N-CSR 1 a07-1767_1ncsr.htm CERTIFIED ANNUAL SHAREHOLDER REPORT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number			811-03692

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

1221 Avenue of the Americas, New York, New York					10020
(Address of principal executive offices)					(Zip code)

Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)

Registrant’s telephone number, including area code:				212-762-4000

Date of fiscal year end:	December 31, 2006

Date of reporting period:		December 31, 2006

Item 1 - Report to Shareholders

MORGAN STANLEY
VARIABLE INVESTMENT SERIES

Annual Report

DECEMBER 31, 2006

Morgan Stanley Variable Investment Series

Table of Contents

Letter to the Shareholders					1

Expense Example					27

Portfolio of Investments:

Money Market					33

Limited Duration					36

Income Plus					47

High Yield					55

Utilities					65

Income Builder					67

Dividend Growth					74

Global Dividend Growth					78

European Equity					83

Equity					88

S&P 500 Index					91

Global Advantage					103

Aggressive Equity					108

Strategist					111

Financial Statements:

Statements of Assets and Liabilities					124

Statements of Operations					127

Statements of Changes in Net Assets					130

Notes to Financial Statements					142

Financial Highlights					160

Report of Independent Registered Public Accounting Firm					172

Results of Special Shareholder Meeting (unaudited)					173

Trustee and Officer Information (unaudited)					181

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006

Dear Shareholder:

In 2006, the global capital markets provided strong returns in an environment of low volatility relative to historical measures. Although concerns about a U.S.-led global economic slowdown prompted a worldwide market correction in the second quarter, investors grew more comfortable with the pace of economic moderation in the U.S. in the second half of the year. For the year overall, stocks outperformed bonds, with international stock markets leading the way.

Domestic Equity Overview

In the 12 months ended December 31, 2006, the U.S. stock market completed its fourth consecutive year of positive performance. As measured by the S&P 500^® Index, the broad market was up 15.79 percent for the year, with stocks advancing in each month except May.

During roughly the first half of the year, slowing economic growth, rising inflation, and the policy actions of the Federal Open Market Committee (the "Fed") received the lion's share of investors' attention and concern. Speculation that the Fed would pause its series of increases to the target federal funds rate helped support the stock market early in the year, as did encouraging labor market data and improved consumer confidence. However, in May, a backdrop of sharply rising commodity prices and an uptick in long-term interest rates reignited inflation concerns, and the Fed raised the target rate for the 16^th consecutive time —a move that was not well received by stock markets both in the U.S. and abroad. Although the Fed raised rates again at its June 29^th meeting, its language suggested that additional rate increases might soon become unnecessary. July proved challenging as well, as investors dealt with record high oil prices, escalating geopolitical tensions in the Middle East, a disappointing second quarter gross domestic product (GDP) report, and declining retail sales and housing data.

Early in the third quarter, however, many of the uncertainties that had been overhanging the market began to ease, and investor sentiment became more positive. The Fed discontinued its rate increases for the remainder of 2006. Oil prices declined from their recent record levels as the Israeli-Hezbollah conflict reached a peaceful accord and the U.S. hurricane season appeared to be relatively quiet. Gasoline prices also fell, providing some relief to consumers and buoying retail sales. Corporate earnings reports, on the whole, had continued to be solid throughout the year, and merger-and-acquisition and corporate restructuring activity continued at a very robust pace. Yet, evidence of a slowing economy persisted: housing trends continued to show weakness, and third quarter GDP growth came in below expectations. Nonetheless, in the final months of the period, stabilizing economic data bolstered the belief that a "soft landing" had taken place — in other words, the Fed was able to moderate the pace of economic growth without causing a recession.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

For the year, within the S&P 500 Index, the telecommunication services sector was the best performing group. Rising from their multi-year slump, telecom stocks benefited from a wave of industry consolidation, healthier balance sheets, and improved investor confidence. The energy sector, which had dominated in 2005, slipped into second place as declining oil prices in the second half of the year brought a turn in sentiment. Nonetheless, the record profits reported by some energy companies still captured investors' favor throughout 2006. Rounding out the top three performers was the utilities sector. The surprising strength of the group could be attributed to a number of factors. As bond yields became less compelling, investors turned to stocks that they believed offered more attractive dividend yields, and utilities stocks were beneficiaries of this trend. Regulatory changes were also perceived as favorable for the overall business environment. Finally, investors demonstrated a preference for utilities stocks' "defensive" characteristics (that is, they are perceived as less sensitive to economic cycles) given the slowing economic environment.

While no sector had a negative return for the year, the health care sector gained the least. Although expectations that the mid-term Congressional elections would result in a turnover to a Democratic majority hurt the outlook for many pharmaceuticals companies, the pharmaceuticals stocks generally held up relatively well. Rather, weakness in the sector appeared to come more from individual companies across a diverse group of health care industries, including biotechnology, medical devices, and health care equipment and services. Performance of the technology and industrials sectors also lagged that of the broad market, though to a lesser extent.

Despite some observers' expectations that large-capitalization stocks would lead in 2006, small-cap stocks again outperformed large- and mid-cap stocks, although performance returns were double-digit for all three segments. Moreover, value stocks performed better than growth stocks by a wide margin, also defying some predictions.

Fixed Income Overview

The first half of 2006 provided few surprises in the bond market. The Fed continued to pursue its monetary tightening policy, raising the target federal funds rate at each of its meetings to 5.25 percent by the end of June. In the second half of the year, as economic growth moderated, the housing sector weakened, and inflation concerns eased, the Fed finally took a widely anticipated respite from its record cycle of 17 consecutive rate increases, electing to keep the target fed funds rate unchanged for the remainder of the year. Despite the pause in its tightening campaign, the Fed continued to acknowledge the potential for inflation risks and reiterated previous statements that further actions regarding interest rates would be data dependent.

Inflation, as measured by the core PCE (Personal Consumption Expenditures) deflator — the Fed's preferred inflation gauge — remained elevated, rising 2.4 percent for the year ended in October, notably above the Fed's comfort zone of 1-2 percent. During the last week of December, the financial markets were

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

surprised by stronger than expected data from the Chicago Purchasing Managers Index, new home sales and existing home sales, and consumer confidence reports. This data quelled much of the ongoing speculation that the soft housing and auto markets would translate into moderating economic growth and inflation, and perhaps an ease in Fed policy.

Yields rose across the U.S. Treasury curve during the first six months, though more so on the short end of the curve which tends to more closely track changes in interest rates. Around mid-year, as expectations of a pause in Fed tightening grew, yields peaked and then drifted lower throughout most of the last half of the year, and the bond market rallied. On a net basis, however, Treasury yields moved across the curve and ended 2006 at higher levels than when the year began.

Within the government sector, agency issues posted the highest returns for the year while the Treasury sector underperformed due to its high sensitivity to interest rate changes. Mortgage-backed securities also outperformed Treasuries. Early in the period when yields were rising, higher coupon mortgages performed well as mortgage prepayments slowed. However, in response to a decline in yields in the last months of the year, lower coupon mortgages outperformed.

While the overall environment appeared to be good for corporate credit issues and defaults were near historic lows, much of the good news had already been priced into the market. Because interest rates remained at relatively low levels throughout the year, investors turned to the riskier segments of the market in an attempt to capture higher yields. The increased appetite for risk helped provide support to the high-yield market, causing yield spreads to compress to near record low levels. In this environment, the lowest credit tiers of the high-yield market — namely CCC rated securities — turned in the best performance. High demand for high-yield bonds was met by an equally high supply, which was fueled in part by an unprecedented amount of leveraged buyout and private equity activity during the year. In fact, more than $150 billion in new high-yield issues came to market in 2006, breaking the previous issuance record set in 2004.

International Equity Overview

International equity markets turned in another year of strong performance, handily outpacing the U.S. market in the 12 months ended December 31, 2006. The slowdown in the U.S. economy and its potential global impact proved to be a difficult but surmountable hurdle for international investors. In May, markets worldwide declined sharply in response to the U.S. Federal Open Market Committee's ongoing monetary tightening stance. However, following one more increase to the target federal funds rate in June, the central bank ceased its tightening for the second half of 2006. Global economic growth remained intact, and the threat of a U.S. recession subsided. International stocks, with the exception of Japan, rallied strongly going into year end.

Europe's economic picture continued to be stable in 2006, providing a positive backdrop for European stock markets. Growth in European services industries, the largest part of the economy, unexpectedly accelerated in November. Eurozone retail-sales growth and German exports gained momentum toward year end.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Meanwhile, inflation in the Eurozone began to rise as companies passed on costs from oil prices doubling in the past three years. The European Central Bank raised interest rates during the period to keep inflation under control, but many investors viewed the central bank's actions positively, as evidence that the economy was on strong ground.

On the whole, improving corporate profits and robust European domestic demand contributed to a generally positive environment for European stocks. Corporate earnings have risen but valuations have not yet expanded, providing a relatively attractive opportunity for investors in European stocks. The best performing sectors in the MSCI Europe Index were real estate, utilities, and automobiles. The weakest performers were the pharmaceuticals, software, and energy sectors.

In Japan, investors lost much of the optimism that drove the market's gains in 2005, and Japanese stocks were volatile during the period, especially in the small- and mid-cap segments. In January, an investigation of regulatory fraud at an internet company drove markets lower as speculation spread that other start-up companies might have a similar fate. Although markets turned around in March, supported by the Bank of Japan's decision to lift its zero interest rate monetary policy and a well-received Tankan survey of corporate sentiment, gains were short lived. Stocks fluctuated in the second and third quarters, given the uncertainties of U.S. economic deceleration, escalating geopolitical tensions, rapid yen appreciation and rising oil prices, despite evidence of economic strength. However, conditions improved in the fourth quarter, with better-than-expected Tankan surveys, a worldwide stock market rally and depreciation in the yen relative to the U.S. dollar. Nonetheless, the central bank kept interest rates steady in the second half of the year, due to concerns about the strength of the economy's rebound.

Elsewhere in Asia, the markets faced the same challenges as all global investors: concerns about energy prices, global liquidity, inflation, political uncertainty and the prospect of an economic slowdown in the U.S. As with the other global markets, Asian markets experienced a correction in the second quarter but rebounded in the second half of the year, especially in the fourth quarter. Despite political noise in Taiwan and ill-received central bank policy announcements in Thailand, most markets in the region closed the year in positive territory, buoyed in no small part by strong fourth quarter returns. China outpaced its peers, followed by Indonesia and the Philippines. Pakistan had a strong start but lagged its regional peers to post only a modest gain for the year overall.

Emerging markets equities posted their fourth consecutive calendar year of double-digit returns in 2006. Moreover, the emerging markets continued their outperformance over the developed markets for the sixth consecutive year. During the year, the asset class benefited from strong macroeconomic growth, a healthy consumer and supportive commodity prices. On a regional basis, Latin America was the star performer, followed by Asia and the Europe, Middle East and Africa (EMEA) region.

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures,

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

please visit www.morganstanley.com or speak with your Financial Advisor. Investment returns and principal value will fluctuate and portfolio shares, when redeemed, may be worth more or less than their original cost.

Aggressive Equity Portfolio

For the 12-month period ended December 31, 2006, Aggressive Equity Portfolio Class X shares produced a total return of 7.84 percent versus 9.46 percent for the Russell 3000^® Growth Index. For the same period, the Portfolio's Class Y shares returned 7.64 percent. Past performance is no guarantee of future results.

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

The Portfolio's overall underperformance against the Russell 3000 Growth Index was due to stock selection, even though sector allocations contributed positively to overall performance. Areas of weakness for the Portfolio included the consumer discretionary sector, where a large overweight position versus the Russell 3000 Growth Index was the main detractor. Additionally, stock selection in consumer products and a single holding in a leisure time company proved detrimental. Within the other energy category, stock selection in crude oil producers also hampered returns.

Despite these drags on performance, there were several sources of positive returns for the Portfolio.

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 shown above due to differences in expenses.

Average Annual Total Returns as of December 31, 2006

	1 Year			5 Years			10 Years		Since Inception*
Class X		7.84	%⁽¹⁾		7.87	%⁽¹⁾		—		5.43	%⁽¹⁾
Class Y		7.64	%⁽¹⁾		7.59	%⁽¹⁾		—		0.06	%⁽¹⁾

(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

(3) The Russell 3000® Growth Index measures the performance of those companies in the Russell 3000® Index with higher price-to-book ratios and higher forecasted growth values. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

* Inception dates of May 4, 1999 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Stock selection in the multi-industry sector, which includes conglomerates, added to relative returns. Within the technology sector, stock selection in semiconductors more than offset the negative impact of the sector's underweight allocation. An overweight position in the utilities sector also benefited performance, as did stock selection in wireless companies.

At the close of the period, consumer discretionary represented the largest sector weight, followed by the financial services and other energy sectors. The Portfolio's exposures in the consumer discretionary and other energy sectors were overweighted versus the Russell 3000 Growth Index, while the financial services sector was underweight relative to the Russell 3000 Growth Index.

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

Dividend Growth Portfolio

For the 12-month period ended December 31, 2006, Dividend Growth Portfolio Class X shares produced a total return of 11.09 percent versus 15.79 percent for the S&P 500^® Index. For the same period, the Portfolio's Class Y shares returned 10.83 percent. Past performance is no guarantee of future results.

Average Annual Total Returns as of December 31, 2006

1 Year

5 Years

10 Years

Since Inception*

Class X

11.09

%⁽¹⁾

5.94

%⁽¹⁾

6.44

%⁽¹⁾

9.27

%⁽¹⁾

Class Y

10.83

%⁽¹⁾

5.67

%⁽¹⁾

—

4.57

%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

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

* Inception dates of March 1, 1990 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

On a sector basis, the Portfolio's underperformance relative to the S&P 500 Index was primarily attributable to stock selection in the health care, technology and energy sectors. Within the health care sector, the negative influence was widespread across a variety of holdings, including pharmaceuticals, biotechnology, medical devices, and health care equipment and services, and was primarily driven by individual company-specific factors. Weakness in the Portfolio's technology holdings was focused mainly in two industry groups: computer hardware and peripherals, and communications equipment. Stock selection within the energy sector also proved detrimental, due largely to negative company-specific events within certain oil services and exploration and production holdings.

In addition, in the first half of the year, we had positioned the Portfolio with a slight tilt toward growth-style stocks, given that economic growth began to slow and that growth stocks have historically performed better than their value counterparts in this environment. However, in 2006, value stocks strongly outpaced growth stocks for the year overall. Although we shifted the Portfolio's positioning in the second half of the year and performance subsequently improved, the value-oriented market climate proved challenging early in the period.

However, the Portfolio achieved good gains elsewhere. Relative to the S&P 500 Index, the Portfolio's stock selection in the financials sector added to results, with very strong performance in its capital markets holdings and a smaller contribution from insurance holdings. The Portfolio's weak stock selection in the energy sector was partially offset by an overweight allocation there. Two holdings in the materials sector also buoyed returns, driven by company-specific factors.

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

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Equity Portfolio

For the 12-month period ended December 31, 2006, Equity Portfolio Class X shares produced a total return of 4.18 percent versus 9.46 percent for the Russell 3000^® Growth Index. For the same period, the Portfolio's Class Y shares returned 3.92 percent. Past performance is no guarantee of future results.

The Portfolio's underperformance against the Russell 3000 Growth Index was due to both stock selection and sector allocations. The bottom contributing sectors relative to the Russell 3000 Growth Index were consumer discretionary, health care, and autos and transportation. Within the consumer discretionary sector, a large overweight allocation detracted from relative returns. Furthermore, stock selection in the commercial services, consumer electronics and one holding in a leisure time company also served to weaken performance. In the health care sector, stock selection in medical and dental instruments and pharmaceutical firms offset the positive influence achieved through the sector's underweight position. In the autos and transportation category, an overweight allocation was detrimental to performance, as was the Portfolio's holdings in transportation and logistics companies.

Average Annual Total Returns as of December 31, 2006

1 Year

5 Years

10 Years

Since Inception*

Class X

4.18

%⁽¹⁾

5.77

%⁽¹⁾

9.21

%⁽¹⁾

12.00

%⁽¹⁾

Class Y

3.92

%⁽¹⁾

5.51

%⁽¹⁾

—

(1.33

)%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

* Inception dates of March 9, 1984 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Among the areas of strength for the Portfolio was the financial services sector. Here, stock selection in diversified financial services and financial information services companies was a significant positive contributor to returns. Stock selection within the multi-industry sector, which includes conglomerates, also proved advantageous. In the utilities sector, an overweight position and stock selection in wireless companies further bolstered performance.

At the close of the period, consumer discretionary represented the largest sector weight, followed by the financial services and other energy sectors. All three sectors were overweight versus the Russell 3000 Growth Index.

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

European Equity Portfolio

For the 12-month period ended December 31, 2006, European Equity Portfolio Class X shares produced a total return of 30.21 percent versus 33.72 percent for the MSCI Europe Index. For the same period, the Portfolio's Class Y shares returned 29.88 percent. Past performance is no guarantee of future results.

Average Annual Total Returns as of December 31, 2006

1 Year

5 Years

10 Years

Since Inception*

Class X

30.21

%⁽¹⁾

10.12

%⁽¹⁾

8.93

%⁽¹⁾

12.20

%⁽¹⁾

Class Y

29.88

%⁽¹⁾

9.84

%⁽¹⁾

—

3.01

%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

(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, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. 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 is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

* Inception dates of March 1, 1991 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

The Portfolio's underperformance relative to the MSCI Europe Index was primarily driven by our stock selection in banks. Within this group, some of the Portfolio's holdings had performed well early in the period but were unable to sustain their advance for the duration of the period. In addition, the Portfolio was less exposed to some of the MSCI Europe Index's better performing bank stocks, especially in the U.K. An underweight in the telecommunication services sector, which rebounded toward the end of the period, and a lack of real estate stocks, one of the market's top performing groups, further detracted from results. Finally, despite garnering strong absolute gains, the Portfolio's food, beverage and tobacco holdings lagged the performance of their peers within the MSCI Europe Index due to a variety of company specific reasons.

Nonetheless, the Portfolio's absolute return for the period should not be overlooked, and the Portfolio did show strength in other areas relative to the MSCI Europe Index. For example, the Portfolio was well served by our stock selection within the media group. In particular, a publishing and professional information services company showed strength following a restructuring. Stock selection in the technology hardware and equipment industry also bolstered returns, as a telecommunications networking company performed well on the back of improving sales dynamics. Elsewhere, the Portfolio's underweight position in the energy sector helped mitigate the negative influence of the broad sector's weakening returns amid retreating oil prices and rising production costs.

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

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Global Advantage Portfolio

For the 12-month period ended December 31, 2006, Global Advantage Portfolio Class X shares produced a total return of 18.55 percent versus 20.07 percent for the Morgan Stanley Capital International (MSCI) World Index. For the same period, the Portfolio's Class Y shares returned 18.35 percent. Past performance is no guarantee of future results.

Although the Portfolio's country and sector allocations may provide a useful basis for performance discussions, these allocations are not based on top-down positioning decisions. Given our bottom-up approach to stock selection, the Portfolio's weightings in countries or sectors are indicative of where we found the most attractive investment opportunities (or, conversely, a lack of opportunities) on an individual stock basis.

In the 12-month period, the Portfolio achieved positive performance relative to the MSCI World Index in a number of areas. The largest country-level contributors were an overweight in Spain, an underweight in Japan and an overweight in Singapore. These exposures proved advantageous during the period because Spain was the MSCI World Index's top performing market, Singapore was within the top five best performers, and Japan

Average Annual Total Returns as of December 31, 2006

	1 Year			5 Years			10 Years		Since Inception*
Class X		18.55	%⁽¹⁾		8.15	%⁽¹⁾		—		1.80	%⁽¹⁾
Class Y		18.35	%⁽¹⁾		7.89	%⁽¹⁾		—		(0.81	)%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

(3) The Morgan Stanley Capital International (MSCI) World Index measures performance from a diverse range of global stock markets including the U.S., Canada, Europe, Australia, New Zealand, and the Far East. 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 is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

* Inception dates of May 18, 1998 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

was among the worst performing markets. Moreover, of the 19 major world markets represented in the MSCI World Index, only two countries underperformed the U.S.: Japan and New Zealand. Because international markets had stronger performance, the Portfolio's underweight exposure to U.S. stocks served the Portfolio well. In addition, the Portfolio benefited from stock selection in Singapore, the U.S. and the U.K.

On a sector basis, an underweight in the energy sector boosted returns relative to the MSCI World Index. Because the earnings growth of energy companies is dependent on commodity prices, we have tended to avoid investment in energy stocks. The Portfolio's limited exposure to energy stocks was additive to performance as the price of crude oil began to retreat in the second half of the year. An underweight in the consumer staples sector and an overweight in the financials sector also had a positive influence on returns. Additionally, stock selection was strong in the financials, consumer discretionary and industrials sectors.

However, the Portfolio's underperformance relative to the MSCI World Index derived from an overweight position in South Africa and an underweight in France. Stock selection in Spain, Germany and Japan also had a detrimental effect. In terms of sectors, the Portfolio was hampered by an overweight in information technology and an underweight in utilities. Within the health care sector, both an overweight exposure and stock selection detracted from the Portfolio's results relative to the MSCI World Index.

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

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Global Dividend Growth Portfolio

For the 12-month period ended December 31, 2006, Global Dividend Growth Portfolio Class X shares produced a total return of 21.94 percent versus 20.07 percent for the MSCI World Index. For the same period, the Portfolio's Class Y shares returned 21.60 percent. Past performance is no guarantee of future results.

Relative to the MSCI World Index, the strongest performance in the Portfolio over this period came from stock selection and an underweight position in the information technology sector. In particular, the Portfolio's holdings in the equipment and hardware group and in the software and services group performed very well. The Portfolio also benefited from a zero weight in the semiconductors group, which sold off sharply during the year.

The Portfolio's positioning within the energy sector was also a strongly positive influence on performance for the year. Within this sector, the Portfolio emphasized the higher quality names, which finally began to pay off as performance of the broader sector began to stall. The Portfolio was underweight in the sector throughout the year and this also had a small positive effect.

Average Annual Total Returns as of December 31, 2006

1 Year

5 Years

10 Years

Since Inception*

Class X

21.94

%⁽¹⁾

11.48

%⁽¹⁾

8.57

%⁽¹⁾

9.67

%⁽¹⁾

Class Y

21.60

%⁽¹⁾

11.21

%⁽¹⁾

—

7.34

%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

* Inception dates of February 23, 1994 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

The financials sector was another area where the Portfolio gained relative outperformance. In particular, stock selection in banks was strong, primarily in the Portfolio's holdings in Europe. Stock selection in diversified financials was also positive but the Portfolio's holdings within the insurance group lagged the MSCI World Index.

The weakest contributor to 2006 performance was stock selection and an underweight position in the utilities sector. Stock selection in the industrials sector was also a detractor, particularly within the capital goods group.

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

High Yield Portfolio

For the 12-month period ended December 31, 2006, High Yield Portfolio Class X shares produced a total return of 9.29 percent versus 10.76 percent for the Lehman Brothers U.S. Corporate High Yield — 2% Issuer Cap Index and 11.95 percent for the CSFB High Yield Index. For the same period, the Portfolio's Class Y shares returned 9.01 percent. Past performance is no guarantee of future results.

Average Annual Total Returns as of December 31, 2006

1 Year

5 Years

10 Years

Since Inception*

Class X

9.29

%⁽¹⁾

7.79

%⁽¹⁾

(3.83

)%⁽¹⁾

3.78

%⁽¹⁾

Class Y

9.01

%⁽¹⁾

7.52

%⁽¹⁾

—

(6.03

)%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

(3) The Lehman Brothers U.S. Corporate High Yield — 2% Issuer Cap Index is the 2% Issuer Cap component of the Lehman Brothers U.S. Corporate High Yield Index which covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes Emerging Markets debt. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. The Fund's benchmark was changed from the CSFB High Yield Index to the Lehman Brothers U.S. Corporate High-Yield — 2% Issuer Cap Index to more accurately reflect the Fund's investible universe.

(4) The CSFB High Yield Index is designed to mirror the investible universe of the U.S. dollar-denominated high yield debt market. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

* Inception dates of March 9, 1984 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Throughout the year, we continued to seek to maintain a balanced and well-diversified portfolio while allowing for strategic overweights in securities and sectors that we believed possessed the most attractive risk profiles. Over the course of the period, we increased the Portfolio's average credit quality to BB, which is higher than that of the Lehman Brothers U.S. Corporate High Yield — 2% Issuer Cap Index. The Portfolio adopted this conservative posture because in our view, yield spreads, which were at historically tight levels, reflected the persistence of a near-perfect credit environment for an unrealistically extended period of time. This defensive positioning dampened performance as the lowest-rated segments of the market outperformed.

In terms of issuer size, we focused on larger companies because of their financial flexibility, their ability to withstand less favorable financial conditions, and their superior access to capital markets. Over the course of the year, we increased exposure to the transportation, health care, retail and energy sectors and decreased exposure to building products, manufacturing, chemicals, and metals. Strong security selection in several sectors, especially autos and retail, helped boost performance, as did a lower-than-benchmark duration**, which served the Portfolio well when interest rates rose.

At year end, the Portfolio's major sector overweights included autos and vehicle parts, energy, food and tobacco, and aerospace and defense. Key sector underweights included technology, utilities, media, cable, and paper and forest products.

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

** A measure of the sensitivity of a bond's price to changes in interest rates, expressed in years. Each year of duration represents an expected 1 percent change in the price of a bond for every 1 percent change in interest rates. The longer a bond's duration, the greater the effect of interest-rate movements on its price. Typically, portfolios with shorter durations perform better in rising interest-rate environments, while portfolios with longer durations perform better when rates decline.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Income Builder Portfolio

For the 12-month period ended December 31, 2003, Income Builder Portfolio Class X shares produced a total return of 14.21 percent versus 22.25 percent for the Russell 1000^® Value Index and 3.78 percent for the Lehman Brothers U.S. Government/Credit Index. For the same period, the Portfolio's Class Y shares returned 13.96 percent. Past performance is no guarantee of future results.

In the stock portion of the Portfolio, the primary area of underperformance for the portfolio relative to the Russell 1000 Value Index was in the health care sector. A surprise negative announcement by a health care equipment and services company early in the reporting period was responsible for most of the Portfolio's weak performance in this sector. In addition, the Portfolio's health care sector overweight is largely composed of pharmaceutical stocks, which proved to be a negative influence during this time period. With the Democrats gaining a majority in Congress, investors and drug companies were concerned about potential Medicare reform that would ultimately enable government to negotiate drug prices. The telecommunications sector was another drag on performance relative to the Russell 1000 Value Index, primarily due to stock selection.

Average Annual Total Returns as of December 31, 2006

	1 Year			5 Year			10 Years		Since Inception*
Class X		14.21	%⁽¹⁾		8.63	%⁽¹⁾		—		7.73	%⁽¹⁾
Class Y		13.96	%⁽¹⁾		8.35	%⁽¹⁾		—		6.80	%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

(3) The Russell 1000® Value Index measures the performance of those companies in the Russell 1000® Index with lower price -to-book ratios and lower forecasted growth values. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

(4) The Lehman Brothers U.S. Government/Credit Index tracks the performance of government and corporate obligations, including U.S. government agency and Treasury securities and corporate and Yankee bonds. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

* Inception dates of January 21, 1997 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

The Portfolio had no exposure to some of the market's best performing telecom stocks, and one of the Portfolio's larger telecom holdings provided lackluster returns during the period. Further detracting from performance was an underweight in the energy sector. We had been reducing exposure to the sector all year, as the lofty valuations of many energy stocks appear to exceed what we would consider an appropriate balance of risk and return.

Nonetheless, the Portfolio did outperform the Russell 1000 Value Index in other areas. In the consumer discretionary sector, our stock selection among retailers and autos served the Portfolio well. The financial services sector also contributed positively to performance, particularly in the Portfolio's diversified financial holdings. These companies had strong exposure to the capital markets through their investment banking and trading operations, and benefited from the robust merger and acquisition activity and rising markets during the period. The Portfolio owned some of the utility sector's best performing stocks, which offset the negative impact of an underweight in the sector. Moreover, on an absolute basis, the Portfolio achieved positive results from all of its represented sectors.

As of the end of the reporting period, the Portfolio held 64 percent in stocks, 11 in bonds and 23 percent in convertible securities. With regard to bonds, we kept the Portfolio's overall duration** well below that of the Lehman Brothers U.S. Government/Credit Index during the period. This posture was beneficial as interest rates rose across the market, but detracted from relative performance during periods of sharp yield increases. An underweight to the agency sector detracted slightly from relative performance as this sector posted solid returns. Given aggressive bond valuations at the start of the year and concerns regarding increasing leverage trends, we chose to maintain a defensive posture in credit over the course of 2006. This positioning had a small negative effect on the performance of the Portfolio relative to the Lehman Brothers U.S. Government/Credit Index over the period, as spreads (or the extra return required by investors for assuming credit risk) generally narrowed. However, good security selection helped offset a portion of this weakness.

The Portfolio's investments in convertible securities made gains in the consumer discretionary, financials, and technology sectors. In the consumer discretionary sector, media holdings were standouts as both stock selection and a resulting overweight in media contributed positively. However, security selection in the industrial sector had a negative impact.

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

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Income Plus Portfolio

For the 12-month period ended December 31, 2006, Income Plus Portfolio Class X shares produced a total return of 5.69 percent versus 4.30 percent for the Lehman Brothers U.S. Corporate Index and 4.33 percent for the Lehman Brothers U.S. Aggregate Index. For the same period, the Portfolio's Class Y shares returned 5.34 percent. Past performance is no guarantee of future results.

During the reporting year, we kept the Portfolio's overall duration** relatively low. This posture proved beneficial to performance as interest rates rose across much of the curve. However, when rates declined later in the year, this defensive positioning detracted from relative performance.

In terms of credit risk, the Portfolio was also positioned defensively with a focus on higher-quality securities. This conservative posture, coupled with a slight narrowing of yield spreads, dampened performance as the lowest-rated segments of the credit market outperformed. On a more positive note, however, strong security selection in several sectors was additive to performance.

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

** A measure of the sensitivity of a bond's price to changes in interest rates, expressed in years. Each year of

Average Annual Total Returns as of December 31, 2006

1 Year

5 Years

10 Years

Since Inception*

Class X

5.69

%⁽¹⁾

5.63

%⁽¹⁾

6.34

%⁽¹⁾

7.50

%⁽¹⁾

Class Y

5.34

%⁽¹⁾

5.36

%⁽¹⁾

—

6.76

%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

(3) The Lehman Brothers U.S. Corporate Index covers U.S. dollar-denominated, investment-grade, fixed rate, taxable securities sold by industrial, utility and financial issuers. It includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity and quality requirements. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. The Portfolio's benchmark was changed from the Lehman Brothers U.S. Aggregate Index to the Lehman Brothers U.S. Corporate Index to more accurately reflect the Portfolio's investible universe.

(4) The Lehman Brothers U.S. 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 is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

* Inception dates of March 1, 1987 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

duration represents an expected 1 percent change in the price of a bond for every 1 percent change in interest rates. The longer a bond's duration, the greater the effect of interest-rate movements on its price. Typically, portfolios with shorter durations perform better in rising interest-rate environments, while portfolios with longer durations perform better when rates decline.

Limited Duration Portfolio

For the 12-month period ended December 31, 2006, Limited Duration Portfolio Class X shares produced a total return of 4.28 percent versus 4.69 percent for the Lehman Brothers U.S. Credit Index (1-5 Year). For the same period, the Portfolio's Class Y shares returned 4.03 percent. Past performance is no guarantee of future results.

During the reporting year, we kept the Portfolio's overall duration** (a measure of interest-rate sensitivity) relatively low. This posture proved beneficial to performance as interest rates rose across much of the curve. However, when rates declined later in the year, this defensive positioning detracted from relative performance.

Average Annual Total Returns as of December 31, 2006

	1 Year			5 Years			10 Years		Since Inception*
Class X		4.28	%⁽¹⁾		2.76	%⁽¹⁾		—		3.64	%⁽¹⁾
Class Y		4.03	%⁽¹⁾		2.49	%⁽¹⁾		—		3.46	%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

(3) 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 is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

* Inception dates of May 4, 1999 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

The Portfolio's emphasis on higher coupon mortgages benefited performance during the first half of the year when rates were rising as these issues outperformed their lower coupon counterparts. Higher coupon mortgages typically have slower pre-payment rates and as such, tend to be less sensitive to rising interest rates. In the last months of the year, as rates began to fall, this emphasis kept the Portfolio from more fully participating in the comparatively better performance of lower-coupon mortgages.

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

Money Market Portfolio

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

As of December 31, 2006, Money Market Portfolio had net assets of more than $234 million with an average portfolio maturity of 41 days. For the seven-day period ended December 31, 2006, the Portfolio's Class X shares provided an effective annualized yield of 4.90 percent and a current yield of 4.78 percent, while its 30-day moving average yield for December was 4.80 percent. For the 12-month period ended December 31, 2006, the Portfolio's Class X shares returned 4.61 percent. Past performance is no guarantee of future results.

For the seven-day period ended December 31, 2006, the Portfolio's Class Y shares provided an effective annualized yield of 4.64 percent and a current yield of 4.54 percent, while its 30-day moving average yield for December was 4.55 percent. For the 12-month period ended December 31, 2006, the Portfolio's Class Y shares returned 4.35 percent. Past performance is no guarantee of future results.

Our strategy in managing the Portfolio remained consistent with its long-term focus on maintaining preservation of capital and liquidity. We adhered to a conservative approach that emphasized purchasing high-quality money market obligations and avoiding the use of derivatives or structured notes that might fluctuate excessively with changing interest rates.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

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

S&P 500 Index Portfolio

For the 12-month period ended December 31, 2006, the S&P 500 Index Portfolio Class X shares produced a total return of 15.56 percent versus 15.79 percent for the S&P 500^® Index. For the same period, the Portfolio's Class Y shares returned 15.21 percent. Past performance is no guarantee of future results.

Based on absolute returns, all sectors in the S&P 500 Index and therefore in the Portfolio had positive performance during the period. The top three performers were the telecommunication services, energy and utilities sectors. In the telecom sector, a wave of industry consolidation helped revive the sector after its multi-year period of sluggishness. Investor confidence was buoyed by improved earnings and the proliferation of acquisition announcements. Despite weaker performance in the second half of the year, the energy sector had advanced considerably on the back of rising oil prices in the first half of the year and record profits at some energy companies. Notable performance also came from the utilities sector, which benefited from merger and acquisition announcements and stronger balance sheets.

Average Annual Total Returns as of December 31, 2006

	1 Year			5 Years			10 Years		Since Inception*
Class X		15.56	%⁽¹⁾		5.79	%⁽¹⁾		—		4.17	%⁽¹⁾
Class Y		15.21	%⁽¹⁾		5.53	%⁽¹⁾		—		0.50	%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

* Inception dates of May 18, 1998 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

The bottom three performing sectors were health care, technology and industrials. Within the health care sector, pharmaceuticals companies with poor performance and declining outlooks and a health care equipment and services holding with a disappointing earnings report muted the broad sector's advance. Weakness in the technology sector stemmed from difficulties in the semiconductor and semiconductor capital equipment group. Intensifying competition created a price war between two of the industry's largest players and, although unit sales were up, profit margins were down. The lackluster return of one of the industrial sector's major constituents dampened the performance of the entire sector.

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

Strategist Portfolio

For the 12-month period ended December 31, 2006, Strategist Portfolio Class X shares produced a total return of 15.01 percent versus 15.79 percent for the S&P 500^® Index and 3.78 percent for the Lehman Brothers U.S. Government/Credit Index. For further comparison, the average Lipper Variable Flexible Portfolio total return was 10.31 percent and U.S. Treasury bills returned 4.80 percent. For the same period, the Portfolio's Class Y shares returned 14.75 percent. Past performance is no guarantee of future results.

The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's

Average Annual Total Returns as of December 31, 2006

1 Year

5 Years

10 Years

Since Inception*

Class X

15.01

%⁽¹⁾

9.36

%⁽¹⁾

9.20

%⁽¹⁾

9.59

%⁽¹⁾

Class Y

14.75

%⁽¹⁾

9.09

%⁽¹⁾

—

5.07

%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

* Inception dates of March 1, 1987 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.

Strategist Portfolio's flexible investment approach allows investment across stocks, bonds, cash and other investment classes. To determine the specific allocation among asset classes throughout the period, we rigorously evaluate a comprehensive array of quantitative and qualitative factors. The quantitative analysis comprises an extensive "top-down" asset class review of many macroeconomic variables, with a primary focus on three core factors: monetary policy and its impact on liquidity, inflation trends and corporate profitability. A second, more qualitative process then broadens the analysis to determine which individual sectors and industries would offer the best opportunities, in our view, given the macroeconomic climate. Individual holdings are then selected to provide desired exposure to asset classes and sectors.

As the result of our investment process, Strategist Portfolio migrated to a more defensive posture throughout 2006, as higher federal funds target rates sparked concerns that the Federal Open Market Committee (the "Fed") would attempt to restrict monetary policy further during the year. While interest rate increases were limited to the first half of the year, our macroeconomic analysis of such factors as industrial production, capacity utilization, leading economic indicators and job creation pointed to a more robust third and fourth quarter, raising the probability that interest rates would need to be increased further.

In response, we initially reduced the Portfolio's fixed income exposure in the first quarter from 25 percent of total net assets to 20 percent, and subsequently lowered the equity exposure in the second quarter from 65 percent to 60 percent. The Portfolio's cash allocation was raised from 10 percent to 20 percent during the reporting period. At year end, the Portfolio's asset allocation target stood at 60 percent equity, 20 percent fixed income and 20 percent in cash-equivalent instruments.

In conjunction with these asset-class level shifts, we also reallocated the Portfolio's exposures from more economically sensitive sectors to more stable, less cyclical sectors within the fixed income and equity portfolios. During the reporting period, we reduced the Portfolio's largest sector weight, information technology, from a significant overweight versus the benchmark S&P 500 Index to a modest overweight. We also eliminated an overweight position in industrials, moving to an underweight position versus the benchmark. Proceeds were reallocated to consumer staples, where the Portfolio's modest overweight position doubled to a more substantial position. Exposure to telecommunications services — specifically the traditionally defensive telephone utility companies — was also increased from a modest underweight position to an overweight relative to the S&P 500 Index.

We also kept the fixed income component of the Portfolio generally defensive throughout the period under

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

review. As fixed income sectors sold off, short-term debt was reallocated to mortgage securities and corporate and government bonds. At the end of December, the fixed income portion of the portfolio averaged an effective duration** of 4.44 years, slightly below the benchmark duration as measured by the Lehman Brothers Government/Credit Index. At the close of the period, the Portfolio held just over a third of its fixed income assets in government-issued bonds, about a quarter of its assets in corporates, and the balance in mortgages and short-term paper.

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

** A measure of the sensitivity of a bond's price to changes in interest rates, expressed in years. Each year of duration represents an expected 1 percent change in the price of a bond for every 1 percent change in interest rates. The longer a bond's duration, the greater the effect of interest-rate movements on its price. Typically, portfolios with shorter durations perform better in rising-interest-rate environments, while portfolios with longer durations perform better when rates decline.

Utilities Portfolio

For the 12-month period ended December 31, 2006, Utilities Portfolio Class X shares produced a total return of 20.32 percent versus 20.99 percent for the S&P 500^® Utilities Index and 15.79 percent for the S&P 500^®Index. For the same period, the Portfolio's Class Y shares returned 20.03 percent.

Average Annual Total Returns as of December 31, 2006

1 Year

5 Years

10 Years

Since Inception*

Class X

20.32

%⁽¹⁾

8.53

%⁽¹⁾

7.41

%⁽¹⁾

9.00

%⁽¹⁾

Class Y

20.03

%⁽¹⁾

8.27

%⁽¹⁾

—

1.80

%⁽¹⁾

(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

(3) The Standard & Poor's 500® Utilities Index (S&P 500® Utilities Index) is an unmanaged, market capitalization weighted index consisting of utilities companies in the S&P 500® Index and is designed to measure the performance of the utilities sector. It includes reinvested dividends. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. The Portfolio's primary benchmark is being changed from the S&P 500® Index to the S&P 500® Utilities Index to more accurately reflect the Portfolio's investible universe. The S&P 500® Index will continue to be listed in addition to the S&P 500® Utilities Index.

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

* Inception dates of March 1, 1990 for Class X and June 5, 2000 for Class Y.

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Past performance is no guarantee of future results.

For the 12-month period ended December 31, 2006, all sub-sectors within the utilities sector provided strong returns relative to the broad market; however, the Portfolio's slight underperformance against the S&P 500 Utilities Index was caused by an underweight allocation within the electric utilities segment. Many of the European and Latin American telecom operators held in the Portfolio contributed favorably to total returns.

Given the attractive opportunities within the broad utility markets, at the close of the period the Portfolio was fully invested and held an average cash balance in the range of 1 to 2 percent. The Portfolio provided shareholders with diversified exposure to the utilities sector through a 64 percent allocation to electric utilities, a 20 percent allocation to telecommunications services and a 16 percent allocation in natural gas/energy. Within the telecommunications services segment, 6 percent was allocated to European and Latin American telecommunication operators. We note that the Portfolio's holdings and allocations may be modified at any time, in response to our analysis of broader trends or company specific fundamentals.

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

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

Very truly yours,

Ronald E. Robison
President and Principal Executive Officer

Morgan Stanley Variable Investment Series

Letter to the Shareholders n December 31, 2006 continued

Proxy Voting Policy and Procedures and Proxy Voting Record

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

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

For More Information About Portfolio Holdings

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

Morgan Stanley Variable Investment Series

Expense Example n December 31, 2006

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

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 07/01/06 – 12/31/06.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

Morgan Stanley Variable Investment Series

Expense Example n December 31, 2006 continued

Money Market

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (2.43% return)	$	1,000.00	$	1,024.30	$	2.78
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.19	$	2.77
Class Y
Actual (2.31% return)	$	1,000.00	$	1,023.10	$	4.04
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.94	$	4.03

* Expenses are equal to the Portfolio's annualized expense ratios of 0.55% and 0.80% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).

Limited Duration

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (2.88% return)	$	1,000.00	$	1,028.80	$	2.51
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.74	$	2.50
Class Y
Actual (2.65% return)	$	1,000.00	$	1,026.50	$	3.78
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.48	$	3.77

* Expenses are equal to the Portfolio's annualized expense ratios of 0.49% and 0.74% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Income Plus

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (6.52% return)	$	1,000.00	$	1,065.20	$	2.92
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.38	$	2.85
Class Y
Actual (6.40% return)	$	1,000.00	$	1,064.00	$	4.21
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.12	$	4.13

* Expenses are equal to the Portfolio's annualized expense ratios of 0.56% and 0.81% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Morgan Stanley Variable Investment Series

Expense Example n December 31, 2006 continued

High Yield

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (6.42% return)	$	1,000.00	$	1,064.20	$	5.15
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.21	$	5.04
Class Y
Actual (6.27% return)	$	1,000.00	$	1,062.70	$	6.45
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.95	$	6.31

* Expenses are equal to the Portfolio's annualized expense ratios of 0.99% and 1.24% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Utilities

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (15.01% return)	$	1,000.00	$	1,150.10	$	3.85
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.63	$	3.62
Class Y
Actual (14.88% return)	$	1,000.00	$	1,148.80	$	5.20
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.37	$	4.89

* Expenses are equal to the Portfolio's annualized expense ratios of 0.71% and 0.96% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Income Builder

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (11.19% return)	$	1,000.00	$	1,111.90	$	4.36
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.07	$	4.18
Class Y
Actual (10.99% return)	$	1,000.00	$	1,109.90	$	5.69
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.81	$	5.45

* Expenses are equal to the Portfolio's annualized expense ratios of 0.82% and 1.07% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Morgan Stanley Variable Investment Series

Expense Example n December 31, 2006 continued

Dividend Growth

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (11.47% return)	$	1,000.00	$	1,114.70	$	3.14
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.23	$	3.01
Class Y
Actual (11.35% return)	$	1,000.00	$	1,113.50	$	4.47
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.97	$	4.28

* Expenses are equal to the Portfolio's annualized expense ratios of 0.59% and 0.84% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Global Dividend Growth

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (16.03% return)	$	1,000.00	$	1,160.30	$	4.47
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.07	$	4.18
Class Y
Actual (15.88% return)	$	1,000.00	$	1,158.80	$	5.82
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.81	$	5.45

European Equity

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (16.71% return)	$	1,000.00	$	1,167.10	$	5.46
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.16	$	5.09
Class Y
Actual (16.57% return)	$	1,000.00	$	1,165.70	$	6.82
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.90	$	6.36

* Expenses are equal to the Portfolio's annualized expense ratios of 1.00% and 1.25% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). If the Fund had borne all of its expenses, the annualized expense ratios would have been 1.06% and 1.31% for Class X and Class Y shares, respectively.

Morgan Stanley Variable Investment Series

Expense Example n December 31, 2006 continued

Equity

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (5.60% return)	$	1,000.00	$	1,056.00	$	2.80
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.48	$	2.75
Class Y
Actual (5.48% return)	$	1,000.00	$	1,054.80	$	4.09
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.22	$	4.02

* Expenses are equal to the Portfolio's annualized expense ratios of 0.54% and 0.79% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

S&P 500 Index

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (12.63% return)	$	1,000.00	$	1,126.30	$	1.50
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,023.79	$	1.43
Class Y
Actual (12.45% return)	$	1,000.00	$	1,124.50	$	2.84
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.53	$	2.70

* Expenses are equal to the Portfolio's annualized expense ratios of 0.28% and 0.53% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Global Advantage

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 12/31/06
Class X
Actual (14.93% return)	$	1,000.00	$	1,149.30	$	4.93
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.62	$	4.63
Class Y
Actual (14.88% return)	$	1,000.00	$	1,148.80	$	6.28
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.36	$	5.90

* Expenses are equal to the Portfolio's annualized expense ratios of 0.91% and 1.16% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Morgan Stanley Variable Investment Series

Expense Example n December 31, 2006 continued

Aggressive Equity

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (5.32% return)	$	1,000.00	$	1,053.20	$	4.35
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.97	$	4.28
Class Y
Actual (5.17% return)	$	1,000.00	$	1,051.70	$	5.64
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.71	$	5.55

* Expenses are equal to the Portfolio's annualized expense ratios of 0.84% and 1.09% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

Strategist

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	07/01/06		12/31/06		07/01/06 – 12/31/06
Class X
Actual (9.03% return)	$	1,000.00	$	1,090.30	$	2.95
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.38	$	2.85
Class Y
Actual (8.91% return)	$	1,000.00	$	1,089.10	$	4.27
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.12	$	4.13

Morgan Stanley Variable Investment Series - Money Market

Portfolio of Investments n December 31, 2006

		Commercial Paper (79.5%)
		Asset-Backed - Auto (3.0%)
$	7,062	DaimlerChrysler Revolving Auto Conduit LLC-A1 (Series I)	5.32 - 5.36	%	01/23/07 - 02/22/07	$	7,008,816
		Asset-Backed - Consumer (16.0%)
	2,826	Barton Capital LLC - 144A*	5.32 - 5.41		01/03/07 - 01/16/07		2,821,976
	500	Bryant Park Funding LLC - 144A*	5.32		01/03/07		499,706
	1,675	Gemini Securitization Corp. LLC - 144A*	5.31		01/26/07		1,668,380
	9,227	Old Line Funding, Corp. - 144A*	5.32 - 5.36		01/02/07 - 01/11/07		9,216,679
	709	Ranger Funding Co., LLC - 144A*	5.34		01/17/07		707,121
	4,391	Regency Markets No 1 LLC - 144A*	5.31 - 5.37		01/05/07 - 01/22/07		4,379,066
	6,265	Thames Asset Global Securitization - 144A*	5.33 - 5.35		01/04/07 - 01/22/07		6,251,724
	10,840	Three Rivers Funding Corp. - 144A*	5.30 - 5.35		01/02/07 - 01/05/07		10,834,075
	1,200	Thunder Bay Funding LLC - 144A*	5.31		01/04/07		1,199,120
							37,577,847
		Asset-Backed - Corporate (9.4%)
	700	Amsterdam Funding Corp. - 144A*	5.34		01/05/07		699,385
	2,720	Atlantis One Funding - 144A*	5.33		03/19/07		2,688,902
	4,000	Eureka Securitization, Inc. - 144A*	5.31		01/17/07		3,989,480
	7,135	Kaiserplatz Funding (Delaware) LLC - 144A*	5.32 - 5.35		01/08/07 - 03/16/07		7,103,172
	2,000	Nieuw Amsterdam Receivables Corp. - 144A*	5.37		01/24/07		1,992,569
	5,585	Simba Funding Corp. - 144A*	5.33		01/22/07 - 01/26/07		5,564,701
							22,038,209
		Asset-Backed - Diversified (0.4%)
	1,000	Yorktown Capital, LLC - 144A*	5.33		01/10/07		998,380
		Asset-Backed - Mortgage (4.5%)
	10,575	Sydney Capital Corp. - 144A*	5.33		01/03/07 - 02/05/07		10,529,242
		Asset-Backed - Securities (11.2%)
	5,163	Clipper Receivable Co., LLC - 144A*	5.34 - 5.36		01/26/07 - 02/06/07		5,136,492
	4,000	Curzon Funding LLC - 144A*	5.34		03/23/07		3,951,399
	1,500	Galleon Capital LLC - 144A*	5.36		01/30/07		1,493,115
	11,606	Golden Fish LLC - 144A*	5.33 - 5.38		01/11/07 - 01/31/07		11,570,228
	2,098	Scaldis Capital LLC - 144A*	5.33 - 5.34		02/12/07 - 02/15/07		2,083,774
	2,240	Solitaire Funding LLC - 144A*	5.34		01/12/07 - 01/18/07		2,234,380
							26,469,388
		Banking (2.7%)
	1,657	Bank of America Corp.	5.34 - 5.36		01/12/07 - 03/01/07		1,649,641
	3,500	Citigroup Funding Inc.	5.34		04/12/07		3,447,427
	1,175	HSBC USA Inc.	5.38		03/01/07		1,164,547
							6,261,615

See Notes to Financial Statements
33

Morgan Stanley Variable Investment Series - Money Market

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS		DESCRIPTION	ANNUALIZED YIELD ON DATE OF PURCHASE			MATURITY DATE	VALUE
		Finance - Auto (0.2%)
$	535	American Honda Finance Corp.		5.36	%	02/13/07	$	531,442
		Finance - Consumer (3.6%)
	8,500	American Express Credit Corp.		5.31		03/01/07 - 03/02/07		8,424,600
		Insurance (3.6%)
	8,575	Irish Life & Permanent PLC - 144A*		5.32 - 5.33		01/12/07 - 02/06/07		8,544,228
		International Banks (24.9%)
	500	ANZ (Del) Inc.		5.32		01/03/07		499,707
	8,050	Bank of Ireland - 144A*		5.26 - 5.32		02/23/07 - 05/08/07		7,929,529
	11,500	BNP Paribas Finance, Inc.		5.34 - 5.38		01/16/07 - 04/25/07		11,449,739
	350	Calyon North America, Inc.		5.34		05/14/07		343,136
	600	Danske Corp. - 144A*		5.36		02/01/07		597,074
	2,950	DEPFA Bank PLC - 144A*		5.31 - 5.35		05/01/07		2,898,023
	7,075	Fortis Banque Luxembourg		5.40 - 5.41		02/16/07		7,025,320
	601	ING (U.S.) Funding LLC		5.31		04/17/07		591,624
	4,000	KBC Financial Products International Ltd - 144A*		5.29		04/05/07		3,944,533
	1,100	Nordea North America, Inc.		5.31		01/03/07		1,099,355
	500	Sanpaolo IMI U.S. Financial Co.		5.34		04/27/07		491,396
	6,690	Santander Central Hispano Finance (Del) Inc.		5.32 - 5.37		01/05/07 - 02/08/07		6,674,727
	900	Skandinaviska Enskilda Banken AB - 144A*		5.36		01/04/07		899,331
	8,417	Societe Generale N.A., Inc.		5.32 - 5.36		01/08/07 - 02/16/07		8,380,747
	3,200	Swedbank		5.33		01/05/07 - 02/21/07		3,190,431
	1,400	UBS Finance (Delaware) LLC		5.34 - 5.36		01/11/07 - 03/08/07		1,389,362
	1,100	Westpac Banking Corp.		5.29 - 5.34		03/29/07 - 05/01/07		1,083,406
								58,487,440
		Total Commercial Paper (Cost $186,871,207)						186,871,207
		Floating Rate Notes (6.4%)
		Domestic Banks
	3,000	American Express Centurion Bank		5.44	†	01/19/07‡		3,001,654
	3,600	Bank of America Corp.		5.66	†	03/06/07‡		3,608,121
	3,385	JP Morgan Chase & Co.		5.44	†	03/14/07‡		3,386,663
	5,000	Merrill Lynch & Co., Inc.		5.50	†	01/19/07‡		5,006,128
		Total Floating Rate Notes (Cost $15,002,566)						15,002,566

See Notes to Financial Statements
34

Morgan Stanley Variable Investment Series - Money Market

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS		DESCRIPTION	ANNUALIZED YIELD ON DATE OF PURCHASE			MATURITY DATE			VALUE
		Bankers' Acceptances (0.9%)
		Domestic Banks
$	2,135	JP Morgan Chase & Co. (Cost $2,094,867)		5.31 - 5.33	%	05/02/07 - 05/21/07			$	2,094,867
		Certificates of Deposit (12.6%)
		Domestic Banks (2.3%)
	5,500	Wells Fargo Bank, N.A.		5.38		02/28/07				5,495,792
		International Banks (10.3%)
	3,440	Abbey National Treasury Services PLC		5.33 - 5.35		02/01/07				3,440,109
	910	Australia and N. Zealand Bkg Group, Ltd		5.38		01/29/07				909,458
	7,800	Natexis Banques Populaires - NY		5.33 - 5.35		01/23/07 - 03/06/07				7,795,856
	7,000	Rabobank Nederland - 144A*		5.33 - 5.40		01/02/07 - 03/02/07				6,998,429
	3,000	Toronto Dominion Bank		5.33		05/07/07				3,000,087
	2,000	Svenska Handelsbanken Inc.		5.35		03/06/07				1,998,416
										24,142,355
		Total Certificates of Deposit (Cost $29,638,147)								29,638,147
		Total Investments (Cost $233,606,787) (a)					99.4	%		233,606,787
		Other Assets in Excess of Liabilities					0.6			1,379,224
		Net Assets					100.0	%	$	234,986,011

* Resale is restricted to qualified institutional investors.

† Rate shown is the rate in effect at December 31, 2006.

‡ Date of next interest rate reset.

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

SUMMARY OF INVESTMENTS PERCENT OF
MATURITY SCHEDULE MARKET VALUE

1 - 30 Days	51	%
31 - 60 Days	22
61 - 90 Days	17
91 - 120 Days	4
121 - 180 Days	6
	100	%

See Notes to Financial Statements
35

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Corporate Bonds (29.7%)
		Aerospace & Defense (0.1%)
$	30	Raytheon Co.		6.15	%	11/01/08	$	30,397
	111	Raytheon Co.		6.75		08/15/07		111,834
								142,231
		Air Freight/Couriers (0.3%)
	130	FedEx Corp.		2.65		04/01/07		129,125
	260	FedEx Corp.		5.50		08/15/09		261,145
								390,270
		Beverages: Alcoholic (0.2%)
	415	Miller Brewing Co. - 144A*		4.25		08/15/08		407,811
		Building Products (0.1%)
	145	Masco Corp.		4.625		08/15/07		143,966
		Cable/Satellite TV (0.5%)
	490	Comcast Cable Communications, Inc.		6.875		06/15/09		507,162
	242	Cox Communications Inc.		5.91	†	12/14/07		243,076
								750,238
		Casino/Gaming (0.3%)
	415	Harrahs Operating Co., Inc.		7.125		06/01/07		416,988
		Chemicals: Major Diversified (0.1%)
	135	ICI Wilmington Inc.		4.375		12/01/08		132,520
		Computer Processing Hardware (0.2%)
	310	Hewlett-Packard Co.		5.496	†	05/22/09		310,697
		Containers/Packaging (0.1%)
	90	Sealed Air Corp. - 144A*		6.95		05/15/09		92,813
		Department Stores (0.7%)
	230	Federated Department Stores, Inc.		6.625		09/01/08		233,831
	370	JC Penney Corp., Inc.		7.375		08/15/08		379,041
	525	May Department Stores Co., Inc.		3.95		07/15/07		519,962
								1,132,834
		Drugstore Chains (0.4%)
	175	CVS Corp.		3.875		11/01/07		172,802
	390	CVS Corp.		4.00		09/15/09		377,284
								550,086
		Electric Utilities (4.5%)
	330	Ameren Corp.		4.263		05/15/07		328,312
	520	Appalachian Power Co. (Series G)		3.60		05/15/08		507,856
	470	Baltimore Gas & Electric Co.		6.625		03/15/08		476,259
	710	Carolina Power & Light Company Inc.		6.80		08/15/07		715,209
	410	CC Funding Trust I		6.90		02/16/07		410,509
	248	Columbus Southern Power Co.		4.40		12/01/10		238,947
	235	Commonwealth Edison Co.		3.70		02/01/08		230,410

See Notes to Financial Statements
36

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
$	245	Consumers Energy Co.		4.80	%	02/17/09	$	241,910
	330	Dominion Resources Inc.		5.687	†	05/15/08		330,585
	240	Duke Energy Corp.		3.75		03/05/08		235,596
	170	Entergy Gulf States, Inc.		3.60		06/01/08		165,566
	220	Entergy Gulf States, Inc.		5.769	†	12/01/09		219,700
	45	Entergy Gulf States, Inc. - 144A*		6.10	†	12/08/08		45,120
	495	FPL Group Capital Inc.		5.551		02/16/08		495,771
	570	Pacific Gas & Electric Co.		3.60		03/01/09		550,858
	230	Panhandle Eastern Pipe Line Co. (Series B)		2.75		03/15/07		228,652
	390	Peco Energy Co.		3.50		05/01/08		380,891
	330	Southwestern Public Service Co. (Series A)		6.20		03/01/09		334,834
	400	Texas-New Mexico Power Co.		6.25		01/15/09		405,143
	200	Wisconsin Electric Power Co.		3.50		12/01/07		196,766
								6,738,894
		Electrical Products (0.3%)
	420	Cooper Industries, Inc.		5.25		07/01/07		418,761
		Environmental Services (0.0%)
	60	USA Waste Services, Inc.		7.125		10/01/07		60,568
		Finance/Rental/Leasing (2.7%)
	560	American Honda Finance Corp. - 144A*		3.85		11/06/08		546,703
	370	CIT Group Inc.		4.75		08/15/08		366,999
	90	CIT Group Inc.		5.00		11/24/08		89,594
	540	Countrywide Home Loans, Inc. (Series L)		3.25		05/21/08		525,140
	250	MBNA Corp. (Series F)		5.798	†	05/05/08		251,630
	815	Nationwide Buildings Society - 144A* (United Kingdom)		2.625		01/30/07		813,430
	455	Residential Capital Corp.		6.00		02/22/11		454,550
	430	Residential Capital Corp.		6.375		06/30/10		435,341
	525	SLM Corp.		4.00		01/15/10		506,740
								3,990,127
		Financial Conglomerates (1.4%)
	95	Bank One Corp. (Series A)		6.00		02/17/09		96,234
	150	Chase Manhattan Corp.		6.00		02/15/09		151,762
	55	Chase Manhattan Corp.		7.00		11/15/09		57,613
	315	Citicorp		6.375		11/15/08		321,188
	170	Citigroup Inc.		3.625		02/09/09		165,055
	120	General Electric Capital Corp. (Series A)		4.25		12/01/10		116,208
	410	ING Security Life Institutional - 144A*		2.70		02/15/07		408,519
	515	Pricoa Global Funding I - 144A*		3.90		12/15/08		500,709
	340	Prudential Funding LLC - 144A*		6.60		05/15/08		344,835
								2,162,123

See Notes to Financial Statements
37

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Food Retail (0.4%)
$	305	Fred Meyer, Inc.		7.45	%	03/01/08	$	311,689
	230	Safeway Inc.		7.50		09/15/09		241,510
								553,199
		Food: Major Diversified (0.9%)
	440	General Mills Inc.		3.875		11/30/07		433,504
	200	Kraft Foods Inc.		4.00		10/01/08		195,687
	675	Kraft Foods Inc.		5.25		06/01/07		674,539
								1,303,730
		Forest Products (0.0%)
	30	Weyerhaeuser Co.		6.125		03/15/07		30,023
		Gas Distributors (0.6%)
	175	Keyspan Corp.		4.90		05/16/08		173,787
	180	NiSource Finance Corp.		5.94	†	11/23/09		180,196
	650	Sempra Energy		4.75		05/15/09		642,321
								996,304
		Home Furnishings (0.2%)
	305	Mohawk Industries, Inc. (Class C)		6.50		04/15/07		305,738
		Home Improvement Chains (0.1%)
	105	Home Depot, Inc.		5.49	†	12/16/09		105,078
		Hotels/Resorts/Cruiselines (0.3%)
	285	Hyatt Equities LLC - 144A*		6.875		06/15/07		286,216
	130	Starwood Hotels & Resorts Worldwide, Inc.		7.375		05/01/07		130,541
								416,757
		Household/Personal Care (0.3%)
	425	Clorox Co. (The)		5.485	†	12/14/07		425,575
		Industrial Conglomerates (0.3%)
	415	Textron Financial Corp.		4.125		03/03/08		409,289
		Insurance Brokers/Services (0.5%)
	800	Marsh & McLennan Companies Inc.		5.375		03/15/07		799,776
		Investment Banks/Brokers (1.1%)
	775	Goldman Sachs Group Inc. (The)		4.125		01/15/08		766,335
	35	Lehman Brothers Holdings, Inc. (Series G)		5.494	†	04/20/07		35,026
	775	Lehman Brothers Holdings, Inc.		8.25		06/15/07		785,099
								1,586,460
		Life/Health Insurance (1.3%)
	545	John Hancock Financial Services, Inc.		5.625		12/01/08		547,938
	695	Met Life Global Funding I - 144A* (Note 4)		3.375		10/05/07		680,734

See Notes to Financial Statements
38

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
$	300	Monumental Global Funding II - 144A*		3.85	%	03/03/08	$	294,521
	350	Monumental Global Funding II - 144A*		4.375		07/30/09		342,625
								1,865,818
		Major Banks (2.7%)
	445	Bank of America Corp.		3.375		02/17/09		429,514
	215	Bank of New York Co., Inc. (The)		5.20		07/01/07		214,992
	800	HBOS Treasury Services PLC - 144A* (United Kingdom)		5.625		07/20/09		808,602
	310	Popular North America Inc. (Series F)		5.65		04/15/09		310,895
	615	Suntrust Bank Atlanta		4.55		05/25/09		605,161
	615	Unicredit Luxembourg Finance S.A. - 144A*		5.426	†	10/24/08		615,300
	235	Wachovia Corp.		3.625		02/17/09		227,652
	390	Well Fargo & Co.		3.12		08/15/08		376,822
	450	World Savings Bank FSB (Series T)		4.125		12/15/09		436,822
								4,025,760
		Major Telecommunications (1.0%)
	300	Deutsche Telekom International Finance BV (Netherlands)		8.00		06/15/10		325,095
	405	Telecom Italia Capital SA (Luxembourg)		4.00		11/15/08		394,585
	660	Verizon Global Funding Corp.		6.125		06/15/07		661,739
	150	Verizon Global Funding Corp.		7.25		12/01/10		160,029
								1,541,448
		Managed Health Care (0.2%)
	175	UnitedHealth Group Inc.		4.125		08/15/09		169,973
	105	UnitedHealth Group Inc.		5.20		01/17/07		104,990
								274,963
		Media Conglomerates (0.9%)
	430	Time Warner, Inc.		5.606	†	11/13/09		430,619
	400	Time Warner, Inc.		6.15		05/01/07		400,820
	160	Viacom Inc.		5.711	†	06/16/09		160,379
	300	Viacom Inc.		5.75		04/30/11		300,437
								1,292,255
		Medical Specialties (0.3%)
	495	Baxter International, Inc.		5.196		02/16/08		493,887
		Motor Vehicles (0.3%)
	335	DaimlerChrysler North American Holdings Co		5.79	†	03/13/09		335,526
	155	DaimlerChrysler North American Holdings Co.		4.05		06/04/08		151,740
								487,266

See Notes to Financial Statements
39

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Multi-Line Insurance (1.2%)
$	690	American General Finance Corp. (Series H)		4.625	%	09/01/10	$	673,917
	120	Equitable Income Co., Inc,		6.50		04/01/08		121,479
	500	Hartford Financial Services Group, Inc. (The)		5.55		08/16/08		502,167
	190	International Lease Finance Corp.		3.75		08/01/07		188,184
	415	International Lease Finance Corp. (Series Q)		4.625		06/02/08		410,285
								1,896,032
		Oil & Gas Pipelines (0.3%)
	500	Enbridge Energy Parners, LP		4.00		01/15/09		484,801
		Other Metals/Minerals (0.3%)
	365	Brascan Corp. (Canada)		8.125		12/15/08		382,978
		Property - Casualty Insurers (1.0%)
	595	Mantis Reef Ltd. - 144A* (Australia)		4.692		11/14/08		587,618
	195	Platinum Underwriters Holdings, Ltd. (Series B) (Bermuda)		6.371		11/16/07		193,828
	285	St. Paul Travelers Companies, Inc. (The)		5.01		08/16/07		283,952
	375	XLLIAC Global Funding - 144A*		4.80		08/10/10		367,817
								1,433,215
		Railroads (0.8%)
	315	Burlington North Santa Fe Railway Co.		6.125		03/15/09		320,137
	165	Norfolk Southern Corp.		7.35		05/15/07		166,158
	670	Union Pacific Corp. (Series E)		6.79		11/09/07		676,588
								1,162,883
		Real Estate Development (0.5%)
	597	World Financial Properties - 144A*		6.91		09/01/13		625,414
	176	World Financial Properties - 144A*		6.95		09/01/13		184,692
								810,106
		Regional Banks (0.4%)
	530	Banco Santander Central Hispano Issuances Ltd. (Cayman Islands)		7.625		11/03/09		562,153
		Restaurants (0.3%)
	440	Tricon Global Restaurants, Inc.		7.65		05/15/08		452,467
		Savings Banks (1.0%)
	155	Household Finance Corp.		4.125		12/15/08		151,992
	670	Household Finance Corp.		6.40		06/17/08		680,500
	100	Sovereign Bank (Series CD)		4.00		02/01/08		98,582
	135	Washington Mutual Inc.		4.00		01/15/09		131,686
	350	Washington Mutual Inc.		8.25		04/01/10		377,266
								1,440,026

See Notes to Financial Statements
40

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Trucks/Construction/Farm Machinery (0.3%)
$	405	Caterpillar Financial Services Corp. (Series F)		3.625	%	11/15/07	$	399,175
		Wireless Telecommunications (0.3%)
	510	Vodafone Group PLC (United Kingdom)		5.454	†	12/28/07		510,392
		Total Corporate Bonds (Cost $44,736,519)						44,288,481
		Collateralized Mortgage Obligations (28.6%)
		U.S Government Agencies (2.1%)
	1,252	Federal Home Loan Mortgage Corp. 2644 AU (PAC)		3.50		5/15/22		1,233,544
	723	Federal Home Loan Mortgage Corp. 2182 ZC		7.50		9/15/29		757,099
	653	Federal National Mortgage Assoc. 2005-27 NA (PAC)		5.50		1/25/24		652,238
	479	Federal National Mortgage Assoc. 2005-52 PA (PAC)		6.50		6/25/35		495,636
		Total U.S. Government Agencies						3,138,517
		Private Issues (26.5%)
	1,056	Bank of America Funding Corp. 2006-H 3A1		6.236		09/20/46		1,062,110
	551	Bear Stearns Alt-A Trust 2003-3 3A		5.70	†	10/25/33		552,929
		Bear Stearns Mortgage Funding Trust
	700	2006-AR5 1A2		5.56	†	12/25/36		700,000
	844	2006-AR3 1A1		5.53	†	10/25/36		843,602
	862	2006-AR1 1A2		5.60	†	07/25/36		860,675
		Countrywide Alternative Loan Trust
	805	2006-0A1 1A2		5.65	†	03/20/46		804,909
	3,248	2005-81 X1 (IO)		1.85	†	02/25/37		178,616
	775	2006-0A14 2A1		5.54	†	11/25/46		776,297
	771	2006-0A16 A3		5.60	†	10/25/46		770,448
	795	2006-0A22 A2		5.56	†	02/25/47		794,719
	4,533	2006-0A1 2X (IO)		1.39	†	03/20/46		215,252
	113	Countrywide Alternative Loan Trust NIM 2006-OA6N N1 - 144A*		5.25		07/25/46		112,297
	81	Countrywide Asset-Backed NIM Certificates 2005-2 N - 144A*		4.50		08/25/36		79,799
		Countrywide Home Loans
	805	2006-0A4 A2		5.62	†	04/25/46		807,564
	4,996	2004-25 1X (IO)		1.73	†	02/25/35		113,412
	1,043	DSLA Mortgage Loan Trust 2006-AR2 2A1A		5.55	†	11/19/37		1,045,668
	63	DSLA NIM Corp. 2006-1 N1 - 144A*		5.926		04/20/46		62,988
		Greenpoint Mortgage Funding Trust
	720	2006-AR2 4A1		6.827	†	03/25/36		737,399
	2,379	2005-AR3 X1 (IO)		2.238	†	08/25/45		72,793
	3,612	2005-AR4 X4 (IO)		2.144	†	10/25/45		111,621

See Notes to Financial Statements
41

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
$	112	GS Mortgage Securities Corp. 2006-NIM3 N1 - 144A*		6.414	%	06/25/46	$	112,224
		Harborview Mortgage Loan Trust
	4,176	2005-2 X (IO)		1.382	†	05/19/35		103,097
	1,193	2006-10 2A1B		5.59	†	11/19/36		1,193,315
	850	2006-7 2A1B		5.60	†	10/19/37		852,208
	1,036	2006-8 2A1B		5.60	†	08/21/46		1,037,230
	831	2006-1 2A1A		5.59	†	03/19/37		833,051
	800	2006-14 2A1B		5.55	†	03/19/38		800,000
	1,123	2006-9 2AB2		5.63	†	11/19/36		1,128,435
	‡	2006-5 PO2		0.00		07/19/47		19
	6,661	2006-5 X2 (IO)		1.85	†	07/19/47		250,825
	2,567	2005-16 X1 (IO)		1.98	†	01/19/36		72,984
	7,145	2005-16 X3 (IO)		1.72	†	01/19/36		187,548
	4,043	2005-3 X2 (IO)		1.083	†	06/19/35		96,011
	250	2005-9 B1		5.95	†	06/20/35		253,215
	2	2006-1 PO1		0.00		03/19/37		1,434
	1,399	2006-12 2A2B		5.60	†	01/19/38		1,400,063
	654	2005-12 2A11		6.827	†	10/19/35		673,683
	1,515	2005-16 4A1A		6.827	†	01/19/36		1,545,807
	4,520	2006-1 X1 (IO)		1.73	†	03/19/37		208,359
		Harborview NIM Corp.
	97	2006-7A N1 - 144A*		6.409		09/19/36		96,628
	262	2006-9A N1 - 144A*		6.409		11/19/36		261,603
	51	2006-BU1 N1 - 144A*		5.926		02/20/46		50,730
		Indymac Index Mortgage Loan Trust
	327	2004-AR3 B1		5.85	†	07/25/34		327,070
	3,278	2005-AR12 AX2 (IO)		1.20	†	07/25/35		106,545
	118	Indymac Index NIM Corp. 2006-AR6 N1 - 144A*		6.654		06/25/46		117,501
	119	Lehman XS Net Interest Margin Notes 2006-GP1 A1 - 144A*		6.25		05/28/46		119,384
		Luminent Mortgage Trust
	1,038	2006-6 A1		5.55	†	10/25/46		1,039,962
	760	2006-1 A1		5.59	†	04/25/36		762,320
	779	2006-2 A1B		5.63	†	02/25/46		780,031
	909	Mortgageit Trust 2006-1 2A1B		5.63	†	04/25/36		912,819
	99	Rali NIM Corp. 2006-Q04 N1 - 144A*		6.048		04/25/46		98,828
		Residential Accredit Loans Inc.
	346	2006-Q01 1A1		5.61	†	02/25/46		345,996
	387	2006-Q01 2A1		5.62	†	02/25/46		386,724
	975	2006-Q010 A2		5.55	†	01/25/37		975,000
	798	2006-QH1 A1		5.54	†	12/25/36		797,507

See Notes to Financial Statements
42

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
$	1,139	2006-QO6 A2		5.58	† %	06/25/46	$	1,137,458
	1,150	2006-QO2 A2		5.62	†	02/25/46		1,152,081
	107	Sharps SP I LLC Net Interest Margin Trust 2006-AHM3 N1 - 144A*		7.00		10/25/46		106,822
		Structured Asset Mortgage Investments Inc.
	631	2006-AR1 2A2		5.66	†	02/25/36		633,220
	886	2006-AR2 A2		5.66	†	02/25/36		889,483
	1,089	2006-AR8 A1A		5.55	†	10/25/36		1,091,536
	1,214	2006-AR3 11A2		5.62	†	04/25/36		1,219,014
		Washington Mutual Mortgage Pass-Through Certificates
	721	2005-AR13 A1B3		5.71	†	10/25/45		724,622
	727	2005-AR15 A1B3		5.69	†	11/25/45		728,384
	694	2005-AR8 2AB3		5.71	†	07/25/45		697,498
	1,374	2006-AR9 1A		5.827	†	08/25/46		1,378,510
	3,732	2004-AR10 X (IO)		1.104	†	07/25/44		68,230
	5,342	2004-AR12 X (IO)		0.963	†	10/25/44		97,659
	2,183	2004-AR8 X (IO)		1.132	†	06/25/44		40,926
	791	Washington Mutual Alternative Loan Trust Mortgage Pass-Through Certificates 2006-AR6 2A		5.787	†	08/25/46		794,123
		Total Private Issues						39,390,820
		Total Collateralized Mortgage Obligations (Cost $43,167,464)						42,529,338
		Asset-Backed Securities (17.2%)
		Finance/Rental/Leasing
	250	Aegis Asset Backed Securities Trust 2004-2 B1		7.35	†	06/25/34		252,473
	375	Ameriquest Morgage Securities Inc. 2004-R7 M5		6.50	†	08/25/34		377,860
	1,100	Capital Auto Receivables Asset Trust-2006-2 A3A		4.98		05/15/11		1,094,929
	1,375	Capital Auto Receivables Asset Trust 2006-SN1A A3 - 144A*		5.31		10/20/09		1,375,991
	1,500	Capital Auto Receivables Asset Trust 2006-1 A3		5.03		10/15/09		1,496,152
	575	Captial One Auto Finance Trust-2006-C A3A		5.07		07/15/11		574,272
	1,050	Caterpillar Financial Asset Trust 2006-A A3		5.57		05/25/10		1,057,018
	1,281	Chase Manhattan Auto Owner Trust 2004-A A4		2.83		09/15/10		1,258,704
	725	CIT Equipment Collateral-2006-VT2 A3		5.07		02/20/10		724,068
	173	CIT Equipment Collateral 2004-EF1 A3		3.50		09/20/08		170,897
	610	CNH Equipment Trust 2005-A A3		4.02		04/15/09		606,207
	525	CNH Equipment Trust 2006-B A3		5.20		06/15/10		525,459
	2	Fifth Third Auto Trust 2004-A A3		3.19		02/20/08		2,077
	1,100	Ford Credit Auto Owner Trust 2006-B A3		5.26		10/15/10		1,101,444

See Notes to Financial Statements
43

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
$	1,050	GE Equipment Small Ticket LLC-2005-2A A3		4.88	%	10/22/09	$	1,046,239
	1,025	GS Auto Loan Trust 2006-1 A3		5.37		12/15/10		1,028,049
	850	Harley-Davidson Motorcycle Trust 2005-3 A2		4.41		06/15/12		841,407
	150	Harley-Davidson Motorcycle Trust 2002-2 A2		3.09		06/15/10		148,717
	721	Harley-Davidson Motorcycle Trust 2003-3 A2		2.76		05/15/11		712,174
	900	Harley-Davidson Motorcycle Trust 2004-2 A2		3.56		02/15/12		878,365
	750	Harley-Davidson Motorcycle Trust 2005-2 A2		4.07		02/15/12		737,366
	625	Hertz Vehicle Financing LLC 2005-2A A2 - 144A*		4.93		02/25/10		621,717
	150	Home Equity Asset Trust 2004-3 B1		7.45	†	08/25/34		152,066
	1,150	Honda Auto Receivables Owner Trust 2005-5 A3		4.61		08/17/09		1,144,555
	850	Honda Auto Receivables Owner Trust 2005-6 A3		4.85		10/19/09		847,125
	1,025	Merrill Auto Trust Securitization 2005-1 A3		4.10		08/25/09		1,017,708
	825	National City Auto Receivables Trust 2004-A A4		2.88		05/15/11		809,968
	1,021	Nissan Auto Receivables Owner Trust 2004-A A4		2.76		07/15/09		1,003,626
	650	Nissan Auto Receivables Owner Trust 2006-C A3		5.44		04/15/10		653,679
	450	Park Place Securities Inc. 2004-MCW1 M7		7.20	†	10/25/34		454,098
	250	Structured Asset Investment Loan Trust 2003-BC4 M2		8.35	†	06/25/33		250,614
	1,200	USAA Auto Owner Trust 2005-3 A3		4.55		02/16/10		1,192,634
	534	Wachovia Auto Owner Trust 2005-A A3		4.06		09/21/09		530,162
	863	Whole Auto Loan Trust 2003-1 A4		2.58		03/15/10		862,938
		Total Asset-Backed Securities (Cost $25,679,470)						25,550,758
		U.S. Government Agency & Obligation (11.6%)
	7,410	Federal Home Loan Bank		3.625		02/15/07		7,396,447
	10,000	U.S. Treasury Note		3.125		05/15/07		9,932,820
		Total U.S. Government Agency & Obligation (Cost $17,364,588)						17,329,267
		U.S. Government Agencies - Mortgage-Backed Securities (11.0%)
	68	Federal Home Loan Mortgage Corp.		7.50		08/01/32		70,864
	428	Federal Home Loan Mortgage Corp. PC Gold		7.50		02/01/27 - 04/01/32		445,309
	330	Federal Home Loan Mortgage Corp. (ARM)		3.536		07/01/34		329,628
	442	Federal Home Loan Mortgage Corp. (ARM)		4.152		08/01/34		444,517
	920	Federal Home Loan Mortgage Corp. (ARM)		4.349		10/01/33		912,151
	885	Federal Home Loan Mortgage Corp. (ARM)		4.373		07/01/35		876,674
	343	Federal National Mortgage Assoc.(ARM)		3.612		07/01/34		343,931
	196	Federal National Mortgage Assoc.(ARM)		3.747		06/01/34		197,362
	384	Federal National Mortgage Assoc.(ARM)		4.164		09/01/34		383,116

See Notes to Financial Statements
44

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE			VALUE
$	632	Federal National Mortgage Assoc.(ARM)		4.19	%	05/01/35			$	634,424
	549	Federal National Mortgage Assoc.(ARM)		4.296		04/01/35				545,115
	551	Federal National Mortgage Assoc.(ARM)		4.331		05/01/35				552,898
	923	Federal National Mortgage Assoc.(ARM)		4.468		05/01/35				913,733
	393	Federal National Mortgage Assoc.(ARM)		4.486		04/01/35				390,044
	654	Federal National Mortgage Assoc.(ARM)		4.75		07/01/35				647,367
	437	Federal National Mortgage Assoc.(ARM)		5.96		07/01/33				443,895
	850	Federal National Mortgage Assoc.(ARM)		4.751		09/01/35				840,963
	880	Federal National Mortgage Assoc.		6.50		01/01/32 - 11/01/33				899,801
	2,775	Federal National Mortgage Assoc.		7.00		***				2,848,711
	2,125	Federal National Mortgage Assoc.		7.00		11/01/24 - 04/01/36				2,185,157
	1,418	Federal National Mortgage Assoc.		7.50		03/01/24 - 08/01/32				1,476,730
		Total U.S. Government Agencies - Mortgage-Backed Securities				(Cost $16,553,470)				16,382,390
		Short-Term Investments (3.1%)
		U.S. Government Obligation (a) (0.1%)
	125	U.S. Treasury Bill** (Cost $124,822)		5.09		01/11/07				124,788
		Repurchase Agreement (3.0%)
	4,462	Joint repurchase agreement account (dated 12/29/06; proceeds $4,464,610) (b) (Cost $4,462,000)		5.265		01/02/07				4,462,000
		Total Short-Term Investments (Cost $4,586,822)								4,586,788
		Total Investments (Cost $152,088,333) (c) (d)					101.2	%		150,667,022
		Liabilities in Excess of Other Assets					(1.2	)		(1,802,517	)
		Net Assets					100.0	%	$	148,864,505

ARM Adjustable Rate Mortgage. Interest rate in effect as of December 31, 2006.

IO Interest Only Security.

PAC Planned Amortization Class.

PC Participation Certificate.

PO Principal Only Security.

‡ Amount is less than one thousand.

* Resale is restricted to qualified institutional investors.

** A portion of this security has been physically segregated in connection with open futures contracts in the amount of $60,680.

*** 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.

See Notes to Financial Statements
45

Morgan Stanley Variable Investment Series - Limited Duration

Portfolio of Investments n December 31, 2006 continued

† Floating rate security; rate shown is the rate in effect at December 31, 2006.

(a) Purchased on a discount basis. The interest rate shown has been adjusted to reflect a money market equivalent yield.

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

(c) Securities have been designated as collateral in an amount equal to $61,994,165 in connection with securities purchased on a forward commitment basis, when-issued securities,open futures contracts,and open credit default swap contract.

(d) The aggregate cost for federal income tax purposes is $152,897,221. The aggregate gross unrealized appreciation is $134,665 and the aggregate gross unrealized depreciation is $2,364,864, resulting in net unrealized depreciation of $2,230,199.

FUTURES CONTRACTS OPEN AT DECEMBER 31, 2006:

NUMBER OF CONTRACTS		LONG/SHORT	DESCRIPTION, DELIVERY MONTH AND YEAR	UNDERLYING FACE AMOUNT AT VALUE			UNREALIZED APPRECIATION (DEPRECIATION)
	239	Long	U.S. Treasury Note 2 Year,
			March 2007	$	48,763,471		$	(147,631	)
	97	Short	U.S. Treasury Note 5 Year,
			March 2007		(10,191,063	)		94,007
Net Unrealized Appreciation							$	(53,624	)

CREDIT DEFAULT SWAP CONTRACT OPEN AT DECEMBER 31, 2006:

SWAP COUNTERPARTY & REFERENCE OBLIGATION				BUY/SELL PROTECTION				NOTIONAL AMOUNT (000'S)				PAY/RECEIVE FIXED RATE				TERMINATION DATE				UNREALIZED APPRECIATION
Goldman Sachs International Southwest Airlines Co.				Buy				$	400				0.22	%		December 20, 2011				$	2,071

LONG-TERM CREDIT ANALYSIS
AAA	67.4	%
AA	8.4
A	12.8
BBB	10.9
NR	0.5
	100.0	%*

* Does not include open long futures contracts with an underlying face amount of $48,763,471 with unrealized depreciation of $147,631, open short futures contracts with an underlying face amount of $10,191,063 with unrealized appreciation of $94,077 and an open swap contract with unrealized appreciation of $2,071.

See Notes to Financial Statements
46

Morgan Stanley Variable Investment Series - Income Plus

Portfolio of Investments n December 31, 2006

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Corporate Bonds (54.8%)
		Advertising/Marketing Services (0.4%)
$	935	Interpublic Group of Companies, Inc. (The)		5.40	%	11/15/09	$	920,975
	730	Interpublic Group of Companies, Inc. (The)		6.25		11/15/14		682,550
								1,603,525
		Aerospace & Defense (0.7%)
	2,739	Raytheon Co.		6.15		11/01/08		2,775,242
		Air Freight/Couriers (1.1%)
	4,173	FedEx Corp. (Series 97-A)		7.50		01/15/18		4,625,677
		Airlines (0.8%)
	1,890	America West Airlines, Inc. (Series A)		6.85		07/02/09		1,891,563
	1,435	America West Airlines, Inc. (Series 01-1)		7.10		04/02/21		1,518,722
								3,410,285
		Auto Parts: O.E.M. (0.3%)
	1,080	ArvinMeritor, Inc.		8.75		03/01/12		1,115,100
		Beverages: Alcoholic (0.6%)
	2,635	FBG Finance Ltd. - 144A* (Australia)		5.125		06/15/15		2,495,076
		Cable/Satellite TV (1.2%)
	1,650	Comcast Cable Communications, Inc.		6.75		01/30/11		1,730,385
	400	Comcast Cable Communications, Inc.		7.125		06/15/13		431,639
	1,125	EchoStar DBS Corp.		6.375		10/01/11		1,120,781
	970	Echostar DBS Corp.		6.625		10/01/14		948,175
	445	TCI Communications, Inc.		7.875		02/15/26		509,503
								4,740,483
		Computer Processing Hardware (0.6%)
	2,380	Hewlett-Packard Co.		5.496		05/22/09		2,385,353
		Department Stores (1.7%)
	2,275	Federated Department Stores, Inc.		6.625		09/01/08		2,312,897
	1,875	May Department Stores Co.		5.95		11/01/08		1,888,536
	2,320	May Department Stores Co.		6.70		07/15/34		2,295,492
								6,496,925
		Discount Stores (0.1%)
	386	Wal-Mart Stores, Inc. (Series 92A1)		7.49		06/21/07		388,712
		Drugstore Chains (1.5%)
	970	CVS Corp.		3.875		11/01/07		957,818
	1,180	CVS Corp.		5.75		08/15/11		1,195,390
	3,880	CVS Corp. - 144A*		6.036		12/10/28		3,875,674
								6,028,882

See Notes to Financial Statements
47

Morgan Stanley Variable Investment Series - Income Plus

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Electric Utilities (7.1%)
$	2,700	Ameren Corp.		4.263	%	05/15/07	$	2,686,190
	2,640	Arizona Public Service Co.		5.80		06/30/14		2,637,912
	1,880	CC Funding Trust I		6.90		02/16/07		1,882,333
	1,070	Consolidated Natural Gas Co. (Series C)		6.25		11/01/11		1,106,275
	2,195	Consumers Energy Co.		4.80		02/17/09		2,167,312
	120	Detroit Edison Co. (The)		5.20		10/15/12		118,327
	1,535	Detroit Edison Co. (The)		6.125		10/01/10		1,570,560
	2,170	Duquesne Light Co. (Series O)		6.70		04/15/12		2,291,815
	940	Entergy Gulf States, Inc.		3.60		06/01/08		915,484
	1,875	Entergy Gulf States, Inc.		5.769	†	12/01/09		1,872,446
	2,425	Entergy Gulf States, Inc. - 144A*		6.10	†	12/08/08		2,431,458
	2,385	Ohio Power Company - IBC (Series K)		6.00		06/01/16		2,453,345
	2,250	Panhandle Eastern Pipe Line Co. (Series B)		2.75		03/15/07		2,236,815
	1,015	Public Service Electric & Gas Co.(Series G)		5.125		09/01/12		1,002,497
	1,475	Texas Eastern Transmission, LP		7.00		07/15/32		1,661,208
	780	TXU Energy Co.		7.00		03/15/13		817,183
								27,851,160
		Electrical Products (0.9%)
	1,945	Cooper Industries, Inc.		5.25		07/01/07		1,939,264
	1,580	Cooper Industries, Inc.		5.25		11/15/12		1,565,974
								3,505,238
		Environmental Services (1.4%)
	5,155	Waste Management, Inc.		7.375		08/01/10		5,487,714
		Finance/Rental/Leasing (3.9%)
	325	CIT Group, Inc.		7.375		04/02/07		326,568
	4,055	Countrywide Home Loans, Inc. (Series L)		3.25		05/21/08		3,943,415
	3,120	MBNA Corp. (Series F)		5.798	†	05/05/08		3,140,339
	4,660	Residential Capital LLC		6.375		06/30/10		4,717,882
	3,000	SLM Corp.		5.537	†	07/26/10		3,003,561
								15,131,765
		Financial Conglomerates (2.7%)
	330	Bank One Corp. (Series A)		6.00		02/17/09		334,286
	4,600	General Motors Acceptance Corp.		6.875		09/15/11		4,722,907
	5,290	JPMorgan Chase & Co.		6.75		02/01/11		5,566,371
								10,623,564
		Food Retail (0.8%)
	920	Delhaize America, Inc.		9.00		04/15/31		1,096,921
	1,930	Fred Meyer, Inc.		7.45		03/01/08		1,972,325
								3,069,246

See Notes to Financial Statements
48

Morgan Stanley Variable Investment Series - Income Plus

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Food: Major Diversified (0.9%)
$	1,045	ConAgra Foods, Inc.		7.00	%	10/01/28	$	1,135,395
	1,040	ConAgra Foods, Inc.		8.25		09/15/30		1,281,023
	1,395	Sara Lee Corp.		6.125		11/01/32		1,266,103
								3,682,521
		Food: Meat/Fish/Dairy (0.1%)
	350	Pilgrim's Pride Corp.		9.625		09/15/11		367,500
		Gas Distributors (1.1%)
	815	Keyspan Corp.		4.90		05/16/08		809,352
	1,870	NiSource Finance Corp.		5.94	†	11/23/09		1,872,036
	1,785	Sempra Energy		4.621		05/17/07		1,778,351
								4,459,739
		Home Furnishings (0.5%)
	1,970	Mohawk Industries, Inc. (Series D)		7.20		04/15/12		2,048,416
		Home Improvement Chains (0.3%)
	1,105	Home Depot, Inc.		5.49	†	12/16/09		1,105,818
		Insurance Brokers/Services (1.6%)
	2,505	Farmers Exchange Capital - 144A*		7.05		07/15/28		2,621,402
	3,105	Farmers Insurance Exchange - 144A*		8.625		05/01/24		3,733,331
								6,354,733
		Major Banks (3.9%)
	1,660	HSBC Finance Corp.		6.75		05/15/11		1,758,503
	1,800	Huntington National Bank (Series T)		4.375		01/15/10		1,747,075
	1,580	Popular North America Inc. (Series F)		5.65		04/15/09		1,584,561
	4,910	Unicredit Luxembourg Finance S.A. - 144A* (Luxembourg)		5.426	†	10/24/08		4,912,396
	5,000	Wells Fargo Bank NA		7.55		06/21/10		5,363,030
								15,365,565
		Major Telecommunications (5.1%)
	3,245	AT&T Corp.		8.00	†	11/15/31		4,038,179
	2,660	France Telecom S.A. (France)		8.50	†	03/01/31		3,502,215
	1,000	GTE Corp.		7.90		02/01/27		1,040,726
	2,165	SBC Communications, Inc.		6.15		09/15/34		2,136,416
	2,005	Sprint Capital Corp.		8.75		03/15/32		2,420,069
	3,645	Telecom Italia Capital SA (Luxembourg)		4.00		01/15/10		3,483,016
	2,715	Telefonica Europe BV (Netherlands)		8.25		09/15/30		3,243,898
								19,864,519

See Notes to Financial Statements
49

Morgan Stanley Variable Investment Series - Income Plus

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Managed Health Care (0.2%)
$	950	UnitedHealth Group Inc.		5.20	%	01/17/07	$	949,910
		Media Conglomerates (2.4%)
	562	News America, Inc.		7.30		04/30/28		608,927
	1,690	News America, Inc.		7.28		06/30/28		1,823,868
	4,725	Time Warner, Inc.		5.606	†	11/13/09		4,731,799
	2,320	Viacom, Inc.		6.875		04/30/36		2,300,897
								9,465,491
		Motor Vehicles (1.4%)
	1,490	DaimlerChrysler North American Holdings Co.		8.00		06/15/10		1,597,536
	1,015	DaimlerChrysler North American Holdings Co.		8.50		01/18/31		1,211,690
	3,050	General Motors Corp.		8.375		07/15/33		2,836,500
								5,645,726
		Multi-Line Insurance (2.3%)
	4,060	American General Finance Corp. (Series H)		4.625		09/01/10		3,965,365
	5,000	Nationwide Financial Services, Inc.		8.00		03/01/27		5,202,180
								9,167,545
		Oil & Gas Pipelines (1.1%)
	2,665	Kinder Morgan Finance Co. (Canada)		5.70		01/05/16		2,449,367
	1,695	Plains All American Pipeline. L.P.		6.70		05/15/36		1,749,196
								4,198,563
		Other Metals/Minerals (0.7%)
	2,435	Brascan Corp. (Canada)		7.125		06/15/12		2,597,341
		Property - Casualty Insurers (1.6%)
	2,500	Mantis Reef Ltd. - 144A* (Australia)		4.692		11/14/08		2,468,985
	2,945	Platinum Underwriters Finance Inc. (Series B)		7.50		06/01/17		3,111,363
	825	Platinum Underwriters Holdings, Ltd. (Series B) (Bermuda)		6.371		11/16/07		820,043
								6,400,391
		Pulp & Paper (0.8%)
	195	Abitibi-Consolidated Inc. (Canada)		8.85		08/01/30		160,875
	3,105	Bowater Canada Finance (Canada)		7.95		11/15/11		3,058,425
								3,219,300
		Railroads (2.2%)
	3,117	Burlington Northern Santa Fe Corp. (Series 95-A)		7.97		01/01/15		3,379,218
	1,470	Norfolk Southern Corp.		7.35		05/15/07		1,480,319
	2,925	Union Pacific Corp.		6.625		02/01/08		2,959,723
	790	Union Pacific Corp. (Series E)		6.79		11/09/07		797,768
								8,617,028

See Notes to Financial Statements
50

Morgan Stanley Variable Investment Series - Income Plus

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Real Estate Development (0.4%)
$	1,381	World Financial Properties - 144A*		6.91	%	09/01/13	$	1,445,887
	176	World Financial Properties - 144A*		6.95		09/01/13		184,692
								1,630,579
		Restaurants (0.4%)
	1,225	Tricon Global Restaurants, Inc.		8.875		04/15/11		1,375,406
		Savings Banks (2.0%)
	500	Household Finance Corp.		4.125		11/16/09		486,431
	1,140	Household Finance Corp.		6.375		10/15/11		1,193,303
	1,915	Household Finance Corp.		8.00		07/15/10		2,081,863
	3,630	Washington Mutual Inc.		8.25		04/01/10		3,912,788
								7,674,385
		Total Corporate Bonds (Cost $212,156,270)						215,924,423
		U.S. Government Agencies & Obligations (14.7%)
	3	Federal Home Loan Mortgage Corp.		11.50		05/01/19		3,480
		Federal Home Loan Mortgage Corp. Gold
	6			6.50		12/01/28		6,450
	29			8.50		01/01/22 - 12/01/24		31,058
		Federal National Mortgage Assoc.
	131			7.50		06/01/28 - 04/01/32		136,370
	1,701			8.00		08/01/29 - 05/01/32		1,796,527
	2			9.00		06/01/21 - 01/01/25		2,314
		Government National Mortgage Assoc.
	1			7.50		04/15/24		925
	540			8.00		10/15/24 - 11/15/29		572,254
	91			8.50		06/15/17 - 03/01/28		97,731
	101			9.00		07/15/24 - 11/15/24		109,603
	6			10.00		05/15/16 - 04/15/19		6,870
		U.S. Treasury Bonds
	28,950			6.125 - 6.375		08/15/27 - 08/15/29		33,993,636
		U.S. Treasury Notes
	3,535	††		4.25		08/15/13		3,447,502
	18,080			4.25		08/15/13 - 11/15/13		17,611,385
		Total U.S. Government Agencies & Obligations (Cost $58,644,354)						57,816,105

See Notes to Financial Statements
51

Morgan Stanley Variable Investment Series - Income Plus

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE			VALUE
		Asset-Backed Securities (3.8%)
		Finance/Rental/Leasing
$	614	CIT Equipment Collateral 2004-EF1 A3		3.50	%	09/20/08			$	607,634
	1,495	DaimlerChrysler Auto Trust 2003-B A4		2.86		03/09/09				1,482,526
	1,222	Ford Credit Auto Owner Trust 2005-B A3		4.17		01/15/09				1,215,954
	2,200	Harley-Davidson Motorcycle Trust 2004-2 A2		3.56		02/15/12				2,147,113
	1,111	Honda Auto Receivables Owner Trust 2005-2 A3		3.93		01/15/09				1,103,985
	3,500	MBNA Credit Card Master Note Trust 2004-A4 A4		2.70		09/15/09				3,476,988
	2,425	TXU Electric Delivery Transition Bond Co. LLC 2004-1 A2		4.81		11/17/14				2,405,640
	211	USAA Auto Owner Trust 2004-2 A3		3.03		06/16/08				210,340
	1,429	USAA Auto Owner Trust 2005-1 A3		3.90		07/15/09				1,419,182
	1,051	Volkswagen Auto Lease Trust 2005-A A3		3.82		05/20/08				1,046,863
		Total Asset-Back Securities (Cost $15,273,259)								15,116,225
		Foreign Government Obligations (0.7%)
MXN	16,745	Mexican Fixed Rate Bonds (Series M20) (Mexico)		10.00		12/05/24				1,923,830
$	1,568	Republic of Argentina (Argentina)		5.83		12/31/33				764,636
		Total Foreign Government Obligations (Cost $2,317,285)								2,688,466
		Short-Term Investments (26.0%)
		U.S. Government Obligation (a) (0.2%)
	700	U.S. Treasury Bill** (Cost $699,010)		5.09		01/11/07				698,812
		Repurchase Agreements (25.8%)
	3,757	The Bank of New York (dated 12/29/06; proceeds $3,758,616) (b)		5.063		01/02/07				3,756,503
	98,100	Joint repurchase agreement account (dated 12/29/06; proceeds $98,157,388) (c)		5.265		01/02/07				98,100,000
		Total Repurchase Agreements (Cost $101,856,503)								101,856,503
		Total Short-Term Investments (Cost $102,555,513)								102,555,315
		Total Investments (Cost $390,946,681) (d) (e)					100.0	%		394,100,534
		Other Assets in Excess of Liabilities					0.0			174,013
		Net Assets					100.0	%	$	394,274,547

See Notes to Financial Statements
52

Morgan Stanley Variable Investment Series - Income Plus

Portfolio of Investments n December 31, 2006 continued

MXN Mexican New Peso.

* Resale is restricted to qualified institutional investors.

** A portion of this security has been physically segregated in connection with open futures contracts in the amount of $514,300.

† Floating rate security, rate shown is the rate in effect at December 31, 2006.

†† Security purchased on a forward commitment basis.

(a) Purchased on a discount basis. The interest rate shown has been adjusted to reflect a money market equivalent yield.

(b) Collaterized by Federal National Mortgage Assoc. 6.086% due 04/01/36 valued at $3,831,633.

(c) Collaterized by federal agency and U.S. Treasury Obligations.

(d) Securities have been designated as collateral in a amount equal to $156,848,948 in connection with open futures contracts and credit default swap contracts.

(e) The aggregate cost for federal income tax purposes is $392,911,392. The aggregate gross unrealized appreciation is $4,785,326 and the aggregate gross unrealized depreciation is $3,596,184 resulting in net unrealized appreciation of $1,189,142.

FUTURES CONTRACTS OPEN AT DECEMBER 31, 2006:

NUMBER OF CONTRACTS		LONG/SHORT	DESCRIPTION, DELIVERY MONTH AND YEAR	UNDERLYING FACE AMOUNT AT VALUE			UNREALIZED APPRECIATION (DEPRECIATION)
	526	Long	U.S. Treasury Note 10 Year, March 2007	$	56,528,563		$	(442,395	)
	176	Long	U.S. Treasury Bond 20 Year, March 2007		19,613,000			(333,218	)
	184	Long	U.S. Treasury Note 5 Year, March 2007		19,331,500			(77,959	)
	270	Short	U.S. Treasury Note 2 Year, March 2007		(55,088,440	)		171,128
	Net Unrealized Depreciation						$	(682,444	)

See Notes to Financial Statements
53

Morgan Stanley Variable Investment Series - Income Plus

Portfolio of Investments n December 31, 2006 continued

CREDIT DEFAULT SWAP CONTRACTS OPEN AT DECEMBER 31, 2006:

SWAP COUNTERPARTY & REFERENCE OBLIGATION	BUY/SELL PROTECTION	NOTIONAL AMOUNT (000'S)		PAY/RECEIVE FIXED RATE			TERMINATION DATE	UNREALIZED APPRECIATION (DEPRECIATION)
Goldman Sachs Capital Markets, L.P. Dow Jones CDX.NA.IG.HVOL.6 Index	Buy	$	15,900		0.75	%	June 20, 2011	$	(33,356	)
Goldman Sachs International The Hartford Financial Services Group Inc.	Buy		3,900		0.12		December 20, 2011		(893	)
Goldman Sachs International Lehman Brothers Holdings Inc.	Buy		3,900		0.20		December 20, 2011		3,432
Goldman Sachs International Southwest Airlines Co.	Buy		4,000		0.22		December 20, 2011		20,708
Goldman Sachs International Motorola, Inc.	Buy		1,270		0.15		December 20, 2011		(145	)
Goldman Sachs International Motorola, Inc.	Buy		2,640		0.157		December 20, 2011		(1,117	)
Goldman Sachs International Union Paific Corporation	Buy		3,900		0.20		December 20, 2011		1,002
Net Unrealized Depreciation								$	(10,369	)

LONG-TERM CREDIT ANALYSIS
AAA	43.9	%
AA	5.3
A	17.0
BBB	29.2
BB	2.8
B	1.8
	100.0	%*

* Does not include open long futures contracts with an underlying face amount of $95,473,063 with unrealized depreciation of $853,572, open short futures contracts with underlying face amount of $55,088,440 with unrealized appreciation of $171,128 and open swap contracts with net unrealized depreciation of $10,369.

See Notes to Financial Statements
54

Morgan Stanley Variable Investment Series - High Yield

Portfolio of Investments n December 31, 2006

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Corporate Bonds (92.8%)
		Advertising/Marketing Services (1.4%)
$	75	Advanstar Communications, Inc.		10.75	%	08/15/10	$	81,094
	85	Interpublic Group of Companies, Inc. (The)		5.40		11/15/09		83,725
	220	Interpublic Group of Companies, Inc. (The) (g)		6.25		11/15/14		205,700
	445	Idears Inc. - 144A*		8.00		11/15/16		453,900
								824,419
		Aerospace & Defense (1.1%)
	650	K&F Acquisition Inc.		7.75		11/15/14		672,750
		Aluminum (1.1%)
	665	Novelis, Inc. - 144A* (Canada)		8.25	**	02/15/15		646,712
		Apparel/Footwear (1.7%)
	600	Levi Strauss & Co.		10.122	**	04/01/12		618,750
	180	Oxford Industries, Inc.		8.875		06/01/11		186,750
	205	Phillips-Van Heusen Corp. (g)		7.25		02/15/11		210,125
								1,015,625
		Apparel/Footwear Retail (0.6%)
	330	Brown Shoe Co., Inc.		8.75		05/01/12		349,800
		Auto Parts: O.E.M. (1.8%)
	535	ArvinMeritor, Inc. (g)		8.75		03/01/12		552,388
	470	TRW Automotive, Inc.		9.375		02/15/13		506,425
								1,058,813
		Broadcasting (0.6%)
	375	LIN Television Corp. (g)		6.50		05/15/13		359,063
		Building Products (1.9%)
	115	Interface Inc.		7.30		04/01/08		117,588
	320	Interface Inc.		9.50		02/01/14		337,600
	145	Interface Inc. (g)		10.375		02/01/10		160,950
	505	Nortek Inc. (g)		8.50		09/01/14		497,425
								1,113,563
		Cable/Satellite TV (3.5%)
	565	Cablevision Systems Corp. (Series B)		9.87	**	04/01/09		598,900
	182	CCH I LLC /CCH /CAPCO (g)		11.00		10/01/15		187,688
	350	Echostar DBS Corp.		6.625		10/01/14		342,125
	45	Intelsat Sub holdings Co. Ltd. (Bermuda)		8.25		01/15/13		45,900
	440	Intelsat Sub holdings Co. Ltd. (Bermuda) (g)		8.625		01/15/15		459,800
	330	Intelsat Sub holdings Co. Ltd. (Bermuda)		10.484	**	01/15/12		334,538
	65	NTL Cable PLC (United Kingdom) (g)		8.75		04/15/14		68,331
								2,037,282

See Notes to Financial Statements
55

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PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Casino/Gaming (5.7%)
$	4,485	Aladdin Gaming Holdings/Capital Corp. LLC (Series B) (a)(b)(f)		13.50	%	03/01/10	$	0
	680	Isle of Capri Casinos		7.00		03/01/14		680,000
	555	Las Vegas Sands Corp.		6.375		02/15/15		540,431
	1,225	MGM Mirage Inc.		6.00		10/01/09		1,228,063
	7,210	Resort At Summerlin LP/Ras Co. (Series B) (a)(b)(f)		13.00		12/15/07		0
	700	Station Casinos, Inc.		6.00		04/01/12		667,625
	85	Station Casinos, Inc. (g)		7.75		08/15/16		86,063
	185	Tropicana Entertainment - 144A*		9.625		12/15/14		184,075
								3,386,257
		Chemicals: Major Diversified (0.5%)
	290	Westlake Chemical Corp. (g)		6.625		01/15/16		282,025
		Chemicals: Specialty (4.5%)
	490	Equistar Chemical Funding		10.125		09/01/08		523,075
	270	Innophos, Inc.		8.875		08/15/14		275,400
	137	Innophos, Inc.		13.38	**†	02/15/15		143,715
	175	Koppers Industry Inc.		9.875		10/15/13		191,188
	250	Koppers Industry Inc.		9.875	††	11/15/14		201,250
	318	Millennium America, Inc.		9.25		06/15/08		329,925
	275	Nalco Co.		7.75		11/15/11		282,563
	385	Nalco Co. (g)		8.875		11/15/13		409,544
	275	Rockwood Specialties Group, Inc.		10.625		05/15/11		294,250
								2,650,910
		Coal (1.3%)
	140	Foundation PA Coal Co.		7.25		08/01/14		143,150
	635	Massey Energy Co.		6.875		12/15/13		600,075
								743,225
		Commercial Printing/Forms (0.7%)
	430	Quebecor World Capital Corp. - 144A* (Canada) (g)		8.75		03/15/16		413,875
		Containers/Packaging (4.1%)
	355	Berry Plastics Holding Corp. - 144A* (g)		8.875		09/15/14		362,100
	360	Graham Packaging Company Inc. (g)		8.50		10/15/12		365,400
	415	Graham Packaging Company Inc. (g)		9.875		10/15/14		421,225
	430	Graphic Packaging International Corp. (g)		9.50		08/15/13		455,800
	400	Owens-Brockway Glass Containers Corp.		8.75		11/15/12		426,000
	60	Owens-Illinois, Inc.		7.35		05/15/08		60,675
	285	Owens-Illinois, Inc. (g)		7.50		05/15/10		287,494
								2,378,694

See Notes to Financial Statements
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PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Data Processing Services (0.7%)
$	345	Sungard Data Systems, Inc.		9.125	%	08/15/13	$	363,975
	35	Sungard Data Systems, Inc.		9.972	**	08/15/13		36,531
								400,506
		Electric Utilities (5.2%)
	370	AES Corp. (The)		7.75		03/01/14		392,200
	42	AES Corp. (The)		8.875		02/15/11		45,255
	54	AES Corp. (The) (g)		9.375		09/15/10		58,927
	150	AES Corp. (The) - 144A* (g)		9.00		05/15/15		162,000
	595	CMS Energy Corp. (g)		7.50		01/15/09		616,569
	275	IPALCO Enterprises, Inc.		8.375		11/14/08		286,688
	115	IPALCO Enterprises, Inc.		8.625		11/14/11		125,638
	370	MSW Energy Holdings/Finance (Series B)		7.375		09/01/10		379,250
	80	MSW Energy Holdings/Finance (Series B)		8.50		09/01/10		83,600
	290	Nevada Power Co.		8.25		06/01/11		318,242
	271	Nevada Power Co.		9.00		08/15/13		294,017
	303	PSEG Energy Holdings Inc.		8.625		02/15/08		312,090
								3,074,476
		Electrical Products (1.0%)
	555	Ormat Funding Corp.		8.25		12/30/20		568,757
		Environmental Services (1.4%)
	280	Allied Waste North America, Inc. (g)		5.75		02/15/11		272,300
	120	Allied Waste North America, Inc.		6.375		04/15/11		119,100
	355	Allied Waste North America, Inc. (g)		7.875		04/15/13		367,869
	55	Allied Waste North America, Inc.		8.50		12/01/08		58,093
	9	Allied Waste North America, Inc.		9.25		09/01/12		9,607
								826,969
		Finance/Rental/Leasing (1.9%)
	415	Ford Motor Credit Corp.		7.25		10/25/11		406,802
	380	Ford Motor Credit Corp.		5.80		01/12/09		373,275
	350	Residential Capital Corp.		6.375		06/30/10		354,347
								1,134,424
		Financial Conglomerates (1.8%)
	600	General Motors Acceptance Corp.		6.875		09/15/11		616,030
	460	General Motors Acceptance Corp.		4.375		12/10/07		453,700
								1,069,730
		Food Retail (1.0%)
	190	CA FM Lease Trust - 144A*		8.50		07/15/17		203,662
	350	Delhaize America, Inc.		8.125		04/15/11		379,315
								582,977

See Notes to Financial Statements
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PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Food: Meat/Fish/Dairy (4.0%)
$	290	Michael Foods Inc. (Series B)		8.00	%	11/15/13	$	302,325
	470	Pilgrim's Pride Corp.		9.25		11/15/13		492,325
	710	Pilgrim's Pride Corp.		9.625		09/15/11		745,500
	170	Smithfield Foods Inc.		7.00		08/01/11		172,550
	75	Smithfield Foods Inc.		7.75		05/15/13		78,000
	535	Smithfield Foods Inc. (Series B)		8.00		10/15/09		561,750
								2,352,450
		Forest Products (1.5%)
	375	Covalence Specialty Material - 144A*		10.25		03/01/16		345,000
	220	Crown Americas, Inc.		7.625		11/15/13		227,700
EUR	200	Crown Euro Holdings SA (France)		6.25		09/01/11		276,456
								849,156
		Hospital/Nursing Management (3.2%)
$	515	Community Health System Inc.		6.50		12/15/12		509,850
	255	HCA, Inc.		5.75		03/15/14		212,287
	140	HCA, Inc.		6.30		10/01/12		128,450
	150	HCA, Inc. (g)		6.50		02/15/16		127,125
	200	HCA, Inc.		8.70		02/10/10		208,034
	90	HCA, Inc.		8.75		09/01/10		94,050
	110	HCA, Inc. - 144A*		9.125		11/15/14		117,839
	165	Tenet Healthcare Corp.		7.375		02/01/13		152,418
	305	Tenet Healthcare Corp. (g)		9.875		07/01/14		311,863
								1,861,916
		Industrial Machinery (0.2%)
	100	Goodman Global Holding Company, Inc. (Series B)		8.36	**	06/15/12		101,750
		Industrial Specialties (1.7%)
	560	Johnsondiversy, Inc.		9.625		05/15/12		589,400
	405	UCAR Finance, Inc.		10.25		02/15/12		428,794
								1,018,194
		Media Conglomerates (1.0%)
	581	Canwest Media Inc. (Canada)		8.00		09/15/12		609,325
		Medical Distributors (0.5%)
	315	AmerisourceBergen Corp.		5.625		09/15/12		311,243
		Medical Specialties (1.1%)
	655	Fisher Scientific International, Inc.		6.125		07/01/15		648,596

See Notes to Financial Statements
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PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Medical/Nursing Services (1.8%)
$	330	DaVita Inc. (g)		6.625	%	03/15/13	$	332,475
	570	Fresenius Medical Care Capital Trust		7.875		06/15/11		599,925
	95	Fresenius Medical Care Capital Trust II		7.875		02/01/08		96,900
								1,029,300
		Metal Fabrications (1.2%)
	215	General Cable Corp.		9.50		11/15/10		228,975
	460	Hexcell Corp.		6.75		02/01/15		455,400
	45	Northwest Pipeline Corp.		8.125		03/01/10		47,081
								731,456
		Miscellaneous Commercial Services (1.3%)
	150	Iron Mountain Inc. (g)		7.75		01/15/15		153,750
	585	Iron Mountain Inc.		8.625		04/01/13		606,937
								760,687
		Miscellaneous Manufacturing (0.5%)
	320	Propex Fabrics Inc.		10.00		12/01/12		284,800
		Motor Vehicles (0.6%)
	175	General Motors Corp. (g)		7.125		07/15/13		165,375
	215	General Motors Corp. (g)		8.375		07/15/33		199,950
								365,325
		Movies/Entertainment (0.5%)
	285	AMC Entertainment Inc.		9.624	**	08/15/10		296,044
		Oil & Gas Pipelines (3.7%)
	295	Colorado Interstate Gas Co.		6.80		11/15/15		308,211
	495	El Paso Production Holdings (g)		7.75		06/01/13		520,369
	375	Pacific Energy Partners/Finance		7.125		06/15/14		385,260
	155	Southern Natural Gas		8.875		03/15/10		163,384
	735	Williams Companies, Inc. (The)		7.875		09/01/21		791,963
								2,169,187
		Oil & Gas Production (5.1%)
	455	Chaparral Energy, Inc.		8.50		12/01/15		455,000
	565	Chesapeake Energy Corp.		7.50		09/15/13		591,131
	28	Chesapeake Energy Corp. (g)		7.75		01/15/15		29,295
	100	Chesepeaks Energy Corp.		7.625		07/15/13		105,875
	385	Hilcorp Energy/Finance - 144A*		7.75		11/01/15		380,188
	280	Hilcorp Energy/Finance - 144A*		10.50		09/01/10		301,000
	345	Husky Oil Ltd. (Canada)		8.90		08/15/28		362,546
	140	Magnum Hunter Resources, Inc.		9.60		03/15/12		147,525
	250	Opti Canada Inc. - 144A* (Canada)		8.25		12/15/14		258,125
	410	Pogo Producing Co. (g)		6.875		10/01/17		393,600
								3,024,285

See Notes to Financial Statements
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PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Oilfield Services/Equipment (1.5%)
$	175	CIE Gener de Geophysique S.A. (France)		7.50	%	05/15/15	$	176,750
	135	Hanover Compressor Co.		8.625		12/15/10		141,750
	185	Hanover Compressor Co. (g)		9.00		06/01/14		200,725
	128	Hanover Equipment Trust 2001 A (Series A)		8.50		09/01/08		130,240
	210	Hanover Equipment Trust 2001 B (Series B)		8.75		09/01/11		219,975
								869,440
		Other Metals/Minerals (0.0%)
	355	Murrin Holdings Property Ltd. (Australia) (b) (f)		9.375		08/31/07		0
		Other Transportation (1.1%)
	650	CHC Helicopter Corp. (Canada)		7.375		05/01/14		629,687
		Pharmaceuticals: Major (1.3%)
	490	VWR International Inc.		6.875		04/15/12		495,513
	260	Warner Chilcott Corp.		8.75		02/01/15		267,800
								763,313
		Publishing: Books/Magazines (1.0%)
	206	Dex Media East/Finance		12.125		11/15/12		227,373
	327	Dex Media West/Finance		9.875		08/15/13		358,065
								585,438
		Pulp & Paper (0.8%)
	340	Georgia Pacific Corp. - 144A*		7.125		01/15/17		340,850
	110	Glatfelter (P.H.) Co.		7.125		05/01/16		111,100
								451,950
		Real Estate Investment Trusts (1.9%)
	540	Host Marriott LP		6.375		03/15/15		535,275
	550	Host Marriott LP		7.125		11/01/13		565,125
								1,100,400
		Semiconductors (0.6%)
	365	Freescale Semiconductors - 144A*		8.875		12/15/14		365,456
		Services to the Health Industry (1.1%)
	270	National Mentor Holdings Inc. - 144A*		11.25		07/01/14		288,225
	345	Omnicare Inc.		6.75		12/15/13		342,413
								630,638

See Notes to Financial Statements
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PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Specialty Stores (3.5%)
$	380	Linens' n Things, Inc.		10.999	**%	01/15/14	$	370,500
	580	Petro Stopping Centers LP/Petro Financial Corp.		9.00		02/15/12		603,200
	770	Sonic Automotive, Inc.		8.625		08/15/13		796,950
	280	United Auto Group Inc. (g)		7.75		12/15/16		281,400
								2,052,050
		Specialty Telecommunications (2.1%)
	320	American Tower Corp.		7.125		10/15/12		330,400
	310	American Tower Corp.		7.50		05/01/12		322,400
	98	Panamsat Corp.		9.00		08/15/14		104,002
	445	Qwest Communications International		8.874	**	02/15/09		452,788
								1,209,590
		Steel (1.3%)
	705	Amsted Industries Inc. - 144A*		10.25		10/15/11		757,875
		Telecommunications (1.4%)
	357	Axtel SA (Mexico)		11.00		12/15/13		399,126
	615	Exodus Communications, Inc. (a) (b) (f)		11.625		07/15/10		0
	135	Nordic Tel Company - 144A* (Denmark)		8.875		05/01/16		145,125
EUR	110	TDC AS (Denmark)		6.50		04/19/12		153,116
$	4,679	Rhythms Netconnections, Inc. (a) (b) (f)		12.75		04/15/09		0
	100	U.S. West Communications Corp. (g)		5.625		11/15/08		100,625
								797,992
		Tobacco (0.5%)
	295	RJ Reynolds Tobacco Holdings		6.50		07/15/10		300,712
		Trucks/Construction/Farm Machinery (0.6%)
	347	Manitowoc Inc. (The)		10.50		08/01/12		374,326
		Wholesale Distributors (1.0%)
	70	Buhrmann US, Inc.		7.875		03/01/15		68,600
	65	Buhrmann US, Inc.		8.25		07/01/14		64,837
	415	RBS Global & Rexnold Corp. - 144A* (g)		9.50		08/01/14		433,675
								567,112
		Wireless Telecommunications (1.7%)
	415	Ubiquitel Operating Co.		9.875		03/01/11		450,275
	460	Wind Acquisition Finance SA - 144A* (Luxembourg) (g)		10.75		12/01/15		525,550
								975,825
		Total Corporate Bonds (Cost $70,207,621)						54,436,370

See Notes to Financial Statements
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PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Convertible Bonds (0.6%)
		Telecommunication Equipment (0.6%)
$	370	Nortel Networks Corp. (Canada) (Cost $362,188)		4.25	%	09/01/08	$	359,825
		Foreign Government Obligation (0.4%)
MXN	2,150	Mexican Fixed Rate Bonds (Mexico) (Cost $213,090)		10.00		12/05/24		247,013

NUMBER OF SHARES
		Common Stocks (0.5%)
		Casino/Gaming (0.0%)
	2,000	Fitzgeralds Gaming Corp. +(d)(f)	0
		Food: Specialty/Candy (d)(f) (0.0%)
	2,375	SFAC New Holdings Inc. ++(c)	0
	436	SFFB Holdings Inc. (c)	0
	120,000	Specialty Foods Acquisition Corp. - 144A*	0
			0
		Restaurants (d)(f) (0.0%)
	3,374	American Restaurant Group Holdings, Inc. (c)	26,992
	7,750	American Restaurant Group Holdings, Inc. - 144A*	0
	37,167	American Restaurant Group Holdings, Inc. (c)	0
	4,366	American Restaurant Group Holdings, Inc. (c)	0
	92,158	Catalina Restaurant Group (Escrow) (c)	922
			27,914
		Specialty Telecommunications (c)(d) (0.0%)
	12,688	Birch Telecom Inc. +++(f)	127
	131,683	PFB Telecom NV (Series B) (f)	0
	565	XO Holdings, Inc.	2,429
			2,556
		Telecommunications (0.0%)
	2,251	Viatel Holdings Bermuda Ltd. (Bermuda) (c)(d)	11
		Textiles (0.0%)
	298,461	U.S. Leather, Inc. (c)(d)(f)	0
		Wireless Telecommunications (c) (0.5%)
	4,000	NII Holdings, Inc. (d)(g)	257,760
	521	USA Mobility, Inc.	11,655
	38,444	Vast Solutions, Inc. (Class B1) (d)(f)	0
	38,444	Vast Solutions, Inc. (Class B2) (d)(f)	0
	38,444	Vast Solutions, Inc. (Class B3) (d)(f)	0
			269,415
		Total Common Stocks (Cost $42,347,298)	299,896

See Notes to Financial Statements
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NUMBER OF WARRANTS			EXPIRATION DATE	VALUE
		Warrants (d) (0.0%)
		Casino/Gaming (f) (0.0%)
	83,500	Aladdin Gaming Enterprises, Inc. - 144A*	03/01/10	$	0
	6,000	Resort At Summerlin LP - 144A*	12/15/07		0
					0
		Personnel Services (0.0%)
	42,250	Comforce Corp. - 144A*	12/01/09		0
		Restaurants (0.0%)
	1,500	American Restaurant Group Holdings, Inc. - 144A* (f)	08/15/08		0
		Specialty Telecommunications (c) (0.0%)
	1,132	XO Holdings, Inc. (Series A)	01/16/10		792
	849	XO Holdings, Inc. (Series B)	01/16/10		365
	849	XO Holdings, Inc. (Series C)	01/16/10		187
					1,344
		Warrants (Cost $128,479)			1,344

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE
		Short-Term Investments (22.5%)
		Repurchase Agreement (3.9%)
$	2,300	Joint repurchased agreemnet account (dated 12/29/06; proceeds $2,301,346) (e) (Cost $2,300,000)		5.265	%	01/02/07				2,300,000
		Security Purchased From Securities Lending Collateral (18.6%)
	10,886	The Bank of New York Institutional Cash Reserve Fund (Cost $10,885,634)								10,885,634
		Total Short-Term Investments (Cost $13,185,634)								13,185,634
		Total Investments (Cost $126,444,310) (h)					116.8	%		68,530,082
		Liabilities in Excess of Other Assets					(16.8	)		(9,858,554	)
		Net Assets					100.0	%	$	58,671,528

See Notes to Financial Statements
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* Resale is restricted to qualified institutional investors.

** Floating rate security. Rate shown is the rate in effect at December 31, 2006.

+ Resale is restricted, acquired (12/22/98) at a cost basis of $9,020.

++ Resale is restricted, acquired (06/10/99) at a cost basis of $24.

+++ Resale is restricted, acquired (between 06/18/98 and 08/25/98) at a cost basic of $6,473,685.

† Payment-in-kind security.

†† Currently a zero coupon bond and is scheduled to pay interest at the rate shown at a future specified date.

(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 federal agency and U.S. Treasury obligations.

(f) Securities with total market value equal to $28,041 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees.

(g) All or a portion of this security was on loan at December 31, 2006.

(h) The aggregate cost for federal income tax purposes is $126,323,389. The aggregate gross unrealized appreciation is $1,343,951 and the aggregate gross unrealized depreciation is $59,137,258, resulting in net unrealized depreciation of $57,793,307.

FORWARD FOREIGN CURRENCY CONTRACT OPEN AT DECEMBER 31, 2006:

CONTRACTS TO DELIVER				IN EXCHANGE FOR				DELIVERY DATE				UNREALIZED DEPRECIATION
EUR	333,000			$	421,545				01/29/07			$	(18,567	)

Currency Abbreviations:

EUR Euro.

MXN Mexican New Peso.

LONG-TERM CREDIT ANALYSIS

A	4.0	%
BBB	3.6
BB	24.7
B	47.3
CCC	18.6
NR	1.8
	100.0	%*

* Does not include open forward foreign currency contract with unrealized depreciation of $18,567.

See Notes to Financial Statements
64

Morgan Stanley Variable Investment Series - Utilities

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (97.7%)
		Electric Utilities (62.0%)
	216,000	AES Corp. (The)*	$	4,760,640
	93,000	Allegheny Energy, Inc. (b)*		4,269,630
	54,000	Ameren Corp. (b)		2,901,420
	84,000	American Electric Power Co., Inc.		3,576,720
	52,000	Consolidated Edison, Inc. (b)		2,499,640
	51,000	Constellation Energy Group, Inc.		3,512,370
	53,000	Dominion Resources, Inc. (b)		4,443,520
	80,000	DPL, Inc.		2,222,400
	35,000	DTE Energy Co. (b)		1,694,350
	146,432	Duke Energy Corp. (b)		4,863,007
	121,000	Edison International		5,503,080
	74,000	Entergy Corp.		6,831,680
	81,000	Exelon Corp.		5,013,090
	88,000	FirstEnergy Corp. (b)		5,306,400
	128,000	FPL Group, Inc. (b)		6,965,760
	53,000	Mirant Corp. (b)*		1,673,210
	81,000	NRG Energy, Inc. (b)*		4,536,810
	71,000	NSTAR		2,439,560
	120,000	PG&E Corp.		5,679,600
	34,000	Pinnacle West Capital Corp. (b)		1,723,460
	73,000	PNM Resources Inc. (b)		2,270,300
	146,000	PPL Corp. (b)		5,232,640
	70,000	Public Service Enterprise Group, Inc. (b)		4,646,600
	105,000	SCANA Corp. (b)		4,265,100
	108,000	Southern Co. (The) (b)		3,980,880
	82,000	TXU Corp.		4,445,220
	95,000	Wisconsin Energy Corp.		4,508,700
				109,765,787
		Energy (16.3%)
	110,000	AGL Resources, Inc. (b)		4,280,100
	98,861	Dynegy, Inc. (Class A)*		715,754
	45,000	El Paso Corp.		687,600
	80,000	Equitable Resources, Inc. (b)		3,340,000
	160,000	MDU Resources Group, Inc. (b)		4,102,400

NUMBER OF SHARES			VALUE
	54,000	New Jersey Resources Corp.	$	2,623,320
	38,000	Questar Corp.		3,155,900
	98,000	Sempra Energy		5,491,920
	165,000	Williams Companies, Inc. (The) (b)		4,309,800
				28,706,794
		Telecommunications (19.4%)
	57,932	ALLTEL Corp.		3,503,727
	45,000	America Movil S.A. de C.V. (Series L) (ADR) (Mexico) (b)		2,034,900
	115,946	AT&T Inc.		4,145,069
	87,000	BellSouth Corp.		4,098,570
	38,000	Citizens Communications Co. (b)		546,060
	93,000	Crown Castle International Corp. (b)*		3,003,900
	21,000	NII Holdings, Inc. (b)*		1,353,240
	70,000	Qwest Communications International, Inc. (b)*		585,900
	39,000	Rogers Communications, Inc. (Class B) (Canada)		2,324,400
	92,750	Sprint Nextel Corp.		1,752,048
	45,860	Telefonica de Espana S.A. (ADR) (Spain) (b)		2,923,575
	105,000	Telefonos de Mexico S.A. (Series L) (ADR) (Mexico)		2,967,300
	90,120	Verizon Communications, Inc.		3,356,069
	127,965	Windstream Corp.		1,819,662
				34,414,420
		Total Common Stocks (Cost $93,138,544)		172,887,001

See Notes to Financial Statements
65

Morgan Stanley Variable Investment Series - Utilities

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS					VALUE
		Short-Term Investments (27.8%)
		Security Purchased from Securities Lending Collateral (25.5%)
$	45,091	The Bank of New York Institutional Cash Reserve Fund (Cost $45,091,044)			$	45,091,044
		Repurchase Agreement (2.3%)
	4,186	Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $4,188,449) (a) (Cost $4,186,000)				4,186,000
		Total Short-Term Investments (Cost $49,277,044)				49,277,044
Total Investments (Cost $142,415,588) (c)			125.5	%		222,164,045
Liabilities in Excess of Other Assets			(25.5	)		(45,137,995	)
Net Assets			100.0	%	$	177,026,050

ADR American Depositary Receipt.

* Non-income producing security.

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

(b) All or portion of this security was on loan as of December 31, 2006.

(c) The aggregate cost for federal income tax purposes is $143,722,105. The aggregate gross unrealized appreciation is $78,456,874 and the aggregate gross unrealized depreciation is $14,934, resulting in net unrealized appreciation of $78,441,940.

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Electric Utilities	$	109,765,787		62.0	%
Security Purchased from Securities Lending Collateral		45,091,044		25.5
Telecommunications		34,414,420		19.4
Energy		28,706,794		16.3
Repurchase Agreement		4,186,000		2.3
	$	222,164,045		125.5	%

See Notes to Financial Statements
66

Morgan Stanley Variable Investment Series - Income Builder

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (64.2%)
		Aerospace & Defense (1.4%)
	6,590	Northrop Grumman Corp.	$	446,143
	13,230	Raytheon Co.		698,544
				1,144,687
		Beverages: Alcoholic (0.3%)
	3,400	Diageo PLC (ADR) (United Kingdom)		269,654
		Beverages: Non-Alcoholic (1.2%)
	19,430	Coca-Cola Co. (The)		937,498
		Broadcasting (0.5%)
	10,769	Clear Channel Communications, Inc.		382,730
		Cable/Satellite TV (0.5%)
	9,500	Comcast Corp. (Class A)*		402,135
		Chemicals: Major Diversified (2.6%)
	27,840	Bayer AG (ADR) (Germany)		1,485,542
	13,400	Du Pont (E.I.) de Nemours & Co.		652,714
				2,138,256
		Computer Processing Hardware (0.3%)
	5,221	Hewlett-Packard Co.		215,053
		Department Stores (0.3%)
	3,690	Kohl's Corp.*		252,507
		Discount Stores (1.1%)
	18,920	Wal-Mart Stores, Inc.		873,726
		Electric Utilities (2.8%)
	14,610	American Electric Power Co., Inc.		622,094
	10,613	Entergy Corp.		979,792
	11,220	FirstEnergy Corp.		676,566
				2,278,452
		Finance/Rental/Leasing (1.5%)
	18,350	Freddie Mac		1,245,965
		Financial Conglomerates (5.3%)
	31,540	Citigroup, Inc.		1,756,778
	42,148	JPMorgan Chase & Co.		2,035,748
	6,810	State Street Corp.		459,266
				4,251,792
		Food Retail (0.4%)
	3,650	Safeway Inc.		126,144
	4,600	SUPERVALU, Inc.		164,450
				290,594

See Notes to Financial Statements
67

Morgan Stanley Variable Investment Series - Income Builder

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Food: Major Diversified (1.3%)
	9,400	ConAgra Foods, Inc.	$	253,800
	28,690	Unilever N.V. (NY Registered Shares) (Netherlands)		781,803
				1,035,603
		Food: Specialty/Candy (0.8%)
	14,710	Cadbury Schweppes PLC (ADR) (United Kingdom)		631,500
		Household/Personal Care (0.6%)
	3,050	Kimberly-Clark Corp.		207,247
	5,000	Procter & Gamble Co. (The)		321,350
				528,597
		Industrial Conglomerates (3.3%)
	40,570	General Electric Co.		1,509,610
	3,282	Ingersoll-Rand Co. Ltd. (Class A) (Bermuda)		128,425
	10,050	Siemens AG (ADR) (Germany)		990,427
				2,628,462
		Insurance Brokers/Services (1.5%)
	39,400	Marsh & McLennan Companies, Inc.		1,208,004
		Integrated Oil (2.9%)
	760	BP PLC (ADR) (United Kingdom)		50,996
	12,248	ConocoPhillips		881,244
	7,140	Exxon Mobil Corp.		547,138
	12,710	Royal Dutch Shell PLC (ADR) (Class A) (United Kingdom)		899,741
				2,379,119
		Internet Retail (0.4%)
	8,300	Amazon.com, Inc.*		327,518
		Internet Software/Services (0.5%)
	15,500	Yahoo!, Inc.*		395,870
		Investment Banks/Brokers (2.7%)
	620	Goldman Sachs Group, Inc. (The)		123,597
	12,520	Merrill Lynch & Co., Inc.		1,165,612
	44,310	Schwab (Charles) Corp. (The)		856,955
				2,146,164
		Life/Health Insurance (0.3%)
	13,650	Aegon N.V. (NY Registered Shares) (Netherlands)		258,668
		Major Banks (1.6%)
	13,455	Bank of America Corp.		718,362
	7,720	PNC Financial Services Group		571,589
				1,289,951

See Notes to Financial Statements
68

Morgan Stanley Variable Investment Series - Income Builder

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Major Telecommunications (3.6%)
	5,376	Embarq Corp.	$	282,563
	15,780	France Telecom S.A. (ADR) (France)		437,106
	51,407	Sprint Nextel Corp.		971,078
	33,514	Verizon Communications, Inc.		1,248,061
				2,938,808
		Managed Health Care (0.6%)
	3,610	CIGNA Corp.		474,968
		Media Conglomerates (3.1%)
	70,540	Time Warner, Inc.		1,536,361
	22,535	Viacom, Inc. (Class B)*		924,611
				2,460,972
		Medical Specialties (0.8%)
	8,380	Applera Corp. - Applied Biosystems Group		307,462
	19,100	Boston Scientific Corp.*		328,138
				635,600
		Motor Vehicles (0.6%)
	12,730	Honda Motor Co., Ltd. (ADR) (Japan)		503,344
		Multi-Line Insurance (0.7%)
	6,290	Hartford Financial Services Group, Inc. (The)		586,920
		Oil & Gas Pipelines (0.6%)
	19,900	Williams Companies, Inc. (The)		519,788
		Oilfield Services/Equipment (0.7%)
	9,280	Schlumberger Ltd. (Netherlands Antilles)		586,125
		Other Consumer Services (0.1%)
	2,400	Block (H.&R.), Inc.		55,296
		Packaged Software (1.5%)
	57,070	Symantec Corp.*		1,189,910
		Pharmaceuticals: Major (9.9%)
	24,170	Abbott Laboratories		1,177,321
	36,780	Bristol-Myers Squibb Co.		968,050
	6,970	GlaxoSmithKline PLC (ADR) (United Kingdom)		367,737
	22,780	Lilly (Eli) & Co.		1,186,838
	26,700	Pfizer, Inc.		691,530
	11,780	Roche Holdings Ltd. (ADR) (Switzerland)		1,056,960
	7,980	Sanofi-Aventis (ADR) (France)		368,437
	56,510	Schering-Plough Corp.		1,335,896
	16,330	Wyeth		831,524
				7,984,293

See Notes to Financial Statements
69

Morgan Stanley Variable Investment Series - Income Builder

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Precious Metals (0.7%)
	13,120	Newmont Mining Corp.	$	592,368
		Property - Casualty Insurers (2.9%)
	15,760	Chubb Corp. (The)		833,862
	19,003	St. Paul Travelers Companies, Inc. (The)		1,020,271
	6,900	XL Capital Ltd. (Class A) (Cayman Islands)		496,938
				2,351,071
		Regional Banks (0.6%)
	11,800	Fifth Third Bancorp		482,974
		Restaurants (0.4%)
	6,840	McDonald's Corp.		303,217
		Semiconductors (1.5%)
	37,489	Intel Corp.		759,152
	30,200	Micron Technology, Inc.*		421,592
				1,180,744
		Specialty Stores (0.3%)
	6,300	Office Depot, Inc.*		240,471
		Telecommunication Equipment (0.4%)
	13,915	Motorola, Inc.		286,092
		Tobacco (1.1%)
	9,890	Altria Group, Inc.		848,760
		Total Common Stocks (Cost $40,941,902)		51,734,226

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE
		Convertible Bonds (15.9%)
		Airlines (2.1%)
$	1,500	Continental Airlines Inc.		4.50	%	02/01/07	1,606,875
		Cable/Satellite TV (1.3%)
	1,000	Echostar Communications Corp.		5.75		05/15/08	1,023,750
		Electric Utilities (0.7%)
	173	PG&E Corp.		9.50		06/30/10	590,146
		Electronic Components (1.2%)
	1,000	SCI Systems, Inc.		3.00		03/15/07	998,750
		Electronic Production Equipment (1.3%)
	1,100	Veeco Instruments, Inc.		4.125		12/21/08	1,072,500

See Notes to Financial Statements
70

Morgan Stanley Variable Investment Series - Income Builder

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Hotels/Resorts/Cruiselines (2.0%)
$	1,000	Hilton Hotels Corp. - 144A**		3.375	%	04/15/23	$	1,582,500
		Household/Personal Care (1.8%)
	1,000	Church & Dwight Co., Inc. - 144A**		5.25		08/15/33		1,445,000
		Internet Retail (1.1%)
	901	Amazon.com, Inc.		4.75		02/01/09		888,611
		Media Conglomerates (1.6%)
	1,080	Walt Disney Co. (The)		2.125		04/15/23		1,317,600
		Semiconductors (2.8%)
	1,450	Intel Corp. - 144A**		2.95		12/15/35		1,319,500
	950	Skyworks Solutions, Inc.		4.75		11/15/07		959,500
								2,279,000
		Total Convertible Bonds (Cost $11,369,845)						12,804,732
		Corporate Bonds (10.7%)
		Agricultural Commodities/Milling (1.8%)
	1,460	Corn Products International Inc.		8.25		07/15/07		1,476,932
		Broadcasting (1.6%)
	1,200	Clear Channel Communications, Inc.		8.00		11/01/08		1,248,118
		Building Products (1.6%)
	1,200	American Standard, Inc.		8.25		06/01/09		1,267,783
		Home Building (1.5%)
	1,200	Toll Corp.		8.25		02/01/11		1,236,000
		Hotels/Resorts/Cruiselines (2.6%)
	2,000	Starwood Hotels & Resorts Worldwide, Inc.		7.875		05/01/12		2,114,528
		Other Consumer Services (1.6%)
	1,200	Roto-Rooter Inc.		8.75		02/24/11		1,248,000
		Total Corporate Bonds (Cost $8,559,309)						8,591,361

NUMBER OF SHARES
		Convertible Preferred Stocks (7.3%)
		Financial Conglomerates (1.0%)
	27,000	Citigroup Funding Inc. (Series GNW) $1.6643	855,900
		Investment Banks/Brokers (1.3%)
	38,000	Lehman Brothers Holdings Inc. (Series GIS) $1.5625	1,045,760
		Life/Health Insurance (1.7%)
	44,000	MetLife, Inc. (Series B) $1.5938 (Note 4)	1,345,520

See Notes to Financial Statements
71

Morgan Stanley Variable Investment Series - Income Builder

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Pharmaceuticals: Major (0.4%)
	6,200	Schering-Plough Corp. $3.00	$	352,718
		Property - Casualty Insurers (1.0%)
	30,000	Travelers Property Casualty Corp. $1.125		784,200
		Real Estate Investment Trusts (0.6%)
	9,000	Equity Residential Properties Trust (Series E) $1.75		506,790
		Telecommunication Equipment (1.3%)
	1,000	Lucent Technologies Capital Trust I $77.50		1,017,500
		Total Convertible Preferred Stocks (Cost $5,232,040)		5,908,388

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE
		Short-Term Investment (1.7%)
		Repurchase Agreement Account
$	1,360	Joint repurchase agreement account (dated 12/29/06; proceeds $1,360,796) (a) (Cost $1,360,000)		5.265	%	01/02/07				1,360,000
		Total Investments (Cost $67,463,096) (b)					99.8	%		80,398,707
		Other Assets in Excess of Liabilities					0.2			167,453
		Net Assets					100.0	%	$	80,566,160

ADR American Depositary Receipt.

* Non-income producing security.

** Resale is restricted to qualified institutional investors.

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

(b) The aggregate cost for federal income tax purposes is $68,046,796. The aggregate gross unrealized appreciation is $13,808,733 and the aggregate gross unrealized depreciation is $1,456,822, resulting in net unrealized appreciation of $12,351,911.

See Notes to Financial Statements
72

Morgan Stanley Variable Investment Series - Income Builder

Summary of Investments n December 31, 2006

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Pharmaceuticals: Major	$	8,337,011		10.3	%
Financial Conglomerates		5,107,692		6.3
Media Conglomerates		3,778,572		4.7
Hotels/Resorts/Cruiselines		3,697,028		4.6
Semiconductors		3,459,744		4.3
Investment Banks/Brokers		3,191,924		4.0
Property - Casualty Insurers		3,135,271		3.9
Major Telecommunications		2,938,808		3.6
Electric Utilities		2,868,598		3.5
Industrial Conglomerates		2,628,462		3.3
Integrated Oil		2,379,119		2.9
Chemicals: Major Diversified		2,138,256		2.6
Household/Personal Care		1,973,597		2.4
Broadcasting		1,630,848		2.1
Airlines		1,606,875		2.1
Life/Health Insurance		1,604,188		2.0
Agricultural Commodities/ Milling		1,476,932		1.8
Cable/Satellite TV		1,425,885		1.8
Repurchase Agreement		1,360,000		1.7
Telecommunication Equipment		1,303,592		1.7
Other Consumer Services		1,303,296		1.7
Major Banks		1,289,951		1.6
Building Products		1,267,783		1.6
Finance/Rental/Leasing		1,245,965		1.5
Home Building		1,236,000		1.5
Internet Retail		1,216,129		1.5
Insurance Brokers/Services		1,208,004		1.5

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Packaged Software	$	1,189,910		1.5	%
Aerospace & Defense		1,144,687		1.4
Electronic Production Equipment		1,072,500		1.3
Food: Major Diversified		1,035,603		1.3
Electronic Components		998,750		1.2
Beverages: Non-Alcoholic		937,498		1.2
Discount Stores		873,726		1.1
Tobacco		848,760		1.1
Medical Specialties		635,600		0.8
Food: Specialty/Candy		631,500		0.8
Precious Metals		592,368		0.7
Multi-Line Insurance		586,920		0.7
Oilfield Services/Equipment		586,125		0.7
Oil & Gas Pipelines		519,788		0.6
Real Estate Investment Trusts		506,790		0.6
Motor Vehicles		503,344		0.6
Regional Banks		482,974		0.6
Managed Health Care		474,968		0.6
Internet Software/Services		395,870		0.5
Restaurants		303,217		0.4
Food Retail		290,594		0.4
Beverages: Alcoholic		269,654		0.3
Department Stores		252,507		0.3
Specialty Stores		240,471		0.3
Computer Processing Hardware		215,053		0.3
	$	80,398,707		99.8	%

See Notes to Financial Statements
73

Morgan Stanley Variable Investment Series - Dividend Growth

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (93.8%)
		Aerospace & Defense (2.8%)
	100,885	Boeing Co.	$	8,962,623
	115,658	Northrop Grumman Corp.		7,830,047
				16,792,670
		Apparel/Footwear (1.5%)
	114,067	V.F. Corp.		9,362,619
		Beverages: Alcoholic (1.4%)
	111,138	Diageo PLC (ADR) (United Kingdom)		8,814,355
		Beverages: Non-Alcoholic (2.7%)
	268,098	PepsiCo, Inc.		16,769,530
		Biotechnology (0.9%)
	79,832	Amgen Inc.*		5,453,324
		Chemicals: Agricultural (1.2%)
	139,243	Monsanto Co.		7,314,435
		Computer Communications (2.3%)
	503,604	Cisco Systems, Inc.*		13,763,497
		Computer Processing Hardware (0.8%)
	186,493	Dell Inc.*		4,679,109
		Data Processing Services (2.8%)
	238,365	Automatic Data Processing, Inc.		11,739,476
	240,008	Western Union Co.		5,380,979
				17,120,455
		Department Stores (0.5%)
	80,500	Federated Department Stores, Inc.		3,069,465
		Discount Stores (2.1%)
	26,903	Sears Holdings Corp.*		4,517,821
	141,329	Target Corp.		8,062,819
				12,580,640
		Drugstore Chains (0.5%)
	104,161	CVS Corp.		3,219,617

NUMBER OF SHARES			VALUE
		Electric Utilities (1.9%)
	140,328	Exelon Corp.	$	8,684,900
	55,751	TXU Corp.		3,022,262
				11,707,162
		Finance/Rental/Leasing (1.0%)
	123,380	SLM Corp.		6,017,243
		Financial Conglomerates (11.9%)
	249,231	American Express Co.		15,120,845
	428,148	Citigroup, Inc. (Note 4)		23,847,844
	251,933	JPMorgan Chase & Co.		12,168,364
	174,454	Prudential Financial, Inc.		14,978,620
	103,360	UBS AG (Switzerland)		6,235,709
				72,351,382
		Financial Publishing/ Services (1.5%)
	137,536	McGraw-Hill Companies, Inc. (The)		9,355,199
		Home Improvement Chains (1.3%)
	265,430	Lowe's Companies, Inc.		8,268,144
		Hotels/Resorts/ Cruiselines (1.6%)
	153,156	Starwood Hotels & Resorts Worldwide, Inc.		9,572,250
		Household/Personal Care (2.9%)
	275,523	Procter & Gamble Co. (The)		17,707,863
		Industrial Conglomerates (7.0%)
	92,537	3M Co.		7,211,408
	524,127	General Electric Co.		19,502,766
	254,731	United Technologies Corp.		15,925,782
				42,639,956
		Information Technology Services (1.3%)
	216,093	Accenture Ltd. (Class A) (Bermuda)		7,980,314
		Integrated Oil (3.1%)
	244,256	Exxon Mobil Corp.		18,717,337

See Notes to Financial Statements
74

Morgan Stanley Variable Investment Series - Dividend Growth

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Internet Software/Services (1.6%)
	6,406	Google, Inc. (Class A)*	$	2,949,835
	258,973	Yahoo!, Inc.*		6,614,170
				9,564,005
		Investment Banks/Brokers (3.0%)
	32,434	Goldman Sachs Group, Inc. (The)		6,465,718
	129,209	Merrill Lynch & Co., Inc.		12,029,358
				18,495,076
		Investment Managers (1.8%)
	263,133	Mellon Financial Corp.		11,091,056
		Life/Health Insurance (1.1%)
	49,085	Lincoln National Corp.		3,259,244
	54,190	MetLife, Inc. (Note 4)		3,197,752
				6,456,996
		Major Banks (1.0%)
	107,200	Wachovia Corp.		6,105,040
		Major Telecommunications (1.3%)
	126,802	ALLTEL Corp.		7,668,985
		Managed Health Care (1.4%)
	154,315	UnitedHealth Group Inc.		8,291,345
		Media Conglomerates (2.7%)
	766,430	Time Warner, Inc.		16,692,845
		Medical Specialties (2.2%)
	34,526	Alcon, Inc. (Switzerland)		3,858,971
	207,995	Thermo Fisher Scientific, Inc.*		9,420,094
				13,279,065
		Multi-Line Insurance (1.5%)
	127,250	American International Group, Inc.		9,118,735
		Office Equipment/Supplies (1.4%)
	182,038	Pitney Bowes, Inc.		8,408,335
		Oil & Gas Production (1.3%)
	169,684	XTO Energy Inc.		7,983,632

NUMBER OF SHARES			VALUE
		Oilfield Services/ Equipment (3.3%)
	76,575	Cameron International Corp.*	$	4,062,304
	154,673	Schlumberger Ltd. (Netherlands Antilles)		9,769,147
	148,353	Weatherford International Ltd. (Bermuda)*		6,199,672
				20,031,123
		Other Consumer Services (0.6%)
	118,937	eBay Inc.*		3,576,436
		Other Metals/Minerals (0.5%)
	26,662	Phelps Dodge Corp.		3,191,975
		Packaged Software (2.7%)
	549,951	Microsoft Corp.		16,421,537
		Pharmaceuticals: Major (6.7%)
	178,991	Johnson & Johnson		11,816,986
	461,894	Pfizer, Inc.		11,963,055
	331,637	Wyeth		16,886,956
				40,666,997
		Property - Casualty Insurers (1.6%)
	76,800	Progressive Corp. (The)		1,860,096
	107,923	XL Capital Ltd. (Class A) (Cayman Islands)		7,772,614
				9,632,710
		Semiconductors (1.4%)
	422,564	Intel Corp.		8,556,921
		Specialty Stores (0.6%)
	133,414	Staples, Inc.		3,562,154
		Telecommunication Equipment (0.3%)
	48,200	QUALCOMM, Inc.		1,821,478
		Tobacco (2.8%)
	200,960	Altria Group, Inc.		17,246,387
		Total Common Stocks (Cost $488,624,318)		571,119,399

See Notes to Financial Statements
75

Morgan Stanley Variable Investment Series - Dividend Growth

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS					VALUE
		Short-Term Investment (5.4%) Repurchase Agreement
$	32,584	Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $32,603,062) (a) (Cost $32,584,000)			$	32,584,000
Total Investments (Cost $521,208,318) (b)			99.2	%		603,703,399
Other Assets in Excess of Liabilities			0.8			4,887,407
Net Assets			100.0	%	$	608,590,806

ADR American Depositary Receipt.

* Non-income producing security.

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

(b) The aggregate cost for federal income tax purposes is $524,140,834. The aggregate gross unrealized appreciation is $84,137,940 and the aggregate gross unrealized depreciation is $4,575,375, resulting in net unrealized appreciation of $79,562,565.

See Notes to Financial Statements
76

Morgan Stanley Variable Investment Series - Dividend Growth

Summary of Investments n December 31, 2006

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Financial Conglomerates	$	72,351,382		11.9	%
Industrial Conglomerates		42,639,956		7.0
Pharmaceuticals: Major		40,666,997		6.7
Repurchase Agreement		32,584,000		5.4
Oilfield Services/Equipment		20,031,123		3.3
Integrated Oil		18,717,337		3.1
Investment Banks/Brokers		18,495,076		3.0
Household/Personal Care		17,707,863		2.9
Tobacco		17,246,387		2.8
Data Processing Services		17,120,455		2.8
Aerospace & Defense		16,792,670		2.8
Beverages: Non-Alcoholic		16,769,530		2.7
Media Conglomerates		16,692,845		2.7
Packaged Software		16,421,537		2.7
Computer Communications		13,763,497		2.3
Medical Specialties		13,279,065		2.2
Discount Stores		12,580,640		2.1
Electric Utilities		11,707,162		1.9
Investment Managers		11,091,056		1.8
Property - Casualty Insurers		9,632,710		1.6
Hotels/Resorts/Cruiselines		9,572,250		1.6
Internet Software/Services		9,564,005		1.6
Apparel/Footwear		9,362,619		1.5
Financial Publishing/Services		9,355,199		1.5
Multi-Line Insurance		9,118,735		1.5

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Beverages: Alcoholic	$	8,814,355		1.4	%
Semiconductors		8,556,921		1.4
Office Equipment/Supplies		8,408,335		1.4
Managed Health Care		8,291,345		1.4
Home Improvement Chains		8,268,144		1.3
Oil & Gas Production		7,983,632		1.3
Information Technology Services		7,980,314		1.3
Major Telecommunications		7,668,985		1.3
Chemicals: Agricultural		7,314,435		1.2
Life/Health Insurance		6,456,996		1.1
Major Banks		6,105,040		1.0
Finance/Rental/Leasing		6,017,243		1.0
Biotechnology		5,453,324		0.9
Computer Processing Hardware		4,679,109		0.8
Other Consumer Services		3,576,436		0.6
Specialty Stores		3,562,154		0.6
Drugstore Chains		3,219,617		0.5
Other Metals/Minerals		3,191,975		0.5
Department Stores		3,069,465		0.5
Telecommunication Equipment		1,821,478		0.3
	$	603,703,399		99.2	%

See Notes to Financial Statements
77

Morgan Stanley Variable Investment Series - Global Dividend Growth

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (97.9%)
		Australia (1.9%)
		Beverages: Alcoholic
	276,778	Foster's Group Ltd.	$	1,511,941
		Construction Materials
	194,168	Boral Ltd.		1,169,498
		Food: Major Diversified
	1,115,355	Goodman Fielder Ltd.		1,954,624
		Total Australia		4,636,063
		Bermuda (4.7%)
		Apparel/Footwear
	155,500	Yue Yuen Industrial (Holdings) Ltd.		493,752
		Industrial Conglomerates
	109,793	Ingersoll - Rand Ltd. (Class A)		4,296,200
	211,882	Tyco International Ltd.		6,441,213
				10,737,413
		Total Bermuda		11,231,165
		Cayman Islands (1.5%)
		Property - Casualty Insurers
	49,271	XL Capital Ltd. (Class A)		3,548,497
		France (7.6%)
		Construction Materials
	24,704	Lafarge S.A.		3,673,952
		Integrated Oil
	55,563	Total S.A.		4,006,989
		Major Banks
	55,829	BNP Paribas		6,088,987
		Major Telecommunications
	49,826	France Telecom S.A.		1,377,471
		Pharmaceuticals: Major
	33,770	Sanofi-Aventis		3,117,174
		Total France		18,264,573

NUMBER OF SHARES			VALUE
		Germany (2.2%)
		Chemicals: Major Diversified
	14,598	BASF AG	$	1,422,611
		Motor Vehicles
	45,322	Bayerische Motoren Werke (BMW) AG		2,602,199
	20,764	DaimlerChrysler AG (Registered Shares)		1,282,328
				3,884,527
		Total Germany		5,307,138
		Ireland (3.2%)
		Food: Specialty/Candy
	117,633	Kerry Group PLC (A Shares)		2,938,476
		Major Banks
	203,860	Bank of Ireland		4,707,739
		Total Ireland		7,646,215
		Italy (1.9%)
		Integrated Oil
	135,672	ENI SpA		4,561,755
		Japan (7.9%)
		Electrical Products
	182,600	Sumitomo Electric Industries, Ltd.		2,852,646
		Electronic Equipment/ Instruments
	69,100	Canon Inc.		3,888,544
		Household/Personal Care
	89,000	Kao Corp.		2,399,546
		Motor Vehicles
	177,300	Nissan Motor Co., Ltd.		2,133,974
		Pharmaceuticals: Major
	59,800	Takeda Pharmaceutical Co., Ltd.		4,103,528
		Pharmaceuticals: Other
	53,800	Astellas Pharma Inc.		2,444,633

See Notes to Financial Statements
78

Morgan Stanley Variable Investment Series - Global Dividend Growth

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Property - Casualty Insurers
	102,000	Mitsui Sumitomo Insurance Co., Ltd.	$	1,115,438
		Total Japan		18,938,309
		Netherlands (3.9%)
		Engineering & Construction
	88,245	Chicago Bridge & Iron Company N.V.		2,412,618
		Food: Major Diversified
	133,156	Unilever NV (Share Certificates)		3,637,252
		Industrial Conglomerates
	30,166	Koninklijke (Royal) Philips Electronics NV		1,137,288
		Publishing: Books/Magazines
	75,182	Wolters Kluwer NV (Share Certificates)		2,161,790
		Total Netherlands		9,348,948
		New Zealand (0.6%)
		Major Telecommunications
	443,273	Telecom Corporation of New Zealand Ltd.		1,519,002
		Singapore (0.8%)
		Other Transportation
	1,862,000	ComfortDelGro Corp. Ltd.		1,953,868
		South Korea (0.8%)
		Wireless Telecommunications
	74,512	SK Telecom Co., Ltd. (ADR)		1,973,078
		Spain (2.3%)
		Major Banks
	111,984	Banco Bilbao Vizcaya Argentaria, S.A.		2,695,399
		Major Telecommunications
	133,385	Telefonica S.A.		2,837,359
		Total Spain		5,532,758

NUMBER OF SHARES			VALUE
		Switzerland (2.6%)
		Chemicals: Agricultural
	12,695	Syngenta AG (Registered Shares)*	$	2,361,303
		Financial Conglomerates
	49,182	UBS AG (Registered Shares)		2,988,125
		Pharmaceuticals: Major
	17,804	Novartis AG (Registered Shares)		1,026,199
		Total Switzerland		6,375,627
		Taiwan (0.7%)
		Major Telecommunications
	81,191	Chunghwa Telecom Co., Ltd. (ADR)		1,601,898
		United Kingdom (21.5%)
		Advertising/Marketing Services
	191,166	WPP Group PLC		2,584,430
		Aerospace & Defense
	422,790	Rolls-Royce Group PLC*		3,706,387
	16,071,297	Rolls-Royce Group PLC (B Shares)		31,466
				3,737,853
		Beverages: Alcoholic
	124,322	Diageo PLC		2,440,186
		Financial Conglomerates
	891,569	Old Mutual Plc		3,041,713
		Food Retail
	636,553	Morrison (W.M.) Supermarkets PLC		3,171,852
		Food: Specialty/Candy
	465,025	Cadbury Schweppes PLC		4,975,732
		Integrated Oil
	71,814	Royal Dutch Shell PLC (ADR) (Class A)		5,083,713

See Notes to Financial Statements
79

Morgan Stanley Variable Investment Series - Global Dividend Growth

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Major Banks
	256,254	Barclays PLC	$	3,662,554
	133,114	Royal Bank of Scotland Group PLC		5,194,234
				8,856,788
		Pharmaceuticals: Major
	211,814	GlaxoSmithKline PLC		5,573,711
		Publishing: Books/Magazines
	353,823	Reed Elsevier PLC		3,882,864
		Tobacco
	118,600	Imperial Tobacco Group PLC		4,667,359
		Wireless Telecommunications
	1,372,655	Vodafone Group PLC		3,802,843
		Total United Kingdom		51,819,044
		United States (33.8%)
		Aerospace & Defense
	15,812	Boeing Co.		1,404,738
	16,511	Northrop Grumman Corp.		1,117,795
				2,522,533
		Aluminum
	53,714	Alcoa, Inc.		1,611,957
		Computer Peripherals
	250,545	EMC Corp.*		3,307,194
		Computer Processing Hardware
	61,071	Hewlett-Packard Co.		2,515,514
		Data Processing Services
	98,085	First Data Corp.		2,503,129
		Electric Utilities
	30,205	American Electric Power Co., Inc.		1,286,129
	30,400	Dominion Resources, Inc.		2,548,736
				3,834,865
		Finance/Rental/Leasing
	63,055	Freddie Mac		4,281,434
		Financial Conglomerates
	92,902	Citigroup, Inc.		5,174,641

NUMBER OF SHARES			VALUE
		Forest Products
	18,267	Weyerhaeuser Co.	$	1,290,564
		Information Technology Services
	56,661	International Business Machines Corp.		5,504,616
		Insurance Brokers/Services
	124,024	Marsh & McLennan Companies, Inc.		3,802,576
		Integrated Oil
	57,704	Chevron Corp.		4,242,975
		Investment Banks/Brokers
	40,593	Merrill Lynch & Co., Inc.		3,779,208
		Investment Managers
	83,529	Mellon Financial Corp.		3,520,747
		Major Telecommunications
	42,064	AT&T Inc.		1,503,788
	60,758	Verizon Communications, Inc.		2,262,628
				3,766,416
		Managed Health Care
	67,520	UnitedHealth Group Inc.		3,627,850
		Multi-Line Insurance
	17,474	American International Group, Inc.		1,252,187
		Packaged Software
	70,821	McAfee Inc.*		2,009,900
		Pharmaceuticals: Major
	138,067	Pfizer, Inc.		3,575,935
	224,095	Schering-Plough Corp.		5,297,606
	93,677	Wyeth		4,770,033
				13,643,574
		Property - Casualty Insurers
	48,681	St. Paul Travelers Companies, Inc. (The)		2,613,683
		Tobacco
	75,182	Altria Group, Inc.		6,452,119
		Total United States		81,257,682
		Total Common Stocks (Cost $158,761,077)		235,515,620

See Notes to Financial Statements
80

Morgan Stanley Variable Investment Series - Global Dividend Growth

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS					VALUE
		Short-Term Investment (2.0%) Repurchase Agreement
$	4,972	Joint repurchase agreement account 5.25% due 01/02/07 (dated 12/29/06; proceeds $4,974,900) (a) (Cost $4,972,000)			$	4,972,000
Total Investments (Cost $163,733,077) (b)			99.9	%		240,487,620
Other Assets in Excess of Liabilities			0.1			125,108
Net Assets			100.0	%	$	240,612,728

ADR American Depositary Receipt.

* Non-income producing security.

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

(b) The aggregate cost for federal income tax purposes is $164,306,829. The aggregate gross unrealized appreciation is $77,139,390 and the aggregate gross unrealized depreciation is $958,599, resulting in net unrealized appreciation of $76,180,791.

See Notes to Financial Statements
81

Morgan Stanley Variable Investment Series - Global Dividend Growth

Summary of Investments n December 31, 2006

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Pharmaceuticals: Major	$	27,464,186		11.4	%
Major Banks		22,348,913		9.3
Integrated Oil		17,895,432		7.4
Industrial Conglomerates		11,874,701		4.9
Financial Conglomerates		11,204,479		4.7
Tobacco		11,119,478		4.6
Major Telecommunications		11,102,146		4.6
Food: Specialty/Candy		7,914,208		3.3
Property - Casualty Insurers		7,277,618		3.0
Aerospace & Defense		6,260,386		2.6
Publishing: Books/Magazines		6,044,654		2.5
Motor Vehicles		6,018,501		2.5
Wireless Telecommunications		5,775,921		2.4
Food: Major Diversified		5,591,876		2.3
Information Technology Services		5,504,616		2.3
Repurchase Agreement		4,972,000		2.0
Construction Materials		4,843,450		2.0
Finance/Rental/Leasing		4,281,434		1.8
Beverages: Alcoholic		3,952,127		1.7
Electronic Equipment/ Instruments		3,888,544		1.6
Electric Utilities		3,834,865		1.6
Insurance Brokers/ Services		3,802,576		1.6

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Investment Banks/Brokers	$	3,779,208		1.6	%
Managed Health Care		3,627,850		1.5
Investment Managers		3,520,747		1.5
Computer Peripherals		3,307,194		1.4
Food Retail		3,171,852		1.3
Electrical Products		2,852,646		1.2
Advertising/Marketing Services		2,584,430		1.1
Computer Processing Hardware		2,515,514		1.1
Data Processing Services		2,503,129		1.0
Pharmaceuticals: Other		2,444,633		1.0
Engineering & Construction		2,412,618		1.0
Household/Personal Care		2,399,546		1.0
Chemicals: Agricultural		2,361,303		1.0
Packaged Software		2,009,900		0.8
Other Transportation		1,953,868		0.8
Aluminum		1,611,957		0.7
Chemicals: Major Diversified		1,422,611		0.6
Forest Products		1,290,564		0.5
Multi-Line Insurance		1,252,187		0.5
Apparel/Footwear		493,752		0.2
	$	240,487,620		99.9	%

See Notes to Financial Statements
82

Morgan Stanley Variable Investment Series - European Equity

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (99.2%)
		Austria (1.0%)
		Major Telecommunications
	72,938	Telekom Austria AG	$	1,953,854
		Belgium (3.1%)
		Chemicals: Specialty
	14,052	Solvay S.A. (a)		2,154,699
		Electronic Equipment/ Instruments
	62,751	Agfa Gevaert NV (a)		1,603,128
		Other Metals/Minerals
	12,446	Umicore		2,118,663
		Total Belgium		5,876,490
		France (19.0%)
		Construction Materials
	27,856	Lafarge S.A.		4,142,714
		Electric Utilities
	51,504	Electricite de France		3,751,650
		Electrical Products
	40,854	Schneider Electric S.A.		4,533,910
		Gas Distributors
	78,877	Gaz de France (a)		3,627,400
		Integrated Oil
	62,415	Total S.A.		4,501,129
		Major Banks
	48,855	BNP Paribas		5,328,368
		Major Telecommunications
	155,860	France Telecom S.A.		4,308,846
		Motor Vehicles
	15,840	Renault S.A.		1,902,124
		Pharmaceuticals: Major
	38,212	Sanofi-Aventis		3,527,198
		Total France		35,623,339
		Germany (13.1%)
		Industrial Conglomerates
	20,360	MAN AG		1,839,319
	19,958	Siemens AG (Registered Shares)		1,978,930
				3,818,249

NUMBER OF SHARES			VALUE
		Investment Banks/Brokers
	47,868	AWD Holding AG (a)	$	2,022,595
		Major Banks
	70,566	Commerzbank AG		2,686,480
		Medical/Nursing Services
	14,760	Fresenius Medical Care AG & Co. KGaA		1,966,623
		Motor Vehicles
	50,889	Bayerische Motoren Werke (BMW) AG		2,921,832
	30,254	DaimlerChrysler AG (Registered Shares)		1,868,405
				4,790,237
		Multi-Line Insurance
	24,861	Allianz SE (Registered Shares)		5,077,146
	24,660	Muenchener Rueckver AG (Registered Shares)		4,244,041
				9,321,187
		Total Germany		24,605,371
		Greece (3.0%)
		Major Banks
	67,024	National Bank of Greece S.A.		3,086,726
		Regional Banks
	69,892	EFG Eurobank Ergasias		2,530,777
		Total Greece		5,617,503
		Italy (4.4%)
		Major Banks
	294,472	Banca Intesa SpA		2,273,224
	428,785	Banca Monte dei Paschi di Siena SpA (a)		2,773,955
	375,642	UniCredito Italiano SpA		3,291,429
		Total Italy		8,338,608
		Netherlands (7.2%)
		Air Freight/Couriers
	70,313	TNT NV		3,022,936

See Notes to Financial Statements
83

Morgan Stanley Variable Investment Series - European Equity

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Financial Conglomerates
	42,632	ING Groep NV (Share Certificates)	$	1,889,679
		Food: Major Diversified
	107,694	Unilever NV (Share Certificates)		2,941,739
		Publishing: Books/Magazines
	194,948	Wolters Kluwer NV (Share Certificates)		5,605,551
		Total Netherlands		13,459,905
		Norway (1.1%)
		Pulp & Paper
	115,241	Norske Skogindustrier ASA		1,985,895
		Spain (4.4%)
		Major Banks
	157,264	Banco Bilbao Vizcaya Argentaria, S.A.		3,785,266
		Major Telecommunications
	100,943	Telefonica S.A. (a)		2,147,255
		Tobacco
	45,019	Altadis, S.A.		2,355,490
		Total Spain		8,288,011
		Sweden (4.9%)
		Industrial Machinery
	62,485	Atlas Copco AB (A Shares) (a)		2,096,751
	262,973	Sandvik AB (a)		3,817,486
				5,914,237
		Telecommunication Equipment
	796,257	Telefonaktiebolaget LM Ericsson (B Shares)		3,212,119
		Total Sweden		9,126,356
		Switzerland (16.0%)
		Chemicals: Specialty
	30,278	Ciba Specialty Chemicals AG (Registered Shares)		2,013,482
		Food: Major Diversified
	8,041	Nestle S.A. (Registered Shares)		2,856,706

NUMBER OF SHARES			VALUE
		Major Banks
	30,459	Credit Suisse Group (Registered Shares)	$	2,130,481
		Medical Specialties
	7,061	Nobel Biocare Holding AG Bearer		2,087,074
		Multi-Line Insurance
	7,634	Zurich Financial Services AG (Registered Shares)		2,054,440
		Other Consumer Specialties
	74,799	Compagnie Financiere Richemont AG (Series A) (Units)†		4,357,342
		Pharmaceuticals: Major
	96,111	Novartis AG (Registered Shares)		5,539,709
	24,703	Roche Holding AG		4,428,623
				9,968,332
		Property - Casualty Insurers
	52,799	Swiss Re (Registered Shares)		4,488,002
		Total Switzerland		29,955,859
		United Kingdom (22.0%)
		Aerospace & Defense
	221,506	Rolls-Royce Group PLC*		1,941,832
	8,403,272	Rolls-Royce Group PLC (B Shares)		16,453
				1,958,285
		Containers/Packaging
	177,639	Rexam PLC		1,827,686
		Financial Conglomerates
	694,755	Old Mutual Plc		2,370,254
		Food Retail
	449,711	Morrison (W.M.) Supermarkets PLC		2,240,845
	235,794	Tesco PLC		1,867,419
				4,108,264

See Notes to Financial Statements
84

Morgan Stanley Variable Investment Series - European Equity

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Food: Specialty/Candy
	332,020	Cadbury Schweppes PLC	$	3,552,589
		Integrated Oil
	239,440	Royal Dutch Shell PLC (A Shares)		8,368,072
		Investment Managers
	108,370	Man Group PLC		1,109,158
		Major Banks
	376,308	HSBC Holdings PLC		6,859,361
		Multi-Line Insurance
	125,219	Aviva PLC		2,015,267
		Other Metals/Minerals
	39,430	Anglo American PLC		1,923,052
		Pharmaceuticals: Major
	120,707	GlaxoSmithKline PLC		3,176,305
		Publishing: Books/Magazines
	171,097	Reed Elsevier PLC		1,877,624
		Tobacco
	53,166	Imperial Tobacco Group PLC		2,092,284
		Total United Kingdom		41,238,201
		Total Common Stocks (Cost $137,029,459)		186,069,392
PRINCIPAL AMOUNT IN THOUSANDS
		Short-Term Investments (6.3%)
		Short-Term Debt Securities held as Collateral on Loaned Securities (5.4%)
$	333	Alliance & Leister Plc., 5.36%, 01/29/08 (b)		332,792
	166	Bancaja, 5.37%, 01/29/08 (b)		166,396
	532	Bank of America, 5.32%, 05/15/07 (b)		532,468
	166	Bank of New York Co., Inc., 5.34%, 01/29/08 (b)		166,396

PRINCIPAL AMOUNT IN THOUSANDS			VALUE
		Bear Stearns,
$	332	5.39%, 01/29/08 (b)	$	332,792
	133	5.38%, 03/08/07 (b)		133,142
	200	5.37%, 03/12/07 (b)		199,676
	333	BNP Paribas Mtn., 5.35%, 01/29/08 (b)		332,792
		CIC NY,
	233	5.33%, 09/04/07 (b)		232,930
	333	5.34%, 05/31/07 (b)		332,792
	339	Dekabank Deutsche Girozentrale, 5.39%, 01/29/08 (b)		339,448
	1,068	Deutsche Bank Securities Inc., 5.33%, 01/02/07		1,067,902
	333	Dexia Bank NY, 5.33%, 09/28/07 (b)		332,743
	166	Gemini Securitization Corp. 5.34%, 01/02/07 (b)		166,298
		Goldman Sachs Group, Inc.
	166	5.40%, 01/29/08 (b)		166,396
	313	5.42%, 12/28/07 (b)		312,825
	166	HSBC Finance Corp., 5.34%, 01/29/08 (b)		166,396
	166	Liberty Lighthouse US Capital, 5.33%, 02/01/07 (b)		166,388
	200	Manufacturers and Traders, 5.33%, 06/15/07 (b)		199,676
	175	Merrill Lynch and Co., 5.35%, 04/26/07 (b)		174,929
	166	MIT UFJ Trust NY, 5.33%, 02/16/07 (b)		166,396
		Natexis Banques Populaires NY,
	166	5.35%, 02/28/07 (b)		166,396
	333	5.34%, 04/05/07 (b)		332,792
		National City Bank Cleveland
	316	5.32%, 03/01/07 (b)		316,138
	166	5.32%, 09/18/07 (b)		166,387
	666	National Rural Utilites Coop., Fin., 5.34%, 01/29/08 (b)		665,585
	386	Nationwide Building Society, 5.44%, 12/28/07 (b)		386,039

See Notes to Financial Statements
85

Morgan Stanley Variable Investment Series - European Equity

Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS					VALUE
$	499	Nordea Bank New York, 5.31%, 05/16/07 (b)			$	499,176
	157	Rhein-Main Securitisaton Limited, 5.33%, 01/18/07				157,117
	333	Skandi New York, 5.34%, 01/29/08 (b)				332,792
	333	SLM Corp., 5.36%, 01/29/08 (b)				332,792
	333	Toronto Dominion New York, 5.32%, 05/29/07 (b)				332,792
	183	Tulip Funding, 5.36%, 01/16/07				182,827
	233	Unicredito Italiano Bank PLC, 5.36%, 01/29/08 (b)				232,955
	113	World Savings Bank FSA 5.35%, 10/19/07 (b)				113,150
Securities held as Collateral		Total Short-Term Debt on Loaned Securities (Cost $10,238,511)				10,238,511
		Repurchase Agreement (0.9%)
	1,634	Joint repurchase agreement account 5.25% due 01/02/07 (dated 12/29/06; proceeds $1,634,953) (c) (Cost $1,634,000)				1,634,000
Total Investments (Cost $148,901,970) (d)			105.5	%		197,941,903
Liabilities in Excess of Other Assets			(5.5	)		(10,304,638	)
Net Assets			100.0	%	$	187,637,265

* Non-income producing security.

† Consists of one or more class of securities traded together as a unit; stocks with attached warrants.

(a) All or a portion of securities was on loan at December 31, 2006.

(b) Variable/Floating Rate Security - interest rate changes on these instruments are based on changes in a designated base rate. The rate shown are those in effect on December 31, 2006.

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

(d) The aggregate cost for federal income tax purposes is $149,146,282. The aggregate gross unrealized appreciation is $48,810,337 and the aggregate gross unrealized depreciation is $14,716 resulting in net unrealized appreciation of $48,795,621.

FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2006:

CONTRACTS
TO DELIVER

IN EXCHANGE
FOR

DELIVERY
DATE

UNREALIZED
APPRECIATION

GBP

32,342

EUR

48,104

02/08/07

267

Currency Abbreviations:

GBP British Pound.

EUR Euro.

See Notes to Financial Statements
86

Morgan Stanley Variable Investment Series - European Equity

Summary of Investments n December 31, 2006

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Major Banks	$	32,215,290		17.2	%
Pharmaceuticals: Major		16,671,835		8.9
Multi-Line Insurance		13,390,894		7.1
Integrated Oil		12,869,201		6.9
Collateral on Loaned Securities		10,238,511		5.4
Major Telecommunications		8,409,955		4.5
Publishing: Books/ Magazines		7,483,175		4.0
Motor Vehicles		6,692,361		3.6
Industrial Machinery		5,914,237		3.1
Food: Major Diversified		5,798,445		3.1
Electrical Products		4,533,910		2.4
Property - Casualty Insurers		4,488,002		2.4
Tobacco		4,447,774		2.4
Other Consumer Specialties		4,357,342		2.3
Financial Conglomerates		4,259,933		2.3
Chemicals: Specialty		4,168,181		2.2
Construction Materials		4,142,714		2.2
Food Retail		4,108,264		2.2
Other Metals/Minerals		4,041,715		2.2

INDUSTRY	VALUE			PERCENT OF NET ASSETS
Industrial Conglomerates	$	3,818,249			2.0	%
Electric Utilities		3,751,650			2.0
Gas Distributors		3,627,400			1.9
Food: Specialty/Candy		3,552,589			1.9
Telecommunication Equipment		3,212,119			1.7
Air Freight/Couriers		3,022,936			1.6
Regional Banks		2,530,777			1.3
Medical Specialties		2,087,074			1.1
Investment Banks/ Brokers		2,022,595			1.1
Pulp & Paper		1,985,895			1.1
Medical/Nursing Services		1,966,623			1.0
Aerospace & Defense		1,958,285			1.0
Containers/Packaging		1,827,686			1.0
Repurchase Agreement		1,634,000			0.9
Electronic Equipment/ Instruments		1,603,128			0.9
Investment Managers		1,109,158			0.6
	$	197,941,903	*		105.5	%

* Does not include open forward foreign currency contracts with unrealized appreciation of $267.

See Notes to Financial Statements
87

Morgan Stanley Variable Investment Series - Equity

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (96.2%)
		Air Freight/Couriers (4.5%)
	252,281	C.H. Robinson Worldwide, Inc.	$	10,315,770
	288,171	Expeditors International of Washington, Inc.		11,670,926
				21,986,696
		Apparel/Footwear Retail (2.6%)
	181,037	Abercrombie & Fitch Co. (Class A)		12,605,606
		Biotechnology (0.5%)
	43,512	Techne Corp.*		2,412,740
		Broadcasting (3.4%)
	607,026	Grupo Televisa S.A. (ADR) (Mexico)		16,395,772
		Casino/Gaming (2.6%)
	133,880	Wynn Resorts, Ltd.		12,564,638
		Chemicals: Agricultural (5.2%)
	480,714	Monsanto Co.		25,251,906
		Discount Stores (8.0%)
	287,048	Costco Wholesale Corp.		15,176,228
	141,527	Sears Holdings Corp.*		23,766,629
				38,942,857
		Financial Conglomerates (8.9%)
	290,064	American Express Co.		17,598,183
	535,457	Brookfield Asset Management Inc. (Class A) (Canada)		25,798,318
				43,396,501
		Financial Publishing/ Services (3.0%)
	207,927	Moody's Corp.		14,359,439
		Home Building (2.4%)
	198,118	Desarrolladora Homex S.A. de C.V. (ADR) (Mexico)*		11,702,830
		Hotels/Resorts/ Cruiselines (3.3%)
	339,232	Marriott International, Inc. (Class A)		16,188,151

NUMBER OF SHARES			VALUE
		Internet Retail (3.1%)
	383,636	Amazon.com, Inc.*	$	15,138,276
		Internet Software/ Services (9.4%)
	61,921	Google, Inc. (Class A)*		28,513,382
	666,527	Yahoo!, Inc.*		17,023,100
				45,536,482
		Investment Banks/ Brokers (3.2%)
	207,574	Greenhill & Co., Inc.		15,318,961
		Investment Trusts/ Mutual Funds (1.0%)
	324,415	Aeroplan Income Fund† (Canada)		4,718,309
		Medical Specialties (2.8%)
	334,915	Dade Behring Holdings, Inc.		13,332,966
		Miscellaneous Commercial Services (6.9%)
	242,618	Corporate Executive Board Co. (The)		21,277,599
	297,364	Iron Mountain Inc.*		12,293,028
				33,570,627
		Oil & Gas Production (6.2%)
	625,484	Ultra Petroleum Corp. (Canada)*		29,866,861
		Other Consumer Services (5.1%)
	814,738	eBay Inc.*		24,499,172
		Personnel Services (2.1%)
	219,223	Monster Worldwide, Inc.*		10,224,561
		Property - Casualty Insurers (3.2%)
	4,188	Berkshire Hathaway Inc. (Class B)*		15,353,208
		Restaurants (2.3%)
	342,152	Wendy's International, Inc.		11,321,810
		Services to the Health Industry (1.1%)
	72,731	Stericycle, Inc.*		5,491,190

See Notes to Financial Statements
88

Morgan Stanley Variable Investment Series - Equity

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES					VALUE
		Specialty Telecommunications (2.1%)
	321,640	Crown Castle International Corp.*			$	10,388,972
		Wireless Telecommunications (3.3%)
	351,328	America Movil SAB de C.V. (Series L) (ADR) (Mexico)				15,887,052
		Total Common Stocks (Cost $395,479,984)				466,455,583
PRINCIPAL AMOUNT IN THOUSANDS
		Short-Term Investment (4.5%) Repurchase Agreement
$	21,537	Joint repurchase agreeement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $21,549,599 (a) (Cost $21,537,000)			$	21,537,000
Total Investments (Cost $417,016,984) (b)			100.7	%		487,992,583
Liabilities in Excess of Other Assets			(0.7	)		(3,527,918	)
Net Assets			100.0	%	$	484,464,665

ADR American Depositary Receipt.

* Non-income producing security.

† Consists of one or more class of securities traded together as a unit; stocks with attached warrants.

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

(b) The aggregate cost for federal income tax purposes is $417,104,552. The aggregate gross unrealized appreciation is $92,031,512 and the aggregate gross unrealized depreciation is $21,143,481, resulting in net unrealized appreciation of $70,888,031.

FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2006:

CONTRACTS TO DELIVER		IN EXCHANGE FOR		DELIVERY DATE		UNREALIZED DEPRECIATION
$	107,896	CAD	125,110		01/02/07	$	(671	)
$	718,004	CAD	834,008		01/03/07		(3,221	)

Total Unrealized Depreciation

(3,892

)

Currency Abbreviation:

CAD Canadian Dollar.

See Notes to Financial Statements
89

Morgan Stanley Variable Investment Series - Equity

Summary of Investments n December 31, 2006

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Internet Software/ Services	$	45,536,482		9.4	%
Financial Conglomerates		43,396,501		8.9
Discount Stores		38,942,857		8.0
Miscellaneous Commercial Services		33,570,627		6.9
Oil & Gas Production		29,866,861		6.2
Chemicals: Agricultural		25,251,906		5.2
Other Consumer Services		24,499,172		5.1
Air Freight/Couriers		21,986,696		4.5
Repurchase Agreement		21,537,000		4.5
Broadcasting		16,395,772		3.4
Hotels/Resorts/ Cruiselines		16,188,151		3.3
Wireless Telecommunications		15,887,052		3.3
Property - Casualty Insurers		15,353,208		3.2
Investment Banks/ Brokers		15,318,961		3.2

INDUSTRY	VALUE			PERCENT OF NET ASSETS
Internet Retail	$	15,138,276			3.1	%
Financial Publishing/ Services		14,359,439			3.0
Medical Specialties		13,332,966			2.8
Apparel/Footwear Retail		12,605,606			2.6
Casino/Gaming		12,564,638			2.6
Home Building		11,702,830			2.4
Restaurants		11,321,810			2.3
Specialty Telecommunications		10,388,972			2.1
Personnel Services		10,224,561			2.1
Services to the Health Industry		5,491,190			1.1
Investment Trusts/ Mutual Funds		4,718,309			1.0
Biotechnology		2,412,740			0.5
	$	487,992,583	*		100.7	%

* Does not include open forward foreign currency contracts with unrealized depreciation of $3,892

See Notes to Financial Statements
90

Morgan Stanley Variable Investment Series - S&P 500 Index

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (98.4%)
		Advertising/Marketing Services (0.2%)
	8,921	Interpublic Group of Companies, Inc. (The)*	$	109,193
	3,456	Omnicom Group, Inc.		361,290
				470,483
		Aerospace & Defense (1.6%)
	15,989	Boeing Co.		1,420,463
	8,182	General Dynamics Corp.		608,332
	2,523	Goodrich Corp.		114,923
	2,526	L-3 Communications Holdings, Inc.		206,576
	7,200	Lockheed Martin Corp.		662,904
	6,984	Northrop Grumman Corp.		472,817
	8,991	Raytheon Co.		474,725
	3,381	Rockwell Collins, Inc.		213,983
				4,174,723
		Agricultural Commodities/ Milling (0.2%)
	13,290	Archer-Daniels-Midland Co.		424,748
		Air Freight/Couriers (0.9%)
	6,200	FedEx Corp.		673,444
	21,708	United Parcel Service, Inc. (Class B)		1,627,666
				2,301,110
		Airlines (0.1%)
	16,011	Southwest Airlines Co.		245,289
		Aluminum (0.2%)
	17,533	Alcoa, Inc.		526,165
		Apparel/Footwear (0.4%)
	7,431	Coach, Inc.*		319,236
	2,229	Jones Apparel Group, Inc.		74,515
	2,072	Liz Claiborne, Inc.		90,049
	3,802	Nike, Inc. (Class B)		376,512
	1,808	V.F. Corp.		148,401
				1,008,713

NUMBER OF SHARES			VALUE
		Apparel/Footwear Retail (0.3%)
	10,654	Gap, Inc. (The)	$	207,753
	6,916	Limited Brands, Inc.		200,149
	4,626	Nordstrom, Inc.		228,247
	9,202	TJX Companies, Inc. (The)		262,441
				898,590
		Auto Parts: O.E.M. (0.2%)
	3,013	Eaton Corp.		226,397
	3,959	Johnson Controls, Inc.		340,157
				566,554
		Automotive Aftermarket (0.0%)
	3,589	Goodyear Tire & Rubber Co. (The)*		75,333
		Beverages: Alcoholic (0.4%)
	15,546	Anheuser-Busch Companies, Inc.		764,863
	1,593	Brown-Forman Corp. (Class B)		105,520
	4,248	Constellation Brands Inc. (Class A)*		123,277
	925	Molson Coors Brewing Co. (Class B)		70,707
				1,064,367
		Beverages: Non-Alcoholic (1.6%)
	41,232	Coca-Cola Co. (The)		1,989,444
	5,604	Coca-Cola Enterprises Inc.		114,434
	2,768	Pepsi Bottling Group, Inc. (The)		85,559
	33,204	PepsiCo, Inc.		2,076,910
				4,266,347
		Biotechnology (1.4%)
	23,588	Amgen Inc.*		1,611,296
	6,817	Biogen Idec Inc.*		335,328
	7,531	Celgene Corp.*		433,258
	5,315	Genzyme Corp.*		327,298
	9,298	Gilead Sciences, Inc.*		603,719
	4,837	MedImmune, Inc.*		156,574
	1,080	Millipore Corp.*		71,928
				3,539,401

See Notes to Financial Statements
91

Morgan Stanley Variable Investment Series - S&P 500 Index

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Broadcasting (0.2%)
	9,985	Clear Channel Communications, Inc.	$	354,867
	5,101	Univision Communications, Inc. (Class A)*		180,677
				535,544
		Building Products (0.2%)
	3,508	American Standard Companies, Inc.		160,842
	7,971	Masco Corp.		238,094
				398,936
		Cable/Satellite TV (0.8%)
	42,082	Comcast Corp. (Class A)*		1,781,331
	15,587	DIRECTV Group, Inc. (The)*		388,740
				2,170,071
		Casino/Gaming (0.2%)
	3,761	Harrah's Entertainment, Inc.		311,110
	6,863	International Game Technology		317,071
				628,181
		Chemicals: Agricultural (0.2%)
	10,986	Monsanto Co.		577,095
		Chemicals: Major Diversified (0.8%)
	19,315	Dow Chemical Co. (The)		771,441
	18,599	Du Pont (E.I.) de Nemours & Co.		905,957
	1,664	Eastman Chemical Co.		98,692
	2,296	Hercules Inc.*		44,336
	2,871	Rohm & Haas Co.		146,766
				1,967,192
		Chemicals: Specialty (0.3%)
	4,455	Air Products & Chemicals, Inc.		313,097
	1,156	Ashland Inc.		79,972
	6,529	Praxair, Inc.		387,366
	1,333	Sigma-Aldrich Corp.		103,601
				884,036

NUMBER OF SHARES			VALUE
		Coal (0.1%)
	3,693	CONSOL Energy, Inc.	$	118,656
	5,334	Peabody Energy Corp.		215,547
				334,203
		Commercial Printing/ Forms (0.1%)
	4,384	Donnelley (R.R.) & Sons Co.		155,807
		Computer Communications (1.4%)
	9,182	Avaya Inc.*		128,364
	122,794	Cisco Systems, Inc.*		3,355,960
	11,440	Juniper Networks, Inc.*		216,674
	3,188	QLogic Corp.*		69,881
				3,770,879
		Computer Peripherals (0.4%)
	44,534	EMC Corp.*		587,849
	1,980	Lexmark International, Inc. (Class A)*		144,936
	7,559	Network Appliance, Inc.*		296,917
	4,225	Seagate Technology Inc. (Escrow) (a)		0
				1,029,702
		Computer Processing Hardware (2.1%)
	17,198	Apple Computer, Inc.*		1,459,078
	45,933	Dell, Inc.*		1,152,459
	55,383	Hewlett-Packard Co.		2,281,226
	3,603	NCR Corp.*		154,064
	71,168	Sun Microsystems, Inc.*		385,731
				5,432,558
		Construction Materials (0.1%)
	1,909	Vulcan Materials Co.		171,562
		Containers/Packaging (0.2%)
	2,107	Ball Corp.		91,865
	2,120	Bemis Company, Inc.		72,037
	2,691	Pactiv Corp.*		96,042
	1,630	Sealed Air Corp.		105,820
	2,163	Temple-Inland Inc.		99,563
				465,327

See Notes to Financial Statements
92

Morgan Stanley Variable Investment Series - S&P 500 Index

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Contract Drilling (0.4%)
	6,053	Nabors Industries, Ltd. (Bermuda)*	$	180,258
	2,741	Noble Corp. (Cayman Islands)		208,727
	2,233	Rowan Companies, Inc.		74,136
	5,912	Transocean Inc. (Cayman Islands)*		478,222
				941,343
		Data Processing Services (0.9%)
	2,398	Affiliated Computer Services, Inc. (Class A)*		117,118
	11,134	Automatic Data Processing, Inc.		548,349
	3,472	Computer Sciences Corp.*		185,301
	2,786	Convergys Corp.*		66,251
	3,273	Fidelity National Information Services, Inc.		131,215
	15,485	First Data Corp.		395,177
	3,502	Fiserv, Inc.*		183,575
	6,846	Paychex, Inc.		270,691
	15,498	Western Union Co.		347,465
				2,245,142
		Department Stores (0.5%)
	1,231	Dillard's, Inc. (Class A)		43,048
	10,619	Federated Department Stores, Inc.		404,902
	6,613	Kohl's Corp.*		452,528
	4,549	Penney (J.C.) Co., Inc.		351,911
				1,252,389
		Discount Stores (1.6%)
	2,214	Big Lots, Inc.*		50,745
	9,266	Costco Wholesale Corp.		489,893
	6,310	Dollar General Corp.		101,339
	3,066	Family Dollar Stores, Inc.		89,926
	1,680	Sears Holdings Corp.*		282,122
	17,367	Target Corp.		990,787
	49,725	Wal-Mart Stores, Inc.		2,296,301
				4,301,113

NUMBER OF SHARES			VALUE
		Drugstore Chains (0.6%)
	16,653	CVS Corp.	$	514,744
	20,290	Walgreen Co.		931,108
				1,445,852
		Electric Utilities (3.2%)
	13,430	AES Corp. (The)*		295,997
	3,342	Allegheny Energy, Inc.*		153,431
	4,171	Ameren Corp.		224,108
	7,999	American Electric Power Co., Inc.		340,597
	6,326	CenterPoint Energy, Inc.		104,885
	4,498	CMS Energy Corp.*		75,117
	5,193	Consolidated Edison, Inc.		249,628
	3,640	Constellation Energy Group, Inc.		250,687
	7,152	Dominion Resources, Inc.		599,624
	3,599	DTE Energy Co.		174,228
	25,392	Duke Energy Corp.		843,268
	6,588	Edison International		299,622
	4,183	Entergy Corp.		386,175
	13,567	Exelon Corp.		839,662
	6,455	FirstEnergy Corp.		389,236
	8,174	FPL Group, Inc.		444,829
	7,053	PG&E Corp.		333,818
	2,019	Pinnacle West Capital Corp.		102,343
	7,716	PPL Corp.		276,541
	5,140	Progress Energy, Inc.		252,271
	5,100	Public Service Enterprise Group, Inc.		338,538
	15,019	Southern Co. (The)		553,600
	4,230	TECO Energy, Inc.		72,883
	9,286	TXU Corp.		503,394
	8,227	Xcel Energy, Inc.		189,715
				8,294,197
		Electrical Products (0.4%)
	3,418	American Power Conversion Corp.		104,557
	1,838	Cooper Industries Ltd. (Class A) (Bermuda)		166,210
	16,224	Emerson Electric Co.		714,992
	2,867	Molex Inc.		90,683
				1,076,442

See Notes to Financial Statements
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NUMBER OF SHARES			VALUE
		Electronic Components (0.1%)
	3,735	Jabil Circuit, Inc.	$	91,694
	4,550	SanDisk Corp.*		195,787
	10,774	Sanmina-SCI Corp.*		37,170
	18,493	Solectron Corp.*		59,548
				384,199
		Electronic Equipment/ Instruments (0.4%)
	8,264	Agilent Technologies, Inc.*		288,000
	4,268	JDS Uniphase Corp.*		71,105
	3,441	Rockwell Automation, Inc.		210,176
	5,151	Symbol Technologies, Inc.		76,956
	1,668	Tektronix, Inc.		48,656
	19,519	Xerox Corp.*		330,847
				1,025,740
		Electronic Production Equipment (0.3%)
	28,085	Applied Materials, Inc.		518,168
	4,026	KLA-Tencor Corp.		200,293
	2,499	Novellus Systems, Inc.*		86,016
	3,837	Teradyne, Inc.*		57,402
				861,879
		Electronics/Appliance Stores (0.2%)
	8,157	Best Buy Co., Inc.		401,243
	2,869	Circuit City Stores - Circuit City Group		54,453
	2,746	RadioShack Corp.		46,078
				501,774
		Electronics/Appliances (0.2%)
	5,809	Eastman Kodak Co.		149,872
	1,320	Harman International Industries, Inc.		131,881
	1,585	Whirlpool Corp.		131,587
				413,340
		Engineering & Construction (0.1%)
	1,780	Fluor Corp.		145,337

NUMBER OF SHARES			VALUE
		Environmental Services (0.2%)
	5,134	Allied Waste Industries, Inc.*	$	63,097
	10,818	Waste Management, Inc.		397,778
				460,875
		Finance/Rental/Leasing (1.5%)
	8,250	Capital One Financial Corp.		633,765
	4,010	CIT Group, Inc.		223,638
	12,559	Countrywide Financial Corp.		533,129
	19,716	Fannie Mae		1,170,933
	14,013	Freddie Mac		951,483
	1,228	Ryder System, Inc.		62,702
	8,265	SLM Corp.		403,084
				3,978,734
		Financial Conglomerates (4.6%)
	24,361	American Express Co.		1,477,982
	99,357	Citigroup, Inc. (Note 4)		5,534,185
	70,144	JPMorgan Chase & Co.		3,387,955
	5,455	Principal Financial Group, Inc.		320,208
	9,645	Prudential Financial, Inc.		828,120
	6,715	State Street Corp.		452,860
				12,001,310
		Financial Publishing/ Services (0.4%)
	2,530	Equifax, Inc.		102,718
	7,162	McGraw-Hill Companies, Inc. (The)		487,159
	4,752	Moody's Corp.		328,173
				918,050
		Food Distributors (0.2%)
	12,499	SYSCO Corp.		459,463
		Food Retail (0.4%)
	14,507	Kroger Co. (The)		334,676
	8,964	Safeway Inc.		309,796
	4,163	Supervalu, Inc.		148,827
	2,890	Whole Foods Market, Inc.		135,628
				928,927

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NUMBER OF SHARES			VALUE
		Food: Major Diversified (0.6%)
	4,404	Campbell Soup Co.	$	171,272
	10,303	ConAgra Foods Inc.		278,181
	6,937	General Mills, Inc.		399,571
	6,662	Heinz (H.J.) Co.		299,857
	5,074	Kellogg Co.		254,004
	15,101	Sara Lee Corp.		257,170
				1,660,055
		Food: Meat/Fish/Dairy (0.1%)
	2,705	Dean Foods Co.*		114,367
	5,095	Tyson Foods, Inc. (Class A)		83,813
				198,180
		Food: Specialty/Candy (0.2%)
	3,516	Hershey Co. (The)		175,097
	2,657	McCormick & Co., Inc. (Non-Voting)		102,454
	4,439	Wrigley (Wm.) Jr. Co.		229,585
				507,136
		Forest Products (0.1%)
	4,783	Weyerhaeuser Co.		337,919
		Gas Distributors (0.3%)
	7,931	Dynegy, Inc. (Class A)*		57,420
	3,544	KeySpan Corp.		145,942
	904	Nicor Inc.		42,307
	5,520	NiSource, Inc.		133,032
	778	Peoples Energy Corp.		34,676
	1,736	Questar Corp.		144,175
	5,301	Sempra Energy		297,068
				854,620
		Home Building (0.2%)
	2,400	Centex Corp.		135,048
	5,580	D.R. Horton, Inc.		147,814
	1,588	KB Home		81,433
	2,788	Lennar Corp. (Class A)		146,258
	4,273	Pulte Homes, Inc.		141,522
				652,075

NUMBER OF SHARES			VALUE
		Home Furnishings (0.1%)
	3,619	Leggett & Platt, Inc.	$	86,494
	5,605	Newell Rubbermaid, Inc.		162,265
				248,759
		Home Improvement Chains (1.1%)
	41,268	Home Depot, Inc. (The)		1,657,323
	30,792	Lowe's Companies, Inc.		959,171
	2,263	Sherwin-Williams Co.		143,881
				2,760,375
		Hospital/Nursing Management (0.1%)
	4,864	Health Management Associates, Inc. (Class A)		102,679
	1,495	Manor Care, Inc.		70,146
	9,530	Tenet Healthcare Corp.*		66,424
				239,249
		Hotels/Resorts/ Cruiselines (0.5%)
	8,998	Carnival Corp. (Panama)		441,352
	7,818	Hilton Hotels Corp.		272,848
	6,796	Marriott International, Inc. (Class A)		324,305
	4,287	Starwood Hotels & Resorts Worldwide, Inc.		267,938
	4,007	Wyndham Worldwide Corp.*		128,304
				1,434,747
		Household/Personal Care (2.3%)
	8,989	Avon Products, Inc.		296,997
	3,070	Clorox Co. (The)		196,941
	10,400	Colgate-Palmolive Co.		678,496
	2,575	Estee Lauder Companies, Inc. (The) (Class A)		105,111
	1,578	International Flavors & Fragrances, Inc.		77,574
	9,267	Kimberly-Clark Corp.		629,693
	64,074	Procter & Gamble Co. (The)		4,118,036
				6,102,848

See Notes to Financial Statements
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NUMBER OF SHARES			VALUE
		Industrial Conglomerates (5.0%)
	14,890	3M Co.	$	1,160,378
	4,792	Danaher Corp.		347,132
	208,436	General Electric Co.**		7,755,904
	16,510	Honeywell International, Inc.		746,912
	6,200	Ingersoll-Rand Co. Ltd. (Class A) (Bermuda)		242,606
	3,735	ITT Corp.		212,223
	2,537	Textron, Inc.		237,895
	40,216	Tyco International Ltd. (Bermuda)		1,222,566
	20,294	United Technologies Corp.		1,268,781
				13,194,397
		Industrial Machinery (0.2%)
	8,482	Illinois Tool Works Inc.		391,783
	2,384	Parker Hannifin Corp.		183,282
				575,065
		Industrial Specialties (0.1%)
	3,606	Ecolab Inc.		162,991
	3,342	PPG Industries, Inc.		214,590
				377,581
		Information Technology Services (1.4%)
	3,652	Citrix Systems, Inc.*		98,787
	2,867	Cognizant Technology Solutions Corp. (Class A)*		221,218
	10,459	Electronic Data Systems Corp.		288,145
	30,459	International Business Machines Corp.		2,959,092
	6,968	Unisys Corp.*		54,629
				3,621,871
		Insurance Brokers/ Services (0.2%)
	6,262	AON Corp.		221,299
	11,144	Marsh & McLennan Companies, Inc.		341,675
				562,974

NUMBER OF SHARES			VALUE
		Integrated Oil (5.8%)
	44,081	Chevron Corp.	$	3,241,276
	33,278	ConocoPhillips		2,394,352
	117,937	Exxon Mobil Corp.		9,037,512
	5,474	Hess Corp.		271,346
	3,782	Murphy Oil Corp.		192,315
				15,136,801
		Internet Retail (0.2%)
	6,247	Amazon.com, Inc.*		246,507
	4,513	IAC/InterActiveCorp*		167,703
				414,210
		Internet Software/Services (1.1%)
	4,333	Google, Inc. (Class A)*		1,995,260
	4,957	VeriSign, Inc.*		119,216
	24,754	Yahoo!, Inc.*		632,217
				2,746,693
		Investment Banks/Brokers (2.9%)
	4,893	Ameriprise Financial, Inc.		266,669
	2,372	Bear Stearns Companies, Inc. (The)		386,114
	704	Chicago Mercantile Exchange Holdings Inc. (Class A)		358,864
	8,633	ETRADE Group, Inc.		193,552
	8,611	Goldman Sachs Group, Inc. (The)		1,716,603
	10,718	Lehman Brothers Holdings Inc.		837,290
	17,874	Merrill Lynch & Co., Inc.		1,664,069
	22,481	Morgan Stanley (Note 4)		1,830,628
	20,683	Schwab (Charles) Corp. (The)		400,009
				7,653,798
		Investment Managers (0.5%)
	1,826	Federated Investors, Inc. (Class B)		61,682
	3,371	Franklin Resources, Inc.		371,383
	4,008	Janus Capital Group, Inc.		86,533
	2,657	Legg Mason, Inc.		252,548
	8,328	Mellon Financial Corp.		351,025
	5,331	Price (T.) Rowe Group, Inc.		233,338
				1,356,509

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Life/Health Insurance (0.9%)
	9,999	AFLAC, Inc.	$	459,954
	8,962	Genworth Financial Inc. (Class A)		306,590
	5,806	Lincoln National Corp.		385,518
	15,372	MetLife, Inc. (Note 4)		907,102
	1,983	Torchmark Corp.		126,436
	6,926	UnumProvident Corp.		143,922
				2,329,522
		Major Banks (5.1%)
	90,805	Bank of America Corp.		4,848,079
	15,453	Bank of New York Co., Inc. (The)		608,385
	10,938	BB&T Corp.		480,506
	3,212	Comerica, Inc.		188,480
	4,805	Huntington Bancshares, Inc.		114,119
	8,120	KeyCorp		308,804
	12,771	National City Corp.		466,908
	5,941	PNC Financial Services Group		439,871
	14,742	Regions Financial Corp.		551,351
	7,161	SunTrust Banks, Inc.		604,746
	38,541	Wachovia Corp.		2,194,910
	68,264	Wells Fargo & Co.		2,427,468
				13,233,627
		Major Telecommunications (3.2%)
	7,555	ALLTEL Corp.		456,926
	77,706	AT&T Inc.		2,777,990
	36,884	BellSouth Corp.		1,737,605
	3,023	Embarq Corp.		158,889
	58,537	Sprint Nextel Corp.		1,105,764
	59,034	Verizon Communications, Inc.		2,198,426
				8,435,600
		Managed Health Care (1.5%)
	10,555	Aetna, Inc.		455,765
	8,623	Caremark Rx, Inc.		492,459
	2,074	CIGNA Corp.		272,876
	3,222	Coventry Health Care, Inc.*		161,261
	3,361	Humana, Inc.*		185,897
	27,237	UnitedHealth Group Inc.		1,463,444
	12,537	WellPoint Inc.*		986,537
				4,018,239

NUMBER OF SHARES			VALUE
		Media Conglomerates (2.0%)
	15,803	CBS Corp. (Class B)	$	492,738
	41,825	Disney (Walt) Co. (The)		1,433,343
	47,330	News Corp. (Class A)		1,016,648
	80,728	Time Warner, Inc.		1,758,256
	14,140	Viacom, Inc. (Class B)*		580,164
				5,281,149
		Medical Distributors (0.4%)
	3,884	AmerisourceBergen Corp.		174,625
	8,190	Cardinal Health, Inc.		527,682
	5,985	McKesson Corp.		303,439
	2,810	Patterson Companies, Inc.*		99,783
				1,105,529
		Medical Specialties (1.9%)
	3,705	Applera Corp. - Applied Biosystems Group		135,937
	2,082	Bard (C.R.), Inc.		172,744
	1,087	Bausch & Lomb, Inc.		56,589
	13,234	Baxter International, Inc.		613,925
	4,987	Becton, Dickinson & Co.		349,838
	4,952	Biomet, Inc.		204,369
	23,844	Boston Scientific Corp.*		409,640
	3,151	Hospira, Inc.*		105,811
	23,277	Medtronic, Inc.		1,245,552
	2,475	Pall Corp.		85,511
	2,487	PerkinElmer, Inc.		55,286
	7,147	St. Jude Medical, Inc.*		261,294
	6,010	Stryker Corp.		331,211
	8,252	Thermo Fisher Scientific, Inc.*		373,733
	2,052	Waters Corp.*		100,486
	4,826	Zimmer Holdings, Inc.*		378,262
				4,880,188
		Miscellaneous Commercial Services (0.1%)
	2,760	Cintas Corp.		109,600
	2,677	Sabre Holdings Corp. (Class A)		85,369
				194,969

See Notes to Financial Statements
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NUMBER OF SHARES			VALUE
		Miscellaneous Manufacturing (0.1%)
	4,128	Dover Corp.	$	202,355
		Motor Vehicles (0.4%)
	38,195	Ford Motor Co.		286,844
	11,437	General Motors Corp.		351,345
	5,240	Harley-Davidson, Inc.		369,263
				1,007,452
		Multi-Line Insurance (1.9%)
	52,568	American International Group, Inc.		3,767,023
	6,409	Hartford Financial Services Group, Inc. (The)		598,024
	9,240	Loews Corp.		383,183
	2,128	Safeco Corp.		133,106
				4,881,336
		Office Equipment/Supplies (0.1%)
	1,909	Avery Dennison Corp.		129,678
	4,487	Pitney Bowes, Inc.		207,255
				336,933
		Oil & Gas Pipelines (0.3%)
	14,263	El Paso Corp.		217,938
	2,169	Kinder Morgan, Inc.		229,372
	12,058	Williams Companies, Inc. (The)		314,955
				762,265
		Oil & Gas Production (1.2%)
	9,296	Anadarko Petroleum Corp.		404,562
	6,661	Apache Corp.		443,023
	8,410	Chesapeake Energy Corp.		244,311
	8,938	Devon Energy Corp.		599,561
	4,923	EOG Resources, Inc.		307,441
	17,421	Occidental Petroleum Corp.		850,667
	7,399	XTO Energy Inc.		348,123
				3,197,688
		Oil Refining/Marketing (0.5%)
	7,108	Marathon Oil Corp.		657,490
	2,490	Sunoco, Inc.		155,277
	12,226	Valero Energy Corp.		625,482
				1,438,249

NUMBER OF SHARES			VALUE
		Oilfield Services/Equipment (1.3%)
	6,486	Baker Hughes Inc.	$	484,245
	5,928	BJ Services Co.		173,809
	20,332	Halliburton Co.		631,309
	3,549	National Oilwell-Varco, Inc.*		217,128
	23,824	Schlumberger Ltd. (Netherlands Antilles)		1,504,724
	4,032	Smith International, Inc.		165,594
	6,869	Weatherford International Ltd. (Bermuda)*		287,055
				3,463,864
		Other Consumer Services (0.4%)
	2,830	Apollo Group, Inc. (Class A)*		110,285
	6,517	Block (H.&R.), Inc.		150,152
	23,397	eBay, Inc.*		703,548
				963,985
		Other Consumer Specialties (0.1%)
	3,061	Fortune Brands, Inc.		261,379
		Other Metals/Minerals (0.2%)
	4,125	Phelps Dodge Corp.		493,845
		Packaged Software (3.2%)
	11,796	Adobe Systems, Inc.*		485,052
	4,685	Autodesk, Inc.*		189,555
	4,147	BMC Software, Inc.*		133,533
	8,305	CA Inc.		188,108
	7,122	Compuware Corp.*		59,326
	7,050	Intuit Inc.*		215,095
	174,925	Microsoft Corp.		5,223,261
	6,855	Novell, Inc.*		42,501
	80,893	Oracle Corp.*		1,386,506
	18,967	Symantec Corp.*		395,462
				8,318,399
		Personnel Services (0.1%)
	2,596	Monster Worldwide, Inc.*		121,077
	3,389	Robert Half International, Inc.		125,800
				246,877

See Notes to Financial Statements
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NUMBER OF SHARES			VALUE
		Pharmaceuticals: Generic Drugs (0.1%)
	2,151	Barr Pharmaceuticals Inc.*	$	107,808
	4,285	Mylan Laboratories, Inc.		85,529
	2,072	Watson Pharmaceuticals, Inc.*		53,934
				247,271
		Pharmaceuticals: Major (5.8%)
	31,036	Abbott Laboratories		1,511,764
	39,768	Bristol-Myers Squibb Co.		1,046,694
	58,627	Johnson & Johnson		3,870,554
	19,907	Lilly (Eli) & Co.		1,037,155
	43,899	Merck & Co., Inc.		1,913,996
	145,800	Pfizer, Inc.		3,776,220
	29,979	Schering-Plough Corp.		708,704
	27,231	Wyeth		1,386,602
				15,251,689
		Pharmaceuticals: Other (0.3%)
	3,109	Allergan, Inc.		372,272
	6,404	Forest Laboratories, Inc.*		324,042
	4,916	King Pharmaceuticals, Inc.*		78,263
				774,577
		Precious Metals (0.2%)
	3,982	Freeport-McMoRan Copper & Gold, Inc. (Class B)		221,917
	9,104	Newmont Mining Corp.		411,045
				632,962
		Property - Casualty Insurers (1.2%)
	6,583	ACE Ltd. (Cayman Islands)		398,732
	12,637	Allstate Corp. (The) (Note 4)		822,795
	8,324	Chubb Corp. (The)		440,423
	3,503	Cincinnati Financial Corp.		158,721
	15,402	Progressive Corp. (The)		373,036
	13,953	St. Paul Travelers Companies, Inc. (The)		749,137
	3,651	XL Capital Ltd. (Class A) (Cayman Islands)		262,945
				3,205,789
		Publishing: Books/Magazines (0.0%)
	783	Meredith Corp.		44,122

NUMBER OF SHARES			VALUE
		Publishing: Newspapers (0.2%)
	1,316	Dow Jones & Co., Inc.	$	50,008
	4,738	Gannett Co., Inc.		286,459
	2,908	New York Times Co. (The) (Class A)		70,839
	1,685	Scripps (E.W.) Co. (Class A)		84,149
	3,855	Tribune Co.		118,657
				610,112
		Pulp & Paper (0.2%)
	9,200	International Paper Co.		313,720
	3,664	MeadWestvaco Corp.		110,140
				423,860
		Railroads (0.7%)
	7,263	Burlington Northern Santa Fe Corp.		536,082
	8,800	CSX Corp.		302,984
	8,025	Norfolk Southern Corp.		403,577
	5,454	Union Pacific Corp.		501,877
				1,744,520
		Real Estate Development (0.1%)
	3,736	CB Richard Ellis Group, Inc. (Class A)*		124,035
	4,335	Realogy Corp.*		131,437
				255,472
		Real Estate Investment Trusts (1.1%)
	1,951	Apartment Investment & Management Co. (Class A)		109,295
	4,416	Archstone-Smith Trust		257,055
	2,351	Boston Properties, Inc.		263,030
	7,107	Equity Office Properties Trust		342,344
	5,907	Equity Residential		299,780
	4,570	Kimco Realty Corp.		205,422
	3,580	Plum Creek Timber Co., Inc.		142,663
	5,004	ProLogis		304,093
	2,478	Public Storage, Inc.		241,605
	4,475	Simon Property Group, Inc.		453,273
	2,611	Vornado Realty Trust		317,237
				2,935,797

See Notes to Financial Statements
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NUMBER OF SHARES			VALUE
		Recreational Products (0.2%)
	1,856	Brunswick Corp.	$	59,206
	6,238	Electronic Arts Inc.*		314,146
	3,212	Hasbro, Inc.		87,527
	7,712	Mattel, Inc.		174,754
				635,633
		Regional Banks (1.2%)
	3,792	Commerce Bancorp, Inc.		133,744
	2,625	Compass Bancshares, Inc.		156,581
	11,284	Fifth Third Bancorp		461,854
	2,517	First Horizon National Corp.		105,160
	1,566	M&T Bank Corp.		191,303
	5,158	Marshall & Ilsley Corp.		248,151
	3,791	Northern Trust Corp.		230,076
	6,571	Synovus Financial Corp.		202,584
	35,545	U.S. Bancorp		1,286,374
	2,162	Zions Bancorporation		178,235
				3,194,062
		Restaurants (0.8%)
	2,969	Darden Restaurants, Inc.		119,265
	25,008	McDonald's Corp.		1,108,604
	15,288	Starbucks Corp.*		541,501
	1,933	Wendy's International, Inc.		63,963
	5,360	Yum! Brands, Inc.		315,168
				2,148,501
		Savings Banks (0.4%)
	7,268	Sovereign Bancorp, Inc.		184,535
	19,113	Washington Mutual, Inc.		869,450
				1,053,985
		Semiconductors (2.1%)
	11,093	Advanced Micro Devices, Inc.*		225,743
	7,317	Altera Corp.*		143,999
	6,915	Analog Devices, Inc.		227,296
	9,483	Broadcom Corp. (Class A)*		306,396
	116,592	Intel Corp.		2,360,988
	6,045	Linear Technology Corp.		183,284
	8,219	LSI Logic Corp.*		73,971
	6,485	Maxim Integrated Products, Inc.		198,571

NUMBER OF SHARES			VALUE
	15,255	Micron Technology, Inc.*	$	212,960
	5,835	National Semiconductor Corp.		132,454
	7,189	NVIDIA Corp.*		266,065
	4,243	PMC - Sierra, Inc.*		28,470
	30,005	Texas Instruments Inc.		864,144
	6,799	Xilinx, Inc.		161,884
				5,386,225
		Services to the Health Industry (0.4%)
	2,739	Express Scripts, Inc.*		196,112
	4,013	IMS Health Inc.		110,277
	2,536	Laboratory Corp. of America Holdings*		186,320
	5,933	Medco Health Solutions, Inc.*		317,060
	3,234	Quest Diagnostics Inc.		171,402
				981,171
		Specialty Insurance (0.2%)
	2,145	Ambac Financial Group, Inc.		191,055
	2,726	MBIA Inc.		199,161
	1,679	MGIC Investment Corp.		105,005
				495,221
		Specialty Stores (0.4%)
	3,025	AutoNation, Inc.*		64,493
	1,024	AutoZone, Inc.*		118,333
	5,716	Bed Bath & Beyond Inc.*		217,780
	5,630	Office Depot, Inc.*		214,897
	1,506	OfficeMax Inc.		74,773
	14,612	Staples, Inc.		390,140
	2,737	Tiffany & Co.		107,400
				1,187,816
		Specialty Telecommunications (0.2%)
	2,321	CenturyTel, Inc.		101,335
	6,509	Citizens Communications Co.		93,534
	32,516	Qwest Communications International, Inc.*		272,159
	9,641	Windstream Corp.		137,095
				604,123

See Notes to Financial Statements
100

Morgan Stanley Variable Investment Series - S&P 500 Index

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Steel (0.3%)
	2,037	Allegheny Technologies, Inc.	$	184,715
	6,109	Nucor Corp.		333,918
	2,396	United States Steel Corp.		175,243
				693,876
		Telecommunication Equipment (1.2%)
	2,370	ADC Telecommunications, Inc.*		34,436
	1,707	CIENA Corp.*		47,301
	4,085	Comverse Technology, Inc.*		86,234
	31,631	Corning, Inc.*		591,816
	48,883	Motorola, Inc.		1,005,034
	33,416	QUALCOMM, Inc.		1,262,791
	8,933	Tellabs, Inc.*		91,653
				3,119,265
		Tobacco (1.5%)
	42,380	Altria Group, Inc.		3,637,052
	3,467	Reynolds American, Inc.		226,984
	3,253	UST, Inc.		189,325
				4,053,361
		Tools/Hardware (0.1%)
	1,376	Black & Decker Corp.		110,039
	1,180	Snap-On, Inc.		56,215
	1,644	Stanley Works (The)		82,677
				248,931
		Trucks/Construction/Farm Machinery (0.7%)
	13,154	Caterpillar Inc.		806,735
	1,061	Cummins Inc.		125,389
	4,675	Deere & Co.		444,452
	5,021	PACCAR, Inc.		325,863
	1,700	Terex Corp.*		109,786
				1,812,225

NUMBER OF SHARES					VALUE
		Wholesale Distributors (0.1%)
	3,446	Genuine Parts Co.			$	163,444
	1,479	Grainger (W.W.), Inc.				103,441
						266,885
		Total Common Stocks (Cost $180,590,654)				257,415,785
PRINCIPAL AMOUNT IN THOUSANDS
		Short-Term Investment (1.6%) Repurchase Agreement
$	4,116	Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $4,118,408) (b) (Cost $4,116,000)				4,116,000
Total Investments (Cost $184,706,654) (c)(d)			100.0	%		261,531,785
Liabilities in Excess of Other Assets			(0.0	)		(103,744	)
Net Assets			100.0	%	$	261,428,041

* Non-income producing security.

** A portion of this security has been physically segregated in connection with open futures contracts in the amount of $182,000.

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

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

(c) Securities have been designated as collateral in an amount equal to $4,450,863 in connection with open futures contracts.

(d) The aggregate cost for federal income tax purposes is $188,267,485. The aggregate gross unrealized appreciation is $83,702,469 and the aggregate gross unrealized depreciation is $10,438,169, resulting in net unrealized appreciation of $73,264,300.

See Notes to Financial Statements
101

Morgan Stanley Variable Investment Series - S&P 500 Index

Portfolio of Investments n December 31, 2006 continued

SECTOR	VALUE			PERCENT OF NET ASSETS
Finance	$	57,138,137			21.8	%
Electronic Technology		25,185,170			9.6
Health Technology		24,693,127			9.4
Energy Minerals		20,106,939			7.7
Consumer Non-Durables		18,861,006			7.2
Producer Manufacturing		18,162,907			6.9
Technology Services		16,932,104			6.5
Consumer Services		13,816,412			5.3
Retail Trade		13,691,047			5.2
Utilities		9,148,815			3.5
Communications		9,039,722			3.5
Industrial Services		5,773,686			2.2
Health Services		5,238,658			2.0
Process Industries		5,119,840			2.0
Transportation		4,290,919			1.6
Repurchase Agreement		4,116,000			1.6
Consumer Durables		3,542,902			1.4
Non-Energy Minerals		2,856,330			1.1
Commercial Services		1,986,187			0.8
Distribution Services		1,831,877			0.7
	$	261,531,785	*		100.0	%

* Does not include open long futures contracts with an underlying face amount of $4,642,300 with unrealized appreciation of $9,321.

FUTURES CONTRACTS OPEN AT DECEMBER 31, 2006:

NUMBER OF CONTRACTS		LONG/ SHORT	DESCRIPTION, DELIVERY MONTH AND YEAR	UNDERLYING FACE AMOUNT AT VALUE		UNREALIZED APPRECIATION
	55	Long	S&P 500 Index, E-MINI March 2007	$	3,928,100	$	8,553
	2	Long	S&P 500 Index, March 2007		714,200		768
			Total Unrealized Appreciation			$	9,321

See Notes to Financial Statements
102

Morgan Stanley Variable Investment Series - Global Advantage

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (95.8%) Australia (3.3%)
		Data Processing Services
	75,200	Computershare Ltd.	$	528,330
		Other Consumer Services
	57,000	A.B.C. Learning Centres Ltd.		377,965
		Total Australia		906,295
		Bermuda (2.5%)
		Multi-Line Insurance
	15,100	Axis Capital Holdings Ltd.		503,887
		Semiconductors
	10,292	Marvell Technology Group, Ltd.*		197,503
		Total Bermuda		701,390
		British Virgin Islands (1.1%)
		Electronic Equipment/ Instruments
	19,200	Nam Tai Electronics, Inc.		291,648
		Canada (1.6%)
		Biotechnology
	22,900	Angiotech Pharmaceuticals, Inc.*		188,123
		Food: Specialty/Candy
	27,900	SunOpta Inc.*		245,520
		Total Canada		433,643
		France (1.0%)
		Pharmaceuticals: Other
	6,200	Ipsen S.A.		288,153
		Germany (5.7%)
		Apparel/Footwear
	8,808	Adidas AG		438,537
		Finance/Rental/Leasing
	5,234	Grenkeleasing AG		249,059
		Financial Conglomerates
	8,754	Hypo Real Estate Holding AG		551,482

NUMBER OF SHARES			VALUE
		Medical Specialties
	1,800	Fresenius AG	$	360,354
		Total Germany		1,599,432
		Greece (2.8%)
		Regional Banks
	11,980	EFG Eurobank Ergasias		433,794
		Wireless Telecommunications
	11,900	Cosmote Mobile Telecommunications S.A.		351,753
		Total Greece		785,547
		Hong Kong (4.6%)
		Agricultural Commodities/Milling
	644,000	Global Bio-chem Technology Group Co., Ltd.		216,905
		Apparel/Footwear Retail
	55,500	Esprit Holdings Ltd.		619,647
		Wholesale Distributors
	146,200	Li & Fung Ltd.		454,825
		Total Hong Kong		1,291,377
		Israel (1.5%)
		Pharmaceuticals: Other
	13,200	Teva Pharmaceutical Industries Ltd. (ADR)		410,256
		Italy (3.0%)
		Major Banks
	96,000	UniCredito Italiano SpA		841,166
		Japan (3.1%)
		Home Building
	9,900	Daito Trust Construction Co., Ltd.		454,006
		Industrial Machinery
	25,500	OSG Corp.		417,647
		Total Japan		871,653

See Notes to Financial Statements
103

Morgan Stanley Variable Investment Series - Global Advantage

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Mexico (1.1%)
		Beverages: Non-Alcoholic
	2,600	Fomento Economico Mexicano, S.A.B. de C.V. (ADR) (Units)†	$	300,976
		Singapore (4.2%)
		Airlines
	37,000	Singapore Airlines Ltd.		422,016
		Electronic Components
	25,900	Flextronics International Ltd.*		297,332
		Marine Shipping
	293,000	Cosco Corp (Singapore) Ltd.		439,223
		Total Singapore		1,158,571
		South Africa (1.0%)
		Pharmaceuticals: Generic Drugs
	61,700	Aspen Pharmacare Holdings Ltd.*		284,669
		Spain (8.2%)
		Apparel/Footwear Retail
	5,500	Industria de Diseno Textil, S.A. (Inditex)		296,191
		Broadcasting
	18,800	Gestevision Telecinco S.A.		535,367
		Major Banks
	15,331	Banco Bilbao Vizcaya Argentaria, S.A.		369,010
	30,384	Banco Santander Central Hispano S.A.		566,939
				935,949
		Major Telecommunications
	24,938	Telefonica S.A.		530,480
		Total Spain		2,297,987
		Switzerland (2.2%)
		Financial Conglomerates
	10,066	UBS AG (Registered Shares)		611,575

NUMBER OF SHARES			VALUE
		Taiwan (1.8%)
		Semiconductors
	45,113	Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)	$	493,085
		United Kingdom (9.4%)
		Beverages: Alcoholic
	29,900	SABMiller PLC		687,859
		Investment Managers
	64,026	Man Group PLC		655,301
	176,000	RAB Capital PLC		361,820
				1,017,121
		Major Banks
	20,169	Standard Chartered PLC		589,174
		Pharmaceuticals: Other
	16,387	Shire PLC		339,771
		Total United Kingdom		2,633,925
		United States (37.7%)
		Apparel/Footwear
	8,800	Under Armour, Inc. (Class A)*		443,960
		Beverages: Non-Alcoholic
	5,300	PepsiCo, Inc.		331,515
		Biotechnology
	8,611	Amgen Inc.*		588,217
	5,141	Genentech, Inc.*		417,089
	4,700	Gilead Sciences, Inc.*		305,171
				1,310,477
		Broadcasting
	18,500	XM Satellite Radio Holdings Inc. (Class A)*		267,325
		Computer Processing Hardware
	7,965	Apple Computer, Inc.*		675,751
		Data Processing Services
	14,600	Western Union Co.		327,332
		Electric Utilities
	8,000	Constellation Energy Group, Inc.		550,960

See Notes to Financial Statements
104

Morgan Stanley Variable Investment Series - Global Advantage

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Electronic Components
	8,500	Amphenol Corp. (Class A)	$	527,680
		Electronic Equipment/ Instruments
	7,500	Mine Safety Appliances Co.		274,875
		Financial Conglomerates
	5,950	Prudential Financial, Inc.		510,867
		Hospital/Nursing Management
	8,900	United Surgical Partners International, Inc.*		252,315
		Insurance Brokers/Services
	13,500	Willis Group Holdings Ltd.		536,085
		Investment Banks/Brokers
	2,800	Goldman Sachs Group, Inc. (The)		558,180
	4,709	Merrill Lynch & Co., Inc.		438,408
				996,588
		Life/Health Insurance
	9,700	AFLAC, Inc.		446,200
		Media Conglomerates
	32,316	News Corp. (Class A)		694,148
		Medical Specialties
	5,200	Bard (C.R.), Inc.		431,444
	9,800	Thermo Fisher Scientific, Inc.*		443,842
				875,286
		Medical/Nursing Services
	12,900	Matria Healthcare, Inc.*		370,617
		Miscellaneous Commercial Services
	10,700	FTI Consulting Inc.*		298,423
		Real Estate Development
	8,600	CB Richard Ellis Group, Inc. (Class A)*		285,520
		Specialty Stores
	12,640	Staples, Inc.		337,488

NUMBER OF SHARES					VALUE
		Telecommunication Equipment
	11,741	Corning, Inc.*			$	219,674
		Total United States				10,533,086
		Total Common Stocks (Cost $22,998,638)				26,734,434
		Investment Companies (1.9%) United Kingdom (0.9%)
		Investment Trusts/Mutual Funds
	28,800	Hirco PLC*				242,466
		United States (1.0%)
		Investment Trusts/Mutual Funds
	12,200	KKR Private Equity Investors LP (Units)†				278,770
		Total Investment Companies (Cost $585,374)				521,236
PRINCIPAL AMOUNT IN THOUSANDS
		Short-Term Investment (2.6%) Repurchase Agreement
$	730	Joint repurchase agreement account 5.26% due 01/02/07 (dated 12/29/06; proceeds $730,427) (a) (Cost $730,000)				730,000
	Total Investments (Cost $24,314,012) (b)		100.3	%		27,985,670
	Liabilities in Excess of Other Assets		(0.3	)		(78,376	)
	Net Assets		100.0	%	$	27,907,294

See Notes to Financial Statements
105

Morgan Stanley Variable Investment Series - Global Advantage

Portfolio of Investments n December 31, 2006 continued

ADR American Depositary Receipt.

* Non-income producing security.

† Consists of one or more class of securities traded together as a unit; stocks with attached warrants.

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

(b) The aggregate cost for federal income tax purposes is $24,314,126. The aggregate gross unrealized appreciation is $4,754,696 and the aggregate gross unrealized depreciation is $1,083,152, resulting in net unrealized appreciation of $3,671,544.

FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2006:

CONTRACTS TO DELIVER		IN EXCHANGE FOR		DELIVERY DATE	UNREALIZED APPRECIATION
$	122,962	EUR	93,507	01/02/07	$	430
	97,052	EUR	73,686	01/03/07		184
		Total Unrealized Appreciation			$	614

Currency Abbreviation:

EUR Euro.

See Notes to Financial Statements
106

Morgan Stanley Variable Investment Series - Global Advantage

Summary of Investments n December 31, 2006

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Major Banks	$	2,366,289		8.5	%
Financial Conglomerates		1,673,924		6.0
Biotechnology		1,498,600		5.4
Medical Specialties		1,235,640		4.4
Pharmaceuticals: Other		1,038,180		3.7
Investment Managers		1,017,121		3.6
Investment Banks/Brokers		996,588		3.6
Apparel/Footwear Retail		915,838		3.3
Apparel/Footwear		882,497		3.2
Data Processing Services		855,662		3.1
Electronic Components		825,012		2.9
Broadcasting		802,692		2.9
Repurchase Agreement		730,000		2.6
Media Conglomerates		694,148		2.5
Semiconductors		690,588		2.5
Beverages: Alcoholic		687,859		2.5
Computer Processing Hardware		675,751		2.4
Beverages: Non-Alcoholic		632,491		2.3
Electronic Equipment/ Instruments		566,523		2.0
Electric Utilities		550,960		2.0
Insurance Brokers/ Services		536,085		1.9
Major Telecommunications		530,480		1.9
Investment Trusts/Mutual Funds		521,236		1.9
Multi-Line Insurance		503,887		1.8
Wholesale Distributors		454,825		1.6

INDUSTRY	VALUE			PERCENT OF NET ASSETS
Home Building	$	454,006			1.6	%
Life/Health Insurance		446,200			1.6
Marine Shipping		439,223			1.6
Regional Banks		433,794			1.5
Airlines		422,016			1.5
Industrial Machinery		417,647			1.5
Other Consumer Services		377,965			1.3
Medical/Nursing Services		370,617			1.3
Wireless Telecommunications		351,753			1.3
Specialty Stores		337,488			1.2
Miscellaneous Commercial Services		298,423			1.1
Real Estate Development		285,520			1.0
Pharmaceuticals: Generic Drugs		284,669			1.0
Hospital/Nursing Management		252,315			0.9
Finance/Rental/Leasing		249,059			0.9
Food: Specialty/Candy		245,520			0.9
Telecommunication Equipment		219,674			0.8
Agricultural Commodities/ Milling		216,905			0.8
	$	27,985,670	*		100.3	%

* Does not include open foreign currency contracts with unrealized appreciation of $614.

See Notes to Financial Statements
107

Morgan Stanley Variable Investment Series - Aggressive Equity

Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (97.0%)
		Air Freight/Couriers (4.6%)
	32,963	C.H. Robinson Worldwide, Inc.	$	1,347,857
	37,652	Expeditors International of Washington, Inc.		1,524,906
				2,872,763
		Apparel/Footwear Retail (2.6%)
	23,654	Abercrombie & Fitch Co. (Class A)		1,647,028
		Biotechnology (0.5%)
	5,676	Techne Corp.*		314,734
		Broadcasting (3.4%)
	79,314	Grupo Televisa S.A. (ADR) (Mexico)		2,142,271
		Casino/Gaming (2.6%)
	17,284	Wynn Resorts, Ltd.		1,622,103
		Chemicals: Agricultural (5.3%)
	62,810	Monsanto Co.		3,299,409
		Discount Stores (8.0%)
	37,506	Costco Wholesale Corp.		1,982,942
	18,259	Sears Holdings Corp.*		3,066,234
				5,049,176
		Financial Conglomerates (9.0%)
	37,900	American Express Co.		2,299,393
	69,963	Brookfield Asset Management Inc. (Class A) (Canada)		3,370,817
				5,670,210
		Financial Publishing/ Services (3.0%)
	27,168	Moody's Corp.		1,876,222
		Home Building (2.4%)
	25,886	Desarrolladora Homex S.A. de C.V. (ADR) (Mexico)*		1,529,086

NUMBER OF SHARES			VALUE
		Hotels/Resorts/ Cruiselines (3.4%)
	44,324	Marriott International, Inc. (Class A)	$	2,115,141
		Internet Retail (3.1%)
	50,126	Amazon.com, Inc.*		1,977,972
		Internet Software/ Services (9.5%)
	8,086	Google, Inc. (Class A)*		3,723,441
	87,088	Yahoo!, Inc.*		2,224,228
				5,947,669
		Investment Banks/ Brokers (3.2%)
	27,122	Greenhill & Co., Inc.		2,001,604
		Investment Trusts/Mutual Funds (1.0%)
	44,129	Aeroplan Income Fund (Canada)†		641,814
		Medical Specialties (2.8%)
	43,760	Dade Behring Holdings, Inc.		1,742,086
		Miscellaneous Commercial Services (7.0%)
	31,701	Corporate Executive Board Co. (The)		2,780,178
	38,854	Iron Mountain Inc.*		1,606,224
				4,386,402
		Oil & Gas Production (6.2%)
	81,726	Ultra Petroleum Corp. (Canada)*		3,902,417
		Other Consumer Services (5.1%)
	106,454	eBay, Inc.*		3,201,072
		Personnel Services (2.1%)
	28,644	Monster Worldwide, Inc.*		1,335,956
		Property - Casualty Insurers (3.2%)
	547	Berkshire Hathaway, Inc. (Class B)*		2,005,302

See Notes to Financial Statements
108

Morgan Stanley Variable Investment Series - Aggressive Equity

Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES					VALUE
		Restaurants (2.4%)
	44,706	Wendy's International, Inc.			$	1,479,322
		Services to the Health Industry (1.1%)
	9,499	Stericycle, Inc.*				717,175
		Specialty Telecommunications (2.2%)
	42,026	Crown Castle International Corp.*				1,357,440
		Wireless Telecommunications (3.3%)
	45,904	America Movil SAB de C.V. (Series L) (ADR) (Mexico)				2,075,779
		Total Common Stocks (Cost $46,921,772)				60,910,153
PRINCIPAL AMOUNT IN THOUSANDS
		Short-Term Investment (3.6%) Repurchase Agreement
2,256		Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $2,257,320) (a) (Cost $2,256,000)				2,256,000
Total Investments (Cost $49,177,772) (b)			100.6	%		63,166,153
Liabilities In Excess of Other Assets			(0.6	)		(407,421	)
Net Assets			100.0	%	$	62,758,732

ADR American Depositary Receipt.

† Consists of one or more class of securities traded together as a unit; stocks with attached warrants.

* Non-income producing security.

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

(b) The aggregate cost for federal income tax purposes is $49,188,021. The aggregate gross unrealized appreciation is $15,677,032 and the aggregate gross unrealized depreciation is $1,698,900, resulting in net unrealized appreciation of $13,978,132.

FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2006:

CONTRACTS TO DELIVER		IN EXCHANGE FOR		DELIVERY DATE	UNREALIZED DEPRECIATION
$	13,110	CAD	15,202	01/02/07	$	(82	)
	87,251	CAD	101,347	01/03/07		(391	)
Total Unrealized Depreciation					$	(473	)

Currency Abbreviation:

CAD Canadian Dollar.

See Notes to Financial Statements
109

Morgan Stanley Variable Investment Series - Aggressive Equity

Summary of Investments n December 31, 2006

INDUSTRY	VALUE		PERCENT OF NET ASSETS
Internet Software/Services	$	5,947,669		9.5	%
Financial Conglomerates		5,670,210		9.0
Discount Stores		5,049,176		8.0
Miscellaneous Commercial Services		4,386,402		7.0
Oil & Gas Production		3,902,417		6.2
Chemicals: Agricultural		3,299,409		5.3
Other Consumer Services		3,201,072		5.1
Air Freight/Couriers		2,872,763		4.6
Repurchase Agreement		2,256,000		3.6
Broadcasting		2,142,271		3.4
Hotels/Resorts/Cruiselines		2,115,141		3.4
Wireless Telecommunications		2,075,779		3.3
Property - Casualty Insurers		2,005,302		3.2
Investment Banks/Brokers		2,001,604		3.2
Internet Retail		1,977,972		3.1

INDUSTRY	VALUE			PERCENT OF NET ASSETS
Financial Publishing/ Services	$	1,876,222			3.0	%
Medical Specialties		1,742,086			2.8
Apparel/Footwear Retail		1,647,028			2.6
Casino/Gaming		1,622,103			2.6
Home Building		1,529,086			2.4
Restaurants		1,479,322			2.4
Specialty Telecommunications		1,357,440			2.2
Personnel Services		1,335,956			2.1
Services To The Health Industry		717,175			1.1
Investment Trusts/Mutual Funds		641,814			1.0
Biotechnology		314,734			0.5
	$	63,166,153	*		100.6	%

* Does not include open forward foreign currency contracts with unrealized depreciation of $473.

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006

NUMBER OF SHARES			VALUE
		Common Stocks (63.7%)
		Advertising/Marketing Services (1.0%)
	33,580	Omnicom Group, Inc. (c)	$	3,510,453
		Aerospace & Defense (1.8%)
	51,060	Northrop Grumman Corp.		3,456,762
	58,965	Raytheon Co.		3,113,352
				6,570,114
		Agricultural Commodities/Milling (0.6%)
	71,770	Archer-Daniels-Midland Co.		2,293,769
		Beverages: Non-Alcoholic (0.4%)
	32,540	Coca-Cola Co. (The)		1,570,055
		Biotechnology (2.5%)
	61,030	Celgene Corp. (c)*		3,511,056
	40,560	Gilead Sciences, Inc.*		2,633,561
	73,390	Vertex Pharmaceuticals Inc. (c)*		2,746,254
				8,890,871
		Chemicals: Major Diversified (0.6%)
	56,755	Dow Chemical Co. (The)		2,266,795
		Computer Communications (1.1%)
	145,720	Cisco Systems, Inc.*		3,982,528
		Computer Peripherals (0.6%)
	152,865	EMC Corp.*		2,017,818
		Computer Processing Hardware (2.0%)
	37,957	Apple Computer, Inc.*		3,220,272
	157,490	Dell Inc.*		3,951,424
				7,171,696
		Department Stores (0.9%)
	46,265	Kohl's Corp.*		3,165,914
		Discount Stores (0.8%)
	56,525	Costco Wholesale Corp. (c)		2,988,477
		Electrical Products (0.8%)
	67,970	Emerson Electric Co.		2,995,438
		Electronics/Appliances (1.0%)
	84,650	Sony Corp. (ADR) (Japan) (c)		3,625,560
		Environmental Services (1.1%)
	111,110	Waste Management, Inc.		4,085,515
		Financial Conglomerates (4.0%)
	74,105	American Express Co.		4,495,950
	94,895	Citigroup, Inc.		5,285,651
	95,935	JPMorgan Chase & Co.		4,633,660
				14,415,261

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Food: Major Diversified (2.2%)
	79,730	Kellogg Co. (c)	$	3,991,284
	113,045	Kraft Foods Inc. (Class A) (c)		4,035,706
				8,026,990
		Forest Products (1.8%)
	90,470	Weyerhaeuser Co. (c)		6,391,706
		Household/Personal Care (1.0%)
	52,835	Colgate-Palmolive Co.		3,446,955
		Industrial Conglomerates (0.9%)
	82,740	General Electric Co.		3,078,755
		Information Technology Services (1.2%)
	44,647	International Business Machines Corp.		4,337,456
		Integrated Oil (1.9%)
	43,480	Exxon Mobil Corp. (c)		3,331,872
	68,380	Hess Corp.		3,389,597
				6,721,469
		Investment Banks/Brokers (1.4%)
	257,300	Schwab (Charles) Corp. (The) (c)		4,976,182
		Major Banks (2.3%)
	89,400	Bank of America Corp.		4,773,066
	96,785	Wells Fargo & Co.		3,441,675
				8,214,741
		Marine Shipping (0.7%)
	53,355	Tidewater, Inc. (c)		2,580,248
		Media Conglomerates (1.5%)
	89,240	Disney (Walt) Co. (The)		3,058,255
	116,165	Time Warner, Inc. (c)		2,530,074
				5,588,329
		Medical Specialties (3.8%)
	207,190	Applera Corp. - Celera Genomics Group (c)*		2,898,588
	46,705	Bard (C.R.), Inc.		3,875,114
	95,180	St. Jude Medical, Inc.*		3,479,781
	76,305	Thermo Fisher Scientific, Inc.*		3,455,853
				13,709,336
		Motor Vehicles (0.9%)
	82,035	Honda Motor Co., Ltd. (ADR) (Japan)		3,243,664
		Oilfield Services/Equipment (1.2%)
	72,575	Halliburton Co. (c)		2,253,454
	53,460	Smith International, Inc. (c)		2,195,602
				4,449,056

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Other Metals/Minerals (1.0%)
	64,900	Southern Copper Corp. (c)	$	3,497,461
		Packaged Software (3.6%)
	170,220	Microsoft Corp.		5,082,769
	322,235	Oracle Corp.*		5,523,108
	98,560	Sybase, Inc. (c)*		2,434,432
				13,040,309
		Pharmaceuticals: Major (2.4%)
	56,680	Johnson & Johnson		3,742,014
	13,700	Lilly (Eli) & Co.		713,770
	84,615	Wyeth		4,308,596
				8,764,380
		Property - Casualty Insurers (1.3%)
	69,580	Allstate Corp. (The) (Note 4)		4,530,354
		Recreational Products (1.1%)
	168,670	Mattel, Inc. (c)		3,822,062
		Restaurants (0.7%)
	54,770	McDonald's Corp. (c)		2,427,954
		Semiconductors (1.6%)
	163,120	Intel Corp.		3,303,180
	212,794	Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) (Taiwan) (c)		2,325,838
				5,629,018
		Specialty Telecommunications (3.1%)
	372,320	Citizens Communications Co. (c)		5,350,238
	398,105	Windstream Corp.		5,661,053
				11,011,291
		Steel (3.4%)
	84,100	Nucor Corp.		4,596,906
	105,290	United States Steel Corp.		7,700,911
				12,297,817
		Telecommunication Equipment (1.6%)
	138,230	Motorola, Inc.		2,842,009
	152,010	Nokia Corp. (ADR) (Finland)		3,088,843
				5,930,852
		Tobacco (3.2%)
	67,570	Altria Group, Inc.		5,798,857
	99,850	UST, Inc.		5,811,270
				11,610,127

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

NUMBER OF SHARES			VALUE
		Trucks/Construction/Farm Machinery (0.7%)
	40,410	Caterpillar Inc.	$	2,478,345
		Total Common Stocks (Cost $158,273,229)		229,355,121

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE
		Corporate Bonds (5.0%)
		Aerospace & Defense (0.1%)
$	89	Raytheon Co. (c)		6.15	%	11/01/08	90,178
	275	Systems 2001 Asset Trust - 144A** (Cayman Islands)		6.664		09/15/13	288,134
							378,312
		Air Freight/Couriers (0.0%)
	140	FedEx Corp.		2.65		04/01/07	139,058
		Airlines (0.1%)
	341	America West Airlines, Inc. (Series 01-1)		7.10		04/02/21	360,590
		Beverages: Alcoholic (0.1%)
	205	FBG Finance Ltd. - 144A** (Australia)		5.125		06/15/15	194,114
	195	Miller Brewing Co. - 144A**		4.25		08/15/08	191,622
							385,736
		Cable/Satellite TV (0.1%)
	110	Comcast Cable Communications, Inc.		6.75		01/30/11	115,359
	25	Comcast Corp.		7.625		02/15/08	25,590
	160	TCI Communications, Inc.		7.875		02/15/26	183,192
							324,141
		Chemicals: Major Diversified (0.0%)
	105	ICI Wilmington Inc.		4.375		12/01/08	103,071
		Computer Processing Hardware (0.1%)
	180	Hewlett-Packard Co.		5.496	††	05/22/09	180,405
		Department Stores (0.1%)
	275	May Department Stores Co.		5.95		11/01/08	276,985
	175	May Department Stores Co. (c)		6.70		07/15/34	173,151
							450,136
		Drugstore Chains (0.1%)
	290	CVS Corp. - 144A**		6.036		12/10/28	289,677
	55	CVS Corp.		5.75		08/15/11	55,717
							345,394

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Electric Utilities (0.5%)
$	195	Ameren Corp.		4.263	%	05/15/07	$	194,003
	210	Arizona Public Service Co.		5.80		06/30/14		209,834
	185	Carolina Power & Light Co.		5.125		09/15/13		182,128
	225	CC Funding Trust I		6.90		02/16/07		225,279
	65	Consolidated Natural Gas Co. (Series C)		6.25		11/01/11		67,204
	125	Consumers Energy Co.		4.80		02/17/09		123,423
	90	Detroit Edison Co. (The)		6.125		10/01/10		92,085
	85	Entergy Gulf States, Inc.		3.60		06/01/08		82,783
	130	Entergy Gulf States, Inc.		5.769	††	12/01/09		129,823
	170	Ohio Power Company - IBC (Series K)		6.00		06/01/16		174,872
	45	Panhandle Eastern Pipe Line Co. (Series B)		2.75		03/15/07		44,736
	125	Public Service Electric & Gas Co. (Series B)		5.00		01/01/13		122,513
	100	Texas Eastern Transmission, LP		7.00		07/15/32		112,624
	145	Wisconsin Electric Power Co.		3.50		12/01/07		142,655
								1,903,962
		Electrical Products (0.1%)
	215	Cooper Industries, Inc.		5.25		07/01/07		214,366
	175	Cooper Industries, Inc.		5.25		11/15/12		173,447
								387,813
		Electronics/Appliances (0.0%)
	130	LG Electronics Inc. - 144A** (South Korea)		5.00		06/17/10		127,524
		Finance/Rental/Leasing (0.4%)
	125	CIT Group Inc. (c)		4.75		08/15/08		123,986
	260	Countrywide Home Loans, Inc. (Series L) (c)		3.25		05/21/08		252,845
	255	MBNA Corp. (Series F)		5.798	††	05/05/08		256,662
	260	Nationwide Building Society - 144A** (United Kingdom)		4.25		02/01/10		252,069
	355	Residential Capital Corp.		6.375		06/30/10		359,409
	170	SLM Corp. (c)		4.00		01/15/10		164,087
								1,409,058
		Financial Conglomerates (0.1%)
	295	Chase Manhattan Corp.		6.00		02/15/09		298,464
	125	General Electric Capital Corp. (Series A)		4.25		12/01/10		121,050
								419,514
		Food Retail (0.0%)
	150	Fred Meyer, Inc. (c)		7.45		03/01/08		153,289

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Food: Major Diversified (0.1%)
$	65	ConAgra Foods, Inc.		7.00	%	10/01/28	$	70,623
	90	ConAgra Foods, Inc.		8.25		09/15/30		110,858
	110	Sara Lee Corp. (c)		6.125		11/01/32		99,836
								281,317
		Gas Distributors (0.1%)
	130	NiSource Finance Corp.		5.94	††	11/23/09		130,142
	125	Sempra Energy		4.621		05/17/07		124,534
								254,676
		Home Furnishings (0.0%)
	115	Mohawk Industries, Inc. (Series D)		7.20		04/15/12		119,578
		Home Improvement Chains (0.0%)
	85	Home Depot Inc.		5.486		12/16/09		85,063
		Hotels/Resorts/Cruiselines (0.1%)
	170	Hyatt Equities LLC - 144A**		6.875		06/15/07		170,725
		Household/Personal Care (0.1%)
	240	Clorox Co. (The)		5.485	††	12/14/07		240,325
		Industrial Conglomerates (0.1%)
	135	Textron Financial Corp.		4.125		03/03/08		133,142
	160	Textron Financial Corp.		5.125		02/03/11		158,961
								292,103
		Insurance Brokers/Services (0.1%)
	375	Farmers Exchange Capital - 144A**		7.05		07/15/28		392,425
		Major Banks (0.5%)
	75	Bank of New York Co., Inc. (The)		5.20		07/01/07		74,997
	115	HSBC Finance Corp.		6.75		05/15/11		121,824
	125	Popular North America Inc. (Series F)		5.65		04/15/09		125,361
	360	Unicredit Luxembourg Finance S.A. - 144A**		5.426		10/24/08		360,176
	295	USB Capital IX		6.189	††	‡		301,561
	895	Wachovia Capital Trust III		5.80	††	‡		903,220
								1,887,139
		Major Telecommunications (0.3%)
	210	France Telecom S.A. (France) (c)		8.50		03/01/31		276,491
	125	SBC Communications, Inc.		6.15		09/15/34		123,350
	60	Sprint Capital Corp.		8.75		03/15/32		72,421
	110	Telecom Italia Capital SA (Luxembourg)		4.00		11/15/08		107,171
	165	Telecom Italia Capital SA (Luxembourg)		4.00		01/15/10		157,667
	200	Telefonica Europe BV (Netherlands)		8.25		09/15/30		238,961
								976,061

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Managed Health Care (0.0%)
$	40	WellPoint Inc.		3.75	%	12/14/07	$	39,378
		Media Conglomerates (0.2%)
	325	Time Warner, Inc.		5.606		11/13/09		325,468
	190	Viacom, Inc.		6.875		04/30/36		188,436
								513,904
		Motor Vehicles (0.0%)
	100	DaimlerChrysler North American Holdings Co. (c)		8.50		01/18/31		119,378
		Multi-Line Insurance (0.4%)
	490	AIG SunAmerica Global Financing VI - 144A**		6.30		05/10/11		510,406
	250	American General Finance Corp. (Series H)		4.625		09/01/10		244,173
	325	AXA Financial, Inc.		6.50		04/01/08		329,007
	45	International Lease Finance Corp. (c)		3.75		08/01/07		44,570
	225	Two-Rock Pass Through - 144A** (Bahamas)		6.316	††	‡‡		221,675
								1,349,831
		Oil & Gas Pipelines (0.0%)
	170	Plains All American Pipeline. L.P. (c)		6.70		05/15/36		175,436
		Other Metals/Minerals (0.1%)
	185	Brascan Corp. (Canada)		7.125		06/15/12		197,334
		Property - Casualty Insurers (0.3%)
	300	Mantis Reef Ltd. - 144A** (Australia)		4.692		11/14/08		296,278
	85	Platinum Underwriters Finance Inc. (Series B)		7.50		06/01/17		89,802
	150	Platinum Underwriters Holdings, Ltd. (Series B) (Bermuda)		6.371		11/16/07		149,099
	210	St. Paul Travelers Companies, Inc. (The)		5.01		08/16/07		209,228
	260	XLLIAC Global Funding - 144A**		4.80		08/10/10		255,019
								999,426
		Railroads (0.1%)
	105	Burlington North Santa Fe Railway Co.		6.125		03/15/09		106,712
	120	Norfolk Southern Corp.		7.35		05/15/07		120,842
	45	Union Pacific Corp.		6.625		02/01/08		45,534
	60	Union Pacific Corp. (Series E)		6.79		11/09/07		60,590
								333,678
		Real Estate Development (0.1%)
	444	World Financial Properties - 144A**		6.91		09/01/13		464,417
		Real Estate Investment Trusts (0.1%)
	260	EOP Operating LP		6.763		06/15/07		261,709
		Regional Banks (0.1%)
	300	Marshall & Ilsley Bank (Series T)		3.80		02/08/08		295,325

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Restaurants (0.0%)
$	105	Tricon Global Restaurants, Inc.		8.875	%	04/15/11	$	117,892
		Savings Banks (0.2%)
	170	Household Finance Corp.		4.125		12/15/08		166,701
	95	Household Finance Corp. (c)		5.875		02/01/09		96,410
	75	Household Finance Corp.		6.375		10/15/11		78,507
	75	Household Finance Corp.		6.40		06/17/08		76,175
	100	Sovereign Bank (Series CD)		4.00		02/01/08		98,582
	165	Washington Mutual Bank		5.50		01/15/13		164,529
	120	Washington Mutual Inc.		8.25		04/01/10		129,348
								810,252
		Trucks/Construction/Farm Machinery (0.1%)
	55	Caterpillar Financial Services Corp. (Series F)		3.625		11/15/07		54,209
	220	Caterpillar Financial Services Corp. (Series F)		5.445	††	08/20/07		220,228
								274,437
		Wireless Telecommunications (0.1%)
	195	Vodafone Group PLC (United Kingdom)		5.454	††	12/28/07		195,150
		Total Corporate Bonds (Cost $17,849,425)						17,914,962
		U.S. Government Obligations (c) (6.4%)
		U.S.Treasury Bonds
	3,850			6.125		08/15/29		4,500,893
	200			6.375		08/15/27		238,047
	2,875			8.125		08/15/19		3,757,041
	3,250			8.125		08/15/21		4,338,496
		U.S. Treasury Notes
	1,400			3.125		05/15/07		1,390,595
	500			4.00		11/15/12		482,910
	4,800			4.25		11/15/13		4,674,754
	2,080	†		4.25		08/15/13		2,028,572
	1,800	†		4.50		02/28/11		1,787,413
		Total U.S. Government Obligations (Cost $22,899,913)						23,198,721
		U.S. Government Agency-Mortgage-Backed Securities (3.9%)
		Federal Home Loan Mortgage Corp.
	73,227			7.50		01/01/30 - 04/01/31		76,157
		Federal Home Loan Mortgage Corp. PC Gold
	4,269			6.50		05/01/29 - 12/01/31		4,375
	196			8.00		01/01/30 - 12/01/30		206,335

See Notes to Financial Statements
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Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Federal National Mortgage Assoc.
$	3,154			6.50	%	11/01/29	$	3,237
	1,832			7.00		10/01/27 - 10/01/35		1,884,119
	450			7.00		#		461,953
	1,021			7.50		08/01/29 -09/01/35		1,063,883
	749			8.00		11/01/29 -06/01/31		790,672
		Federal National Mortgage Assoc. ARM
	197			5.96		07/01/33		199,900
	788			6.731		03/01/36		805,078
	1,411			6.774		01/01/36		1,440,539
	1,331			6.778		01/01/36		1,359,054
	657			6.786		03/01/36		670,361
	753			7.216		05/01/36		770,011
	753			7.219		05/01/36		769,975
	452			7.237		07/01/36		462,084
	1,571			7.246		04/01/36 - 07/01/36		1,605,905
	1,354			7.271		04/01/36		1,392,473
		Total U.S. Government Agency-Mortgage-Backed Securities (Cost $14,090,441)						13,966,111
		Asset-Backed Securities (3.6%)
		Finance/Rental/Leasing
	500	Banc of America Securities Auto Trust 2005-WF1 A3		3.99		08/18/09		496,007
	525	Capital Auto Receivables Asset Trust 2006-2 A3A		4.98		05/15/11		522,580
	425	Capital Auto Receivables Asset Trust 2006-SNIA A3		5.31		10/20/09		425,306
	90	Capital Auto Receivables Asset Trust 2003-3 A3B		5.40	††	01/15/08		89,680
	500	Capital Auto Receivables Asset Trust 2005-1 A4		4.05		07/15/09		496,820
	275	Capital One Auto Finance Trust 2006-C A3A		5.07		07/15/11		274,652
	347	Caterpillar Financial Asset Trust 2005-A A3		3.90		02/25/09		345,005
	475	Caterpillar Financial Asset Trust 2006-A A3		5.57		05/25/10		478,175
	375	CIT Equipment Collateral 2006-VT2 A3		5.07		02/20/10		374,518
	77	CIT Equipment Collateral 2004-EF1 A3		3.50		09/20/08		75,954
	305	CNH Equipment Trust 2005-A A3		4.02		04/15/09		303,104
	317	DaimlerChrysler Auto Trust 2005-B A3		4.04		09/08/09		314,882
	227	Ford Credit Auto Owner Trust 2005-B A3		4.17		01/15/09		225,820
	300	Ford Credit Auto Owner Trust 2006-A A3		5.05		03/15/10		299,367
	400	GE Capital Credit Card Master Note Trust 2004-2 A		5.39	††	09/15/10		400,438
	475	GS Auto Loan Trust 2006-1 A3		5.37		12/15/10		476,413
	200	Harley Davidson Motorcycle Trust 2005-3 A2		4.41		06/15/12		197,978
	600	Harley-Davidson Motorcycle Trust 2005-1 A2		3.76		12/17/12		590,800
	350	Harley-Davidson Motorcycle Trust 2005-2 A2		4.07		02/15/12		344,104

See Notes to Financial Statements
119

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Portfolio of Investments n December 31, 2006 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
$	300	Hertz Vehicle Financing LLC 2005-2A A2 - 144A**		4.93	%	02/25/10	$	298,424
	198	Honda Auto Receivables Owner Trust 2005-2 A3		3.93		01/15/09		197,140
	414	Honda Auto Receivables Owner Trust 2005-3 A3		3.87		04/20/09		410,798
	400	Honda Auto Receivables Owner Trust 2005-6 A3		4.85		10/19/09		398,647
	300	Hyundai Auto Receivables Trust 2005-A A3		3.98		11/16/09		296,868
	575	MBNA Credit Card Master Note Trust 2003-A3 A3		5.489	††	08/16/10		576,348
	525	Merrill Auto Trust Securitization 2005-1 A3		4.10		08/25/09		521,265
	375	National City Auto Receivables Trust 2004-A A4		2.88		05/15/11		368,167
	483	Nissan Auto Receivables Owner Trust 2005-B A3		3.99		07/15/09		479,618
	125	TXU Electric Delivery Transition Bond Co. LLC 2004-1 A2		4.81		11/17/14		124,002
	650	USAA Auto Owner Trust 2004-2 A-4		3.58		02/15/11		642,037
	251	USAA Auto Owner Trust 2004-3 A3		3.16		02/17/09		248,973
	255	USAA Auto Owner Trust 2005-1 A3		3.90		07/15/09		253,425
	216	Volkswagen Auto Lease Trust 2005-A A3		3.82		05/20/08		215,531
	350	Volkswagen Auto Loan Enhanced Trust 2005-1 A3		4.80		07/20/09		348,930
	78	Wachovia Auto Owner Trust 2004-B A3		2.91		04/20/09		77,676
	232	Wachovia Auto Owner Trust 2005-A A3		4.06		09/21/09		230,505
	400	Wachovia Auto Owner Trust 2005-B A3		4.79		04/20/10		398,372
	62	World Omni Auto Receivables Trust 2004-A A3		3.29		11/12/08		62,023
		Total Asset-Backed Securities (Cost $12,941,305)						12,880,352
		Collateralized Mortgage Obligations (1.2%)
	685	Federal National Mortgage Assoc. 2006 - 28 1A1		5.46	††	03/25/36		684,654
	730	Federal National Mortgage Assoc. 2006 - 118 A2		5.41		12/25/36		728,737
	7,982	Federal National Mortgage Assoc. 2006 - 28 1P (IO)		1.519	††	03/25/36		188,318
	1,004	Federal National Mortgage Assoc. 2005 - 68 XI (IO)		6.00		08/25/35		324,536
	398	Freddie Mac Whole Loan 2005-5001 2A2		5.50	††	09/25/45		400,316
	500	Greenpoint Financial Corp.		5.52		01/25/46		500,000
	348	Harborview Mortgage Loan Trust 2006 - 10 2A1A		5.50		11/19/36		348,050
	487	Harborview Mortgage Loan Trust 2006 - 8 2A1B		5.57		08/21/46		487,729
	725	Residential Accredited Loans, Inc.		5.50		02/25/46		725,000
		Total Collateralized Mortgage Obligations (Cost $4,233,708)						4,387,340

See Notes to Financial Statements
120

Morgan Stanley Variable Investment Series - Strategist

Portfolio of Investments n December 31, 2006 continued

NUMBER OF CONTRACTS			COUPON RATE			MATURITY DATE			VALUE
		Put Option Purchased (0.0%)
	188	90 day Euro $ June/2007 @ $94.25 (Cost $59,897)							$	3,760
PRINCIPAL AMOUNT IN THOUSANDS
		Short-Term Investments (34.9%)
		U.S. Government Obligation (a) (0.0%)
$	100	U.S. Treasury Bill*** (Cost $99,858)		5.09	%	01/11/07				99,858
		Repurchase Agreement (17.2%)
	62,043	Joint repurchase agreement account (dated 12/29/06; proceeds $62,079,295) (b) (Cost $62,043,000)		5.265		01/02/07				62,043,000
		Security Purchased From Securities Lending Collateral (17.7%)
	63,574	The Bank of New York Institutional Cash Reserve Fund (Cost $63,573,985)								63,573,985
		Total Short-Term Investments (Cost $125,716,843)								125,716,843
		Total Investments (Cost $356,064,761) (d)(e)					118.7	%		427,423,210
		Liabilities in Excess of Other Assets					(18.7	)		(67,381,226	)
		Net Assets					100.0	%	$	360,041,984

ADR American Depositary Receipt.

ARM Adjustable Rate Mortgage.

IO Interest Only Security.

PC Participation Certificate.

* Non-income producing security.

** Resale is restricted to qualified institutional investors.

*** A portion of this security has been physically segregated in connection with open futures contracts in an amount equal to $46,959.

‡ Securities represent beneficial interest in the Trusts. The corresponding assets of Trust are Junior Subordinated notes due 2042 and a stock purchase contract to purchase preferred stock on March 15, 2011 for Wachovia Capital Trust III and on April 15, 2011 for UBS Captal IX. Securities issued have a perpetual maturity and the trust will redeem them only to the extent the preferred stock is redeemed.

‡‡ Foreign issued with perpetual maturity.

† Security was purchased on a forward commitment basis.

See Notes to Financial Statements
121

Morgan Stanley Variable Investment Series - Strategist

Portfolio of Investments n December 31, 2006 continued

†† Variable rate security; rate shown is the rate in effect at December 31, 2006.

# 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.

(a) Purchased on a discount basis. The interest rate shown has been adjusted to reflect a money market equivalent yield.

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

(c) All or a portion of this security was on loan as of December 31, 2006.

(d) Securities have been designated as collateral in a amount equal to $16,757,657 in connection with securities purchased on a forward commitment basis and open futures contracts.

(e) The aggregate cost for federal income tax purposes is $356,777,006. The aggregate gross unrealized appreciation is $74,842,785 and the aggregate gross unrealized depreciation is $4,196,581, resulting in net unrealized appreciation of $70,646,204.

FUTURES CONTRACTS OPEN AT DECEMBER 31, 2006:

NUMBER OF CONTRACTS		LONG/SHORT	DESCRIPTION, DELIVERY MONTH, AND YEAR	UNDERLYING FACE AMOUNT AT VALUE			UNREALIZED APPRECIATION (DEPRECIATION)
	35	Long	U.S. Treasury Notes 10 Year, March 2007	$	3,761,406		$	(28,619	)
	31	Long	U.S. Treasury Notes 5 Year, March 2007		3,256,938			(17,124	)
	22	Long	U.S. Treasury Bonds 20 Year, March 2007		2,451,625			(40,334	)
	14	Short	U.S. Treasury Notes 2 Year, March 2007		(2,856,438	)		11,775
	Net Unrealized Depreciation						$	(74,302	)

See Notes to Financial Statements
122

Morgan Stanley Variable Investment Series - Strategist

Portfolio of Investments n December 31, 2006 continued

CREDIT DEFAULT SWAP CONTRACTS OPEN AT DECEMBER 31, 2006:

SWAP COUNTERPARTY & REFERENCE OBLIGATION	BUY/SELL PROTECTION	NOTIONAL AMOUNT (000'S)		PAY/RECEIVE FIXED RATE		TERMINATION DATE			UNREALIZED APPRECIATION (DEPRECIATION)
Goldman Sachs International Hartford Financial Services Group Inc.	Buy	$	350		0.12	%	D	ecember 20, 2011	$	(80	)
Goldman Sachs International Lehman Brothers Holdings Inc.	Buy		350		0.20	December 20, 2011				308
Goldman Sachs International Southwest Airlines Co.	Buy		370		0.22	December 20, 2011				1,915
Goldman Sachs International Motorola, Inc.	Buy		120		0.15	December 20, 2011				(14	)
Goldman Sachs International Motorola, Inc.	Buy		240		0.157	December 20, 2011				(101	)
Goldman Sachs International Union Pacific Corporation	Buy		350		0.20	December 20, 2011				90
Net Unrealized Appreciation									$	2,118

SUMMARY OF INVESTMENTS PORTFOLIO COMPOSITION*	MARKET VALUE		PERCENT OF MARKET VALUE
Common Stocks	$	229,355,121		53.7	%
Short-Term Investments		125,716,843		29.4
U.S. Government Agencies and Obligations		37,164,832		8.7
Corporate Bonds		17,914,962		4.2
Asset-Backed Securities		12,880,352		3.0
Collateralized Mortgage Obligations		4,387,340		1.0
Put Option Purchased		3,760		0.0
TOTAL INVESTMENTS	$	427,423,210		100	%

* Does not include outstanding long futures contracts with an underlying face amount of $9,469,969 with unrealized depreciation of $86,077, outstanding short futures contracts with an underlying face amount of $2,856,438 with unrealized appreciation of $11,775, and open swap contracts with net unrealized appreciation of $2,118.

See Notes to Financial Statements
123

Morgan Stanley Variable Investment Series

Financial Statements

Statements of Assets and Liabilities
For the year ended December 31, 2006

	Money Market		Limited Duration			Income Plus			High Yield			Utilities
Assets:
Investments in securities, at value*	$	233,606,787	$	149,986,288		$	394,100,534		$	68,530,082	††	$	222,164,045	††
Investments in affiliates**		—		680,734			—			—			—
Cash		3,965		7,371			—			864			591
Receivable for:
Investments sold		—		—			—			—			226,832
Shares of beneficial interest sold		1,354,262		292,398			1,873,889			63,727			27,272
Dividends		—		—			—			—			351,162
Interest		1,014,518		905,155			4,599,372			1,136,115			1,837
Foreign withholding taxes reclaimed		—		—			—			—			—
Principal paydowns		—		95,871			—			—			—
Unrealized appreciation on open forward foreign currency contracts		—		—			—			—			—
Unrealized appreciation on open swap contracts		—		2,071			25,142			—			—
Prepaid expenses and other assets		5,747		50,576			11,834			14,267			5,512
Total Assets		235,985,279		152,020,464			400,610,771			69,745,055			222,777,251
Liabilities:
Collateral on securities loaned at value		—		—			—			10,885,634			45,091,044
Payable for:
Investments purchased		—		2,856,994			5,779,843			—			393,017
Shares of beneficial interest redeemed		827,859		165,302			149,306			98,063			109,941
Variation margin		—		12,610			72,655			—			—
Distribution fee (Class Y)		20,469		24,508			44,418			6,540			7,308
Investment advisory fee		84,947		38,150			140,306			20,974			86,242
Administration fee		9,439		10,173			26,725			3,995			12,104
Periodic payment on swap contracts		—		29			5,187			—			—
Transfer agent fee		500		500			500			500			500
Unrealized depreciation on open swap contracts		—		—			35,511			—			—
Unrealized depreciation on open forward foreign currency contracts		—		—			—			18,567			—
Accrued expenses and other payables		56,054		47,693			81,773			39,254			51,045
Total Liabilities		999,268		3,155,959			6,336,224			11,073,527			45,751,201
Net Assets	$	234,986,011	$	148,864,505		$	394,274,547		$	58,671,528		$	177,026,050
Composition of Net Assets:
Paid-in-capital	$	234,985,822	$	160,772,318		$	409,667,644		$	373,075,338		$	81,031,537
Accumulated undistributed net investment income (loss)		189		(771,515	)		(1,572,551	)		146,531			11,005
Accumulated undistributed net realized gain (loss)		—		(9,663,434	)		(16,282,502	)		(256,618,011	)		16,235,051
Net unrealized appreciation (depreciation)		—		(1,472,864	)		2,461,956			(57,932,330	)		79,748,457
Net Assets	$	234,986,011	$	148,864,505		$	394,274,547		$	58,671,528		$	177,026,050
* Cost	$	233,606,787	$	151,397,321		$	390,946,681	‡	$	126,444,310		$	142,415,588
Class X Shares:
Net Assets	$	132,690,202	$	34,046,575		$	183,593,819		$	27,907,124		$	142,721,042
Shares Outstanding (unlimited authorized shares of $.01 par value)		132,690,084		3,588,028			17,468,406			24,016,616			7,340,836
Net Asset Value Per Share	$	1.00	$	9.49		$	10.51		$	1.16		$	19.44
Class Y Shares:
Net Assets	$	102,295,809	$	114,817,930		$	210,680,728		$	30,764,404		$	34,305,008
Shares Outstanding (unlimited authorized shares of $.01 par value)		102,295,737		12,117,159			20,076,779			26,444,862			1,765,505
Net Asset Value Per Share	$	1.00	$	9.48		$	10.49		$	1.16		$	19.43

† Includes foreign currency at value of $1,228 and $109, with cost of $1,236 and $109, respectively.

** Cost of $691,012, $1,100,000, and $24,236,841, respectively.

†† Includes securites loaned at value $10,442,200, $47,134,968 and $9,891,729 respectively.

‡ Including repurchase agreements of $101,856,503.

See Notes to Financial Statements
124

	Income Builder			Dividend Growth			Global Dividend Growth			European Equity			Equity
Assets:
Investments in securities, at value*	$	79,053,187		$	576,657,803		$	240,487,620		$	197,941,903	††	$	487,992,583
Investments in affiliates**		1,345,520			27,045,596			—			—			—
Cash		388			602			18,294	†		466	†		1,690
Receivable for:
Investments sold		—			8,000,636			—			—			—
Shares of beneficial interest sold		197			12,771			92,938			8,799			76,277
Dividends		80,957			570,648			306,905			88,496			79,612
Interest		293,785			14,296			2,175			715			9,449
Foreign withholding taxes reclaimed		—			75,620			20,100			108,694			—
Principal paydowns		—			—			—			—			—
Unrealized appreciation on open forward foreign currency contracts		—			—			—			267			—
Unrealized appreciation on open swap contracts		—			—			—			—			—
Prepaid expenses and other assets		6,045			57,621			5,529			5,017			28,450
Total Assets		80,780,079			612,435,593			240,933,561			198,154,357			488,188,061
Liabilities:
Collateral on securities loaned at value		—			—			—			10,238,511			—
Payable for:
Investments purchased		—			3,083,081			—			—			2,394,121
Shares of beneficial interest redeemed		123,232			356,642			88,710			56,634			1,018,088
Variation margin		—			—			—			—			—
Distribution fee (Class Y)		9,653			29,208			15,714			9,598			24,606
Investment advisory fee		45,896			245,234			136,110			123,924			175,769
Administration fee		5,480			41,656			16,252			12,668			33,480
Periodic payment on swap contracts		—			—			—			—			—
Transfer agent fee		500			500			500			500			500
Unrealized depreciation on open swap contracts		—			—			—			—			—
Unrealized depreciation on open forward foreign currency contracts		—			—			—			—			3,892
Accrued expenses and other payables		29,158			88,466			63,547			75,257			72,940
Total Liabilities		213,919			3,844,787			320,833			10,517,092			3,723,396
Net Assets	$	80,566,160		$	608,590,806		$	240,612,728		$	187,637,265		$	484,464,665
Composition of Net Assets:
Paid-in-capital	$	63,741,295		$	719,589,990		$	137,360,893		$	138,184,173		$	811,151,669
Accumulated undistributed net investment income (loss)		(280,431	)		26,650			4,192,294			2,883,752			10,361
Accumulated undistributed net realized gain (loss)		4,169,685			(193,520,915	)		22,299,045			(2,478,004	)		(397,674,014	)
Net unrealized appreciation (depreciation)		12,935,611			82,495,081			76,760,496			49,047,344			70,976,649
Net Assets	$	80,566,160		$	608,590,806		$	240,612,728		$	187,637,265		$	484,464,665
* Cost	$	66,363,096		$	496,971,477		$	163,733,077		$	148,901,970		$	417,016,984
Class X Shares:
Net Assets	$	35,195,063		$	471,930,424		$	165,863,516		$	142,000,196		$	370,757,380
Shares Outstanding (unlimited authorized shares of $.01 par value)		2,589,232			28,542,143			9,313,599			5,602,967			12,513,907
Net Asset Value Per Share	$	13.59		$	16.53		$	17.81		$	25.34		$	29.63
Class Y Shares:
Net Assets	$	45,371,097		$	136,660,382		$	74,749,212		$	45,637,069		$	113,707,285
Shares Outstanding (unlimited authorized shares of $.01 par value)		3,345,870			8,276,777			4,233,865			1,811,658			3,863,036
Net Asset Value Per Share	$	13.56		$	16.51		$	17.66		$	25.19		$	29.43

125

Morgan Stanley Variable Investment Series

Financial Statements continued

Statements of Assets and Liabilities continued
For the year ended December 31, 2006

	S&P 500 Index			Global Advantage			Aggressive Equity			Strategist
Assets:
Investments in securities, at value*	$	252,437,075		$	27,985,670		$	63,166,153		$	422,892,856	††
Investments in affiliates**		9,094,710			—			—			4,530,354
Cash		420			160,409	†		299			174
Receivable for:
Investments sold		40,665			—			—			460,755
Shares of beneficial interest sold		71,130			—			—			132,965
Dividends		358,834			22,932			10,519			382,709
Interest		1,806			320			990			757,158
Foreign withholding taxes reclaimed		—			12,098			—			—
Unrealized appreciation on open forward foreign currency contracts		—			614			—			—
Unrealized appreciation on open swap contracts		—			—			—			2,313
Prepaid expenses and other assets		16,515			1,713			3,939			21,627
Total Assets		262,021,155			28,183,756			63,181,900			429,180,911
Liabilities:
Collateral on securities loaned at value		—			—			—			63,573,985
Payable for:
Investments purchased		—			220,671			302,892			5,201,400
Shares of beneficial interest redeemed		427,098			8,011			43,936			107,980
Variation margin		17,345			—			—			7,281
Distribution fee (Class Y)		37,877			2,288			6,887			21,702
Investment advisory fee		26,977			13,564			36,247			129,182
Administration fee		17,985			1,904			4,328			24,606
Periodic payments on open swap contracts		—			—			—			128
Transfer agent fee		500			500			500			500
Unrealized depreciation on swap contracts		—			—			—			195
Unrealized depreciation on open forward foreign currency contracts		—			—			473			—
Accrued expenses and other payables		65,332			29,524			27,905			71,968
Total Liabilities		593,114			276,462			423,168			69,138,927
Net Assets	$	261,428,041		$	27,907,294		$	62,758,732		$	360,041,984
Composition of Net Assets:
Paid-in-capital	$	223,832,650		$	42,677,343		$	88,348,631		$	252,476,116
Accumulated undistributed net investment income (loss)		4,022,059			211,182			(1,194	)		(410,525	)
Accumulated undistributed net realized gain (loss)		(43,261,120	)		(18,654,300	)		(39,577,219	)		36,690,128
Net unrealized appreciation		76,834,452			3,673,069			13,988,514			71,286,265
Net Assets	$	261,428,041		$	27,907,294		$	62,758,732		$	360,041,984
* Cost	$	179,457,643		$	24,314,012		$	49,177,772		$	354,279,340
Class X Shares:
Net Assets	$	84,545,075		$	17,140,521		$	30,719,833		$	258,164,266
Shares Outstanding (unlimited authorized shares of $.01 par value)		6,495,369			1,673,396			2,068,277			15,616,154
Net Asset Value Per Share	$	13.02		$	10.24		$	14.85		$	16.53
Class Y Shares:
Net Assets	$	176,882,966		$	10,766,773		$	32,038,899		$	101,877,718
Shares Outstanding (unlimited authorized shares of $.01 par value)		13,693,420			1,056,851			2,186,727			6,171,093
Net Asset Value Per Share	$	12.92		$	10.19		$	14.65		$	16.51

† Includes foreign currency at value of $159,432, with cost of $157,446.

** Cost of $5,249,011, and $1,785,421, respectively.

†† Includes securites loaned at value of $61,570,134.

See Notes to Financial Statements
126

Morgan Stanley Variable Investment Series

Financial Statements continued

Statements of Operations
For the year ended December 31, 2006

	Money Market		Limited Duration			Income Plus			High Yield
Investment Income:
Income
Interest	$	12,477,802	$	7,386,669		$	22,430,238		$	4,848,673
Interest and dividends from affiliates		—		44,119			—			—
Income from securities loaned - net		—		—			—			3,204
Dividends		—		—			—			59,182
Total Income		12,477,802		7,430,788			22,430,238			4,911,059
Expenses
Investment advisory fee		1,104,147		478,998			1,709,889			266,762
Administration fee		122,829		127,733			325,693			50,812
Distribution fee (Class Y shares)		259,103		303,128			510,970			81,454
Transfer agent fees and expenses		500		500			500			500
Shareholder reports and notices		35,890		33,247			71,563			25,814
Professional fees		36,529		43,730			44,417			230,561
Trustees' fees and expenses		4,575		3,002			7,772			1,214
Custodian fees		24,748		34,772			62,062			8,031
Other		17,754		28,831			38,795			19,407
Total Expenses		1,606,075		1,053,941			2,771,661			684,555
Less: amounts waived/reimbursed		—		—			—			—
Net Expenses		1,606,075		1,053,941			2,771,661			684,555
Net Investment Income		10,871,727		6,376,847			19,658,577			4,226,504
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments		—		(433,978	)		5,338,973			(5,738,004	)
Investments in affiliates		—		—			—			—
Futures contracts		—		(102,490	)		1,688,234			—
Option contracts		—		5,466			—			—
Swap contracts		—		(112	)		(39,805	)		—
Foreign exchange transactions		—		—			19,387			(2,703	)
Net Realized Gain (Loss)		—		(531,114	)		7,006,789			(5,740,707	)
Net Change in Unrealized Appreciation/Depreciation on:
Investments		—		535,866			(4,795,689	)		7,206,677
Investments in affiliates		—		10,677			—			—
Futures contracts		—		(18,832	)		(1,022,567	)		—
Swap contracts		—		2,071			(10,369	)		—
Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies		—		—			916			(22,635	)
Net Appreciation (Depreciation)		—		529,782			(5,827,709	)		7,184,042
Net Gain (Loss)		—		(1,332	)		1,179,080			1,443,335
Net Increase	$	10,871,727	$	6,375,515		$	20,837,657		$	5,669,839

See Notes to Financial Statements
127

Morgan Stanley Variable Investment Series

Financial Statements continued

Statements of Operations continued
For the year ended December 31, 2006

	Utilities			Income Builder			Dividend Growth			Global Dividend Growth			European Equity
Investment Income:
Income
Interest	$	169,836		$	1,195,585		$	1,053,029		$	248,674		$	80,068
Interest and dividends from affiliates		—			70,125			647,333			—			—
Income from securities loaned - net		5,656			—			—			—			14,491
Dividends		4,727,099	*		1,408,941	*		11,112,851	*		6,110,242	*		4,712,966	*
Total Income		4,902,591			2,674,651			12,813,213			6,358,916			4,807,525
Expenses
Investment advisory fee		1,010,931			550,292			3,053,714			1,618,175			1,612,985
Administration fee		141,885			65,707			522,136			193,215			148,320
Distribution fee (Class Y shares)		82,226			112,901			344,042			178,033			105,574
Transfer agent fees and expenses		500			500			500			500			500
Shareholder reports and notices		30,865			15,634			100,865			45,219			42,184
Professional fees		41,238			25,741			40,578			42,882			41,131
Trustees' fees and expenses		3,324			1,495			12,924			4,488			3,434
Custodian fees		17,432			14,456			44,333			69,448			109,042
Other		15,146			8,232			48,276			26,454			24,363
Total Expenses		1,343,547			794,958			4,167,368			2,178,414			2,087,533
Less: amounts waived/reimbursed		—			—			—			—			(127,905	)
Net Expenses		1,343,547			794,958			4,167,368			2,178,414			1,959,628
Net Investment Income (Loss)		3,559,044			1,879,693			8,645,845			4,180,502			2,847,897
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments		20,592,662			5,190,820			154,627,176			22,816,103			36,558,812
Investments in affiliates		—			—			4,060,358			—			—
Futures contracts		—			—			—			—			—
Option contracts		—			—			—			—			—
Swap contracts		—			—			—			—			—
Foreign exchange transactions		—			(1,365	)		(13,823	)		61,979			37,941
Capital gain distribution received		—			—			—			—			—
Net Realized Gain (Loss)		20,592,662			5,189,455			158,673,711			22,878,082			36,596,753
Net Change in Unrealized Appreciation/Depreciation on:
Investments		8,312,994			3,488,129			(100,529,632	)		20,241,327			9,363,755
Investments in affiliates		—			133,320			(645,687	)		—			—
Futures contracts		—			—			—			—			—
Swap contract		—			—			—			—			—
Option contracts		—			—			—			—			—
Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies		—			—			—			15,422			20,114
Net Appreciation (Depreciation)		8,312,994			3,621,449			(101,175,319	)		20,256,749			9,383,869
Net Gain		28,905,656			8,810,904			57,498,392			43,134,831			45,980,622
Net Increase	$	32,464,700		$	10,690,597		$	66,144,237		$	47,315,333		$	48,828,519

* Net of foreign withholding tax of $17,940, $31,809, $60,019, $330,531, $525,460, $63,635, $32,749, $6,677 and $51,614, respectively.

See Notes to Financial Statements
128

	Equity			S&P 500 Index			Global Advantage			Aggressive Equity			Strategist
Investment Income:
Income
Interest	$	569,138		$	154,641		$	38,417		$	60,152		$	6,715,921
Interest and dividends from affiliates					275,771			—			—			91,448
Income from securities loaned - net		—			—			—			—			26,657
Dividends		2,624,645	*		4,802,880			442,851	*		321,990	*		4,642,686	*
Total Income		3,193,783			5,233,292			481,268			382,142			11,476,712
Expenses
Investment advisory fee		2,253,672			321,756			161,406			439,029			1,563,826
Administration fee		429,271			214,504			22,653			52,421			297,871
Distribution fee (Class Y shares)		294,731			437,022			26,369			79,135			249,669
Transfer agent fees and expenses		500			500			500			500			500
Shareholder reports and notices		80,938			44,594			18,052			21,657			54,191
Professional fees		37,522			25,796			30,348			25,928			47,276
Trustees' fees and expenses		10,378			4,949			527			1,181			6,956
Custodian fees		36,675			86,461			21,490			13,095			52,720
Other		36,548			47,203			11,604			6,379			37,334
Total Expenses		3,180,235			1,182,785			292,949			639,325			2,310,343
Less: amounts waived/reimbursed		—			—			—			—			—
Net Expenses		3,180,235			1,182,785			292,949			639,325			2,310,343
Net Investment Income (Loss)		13,548			4,050,507			188,319			(257,183	)		9,166,369
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments		105,577,906			(5,023,929	)		3,763,061			5,755,254			37,511,626
Investments in affiliates		—			192,501			25,162			—			—
Futures contracts		—			180,482			—			—			67,833
Option contracts		—			—			—			—			9,132
Swap contracts		—			—			—			—			(205	)
Foreign exchange transactions		4,685			—			55,738			853			—
Capital gain distribution received		—			1,380			—			—			—
Net Realized Gain (Loss)		105,582,591			(4,649,566	)		3,843,961			5,756,107			37,588,386
Net Change in Unrealized Appreciation/Depreciation on:
Investments		(87,241,496	)		36,999,880			743,680			(702,899	)		4,523,101
Investments in affiliates		—			1,445,886			—			—			719,298
Futures contracts		—			45,876			—			—			(87,663	)
Swap contract		—			—			—			—			2,118
Option contracts		—			—			—			—			(56,137	)
Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies		1,050			—			2,277			133			—
Net Appreciation (Depreciation)		(87,240,446	)		38,491,642			745,957			(702,766	)		5,100,717
Net Gain		18,342,145			33,842,076			4,589,918			5,053,341			42,689,103
Net Increase	$	18,355,693		$	37,892,583		$	4,778,237		$	4,796,158		$	51,855,472

129

Morgan Stanley Variable Investment Series

Financial Statements continued

Statements of Changes in Net Assets

	Money Market						Limited Duration						Income Plus
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	10,871,727		$	6,682,122		$	6,376,847		$	5,217,069		$	19,658,577		$	21,002,765
Net realized gain (loss)		—			—			(531,114	)		(468,420	)		7,006,789			12,520,337
Net change in unrealized appreciation/depreciation		—			—			529,782			(1,888,326	)		(5,827,709	)		(19,192,968	)
Net Increase		10,871,727			6,682,122			6,375,515			2,860,323			20,837,657			14,330,134
Dividends and Distributions to Shareholders from:
Net investment income
Class X Shares		(6,425,257	)		(4,328,127	)		(1,792,986	)		(1,854,147	)		(10,526,033	)		(13,561,436	)
Class Y Shares		(4,446,503	)		(2,353,861	)		(5,393,378	)		(4,660,246	)		(10,245,949	)		(9,072,366	)
Net realized gain
Class X Shares		—			—			—			—			—			—
Class Y Shares		—			—			—			—			—			—
Total Dividends and Distributions		(10,871,760	)		(6,681,988	)		(7,186,364	)		(6,514,393	)		(20,771,982	)		(22,633,802	)
Net decrease from transactions in shares of beneficial interest		(7,302,059	)		(26,228,771	)		(19,216,585	)		(6,001,684	)		(39,015,940	)		(30,770,936	)
Total Decrease		(7,302,092	)		(26,228,637	)		(20,027,434	)		(9,655,754	)		(38,950,265	)		(39,074,604	)
Net Assets:
Beginning of period		242,288,103			268,516,740			168,891,939			178,547,693			433,224,812			472,299,416
End of Period	$	234,986,011		$	242,288,103		$	148,864,505		$	168,891,939		$	394,274,547		$	433,224,812
Accumulated Undistributed Net Investment Income (Loss)	$	189		$	222		$	(771,515	)	$	(1,650,839	)	$	(1,572,551	)	$	(1,611,848	)

See Notes to Financial Statements
130

	High Yield						Utilities
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	4,226,504		$	5,248,269		$	3,559,044		$	4,471,414
Net realized gain (loss)		(5,740,707	)		(15,872,694	)		20,592,662			27,792,726
Net change in unrealized appreciation/depreciation		7,184,042			11,785,380			8,312,994			(5,137,320	)
Net Increase		5,669,839			1,160,955			32,464,700			27,126,820
Dividends and Distributions to Shareholders from:
Net investment income
Class X Shares		(2,186,136	)		(2,938,838	)		(2,967,100	)		(3,771,455	)
Class Y Shares		(2,227,621	)		(2,642,462	)		(602,490	)		(694,016	)
Net realized gain
Class X Shares		—			—			—			—
Class Y Shares		—			—			—			—
Total Dividends and Distributions		(4,413,757	)		(5,581,300	)		(3,569,590	)		(4,465,471	)
Net decrease from transactions in shares of beneficial interest		(13,360,805	)		(13,340,144	)		(39,349,557	)		(33,617,391	)
Total Decrease		(12,104,723	)		(17,760,489	)		(10,454,447	)		(10,956,042	)
Net Assets:
Beginning of period		70,776,251			88,536,740			187,480,497			198,436,539
End of Period	$	58,671,528		$	70,776,251		$	177,026,050		$	187,480,497
Accumulated Undistributed Net Investment Income (Loss)	$	146,531		$	290,279		$	11,005		$	4,791

131

Morgan Stanley Variable Investment Series

Financial Statements continued

Statements of Changes in Net Assets continued

	Income Builder						Dividend Growth						Global Dividend Growth
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)	$	1,879,693		$	2,139,794		$	8,645,845		$	9,895,310		$	4,180,502		$	4,802,022
Net realized gain		5,189,455			7,726,364			158,673,711			74,155,589			22,878,082			15,808,787
Net change in unrealized appreciation/depreciation		3,621,449			(3,879,798	)		(101,175,319	)		(44,392,543	)		20,256,749			(4,922,978	)
Net Increase		10,690,597			5,986,360			66,144,237			39,658,356			47,315,333			15,687,831
Dividends and Distributions to Shareholders from:
Net investment income
Class X Shares		(967,031	)		(1,168,913	)		(7,037,672	)		(8,350,791	)		(3,431,090	)		(3,212,516	)
Class Y Shares		(1,084,514	)		(1,161,891	)		(1,568,570	)		(1,526,671	)		(1,269,031	)		(1,016,465	)
Net realized gain
Class X Shares		—			—			—			—			(2,186,354	)		—
Class Y Shares		—			—			—			—			(919,279	)		—
Total Dividends and Distributions		(2,051,545	)		(2,330,804	)		(8,606,242	)		(9,877,462	)		(7,805,754	)		(4,228,981	)
Net decrease from transactions in shares of beneficial interest		(13,552,202	)		(15,794,785	)		(174,783,350	)		(181,522,284	)		(51,495,097	)		(40,218,030	)
Total Increase (Decrease)		(4,913,150	)		(12,139,229	)		(117,245,355	)		(151,741,390	)		(11,985,518	)		(28,759,180	)
Net Assets:
Beginning of period		85,479,310			97,618,539			725,836,161			877,577,551			252,598,246			281,357,426
End of Period	$	80,566,160		$	85,479,310		$	608,590,806		$	725,836,161		$	240,612,728		$	252,598,246
Accumulated Undistributed Net Investment Income (Loss)	$	(280,431	)	$	(466,676	)	$	26,650		$	870		$	4,192,294		$	4,649,934

See Notes to Financial Statements
132

	European Equity						Equity
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)	$	2,847,897		$	3,018,083		$	13,548		$	(203,837	)
Net realized gain		36,596,753			23,642,426			105,582,591			41,261,475
Net change in unrealized appreciation/depreciation		9,383,869			(11,551,334	)		(87,240,446	)		56,144,603
Net Increase		48,828,519			15,109,175			18,355,693			97,202,241
Dividends and Distributions to Shareholders from:
Net investment income
Class X Shares		(2,468,499	)		(1,892,105	)		—			—
Class Y Shares		(635,684	)		(395,805	)		—			—
Net realized gain
Class X Shares		—			—			—			—
Class Y Shares		—			—			—			—
Total Dividends and Distributions		(3,104,183	)		(2,287,910	)		—			—
Net decrease from transactions in shares of beneficial interest		(42,459,254	)		(49,465,088	)		(143,355,879	)		(140,564,177	)
Total Increase (Decrease)		3,265,082			(36,643,823	)		(125,000,186	)		(43,361,936	)
Net Assets:
Beginning of period		184,372,183			221,016,006			609,464,851			652,826,787
End of Period	$	187,637,265		$	184,372,183		$	484,464,665		$	609,464,851
Accumulated Undistributed Net Investment Income (Loss)	$	2,883,752		$	3,102,097		$	10,361		$	(7,872	)

133

Morgan Stanley Variable Investment Series

Financial Statements continued

Statements of Changes in Net Assets continued

	S&P 500 Index						Global Advantage
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)	$	4,050,507		$	4,056,542		$	188,319		$	317,398
Net realized gain (loss)		(4,649,566	)		(13,220,131	)		3,843,961			1,937,264
Net change in unrealized appreciation/depreciation		38,491,642			21,006,259			745,957			(387,081	)
Net Increase		37,892,583			11,842,670			4,778,237			1,867,581
Dividends and Distributions to Shareholders from:
Net investment income
Class X Shares		(1,518,687	)		(1,907,197	)		(141,736	)		(59,993	)
Class Y Shares		(2,500,973	)		(2,393,740	)		(58,622	)		(5,014	)
Net realized gain
Class X Shares		—			—			—			—
Class Y Shares		—			—			—			—
Total Dividends and Distributions		(4,019,660	)		(4,300,937	)		(200,358	)		(65,007	)
Net decrease from transactions in shares of beneficial interest		(48,888,393	)		(28,127,212	)		(6,514,946	)		(6,610,422	)
Total Increase (Decrease)		(15,015,470	)		(20,585,479	)		(1,937,067	)		(4,807,848	)
Net Assets:
Beginning of period		276,443,511			297,028,990			29,844,361			34,652,209
End of Period	$	261,428,041		$	276,443,511		$	27,907,294		$	29,844,361
Accumulated Undistributed Net Investment Income (Loss)	$	4,022,059		$	4,034,510		$	211,182		$	167,483

See Notes to Financial Statements
134

	Aggressive Equity						Strategist
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)	$	(257,183	)	$	(251,276	)	$	9,166,369		$	7,263,945
Net realized gain (loss)		5,756,107			8,161,466			37,588,386			30,088,438
Net change in unrealized appreciation/depreciation		(702,766	)		4,920,951			5,100,717			(5,714,488	)
Net Increase		4,796,158			12,831,141			51,855,472			31,637,895
Dividends and Distributions to Shareholders from:
Net investment income
Class X Shares		—			—			(7,035,514	)		(6,055,946	)
Class Y Shares		—			—			(2,401,634	)		(1,698,757	)
Net realized gain
Class X Shares		—			—			(21,363,709	)		(27,439,402	)
Class Y Shares		—			—			(7,921,211	)		(8,632,691	)
Total Dividends and Distributions		—			—			(38,722,068	)		(43,826,796	)
Net decrease from transactions in shares of beneficial interest		(9,450,216	)		(11,558,651	)		(41,033,345	)		(44,249,741	)
Total Increase (Decrease)		(4,654,058	)		1,272,490			(27,899,941	)		(56,438,642	)
Net Assets:
Beginning of period		67,412,790			66,140,300			387,941,925			444,380,567
End of Period	$	62,758,732		$	67,412,790		$	360,041,984		$	387,941,925
Accumulated Undistributed Net Investment Income (Loss)	$	(1,194	)	$	(1,104	)	$	(410,525	)	$	(315,447	)

135

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						Limited Duration						Income Plus
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Class X Shares
Shares
Sold		109,246,644			248,779,404			665,672			1,375,764			1,343,320			4,705,113
Reinvestment of dividends and distributions		6,425,257			4,328,127			188,884			192,830			1,019,274			1,280,455
Redeemed		(127,333,937	)		(287,355,141	)		(1,762,052	)		(2,493,195	)		(7,329,366	)		(11,282,428	)
Net Decrease - Class X		(11,662,036	)		(34,247,610	)		(907,496	)		(924,601	)		(4,966,772	)		(5,296,860	)
Amount
Sold	$	109,246,644		$	248,779,404		$	6,329,126		$	13,268,966		$	13,895,567		$	50,009,352
Reinvestment of dividends and distributions		6,425,257			4,328,127			1,792,986			1,854,147			10,526,033			13,561,436
Redeemed		(127,333,937	)		(287,355,141	)		(16,752,031	)		(24,038,563	)		(75,585,703	)		(119,766,664	)
Net Decrease - Class X	$	(11,662,036	)	$	(34,247,610	)	$	(8,629,919	)	$	(8,915,450	)	$	(51,164,103	)	$	(56,195,876	)
Class Y Shares
Shares
Sold		76,887,209			92,195,390			1,629,699			3,904,285			3,964,215			8,294,112
Reinvestment of dividends and distributions		4,446,503			2,353,861			569,030			485,479			993,332			858,464
Redeemed		(76,973,735	)		(86,530,412	)		(3,313,425	)		(4,088,244	)		(3,787,698	)		(6,749,152	)
Net Increase (Decrease) - Class Y		4,359,977			8,018,839			(1,114,696	)		301,520			1,169,849			2,403,424
Amount
Sold	$	76,887,209		$	92,195,390		$	15,487,495		$	37,530,317		$	40,971,454		$	87,345,587
Reinvestment of dividends and distributions		4,446,503			2,353,861			5,393,378			4,660,246			10,245,949			9,072,366
Redeemed		(76,973,735	)		(86,530,412	)		(31,467,539	)		(39,276,797	)		(39,069,240	)		(70,993,013	)
Net Increase (Decrease) - Class Y	$	4,359,977		$	8,018,839		$	(10,586,666	)	$	2,913,766		$	12,148,163		$	25,424,940

See Notes to Financial Statements
136

	High Yield						Utilities
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Class X Shares
Shares
Sold		1,952,259			13,496,739			586,135			1,335,907
Reinvestment of dividends and distributions		1,912,342			2,532,976			168,646			233,505
Redeemed		(10,783,191	)		(25,804,416	)		(2,772,944	)		(3,624,937	)
Net Decrease - Class X		(6,918,590	)		(9,774,701	)		(2,018,163	)		(2,055,525	)
Amount
Sold	$	2,235,982		$	15,776,348		$	10,237,686		$	21,469,598
Reinvestment of dividends and distributions		2,186,136			2,938,838			2,967,100			3,771,455
Redeemed		(12,343,831	)		(30,174,500	)		(48,359,557	)		(57,867,442	)
Net Decrease - Class X	$	(7,921,713	)	$	(11,459,314	)	$	(35,154,771	)	$	(32,626,389	)
Class Y Shares
Shares
Sold		1,457,028			3,906,738			140,360			470,184
Reinvestment of dividends and distributions		1,945,922			2,278,324			34,212			42,933
Redeemed		(8,143,950	)		(7,824,487	)		(414,489	)		(564,833	)
Net Increase (Decrease) - Class Y		(4,741,000	)		(1,639,425	)		(239,917	)		(51,716	)
Amount
Sold	$	1,672,591		$	4,567,041		$	2,414,602		$	7,317,741
Reinvestment of dividends and distributions		2,227,621			2,642,462			602,490			694,016
Redeemed		(9,339,304	)		(9,090,333	)		(7,211,878	)		(9,002,759	)
Net Increase (Decrease) - Class Y	$	(5,439,092	)	$	(1,880,830	)	$	(4,194,786	)	$	(991,002	)

137

Morgan Stanley Variable Investment Series

Financial Statements continued

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

	Income Builder						Dividend Growth						Global Dividend Growth
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Class X Shares
Shares
Sold		357,728			629,177			1,779,979			4,008,324			827,891			1,618,860
Reinvestment of dividends and distributions		75,653			98,176			454,831			575,026			365,957			228,486
Redeemed		(1,080,550	)		(1,676,474	)		(12,284,130	)		(16,961,611	)		(3,879,861	)		(4,639,595	)
Net Decrease - Class X		(647,169	)		(949,121	)		(10,049,320	)		(12,378,261	)		(2,686,013	)		(2,792,249	)
Amount
Sold	$	4,519,054		$	7,494,743		$	27,526,029		$	58,096,231		$	13,309,522		$	23,506,784
Reinvestment of dividends and distributions		967,031			1,168,913			7,037,672			8,350,791			5,617,444			3,212,516
Redeemed		(13,695,332	)		(19,992,904	)		(189,968,236	)		(245,771,557	)		(62,256,793	)		(67,321,070	)
Net Decrease - Class X	$	(8,209,247	)	$	(11,329,248	)	$	(155,404,535	)	$	(179,324,535	)	$	(43,329,827	)	$	(40,601,770	)
Class Y Shares
Shares
Sold		363,909			582,980			536,789			1,726,250			448,676			1,031,618
Reinvestment of dividends and distributions		84,940			97,773			101,496			105,128			143,590			72,813
Redeemed		(868,154	)		(1,056,647	)		(1,890,964	)		(1,971,609	)		(1,101,133	)		(1,069,507	)
Net Increase (Decrease) - Class Y		(419,305	)		(375,894	)		(1,252,679	)		(140,231	)		(508,867	)		34,924
Amount
Sold	$	4,612,483		$	6,854,269		$	8,270,594		$	24,773,295		$	7,221,398		$	14,785,462
Reinvestment of dividends and distributions		1,084,514			1,161,891			1,568,570			1,526,671			2,188,310			1,016,465
Redeemed		(11,039,952	)		(12,481,697	)		(29,217,979	)		(28,497,715	)		(17,574,978	)		(15,418,187	)
Net Increase (Decrease) - Class Y	$	(5,342,955	)	$	(4,465,537	)	$	(19,378,815	)	$	(2,197,749	)	$	(8,165,270	)	$	383,740

See Notes to Financial Statements
138

	European Equity						Equity
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Class X Shares
Shares
Sold		416,488			958,531			757,873			1,880,891
Reinvestment of dividends and distributions		113,651			106,537			—			—
Redeemed		(2,241,650	)		(3,423,101	)		(5,310,192	)		(7,127,359	)
Net Decrease - Class X		(1,711,511	)		(2,358,033	)		(4,552,319	)		(5,246,468	)
Amount
Sold	$	9,269,376		$	17,855,271		$	21,489,639		$	47,036,045
Reinvestment of dividends and distributions		2,468,499			1,892,105			—			—
Redeemed		(50,025,518	)		(63,569,633	)		(150,535,011	)		(176,395,272	)
Net Decrease - Class X	$	(38,287,643	)	$	(43,822,257	)	$	(129,045,372	)	$	(129,359,227	)
Class Y Shares
Shares
Sold		157,955			159,375			440,434			739,898
Reinvestment of dividends and distributions		29,416			22,400			—			—
Redeemed		(375,571	)		(486,799	)		(945,510	)		(1,187,566	)
Net Increase (Decrease) - Class Y		(188,200	)		(305,024	)		(505,076	)		(447,668	)
Amount
Sold	$	3,520,364		$	2,935,315		$	12,444,856		$	18,309,719
Reinvestment of dividends and distributions		635,684			395,805			—			—
Redeemed		(8,327,659	)		(8,973,951	)		(26,755,363	)		(29,514,669	)
Net Increase (Decrease) - Class Y	$	(4,171,611	)	$	(5,642,831	)	$	(14,310,507	)	$	(11,204,950	)

139

Morgan Stanley Variable Investment Series

Financial Statements continued

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

	S&P 500 Index						Global Advantage
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Class X Shares
Shares
Sold		642,185			1,671,512			170,833			358,007
Reinvestment of dividends and distributions		131,374			175,779			15,908			7,556
Redeemed		(3,343,367	)		(4,538,402	)		(720,544	)		(1,045,383	)
Net Decrease - Class X		(2,569,808	)		(2,691,111	)		(533,803	)		(679,820	)
Amount
Sold	$	7,714,656		$	18,550,567		$	1,568,635		$	2,941,752
Reinvestment of dividends and distributions		1,518,687			1,907,197			141,736			59,993
Redeemed		(40,271,797	)		(50,287,505	)		(6,669,546	)		(8,548,051	)
Net Decrease - Class X	$	(31,038,454	)	$	(29,829,741	)	$	(4,959,175	)	$	(5,546,306	)
Class Y Shares
Shares
Sold		1,577,433			4,166,002			68,199			92,468
Reinvestment of dividends and distributions		217,665			222,054			6,609			635
Redeemed		(3,268,404	)		(4,238,508	)		(243,567	)		(223,229	)
Net Increase (Decrease) - Class Y		(1,473,306	)		149,548			(168,759	)		(130,126	)
Amount
Sold	$	18,740,921		$	45,558,498		$	626,138		$	748,504
Reinvestment of dividends and distributions		2,500,973			2,393,740			58,622			5,014
Redeemed		(39,091,833	)		(46,249,709	)		(2,240,531	)		(1,817,634	)
Net Increase (Decrease) - Class Y	$	(17,849,939	)	$	1,702,529		$	(1,555,771	)	$	(1,064,116	)

See Notes to Financial Statements
140

	Aggressive Equity						Strategist
	For The Year Ended December 31, 2006			For The Year Ended December 31, 2005			For The Year Ended December 31, 2006			For The Year Ended December 31, 2005
Class X Shares
Shares
Sold		314,499			826,424			1,002,717			1,913,234
Reinvestment of dividends and distributions		—			—			1,826,116			2,189,787
Redeemed		(943,211	)		(1,558,559	)		(5,270,272	)		(6,845,272	)
Net Decrease - Class X		(628,712	)		(732,135	)		(2,441,439	)		(2,742,251	)
Amount
Sold	$	4,474,299		$	9,603,368		$	16,261,262		$	30,623,256
Reinvestment of dividends and distributions		—			—			28,399,223			33,495,348
Redeemed		(13,406,950	)		(17,983,235	)		(86,096,128	)		(110,014,244	)
Net Decrease - Class X	$	(8,932,651	)	$	(8,379,867	)	$	(41,435,643	)	$	(45,895,640	)
Class Y Shares
Shares
Sold		379,729			287,858			667,001			897,997
Reinvestment of dividends and distributions		—			—			665,111			676,749
Redeemed		(417,328	)		(570,455	)		(1,277,578	)		(1,439,668	)
Net Increase (Decrease) - Class Y		(37,599	)		(282,597	)		54,534			135,078
Amount
Sold	$	5,309,981		$	3,324,353		$	10,938,732		$	14,293,901
Reinvestment of dividends and distributions		—			—			10,322,845			10,331,448
Redeemed		(5,827,546	)		(6,503,137	)		(20,859,279	)		(22,979,450	)
Net Increase (Decrease) - Class Y	$	(517,565	)	$	(3,178,784	)	$	402,298		$	1,645,899

141

Morgan Stanley Variable Investment Series

Notes to Financial Statements n December 31, 2006

1. Organization and Accounting Policies

Morgan Stanley Variable Investment Series (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund is offered exclusively to life insurance companies in connection with particular life insurance and/or annuity contracts they offer.

The Fund, organized on February 25, 1983 as a Massachusetts business trust, consists of fourteen Portfolios ("Portfolios") which commenced operations as follows:

PORTFOLIO

COMMENCEMENT OF
OPERATIONS

PORTFOLIO

COMMENCEMENT OF
OPERATIONS

Money Market

March 9, 1984

Global Dividend Growth

February 23, 1994

Limited Duration

May 4, 1999

European Equity

March 1, 1991

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

Global Advantage

May 18, 1998

Income Builder

January 21, 1997

Aggressive Equity

May 4, 1999

Dividend Growth

March 1, 1990

Strategist

March 1, 1987

On June 5, 2000, the Fund commenced offering one additional class of shares (Class Y shares). The two classes are identical except that Class Y shares incur distribution expenses. Class X shares are generally available to holders of contracts offered by Metropolitan Life Insurance Company and other contracts offered before May 1, 2000. Class Y shares are available to holders of contracts offered on or after June 5, 2000.

The investment objectives of each Portfolio are as follows:

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

Limited Duration				Seeks to provide a high level of current income consistent with the preservation of capital.

Income Plus				Seeks, as its primary objective, to provide a high level of current income and, as a secondary objective, capital appreciation, but only when consistent with its primary objective.

High Yield				Seeks, as its primary objective, to provide a high level of current income and, as a secondary objective, capital appreciation, but only when consistent with its primary objective.

Utilities				Seeks both capital appreciation and current income .

Income Builder				Seeks, as its primary objective, to earn reasonable income and, as a secondary objective, growth of capital.

142

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Notes to Financial Statements n December 31, 2006 continued

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

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

European Equity				Seeks to maximize the capital appreciation of its investments.

Equity				Seeks, as its primary objective, growth of capital and, as a secondary objective, income, but only when consistent with its primary objective.

S&P 500 Index				Seeks to provide investment results that, before expenses, correspond to the total return of the Standard & Poor's 500^® Composite Stock Price Index.

Global Advantage				Seeks long-term capital growth.

Aggressive Equity				Seeks long-term capital growth.

Strategist				Seeks a high total investment return.

The following is a summary of significant accounting policies:

A. Valuation of Investments — Money Market: Portfolio securities are valued at amortized cost which approximates market value, in accordance with Rule 2a-7 under the Act. All remaining Portfolios: (1) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange, or other exchange is valued at its latest sale price, prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) credit default swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statements of Operations; (5) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (6) 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; (7) futures are valued at the latest price published by the commodities exchange on which they trade; (8) when market quotations are not readily available, Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") (and/or, in the case of Global

143

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Notes to Financial Statements n December 31, 2006 continued

Dividend Growth and European Equity, Morgan Stanley Investment Management Limited, (the "Sub Adviser")) determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuation of such securities are determined (that is, close of the foreign market on which the securities trade ) and the close of business on the NYSE. If developments occur during such periods that are expected to materially affect the value of such securities, such valuation may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund's Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the Trustees of the Fund; (9) certain of the Fund's portfolio securities may be valued by an outside pricing service approved by the Trustees and; (10) 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. Repurchase Agreements — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Adviser, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest.

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

144

Morgan Stanley Variable Investment Series

Notes to Financial Statements n December 31, 2006 continued

E. Options — When the Fund writes a call or put option, an amount equal to the premium received is included in the Fund's Statement of Assets and Liabilities as a liability which is subsequently marked-to-market to reflect the current market value of the option written. If a written option either expires or the Fund enters into a closing purchase transaction, the Fund realizes a gain or loss without regard to any unrealized gain or loss on the underlying security or currency and the liability related to such option is extinguished. If a written call option is exercised, the Fund realizes a gain or loss from the sale of the underlying security and or currency and the proceeds from such sale are increased by the premium originally received.

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

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

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

145

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Notes to Financial Statements n December 31, 2006 continued

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

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

Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in high-quality short-term investments. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent.

PORTFOLIO	VALUE OF LOANED SECURITIES		VALUE OF COLLATERAL CASH			VALUE OF COLLATERAL NON-CASH⁽²⁾
High Yield	$	10,442,200	$	10,885,634	⁽¹⁾		—
Utilities		47,134,968		45,091,044	⁽¹⁾	$	3,788,911
European Equity		9,891,729		10,238,511			—
Strategist		61,570,134		63,573,985	⁽¹⁾		371,772

⁽¹⁾ The Portfolios received cash collateral which was subsequently invested in the Bank of New York Institutional Cash Reserve Fund as reported in the Portfolios of Investments.

⁽²⁾ Collateral was received in the form of U.S. Government Obligations, which the Portfolios cannot sell or repledge and accordingly, are not reflected in the Portfolios of Investments.

The Portfolios have the right under the lending agreement to recover the securities from the borrower on demand.

I. Credit Default Swaps — A credit default swap is an agreement between two parties to exchange the credit risk of an issuer. The Fund may purchase credit protection on the referenced obligation of the credit default swap ("Buy Contract"), or provide credit protection on the referenced obligation of the credit default swap ("Sale Contract"). A buyer of a credit default swap is said to buy protection by paying periodic fees in

146

Morgan Stanley Variable Investment Series

Notes to Financial Statements n December 31, 2006 continued

return for a contingent payment from the seller if the issuer has a credit event such as bankruptcy, failure to pay outstanding obligations or deteriorating credit while the swap is outstanding. A seller of a credit default swap is said to sell protection and thus collect the periodic fees and profits if the credit of the issuer remains stable or improves while the swap is outstanding. If a credit event occurs, the seller pays to the buyer the maximum payout amount limited to the Notional Amount of the swap contract as disclosed in the table following the Portfolio of Investments. During the term of the swap agreement, the Fund receives or pays periodic fixed payments from or to the respective counterparty calculated at the agreed upon interest rate applied to the Notional Amount. These periodic payments are accrued daily and recorded as realized gains or losses in the Statements of Operations. In addition, upon termination of the swap contract, gains and losses are also realized. Any upfront payment received or paid by the Fund is recorded as assets/liabilities on the Fund's books.

J. Federal Income Tax Policy — 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 substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required.

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

L. 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.

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

2. Investment Advisory/Administration and Sub-Advisory Agreements

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

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

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daily net assets exceeding $1.25 billion but not exceeding $1.5 billion and 0.275% to the portion of the daily net assets in excess of $1.5 billion.

Limited Duration — 0.30%.

Income Plus — 0.42% to the portion of the daily net assets not exceeding $500 million; 0.35% to the portion of the daily net assets exceeding $500 million but not exceeding $1.25 billion and 0.22% to the portion of the daily net assets in excess of $1.25 billion.

High Yield — 0.42% to the portion of the daily net assets not exceeding $500 million; 0.345% to the portion of the daily net assets exceeding $500 million but not exceeding $750 million; 0.295% to the portion of the daily net assets exceeding $750 million but not exceeding $1 billion; 0.27% to the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.245% to the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion and 0.22% to the portion of the daily net assets in excess of $3 billion.

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

Income Builder — 0.67% to the portion of the daily net assets not exceeding $500 million and 0.645% to the portion of the daily net assets in excess of $500 million.

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

Global Dividend Growth — 0.67% to the portion of the daily net assets not exceeding $1 billion; 0.645% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.62% to the portion of the daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.595% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.57% to the portion of the daily net assets exceeding $3.5 billion but not exceeding $4.5 billion and 0.545% to the portion of the daily net assets in excess of $4.5 billion

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European Equity — 0.87% to the portion of the daily net assets not exceeding $500 million; 0.82% to the portion of the daily net assets exceeding $500 million but not exceeding $2 billion; 0.77% to the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion and 0.745% to the portion of the daily net assets in excess of $3 billion.

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

S&P 500 Index — 0.12% to the portion of the daily net assets not exceeding $2 billion and 0.10% to the portion of the daily net assets in excess of $2 billion.

Global Advantage — 0.57% to the portion of the daily net assets not exceeding $1.5 billion and 0.545% to the portion of the daily net assets in excess of $1.5 billion.

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

Strategist — 0.42% to the portion of the daily net assets not exceeding $1.5 billion and 0.395% to the portion of the daily net assets in excess of $1.5 billion.

Under the Sub-Advisory Agreements between the Investment Adviser and the Sub-Adviser, the Sub-Adviser provides Global Dividend Growth and European Equity with investment advice and portfolio management relating to the Portfolios' investments in securities, subject to the overall supervision of the Investment Adviser. As compensation for its services provided pursuant to the Sub-Advisory Agreements, the Investment Adviser paid the Sub-Adviser compensation in the amounts of $758,332 and $696,348, respectively, for the year ended December 31, 2006.

The Investment Adviser has agreed to cap European Equity and S&P 500 Index's operating expenses (except for distribution fees) by assuming the Portfolio's "other expenses" and/or waiving the Portfolio's advisory fees, and Morgan Stanley Services Company Inc. (the "Administrator") has agreed to waive the Portfolio's administrative fees, to the extent such operating expenses exceed 1.00% and 0.40%, respectively, of the average daily net assets of the Portfolio on an annualized basis.

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

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Adviser, Administrator and Sub-Adviser. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. Under the Plan, Class Y shares of each Portfolio bear a distribution fee which is accrued daily and paid monthly at the annual rate of 0.25% of the average daily net assets of the class.

4. Security Transactions and Transactions with Affiliates

Purchases and sales/prepayments/maturities of portfolio securities, excluding short-term investments (except Money Market), for the year ended December 31, 2006 were as follows:

	U.S. GOVERNMENT SECURITIES				OTHER
	PURCHASES		SALES/PREPAYMENTS/ MATURITIES		PURCHASES		SALES/PREPAYMENTS/ MATURITIES
Money Market	$	31,510,337	$	30,537,385	$	3,199,315,528	$	3,218,901,576
Limited Duration		15,950,862		33,535,995		63,078,880		59,943,101
Income Plus		38,455,319		46,641,386		84,839,579		164,514,892
High Yield		—		—		14,035,333		26,986,932
Utilities		425,182		416,587		32,771,729		72,225,523
Income Builder		—		—		15,330,243		27,477,186
Dividend Growth		—		—		720,519,521		914,892,353
Global Dividend Growth		—		—		56,883,755		110,118,061
European Equity		—		—		114,415,578		157,367,296
Equity		—		—		583,596,576		735,682,950
S&P 500 Index		—		—		9,674,346		57,383,336
Global Advantage		—		—		26,257,173		32,732,927
Aggressive Equity		—		—		37,852,234		47,655,779
Strategist		34,224,754		44,305,039		77,497,932		152,528,323

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The following Portfolios had transactions with the following affiliates of the Fund:

PORTFOLIO	ISSUER	PURCHASES		SALES/ MATURITIES		NET REALIZED GAINS		INCOME		VALUE
Limited Duration	Allstate Corp. (The)		—	$	578,011		—	$	12,297		—
	MetLife, Inc.		—		185,259		—		8,430		—
Income Builder	MetLife, Inc.		—		—		—		70,125	$	1,345,520
Dividend Growth	Citigroup Inc.*	$	13,045,338		13,576,242	$	3,150,010		585,625		23,847,844
	MetLife, Inc.		9,951,703		7,968,521		910,348		61,708		3,197,752
S&P 500 Index	Allstate Corp. (The)		—		179,812		58,039		19,873		822,795
	MetLife, Inc.		1,116		162,087		44,883		9,396		907,102
	Morgan Stanley		—		238,577		19,230		26,527		1,830,628
	Citigroup Inc.*		—		1,148,334		70,349		219,975		5,534,185
Global Advantage	MetLife, Inc.		—		308,114		25,162		—		—
Strategist	Allstate Corp. (The)		279,203		—		—		91,448		4,530,354

* Citigroup Inc. is an affiliate of Dividend Growth and S&P 500 Index only.

The following Portfolios had transactions with other Morgan Stanley funds during the year ended December 31, 2006:

	PURCHASES		SALES		NET REALIZED GAINS
Utilities		—	$	209,061	$	71,816
Dividend Growth	$	1,048,795		575,260		1,673
Global Dividend Growth		—		348,937		59,033
Equity		12,736,162		6,986,088		2,078,162
European Equity		—		29,052		5,687
Global Advantage		144,035		142,080		45,195
Aggressive Equity		20,531		947,603		239,736
Income Builder		11,570		—		—

For the year ended December 31, 2006, Dividend Growth, Utilities and Strategist had open payables of $1,548,360, $393,017 and $822,956, respectively, and Dividend Growth, Utilities and Strategist had open receivables of $1,858,558, $226,832 and $460,755, respectively, with Morgan Stanley & Co., an affiliate of the Investment Adviser, Sub-Adviser, Administrator and Distributor.

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For the year ended December 31, 2006, the following Portfolios incurred brokerage commissions with Morgan Stanley & Co., Inc., an affiliate of the Investment Adviser, Sub-Adviser, Administrator and Distributor, for portfolio transactions executed on behalf of the Portfolio:

UTILITIES				DIVIDEND GROWTH				EQUITY				GLOBAL ADVANTAGE				AGGRESSIVE EQUITY				STRATEGIST
$	51,209			$	217,113			$	103,630			$	3,056			$	620			$	76,772

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

The Fund has an unfunded noncontributory defined benefit pension plan covering certain 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 factors which include years of service and compensation. The Trustees voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003.

Aggregate pension costs for the year ended December 31, 2006, included in Trustees' fees 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

MONEY MARKET		LIMITED DURATION		INCOME PLUS		HIGH YIELD		UTILITIES		INCOME BUILDER		DIVIDEND GROWTH		GLOBAL DIVIDEND GROWTH
$	477	$	314	$	807	$	150	$	325	$	93	$	1,573	$	456
		EUROPEAN EQUITY		EQUITY		S&P 500 INDEX		GLOBAL ADVANTAGE		AGGRESSIVE EQUITY		STRATEGIST
		$	372	$	1,161	$	460	$	58	$	113	$	606

ACCRUED PENSION LIABILITY

MONEY MARKET		LIMITED DURATION		INCOME PLUS		HIGH YIELD		UTILITIES		INCOME BUILDER		DIVIDEND GROWTH		GLOBAL DIVIDEND GROWTH
$	12,065	$	233	$	7,843	$	3,960	$	6,123	$	1,038	$	12,003	$	1,527
		EUROPEAN EQUITY		EQUITY		S&P 500 INDEX		GLOBAL ADVANTAGE		AGGRESSIVE EQUITY		STRATEGIST
		$	1,881	$	7,300	$	436	$	533	$	1,026	$	8,869

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

5. Federal Income Tax Status

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

The tax character of distributions paid for the years ended December 31, 2005 and December 31, 2006 for all portfolios was the same as the book character shown on the Statements of Changes in Net Assets except as follows:

	STRATEGIST
	FOR THE YEAR ENDED DECEMBER 31, 2006		FOR THE YEAR ENDED DECEMBER 31, 2005
Ordinary income	$	9,470,898	$	9,779,212
Long-term capital gains		29,251,170		34,047,584
Total distributions	$	38,722,068	$	43,826,796

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As of December 31, 2006, the tax-basis components of accumulated earnings (losses) were as follows:

	LIMITED DURATION			INCOME PLUS			HIGH YIELD			UTILITIES			INCOME BUILDER
Undistributed ordinary income	$	38,057		$	212,245		$	294,058		$	17,638		$	231,162
Undistributed long-term gains		—			—			—			17,541,616			4,243,942
Net accumulated earnings		38,057			212,245			294,058			17,559,254			4,475,104
Capital loss carryforward*		(9,363,071	)		(16,775,933	)		(256,616,841	)		—			—
Post-October losses		(353,944	)		—			(13,206	)		—			—
Temporary differences		(727	)		(9,098	)		(274,979	)		(6,681	)		(2,150	)
Net unrealized appreciation (depreciation)		(2,228,128	)		1,179,689			(57,792,842	)		78,441,940			12,351,911
Total accumulated earnings (losses)	$	(11,907,813	)	$	(15,393,097	)	$	(314,403,810	)	$	95,994,513		$	16,824,865
	DIVIDEND GROWTH			GLOBAL DIVIDEND GROWTH			EUROPEAN EQUITY			EQUITY			S&P 500 INDEX
Undistributed ordinary income	$	40,645		$	4,990,937		$	2,886,414		$	19,182		$	4,002,226
Undistributed long-term gains		—			22,089,212			—			—			—
Net accumulated earnings		40,645			27,080,149			2,886,414			19,182			4,002,226
Foreign tax credit pass-through		—			182,443			398,568			—			—
Capital loss carryforward*		(190,588,194	)		—			(2,233,646	)		(397,586,294	)		(39,616,958	)
Post-October losses		—			(10,765	)		—			—			(52,958	)
Temporary differences		(14,200	)		(186,736	)		(401,009	)		(8,973	)		(1,219	)
Net unrealized appreciation		79,562,565			76,186,744			48,802,765			70,889,081			73,264,300
Total accumulated earnings (losses)	$	(110,999,184	)	$	103,251,835		$	49,453,092		$	(326,687,004	)	$	37,595,391

	GLOBAL ADVANTAGE			AGGRESSIVE EQUITY			STRATEGIST
Undistributed ordinary income	$	212,012		$	—		$	2,918,755
Undistributed long-term gains		—			—			33,952,691
Net accumulated earnings		212,012			—			36,871,446
Foreign tax credit pass-through		27,960			—			—
Capital loss carryforward*		(18,654,177	)		(39,566,955	)		—
Post-October losses		—			—			—
Temporary differences		(28,799	)		(1,209	)		(10,037	)
Net unrealized appreciation		3,672,955			13,978,265			70,704,459
Total accumulated earnings (losses)	$	(14,770,049	)	$	(25,589,899	)	$	107,565,868

*As of December 31, 2006, the following Portfolios had a net capital loss carryforward which may be used to offset future capital gains to the extent provided by regulations.

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	(AMOUNTS IN THOUSANDS)
AVAILABLE THROUGH DECEMBER 31,	2007		2008		2009		2010		2011		2012		2013		2014		TOTAL
Limited Duration		—		—		—	$	328	$	1,546	$	4,026	$	1,267	$	2,196	$	9,363
Income Plus		—		—		—		16,776		—		—		—		—		16,776
High Yield	$	10,786	$	7,524	$	47,273		63,495		81,458		24,098		15,736		6,247		256,617
Dividend Growth		—		—		7,425		134,941		48,222		—		—		—		190,588
European Equity		—		—		—		—		2,234		—		—		—		2,234
Equity		—		—		266,780		130,806		—		—		—		—		397,586
S & P 500 Index		—		—		6,878		14,114		—		3,450		9,726		5,449		39,617
Global Advantage		—		—		4,482		14,172		—		—		—		—		18,654
Aggressive Equity		—		—		26,482		13,085		—		—		—		—		39,567

During the year ended December 31, 2006, the following Portfolios utilized net capital loss carryforwards: Income Plus — $3,200,497; Utilities — $2,037,525; Income Builder — $523,001; Dividend Growth — $156,607,553; European Equity — $35,094,749; Equity — $105,636,642; Global Advantage — $3,781,711; Aggressive Equity — $5,753,242.

At December 31, 2006, the primary reason(s) for significant temporary/permanent book/tax differences were as follows:

TEMPORARY DIFFERENCES

PERMANENT DIFFERENCES

POST-
OCTOBER
LOSSES

LOSS
DEFERRALS FROM
WASH SALES

FOREIGN
CURRENCY
GAINS/LOSSES

GAINS/
LOSSES ON
PAYDOWNS

Limited Duration

•

Income Plus

•

High Yield

•

Utilities

•

Income Builder

•

Dividend Growth

•

Global Dividend Growth

•

European Equity

•

Equity

•

S & P 500 Index

•

Global Advantage

•

Aggressive Equity

•

Strategist

•

Additionally, the following Portfolios had other temporary differences: High Yield, European Equity, — income from the mark-to-market of forward foreign currency contracts; Limited Duration, Income Plus,

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S&P 500 Index, Strategist — capital gain/loss from the mark-to-market of futures contracts; High Yield — income on bonds in default; Income Plus, Strategist — capital loss deferral on straddles. The following Portfolios had other permanent differences: High Yield — expired capital loss carryforward; Aggressive Equity — a net operating loss; Income Builder, S&P 500 Index — tax adjustments on real estate investment trusts and/or convertible preferred stock held/sold. The following Portfolios had temporary and permanent differences attributable to book amortization of premiums/discounts on debt securities: Limited Duration, Income Plus, High Yield, Utilities, Income Builder and Strategist.

The permanent differences resulted in the following reclassifications among the Portfolios' components of net assets at December 31, 2006:

	ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)			ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS)			PAID-IN-CAPITAL
Limited Duration	$	1,688,841		$	(1,688,841	)		—
Income Plus		1,152,702			(1,152,702	)		—
High Yield		43,505			2,691,557		$	(2,735,062	)
Utilities		16,760			(16,760	)		—
Income Builder		358,097			(358,097	)		—
Dividend Growth		(13,823	)		13,823			—
Global Dividend Growth		61,979			(61,979	)		—
European Equity		37,941			(37,941	)		—
Equity		4,685			(4,685	)		—
S&P 500 Index		(43,298	)		43,298			—
Global Advantage		55,738			(55,738	)		—
Aggressive Equity		257,093			(853	)		(256,240	)
Strategist		175,701			(175,701	)		—

6. Purposes of and Risks Relating to Certain Financial Instruments

All of the Portfolios (except for Money Market, Income Plus, and S&P 500 Index) may enter into forward contracts to facilitate settlement of foreign currency denominated foreign securities.

Forward contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The respective 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 from the potential inability of the counterparties to meet the terms of their contracts.

All Portfolios (except Money Market, High Yield, Income Builder, Dividend Growth, and Equity) may invest in futures contracts. Futures contracts involve elements of market risk in excess of the amount reflected in the Statements of Assets and Liabilities. The respective Portfolios bear the risk of an unfavorable

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change in the value of the underlying securities. Risks may also arise upon entering into these futures contracts from the potential inability of the counterparties to meet the terms of their contracts.

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

High Yield, Utilities, Global Dividend Growth, European Equity and Strategist may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.

At December 31, 2006, European Equity's investments in securities of issuers in the United Kingdom and France represented 22% and 19%, respectively, 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 December 31, 2006, Global Dividend Growth and European Equity cash balances consisted principally of interest bearing deposits with J.P. Morgan Chase Bank, the custodian of each Portfolio.

7. Portfolio Liquidation

On June 16, 2006, the shareholders of the Information Portfolio approved its liquidation. On June 23, 2006, the Portfolio was liquidated and the value of the Portfolio's shares were transferred to the Money Market Portfolio.

8. New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after

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December 15, 2006 and is to be applied to all open tax years as of the effective date. Recent SEC guidance allows implementing FIN 48 in the fund NAV calculations on the fund's last NAV calculation in the first required financial statement period. As a result, the Fund will incorporate FIN 48 in its semiannual report on June 30, 2007. The impact to the Fund's financial statements, if any, is currently being assessed.

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

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Financial Highlights


YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME*		NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS		DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS			TOTAL DIVIDENDS AND DISTRIBUTIONS
MONEY MARKET CLASS X SHARES
	2002	$	1.00	$	0.013		—		$	0.013	$	(0.013	)**		—		$	(0.013	)**
	2003		1.00		0.007		—			0.007		(0.007	)**		—			(0.007	)**
	2004		1.00		0.009		—			0.009		(0.009	)**		—			(0.009	)**
	2005		1.00		0.030		—			0.030		(0.030	)		—			(0.030	)
	2006		1.00		0.045	$	0.005			0.050		(0.050	)		—			(0.050	)
CLASS Y SHARES
	2002		1.00		0.011		—			0.011		(0.011	)**		—			(0.011	)**
	2003		1.00		0.004		—			0.004		(0.004	)**		—			(0.004	)**
	2004		1.00		0.006		—			0.006		(0.006	)**		—			(0.006	)**
	2005		1.00		0.030		—			0.030		(0.030	)		—			(0.030	)
	2006		1.00		0.043		(0.003	)		0.040		(0.040	)		—			(0.040	)
LIMITED DURATION CLASS X SHARES
	2002		10.17		0.27		0.13			0.40		(0.36	)	$	(0.04	)		(0.40	)
	2003		10.17		0.21		0.01			0.22		(0.38	)		—			(0.38	)
	2004		10.01		0.28		(0.14	)		0.14		(0.41	)		—			(0.41	)
	2005		9.74		0.31		(0.13	)		0.18		(0.38	)		—			(0.38	)
	2006		9.54		0.40		0.00			0.40		(0.45	)		—			(0.45	)
CLASS Y SHARES
	2002		10.16		0.24		0.14			0.38		(0.34	)		(0.04	)		(0.38	)
	2003		10.16		0.18		0.02			0.20		(0.36	)		—			(0.36	)
	2004		10.00		0.25		(0.14	)		0.11		(0.38	)		—			(0.38	)
	2005		9.73		0.28		(0.14	)		0.14		(0.35	)		—			(0.35	)
	2006		9.52		0.37		0.01			0.38		(0.42	)		—			(0.42	)
INCOME PLUS CLASS X SHARES
	2002		10.55		0.58		(0.02	)		0.56		(0.64	)		—			(0.64	)
	2003		10.47		0.56		0.30			0.86		(0.60	)		—			(0.60	)
	2004		10.73		0.55		(0.01	)		0.54		(0.59	)		—			(0.59	)
	2005		10.68		0.51		(0.15	)		0.36		(0.55	)		—			(0.55	)
	2006		10.49		0.51		0.05			0.56		(0.54	)		—			(0.54	)
CLASS Y SHARES
	2002		10.54		0.54		(0.01	)		0.53		(0.61	)		—			(0.61	)
	2003		10.46		0.54		0.29			0.83		(0.58	)		—			(0.58	)
	2004		10.71		0.52		0.01			0.53		(0.57	)		—			(0.57	)
	2005		10.67		0.48		(0.16	)		0.32		(0.52	)		—			(0.52	)
	2006		10.47		0.49		0.05			0.54		(0.52	)		—			(0.52	)

See Notes to Financial Statements
160

									RATIOS TO AVERAGE NET ASSETS***
YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN†			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME			PORTFOLIO TURNOVER RATE
MONEY MARKET CLASS X SHARES
	2002	$	1.00		1.34	%	$	432,817		0.51	%		1.32	%		N/A
	2003		1.00		0.67			251,779		0.52			0.69			N/A
	2004		1.00		0.87			178,600		0.53			0.85			N/A
	2005		1.00		2.79			144,352		0.54			2.74			N/A
	2006		1.00		4.61			132,690		0.55			4.53			N/A
CLASS Y SHARES
	2002		1.00		1.08			133,506		0.76			1.07			N/A
	2003		1.00		0.42			93,808		0.77			0.44			N/A
	2004		1.00		0.62			89,917		0.78			0.60			N/A
	2005		1.00		2.53			97,936		0.79			2.49			N/A
	2006		1.00		4.35			102,296		0.80			4.28			N/A
LIMITED DURATION CLASS X SHARES
	2002		10.17		4.06			73,476		0.48			2.65			58	%
	2003		10.01		2.23			64,576		0.51			2.02			215
	2004		9.74		1.42			52,784		0.49			2.77			128
	2005		9.54		1.87			42,872		0.45			3.17			56
	2006		9.49		4.28			34,047		0.47			4.18			51
CLASS Y SHARES
	2002		10.16		3.81			72,800		0.73			2.40			58
	2003		10.00		1.98			125,616		0.76			1.77			215
	2004		9.73		1.17			125,764		0.74			2.52			128
	2005		9.52		1.51			126,020		0.70			2.92			56
	2006		9.48		4.03			114,818		0.72			3.93			51
INCOME PLUS CLASS X SHARES
	2002		10.47		5.51			423,685		0.52			5.57			106
	2003		10.73		8.45			363,555		0.53			5.30			72
	2004		10.68		5.23			296,246		0.54			5.18			28
	2005		10.49		3.33			235,256		0.54			4.80			57
	2006		10.51		5.69			183,594		0.56			4.95			38
CLASS Y SHARES
	2002		10.46		5.26			102,262		0.77			5.32			106
	2003		10.71		8.09			140,629		0.78			5.05			72
	2004		10.67		5.07			176,054		0.79			4.93			28
	2005		10.47		3.08			197,968		0.79			4.55			57
	2006		10.49		5.34			210,681		0.81			4.70			38

161

Morgan Stanley Variable Investment Series

Financial Highlights continued


YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME*		NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS			TOTAL DIVIDENDS AND DISTRIBUTIONS
HIGH YIELD CLASS X SHARES
	2002	$	1.33	$	0.26	$	(0.34	)	$	(0.08	)	$	(0.22	)		—		$	(0.22	)
	2003		1.03		0.16		0.10			0.26			(0.11	)		—			(0.11	)
	2004		1.18		0.09		0.02			0.11			(0.09	)		—			(0.09	)
	2005		1.20		0.08		(0.06	)		0.02			(0.08	)		—			(0.08	)
	2006		1.14		0.08		0.02			0.10			(0.08	)		—			(0.08	)
CLASS Y SHARES
	2002		1.33		0.24		(0.32	)		(0.08	)		(0.22	)		—			(0.22	)
	2003		1.03		0.15		0.11			0.26			(0.11	)		—			(0.11	)
	2004		1.18		0.09		0.02			0.11			(0.09	)		—			(0.09	)
	2005		1.20		0.08		(0.06	)		0.02			(0.08	)		—			(0.08	)
	2006		1.14		0.08		0.02			0.10			(0.08	)		—			(0.08	)
UTILITIES CLASS X SHARES
	2002		14.73		0.37		(3.72	)		(3.35	)		(0.38	)		—			(0.38	)
	2003		11.00		0.34		1.54			1.88			(0.35	)		—			(0.35	)
	2004		12.53		0.34		2.21			2.55			(0.35	)		—			(0.35	)
	2005		14.73		0.37		1.77			2.14			(0.37	)		—			(0.37	)
	2006		16.50		0.36		2.95			3.31			(0.37	)		—			(0.37	)
CLASS Y SHARES
	2002		14.72		0.34		(3.72	)		(3.38	)		(0.35	)		—			(0.35	)
	2003		10.99		0.31		1.55			1.86			(0.32	)		—			(0.32	)
	2004		12.53		0.31		2.20			2.51			(0.32	)		—			(0.32	)
	2005		14.72		0.33		1.77			2.10			(0.33	)		—			(0.33	)
	2006		16.49		0.32		2.95			3.27			(0.33	)		—			(0.33	)
INCOME BUILDER CLASS X SHARES
	2002		10.61		0.42		(1.22	)		(0.80	)		(0.42	)	$	(0.01	)††		(0.43	)
	2003		9.38		0.32		1.60			1.92			(0.32	)		—			(0.32	)
	2004		10.98		0.34		0.84			1.18			(0.42	)		—			(0.42	)
	2005		11.74		0.29		0.52			0.81			(0.33	)		—			(0.33	)
	2006		12.22		0.31		1.40			1.71			(0.34	)		—			(0.34	)
CLASS Y SHARES
	2002		10.60		0.39		(1.22	)		(0.83	)		(0.40	)		(0.01	)††		(0.41	)
	2003		9.36		0.31		1.58			1.89			(0.30	)		—			(0.30	)
	2004		10.95		0.32		0.83			1.15			(0.39	)		—			(0.39	)
	2005		11.71		0.26		0.53			0.79			(0.30	)		—			(0.30	)
	2006		12.20		0.28		1.39			1.67			(0.31	)		—			(0.31	)

See Notes to Financial Statements
162

									RATIOS TO AVERAGE NET ASSETS***
YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN†			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME			PORTFOLIO TURNOVER RATE
HIGH YIELD CLASS X SHARES
	2002	$	1.03		(7.14	)%	$	45,503		0.73	%		21.71	%		48	%
	2003		1.18		27.73			56,162		0.70			14.09			59
	2004		1.20		9.84			48,990		0.66			7.60			55
	2005		1.14		2.18			35,226		0.87			6.81			48
	2006		1.16		9.29			27,907		0.95			6.78			23
CLASS Y SHARES
	2002		1.03		(7.36	)		10,797		0.98			21.46			48
	2003		1.18		27.43			35,306		0.95			13.84			59
	2004		1.20		9.56			39,547		0.91			7.35			55
	2005		1.14		1.92			35,551		1.12			6.56			48
	2006		1.16		9.01			30,764		1.20			6.53			23
UTILITIES CLASS X SHARES
	2002		11.00		(22.87	)		189,936		0.68			2.99			51
	2003		12.53		17.34			175,191		0.70			2.94			35
	2004		14.73		20.66			168,148		0.69			2.59			13
	2005		16.50		14.62			154,413		0.70			2.31			29
	2006		19.44		20.32			142,721		0.71			2.05			19
CLASS Y SHARES
	2002		10.99		(23.08	)		20,157		0.93			2.74			51
	2003		12.53		17.17			25,933		0.95			2.69			35
	2004		14.72		20.28			30,289		0.94			2.34			13
	2005		16.49		14.35			33,068		0.95			2.06			29
	2006		19.43		20.03			34,305		0.96			1.80			19
INCOME BUILDER CLASS X SHARES
	2002		9.38		(7.64	)		49,505		0.80			4.20			75
	2003		10.98		20.84			51,890		0.84			3.26			62
	2004		11.74		10.96			49,126		0.82			3.07			38
	2005		12.22		6.96			39,562		0.84			2.47			27
	2006		13.59		14.21			35,195		0.83			2.43			19
CLASS Y SHARES
	2002		9.36		(7.96	)		13,930		1.05			3.95			75
	2003		10.95		20.51			42,443		1.09			3.04			62
	2004		11.71		10.72			48,493		1.07			2.82			38
	2005		12.20		6.71			45,918		1.09			2.22			27
	2006		13.56		13.96			45,371		1.08			2.18			19

163

Morgan Stanley Variable Investment Series

Financial Highlights continued


YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME*		NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS			TOTAL DIVIDENDS AND DISTRIBUTIONS
DIVIDEND GROWTH CLASS X SHARES
	2002	$	13.48	$	0.25	$	(2.66	)	$	(2.41	)	$	(0.25	)		—		$	(0.25	)
	2003		10.82		0.22		2.76			2.98			(0.23	)		—			(0.23	)
	2004		13.57		0.22		0.92			1.14			(0.23	)		—			(0.23	)
	2005		14.48		0.19		0.61			0.80			(0.19	)		—			(0.19	)
	2006		15.09		0.21		1.45			1.66			(0.22	)		—			(0.22	)
CLASS Y SHARES
	2002		13.47		0.22		(2.66	)		(2.44	)		(0.22	)		—			(0.22	)
	2003		10.81		0.19		2.75			2.94			(0.20	)		—			(0.20	)
	2004		13.55		0.19		0.92			1.11			(0.20	)		—			(0.20	)
	2005		14.46		0.15		0.62			0.77			(0.16	)		—			(0.16	)
	2006		15.07		0.17		1.45			1.62			(0.18	)		—			(0.18	)
GLOBAL DIVIDEND GROWTH CLASS X SHARES
	2002		11.47		0.21		(1.62	)		(1.41	)		(0.19	)		—			(0.19	)
	2003		9.87		0.18		2.94			3.12			(0.22	)		—			(0.22	)
	2004		12.77		0.21		1.68			1.89			(0.20	)		—			(0.20	)
	2005		14.46		0.27		0.63			0.90			(0.24	)		—			(0.24	)
	2006		15.12		0.29		2.94			3.23			(0.33	)	$	(0.21	)		(0.54	)
CLASS Y SHARES
	2002		11.43		0.18		(1.61	)		(1.43	)		(0.18	)		—			(0.18	)
	2003		9.82		0.15		2.91			3.06			(0.20	)		—			(0.20	)
	2004		12.68		0.18		1.66			1.84			(0.18	)		—			(0.18	)
	2005		14.34		0.23		0.64			0.87			(0.21	)		—			(0.21	)
	2006		15.00		0.25		2.91			3.16			(0.29	)		(0.21	)		(0.50	)
EUROPEAN EQUITY CLASS X SHARES
	2002		16.71		0.12		(3.66	)		(3.54	)		(0.20	)		—			(0.20	)
	2003		12.97		0.17		3.57			3.74			(0.13	)		—			(0.13	)
	2004		16.58		0.21		1.88			2.09			(0.20	)		—			(0.20	)
	2005		18.47		0.30		1.28			1.58			(0.23	)		—			(0.23	)
	2006		19.82		0.36		5.55			5.91			(0.39	)		—			(0.39	)
CLASS Y SHARES
	2002		16.65		0.08		(3.63	)		(3.55	)		(0.19	)		—			(0.19	)
	2003		12.91		0.13		3.56			3.69			(0.10	)		—			(0.10	)
	2004		16.50		0.16		1.88			2.04			(0.17	)		—			(0.17	)
	2005		18.37		0.25		1.26			1.51			(0.18	)		—			(0.18	)
	2006		19.70		0.29		5.54			5.83			(0.34	)		—			(0.34	)

See Notes to Financial Statements
164

									RATIOS TO AVERAGE NET ASSETS***
YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN†			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME			PORTFOLIO TURNOVER RATE
DIVIDEND GROWTH CLASS X SHARES
	2002	$	10.82		(18.01	)%	$	819,935		0.57	%		1.98	%		21	%
	2003		13.57		27.89			865,039		0.59			1.92			42
	2004		14.48		8.46			737,801		0.58			1.60			43
	2005		15.09		5.61			582,259		0.57			1.30			38
	2006		16.53		11.09			471,931		0.59			1.37			114
CLASS Y SHARES
	2002		10.81		(18.23	)		70,844		0.82			1.73			21
	2003		13.55		27.52			118,445		0.84			1.67			42
	2004		14.46		8.21			139,777		0.83			1.35			43
	2005		15.07		5.35			143,577		0.82			1.05			38
	2006		16.51		10.83			136,660		0.84			1.12			114
GLOBAL DIVIDEND GROWTH CLASS X SHARES
	2002		9.87		(12.52	)		201,022		0.81			1.96			17
	2003		12.77		32.07			221,971		0.82			1.73			103
	2004		14.46		14.93			213,836		0.81			1.58			21
	2005		15.12		6.34			181,475		0.82			1.88			20
	2006		17.81		21.94			165,864		0.83			1.80			24
CLASS Y SHARES
	2002		9.82		(12.72	)		20,981		1.06			1.71			17
	2003		12.68		31.64			47,524		1.07			1.48			103
	2004		14.34		14.65			67,522		1.05			1.34			21
	2005		15.00		6.17			71,123		1.07			1.63			20
	2006		17.66		21.60			74,749		1.08			1.55			24
EUROPEAN EQUITY CLASS X SHARES
	2002		12.97		(21.36	)		193,153		1.05			0.82			92
	2003		16.58		29.03			198,424		1.04			1.26			95
	2004		18.47		12.74			178,683		1.04			1.24			103
	2005		19.82		8.69			144,969		1.02	(1)		1.60	(1)		61
	2006		25.34		30.21			142,000		1.00	(2)		1.59	(2)		62
CLASS Y SHARES
	2002		12.91		(21.53	)		22,133		1.30			0.57			92
	2003		16.50		28.70			36,568		1.29			1.01			95
	2004		18.37		12.48			42,333		1.29			0.99			103
	2005		19.70		8.36			39,404		1.27	(1)		1.35	(1)		61
	2006		25.19		29.88			45,637		1.25	(2)		1.34	(2)		62

165

Morgan Stanley Variable Investment Series

Financial Highlights continued


YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME (LOSS)*			NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS		TOTAL DIVIDENDS AND DISTRIBUTIONS
EQUITY CLASS X SHARES
	2002	$	22.66	$	0.07		$	(4.87	)	$	(4.80	)	$	(0.08	)		—	$	(0.08	)
	2003		17.78		0.07			3.97			4.04			(0.07	)		—		(0.07	)
	2004		21.75		0.09			2.33			2.42			(0.10	)		—		(0.10	)
	2005		24.07		—			4.39			4.39			—			—		—
	2006		28.46		0.02			1.15			1.17			—			—		—
CLASS Y SHARES
	2002		22.64		0.03			(4.89	)		(4.86	)		(0.03	)		—		(0.03	)
	2003		17.75		0.02			3.98			4.00			(0.03	)		—		(0.03	)
	2004		21.72		0.05			2.31			2.36			(0.05	)		—		(0.05	)
	2005		24.03		(0.06	)		4.37			4.31			—			—		—
	2006		28.34		(0.05	)		1.14			1.09			—			—		—
S&P 500 INDEX CLASS X SHARES
	2002		10.48		0.10			(2.45	)		(2.35	)		(0.09	)		—		(0.09	)
	2003		8.04		0.12			2.11			2.23			(0.10	)		—		(0.10	)
	2004		10.17		0.17			0.90			1.07			(0.10	)		—		(0.10	)
	2005		11.14		0.18			0.33			0.51			(0.19	)		—		(0.19	)
	2006		11.46		0.20			1.56			1.76			(0.20	)		—		(0.20	)
CLASS Y SHARES
	2002		10.44		0.08			(2.44	)		(2.36	)		(0.08	)		—		(0.08	)
	2003		8.00		0.09			2.10			2.19			(0.08	)		—		(0.08	)
	2004		10.11		0.15			0.88			1.03			(0.08	)		—		(0.08	)
	2005		11.06		0.15			0.33			0.48			(0.16	)		—		(0.16	)
	2006		11.38		0.17			1.54			1.71			(0.17	)		—		(0.17	)
GLOBAL ADVANTAGE CLASS X SHARES
	2002		7.17		0.05			(1.53	)		(1.48	)		(0.06	)		—		(0.06	)
	2003		5.63		0.05			1.69			1.74			(0.07	)		—		(0.07	)
	2004		7.30		0.06			0.85			0.91			(0.03	)		—		(0.03	)
	2005		8.18		0.09			0.46			0.55			(0.02	)		—		(0.02	)
	2006		8.71		0.07			1.53			1.60			(0.07	)		—		(0.07	)
CLASS Y SHARES
	2002		7.14		0.03			(1.52	)		(1.49	)		(0.04	)		—		(0.04	)
	2003		5.61		0.04			1.67			1.71			(0.05	)		—		(0.05	)
	2004		7.27		0.04			0.85			0.89			(0.02	)		—		(0.02	)
	2005		8.14		0.07			0.45			0.52			—			—		—
	2006		8.66		0.05			1.53			1.58			(0.05	)		—		(0.05	)

See Notes to Financial Statements
166

									RATIOS TO AVERAGE NET ASSETS***
YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN†			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME (LOSS)			PORTFOLIO TURNOVER RATE
EQUITY CLASS X SHARES
	2002	$	17.78		(21.21	)%	$	622,133		0.51	%		0.36	%		223	%
	2003		21.75		22.80			616,027		0.52			0.38			210
	2004		24.07		11.14			537,086		0.53			0.41			137
	2005		28.46		18.16			485,662		0.53			0.02			72
	2006		29.63		4.18			370,757		0.54			0.06			111
CLASS Y SHARES
	2002		17.75		(21.45	)		64,829		0.76			0.11			223
	2003		21.72		22.55			100,400		0.77			0.13			210
	2004		24.03		10.86			115,741		0.78			0.16			137
	2005		28.34		17.89			123,803		0.78			(0.23	)		72
	2006		29.43		3.92			113,707		0.79			(0.19	)		111
S&P 500 INDEX CLASS X SHARES
	2002		8.04		(22.48	)		110,789		0.46			1.15			5
	2003		10.17		27.85			135,767		0.46			1.31			0
	2004		11.14		10.59			130,944		0.33			1.69			4
	2005		11.46		4.64			103,899		0.28			1.59			5
	2006		13.02		15.56			84,545		0.28			1.67			4
CLASS Y SHARES
	2002		8.00		(22.67	)		62,977		0.71			0.90			5
	2003		10.11		27.54			133,144		0.71			1.06			0
	2004		11.06		10.29			166,085		0.58			1.44			4
	2005		11.38		4.43			172,544		0.53			1.34			5
	2006		12.92		15.21			176,883		0.53			1.42			4
GLOBAL ADVANTAGE CLASS X SHARES
	2002		5.63		(20.81	)		22,866		0.80			0.72			119
	2003		7.30		31.12			25,598		0.93			0.87			98
	2004		8.18		12.54			23,620		0.84			0.79			111
	2005		8.71		6.80			19,227		0.92			1.09			89
	2006		10.24		18.55			17,141		0.94			0.76			96
CLASS Y SHARES
	2002		5.61		(20.94	)		5,229		1.05			0.47			119
	2003		7.27		30.75			9,308		1.18			0.62			98
	2004		8.14		12.29			11,032		1.09			0.54			111
	2005		8.66		6.44			10,618		1.17			0.84			89
	2006		10.19		18.35			10,767		1.19			0.51			96

167

Morgan Stanley Variable Investment Series

Financial Highlights continued


YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME (LOSS)*			NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS			TOTAL DIVIDENDS AND DISTRIBUTIONS
AGGRESSIVE EQUITY CLASS X SHARES
	2002	$	10.20	$	0.01		$	(2.31	)	$	(2.30	)	$	(0.03	)		—		$	(0.03	)
	2003		7.87		0.01			2.04			2.05			0.00	#		—			—
	2004		9.92		(0.02	)		1.28			1.26			0.00	##		—			—
	2005		11.18		(0.03	)		2.62			2.59			—			—			—
	2006		13.77		(0.04	)		1.12			1.08			—			—			—
CLASS Y SHARES
	2002		10.17		(0.01	)		(2.31	)		(2.32	)		(0.01	)		—			(0.01	)
	2003		7.84		(0.01	)		2.03			2.02			—			—			—
	2004		9.86		(0.04	)		1.27			1.23			—			—			—
	2005		11.09		(0.06	)		2.58			2.52			—			—			—
	2006		13.61		(0.07	)		1.11			1.04			—			—			—
STRATEGIST CLASS X SHARES
	2002		13.94		0.19			(1.56	)		(1.37	)		(0.21	)		—			(0.21	)
	2003		12.36		0.18			3.03			3.21			(0.23	)		—			(0.23	)
	2004		15.34		0.28			1.30			1.58			(0.32	)‡‡		—			(0.32	)
	2005		16.60		0.30			0.96			1.26			(0.32	)	$	(1.49	)		(1.81	)
	2006		16.05		0.41			1.86			2.27			(0.44	)		(1.35	)		(1.79	)

See Notes to Financial Statements
168

									RATIOS TO AVERAGE NET ASSETS***
YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN†			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME (LOSS)			PORTFOLIO TURNOVER RATE
AGGRESSIVE EQUITY CLASS X SHARES
	2002	$	7.87		(22.60	)%	$	39,724		0.84	%		0.07	%		268	%
	2003		9.92		26.06			42,363		0.87			0.10			195
	2004		11.18		12.71			38,347		0.85			(0.16	)		185
	2005		13.77		23.17			37,130		0.86			(0.29	)		85
	2006		14.85		7.84			30,720		0.85			(0.27	)		59
CLASS Y SHARES
	2002		7.84		(22.83	)		17,575		1.09			(0.18	)		268
	2003		9.86		25.77			26,519		1.12			(0.15	)		195
	2004		11.09		12.47			27,793		1.10			(0.41	)		185
	2005		13.61		22.72			30,283		1.11			(0.54	)		85
	2006		14.65		7.64			32,039		1.10			(0.52	)		59
STRATEGIST CLASS X SHARES
	2002		12.36		(9.89	)		372,254		0.52			1.47			124
	2003		15.34		26.24			388,356		0.52			1.31			93
	2004		16.60		10.37			345,215		0.53			1.79			55
	2005		16.05		8.32			289,876		0.54			1.84			46
	2006		16.53		15.01			258,164		0.55			2.53			36

169

Morgan Stanley Variable Investment Series

Financial Highlights continued


YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME*		NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS			TOTAL DIVIDENDS AND DISTRIBUTIONS
STRATEGIST CLASS Y SHARES
	2002	$	13.93	$	0.16	$	(1.56	)	$	(1.40	)	$	(0.18	)		—		$	(0.18	)
	2003		12.35		0.14		3.03			3.17			(0.20	)		—			(0.20	)
	2004		15.32		0.24		1.30			1.54			(0.28	)‡‡		—			(0.28	)
	2005		16.58		0.26		0.96			1.22			(0.28	)	$	(1.49	)		(1.77	)
	2006		16.03		0.37		1.86			2.23			(0.40	)		(1.35	)		(1.75	)

* 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.

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

† 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 $0.002.

# Distribution of investment income of less than $0.001.

## Distribution of investment income of $0.001.

(1) If the Investment Adviser had not "capped" all expenses (except for distribution fees) for European Equity, at 1.0% of its daily net assets for the period June 1, 2005 through December 31, 2005, the ratios of expenses and net investment income to average net assets would have been 1.06% and 1.56%, respectively, for Class X shares and 1.31% and 1.31%, respectively, for Class Y Shares.

(2) If the Investment Adviser had not "capped" all expenses (except for distribution fees) for European Equity, at 1.0% of its daily net assets for the year ended December 31, 2006, the ratios of expenses and net investment income to average net assets would have been 1.07% and 1.52%, respectively, for Class X shares and 1.32% and 1.27%, respectively, for Class Y Shares.

See Notes to Financial Statements
170

									RATIOS TO AVERAGE NET ASSETS***
YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN†			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME			PORTFOLIO TURNOVER RATE
STRATEGIST CLASS Y SHARES
	2002	$	12.35		(10.11	)%	$	57,651		0.77	%		1.22	%		124	%
	2003		15.32		25.88			89,935		0.77			1.06			93
	2004		16.58		10.12			99,165		0.78			1.54			55
	2005		16.03		8.06			98,066		0.79			1.59			46
	2006		16.51		14.75			101,878		0.80			2.28			36

171

Morgan Stanley Variable Investment Series

Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Morgan Stanley Variable Investment Series (the "Fund") comprising the Money Market, Limited Duration, Income Plus, High Yield, Utilities, Income Builder, Dividend Growth, Global Dividend Growth, European Equity, Equity, S&P 500 Index, Global Advantage, Aggressive Equity, and Strategist Portfolios, as of December 31, 2006, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the portfolios constituting the Morgan Stanley Variable Investment Series as of December 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP
New York, New York
February 20, 2007

172

Morgan Stanley Variable Investment Series

Results of Special Shareholder Meeting (unaudited)

On August 1, 2006, a Special Meeting of Shareholders of the Fund was scheduled in order to vote on the proposals set forth below. The meeting was held on August 1, 2006, and results were as follows:

(1) Election of Trustees:

	FOR		WITHHOLD		ABSTAIN		BNV*
Frank L. Bowman		463,819,903		44,847,036		0		0
Kathleen A. Dennis		464,740,749		43,926,190		0		0
James F. Higgins		464,671,921		43,995,018		0		0
Joseph J. Kearns		464,669,200		43,997,739		0		0
Michael F. Klein		464,531,107		44,135,832		0		0
W. Allen Reed		464,138,829		44,528,110		0		0
Fergus Reid		463,956,148		44,710,791		0		0

The following Trustees were not standing for reelection at this meeting: Michael Bozic, Dr. Manuel H. Johnson and Michael E. Nugent.

(2) Eliminate certain fundamental investment restrictions:

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Eliminate fundamental policy restricting the Portfolio's ability to pledge assets	Aggressive Equity		4,267,839		213,614		242,503		0
	Dividend Growth		39,990,267		1,648,706		1,318,594		0
	Equity		17,636,922		939,686		757,327		0
	European Equity		7,725,223		349,271		289,716		0
	Global Advantage		2,884,950		138,684		73,141		0
	Global Dividend Growth		13,856,503		734,750		507,050		0
	High Yield		52,666,409		2,620,313		1,124,376		0
	Income Builder		6,062,868		277,369		208,467		0
	Income Plus		37,054,052		1,365,250		1,251,620		0
	Limited Duration		13,170,227		555,167		330,867		0
	Money Market		202,704,533		32,797,214		9,372,104		0
	S&P 500 Index		20,632,884		1,107,290		958,943		0
	Strategist		20,667,191		714,868		708,580		0
	Utilities		8,143,069		240,869		357,663		0

173

Morgan Stanley Variable Investment Series

Results of Special Shareholder Meeting (unaudited) continued

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Eliminate the fundamental policy restricting purchases of securities on margin	Aggressive Equity		4,255,805		220,004		248,147		0
	Dividend Growth		39,815,706		1,763,785		1,378,076		0
	Equity		17,596,226		956,794		780,915		0
	European Equity		7,707,798		393,758		262,654		0
	Global Advantage		2,890,320		133,314		73,141		0
	Global Dividend Growth		13,805,458		831,014		461,831		0
	High Yield		52,634,465		2,647,691		1,128,942		0
	Income Builder		6,028,441		306,351		213,912		0
	Income Plus		36,908,455		1,546,816		1,215,651		0
	Limited Duration		13,075,928		588,868		391,465		0
	Money Market		201,822,976		33,782,958		9,267,917		0
	S&P 500 Index		20,594,095		1,111,444		993,578		0
	Strategist		20,647,908		696,603		746,128		0
	Utilities		8,112,133		279,230		350,238		0
Eliminate the fundamental policy prohibiting investments in oil, gas, and other types of minerals or mineral leases	Aggressive Equity		4,266,073		207,810		250,073		0
	Dividend Growth		40,042,958		1,611,198		1,303,411		0
	Equity		17,709,721		908,685		715,529		0
	European Equity		7,767,009		334,751		262,450		0
	Global Advantage		2,886,684		130,872		79,219		0
	Global Dividend Growth		13,985,750		673,229		439,324		0
	High Yield		52,712,753		2,551,829		1,146,516		0
	Income Builder		6,050,942		302,058		195,704		0
	Income Plus		37,090,283		1,304,701		1,275,938		0
	Limited Duration		13,111,755		535,300		409,206		0
	Money Market		202,172,189		33,186,705		9,514,957		0
	S&P 500 Index		20,528,351		1,163,782		1,006,984		0
	Strategist		20,757,316		559,944		773,379		0
	Utilities		8,145,307		250,309		345,985		0
Eliminate the fundamental policy regarding investments in warrants	Dividend Growth		39,867,871		1,685,067		1,404,629		0
	Equity		17,617,308		965,295		751,332		0

174

Morgan Stanley Variable Investment Series

Results of Special Shareholder Meeting (unaudited) continued

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Eliminate the fundamental policy prohibiting or restricting the purchase of securities of issuers in which trustees, officers have interest	Dividend Growth		39,923,038		1,683,789		1,350,740		0
	Equity		17,604,698		993,008		736,229		0
	European Equity		7,698,330		395,372		270,508		0
	Global Dividend Growth		13,812,093		837,933		448,277		0
	High Yield		52,491,651		2,635,684		1,283,763		0
	Income Builder		5,956,007		363,606		229,091		0
	Income Plus		36,992,220		1,446,681		1,232,021		0
	Money Market		201,529,170		33,747,425		9,597,256		0
	Strategist		20,454,744		906,894		729,001		0
	Utilities		8,137,097		265,391		339,113		0
Eliminate the fundamental policy prohibiting investments for purposes of exercising control	Aggressive Equity		4,290,470		208,971		224,515		0
	Dividend Growth		40,078,028		1,500,775		1,378,764		0
	Equity		17,673,700		905,661		754,574		0
	European Equity		7,715,529		378,453		270,228		0
	Global Advantage		2,898,608		120,508		77,659		0
	Global Dividend Growth		13,883,972		763,042		451,289		0
	High Yield		52,642,779		2,457,048		1,311,271		0
	Income Builder		5,975,225		353,328		220,151		0
	Income Plus		37,340,254		1,148,826		1,181,842		0
	Limited Duration		13,151,007		512,120		393,134		0
	Money Market		202,620,215		32,491,534		9,762,102		0
	S&P 500 Index		20,701,276		1,013,939		983,902		0
	Strategist		20,695,866		633,874		760,899		0
	Utilities		8,178,573		217,817		345,211		0
Eliminate the fundamental policy regarding purchase of common stock	High Yield		53,091,974		2,274,092		1,045,032		0
	Income Plus		37,467,111		1,035,010		1,168,801		0

175

Morgan Stanley Variable Investment Series

Results of Special Shareholder Meeting (unaudited) continued

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Eliminate the fundamental policy regarding investments in unseasoned companies	Dividend Growth		39,890,709		1,734,565		1,332,293		0
	Equity		17,558,896		994,502		780,537		0
	European Equity		7,716,585		387,095		260,530		0
	Global Advantage		2,895,605		118,642		82,528		0
	Global Dividend Growth		13,816,268		803,766		478,269		0
	High Yield		52,632,727		2,521,189		1,257,182		0
	Income Builder		5,958,443		383,514		206,747		0
	Income Plus		37,221,335		1,210,111		1,239,476		0
	Money Market		202,512,618		32,983,315		9,377,918		0
	S&P 500 Index		20,638,750		1,073,587		986,780		0
	Strategist		20,501,658		845,599		743,382		0
	Utilities		8,141,978		256,393		343,230		0
Eliminate the fundamental policy regarding investments in foreign securities	Equity		17,701,212		866,940		765,783		0
Eliminate the fundamental policy prohibiting participation in joint securities accounts	Aggressive Equity		4,280,293		216,191		227,472		0
	Dividend Growth		39,916,475		1,582,269		1,458,823		0
	Equity		17,652,682		881,178		800,075		0
	European Equity		7,758,785		319,661		285,764		0
	Global Advantage		2,896,120		122,996		77,659		0
	Global Dividend Growth		13,895,925		736,190		466,188		0
	High Yield		52,782,272		2,318,285		1,310,541		0
	Income Builder		5,965,051		355,317		228,336		0
	Income Plus		37,119,973		1,323,760		1,227,189		0
	Limited Duration		13,122,709		553,629		379,923		0
	Money Market		203,101,446		32,425,551		9,346,854		0
	S&P 500 Index		20,682,775		1,025,039		991,303		0
	Strategist		20,583,298		734,391		772,950		0
	Utilities		8,164,814		227,364		349,423		0

176

Morgan Stanley Variable Investment Series

Results of Special Shareholder Meeting (unaudited) continued

(3) Modify certain fundamental investment restrictions:

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Modify fundamental policy regarding diversification	Aggressive Equity		4,276,108		207,689		240,159		0
	Dividend Growth		39,958,732		1,582,893		1,415,942		0
	Equity		17,751,798		846,699		735,438		0
	European Equity		7,729,817		361,929		272,464		0
	Global Advantage		2,898,092		121,024		77,659		0
	Global Dividend Growth		13,875,797		783,806		438,700		0
	High Yield		52,797,852		2,471,765		1,141,481		0
	Income Builder		5,973,407		371,055		204,242		0
	Income Plus		37,187,485		1,298,669		1,184,768		0
	Limited Duration		13,154,676		525,517		376,068		0
	Money Market		203,036,134		32,533,812		9,303,905		0
	S&P 500 Index		20,705,069		986,867		1,007,181		0
	Strategist		20,790,568		548,257		751,814		0
	Utilities		8,182,685		223,832		335,084		0
Modify fundamental policy regarding borrowing money	Aggressive Equity		4,257,055		236,008		230,893		0
	Dividend Growth		39,741,118		1,807,173		1,409,276		0
	Equity		17,564,149		1,026,143		743,643		0
	European Equity		7,684,180		405,255		274,775		0
	Global Advantage		2,890,858		127,237		78,680		0
	Global Dividend Growth		13,788,979		855,367		453,957		0
	High Yield		52,410,223		2,632,262		1,368,613		0
	Income Builder		5,909,112		433,601		205,991		0
	Limited Duration		13,079,170		580,619		396,472		0
	Money Market		202,052,950		33,302,527		9,518,374		0
	S&P 500 Index		20,620,584		1,073,220		1,005,313		0
	Strategist		20,430,352		917,964		742,323		0
	Utilities		8,140,737		265,324		335,540		0

177

Morgan Stanley Variable Investment Series

Results of Special Shareholder Meeting (unaudited) continued

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Modify fundamental policy regarding loans	Aggressive Equity		4,265,451		229,835		228,670		0
	Dividend Growth		39,746,051		1,793,620		1,417,896		0
	Equity		17,574,159		1,008,133		751,643		0
	European Equity		7,683,968		401,689		278,553		0
	Global Advantage		2,891,788		127,328		77,659		0
	Global Dividend Growth		13,794,218		833,665		470,420		0
	High Yield		52,702,784		2,544,405		1,163,909		0
	Income Builder		5,903,241		430,531		214,932		0
	Income Plus		37,038,639		1,399,325		1,232,958		0
	Limited Duration		13,041,001		610,011		405,249		0
	Money Market		202,119,469		33,047,763		9,706,619		0
	S&P 500 Index		20,604,919		1,074,359		1,019,839		0
	Strategist		20,422,833		911,928		755,878		0
	Utilities		8,152,483		255,197		333,921		0
Modify fundamental policy regarding investment in commodities, commodity contracts, and futures contracts	Aggressive Equity		4,264,040		222,559		237,357		0
	Dividend Growth		39,890,223		1,713,415		1,353,929		0
	Equity		17,652,138		943,451		738,346		0
	European Equity		7,714,741		377,356		272,113		0
	Global Advantage		2,890,303		127,237		79,235		0
	Global Dividend Growth		13,834,016		815,830		448,457		0
	High Yield		52,658,394		2,605,023		1,147,681		0
	Income Builder		5,961,087		381,625		205,992		0
	Income Plus		37,027,499		1,403,667		1,239,756		0
	Limited Duration		13,055,551		601,088		399,622		0
	Money Market		203,152,899		32,302,413		9,418,539		0
	S&P 500 Index		20,615,171		1,058,039		1,025,907		0
	Strategist		20,633,370		700,125		757,144		0
	Utilities		8,165,445		245,549		330,607		0

178

Morgan Stanley Variable Investment Series

Results of Special Shareholder Meeting (unaudited) continued

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Modify fundamental policy regarding issuance of senior securities	Aggressive Equity		4,270,019		210,441		243,496		0
	Dividend Growth		39,936,524		1,611,234		1,409,809		0
	Equity		17,634,852		904,257		794,826		0
	European Equity		7,698,781		384,336		281,093		0
	Global Advantage		2,890,858		128,258		77,659		0
	Global Dividend Growth		13,863,501		770,264		464,538		0
	High Yield		52,716,758		2,494,442		1,199,898		0
	Income Builder		5,978,398		355,374		214,932		0
	Income Plus		37,099,086		1,367,984		1,203,852		0
	Limited Duration		13,112,770		549,048		394,443		0
	Money Market		202,756,133		32,142,164		9,975,554		0
	S&P 500 Index		20,580,770		1,064,323		1,054,024		0
	Strategist		20,484,370		869,960		736,309		0
	Utilities		8,157,402		241,126		343,073		0

(4) Reclassify certain fundamental policies as non-fundamental policies:

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Reclassify as non-fundamental the fundamental policy prohibiting investments in other investment companies exceeding specified percentage limitations	Dividend Growth		39,979,391		1,584,985		1,393,191		0
	Equity		17,674,727		861,150		798,058		0
	European Equity		7,738,964		351,411		273,835		0
	Global Dividend Growth		13,898,608		766,110		433,585		0
	High Yield		52,924,955		2,306,138		1,180,005		0
	Income Builder		5,957,563		381,031		210,110		0
	Income Plus		37,261,939		1,213,374		1,195,609		0
	Money Market		202,621,568		32,614,231		9,638,052		0
	Strategist		20,669,831		684,141		736,667		0
	Utilities		8,180,225		218,163		343,213		0

179

Morgan Stanley Variable Investment Series

Results of Special Shareholder Meeting (unaudited) continued

	PORTFOLIO	FOR		AGAINST		ABSTAIN		BNV+
Reclassify as non-fundamental the fundamental policy prohibiting or limiting investments in illiquid or restricted securities	Dividend Growth		39,920,114		1,626,025		1,411,428		0
	Equity		17,597,991		924,607		811,337		0
	European Equity		7,694,421		385,895		283,894		0
	Income Plus		37,248,386		1,178,761		1,243,775		0
	Money Market		202,286,526		32,265,893		10,321,432		0
	Strategist		20,635,816		703,447		751,376		0
	Utilities		8,145,295		243,077		353,229		0
Reclassify as non-fundamental the fundamental policy on the purchase or sale of puts, calls and combinations thereof	Equity		17,548,304		1,004,473		781,158		0
	High Yield		52,525,910		2,511,419		1,373,769		0
	Money Market		202,019,785		33,015,908		9,838,158		0

+ Broker "non-votes" are shares held in street name for which the broker indicates that instructions have not been received from the beneficial owners or other persons entitled to vote and for which the broker does not have discretionary voting authority.

180

Morgan Stanley Variable Investment Series

Trustee and Officer Information (unaudited)

Independent Trustees:

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

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

Other Directorships
Held by Independent Trustee

Frank L. Bowman (62)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (since February 2005); Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly variously, Admiral in the U.S. Navy, Director of Naval Nuclear Propulsion Program and Deputy Administrator – Naval Reactors in the National Nuclear Security Administration at the U.S. Department of Energy (1996-2004). Honorary Knight Commander of the Most Excellent Order of the British Empire.

171

Director of the National Energy Foundation, the U.S. Energy Association, the American Council for Capital Formation and the Armed Services YMCA of the USA.

Michael Bozic (65)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
April 1994

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

173

Director of various business
organizations.

181

Morgan Stanley Variable Investment Series

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

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

Other Directorships
Held by Independent Trustee

Kathleen A. Dennis (53)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

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

171

None.

Dr. Manuel H. Johnson (57)
c/o Johnson Smick Group, Inc.
888 16th Street, N.W.
Suite 740
Washington, D.C. 20006

Trustee

Since
July 1991

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

173

Director of NVR, Inc. (home construction); Director of KFX Energy; Director of RBS Greenwich Capital Holdings (financial holding company).

Joseph J. Kearns (64)
c/o Kearns & Associates LLC
PMB754
23852 Pacific Coast Highway
Malibu, CA 90265

Trustee

Since
August 1994

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

174

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

182

Morgan Stanley Variable Investment Series

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

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

Other Directorships
Held by Independent Trustee

Michael F. Klein (48)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

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

171

Director of certain investment funds managed or sponsored by Aetos Capital, LLC.

Michael E. Nugent (70)
c/o Triumph Capital, L.P.
445 Park Avenue
New York, NY 10022

Chairman of the Board and Trustee

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

General Partner of Triumph Capital, L.P., (private investment partnership); Chairman of the Boards of the Retail Funds and Institutional Funds (since July 2006) and Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2001); formerly Chairperson of the Insurance Committee (until July 2006); Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988).

173

None.

183

Morgan Stanley Variable Investment Series

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

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

Other Directorships
Held by Independent Trustee

W. Allen Reed (59)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

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

171

Director of GMAC (financial services), and Temple-Inland Industries (packaging, banking and forest products); member of the Board of Executives of the Morgan Stanley Capital International Editorial Board; Director of Legg Mason and Director of various investment fund advisory boards.

Fergus Reid (74)
c/o Lumelite Plastics Corporation
85 Charles Colman Blvd.
Pawling, NY 12564

Trustee

Since
June 1992

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

174

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

184

Morgan Stanley Variable Investment Series

Trustee and Officer Information (unaudited) continued

Interested Trustee:

Name, Age and Address of
Interested Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

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

Other Directorships Held by
Interested Trustee

James F. Higgins (58)
c/o Morgan Stanley Trust
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311

Trustee

Since
June 2000

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

173

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

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

** The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by the Investment Adviser and any funds that have an investment adviser that is an affiliated person of the Investment Adviser (including, but not limited to, Morgan Stanley Investment Management Inc.) as of December 31, 2006.

185

Morgan Stanley Variable Investment Series

Trustee and Officer Information (unaudited) continued

Executive Officers:

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

Ronald E. Robison (67)
1221 Avenue of the Americas
New York, NY 10020

President and Principal Executive Officer

President since September 2005 and Principal Executive Officer since May 2003

President (since September 2005) and Principal Executive Officer (since May 2003) of funds in the Fund Complex; President (since September 2005) and Principal Executive Officer (since May 2003) of the Van Kampen Funds; Managing Director, Director and/or Officer of the Investment Adviser and various entities affiliated with the Investment Adviser; Director of Morgan Stanley SICAV (since May 2004). Formerly, Executive Vice President (July 2003 to September 2005) of funds in the Fund Complex and the Van Kampen Funds; President and Director of the Institutional Funds (March 2001 to July 2003); Chief Administrative Officer of the Investment Adviser; Chief Administrative Officer of Morgan Stanley Services Company Inc.

J. David Germany (52)
Morgan Stanley Investment
Management Limited
25 Cabot Square
Canary Wharf, London
United Kingdom E144QA

Vice President

Since February 2006

Managing Director and (since December 2005) Chief Investment Officer – Global Fixed Income of Morgan Stanley Investment Management; Managing Director and Director of Morgan Stanley Investment Management Limited; Vice President of the Retail and Institutional Funds (since February 2006).

Dennis F. Shea (53)
1221 Avenue of the Americas
New York, NY 10020

Vice President

Since February 2006

Managing Director and (since February 2006) Chief Investment Officer – Global Equity of Morgan Stanley Investment Management; Vice President of the Retail and Institutional Funds (since February 2006). Formerly, Managing Director and Director of Global Equity Research at Morgan Stanley.

Barry Fink (51)
1221 Avenue of the Americas
New York, NY 10020

Vice President

Since February 1997

Managing Director of Morgan Stanley Investment Management; Managing Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Vice President of the Retail Funds and (since July 2003) the Institutional Funds. Formerly, Secretary, General Counsel and/or Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Secretary and General Counsel of the Retail Funds.

Amy R. Doberman (44)
1221 Avenue of the Americas
New York, NY 10020

Vice President

Since July 2004

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

Carsten Otto (43)
1221 Avenue of the Americas
New York, NY 10020

Chief Compliance Officer

Since October 2004

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

186

Morgan Stanley Variable Investment Series

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

Stefanie V. Chang Yu (40)
1221 Avenue of the Americas
New York, NY 10020

Vice President

Since December1997

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

Francis J. Smith (41)
c/o Morgan Stanley Trust Harborside Financial Center Plaza Two
Jersey City, NJ 07311

Treasurer and Chief Financial Officer

Treasurer since July 2003 and Chief Financial Officer since September 2002

Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Treasurer and Chief Financial Officer of the Retail Funds (since July 2003). Formerly, Vice President of the Retail Funds (September 2002 to July 2003).

Mary E. Mullin (39)
1221 Avenue of the Americas
New York, NY 10020

Secretary

Since June 1999

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

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

187

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Trustees
	Frank L. Bowman	Joseph J. Kearns

	Michael Bozic	Michael F. Klein

	Kathleen A. Dennis	Michael E. Nugent

	James F. Higgins	W. Allen Reed

	Dr. Manuel H. Johnson	Fergus Reid

Officers
Michael E. Nugent Chairman of the Board

Ronald E. Robison President and Principal Executive Officer

J. David Germany Vice President

Dennis F. Shea Vice President

Barry Fink Vice President

Amy R. Doberman Vice President

Carsten Otto Chief Compliance Officer

Stefanie V. Chang Yu Vice President

Francis J. Smith Treasurer and Chief Financial Officer

Mary E. Mullin Secretary

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

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

Sub-Adviser (Global Dividend Growth and European Equity)
Morgan Stanley Investment Management Limited 25 Cabot Square, Canary Wharf London, United Kingdom E14 4QA

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

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

Morgan Stanley Funds are distributed by Morgan Stanley Distributors Inc.

Morgan Stanley Distributors Inc., member NASD.

VARINANR RA07-00164P-Y12/06

#40113A

Item 2. Code of Ethics.

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

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

(d) Not applicable.

(e) Not applicable.

(f)

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

(2) Not applicable.

(3) Not applicable.

Item 3. Audit Committee Financial Expert.

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

Item 4. Principal Accountant Fees and Services.

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

2006

	Registrant			Covered Entities(1)
Audit Fees	$	360,200		N/A

Non-Audit Fees
Audit-Related Fees	$	496	(2)	$	5,162,000	(2)
Tax Fees	$	63,306	(3)	$	1,389,000	(4)
All Other Fees	$	—	(5)	$	—	(5)
Total Non-Audit Fees	$	63,802		$	6,551,000

Total	$	424,002		$	6,551,000

2005

	Registrant			Covered Entities(1)
Audit Fees	$	387,503		N/A

Non-Audit Fees
Audit-Related Fees	$	540	(2)	$	3,215,745	(2)
Tax Fees	$	62,298	(3)	$	24,000	(4)
All Other Fees	$	—	(5)	$	—	(5)
Total Non-Audit Fees	$	62,838		$	3,239,745

Total	$	450,341		$	3,239,745

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

(1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant.

(2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities’ and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements.

(3) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant’s tax returns.

(4) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities’ tax returns.

(5) All other fees represent project management for future business applications and improving business and operational processes.

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

APPENDIX A

AUDIT COMMITTEE

AUDIT AND NON-AUDIT SERVICES

PRE-APPROVAL POLICY AND PROCEDURES

OF THE

MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS

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

1. Statement of Principles

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

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

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

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

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

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

2. Delegation

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

3. Audit Services

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

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

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

4. Audit-related Services

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

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

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

5. Tax Services

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

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

6. All Other Services

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

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

7. Pre-Approval Fee Levels or Budgeted Amounts

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

8. Procedures

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

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

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

9. Additional Requirements

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

10. Covered Entities

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

Morgan Stanley Retail Funds

Morgan Stanley Investment Advisors Inc.

Morgan Stanley & Co. Incorporated

Morgan Stanley DW Inc.

Morgan Stanley Investment Management Inc.

Morgan Stanley Investment Management Limited

Morgan Stanley Investment Management Private Limited

Morgan Stanley Asset & Investment Trust Management Co., Limited

Morgan Stanley Investment Management Company

Van Kampen Asset Management

Morgan Stanley Services Company, Inc.

Morgan Stanley Distributors Inc.

Morgan Stanley Trust FSB

Morgan Stanley Institutional Funds

Morgan Stanley Investment Management Inc.

Morgan Stanley Investment Advisors Inc.

Morgan Stanley Investment Management Limited

Morgan Stanley Investment Management Private Limited

Morgan Stanley Asset & Investment Trust Management Co., Limited

Morgan Stanley Investment Management Company

Morgan Stanley & Co. Incorporated

Morgan Stanley Distribution, Inc.

Morgan Stanley AIP GP LP

Morgan Stanley Alternative Investment Partners LP

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

(f) Not applicable.

(g) See table above.

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

Item 5. Audit Committee of Listed Registrants.

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

(b) Not applicable.

Item 6. Schedule of Investments

Refer to Item 1.

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

Applicable only to reports filed by closed-end funds.

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

Applicable only to reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable only to reports filed by closed-end funds.

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

Not applicable.

Item 11. Controls and Procedures

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

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

Item 12. Exhibits

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

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

SIGNATURES

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

Morgan Stanley Variable Investment Series

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
February 9, 2007

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

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
February 9, 2007

/s/ Francis Smith
Francis Smith
Principal Financial Officer
February 9, 2007