MORGAN STANLEY BALANCED FUND 1221 Avenue of the Americas New York, NY 10020 May 24, 2007 Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Attention: Larry Greene Division of Investment Management RE: MORGAN STANLEY BALANCED FUND (FILE NOS. 33-56853 AND 811-7245) Dear Mr. Greene: Thank you for your telephonic comments on May 10, 2007 regarding the registration statement on Form N-1A for Morgan Stanley Balanced Fund (the "Fund") filed with the Securities and Exchange Commission on March 26, 2007. Below, we provide responses or any supplemental explanations to the Staff's comments, as requested. Post-effective Amendment No. 17 to the Fund's registration statement on Form N-1A (the "Amendment"), will be filed via EDGAR on or about May 24, 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. COMMENT 2. PLEASE INDICATE WHETHER THE FUND IS CURRENT WITH ITS 40-17G FILINGS. Response 2. The Fund is current with such filings. COMMENT 3. WHEN SUBMITTING A FILING, PLEASE CHECK A PROPER BOX UNDER THE "APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING" ON THE COVER PAGE OF THE REGISTRATION STATEMENT. Response 3. Our review of the Fund's filing made pursuant to Rule 485(a) on March 26, 2007 shows a check in the box on the cover page of the filing next to " On May 31, 2007 pursuant to paragraph (a)(1)." 1 With respect to the Amendment, the Fund confirms that the box on the cover page of the filing next to "On May 31, 2007 pursuant to paragraph (b)" has been checked. COMMENTS TO THE PROSPECTUS -------------------------- COMMENT 4. IF THE FUND'S INVESTMENTS IN INVERSE FLOATING RATE SECURITIES WILL RAISE ANY UNIQUE ACCOUNTING ISSUES, PLEASE ADD APPROPRIATE DISCLOSURE. Response 4. The Fund is not aware of any current or future accounting issues relating to its investments in inverse floaters that would require additional disclosure in the Fund's registration statement. COMMENT 5. IN THE SECTION ENTITLED "ADDITIONAL INVESTMENT STRATEGIES", PLEASE PROVIDE THE PERCENTAGE LIMITATIONS FOR THE FUND'S INVESTMENTS IN OPTIONS AND FUTURES. Response 5. We respectfully acknowledge the comment, but believe the disclosure is sufficient as the Fund does not have any express percentage limit on its ability to engage in futures and options. We note that the placement of the "Options and Futures" disclosure in this section indicates that these techniques are not "principal investment strategies" as that term is defined in Item 2 of Form N-1A. COMMENT 6. IN THE ANNUAL FUND OPERATING EXPENSES TABLE PLEASE ADD APPROPRIATE DISCLOSURE TO THE FEE TABLE IN THE PROSPECTUS IF THE FUND INVESTED IN OTHER INVESTMENT COMPANIES DURING THE LAST FISCAL YEAR. Response 6. The Fund confirms that it did not incur "Acquired Fund Fees and Expenses" in amounts necessary to require disclosure pursuant to Item 3 of Form N-1A. COMMENT 7. IN THE "FEES AND EXPENSES" SECTION OF THE PROSPECTUS, CONSIDER MOVING THE FOOTNOTES TO AFTER THE EXAMPLE. Response 7. We respectfully acknowledge the comment, but believe the current placement of the footnotes is appropriate. We believe to move the footnotes to below the Example would diminish the impact of the information and could result in a shareholder being unable to locate the footnotes. COMMENT 8. IN THE SECTION ENTITLED "FUND MANAGEMENT", PLEASE CONFIRM THAT EACH MEMBER OF THE TEAM MANAGING THE FUND HAS BEEN LISTED. 2 Response 8. The Fund confirms that each portfolio manager that has primary responsibility for managing the Fund has been listed in the "Fund Management" section. COMMENTS TO THE STATEMENT OF ADDITIONAL INFORMATION --------------------------------------------------- COMMENT 9. UNDER "DESCRIPTION OF THE FUND AND ITS INVESTMENT STRATEGIES AND RISKS--OPTIONS AND FUTURES TRANSACTIONS", PLEASE DISCLOSE THAT THE FUND WILL USE SEGREGATED ACCOUNTS IN CONNECTION WITH ITS USE OF OPTIONS AND FUTURES. Response 9. The Fund confirms that such disclosure is included. COMMENT 10. UNDER "DESCRIPTION OF THE FUND AND ITS INVESTMENT STRATEGIES AND RISKS--LOANS OF PORTFOLIO SECURITIES", IF THE FUND'S LENDING AGENT IS AN AFFILIATE, PLEASE STATE SO. Response 10. The Fund does not use an affiliated lending agent. COMMENT 11. UNDER "DESCRIPTION OF THE FUND AND ITS INVESTMENT STRATEGIES AND RISKS--WHEN, AS AND IF SECURITIES", PLEASE DISCLOSE THAT THE FUND WILL USE SEGREGATED ACCOUNTS IN CONNECTION WITH ITS COMMITMENTS TO PURCHASE WHEN, AS AND IF SECURITIES. Response 11. The Fund confirms that such disclosure is included. COMMENT 12. IN THE SECTION ENTITLED "PORTFOLIO MANAGERS - PORTFOLIO MANAGER COMPENSATION STRUCTURE," INCLUDE ONLY THOSE ITEMS THAT FORMED THE BASIS OF THE DISCRETIONARY COMPENSATION RECEIVED BY THE PORTFOLIO MANAGERS OF THE FUND DURING THE LAST YEAR. Response 17. We believe the current disclosure is in compliance with SEC Release 2004-89. This Release requires that the SAI include disclosure regarding the structure of, and the method used to determine, the compensation of a fund's portfolio managers. The Release notes that the purpose of this disclosure is to help investors better understand a portfolio manager's incentives in managing a fund and to shed light on possible conflicts of interest that could arise when a portfolio manager manages other accounts. Therefore, in order to achieve this purpose, the disclosure, in our view, should include all possible forms of compensation that are available to the portfolio manager in connection with managing the portfolio and other accounts. 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; 3 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 212-762-8687. Sincerely, /s/ Edward Meehan Edward Meehan
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CORRESP Filing
Morgan Stanley Balanced Growth Fund Inactive CORRESPCorrespondence with SEC
Filed: 24 May 07, 12:00am