Morgan Stanley Series Funds 522 Fifth Avenue New York, NY 10036 September 19, 2007 U.S. Securities and Exchange Commission 100 F Street, NE Washington, D.C. 20549 Attention: Larry L. Greene, Senior Counsel Re: MORGAN STANLEY SERIES FUNDS FILE NUMBERS 811-22075 AND 333-143505 Dear Mr. Greene: Thank you for your oral comments on September 5, 2007 in reference to our response letter dated August 16, 2007 which was in response to your comment letter dated July 3, 2007 regarding the registration statement on Form N-1A for the Morgan Stanley Series Funds, relating to the Morgan Stanley U.S. Quantitative Large Cap Fund (formerly, Morgan Stanley U.S. Quantitative Large Cap Core Fund) and the Morgan Stanley International Quantitative Fund (each a "Fund" and, together, the "Funds"), filed with the Securities and Exchange Commission on June 5, 2007. Below, we describe the changes made to the registration statement in response to your comments and provide any responses to or any supplemental explanations of such comments, as requested. These changes will be reflected in Pre-Effective Amendment No. 1 to the Fund's registration statement. PROSPECTUS - ---------- COMMENT 1. (FORMERLY COMMENT 2.) AMEND THE DEFINITION OF A U.S. ISSUER INCLUDED IN THE SECTION "PRINCIPAL INVESTMENT STRATEGIES" TO INDICATE THAT THE FIRST CRITERIA (I.E., ITS PRINCIPAL TRADING MARKET (I.E., A U.S. STOCK EXCHANGE OR OVER-THE- COUNTER MARKETS) IS IN THE UNITED STATES) MUST BE SATISFIED ALONG WITH ONE OF THE REMAINING TWO PRONGS. Response 1. We respectfully acknowledge your comment, however, we believe that the definition of a U.S. issuer as disclosed in the prospectus is adequate and not misleading to investors. We believe that an issuer can be deemed to be a U.S. issuer 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 definition of U.S. issuer has been approved by the Fund's Board of Trustees. COMMENT 2. (FORMERLY COMMENT 5.) CLARIFY WHETHER THE ASSETS USED TO COVER THE FUND'S DERIVATIVE INSTRUMENTS ARE CONSIDERED ILLIQUID. Response 2. The assets used to cover the Fund's derivative investments will include cash, Treasury bills or other liquid portfolio securities. A derivative investment is "covered" when the Fund owns the underlying security subject to the option or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional consideration held in a segregated account on the Fund's books) upon conversion or exchange of other securities held in the Fund's portfolio. Because the Fund must own the underlying security or have an absolute and immediate right to acquire such security with consideration maintained in a segregated account, we believe it is clear that such assets are illiquid. Disclosure to this effect is included in the Statement of Additional Information under the caption "Description of the Funds and Their Investments and Risks - Investment Strategies and Risks - Options and Futures Transactions - Covered Call Writing" located on page 4. COMMENT 3. (FORMERLY COMMENT 7.) DISCLOSURE CAPTIONED "MORGAN STANLEY INTERNATIONAL QUANTITATIVE FUND - PRINCIPAL INVESTMENT STRATEGIES" INDICATES THAT THE INTERNATIONAL FUND INVESTS PRIMARILY IN EQUITY SECURITIES OF NON-U.S. ISSUERS DOMICILED IN COUNTRIES COMPRISING THE MSCI EUROPE, AUSTRALASIA, FAR EAST INDEX AND THE TERM "DOMICILED" IS DEFINED BY SATISFYING ONE OF FOUR CRITERIA. AMEND THE CRITERIA TO INDICATE THAT THE FIRST CRITERIA (I.E., "ORGANIZED UNDER THE LAWS OF THE COUNTRY") MUST BE SATISFIED ALONG WITH ONE OF THE REMAINING THREE PRONGS. Response 3. The Fund has amended the disclosure as noted to achieve compliance consistency across the Morgan Stanley fund complex. The amended disclosure shall state: "The Investment Adviser 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." COMMENT 4. (FORMERLY COMMENT 18.) DISCLOSURE CAPTIONED "LIMITED PORTABILITY" INDICATES THAT SHAREHOLDERS MAY HAVE ONLY LIMITED ABILITY TO TRANSFER THEIR ACCOUNT TO ANOTHER SECURITIES DEALERS AND THAT FUND SHARES MAY ONLY BE TRANSFERRED TO ACCOUNTS HELD AT A LIMITED NUMBER OF SECURITIES DEALERS. CLARIFY WHETHER A TRANSFER WILL TRIGGER THE ORDER PROCESSING FEE DISCLOSED HEREIN. Response 4. The disclosure captioned "Limited Portability" has been removed. STATEMENT OF ADDITIONAL INFORMATION - ----------------------------------- COMMENT 5. (FORMERLY COMMENT 22.) ADD THE SUBSTANCE OF THE DISCUSSION SUB-CAPTIONED "REAL ESTATE INVESTMENT TRUSTS ("REITS")" TO THE PROSPECTUS. Response 5. Disclosure has been added to the prospectus to address the Fund's investment in REITs with respect to the Large Cap Fund. Disclosure with respect to the International Fund is included in the prospectus under the caption "Principal Risks - Foreign real estate companies" located on page 8. COMMENT 6. (FORMERLY COMMENT 23.) EACH FUND'S OBJECTIVE IS CAPITAL APPRECIATION. HOWEVER, EACH FUND ENGAGES IN REPURCHASE AGREEMENTS, THE LENDING OF SECURITIES, AND CERTAIN DERIVATIVES FOR THE PURPOSE OF GENERATING INCOME. EXPLAIN WHETHER THE FUNDS' HAVE A SECONDARY OBJECTIVE OF INCOME. Response 6. The Funds do not have a secondary objective of income. The Funds' engagement in repurchase agreements and the lending of securities are described only in the Funds' Statement of Additional Information and, accordingly, are not strategies of the Funds used to achieve their investment objectives. Rather, these investments are made to put to use assets that are not otherwise investable within the Funds' principal strategies. With respect to certain derivatives, the disclosure regarding generating income with regard to the International Fund's ability to sell covered call options was removed. 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) 296-6989 or Brynn D. Peltz of Clifford Chance US LLP at (212) 878-8055. Thank you. Best regards, /s/ Sheri Schreck Sheri Schreck
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CORRESP Filing
Morgan Stanley Series Funds Inactive CORRESPCorrespondence with SEC
Filed: 19 Sep 07, 12:00am