,196 ------------ 2,431,549 ------------ OIL & GAS PIPELINES (0.1%) 335 Williams Companies, Inc. - 144A** 7.50% due 01/15/31..................... 315,630 340 Williams Companies, Inc. 7.75% due 06/15/31..................... 329,851 ------------ 645,481 ------------ PHARMACEUTICALS: MAJOR (0.5%) 1,000 Abbott Laboratories 6.40% due 12/01/06..................... 1,027,500 515 American Home Products Corp. - 144A* 6.70% due 03/15/11..................... 511,302 225 American Home Products Corp. 6.70% due 03/15/11..................... 223,385 1,000 Johnson & Johnson 6.95% due 09/01/29..................... 1,015,610 275 Pharmacia Corp. 6.60% due 12/01/28..................... 262,820 ------------ 3,040,617 ------------ PROPERTY - CASUALTY INSURERS (0.1%) 740 Florida Windstorm - 144A** 7.125% due 02/25/19.................... 730,521 ------------ PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- RAILROADS (0.6%) $ 1,781 Southern Pacific Transportation Co. (Series B) 7.28% due 04/30/15..................... $ 1,770,116 1,000 Union Pacific Corp. 6.34% due 11/25/03..................... 1,015,830 1,000 Union Pacific Corp. 6.625% due 02/01/08.................... 994,430 ------------ 3,780,376 ------------ REAL ESTATE DEVELOPMENT (0.0%) 221 World Financial Properties Tower (Class B) 6.91% due 09/01/13..................... 223,580 ------------ REAL ESTATE INVESTMENT TRUSTS (0.1%) 525 EOP Operating L.P. 6.763% due 06/15/07.................... 528,392 375 EOP Operating L.P. 7.25% due 06/15/28..................... 337,868 ------------ 866,260 ------------ SAVINGS BANKS (0.3%) 1,500 Washington Mutual Financial Corp. 8.25% due 06/15/05........................... 1,605,060 ------------ SERVICES TO THE HEALTH INDUSTRY (0.1%) 310 Anthem Insurance - 144A** 9.00% due 04/01/27..................... 290,786 305 Anthem Insurance - 144A** 9.125% due 04/01/10.................... 307,361 ------------ 598,147 ------------ SPECIALTY TELECOMMUNICATIONS (0.1%) 635 Qwest Capital Funding - 144A** 7.25% due 02/15/11..................... 626,275
SEE NOTES TO FINANCIAL STATEMENTS 110 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 155 Qwest Capital Funding 7.90% due 08/15/10..................... $ 159,542 ------------ 785,817 ------------ TELECOMMUNICATIONS EQUIPMENT (0.1%) 725 Nortel Networks Ltd. 6.125% due 02/15/06.................... 624,333 ------------ WIRELESS COMMUNICATIONS (0.4%) 1,255 AT &T Wireless - 144A** 8.75% due 03/01/31..................... 1,313,358 475 Vodafone Airtouch 7.75% due 02/15/10..................... 498,916 1,000 Vodafone Group 6.65% due 05/01/08..................... 983,210 ------------ 2,795,484 ------------ TOTAL CORPORATE BONDS (COST $90,448,336)..................... 90,856,735 ------------ ASSET-BACKED SECURITIES (1.0%) FINANCE/RENTAL/ LEASING (1.0%) 700 American Express Credit Assets 5.53% due 10/15/08..................... 693,000 950 Citibank Credit Issuance Trust 6.90% due 10/15/07........................... 992,446 390 First Security Auto Owner Trust 7.30% due 07/15/04........................... 398,775 710 Ford Credit Auto Owner Trust 6.74% due 06/15/04..................... 729,298 450 Honda Auto Receivables Owner Trust 6.62% due 07/15/04..................... 460,827 PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- $ 450 MBNA Master Credit Card Trust 5.90% due 08/15/11........................... $ 443,250 610 MMCA Automobile Trust 7.00% due 06/15/04..................... 625,439 535 Nissan Auto Receivables Owner Trust 6.72% due 08/16/04..................... 547,369 750 PSE&G Transition Funding LLC. 6.61% due 06/15/15........................... 756,090 385 Toyota Auto Receivables Owner Trust 6.76% due 08/15/04..................... 394,625 ------------ TOTAL ASSET-BACKED SECURITIES (COST $6,051,542)...................... 6,041,119 ------------ FOREIGN GOVERNMENT OBLIGATIONS (0.5%) 1,000 Manitoba (Province of) (Canada) 5.50% due 10/01/08..................... 957,260 1,400 Quebec (Province of) (Canada) 6.125% due 01/22/11.................... 1,362,928 1,000 New Brunswick (Province of) (Canada) 7.625% due 06/29/04.................... 1,059,470 ------------ TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST $3,309,220)...................... 3,379,658 ------------
SEE NOTES TO FINANCIAL STATEMENTS 111 Morgan Stanley Variable Investment Series - Strategist PORTFOLIO OF INVESTMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED
PRINCIPAL AMOUNT IN THOUSANDS VALUE ----------------------------------------------------------------- SHORT-TERM INVESTMENT (A) (17.0%) U.S. GOVERNMENT AGENCY $108,700 Federal National Mortgage Assoc. 3.94% due 07/02/01 (COST $108,688,103).................... $108,688,103 ------------
TOTAL INVESTMENTS (COST $552,312,947)(B)................. 100.1% 638,773,861 LIABILITIES IN EXCESS OF OTHER ASSETS... (0.1) (818,695) ------ ------------ NET ASSETS.............................. 100.0% $637,955,166 ====== ============
--------------------------------------------------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. ** RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS. (A) SECURITIY WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $95,943,841 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $9,482,927, RESULTING IN NET UNREALIZED APPRECIATION OF $86,460,914. SEE NOTES TO FINANCIAL STATEMENTS 112 (This page has been left blank intentionally.) 113 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2001 (UNAUDITED)
MONEY SHORT-TERM QUALITY HIGH MARKET BOND INCOME PLUS YIELD UTILITIES ------------ ----------- ------------ ------------ ------------ ASSETS: Investments in securities, at value *....................... $477,419,328 $20,210,680 $450,213,865 $ 97,581,911 $466,097,589 Cash..................... 4,682 22,185 -- 13,501 78,787 Receivable for: Investments sold....... -- -- 7,717,116 1,826,660 157,391 Shares of beneficial interest sold......... 13,826,024 36,736 272,285 40,276 347,933 Dividends.............. -- -- -- -- 490,852 Interest............... 390,045 267,706 6,020,169 2,984,987 632,071 Foreign withholding taxes reclaimed....... -- -- -- -- -- Variation margin....... -- -- -- -- -- Prepaid expenses and other assets............ 1,313 145 6,619 4,940 4,892 ------------ ----------- ------------ ------------ ------------ TOTAL ASSETS......... 491,641,392 20,537,452 464,230,054 102,452,275 467,809,515 ------------ ----------- ------------ ------------ ------------ LIABILITIES: Payable for: Investments purchased............. -- -- 18,176,302 2,123,345 -- Shares of beneficial interest repurchased........... 1,632,251 1,117 354,160 169,459 446,354 Plan of distribution fee (Class Y)......... 12,402 1,550 4,407 948 4,586 Investment management fee................... 195,067 5,731 183,222 42,912 255,207 Payable to bank.......... -- -- 9,610 -- -- Unrealized depreciation on forward foreign currency contracts...... -- -- -- -- -- Accrued expenses and other payables.......... 42,359 16,637 57,561 31,188 59,321 ------------ ----------- ------------ ------------ ------------ TOTAL LIABILITIES.... 1,882,079 25,035 18,785,262 2,367,852 765,468 ------------ ----------- ------------ ------------ ------------ NET ASSETS: Paid-in-capital.......... 489,759,142 20,570,810 474,747,467 399,413,636 313,539,512 Accumulated undistributed net investment income (loss).................. 171 (32,681) (616,556) 1,260,482 (88,153) Accumulated undistributed net realized gain (loss).................. -- 16,827 (36,254,158) (84,427,873) 8,016,991 Net unrealized appreciation (depreciation).......... -- (42,539) 7,568,039 (216,161,822) 145,575,697 ------------ ----------- ------------ ------------ ------------ NET ASSETS........... $489,759,313 $20,512,417 $445,444,792 $100,084,423 $467,044,047 ============ =========== ============ ============ ============ *COST................ $477,419,328 $20,253,219 $442,645,826 $313,743,733 $320,521,892 ============ =========== ============ ============ ============ CLASS X SHARES: Net Assets............... $427,032,252 $12,265,244 $421,042,697 $ 95,470,757 $444,180,240 Shares Outstanding (unlimited authorized shares of $.01 par value).................. 427,032,114 1,231,608 40,937,206 51,627,105 24,756,190 NET ASSET VALUE PER SHARE............... $1.00 $9.96 $10.29 $1.85 $17.94 ============ =========== ============ ============ ============ CLASS Y SHARES: Net Assets............... $ 62,727,061 $ 8,247,173 $ 24,402,095 $ 4,613,666 $ 22,863,807 Shares Outstanding (unlimited authorized shares of $.01 par value).................. 62,727,028 829,248 2,374,823 2,491,431 1,274,762 NET ASSET VALUE PER SHARE............... $1.00 $9.95 $10.28 $1.85 $17.94 ============ =========== ============ ============ ============
------------------------ + INCLUDES FOREIGN CASH OF $381,848. SEE NOTES TO FINANCIAL STATEMENTS 114
GLOBAL INCOME DIVIDEND CAPITAL DIVIDEND EUROPEAN PACIFIC BUILDER GROWTH GROWTH GROWTH GROWTH GROWTH EQUITY ----------- -------------- ------------ ------------ ------------ ----------- -------------- ASSETS: Investments in securities, at value *....................... $70,183,206 $1,497,104,050 $142,082,438 $331,190,561 $403,250,799 $66,943,552 $1,346,646,265 Cash..................... 36,282 -- 63,412 263,148 502,496 961,915+ -- Receivable for: Investments sold....... -- 6,945,026 2,214,693 321,844 2,911,894 231,327 22,960,203 Shares of beneficial interest sold......... 24,847 1,055,851 104,461 65,973 64,866 3,679 396,541 Dividends.............. 174,967 1,479,378 45,150 708,664 289,127 37,128 286,549 Interest............... 307,627 -- -- 1,676 2,204 -- 28 Foreign withholding taxes reclaimed....... -- -- -- 442,617 686,510 15,838 19,710 Variation margin....... -- -- -- -- -- -- -- Prepaid expenses and other assets............ 1,397 2,768 269 483 538 386,439 26,757 ----------- -------------- ------------ ------------ ------------ ----------- -------------- TOTAL ASSETS......... 70,728,326 1,506,587,073 144,510,423 332,994,966 407,708,434 68,579,878 1,370,336,053 ----------- -------------- ------------ ------------ ------------ ----------- -------------- LIABILITIES: Payable for: Investments purchased............. 1,900,278 -- 1,392,635 -- 2,508,564 115,480 12,329,135 Shares of beneficial interest repurchased........... 10,406 956,980 111,479 246,282 548,754 15,177,155 998,615 Plan of distribution fee (Class Y)......... 704 7,486 1,059 1,119 3,465 358 9,721 Investment management fee................... 42,523 667,358 76,635 208,497 321,938 41,866 553,694 Payable to bank.......... -- 1,556,789 -- -- -- -- -- Unrealized depreciation on forward foreign currency contracts...... -- -- -- -- 16,524 211 -- Accrued expenses and other payables.......... 17,856 123,810 32,608 79,113 98,474 61,441 85,263 ----------- -------------- ------------ ------------ ------------ ----------- -------------- TOTAL LIABILITIES.... 1,971,767 3,312,423 1,614,416 535,011 3,497,719 15,396,511 13,976,428 ----------- -------------- ------------ ------------ ------------ ----------- -------------- NET ASSETS: Paid-in-capital.......... 71,302,746 1,610,174,146 143,878,815 326,482,051 411,300,027 106,333,978 1,644,060,965 Accumulated undistributed net investment income (loss).................. (331,936) (22,782) 174,312 1,842,063 2,137,001 (986,012) (10,037) Accumulated undistributed net realized gain (loss).................. (2,114,536) (300,966,085) (12,539,688) (7,585,238) (25,193,076) (46,822,621) (346,760,168) Net unrealized appreciation (depreciation).......... (99,715) 194,089,371 11,382,568 11,721,079 15,966,763 (5,341,978) 59,068,865 ----------- -------------- ------------ ------------ ------------ ----------- -------------- NET ASSETS........... $68,756,559 $1,503,274,650 $142,896,007 $332,459,955 $404,210,715 $53,183,367 $1,356,359,625 =========== ============== ============ ============ ============ =========== ============== *COST................ $70,282,921 $1,303,014,679 $130,699,870 $319,401,985 $387,132,582 $72,292,656 $1,287,577,400 =========== ============== ============ ============ ============ =========== ============== CLASS X SHARES: Net Assets............... $64,882,043 $1,464,571,158 $137,510,660 $326,610,050 $387,580,325 $49,828,885 $1,306,798,995 Shares Outstanding (unlimited authorized shares of $.01 par value).................. 5,838,550 100,690,544 8,738,040 27,727,075 22,300,490 10,339,869 51,770,058 NET ASSET VALUE PER SHARE............... $11.11 $14.55 $15.74 $11.78 $17.38 $4.82 $25.24 =========== ============== ============ ============ ============ =========== ============== CLASS Y SHARES: Net Assets............... $ 3,874,516 $ 38,703,492 $ 5,385,347 $ 5,849,905 $ 16,630,390 $ 3,354,482 $ 49,560,630 Shares Outstanding (unlimited authorized shares of $.01 par value).................. 349,101 2,663,842 343,077 497,848 959,618 695,924 1,964,911 NET ASSET VALUE PER SHARE............... $11.10 $14.53 $15.70 $11.75 $17.33 $4.82 $25.22 =========== ============== ============ ============ ============ =========== ============== S&P 500 INDEX ----------------- ASSETS: Investments in securities, at value *....................... $215,333,227 Cash..................... 55,053 Receivable for: Investments sold....... -- Shares of beneficial interest sold......... 273,117 Dividends.............. 149,046 Interest............... -- Foreign withholding taxes reclaimed....... -- Variation margin....... 50,525 Prepaid expenses and other assets............ 16,073 ------------ TOTAL ASSETS......... 215,877,041 ------------ LIABILITIES: Payable for: Investments purchased............. 353,070 Shares of beneficial interest repurchased........... 89,542 Plan of distribution fee (Class Y)......... 5,681 Investment management fee................... 71,423 Payable to bank.......... -- Unrealized depreciation on forward foreign currency contracts...... -- Accrued expenses and other payables.......... 50,150 ------------ TOTAL LIABILITIES.... 569,866 ------------ NET ASSETS: Paid-in-capital.......... 230,799,644 Accumulated undistributed net investment income (loss).................. 919,319 Accumulated undistributed net realized gain (loss).................. (5,901,165) Net unrealized appreciation (depreciation).......... (10,510,623) ------------ NET ASSETS........... $215,307,175 ============ *COST................ $225,228,676 ============ CLASS X SHARES: Net Assets............... $186,357,371 Shares Outstanding (unlimited authorized shares of $.01 par value).................. 16,751,560 NET ASSET VALUE PER SHARE............... $11.12 ============ CLASS Y SHARES: Net Assets............... $ 28,949,804 Shares Outstanding (unlimited authorized shares of $.01 par value).................. 2,608,630 NET ASSET VALUE PER SHARE............... $11.10 ============
115 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2001 (UNAUDITED) CONTINUED
COMPETITIVE EDGE AGGRESSIVE "BEST IDEAS" EQUITY INFORMATION STRATEGIST -------------- ------------- ------------ ------------ ASSETS: Investments in securities, at value *....................... $58,403,719 $111,609,558 $ 9,890,851 $638,773,861 Cash..................... -- 1,451,376 74,128 89,800 Receivable for: Investments sold....... 1,407,416 645,009 -- 1,403,981 Shares of beneficial interest sold......... 48,687 914,542 35,618 479,947 Dividends.............. 19,345 48,934 1,870 227,457 Interest............... 161 18,232 9,316 2,696,320 Foreign withholding taxes reclaimed....... 29,660 247 -- -- Prepaid expenses and other assets............ 133 3,964 66 10,117 Receivable from affiliate............... -- -- 24,235 -- ----------- ------------ ----------- ------------ TOTAL ASSETS......... 59,909,121 114,691,862 10,036,084 643,681,483 ----------- ------------ ----------- ------------ LIABILITIES: Payable for: Investments purchased............. 1,333,901 4,062,872 -- 4,989,669 Shares of beneficial interest repurchased........... 109,691 318,305 525 411,832 Plan of distribution fee (Class Y)......... 1,147 3,485 1,070 6,897 Investment management fee................... 32,430 68,537 -- 265,265 Unrealized depreciation on forward foreign currency contracts...... 2,103 -- -- -- Accrued expenses and other payables.......... 23,247 35,267 24,301 52,654 ----------- ------------ ----------- ------------ TOTAL LIABILITIES.... 1,502,519 4,488,466 25,896 5,726,317 ----------- ------------ ----------- ------------ NET ASSETS: Paid-in-capital.......... 77,070,909 147,372,049 13,512,021 569,334,632 Accumulated undistributed net investment income (loss).................. 223,984 159,296 52,288 (33,782) Accumulated undistributed net realized loss....... (6,565,308) (42,218,470) (2,274,791) (17,806,598) Net unrealized appreciation (depreciation).......... (12,322,983) 4,890,521 (1,279,330) 86,460,914 ----------- ------------ ----------- ------------ NET ASSETS........... $58,406,602 $110,203,396 $10,010,188 $637,955,166 =========== ============ =========== ============ *COST................ $70,725,397 $106,719,037 $11,170,181 $552,312,947 =========== ============ =========== ============ CLASS X SHARES: Net Assets............... $52,878,032 $ 93,092,363 $ 4,553,033 $602,607,754 Shares Outstanding (unlimited authorized shares of $.01 par value).................. 6,684,740 8,280,484 742,487 41,103,528 NET ASSET VALUE PER SHARE............... $7.91 $11.24 $6.13 $14.66 =========== ============ =========== ============ CLASS Y SHARES: Net Assets............... $ 5,528,570 $ 17,111,033 $ 5,457,155 $ 35,347,412 Shares Outstanding (unlimited authorized shares of $.01 par value).................. 700,735 1,524,851 891,122 2,412,827 NET ASSET VALUE PER SHARE............... $7.89 $11.22 $6.12 $14.65 =========== ============ =========== ============
SEE NOTES TO FINANCIAL STATEMENTS 116 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED)
QUALITY MONEY SHORT-TERM INCOME HIGH MARKET BOND PLUS YIELD UTILITIES ----------- ---------- ----------- ------------ -------------- INVESTMENT INCOME: INCOME Interest............... $11,963,526 $394,949 $14,342,728 $ 9,980,036 $ 2,085,626 Dividends.............. -- -- -- -- 4,815,169* ----------- -------- ----------- ------------ ------------ TOTAL INCOME......... 11,963,526 394,949 14,342,728 9,980,036 6,900,795 ----------- -------- ----------- ------------ ------------ EXPENSES Investment management fee................... 1,120,690 33,117 1,072,536 303,802 1,648,908 Plan of distribution fee (Class Y shares)............... 50,372 5,296 16,253 4,518 25,290 Professional fees...... 13,158 13,336 16,745 14,540 16,857 Custodian fees......... 13,320 2,659 20,259 8,791 11,011 Shareholder reports and notices............... 10,759 357 15,043 10,220 8,021 Trustees' fees and expenses.............. 393 148 354 187 470 Transfer agent fees and expenses.............. 248 248 248 248 248 Other.................. 1,369 1,024 4,274 1,292 2,731 ----------- -------- ----------- ------------ ------------ TOTAL EXPENSES....... 1,210,309 56,185 1,145,712 343,598 1,713,536 ----------- -------- ----------- ------------ ------------ Less: amounts waived/reimbursed....... -- (1,495) -- -- -- Less: expense offset..... -- (1,168) -- -- -- ----------- -------- ----------- ------------ ------------ NET EXPENSES......... 1,210,309 53,522 1,145,712 343,598 1,713,536 ----------- -------- ----------- ------------ ------------ NET INVESTMENT INCOME.............. 10,753,217 341,427 13,197,016 9,636,438 5,187,259 ----------- -------- ----------- ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments............ 3,516 21,288 2,356,432 (44,857,668) 14,115,803 Futures contracts...... -- -- -- -- -- Foreign exchange transactions.......... -- -- -- -- -- ----------- -------- ----------- ------------ ------------ NET GAIN (LOSS).... 3,516 21,288 2,356,432 (44,857,668) 14,115,803 ----------- -------- ----------- ------------ ------------ Net change in unrealized appreciation/depreciation on: Investments............ -- (62,446) 155,285 13,594,925 (78,600,404) Future contracts....... -- -- -- -- -- Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies............ -- -- -- -- -- ----------- -------- ----------- ------------ ------------ NET APPRECIATION (DEPRECIATION).... -- (62,446) 155,285 13,594,925 (78,600,404) ----------- -------- ----------- ------------ ------------ NET GAIN (LOSS).... 3,516 (41,158) 2,511,717 (31,262,743) (64,484,601) ----------- -------- ----------- ------------ ------------ NET INCREASE (DECREASE).............. $10,756,733 $300,269 $15,708,733 $(21,626,305) $(59,297,342) =========== ======== =========== ============ ============
--------------------- * NET OF $32,521 WITHHOLDING TAX. SEE NOTES TO FINANCIAL STATEMENTS 117 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED) CONTINUED
GLOBAL INCOME DIVIDEND CAPITAL DIVIDEND BUILDER GROWTH GROWTH GROWTH ------------ ------------- -------------- -------------- INVESTMENT INCOME: INCOME Interest............... $ 915,464 $ 175,934 $ 284,298 $ 271,769 Dividends.............. 838,669 18,046,240* 428,089* 5,298,570* ---------- ----------- ------------ ------------ TOTAL INCOME......... 1,754,133 18,222,174 712,387 5,570,339 ---------- ----------- ------------ ------------ EXPENSES Investment management fee................... 240,868 4,022,504 497,061 1,320,277 Plan of distribution fee (Class Y shares)............... 2,614 33,268 5,076 4,474 Professional fees...... 11,154 14,949 14,691 16,321 Custodian fees......... 3,559 36,641 13,315 50,910 Shareholder reports and notices............... 4,254 102,627 6,187 39,140 Trustees' fees and expenses.............. 467 4,870 738 2,245 Transfer agent fees and expenses.............. 509 248 248 248 Other.................. 1,014 5,570 644 5,845 ---------- ----------- ------------ ------------ TOTAL EXPENSES....... 264,439 4,220,677 537,960 1,439,460 ---------- ----------- ------------ ------------ Less: amounts waived/reimbursed....... -- -- -- -- Less: expense offset..... -- -- -- -- ---------- ----------- ------------ ------------ NET EXPENSES......... 264,439 4,220,677 537,960 1,439,460 ---------- ----------- ------------ ------------ NET INVESTMENT INCOME (LOSS).............. 1,489,694 14,001,497 174,427 4,130,879 ---------- ----------- ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments............ (37,741) (34,121,274) (9,904,454) (3,307,835) Futures contracts...... -- -- -- -- Foreign exchange transactions.......... -- -- -- 3,989 ---------- ----------- ------------ ------------ NET LOSS........... (37,741) (34,121,274) (9,904,454) (3,303,846) ---------- ----------- ------------ ------------ Net change in unrealized appreciation/depreciation on: Investments............ 1,463,063 37,993,896 (18,018,938) (14,089,297) Future contracts....... -- -- -- -- Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies............ -- -- -- (72,651) ---------- ----------- ------------ ------------ NET APPRECIATION (DEPRECIATION).... 1,463,063 37,993,896 (18,018,938) (14,161,948) ---------- ----------- ------------ ------------ NET GAIN (LOSS).... 1,425,322 3,872,622 (27,923,392) (17,465,794) ---------- ----------- ------------ ------------ NET INCREASE (DECREASE).............. $2,915,016 $17,874,119 $(27,748,965) $(13,334,915) ========== =========== ============ ============
--------------------- * NET OF $364,611, $2,925, $522,596, $716,731, $58,580, $48,341 , $6,677, $41,333, $1,493, $132 AND $6,589 FOREIGN WITHHOLDING TAX, RESPECTIVELY. SEE NOTES TO FINANCIAL STATEMENTS 118
COMPETITIVE EUROPEAN PACIFIC S&P 500 EDGE AGGRESSIVE GROWTH GROWTH EQUITY INDEX "BEST IDEAS" EQUITY ------------ ------------- --------------- -------------- -------------- -------------- INVESTMENT INCOME: INCOME Interest............... $ 391,088 $ 54,383 $ 4,981,245 $ 181,189 $ 56,304 $ 284,150 Dividends.............. 4,782,930* 415,768* 3,779,888* 1,255,757* 421,022* 398,503* ------------ ----------- ------------- ------------ ------------ ------------ TOTAL INCOME......... 5,174,018 470,151 8,761,133 1,436,946 477,326 682,653 ------------ ----------- ------------- ------------ ------------ ------------ EXPENSES Investment management fee................... 2,126,517 278,315 3,629,910 427,821 212,792 452,064 Plan of distribution fee (Class Y shares)............... 17,609 1,651 47,020 25,386 6,422 18,861 Professional fees...... 15,941 21,302 15,521 10,313 12,724 12,532 Custodian fees......... 94,596 142,811 34,353 33,280 12,312 29,580 Shareholder reports and notices............... 45,265 8,522 38,715 7,229 6,346 8,388 Trustees' fees and expenses.............. 2,777 278 8,158 1,910 434 1,039 Transfer agent fees and expenses.............. 248 248 248 248 248 248 Other.................. 4,980 23,161 6,542 11,341 959 643 ------------ ----------- ------------- ------------ ------------ ------------ TOTAL EXPENSES....... 2,307,933 476,288 3,780,467 517,528 252,237 523,355 ------------ ----------- ------------- ------------ ------------ ------------ Less: amounts waived/reimbursed....... -- -- -- -- -- -- Less: expense offset..... -- -- -- -- -- -- ------------ ----------- ------------- ------------ ------------ ------------ NET EXPENSES......... 2,307,933 476,288 3,780,467 517,528 252,237 523,355 ------------ ----------- ------------- ------------ ------------ ------------ NET INVESTMENT INCOME (LOSS).............. 2,866,085 (6,137) 4,980,666 919,418 225,089 159,298 ------------ ----------- ------------- ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments............ (25,355,254) (6,671,711) (275,248,540) (4,791,298) (6,053,062) (25,538,952) Futures contracts...... -- -- -- (356,897) -- -- Foreign exchange transactions.......... 950,777 (66,543) -- -- (4,077) -- ------------ ----------- ------------- ------------ ------------ ------------ NET LOSS........... (24,404,477) (6,738,254) (275,248,540) (5,148,195) (6,057,139) (25,538,952) ------------ ----------- ------------- ------------ ------------ ------------ Net change in unrealized appreciation/depreciation on: Investments............ (50,033,228) 1,778,901 (71,356,406) (11,513,533) (5,465,958) (6,514,114) Future contracts....... -- -- -- (531,987) -- -- Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies............ (808,780) 21,724 -- -- (1,849) -- ------------ ----------- ------------- ------------ ------------ ------------ NET APPRECIATION (DEPRECIATION).... (50,842,008) 1,800,625 (71,356,406) (12,045,520) (5,467,807) (6,514,114) ------------ ----------- ------------- ------------ ------------ ------------ NET GAIN (LOSS).... (75,246,485) (4,937,629) (346,604,946) (17,193,715) (11,524,946) (32,053,066) ------------ ----------- ------------- ------------ ------------ ------------ NET INCREASE (DECREASE).............. $(72,380,400) $(4,943,766) $(341,624,280) $(16,274,297) $(11,299,857) $(31,893,768) ============ =========== ============= ============ ============ ============ INFORMATION STRATEGIST ----------- -------------- INVESTMENT INCOME: INCOME Interest............... $ 46,518 $ 8,820,957 Dividends.............. 10,235* 1,545,167* ----------- ------------ TOTAL INCOME......... 56,753 10,366,124 ----------- ------------ EXPENSES Investment management fee................... 27,873 1,642,336 Plan of distribution fee (Class Y shares)............... 4,465 33,969 Professional fees...... 34,372 15,677 Custodian fees......... 13,476 19,804 Shareholder reports and notices............... 88 23,172 Trustees' fees and expenses.............. 9 616 Transfer agent fees and expenses.............. 248 248 Other.................. 617 5,733 ----------- ------------ TOTAL EXPENSES....... 81,148 1,741,555 ----------- ------------ Less: amounts waived/reimbursed....... (76,683) -- Less: expense offset..... -- -- ----------- ------------ NET EXPENSES......... 4,465 1,741,555 ----------- ------------ NET INVESTMENT INCOME (LOSS).............. 52,288 8,624,569 ----------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments............ (2,258,216) (7,936,235) Futures contracts...... -- -- Foreign exchange transactions.......... -- -- ----------- ------------ NET LOSS........... (2,258,216) (7,936,235) ----------- ------------ Net change in unrealized appreciation/depreciation on: Investments............ (993,726) (49,705,418) Future contracts....... -- -- Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies............ -- -- ----------- ------------ NET APPRECIATION (DEPRECIATION).... (993,726) (49,705,418) ----------- ------------ NET GAIN (LOSS).... (3,251,942) (57,641,653) ----------- ------------ NET INCREASE (DECREASE).............. $(3,199,654) $(49,017,084) =========== ============
119 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED Statements of Changes in Net Assets
MONEY MARKET SHORT-TERM BOND --------------------------------- --------------------------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED MONTHS ENDED ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ ------------- ------------------ ------------- ------------------ (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................. $ 10,753,217 $ 22,560,142 $ 341,427 $ 276,431 Net realized gain (loss).............. 3,516 2,431 21,288 (1,534) Net change in unrealized appreciation/depreciation............ -- -- (62,446) 48,780 ------------ ------------ ----------- ---------- NET INCREASE (DECREASE)............. 10,756,733 22,562,573 300,269 323,677 ------------ ------------ ----------- ---------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (9,875,477) (22,379,796) (273,247) (256,046) Class Y Shares........................ (877,853) (180,251) (115,052) (18,021) Net realized gain Class X Shares........................ (3,257) (2,394) -- -- Class Y Shares........................ (259) (37) -- -- Paid-in-capital Class X Shares........................ -- -- -- -- Class Y Shares........................ -- -- -- -- ------------ ------------ ----------- ---------- TOTAL DIVIDENDS AND DISTRIBUTIONS... (10,756,846) (22,562,478) (388,299) (274,067) ------------ ------------ ----------- ---------- Net increase (decrease) from transactions in shares of beneficial interest............................... 117,153,243 (63,037,023) 12,743,748 4,632,500 ------------ ------------ ----------- ---------- TOTAL INCREASE (DECREASE)........... 117,153,130 (63,036,928) 12,655,718 4,682,110 NET ASSETS: Beginning of period..................... 372,606,183 435,643,111 7,856,699 3,174,589 ------------ ------------ ----------- ---------- END OF PERIOD........................... $489,759,313 $372,606,183 $20,512,417 $7,856,699 ============ ============ =========== ========== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ 171 $ 284 $ (32,681) $ 2,364 ============ ============ =========== ==========
------------------------ + CLASS Y SHARES WERE ISSUED JUNE 5, 2000. SEE NOTES TO FINANCIAL STATEMENTS 120
QUALITY INCOME PLUS HIGH YIELD UTILITIES ----------------------------------- ---------------------------------- -------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 --------------- ------------------ -------------- ------------------ -------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................. $ 13,197,016 $ 28,732,096 $ 9,636,438 $ 38,051,913 $ 5,187,259 Net realized gain (loss).............. 2,356,432 (10,516,981) (44,857,668) (3,132,579) 14,115,803 Net change in unrealized appreciation/depreciation............ 155,285 25,002,447 13,594,925 (102,561,779) (78,600,404) ------------ ------------ ------------ ------------ ------------ NET INCREASE (DECREASE)............. 15,708,733 43,217,562 (21,626,305) (67,642,445) (59,297,342) ------------ ------------ ------------ ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (13,146,300) (28,551,058) (9,838,881) (37,708,110) (5,101,132) Class Y Shares........................ (432,127) (80,831) (333,859) (181,257) (197,896) Net realized gain Class X Shares........................ -- -- -- -- (27,668,154) Class Y Shares........................ -- -- -- -- (1,423,813) Paid-in-capital Class X Shares........................ -- -- -- -- -- Class Y Shares........................ -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS... (13,578,427) (28,631,889) (10,172,740) (37,889,367) (34,390,995) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from transactions in shares of beneficial interest............................... 31,629,861 (59,032,899) 1,291,131 (43,559,323) (10,071,182) ------------ ------------ ------------ ------------ ------------ TOTAL INCREASE (DECREASE)........... 33,760,167 (44,447,226) (30,507,914) (149,091,135) (103,759,519) NET ASSETS: Beginning of period..................... 411,684,625 456,131,851 130,592,337 279,683,472 570,803,566 ------------ ------------ ------------ ------------ ------------ END OF PERIOD........................... $445,444,792 $411,684,625 $100,084,423 $130,592,337 $467,044,047 ============ ============ ============ ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ (616,556) $ 170,211 $ 1,260,482 $ 183,893 $ (88,153) ============ ============ ============ ============ ============ UTILITIES INCOME BUILDER ------------------ --------------------------------- FOR THE YEAR FOR THE SIX FOR THE YEAR ENDED MONTHS ENDED ENDED DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ ------------------ ------------- ------------------ (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................. $ 12,506,131 $ 1,489,684 $ 3,364,951 Net realized gain (loss).............. 22,995,021 (37,741) (1,439,206) Net change in unrealized appreciation/depreciation............ (17,897,321) 1,463,063 (2,608,659) ------------ ----------- ------------ NET INCREASE (DECREASE)............. 17,603,831 2,915,016 (682,914) ------------ ----------- ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (12,359,196) (1,571,235) (3,258,344) Class Y Shares........................ (137,756) (69,033) (16,825) Net realized gain Class X Shares........................ (33,661,404) -- -- Class Y Shares........................ (57,888) -- -- Paid-in-capital Class X Shares........................ -- -- (188,897) Class Y Shares........................ -- -- (975) ------------ ----------- ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS... (46,216,244) (1,640,268) (3,465,041) ------------ ----------- ------------ Net increase (decrease) from transactions in shares of beneficial interest............................... 18,929,027 7,134,631 (17,121,201) ------------ ----------- ------------ TOTAL INCREASE (DECREASE)........... (9,683,386) 8,409,379 (21,269,156) NET ASSETS: Beginning of period..................... 580,486,952 60,347,180 81,616,336 ------------ ----------- ------------ END OF PERIOD........................... $570,803,566 $68,756,559 $ 60,347,180 ============ =========== ============ UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ 9,160 $ (331,936) $ 26,859 ============ =========== ============
------------------------ + CLASS Y SHARES WERE ISSUED JUNE 5, 2000. 121 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED STATEMENTS OF CHANGES IN NET ASSETS CONTINUED
DIVIDEND GROWTH CAPITAL GROWTH ------------------------------------ --------------------------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED MONTHS ENDED ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ ---------------- ------------------ ------------- ------------------ (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income (loss).......... $ 14,001,497 $ 33,434,804 $ 174,427 $ 801,077 Net realized gain (loss).............. (34,121,274) (247,633,286) (9,904,454) 8,578,573 Net change in unrealized appreciation/depreciation............ 37,993,896 255,968,189 (18,018,938) (7,754,345) -------------- -------------- ------------ ------------ NET INCREASE (DECREASE)............. 17,874,119 41,769,707 (27,748,965) 1,625,305 -------------- -------------- ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (13,754,378) (33,410,710) (773,047) (16,143) Class Y Shares........................ (260,206) (116,132) (27,695) (51) Net realized gain Class X Shares........................ -- (355,389,540) (9,671,004) (31,601,359) Class Y Shares........................ -- (366,002) (378,927) (99,741) -------------- -------------- ------------ ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS... (14,014,584) (389,282,384) (10,850,673) (31,717,294) -------------- -------------- ------------ ------------ Net increase (decrease) from transactions in shares of beneficial interest............................... (72,391,738) (114,494,397) (5,206,818) 45,543,036 -------------- -------------- ------------ ------------ TOTAL INCREASE (DECREASE)........... (68,532,203) (462,007,074) (43,806,456) 15,451,047 NET ASSETS: Beginning of period..................... 1,571,806,853 2,033,813,927 186,702,463 171,251,416 -------------- -------------- ------------ ------------ END OF PERIOD........................... $1,503,274,650 $1,571,806,853 $142,896,007 $186,702,463 ============== ============== ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ (22,782) $ (9,695) $ 174,312 $ 800,627 ============== ============== ============ ============
------------------------ + CLASS Y SHARES WERE ISSUED JUNE 5, 2000. SEE NOTES TO FINANCIAL STATEMENTS 122
GLOBAL DIVIDEND GROWTH EUROPEAN GROWTH PACIFIC GROWTH ---------------------------------- ---------------------------------- -------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 -------------- ------------------ -------------- ------------------ -------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income (loss).......... $ 4,130,879 $ 7,867,441 $ 2,866,085 $ 2,594,600 $ (6,137) Net realized gain (loss).............. (3,303,846) 7,688,701 (24,404,477) 76,598,627 (6,738,254) Net change in unrealized appreciation/depreciation............ (14,161,948) (33,765,802) (50,842,008) (105,877,322) 1,800,625 ------------ ------------ ------------ ------------ ------------ NET INCREASE (DECREASE)............. (13,334,915) (18,209,660) (72,380,400) (26,684,095) (4,943,766) ------------ ------------ ------------ ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (8,890,511) (2,796,221) (4,595,028) (3,290,821) (889,116) Class Y Shares........................ (157,422) -- (189,010) (8,172) (45,120) Net realized gain Class X Shares........................ (3,829,787) (38,145,152) (72,684,527) (84,881,334) -- Class Y Shares........................ (68,473) (20,655) (3,122,453) (210,787) -- ------------ ------------ ------------ ------------ ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS... (12,946,193) (40,962,028) (80,591,018) (88,391,114) (934,236) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from transactions in shares of beneficial interest............................... (17,239,589) (71,777,150) 38,237,002 54,315,573 (5,876,234) ------------ ------------ ------------ ------------ ------------ TOTAL INCREASE (DECREASE)........... (43,520,697) (130,948,838) (114,734,416) (60,759,636) (11,754,236) NET ASSETS: Beginning of period..................... 375,980,652 506,929,490 518,945,131 579,704,767 64,937,603 ------------ ------------ ------------ ------------ ------------ END OF PERIOD........................... $332,459,955 $375,980,652 $404,210,715 $518,945,131 $ 53,183,367 ============ ============ ============ ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ 1,842,063 $ 6,759,117 $ 2,137,001 $ 4,054,954 $ (986,012) ============ ============ ============ ============ ============ PACIFIC GROWTH EQUITY ------------------ ------------------------------------ FOR THE YEAR FOR THE SIX FOR THE YEAR ENDED MONTHS ENDED ENDED DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ ------------------ ---------------- ------------------ (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income (loss).......... $ 18,108 $ 4,980,666 $ 12,933,151 Net realized gain (loss).............. 4,924,305 (275,248,540) 241,612,765 Net change in unrealized appreciation/depreciation............ (37,297,247) (71,356,406) (526,098,393) ------------ -------------- -------------- NET INCREASE (DECREASE)............. (32,354,834) (341,624,280) (271,552,477) ------------ -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (1,544,980) (4,917,750) (12,785,786) Class Y Shares........................ (892) (101,936) (118,384) Net realized gain Class X Shares........................ -- (279,989,635) (309,799,810) Class Y Shares........................ -- (10,606,414) (519,733) ------------ -------------- -------------- TOTAL DIVIDENDS AND DISTRIBUTIONS... (1,545,872) (295,615,735) (323,223,713) ------------ -------------- -------------- Net increase (decrease) from transactions in shares of beneficial interest............................... (17,089,075) 143,562,894 361,741,551 ------------ -------------- -------------- TOTAL INCREASE (DECREASE)........... (50,989,781) (493,677,121) (233,034,639) NET ASSETS: Beginning of period..................... 115,927,384 1,850,036,746 2,083,071,385 ------------ -------------- -------------- END OF PERIOD........................... $ 64,937,603 $1,356,359,625 $1,850,036,746 ============ ============== ============== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ (45,639) $ (10,037) $ 28,983 ============ ============== ==============
------------------------ + CLASS Y SHARES WERE ISSUED JUNE 5, 2000. 123 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED STATEMENTS OF CHANGES IN NET ASSETS CONTINUED
S&P 500 INDEX COMPETITIVE EDGE "BEST IDEAS" --------------------------------- ---------------------------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED MONTHS ENDED ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ ------------- ------------------ -------------- ------------------ (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................. $ 919,418 $ 1,936,508 $ 225,089 $ 386,773 Net realized gain (loss).............. (5,148,195) (569,474) (6,057,139) 5,361,073 Net change in unrealized appreciation/depreciation............ (12,045,520) (23,329,057) (5,467,807) (20,691,597) ------------ ------------ ------------ ----------- NET INCREASE (DECREASE)............. (16,274,297) (21,962,023) (11,299,857) (14,943,751) ------------ ------------ ------------ ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (1,685,269) (1,171,429) (348,939) (314,559) Class Y Shares........................ (251,291) (8,524) (32,735) (2,328) Net realized gain Class X Shares........................ -- (1,055,974) (3,960,881) -- Class Y Shares........................ -- (7,684) (413,197) -- ------------ ------------ ------------ ----------- TOTAL DIVIDENDS AND DISTRIBUTIONS... (1,936,560) (2,243,611) (4,755,752) (316,887) ------------ ------------ ------------ ----------- Net increase (decrease) from transactions in shares of beneficial interest............................... 10,264,284 61,496,562 (85,898) 27,513,945 ------------ ------------ ------------ ----------- TOTAL INCREASE (DECREASE)........... (7,946,573) 37,290,928 (16,141,507) 12,253,307 NET ASSETS: Beginning of period..................... 223,253,748 185,962,820 74,548,109 62,294,802 ------------ ------------ ------------ ----------- END OF PERIOD........................... $215,307,175 $223,253,748 $ 58,406,602 $74,548,109 ============ ============ ============ =========== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ 919,319 $ 1,936,461 $ 223,984 $ 380,569 ============ ============ ============ ===========
------------------------ + CLASS Y SHARES WERE ISSUED JUNE 5, 2000. ++ FOR THE PERIOD NOVEMBER 6, 2000 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 2000. SEE NOTES TO FINANCIAL STATEMENTS 124
AGGRESSIVE EQUITY INFORMATION STRATEGIST ----------------------------------- ---------------------------------- ---------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000++ JUNE 30, 2001 --------------- ------------------ ------------- ------------------- ---------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................. $ 159,298 $ 390,024 $ 52,288 $ 14,872 $ 8,624,569 Net realized gain (loss).............. (25,538,952) (16,497,626) (2,258,216) (16,575) (7,936,235) Net change in unrealized appreciation/depreciation............ (6,514,114) 4,022,722 (993,726) (285,604) (49,705,418) ------------ ------------ ----------- ---------- ------------ NET INCREASE (DECREASE)............. (31,893,768) (12,084,880) (3,199,654) (287,307) (49,017,084) ------------ ------------ ----------- ---------- ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (337,431) (49,395) (7,156) -- (8,548,348) Class Y Shares........................ (52,589) (497) (8,125) -- (381,542) Net realized gain Class X Shares........................ -- -- -- -- (25,786,206) Class Y Shares........................ -- -- -- -- (1,505,344) ------------ ------------ ----------- ---------- ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS... (390,020) (49,892) (15,281) -- (36,221,440) ------------ ------------ ----------- ---------- ------------ Net increase (decrease) from transactions in shares of beneficial interest............................... (9,562,197) 125,986,777 8,623,623 4,888,807 (1,475,787) ------------ ------------ ----------- ---------- ------------ TOTAL INCREASE (DECREASE)........... (41,845,985) 113,852,005 5,408,688 4,601,500 (86,714,311) NET ASSETS: Beginning of period..................... 152,049,381 38,197,376 4,601,500 -- 724,669,477 ------------ ------------ ----------- ---------- ------------ END OF PERIOD........................... $110,203,396 $152,049,381 $10,010,188 $4,601,500 $637,955,166 ============ ============ =========== ========== ============ UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ 159,296 $ 390,018 $ 52,288 $ 15,281 $ (33,782) ============ ============ =========== ========== ============ STRATEGIST ------------------ FOR THE YEAR ENDED DECEMBER 31, 2000+ ------------------ INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................. $ 19,788,254 Net realized gain (loss).............. 26,318,018 Net change in unrealized appreciation/depreciation............ (34,158,403) ------------ NET INCREASE (DECREASE)............. 11,947,869 ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class X Shares........................ (19,395,713) Class Y Shares........................ (245,565) Net realized gain Class X Shares........................ (85,487,009) Class Y Shares........................ (209,745) ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS... (105,338,032) ------------ Net increase (decrease) from transactions in shares of beneficial interest............................... 88,358,964 ------------ TOTAL INCREASE (DECREASE)........... (5,031,199) NET ASSETS: Beginning of period..................... 729,700,676 ------------ END OF PERIOD........................... $724,669,477 ============ UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)................................. $ 149,692 ============
------------------------ + CLASS Y SHARES WERE ISSUED JUNE 5, 2000. 125 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED STATEMENTS OF CHANGES IN NET ASSETS CONTINUED SUMMARY OF TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
MONEY MARKET SHORT-TERM BOND --------------------------------- --------------------------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED MONTHS ENDED ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ ------------- ------------------ ------------- ------------------ (UNAUDITED) (UNAUDITED) CLASS X SHARES SHARES Sold..................... 655,366,293 934,549,163 1,273,270 733,662 Reinvestment of dividends and distributions....... 9,878,734 22,382,190 27,368 25,864 Redeemed................. (597,005,968) (1,033,781,220) (714,207) (435,676) ------------- --------------- ----------- ----------- NET INCREASE (DECREASE) - CLASS X................. 68,239,059 (76,849,867) 586,431 323,850 ------------- --------------- ----------- ----------- AMOUNT Sold..................... $ 655,366,293 $ 934,549,163 $12,761,564 $ 7,265,518 Reinvestment of dividends and distributions....... 9,878,734 22,382,190 273,247 256,046 Redeemed................. (597,005,968) (1,033,781,220) (7,146,477) (4,317,357) ------------- --------------- ----------- ----------- NET INCREASE (DECREASE) - CLASS X................. $ 68,239,059 $ (76,849,867) $ 5,888,334 $ 3,204,207 ------------- --------------- ----------- ----------- CLASS Y SHARES SHARES Sold..................... 120,689,779 21,834,091 785,952 152,198 Reinvestment of dividends and distributions....... 878,112 180,288 11,546 1,815 Redeemed................. (72,653,707) (8,201,535) (111,968) (10,295) ------------- --------------- ----------- ----------- NET INCREASE - CLASS Y... 48,914,184 13,812,844 685,530 143,718 ------------- --------------- ----------- ----------- AMOUNT Sold..................... $ 120,689,779 $ 21,834,091 $ 7,859,745 $ 1,512,471 Reinvestment of dividends and distributions....... 878,112 180,288 115,051 18,021 Redeemed................. (72,653,707) (8,201,535) (1,119,382) (102,199) ------------- --------------- ----------- ----------- NET INCREASE - CLASS Y... $ 48,914,184 $ 13,812,844 $ 6,855,414 $ 1,428,293 ------------- --------------- ----------- -----------
------------------------ + FOR THE CLASS Y SHARES FOR THE PERIOD JUNE 5, 2000 (ISSUED DATE) THROUGH DECEMBER 31, 2000. SEE NOTES TO FINANCIAL STATEMENTS 126
QUALITY INCOME PLUS HIGH YIELD UTILITIES ----------------------------------- ---------------------------------- -------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 --------------- ------------------ -------------- ------------------ -------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) CLASS X SHARES SHARES Sold..................... 7,534,904 5,308,884 11,060,136 7,327,491 1,197,430 Reinvestment of dividends and distributions....... 1,272,218 2,888,463 4,591,025 10,699,948 1,811,337 Redeemed................. (7,635,406) (14,707,375) (16,920,862) (29,780,742) (3,695,401) ------------ ------------- ------------ ------------- ------------ NET INCREASE (DECREASE) - CLASS X................. 1,171,716 (6,510,028) (1,269,701) (11,753,303) (686,634) ------------ ------------- ------------ ------------- ------------ AMOUNT Sold..................... $ 78,206,435 $ 52,461,632 $ 26,904,007 $ 26,691,531 $ 24,480,474 Reinvestment of dividends and distributions....... 13,146,299 28,551,058 9,838,880 37,708,109 32,769,285 Redeemed................. (79,059,494) (145,125,419) (39,275,204) (110,680,449) (75,201,178) ------------ ------------- ------------ ------------- ------------ NET INCREASE (DECREASE) - CLASS X................. $ 12,293,240 $ (64,112,729) $ (2,532,317) $ (46,280,809) $(17,951,419) ------------ ------------- ------------ ------------- ------------ CLASS Y SHARES SHARES Sold..................... 2,035,924 521,019 1,994,802 838,148 707,867 Reinvestment of dividends and distributions....... 41,932 8,045 160,247 62,141 89,900 Redeemed................. (209,800) (22,297) (463,158) (100,749) (402,682) ------------ ------------- ------------ ------------- ------------ NET INCREASE - CLASS Y... 1,868,056 506,767 1,691,891 799,540 395,085 ------------ ------------- ------------ ------------- ------------ AMOUNT Sold..................... $ 21,071,778 $ 5,222,238 $ 4,472,071 $ 2,862,807 $ 14,410,953 Reinvestment of dividends and distributions....... 432,127 80,830 333,859 181,257 1,621,709 Redeemed................. (2,167,284) (223,238) (982,482) (322,578) (8,152,425) ------------ ------------- ------------ ------------- ------------ NET INCREASE - CLASS Y... $ 19,336,621 $ 5,079,830 $ 3,823,448 $ 2,721,486 $ 7,880,237 ------------ ------------- ------------ ------------- ------------ UTILITIES INCOME BUILDER ------------------ ---------------------------------- FOR THE YEAR FOR THE SIX FOR THE YEAR ENDED MONTHS ENDED ENDED DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ ------------------ -------------- ------------------ (UNAUDITED) CLASS X SHARES SHARES Sold..................... 3,339,684 1,664,784 596,272 Reinvestment of dividends and distributions....... 2,132,995 142,780 318,465 Redeemed................. (5,380,502) (1,437,598) (2,580,512) ------------- ------------ ------------ NET INCREASE (DECREASE) - CLASS X................. 92,177 369,966 (1,665,775) ------------- ------------ ------------ AMOUNT Sold..................... $ 75,452,968 $ 18,825,799 $ 6,501,915 Reinvestment of dividends and distributions....... 46,020,620 1,571,236 3,447,241 Redeemed................. (121,835,075) (16,191,805) (28,033,361) ------------- ------------ ------------ NET INCREASE (DECREASE) - CLASS X................. $ (361,487) $ 4,205,230 $(18,084,205) ------------- ------------ ------------ CLASS Y SHARES SHARES Sold..................... 911,424 268,879 96,113 Reinvestment of dividends and distributions....... 8,984 6,262 1,646 Redeemed................. (40,731) (14,954) (8,845) ------------- ------------ ------------ NET INCREASE - CLASS Y... 879,677 260,187 88,914 ------------- ------------ ------------ AMOUNT Sold..................... $ 19,996,170 $ 3,027,389 $ 1,040,551 Reinvestment of dividends and distributions....... 195,644 69,033 17,800 Redeemed................. (901,300) (167,021) (95,347) ------------- ------------ ------------ NET INCREASE - CLASS Y... $ 19,290,514 $ 2,929,401 $ 963,004 ------------- ------------ ------------
------------------------ + FOR THE CLASS Y SHARES FOR THE PERIOD JUNE 5, 2000 (ISSUED DATE) THROUGH DECEMBER 31, 2000. 127 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED STATEMENTS OF CHANGES IN NET ASSETS CONTINUED SUMMARY OF TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST CONTINUED
DIVIDEND GROWTH CAPITAL GROWTH ----------------------------------- ---------------------------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED MONTHS ENDED ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ --------------- ------------------ -------------- ------------------ (UNAUDITED) (UNAUDITED) CLASS X SHARES SHARES Sold..................... 5,134,729 6,915,502 731,868 2,339,000 Reinvestment of dividends and distributions....... 481,401 29,902,455 663,536 1,544,543 Redeemed................. (12,000,158) (40,746,272) (1,788,787) (1,968,416) ------------- ------------- ------------ ------------ NET INCREASE (DECREASE) - CLASS X................. (6,384,028) (3,928,315) (393,383) 1,915,127 ------------- ------------- ------------ ------------ AMOUNT Sold..................... $ 74,136,237 $ 107,878,599 $ 13,056,550 $ 53,795,246 Reinvestment of dividends and distributions....... 7,004,390 379,049,270 10,444,051 31,601,359 Redeemed................. (173,095,429) (619,548,550) (31,538,982) (43,563,364) ------------- ------------- ------------ ------------ NET INCREASE (DECREASE) - CLASS X................. $ (91,954,802) $(132,620,681) $ (8,038,381) $ 41,833,241 ------------- ------------- ------------ ------------ CLASS Y SHARES SHARES Sold..................... 1,857,077 1,340,964 170,434 186,139 Reinvestment of dividends and distributions....... 11,367 37,255 25,900 4,877 Redeemed................. (521,844) (60,977) (30,592) (13,681) ------------- ------------- ------------ ------------ NET INCREASE - CLASS Y... 1,346,600 1,317,242 165,742 177,335 ------------- ------------- ------------ ------------ AMOUNT Sold..................... $ 26,963,618 $ 18,463,831 $ 2,951,915 $ 3,889,764 Reinvestment of dividends and distributions....... 165,158 482,134 406,622 99,741 Redeemed................. (7,565,712) (819,681) (526,974) (279,710) ------------- ------------- ------------ ------------ NET INCREASE - CLASS Y... $ 19,563,064 $ 18,126,284 $ 2,831,563 $ 3,709,795 ------------- ------------- ------------ ------------
------------------------ + FOR THE CLASS Y SHARES FOR THE PERIOD JUNE 5, 2000 (ISSUED DATE) THROUGH DECEMBER 31, 2000. SEE NOTES TO FINANCIAL STATEMENTS 128
GLOBAL DIVIDEND GROWTH EUROPEAN GROWTH PACIFIC GROWTH ---------------------------------- ----------------------------------- --------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 -------------- ------------------ --------------- ------------------ --------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) CLASS X SHARES SHARES Sold..................... 1,328,030 2,246,998 5,140,611 9,230,245 45,964,416 Reinvestment of dividends and distributions....... 1,079,822 3,301,049 4,446,465 3,299,856 184,464 Redeemed................. (4,047,513) (11,288,529) (7,326,292) (10,913,565) (47,358,119) ------------ ------------- ------------- ------------- ------------- NET INCREASE (DECREASE) - CLASS X................. (1,639,661) (5,740,482) 2,260,784 1,616,536 (1,209,239) ------------ ------------- ------------- ------------- ------------- AMOUNT Sold..................... $ 16,758,125 $ 28,967,660 $ 120,090,859 $ 272,639,151 $ 239,918,570 Reinvestment of dividends and distributions....... 12,720,298 40,941,373 77,279,555 88,172,155 889,116 Redeemed................. (50,750,501) (143,825,063) (170,428,924) (317,442,661) (249,252,891) ------------ ------------- ------------- ------------- ------------- NET INCREASE (DECREASE) - CLASS X................. $(21,272,078) $ (73,916,030) $ 26,941,490 $ 43,368,645 $ (8,445,205) ------------ ------------- ------------- ------------- ------------- CLASS Y SHARES SHARES Sold..................... 341,751 186,212 1,237,076 468,981 4,829,371 Reinvestment of dividends and distributions....... 19,225 1,677 191,083 8,195 9,361 Redeemed................. (37,100) (13,917) (886,198) (59,519) (4,273,904) ------------ ------------- ------------- ------------- ------------- NET INCREASE - CLASS Y... 323,876 173,972 541,961 417,657 564,828 ------------ ------------- ------------- ------------- ------------- AMOUNT Sold..................... $ 4,265,187 $ 2,287,280 $ 27,821,346 $ 12,215,627 $ 24,866,150 Reinvestment of dividends and distributions....... 225,896 20,655 3,311,463 218,959 45,120 Redeemed................. (458,594) (169,055) (19,837,297) (1,487,658) (22,342,299) ------------ ------------- ------------- ------------- ------------- NET INCREASE - CLASS Y... $ 4,032,489 $ 2,138,880 $ 11,295,512 $ 10,946,928 $ 2,568,971 ------------ ------------- ------------- ------------- ------------- PACIFIC GROWTH EQUITY ------------------ ----------------------------------- FOR THE YEAR FOR THE SIX FOR THE YEAR ENDED MONTHS ENDED ENDED DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ ------------------ --------------- ------------------ (UNAUDITED) CLASS X SHARES SHARES Sold..................... 51,041,243 1,390,544 7,164,752 Reinvestment of dividends and distributions....... 197,316 11,263,855 7,535,790 Redeemed................. (53,387,675) (6,709,723) (7,537,949) ------------- ------------- ------------- NET INCREASE (DECREASE) - CLASS X................. (2,149,116) 5,944,676 7,162,593 ------------- ------------- ------------- AMOUNT Sold..................... $ 359,491,480 $ 47,283,076 $ 363,241,322 Reinvestment of dividends and distributions....... 1,544,980 284,907,386 319,231,351 Redeemed................. (379,056,684) (223,933,323) (355,434,066) ------------- ------------- ------------- NET INCREASE (DECREASE) - CLASS X................. $ (18,020,224) $ 108,257,139 $ 327,038,607 ------------- ------------- ------------- CLASS Y SHARES SHARES Sold..................... 142,556 893,832 829,761 Reinvestment of dividends and distributions....... 114 424,131 14,864 Redeemed................. (11,574) (157,538) (40,139) ------------- ------------- ------------- NET INCREASE - CLASS Y... 131,096 1,160,425 804,486 ------------- ------------- ------------- AMOUNT Sold..................... $ 1,009,590 $ 29,867,978 $ 35,773,057 Reinvestment of dividends and distributions....... 892 10,708,350 623,947 Redeemed................. (79,333) (5,270,573) (1,694,060) ------------- ------------- ------------- NET INCREASE - CLASS Y... $ 931,149 $ 35,305,755 $ 34,702,944 ------------- ------------- -------------
------------------------ + FOR THE CLASS Y SHARES FOR THE PERIOD JUNE 5, 2000 (ISSUED DATE) THROUGH DECEMBER 31, 2000. 129 Morgan Stanley Variable Investment Series FINANCIAL STATEMENTS CONTINUED STATEMENTS OF CHANGES IN NET ASSETS CONTINUED SUMMARY OF TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST CONTINUED
S&P 500 INDEX COMPETITIVE EDGE "BEST IDEAS" ---------------------------------- ---------------------------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED MONTHS ENDED ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000+ -------------- ------------------ -------------- ------------------ (UNAUDITED) (UNAUDITED) CLASS X SHARES SHARES Sold..................... 1,746,495 6,860,524 1,323,508 3,173,771 Reinvestment of dividends and distributions....... 151,553 168,487 544,857 26,257 Redeemed................. (2,612,920) (3,409,330) (2,048,743) (1,371,010) ------------ ------------ ------------ ------------ NET INCREASE (DECREASE) - CLASS X................. (714,872) 3,619,681 (180,378) 1,829,018 ------------ ------------ ------------ ------------ AMOUNT Sold..................... $ 20,174,667 $ 89,722,478 $ 12,631,089 $ 37,675,407 Reinvestment of dividends and distributions....... 1,685,269 2,227,401 4,309,820 314,559 Redeemed................. (29,360,744) (44,290,749) (19,227,945) (15,717,456) ------------ ------------ ------------ ------------ NET INCREASE (DECREASE) - CLASS X................. $ (7,500,808) $ 47,659,130 $ (2,287,036) $ 22,272,510 ------------ ------------ ------------ ------------ CLASS Y SHARES SHARES Sold..................... 1,771,088 1,162,112 235,582 508,335 Reinvestment of dividends and distributions....... 22,639 1,226 56,519 194 Redeemed................. (242,344) (106,091) (50,621) (49,274) ------------ ------------ ------------ ------------ NET INCREASE - CLASS Y... 1,551,383 1,057,247 241,480 459,255 ------------ ------------ ------------ ------------ AMOUNT Sold..................... $ 20,269,836 $ 15,208,446 $ 2,216,806 $ 5,807,167 Reinvestment of dividends and distributions....... 251,291 16,208 445,932 2,328 Redeemed................. (2,756,035) (1,387,222) (461,600) (568,060) ------------ ------------ ------------ ------------ NET INCREASE - CLASS Y... $ 17,765,092 $ 13,837,432 $ 2,201,138 $ 5,241,435 ------------ ------------ ------------ ------------
------------------------ + FOR THE CLASS Y SHARES FOR THE PERIOD JUNE 5, 2000 (ISSUED DATE) THROUGH DECEMBER 31, 2000. ++ FOR THE PERIOD NOVEMBER 6, 2000 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 2000. SEE NOTES TO FINANCIAL STATEMENTS 130
AGGRESSIVE EQUITY INFORMATION STRATEGIST ---------------------------------- ---------------------------------- --------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED JUNE 30, 2001 DECEMBER 31, 2000+ JUNE 30, 2001 DECEMBER 31, 2000++ JUNE 30, 2001 -------------- ------------------ ------------- ------------------- --------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) CLASS X SHARES SHARES Sold..................... 1,081,818 9,387,514 1,144,195 302,730 2,100,609 Reinvestment of dividends and distributions....... 30,021 3,288 1,167 -- 2,338,207 Redeemed................. (2,522,098) (2,321,837) (691,460) (14,145) (5,435,088) ------------ ------------ ----------- ---------- ------------ NET INCREASE (DECREASE) - CLASS X................. (1,410,259) 7,068,965 453,902 288,585 (996,272) ------------ ------------ ----------- ---------- ------------ AMOUNT Sold..................... $ 12,980,713 $146,383,257 $ 8,837,063 $2,991,621 $ 33,083,812 Reinvestment of dividends and distributions....... 337,431 49,395 7,156 -- 34,334,555 Redeemed................. (30,080,266) (34,737,951) (5,110,189) (128,569) (84,519,331) ------------ ------------ ----------- ---------- ------------ NET INCREASE (DECREASE) - CLASS X................. $(16,762,122) $111,694,701 $ 3,734,030 $2,863,052 $(17,100,964) ------------ ------------ ----------- ---------- ------------ CLASS Y SHARES SHARES Sold..................... 749,505 1,003,354 763,162 210,137 1,378,032 Reinvestment of dividends and distributions....... 4,687 33 1,328 -- 128,659 Redeemed................. (166,478) (66,250) (79,161) (4,344) (498,029) ------------ ------------ ----------- ---------- ------------ NET INCREASE - CLASS Y... 587,714 937,137 685,329 205,793 1,008,662 ------------ ------------ ----------- ---------- ------------ AMOUNT Sold..................... $ 9,088,522 $ 15,298,277 $ 5,440,844 $2,068,622 $ 21,484,800 Reinvestment of dividends and distributions....... 52,589 497 8,125 -- 1,886,886 Redeemed................. (1,941,186) (1,006,698) (559,376) (42,867) (7,746,510) ------------ ------------ ----------- ---------- ------------ NET INCREASE - CLASS Y... $ 7,199,925 $ 14,292,076 $ 4,889,593 $2,025,755 $ 15,625,176 ------------ ------------ ----------- ---------- ------------ STRATEGIST ------------------ FOR THE YEAR ENDED DECEMBER 31, 2000+ ------------------ CLASS X SHARES SHARES Sold..................... 5,636,054 Reinvestment of dividends and distributions....... 6,205,199 Redeemed................. (7,949,205) ------------- NET INCREASE (DECREASE) - CLASS X................. 3,892,048 ------------- AMOUNT Sold..................... $ 102,563,826 Reinvestment of dividends and distributions....... 104,882,722 Redeemed................. (143,279,933) ------------- NET INCREASE (DECREASE) - CLASS X................. $ 64,166,615 ------------- CLASS Y SHARES SHARES Sold..................... 1,463,098 Reinvestment of dividends and distributions....... 27,045 Redeemed................. (85,978) ------------- NET INCREASE - CLASS Y... 1,404,165 ------------- AMOUNT Sold..................... $ 25,207,978 Reinvestment of dividends and distributions....... 455,311 Redeemed................. (1,470,940) ------------- NET INCREASE - CLASS Y... $ 24,192,349 -------------
------------------------ + FOR THE CLASS Y SHARES FOR THE PERIOD JUNE 5, 2000 (ISSUED DATE) THROUGH DECEMBER 31, 2000. 131 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Variable Investment Series (the "Fund"), formerly Morgan Stanley Dean Witter Variable Investment Series, is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. Investments in the Fund may be made only by (1) Northbrook Life Insurance Company to fund the benefits under variable annuity contracts and variable life insurance contracts it issues; (2) Allstate Life Insurance Company to fund the benefits under variable annuity contracts it issues; (3) Glenbrook Life and Annuity Company to fund the benefits under variable annuity contracts and variable life insurance contracts it issues; and (4) Paragon Life Insurance Company to fund the benefits under variable life insurance contracts it issues to certain employees of Morgan Stanley Dean Witter & Co., the parent company of Morgan Stanley Investment Advisors Inc. (the "Investment Manager"), formerly Morgan Stanley Dean Witter Advisors Inc. The Fund, organized on February 25, 1983 as a Massachusetts business trust, consists of seventeen Portfolios ("Portfolios") which commenced operations as follows:
COMMENCEMENT COMMENCEMENT PORTFOLIO OF OPERATIONS PORTFOLIO OF OPERATIONS --------- ------------------- --------- ------------------ Money Market............................ March 9, 1984 European Growth ........................ March 1, 1991 Short-Term Bond......................... May 4, 1999 Pacific Growth ......................... February 23, 1994 Quality Income Plus..................... March 1, 1987 Equity ................................. March 9, 1984 High Yield.............................. March 9, 1984 S&P 500 Index .......................... May 18, 1998 Utilities............................... March 1, 1990 Competitive Edge "Best Ideas" .......... May 18, 1998 Income Builder.......................... January 21, 1997 Aggressive Equity ...................... May 4, 1999 Dividend Growth......................... March 1, 1990 Information ............................ November 6, 2000 Capital Growth.......................... March 1, 1991 Strategist ............................. March 1, 1987 Global Dividend Growth.................. February 23, 1994
On June 5, 2000, the Fund commenced offering one additional class of shares (Class Y shares), with all Portfolio shares issued prior to May 1, 2000 designated Class X shares. The two classes are identical except that Class Y shares incur distribution expenses. Class X shares are generally available to holders of contracts offered by Paragon Life Insurance Company and other contracts offered before May 1, 2000. Class Y shares are available to holders of contracts offered by Northbrook Life Insurance Company, Allstate Life Insurance Company, and Glenbrook Life and Annuity Company offered on or after June 5, 2000. 132 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED The investment objectives of each Portfolio are as follows: PORTFOLIO INVESTMENT OBJECTIVE Money Market Seeks high current income, preservation of capital and liquidity by investing in short-term money market instruments. Short-Term Bond Seeks to provide a high level of current income consistent with the preservation of capital, by investing primarily in bonds issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities and investment grade corporate and other types of bonds including asset-backed securities. Quality Income Plus Seeks, as its primary objective, to earn a high level of current income and, as a secondary objective, capital appreciation, but only when consistent with its primary objective, by investing primarily in U.S. Government securities and higher-rated fixed income securities. High Yield Seeks, as its primary objective, to earn a high level of current income and, as a secondary objective, capital appreciation, but only when consistent with its primary objective, by investing primarily in lower-rated fixed income securities. Utilities Seeks both capital appreciation and current income by investing in equity and fixed income securities of companies engaged in the utilities industry. Income Builder Seeks, as its primary objective, to earn reasonable income and, as a secondary objective, growth of capital by investing primarily in income-producing equity securities. Dividend Growth Seeks to provide reasonable current income and long-term growth of income and capital by investing primarily in common stocks of companies with a record of paying dividends and the potential for increasing dividends. Capital Growth Seeks long-term capital growth by investing primarily in common stocks. Global Dividend Growth Seeks to provide reasonable current income and long-term growth of income and capital by investing primarily in common stocks of companies, issued by issuers worldwide, with a record of paying dividends and the potential for increasing dividends. European Growth Seeks to maximize the capital appreciation of its investments by investing primarily in securities issued by issuers located in Europe. Pacific Growth Seeks to maximize the capital appreciation of its investments by investing primarily in securities issued by issuers located in Asia, Australia and New Zealand. Equity Seeks, as its primary objective, capital growth and, as a secondary objective, income, but only when consistent with its primary objective, by investing primarily in equity securities and securities convertible into equity securities.
133 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED PORTFOLIO INVESTMENT OBJECTIVE S&P 500 Index Seeks to provide investment results that, before expenses, correspond to the total return of the Standards & Poor's 500 Composite Stock Price Index (the "S&P 500 INDEX") by investing primarily in common stocks included in the S&P 500 INDEX. Competitive Edge Seeks long-term capital growth by investing primarily in the "Best Ideas" common stock of U.S. and non-U.S. companies included in the "Best Ideas" list, a research compilation assembled and maintained by Morgan Stanley Equity Research. Aggressive Equity Seeks long-term capital growth by investing primarily in equity securities of companies that offer the potential for superior earnings growth. Information Seeks long-term capital appreciation by investing primarily in common stocks and investment grade convertible securities of companies throughout the world that are engaged in the communications and information industry. Strategist Seeks a high total investment return through a fully managed investment policy utilizing equity, investment grade fixed income and money market securities and writing covered options.
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Money Market: securities are valued at amortized cost which approximates market value. All remaining Portfolios: (1) an equity portfolio security listed or traded on the New York or American Stock Exchange, NASDAQ, or other exchange is valued at its latest sale price, prior to the time when assets are valued; if there were no sales that day, the security is valued at the latest bid price (in cases where securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market pursuant to procedures adopted by the Trustees); (2) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the latest available bid price; (3) listed options are valued at the latest sale price on the exchange on which they are listed unless no sales of such options have taken place that day, in which case they are valued at the mean between their latest bid and asked price; (4) when market quotations are not readily available, including circumstances under which it is determined by the Investment Manager (or, in the case of European Growth and Pacific Growth, by Morgan Stanley Investment Management Inc. (the "Sub- 134 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED Advisor")) that sale or bid prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Trustees (valuation of debt securities for which market quotations are not readily available may also be based upon current market prices of securities which are comparable in coupon, rating and maturity or an appropriate matrix utilizing similar factors); (5) certain of the Fund's portfolio securities may be valued by an outside pricing service approved by the Trustees. The pricing service may utilize a matrix system incorporating security quality, maturity and coupon as the evaluation model parameters, and/or research and evaluations by its staff, including review of broker-dealer market price quotations in determining what it believes is the fair valuation of the securities valued by such pricing service; and (6) short-term debt securities having a maturity date of more than sixty days at the time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date except for certain dividends on foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. Interest income is accrued daily except where collection is not expected. The Fund amortizes premiums and accretes discounts over the life of the respective securities. C. ACCOUNTING FOR OPTIONS AND FUTURES CONTRACTS -- (1) Written options on debt obligations, equities and foreign currency: when the Fund writes a call or put option, the premium received is recorded as an asset and is also included in the Fund's Statement of Assets and Liabilities as a liability which is subsequently marked-to-market to reflect the current market value of the option written. If a written option either expires or the Fund enters into a closing purchase transaction, the Fund realizes a gain or loss without regard to any unrealized gain or loss on the underlying security or currency and the liability related to such option is extinguished. If a written call option is exercised, the Fund realizes a gain or loss from the sale of the underlying security or currency and the proceeds from such sale are increased by the premium originally received. If a put option which the Fund has written is exercised, the amount of the premium originally received reduces the cost of the security which the Fund purchases upon exercise of the option; (2) Purchased options on debt obligations, equities and foreign currency: when the Fund purchases a call or put option, the premium paid is recorded as an investment and is subsequently marked-to-market to reflect 135 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED the current market value. If a purchased option expires, the Fund will realize a loss to the extent of the premium paid. If the Fund enters into a closing sale transaction, a gain or loss is realized for the difference between the proceeds from the sale and the cost of the option. If a put option is exercised, the cost of the security sold upon exercise will be increased by the premium originally paid. If a call option is exercised, the cost of the security purchased upon exercise will be increased by the premium originally paid; (3) Options on futures contracts: the Fund is required to deposit cash, U.S. Government securities or other liquid portfolio securities as "initial margin" and "variation margin" with respect to written call and put options on futures contracts. If a written option expires, the Fund realizes a gain. If a written call or put option is exercised, the premium received will decrease or increase the unrealized loss or gain on the futures contract. If the Fund enters into a closing purchase transaction, the Fund realizes a gain or loss without regard to any unrealized gain or loss on the underlying futures contract and the liability related to such option is extinguished; (4) Futures contracts: a futures contract is an agreement between two parties to buy and sell financial instruments at a set price on a future date. Upon entering into such a contract, the Fund is required to pledge to the broker cash, U.S. Government securities or other liquid portfolio securities equal to the minimum initial margin requirements of the applicable futures exchange. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments known as variation margin are recorded by the Fund as unrealized gains or losses. Upon closing of the contract, the Fund realizes a gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Portfolios investing in foreign currency denominated transactions are translated into U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are included in the Statement of Operations as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. Federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. The Portfolios do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities. 136 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED E. FORWARD FOREIGN CURRENCY CONTRACTS -- Some of the Portfolios may enter into forward contracts which are valued daily at the appropriate forward exchange rates. The resultant unrealized exchange gains and losses are included in the Statement of Operations as unrealized gain/loss on foreign exchange transactions. The Portfolios record realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery. F. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply individually for each Portfolio with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and distributions to its shareholders on the record date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital. H. EXPENSES -- Direct expenses are charged to the respective Portfolio and general Fund expenses are allocated on the basis of relative net assets or equally among the Portfolios. The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by a Portfolio. 2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS Pursuant to an Investment Management Agreement (the "Agreement"), the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the following annual rates to each Portfolios' net assets determined at the close of each business day: Money Market -- 0.50% to the portion of daily net assets not exceeding $500 million; 0.425% to the portion of daily net assets exceeding $500 million but not exceeding $750 million, and 0.375% to the portion of daily net assets exceeding $750 million. Short-Term Bond -- 0.45%. Quality Income Plus -- 0.50% to the portion of daily net assets not exceeding $500 million and 0.45% to the portion of daily net assets exceeding $500 million. 137 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED High Yield -- 0.50% to the portion of daily net assets not exceeding $500 million and 0.425% to the portion of daily net assets exceeding $500 million. Utilities -- 0.65% to the portion of daily net assets not exceeding $500 million; 0.55% to the portion of daily net assets exceeding $500 million but not exceeding $1 billion and 0.525% to the portion of daily net assets exceeding $1 billion. Income Builder -- 0.75%. Dividend Growth -- 0.625% to the portion of daily net assets not exceeding $500 million; 0.50% to the portion of daily net assets exceeding $500 million but not exceeding $1 billion; 0.475% to the portion of daily net assets exceeding $1 billion but not exceeding $2 billion; 0.45% to the portion of daily net assets exceeding $2 billion but not exceeding $3 billion and 0.425% to the portion of daily net assets exceeding $3 billion. Capital Growth -- 0.65%. Global Dividend Growth -- 0.75% to the portion of daily net assets not exceeding $1 billion and 0.725% to the portion of daily net assets exceeding $1 billion. European Growth -- 0.95% to the portion of daily net assets not exceeding $500 million and 0.90% to the portion of daily net assets exceeding $500 million. Pacific Growth -- 0.95%. Equity -- 0.50% to the portion of daily net assets not exceeding $1 billion; 0.475% to the portion of daily net assets exceeding $1 billion but not exceeding $2 billion and 0.45% to the portion of daily net assets exceeding $2 billion. S&P 500 Index -- 0.40%. Competitive Edge "Best Ideas" -- 0.65%. Information -- 0.75% Aggressive Equity -- 0.75%. Strategist -- 0.50% to the portion of daily net assets not exceeding $1.5 billion and 0.475% to the portion of daily net assets exceeding $1.5 billion. 138 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED Under a Sub-Advisory Agreement between the Investment Manager and the Sub-Advisor, the Sub-Advisor provides European Growth and Pacific Growth with investment advice and portfolio management relating to the Portfolios' investments in securities, subject to the overall supervision of the Investment Manager. As compensation for its services provided pursuant to the Sub-Advisory Agreement, the Investment Manager pays the Sub-Advisor monthly compensation equal to 40% of its monthly compensation. The Investment Manager has agreed to assume all operating expenses (except for Plan of Distribution fees) and to waive its compensation to the extent that such expenses and compensation on an annualized basis exceed 0.50% of the daily net assets of S&P 500 Index. For the period June 1, 2001 through December 31, 2001, the Investment Manager has agreed to waive its fee and reimburse all operating expenses (except for Plan of Distribution fees) for Short-Term Bond to the extent they exceed 0.50% of the daily net assets. The Investment Manager has agreed to waive its fee and reimburse all operating expenses (except for Plan of Distribution fees) for Information until such time the Portfolio has $50 million of net assets or December 31, 2001, whichever occurs first. At June 30, 2001, included in the Statement of Assets and Liabilities is a receivable from affiliate, which represents expense reimbursements due to the Portfolio. 3. PLAN OF DISTRIBUTION Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager and Sub-Advisor. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. Under the Plan, Class Y shares of each Portfolio bear a distribution fee which is accrued daily and paid monthly at the annual rate of 0.25% of the average daily net assets of the class. 139 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES Purchases and sales/maturities of portfolio securities, excluding short-term investments (except Money Market), for the six months ended June 30, 2001 were as follows:
U.S. GOVERNMENT SECURITIES OTHER -------------------------------- ---------------------------------- PURCHASES SALES/MATURITIES PURCHASES SALES/MATURITIES ------------ ---------------- -------------- ---------------- Money Market............................ $229,311,575 $113,913,083 $2,639,091,375 $2,653,995,712 Short-Term Bond......................... 14,583,545 7,893,466 5,235,408 1,307,136 Quality Income Plus..................... 166,138,306 167,812,006 91,575,077 80,392,288 High Yield.............................. -- -- 62,931,024 58,161,108 Utilities............................... 2,494,266 2,534,141 85,058,950 102,014,944 Income Builder.......................... -- -- 14,797,365 10,241,623 Dividend Growth......................... -- -- 130,885,134 199,531,758 Capital Growth.......................... -- -- 245,970,103 268,426,425 Global Dividend Growth.................. -- -- 15,370,723 40,701,339 European Growth......................... -- -- 188,741,789 221,775,654 Pacific Growth.......................... -- -- 38,686,833 48,374,569 Equity.................................. -- -- 2,263,342,381 2,313,034,225 S&P 500 Index........................... -- -- 5,703,807 8,053,068 Competitive Edge "Best Ideas"........... -- -- 12,932,198 15,839,840 Aggressive Equity....................... 12,137,521 9,516,633 250,433,384 255,030,057 Information............................. -- -- 10,680,938 4,971,827 Strategist.............................. 106,032,273 97,215,506 189,693,797 167,547,734
Included in the aforementioned purchases and sales of portfolio securities of S&P 500 Index are purchases and sales of Morgan Stanley Dean Witter & Co., an affiliate of the Investment Manager, Sub-Advisor and Distributor, of $1,124,499 and $90,715, respectively including realized losses of $38,553 and purchases and sales of Allstate Corp., an affiliate of the Fund, of $470,543 and $23,981, respectively, including realized losses of $2,487. Included in the purchases of Aggressive Equity are purchases of Allstate Corp. of $396,851. Included in the sales of portfolio securities of Equity are sales of Allstate Corp. of $10,849,023, including net realized losses of $48,837. Included in the payable for investments purchased at June 30, 2001 for Income Builder and Aggressive Equity, are $139,719 and $325,595, respectively for unsettled trades with Morgan Stanley DW Inc. "(MSDW)", an affiliate of the Investment Manager, Sub-Advisor and Distributor. Included in the receivable for investments sold at June 30, 2001 for Dividend Growth is $2,087,375 for unsettled trades with MSDW. 140 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED For the six months ended June 30, 2001, the following Portfolios incurred brokerage commissions with MSDW for portfolio transactions executed on behalf of the Portfolio:
GLOBAL INCOME DIVIDEND CAPITAL DIVIDEND UTILITIES BUILDER GROWTH GROWTH GROWTH --------- ------- -------- ------- -------- $11,070 $9,203 $44,421 $33,876 $2,115 ======= ====== ======= ======= ======
AGGRESSIVE EQUITY EQUITY INFORMATION STRATEGIST ------ ---------- ----------- ---------- $35,658 $6,095 $3,633 $2,475 ======= ====== ====== ======
Included in the payable for investments purchased at June 30, 2001 for Competitive Edge "Best Ideas" is $1,082,540 for unsettled trades with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager, Sub-Advisor and Distributor. Included in the receivable for investments sold at June 30, 2001 for Equity, Competitive Edge "Best Ideas" and Aggressive Equity are $11,079,162, $1,306,899, and $1,056,030, respectively, for unsettled trades with Morgan Stanley & Co., Inc. For the six months ended June 30, 2001, the following Portfolios incurred brokerage commissions with Morgan Stanley & Co., for portfolio transactions executed on behalf of the Portfolio:
GLOBAL INCOME DIVIDEND CAPITAL DIVIDEND PACIFIC UTILITITES BUILDER GROWTH GROWTH GROWTH GROWTH ---------- ------- -------- ------- -------- ------- $7,605 $225 $24,138 $17,474 $9,392 $355 ====== ==== ======= ======= ====== ====
COMPETITIVE S&P 500 EDGE AGGRESSIVE EQUITY INDEX "BEST IDEAS" EQUITY STRATEGIST INFORMATION ------ ------- ------------ ---------- ---------- ----------- $338,945 $131 $18,306 $34,259 $22,116 $121 ======== ==== ======= ======= ======= ====
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, Sub-Advisor and Distributor, is the Fund's transfer agent. The Fund has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended June 30, 2001 included in Trustees' fees 141 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED and expenses in the Statements of Operations and the accrued pension liability included in accrued expenses in the Statements of Assets and Liabilities are as follows:
AGGREGATE PENSION COSTS --------------------------------------------------------------------- GLOBAL SHORT-TERM INCOME DIVIDEND CAPITAL DIVIDEND EUROPEAN BOND BUILDER GROWTH GROWTH GROWTH GROWTH ---------- -------- -------- ----------- --------- -------- $145 $ 443 $3,492 $681 $1,925 $2,330 ==== ====== ====== ==== ====== ====== COMPETITIVE PACIFIC S&P 500 EDGE AGGRESSIVE GROWTH EQUITY INDEX "BEST IDEAS" EQUITY ---------- -------- -------- -------------- ---------- $239 $5,349 $1,776 $411 $ 981 ==== ====== ====== ==== ======
ACCRUED PENSION LIABILITY ------------------------------------------------------------------------------------------------------------- MONEY SHORT-TERM QUALTY HIGH INCOME DIVIDEND CAPITAL MARKET BOND INCOME PLUS YIELD UTILITIES BUILDER GROWTH GROWTH --------------------- ---------- ----------- -------- --------- ----------- --------- --------- $10,665 $ 148 $7,121 $ 3,598 $4,713 $ 562 $12,149 $1,201 ======= ====== ====== ======= ====== ======= ======= ====== GLOBAL COMPETITIVE DIVIDEND EUROPEAN PACIFIC S&P 500 EDGE AGGRESSIVE GROWTH GROWTH GROWTH EQUITY INDEX "BEST IDEAS" EQUITY STRATEGIST -------- -------- ------- ------ ------- ------------ ---------- ---------- $ 2,751 $3,407 $ 391 $11,669 $1,847 $ 535 $ 985 $7,512 ======= ====== ====== ======= ====== ======= ======= ======
5. FEDERAL INCOME TAX STATUS At December 31, 2000, the following Portfolios had an approximate net capital loss carryover which may be used to offset future capital gains to the extent provided by regulations:
AVAILABLE THROUGH DECEMBER 31, 2001 2002 2003 2004 2005 2006 2007 2008 TOTAL ---------------------------------------- ------ ------- ------ ------ ------ ------- ------- -------- -------- Short-Term Bond......................... -- -- -- -- -- -- $ 3 $ 1 $ 4 Quality Income Plus..................... -- $12,983 -- $2,491 -- -- 10,670 10,496 36,640 High Yield.............................. $4,736 3,256 $2,984 5,521 -- $ 2,735 10,786 7,523 37,541 Income Builder.......................... -- -- -- -- -- -- 180 1,618 1,798 Dividend Growth......................... -- -- -- -- -- -- -- 235,564 235,564 Pacific Growth.......................... -- -- -- -- $5,427 33,536 -- -- 38,963 Equity.................................. -- -- -- -- 3,342 14 -- -- 3,356 S&P 500 Index........................... -- -- -- -- -- -- -- 177 177 Competitive Edge "Best ideas"........... -- -- -- -- -- 853 544 -- 1,397 Aggressive Equity....................... -- -- -- -- -- -- 68 11,560 11,628
142 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED The Equity Portfolio obtained a net capital loss carryover of approximately $6,329,000 from a previous acquisition. Utilization of this carryover is subject to limitations imposed by the Internal Revenue Code and Treasury Regulations. Net capital and net foreign currency losses incurred after October 31 ("post-October losses") within the taxable year are deemed to arise on the first business day of the Portfolios' next taxable year. The following Portfolios incurred and will elect to defer post-October losses during fiscal 2000: Quality Income Plus -- $1,971,000; Utilities -- $6,056,000; Capital Growth -- $1,082,000; Global Dividend Growth -- $10,000; Pacific Growth -- $377,000; Equity -- $58,282,000; S&P 500 Index -- $643,000; Competitive Edge "Best Ideas" -- $409,000; Information -- $16,000; Aggressive Equity -- $4,937,000; and Strategist -- $9,909,000. At December 31, 2000, the primary reason(s) for significant temporary book/tax differences were as follows:
TEMPORARY DIFFERENCES ----------------------------- POST-OCTOBER LOSS DEFERRALS LOSSES FROM WASH SALES ------------ --------------- Short-Term Bond......................... - Quality Income Plus..................... - High Yield.............................. - Utilities............................... - - Income Builder.......................... - Dividend Growth......................... - Capital Growth.......................... - - Global Dividend Growth.................. - - European Growth......................... - Pacific Growth.......................... - - Equity.................................. - - S&P 500 Index........................... - - Competitive Edge "Best Ideas"........... - - Aggressive Equity....................... - - Information............................. - - Strategist.............................. - -
Additionally, the following Portfolios had other temporary differences: Global Dividend Growth and Pacific Growth -- income from mark-to-market of passive foreign investment companies; European Growth -- income from mark-to-market of forward foreign currency contracts; High Yield -- interest on bonds in default. 143 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED 6. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS Global Dividend Growth, European Growth, Pacific Growth, Competitive Edge "Best Ideas" and Aggressive Equity may enter into forward contracts to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities. European Growth and Pacific Growth may also purchase and write put options on foreign currencies ("options") in which the Portfolios' securities are denominated to protect against a decline in value of such securities due to currency devaluations. Forward contracts and options involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. The Portfolios bear the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts. Risks may also arise upon entering into these forward contracts and options from the potential inability of the counterparties to meet the terms of their contracts. At June 30, 2001, European Growth, Competitive Edge "Best Ideas" and Pacific Growth had outstanding forward contracts. S&P 500 Index may purchase and sell stock index futures ("futures contacts") for the following reasons: to simulate full investment in the S&P 500 INDEX while retaining a cash balance for fund management purposes, to facilitate trading, to reduce transaction costs or to seek higher investment returns when a futures contract is priced more attractively than stocks comprising the S&P 500 INDEX. These futures contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. S&P 500 Index bears the risk of an unfavorable change in the value of the underlying securities. At June 30, 2001, S&P 500 Index had outstanding futures contracts. At June 30, 2001, European Growth's investments in securities of issuers in the United Kingdom represented 36.7% of the Portfolio's net assets. Pacific Growth's investments in securities of issuers in Japan represented 51.6% of the Portfolio's net assets. These investments, which involve risks and considerations not present with respect to U.S. securities, may be affected by economic or political developments in these regions. At June 30, 2001, Global Dividend Growth's, European Growth's, Pacific Growth's and Information's cash balance consisted principally of interest bearing deposits with Chase Manhattan Bank N.A., the custodian of each Portfolio. 144 Morgan Stanley Variable Investment Series NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2001 (UNAUDITED) CONTINUED 7. CHANGE IN ACCOUNTING POLICY Effective January 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, related to premiums and discounts on debt securities. The cumulative effect of this accounting change had no impact on the net assets of each respective Portfolio, but resulted in the following changes to Short-Term Bond, Quality Income Plus, High Yield, Utilities, Income Builder and Strategist: an increase or (decrease) in the cost of securities of $11,827, $(405,358), $1,612,891, $14,456, $(210,499) and $121,487, respectively; and a corresponding increase or (decrease) to undistributed net investment income based on securities held as of December 31, 2000. The effect of this change for the six months ended June 30, 2001 was to decrease net investment income by $28,855, $88,105, $443,606, $72,576, $147,785 and $192,366, respectively; with a corresponding increase or (decrease) in unrealized appreciation/depreciation of $32,775, $107,429, $(39,404), $78,791, $13,243 and $11,598, respectively; and an increase or (decrease) in net realized gains/losses of $(3,920), $(19,324), $483,010, $(6,215), $134,542, and $180,768, respectively. The statement of changes in net assets and the financial highlights for the prior periods have not been restated to reflect this change. 145 Morgan Stanley Variable Investment Series FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
NET ASSET TOTAL YEAR VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND DECEMBER 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS ----------- --------- ------------- -------------- ---------- ------------ ------------- ------------- MONEY MARKET CLASS X SHARES 1996................ $ 1.00 $0.050 -- $0.050 $(0.050) -- $(0.050) 1997................ 1.00 0.051 -- 0.051 (0.051) -- (0.051) 1998................ 1.00 0.051 -- 0.051 (0.051) -- (0.051) 1999................ 1.00 0.047 -- 0.047 (0.047) -- (0.047) 2000*(b)............ 1.00 0.058 -- 0.058 (0.058) -- (0.058) 2001*(a)............ 1.00 0.024 -- 0.024 (0.024)** -- (0.024) CLASS Y SHARES* 2000(c)............. 1.00 0.033 -- 0.033 (0.033) -- (0.033) 2001(a)............. 1.00 0.023 -- 0.023 (0.023)** -- (0.023) SHORT-TERM BOND CLASS X SHARES 1999(f)............. 10.00 0.27 $(0.12) 0.15 (0.27) -- (0.27) 2000*(b)............ 9.88 0.51 0.05 0.56 (0.48) -- (0.48) 2001*(a)............ 9.96 0.24(8) 0.01(8) 0.25 (0.25) -- (0.25) CLASS Y SHARES* 2000(c)............. 9.86 0.28 0.09 0.37 (0.28) -- (0.28) 2001(a)............. 9.95 0.22(8) 0.02(8) 0.24 (0.24) -- (0.24) QUALITY INCOME PLUS CLASS X SHARES 1996................ 10.96 0.71 (0.58) 0.13 (0.72) -- (0.72) 1997................ 10.37 0.70 0.40 1.10 (0.70) -- (0.70) 1998................ 10.77 0.68 0.23 0.91 (0.68) -- (0.68) 1999................ 11.00 0.67 (1.14) (0.47) (0.67) -- (0.67) 2000*(b)............ 9.86 0.68 0.37 1.05 (0.69) -- (0.69) 2001*(a)............ 10.22 0.32(8) 0.07(8) 0.39 (0.32) -- (0.32) CLASS Y SHARES* 2000(c)............. 9.80 0.38 0.42 0.80 (0.39) -- (0.39) 2001(a)............. 10.21 0.29(8) 0.09(8) 0.38 (0.31) -- (0.31)
SEE NOTES TO FINANCIAL STATEMENTS 146
RATIOS TO AVERAGE NET ASSET NET ASSETS NET ASSETS YEAR VALUE END OF ------------------------------------ PORTFOLIO ENDED END OF TOTAL PERIOD NET INVESTMENT TURNOVER DECEMBER 31 PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) RATE ----------- --------- --------- ---------- ---------------- -------------- --------- MONEY MARKET CLASS X SHARES 1996................ $ 1.00 5.11% $340,238 0.52% 4.97% N/A 1997................ 1.00 5.23 335,578 0.52 5.10 N/A 1998................ 1.00 5.18 442,034 0.52 5.04 N/A 1999................ 1.00 4.80 435,643 0.52 4.68 N/A 2000*(b)............ 1.00 6.01 358,793 0.52 5.83 N/A 2001*(a)............ 1.00 2.47(1) 427,032 0.52(2) 4.81(2) N/A CLASS Y SHARES* 2000(c)............. 1.00 3.37(1) 13,813 0.77(2) 5.86(2) N/A 2001(a)............. 1.00 2.34(1) 62,727 0.77(2) 4.56(2) N/A SHORT-TERM BOND CLASS X SHARES 1999(f)............. 9.88 1.56(1) 3,175 0.62(2)(5) 4.83(2)(5) 56%(1) 2000*(b)............ 9.96 5.85 6,427 0.98 5.08 16 2001*(a)............ 9.96 2.50(1) 12,265 0.67(2)(7)# 4.72(2)(7)(8) 61(1) CLASS Y SHARES* 2000(c)............. 9.95 3.82(1) 1,430 1.17(2) 5.00(2) 16 2001(a)............. 9.95 2.29(1) 8,247 0.92(2)(7)# 5.47(2)(7)(8) 61(1) QUALITY INCOME PLUS CLASS X SHARES 1996................ 10.37 1.56 474,660 0.53 6.84 182 1997................ 10.77 11.09 474,990 0.53 6.71 171 1998................ 11.00 8.67 547,583 0.52 6.23 152 1999................ 9.86 (4.32) 456,132 0.52 6.45 119 2000*(b)............ 10.22 11.09 406,508 0.52 6.90 105 2001*(a)............ 10.29 3.79(1) 421,043 0.53(2) 6.16(2)(8) 62(1) CLASS Y SHARES* 2000(c)............. 10.21 8.31(1) 5,176 0.77(2) 6.53(2) 105 2001(a)............. 10.28 3.68(1) 24,402 0.78(2) 5.91(2)(8) 62(1)
147 Morgan Stanley Variable Investment Series FINANCIAL HIGHLIGHTS CONTINUED
NET ASSET TOTAL YEAR VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND DECEMBER 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS ----------- --------- ------------- -------------- ---------- ------------ ------------- ------------- HIGH YIELD CLASS X SHARES 1996..................... $ 6.26 $0.77 $(0.06) $ 0.71 $(0.79) -- $(0.79) 1997..................... 6.18 0.75 (0.06) 0.69 (0.75) -- (0.75) 1998..................... 6.12 0.71 (1.05) (0.34) (0.71) -- (0.71) 1999..................... 5.07 0.68 (0.74) (0.06) (0.68) -- (0.68) 2000*(b)................. 4.33 0.66 (1.90) (1.24) (0.66) -- (0.66) 2001*(a)................. 2.43 0.18(8) (0.57)(8) (0.39) (0.19) -- (0.19) CLASS Y SHARES* 2000(c).................. 3.92 0.37 (1.48) (1.11) (0.38) -- (0.38) 2001(a).................. 2.43 0.17(8) (0.56)(8) (0.39) (0.19) -- (0.19) UTILITIES CLASS X SHARES 1996..................... 14.68 0.55 0.70 1.25 (0.55) $(0.04) (0.59) 1997..................... 15.34 0.57 3.46 4.03 (0.57) (0.21) (0.78) 1998..................... 18.59 0.57 3.68 4.25 (0.57) (1.02) (1.59) 1999..................... 21.25 0.55 2.08 2.63 (0.55) (0.43) (0.98) 2000*(b)................. 22.90 0.49 0.17 0.66 (0.49) (1.38) (1.87) 2001*(a)................. 21.69 0.21(8) (2.54)(8) (2.33) (0.22) (1.20) (1.42) CLASS Y SHARES* 2000(c).................. 22.98 0.24 0.19 0.43 (0.35) (1.38) (1.73) 2001(a).................. 21.68 0.18(8) (2.53)(8) (2.35) (0.19) (1.20) (1.39) INCOME BUILDER CLASS X SHARES 1997(d).................. 10.00 0.44 1.76 2.20 (0.44) -- (0.44) 1998..................... 11.76 0.56 (0.19) 0.37 (0.56) (0.11) (0.67) 1999..................... 11.46 0.58 0.21 0.79 (0.56) (0.28)++ (0.81) 2000*(b)................. 11.44 0.55 (0.54) 0.01 (0.56) (0.03)++ (0.59) 2001*(a)................. 10.86 0.26(8) 0.27(8) 0.53 (0.28) -- (0.28) CLASS Y SHARES* 2000(c).................. 11.15 0.32 (0.21) 0.11 (0.39) (0.02)++ (0.41) 2001(a).................. 10.85 0.25(8) 0.27(8) 0.52 (0.27) -- (0.27)
SEE NOTES TO FINANCIAL STATEMENTS 148
RATIOS TO AVERAGE NET ASSET NET ASSETS NET ASSETS YEAR VALUE END OF -------------------------------- PORTFOLIO ENDED END OF TOTAL PERIOD NET INVESTMENT TURNOVER DECEMBER 31 PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) RATE ----------- --------- ----------- ---------- ------------ -------------- --------- HIGH YIELD CLASS X SHARES 1996..................... $ 6.18 11.98% $259,549 0.51% 12.59% 57% 1997..................... 6.12 11.87 368,061 0.53 12.44 95 1998..................... 5.07 (6.20) 364,079 0.53 12.27 93 1999..................... 4.33 (1.33) 279,683 0.53 14.05 48 2000*(b)................. 2.43 (32.22) 128,646 0.54 17.40 9 2001*(a)................. 1.85 (16.93)(1) 95,471 0.56(2) 15.87(2)(8) 51(1) CLASS Y SHARES* 2000(c).................. 2.43 (30.02)(1) 1,947 0.79(2) 20.95(2) 9 2001(a).................. 1.85 (17.04)(1) 4,614 0.81(2) 15.62(2)(8) 51(1) UTILITIES CLASS X SHARES 1996..................... 15.34 8.68 440,662 0.67 3.61 9 1997..................... 18.59 27.15 458,134 0.67 3.48 13 1998..................... 21.25 23.76 560,803 0.67 2.89 7 1999..................... 22.90 12.71 580,487 0.67 2.51 10 2000*(b)................. 21.69 3.03 551,734 0.66 2.16 13 2001*(a)................. 17.94 (10.74)(1) 444,180 0.66(2) 2.04(2)(8) 18(1) CLASS Y SHARES* 2000(c).................. 21.68 2.07(1) 19,069 0.91(2) 1.93(2) 13 2001(a).................. 17.94 (10.86)(1) 22,864 0.91(2) 1.79(2)(8) 18(1) INCOME BUILDER CLASS X SHARES 1997(d).................. 11.76 22.38(1) 55,423 0.15(2)(3) 5.73(2)(3) 41(1) 1998..................... 11.46 3.21 87,769 0.81 5.09 54 1999..................... 11.44 7.06 81,616 0.81 4.98 43 2000*(b)................. 10.86 0.17 59,383 0.81 5.07 51 2001*(a)................. 11.11 4.90(1) 64,882 0.82(2) 4.65(2)(8) 17(1) CLASS Y SHARES* 2000(c).................. 10.85 1.06(1) 965 1.06(2) 5.17(2) 51 2001(a).................. 11.10 4.81(1) 3,875 1.07(2) 4.56(2)(8) 17(1)
149 Morgan Stanley Variable Investment Series FINANCIAL HIGHLIGHTS CONTINUED
NET ASSET TOTAL YEAR VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND DECEMBER 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS ----------- --------- ------------- -------------- ---------- ------------ ------------- ------------- DIVIDEND GROWTH CLASS X SHARES 1996..................... $15.59 $ 0.41 $ 3.22 $ 3.63 $(0.41) $(0.41) $(0.82) 1997..................... 18.40 0.41 4.20 4.61 (0.41) (1.00) (1.41) 1998..................... 21.60 0.41 2.58 2.99 (0.41) (2.05) (2.46) 1999..................... 22.13 0.39 (0.55) (0.16) (0.39) (3.26) (3.65) 2000*(b)................. 18.32 0.31 0.02 0.33 (0.33) (3.82) (4.15) 2001*(a)................. 14.50 0.13 0.06 0.19 (0.14) -- (0.14) CLASS Y SHARES* 2000(c).................. 17.79 0.12 0.62 0.74 (0.22) (3.82) (4.04) 2001(a).................. 14.49 0.12 0.04 0.16 (0.12) -- (0.12) CAPITAL GROWTH CLASS X SHARES 1996..................... 15.22 0.08 1.65 1.73 (0.03) (0.27) (0.30) 1997..................... 16.65 0.01 3.90 3.91 (0.08) (2.19) (2.27) 1998..................... 18.29 (0.05) 3.59 3.54 -- (1.47) (1.47) 1999..................... 20.36 0.00 6.12 6.12 -- (2.75) (2.75) 2000*(b)................. 23.73 0.10 0.28 0.38 -- (4.05) (4.05) 2001*(a)................. 20.06 0.02 (3.04) (3.02) (0.10) (1.20) (1.30) CLASS Y SHARES* 2000(c).................. 24.55 0.03 (0.50) (0.47) -- (4.05) (4.05) 2001(a).................. 20.03 0.00 (3.04) (3.04) (0.09) (1.20) (1.29) GLOBAL DIVIDEND GROWTH CLASS X SHARES 1996..................... 11.69 0.24 1.75 1.99 (0.24) (0.31) (0.55) 1997..................... 13.13 0.22 1.37 1.59 (0.23) (0.60) (0.83) 1998..................... 13.89 0.24 1.45 1.69 (0.24) (1.52) (1.76) 1999..................... 13.82 0.27 1.71 1.98 (0.29) (1.07) (1.36) 2000*(b)................. 14.44 0.24 (0.64) (0.40) (0.09) (1.22) (1.31) 2001*(a)................. 12.73 0.15 (0.63) (0.48) (0.33) (0.14) (0.47) CLASS Y SHARES* 2000(c).................. 13.96 0.08 (0.11) (0.03) -- (1.22) (1.22) 2001(a).................. 12.71 0.15 (0.64) (0.49) (0.33) (0.14) (0.47)
SEE NOTES TO FINANCIAL STATEMENTS 150
RATIOS TO AVERAGE NET ASSET NET ASSETS NET ASSETS YEAR VALUE END OF -------------------------- PORTFOLIO ENDED END OF TOTAL PERIOD NET INVESTMENT TURNOVER DECEMBER 31 PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) RATE ----------- --------- ----------- ----------- ---------- -------------- ---------- DIVIDEND GROWTH CLASS X SHARES 1996..................... $18.40 23.96% $1,288,404 0.57% 2.46% 23% 1997..................... 21.60 25.61 1,905,906 0.54 2.06 28 1998..................... 22.13 14.28 2,249,927 0.53 1.85 45 1999..................... 18.32 (2.39) 2,033,814 0.52 1.82 81 2000*(b)................. 14.50 5.30 1,552,724 0.54 2.07 34 2001*(a)................. 14.55 1.31(1) 1,464,571 0.55(2) 1.86(2) 9(1) CLASS Y SHARES* 2000(c).................. 14.49 7.65(1) 19,083 0.79(2) 1.59(2) 34 2001(a).................. 14.53 1.13(1) 38,703 0.80(2) 1.61(2) 9(1) CAPITAL GROWTH CLASS X SHARES 1996..................... 16.65 11.55 86,862 0.73 0.52 98 1997..................... 18.29 24.54 127,100 0.71 0.01 139 1998..................... 20.36 19.63 138,603 0.70 (0.26) 248 1999..................... 23.73 33.29 171,251 0.72 0.02 575 2000*(b)................. 20.06 1.28 183,151 0.69 0.43 349 2001*(a)................. 15.74 (15.09)(1) 137,511 0.70(2) 0.23(2) 170(1) CLASS Y SHARES* 2000(c).................. 20.03 (2.24)(1) 3,551 0.94(2) 0.30(2) 349 2001(a).................. 15.70 (15.20)(1) 5,385 0.95(2) (0.02)(2) 170(1) GLOBAL DIVIDEND GROWTH CLASS X SHARES 1996..................... 13.13 17.49 334,821 0.85 1.94 39 1997..................... 13.89 12.04 481,613 0.84 1.61 48 1998..................... 13.82 12.53 484,228 0.84 1.68 52 1999..................... 14.44 14.65 506,929 0.83 1.90 43 2000*(b)................. 12.73 (2.50) 373,770 0.80 1.88 40 2001*(a)................. 11.78 (3.72)(1) 326,610 0.82(2) 2.34(2) 4(1) CLASS Y SHARES* 2000(c).................. 12.71 0.07(1) 2,211 1.05(2) 1.14(2) 40 2001(a).................. 11.75 (3.81)(1) 5,850 1.07(2) 2.09(2) 4(1)
151 Morgan Stanley Variable Investment Series FINANCIAL HIGHLIGHTS CONTINUED
NET ASSET TOTAL YEAR VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND DECEMBER 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS ----------- --------- ------------- -------------- ---------- ------------ ------------- ------------- EUROPEAN GROWTH CLASS X SHARES 1996..................... $17.53 $ 0.17 $ 4.91 $ 5.08 $(0.04) $(1.01) $(1.05) 1997..................... 21.56 0.21 3.19 3.40 (0.24) (1.18) (1.42) 1998..................... 23.54 0.15 5.53 5.68 (0.31) (1.73) (2.04) 1999..................... 27.18 0.25 6.91 7.16 (0.19) (2.68) (2.87) 2000*(b)................. 31.47 0.13 (1.43) (1.30) (0.18) (4.62) (4.80) 2001*(a)................. 25.37 0.15 (3.82) (3.67) (0.26) (4.06) (4.32) CLASS Y SHARES* 2000(c).................. 32.26 (0.03) (2.10) (2.13) (0.18) (4.62) (4.80) 2001(a).................. 25.33 0.13 (3.82) (3.69) (0.25) (4.06) (4.31) PACIFIC GROWTH CLASS X SHARES 1996..................... 9.70 0.05 0.32 0.37 (0.11) -- (0.11) 1997..................... 9.96 0.12 (3.82) (3.70) (0.14) -- (0.14) 1998..................... 6.12 0.06 (0.75) (0.69) (0.28) -- (0.28) 1999..................... 5.15 0.04 3.33 3.37 (0.06) -- (0.06) 2000*(b)................. 8.46 0.00 (2.78) (2.78) (0.12) -- (0.12) 2001*(a)................. 5.56 0.00 (0.67) (0.67) (0.07) -- (0.07) CLASS Y SHARES* 2000(c).................. 7.70 (0.01) (2.01) (2.02) (0.12) -- (0.12) 2001(a).................. 5.56 (0.01) (0.66) (0.67) (0.07) -- (0.07) EQUITY CLASS X SHARES 1996..................... 27.14 0.16 2.70 2.86 (0.16) (3.45) (3.61) 1997..................... 26.39 0.18 9.27 9.45 (0.18) (2.08) (2.26) 1998..................... 33.58 0.25 9.47 9.72 (0.25) (4.47) (4.72) 1999..................... 38.58 0.22 20.48 20.70 (0.22) (5.18) (5.40) 2000*(b)................. 53.88 0.30 (6.46) (6.16) (0.29) (7.75) (8.04) 2001*(a)................. 39.68 0.11 (7.54) (7.43) (0.12) (6.89) (7.01) CLASS Y SHARES* 2000(c).................. 49.12 0.21 (1.68) (1.47) (0.24) (7.75) (7.99) 2001(a).................. 39.66 0.06 (7.53) (7.47) (0.08) (6.89) (6.97)
SEE NOTES TO FINANCIAL STATEMENTS 152
RATIOS TO AVERAGE NET ASSET NET ASSETS NET ASSETS YEAR VALUE END OF -------------------------- PORTFOLIO ENDED END OF TOTAL PERIOD NET INVESTMENT TURNOVER DECEMBER 31 PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) RATE ----------- --------- ----------- ----------- ---------- -------------- ---------- EUROPEAN GROWTH CLASS X SHARES 1996..................... $21.56 29.99% $ 302,422 1.11% 0.97% 43% 1997..................... 23.54 16.07 391,441 1.12 1.04 45 1998..................... 27.18 23.96 510,638 1.11 0.65 56 1999..................... 31.47 29.11 579,705 1.04 0.87 55 2000*(b)................. 25.37 (4.92) 508,366 1.00 0.46 78 2001*(a)................. 17.38 (14.46)(1) 387,580 1.02(2) 1.28(2) 43(1) CLASS Y SHARES* 2000(c).................. 25.33 (7.39)(1) 10,580 1.25(2) (0.18)(2) 78 2001(a).................. 17.33 (14.57)(1) 16,630 1.27(2) 1.03(2) 43(1) PACIFIC GROWTH CLASS X SHARES 1996..................... 9.96 3.89 144,536 1.37 1.01 50 1997..................... 6.12 (37.70) 68,904 1.44 1.09 58 1998..................... 5.15 (10.40) 52,842 1.51 0.91 112 1999..................... 8.46 66.09 115,927 1.42 0.85 105 2000*(b)................. 5.56 (33.46) 64,209 1.21 0.01 46 2001*(a)................. 4.82 (12.11)(1) 49,829 1.57(2) (0.01)(2) 68(1) CLASS Y SHARES* 2000(c).................. 5.56 (26.72)(1) 728 1.46(2) (0.20)(2) 46 2001(a).................. 4.82 (12.13)(1) 3,354 1.82(2) (0.26)(2) 68(1) EQUITY CLASS X SHARES 1996..................... 26.39 12.36 521,908 0.54 0.58 279 1997..................... 33.58 37.43 823,090 0.52 0.61 145 1998..................... 38.58 30.45 1,138,413 0.52 0.73 257 1999..................... 53.88 58.59 2,083,071 0.51 0.54 323 2000*(b)................. 39.68 (12.35) 1,818,134 0.50 0.62 402 2001*(a)................. 25.24 (18.70)(1) 1,306,799 0.51(2) 0.68(2) 173(1) CLASS Y SHARES* 2000(c).................. 39.66 (3.99)(1) 31,903 0.75(2) 0.85(2) 402 2001(a).................. 25.22 (18.83)(1) 49,561 0.76(2) 0.43(2) 173(1)
153 Morgan Stanley Variable Investment Series FINANCIAL HIGHLIGHTS CONTINUED
NET ASSET TOTAL YEAR VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND DECEMBER 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS ----------- --------- ------------- -------------- ---------- ------------ ------------- ------------- S&P 500 INDEX CLASS X SHARES 1998(e).................. $10.00 $0.06 $ 1.16 $1.22 -- -- -- 1999..................... 11.22 0.06 2.21 2.27 $ (0.03) $(0.03) $(0.06) 2000*(b)................. 13.43 0.12 (1.37) (1.25) (0.07) (0.06) (0.13) 2001*(a)................. 12.05 0.05 (0.88) (0.83) (0.10) -- (0.10) CLASS Y SHARES* 2000(c).................. 13.47 0.04 (1.34) (1.30) (0.07) (0.06) (0.13) 2001(a).................. 12.04 0.04 (0.88) (0.84) (0.10) -- (0.10) COMPETITIVE EDGE "BEST IDEAS" CLASS X SHARES 1998(e).................. 10.00 0.07 (0.25) (0.18) -- -- -- 1999..................... 9.82 0.06 2.56 2.62 (0.07) -- (0.07) 2000*(b)................. 12.37 0.06 (2.20) (2.14) (0.05) -- (0.05) 2001*(a)................. 10.18 0.03 (1.60) (1.57) (0.06) (0.64) (0.70) CLASS Y SHARES* 2000(c).................. 12.03 0.00 (1.82) (1.82) (0.05) -- (0.05) 2001(a).................. 10.16 0.02 (1.60) (1.58) (0.05) (0.64) (0.69) AGGRESSIVE EQUITY CLASS X SHARES 1999(f).................. 10.00 0.05 4.55 4.60 (0.03) -- (0.03) 2000*(b)................. 14.57 0.05 (0.30) (0.25) (0.01) -- (0.01) 2001*(a)................. 14.31 0.02 (3.05) (3.03) (0.04) -- (0.04) CLASS Y SHARES* 2000(c).................. 14.66 0.03 (0.39) (0.36) (0.01) -- (0.01) 2001(a).................. 14.29 0.00 (3.04) (3.04) (0.03) -- (0.03) INFORMATION FUND* CLASS X SHARES 2000(g).................. 10.00 0.06 (0.75) (0.69) -- -- -- 2001(a).................. 9.31 0.05 (3.22) (3.17) (0.01) -- (0.01) CLASS Y SHARES 2000(g).................. 10.00 0.05 (0.74) (0.69) -- -- -- 2001(a).................. 9.31 0.04 (3.22) (3.18) (0.01) -- (0.01)
SEE NOTES TO FINANCIAL STATEMENTS 154
RATIOS TO AVERAGE NET ASSET NET ASSETS NET ASSETS YEAR VALUE END OF ---------------------------------- PORTFOLIO ENDED END OF TOTAL PERIOD NET INVESTMENT TURNOVER DECEMBER 31 PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) RATE ----------- --------- ----------- ---------- -------------- -------------- --------- S&P 500 INDEX CLASS X SHARES 1998(e).................. $11.22 12.20%(1) $ 48,732 --(4) 1.85%(2)(4) 2%(1) 1999..................... 13.43 20.23 185,963 0.48%(5) 1.03(5) 1 2000*(b)................. 12.05 (9.38) 210,530 0.45 0.88 3 2001*(a)................. 11.12 (6.88)(1) 186,357 0.46(2) 0.88(2) 3(1) CLASS Y SHARES* 2000(c).................. 12.04 (9.73)(1) 12,724 0.71(2) 0.60(2) 3 2001(a).................. 11.10 (7.00)(1) 28,950 0.71(2) 0.63(2) 3(1) COMPETITIVE EDGE "BEST IDEAS" CLASS X SHARES 1998(e).................. 9.82 (1.90)(1) 36,539 --(4) 1.74(2)(4) 31(1) 1999..................... 12.37 26.88 62,295 0.56(5) 0.72(5) 54 2000*(b)................. 10.18 (17.39) 69,882 0.71 0.50 70 2001*(a)................. 7.91 (15.41)(1) 52,878 0.75(2) 0.71(2) 20(1) CLASS Y SHARES* 2000(c).................. 10.16 (15.22)(1) 4,666 0.96(2) 0.06(2) 70 2001(a).................. 7.89 (15.50)(1) 5,529 1.00(2) 0.46(2) 20(1) AGGRESSIVE EQUITY CLASS X SHARES 1999(f).................. 14.57 46.08(1) 38,197 0.52(2)(5) 0.86(2)(5) 108(1) 2000*(b)................. 14.31 (1.75) 138,657 0.82 0.32 414 2001*(a)................. 11.24 (21.17)(1) 93,092 0.84(2) 0.29(2) 228(1) CLASS Y SHARES* 2000(c).................. 14.29 (2.48)(1) 13,392 1.05(2) 0.32(2) 414 2001(a).................. 11.22 (21.24)(1) 17,111 1.09(2) 0.04(2) 228(1) INFORMATION FUND* CLASS X SHARES 2000(g).................. 9.31 (6.90)(1) 2,686 --(6) 3.80(2)(6) 1(1) 2001(a).................. 6.13 (34.05)(1) 4,553 --(7) 1.53(2)(7) 80(1) CLASS Y SHARES 2000(g).................. 9.31 (6.90)(1) 1,915 0.25(2)(6) 3.55(2)(6) 1(1) 2001(a).................. 6.12 (34.17)(1) 5,457 0.25(2)(7) 1.28(2)(7) 80(1)
155 Morgan Stanley Variable Investment Series FINANCIAL HIGHLIGHTS CONTINUED
NET ASSET TOTAL YEAR VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND DECEMBER 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS ----------- --------- ------------- -------------- ---------- ------------ ------------- ------------- STRATEGIST CLASS X SHARES 1996..................... $12.45 $0.43 $ 1.39 $ 1.82 $(0.43) $(0.12) $(0.55) 1997..................... 13.72 0.45 1.40 1.85 (0.45) (0.32) (0.77) 1998..................... 14.80 0.36 3.40 3.76 (0.36) (1.56) (1.92) 1999..................... 16.64 0.40 2.46 2.86 (0.40) -- (0.40) 2000*(b)................. 19.10 0.50 (0.20) 0.30 (0.48) (2.26) (2.74) 2001*(a)................. 16.66 0.21(8) (1.33)(8) (1.12) (0.22) (0.66) (0.88) CLASS Y SHARES* 2000(c).................. 19.29 0.49 (0.51) (0.02) (0.36) (2.26) (2.62) 2001(a).................. 16.65 0.19(8) (1.33)(8) (1.14) (0.20) (0.66) (0.86)
--------------------- (A) FOR SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED). (B) PRIOR TO JUNE 5, 2000, THE FUND ISSUED ONE CLASS OF SHARES. ALL SHARES OF THE FUND HELD PRIOR TO MAY 1, 2000 HAVE BEEN DESIGNATED CLASS X SHARES. (C) FOR THE PERIOD JUNE 5, 2000 (ISSUED DATE) THROUGH DECEMBER 31, 2000. COMMENCEMENT OF OPERATIONS: (D) JANUARY 21, 1997. (E) MAY 18, 1998. (F) MAY 4, 1999. (G) NOVEMBER 6, 2000. * THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. ** INCLUDES CAPITAL GAIN DISTRIBUTION OF LESS THAN $0.001. + CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. ++ DISTRIBUTION FROM PAID-IN-CAPITAL. ++ INCLUDES DISTRIBUTIONS FROM PAID-IN-CAPITAL OF $0.02. # DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01% (1) NOT ANNUALIZED. (2) ANNUALIZED. (3) IF THE INVESTMENT MANAGER HAD NOT ASSUMED ALL EXPENSES AND WAIVED ITS MANAGEMENT FEE FOR THE PERIOD JANUARY 21, 1997 THROUGH DECEMBER 3, 1997 FOR INCOME BUILDER, THE RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 0.99% AND 4.89%, RESPECTIVELY. (4) IF THE INVESTMENT MANAGER HAD NOT ASSUMED ALL EXPENSES AND WAIVED ITS MANAGEMENT FEE FOR THE PERIOD MAY 18, 1998 THROUGH DECEMBER 31, 1998 FOR COMPETITIVE EDGE "BEST IDEAS" AND S&P 500 INDEX, THE RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 0.92% AND 0.83%, RESPECTIVELY, FOR COMPETITIVE EDGE "BEST IDEAS" AND 0.59% AND 1.26%, RESPECTIVELY, FOR S&P 500 INDEX. (5) IF THE INVESTMENT MANAGER HAD NOT ASSUMED ALL EXPENSES AND WAIVED ITS MANAGEMENT FEE FOR THE PERIOD JANUARY 1, 1999 THROUGH APRIL 30, 1999 FOR COMPETITIVE EDGE "BEST IDEAS" AND FOR THE PERIOD MAY 4, 1999 THROUGH NOVEMBER 4, 1999 FOR SHORT-TERM BOND AND AGGRESSIVE EQUITY AND FOR THE PERIOD JANUARY 1, 1999 THROUGH JANUARY 5, 1999 FOR S&P 500 INDEX AND "CAPPED" THE EXPENSES OF S&P 500 INDEX AT 0.50% OF ITS DAILY NET ASSETS FOR THE PERIOD JANUARY 6, 1999 THROUGH DECEMBER 31, 1999, THE RATIOS OF EXPENSES AND NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS WOULD HAVE BEEN 0.77% AND 0.51%, RESPECTIVELY, FOR COMPETITIVE EDGE "BEST IDEAS", 2.38% AND 3.07%, RESPECTIVELY, FOR SHORT-TERM BOND, 1.41% AND (0.02)%, RESPECTIVELY, FOR AGGRESSIVE EQUITY AND 0.48% AND 1.02%, RESPECTIVELY, FOR S&P 500 INDEX. (6) IF THE INVESTMENT MANAGER HAD NOT ASSUMED ALL EXPENSES (EXCEPT FOR PLAN OF DISTRIBUTION FEES) AND WAIVED ITS MANAGEMENT FEE FOR THE PERIOD NOVEMBER 6, 2000 THROUGH DECEMBER 31, 2000 FOR INFORMATION, THE RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.82% AND 1.98%, RESPECTIVELY, FOR CLASS X SHARES AND 2.07% AND 1.73%, RESPECTIVELY, FOR CLASS Y SHARES. SEE NOTES TO FINANCIAL STATEMENTS 156
RATIOS TO AVERAGE NET ASSET NET ASSETS NET ASSETS YEAR VALUE END OF ------------------------ PORTFOLIO ENDED END OF TOTAL PERIOD NET INVESTMENT TURNOVER DECEMBER 31 PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) RATE ----------- --------- ------- ---------- -------- -------------- --------- STRATEGIST CLASS X SHARES 1996..................... $13.72 15.02% $423,768 0.52% 3.30% 153% 1997..................... 14.80 13.71 497,028 0.52 3.09 159 1998..................... 16.64 26.55 633,934 0.52 2.32 84 1999..................... 19.10 17.35 729,701 0.52 2.24 120 2000*(b)................. 16.66 1.64 701,294 0.52 2.68 126 2001*(a)................. 14.66 (6.72)(1) 602,608 0.52(2) 2.64(2)(8) 51(1) CLASS Y SHARES* 2000(c).................. 16.65 (0.02)(1) 23,375 0.77(2) 2.77(2) 126 2001(a).................. 14.65 (6.84)(1) 35,347 0.77(2) 2.41(2)(8) 51(1)
--------------------- (7) IF THE INVESTMENT MANAGER HAD NOT "CAPPED" ALL EXPENSES (EXCEPT FOR PLAN OF DISTRIBUTION FEES) FOR SHORT-TERM BOND AT 0.50% OF ITS DAILY NET ASSETS FOR THE PERIOD JUNE 1, 2001 THROUGH JUNE 30, 2001 AND HAD NOT ASSUMED ALL EXPENSES (EXCEPT FOR PLAN OF DISTRIBUTION FEES) AND WAIVED ITS MANAGEMENT FEE FOR INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 2001, THE RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 0.69% AND 5.34%, RESPECTIVELY, FOR SHORT-TERM BOND CLASS X SHARES AND 0.94% AND 5.09%, RESPECTIVELY, FOR SHORT-TERM BOND CLASS Y SHARES AND 2.06% AND (0.53%), RESPECTIVELY, FOR INFORMATION CLASS X SHARES AND 2.31% AND (0.78%), RESPECTIVELY, FOR INFORMATION CLASS Y SHARES. (8) EFFECTIVE JANUARY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES, AS REVISED, RELATED TO PREMIUMS AND DISCOUNTS ON DEBT SECURITIES. THE EFFECT OF THIS CHANGE FOR THE SIX MONTHS ENDED JUNE 30, 2001 FOR SHORT-TERM BOND, QUALITY INCOME PLUS, HIGH YIELD, UTILITIES, INCOME BUILDER AND STRATEGIST WAS TO DECREASE NET INVESTMENT INCOME PER SHARE AND INCREASE NET REALIZED AND UNREALIZED GAIN/LOSS PER SHARE BY $0.03, $0.01, $0.01, $0.00, $0.03, AND $0.00, RESPECTIVELY, AND TO DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS BY 0.64%, 0.13%, 0.69%, 0.04%, 0.46%, AND 0.05%, RESPECTIVELY. THE FINANCIAL HIGHLIGHTS DATA PRESENTED IN THIS TABLE FOR PRIOR PERIODS HAS NOT BEEN RESTATED TO REFLECT THIS CHANGE. 157 TRUSTEES ------------------------------------------------------- Michael Bozic Dr. Manuel H. Johnson Charles A. Fiumefreddo Michael E. Nugent Edwin J. Garn Philip J. Purcell Wayne E. Hedien John L. Schroeder James F. Higgins OFFICERS ------------------------------------------------------- Charles A. Fiumefreddo CHAIRMAN AND CHIEF EXECUTIVE OFFICER Mitchell M. Merin PRESIDENT Barry Fink VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL Thomas F. Caloia TREASURER TRANSFER AGENT INDEPENDENT AUDITORS -------------------------------------- -------------------------------------- Morgan Stanley Dean Witter Trust FSB Deloitte & Touche LLP Harborside Financial Center--Plaza Two Two World Financial Center Jersey City, New Jersey 07311 New York, New York 10281 INVESTMENT MANAGER ---------------------------------------- Morgan Stanley Investment Advisors Inc. Two World Trade Center New York, New York 10048 SUB-ADVISOR (EUROPEAN GROWTH AND PACIFIC GROWTH PORTFOLIO) ---------------------------------------- Morgan Stanley Investment Management Inc. 1221 Avenue of the Americas New York, New York 10020 The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon. This report is submitted for the general information of shareholders of the Fund. For more detailed information about the Fund, its officers and trustees, fees, expenses and other pertinent information, please see the prospectus of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Read the prospectus carefully before investing. Morgan Stanley Distributors Inc., member NASD. #40113A