Morgan Stanley International Value Equity Fund Inactive
Filed: 20 Dec 07, 12:00am
MORGAN STANLEY INTERNATIONAL VALUE EQUITY FUND 522 Fifth Avenue New York, NY 10036 December 20, 2007 Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Attention: Larry Greene, Division of Investment Management RE: MORGAN STANLEY INTERNATIONAL VALUE EQUITY FUND (FILE NOS. 333-53546 AND 811-10273) Dear Mr. Greene: Thank you for your telephonic comments regarding the registration statement on Form N-1A for Morgan Stanley International Value Equity Fund (the "Fund") filed with the Securities and Exchange Commission (the "SEC") on October 11, 2007. Below, we describe the changes made to the registration statement in response to the Staff's comments and provide any responses to or any supplemental explanations of such comments, as requested. These changes will be reflected in post-effective amendment number 10 to the Fund's registration statement on Form N-1A, which will be filed via EDGAR on or about December 20, 2007. GENERAL COMMENTS TO FORM N-1A COMMENT 1. PLEASE FILE A RESPONSE LETTER TO THESE COMMENTS VIA EDGAR, INCLUDING THE "TANDY" PROVISION. Response 1. This response letter addressing the Staff's comments has been filed via EDGAR correspondence, including the "Tandy" provision, separate from the corresponding Post-Effective Amendment. COMMENTS TO THE PROSPECTUS COMMENT 2. IN THE FIRST PARAGRAPH OF THE SECTION "PRINCIPAL INVESTMENT STRATEGIES", THE PROSPECTUS STATES THAT "[A] COMPANY WILL BE CONSIDERED LOCATED OUTSIDE OF THE UNITED STATES IF IT (a) IS NOT ORGANIZED UNDER THE LAWS OF THE UNITED STATES, (b) DOES NOT HAVE SECURITIES WHICH ARE PRINCIPALLY TRADED ON A U.S. STOCK EXCHANGE, (c) DOES NOT DERIVE AT LEAST 50% OF ITS REVENUES FROM GOODS PRODUCED OR SOLD, INVESTMENTS MADE, OR SERVICES PERFORMED IN THE UNITED STATES OR (d) DOES NOT MAINTAIN AT LEAST 50% OF ITS ASSETS IN THE UNITED STATES. THE STAFF TAKES THE POSITION THAT THE SECOND PRONG MUST BE SATISFIED ALONG WITH THE REMAINING PRONGS. 1
Response 2. The Fund has amended the disclosure as noted to achieve compliance consistency across the Morgan Stanley fund complex. The amended disclosure will state: "The Subadviser ... may consider an issuer to be from a particular country or geographic region if (i) its principal securities trading market is in that country or geographic region; (ii) alone or on a consolidated basis it derives 50% or more of its annual revenue from goods produced, sales made or services performed in that country or geographic region; or (iii) it is organized under the laws of, or has a principal office in that country or geographic region. By applying these tests, it is possible that a particular issuer could be deemed to be from more than one country or geographic region." We respectfully acknowledge your comment, however, we believe that the test as disclosed in the prospectus is adequate and not misleading to investors. We believe that an issuer can be deemed to be from a particular country or geographic region if such issuer meets any one of the three prongs of the definition. In addition, the definition as disclosed in the prospectus is used by the Morgan Stanley compliance department to monitor the status of such issuers. Moreover, this test has been approved by the Fund's Board of Trustees. COMMENT 3. IN THE SECTION "PRINCIPAL RISKS - CONVERTIBLE SECURITIES", PLEASE CLARIFY WHETHER THE CONVERTIBLE SECURITIES IN WHICH THE FUND INVESTS MAY INCLUDE CONVERTIBLE SECURITIES THAT ARE BELOW INVESTMENT GRADE. Response 3. The Fund may invest up to 5% of its net assets in convertible securities rated below investment grade. As a result, junk bond disclosure is included in the Statement of Additional Information, not the Prospectus. COMMENT 4. IN THE "FEES AND EXPENSES" SECTION OF THE PROSPECTUS, INCLUDE DISCLOSURE RELATING TO THE FUND'S INVESTMENTS IN OTHER INVESTMENT COMPANIES, AS REQUIRED BY FORM N-1A ITEM 3(f)), AS APPLICABLE. Response 4. We confirm that the Fund's investments in other investment companies does not require the disclosure referred to in Item 3(f). COMMENT 5. PLEASE INCLUDE THE ORDER PROCESSING FEE IN THE FEE TABLE AS REQUIRED BY FORM N-1A IF AN INVESTOR CAN ONLY INVEST IN THE FUND THROUGH MORGAN STANLEY & CO. INCORPORATED ("MS & CO.") AND WILL INCUR THIS CHARGE WHEN IT INVESTS IN THE FUND. Response 5. Form N-1A requires that the costs and expenses that an investor will bear directly or indirectly be included in the fee table. 2
The order processing fee that Morgan Stanley & Co. charges clients when a client purchases or tenders shares of the Fund is not required to be included in the fee table because only investors that purchase shares through Morgan Stanley & Co. would be subject to that fee and the Fund is available through means other than Morgan Stanley & Co. COMMENT 6. IN THE "FUND MANAGEMENT" SECTION OF THE PROSPECTUS, IN THE DESCRIPTION OF MR. DEROLD'S BUSINESS EXPERIENCE, PLEASE CLARIFY WHAT TYPE OF BUSINESS IS "DCFN RESEARCH." Response 6. The requested disclosure has been added. COMMENT 7. IN THE "FUND MANAGEMENT" SECTION, THE PROSPECTUS STATES "[E]ACH MEMBER OF THE TEAM HAS GLOBAL SECTOR RESEARCH RESPONSIBILITIES, MAKES INVESTMENT MANAGEMENT DECISIONS FOR THE FUND AND IS RESPONSIBLE FOR THE OVERALL EXECUTION OF THE FUND. MESSRS. LOCK, WRIGHT, RIDDELL, DEROLD AND GOODACRE HAVE DAY-TO-DAY PORTFOLIO ADMINISTRATION RESPONSIBILITIES AS WELL." PLEASE CLARIFY IF "EACH MEMBER" INCLUDES ADDITIONAL TEAM MEMBERS THAT ARE NOT MENTIONED IN THE PROSPECTUS. Response 7. We have clarified the prospectus disclosure accordingly. COMMENT 8. IN THE "HOW TO SELL SHARES" SECTION, THE PROSPECTUS STATES "[I]F WE DETERMINE THAT IT IS IN THE BEST INTEREST OF OTHER SHAREHOLDERS NOT TO PAY REDEMPTION PROCEEDS IN CASH, WE MAY PAY YOU PARTLY OR ENTIRELY BY DISTRIBUTING TO YOU READILY MARKETABLE SECURITIES HELD BY THE FUND FROM WHICH YOU ARE REDEEMING. YOU MAY INCUR BROKERAGE CHARGES WHEN YOU SELL THOSE SECURITIES." IF SHAREHOLDERS MAY ALSO INCUR CAPITAL GAINS IN CONNECTION WITH PAYMENTS-IN-KIND, ADD RELATED DISCLOSURE. Response 8. Capital gains disclosure has been added. COMMENT 9. IN ACCORDANCE WITH ITEM 6(e) OF FORM N-1A AND RELEASE NO. IC-26782 (FOOTNOTE 45), DESCRIBE WITH SPECIFICITY THE FUND'S POLICIES, PROCEDURES AND RESTRICTIONS FOR DETERRING FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES BY SHAREHOLDERS WITH RESPECT TO TRANSACTIONS THAT OCCUR THROUGH OMNIBUS ACCOUNTS AT INTERMEDIARIES. IN 3
PARTICULAR, DESCRIBE THE TYPES OF FINANCIAL INTERMEDIARIES THROUGH WHICH SHARES WILL BE HELD. Response 9. We respectfully acknowledge the comment but believe the current disclosure in the Prospectus is specific and appropriate in describing the Fund's ability to monitor transactions that occur through intermediaries. As you have requested and consistent with SEC Release 2004-89, the Fund hereby acknowledges that: o the Fund is responsible for the adequacy and accuracy of the disclosure in the filings; o the Staff's comments or changes to disclosure in response to Staff comments in the filings reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filings; and o the Fund may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. If you would like to discuss any of these responses in further detail or if you have any questions, please feel free to contact me at (212) 296-6992. Thank you. Sincerely, /s/ Alice J. Gerstel -------------------------------- Alice J. Gerstel 4