SEC Company Response from MORGAN STANLEY INFORMATION FUND (CIK 0000934540) — Jul 28, 2005
MORGAN STANLEY INFORMATION FUND (CIK 0000934540)
Date: July 28, 2005 · CIK: 0000934540 · Accession: 0000950136-05-004403
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Morgan Stanley Information Fund
1221 Avenue of the Americas
New York, NY 10020
July 29, 2005
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attention: Larry Greene, Division of Investment Management
Mail Stop 0505
RE: MORGAN STANLEY INFORMATION FUND
(FILE NO. 33-87472)
Dear Mr. Greene:
Thank you for your telephonic comments regarding the registration statement on
Form N-1A for Morgan Stanley Information Fund (the "Fund") filed with the
Securities and Exchange Commission on May 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
12 to the Fund's registration statement on Form N-1A, which will be filed via
EDGAR on or about July 29, 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 PROSPECTUS
----------------------
COMMENT 3. TO THE EXTENT THAT THE FUND INVESTS IN EMERGING MARKET COUNTRIES,
PLEASE INCLUDE THE RELEVANT RISK DISCLOSURE.
Response 3. The relevant risk disclosure has been added.
COMMENT 4. ADD DISCLOSURE REGARDING THE CIRCUMSTANCES UNDER WHICH THE ADVISER
WILL MOVE TO SELL SECURITIES.
Response 4. The relevant disclosure has been added to the
section entitled "Principal Investment Strategies."
COMMENT 5. TO THE EXTENT THAT THE FUND INVESTS IN UNSPONSORED DEPOSITORY
RECEIPTS, PLEASE INCLUDE A DESCRIPTION OF THE RISKS.
Response 5. The relevant risk disclosure has been added to the
Fund's Statement of Additional Information.
COMMENT 6. TO THE EXTENT THAT THE FUND INVESTS IN CONVERTIBLE SECURITIES RATED
BELOW INVESTMENT GRADE, PLEASE INCLUDE THE RELEVANT RISK
DISCLOSURE.
Response 6. The relevant risk disclosure is included in the
Prospectus section entitled "Principal Risks."
COMMENT 7. INCLUDE DISCLOSURE REGARDING THE SEGREGATION OF ASSETS TO COVER
OUTSTANDING OBLIGATIONS FOR FORWARD FOREIGN CURRENCY EXCHANGE
CONTRACTS.
Response 7. The relevant disclosure appears in the Fund's
Statement of Additional Information.
COMMENT 8. IN THE SECTION ENTITLED "FUND MANAGEMENT," PLEASE ADD A STATEMENT
INDICATING THAT THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS
ADDITIONAL INFORMATION CONCERNING THE PORTFOLIO MANAGERS'
COMPENSATION STRUCTURE, OTHER ACCOUNTS MANAGED BY THE PORTFOLIO
MANAGERS AND THE PORTFOLIO MANAGERS' OWNERSHIP OF SECURITIES OF THE
FUND.
Response 8. The disclosure has been so revised.
COMMENT 9. EXPLAIN SUPPLEMENTALLY WHETHER THE FOLLOWING SENTENCE INCLUDED
UNDER "FUND-FUND MANAGEMENT" IS CONSISTENT WITH ITEM 5(A)(2) AND
ITEM 15(A) OF FORM N-1A: "THE COMPOSITION OF THE TEAM MAY CHANGE
WITHOUT NOTICE FROM TIME TO TIME."
Response 9. Item 5(a)(2) requires disclosure of the persons
"primarily responsible for the day-to-day management of the
Fund's portfolio (`portfolio manager')," and Item 15(a)
requires certain disclosure regarding such persons' management
of other accounts. The Fund is managed by a team of investment
professionals. The team may be
comprised both of persons "primarily responsible for the
day-to-day management of the Fund's portfolio" (any such
persons are disclosed under Item 5(a)(2) and Item 15(a)) and
persons who are not. The referenced disclosure states that the
composition of each team may change without notice from time to
time. We note supplementally that, notwithstanding this
disclosure, 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 Statement of Additional Information with the
information required by Item 5(a)(2) and Item 15(a) for such
team member.
COMMENT 10. CONSIDER INCLUDING THE ORDER PROCESSING FEE IN THE FEE TABLE OR AS
A FOOTNOTE TO THE FEE TABLE AND IN THE EXAMPLE.
Response 10. 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 11. 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 11. Such a description does not appear on the Fund's
website.
COMMENT 12. HAVE FUND SHAREHOLDERS APPROVED THE AMENDED AND RESTATED INVESTMENT
ADVISORY AGREEMENT?
Response 12. 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 13. CONSIDER ADDING ADDITIONAL DISCLOSURE REGARDING FAIR VALUATION TO
THE SECTION "PRICING FUND SHARES".
Response 13. We respectfully acknowledge the comment, but
believe the current disclosure is sufficient.
COMMENT 14. 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 14. 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 15. CONSIDER ADDING ADDITIONAL DISCLOSURE REGARDING REVENUE SHARING TO
THE SECTION "ADDITIONAL INFORMATION".
Response 15. We respectfully acknowledge the comment, but
believe the current disclosure is sufficient.
COMMENT 16. IN THE "HOW TO EXCHANGE SHARES - EXCHANGE PROCEDURES" SECTION,
PLEASE REPLACE THE WORD "ACCEPTED" WITH "RECEIVED" OR ANOTHER TERM
TO THAT EFFECT, IN ACCORDANCE WITH RULE 22C-1, WITH RESPECT TO THE
FOLLOWING SENTENCE: "AN EXCHANGE TO ANY MORGAN STANLEY FUND (EXCEPT
A MONEY MARKET FUND) IS MADE ON THE BASIS OF THE NEXT CALCULATED
NET ASSET VALUES OF THE FUNDS INVOLVED AFTER THE EXCHANGE
INSTRUCTIONS ARE ACCEPTED." [EMPHASIS ADDED]
Response 16. The disclosure has been so revised.
COMMENT 17. CONFIRM THAT THE ANNUAL DISTRIBUTION AND SHAREHOLDER SERVICES
(12B-1) FEES PAYABLE BY THE FUND'S CLASSES WILL NOT EXCEED THE
LIMITATIONS UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS (NASD) RELATING TO "SERVICE FEES" AND
"ASSET-BASED SALES CHARGES."
Response 17. The Fund complies with the limitations under the
NASD Rules relating to "service fees" and "asset-based sales
charges."
COMMENTS TO SAI
---------------
COMMENT 18. PLEASE CONFIRM THAT THE REGISTRATION STATEMENT INCLUDES APPLICABLE
DISCLOSURE REGARDING "SEGREGATING ASSETS" IN CONNECTION WITH THE
FUND'S USE OF DERIVATIVES.
Response 18. The disclosure has been so revised.
COMMENT 19. IN THE SECTION ENTITLED "FUND MANAGEMENT - PORTFOLIO MANAGER
COMPENSATION STRUCTURE," INCLUDE ONLY THE DISCRETIONARY
COMPENSATION RECEIVED BY THE PORTFOLIO MANAGERS OF THE FUND DURING
THE LAST YEAR.
Response 19. We believe the current disclosure is in compliance
with SEC Release 2004-89. The 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.
COMMENT 20. PLEASE REVISE THE "DISCLOSURE OF PORTFOLIO HOLDINGS" SECTION TO (I)
CLARIFY WHAT TIME LAG THERE IS WITH RESPECT TO DISSEMINATION OF
PUBLIC PORTFOLIO HOLDINGS INFORMATION, (II) CLARIFY WHICH
EXEMPTIONS AND EXCEPTIONS TO THE POLICY EXIST AND (III) INCLUDE AN
EXHAUSTIVE LIST OF THOSE PERSONS WHO MAY RECEIVE NON-PUBLIC
PORTFOLIO HOLDINGS INFORMATION WITHOUT ENTERING INTO A
NON-DISCLOSURE AGREEMENT. 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 20. With respect to clause (i), we respectfully
acknowledge the comment, but believe the current disclosure is
sufficient. With respect to clauses (ii) and (iii), the
disclosure has been so revised. 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.
COMMENT 21. PROVIDE FURTHER FUND SPECIFIC DISCLOSURE PURSUANT TO ITEM 12(B)(10)
OF FORM N-1A.
Response 21. Additional disclosure has been added to the SAI in
compliance with Item 12(b)(10) of Form N-1A.
COMMENT 22. IN THE SECTION ENTITLED "MANAGEMENT OF THE FUND - MANAGEMENT
INFORMATION" IN THE PARAGRAPH THAT BEGINS "THE FUND DOES NOT HAVE A
SEPARATE NOMINATING COMMITTEE...", THE LAST SENTENCE OF SUCH
PARAGRAPH STATES "NOMINATIONS FROM SHAREHOLDERS SHOULD BE IN
WRITING AND SENT TO THE INDEPENDENT TRUSTEES AS
DESCRIBED BELOW." PLEASE REVISE THE DISCLOSURE TO MAKE CLEAR WHAT
IS MEANT BY "AS DESCRIBED BELOW."
Response 22. The disclosure has been revised to read as
follows: Nominations from shareholders should be in writing and
sent to the Independent Trustees as described below under the
caption "Shareholder Communications."
As you have requested and consistent with SEC Press Release 2004-89, the Fund
hereby acknowledges that:
o the Fund is responsible for the adequacy and accuracy of the disclosure in
the filings;
o 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
o 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