<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
--Enter Company Name Here--
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--Enter Company Name Here--
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
51 MADISON AVENUE NEW YORK, NEW YORK 10010
-----------------
Dear Policy Owners:
As owners of NYLIAC Variable Universal Life, NYLIAC Variable Annuity and
Life Stages policies ("Policy Owners") with net premiums or contributions
allocated to the Morgan Stanley Emerging Markets Equity Portfolio (the
"Portfolio") of the Morgan Stanley Universal Funds, Inc. (the "Company"), you
are entitled to instruct NYLIAC on the voting of shares of the Portfolio.
NYLIAC will vote these shares at a Special Meeting of Shareholders of the
Company scheduled to be held on May 1, 1997. The record date for determining
shares entitled to be voted at the special Meeting and for determining Policy
Owners entitled to give voting instructions to NYLIAC is March 21, 1997 (the
"Record Date"). The enclosed Proxy Statement of the management of the Company
provides information on the proposal to be voted upon at the Special Meeting.
You are urged to read the Proxy Statement before completing the enclosed
Voting Instruction Form.
In summary, on February 5, 1997 Morgan Stanley Group Inc. and Dean Witter,
Discover & Co. announced that they had entered into an Agreement and Plan of
Merger to form Morgan Stanley, Dean Witter, Discover & Co. Subject to certain
conditions being met, it is currently anticipated that the transaction will
close in mid-1997.
Morgan Stanley Group Inc. is the parent of Morgan Stanley Asset Management
Inc., the investment adviser to the Portfolio (the "Adviser"). After the
merger, the Adviser will be a subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. With the change in control of the Adviser, the existing
investment advisory agreement will automatically terminate.
Subject to approval by the shareholders of the Portfolio, the Adviser will
continue to provide investment advisory and management services to the
Portfolio following the merger. The primary purpose of the Special Meeting is
to permit the shareholders to consider a new investment advisory agreement
between the Company and the Adviser to take effect following the merger. The
new investment advisory agreement will be identical to the current investment
advisory agreement, except for the dates of execution, effectiveness and
termination.
In order to instruct NYLIAC as to how to vote the shares of the Portfolio
held in the NYLIAC separate accounts, you are asked to promptly mark the
enclosed Voting Instruction Form, then sign, date and mail it in the
accompanying postage-paid envelope.
If a Voting Instruction Form is not marked to indicate voting instructions
but is signed, dated and returned, it will be treated as an instruction to
vote the shares FOR the proposal. Shares attributable to Policy Owners for
which NYLIAC receives no voting instructions in time will be voted by NYLIAC
for or against approval of the proposal, or as an abstention, in the same
proportion as the shares attributable to the Policy Owners for which voting
instructions are received.
The number of shares of the Portfolio held in each of the NYLIAC separate
accounts for which you may give instructions was determined as of the Record
Date for the Special Meeting of Shareholders of the Company, and was
calculated by dividing your policy's account value (minus any policy
indebtedness) allocable to the Portfolio by the net asset value of one share
of the Portfolio.
Please mail your voting instructions to NYLIAC by April 24, 1997. It is
important that your policy be represented.
Michael G. Gallo
Senior Vice President
New York Life Insurance and
Annuity Corporation
April 2, 1997
<PAGE>
[LETTERHEAD OF AMERICAN GENERAL APPEARS HERE]
April 2, 1997
Dear Contract Owner:
The enclosed proxy statement relates to a special meeting of the
shareholders of Morgan Stanley Universal Funds, Inc. (The "Company"). On
February 4, 1997, Morgan Stanley Group Inc., the parent corporation of the
Company's investment advisers entered into an Agreement and Plan of Merger with
Dean Witter, Discover & Co. Pursuant to the merger agreement, the Company's
investment advisers, Morgan Stanley Asset Management Inc. ("MSAM") and Miller
Anderson & Sherrerd, LLP ("MAS") each will become a subsidiary of the merged
company, which will be named Morgan Stanley, Dean Witter, Discover & Co. The
Company's current investment advisers will continue to provide the Company with
investment advisory and management services following the merger. The primary
purpose of the special meeting is to permit the Company's shareholders to
consider new investment advisory agreements to take effect following the merger.
The new investment advisory agreements between the Company and its investment
advisers will be identical to the Company's current investment advisory
agreements, except for the dates of execution, effectiveness and termination.
The attached proxy statement seeks shareholder approval on this item.
Although we encourage you to read carefully the full proxy statement, the
Company has provided a brief question-and-answer section for your convenience.
Your vote is important and your participation
in the governance of the Company does make a difference.
The proposal has been unanimously approved by the Board of Directors of
the Company, who recommend that you vote "FOR" the proposal. Your immediate
response will help save on the costs of additional solicitations. We look
forward to your participation and we thank you for your continued confidence in
American General Life Insurance Company.
PLEASE SIGN AND RETURN YOUR VOTING INSTRUCTION FORM IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Sincerely,
Tim W. Still
Vice President, Annuity Administration
American General Life Insurance Company
[LOGO OF AMERICAN GENERAL
APPEARS HERE]
<PAGE>
MORGAN STANLEY UNIVERSAL FUNDS, INC.
P.O. BOX 2798 BOSTON, MA 02208-2798
-----------------
INFORMATION ABOUT YOUR PROXY STATEMENT
Q. Why am I receiving this proxy statement?
A. The direct parent company of Morgan Stanley Asset Management Inc. ("MSAM")
and the indirect parent of Miller Anderson & Sherrerd, LLP ("MAS"), your
investment advisers, is merging with another company and, as a result, your
consent is being sought on:
. approval of a new investment advisory agreement with MSAM; and/or
. approval of a new investment advisory agreement with MAS.
Please refer to the proxy statement for a detailed explanation of the
proposed items.
Q. How will this affect my account?
A. You can expect the same management expertise and shareholder service you
are currently receiving. The new investment advisory agreements between
your Company and its investment advisers will be identical to the Company's
current investment advisory agreements, except for the dates of execution,
effectiveness and initial terms.
Q. Why do I need to vote?
A. Your vote is needed to ensure that the proposal can be acted upon. Your
immediate response on the enclosed proxy card will help save on the costs
of any further solicitations for a Shareholder vote. We encourage all
Shareholders to participate in the governance of their Company.
Q. How does the Board of Directors suggest that I vote?
A. After careful consideration, the Board of Directors of your Company
unanimously recommends that you vote "FOR" each item proposed on the
enclosed proxy card(s).
Q. Who is paying for expenses related to the Shareholder meeting?
A. The Company's investment advisers or their affiliates will pay for all
costs of solicitation. The Company will not pay for the expenses relating
to the approval.
<PAGE>
MORGAN STANLEY UNIVERSAL FUNDS, INC.
P.O. BOX 2798 BOSTON, MASSACHUSETTS 02208-2798
-----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
MAY 1, 1997
-----------------
A Special Meeting of Shareholders (the "Meeting") of Morgan Stanley
Universal Funds, Inc. (the "Company"), will be held at the offices of Morgan
Stanley Asset Management Inc. on May 1, 1997, at 12:30 p.m. (New York time),
in Conference Room 3, at 1221 Avenue of the Americas, 22nd Floor, New York, NY
10020, for the following purposes:
1. To approve or disapprove a new investment advisory agreement with Morgan
Stanley Asset Management Inc.;
2. To approve or disapprove a new investment advisory agreement with Miller
Anderson & Sherrerd, LLP; and
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
Only Shareholders of investment portfolios (the "Portfolios") advised by
Morgan Stanley Asset Management Inc. are entitled to vote on Proposal 1 (with
each appropriate Portfolio voting separately). Likewise, only Shareholders of
the Portfolios advised by Miller Anderson & Sherrerd, LLP are entitled to vote
on Proposal 2 (with each appropriate Portfolio voting separately). The
enclosed proxy card(s) will enable you to vote with respect to the
Portfolio(s) in which you are a shareholder. (You will receive a separate
solicitation for each account you have with the Company and a separate proxy
card for each Portfolio in which such accounts have an investment.)
Shareholders of record at the close of business on March 21, 1997 are
entitled to notice of and to vote at this Meeting or any adjournment thereof.
By Order of the Board of Directors
Valerie Y. Lewis, Secretary
April 2, 1997
<PAGE>
PROXY STATEMENT
-----------------
MORGAN STANLEY UNIVERSAL FUNDS, INC.
P.O. BOX 2798 BOSTON, MASSACHUSETTS 02208-2798
-----------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 1, 1997
This proxy statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Morgan Stanley Universal Funds, Inc. (the
"Company") of proxies to be voted at a Special Meeting of Shareholders and all
adjournments thereof (the "Meeting"), to be held at the offices of Morgan
Stanley Asset Management Inc., Conference Room 3, 22nd Floor, 1221 Avenue of
the Americas, New York, NY 10020 on Thursday, May 1, 1997 at 12:30p.m. (New
York time). The approximate mailing date of this proxy statement and
accompanying form of proxy is April 2, 1997.
The primary purpose of the Meeting is to permit the Company's shareholders to
consider New Advisory Agreements (defined below) to take effect following the
consummation of the transactions contemplated by an Agreement and Plan of
Merger, dated as of February 4, 1997 (the "Merger Agreement"), between Dean
Witter, Discover & Co. ("Dean Witter Discover") and Morgan Stanley Group Inc.
("MS Group"), the direct parent of Morgan Stanley Asset Management Inc. ("MSAM"
or an "Adviser") and the indirect parent of Miller Anderson & Sherrerd, LLP
("MAS" or an "Adviser"), the Company's investment advisers. Pursuant to the
Merger Agreement, MSAM will become a direct subsidiary and MAS will become an
indirect subsidiary of the merged company, which will be called Morgan Stanley,
Dean Witter, Discover & Co. The Company's New Advisory Agreements are identical
to the Company's Current Advisory Agreements (defined below), except for the
dates of execution, effectiveness and initial terms.
The proposals to be submitted to shareholders are summarized in tabular form
below:
PROPOSALS TO SHAREHOLDERS
PROPOSAL 1. APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT WITH MORGAN STANLEY
ASSET MANAGEMENT INC.
Only Shareholders of the following Portfolios may vote on Proposal 1:
Mid Cap Value Portfolio International Magnum Portfolio
U.S. Real Estate Portfolio Emerging Markets Equity Portfolio
Global Equity Portfolio Asian Equity Portfolio
<PAGE>
PROPOSAL 2. APPROVAL OF NEW MANAGEMENT ADVISORY AGREEMENT WITH MILLER ANDERSON
& SHERRERD, LLP
Only Shareholders of the following Portfolios may vote on Proposal 2:
Fixed Income Portfolio Growth Portfolio
High Yield Portfolio Value Portfolio
The Company will furnish, without charge, a copy of its most recent Annual
Report to Shareholders of the Company on request. As of December 31, 1996, the
Company was comprised of one active, non-diversified portfolio, the Emerging
Markets Equity Portfolio. Requests should be directed to the Company at Morgan
Stanley Asset Management Inc. 1221 Avenue of the Americas New York, NY 10020 or
by calling (800) 422-6464 ext.7182.
The record date for determining shareholders entitled to vote at the meeting
is March 21, 1997. Shareholders of each portfolio ("Portfolio") of the Company
will be entitled to one vote per share with respect to approval or disapproval
of the New Advisory Agreements (defined below). MSAM acts as an investment
adviser for the Company with respect to the U.S. Real Estate, Growth, Emerging
Markets Equity, Global Equity, International Magnum and Asian Equity Portfolios
(together, the "MSAM Advised Portfolios"). Shareholders of each of the MSAM
Advised Portfolios will vote separately on a New Advisory Agreement (defined
below) with MSAM. MAS acts as an investment adviser for the Company with
respect to the High Yield, Fixed Income, Value and Mid Cap Value Portfolios
(together, the "MAS Advised Portfolios"). Shareholders of each of the MAS
Advised Portfolios will vote separately on a New Advisory Agreement (defined
below) with MAS.
At the close of business on March 21, 1997, there were issued and outstanding
the following number of shares of each Portfolio.
<TABLE>
<CAPTION>
OUTSTANDING
PORTFOLIO SHARES
--------- -------------
<S> <C>
Fixed Income Portfolio 819,654.661
High Yield Portfolio 812,068.788
Growth Portfolio 268,477.965
Value Portfolio 310,551.693
Mid Cap Value Portfolio 320,040.774
U.S. Real Estate Portfolio 500,000.000
Global Equity Portfolio 508,675.752
International Magnum Portfolio 1,034,241.715
Emerging Markets Equity Portfolio 1,391,495.303
Asian Equity Portfolio 1,000,000.000
</TABLE>
Shares of each Portfolio are offered only to insurance companies for the
purpose of funding their variable annuity contracts and variable life insurance
policies and to certain tax-qualified investors. The Portfolios are new and
therefore a majority of the shares of each Portfolio are currently owned by
MSAM and/or MS Group in connection with providing initial capital to the
Portfolios. Information about owners of five percent or more of the outstanding
shares of each Portfolio is set forth in the following table.
2
<PAGE>
<TABLE>
<CAPTION>
TOTAL PERCENT OF
TITLE OF CLASS OF NAME OF BENEFICIAL OWNER NUMBER OF OUTSTANDING
SHARES INC. SHARES SHARES
- ----------------- ------------------------ ------------- -----------
<S> <C> <C> <C>
Fixed Income Portfolio Morgan Stanley Group Inc. 800,000.000 98%
1221 Avenue of the Americas
New York, NY 10020
High Yield Portfolio Morgan Stanley Group Inc. 800,000.000 99%
1221 Avenue of the Americas
New York, NY 10020
Growth Portfolio Morgan Stanley Group Inc. 250,000.000 93%
1221 Avenue of the Americas
New York, NY 10020
American General Life 18,477.965 7%
Insurance Company
P.O. Box 1591
Houston, TX 77251
Value Portfolio Morgan Stanley Group Inc. 300,000.000 97%
1221 Avenue of the Americas
New York, NY 10020
Mid Cap Value Portfolio Morgan Stanley Group Inc. 300,000.000 94%
1221 Avenue of the Americas
New York, NY 10020
American General Life 20,040.774 6%
Insurance Company
P.O. Box 1591
Houston, TX 77251
U.S. Real Estate
Portfolio Morgan Stanley Group Inc. 500,000.000 100%
1221 Avenue of the Americas
New York, NY 10020
Global Equity Portfolio Morgan Stanley Group Inc. 500,000.000 98%
1221 Avenue of the Americas
New York, NY 10020
International Magnum Morgan Stanley Group Inc. 1,000,000.000 97%
Portfolio 1221 Avenue of the Americas
New York, NY 10020
Emerging Markets Equity Morgan Stanley Group Inc. 768,971.226 55%
Portfolio 1221 Avenue of the Americas
New York, NY 10020
New York Life Insurance 603,725.245 43%
and Annuity Corporation
300 Interpace Parkway
Parsippany, NJ 07054
Asian Equity Portfolio Morgan Stanley Group Inc. 1,000,000.000 100%
1221 Avenue of the Americas
New York, NY 10020
</TABLE>
3
<PAGE>
Under current interpretation and administration of the Investment Company Act
of 1940, as amended (the "1940 Act"), and regulations thereunder, insurance
companies holding shares of the Portfolios in separate accounts which are
registered under the 1940 Act are required to vote the shares in accordance
with instructions from their variable annuity contract owners and variable life
insurance policy owners. Instructions are obtained by the insurance companies
sending this proxy statement to their contract owners and policy owners and
soliciting the instructions. Shares held in registered separate accounts for
which contract owners and policy owners do not give instructions are voted for
and against the proposal in the same proportions as the shares voted pursuant
to instructions. In addition, shares of each Portfolio owned by MS Group and/or
MSAM in connection with providing initial capital will be voted in the same
proportion as shares held in insurance company separate accounts are voted.
VOTING
With respect to each Portfolio, a "vote of majority of the outstanding voting
securities" is required, which is defined under the 1940 Act as the lesser of
(i) 67% or more of the voting shares of the Portfolio entitled to vote thereon
present in person or by proxy at the Meeting, if the holders of more than 50%
of the outstanding voting shares of the Portfolio entitled to vote thereon are
present in person or represented by proxy, or (ii) more than 50% of the
outstanding voting of the Portfolio entitled to vote thereon.
Shareholders of each MSAM Advised Portfolio are entitled to vote with respect
to Proposal Number 1 and Shareholders of each MAS Advised Portfolio are
entitled to vote with respect to Proposal Number 2. Proposal Number 1 will be
approved with respect to an MSAM Advised Portfolio if approved by the
Shareholders of that MSAM Advised Portfolio, regardless of whether the other
Shareholders of any other Portfolios approve the proposal. Likewise, Proposal
Number 2 will be approved with respect to an MAS Advised Portfolio if approved
by the shareholders of that MAS Advised Portfolio, regardless of whether the
other shareholders of any other Portfolios approve the proposal.
The Board recommends that you cast your vote.
. FOR approval of the New Advisory Agreement with MSAM; and/or
. FOR approval of the New Advisory Agreement with MAS.
All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon. Proxies
received prior to the Meeting on which no vote is indicated will be voted "for"
the proposal as to which it is entitled to vote. Abstentions will not be
counted for or against the proposal, but will be counted as votes present for
purposes of determining whether a quorum is present. Abstentions will be
counted as votes present for purposes of determining a "majority of the
outstanding voting securities" present at the Meeting and will therefore have
the effect of counting against any Proposal to which they relate. A majority of
the outstanding Shares entitled to vote on a proposal must be present in person
or by proxy to have a quorum to conduct business at the Meeting.
Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the Company a written notice of revocation, by delivering
a duly executed proxy bearing a later date or by attending the Meeting and
voting in person.
4
<PAGE>
THE PROPOSALS: APPROVAL OF NEW ADVISORY AGREEMENTS
THE ADVISERS
- ------------
MORGAN STANLEY ASSET MANAGEMENT INC. (MSAM)
MSAM currently is a wholly-owned subsidiary of MS Group and provides a broad
range of portfolio management services to customers in the United States and
abroad. At December 31, 1996, MSAM together with its affiliated asset management
companies (other than MAS) managed investments totaling approximately $70.4
billion. The address of MSAM is 1221 Avenue of the Americas, New York, NY
10020.
Set forth below is the name, address and principal occupation of the
principal executive officer and each director of MSAM:
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
Barton M. Biggs Chairman and Managing Director, MSAM; Managing
1221 Avenue of the Americas Director of Morgan Stanley & Co. Incorporated;
New York, New York 10020 Chairman of Morgan Stanley Asset Management Limited
James M. Allwin President, Director and Managing Director, MSAM;
1221 Avenue of the Americas Managing Director of Morgan Stanley & Co.
New York, New York 10020 Incorporated; President of Morgan Stanley Realty
Inc.
Peter A. Nadosky Vice Chairman, Director and Managing Director,
1221 Avenue of the Americas MSAM; Managing Director of Morgan Stanley & Co.
New York, New York 10020 Incorporated; Director of Morgan Stanley Asset
Management Limited
Gordon S. Gray Director and Managing Director, MSAM; Managing
1221 Avenue of the Americas Director of Morgan Stanley & Co. Incorporated
New York, New York 10020
Dennis G. Sherva Director and Managing Director, MSAM; Managing
1221 Avenue of the Americas Director of Morgan Stanley & Co. Incorporated
New York, New York 10020
5
<PAGE>
MILLER ANDERSON & SHERRERD, LLP (MAS)
MAS, a Pennsylvania limited liability partnership founded in 1969, has its
principal offices at One Tower Bridge, West Conshohocken, Pennsylvania 19428.
MAS provides investment services to employee benefit plans, endowment funds,
foundations and other institutional investors and has served as investment
adviser to several open-end investment companies since 1984. At December 31,
1996, MAS managed investments totaling approximately $41.1 billion.
Listed below are the names, address and principal occupations of each of the
principal executive officers of MAS.
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Thomas L. Bennett Principal executive officer and Portfolio
One Tower Bridge Manager; Managing Director, Morgan Stanley &
West Conshohocken, PA 19428 Co. Incorporated
Gary G. Schlarbaum Principal executive officer and Portfolio
One Tower Bridge Manager; Managing Director, Morgan Stanley &
West Conshohocken, PA 19428 Co. Incorporated
Marna C. Whittington Principal executive officer; Managing Director,
One Tower Bridge Morgan Stanley & Co. Incorporated
West Conshohocken, PA 19428
Richard B. Worley Principal executive officer and Portfolio
One Tower Bridge Manager; Managing Director, Morgan Stanley &
West Conshohocken, PA 19428 Co. Incorporated
</TABLE>
MS Group acquired MAS in January 1996. As part of that acquisition, the then
partners of MAS including each of the above-mentioned principal executive
officers, sold their partnership interests in MAS to Morgan Stanley Asset
Management Holdings Inc., an indirect wholly-owned subsidiary of MS Group, for
cash and securities of MS Group.
INFORMATION CONCERNING MORGAN STANLEY GROUP
MS Group and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co."), a
registered broker-dealer, MSAM, a registered investment adviser, and Morgan
Stanley International, provide a wide range of financial services on a global
basis. MS Group's principal businesses include securities underwriting,
distribution and trading; merger, acquisition, restructuring, real estate,
project finance and other corporate finance advisory activities; merchant
banking and other principal investment activities; stock brokerage and
research services; asset management; the trading of foreign exchange and
commodities as well as derivatives on a broad range of asset categories, rates
and indices; real estate advice, financing and investing; and global custody,
securities clearance services and securities lending.
6
<PAGE>
INFORMATION CONCERNING DEAN WITTER, DISCOVER & CO.
Dean Witter Discover is a diversified financial services company offering a
broad range of nationally marketed credit and investment products with a
primary focus on individual customers. Dean Witter Discover has two principal
lines of business: credit services and securities. Its credit services
business consists primarily of the issuance, marketing and servicing of
general purpose credit cards and the provision of transaction processing
services, private-label credit card services and real estate secured loans. It
is the largest single issuer of general purpose credit cards in the United
States as measured by number of accounts and cardmembers and the third largest
originator and servicer of credit card receivables, as measured by managed
loans. Dean Witter Discover's securities business is conducted primarily
through its wholly-owned subsidiaries, Dean Witter Reynolds Inc. ("DWR") and
Dean Witter Intercapital Inc. ("Intercapital"). DWR is a full-service
securities firm offering in a wide variety of securities products to serve the
investment needs of individual clients through over 9,100 professional account
executives located in 371 branch offices. DWR is among the largest NYSE
members and is a member of other major securities, futures and options
exchanges. Intercapital is a registered investment adviser that, along with
its subsidiaries, services investment companies, individual accounts and
institutional portfolios.
THE MERGER
Pursuant to the Merger Agreement, MS Group will be merged (the "Merger")
with and into Dean Witter Discover and the surviving corporation will be named
Morgan Stanley, Dean Witter, Discover & Co. Following the Merger, MSAM will be
a direct subsidiary and MAS will be an indirect subsidiary of Morgan Stanley,
Dean Witter, Discover & Co.
Under the terms of the Merger Agreement, each of MS Group's common shares
will be converted into the right to receive 1.65 shares of Morgan Stanley,
Dean Witter, Discover & Co. common stock and each issued and outstanding share
of Dean Witter Discover common stock will remain outstanding and will
thereafter represent one share of Morgan Stanley, Dean Witter, Discover & Co.
common stock. Following the Merger, MS Group's former shareholders will own
approximately 45% and Dean Witter Discover's former shareholders will own
approximately 55% of the outstanding shares of common stock of Morgan Stanley,
Dean Witter, Discover & Co.
The Merger is expected to be consummated in mid-1997 and is subject to
certain closing conditions, including certain regulatory approvals and the
approval of shareholders of both MS Group and Dean Witter Discover.
The Board of Directors of Morgan Stanley, Dean Witter, Discover & Co.
initially will consist of fourteen members, two of whom will be MS Group
insiders and two of whom will be Dean Witter Discover insiders. The remaining
ten directors will be independent directors, with MS Group and Dean Witter
Discover each nominating five of the ten. The Chairman and Chief Executive
Officer of Morgan Stanley, Dean Witter, Discover & Co. will be the current
Chairman and Chief Executive Officer of Dean Witter Discover, Phillip Purcell.
The President and Chief Operating Officer of Morgan Stanley, Dean Witter,
Discover & Co. will be the current President of MS Group, John Mack.
The Board has been advised that neither MSAM nor MAS anticipates any
reduction, as a result of the Merger, in the quality of services now provided
to the Company and that neither expects that the Merger will result in any
material changes in the business of the MSAM or MAS, respectively, or in the
manner in which they render services to the Company. The Board has also been
advised that neither MSAM nor MAS
7
<PAGE>
anticipates that the Merger or any ancillary transactions will have any
adverse effect on its ability to fulfill its obligations under the applicable
New Advisory Agreements (defined below) with the Company or to operate its
business in a manner consistent with past business practice.
THE ADVISORY AGREEMENTS
In anticipation of the Merger, a majority of the Directors of the Company,
including a majority of the Directors who are not (i) parties to either New
Advisory Agreement (defined below) or (ii) interested persons of any such
party, approved a new investment advisory agreement between the Company and
MSAM (the "New MSAM Advisory Agreement") and a new advisory agreement between
the Company and MAS (the "New MAS Advisory Agreement" and, together with the
New MSAM Advisory Agreement, the "New Advisory Agreements"). The form of the
New MSAM Advisory Agreement is identical to the Current MSAM Advisory
Agreement (defined below) and the form of the New MAS Advisory Agreement is
identical to the Current MAS Advisory Agreement (defined below), except in
each case for the dates of execution, effectiveness and initial term. The
holders of a majority of the outstanding voting securities (within the meaning
of the 1940 Act) of the Portfolios are being asked to approve the appropriate
New Advisory Agreement. See "The New Advisory Agreements" below.
The following summary of the Current Advisory Agreements and the New
Advisory Agreements is qualified by reference to Annexes A and B.
THE CURRENT ADVISORY AGREEMENTS
MORGAN STANLEY ASSET MANAGEMENT INC.
The current advisory agreement between the Company and MSAM dated as of
September 9, 1996 (the "Current MSAM Agreement"), was approved by the initial
Shareholder of the Portfolios on October 1, 1996 for the Emerging Markets
Equity Portfolio, on January 3, 1997 for the Growth, Equity, and International
Equity Portfolios, and on March 1, 1997 for the U.S. Real Estate and Asian
Equity Portfolios.
At a meeting of the Board held on August 15, 1996, a majority of the Board,
including a majority of the Directors who are not "interested parties" as
defined by the 1940 Act ("Independent Directors") approved the Current MSAM
Agreement with respect to each MSAM Advised Portfolio.
The Current MSAM Agreement provides that MSAM, as an investment adviser,
will manage the investments and the reinvestments of the MSAM Advised
Portfolios including the selection of securities for the Company to purchase,
hold or sell, the amount of assets to remain uninvested, and the selection of
brokers through whom the Company's portfolio transactions are executed. MSAM
may also furnish offices, necessary facilities and equipment and provide other
services.
The Current MSAM Agreement provides that MSAM shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which the Current MSAM Agreement relates except
a loss resulting from willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties or breach of its fiduciary
duty with respect to the receipt of compensation for services.
MSAM's activities are subject to the review and supervision of the Board, to
which it renders periodic reports with respect to the MSAM Advised Portfolios'
investment activities. The Current MSAM Agreement may be terminated, without
penalty, on 60 days' written notice by the Company or upon 90 days' written
notice by MSAM and will terminate immediately upon assignment.
8
<PAGE>
Under the Current MSAM Agreement, the Company pays MSAM as compensation for
the services rendered annual fees equal to percentages listed below of the
respective Portfolio's average daily net assets.
<TABLE>
<CAPTION>
PORTFOLIO CONTRACTUAL ADVISORY FEE
--------- ------------------------
<S> <C> <C>
Growth Portfolio First $500 Million 0.55%
From $500 Million to $1 Billion 0.50%
More than $1 Billion 0.45%
U.S. Real Estate Portfolio First $500 Million 0.80%
From $500 Million to $1 Billion 0.75%
More than $1 Billion 0.70%
Global Equity Portfolio First $500 Million 0.80%
From $500 Million to $1 Billion 0.75%
More than $1 Billion 0.70%
International Magnum First $500 Million 0.80%
Portfolio From $500 Million to $1 Billion 0.75%
More than $1 Billion 0.70%
Emerging Markets Equity First $500 Million 1.25%
Portfolio From $500 Million to $1 Billion 1.20%
More than $1 Billion 1.15%
Asian Equity Portfolio First $500 Million 0.80%
From $500 Million to $1 Billion 0.75%
More than $1 Billion 0.70%
</TABLE>
In the fiscal year ending December 31, 1996, MSAM received advisory fees of
$32,000 for services provided to the Emerging Markets Equity Portfolio. MSAM's
net advisory fee for the Emerging Markets Equity Portfolio, after fee waivers
and/or expense reimbursements, as a percentage of average daily net assets was
0.31%. The other MSAM Advised Portfolios did not commence operations in this
fiscal year and, therefore, MSAM did not receive any compensation from the
Company during this period for these Portfolios.
The net assets of the MSAM Advised Portfolios, as well as other investment
companies advised by the Adviser, the rates of compensation to the Adviser,
and the net advisor fees after fee waivers and/or expense reimbursements are
set forth at Annex C hereto.
MILLER ANDERSON & SHERRERD, LLP
The current advisory agreement between the Company and MAS dated as of
September 9, 1996 MAS Advised (the "Current MAS Agreement") was last approved
by the initial shareholder of the MAS Portfolios on January 3, 1997.
At a meeting of the Board held on August 15, 1996, a majority of the Board,
including a majority of the Independent Directors, approved the Current MAS
Agreement with respect to each MAS Advised Portfolio.
9
<PAGE>
The Current MAS Agreement provides that MAS will manage the investments and
the reinvestments of the Portfolios including the selection of securities for
the Company to purchase, hold or sell, the amount of assets to remain
uninvested, and the selection of brokers through whom the Company's portfolio
transactions are executed. MAS may also furnish offices, necessary facilities
and equipment and provide other services.
The Current MAS Agreement provides that MAS shall not be liable for any
error of judgment or mistake of law, or for any loss suffered by the Company
in connection with the matters to which the Current MAS Agreement relates
except a loss resulting from willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duty or breach of fiduciary duty
with respect to the receipt of compensation for services.
MAS's activities are subject to the review and supervision of the Board, to
which it renders periodic reports with respect to the MAS Advised Portfolios
investment activities. The Current MAS Agreement may be terminated without
penalty, on 60 days' written notice by the Company or upon 90 days' written
notice by MAS and will terminate immediately upon assignment.
Under the Current MAS Agreement the Company pays MAS as compensation for the
services rendered annual fees equal to percentages listed below of the
respective Portfolio's average daily net assets.
<TABLE>
<CAPTION>
PORTFOLIO CONTRACTUAL ADVISORY FEE
--------- ------------------------
<S> <C> <C>
Fixed Income Portfolio First $500 Million 0.40%
From $500 Million to $1 Billion 0.35%
More than $1 Billion 0.30%
High Yield Portfolio First $500 Million 0.50%
From $500 Million to $1 Billion 0.45%
More than $1 Billion 0.40%
Value Portfolio First $500 Million 0.55%
From $500 Million to $1 Billion 0.50%
More than $1 Billion 0.45%
Mid Cap Value Portfolio First $500 Million 0.75%
From $500 Million to $1 Billion 0.70%
More than $1 Billion 0.65%
</TABLE>
The MAS Advised Portfolios did not commence operations in the fiscal year
ending December 31, 1996 and, therefore, MAS received no compensation from the
Company during this period.
The net assets of the MAS Advised Portfolios, as well as other investment
companies advised by the Adviser, the rates of compensation to the Adviser,
and the net advisory fee gives fee waiver or expense reimbursement are set
forth at Annex D hereto.
THE NEW ADVISORY AGREEMENTS
The Board approved the New MSAM Advisory Agreement and New MAS Advisory
Agreement on March 13, 1997, the forms of which are attached as Annex A and
Annex B, respectively. The form of the proposed New MSAM Advisory Agreement is
identical to the Current MSAM Agreement, except for the
10
<PAGE>
dates of execution, effectiveness and initial term. Likewise, the form of the
proposed New MAS Advisory Agreement is identical to the Current MAS Agreement,
except for the dates of execution, effectiveness and initial term.
The investment advisory fee as a percentage of net assets payable by each
Portfolio will be the same under each New Advisory Agreement as under the
applicable Current Advisory Agreement. If the investment advisory fee under
each of the New Advisory Agreements had been in effect for the Company's most
recently completed fiscal year, advisory fees paid to MSAM and MAS by the
Company would have been identical to those paid under the applicable Current
Advisory Agreements.
The Board held a meeting on March 13, 1997, at which meeting the Directors,
including the Independent Directors, unanimously approved each New Advisory
Agreement for the Company and recommended the agreements for approval by the
shareholders of the MSAM Advised Portfolios and the MAS Advised Portfolios, as
appropriate. Each New Advisory Agreement would take effect upon the later to
occur of (i) the obtaining of shareholder approval or (ii) the closing of the
Merger. Each New Advisory Agreement will continue in effect for an initial two
year term and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.
In evaluating each New Advisory Agreement, the Board took into account that
the Company's Current Advisory Agreements and the New Advisory Agreements,
including their terms relating to the services to be provided thereunder by
the respective Adviser and the fees and expenses payable by the Company, are
identical, except for the dates of execution, effectiveness and initial term.
The Board also considered other possible benefits to MSAM, MAS and Morgan
Stanley, Dean Witter, Discover & Co. that may result from the Merger including
the continued use of Morgan Stanley & Co. and Dean Witter Discover brokers and
their affiliates, to the extent permitted by law, for brokerage services.
The Board considered the terms of the Merger Agreement and the possible
effects of the Merger upon the organization of each of MSAM and MAS and upon
the ability of each Adviser to provide advisory services to the Company. The
Board considered the skills and capabilities of MSAM and MAS. In this regard,
the Board was informed of the resources of Morgan Stanley, Dean Witter,
Discover & Co. to be made available to each of MSAM and MAS.
The Board also considered the effect on the Company of MSAM and MAS each
becoming an affiliated person of Morgan Stanley, Dean Witter, Discover & Co.
Following the Merger, the 1940 Act will prohibit or impose certain conditions
on the ability of the Company to engage in certain transactions with Morgan
Stanley, Dean Witter, Discover & Co. and its affiliates. For example, absent
exemptive relief, the Company will be prohibited from purchasing securities
from Morgan Stanley & Co. and Dean Witter Discover in transactions in which
Morgan Stanley & Co. and Dean Witter Discover act as a principal. Currently
the Company is prohibited from making such purchases in only those
transactions in which Morgan Stanley & Co. or an affiliate acts as a
principal. The Company will also have to satisfy certain conditions in order
to engage in securities transactions in which Morgan Stanley & Co. or Dean
Witter Discover is acting as an underwriter. The Company is already required
to satisfy such conditions when engaging in transactions in which Morgan
Stanley & Co. or an affiliate is acting as an underwriter. In this connection,
management of MSAM and management of MAS each represented to the Board that
they do not believe these prohibitions or conditions will have a material
effect on the management or performance of the MSAM Advised Portfolios or the
MAS Advised Portfolios, respectively.
11
<PAGE>
After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Directors, including the
Independent Directors, unanimously: (i) approved the New MSAM Advisory
Agreement; (ii) approved the New MAS Advisory Agreement; (iii) voted to
recommend the approval of the New MSAM Advisory Agreement to the shareholders
of the MSAM Advised Portfolios; and (iv) voted to recommend the approval of the
New MAS Advisory Agreement to the Shareholders of the MAS Advised Portfolios.
In the event that shareholders of an MSAM Advised Portfolio or an MAS Advised
Portfolio do not approve the New MSAM Advisory Agreement or the New MAS
Advisory Agreement, respectively, the applicable Current Advisory Agreement
will remain in effect and the Board will take such action as it deems in the
best interest of the Company and its Shareholders, which may include proposing
that Shareholders approve an agreement in lieu of such New Advisory Agreement.
If the Merger is not consummated, each of MSAM and MAS would continue to serve
as investment adviser of the Company pursuant to the terms the applicable
Current Advisory Agreement.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
NEW ADVISORY AGREEMENTS.
12
<PAGE>
ADDITIONAL INFORMATION
DIRECTORS AND OFFICERS OF THE COMPANY
Information is set forth below about the Company's current Directors and
principal executive officers, including their name, position with the Company,
and relationship to MSAM or MAS. None of the Directors own shares of the
Company.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
THE COMPANY AFFILIATION WITH MSAM OR MAS
---------------------- ----------------------------
<S> <C>
Barton M. Biggs Chairman and Director of
Chairman and Director MSAM
Warren J. Olsen Principal of MSAM
Director and President
John D. Barrett, II N/A
Director
Gerard E. Jones N/A
Director
Andrew McNally, IV N/A
Director
Samuel T. Reeves N/A
Director
Fergus Reid N/A
Director
Frederick O. Robertshaw N/A
Director
Michael F. Klein Principal of MSAM
Vice President
Harold J. Schaaff, Jr. General Counsel, Principal and
Vice President Secretary of MSAM
Joseph P. Stadler Vice President of MSAM
Vice President
Valerie Y. Lewis Vice President of MSAM
Secretary
Lorraine Truten Principal of Morgan Stanley &
Vice President Co. Incorporated, Head of
Mutual Fund Services of MAS
Douglas W. Kugler Vice President of Morgan Stanley
Vice President & Co. Incorporated, Head
of Mutual Fund Administration
of MAS, Treasurer of MAS Funds
Karl O. Hartmann N/A
Assistant Secretary
James R. Rooney N/A
Treasurer
Joanna Haigney N/A
Assistant Treasurer
</TABLE>
13
<PAGE>
TRANSACTIONS /AGREEMENTS WITH AFFILIATES
ADMINISTRATOR
Pursuant to Administration Agreements between the Advisers, respectively,
and the Company, MSAM and MAS (each an "Administrator") provide administrative
services to the MSAM Advised Portfolios and the MAS Advised Portfolios,
respectively. For their services under separate administration agreements with
the Company (the "Administration Agreements"), the Company pays the
Administrators a monthly fee which on an annual basis equals 0.25% of the
average daily net assets of each Portfolio. For the fiscal year ended December
31, 1996, the Company paid administration fees to MSAM of approximately
$9,000.00. Administration fees were not paid to MAS in the fiscal year ending
December 31, 1996 because no MAS Advised Portfolio commenced operations during
this period. Whether or not a particular proposal is approved, MSAM and MAS
will continue to provide administrative services to the MSAM Advised
Portfolios and the MAS Advised Portfolios, respectively.
CUSTODIAN
Morgan Stanley Trust Company, located at 1 Pierrepont Plaza, Brooklyn, New
York 11201 ("MSTC"), acts as the Company's custodian for foreign assets held
outside the United States and employs subcustodians who were approved by the
Directors of the Company in accordance with the regulations of the Securities
and Exchange Commission for the purpose of providing custodial services for
such assets. For the fiscal year ended December 31, 1996, the Company paid
MSTC fees of approximately $39,000. Whether or not a particular proposal is
approved, MSTC will continue to act as the Company's custodian for foreign
assets held outside the United States.
DISTRIBUTOR
Under a separate Distribution Agreement with the Company, Morgan Stanley &
Co., a wholly-owned subsidiary of the MS Group, serves as the exclusive
distributor of the Portfolios and sells shares of each Portfolio on the terms
described in the Company's prospectus. In the fiscal year ended December 31,
1996, Morgan Stanley & Co. did not receive any compensation for distribution
services. Whether or not a particular proposal is approved, Morgan Stanley &
Co. will continue to provide distribution services to the Portfolios.
PORTFOLIO TRANSACTIONS
Each Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of investment securities for the Portfolios
and to use its best efforts to obtain the best available price and most
favorable execution with respect to all transactions for the Portfolios. The
Company has authorized each Adviser to pay higher commissions in recognition
of brokerage and research services which, in the opinion of the particular
Adviser, are necessary for the achievement of better execution, provided that
the Adviser believes this to be in the best interest of the Company.
In purchasing and selling securities for the Portfolios, it is the Company's
policy to seek to obtain quality execution at the most favorable prices,
through responsible broker-dealers. In selecting broker-dealers to execute the
securities transactions for the Portfolios, consideration will be given to
such factors as the price of the security, the rate of the commission, the
size and difficulty of the order, the reliability, integrity, financial
condition, general execution and operational capabilities of competing broker-
dealers,
14
<PAGE>
and the brokerage and research services which they provide to the Company.
Some securities considered for investment by a Portfolio may also be
appropriate for other clients served by that Portfolio's Adviser. If purchase
or sale of securities consistent with the investment policies of a Portfolio
and one or more of these other clients served by that Portfolio's Adviser is
considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and
reasonable by the Adviser. Although there is no specified formula for
allocating such transactions, the various allocation methods used by the
Advisers, and the results of such allocations, are subject to periodic review
by the Company's Directors.
Subject to the overriding objective of obtaining the best execution of
orders, each Adviser may allocate a portion of the Company's portfolio
brokerage transactions to Morgan Stanley & Co. or broker affiliates of Morgan
Stanley & Co. and, subsequent to the Merger, to DWR or broker affiliates of
DWR, each under procedures adopted by the Board of Directors. For the fiscal
year ended December 31, 1996, the Company paid brokerage commissions of
approximately $26.00 to Morgan Stanley & Co., an affiliated broker-dealer. For
the fiscal year ended December 31, 1996, commissions paid to the Distributor
represented approximately 0.06% of the total amount of brokerage commissions
paid in such period.
EXPENSES
All costs of solicitation (including the printing and mailing of this proxy
statement, meeting notice, form of proxy and voting instruction material, as
well as any necessary supplementary solicitations) will be paid by MSAM, MAS
or their affiliates. The Company will not pay for the expenses relating to the
approval.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Company does not hold annual shareholder meetings. Shareholders wishing
to submit proposals for inclusion in a proxy statement for a shareholder
meeting subsequent to the Meeting, if any, should send their written proposals
to the Secretary of Morgan Stanley Universal Funds, Inc., c/o Morgan Stanley
Asset Management Inc., Legal Department, 1221 Avenue of the Americas, New
York, New York 10020.
GENERAL
The Company knows of no business other than that mentioned in the Proposals
of the Notice that will be presented for consideration at the Meeting. If any
other matters are properly presented, it is the intention of the persons named
on the enclosed proxy to vote proxies in accordance with their best judgement.
In the event a quorum is present at the Meeting but sufficient votes to
approve a proposal are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
voting instructions by the insurance companies, provided they determine that
such an adjournment and additional solicitation is reasonable and in the
interest of Shareholders based on a consideration of all relevant factors,
including the nature of the relevant proposal, the percentage of affirmative
votes then cast, the percentage of negative votes then cast the nature of the
proposed solicitation activities and the nature of the reasons for such
further solicitation.
A list of Shareholders of the Company entitled to be present and vote at the
Meeting will be available at the offices of the Company, 1221 Avenue of the
Americas, New York, NY 10020 for inspection by any Shareholder during regular
business hours for ten days prior to the date of the Meeting.
15
<PAGE>
Failure of a quorum to be present at the Meeting for the Company may
necessitate adjournment and additional proxy solicitations.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
Valerie Y. Lewis,
Secretary
April 2, 1997
16
<PAGE>
ANNEX A
FORM OF NEW MSAM INVESTMENT ADVISORY AGREEMENT
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , 199 by and between Morgan Stanley
Universal Funds, Inc., a Maryland corporation (the "Fund") and Morgan Stanley
Asset Management Inc., a Delaware corporation (the "Adviser").
1. Duties of Adviser. The Fund hereby appoints the Adviser to act as
investment adviser to the investment funds (the "Portfolios") of the Fund as
set forth on Schedule A attached hereto for the period and on such terms as set
forth in this Agreement. The Fund employs the Adviser to manage the investment
and reinvestment of the assets of the Portfolios, to continuously review,
supervise and administer the investment program of each of the Portfolios, to
determine in its discretion the securities to be purchased or sold and the
portion of each Portfolios' assets to be held uninvested, to provide the Fund
with records concerning the Adviser's activities which the Fund is required to
maintain, and to render regular reports to the Fund's officers and Board of
Directors concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the officers and the Board of Directors of the Fund, and in
compliance with the objectives, policies and limitations set forth in the
Fund's prospectus and applicable laws and regulations. The Adviser accepts such
employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings and equipment and the personnel required
by it to perform the services on the terms and for the compensation provided
herein.
2. Portfolio Transactions. The Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of securities for each of the
Portfolios and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Unless and
until otherwise directed by the Board of Directors of the Fund, the Adviser is
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund. The execution of such transactions
shall not be deemed to represent an unlawful act or breach of any duty created
by this Agreement or otherwise. The Adviser will promptly communicate to the
officers and Directors of the Fund such information relating to portfolio
transactions as they may reasonably request.
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 1 of this Agreement, the Fund shall pay to the
Adviser, at the end of each of the Fund's fiscal quarters, an advisory fee
calculated by applying a quarterly rate, based on the annual percentage rates
as set forth in Schedule B attached hereto with respect to the average daily
net assets of each of the Portfolios for the quarter.
In the event of termination of this Agreement, the fees provided in this
Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in the current fiscal quarter as
a percentage of the total number of days in such quarter.
<PAGE>
4. Other Services. At the request of the Fund, the Adviser in its discretion
may make available to the Fund office facilities, equipment, personnel and
other services. Such office facilities, equipment, personnel and services shall
be provided for or rendered by the Adviser and billed to the Fund at the
Adviser's cost.
5. Reports. The Fund and the Adviser agree to furnish to each other current
prospectuses, statements of additional information, proxy statements, reports
to stockholders, certified copies of their financial statements, and such other
information with regard to their affairs as each may reasonably request.
6. Status of Adviser. The services of the Adviser to the Fund are not to be
deemed exclusive, and the Adviser shall be free to render similar services to
others.
7. Liability of Adviser. In the absence of (i) willful misfeasance, bad faith
or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the Investment Company Act of 1940, as amended
("1940 Act")), the Adviser shall not be subject to any liability whatsoever to
the Fund, or to any stockholder of the Fund, for any error of judgment, mistake
of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale
of any security on behalf of any of the Portfolios.
8. Permissible Interests. Subject to and in accordance with the Articles of
Incorporation of the Fund and the Certificate of Incorporation of the Adviser,
Directors, officers, agents and stockholders of the Fund are or may be
interested in the Adviser (or any successor thereof) as Directors, officers,
agents, stockholders or otherwise; Directors, officers, agents and stockholders
of the Adviser are or may be interested in the Fund as Directors, officers,
stockholders or otherwise; and the Adviser (or any successor) is or may be
interested in the Fund as a stockholder or otherwise; and that the effect of
any such interrelationships shall be governed by said Articles of
Incorporation, Certificate of Incorporation and the provisions of the 1940 Act.
9. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall continue until the earlier of the end of two years after
the date first written above or a date within such two-year period as
specifically approved (a) by the vote of a majority of those members of the
Board of Directors of the Fund who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities of each
of the Portfolios thereafter shall continue for periods of one year so long as
such continuance is specifically approved at least annually; and (a) by the
vote of a majority of those members of the Board of Directors of the Fund who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(b) by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of each of the Portfolios; provided, however,
that if the holders of any Portfolios fail to approve the Agreement as provided
herein, the Adviser may continue to serve in such capacity in the manner and to
the extent permitted by the 1940 Act and rules thereunder. This Agreement may
be terminated with respect to any of the Portfolios at any time, without the
payment of any penalty, by vote of a majority of the entire Board of Directors
of the Fund or by vote of a majority of the outstanding voting securities of
the Portfolio on 60 days' written notice to the Adviser. This Agreement
2
<PAGE>
may be terminated by the Adviser at any time, without the payment of any
penalty, upon 90 days' written notice to the Fund. This Agreement will
automatically and immediately terminate in the event of its assignment,
provided that an assignment to a corporate successor to all or substantially
all of the Adviser's business or to a wholly-owned subsidiary of such
corporate successor which does not result in a change of actual control of the
Adviser's business shall not be deemed to be an assignment for the purposes of
this Agreement. Any notice under this Agreement shall be given in writing,
addressed and delivered or mailed postpaid, to the other party at any office
of such party and shall be deemed given when received by the addressee.
As used in this Section 9, the terms "assignment", "interested persons", and
"a vote of a majority the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act.
10. Amendment of Agreement. This Agreement may be amended by mutual consent,
but the consent of the Fund must be approved (a) by vote of a majority of
those members of the Board of Directors of the Fund who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b) by vote of
a majority of the outstanding voting securities of each of the Portfolios.
11. Use of Name. The Fund agrees that if this Agreement is terminated and
the Adviser shall no longer be the adviser to the Fund, the Fund will, within
a reasonable period of time, change its name to delete reference to "Morgan
Stanley."
12. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of New York, provided, that nothing herein shall be
construed as being inconsistent with the 1940 Act.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first written above.
Morgan Stanley Asset Management Inc. Morgan Stanley Universal Funds, Inc.
By: _________________________________ By: _________________________________
Name: Name:
Title: Title
3
<PAGE>
SCHEDULE A
TO
INVESTMENT ADVISORY AGREEMENT DATED AS OF
BY AND BETWEEN
MORGAN STANLEY UNIVERSAL FUNDS, INC.
AND
MORGAN STANLEY ASSET MANAGEMENT INC.
PORTFOLIOS
1.Money Market Portfolio
2.Growth Portfolio
3.U.S. Real Estate Portfolio
4.Emerging Markets Debt Portfolio
5.Global Equity Portfolio
6.International Magnum Portfolio
7.Emerging Markets Equity Portfolio
8.Asian Equity Portfolio
A-1
<PAGE>
SCHEDULE B
TO
INVESTMENT ADVISORY AGREEMENT DATED AS OF
BY AND BETWEEN
MORGAN STANLEY UNIVERSAL FUNDS, INC.
AND
MORGAN STANLEY ASSET MANAGEMENT INC.
ADVISORY FEES FOR THE FUND'S PORTFOLIOS ADVISED BY MSAM
U.S. FIXED INCOME PORTFOLIO ADVISORY FEES
<TABLE>
<CAPTION>
MONEY
ASSETS MARKET
------ ------
<S> <C>
First $500 million.................................................. 0.30%
From $500 million to $1 billion..................................... 0.25%
More than $1 billion................................................ 0.20%
</TABLE>
U.S. EQUITY PORTFOLIO ADVISORY FEES
<TABLE>
<CAPTION>
U.S.
REAL
ASSETS GROWTH ESTATE
------ ------ ------
<S> <C> <C>
First $500 million........................................... 0.55% 0.80%
First $500 million to $1 billion............................. 0.50% 0.75%
More than $1 billion......................................... 0.45% 0.70%
</TABLE>
GLOBAL PORTFOLIO ADVISORY FEES
<TABLE>
<CAPTION>
EMERGING EMERGING
MARKETS GLOBAL INTERNATIONAL MARKETS ASIAN
ASSETS DEBT EQUITY MAGNUM EQUITY EQUITY
- ------ -------- ------ ------------- -------- ------
<S> <C> <C> <C> <C> <C>
First $500 million.............. 0.75% 0.80% 0.80% 1.25% 0.80%
First $500 million to $1 bil-
lion........................... 0.70% 0.75% 0.75% 1.20% 0.75%
More than $1 billion............ 0.65% 0.70% 0.70% 1.15% 0.70%
</TABLE>
B-1
<PAGE>
ANNEX B
FORM OF NEW MAS INVESTMENT ADVISORY AGREEMENT
MILLER ANDERSON & SHERRERD, LLP
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , 199 by and between Morgan Stanley
Universal Funds, Inc., a Maryland corporation (the "Fund") and Miller Anderson
& Sherrerd, LLP, a Pennsylvania limited liability partnership (the "Adviser").
1. Duties of Adviser. The Fund hereby appoints the Adviser to act as
investment adviser to the investment funds (the "Portfolios") of the Fund as
set forth on Schedule A attached hereto for the period and on such terms as set
forth in this Agreement. The Fund employs the Adviser to manage the investment
and reinvestment of the assets of the Portfolios, to continuously review,
supervise and administer the investment program of each of the Portfolios, to
determine in its discretion the securities to be purchased or sold and the
portion of each Portfolios' assets to be held uninvested, to provide the Fund
with records concerning the Adviser's activities which the Fund is required to
maintain, and to render regular reports to the Fund's officers and Board of
Directors concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the officers and the Board of Directors of the Fund, and in
compliance with the objectives, policies and limitations set forth in the
Fund's prospectus and applicable laws and regulations. The Adviser accepts such
employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings and equipment and the personnel required
by it to perform the services on the terms and for the compensation provided
herein.
2. Portfolio Transactions. The Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of securities for each of the
Portfolios and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Unless and
until otherwise directed by the Board of Directors of the Fund, the Adviser is
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund. The execution of such transactions
shall not be deemed to represent an unlawful act or breach of any duty created
by this Agreement or otherwise. The Adviser will promptly communicate to the
officers and Directors of the Fund such information relating to portfolio
transactions as they may reasonably request.
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 1 of this Agreement, the Fund shall pay to the
Adviser, at the end of each of the Fund's fiscal quarters, an advisory fee
calculated by applying a quarterly rate, based on the annual percentage rates
as set forth in Schedule B attached hereto with respect to the average daily
net assets of each of the Portfolios for the quarter.
In the event of termination of this Agreement, the fees provided in this
Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in the current fiscal quarter as
a percentage of the total number of days in such quarter.
<PAGE>
4. Other Services. At the request of the Fund, the Adviser in its discretion
may make available to the Fund office facilities, equipment, personnel and
other services. Such office facilities, equipment, personnel and services shall
be provided for or rendered by the Adviser and billed to the Fund at the
Adviser's cost.
5. Reports. The Fund and the Adviser agree to furnish to each other current
prospectuses, statements of additional information, proxy statements, reports
to stockholders, certified copies of their financial statements, and such other
information with regard to their affairs as each may reasonably request.
6. Status of Adviser. The services of the Adviser to the Fund are not to be
deemed exclusive, and the Adviser shall be free to render similar services to
others.
7. Liability of Adviser. In the absence of (i) willful misfeasance, bad
faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the Investment company Act of 1940, as amended
("1940 Act")), the Adviser shall not be subject to any liability whatsoever to
the Fund, or to any stockholder of the Fund, for any error of judgment, mistake
of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale
of any security on behalf of any of the Portfolios.
8. Permissible Interests. Subject to and in accordance with the Articles of
Incorporation of the Fund and the Certificate of Incorporation of the Adviser,
Directors, officers, agents and stockholders of the Fund are or may be
interested in the Adviser (or any successor thereof) as Directors, officers,
agents, stockholders or otherwise; Directors, officers, agents and stockholders
of the Adviser are or may be interested in the Fund as Directors, officers,
stockholders or otherwise; and the Adviser (or any successor) is or may be
interested in the Fund as a stockholder or otherwise; and that the effect of
any such interrelationships shall be governed by said Articles of
Incorporation, Certificate of Incorporation and the provisions of the 1940 Act.
9. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall continue until the earlier of the end of two years after
the date first written above or a date within such two-year period as
specifically approved (a) by the vote of a majority of those members of the
Board of Directors of the Fund who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities of each
of the Portfolios thereafter shall continue for periods of one year so long as
such continuance is specifically approved at least annually; and (a) by the
vote of a majority of those members of the Board of Directors of the Fund who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(b) by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of each of the Portfolios; provided, however,
that if the holders of any Portfolios fail to approve the Agreement as provided
herein, the Adviser may continue to serve in such capacity in the manner and to
the extent permitted by the 1940 Act and rules thereunder. This Agreement may
be terminated with respect to any of the Portfolios at any time, without the
payment of any penalty, by vote of a majority of the entire Board of Directors
of the Fund or by vote of a majority of the outstanding voting securities of
the Portfolio on 60 days' written notice to the Adviser. This Agreement may be
terminated by the Adviser at any time, without the payment of any penalty, upon
90 days' written
2
<PAGE>
notice to the Fund. This Agreement will automatically and immediately terminate
in the event of its assignment, provided that an assignment to a corporate
successor to all or substantially all of the Adviser's business or to a wholly-
owned subsidiary of such corporate successor which does not result in a change
of actual control of the Adviser's business shall not be deemed to be an
assignment for the purposes of this Agreement. Any notice under this Agreement
shall be given in writing, addressed and delivered or mailed postpaid, to the
other party at any office of such party and shall be deemed given when received
by the addressee.
As used in this Section 9, the terms "assignment", "interested persons", and
"a vote of a majority the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act.
10. Amendment of Agreement. This Agreement may be amended by mutual consent,
but the consent of the Fund must be approved (a) by vote of a majority of those
members of the Board of Directors of the Fund who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of each of the Portfolios.
11. Use of Name. The Fund agrees that if this Agreement is terminated and the
Adviser shall no longer be the adviser to the Fund, the Fund will, within a
reasonable period of time, change its name to delete reference to "Morgan
Stanley."
12. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of New York, provided, that nothing herein shall be construed
as being inconsistent with the 1940 Act.
14. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first written above.
Miller Anderson & Sherrerd, LLP Morgan Stanley Universal Funds, Inc.
By: _________________________________ By: _________________________________
Name: Name:
Title Title:
3
<PAGE>
SCHEDULE A
TO
INVESTMENT ADVISORY AGREEMENT DATED AS OF
BY AND BETWEEN
MORGAN STANLEY UNIVERSAL FUNDS, INC.
AND
MILLER ANDERSON & SHERRERD, LLP
PORTFOLIOS
1.Fixed Income Portfolio
2.High Yield Portfolio
3.Core Equity Portfolio
4.Value Portfolio
5.Mid Cap Growth Portfolio
6.Mid Cap Value Portfolio
7.International Fixed Income Portfolio
8.Balanced Portfolio
9.Multi-Asset-Class Portfolio
A-1
<PAGE>
SCHEDULE B
TO
INVESTMENT ADVISORY AGREEMENT DATED AS OF
BY AND BETWEEN
MORGAN STANLEY UNIVERSAL FUNDS, INC.
AND
MILLER ANDERSON & SHERRERD, LLP
ADVISORY FEES FOR THE FUND'S PORTFOLIOS ADVISED BY MAS
U.S. FIXED INCOME PORTFOLIO ADVISORY FEES
<TABLE>
<CAPTION>
FIXED HIGH
ASSETS INCOME YIELD
------ ------ -----
<S> <C> <C>
First $500 million............................................ 0.40% 0.50%
From $500 million to $1 billion............................... 0.35% 0.45%
More than $1 billion.......................................... 0.30% 0.40%
</TABLE>
U.S. EQUITY PORTFOLIO ADVISORY FEES
<TABLE>
<CAPTION>
MID MID
CORE CAP CAP
ASSETS EQUITY VALUE GROWTH VALUE
------ ------ ----- ------ -----
<S> <C> <C> <C> <C>
First $500 million............................... 0.55% 0.55% 0.75% 0.75%
First $500 million to $1 billion................. 0.50% 0.50% 0.70% 0.70%
More than $1 billion............................. 0.45% 0.45% 0.65% 0.65%
</TABLE>
GLOBAL PORTFOLIO ADVISORY FEES
<TABLE>
<CAPTION>
INTERNATIONAL
ASSETS FIXED INCOME
------ -------------
<S> <C>
First $500 million........................................... 0.50%
From $500 million to $1 billion.............................. 0.45%
More than $1 billion......................................... 0.40%
</TABLE>
ASSET ALLOCATION PORTFOLIO ADVISORY FEES
<TABLE>
<CAPTION>
MULTI-
ASSET
ASSETS BALANCED CLASS
------ -------- ------
<S> <C> <C>
First $500 million......................................... 0.50% 0.65%
From $500 million to $1 billion............................ 0.45% 0.60%
More than $1 billion....................................... 0.40% 0.55%
</TABLE>
B-1
<PAGE>
ANNEX C
The following tables indicate the name, net assets as of December 31, 1996,
contractual advisory fee and net advisory fee after fee waivers or expense
reimbursements for the last fiscal year for the Portfolios, as well as other
registered investment companies advised by MSAM. Except as indicated in the
tables below, MSAM has voluntarily agreed to a reduction in the fees payable to
it and to reimburse each portfolio, if necessary, if payment of advisory fees
would cause the total annual operating expenses of each portfolio to exceed
certain maximums.
MORGAN STANLEY INSTITUTIONAL FUND, INC.
<TABLE>
<CAPTION>
NET ADVISORY
CONTRACTUAL FEES
RATE OF AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS
PORTFOLIO 12/31/96 FEES(2) OR FEE WAIVERS
--------- ------------- ----------- --------------
<S> <C> <C> <C>
Active Country Allocation Portfolio.. $ 183,866,164 0.65% 0.36%
Aggressive Equity Portfolio.......... 77,289,407 0.80% 0.56%
Asian Equity Portfolio............... 374,522,755 0.80% 0.55%
Balanced Portfolio................... 8,189,270 0.50% 0.00%
China Growth Portfolio(1)............ N/A 1.25% N/A
Emerging Growth Portfolio............ 66,789,901 1.00% 0.95%
Emerging Markets Portfolio........... 1,321,363,055 1.25% *
Emerging Markets Debt Portfolio...... 156,419,732 1.00% *
Equity Growth Portfolio.............. 66,789,901 0.60% 0.36%
European Equity Portfolio............ 181,009,746 0.80% 0.64%
Fixed Income Portfolio............... 132,194,980 0.35% 0.20%
Global Equity Portfolio.............. 84,224,959 0.80% 0.65%
Global Fixed Income Portfolio........ 114,446,527 0.40% 0.18%
Gold Portfolio....................... 29,180,247 1.00% 0.52%
High Yield Portfolio................. 101,321,211 0.50% 0.43%
International Equity Portfolio....... 2,269,491,236 0.80% 0.78%
International Magnum Portfolio....... 108,463,901 0.80% 0.26%
International Small Cap Portfolio.... 234,743,343 0.95% 0.87%
Japanese Equity Portfolio............ 155,659,538 0.80% 0.73%
Latin American Portfolio............. 31,740,977 1.10% 0.62%
MicroCap Portfolio(1)................ N/A 1.00% N/A
Money Market Portfolio............... 1,284,371,173 0.30% *
Mortgage-Backed Securities Portfo-
lio(1).............................. N/A 0.35% N/A
Municipal Bond Portfolio............. 40,295,907 0.35% 0.07%
Municipal Money Market Portfolio..... 721,240,884 0.30% *
Small Cap Value Equity Portfolio..... 25,659,189 0.85% 0.53%
Technology Portfolio................. 5,077,462 1.00% 0.00%
U.S. Real Estate Portfolio........... 219,140,369 0.80% 0.66%
Value Equity Portfolio............... 108,683,175 0.50% 0.42%
</TABLE>
- --------
(1) Portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets
* No fee waiver in effect
<PAGE>
MORGAN STANLEY FUND, INC.
<TABLE>
<CAPTION>
NET ADVISORY
CONTRACTUAL FEES
RATE OF AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS
FUND 12/31/96 FEES(2) OR FEE WAIVERS
---- ------------ ----------- --------------
<S> <C> <C> <C>
Aggressive Equity Fund............... $ 19,194,919 0.90% 0.50%
American Value Fund.................. 481,199,603 0.85% 0.54%
Asian Growth Fund.................... 423,229,234 1.00% *
Emerging Markets Fund................ 128,640,271 1.25% 0.84%
Emerging Markets Debt Fund........... N/A 1.25% N/A
Equity Growth Fund(1)................ N/A 0.70% N/A
European Equity Fund(1).............. N/A 1.00% N/A
Global Equity Fund(1)................ N/A 1.00% N/A
Global Equity Allocation Fund........ 156,402,540 1.00% 0.64%
Global Fixed Income Fund............. 10,452,774 0.75% 0.04%
Government Obligations Money Market
Fund................................ 116,815,884 0.45%(3)
0.40%(4)
0.35%(5) 0.41%
Growth and Income Fund(1)............ N/A 1.00% N/A
High Yield Fund...................... 14,794,857 0.75% 0.42%
International Magnum Fund............ 16,490,305 0.80% *
Japanese Equity Fund(1).............. N/A 1.00% 0.80%
Latin American Fund.................. 28,891,074 1.25% 0.07%
Mid Cap Growth Fund(1)............... N/A 0.75% 0.67%
Money Market Fund.................... 254,854,113 0.45%(3)
0.40%(4)
0.35%(5) 0.36%
Tax-Free Money Market Fund(1)........ N/A 0.45%(3)
0.40%(4)
0.35%(5) 0.14%
U.S. Real Estate Fund................ 14,131,988 1.00% 0.70%
Value Fund(1)........................ N/A 0.70% N/A
Worldwide High Income Fund........... 144,780,814 0.75% 0.61%
</TABLE>
- --------
(1) Portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets
(3) As a percentage of first $250 million
(4) As a percentage of next $250 million
(5) As a percentage of excess over $500 million
* No fee waiver in effect
2
<PAGE>
MORGAN STANLEY UNIVERSAL FUNDS, INC.
<TABLE>
<CAPTION>
NET ADVISORY
CONTRACTUAL FEES
RATE OF AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS
PORTFOLIO 12/31/96 FEES(2) OR FEE WAIVERS
--------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Asian Equity Portfo-
lio(1)................. N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Emerging Market Debt
Portfolio(1)........... N/A 0.75%(3) N/A
0.70%(4)
0.65%(5)
Emerging Markets Equity
Portfolio.............. 11,786,569 1.25%(3) 0.31%
1.20%(4)
1.15%(5)
Global Equity Portfo-
lio(1)................. N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Growth Portfolio(1)..... N/A 0.55%(3) N/A
0.50%(4)
0.45%(5)
International Magnum
Portfolio(1)........... N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Money Market Portfo-
lio(1)................. N/A 0.30%(3) N/A
0.25%(4)
0.20%(5)
U.S. Real Estate Portfo-
lio.................... N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
</TABLE>
- --------
(1) Portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets
(3) As a percentage of first $500 million
(4) As a percentage of next $500 million
(5) As a percentage of excess over $1 billion
3
<PAGE>
U.S. REGISTERED CLOSED-END FUNDS*
<TABLE>
<CAPTION>
CONTRACTUAL
ASSETS AS OF RATE OF
COMPANY 12/31/96 ADVISORY FEES(1)
------- ------------ ----------------
<S> <C> <C>
Morgan Stanley Africa
Investment Fund, Inc... $260,522,375 1.20%
Morgan Stanley Asia-Pa-
cific Fund, Inc........ 856,422,087 1.00%
Morgan Stanley Emerging
Markets Fund, Inc...... 358,394,428 1.25%
Morgan Stanley Emerging
Markets Debt Fund,
Inc.................... 372,677,758 1.00%
Morgan Stanley Global
Opportunity Fund,
Inc.................... 61,590,818 1.00%
Morgan Stanley India In-
vestment Fund, Inc..... 314,423,032 1.10%
Morgan Stanley Russia &
New Europe Fund, Inc... 103,944,599 1.60%
The Brazilian Investment
Fund, Inc.............. 48,856,226 0.90%(2)
0.70%(3)
0.50%(4)
The Latin America Dis-
covery Fund, Inc....... 171,586,180 1.15%
The Malaysia Fund,
Inc.................... 187,762,289 0.90%(2)
0.70%(3)
0.50%(4)
The Morgan Stanley High
Yield Fund, Inc........ 126,330,034 0.70%
The Pakistan Investment
Fund, Inc.............. 55,399,039 1.00%
The Thai Fund, Inc...... 204,208,935 0.90%(2)
0.70%(3)
0.50%(4)
The Turkish Investment
Fund, Inc.............. 36,937,008 0.95%(2)
0.75%(3)
0.55%(4)
</TABLE>
- --------
(1)As a percentage of average weekly net assets
(2)As a percentage of first $50 million
(3)As a percentage of next $50 million
(4)As a percentage of excess over $100 million
*No voluntary fee waivers are in effect with regard to any U.S. Registered
Closed-End Fund.
4
<PAGE>
ANNEX D
The following table indicates the size of each investment company advised or
subadvised by the MAS, the contractual advisory fee rate, and the net advisory
fee after expense reimbursements or fee waivers. Average net assets are
calculated on a daily basis for registered open-end investment companies and
on a weekly basis for registered closed-end investment companies.
MAS FUNDS
<TABLE>
<CAPTION>
NET ADVISORY
FEES
CONTRACTUAL AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS
PORTFOLIO 02/28/97 FEES(1) OR FEE WAIVERS(2)
--------- ---------------- ----------- -----------------
<S> <C> <C> <C>
Advisory Foreign Fixed Income
Portfolio...................... 145,873,909.42 0.375% 0.000%
Advisory Mortgage Portfolio..... 2,253,838,981.92 0.375% 0.000%
Balanced Portfolio.............. 329,383,721.63 0.450% N/A
Balanced Plus Portfolio......... N/A 0.550% N/A
Cash Reserves Portfolio......... 80,739,677.64 0.250% 0.155%
Domestic Fixed Income Portfo-
lio............................ 103,331,990.00 0.375% 0.362%
Emerging Markets Portfolio...... 31,155,993.22 0.750% 0.636%
Equity Portfolio................ 1,323,572,917.28 0.500% N/A
Fixed Income Portfolio.......... 2,406,336,292.39 0.375% N/A
Fixed Income II Portfolio....... 209,281,033.80 0.375% N/A
Global Fixed Income Portfolio... 77,631,231.13 0.375% N/A
Growth Portfolio................ N/A 0.500% N/A
High Yield Portfolio............ 425,469,152.55 0.375% N/A
Intermediate Duration Portfo-
lio............................ 33,672,993.00 0.375% 0.244%
International Equity Portfolio.. 628,440,094.85 0.500% N/A
International Fixed Income Port-
folio.......................... 152,014,240.44 0.375% N/A
Limited Duration Portfolio...... 123,171,083.92 0.300% 0.300%
Mid Cap Growth Portfolio........ 387,888,637.05 0.500% N/A
Mid Cap Value Portfolio......... 113,802,493.05 0.750% 0.564%
Mortgage-Backed Securities Port-
folio.......................... 52,982,927.72 0.375% 0.335%
Municipal Portfolio............. 61,827,035.75 0.375% 0.288%
Multi-Asset-Class Portfolio..... 147,286,694.00 0.650% 0.570%
PA Municipal Portfolio.......... 28,913,376.46 0.375% 0.228%
Small Cap Value Portfolio....... 552,605,546.79 0.750% N/A
Special Purpose Fixed Income
Portfolio...................... 491,580,628.73 0.375% N/A
Value Portfolio................. 2,669,766,596.14 0.500% N/A
</TABLE>
- --------
(1)As a percentage of average daily net assets.
(2)As of the fiscal year ended September 30, 1996.
<PAGE>
MORGAN STANLEY UNIVERSAL FUNDS, INC.
<TABLE>
<CAPTION>
NET ADVISORY
CONTRACTUAL FEES
RATE OF AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS
PORTFOLIO 12/31/96 FEES(2) OR FEE WAIVERS
--------- ------------ ----------- --------------
<S> <C> <C> <C>
Balanced Portfolio(1).................. 0.50%(3)
N/A 0.45%(4) N/A
0.40%(5)
Core Equity Portfolio(1)............... 0.55%(3)
N/A 0.50%(4) N/A
0.45%(5)
Fixed Income Portfolio(1).............. 0.40%(3)
N/A 0.35%(4) N/A
0.30%(5)
High Yield Portfolio(1)................ 0.50%(3)
N/A 0.45%(4) N/A
0.40%(5)
International Fixed Income Portfo-
lio(1)................................ 0.50%(3)
N/A 0.45%(4) N/A
0.40%(5)
Mid Cap Growth Portfolio(1)............ 0.75%(3)
N/A 0.70%(4) N/A
0.65%(5)
Mid Cap Value Portfolio(1)............. 0.75%(3)
N/A 0.70%(4) N/A
0.65%(5)
Multi-Asset-Class Portfolio(1)......... 0.65%(3)
N/A 0.60%(4) N/A
0.55%(5)
Value Equity(1)........................ 0.55%(3)
N/A 0.50%(4) N/A
0.45%(5)
</TABLE>
- --------
(1) Portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets.
(3) As a percentage of first $500 million.
(4) As a percentage of next $500 million.
(5) As a percentage of excess over $1 billion.
2
<PAGE>
OTHER MAS ADVISED FUNDS
<TABLE>
<CAPTION>
NET ADVISORY
FEES AFTER
ASSETS CONTRACTUAL EXPENSE
AS OF RATE OF ADVISORY REIMBURSEMENTS
PORFOLIO 3/20/97 FEES (1) OR FEE WAIVERS
-------- ------- ---------------- --------------
<S> <C> <C> <C>
Growth Fund (Allmerica
Investment Trust) 592,920 .500% on first $50 million
.375% on next $50 million
.250% on next $400 million
.200% on next $350 million N/A
.150% over $850 million
MAS Value Portfolio (LPT
Variable Insurance Series
Trust) 1,432 .625% on first $25 million
.375% on next $75 million
.250% on next $400 million N/A
.200% over $500 million
Equity Portfolio (Minerva
Fund) 69,854 .500%* **
Fixed Income Portfolio
(Republic Portfolios) 89,232 .375% on first $50 million
.250% on next $45 million
$ 300,000 on assets between
$95 and $150 million
.200% on assets between
$150 and $250 million N/A
.150% over $250 million
Money Market Income
(William Penn Interest
Income Fund) 21,019 .375% on first $50 million
.250% on next $50 million N/A
.200% over $100 million
Pennsylvania Tax-Free
Income (William Penn
Interest Income Fund) 129,629 .375% on first $50 million
.250% on next $50 million N/A
.200% over $100 million
Quality Income (William
PennInterest Income Fund) 30,261 .375% on first $50 million
.250% on next $50 million N/A
.200% over $100 million
U.S. Government Securities
Income (William Penn
Interest Income Fund) 37,242 .375% on first $50 million
.250% on next $50 million N/A
.200% over $100 million
Diversified Equity Fund
(The Monogram Funds) 22,884 0.625% on first $25 million
0.375% over $25 million N/A
Value Trust (NASL Series
Trust) 16,929 0.40% on first $50 million
0.30% on next $150 million N/A
0.20% over $200 million
High Yield Trust (NASL
Series Trust) 15,326 0.35% on first $50 million
0.30% on next $150 million
0.25% on next $300 million N/A
0.20% over $500 million
MidCap Growth Portfolio
(Style Select Series Inc.) 10,656 0.50% on first $250 million
0.45% over $250 million N/A
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
FEES AFTER
ASSETS CONTRACTUAL EXPENSE
AS OF RATE OF ADVISORY REIMBURSEMENTS
PORFOLIO 3/20/97 FEES (1) OR FEE WAIVERS
-------- ------- ---------------- --------------
<S> <C> <C> <C>
New York Tax-Free Income
(William Penn Interest
Income Fund) 291 .375% on first $50 million
.250% on next $50 million N/A
.200% over $100 million
Asset Allocation Folio 200
(Asset Allocation
Portfolios) 8,061 0.625% on first $25 million
0.375% on next $75 million
0.250% on next $400 million N/A
0.200% over $500 million
Asset Allocation Folio 300
(Asset Allocation
Portfolios) 21,588 0.625% on first $25 million
O.375% on next $75 million
0.250% on next $400 million N/A
0.200% over $500 million
Asset Allocation Folio 400
(Asset Allocation
Portfolios) 24,985 0.625% on first $25 million
0.375% on next $75 million
0.250% on next $400 million N/A
0.200% over $500 million
Asset Allocation Folio 500
(Asset Allocation
Portfolios) 9,356 0.625% on first $25 million
0.375% on next $75 million
0.250% on next $400 million N/A
0.200% over $500 million
CitiSelect VIP Portfolio
200 (Variable Annuities
Portfolios) 681 0.625% on first $25 million
0.375% on next $75 million N/A
0.200% over $500 million
CitiSelect VIP Folio 300
(Variable Annuities
Portfolios) 1,146 0.625% on first $25 million
0.375% on next $75 million
0.250% on next $400 million N/A
0.200% over $500 million
CitiSelect VIP Folio 400
(Variable Annuities
Portfolios) 921 0.625% on first $25 million
0.375% on next $75 million
0.250% on next $400 million N/A
0.200% over $500 million
CitiSelect VIP Folio 500
(Variable Annuities
Portfolios) 791 0.625% on first $25 million
0.375% on next $75 million
0.250% on next $400 million N/A
0.200% over $500 million
</TABLE>
- --------
(1) As a percentage of average daily net assets.
* Miller Anderson & Sherrerd, LLP is a participant in a joint venture which
serves as the investment adviser of the Minerva Fund. The Minerva Fund's
advisory fees are paid to the joint venture, thereby resulting in indirect
compensation to Miller Anderson & Sherrerd, LLP. Miller Anderson & Sherrerd,
LLP receives no further compensation from the Minerva Fund.
** The investment adviser to the Minerva Fund has voluntarily agreed to waive
its fee to the extent necessary to keep the portfolio's total annual
operating expenses from exceeding 1.00% of its average daily net assets.
4
<PAGE>
[Name of Insurance Company]
[Name of Separate Account]
VOTING INSTRUCTION CARD
At the Special Meeting of Shareholders of Morgan Stanley Universal
Funds, Inc. (the "Company") scheduled to be held on May 1, 1997, and at any
adjournments thereof, the undersigned owner of [an annuity contract]
participating in [Name of Separate Account] hereby instructs [Name
------------------------------------ ---------
of Insurance Company] to vote shares of the [Name of Portfolio] of the
- ---------------------- ---------------------------
Company held under my [contract or policy] (the "Shares") in accordance with the
instructions set forth on the reverse side of this card, and to vote the Shares
on any other matters that may properly come before the meeting, all as set for
in the Notice of Special Meeting and Proxy Statement that accompanied this
Voting Instruction Card.
[Name of Insurance Company] recommends that you vote FOR the Proposal
set forth on the reverse side of this voting instruction card.
- --------------------------------------------------------------------------------
Proposal
Approve the proposed investment advisory agreement between the Company
and Morgan Stanley Asset Management Inc. as described in the Proxy
Statement that accompanied this Voting Instruction Card
The undersigned instructs [Name of Insurance Company] to vote the
Shares as follows:
FOR AGAINST ABSTAIN
--- --- ---
The Shares will be voted as directed. If no direction is given on
this card when duly executed and returned, the Shares will be voted FOR the
Proposal in accordance with the recommendations of the Board of Directors of the
Company. [Name of Insurance Company] will vote on any other business that may
properly come before the meeting in the discretion of its management.
This voting instruction is solicited by [Name of Insurance Company]
and will be voted "FOR" the Proposal unless otherwise indicated.
The undersigned acknowledges receipt with this voting instruction card
along with a copy of the Notice of Special Meeting of Shareholders and the Proxy
Statement of the Board of Directors of the Company.
Please date, sign and return promptly.
Dated: _______________________________, 1997
Your signature(s) on this voting instruction card should be exactly as
your name or names appear on this card. If the shares are held jointly, each
holder should sign. If signing is by attorney, executor, administrator, trustee
or guardian, please print your full title below your signature.
- ---------------------------------------------
Signature
- ---------------------------------------------
Signature
