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Morgan Stanley Mid-Cap Value Fund
1221 Avenue of the Americas
New York, NY 10020
December 23, 2005
Securities and Exchange Commission
Judiciary Plaza
100 F Street, NE
Washington, DC 20549
Attention: Larry Greene, Division of Investment Management
Mail Stop 0505
RE: MORGAN STANLEY MID-CAP VALUE FUND
(FILE NOS. 333-59140 AND 811-10359)
Dear Mr. Greene:
Thank you for your telephonic comments regarding the registration statement on
Form N-1A for Morgan Stanley Mid-Cap Value Fund (the "Fund") filed with the
Securities and Exchange Commission on October 26, 2005. Below, we describe the
changes made to the registration statement in response to the Staff's comments
and provide any responses to or any supplemental explanations of such comments,
as requested. These changes will be reflected in post-effective amendment number
5 to the Fund's registration statement on Form N-1A, which will be filed via
EDGAR on or about December 23, 2005.
GENERAL COMMENTS TO FORM N-1A
COMMENT 1. PLEASE CONFIRM THAT THE FUND IS COMPLYING WITH THE PRIVACY POLICY
NOTIFICATION REQUIREMENTS OF THE GRAMM-LEACH-BLILEY ACT AND
DISTRIBUTING ITS PRIVACY POLICY TO INVESTORS.
RESPONSE 1. The Fund provides its privacy policy annually in
accordance with the requirements of Regulation S-P.
COMMENT 2. PLEASE CONFIRM THAT THE REGISTRATION STATEMENT INCLUDES THE
ANTI-MONEY LAUNDERING AND CUSTOMER VERIFICATION DISCLOSURE REQUIRED
BY THE U.S. PATRIOT ACT.
RESPONSE 2. The requisite notice of the customer
identification verification policy is disclosed in the
account application form. Anti-money laundering and customer
verification disclosure is also included under the
"Shareholder Information-How to Buy Shares" section of the
Fund's prospectus.
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COMMENTS TO THE PROSPECTUS
COMMENT 3. CONSIDER INCLUDING THE ORDER PROCESSING FEE IN THE FEE TABLE OR AS A
FOOTNOTE TO THE FEE TABLE AND IN THE EXAMPLE.
RESPONSE 3. The Order Processing Fee is not a fee imposed by
the Fund. It is a fee that Morgan Stanley DW Inc. charges
its clients. Therefore, it should not be included in the fee
table, as a footnote to the fee table or in the Example.
COMMENT 4. IF A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT
TO THE DISCLOSURE OF THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE ON
THE FUND'S WEBSITE, PLEASE SO STATE IN THE PROSPECTUS.
RESPONSE 4. Such a description does not appear on the Fund's
website.
COMMENT 5. HAVE FUND SHAREHOLDERS APPROVED THE AMENDED AND RESTATED INVESTMENT
ADVISORY AGREEMENT?
RESPONSE 5. The Fund's investment advisory agreement was
amended and restated to remove the administrative services
component from the Management Agreement and to reduce the
investment advisory fee. The administrative services
previously provided to the Fund by the Investment Adviser
are being provided by Morgan Stanley Services Company Inc.
("Administrator") pursuant to a separate administration
agreement entered into by the Fund with the Administrator.
Such change resulted in a reduction in the advisory fee
concurrent with the implementation of an administration fee
equal to the amount of the advisory fee reduction pursuant
to the new administration agreement. Shareholder approval
was not required.
COMMENT 6. CONSIDER ADDING ADDITIONAL DISCLOSURE REGARDING FAIR VALUATION TO
THE SECTION "PRICING FUND SHARES".
RESPONSE 6. We respectfully acknowledge the comment, but
believe the current disclosure is sufficient.
COMMENT 7. SUPPLEMENTALLY DISCUSS WHETHER WRITTEN NOTICE WITH RESPECT TO THE
FUND'S POLICY "TO REJECT, LIMIT OR PROHIBIT EXCHANGES WITHOUT PRIOR
NOTICE, AT ITS SOLE DISCRETION ..." SET FORTH IN THE "LIMITATIONS ON
EXCHANGES" SECTION OF THE PROSPECTUS HAS BEEN ADEQUATELY PROVIDED TO
INVESTORS IN ACCORDANCE WITH RULE 11A-3. CLARIFY THAT THE FUND WOULD
ONLY REJECT THE PURCHASE PORTION OF AN EXCHANGE REQUEST.
RESPONSE 7. The Fund's ability to reject, limit or prohibit
exchanges is designed to offer the Fund flexibility to
address market timing abuses as they occur. The Release
adopting the rules requiring enhanced market timing
disclosure specifically authorizes such a policy provided it
is disclosed in the Fund's prospectus. Further, written
notice of the policy,
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as disclosed in the Fund's prospectus, is consistent with
the provisions of Rule 11a-3(b)(6)(ii). Exchange requests
consist of a redemption of Fund shares and a simultaneous
purchase of another fund's shares. The Fund reserves the
right to reject any exchange request for any reason. The
Fund would not reject a valid redemption request.
COMMENT 8. CONSIDER ADDING ADDITIONAL DISCLOSURE REGARDING REVENUE SHARING TO
THE SECTION "ADDITIONAL INFORMATION".
RESPONSE 8. We respectfully acknowledge the comment, but
believe the current disclosure is sufficient.
COMMENT 9. IN THE SECTION TITLED "FUND MANAGEMENT", (1) PLEASE CLARIFY WHETHER
THERE ARE MEMBERS OF THE PORTFOLIO MANAGEMENT TEAM THAT ARE INVOLVED
WITH THE MANAGEMENT OF THE FUND THAT ARE NOT DISCLOSED IN THE
PROSPECTUS, AND (2) EXPLAIN SUPPLEMENTALLY WHETHER THE FOLLOWING
SENTENCE IS CONSISTENT WITH ITEM 5(a)(2) AND ITEM 15(a) OF
FORM N-1A: "THE COMPOSITION OF THE PORTFOLIO MANAGEMENT TEAM MAY
CHANGE WITHOUT NOTICE FROM TIME TO TIME."
RESPONSE 9. The Fund has revised the disclosure to clarify
the team and its members jointly and primarily responsible
for the day-to-day management of the Fund.
The referenced disclosure states that the
composition of the team may change without notice from time
to time. We note supplementally that to the extent that a
team member with primary responsibility for the day-to-day
management of the Fund's portfolio changes, the Fund intends
to supplement its Prospectus and its Statement of Additional
Information with the information required by Item 5(a)(2)
and Item 15(a) for such team member.
COMMENT 10. IN THE "FEES AND EXPENSES" SECTION OF THE PROSPECTUS, CONSIDER
MOVING THE FOOTNOTES TO AFTER THE EXAMPLE.
RESPONSE 10. We respectfully acknowledge the comment, but
believe the current placement of the footnote is
appropriate. The footnotes refer to the Annual Fund
Operating Expenses and although arguably the Annual Fund
Operating Expenses and the Example constitute the "Fee
Table", we believe that to move the footnotes to below the
Example would diminish the impact of the information and
could result in a shareholder being unable to locate the
footnotes.
COMMENT 11. SUPPLEMENTALLY CONFIRM THAT THE DISCUSSION REGARDING THE BASIS FOR
THE BOARD OF TRUSTEES' APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
APPEARS IN THE FUND'S ANNUAL REPORT TO SHAREHOLDERS.
RESPONSE 11. The noted discussion appears in the Fund's
annual report to shareholders.
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COMMENT 12. TO THE EXTENT THAT THE FUND INVESTS IN CONVERTIBLE SECURITIES
RATED BELOW INVESTMENT GRADE, PLEASE INCLUDE THE RELEVANT RISK
DISCLOSURE.
RESPONSE 12. The relevant risk disclosure has been added to
the Prospectus section entitled "Principal Risks" and also
in the Fund's Statement of Additional Information.
COMMENT 13. IN CONNECTION WITH THE FUND'S USE OF FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS, PLEASE CONFIRM THE APPROPRIATE USE OF
"SEGREGATING ASSETS" AND INCLUSION OF APPLICABLE DISCLOSURE.
RESPONSE 13. The applicable disclosure is included in the
Fund's Statement of Additional Information.
COMMENTS TO THE SAI
COMMENT 14. IN THE SECTION ENTITLED "FUND MANAGEMENT - PORTFOLIO MANAGER
COMPENSATION STRUCTURE," (1) INCLUDE ONLY THE DISCRETIONARY
COMPENSATION RECEIVED BY THE PORTFOLIO MANAGERS OF THE FUND DURING
THE LAST YEAR AND (2) CONFIRM THAT YOU ARE PROVIDING THE REQUESTED
INFORMATION.
RESPONSE 14. We believe the current disclosure is in
compliance with SEC Release 2004-89. This Release requires
that the SAI include disclosure regarding the structure of,
and the method used to determine, the compensation of its
portfolio managers. The Release notes that the purpose of
this disclosure is to help investors better understand a
portfolio manager's incentives in managing a fund and to
shed light on possible conflicts of interest that could
arise when a portfolio manager manages other accounts.
Therefore, in order to achieve this purpose, the disclosure,
in our view, should include all possible forms of
compensation that are available to the portfolio manager in
connection with managing the portfolio and other accounts.
Please note that we revised the disclosure to clarify that
investment performance, upon which a portfolio manager's
compensation is linked, is calculated for one-, three-, and
five-year periods measured against a fund's/account's
primary benchmark, indices and/or peer groups, where
applicable.
COMMENT 15. PLEASE REVISE THE "DISCLOSURE OF PORTFOLIO HOLDINGS" SECTION TO
CLARIFY WHAT TIME LAG THERE IS WITH RESPECT TO DISSEMINATION OF
PUBLIC PORTFOLIO HOLDINGS INFORMATION. PLEASE SUPPLEMENTALLY DISCUSS
WHY PERSONS WHO OWE A DUTY OF TRUST OR CONFIDENCE TO THE FUND MAY
RECEIVE NON-PUBLIC PORTFOLIO HOLDINGS INFORMATION WITHOUT ENTERING
INTO A NON-DISCLOSURE AGREEMENT. PLEASE PROVIDE A LIST OF ALL
ONGOING ARRANGEMENTS.
RESPONSE 15. We respectfully acknowledge the comment, but
believe the current disclosure is sufficient. Persons who
owe a duty of trust or
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confidence to the Fund (such as lawyers and accountants)
have non-disclosure obligations with respect to many kinds
of information concerning the Fund, including non-public
portfolio holdings information. Requiring such persons to
enter into a non-disclosure agreement would be redundant. A
current list of all ongoing arrangements has been added to
the definitive SAI.
As you have requested and consistent with SEC Release 2004-89, the Fund hereby
acknowledges that:
- - the Fund is responsible for the adequacy and accuracy of the disclosure in
the filings;
- - the Staff's comments or changes to disclosure in response to Staff
comments in the filings reviewed by the Staff do not foreclose the Commission
from taking any action with respect to the filings; and
- - the Fund may not assert Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws of
the United States.
If you would like to discuss any of these responses in further detail or if you
have any questions, please feel free to contact me at (630) 684-6301. Thank you.
Sincerely,
/s/ Elizabeth Nelson
Elizabeth Nelson
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