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)

522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)

Ronald E. Robison
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)

Registrant's telephone number, including area code: 212-296-6990

Date of fiscal year end: September 30, 2008

Date of reporting period: March 31, 2008

Item 1 - Report to Shareholders

Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley Income
Securities Inc. 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, 2008

MARKET CONDITIONS

The six-month period under review marked an unprecedented time for fixed income
markets. Residential housing prices continued to decline, many large banks and
financial firms began writing down mortgage-related losses, and liquidity and
credit availability became even more restricted. At the same time, the economy
began to slow with gross domestic product (GDP) growth measuring just 0.6
percent in the fourth quarter of 2007. Weaker economic data released in the
first quarter of 2008 fueled fears of an impending recession, causing investors
to continue to seek low-risk assets in the exceedingly volatile environment that
persisted throughout the period.

Central banks in the U.S. and around the world added liquidity to the financial
system in an attempt to ease the liquidity crisis and boost the economy. Not
only did the Federal Open Market Committee (the "Fed") reduce the target federal
funds rate from 4.75 percent to 2.25 percent by the end of the period, but in an
unprecedented move, it granted primary brokerage firms access to its discount
window and loosened its collateral requirements, extending loans of Treasury
securities in exchange for lower quality, less liquid securities. Finally, in
what was most decidedly the biggest headline event, the Fed arranged and
supported JPMorgan Chase's purchase of Bear Stearns, which was viewed by many as
necessary to avoid serious market repercussions had the firm failed.

The flight to quality during the reporting period pushed U.S. Treasury prices
higher and yields lower, particularly on short-dated issues, causing the yield
curve to steepen. As a result, Treasuries outperformed all other sectors of the
fixed income market as rising risk premiums pushed credit spreads sharply wider.
Within the corporate sector, financial credits suffered the most and overall,
lower rated securities underperformed higher quality issues. Although the
performance of all mortgage securities continued to decline, non-agency
mortgages were the hardest hit during the period.

PERFORMANCE ANALYSIS

For the six-month period ended March 31, 2008, the net asset value (NAV) of
Morgan Stanley Income Securities Inc. (ICB) decreased from $16.95 to $16.64 per
share. Based on the NAV change plus reinvestment of dividends totaling $0.46635
per share, the Fund's total NAV return was 1.23 percent. ICB's value on the New
York Stock Exchange (NYSE) moved from $15.33 to $14.81 per share during the same
period. Based on this change plus reinvestment of dividends, the Fund's total
market return was -0.44 percent. ICB's NYSE market price was at an 11 percent
discount to its NAV. During the fiscal period, the Fund purchased and retired
122,737 shares of common stock at a weighted average market discount of 9.26
percent. Past performance is no guarantee of future results.

Monthly dividends for the second quarter of 2008, declared in April, were
unchanged at $0.077725 per share. The dividend reflects the current level of the
Fund's net investment income.

Throughout most of the period, we positioned the Fund for a steepening in the
yield curve by underweighting longer dated issues and overweighting intermediate
dated issues. This positioning was additive to performance as rates in the
intermediate portion of the curve fell more than those on the long end of the
curve.

We have maintained a lower exposure to corporate credit for some time now, which
has benefited performance as credit spreads in the sector have widened
considerably, putting downward pressure on prices. While we are looking for
areas to take advantage of this spread widening and add to corporate positions,
we remain cautious because we believe the corporate credit market remains
vulnerable to potential credit downgrades and/or further weakening of the
economy.

Conversely, positions in agency mortgage securities, commercial mortgage-backed
securities and asset-backed securities detracted from relative performance. As a
result of defaults in the subprime market, all residential and commercial
mortgage-backed product spreads moved wider and market liquidity for these types
of products was severely diminished. Additionally asset-backed securities,
especially those backed by home equity lines of credit were negatively impacted.
However, we note that the majority of the portfolio's holdings in these
securities are backed by prime and near-prime borrowers with good credit scores
and favorable loan-to-value ratios.

The Fund's procedure for reinvesting all dividends and distributions in 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.

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

PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. INVESTMENT RETURN, NET ASSET VALUE AND COMMON SHARE MARKET PRICE WILL
FLUCTUATE AND FUND SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.

There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.

<Table>
<Caption>
PORTFOLIO COMPOSITION(@)

Corporate Bonds 80.5%
Commercial Mortgage-Backed
Securities 8.7
Short-Term Investments 6.1
Asset-Backed Securities 3.7
Collateralized Mortgage
Obligations 0.5
Foreign Government Obligation 0.5
</Table>

<Table>
<Caption>
LONG-TERM CREDIT ANALYSIS

AAA 16.9%
AA 6.6
A 21.7
BBB 52.2
BB 2.2
B or Below 0.4
</Table>

@ Does not include open long/short futures contracts with an underlying face
amount of $69,160,486 with net unrealized depreciation of $1,120,166. Also
does not include open swap contracts with net unrealized appreciation of
$5,387,584.

Data as of March 31, 2008. Subject to change daily. All percentages for
portfolio composition are as a percentage of total investments and all
percentages for long-term credit analysis are as a percentage of total long-term
investments. These data are provided for informational purposes only and should
not be deemed 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.

FOR MORE INFORMATION
ABOUT PORTFOLIO HOLDINGS

EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS. THE SEMIANNUAL REPORTS AND THE ANNUAL REPORTS ARE
FILED ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) ON FORM
N-CSRS AND FORM N-CSR, RESPECTIVELY. MORGAN STANLEY ALSO DELIVERS THE SEMIANNUAL
AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE REPORTS AVAILABLE ON ITS
PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM/MSIM. EACH MORGAN STANLEY FUND ALSO FILES
A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FUND'S FIRST AND
THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES NOT DELIVER THE REPORTS
FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS, NOR ARE THE REPORTS
POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY, HOWEVER, OBTAIN THE FORM
N-Q FILINGS (AS WELL AS THE FORM N-CSR AND N-CSRS FILINGS) BY ACCESSING THE
SEC'S WEB SITE, HTTP://WWW.SEC.GOV. YOU MAY ALSO REVIEW AND COPY THEM AT THE
SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF
THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING THE SEC AT (800) SEC-
0330. YOU CAN ALSO REQUEST COPIES OF THESE MATERIALS, UPON PAYMENT OF A
DUPLICATING FEE, BY ELECTRONIC REQUEST AT THE SEC'S E-MAIL ADDRESS
(PUBLICINFO@SEC.GOV) OR BY WRITING THE PUBLIC REFERENCE SECTION OF THE SEC,
WASHINGTON, DC 20549-0102.

IN ADDITION TO FILING A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC
EACH FISCAL QUARTER, THE FUND MAKES PORTFOLIO HOLDINGS INFORMATION AVAILABLE BY
PERIODICALLY PROVIDING THE INFORMATION ON ITS PUBLIC WEB SITE,
WWW.MORGANSTANLEY.COM/MSIM. THE FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO
HOLDINGS ON THE PUBLIC

WEB SITE ON A CALENDAR-QUARTER BASIS APPROXIMATELY 31 CALENDAR DAYS AFTER THE
CLOSE OF THE CALENDAR QUARTER. THE FUND ALSO PROVIDES TOP 10 HOLDINGS
INFORMATION ON THE PUBLIC WEB SITE APPROXIMATELY 15 BUSINESS DAYS FOLLOWING THE
END OF EACH MONTH.

FOR MORE INFORMATION ABOUT WEB SITE POSTINGS, CALL 1-800-869-3863.

PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD

YOU MAY OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICY AND PROCEDURES WITHOUT
CHARGE, UPON REQUEST, BY CALLING TOLL FREE (800) 869-NEWS OR BY VISITING THE
MUTUAL FUND CENTER ON OUR WEB SITE AT WWW.MORGANSTANLEY.COM. IT IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.

YOU MAY OBTAIN INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO
PORTFOLIO SECURITIES DURING THE MOST RECENT TWELVE-MONTH PERIOD ENDED JUNE 30
WITHOUT CHARGE BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE AT
WWW.MORGANSTANLEY.COM. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND
EXCHANGE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV.

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED)

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

Corporate Bonds (80.7%)

Advertising/Marketing Services (0.1%)
$ 175 Interpublic Group of Companies, Inc.
(The)................................. 6.25 % 11/15/14 $ 141,969
------------
Aerospace & Defense (0.3%)
504 Systems 2001 Asset Trust - 144A* (Cayman
Islands).............................. 6.664 09/15/13 503,972
------------
Air Freight/Couriers (1.4%)
2,000 FedEx Corp. ............................ 7.25 02/15/11 2,176,224
------------
Airlines (0.3%)
369 America West Airlines, Inc. (Series 01-
1).................................... 7.10 04/02/21 367,305
------------
Auto Parts: O.E.M. (0.3%)
405 ArvinMeritor, Inc. ..................... 8.75 03/01/12 372,600
------------
Beverages: Alcoholic (0.9%)
210 Anheuser-Busch Companies, Inc. ......... 5.50 01/15/18 217,433
1,100 FBG Finance Ltd. - 144A* (Australia).... 5.125 06/15/15 1,091,431
------------
1,308,864
------------
Biotechnology (1.1%)
140 Amgen Inc. ............................. 5.85 06/01/17 140,135
1,540 Biogen Idec Inc. ....................... 6.875 03/01/18 1,558,632
------------
1,698,767
------------
Cable/Satellite TV (4.2%)
1,355 Comcast Cable Communications, Inc. ..... 6.75 01/30/11 1,409,644
1,740 Comcast Cable Communications, Inc. ..... 7.125 06/15/13 1,850,591
2,310 Comcast Corp. .......................... 6.50 01/15/15 2,368,801
125 DIRECTV Holdings/Financing.............. 6.375 06/15/15 117,188
695 EchoStar DBS Corp. ..................... 6.375 10/01/11 668,938
45 EchoStar DBS Corp. ..................... 6.625 10/01/14 41,063
------------
6,456,225
------------
Chemicals: Major Diversified (0.2%)
235 Du Pont (E.I.) De Nemours & Co., Inc. .. 5.00 01/15/13 244,954
------------
Data Processing Services (0.5%)
720 Fiserv, Inc. ........................... 6.80 11/20/17 745,363
------------
Department Stores (0.4%)
610 May Department Stores Co. .............. 5.95 11/01/08 611,564
------------
Discount Stores (0.1%)
145 Target Corp. ........................... 6.50 10/15/37 140,650
------------
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

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

Drugstore Chains (1.0%)
$ 65 CVS Caremark Corp. ..................... 5.75 % 06/01/17 $ 66,128
495 CVS Corp. .............................. 5.75 08/15/11 518,212
948 CVS Pass-Through Trust - 144A*.......... 6.036 12/10/28 905,379
------------
1,489,719
------------
Electric Utilities (13.5%)
3,085 Arizona Public Service Co. ............. 5.80 06/30/14 3,028,606
2,105 Carolina Power & Light Co. ............. 5.125 09/15/13 2,210,111
285 CenterPoint Energy Resources, Corp. .... 6.25 02/01/37 266,697
305 CenterPoint Energy Resources, Corp.
(Series B)............................ 7.875 04/01/13 339,166
1,705 Consumers Energy Co. ................... 4.00 05/15/10 1,708,338
240 Consumers Energy Co. (Series H)......... 4.80 02/17/09 241,617
1,015 Detroit Edison Co. (The)................ 6.125 10/01/10 1,075,844
835 Duquesne Light Co. (Series O)........... 6.70 04/15/12 910,306
400 Enel Finance International - 144A*
(Luxemburg)........................... 5.70 01/15/13 414,448
930 Entergy Gulf States, Inc. .............. 3.476+ 12/01/09 910,594
820 Entergy Gulf States, Inc. - 144A*....... 6.474+ 12/08/08 822,257
1,545 Exelon Corp. ........................... 6.75 05/01/11 1,631,395
215 Indianapolis Power & Light Co. - 144A*.. 6.30 07/01/13 234,527
250 Nevada Power Co. ....................... 8.25 06/01/11 271,161
1,565 Ohio Edison Co. ........................ 6.40 07/15/16 1,614,999
1,310 Ohio Power Company (Series K)........... 6.00 06/01/16 1,317,843
500 Pacific Gas & Electric Co. ............. 5.625 11/30/17 514,597
205 PacifiCorp.............................. 6.25 10/15/37 207,826
185 Public Service Electric & Gas Co.
(Series B)............................ 5.00 01/01/13 190,149
570 Texas Eastern Transmission.............. 7.00 07/15/32 609,219
430 Union Electric Co. ..................... 6.40 06/15/17 452,689
1,800 Virginia Electric Power Co. ............ 5.95 09/15/17 1,899,041
------------
20,871,430
------------
Electrical Products (0.6%)
920 Cooper Industries, Inc. ................ 5.25 11/15/12 954,445
------------
Electronic Components (0.4%)
635 Philips Electronics..................... 5.75 03/01/18 648,223
------------
Electronic Equipment/Instruments (0.7%)
1,085 Xerox Corp. ............................ 5.50 05/15/12 1,095,136
------------
Electronics/Appliances (0.5%)
705 LG Electronics Inc. - 144A* (South
Korea)................................ 5.00 06/17/10 698,418
------------
Environmental Services (0.9%)
1,370 Waste Management, Inc. ................. 6.875 05/15/09 1,405,830
------------
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

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

Finance/Rental/Leasing (1.8%)
$ 555 Capital One Financial Corp. ............ 6.75 % 09/15/17 $ 527,355
1,315 Capmark Financial Group Inc. - 144A*.... 5.875 05/10/12 833,834
450 Capmark Financial Group Inc. - 144A*.... 6.30 05/10/17 270,215
840 CIT Group, Inc. ........................ 5.65 02/13/17 652,435
600 Countrywide Financial Corp. ............ 6.25 05/15/16 487,555
------------
2,771,394
------------
Financial Conglomerates (0.6%)
510 Brookfield Asset Management Inc.
(Canada).............................. 5.80 04/25/17 461,000
170 Citigroup Inc. ......................... 5.875 05/29/37 148,127
285 Prudential Financial, Inc. (Series D)... 6.625 12/01/37 282,410
------------
891,537
------------
Food Retail (0.9%)
901 Delhaize America, Inc. ................. 9.00 04/15/31 1,087,275
280 Kroger Co. (The)........................ 5.00 04/15/13 281,866
------------
1,369,141
------------
Food: Major Diversified (2.2%)
800 ConAgra Foods, Inc. .................... 7.00 10/01/28 812,666
670 ConAgra Foods, Inc. .................... 8.25 09/15/30 772,036
330 Kellogg Co. ............................ 5.125 12/03/12 341,593
800 Kraft Foods Inc. ....................... 6.125 02/01/18 800,956
645 Kraft Foods Inc. ....................... 6.00 02/11/13 667,540
------------
3,394,791
------------
Food: Meat/Fish/Dairy (0.3%)
130 Pilgrim's Pride Corp. .................. 7.625 05/01/15 125,775
345 Smithfield Foods, Inc. (Series B)....... 8.00 10/15/09 351,900
------------
477,675
------------
Gas Distributors (1.6%)
285 DCP Midstream LLC - 144A*............... 6.75 09/15/37 279,349
675 Equitable Resources Inc. ............... 6.50 04/01/18 679,676
745 NiSource Finance Corp. ................. 3.663+ 11/23/09 723,478
790 NiSource Finance Corp. ................. 7.875 11/15/10 859,281
------------
2,541,784
------------
Home Building (0.1%)
240 Pulte Homes, Inc. ...................... 6.375 05/15/33 188,400
------------
Home Improvement Chains (2.4%)
2,390 Home Depot, Inc. (The).................. 5.40 03/01/16 2,250,006
1,455 Home Depot, Inc. (The).................. 2.925+ 12/16/09 1,388,090
------------
3,638,096
------------
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

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

Hospital/Nursing Management (0.1%)
$ 245 Tenet Healthcare Corp. ................. 7.375 % 02/01/13 $ 219,888
------------
Industrial Conglomerates (0.8%)
865 General Electric Co. ................... 5.25 12/06/17 865,430
360 Honeywell International Inc. ........... 5.30 03/01/18 369,615
------------
1,235,045
------------
Insurance Brokers/Services (1.8%)
1,170 Catlin Insurance Co., Ltd. - 144A*
(Bermuda)............................. 7.249+ ## 978,062
450 Farmers Exchange Capital - 144A*........ 7.05 07/15/28 414,250
1,330 Farmers Insurance Exchange - 144A*...... 8.625 05/01/24 1,407,048
------------
2,799,360
------------
Integrated Oil (2.4%)
1,565 Amerada Hess Corp. ..................... 6.65 08/15/11 1,686,206
1,125 Marathon Oil Corp. ..................... 6.00 10/01/17 1,143,297
1,030 Petro-Canada (Canada)................... 5.95 05/15/35 932,969
------------
3,762,472
------------
Investment Banks/Brokers (2.1%)
530 Bear Stearns Companies Inc. (The)....... 6.40 10/02/17 524,241
400 Goldman Sachs Group, Inc. (The)......... 6.15 04/01/18 400,144
390 Goldman Sachs Group, Inc. (The)......... 6.75 10/01/37 363,937
315 Lehman Brothers Holdings, Inc. ......... 5.75 01/03/17 285,040
485 Lehman Brothers Holdings, Inc. ......... 6.50 07/19/17 461,363
835 Lehman Brothers Holdings, Inc. ......... 6.875 07/17/37 726,067
555 Merrill Lynch & Co., Inc. .............. 5.70 05/02/17 528,131
------------
3,288,923
------------
Major Banks (2.7%)
535 Bank of America Corp. .................. 5.75 12/01/17 554,666
445 Bank of New York Mellon Corp. (Series
G).................................... 4.50 04/01/13 448,653
245 Barclays Bank Plc - 144A* (United
Kingdom).............................. 6.05 12/04/17 239,397
1,805 Credit Suisse New York (CH)............. 6.00 02/15/18 1,804,009
1,115 Wachovia Capital Trust III.............. 5.80+ # 794,930
315 Wells Fargo Co. ........................ 5.625 12/11/17 322,800
------------
4,164,455
------------
Major Telecommunications (9.3%)
1,465 AT&T Corp. ............................. 8.00+ 11/15/31 1,716,784
1,245 France Telecom S.A. (France)............ 8.50+ 03/01/31 1,546,773
1,525 SBC Communications, Inc. ............... 6.15+ 09/15/34 1,469,479
2,095 Sprint Capital Corp. ................... 8.75 03/15/32 1,774,232
2,695 Sprint Nextel Corp. .................... 6.00 12/01/16 2,098,661
1,690 Telecom Italia Capital SA (Luxembourg).. 4.95 09/30/14 1,540,080
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

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

$ 1,405 Telecom Italia Capital SA (Luxembourg).. 4.00 % 01/15/10 $ 1,378,867
1,380 Telefonica Europe BV (Netherlands)...... 8.25 09/15/30 1,616,066
840 Verizon Communications.................. 5.50 02/15/18 819,665
405 Verizon New England Inc. ............... 6.50 09/15/11 423,458
------------
14,384,065
------------
Managed Health Care (0.2%)
320 Unitedhealth Group Inc. ................ 6.00 02/15/18 314,021
------------
Media Conglomerates (4.1%)
1,110 News America Inc - 144A*................ 6.65 11/15/37 1,123,052
2,005 Time Warner, Inc. ...................... 3.30+ 11/13/09 1,920,626
2,090 Time Warner, Inc. ...................... 5.875 11/15/16 1,990,784
1,350 Viacom, Inc. ........................... 6.875 04/30/36 1,303,931
------------
6,338,393
------------
Medical Specialties (0.8%)
1,330 Hospira, Inc. .......................... 5.31+ 03/30/10 1,294,138
------------
Motor Vehicles (1.2%)
795 DaimlerChrysler North American Holdings
Corp. ................................ 7.30 01/15/12 849,514
260 DaimlerChrysler North American Holdings
Corp. ................................ 8.00 06/15/10 278,522
675 DaimlerChrysler North American Holdings
Corp. ................................ 8.50 01/18/31 773,694
------------
1,901,730
------------
Multi-Line Insurance (1.0%)
1,170 AIG SunAmerica Global Financing
VI - 144A*............................ 6.30 05/10/11 1,230,383
750 Two-Rock Pass-Through - 144A*
(Bermuda)............................. 4.036 ## 300,000
------------
1,530,383
------------
Oil & Gas Pipelines (4.4%)
630 Colorado Interstate Gas Co. ............ 6.80 11/15/15 652,684
2,685 Enterprise Products Operating L.P.
(Series B)............................ 5.60 10/15/14 2,690,059
415 Kinder Morgan Energy Partners, L.P. .... 5.85 09/15/12 425,994
1,095 Kinder Morgan Finance Co. (Canada)...... 5.70 01/05/16 1,042,988
1,010 Plains All American Pipeline LP/PAA
Finance Corp. ........................ 6.70 05/15/36 977,074
480 Trans-Canada Pipelines.................. 6.20 10/15/37 464,357
470 Transcontinental Gas Pipe Line Corp.
(Series B)............................ 8.875 07/15/12 536,975
------------
6,790,131
------------
Oil & Gas Production (3.2%)
920 Anadarko Finance Co. (Series B)
(Canada).............................. 6.75 05/01/11 983,341
385 Chesapeake Energy Corp. ................ 7.625 07/15/13 396,550
1,910 Devon Financing Corp. .................. 6.875 09/30/11 2,086,356
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

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

$ 1,270 EnCana Corp. ........................... 6.50 % 02/01/38 $ 1,265,204
250 Husky Oil Ltd. (Canada)................. 8.90 08/15/28 253,693
------------
4,985,144
------------
Oil Refining/Marketing (0.3%)
515 Valero Energy Corp. .................... 3.50 04/01/09 511,862
------------
Oilfield Services/Equipment (0.6%)
850 Weatherford International Inc. ......... 6.35 06/15/17 880,732
------------
Other Metals/Minerals (0.7%)
1,030 Brascan Corp. (Canada).................. 7.125 06/15/12 1,029,182
------------
Pharmaceuticals: Major (0.2%)
285 Wyeth................................... 5.45 04/01/17 290,784
70 Wyeth................................... 5.50 02/15/16 71,490
------------
362,274
------------
Property - Casualty Insurers (1.2%)
1,400 Mantis Reef Ltd. - 144A* (Australia).... 4.692 11/14/08 1,410,585
500 Platinum Underwriters Finance Inc.
(Series B)............................ 7.50 06/01/17 503,045
------------
1,913,630
------------
Railroads (1.3%)
1,105 Burlington Northern Santa Fe Corp. ..... 6.125 03/15/09 1,126,587
800 Union Pacific Corp. .................... 5.45 01/31/13 824,190
------------
1,950,777
------------
Real Estate Development (0.5%)
667 World Financial Properties - 144A*...... 6.91 09/01/13 637,746
149 World Financial Properties - 144A*...... 6.95 09/01/13 144,749
------------
782,495
------------
Real Estate Investment Trusts (0.8%)
1,485 iStar Financial Inc. ................... 3.34 03/09/10 1,175,023
------------
Restaurants (0.5%)
760 Tricon Global Restaurants, Inc. ........ 8.875 04/15/11 838,132
------------
Savings Banks (2.3%)
1,975 Sovereign Bancorp, Inc. ................ 5.114+ 03/23/10 1,892,011
1,455 Washington Mutual Inc. ................. 8.25 04/01/10 1,266,403
300 Washington Mutual PFD IV - 144A*........ 9.75+ # 229,825
300 Washington Mutual Preferred Funding II.. 6.665+ # 162,225
------------
3,550,464
------------
Services to the Health Industry (0.7%)
1,115 Medco Health Solutions.................. 7.125 03/15/18 1,144,500
------------
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

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

Tobacco (0.2%)
$ 345 Reynolds American Inc. ................. 6.50 % 07/15/10 $ 353,625
------------
Total Corporate Bonds (Cost $127,937,780)........................ 124,705,320
------------
Commercial Mortgage-Backed Securities
(8.7%)
600 Banc of America Commercial Mortgage Inc.
2007-2 A4............................. 5.688+ 04/10/49 596,982
875 Banc of America Commercial Mortgage Inc.
2007-3 A4............................. 5.659+ 06/10/49 865,621
650 Bear Stearns Commercial Mortgage
Securities Inc.
2007-PW16 A4.......................... 5.713+ 06/11/40 647,074
875 Citigroup Commercial Mortgage Trust
2007-C6 A4............................ 5.889+ 06/10/17 870,152
1,300 Commercial Mortgage Pass-Through
Certificate 2007-C9 A4................ 5.816+ 12/10/49 1,302,208
975 Greenwich Capital Commercial Funding
Corp. 2007-GG9 A4..................... 5.444+ 03/10/39 950,699
1,225 GS Mortgage Securities Corporation II
2007-GG10 A4.......................... 5.799+ 08/10/45 1,225,758
425 JPMorgan Chase Commercial Mortgage
Securities
2007-CB18 A4.......................... 5.44+ 06/12/47 413,644
700 JPMorgan Chase Commercial Mortgage
Securities
2007-CB19 A4.......................... 5.747+ 02/12/49 696,565
950 JPMorgan Chase Commercial Mortgage
Securities
2007-LD11 A4.......................... 6.007+ 06/15/49 951,011
650 LB Commercial Conduit Mortgage Trust
2007-C3 A4............................ 5.933+ 07/15/44 657,087
425 LB-UBS Commercial Mortgage Trust 2007-C2
A3.................................... 5.43+ 02/15/40 413,494
675 LB-UBS Commercial Mortgage Trust 2007-C6
A4.................................... 5.858+ 07/15/40 674,547
1,000 Wachovia Bank Commercial Mortgage Trust
2007-C30 A5........................... 5.342+ 12/15/43 966,116
1,200 Wachovia Bank Commercial Mortgage Trust
2007-C32 A3........................... 5.741+ 06/15/49 1,191,542
1,000 Wachovia Bank Commercial Mortgage Trust
2007-C33 A4........................... 6.10+ 02/15/51 1,009,916
------------
Total Commercial Mortgage-Backed Securities
(Cost $13,308,585).............................................. 13,432,416
------------
Asset-Backed Securities (3.7%)
550 Capital One Multi-Asset Execution Trust
2007-A7 A7............................ 5.75 07/15/20 525,250
555 Citibank Credit Card Issuance Trust
2007-A8 A8............................ 5.65 09/20/19 541,970
600 Discover Card Master Trust 2007-A1 A1... 5.65 03/16/20 578,929
1,350 Ford Credit Auto Owner Trust 2007-A
A3A................................... 5.40 08/15/11 1,388,002
1,275 GS Auto Loan Trust 2007-1 A3............ 5.39 12/15/11 1,296,000
433 Harley-Davidson Motorcycle Trust 2004-2
A2.................................... 3.56 02/15/12 433,278
950 TXU Electric Delivery Transition Bond
Co. LLC 2004-1 A2..................... 4.81 11/17/14 973,423
9 USAA Auto Owner Trust 2005-1 A3......... 3.90 07/15/09 9,242
------------
Total Asset-Backed Securities (Cost $5,716,137).................. 5,746,094
------------
Collateralized Mortgage Obligations
(0.6%)
471 American Home Mortgage Assets 2007-5
A3.................................... 2.899+ 06/25/47 231,655
472 Countrywide Alternative Loan Trust 2005-
51 B1................................. 3.536+ 11/20/35 151,053
323 Countrywide Alternative Loan Trust 2005-
81 M1................................. 3.299+ 02/25/37 137,477
200 Countrywide Alternative Loan Trust 2006-
0A16 M4............................... 3.119+ 10/25/46 20,000
225 Harborview Mortgage Loan Trust 2006-8
B4.................................... 3.149+ 08/21/36 45,000
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

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

$ 400 Lehman XS Trust 2007-4N M4.............. 3.599+ % 03/25/47 $ 122,250
199 Luminent Mortgage Trust 2006-5 B1....... 2.959+ 07/25/36 85,987
425 Master Adjustable Rate Mortgages Trust
2007-3 1M1............................ 3.449+ 05/25/47 72,248
------------
Total Collateralized Mortgage Obligations (Cost $2,136,715)...... 865,670
------------
Foreign Government Obligation (0.5%)
MXN 7,735 Mexican Fixed Rate Bonds (Series M20)
(Mexico) (Cost $777,562).............. 9.50 12/18/14 808,041
------------
Short-Term Investments (6.1%)

U.S. Government Obligations (a) (1.1%)
1,650 U.S. Treasury Bills** (Cost
$1,649,401)........................... 0.45 - 3.15 04/10/08 1,649,401
------------

<Caption>
NUMBER OF
SHARES (000)
- ------------

Investment Company (b) (5.0%)
7,763 Morgan Stanley Institutional Liquidity Money Market Portfolio -
Institutional Class++ (Cost $7,763,030) 7,763,030
------------
Total Short-Term Investments (Cost $9,412,431)................... 9,412,431
------------

Total Investments (Cost $159,289,210) (c) (d)......... 100.3% 154,969,972
Liabilities in Excess of Other Assets................. (0.3) (411,710)
------- ------------

Net Assets............................................ 100.0% $154,558,262
===== ============

</Table>

- ----------

<Table>

MXN Mexican New Peso.
* Resale is restricted to qualified institutional investors.
** A portion of this security has been physically segregated in
connection with open futures contracts in an amount equal to $328,720.
# Securities issued with perpetual maturity.
## Foreign issued securities with perpetual maturity.
+ Floating rate security, rate shown is the rate in effect at March 31,
2008.
++ May include cash designated as collateral in connection with open swap
contracts.
(a) Purchased on a discount basis. The interest rates shown have been
adjusted to reflect a money market equivalent yield.
(b) See Note 3 to the financial statements regarding investments in Morgan
Stanley Institutional Liquidity Money Market Portfolio - Institutional
Class.
(c) Securities have been designated as collateral in an amount equal to
$75,854,174 in connection with open futures and swap contracts.
(d) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $1,810,407 and the aggregate gross unrealized
depreciation is $6,129,645 resulting in net unrealized depreciation of
$4,319,238.
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

FUTURES CONTRACTS OPEN AT MARCH 31, 2008:

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

125 Long U.S. Treasury Notes 5 Year,
June 2008 $ 14,279,298 $ 135,977
63 Long U.S. Treasury Bonds 20 Year,
June 2008 8,078,188 (88,735)
24 Long U.S. Treasury Notes 2 Year,
June 2008 5,151,750 29,601
348 Short U.S. Treasury Notes 10 Year,
June 2008 (41,651,250) (1,197,009)
-----------
Net Unrealized Depreciation.................................. $(1,120,166)
===========

</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

CREDIT DEFAULT SWAP CONTRACTS OPEN AT MARCH 31, 2008:

<Table>
<Caption>
NOTIONAL UNREALIZED
SWAP COUNTERPARTY & BUY/SELL AMOUNT INTEREST TERMINATION APPRECIATION
REFERENCE OBLIGATION PROTECTION (000'S) RATE DATE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------

Lehman Brothers Special Financing Inc.
ABX He Buy 430 0.18 July 25, 2045 $ (23,611)

Credit Suisse International
ABX He Buy 430 0.18 July 25, 2045 (19,314)

Goldman Sachs International
Trane Inc. Buy 280 0.50 March 20, 2013 2,109

UBS AG
Trane Inc. Buy 855 0.50 March 20, 2013 6,439

Goldman Sachs International
Trane Inc. Buy 115 0.60 March 20, 2018 857

UBS AG
Trane Inc. Buy 895 0.60 March 20, 2018 6,670

Credit Suisse International
Arrow Electronics, Inc. Buy 975 1.00 March 20, 2015 5,129

Lehman Brothers Special Financing Inc.
Arrow Electronics, Inc. Buy 160 1.04 March 20, 2018 1,250

Credit Suisse International
Arrow Electronics, Inc. Buy 235 1.11 March 20, 2013 (1,086)

Lehman Brothers Special Financing Inc.
Arrow Electronics, Inc. Buy 1,020 1.40 March 20, 2013 0

Goldman Sachs International
Avalonbay Communities Inc. Buy 1,490 3.05 March 20, 2013 (11,449)

Merrill Lynch International
Carnival Corp. Buy 895 1.50 March 20, 2018 (7,528)

Merrill Lynch International
Carnival Corp. Buy 750 1.57 March 20, 2018 (10,261)

Bank of America, N.A.
Carnival Corp. Buy 905 1.57 March 20, 2018 (12,380)

Goldman Sachs International
Carnival Corp. Buy 70 1.60 March 20, 2018 (902)

Merrill Lynch International
Carnival Corp. Buy 495 1.60 March 20, 2018 (6,382)

Bank of America, N.A.
Centurytel, Inc. Buy 395 0.88 September 20, 2017 22,157
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

Lehman Brothers Special Financing Inc.
CMBX NA Buy 4,080 0.10 October 12, 2052 (243,026)

Lehman Brothers Special Financing Inc.
CMBX NA Buy 4,105 0.10 October 12, 2052 (265,558)

Lehman Brothers Special Financing Inc.
CMBX NA Buy 5,100 0.10 October 12, 2052 (343,770)

Goldman Sachs International
Coca-Cola Enterprises Inc. Buy 1,550 0.588 March 20, 2013 (3,142)

Lehman Brothers Special Financing Inc.
Coca-Cola Enterprises Inc. Buy 695 0.64 March 20, 2013 (3,091)

Citibank, N.A., New York
Covidien Ltd. Buy 167 0.43 March 20, 2012 20

Citibank, N.A., New York
Covidien Ltd. Buy 323 0.43 March 20, 2012 38

Goldman Sachs International
Chubb Corp. Buy 1,640 0.10 March 20, 2012 29,714

Goldman Sachs International
Dell Inc. Buy 830 0.22 March 20, 2012 14,897

Merrill Lynch International
Disney (Walt) Co. Buy 1,435 0.60 March 20, 2013 (4,935)

Merrill Lynch International
Disney (Walt) Co. Buy 1,520 0.77 March 20, 2013 0

Goldman Sachs International
Dow Jones Index Sell 825 0.60 December 20, 2012 (7,578)

Goldman Sachs International
Dow Jones Index Sell 2,430 0.60 December 20, 2012 (48,346)

Goldman Sachs International
Dow Jones Index Sell 1,525 1.40 December 20, 2012 (32,265)

Goldman Sachs International
Dow Jones Index Sell 1,570 1.40 December 20, 2012 (30,415)

Goldman Sachs International
Dow Jones Index Sell 1,600 1.40 December 20, 2012 (35,773)

Merrill Lynch International
Dow Jones Index Sell 2,775 1.40 December 20, 2012 77,207

Goldman Sachs International
Dow Jones Index Sell 3,430 1.40 December 20, 2012 (64,324)
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

Goldman Sachs International
Dow Jones Index Sell 1,605 0.80 December 20, 2017 (6,711)

JPMorgan Chase N.A. New York
Eaton Corp. Buy 255 0.60 March 20, 2013 2,164

Citibank, N.A., New York
Eaton Corp. Buy 715 0.62 March 20, 2013 5,414

Citibank, N.A., New York
Eaton Corp. Buy 575 0.72 March 20, 2013 1,728

Citibank, N.A., New York
Eaton Corp. Buy 405 0.82 March 20, 2018 3,436

Merrill Lynch International
Eaton Corp. Buy 560 0.92 March 20, 2018 288

Goldman Sachs International
Eaton Corp. Buy 490 0.97 March 20, 2018 (1,699)

Goldman Sachs International
E.I. Du Pont De Nemours and Co. Buy 250 0.43 March 20, 2013 505

UBS AG
Eli Lilly & Co. Buy 1,265 0.30 March 20, 2013 7,885

Goldman Sachs International
Eli Lilly & Co. Buy 310 0.33 March 20, 2013 1,503

Goldman Sachs International
Firstenergy Corp. Buy 1,480 1.25 March 20, 2013 (8,174)

Goldman Sachs International
Gap, Inc. Buy 1,000 1.19 March 20, 2012 (12,224)

Lehman Brothers Special Financing Inc.
Goodrich Corp. Buy 515 0.45 March 20, 2018 6,348

Lehman Brothers Special Financing Inc.
Goodrich Corp. Buy 370 0.46 March 20, 2018 4,259

Goldman Sachs International
Goodrich Corp. Buy 445 0.47 March 20, 2018 4,760

Bank of America, N.A.
Goodrich Corp. Buy 640 0.70 March 20, 2013 (5,996)

Bank of America, N.A.
Goodrich Corp. Buy 440 0.82 March 20, 2018 (7,844)

Goldman Sachs International
Hartford Financial Services Group, Inc. Buy 1,700 0.12 December 20, 2011 74,373
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

Goldman Sachs International
Lehman Brothers Holdings Inc. Buy 775 4.40 March 20, 2013 (45,562)

Goldman Sachs International
Lehman Brothers Holdings Inc. Buy 390 4.75 March 20, 2013 (28,542)

UBS AG
Martin Marietta Materials, Inc. Buy 715 1.73 March 20, 2018 15,596

UBS AG
Martin Marietta Materials, Inc. Buy 720 1.78 March 20, 2013 9,684

Goldman Sachs International
Merrill Lynch & Co., Inc. Buy 295 3.25 March 20, 2013 (6,915)

Bank of America, N.A.
Merrill Lynch & Co., Inc. Buy 495 3.25 March 20, 2013 (11,603)

Lehman Brothers Special Financing Inc.
Metlife, Inc. Buy 840 2.15 March 20, 2013 (23,859)

Deutsche Bank AG
MGIC Investment Corp. Buy 275 8.15 March 20, 2013 (18,920)

Goldman Sachs International
Motorola, Inc. Buy 540 0.15 December 20, 2011 50,143

Goldman Sachs International
Motorola, Inc. Buy 1,100 0.157 December 20, 2011 101,889

Bank of America, N.A.
Nordstrom, Inc. Buy 620 1.03 March 20, 2018 14,665

Credit Suisse International
Nordstrom, Inc. Buy 1,495 1.04 March 20, 2013 14,442

Credit Suisse International
Nordstrom, Inc. Buy 780 1.05 March 20, 2013 7,184

JPMorgan Chase N.A. New York
Nordstrom, Inc. Buy 485 1.07 March 20, 2018 9,975

JPMorgan Chase N.A. New York
Nordstrom, Inc. Buy 485 1.15 March 20, 2018 6,980

Deutsche Bank AG
Pactiv Corp. Buy 350 1.34 March 20, 2013 308

Credit Suisse International
Pactiv Corp. Buy 1,000 1.35 March 20, 2013 432

Bank of America, N.A.
Pactiv Corp. Buy 1,000 1.375 March 20, 2013 (688)
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

JPMorgan Chase N.A. New York
Pepsi Bottling Group, Inc. Buy 400 0.58 March 20, 2013 (1,204)

JPMorgan Chase N.A. New York
Pepsi Bottling Group, Inc. Buy 530 0.63 March 20, 2013 (2,814)

Citibank, N.A. New York
Pitney Bowes Inc. Buy 1,010 0.48 March 20, 2013 10,079

Credit Suisse International
PMI Group, Inc. Buy 240 8.10 March 20, 2013 (10,351)

Goldman Sachs International
Prologis Buy 655 3.33 March 20, 2013 6,819

Bank of America, N.A.
Sealed Air Corp. Buy 315 1.08 March 20, 2018 11,607

Goldman Sachs International
Sealed Air Corp. Buy 550 1.08 March 20, 2018 20,267

Bank of America, N.A.
Sealed Air Corp. Buy 420 1.12 March 20, 2018 14,204

Goldman Sachs International
Sealed Air Corp. Buy 265 1.24 March 20, 2018 6,552

Goldman Sachs International
Simon Property Group Buy 965 2.32 March 20, 2018 (48,750)

Goldman Sachs International
Simon Property Group Buy 1,210 2.37 March 20, 2018 (65,621)

JPMorgan Chase N.A. New York
SLM Corp. Sell 435 4.95 March 20, 2013 (50,303)

Merrill Lynch International
SLM Corp. Sell 435 5.00 March 20, 2013 (49,584)

Bank of America, N.A.
Textron Financial Corp. Buy 485 0.80 March 20, 2018 29,375

UBS AG
Textron Financial Corp. Buy 420 1.00 March 20, 2013 10,551

UBS AG
Textron Financial Corp. Buy 350 1.01 March 20, 2013 8,793

Goldman Sachs International
Textron Financial Corp. Buy 845 1.05 March 20, 2013 19,221

UBS AG
Textron Financial Corp. Buy 830 1.06 March 20, 2013 (2,442)
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

Bank of America, N.A.
Toll Brothers, Inc. Buy 385 2.25 March 20, 2018 3,720

Bank of America, N.A.
Toll Brothers, Inc. Buy 770 2.90 March 20, 2013 5,316

Citibank, N.A., New York
Tyco Electronics Ltd. Buy 167 0.43 March 20, 2012 5,089

Citibank, N.A., New York
Tyco Electronics Ltd. Buy 323 0.43 March 20, 2012 9,872

Citibank, N.A., New York
Tyco International Ltd. Buy 167 0.43 March 20, 2012 4,990

Citibank, N.A., New York
Tyco International Ltd. Buy 323 0.43 March 20, 2012 9,681

Goldman Sachs International
Union Pacific Corp. Buy 850 0.20 December 20, 2011 9,678

Deutsche Bank AG
Washington Mutual Buy 800 5.00 March 20, 2013 (4,682)

Goldman Sachs International
Washington Mutual Buy 785 6.48 March 20, 2013 (44,811)

Bank of America, N.A.
Yum! Brands, Inc. Buy 70 1.18 March 20, 2013 (445)

Bank of America, N.A.
Yum! Brands, Inc. Buy 690 1.25 March 20, 2013 (6,576)
---------

Net Unrealized Depreciation............................. $(945,194)
=========

</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
PORTFOLIO OF INVESTMENTS - MARCH 31, 2008 (UNAUDITED) continued

INTEREST RATE SWAP CONTRACTS OPEN AT MARCH 31, 2008:

<Table>
<Caption>
NOTIONAL PAYMENTS PAYMENTS UNREALIZED
AMOUNT RECEIVED MADE TERMINATION APPRECIATION
COUNTERPARTY (000'S) BY FUND BY FUND DATE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------------

Deutsche Bank AG, New York $24,375 Fixed Rate 5.389% Floating Rate 3.092+% May 25, 2017 $2,645,420
Citibank N.A. New York 1,375 Fixed Rate 5.44 Floating Rate 3.085+ May 29, 2017 154,701
JPMorgan Chase N.A. New York 4,075 Fixed Rate 5.448 Floating Rate 3.085+ May 29, 2017 461,005
Citibank Capital Market 22,000 Fixed Rate 5.448 Floating Rate 3.096+ August 9, 2017 2,492,600
Bank of America, N.A. New York 10,445 Fixed Rate 5.55 Floating Rate 0.00+ February 22, 2018 205,140
Bank of America, N.A. New York 10,360 Fixed Rate 5.637 Floating Rate 0.00+ March 7, 2018 233,825
Citibank N.A. New York 4,000 Fixed Rate 5.275 Floating Rate 3.331+ October 25, 2037 407,560
JPMorgan Chase N.A. New York 1,300 Floating Rate 3.057+ Fixed Rate 4.582 December 4, 2017 (55,614)
JPMorgan Chase N.A. New York 8,300 Floating Rate 2.598+ Fixed Rate 3.966 March 25, 2018 76,858
JPMorgan Chase N.A. New York 12,700 Floating Rate 2.598+ Fixed Rate 3.966 March 25, 2018 117,602
Bank of America, N.A. New York 13,330 Floating Rate 0.00+ Fixed Rate 5.957 February 22, 2023 (187,953)
Bank of America, N.A. New York 13,315 Floating Rate 0.00+ Fixed Rate 6.04 March 7, 2023 (218,366)
----------
Net Unrealized Appreciation................................................... $6,332,778
==========

</Table>

- ----------

<Table>

+ Floating rate represents USD-3 Months LIBOR.
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
March 31, 2008 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $151,526,180).......................................... $147,206,942
Investment in affiliate, at value
(cost $7,763,030)............................................ 7,763,030
Unrealized appreciation on open swap contracts................. 7,490,973
Receivable for:
Interest.................................................... 2,030,550
Premium paid on open swap contracts......................... 953,429
Periodic interest on open swap contracts.................... 847,198
Dividends from affiliate.................................... 17,675
Prepaid expenses and other assets.............................. 18,870
------------
Total Assets................................................ 166,328,667
------------
Liabilities:
Unrealized depreciation on open swap contracts................. 2,103,389
Payable for:
Swap contract collateral due to brokers..................... 7,777,000
Investments purchased....................................... 1,324,571
Periodic interest on open swap contracts.................... 288,408
Investment advisory fee..................................... 54,267
Capital stock repurchased................................... 51,042
Variation margin............................................ 34,134
Administration fee.......................................... 10,544
Transfer agent fee.......................................... 2,878
Accrued expenses and other payables............................ 124,172
------------
Total Liabilities........................................... 11,770,405
------------
Net Assets.................................................. $154,558,262
============
Composition of Net Assets:
Paid-in-capital................................................ $175,735,142
Net unrealized depreciation.................................... (51,545)
Dividends in excess of net investment income................... (1,349,884)
Accumulated net realized loss.................................. (19,775,451)
------------
Net Assets.................................................. $154,558,262
============
Net Asset Value Per Share
9,286,867 shares outstanding (15,000,000 shares authorized of
$.01 par value)................................................ $16.64
======

</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended March 31, 2008 (unaudited)

<Table>

Net Investment Income:
Income
Interest........................................................ $ 4,350,898
Dividends from affiliate........................................ 141,521
-----------
Total Income................................................. 4,492,419
-----------
Expenses
Investment advisory fee......................................... 334,703
Administration fee.............................................. 63,753
Shareholder reports and notices................................. 39,028
Professional fees............................................... 29,944
Transfer agent fees and expenses................................ 26,585
Custodian fees.................................................. 17,873
Listing fees.................................................... 9,990
Directors' fees and expenses.................................... 4,306
Other........................................................... 13,278
-----------
Total Expenses............................................... 539,460
Less: rebate from Morgan Stanley affiliated cash sweep (note
3)............................................................ (3,447)
-----------
Net Expenses................................................. 536,013
-----------
Net Investment Income........................................ 3,956,406
-----------
Realized and Unrealized Gain (Loss):
Realized Gain (Loss) on:
Investments..................................................... 556,969
Futures contracts............................................... (2,315,217)
Swap contracts.................................................. 365,735
Foreign exchange transactions................................... 275
-----------
Net Realized Loss............................................ (1,392,238)
-----------
Change in Unrealized Appreciation/Depreciation on:
Investments..................................................... (4,431,319)
Futures contracts............................................... (1,207,631)
Swap contracts.................................................. 4,413,240
Translation of other assets and liabilities denominated in
foreign currencies............................................ 248
-----------
Net Change in Unrealized Appreciation/Depreciation........... (1,225,462)
-----------
Net Loss..................................................... (2,617,700)
-----------
Net Increase.................................................... $ 1,338,706
===========

</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
FINANCIAL STATEMENTS continued

Statements of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2008 SEPTEMBER 30, 2007
-------------- ------------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income............................. $ 3,956,406 $ 7,900,901
Net realized loss................................. (1,392,238) (1,904,317)
Net change in unrealized
appreciation/depreciation....................... (1,225,462) 654,326
------------ ------------
Net Increase................................... 1,338,706 6,650,910
------------ ------------
Dividends to shareholders from net investment
income.......................................... (4,361,048) (8,933,990)
Decrease from capital stock transactions.......... (1,889,044) (5,109,765)
------------ ------------
Net Decrease................................... (6,250,092) (7,392,845)
Net Assets:
Beginning of period............................... 159,469,648 166,862,493
------------ ------------
End of Period
(Including dividends in excess of net investment
income of $1,349,884 and $945,242, respectively).. $154,558,262 $159,469,648
============ ============

</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (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 for distribution to shareholders as is
consistent with prudent investment risk 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) certain portfolio securities may be valued by
an outside pricing service approved by the Fund's Directors; (2) 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; (3)
futures are valued at the latest price published by the commodities exchange on
which they trade; (4) credit default/interest rate swaps are marked-to-market
daily based upon quotations from market makers. (5) when market quotations are
not readily available including circumstances under which Morgan Stanley
Investment Advisors Inc. (the "Investment Adviser") determines that the market
quotations are not reflective of 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; (6)
investments in open-end mutual funds, including the Morgan Stanley Institutional
Liquidity Funds, are valued at the net asset value as of the close of each
business day; and (7) 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 and are included in interest income. Interest income is
accrued daily.

C. 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

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued

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.

D. Credit Default Swaps -- A credit default swap is an agreement between two
parties to exchange the credit risk of an issuer. The Fund may purchase credit
protection on the referenced obligation of the credit default swap ("Buy
Contract"), or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A buyer of a credit default swap is said
to buy protection by paying periodic fees in return for a contingent payment
from the seller if the issuer has a credit event such as bankruptcy or a failure
to pay outstanding obligations while the swap is outstanding. A seller of a
credit default swap is said to sell protection and thus collects the periodic
fees and profits if the credit of the issuer remains stable or improves while
the swap is outstanding. If a credit event occurs, the seller pays to the buyer
an agreed upon amount, which approximates the notional amount of the swap as
disclosed in the table following the Portfolio of Investments. During the term
of the swap agreement, the Fund receives or pays periodic fixed payments from or
to the respective counterparty calculated at the agreed upon interest rate
applied to the notional amount. These periodic payments are accrued daily and
recorded as realized gains or losses in the Statement of Operations. In
addition, upon termination of the swap contract, gains and losses are also
realized. Any upfront payment received or paid by the Fund is recorded as
assets/liabilities on the Fund's books. The Fund may pay or receive cash to
collateralize credit default swap contracts. This cash collateral is recorded as
assets/liabilities on the Fund's books. Any cash received may be invested in
Morgan Stanley Institutional Liquidity Funds.

E. Interest Rate Swaps -- Interest rate swaps involve the exchange of
commitments to pay and receive interest based on a notional principal amount.
Net periodic interest payments to be received or paid are accrued daily and are
recorded as realized gains or losses in the Statement of Operations. The Fund
may pay or receive cash to collateralize interest rate swap contracts. This cash
collateral is recorded as assets/liabilities on the Fund's books. Any cash
received may be invested in Morgan Stanley Institutional Liquidity Funds.

F. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no provision for federal income
taxes is required. The Fund files tax returns with the U.S. Internal Revenue
Service, State of New York and City of New York. The Fund adopted the provisions
of the Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN
48") Accounting for Uncertainty in Income Taxes on March 30, 2008. FIN 48 sets
forth a minimum threshold for financial statement recognition of the benefit of
a tax position taken or expected to be taken in a tax return. The implementation
of FIN 48

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued

did not result in any unrecognized tax benefits in the accompanying financial
statements. If applicable, the Fund recognizes interest accrued related to
unrecognized tax benefits in interest expense and penalties in other expenses in
the Statement of Operations. Each of the tax years in the four year period ended
March 31, 2008, remains subject to examination by taxing authorities.

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

H. 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 Advisory/Administration Agreements
Pursuant to an Investment Advisory Agreement with the Investment Adviser, the
Fund pays an advisory fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined at the close of
each business week: 0.42% to the portion of average weekly net assets not
exceeding $500 million and 0.35% to the portion of average weekly net assets in
excess of $500 million.

Pursuant to an Administration Agreement with Morgan Stanley Services Company
Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund
pays an administration fee, accrued daily and payable monthly, by applying the
annual rate of 0.08% to the Fund's weekly net assets.

Under an agreement between the Administrator and State Street Bank and Trust
Company ("State Street"), State Street provides certain administrative services
to the Fund. For such services, the Administrator pays State Street a portion of
the fee the Administrator receives from the Fund.

3. Security Transactions and Transactions with Affiliates
The Fund invests in Morgan Stanley Institutional Liquidity Money Market
Portfolio -- Institutional Class, an open-end management investment company
managed by the Investment Adviser. Investment advisory fees paid by the Fund are
reduced by an amount equal to the advisory and administrative service fees paid
by Morgan Stanley Institutional Liquidity Money Market
Portfolio -- Institutional Class with respect to assets invested by the Fund in
Morgan Stanley Institutional Liquidity Money Market Portfolio -- Institutional
Class. For the six months ended March 31, 2008, advisory fees paid were reduced
by $3,447 relating to the Fund's investment in Morgan Stanley Institutional
Liquidity Money Market Portfolio -- Institutional Class. Income distributions
earned by the Fund are recorded as dividends from affiliate in the Statement of
Operations and totaled $141,521 for the six months

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued

ended March 31, 2008. During the six months ended March 31, 2008, cost of
purchases and sales of investments in Morgan Stanley Institutional Liquidity
Money Market Portfolio -- Institutional Class aggregated $51,476,206 and
$47,586,961, respectively.

The cost of purchases and proceeds from sales/prepayments/maturities of
portfolio securities, excluding short-term investments, for the six months ended
March 31, 2008 aggregated $46,226,289 and $48,378,505, respectively. Included in
the aforementioned are purchases and sales of U.S. Government securities of
$12,573,246, and $30,243,470, respectively.

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. The
Directors voted to close the plan to new participants and eliminate the future
benefits growth due to increases to compensation after July 31, 2003. Aggregate
pension costs for the six months ended March 31, 2008, included in Directors'
fees and expenses in the Statement of Operations amounted to $3,009. At March
31, 2008, the Fund had an accrued pension liability of $61,880, which is
included in accrued expenses in the Statement of Assets and Liabilities.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan")
which allows each independent Director to defer payment of all, or a portion, of
the fees he or she receives for serving on the Board of Directors. Each eligible
Director generally may elect to have the deferred amounts credited with a return
equal to the total return on one or more of the Morgan Stanley funds that are
offered as investment options under the Compensation Plan.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund.

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, 2006...................... 9,732,713 $97,325 $182,636,626
Treasury shares purchased and retired (weighted
average discount 6.93%)++...................... (323,109) (3,231) (5,106,534)
--------- ------- ------------
Balance, September 30, 2007...................... 9,409,604 94,094 177,530,092
Treasury shares purchased and retired (weighted
average discount 9.26%)++...................... (122,737) (1,227) (1,887,817)
--------- ------- ------------
Balance, March 31, 2008.......................... 9,286,867 $92,867 $175,642,275
========= ======= ============

</Table>

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

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued

5. Expense Offset
The expense offset represents a reduction of the fees and expenses for interest
earned on cash balances maintained by the Fund with the transfer agent.

6. Dividends
On April 8, 2008, the Fund declared the following dividends from net investment
income:

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

$0.077725 April 18, 2008 April 25, 2008
$0.077725 May 23, 2008 May 30, 2008
$0.077725 June 20, 2008 June 27, 2008
</Table>

7. 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 ("future contracts").

These futures contracts involve elements 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.

The Fund may enter into credit default swaps for hedging purposes, to add
leverage to its portfolio or to gain exposure to a credit in which the Fund may
otherwise invest. Credit default swaps may involve greater risks than if a Fund
had invested in the issuer directly. Credit default swaps are subject to general
market risk, counterparty risk and credit risk. If the Fund is a buyer and no
credit event occurs, it will lose its investment. In addition, if the Fund is a
seller and a credit event occurs, the value of the referenced obligation
received by the Fund coupled with the periodic payments previously received may
be less than the maximum payout amount it pays to the buyer, resulting in a loss
to the Fund.

The Fund may enter into interest rate swaps and may purchase or sell interest
rate caps, floors and collars. The Fund expects to enter into these transactions
primarily to manage interest rate risk, hedge portfolio positions and preserve a
return or spread on a particular investment or portion of its portfolio. The
Fund may also enter into these transactions to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date.
Interest rate swap transactions are subject to market risk, risk of default by
the other party to the transaction, risk of imperfect correlation and manager
risk. Such risks may exceed the related amounts shown in the Statement of Assets
and Liabilities.

The Fund may invest in mortgage securities. These are fixed income securities
that derive their value from or represent interests in a pool of mortgages or
mortgage securities. An unexpectedly high rate of defaults on the mortgages held
by a mortgage pool may adversely affect the value of a

Morgan Stanley Income Securities Inc.
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued

mortgage-backed security and could result in losses to the Fund. The risk of
such defaults is generally higher in the case of mortgage pools that include
sub-prime mortgages. Sub-prime mortgages refer to loans made to borrowers with
weakened credit histories or with a lower capacity to make timely payments on
their mortgages.

8. 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, 2007, the Fund had a net capital loss carryforward of
$14,948,457 of which $5,407,105 will expire on September 30, 2010 and $9,541,352
will expire on September 30, 2011 to offset future capital gains to the extent
provided by regulations.

As of September 30, 2007, the Fund had temporary book/tax differences primarily
attributable to post-October losses (capital losses incurred after October 31
within the taxable year which are deemed to arise on the first business day of
the Fund's next taxable year), book amortization of premiums on debt securities
and mark-to-market of open futures contracts.

9. Accounting Pronouncements
On March 19, 2008, Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("FAS 161"). FAS 161 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. The application of FAS 161 is required for fiscal years
beginning after November 15, 2008 and interim periods within those fiscal years.
At this time, management is evaluating the implications of FAS 161 and its
impact on the financial statements has not yet been determined.

In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, established a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of SFAS
157 will have on the Fund's financial statement disclosures.

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, 2008 2007 2006 2005 2004 2003
-------------- -------- -------- -------- -------- --------
(unaudited)

Selected Per Share Data:

Net asset value, beginning of period......... $16.95 $17.14 $17.35 $17.59 $17.42 $16.13
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment income(1).................. 0.42 0.82 0.83 0.87 0.95 0.97
Net realized and unrealized gain (loss)... (0.28) (0.12) (0.16) (0.18) 0.13 1.21
------ ------ ------ ------ ----- -----

Total income from investment operations...... 0.14 0.70 0.67 0.69 1.08 2.18
----- ----- ----- ----- ----- -----

Less dividends from net investment income.... (0.47) (0.93) (0.95) (0.98) (0.96) (0.93)
------ ------ ------ ------ ------ ------

Anti-dilutive effect of acquiring treasury
shares(1)................................... 0.02 0.04 0.07 0.05 0.05 0.04
----- ----- ----- ----- ----- -----

Net asset value, end of period............... $16.64 $16.95 $17.14 $17.35 $17.59 $17.42
====== ====== ====== ====== ====== ======

Market value, end of period.................. $14.81 $15.33 $16.07 $15.84 $16.04 $15.87
====== ====== ====== ====== ====== ======

Total Return(2).............................. (0.44)%(3) 1.14% 7.88% 4.92% 7.27% 10.61%

Ratios to Average Net Assets:
Total expenses............................... 0.67 %(4)(5) 0.69%(5)(6)0.68%(6) 0.68% 0.66% 0.67%

Net investment income........................ 4.96 %(4)(5) 4.85%(5)(6)4.88%(6) 4.96% 5.43% 5.81%

Supplemental Data:
Net assets, end of period, in thousands...... $154,558 $159,470 $166,862 $177,341 $185,953 $190,302

Portfolio turnover rate...................... 31 %(3) 46% 59% 58% 40% 56%
</Table>

- ----------

<Table>

(1) The per share amounts were computed using an average number of shares
outstanding during the period.
(2) 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.
(3) Not Annualized.
(4) Annualized.
(5) Reflects rebate of certain Fund expenses in connection with the
investments in Morgan Stanley Institutional Liquidity Money Market
Portfolio - Institutional Class during the period. As a result of such
rebate, the expenses as a percentage of its net assets had an effect of
less than 0.005%.
(6) Before expense offset.
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
REVISED INVESTMENT POLICY (UNAUDITED)

The Directors approved changes/clarifications in the investment policies
discussed below.

Foreign Securities. The Fund may invest in securities of foreign issuers,
including issuers located in emerging market or developing countries. Securities
of such foreign issuers may be denominated in U.S. dollars or in currencies
other than U.S. dollars. The Fund will limit its investments in non-U.S. dollar-
denominated securities to 30% of the Fund's assets.

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
SHAREHOLDER VOTING RESULTS (UNAUDITED)

On December 12, 2007, 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:

Election of Directors by all Shareholders:

------------------------------------
FOR WITHHELD ABSTAIN

Frank L. Bowman................................... 7,116,218 501,694 0
Michael Bozic..................................... 7,103,457 514,455 0
Kathleen A. Dennis................................ 7,114,263 503,649 0
James F. Higgins.................................. 7,113,794 504,118 0
Manuel H. Johnson................................. 7,113,782 504,130 0
Joseph J. Kearns.................................. 7,117,531 500,381 0
Michael F. Klein.................................. 7,113,021 504,891 0
Michael E. Nugent................................. 7,109,466 508,446 0
W. Allen Reed..................................... 7,113,082 504,830 0
Fergus Reid....................................... 7,108,404 509,508 0
</Table>

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
MORGAN STANLEY ADVISOR CLOSED END FUNDS
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY (UNAUDITED)

We are required by federal law to provide you with a copy of our Privacy Policy
annually.

The following Policy applies to current and former individual investors in
Morgan Stanley Advisor closed end funds. This Policy is not applicable to
partnerships, corporations, trusts or other non-individual clients or account
holders. Please note that we may amend this Policy at any time, and will inform
you of any changes to this Policy as required by law.

WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others. We hope this Policy will help you understand how we
collect and share non-public personal information that we gather about you.
Throughout this Policy, we refer to the non-public information that personally
identifies you or your accounts as "personal information."

1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.

FOR EXAMPLE:
- - We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.

- - We may obtain information about account balances, your use of account(s) and
the types of products and services you prefer to receive from us through your
dealings and transactions with us and other sources.

- - We may obtain information about your creditworthiness and credit history from
consumer reporting agencies.

- - We may collect background information from and through third-party vendors to
verify representations you have made and to comply with various regulatory
requirements.

- - If you interact with us through our public and private Web sites, we may
collect information that you provide directly through online communications
(such as an e-mail address). We may also collect information about your
Internet service provider, your domain name, your computer's operating system
and Web browser, your use of our Web sites and your product and service
preferences, through the use of "cookies."

See Notes to Financial Statements

Morgan Stanley Income Securities Inc.
MORGAN STANLEY ADVISOR CLOSED END FUNDS
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY (UNAUDITED) continued

"Cookies" recognize your computer each time you return to one of our sites,
and help to improve our sites' content and personalize your experience on our
sites by, for example, suggesting offerings that may interest you. Please
consult the Terms of Use of these sites for more details on our use of
cookies.

2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.

A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.

B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.

3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.

See Notes to Financial Statements

DIRECTORS

Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid

OFFICERS

Michael E. Nugent
Chairperson of the Board

Ronald E. Robison
President and Principal Executive Officer

Dennis F. Shea
Vice President

Amy R. Doberman
Vice President

Carsten Otto
Chief Compliance Officer

Stefanie V. Chang Yu
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Mary E. Mullin
Secretary

TRANSFER AGENT

Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

LEGAL COUNSEL

Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019

COUNSEL TO THE INDEPENDENT DIRECTORS

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT ADVISER

Morgan Stanley Investment Advisors Inc.
522 Fifth Avenue
New York, New York 10036

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.

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Income Securities Inc.

Semiannual Report
March 31, 2008

ICBSAN
IU08-02911P-Y03/08

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.

Refer to Item 1.

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

Not applicable for semiannual reports.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Applicable only to reports covering periods ending on or after December 31,
2005.

Item 9. Closed-End Fund Repurchases

REGISTRANT PURCHASE OF EQUITY SECURITIES

(d) Maximum
(c) Total Number (or
Number of Approximate
Shares (or Dollar Value)
Units) of Shares (or
(a) Total Purchased as Units) that
Number of Part of Publicly May Yet Be
Shares (or (b) Average Announced Purchased
Units) Price Paid per Plans or Under the Plans
Period Purchased Share (or Unit) Programs or Programs
------ ---------- --------------- ---------------- ---------------

October 1, 2007-
October 31, 2007 26,800 15.464 N/A N/A

November 1, 2007-
November 30, 2007 17,400 15.2721 N/A N/A

December 1, 2007-
December 31, 2007 25,580 15.2442 N/A N/A

January 1, 2008-
January 31, 2008 19,654 15.863 N/A N/A

February 1, 2008-
February 29, 2008 18,902 15.4241 N/A N/A

March 1, 2008 -
March 31, 2008 14,401 14.9076 N/A N/A
------- ------- --- ---
Total 122,737 15.3625 N/A N/A
======= ======= === ===

Item 10. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 11. Controls and Procedures

(a) The Trust's/Fund's principal executive officer and principal financial
officer have concluded that the Trust's/Fund's disclosure controls and
procedures are sufficient to ensure that information required to be disclosed by
the Trust/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.

(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.

Item 12. 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 20, 2008

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 20, 2008

/s/ Francis Smith
Francis Smith
Principal Financial Officer
May 20, 2008