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: 811-02349

Morgan Stanley Income Securities Inc.
(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: September 30, 2003

Date of reporting period: September 30, 2003

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley Income
Securities performed during the annual period. We will provide an overview of
the market conditions, and discuss some of the factors that affected performance
during the reporting period. In addition, this report includes the Fund's
financial statements and a list of Fund investments.

Market forecasts provided in this report may not necessarily come to pass. There
is no assurance that the Fund will achieve its investment objective. The Fund is
subject to market risk, which is the possibility that market values of
securities owned by the Fund will decline and, therefore, the value of the Fund
shares may be less than what you paid for them. Accordingly you can lose money
investing in this Fund.

FUND REPORT

For the year ended September 30, 2003

MARKET OVERVIEW

The 12-month period ended September 30, 2003 was one of extreme volatility in
the fixed income markets. During the first four months of the period, interest
rates generally exhibited an upward trend. That pattern was strengthened in
early January, when a decrease in initial unemployment claims and strong results
in the Institute for Supply Management's purchasing manager survey seemed to
indicate a return to solid growth. The yield on the benchmark five-year Treasury
note rose from 2.56 percent at the end of September 2002 to 2.93 percent at the
end of January 2003.

By late spring, however, fears had arisen about a return to recession and
possibly even deflation. Consequently, the yield on the five-year Treasury note
fell, briefly dropping below 2 percent in mid June. That same month, the Federal
Open Market Committee lowered its key federal funds rate to 1 percent. Interest
rates reversed course again during the summer as market participants once more
sensed signs of a return to firm economic growth. The economic data were mixed
during the final months of the period, and interest rates came down somewhat as
investors tried to establish a new equilibrium.

Corporate bonds entered the period with unusually wide yield spreads, following
a series of accounting scandals and several quarters of weak corporate financial
results. These low valuations, coupled with expectations of economic recovery
and signs of improved corporate profits, drew investors to the corporate market.
Spreads had narrowed considerably by the end of the period, though they remained
somewhat wide by historical standards. Lower-quality bonds generally
outperformed their more conservative peers.

PERFORMANCE ANALYSIS

For the 12-month period ended September 30, 2003, the net asset value (NAV) of
Morgan Stanley Income

Securities Inc. (ICB) increased from $16.13 to $17.42 per share. Based on this
change plus the reinvestment of dividends totaling $0.93 per share, the Fund's
total NAV return was 14.64 percent. ICB's value on the New York Stock Exchange
(NYSE) increased from $15.23 to $15.87 per share during the same period. Based
on this change plus the reinvestment of dividends, ICB's total market return was
10.61 percent. ICB's share price was trading at an 8.9 percent discount to its
NAV on September 30, 2003. Past performance is no guarantee of future results.

Monthly dividends for the fourth quarter of 2003, declared in September,
remained unchanged at $0.08 per share to reflect the Fund's current and
projected earnings level.

The Fund's performance can be attributed to its heavy emphasis on corporate
bonds. Performance was driven primarily by the Fund's holdings in BBB-rated
securities, which posted the best absolute and relative returns of all
investment-grade sectors for the period. Not surprisingly, the sectors that had
the most difficulty during the preceding period typically posted the best
results during this review period. Among those, our positions in utility and
telecommunications-related securities contributed positively to performance.

The Fund's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps support
the market value of the Fund's shares. In addition, we would like to remind you
that the Directors have approved a procedure whereby the Fund may, when
appropriate, purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase.

<Table>
<Caption>
PORTFOLIO COMPOSITION

Corporate Debt 94.4%
Foreign Government Bonds 4.9
Short-Term investments 0.7

</Table>

<Table>
<Caption>
CREDIT ANALYSIS

AAA 2.0%
AA 1.7
A 15.5
BBB 67.0
BB 12.5
B or Below 1.3
</Table>

Subject to change daily. All percentages are as a percentage of total
investments. Provided for information purposes only and should not be deemed as
a recommendation to buy or sell the securities mentioned. Morgan Stanley is a
full-service firm engaged in securities trading and brokerage activities,
investment banking, research and analysis, financing and financial advisory
services.

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

Corporate Bonds (92.1%)
Aerospace & Defense (2.9%)
$ 655 Goodrich Corp. ........................................... 7.625% 12/15/12 $ 754,877
875 Lockheed Martin Corp. .................................... 8.20 12/01/09 1,083,288
1,090 Lockheed Martin Corp. .................................... 8.50 12/01/29 1,458,032
1,140 Raytheon Co. ............................................. 8.20 03/01/06 1,290,078
744 Systems 2001 Asset Trust - 144A*.......................... 6.664 09/15/13 832,969
------------
5,419,244
------------
Air Freight/Couriers (1.2%)
2,000 FedEx Corp. .............................................. 7.25 02/15/11 2,316,236
------------

Airlines (0.8%)
1,529 Continental Airlines, Inc. ............................... 6.90 01/02/18 1,476,842
------------

Apparel/Footwear Retail (0.3%)
470 Gap, Inc. (The)........................................... 10.55 12/15/08 565,175
------------

Auto Parts: O.E.M. (0.5%)
425 ArvinMeritor, Inc. ....................................... 6.625 06/15/07 418,625
555 ArvinMeritor, Inc. ....................................... 8.75 03/01/12 581,363
------------
999,988
------------
Beverages: Alcoholic (0.5%)
835 Miller Brewing Co. - 144A*................................ 4.25 08/15/08 857,871
------------

Broadcasting (0.9%)
1,430 Clear Channel Communications, Inc. ....................... 7.65 09/15/10 1,695,301
------------

Cable/Satellite TV (4.9%)
1,420 Comcast Cable Communications Inc. ........................ 6.75 01/30/11 1,601,333
1,400 Comcast Cable Communications Inc. ........................ 7.125 06/15/13 1,611,197
985 Comcast Cable Communications Inc. ........................ 8.375 05/01/07 1,153,006
1,700 Comcast Corp. ............................................ 6.50 01/15/15 1,872,934
680 Echostar DBS Corp. ....................................... 9.375 02/01/09 725,050
650 Echostar DBS Corp. - 144A*................................ 6.375 10/01/11 650,000
1,325 Liberty Media Corp. ...................................... 5.70 05/15/13 1,322,965
390 TCI Communications, Inc. ................................. 7.875 02/15/26 461,525
------------
9,398,010
------------
</Table>

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PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

Casino/Gaming (3.0%)
$1,840 Harrah's Operating Co., Inc. ............................. 8.00% 02/01/11 $ 2,179,487
1,045 MGM Mirage Inc. .......................................... 8.50 09/15/10 1,175,625
1,955 Park Place Entertainment Corp. ........................... 7.50 09/01/09 2,096,737
255 Station Casinos, Inc. .................................... 8.375 02/15/08 275,081
------------
5,726,930
------------
Chemicals: Specialty (0.1%)
50 FMC Corp. ................................................ 10.25 11/01/09 57,000
165 Millennium America, Inc. ................................. 9.25 06/15/08 171,187
------------
228,187
------------
Containers/Packaging (1.3%)
535 Owens-Brockway Glass Containers Corp. .................... 7.75 05/15/11 553,725
525 Owens-Brockway Glass Containers Corp. .................... 8.75 11/15/12 563,063
505 Packaging Corp of America - 144A*......................... 5.75 08/01/13 512,895
770 Sealed Air Corp - 144A*................................... 5.625 07/15/13 780,017
------------
2,409,700
------------
Department Stores (2.3%)
2,800 Federated Department Stores, Inc. ........................ 6.625 09/01/08 3,182,099
610 May Department Stores Co., Inc. .......................... 5.95 11/01/08 671,137
265 May Department Stores Co., Inc. .......................... 6.70 09/15/28 280,320
165 May Department Stores Co., Inc. .......................... 6.90 01/15/32 179,992
------------
4,313,548
------------
Electric Utilities (7.8%)
645 Appalachian Power Co. (Series H).......................... 5.95 05/15/33 615,956
530 Cincinnati Gas & Electric Co. ............................ 5.70 09/15/12 563,202
365 Cincinnati Gas & Electric Co. (Series A).................. 5.40 06/15/33 335,381
290 Cincinnati Gas & Electric Co. (Series B).................. 5.375 06/15/33 265,466
805 Columbus Southern Power Co.- 144A*........................ 6.60 03/01/33 861,480
625 Constellation Energy Group, Inc. ......................... 7.60 04/01/32 732,873
1,775 Consumers Energy Co. - 144A*.............................. 4.00 05/15/10 1,710,914
90 Consumers Energy Co. - 144A*.............................. 4.80 02/17/09 92,300
195 Consumers Energy Co. - 144A*.............................. 5.375 04/15/13 195,189
835 Duquesne Light Co. ....................................... 6.70 04/15/12 942,789
980 Exelon Corp. ............................................. 6.75 05/01/11 1,108,793
1,505 FirstEnergy Corp. (Series B).............................. 6.45 11/15/11 1,570,468
455 FirstEnergy Corp. (Series C).............................. 7.375 11/15/31 465,770
280 Florida Power & Light Co. ................................ 4.85 02/01/13 287,088
215 Indianapolis Power & Light Co. - 144A*.................... 6.30 07/01/13 220,499
380 Monongahela Power Co. .................................... 5.00 10/01/06 380,950
635 Ohio Edison Co. - 144A*................................... 5.45 05/01/15 619,712
</Table>

5
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Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

$ 675 Ohio Power Co. - 144A*.................................... 6.60% 02/15/33 $ 721,385
600 PSEG Energy Holdings...................................... 8.625 02/15/08 610,500
1,080 PSEG Energy Holdings...................................... 9.125 02/10/04 1,090,800
1,075 TXU Energy Co. - 144A*.................................... 7.00 03/15/13 1,168,609
55 Wisconsin Electric Power Co. ............................. 5.625 05/15/33 54,497
270 Wisconsin Energy Corp. ................................... 6.20 04/01/33 277,918
------------
14,892,539
------------
Electronic Distributors (0.5%)
820 Arrow Electronics, Inc. .................................. 6.875 07/01/13 827,688
190 Arrow Electronics, Inc. .................................. 6.875 06/01/18 187,137
------------
1,014,825
------------
Electronic Equipment/Instruments (0.4%)
755 Xerox Corp. .............................................. 7.125 06/15/10 749,338
------------

Environmental Services (2.1%)
310 Allied Waste North America, Inc. ......................... 8.50 12/01/08 334,800
715 Republic Services Inc. ................................... 6.75 08/15/11 804,000
2,230 USA Waste Services, Inc. ................................. 7.125 10/01/07 2,505,035
235 Waste Management, Inc. ................................... 7.375 05/15/29 268,864
------------
3,912,699
------------
Finance/Rental/Leasing (4.9%)
3,520 Ford Motor Credit Co. .................................... 7.25 10/25/11 3,673,468
1,395 Ford Motor Credit Co. .................................... 7.375 10/28/09 1,486,935
900 Hertz Corp. .............................................. 7.625 08/15/07 979,378
350 MBNA America Bank NA...................................... 7.125 11/15/12 401,446
1,810 MBNA Corp. ............................................... 6.125 03/01/13 1,934,977
800 Newcourt Credit Group Inc. ............................... 6.875 02/16/05 854,114
------------
9,330,318
------------
Financial Conglomerates (5.4%)
615 Boeing Capital Corp. ..................................... 5.80 01/15/13 643,008
495 Boeing Capital Corp. ..................................... 6.10 03/01/11 532,604
210 Boeing Capital Corp. ..................................... 6.50 02/15/12 230,207
675 General Motors Acceptance Corp. .......................... 4.50 07/15/06 689,368
4,120 General Motors Acceptance Corp. .......................... 6.875 09/15/11 4,276,572
2,395 General Motors Acceptance Corp. .......................... 8.00 11/01/31 2,460,096
1,120 Prudential Holdings, LLC (Series C) - 144A*.............. 8.695 12/18/23 1,374,822
------------
10,206,677
------------
</Table>

6
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PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

Food Retail (1.4%)
$2,060 Kroger Co. ............................................... 7.50% 04/01/31 $ 2,429,756
190 Kroger Co. ............................................... 7.70 06/01/29 226,349
------------
2,656,105
------------
Food: Major Diversified (0.2%)
410 Kraft Foods Inc. ......................................... 6.25 06/01/12 449,562
------------

Food: Meat/Fish/Dairy (0.7%)
1,190 Smithfield Foods Inc. .................................... 8.00 10/15/09 1,297,100
95 Smithfield Foods Inc. - 144A*............................. 7.75 05/15/13 101,888
------------
1,398,988
------------
Forest Products (1.7%)
2,945 Weyerhaeuser Co. ......................................... 6.75 03/15/12 3,276,274
------------

Gas Distributors (0.7%)
585 Nisource Finance Corp. ................................... 7.625 11/15/05 646,922
109 Ras Laffan Liquid Natural Gas Co. Ltd. - 144A* (Qatar).... 7.628 09/15/06 116,055
440 Ras Laffan Liquid Natural Gas Co. Ltd. - 144A* (Qatar).... 8.294 03/15/14 514,800
------------
1,277,777
------------
Home Building (1.6%)
630 Centex Corp. ............................................. 7.875 02/01/11 745,700
685 D.R. Horton, Inc. ........................................ 6.875 05/01/13 688,425
640 Pulte Homes, Inc. ........................................ 6.375 05/15/33 614,103
900 Pulte Homes, Inc. ........................................ 7.875 08/01/11 1,064,766
------------
3,112,994
------------
Home Furnishings (0.4%)
600 Mohawk Industries Inc. ................................... 7.20 04/15/12 682,283
------------

Hospital/Nursing Management (3.3%)
1,475 Columbia/HCA Healthcare Corp. ............................ 7.19 11/15/15 1,566,934
85 Columbia/HCA Healthcare Corp. ............................ 9.00 12/15/14 101,836
640 HCA Inc. ................................................. 6.30 10/01/12 652,303
910 Manor Care, Inc. ......................................... 8.00 03/01/08 1,019,200
2,214 Tenet Healthcare Corp. ................................... 6.875 11/15/31 2,003,670
860 Tenet Healthcare Corp. ................................... 7.375 02/01/13 866,450
------------
6,210,393
------------
</Table>

7
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Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

Hotels/Resorts/Cruiselines (2.9%)
$1,370 Hilton Hotels Corp. ...................................... 7.625% 12/01/12 $ 1,496,725
1,140 Hyatt Equities LLC - 144A*................................ 6.875 06/15/07 1,205,209
545 Marriott International, Inc. (Series D)................... 8.125 04/01/05 593,801
285 Marriott International, Inc. (Series E)................... 7.00 01/15/08 322,865
310 Starwood Hotels & Resorts Worldwide, Inc. ................ 7.375 05/01/07 332,475
1,455 Starwood Hotels & Resorts Worldwide, Inc. ................ 7.875 05/01/12 1,593,225
------------
5,544,300
------------
Industrial Conglomerates (0.8%)
730 Hutchison Whampoa International Ltd. - 144A* (Virgin
Islands)................................................ 6.50 02/13/13 759,496
150 Tyco International Group S.A. (Luxembourg)................ 5.80 08/01/06 155,625
520 Tyco International Group S.A. (Luxembourg)................ 6.375 10/15/11 536,250
55 Tyco International Group S.A. (Luxembourg)................ 6.75 02/15/11 58,025
------------
1,509,396
------------
Industrial Machinery (0.6%)
1,120 Kennametal Inc. .......................................... 7.20 06/15/12 1,210,709
------------

Information Technology Services (0.7%)
520 Electronic Data Systems Corp. ............................ 7.125 10/15/09 543,400
885 Electronic Data Systems Corp. - 144A*..................... 6.00 08/01/13 850,653
------------
1,394,053
------------
Integrated Oil (1.2%)
2,025 Amerada Hess Corp. ....................................... 7.875 10/01/29 2,305,120
------------

Major Telecommunications (6.0%)
3,220 AT&T Corp. ............................................... 8.50 11/15/31 3,812,390
1,460 Deutsche Telekom International Finance Corp.
(Netherlands)........................................... 8.75 06/15/30 1,852,014
1,495 GTE Corp. ................................................ 6.94 04/15/28 1,606,419
1,720 Sprint Capital Corp. ..................................... 8.375 03/15/12 2,028,874
400 Verizon Global Funding Corp. ............................. 7.75 12/01/30 480,482
1,515 Verizon New England Inc. ................................. 6.50 09/15/11 1,705,885
------------
11,486,064
------------
Managed Health Care (2.6%)
1,900 Aetna, Inc. .............................................. 7.875 03/01/11 2,269,998
640 Cigna Corp. .............................................. 6.375 10/15/11 689,546
1,560 Health Net, Inc. ......................................... 8.375 04/15/11 1,882,967
------------
4,842,511
------------
</Table>

8
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PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

Media Conglomerates (2.9%)
$2,320 AOL Time Warner Inc. ..................................... 6.875% 05/01/12 $ 2,603,105
2,160 AOL Time Warner Inc. ..................................... 7.625 04/15/31 2,455,218
410 AOL Time Warner Inc. ..................................... 7.70 05/01/32 470,716
40 Time Warner, Inc. ........................................ 6.625 05/15/29 40,681
------------
5,569,720
------------
Medical Distributors (0.3%)
555 AmerisourceBergen Corp. .................................. 8.125 09/01/08 602,175
------------

Miscellaneous Commercial Services (0.4%)
245 Iron Mountain Inc. ....................................... 6.625 01/01/16 232,138
487 Iron Mountain Inc. ....................................... 7.75 01/15/15 502,828
------------
734,966
------------
Motor Vehicles (2.4%)
750 DaimlerChrysler North American Holdings Co. .............. 8.00 06/15/10 873,981
480 DaimlerChrysler North American Holdings Co. .............. 8.50 01/18/31 561,116
425 Ford Motor Co. ........................................... 7.45 07/16/31 391,950
2,600 Ford Motor Co. ........................................... 8.875 11/15/22 2,669,922
------------
4,496,969
------------
Multi-Line Insurance (2.5%)
1,485 Farmers Exchange Capital - 144A*.......................... 7.05 07/15/28 1,389,670
1,580 Farmers Insurance Capital - 144A*......................... 8.625 05/01/24 1,611,600
1,125 Nationwide Mutual Insurance Co. - 144A*................... 7.50 02/15/24 1,175,099
480 Nationwide Mutual Insurance Co. - 144A*................... 8.25 12/01/31 572,224
------------
4,748,593
------------
Oil & Gas Pipelines (1.2%)
555 GulfTerra Energy Partners, L.P. .......................... 8.50 06/01/10 598,013
950 GulfTerra Energy Partners, L.P. - 144A*................... 6.25 06/01/10 945,250
570 Texas Eastern Transmission, L.P. ......................... 7.00 07/15/32 631,612
------------
2,174,875
------------
Oil & Gas Production (1.8%)
85 Devon Financing Corp. .................................... 6.875 09/30/11 97,565
245 Kerr-McGee Corp. ......................................... 5.875 09/15/06 265,607
470 Kerr-McGee Corp. ......................................... 6.875 09/15/11 532,927
1,340 Pemex Project Funding Master Trust........................ 8.00 11/15/11 1,514,200
75 Pemex Project Funding Master Trust........................ 8.625 02/01/22 83,625
910 Vintage Petroleum, Inc. .................................. 7.875 05/15/11 944,125
------------
3,438,049
------------
</Table>

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PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

Oil Refining/Marketing (0.8%)
$ 365 Ashland Inc. ............................................. 7.83% 08/15/05 $ 394,896
1,015 Marathon Oil Corp. ....................................... 6.80 03/15/32 1,104,530
------------
1,499,426
------------
Oilfield Services/Equipment (0.2%)
370 Key Energy Services, Inc. ................................ 6.375 05/01/13 369,075
------------

Other Consumer Services (1.5%)
1,120 Cendant Corp. ............................................ 7.125 03/15/15 1,272,049
1,385 Cendant Corp. ............................................ 7.375 01/15/13 1,596,721
------------
2,868,770
------------
Other Metals/Minerals (1.4%)
1,660 Inco Ltd. (Canada)........................................ 7.20 09/15/32 1,812,934
720 Inco Ltd. (Canada)........................................ 7.75 05/15/12 852,197
------------
2,665,131
------------
Publishing: Newspapers (1.9%)
140 News America Holdings Inc. ............................... 7.75 01/20/24 163,414
3,000 News America Inc. ........................................ 7.25 05/18/18 3,481,230
------------
3,644,644
------------
Pulp & Paper (3.4%)
1,225 Abitibi-Consolidated Inc. (Canada)........................ 8.55 08/01/10 1,337,569
485 Abitibi-Consolidated Inc. (Canada)........................ 8.85 08/01/30 506,055
1,680 Bowater Canada Finance (Canada)........................... 7.95 11/15/11 1,731,292
1,395 International Paper Co. .................................. 5.85 10/30/12 1,484,782
865 MeadWestVaco Corp. ....................................... 6.85 04/01/12 974,331
455 Sappi Papier Holding AG - 144A* (Austria)................. 6.75 06/15/12 504,142
------------
6,538,171
------------
Real Estate Development (0.6%)
855 World Financial Properties - 144A*........................ 6.91 09/01/13 954,918
236 World Financial Properties - 144A*........................ 6.95 09/01/13 263,720
------------
1,218,638
------------
Real Estate Investment Trusts (2.8%)
1,615 EOP Operating LP.......................................... 6.763 06/15/07 1,807,140
100 iStar Financial Inc. ..................................... 7.00 03/15/08 104,000
665 iStar Financial Inc. ..................................... 8.75 08/15/08 744,800
110 Simon Property Group L.P. ................................ 6.35 08/28/12 120,399
</Table>

10
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Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

$1,600 Simon Property Group L.P. ................................ 6.375% 11/15/07 $ 1,779,957
715 Vornado Realty Trust...................................... 5.625 06/15/07 762,956
------------
5,319,252
------------
Savings Banks (0.5%)
760 Washington Mutual Inc. ................................... 8.25 04/01/10 925,376
------------

Services to the Health Industry (0.2%)
175 Medco Health Solutions, Inc. ............................. 7.25 08/15/13 186,528
235 Omnicare, Inc. ........................................... 6.125 06/01/13 230,300
------------
416,828
------------
Specialty Stores (0.4%)
750 Toys "R" Us, Inc. ........................................ 7.375 10/15/18 769,499
------------

Tobacco (0.8%)
1,450 Altria Group, Inc. ....................................... 7.75 01/15/27 1,514,163
------------

Wireless Telecommunications (1.5%)
330 AT&T Wireless Services, Inc. ............................. 7.875 03/01/11 384,137
2,015 AT&T Wireless Services, Inc. ............................. 8.75 03/01/31 2,492,231
------------
2,876,368
------------
Total Corporate Bonds (Cost $163,696,930).................................... 175,260,645
------------
Foreign Government Obligations (4.8%)
60 Petro-Canada.............................................. 4.00 07/15/13 56,418
1,150 Petro-Canada.............................................. 5.35 07/15/33 1,048,647
3,000 Israel (State of)......................................... 7.25 12/15/28 3,262,101
590 United Mexican States (Mexico)............................ 8.30 08/15/31 669,945
3,395 United Mexican States (Mexico)............................ 8.375 01/14/11 4,040,050
------------
Total Foreign Government Obligations (Cost $8,175,647)....................... 9,077,161
------------
Short-Term Investments (0.7%)
U.S. Government Obligation (a) (0.4%)
700 U.S. Treasury Bill** (Cost $696,578)...................... 1.02 03/25/04 696,509
------------
</Table>

11
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Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------

Repurchase Agreement (0.3%)
$ 621 Joint repurchase agreement account (dated 09/30/03;
proceeds $621,019) (b) (Cost $621,000).................. 1.085% 10/01/03 $ 621,000
------------
Total Short-Term Investments (Cost $1,317,578)............................... 1,317,509
------------

Total Investments (Cost $173,190,155) (c)(d)....................... 97.6% 185,655,315

Other Assets in Excess of Liabilities.............................. 2.4 4,647,128
----- ------------
Net Assets......................................................... 100.0% $190,302,443
===== ============
</Table>

- ---------------------

<Table>

* Resale is restricted to qualified institutional investors.
** Security is segregated in connection with open futures
contracts.
(a) Purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by federal agency and U.S. Treasury
obligations.
(c) Securities have been designated as collateral in an amount
equal to $696,509 in connection with open futures contracts.
(d) The aggregate cost for federal income tax purposes is
$173,591,498. The aggregate gross unrealized appreciation is
$12,946,537 and the aggregate gross unrealized depreciation
is $882,720, resulting in net unrealized appreciation of
$12,063,817.
</Table>

Futures Contracts Open at September 30, 2003:

<Table>
<Caption>
UNREALIZED
NUMBER OF DESCRIPTION/DELIVERY UNDERLYING FACE APPRECIATION
CONTRACTS LONG/SHORT MONTH AND YEAR AMOUNT AT VALUE (DEPRECIATION)
- --------- ---------- ---------------------- ------------------------ --------------

82 Short U.S. Treasury Bonds $ (9,196,813) $ (503,765)
December 2003
10 Long U.S. Treasury Notes 5 1,134,688 22,160
Year, December 2003
320 Short U.S. Treasury Notes 10 (36,680,000) (1,248,702)
Year, December 2003
-----------
Net Unrealized Depreciation..................... $(1,730,307)
===========
</Table>

12
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
September 30, 2003

<Table>

Assets:
Investments in securities, at value
(cost $173,190,155)....................................... $185,655,315
Receivable for:
Interest................................................ 3,289,704
Investments sold........................................ 3,265,258
Prepaid expenses and other assets........................... 10,631
------------
Total Assets............................................ 192,220,908
------------
Liabilities:
Payable for:
Investments purchased................................... 1,147,183
Variation margin........................................ 500,813
Investment management fee............................... 82,286
Capital stock repurchased............................... 60,226
Accrued expenses and other payables......................... 127,957
------------
Total Liabilities....................................... 1,918,465
------------
Net Assets.............................................. $190,302,443
============
Composition of Net Assets:
Paid-in-capital............................................. $201,427,246
Net unrealized appreciation................................. 10,734,853
Accumulated undistributed net investment income............. 323,587
Accumulated net realized loss............................... (22,183,243)
------------
Net Assets.............................................. $190,302,443
============
Net Asset Value Per Share,
10,922,518 shares outstanding (15,000,000 shares authorized
of $.01 par value).......................................... $17.42
============
</Table>

13
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS continued

Statement of Operations
For the year ended September 30, 2003

<Table>

Net Investment Income:
Interest Income............................................. $12,067,487
-----------
Expenses
Investment management fee................................... 932,037
Transfer agent fees and expenses............................ 161,996
Professional fees........................................... 49,716
Shareholder reports and notices............................. 37,876
Directors' fees and expenses................................ 19,780
Registration fees........................................... 18,966
Custodian fees.............................................. 8,811
Other....................................................... 14,762
-----------
Total Expenses.......................................... 1,243,944
-----------
Net Investment Income................................... 10,823,543
-----------
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments............................................... 3,050,788
Futures contracts......................................... (1,104,687)
-----------
Net Realized Gain....................................... 1,946,101
-----------
Net Change in Unrealized Appreciation/Depreciation on:
Investments............................................... 11,904,576
Futures contracts......................................... (483,461)
-----------
Net Appreciation........................................ 11,421,115
-----------
Net Gain................................................ 13,367,216
-----------
Net Increase................................................ $24,190,759
===========
</Table>

14
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------

Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 10,823,543 $ 11,894,279
Net realized gain (loss).................................... 1,946,101 (11,115,609)
Net change in unrealized appreciation/depreciation.......... 11,421,115 1,130,584
------------ ------------
Net Increase............................................ 24,190,759 1,909,254
------------ ------------
Dividends and Distributions to Shareholders from:
Net investment income....................................... (10,354,979) (12,776,488)
Paid-in-capital............................................. -- (170,765)
------------ ------------
Total Dividends and Distributions....................... (10,354,979) (12,947,253)
------------ ------------

Decrease from capital stock transactions.................... (5,993,886) (1,364,692)
------------ ------------
Net Increase (Decrease)................................. 7,841,894 (12,402,691)
Net Assets:
Beginning of period......................................... 182,460,549 194,863,240
------------ ------------
End of Period
(Including accumulated undistributed net investment income
of $323,587 and dividends in excess of net investment income
of $189,696, respectively).................................. $190,302,443 $182,460,549
============ ============
</Table>

15
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003

1. Organization and Accounting Policies

Morgan Stanley Income Securities Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Fund's primary investment objective is to
provide as high a level of current income as is consistent with prudent
investment and, as a secondary objective, capital appreciation. The Fund
commenced operations on April 6, 1973.

The following is a summary of significant accounting policies:

A. Valuation of Investments -- (1) all portfolio securities for which
over-the-counter market quotations are readily available are valued at the last
reported bid price; (2) when market quotations are not readily available or
Morgan Stanley Investment Advisors Inc. (the "Investment Manager") determines
that the latest bid price does 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
Directors; (3) certain portfolio securities may be valued by an outside pricing
service approved by the Fund's Trustees; (4) futures are valued at the latest
price published by the commodities exchange on which they trade; and (5)
short-term debt securities having a maturity date of more than sixty days at
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.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.

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 Manager, 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. 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

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 continued

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
and 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.

E. Federal Income Tax Policy -- It is the Fund's policy to comply 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.

F. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.

G. 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 Management Agreement

Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued weekly and payable monthly, by applying the
annual rate of 0.50% to the Fund's weekly net assets.

3. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales/prepayments of portfolio
securities, excluding short-term investments, for the year ended September 30,
2003 aggregated $107,691,516 and $100,241,806, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$2,071,127, and $2,358,726, respectively.

Morgan Stanley Trust, an affiliate of the Investment Manager, is the Fund's
transfer agent. At September 30, 2003, the Fund had transfer agent fees and
expenses payable of approximately $16,000.

The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended September 30, 2003
included in Directors' fees and expenses in the Statement of Operations amounted
to $7,381. At

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 continued

September 30, 2003, the Fund had an accrued pension liability of $59,447 which
is included in accrued expenses in the Statement of Assets and Liabilities.

4. Capital Stock

<Table>
<Caption>
CAPITAL
PAID IN
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
---------- --------- ------------

Balance, September 30, 2001................................. 11,395,818 $113,956 $215,498,308
Treasury shares purchased and retired (weighted average
discount 5.16%)*.......................................... (86,800) (868) (1,363,824)
Distribution from paid-in-capital........................... -- -- (170,765)
---------- -------- ------------
Balance, September 30, 2002................................. 11,309,018 113,088 213,963,719
Treasury shares purchased and retired (weighted average
discount 7.46%)*.......................................... (386,500) (3,865) (5,990,021)
Reclassification due to permanent book/tax differences...... -- -- (6,655,675)
---------- -------- ------------
Balance, September 30, 2003................................. 10,922,518 $109,223 $201,318,023
========== ======== ============
</Table>

- ---------------------
* The Directors have voted to retire the shares purchased.

5. Dividends

On September 23, 2003, the Fund declared the following dividends from net
investment income:

<Table>
<Caption>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ---------------- -----------------

$0.08 October 3, 2003 October 17, 2003
$0.08 November 7, 2003 November 21, 2003
$0.08 December 5, 2003 December 19, 2003
</Table>

6. Purposes of and Risks Relating to Certain Financial Instruments

To hedge against adverse interest rate and market risks, the Fund may enter into
interest rate futures contracts ("futures contracts").

These futures contracts involve element of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the value of the underlying securities.

At September 30, 2003, the Fund had outstanding futures contracts.

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 continued

7. 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 was as follows:

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------

Ordinary income............................................. $10,354,979 $12,833,504
Long-term capital gains..................................... -- --
Paid-in capital............................................. -- 113,749
----------- -----------
Total distributions......................................... $10,354,979 $12,947,253
=========== ===========
</Table>

As of September 30, 2003, the tax-basis components of accumulated losses were as
follows:

<Table>

Undistributed ordinary income............................... $ 737,521
Undistributed long-term gains............................... --
------------
Net accumulated earnings.................................... 737,521
Capital loss carryforward*.................................. (23,866,694)
Temporary differences....................................... (59,447)
Net unrealized appreciation................................. 12,063,817
------------
Total accumulated losses.................................... $(11,124,803)
============
</Table>

* As of September 30, 2003, the Fund had a net capital loss carryforward of
$23,866,694 of which $2,634,142 will expire on September 30, 2004, $1,998,583
will expire on September 30, 2009, $9,696,127 will expire on September 30, 2010
and $9,537,842 will expire on September 30, 2011 to offset future capital gains
to the extent provided by regulations.

As of September 30, 2003, the Fund had temporary book/tax differences primarily
attributable to book amortization of premiums on debt securities and
mark-to-market of open futures contracts and permanent book/tax differences
primarily attributable to tax adjustments on debt securities sold by the Fund
and an expired capital loss carryforward. To reflect reclassifications arising
from the permanent differences, paid-in-capital was charged $6,655,675,
accumulated net realized loss was credited $6,610,956 and accumulated
undistributed net investment income was credited $44,719.

Morgan Stanley Income Securities Inc.
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of capital stock outstanding
throughout each period:

<Table>
<Caption>
FOR THE YEAR ENDED SEPTEMBER 30
---------------------------------------------------------------------
2003 2002 2001 2000 1999
--------- --------- --------- --------- ---------

Selected Per Share Data:

Net asset value, beginning of period...................... $16.13 $17.10 $16.83 $17.51 $19.04
------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment income................................. 0.97* 1.05* 1.28* 1.33* 1.34
Net realized and unrealized gain (loss)............... 1.21 (0.89) 0.31 (0.72) (1.55)
------ ------ ------ ------ ------

Total income (loss) from investment operations............ 2.18 0.16 1.59 0.61 (0.21)
------ ------ ------ ------ ------

Less dividends and distributions from:
Net investment income................................. (0.93) (1.12) (1.32) (1.34) (1.32)
Paid-in-capital....................................... -- (0.02) -- -- --
------ ------ ------ ------ ------

Total dividends and distributions......................... (0.93) (1.14) (1.32) (1.34) (1.32)
------ ------ ------ ------ ------

Anti-dilutive effect of acquiring treasury shares*........ 0.04 0.01 -- 0.05 --
------ ------ ------ ------ ------

Net asset value, end of period............................ $17.42 $16.13 $17.10 $16.83 $17.51
====== ====== ====== ====== ======

Market value, end of period............................... $15.87 $15.23 $17.00 $16.06 $16.31
====== ====== ====== ====== ======

Total Return+............................................. 10.61% (3.89)% 14.07% 7.17% (1.04)%

Ratios to Average Net Assets:
Expenses.................................................. 0.67% 0.66% 0.67% 0.65% 0.66%

Net investment income..................................... 5.81% 6.28% 7.53% 7.89% 7.39%

Supplemental Data:
Net assets, end of period, in thousands................... $190,302 $182,461 $194,863 $192,131 $206,782

Portfolio turnover rate................................... 56% 62% 105% 26% 38%
</Table>

- ---------------------

<Table>

* The per share amounts were computed using an average number
of shares outstanding during the period.
+ Total return is based upon the current market value on the
last day of each period reported. Dividends and
distributions are assumed to be reinvested at the prices
obtained under the Fund's dividend reinvestment plan. Total
return does not reflect brokerage commissions.
</Table>

20
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors of
Morgan Stanley Income Securities Inc.:

We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Income Securities Inc. (the "Fund"), including the portfolio of
investments, as of September 30, 2003, 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 auditing standards generally accepted
in the United States of America. 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2003, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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 Morgan
Stanley Income Securities Inc. as of September 30, 2003, the results of its
operations for the year then ended, the changes in its 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
November 14, 2003

2003 FEDERAL TAX NOTICE (UNAUDITED)

Of the Fund's ordinary income dividends paid during the fiscal
year ended September 30, 2003, 0.21% was attributable to
qualifying Federal obligations. Please consult your tax
advisor to determine if any portion of the dividends you
received is exempt from state income tax.

Morgan Stanley Income Securities Inc.
DIRECTOR AND OFFICER INFORMATION

Independent Directors:
<Table>
<Caption>
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Age and Address of Held with and Length of Principal Occupation(s) During Overseen by
Independent Director Registrant Time Served* Past 5 Years** Director***
- ------------------------------------- ----------- -------------- ------------------------------ -------------

Michael Bozic (62) Director Since April Retired; Director or Trustee 216
c/o Mayer, Brown, Rowe & Maw LLP 1994 of the Retail Funds and TCW/DW
Counsel to the Independent Directors Term Trust 2003 (since April
1675 Broadway 1994) and the Institutional
New York, NY Funds (since July 2003);
formerly 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); formerly variously
Chairman, Chief Executive
Officer, President and Chief
Operating Officer (1987-1991)
of the Sears Merchandise Group
of Sears, Roebuck & Co.

Edwin J. Garn (70) Director Since January Director or Trustee of the 216
c/o Summit Ventures LLC 1993 Retail Funds and TCW/DW Term
1 Utah Center Trust 2003 (since January
201 S. Main Street 1993) and the Institutional
Salt Lake City, UT Funds (since July 2003);
member of the Utah Regional
Advisory Board of Pacific
Corp.; formerly United States
Senator (R-Utah) (1974-1992)
and Chairman, Senate Banking
Committee (1980-1986), Mayor
of Salt Lake City, Utah
(1971-1974), Astronaut, Space
Shuttle Discovery (April
12-19, 1985), and Vice
Chairman, Huntsman Corporation
(chemical company).

Wayne E. Hedien (69) Director Since Retired; Director or Trustee 216
c/o Mayer, Brown, Rowe & Maw LLP September 1997 of the Retail Funds and TCW/DW
Counsel to the Independent Directors Term Trust 2003; (Since
1675 Broadway September 1997) and the
New York, NY Institutional Funds (since
July 2003); formerly
associated with the Allstate
Companies (1966-1994), most
recently as Chairman of The
Allstate Corporation (March
1993-December 1994) and
Chairman and Chief Executive
Officer of its wholly-owned
subsidiary, Allstate Insurance
Company (July 1989-December
1994).

Name, Age and Address of Other Directorships Held by
Independent Director Director
- ------------------------------------- ------------------------------

Michael Bozic (62) Director of Weirton Steel
c/o Mayer, Brown, Rowe & Maw LLP Corporation.
Counsel to the Independent Directors
1675 Broadway
New York, NY

Edwin J. Garn (70) Director of Franklin Covey
c/o Summit Ventures LLC (time management systems), BMW
1 Utah Center Bank of North America, Inc.
201 S. Main Street (industrial loan corporation),
Salt Lake City, UT United Space Alliance (joint
venture between Lockheed
Martin and the Boeing Company)
and Nuskin Asia Pacific
(multilevel marketing); member
of the board of various civic
and charitable organizations.

Wayne E. Hedien (69) Director of The PMI Group Inc.
c/o Mayer, Brown, Rowe & Maw LLP (private mortgage insurance);
Counsel to the Independent Directors Trustee and Vice Chairman of
1675 Broadway The Field Museum of Natural
New York, NY History; director of various
other business and charitable
organizations.
</Table>

Morgan Stanley Income Securities Inc.
DIRECTOR AND OFFICER INFORMATION continued
<Table>
<Caption>
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Age and Address of Held with and Length of Principal Occupation(s) During Overseen by
Independent Director Registrant Time Served* Past 5 Years** Director***
- ------------------------------------- ----------- -------------- ------------------------------ -------------

Dr. Manuel H. Johnson (54) Director Since July Chairman of the Audit 216
c/o Johnson Smick International, Inc. 1991 Committee and Director or
2099 Pennsylvania Avenue, N.W. Trustee of the Retail Funds
Suite 950 and TCW/DW Term Trust 2003
Washington, D.C. (since July 1991) and the
Institutional Funds (since
July 2003); Senior Partner,
Johnson Smick International,
Inc., a consulting firm;
Co-Chairman and a founder of
the Group of Seven Council
(G7C), an international
economic commission; formerly
Vice Chairman of the Board of
Governors of the Federal
Reserve System and Assistant
Secretary of the U.S.
Treasury.

Joseph J. Kearns (61) Director Since July Deputy Chairman of the Audit 217
PMB754 2003 Committee and Director or
23852 Pacific Coast Highway Trustee of the Retail Funds
Malibu, CA and TCW/DW Term Trust 2003
(since July 2003) and the
Institutional Funds (since
August 1994); previously
Chairman of the Audit
Committee of the Institutional
Funds (October 2001-July
2003); President, Kearns &
Associates LLC (investment
consulting); formerly CFO of
the J. Paul Getty Trust.

Michael E. Nugent (67) Director Since July Chairman of the Insurance 216
c/o Triumph Capital, L.P. 1991 Committee and Director or
445 Park Avenue Trustee of the Retail Funds
New York, NY and TCW/DW Term Trust 2003
(since July 1991) and the
Institutional Funds (since
July 2001); General Partner of
Triumph Capital, L.P., a
private investment
partnership; formerly Vice
President, Bankers Trust
Company and BT Capital
Corporation (1984-1988).

Fergus Reid (71) Director Since July Chairman of the Governance 217
85 Charles Colman Blvd. 2003 Committee and Director or
Pawling, NY Trustee of the Retail Funds
and TCW/DW Term Trust 2003
(since July 2003) and the
Institutional Funds (since
June 1992); Chairman of
Lumelite Plastics Corporation.

Name, Age and Address of Other Directorships Held by
Independent Director Director
- ------------------------------------- ------------------------------

Dr. Manuel H. Johnson (54) Director of NVR, Inc. (home
c/o Johnson Smick International, Inc. construction); Chairman and
2099 Pennsylvania Avenue, N.W. Trustee of the Financial
Suite 950 Accounting Foundation
Washington, D.C. (oversight organization of the
Financial Accounting Standards
Board); Director of RBS
Greenwich Capital Holdings
(financial holding company).

Joseph J. Kearns (61) Director of Electro Rent
PMB754 Corporation (equipment
23852 Pacific Coast Highway leasing), The Ford Family
Malibu, CA Foundation, and the UCLA
Foundation.

Michael E. Nugent (67) Director of various business
c/o Triumph Capital, L.P. organizations.
445 Park Avenue
New York, NY

Fergus Reid (71) Trustee and Director of
85 Charles Colman Blvd. certain investment companies
Pawling, NY in the JPMorgan Funds complex
managed by JP Morgan
Investment Management Inc.
</Table>

Morgan Stanley Income Securities Inc.
DIRECTOR AND OFFICER INFORMATION continued

Interested Directors:
<Table>
<Caption>
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Age and Address of Held with and Length of Principal Occupation(s) During Overseen by
Interested Directors Registrant Time Served* Past 5 Years** Director***
- ------------------------------------- ----------- -------------- ------------------------------ -------------

Charles A. Fiumefreddo (70) Chairman of Since July Chairman and Director or 216
c/o Morgan Stanley Trust the Board 1991 Trustee of the Retail Funds
Harborside Financial Center, and and TCW/DW Term Trust 2003
Plaza Two, Director (since July 1991) and the
Jersey City, NJ Institutional Funds (since
July 2003); formerly Chief
Executive Officer of the
Retail Funds and the TCW/DW
Term Trust 2003 (until
September 2002).

James F. Higgins (55) Director Since June Director or Trustee of the 216
c/o Morgan Stanley Trust 2000 Retail Funds and TCW/DW Term
Harborside Financial Center, Trust 2003 (since June 2000)
Plaza Two, and the Institutional Funds
Jersey City, NJ (since July 2003); Senior
Advisor of Morgan Stanley
(since August 2000); Director
of the Distributor and Dean
Witter Realty Inc.; previously
President and Chief Operating
Officer of the Private Client
Group of Morgan Stanley (May
1999-August 2000), and
President and Chief Operating
Officer of Individual
Securities of Morgan Stanley
(February 1997-May 1999).

Philip J. Purcell (60) Director Since April Director or Trustee of the 216
1585 Broadway 1994 Retail Funds and TCW/DW Term
New York, NY Trust 2003 (since April 1994)
and the Institutional Funds
(since July 2003); Chairman of
the Board of Directors and
Chief Executive Officer of
Morgan Stanley and Morgan
Stanley DW Inc.; Director of
the Distributor; Chairman of
the Board of Directors and
Chief Executive Officer of
Novus Credit Services Inc.;
Director and/or officer of
various Morgan Stanley
subsidiaries.

Name, Age and Address of Other Directorships Held by
Interested Directors Director
- ------------------------------------- ------------------------------

Charles A. Fiumefreddo (70) None
c/o Morgan Stanley Trust
Harborside Financial Center,
Plaza Two,
Jersey City, NJ

James F. Higgins (55) Director of AXA Financial,
c/o Morgan Stanley Trust Inc. and The Equitable Life
Harborside Financial Center, Assurance Society of the
Plaza Two, United States (financial
Jersey City, NJ services).

Philip J. Purcell (60) Director of American Airlines,
1585 Broadway Inc. and its parent company,
New York, NY AMR Corporation.
</Table>

- ---------------------

* This is the earliest date the Director began serving the funds advised by
Morgan Stanley Investment Advisors Inc. (the "Investment Manager") (the
"Retail Funds").
** The dates referenced below indicating commencement of services as
Director/Trustee for the Retail Funds and the funds advised by Morgan
Stanley Investment Management Inc., Morgan Stanley Investments LP and Morgan
Stanley AIP GP LP (the "Institutional Funds") reflect the earliest date the
Director/Trustee began serving the Retail or Institutional Funds as
applicable.
*** The Fund Complex includes all open-end and closed-end funds (including all
of their portfolios) advised by the Investment Manager and any funds that
have an investment advisor that is an affiliated person of the Investment
Manager (including but not limited to Morgan Stanley Investment Management
Inc. and Morgan Stanley Investments LP).

Morgan Stanley Income Securities Inc.
DIRECTOR AND OFFICER INFORMATION continued

Officers:

<Table>
<Caption>
Term of
Position(s) Office and
Name, Age and Address of Held with Length of
Executive Officer Registrant Time Served* Principal Occupation(s) During Past 5 Years**
- ----------------------------- --------------- -------------- ------------------------------------------------------------

Mitchell M. Merin (50) President Since May 1999 President and Chief Operating Officer of Morgan Stanley
1221 Avenue of the Americas Investment Management Inc.; President, Director and Chief
New York, NY Executive Officer of the Investment Manager and Morgan
Stanley Services; Chairman, Chief Executive Officer and
Director of the Distributor; Chairman and Director of the
Transfer Agent; Director of various Morgan Stanley
subsidiaries; President Morgan Stanley Investments LP (since
February 2003); President of the Institutional Funds (since
July 2003) and President of the Retail Funds and TCW/DW Term
Trust 2003 (since May 1999); Trustee (since July 2003) and
President (since December 2002) of the Van Kampen Closed-End
Funds; Trustee (since May 1999) and President (since October
2002) of the Van Kampen Open-End Funds.

Ronald E. Robison (64) Executive Vice Since April Chief Global Operations Officer and Managing Director of
1221 Avenue of the Americas President and 2003 Morgan Stanley Investment Management Inc.; Managing Director
New York, NY Principal of Morgan Stanley & Co. Incorporated; Managing Director of
Executive Morgan Stanley; Managing Director, Chief Administrative
Officer Officer and Director of the Investment Manager and Morgan
Stanley Services; Chief Executive Officer and Director of
the Transfer Agent; Executive Vice President and Principal
Executive Officer of the Institutional Funds (since July
2003); and the TCW/DW Term Trust 2003 (since April 2003);
previously President of the Institutional Funds (March
2001-July 2003) and Director of the Institutional Funds
(March 2001-July 2003).

Barry Fink (48) Vice President Since February General Counsel (since May 2000) and Managing Director
1221 Avenue of the Americas and General 1997 (since December 2000) of Morgan Stanley Investment
New York, NY Counsel Management; Managing Director (since December 2000),
Secretary (since February 1997) and Director (since July
1998) of the Investment Manager and Morgan Stanley Services;
Assistant Secretary of Morgan Stanley DW; Chief Legal
Officer of Morgan Stanley Investments LP (since July 2002);
Vice President of the Institutional Funds (since July 2003);
Vice President and Secretary of the Distributor; previously
Secretary of the Retail Funds (February 1997-July 2003);
previously Vice President and Assistant General Counsel of
the Investment Manager and Morgan Stanley Services (February
1997-December 2001).

Joseph J. McAlinden (60) Vice President Since July Managing Director and Chief Investment Officer of the
1221 Avenue of the Americas 1995 Investment Manager, Morgan Stanley Investment Management
New York, NY Inc. and Morgan Stanley Investments LP; Director of the
Transfer Agent, Chief Investment Officer of the Van Kampen
Funds; Vice President of the Institutional Funds (since July
2003) and the Retail Funds (since July 1995).

Stefanie V. Chang (36) Vice President Since July Executive Director of Morgan Stanley & Co. and Morgan
1221 Avenue of the Americas 2003 Stanley Investment Management Inc. and Vice President of the
New York, NY Institutional Funds (since December 1997) and the Retail
Funds (since July 2003); formerly practiced law with the New
York law firm of Rogers & Wells (now Clifford Chance LLP).
</Table>

Morgan Stanley Income Securities Inc.
DIRECTOR AND OFFICER INFORMATION continued

Francis Smith (38) Treasurer and Treasurer Executive Director of the Investment Manager and Morgan
c/o Morgan Stanley Trust Chief Financial since July Stanley Services (since December 2001); previously Vice
Harborside Financial Center, Officer 2003 and Chief President of the Retail Funds (September 2002-July 2003);
Plaza Two, Financial previously Vice President of the Investment Manager and
Jersey City, NJ Officer since Morgan Stanley Services (August 2000-November 2001) and
September 2002 Senior Manager at PricewaterhouseCoopers LLP (January
1998-August 2000).

Thomas F. Caloia (57) Vice President Since July Executive Director (since December 2002) and Assistant
c/o Morgan Stanley Trust 2003 Treasurer of the Investment Manager, the Distributor and
Harborside Financial Center, Morgan Stanley Services; previously Treasurer of the Retail
Plaza Two, Funds (April 1989-July 2003); formerly First Vice President
Jersey City, NJ of the Investment Manager, the Distributor and Morgan
Stanley Services.

Mary E. Mullin (36) Secretary Since July Vice President of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas 2003 Morgan Stanley Investment Management Inc.; Secretary of the
New York, NY Institutional Funds (since June 1999) and the Retail Funds
(since July 2003); formerly practiced law with the New York
law firms of McDermott, Will & Emery and Skadden, Arps,
Slate, Meagher & Flom LLP.
</Table>

- ---------------------

* This is the earliest date the Officer began serving the Retail Funds. Each
Officer serves an indefinite term, until his or her successor is elected.
** The dates referenced below indicating commencement of service as an Officer
for the Retail and Institutional Funds reflect the earliest date the Officer
began serving the Retail or Institutional Funds as applicable.

(This Page Intentionally Left Blank)

DIRECTORS

Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Philip J. Purcell
Fergus Reid

OFFICERS

Charles A. Fiumefreddo
Chairman of the Board

Mitchell M. Merin
President

Ronald E. Robison
Executive Vice President and Principal Executive Officer

Barry Fink
Vice President and General Counsel

Joseph J. McAlinden
Vice President

Stefanie V. Chang
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Thomas F. Caloia
Vice President

Mary E. Mullin
Secretary

TRANSFER AGENT

Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT AUDITORS

Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

INVESTMENT MANAGER

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

Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.

[MORGAN STANLEY TRIANGLE LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Income Securities

Annual Report
September 30, 2003

[MORGAN STANLEY LOGO]

38531RPT-00-12848K03-0S-11/03

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.

(c) The Fund has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1 hereto

(d) The Fund has granted a waiver or an implicit waiver from a provision of
its Code of Ethics.

(e) Not applicable.

(f)

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

(2) Not applicable.

(3) Not applicable.

Item 3. Audit Committee Financial Expert.

The Fund's Board of Directors has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Directors: Dr. Manuel H. Johnson and Joseph J. Kearns. 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 Directors
in the absence of such designation or identification.

Item 9 - 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.

There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.

(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.

Item 10 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.

Items 4 - 8 are not applicable

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 Income Securities Inc.
Ronald E. Robison
Principal Executive Officer
November 19, 2003

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.

Ronald E. Robison
Principal Executive Officer
November 19, 2003

Francis Smith
Principal Financial Officer
November 19, 2003