CORRESP 1 filename1.txt 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. 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. 2 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. 3 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; 4 - 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 5