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Morgan Stanley Income Trust
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 INCOME TRUST
(FILE NOS. 33-24245 AND 811-5654)
Dear Mr. Greene:
Thank you for your telephonic comments regarding the registration statement on
Form N-1A for Morgan Stanley Income Trust (the "Fund") filed with the Securities
and Exchange Commission on October 27, 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 23
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. UNDER THE "PRINCIPAL INVESTMENT STRATEGIES" SECTION, THE FUND WILL
NORMALLY INVEST AT LEAST 80% OF ITS ASSETS IN INVESTMENT GRADE
FIXED-INCOME SECURITIES. THE SECOND SENTENCE OF THE FIRST PARAGRAPH
OF THAT SECTION STATES THAT "THESE SECURITIES MAY INCLUDE CORPORATE
DEBT SECURITIES, PREFERRED STOCKS...." THE FIRST SENTENCE OF THE
SECOND PARAGRAPH OF THAT SECTION STATES: "FIXED-INCOME SECURITIES
ARE DEBT SECURITIES SUCH AS BONDS AND NOTES." WITH REGARD TO
PREFERRED STOCKS, PLEASE RECONCILE THESE TWO SENTENCES.
RESPONSE 3. The second sentence has been so revised.
COMMENT 4. IF THE FUND MAY INVEST IN DEPOSITARY RECEIPTS, PLEASE ADD
APPLICABLE DISCLOSURE UNDER THE "PRINCIPAL INVESTMENT STRATEGIES"
SECTION.
RESPONSE 4. The Fund does not invest in depositary receipts.
The disclosure has been revised accordingly.
COMMENT 5. CONSIDER INCLUDING THE ORDER PROCESSING FEE IN THE FEE TABLE OR AS
A FOOTNOTE TO THE FEE TABLE AND IN THE EXAMPLE.
RESPONSE 5. 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 6. 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 6. Such a description does not appear on the Fund's
website.
COMMENT 7. HAVE FUND SHAREHOLDERS APPROVED THE AMENDED AND RESTATED INVESTMENT
ADVISORY AGREEMENT?
RESPONSE 7. 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.
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COMMENT 8. CONSIDER ADDING ADDITIONAL DISCLOSURE REGARDING FAIR VALUATION TO
THE SECTION "PRICING FUND SHARES."
RESPONSE 8. We respectfully acknowledge the comment, but
believe the current disclosure is sufficient.
COMMENT 9. 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 9. 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, 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 10. CONSIDER ADDING ADDITIONAL DISCLOSURE REGARDING REVENUE SHARING TO
THE SECTION "ADDITIONAL INFORMATION".
RESPONSE 10. We respectfully acknowledge the comment, but
believe the current disclosure is sufficient.
COMMENT 11. IN THE "FEES AND EXPENSES" SECTION OF THE PROSPECTUS, CONSIDER
MOVING THE FOOTNOTES TO AFTER THE EXAMPLE.
RESPONSE 11. 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 12. 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 12. The noted discussion appears in the Fund's annual
report to shareholders.
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COMMENTS TO THE SAI
COMMENT 13. 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 13. 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 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 14. 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 14. We respectfully acknowledge the comment, but
believe the current disclosure is sufficient. Persons who owe
a duty of trust or 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;
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- 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 (212) 762-6641. Thank you.
Sincerely,
/s/ Sheri L. Schreck
Sheri L. Schreck
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