UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

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, 2004

Date of reporting period: March 31, 2004

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 semiannual 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's shares may be less than what you paid for them. Accordingly, you can lose
money investing in this Fund.

FUND REPORT

For the six-months ended March 31, 2004

MARKET CONDITIONS

During the review period the markets saw a substantial amount of data indicating
a stronger economy, including reports of 8.2 percent gross domestic product
growth in the third quarter and 4.2 percent growth in the fourth. While such
robust growth might typically lead to higher interest rates, rates instead fell
during the review period, primarily due to relatively sluggish employment data
and to the resulting indications from the Federal Reserve Bank's Open Market
Committee (the "Fed") that it would be "patient" with leaving the federal funds
rate at low levels. In the Fed's view, the continuing slack in the labor market
implied that the economy could continue to grow without creating inflationary
pressures; indeed, the Fed viewed rapid growth as an essential buffer against
potential deflation.

Against this backdrop, performance varied considerably across the major sectors
of the investment-grade fixed-income market. Changes in interest rates were most
clearly reflected in the Treasury market, which saw a significant increase in
rates in the fourth quarter of 2003 but a decline during the first quarter of
2004 as incoming data failed to confirm the level of strength apparent in the
fourth. A combination of improving economic conditions, broad-based profit
growth and increased liquidity buoyed the credit markets, which outperformed
Treasuries. Investors' increasing appetite for risk led to substantial
outperformance by lower-rated issues, with BBB-rated debt outpacing the
highest-quality bonds by more than 200 basis points. Investors' affinity for
risk was especially apparent in the performance of longer-dated corporate
securities, which performed strongly as investors sought the additional yield
they offered relative to intermediate-term securities.

PERFORMANCE ANALYSIS

For the six-month period ended March 31, 2004, the net asset value (NAV) of
Morgan Stanley Income Securities Inc. (ICB) increased from $17.42 to $17.81 per
share. Based on this change plus reinvestment of dividends totaling $0.48 per
share, the Fund's total NAV return was 5.25 percent. ICB's value on the New York
Stock Exchange (NYSE) increased from $15.87 to $16.40 per share during the same
period. Based on this change plus reinvestment of dividends, the Fund's total
market return was 6.39 percent. On March 31, 2004, ICB's NYSE market price was
at a 7.92 percent discount to its NAV.

Monthly dividends for the second quarter of the year declared in March remained
unchanged at $0.08 per share to reflect the Fund's current and projected
earnings levels. The Fund's level of undistributed net investment income was
$0.01 per share on March 31, 2004, versus $0.03 per share six months earlier.

The greatest contribution to the Fund's performance came from its positions in
corporate bonds, which benefited from strong sector and issue selection. For
example, ICB benefited from our decision to emphasize the insurance sector,
which we felt to be one of the few high-quality areas of the market still
offering good value. We also deemphasized the banking and food and beverage
sectors, all of which underperformed the market during the period. We used our
quantitative risk model and fundamental

research to initiate several new positions to increase the credit sensitivity of
the Fund by supplementing its holdings of BBB-rated securities. Because the
lower-rated bonds outperformed the highest-quality tiers of the market, this
strategy ensured the Fund's participation in that outperformance.

ICB's performance was adversely affected by our interest-rate strategy. Based on
our analysis of the economy and the yield curve, we chose to maintain a
relatively low level of interest-rate sensitivity in anticipation of higher
rates in the event of sustained job growth. We implemented this strategy by
deemphasizing the five-year portion of the yield curve. This stance limited the
Fund's interest-rate sensitivity during a period of generally falling rates and
caused it to miss much of the rally in the five-year section of the curve.

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 -- Non-Convertible 93.1%
Foreign Government Bonds 4.4%
Short-Term Investments 2.0%
Asset-Backed Securities 0.5%
</Table>

<Table>
<Caption>
LONG-TERM CREDIT ANALYSIS

AAA 4.7%
AA 1.6%
A 17.5%
BBB 63.7%
BB 10.3%
B 2.2%
</Table>

Data as of March 31, 2004. Subject to change daily. Portfolio composition
percentages are as a percentage of total investments and long-term credit
analysis is as a percentage of total long-term investments. Provided for
informational purposes only and should not be deemed as a recommendation to buy
or sell the securities mentioned. Morgan Stanley is a full-service securities
firm engaged in securities trading and brokerage activities, investment banking,
research and analysis, financing and financial advisory services.

RESULTS OF ANNUAL SHAREHOLDER MEETING

ON DECEMBER 16, 2003, AN ANNUAL MEETING OF THE FUND'S SHAREHOLDERS WAS HELD FOR
THE PURPOSE OF VOTING ON THE FOLLOWING MATTER, THE RESULTS OF WHICH WERE AS
FOLLOWS:

(1) ELECTION OF DIRECTORS:

<Table>

- -----------------------------------------------------
MICHAEL BOZIC
FOR: 7,815,970
WITHHELD: 256,397
- -----------------------------------------------------
CHARLES A. FIUMEFREDDO
FOR: 7,812,502
WITHHELD: 259,865
- -----------------------------------------------------
EDWIN J. GARN
FOR: 7,805,453
WITHHELD: 266,915
- -----------------------------------------------------
WAYNE E. HEDIEN
FOR: 7,813,279
WITHHELD: 259,088
- -----------------------------------------------------
JAMES F. HIGGINS
FOR: 7,817,761
WITHHELD: 254,607
- -----------------------------------------------------
MANUEL H. JOHNSON
FOR: 7,816,224
WITHHELD: 256,144
- -----------------------------------------------------
JOSEPH K. KEARNS
FOR: 7,817,338
WITHHELD: 255,030
- -----------------------------------------------------
MICHAEL E. NUGENT
FOR: 7,812,993
WITHHELD: 259,374
- -----------------------------------------------------
PHILIP J. PURCELL
FOR: 7,814,317
WITHHELD: 258,050
- -----------------------------------------------------
FERGUS REID
FOR: 7,812,556
WITHHELD: 259,811
- -----------------------------------------------------
</Table>

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED)

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

Corporate Bonds (91.6%)
Aerospace & Defense (1.9%)
$ 875 Lockheed Martin Corp. .................................... 8.20% 12/01/09 $ 1,083,152
170 Lockheed Martin Corp. .................................... 8.50 12/01/29 228,740
1,400 Raytheon Co. ............................................. 4.85 01/15/11 1,457,891
703 Systems 2001 Asset Trust - 144A*.......................... 6.664 09/15/13 790,099
------------
3,559,882
------------
Air Freight/Couriers (1.2%)
2,000 FedEx Corp................................................ 7.25 02/15/11 2,344,360
------------

Airlines (0.8%)
1,512 Continental Airlines, Inc................................. 6.90 01/02/18 1,508,266
------------

Beverages: Alcoholic (0.5%)
835 Miller Brewing Co. - 144A*................................ 4.25 08/15/08 865,056
------------

Broadcasting (0.9%)
1,430 Clear Channel Communications, Inc. ....................... 7.65 09/15/10 1,699,310
------------

Cable/Satellite TV (3.0%)
1,365 Comcast Cable Communications Inc. ........................ 6.75 01/30/11 1,552,193
1,400 Comcast Cable Communications Inc. ........................ 7.125 06/15/13 1,621,596
750 Comcast Cable Communications Inc. ........................ 8.375 05/01/07 871,665
450 Comcast Corp. ............................................ 6.50 01/15/15 498,976
710 Echostar DBS Corp. - 144A*................................ 6.375 10/01/11 757,925
390 TCI Communications, Inc. ................................. 7.875 02/15/26 463,174
------------
5,765,529
------------
Casino/Gaming (3.0%)
1,590 Harrah's Operating Co., Inc. ............................. 8.00 02/01/11 1,912,450
940 MGM Mirage Inc. .......................................... 8.50 09/15/10 1,102,150
1,955 Park Place Entertainment Corp. ........................... 7.50 09/01/09 2,216,481
400 Station Casinos, Inc - 144A*.............................. 6.00 04/01/12 416,000
------------
5,647,081
------------
Chemicals: Major Diversified (0.3%)
540 ICI Wilmington Inc. ...................................... 4.375 12/01/08 554,153
------------

Chemicals: Specialty (0.0%)
50 FMC Corp. ................................................ 10.25 11/01/09 59,000
------------
</Table>

5
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

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

Computer Communications (0.1%)
$ 178 Avaya, Inc. .............................................. 11.125% 04/01/09 $ 213,155

Containers/Packaging (1.2%)
535 Owens-Brockway Glass Containers Corp...................... 7.75 05/15/11 561,750
525 Owens-Brockway Glass Containers Corp...................... 8.75 11/15/12 573,562
505 Packaging Corp. of America................................ 5.75 08/01/13 532,330
725 Sealed Air Corp. - 144A*.................................. 5.625 07/15/13 761,270
------------
2,428,912
------------
Department Stores (2.3%)
2,800 Federated Department Stores, Inc. ........................ 6.625 09/01/08 3,175,654
610 May Department Stores Co., Inc. .......................... 5.95 11/01/08 672,549
265 May Department Stores Co., Inc. .......................... 6.70 09/15/28 291,529
165 May Department Stores Co., Inc. .......................... 6.90 01/15/32 184,626
------------
4,324,358
------------
Electric Utilities (10.5%)
645 Appalachian Power Co. (Series H).......................... 5.95 05/15/33 645,731
530 Cincinnati Gas & Electric Co. ............................ 5.70 09/15/12 572,556
365 Cincinnati Gas & Electric Co. (Series A).................. 5.40 06/15/33 343,151
290 Cincinnati Gas & Electric Co. (Series B).................. 5.375 06/15/33 271,630
805 Columbus Southern Power Co. (Series D).................... 6.60 03/01/33 894,100
625 Consolidated Natural Gas Co. (Series A)................... 5.00 03/01/14 636,759
625 Constellation Energy Group................................ 7.60 04/01/32 748,458
1,775 Consumers Energy Co. ..................................... 4.00 05/15/10 1,758,145
90 Consumers Energy Co. ..................................... 4.80 02/17/09 94,160
195 Consumers Energy Co. ..................................... 5.375 04/15/13 200,843
345 DPL Inc. ................................................. 8.25 03/01/07 365,700
835 Duquesne Light Co. ....................................... 6.70 04/15/12 964,366
570 Entergy Gulf States, Inc. ................................ 3.60 06/01/08 569,221
1,645 Exelon Corp. ............................................. 6.75 05/01/11 1,884,255
1,505 FirstEnergy Corp. (Series B).............................. 6.45 11/15/11 1,650,720
355 FirstEnergy Corp. (Series C).............................. 7.375 11/15/31 397,202
215 Indianapolis Power & Light Co. - 144A*.................... 6.30 07/01/13 235,876
460 Monongahela Power Co. .................................... 5.00 10/01/06 471,500
330 Nevada Power Co. - 144A*.................................. 9.00 08/15/13 372,075
585 Ohio Edison Co. .......................................... 5.45 05/01/15 596,725
675 Ohio Power Co. ........................................... 6.60 02/15/33 749,651
1,275 Pacific Gas & Electric Co. ............................... 6.05 03/01/34 1,294,963
235 Panhandle Eastern Pipe Line Co. - 144A*................... 2.75 03/15/07 234,953
100 PSEG Energy Holdings Inc. ................................ 7.75 04/16/07 106,250
600 PSEG Energy Holdings Inc. ................................ 8.625 02/15/08 651,000
</Table>

6
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

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

$ 300 Reliant Energy Resources Corp. ........................... 7.75% 02/15/11 $ 342,549
250 Southern California Edison Co. ........................... 5.00 01/15/14 257,211
570 Texas Eastern Transmission, L.P. ......................... 7.00 07/15/32 644,106
220 TXU Corp. ................................................ 6.375 06/15/06 238,425
1,355 TXU Energy Co. ........................................... 7.00 03/15/13 1,555,959
55 Wisconsin Electric Power Co. ............................. 5.625 05/15/33 55,612
270 Wisconsin Energy Corp. ................................... 6.20 04/01/33 281,297
------------
20,085,149
------------
Electronic Distributors (0.1%)
165 Avnet Inc. ............................................... 9.75 02/15/08 193,050
------------

Electronic Equipment/Instruments (0.4%)
870 Xerox Corp. .............................................. 7.125 06/15/10 926,550
------------

Environmental Services (2.2%)
310 Allied Waste North America, Inc. ......................... 8.50 12/01/08 348,750
205 Allied Waste North America, Inc. - 144A*.................. 6.50 11/15/10 210,381
715 Republic Services Inc. ................................... 6.75 08/15/11 822,226
2,230 USA Waste Services, Inc. ................................. 7.125 10/01/07 2,540,715
235 Waste Management, Inc. ................................... 7.375 05/15/29 273,065
------------
4,195,137
------------
Finance/Rental/Leasing (5.2%)
3,520 Ford Motor Credit Co. .................................... 7.25 10/25/11 3,817,947
2,615 Ford Motor Credit Co. .................................... 7.375 10/28/09 2,873,634
900 Hertz Corp. .............................................. 7.625 08/15/07 995,275
350 MBNA America Bank NA...................................... 7.125 11/15/12 413,459
1,810 MBNA Corp. ............................................... 6.125 03/01/13 2,011,839
------------
10,112,154
------------
Financial Conglomerates (4.4%)
675 General Motors Acceptance Corp. .......................... 4.50 07/15/06 697,890
4,120 General Motors Acceptance Corp. .......................... 6.875 09/15/11 4,476,384
2,020 General Motors Acceptance Corp. .......................... 8.00 11/01/31 2,242,442
765 Prudential Holdings, LLC (Series C) - 144A*............... 8.695 12/18/23 1,008,696
------------
8,425,412
------------
Food Retail (1.3%)
680 Albertson's, Inc. ........................................ 7.50 02/15/11 799,139
1,360 Kroger Co. ............................................... 7.50 04/01/31 1,609,431
------------
2,408,570
------------
</Table>

7
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

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

Food: Major Diversified (0.2%)
$ 410 Kraft Foods Inc. ......................................... 6.25% 06/01/12 $ 460,433
------------

Food: Meat/Fish/Dairy (0.8%)
95 Smithfield Foods Inc. .................................... 7.75 05/15/13 104,975
1,190 Smithfield Foods Inc. (Series B).......................... 8.00 10/15/09 1,335,775
------------
1,440,750
------------
Forest Products (2.2%)
135 Weyerhaeuser Co. ......................................... 6.00 08/01/06 145,920
3,600 Weyerhaeuser Co. ......................................... 6.75 03/15/12 4,073,094
------------
4,219,014
------------
Gas Distributors (0.7%)
585 Nisource Finance Corp. ................................... 7.625 11/15/05 636,703
91 Ras Laffan Liquid Natural Gas Co. Ltd. - 144A* (Qatar).... 7.628 09/15/06 96,716
440 Ras Laffan Liquid Natural Gas Co. Ltd. - 144A* (Qatar).... 8.294 03/15/14 530,200
------------
1,263,619
------------
Home Building (1.6%)
630 Centex Corp. ............................................. 7.875 02/01/11 758,519
685 D.R. Horton, Inc. ........................................ 6.875 05/01/13 763,775
640 Pulte Homes, Inc. ........................................ 6.375 05/15/33 639,944
680 Pulte Homes, Inc. ........................................ 7.875 08/01/11 817,248
------------
2,979,486
------------
Home Furnishings (0.4%)
600 Mohawk Industries, Inc. .................................. 7.20 04/15/12 698,681
------------

Hospital/Nursing Management (2.4%)
1,475 Columbia/HCA Healthcare Corp. ............................ 7.19 11/15/15 1,628,608
85 Columbia/HCA Healthcare Corp. ............................ 9.00 12/15/14 105,475
640 HCA, Inc. ................................................ 6.30 10/01/12 671,919
910 Manor Care, Inc. ......................................... 8.00 03/01/08 1,045,363
584 Tenet Healthcare Corp. ................................... 6.875 11/15/31 486,180
750 Tenet Healthcare Corp. ................................... 7.375 02/01/13 680,625
------------
4,618,170
------------
</Table>

8
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

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

Hotels/Resorts/Cruiselines (2.6%)
$ 1,370 Hilton Hotels Corp. ...................................... 7.625% 12/01/12 $ 1,580,638
1,140 Hyatt Equities LLC - 144A*................................ 6.875 06/15/07 1,236,873
285 Marriott International, Inc. (Series E)................... 7.00 01/15/08 326,048
235 Starwood Hotels & Resorts Worldwide Inc. ................. 7.375 05/01/07 256,738
1,455 Starwood Hotels & Resorts Worldwide Inc. ................. 7.875 05/01/12 1,651,425
------------
5,051,722
------------
Industrial Conglomerates (1.1%)
580 Hutchison Whampoa International Ltd. - 144A* (Virgin
Islands)................................................ 5.45 11/24/10 600,306
730 Hutchison Whampoa International Ltd. - 144A* (Virgin
Islands)................................................ 6.50 02/13/13 778,306
150 Tyco International Group S.A. (Luxembourg)................ 5.80 08/01/06 159,454
520 Tyco International Group S.A. (Luxembourg)................ 6.375 10/15/11 569,622
55 Tyco International Group S.A. (Luxembourg)................ 6.75 02/15/11 61,332
------------
2,169,020
------------
Industrial Machinery (0.7%)
1,120 Kennametal Inc. .......................................... 7.20 06/15/12 1,247,326
------------

Information Technology Services (0.8%)
560 Electronic Data Systems Corp. ............................ 7.125 10/15/09 598,711
885 Electronic Data Systems Corp. (Series B).................. 6.00 08/01/13 860,397
------------
1,459,108
------------
Insurance Broker/Services (1.6%)
1,150 Farmers Exchange Capital - 144A*.......................... 7.05 07/15/28 1,169,448
1,580 Farmers Insurance Exchange - 144A*........................ 8.625 05/01/24 1,864,590
------------
3,034,038
------------
Integrated Oil (1.6%)
1,665 Amerada Hess Corp. ....................................... 7.875 10/01/29 1,890,270
60 Petro-Canada (Canada)..................................... 4.00 07/15/13 57,176
1,150 Petro-Canada (Canada)..................................... 5.35 07/15/33 1,068,709
------------
3,016,155
------------
Major Telecommunications (6.6%)
2,895 AT&T Corp. ............................................... 8.75 11/15/31 3,426,673
1,460 Deutsche Telekom International Finance Corp.
(Netherlands)........................................... 8.75 06/15/30 1,921,021
580 France Telecom S.A. (France).............................. 9.75 03/01/31 786,790
1,495 GTE Corp.................................................. 6.94 04/15/28 1,628,885
1,720 Sprint Capital Corp. ..................................... 8.375 03/15/12 2,098,075
</Table>

9
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

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

$ 485 Sprint Capital Corp. ..................................... 8.75% 03/15/32 $ 615,211
400 Verizon Global Funding Corp. ............................. 7.75 12/01/30 487,742
1,515 Verizon New England Inc. ................................. 6.50 09/15/11 1,713,109
------------
12,677,506
------------
Managed Health Care (1.5%)
770 Aetna, Inc. .............................................. 7.875 03/01/11 937,823
1,560 Health Net, Inc. ......................................... 8.375 04/15/11 1,923,265
------------
2,861,088
------------
Media Conglomerates (4.9%)
2,210 AOL Time Warner Inc. ..................................... 6.875 05/01/12 2,533,064
2,160 AOL Time Warner Inc. ..................................... 7.625 04/15/31 2,536,516
410 AOL Time Warner Inc. ..................................... 7.70 05/01/32 486,521
140 News America Holdings Inc. ............................... 7.75 01/20/24 166,054
3,000 News America Inc. ........................................ 7.25 05/18/18 3,551,205
105 News America Inc. ........................................ 7.30 04/30/28 120,712
40 Time Warner Inc. ......................................... 6.625 05/15/29 41,953
------------
9,436,025
------------
Medical Distributors (0.3%)
555 AmerisourceBergen Corp. .................................. 8.125 09/01/08 621,600
------------

Miscellaneous Commercial Services (0.4%)
245 Iron Mountain Inc. ....................................... 6.625 01/01/16 238,875
487 Iron Mountain Inc. ....................................... 7.75 01/15/15 513,785
------------
752,660
------------
Motor Vehicles (2.9%)
2,955 DaimlerChrysler North American Holdings Co. .............. 7.30 01/15/12 3,412,372
750 DaimlerChrysler North American Holdings Co. .............. 8.00 06/15/10 884,213
830 DaimlerChrysler North American Holdings Co. .............. 8.50 01/18/31 1,023,773
270 Ford Motor Co. ........................................... 7.45 07/16/31 270,425
------------
5,590,783
------------
Multi-Line Insurance (0.9%)
1,125 Nationwide Mutual Insurance Co. - 144A*................... 7.50 02/15/24 1,164,601
480 Nationwide Mutual Insurance Co. - 144A*................... 8.25 12/01/31 610,463
------------
1,775,064
------------
Oil & Gas Pipelines (0.8%)
950 GulfTerra Energy Partners, L.P. .......................... 6.25 06/01/10 1,040,250
477 GulfTerra Energy Partners, L.P. .......................... 8.50 06/01/10 553,320
------------
1,593,570
------------
</Table>

10
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

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

Oil & Gas Production (3.7%)
$ 245 Kerr-McGee Corp. ......................................... 5.875% 09/15/06 $ 264,116
565 Kerr-McGee Corp. ......................................... 6.875 09/15/11 643,238
1,675 Kerr-McGee Corp. ......................................... 7.875 09/15/31 1,996,128
765 Nexen Inc. (Canada)....................................... 5.05 11/20/13 781,988
765 Pemex Project Funding Master Trust........................ 7.375 12/15/14 854,888
1,200 Pemex Project Funding Master Trust........................ 8.00 11/15/11 1,402,200
125 Pemex Project Funding Master Trust........................ 8.625 02/01/22 145,000
910 Vintage Petroleum, Inc. .................................. 7.875 05/15/11 982,800
------------
7,070,358
------------
Oil Refining/Marketing (0.8%)
365 Ashland Inc. ............................................. 7.83 08/15/05 391,790
1,015 Marathon Oil Corp. ....................................... 6.80 03/15/32 1,143,072
------------
1,534,862
------------
Oilfield Services/Equipment (0.1%)
100 Key Energy Services, Inc. ................................ 6.375 05/01/13 103,000
------------

Other Consumer Services (1.3%)
1,120 Cendant Corp. ............................................ 7.125 03/15/15 1,301,731
980 Cendant Corp. ............................................ 7.375 01/15/13 1,151,635
------------
2,453,366
------------
Other Metals/Minerals (1.5%)
1,660 Inco Ltd. (Canada)........................................ 7.20 09/15/32 1,923,820
720 Inco Ltd. (Canada)........................................ 7.75 05/15/12 871,232
------------
2,795,052
------------
Pharmaceuticals: Major (0.3%)
465 Schering-Plough Corp. .................................... 5.30 12/01/13 486,095
------------

Property/Casualty Insurance (0.8%)
1,400 Mantis Reef Ltd. - 144A* (Australia)...................... 4.692 11/14/08 1,443,264
------------

Pulp & Paper (2.7%)
1,225 Abitibi-Consolidated Inc. (Canada)........................ 8.55 08/01/10 1,341,048
485 Abitibi-Consolidated Inc. (Canada)........................ 8.85 08/01/30 495,056
1,680 Bowater Canada Finance (Canada)........................... 7.95 11/15/11 1,799,700
1,140 International Paper Co. .................................. 4.25 01/15/09 1,170,907
455 Sappi Papier Holding AG - 144A* (Austria)................. 6.75 06/15/12 514,190
------------
5,320,901
------------
</Table>

11
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

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

Real Estate Development (0.7%)
$ 1,016 World Financial Properties - 144A*........................ 6.91% 09/01/13 $ 1,150,600
227 World Financial Properties - 144A*........................ 6.95 09/01/13 258,119
------------
1,408,719
------------
Real Estate Investment Trusts (2.0%)
1,615 EOP Operating L.P. ....................................... 6.763 06/15/07 1,808,981
140 EOP Operating L.P. ....................................... 7.875 07/15/31 169,481
100 iStar Financial, Inc. .................................... 7.00 03/15/08 109,250
240 iStar Financial, Inc. .................................... 8.75 08/15/08 279,600
775 Reckson Operating Partnership............................. 5.15 01/15/11 792,025
470 Rouse Co. (The)........................................... 3.625 03/15/09 466,286
210 Rouse Co. (The)........................................... 5.375 11/26/13 216,033
------------
3,841,656
------------
Restaurants (0.2%)
380 Tricon Global Restaurants, Inc. .......................... 8.875 04/15/11 476,425
------------

Savings Banks (0.9%)
1,335 Washington Mutual Inc. ................................... 8.25 04/01/10 1,634,077
------------

Specialty Stores (0.4%)
750 Toys 'R' Us, Inc. ........................................ 7.375 10/15/18 738,750
------------

Tobacco (1.0%)
570 Altria Group, Inc. ....................................... 7.00 11/04/13 629,275
1,135 Altria Group, Inc. ....................................... 7.75 01/15/27 1,268,631
------------
1,897,906
------------
Utilities (0.2%)
305 Texas-New Mexico Power Co. ............................... 6.25 01/15/09 324,257
------------

Wireless Telecommunications (0.7%)
330 AT&T Wireless Services Inc. .............................. 7.875 03/01/11 394,184
760 AT&T Wireless Services Inc. .............................. 8.75 03/01/31 989,297
------------
1,383,481
------------
Total Corporate Bonds (Cost $160,554,431).................................... 175,193,071
------------
</Table>

12
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

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

Foreign Government Obligations (4.3%)
$ 3,000 Israel (State of) (Israel)................................ 7.25% 12/15/28 $ 3,417,216
590 United Mexican States (Mexico)............................ 8.30 08/15/31 694,725
3,395 United Mexican States (Mexico)............................ 8.375 01/14/11 4,135,110
------------
Total Foreign Government Obligations (Cost $6,994,143)....................... 8,247,051
------------
Asset-Backed Securities (0.5%)
Finance/Rental/Leasing
900 Chase Manhattan Auto Owners Trust (Cost $911,109)......... 2.83 09/15/10 908,549
------------
Short-Term Investments (2.0%)
U.S. Government Obligation (a) (0.4%)
800 U.S. Treasury Bill** (Cost $796,189)...................... 0.98 09/23/04 796,189
------------
Repurchase Agreement (1.6%)
3,078 Joint repurchase agreement account (dated 03/31/04;
proceeds $3,078,090) (b) (Cost $3,078,000).............. 1.055 04/01/04 3,078,000
------------
Total Short-Term Investments (Cost $3,874,189)............................... 3,874,189
------------
</Table>

<Table>

Total Investments (Cost $172,333,872) (c)(d)......................... 98.4% 188,222,860

Other Assets in Excess of Liabilities................................ 1.6 3,098,206
----- ------------
Net Assets........................................................... 100.0% $191,321,066
===== ============
</Table>

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

<Table>

* Resale is restricted to qualified institutional investors.
** This security has been physically segregated in connection with open futures contracts in the
amount of $796,189.
(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 $45,406,366 in connection
with open futures contracts.
(d) The aggregate cost for federal income tax purposes approximates the aggregate cost for book
purposes. The aggregate gross unrealized appreciation is $16,326,016, and the aggregate gross
unrealized depreciation is $437,028, resulting in net unrealized appreciation of $15,888,988.
</Table>

13
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED) continued

Futures Contracts Open at March 31, 2004:

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

380 Short U.S. Treasury Notes 10 Year
June 2004 $(43,854,375) $(917,694)
29 Short U.S. Treasury Bonds 20 Year
June 2004 (3,307,813) (43,064)
---------
Total Unrealized Depreciation............................ $(960,758)
=========
</Table>

14
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
March 31, 2004 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $172,333,872)....................................... $188,222,860
Receivable for:
Interest................................................ 3,080,738
Investments sold........................................ 618,380
Prepaid expenses and other assets........................... 4,210
------------
Total Assets............................................ 191,926,188
------------
Liabilities:
Payable for:
Variation margin........................................ 233,688
Investments purchased................................... 109,574
Investment management fee............................... 86,826
Capital stock repurchased............................... 74,271
Accrued expenses and other payables......................... 100,763
------------
Total Liabilities....................................... 605,122
------------
Net Assets.............................................. $191,321,066
============
Composition of Net Assets:
Paid-in-capital............................................. $198,452,911
Net unrealized appreciation................................. 14,928,230
Accumulated undistributed net investment income............. 87,829
Accumulated net realized loss............................... (22,147,904)
------------
Net Assets.............................................. $191,321,066
============
Net Asset Value Per Share,
(10,739,718 shares outstanding (15,000,000 shares authorized
of $.01 par value).......................................... $17.81
============
</Table>

15
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended March 31, 2004 (unaudited)

<Table>

Net Investment Income:
Interest Income............................................. $ 5,603,600
-----------
Expenses
Investment management fee................................... 477,968
Transfer agent fees and expenses............................ 70,678
Professional fees........................................... 27,679
Shareholder reports and notices............................. 20,079
Custodian fees.............................................. 11,370
Registration fees........................................... 9,878
Directors' fees and expenses................................ 5,606
Other....................................................... 8,807
-----------
Total Expenses.......................................... 632,065
-----------
Net Investment Income................................... 4,971,535
-----------
Net Realized and Unrealized Gain (Loss):
Net Realized Gain/Loss on:
Investments................................................. 2,302,133
Futures contracts........................................... (2,266,794)
-----------
Net Realized Gain....................................... 35,339
-----------
Net Change in Unrealized Appreciation/Depreciation on:
Investments................................................. 3,423,828
Futures contracts........................................... 769,549
-----------
Net Appreciation........................................ 4,193,377
-----------
Net Gain................................................ 4,228,716
-----------
Net Increase................................................ $ 9,200,251
===========
</Table>

16
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
-------------- ------------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 4,971,535 $ 10,823,543
Net realized gain........................................... 35,339 1,946,101
Net change in unrealized depreciation....................... 4,193,377 11,421,115
------------ ------------
Net Increase............................................ 9,200,251 24,190,759
Dividends to shareholders from net investment income........ (5,207,293) (10,354,979)

Decrease from capital stock transactions.................... (2,974,335) (5,993,886)
------------ ------------
Net Increase............................................ 1,018,623 7,841,894
Net Assets:
Beginning of period......................................... 190,302,443 182,460,549
------------ ------------
End of Period
(Including accumulated undistributed net investment income
of $87,829 and $323,587, respectively)...................... $191,321,066 $190,302,443
============ ============
</Table>

17
See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2004 (UNAUDITED)

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) an equity portfolio security listed or traded
on the New York Stock Exchange ("NYSE") or American Stock Exchange or other
exchange is valued at its latest sale price prior to the time when assets are
valued; if there were no sales that day, the security is valued at the mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked price. In cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market; (4) for equity securities traded on foreign
exchanges, the last reported sale price or the latest bid price may be used if
there were no sales on a particular day; (5) futures are valued at the latest
price published by the commodities exchange on which they trade; (6) when market
quotations are not readily available or Morgan Stanley Investment Advisors Inc.
(the "Investment Manager") determines that the latest sale price, the bid price
or the mean between the last reported bid and asked price do not reflect a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Fund's Directors. Occasionally, developments affecting the
closing prices of securities and other assets may occur between the times at
which valuations of such securities are determined (that is, close of the
foreign market on which the securities trade) and the close of business on the
NYSE. If developments occur during such periods that are expected to materially
affect the value of such securities, such valuations may be adjusted to reflect
the estimated fair value of such securities as of the close of the NYSE, as
determined in good faith by the Fund's Directors or by the Investment Manager
using a pricing service and/or procedures approved by the Directors of the Fund;
(7) certain portfolio securities may be valued by an outside pricing service
approved by the Fund's Directors; and (8) 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

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2004 (UNAUDITED) continued

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 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.

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2004 (UNAUDITED) continued

2. Investment Management Agreement

Pursuant to an Investment Management Agreement, the Fund pays 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 six months ended March 31,
2004 aggregated $31,583,851 and $36,866,939, respectively.

Morgan Stanley Trust, an affiliate of the Investment Manager, is the Fund's
transfer agent. At March 31, 2004, the Fund had transfer agent fees and expenses
payable of approximately $9,000.

The Fund has an unfunded noncontributory defined benefit pension plan covering
certain 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 factors which include years of service and compensation.
Aggregate pension costs for the six months ended March 31, 2004 included in
Directors' fees and expenses in the Statement of Operations amounted to $3,706.
At March 31, 2004, the Fund had an accrued pension liability of $60,189 which is
included in accrued expenses in the Statement of Assets and Liabilities.

On December 2, 2003, the Directors voted to close the plan to new participants,
eliminate the future benefits growth due to increases to compensation after July
31, 2003 and effective April 1, 2004, establish an unfunded deferred
compensation plan which allows each independent Director to defer payment of all
or a portion of the fees he receives for serving on the Board of Directors
throughout the year.

4. Capital Stock

Transactions in capital stock were as follows:

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

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
Treasury shares purchased and retired (weighted average
discount 7.34%)*.......................................... (182,800) (1,828) (2,972,507)
---------- -------- ------------
Balance, March 31, 2004..................................... 10,739,718 $107,395 $198,345,516
========== ======== ============
</Table>

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

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2004 (UNAUDITED) continued

5. Dividends

On March 30 , 2004, the Fund declared the following dividends from net
investment income:

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

$0.08 April 16, 2004 April 30, 2004
$0.08 May 7, 2004 May 21, 2004
$0.08 June 4, 2004 June 18, 2004
</Table>

6. Purpose of Risks Relating to Certain Financial Instruments

To hedge against adverse interest rate and market risks, the Fund may enter into
interest rate futures contracts ("future 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 underlying securities. Risks may also
arise upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.

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.

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
market-to-market of open futures contracts.

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2004 (UNAUDITED) continued

8. Legal Matters

The Investment Manager, certain affiliates of the Investment Manager, certain
officers of such affiliates and certain investment companies advised by the
Investment Manager or its affiliates, including the Fund, are named as
defendants in a number of similar class action complaints which were recently
consolidated. This consolidated action also names as defendants certain
individual Trustees and Directors of the Morgan Stanley funds. The consolidated
amended complaint generally alleges that defendants, including the Fund,
violated their statutory disclosure obligations and fiduciary duties by failing
properly to disclose (i) that the Investment Manager and certain affiliates of
the Investment Manager allegedly offered economic incentives to brokers and
others to recommend the funds advised by the Investment Manager or its
affiliates to investors rather than funds managed by other companies, and (ii)
that the funds advised by the Investment Manager or its affiliates, including
the Fund, allegedly paid excessive commissions to brokers in return for their
efforts to recommend these funds to investors. The complaint seeks, among other
things, unspecified compensatory damages, rescissionary damages, fees and costs.
The defendants intend to move to dismiss the action and otherwise vigorously to
defend it. While the Fund believes that it has meritorious defenses, the
ultimate outcome of this matter is not presently determinable at this early
stage of the litigation, and no provision has been made in the Fund's financial
statements for the effect, if any, of this matter.

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 SIX FOR THE YEAR ENDED SEPTEMBER 30
MONTHS ENDED ---------------------------------------------------------
MARCH 31, 2004 2003 2002 2001 2000 1999
-------------- --------- --------- --------- --------- ---------
(unaudited)

Selected Per Share Data:

Net asset value, beginning of period...... $17.42 $16.13 $17.10 $16.83 $17.51 $19.04
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment income................. 0.46* 0.97* 1.05* 1.28* 1.33* 1.34
Net realized and unrealized gain
(loss)................................ 0.39 1.21 (0.89) 0.31 (0.72) (1.55)
------ ------ ------ ------ ------ ------

Total income (loss) from investment
operations............................... 0.85 2.18 0.16 1.59 0.61 (0.21)
------ ------ ------ ------ ------ ------

Less dividends and distributions from:
Net investment income................. (0.48) (0.93) (1.12) (1.32) (1.34) (1.32)
Paid-in capital....................... -- -- (0.02) -- -- --
------ ------ ------ ------ ------ ------

Total dividends and distributions......... (0.48) (0.93) (1.14) (1.32) (1.34) (1.32)
------ ------ ------ ------ ------ ------

Anti-dilutive effect of acquiring treasury
shares*.................................. 0.02 0.04 0.01 -- 0.05 --
------ ------ ------ ------ ------ ------

Net asset value, end of period............ $17.81 $17.42 $16.13 $17.10 $16.83 $17.51
====== ====== ====== ====== ====== ======

Market value, end of period............... $16.40 $15.87 $15.23 $17.00 $16.06 $16.31
====== ====== ====== ====== ====== ======

Total Return+............................. 6.39%(1) 10.61% (3.89)% 14.07% 7.17% (1.04)%

Ratios to Average Net Assets:
Expenses.................................. 0.66%(2) 0.67% 0.66% 0.67% 0.65% 0.66%

Net investment income..................... 5.20%(2) 5.81% 6.28% 7.53% 7.89% 7.39%

Supplemental Data:
Net assets, end of period, in thousands... $191,321 $190,302 $182,461 $194,863 $192,131 $206,782

Portfolio turnover rate................... 17%(1) 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.
(1) Not annualized.
(2) Annualized.
</Table>

23
See Notes to Financial Statements

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
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

The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.

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

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Income Securities Inc.

Semiannual Report
March 31, 2004

[MORGAN STANLEY LOGO]

38531RPT-RA04-00152P-Y03/04

Item 2. Code of Ethics.

Not applicable for semiannual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semiannual reports.

Item 4. Principal Accountant Fees and Services

Not applicable for semiannual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable for semiannual reports.

Item 6. [Reserved.]

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

Not applicable for semiannual reports.

Item 8. [Reserved.]

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) Code of Ethics - Not applicable for semiannual reports.

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

SIGNATURES

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

Morgan Stanley Income Securities Inc.

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
May 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
May 18, 2004

/s/ Francis Smith
Francis Smith
Principal Financial Officer
May 18, 2004