<PAGE>
As filed with the Securities and Exchange Commission on November 1, 1995
FILE NO. 33-23166
811-5624
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT (NO. 33-23166)
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 27
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 28
--------------
MORGAN STANLEY INSTITUTIONAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of Principal Executive Office)
Registrant's Telephone Number (800) 548-7786
Harold J. Schaaff, Jr., Esquire
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas, New York, New York 10020
(Name and Address of Agent for Service)
--------------
COPIES TO:
Warren J. Olsen, Esquire Richard W. Grant, Esquire
Morgan Stanley Asset Management Inc. Morgan, Lewis & Bockius LLP
1221 Avenue of the Americas 2000 One Logan Square
New York, NY 10020 Philadelphia, PA 19103
--------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
/ / ON ________________ PURSUANT TO PARAGRAPH (b)
/X/ 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)
/ / ON ________________ PURSUANT TO PARAGRAPH (a) OF RULE 485
------------------
Registrant has elected to register an indefinite number of shares pursuant
to Regulation 24f-2 under the Investment Company Act of 1940, as amended.
Registrant filed its Rule 24f-2 notice for the period ended December 31, 1994 on
February 21, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
CROSS REFERENCE SHEET
PART A - INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
LOCATION IN PROSPECTUS FOR THE FIXED INCOME, GLOBAL FIXED INCOME,
FORM N-1A MUNICIPAL BOND, MORTGAGE-BACKED SECURITIES, HIGH YIELD,
ITEM NUMBER MONEY MARKET AND MUNICIPAL MONEY MARKET PORTFOLIOS
- ----------- ---------------------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses (Estimated for Municipal Bond, Real Yield and
Mortgage-Backed Securities Portfolios)
Item 3. Condensed Financial Information -- Financial Highlights (for the Fixed
Income, Global Fixed Income, Municipal Bond, High Yield, Money Market
and Municipal Money Market Portfolios only); Performance Information
Item 4. General Description of Registrant -- Prospectus Summary; Investment
Objective and Policies; Additional Investment Information; Investment
Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the Fund;
Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares; Redemption
of Shares; Shareholder Services; Valuation of Shares; Dividends and
Capital Gains Distributions; Taxes; General Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of Shares;
Shareholder Services
Item 9. Pending Legal Proceedings -- *
</TABLE>
<TABLE>
<CAPTION>
FORM N-1A LOCATION IN PROSPECTUS FOR THE SMALL CAP VALUE EQUITY, VALUE
ITEM NUMBER EQUITY AND BALANCED PORTFOLIOS
- ----------- ---------------------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses
Item 3. Condensed Financial Information -- Financial Highlights; Performance
Information
Item 4. General Description of Registrant -- Prospectus Summary; Investment
Objective and Policies; Additional Investment Information; Investment
Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the Fund;
Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares; Redemption
of Shares; Shareholder Services; Valuation of Shares; Dividends and
Capital Gains Distributions; Taxes; General Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of Shares;
Shareholder Services
Item 9. Pending Legal Proceedings -- *
_______________________
* Omitted since the answer is negative or the Item is not applicable.
** Information required by Item 5A is contained in the 1994 Annual Report
to Shareholders, except for the following portfolios which were not in
operation at December 31, 1994: Municipal Bond, Mortgage-Backed
Securities, Latin American, China Growth, U.S. Real Estate, MicroCap and
Aggressive Equity Portfolios. Information required by Item 5A for the
aforementioned portfolios will be contained in the next Report to
Shareholders following commencement of operations.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FORM N-1A LOCATION IN PROSPECTUS FOR THE ACTIVE COUNTRY ALLOCATION
ITEM NUMBER PORTFOLIO
- ----------- --------------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses
Item 3. Condensed Financial Information -- Financial Highlights;
Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objective and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the
Fund; Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Capital Gains Distributions; Taxes; General
Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of
Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of
Shares; Shareholder Services
Item 9. Pending Legal Proceedings -- *
</TABLE>
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUS FOR GOLD PORTFOLIO
- ----------- -----------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses
Item 3. Condensed Financial Information -- Financial Highlights;
Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objective and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the
Fund; Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Capital Gains Distributions; Taxes; General
Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of
Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of
Shares; Shareholder Services
Item 9. Pending Legal Proceedings -- *
_______________________
* Omitted since the answer is negative or the Item is not applicable.
** Information required by Item 5A is contained in the 1994 Annual Report to
Shareholders, except for the following portfolios which were not in
operation at December 31, 1994: Municipal Bond, Mortgage-Backed
Securities, Latin American, China Growth, U.S. Real Estate,
MicroCap and Aggressive Equity Portfolios. Information required by Item
5A for the aforementioned portfolios will be contained in the next Report
to Shareholders following commencement of operations.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROSPECTUS FOR THE GLOBAL EQUITY, INTERNATIONAL
FORM N-1A EQUITY, INTERNATIONAL SMALL CAP, ASIAN EQUITY, EUROPEAN EQUITY,
ITEM NUMBER JAPANESE EQUITY AND LATIN AMERICAN PORTFOLIOS
- ----------- ---------------------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses (Estimated for the Latin American
Portfolio)
Item 3. Condensed Financial Information -- Financial Highlights (for the
Global Equity, International Equity, Asian Equity, International
Small Cap, European Equity, Japanese Equity and Latin American
Portfolios only); Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objective and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the
Fund; Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Capital Gains Distributions; Taxes; General
Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of
Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of
Shares; Shareholder Services
Item 9. Pending Legal Proceedings -- *
</TABLE>
<TABLE>
<CAPTION>
FORM N-1A LOCATION IN PROSPECTUS FOR THE EMERGING MARKETS AND EMERGING
ITEM NUMBER MARKETS DEBT PORTFOLIOS
- ----------- ------------------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses
Item 3. Condensed Financial Information -- Financial Highlights;
Performance Information for the Emerging Markets and Emerging
Markets Debt Portfolios
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objective and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the
Fund; Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Capital Gains Distributions; Taxes; General
Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of
Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of
Shares; Shareholder Services
Item 9. Pending Legal Proceedings -- *
______________________
* Omitted since the answer is negative or the Item is not applicable.
** Information required by Item 5A is contained in the 1994 Annual Report to
Shareholders, except for the following portfolios which were not in
operation at December 31, 1994: Municipal Bond, Mortgage-Backed
Securities, Latin American, China Growth, U.S. Real Estate,
MicroCap and Aggressive Equity Portfolios. Information required by Item 5A
for the aforementioned portfolios will be contained in the next Report to
Shareholders following commencement of operations.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUS FOR THE CHINA GROWTH PORTFOLIO
- ----------- ----------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses (Estimated)
Item 3. Condensed Financial Information -- Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objective and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the
Fund; Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Capital Gains Distributions; Taxes; General
Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of
Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of
Shares; Shareholder Services
Item 9. Pending Legal Proceedings -- *
</TABLE>
<TABLE>
<CAPTION>
FORM N-1A LOCATION IN PROSPECTUS FOR THE EQUITY GROWTH, EMERGING GROWTH,
ITEM NUMBER MICROCAP AND AGGRESSIVE EQUITY PORTFOLIOS
- ----------- --------------------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses (Estimated for the MicroCap and
Aggressive Equity Portfolios)
Item 3. Condensed Financial Information -- Financial Highlights (for the
Equity Growth, Emerging Growth and Aggressive Equity Portfolios
only); Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objective and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the
Fund; Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Capital Gains Distributions; Taxes; General
Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of
Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of
Shares; Shareholder Services
Item 9. Pending Legal Proceedings -- *
_______________________
* Omitted since the answer is negative or the Item is not applicable.
** Information required by Item 5A is contained in the 1994 Annual Report to
Shareholders, except for the following portfolios which were not in
operation at December 31, 1994: Municipal Bond, Mortgage-Backed
Securities, Latin American, China Growth, U.S. Real Estate,
MicroCap and Aggressive Equity Portfolios. Information required by Item 5A
for the aforementioned portfolios will be contained in the next Report to
Shareholders following commencement of operations.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FORM N-1A LOCATION IN PROSPECTUS FOR THE EQUITY GROWTH, EMERGING GROWTH
ITEM NUMBER AND AGGRESSIVE EQUITY PORTFOLIOS
- ----------- --------------------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses (Estimated for the MicroCap and
Aggressive Equity Portfolios)
Item 3. Condensed Financial Information -- Financial Highlights (for the
Equity Growth, Emerging Growth and Aggressive Equity Portfolios
only); Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objective and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the
Fund; Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Capital Gains Distributions; Taxes; General
Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of
Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of
Shares; Shareholder Services
Item 9. Pending Legal Proceedings -- *
</TABLE>
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUS FOR THE U.S. REAL ESTATE PORTFOLIO
- ----------- ---------------------------------------------------------
<S> <C>
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses (Estimated)
Item 3. Condensed Financial Information -- Financial Highlights;
Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objective and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Prospectus Summary; Management of the
Fund; Portfolio Transactions
Item 5A. Management's Discussion of Fund Performance**
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Capital Gains Distributions; Taxes; General
Information
Item 7. Purchase of Securities Being Offered -- Prospectus Summary; Cover
Page; Purchase of Shares; Shareholder Services; Valuation of
Shares
Item 8. Redemption or Repurchase -- Prospectus Summary; Redemption of
Shares; Shareholder Services
Item 9. Pending Legal Proceedings -- *
_______________________
* Omitted since the answer is negative or the Item is not applicable.
** Information required by Item 5A is contained in the 1994 Annual Report to
Shareholders, except for the following portfolios which were not in
operation at December 31, 1994: Municipal Bond, Mortgage-Backed
Securities, Latin American, China Growth, U.S. Real Estate,
MicroCap and Aggressive Equity Portfolios. Information required by Item 5A
for the aforementioned portfolios will be contained in the next Report to
Shareholders following commencement of operations.
</TABLE>
6
<PAGE>
PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN STATEMENT OF ADDITIONAL INFORMATION FOR THE FIXED
INCOME, GLOBAL FIXED INCOME, MUNICIPAL BOND, MORTGAGE-BACKED
SECURITIES, HIGH YIELD, MONEY MARKET, MUNICIPAL MONEY MARKET,
SMALL CAP VALUE EQUITY, VALUE EQUITY, BALANCED, GOLD, GLOBAL
EQUITY, INTERNATIONAL EQUITY, INTERNATIONAL SMALL CAP, ASIAN
EQUITY, EUROPEAN EQUITY, JAPANESE EQUITY, LATIN AMERICAN,
EMERGING MARKETS, EMERGING MARKET DEBT, CHINA GROWTH, EQUITY
GROWTH, EMERGING GROWTH, MICROCAP, AGGRESSIVE EQUITY AND U.S.
REAL ESTATE PORTFOLIOS.
- ----------- -------------------------------------------------------------
<S> <C>
Item 10. Cover Page -- Cover Page
Item 11. Table of Contents -- Cover Page
Item 12. General Information and History -- *
Item 13. Investment Objective and Policies -- Investment Objectives and
Policies; Investment Limitations
Item 14. Management of the Fund -- Management of the Fund
Item 15. Control Persons and Principal Holders of Securities -- Management
of the Fund; General Information
Item 16. Investment Advisory and Other Services -- Management of the Fund
Item 17. Brokerage Allocation -- *
Item 18. Capital Stock and Other Securities -- General Information
Item 19. Purchase, Redemption and Pricing of Securities Being Offered --
Purchase of Shares; Redemption of Shares; Net Asset Value;
General Information
Item 20. Tax Status -- Federal Tax Treatment of Forward Currency and
Futures Contracts
Item 21. Underwriters -- *
Item 22. Calculation of Performance Data -- Performance Information
Item 23. Financial Statements -- Financial Statements
</TABLE>
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN STATEMENT OF ADDITIONAL INFORMATION FOR THE FIXED
INCOME, GLOBAL FIXED INCOME, MUNICIPAL BOND, MORTGAGE-BACKED
SECURITIES, HIGH YIELD, MONEY MARKET, MUNICIPAL MONEY MARKET,
SMALL CAP VALUE EQUITY, VALUE EQUITY, BALANCED, GOLD, GLOBAL
EQUITY, INTERNATIONAL EQUITY, INTERNATIONAL SMALL CAP, ASIAN
EQUITY, EUROPEAN EQUITY, JAPANESE EQUITY, LATIN AMERICAN,
EMERGING MARKETS, EMERGING MARKET DEBT, CHINA GROWTH, EQUITY
GROWTH, EMERGING GROWTH, AGGRESSIVE EQUITY AND U.S.
REAL ESTATE PORTFOLIOS.
- ----------- -------------------------------------------------------------
<S> <C>
Item 10. Cover Page -- Cover Page
Item 11. Table of Contents -- Cover Page
Item 12. General Information and History -- *
Item 13. Investment Objective and Policies -- Investment Objectives and
Policies; Investment Limitations
Item 14. Management of the Fund -- Management of the Fund
Item 15. Control Persons and Principal Holders of Securities -- Management
of the Fund; General Information
Item 16. Investment Advisory and Other Services -- Management of the Fund
Item 17. Brokerage Allocation -- *
Item 18. Capital Stock and Other Securities -- General Information
Item 19. Purchase, Redemption and Pricing of Securities Being Offered --
Purchase of Shares; Redemption of Shares; Net Asset Value;
General Information
Item 20. Tax Status -- Federal Tax Treatment of Forward Currency and
Futures Contracts
Item 21. Underwriters -- *
Item 22. Calculation of Performance Data -- Performance Information
Item 23. Financial Statements -- Financial Statements
<FN>
_______________________
* Omitted since the answer is negative or the Item is not applicable.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
FORM N-1A LOCATION IN STATEMENT OF ADDITIONAL INFORMATION FOR THE ACTIVE
ITEM NUMBER COUNTRY ALLOCATION PORTFOLIO
- ----------- --------------------------------------------------------------
<S> <C>
Item 10. Cover Page -- Cover Page
Item 11. Table of Contents -- Cover Page
Item 12. General Information and History -- *
Item 13. Investment Objective and Policies -- Investment Objectives and
Policies; Investment Limitations
Item 14. Management of the Fund -- Management of the Fund
Item 15. Control Persons and Principal Holders of Securities -- Management
of the Fund; General Information
Item 16. Investment Advisory and Other Services -- Management of the Fund
Item 17. Brokerage Allocation -- *
Item 18. Capital Stock and Other Securities -- General Information
Item 19. Purchase, Redemption and Pricing of Securities Being Offered --
Purchase of Shares; Redemption of Shares; Net Asset Value;
General Information
Item 20. Tax Status -- Federal Tax Treatment of Forward Currency and
Futures Contracts
Item 21. Underwriters -- *
Item 22. Calculation of Performance Data -- Performance Information
Item 23. Financial Statements -- Financial Statements
_______________________
* Omitted since the answer is negative or the Item is not applicable.
</TABLE>
PART C - OTHER INFORMATION
Part C contains the information required by the items contained therein
under the items set forth in the form.
8
<PAGE>
The Prospectus for the Fixed Income, Global Fixed Income, Municipal
Bond, Mortgage-Backed Securities, High Yield, Money Market and Municipal
Money Market Portfolios, included as part of Post-Effective Amendment No. 24
to the Registration Statement on Form N-1A of Morgan Stanley Institutional
Fund, Inc. (File No. 33-23166) filed with the Securities and Exchange
Commission on March 1, 1995 and in final via EDGAR pursuant to Rule 497(e)
on June 30, 1995, and supplemented pursuant to Rule 497(e) on September 6,
1995 and pursuant to Rule 497(c) on October 20, 1995, is hereby incorporated
by reference as if set forth in full herein.
The Prospectus for the Small Cap Value Equity, Value Equity and Balanced
Portfolios, included as part of Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A of Morgan Stanley Institutional Fund, Inc.
(File No. 33-23166) filed with the Securities and Exchange Commission on
March 1, 1995 and in final form, and supplemented pursuant to Rule 497(e)
on September 6, 1995, is hereby incorporated by reference as if set forth in
full herein.
<PAGE>
The Prospectus for the Gold Portfolio, included as part of Post-Effective
Amendment No. 24 to the Registration Statement on Form N-1A of Morgan Stanley
Institutional Fund, Inc. (File No. 33-23166) filed with the Securities and
Exchange Commission on March 1, 1995 and in final form via EDGAR pursuant
to Rule 497(e) on June 30, 1995, and supplemented pursuant to Rule 497(e) on
September 6, 1995, is hereby incorporated by reference as if set forth in
full herein.
The Prospectus for the Global Equity, International Equity, International
Small Cap, Asian Equity, European Equity, Japanese Equity and Latin American
Portfolios, included as part of Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A of Morgan Stanley Institutional Fund,
Inc. (File No. 33-23166) filed with the Securities and Exchange Commission on
March 1, 1995 and in final form via EDGAR pursuant to Rule 497(e) on
June 30, 1995, and supplemented pursuant to Rule 497(e) on September 6, 1995
and pursuant to Rule 497(c) on October 20, 1995, is hereby incorporated by
reference as if set forth in full herein.
The Prospectus for the Emerging Markets and Emerging Markets Debt
Portfolios, included as part of Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A of Morgan Stanley Institutional Fund, Inc.
(File No. 33-23166) filed with the Securities and Exchange Commission on
March 1, 1995 and in final form via EDGAR pursuant to Rule 497(e) on
June 30, 1995, and supplemented pursuant to Rule 497(e) on September 6, 1995,
is hereby incorporated by reference as if set forth in full herein.
The Prospectus for the China Growth Portfolio, included as part of Post-
Effective Amendment No. 25 to the Registration Statement on Form N-1A of
Morgan Stanley Institutional Fund, Inc. (File No. 33-23166) filed with the
Securities and Exchange Commission via EDGAR on August 1, 1995, is hereby
incorporated by reference as if set forth in full herein.
The Prospectus for the Equity Growth, Emerging Growth and Aggressive
Equity Portfolios, included as part of Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A of Morgan Stanley Institutional Fund,
Inc. (File No. 33-23166) filed with the Securities and Exchange Commission on
March 1, 1995 and in final form under Rule 497(c) on October 20, 1995,
is hereby incorporated by reference as if set forth in full herein.
The Prospectus for the Equity Growth, Emerging Growth, MicroCap and
Aggressive Equity Portfolios, included as part of Post-Effective Amendment
No. 26 to the Registration Statement on Form N-1A of Morgan Stanley
Institutional Fund, Inc. (File No. 33-23166) filed with the Securities and
Exchange Commission via EDGAR on October 13, 1995, is hereby incorporated by
referenceas if set forth in full herein.
The Prospectus for the U.S. Real Estate Portfolio, included as part of
Post-Effective Amendment No. 24 to the Registration Statement on Form N-1A of
Morgan Stanley Institutional Fund, Inc. (File No. 33-23166) filed with the
Securities and Exchange Commission on March 1, 1995 and in final form
via EDGAR pursuant to Rule 497(e) on June 30,1995, and supplemented pursuant to
Rule 497(e) on September 6, 1995 and pursuant to Rule 497(c) on October 20,
1995, is hereby incorporated by reference as if set forth in full herein.
<PAGE>
P R O S P E C T U S
- --------------------------------------------------------------------------------
ACTIVE COUNTRY
ALLOCATION PORTFOLIO
A PORTFOLIO OF THE
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798, BOSTON, MASSACHUSETTS 02208-2798
FOR INFORMATION CALL 1-800-548-7786
__________________
Morgan Stanley Institutional Fund, Inc. (the "Fund") is a no-load,
open-end management investment company, or mutual fund, which offers
redeemable shares in a series of diversified and non-diversified investment
portfolios ("portfolios"). The Fund currently consists of twenty-seven
portfolios representing a broad range of investment choices. The Fund is
designed to provide clients with attractive alternatives for meeting their
investment needs. This prospectus (the "Prospectus") pertains to the Class A
and Class B shares of the Active Country Allocation Portfolio (the
"Portfolio"). The Portfolio redesignated its single class of shares as the
Class A shares on _____________, 1995 and began offering a second class of
shares designated as the Class B shares on _____________, 1995. The Class A
and Class B shares currently offered by the Portfolio have different minimum
investment requirements and fund expenses. Shares of the portfolios are
offered with no sales charge or exchange or redemption fee (with the
exception of one of the portfolios).
The ACTIVE COUNTRY ALLOCATION PORTFOLIO seeks long-term capital
appreciation by investing in accordance with country weightings determined by
the Adviser in common stocks of non-U.S. issuers which, in the aggregate,
replicate broad country indices.
The Fund is designed to meet the investment needs of discerning investors
who place a premium on quality and personal service. With Morgan Stanley Asset
Management Inc. as Adviser and Administrator (the "Adviser" and the
"Administrator"), and with Morgan Stanley & Co. Incorporated ("Morgan Stanley")
as Distributor, the Fund makes available to institutional and high net worth
individual investors a series of portfolios which benefit from the investment
expertise and commitment to excellence associated with Morgan Stanley and its
affiliates.
This Prospectus is designed to set forth concisely the information about
the Fund that a prospective investor should know before investing and it
should be retained for future reference. The Fund offers additional
portfolios which are described in other prospectuses and under the Prospectus
Summary Section herein. The Fund currently offers the following portfolios:
(i) GLOBAL AND INTERNATIONAL EQUITY -- Active Country Allocation, Asian
Equity, China Growth, Emerging Markets, European Equity, Global Equity, Gold,
International Equity, International Small Cap, Japanese Equity and Latin
American Portfolios; (ii) U.S. EQUITY -- Aggressive Equity, Emerging Growth,
Equity Growth, MicroCap, Small Cap Value Equity, U.S. Real Estate and Value
Equity Portfolios; (iii) BALANCED -- Balanced Portfolio; (iv) FIXED INCOME --
Emerging Markets Debt, Fixed Income, Global Fixed Income, High Yield,
Mortgage-Backed Securities and Municipal Bond Portfolios; and (v) MONEY
MARKET -- Money Market and Municipal Money Market Portfolios. Additional
information about the Fund is contained in a "Statement of Additional
Information," dated ________, 1995, which is incorporated herein by
reference. The Statement of Additional Information and the prospectuses
pertaining to the other
1
<PAGE>
portfolios of the Fund are available upon request and without charge by writing
or calling the Fund at the address and telephone number set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _________, 1995.
2
<PAGE>
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of
the Active Country Allocation Portfolio will incur:
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Maximum Sales Load Imposed on Reinvested Dividends
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Deferred Sales Load
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Redemption Fees
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fees
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment Advisory Fee (Net of Fee Waiver)*
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45%
Administrative & Shareholder Account Costs
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.15%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.15%
12b-1 Fees
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Custody Fees
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.09%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.09%
Other Expenses
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.11%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.11%
-------
Total Operating Expenses (Net of Fee Waivers)*
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.05%
-------
-------
<FN>
_______
* The Adviser has agreed to waive its advisory fees and/or to reimburse the
Portfolio, if necessary, if such fees would cause the Portfolio's total
annual operating expenses, as a percentage of average daily net assets, to
exceed the percentages set forth in the table above. Absent the fee
waiver, the investment advisory fee would be 0.65%. Absent the fee waiver
and/or expense reimbursement, the Portfolio's total operating expenses
would be 1.00% of the average daily net assets of the Class A shares and
1.25% of the average daily net assets of the Class B shares. As a result of
this reduction, the Investment Advisory Fee stated above is lower than the
contractual fee stated under "Management of the Fund." The Adviser
reserves the right to terminate any of its fee waivers and/or expense
reimbursements at any time in its sole discretion. For further information
on Fund expenses, see "Management of the Fund."
</TABLE>
3
<PAGE>
The purpose of the table above is to assist the investor in understanding
the various expenses that an investor in the Portfolio will bear directly or
indirectly. The Class A expenses and fees for the Portfolio are based on actual
figures for the fiscal year ended December 31, 1994. The Class B expenses and
fees for the Portfolio are based on estimates, assuming that the average daily
net assets of the Class B shares will be $50,000. "Other Expenses"
include Board of Directors' fees and expenses, amortization of organizational
costs, filing fees, professional fees and costs for shareholder reports. Due to
the continuous nature of Rule 12b-1 fees, long term Class B shareholders may pay
more than the equivalent of the maximum front-end sales charges otherwise
permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. ("NASD").
The following example illustrates the expenses that you would pay on a
$1,000 investment assuming (1) a 5% annual rate of return and (2) redemption at
the end of each time period. As noted in the table above, the Fund charges no
redemption fees of any kind. The following example is based on the total
operating expenses of the Portfolio after fee waivers.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Active Country Allocation Portfolio
Class A . . . . . . . . . . . . . . . . $ 8 $26 $44 $ 99
Class B . . . . . . . . . . . . . . . . $11 $33 $58 $128
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The Fund intends to comply with all state laws that restrict investment
company expenses. Currently, the most restrictive state law requires that the
aggregate annual expenses of an investment company shall not exceed two and
one-half percent (2 1/2%) of the first $30 million of average net assets, two
percent (2%) of the next $70 million of average net assets, and one and
one-half percent (1 1/2%) of the remaining net assets of such investment
company.
The Adviser has agreed to a reduction in the amounts payable to it, and
to reimburse the Portfolio, if necessary, if in any fiscal year the sum of the
Portfolio's expenses exceeds the limit set by applicable state law.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides financial highlights for the Class A shares
for each of the periods presented. The new Class B shares were not being
offered as of June 30, 1995. The audited financial highlights for the Class A
shares for the fiscal year ended December 31, 1994 and the unaudited financial
highlights for the Class A shares for the six months ended June 30, 1995 are
part of the Fund's financial statements which appear in the Fund's December 31,
1994 Annual Report to Shareholders and June 30, 1995 Semi-Annual Report to
Shareholders, respectively, and which are included in the Fund's Statement of
Additional Information. The Portfolios' financial highlights for each of the
periods presented, except for the six months ended June 30, 1995, have been
audited by Price Waterhouse LLP, whose unqualified report thereon is also
included in the Statement of Additional Information. The Portfolio's financial
highlights for the six months ended June 30, 1995 are unaudited. Additional
performance information is included in the Annual Report. The Annual Report,
Semi-Annual Report and the financial statements therein, along with the
Statement of Additional Information, are available at no cost from the Fund at
the address and telephone number noted on the cover page of this Prospectus.
Subsequent to October 31, 1992 (the Fund's prior fiscal year end) the Fund
changed its fiscal year end to December 31. The following information should be
read in conjunction with the financial statements and notes thereto.
ACTIVE COUNTRY ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
JANUARY 17, SIX MONTHS ENDED
1992* TO TWO MONTHS ENDED YEAR ENDED YEAR ENDED JUNE 30, 1995
OCTOBER 31, 1992 DECEMBER 31, 1992 DECEMBER 31, 1993 DECEMBER 31, 1994 (Unaudited)
---------------- ----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period . . . . . . . . . . . . . $10.00 $9.37 $9.59 $12.21 $11.65
------ ----- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) . . . 0.11 0.02 0.13 0.19 0.12
Net Realized and Unrealized
Gain/(Loss) on Investments . . (0.74) 0.20 2.75 (0.25) (0.33)
------ ----- ------ ------ ------
Total from Investment
Operations . . . . . . . . (0.63) 0.22 2.88 (0.06) (0.21)
------ ----- ------ ------ ------
DISTRIBUTIONS
Net Investment Income . . . . . -- -- (0.09) (0.14) --
In Excess of Net Investment
Income . . . . . . . . . . . . -- -- (0.08) -- --
Net Realized Gain . . . . . . . -- -- -- (0.36) (0.44)
In Excess of Net Realized Gain . -- -- (0.09) -- --
------ ----- ------ ------ ------
Total Distributions . . . . . -- -- (0.26) (0.50) (0.44)
------ ----- ------ ------ ------
NET ASSET VALUE, END OF PERIOD . $ 9.37 $9.59 $12.21 $11.65 $11.00
------ ----- ------ ------ ------
------ ----- ------ ------ ------
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN . . . . . . . . . . . . . (6.30)% 2.35% 30.72% (0.52)% (1.81)%
------ ----- ------ ------ ------
------ ----- ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) . . . . . . . . . . . . . $47,534 $50,234 $150,854 $182,977 $152,247
Ratio of Expenses to Average Net
Assets (1)(2) . . . . . . . . . . . . 0.88%** 0.80%** 0.80% 0.80% 0.80%
Ratio of Net Investment Income to
Average Net Assets (1)(2) . . . . . . 2.32%** 1.22%** 1.29% 1.43% 1.83%**
Portfolio Turnover Rate . . . . . . . 62% 2% 53% 51% 37%
<FN>
____________
(1) Effect of voluntary expense limitation during the period:
Per share benefit
to net investment
income $0.03 $0.01 $0.05 $0.03 $0.02
Ratios before expense
limitation:
Expenses to Average Net
Assets 1.58%** 1.70%** 1.33% 1.00% 1.17%
Net Investment Income to
Average Net Assets 1.62%** 0.32%** 0.76% 1.23% 1.46%
(2) Under the terms of an Investment Advisory Agreement, the Adviser is entitled to receive an investment advisory fee calculated
at an annual rate of 0.65% of the average daily net assets of the Portfolio. The Adviser has agreed to waive a portion of this
fee and/or reimburse expenses of the Portfolio to the extent that the total operating expenses of the Portfolio exceed 0.80% of
the average daily net assets of the Class A shares and 1.05% of the average daily net assets of the Class B shares. In the
period ended October 31, 1992, the two months ended December 31, 1992, the years ended December 31, 1993 and 1994, and the six
months ended June 30, 1995, the Adviser waived advisory fees and/or reimbursed expenses totalling $164,000, $72,000, $552,000,
$367,000 and $306,000 respectively, for the Portfolio.
* Commencement of Operations.
** Annualized.
</TABLE>
6
<PAGE>
PROSPECTUS SUMMARY
THE FUND
The Fund consists of twenty-seven portfolios, offering institutional
investors and high net worth individual investors a broad range of investment
choices coupled with the advantages of a no-load mutual fund with Morgan Stanley
and its affiliates providing customized services as Adviser, Administrator and
Distributor. Each portfolio offers Class A and Class B shares and has its own
investment objective and policies designed to meet its specific goals. This
Prospectus pertains to the Class A and Class B shares of the Active Country
Allocation Portfolio.
- The ACTIVE COUNTRY ALLOCATION PORTFOLIO seeks long-term capital
appreciation by investing in accordance with country weightings
determined by the Adviser in common stocks of non-U.S. issuers which,
in the aggregate, replicate broad country indices.
The other portfolios of the Fund are described in other prospectuses
which may be obtained from the Fund at the address and phone number noted on
the cover page of this Prospectus. The objectives of these other Portfolios
are listed below:
GLOBAL AND INTERNATIONAL EQUITY:
- The ASIAN EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of Asian issuers.
- The CHINA GROWTH PORTFOLIO seeks to provide long-term capital
appreciation by investing primarily in the equity securities of
issuers in The People's Republic of China, Hong Kong and Taiwan.
- The EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of emerging country issuers.
- The EUROPEAN EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of European issuers.
- The GLOBAL EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of issuers throughout the
world, including United States issuers.
- The GOLD PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of foreign and domestic issuers engaged
in gold-related activities.
- The INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital
appreciation by investing primarily in equity securities of
non-United States issuers.
- The INTERNATIONAL SMALL CAP PORTFOLIO seeks long-term capital
appreciation by investing primarily in equity securities of
non-United States issuers with equity market capitalizations of less
than $500 million.
- The JAPANESE EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of Japanese issuers.
- The LATIN AMERICAN PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of Latin American issuers and
debt securities issued or guaranteed by Latin American governments or
governmental entities.
7
<PAGE>
U.S. EQUITY:
- The AGGRESSIVE EQUITY PORTFOLIO seeks capital appreciation by
investing primarily in corporate equity and equity-linked securities.
- The EMERGING GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of small- to
medium-sized corporations.
- The EQUITY GROWTH PORTFOLIO seeks long-term capital appreciation by
investing in growth-oriented equity securities of medium and large
capitalization companies.
- The MICROCAP PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of small
corporations.
- The SMALL CAP VALUE EQUITY PORTFOLIO seeks high long-term total return
by investing in undervalued equity securities of small- to
medium-sized companies.
- The U.S. REAL ESTATE PORTFOLIO seeks to provide above average current
income and long-term capital appreciation by investing primarily in
equity securities of companies in the U.S. real estate industry,
including real estate investment trusts.
- The VALUE EQUITY PORTFOLIO seeks high total return by investing in
equity securities which the Adviser believes to be undervalued
relative to the stock market in general at the time of purchase.
EQUITY AND FIXED INCOME:
- The BALANCED PORTFOLIO seeks high total return while preserving
capital by investing in a combination of undervalued equity securities
and fixed income securities.
FIXED INCOME:
- The EMERGING MARKETS DEBT PORTFOLIO seeks high total return by
investing primarily in debt securities of government,
government-related and corporate issuers located in emerging
countries.
- The FIXED INCOME PORTFOLIO seeks to produce a high total return
consistent with the preservation of capital by investing in a
diversified portfolio of fixed income securities.
- The GLOBAL FIXED INCOME PORTFOLIO seeks to produce an attractive real
rate of return while preserving capital by investing in fixed income
securities of issuers throughout the world, including United States
issuers.
- The HIGH YIELD PORTFOLIO seeks to maximize total return by investing
in a diversified portfolio of high yield fixed income securities that
offer a yield above that generally available on debt securities in the
three highest rating categories of the recognized rating services.
- The MORTGAGE-BACKED SECURITIES PORTFOLIO seeks to produce as high a
level of current income as is consistent with the preservation of
capital by investing primarily in a variety of investment-grade
mortgage-backed securities.
- The MUNICIPAL BOND PORTFOLIO seeks to produce a high level of current
income consistent with the preservation of principal through
investment primarily in municipal obligations, the interest on which
is exempt from federal income tax.
8
<PAGE>
MONEY MARKET:
- The MONEY MARKET PORTFOLIO seeks to maximize current income and
preserve capital while maintaining high levels of liquidity through
investing in high quality money market instruments with remaining
maturities of one year or less.
- The MUNICIPAL MONEY MARKET PORTFOLIO seeks to maximize current
tax-exempt income and preserve capital while maintaining high levels
of liquidity through investing in high-quality money market
instruments with remaining maturities of one year or less which are
exempt from federal income tax.
9
<PAGE>
INVESTMENT MANAGEMENT
Morgan Stanley Asset Management Inc., a wholly owned subsidiary of Morgan
Stanley Group Inc., which, together with its affiliated asset management
companies, at September 30, 1995 had approximately $[___] billion in assets
under management as an investment manager or as a fiduciary adviser, acts as
investment adviser to the Fund and each of its portfolios. See "Management of
the Fund -- Investment Adviser" and "Management of the Fund -- Administrator."
HOW TO INVEST
Class A shares of the Portfolio are offered directly to investors at net
asset value with no sales commission or 12b-1 charges. Class B shares are
offered at net asset value with no sales commission, but with a 12b-1 fee of
0.25%. Share purchases may be made by sending investments directly to the
Fund. For accounts opened on or after January 1, 1996 ("New Accounts"), the
minimum initial investment is $500,000 for Class A shares and $100,000 for
Class B shares, subject to certain exceptions for Total Funds Management
accounts, an asset allocation service of Morgan Stanley ("TFM Accounts"),
and for accounts held by officers of the Adviser and its affiliates. Shares
in accounts held prior to January 1, 1996 with a value of $100,000 or more
will be converted to Class A shares on January 1, 1996 ("Grandfathered Class A
Accounts"). Shares in accounts held prior to January 1, 1996 with a value of
less than $100,000 will be converted to Class B shares on January 1, 1996
("Grandfathered Class B Accounts"). See "Purchase of Shares -- Minimum
Investment, Account Sizes and Conversion from Class A to Class B Shares." The
minimum subsequent investment is $1,000 (except for automatic reinvestment of
dividends and capital gains distributions for which there is no minimum). See
"Purchase of Shares -- Additional Investments."
HOW TO REDEEM
Shares of the Portfolio may be redeemed at any time, without cost, at the
net asset value per share of the Portfolio next determined after receipt of the
redemption request. The redemption price may be more or less than the purchase
price. Certain redemptions may cause involuntary redemption or automatic
conversion. Class A or Class B shares held in New Accounts are subject to
involuntary redemption if shareholder redemption(s) of such shares reduces
the value of a New Account to less than $100,000 for any continuous 60-day
period. Involuntary redemption does not apply to Grandfathered Class A
Accounts and Grandfathered Class B Accounts, regardless of the value of such
accounts. Class A shares in New Accounts will automatically convert to
Class B shares if shareholder redemption(s) of such shares reduces the value
of a New Account to less than $500,000 for any continuous 60-day period. See
"Purchase of Shares -- Minimum Account Sizes and Involuntary Redemption of
Shares" and "Redemption of Shares."
RISK FACTORS
The investment policies of the Portfolio entail certain risks and
considerations of which an investor should be aware. The Portfolio will invest
in securities of foreign issuers, including issuers in emerging countries, which
are subject to certain risks not typically associated with domestic securities,
including (1) restrictions on foreign investment and on repatriation of capital
invested in foreign countries, (2) currency fluctuations, (3) the cost of
converting foreign currency into U.S. dollars, (4) potential price volatility
and lesser liquidity of shares traded on foreign country securities markets or
lack of a secondary trading market for such securities and (5) political and
economic risks, including the risk of nationalization or expropriation of assets
and the risk of war. In addition, accounting, auditing, financial and other
reporting standards in foreign countries are not equivalent to U.S. standards
and therefore, disclosure of certain material information may not be made and
less information may be available to investors investing in foreign countries
than in the United States. There is also generally less governmental regulation
of the securities industry in foreign countries than the United States.
Moreover, it may be more difficult to obtain a judgment in a court outside the
United States. See "Investment Objective and Policies" and "Additional
Investment Information." In addition, the Portfolio may invest in repurchase
agreements, lend its portfolio securities, purchase securities on a when-issued
basis and invest in forward foreign currency exchange contracts to hedge
currency risk associated with investment in non-U.S. dollar denominated
securities. Each of these investment strategies involves specific risks which
are described under "Investment Objective and Policies" and "Additional
Investment Information" herein and under "Investment Objective and Policies" in
the Statement of Additional Information.
10
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Active Country Allocation Portfolio is
described below, together with the policies the Fund employs in its efforts to
achieve this objective. The Active Country Allocation Portfolio's investment
objective is a fundamental policy which may not be changed without the approval
of a majority of the Portfolio's outstanding voting securities. There is no
assurance that the Fund will attain its objective. The investment policies
described below are not fundamental policies and may be changed without
shareholder approval.
The investment objective of the Active Country Allocation Portfolio is
to provide long-term capital appreciation by investing in accordance with
country weightings determined by the Adviser in equity securities of non-U.S.
issuers which, in the aggregate, replicate broad country indices. The Adviser
utilizes a top-down approach in selecting investments for the Portfolio that
emphasizes country selection and weighting rather than individual stock
selection. This approach reflects the Adviser's philosophy that a diversified
selection of securities representing exposure to world markets, based upon
the economic outlook and current valuation levels for each country, is an
effective way to maximize the return and minimize the risk associated with
international investment.
The Adviser determines country allocations for the Portfolio on an ongoing
basis within policy ranges dictated by each country's market capitalization and
liquidity. The Portfolio will invest in the industrialized countries throughout
the world that comprise the Morgan Stanley Capital International EAFE (Europe,
Australia and the Far East) Index. The Portfolio will also invest in emerging
country equity securities. As used in this Prospectus, the term "emerging
country" applies to any country which, in the opinion of the Adviser, is
generally considered to be an emerging or developing country by the
international financial community, including the International Bank for
Reconstruction and Development (more commonly known as the World Bank) and the
International Finance Corporation. There are currently over 130 countries which,
in the opinion of the Adviser, are generally considered to be emerging or
developing countries by the international financial community, approximately 40
of which currently have stock markets. These countries generally include every
nation in the world except the United States, Canada, Japan, Australia, New
Zealand and most nations located in Western Europe. Currently, investing in many
emerging countries is not feasible or may involve unacceptable political risks.
The Portfolio will focus its investments on those emerging market countries in
which it believes the economies are developing strongly and in which the markets
are becoming more sophisticated. With respect to the portion of the Portfolio
that is invested in emerging country equity securities, the Portfolio initially
intends to invest primarily in some or all of the following countries:
Argentina
Brazil
India
Indonesia
Malaysia
Mexico
Portugal
Philippines
South Africa
South Korea
11
<PAGE>
Thailand
Turkey
As markets in other countries develop, the Portfolio expects to expand and
further diversify the emerging countries in which it invests. The Portfolio does
not intend to invest in any security in a country where the currency is not
freely convertible to U.S. dollars, unless the Portfolio has obtained the
necessary governmental licensing to convert such currency or other appropriately
licensed or sanctioned contractual guarantee to protect such investment against
loss of that currency's external value, or the Portfolio has a reasonable
expectation at the time the investment is made that such governmental licensing
or other appropriately licensed or sanctioned guarantee would be obtained or
that the currency in which the security is quoted would be freely convertible at
the time of any proposed sale of the security by the Portfolio.
An emerging country security is one issued by a company that, in the
opinion of the Adviser, has one or more of the following characteristics:
(i) its principal securities trading market is in an emerging country,
(ii) alone or on a consolidated basis it derives 50% or more of its annual
revenue from either goods produced, sales made or services performed in emerging
countries; or (iii) it is organized under the laws of, and has a principal
office in, an emerging country. The Adviser will base determinations as to
eligibility on publicly available information and inquiries made to the
companies. (See "Foreign Investment Risk Factors and Special Considerations" for
a discussion of the nature of information publicly available for non-U.S.
companies.)
By analyzing a variety of macroeconomic and political factors, the Adviser
develops fundamental projections on interest rates, currencies, corporate
profits and economic growth for each country. These country projections are used
then to determine what the Adviser believes to be a fair value for the stock
market of each country. Discrepancies between actual value and fair value as
determined by the Adviser provide an expected return for each stock market. The
expected return is adjusted by currency return expectations derived from the
Adviser's purchasing-power parity exchange rate model to arrive at an expected
total return in U.S. dollars. The final country allocation decision is then
arrived at by considering the expected total return in light of various country
specific considerations such as market size, volatility, liquidity and country
risk.
Within a particular country, investments are made through the purchase
of equity securities which, in aggregate, replicate a broad market index,
which in most cases will be the Morgan Stanley Capital International index
for the given country. The Adviser may overweight or underweight an industry
segment of a particular index if it concludes this would be advantageous to
the Portfolio. With respect to the Portfolio, equity securities include
common and preferred stock, convertible securities, and rights and warrants
to purchase common stocks. Indexation of the Portfolio's stock selection
reduces stock-specific risk through diversification and minimizes transaction
costs, which can be substantial in foreign markets.
Common stocks purchased for the Portfolio normally will be listed on a
major stock exchange in the subject country. The Portfolio will not invest in
the stocks of U.S. issuers. For a description of special considerations and
certain risks associated with investments in foreign issuers, see "Additional
Investment Information." The Portfolio may temporarily reduce its equity
holdings in response to adverse market conditions and invest in domestic,
Eurodollar and foreign short-term money market instruments for defensive
purposes. See "Investment Objectives and Policies" in the Statement of
Additional Information. For a description of other types of investments and
investment strategies in which the Portfolio may engage, see "Additional
Investment Information" on the following page.
12
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
FOREIGN INVESTMENT. [The Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers trading in U.S. markets and in
non-U.S. dollar-denominated securities of foreign issuers.] Investment
in obligations of foreign issuers and in foreign branches of domestic banks
involves somewhat different investment risks than those affecting obligations of
U.S. issuers. There may be limited publicly available information with respect
to foreign issuers, and foreign issuers are not generally subject to uniform
accounting, auditing and financial standards and requirements comparable to
those applicable to domestic companies. There may also be less government
supervision and regulation of foreign securities exchanges, brokers and
listed companies than in the U.S. Many foreign securities markets have
substantially less volume than U.S. national securities exchanges, and
securities of some foreign issuers are less liquid and more volatile than
securities of comparable U.S. issuers. Brokerage commissions and other
transaction costs on foreign securities exchanges are generally higher than
in the U.S. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, which may decrease the net return on
foreign investments as compared to dividends and interest paid to the
Portfolios by domestic companies. See "Taxes". Additional risks include
future political and economic developments, the possibility that a foreign
jurisdiction might impose or change withholding taxes on income payable with
respect to foreign securities, possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits, and the possible
adoption of foreign governmental restrictions such as exchange controls.
Such investments in securities of foreign issuers are frequently
denominated in foreign currencies, and since the Portfolio may temporarily hold
uninvested reserves in bank deposits in foreign currencies, the value of the
Portfolio's assets as measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and the Portfolio may incur costs in connection with conversions between various
currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Portfolio may enter into
forward foreign currency exchange contracts, that provide for the purchase or
sale of an amount of a specified foreign currency at a future date. Purposes for
which such contracts may be used include protecting against a decline in a
foreign currency against the U.S. dollar between the trade date and settlement
date when the Portfolio purchases or sells securities, locking in the U.S.
dollar value of dividends declared on securities held by the Portfolio and
generally protecting the U.S. dollar value of securities held by the Portfolio
against exchange rate fluctuation. Such contracts may also be used as a
protective measure against the effects of fluctuating rates of currency exchange
and exchange control regulations. While such forward contracts may limit losses
to the Portfolio as a result of exchange rate fluctuation, they will also limit
any gains that may otherwise have been realized. See "Investment Objectives and
Policies -- Forward Foreign Currency Contracts" in the Statement of Additional
Information.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend its securities to
brokers, dealers, domestic and foreign banks or other financial institutions for
the purpose of increasing its net investment income. These loans must be secured
continuously by cash or equivalent collateral or by a letter of credit at least
equal to the market value of the securities loaned plus accrued interest or
income. There may be risks of delay in recovery of the securities or even loss
of rights in the collateral should the borrower of the securities fail
financially. The Portfolio will not enter into securities loan transactions
exceeding, in the aggregate, 33 1/3% of the market value of the Portfolio's
total assets. For more detailed information about securities lending, see
"Investment Objectives and Policies" in the Statement of Additional
Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments, although the Portfolio intends to stay invested in securities
satisfying its primary investment objective to the extent practical. The
Portfolio may make money market investments pending other investment or
settlement for liquidity, or in adverse market conditions. The money market
investments permitted for the Portfolio include obligations of the United States
Government and its agencies and instrumentalities; obligations of foreign
sovereignties; other debt securities; commercial paper including bank
obligations; certificates of deposit (including Eurodollar certificates of
deposit); and repurchase agreements. For more detailed information about these
money market investments, see "Description of Securities and Ratings" in the
Statement of Additional Information.
OPTIONS AND FUTURES. The Portfolio may write (i.e., sell) covered call options
and covered put options on portfolio securities. By selling a covered call
option, the Portfolio would become obligated during the term of the option to
deliver the securities underlying the option should the option holder choose to
exercise the option before the option's termination date. In return for the call
it has written, the Portfolio will receive from the purchaser (or option holder)
a premium which is the price of the option, less a commission charged by a
broker. The Portfolio will keep the premium regardless of whether the option is
exercised. By selling a covered put option, the Portfolio incurs an obligation
to buy the security underlying the option from the purchaser of the put at the
option's exercise price at any time during the option period, at the purchaser's
election (certain options written by the Portfolio will be exercisable by the
purchaser only on a specific date). A call option is "covered" if the Portfolio
owns the security underlying the option it has written or has an absolute or
immediate right to acquire the security by holding a call option on such
security, or maintains a sufficient amount of cash, cash equivalents or liquid
securities to purchase the underlying security. Generally, a put option is
"covered" if the Fund maintains cash, U.S. Government securities or other high
grade debt obligations equal to the exercise price of the option, or if the Fund
holds a put option on the same underlying security with a similar or higher
exercise price.
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When the Portfolio writes covered call options, it augments its income by
the premiums received and is thereby hedged to the extent of that amount against
a decline in the price of the underlying securities. The premiums received will
offset a portion of the potential loss incurred by the Portfolio if the
securities underlying the options are ultimately sold by the Portfolio at a
loss. However, during the option period, the Portfolio has, in return for the
premium on the option, given up the opportunity for capital appreciation above
the exercise price should the market price of the underlying security increase,
but has retained the risk of loss should the price of the underlying security
decline.
The Portfolio will write covered put options to receive the premiums paid
by purchasers (when the Adviser wishes to purchase the security underlying the
option at a price lower than its current market price, in which case the
Portfolio will write the covered put at an exercise price reflecting the lower
purchase price sought) and to close out a long put option position.
The Portfolio may also purchase put or call options on its portfolio
securities. When the Portfolio purchases a call option it acquires the right to
buy a designated security at a designated price (the "exercise price"), and when
the Portfolio purchases a put option it acquires the right to sell a designated
security at the exercise price, in each case on or before a specified date (the
"termination date"), which is usually not more than nine months from the date
the option is issued. The Portfolio may purchase call options to close out a
covered call position or to protect against an increase in the price of a
security it anticipates purchasing. The Portfolio may purchase put options on
securities which it holds in its portfolio to protect itself against a decline
in the value of the security. If the value of the underlying security were to
fall below the exercise price of the put purchased in an amount greater than the
premium paid for the option, the Portfolio would incur no additional loss. The
Portfolio may also purchase put options to close out written put positions in a
manner similar to call option closing purchase transactions. There are no other
limits on the Portfolio's ability to purchase call and put options.
The Portfolio may enter into futures contracts and options on futures
contracts as a hedge against fluctuations in price of a security it holds or
intends to acquire, but not for speculation or for achieving leverage. The
Portfolio may also enter into futures transactions to remain fully invested and
to reduce transaction costs. The Portfolio may enter into futures contracts and
options on futures contracts provided that not more than 5% of the Portfolio's
total assets at the time of entering into the contract or option is required as
deposit to secure obligations under all such contracts and options, and provided
that not more than 20% of the Portfolio's total assets in the aggregate is
invested in options, futures contracts and options on futures contracts.
The Portfolio may purchase and write call and put options on futures
contracts that are traded on any international exchange, traded over the counter
or which are synthetic options or futures or equity swaps, and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in the futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the term of the option.
The Portfolio will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts.
The primary risks associated with the use of futures and options are
(i) imperfect correlation between the change in market value of the stocks held
by the Portfolio and the prices of futures and options relating to the stocks
purchased or sold by the Portfolio; and (ii) possible lack of a liquid secondary
market for a futures contract and the resulting inability to close a futures
position which could have an adverse impact on the Portfolio's ability to hedge.
In the opinion of the Board of Directors, the risk that the Portfolio will be
unable to close out a futures position or options contract will be minimized by
only entering into futures contracts or options transactions for which there
appears to be a liquid secondary market.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
brokers, dealers or banks that meet the credit guidelines adopted by the Fund's
Directors. In a repurchase agreement, the Portfolio buys a security from a
seller that has agreed to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of the agreement. The
term of these agreements is usually from overnight to one week and never exceeds
one year. Repurchase agreements may be viewed as a fully collateralized loan of
money by the Portfolio to the seller. The Portfolio always receives securities
with a market value at least equal to the purchase price (including accrued
interest) as collateral and this value is maintained during the term of the
agreement. If the seller defaults and the collateral value declines, the
Portfolio might incur a loss. If bankruptcy proceedings are commenced with
respect to the seller, the Portfolio's realization upon the collateral may be
delayed or limited. The aggregate of certain repurchase agreements and certain
other investments is limited as set forth under "Investment Limitations."
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<PAGE>
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. In such transactions,
instruments are bought with payment and delivery taking place in the future in
order to secure what is considered to be an advantageous yield or price at the
time of the transaction. Delivery of and payment for these securities may take
as long as a month or more after the date of the purchase commitment but will
take place no more than 120 days after the trade date. The Portfolio will
maintain with the Custodian a separate account with a segregated portfolio of
high-grade debt securities or cash in an amount at least equal to these
commitments. The payment obligation and the interest rates that will be received
are each fixed at the time the Portfolio enters into the commitment and no
interest accrues to the Portfolio until settlement. Thus, it is possible that
the market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed. It is a
current policy of the Portfolio not to enter into when-issued commitments
exceeding, in the aggregate, 15% of the market value of the Portfolio's total
assets less liabilities other than the obligations created by these commitments.
INVESTMENT LIMITATIONS
As a diversified investment company, the Portfolio is subject to the
following limitations: (a) as to 75% of its total assets, the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the United States Government and its agencies and
instrumentalities, and (b) the Portfolio may not own more than 10% of the
outstanding voting securities of any one issuer.
The Portfolio also operates under certain investment restrictions that are
deemed fundamental limitations and may be changed only with the approval of the
holders of a majority of the Portfolio's outstanding shares. See "Investment
Limitations" in the Statement of Additional Information. In addition, the
Portfolio operates under certain non-fundamental investment limitations as
described below and in the Statement of Additional Information. The Portfolio
may not (i) enter into repurchase agreements with more than seven days to
maturity if, as a result, more than 10% of the market value of the Portfolio's
total assets would be invested in such repurchase agreements and other
investments for which market quotations are not readily available or which are
otherwise illiquid; (ii) borrow money, except from banks for extraordinary or
emergency purposes, and then only in amounts up to 10% of the value of the
Portfolio's total assets, taken at cost at the time of borrowing; or purchase
securities while borrowings exceed 5% of its total assets; or mortgage, pledge
or hypothecate any assets except in connection with any such borrowing in
amounts up to 10% of the value of the Portfolio's net assets at the time of
borrowing; (iii) invest in fixed time deposits with a duration of over seven
calendar days; or (iv) invest in fixed time deposits with a duration of from two
business days to seven calendar days if more than 10% of the Portfolio's total
assets would be invested in these deposits.
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MANAGEMENT OF THE FUND
INVESTMENT ADVISER. Morgan Stanley Asset Management Inc. is the Investment
Adviser and Administrator of the Fund and each of its Portfolios. The Adviser
provides investment advice and portfolio management services, pursuant to an
Investment Advisory Agreement and, subject to the supervision of the Fund's
Board of Directors, makes each of the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages each of the Portfolio's investments. The Adviser is entitled to receive
from the Active Country Allocation Portfolio an annual investment advisory fee,
payable quarterly, equal to 0.65% of the average daily net assets of the
Portfolio.
The fees of the Portfolio, which involves international investments, are
higher than those of most investment companies but comparable to those of
investment companies with similar objectives. Effective October 9, 1992, the
Adviser has agreed to a reduction in the fees payable to it and to reimburse the
Portfolio, if necessary, if such fees would cause total annual operating
expenses of the Portfolio to exceed 0.80% of the average daily net assets of the
Portfolio. Prior to October 9, 1992, the maximum expense ratio for the Portfolio
was 0.90% of average daily net assets.
The Adviser, with principal offices at 1221 Avenue of the Americas, New
York, New York 10020, conducts a worldwide portfolio management business,
providing a broad range of portfolio management services to customers in the
United States and abroad. At September 30, 1995, the Adviser, together with its
affiliated asset management companies, managed investments totaling
approximately $___ billion, including approximately $___ billion under active
management and $___ billion as Named Fiduciary or Fiduciary Adviser. See
"Management of the Fund" in the Statement of Additional Information.
PORTFOLIO MANAGERS. BARTON M. BIGGS, MADHAV DHAR, FRANCINE J. BOVICH AND ANN D.
THIVIERGE. Barton Biggs has been Chairman and a director of the Adviser since
1980 and a Managing Director of Morgan Stanley since 1975. He is also a
director of Morgan Stanley Group Inc. and a director and officer of [several]
registered investment companies to which the Adviser and certain of its
affiliates provide investment advisory services. Mr. Biggs holds a B.A. from
Yale University and an M.B.A. from New York University. Madhav Dhar is a
Managing Director of Morgan Stanley. He joined the Adviser in 1984 to focus on
global asset allocation and investment strategy and now heads the Adviser's
emerging markets group and serves as the group's principal portfolio manager.
Mr. Dhar also coordinates the Adviser's developing country funds effort and has
been involved in the launching of the Adviser's country funds. He is the
portfolio manager of the Fund's Emerging Markets Portfolio, the Emerging Markets
and Global Equity Allocation Funds of the Morgan Stanley Fund, Inc., and the
Morgan Stanley Emerging Markets Fund, Inc. (a closed-end investment company
listed on the New York Stock Exchange). Mr. Dhar is also a director of the
Morgan Stanley Emerging Markets Fund, Inc. He holds a B.S. (honors) from St.
Stephens College, Delhi University (India), and an M.B.A. from Carnegie-Mellon
University. Francine Bovich joined the Adviser as a Principal in 1993. She is
responsible for product development, portfolio management and communication of
the Adviser's asset allocation strategy to institutional investor clients.
Previously, Ms. Bovich was a Principal and Executive Vice President of Westwood
Management Corp. ("Westwood"), a registered investment adviser. Before joining
Westwood, she was a Managing Director of Citicorp Investment Management, Inc.
(now Chancellor Capital Management), where she was responsible for the
Institutional Investment Management group. Ms. Bovich began her investment
career with Banker's Trust Company. She holds a B.A. in Economics from
Connecticut College and an M.B.A. in Finance from New York University. Ann
Thivierge is a Vice President of the Adviser. She is a member of the Adviser's
asset allocation committee, primarily representing the Total Fund Management
team since its inception in 1991. Prior to joining the Adviser in 1986, she
spent two years at Edgewood Management Company, a privately held investment
management firm. Ms. Thivierge holds a B.A. in International Relations from
James Madison College, Michigan State University, and an M.B.A. in Finance from
New York University.
ADMINISTRATOR. The Adviser also provides the Fund with administrative services
pursuant to an Administration Agreement. The services provided under the
Administration Agreement are subject to the supervision of the Officers and the
Board of Directors of the Fund and include day-to-day administration of matters
related to the corporate existence of the Fund, maintenance of its records,
preparation of reports, supervision of the Fund's arrangements with its
custodian and assistance in the preparation of the Fund's registration
statements under Federal and State laws. The Administration Agreement also
provides that the Administrator, through its agents, will provide the Fund
dividend disbursing and transfer
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<PAGE>
agent services. For its services under the Administration Agreement, the Fund
pays the Adviser a monthly fee which on an annual basis equals 0.15% of the
average daily net assets of the Portfolio.
In a merger completed on September 1, 1995, The Chase Manhattan Bank, N.A.
("Chase") succeeded to all of the rights and obligations under the U.S. Trust
Administration Agreement between the Adviser and the United States Trust Company
of New York ("U.S. Trust"), pursuant to which U.S. Trust had agreed to provide
certain administrative services to the Fund. Pursuant to a delegation clause in
the U.S. Trust Administration Agreement, U.S. Trust delegated its administration
responsibilities to Chase Global Funds Services Company ("CGFSC"), formerly
known as Mutual Funds Service Company, which after the merger with Chase is a
subsidiary of Chase and will continue to provide certain administrative services
to the Fund. The Adviser supervises and monitors such administrative services
provided by CGFSC. The services provided under the Administration Agreement and
the U.S. Trust Administration Agreement are also subject to the supervision of
the Board of Directors of the Fund. The Board of Directors of the Fund has
approved the provision of services described above pursuant to the
Administration Agreement and the U.S. Trust Administration Agreement as being in
the best interests of the Fund. CGFSC's business address is 73 Tremont Street,
Boston, Massachusetts 02108-3913. For additional information regarding the
Administration Agreement or the U.S. Trust Administration Agreement, see
"Management of the Fund" in the Statement of Additional Information.
DIRECTORS AND OFFICERS. Pursuant to the Fund's Articles of Incorporation,
the Board of Directors decides upon matters of general policy and reviews the
actions of the Fund's Adviser, Administrator and Distributor. The Officers of
the Fund conduct and supervise its daily business operations.
DISTRIBUTOR. Morgan Stanley serves as the exclusive Distributor of the shares
of the Portfolio. Under its Distribution Agreement with the Fund, Morgan
Stanley sells shares of the Fund upon the terms and at the current offering
price described in this Prospectus. Morgan Stanley is not obligated to sell any
certain number of shares of the Fund and receives no compensation for its
distribution services.
The Portfolio currently offers only the classes of shares offered by this
Prospectus. The Portfolio may in the future offer one or more classes of shares
with distribution charges that are different from those of the classes currently
offered.
The Fund has adopted a Plan of Distribution with respect to the Class B
shares pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). Under the
Plan, the Distributor is entitled to receive from the Portfolio a
distribution fee, which is accrued daily and paid [quarterly], of 0.25% of
the Class B shares average daily net assets on an annualized basis. The
Distributor expects to reallocate most of its fee to its investment
representatives. The Distributor may, in its discretion, voluntarily waive
from time to time all or any portion of its distribution fee and each of the
Distributor and the Adviser is free to make additional payments out of its
own assets to promote the sale of Fund shares, including payments that
compensate financial institutions for distribution services or shareholder
services.
The Plan is designed to compensate the Distributor for its services, not
to reimburse the Distributor of its expenses, and the Distributor may retain
any portion of the fee that it does not expend in fulfillment of its
obligations to the Fund.
EXPENSES. The Portfolio is responsible for payment of certain other fees and
expenses (including legal fees, accountants' fees, custodial fees and printing
and mailing costs) specified in the Administration and Distribution Agreements.
PURCHASE OF SHARES
Class A shares of the Portfolio may be purchased directly from the Fund,
without sales commission, at the net asset value per share next determined
after receipt of the purchase order by the Portfolio. Class B shares of the
Portfolio may be purchased directly from the Fund at the net asset value per
share next determined after receipt of the purchase order by the Portfolio.
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<PAGE>
See "Valuation of Shares."
MINIMUM INVESTMENT, ACCOUNT SIZES AND CONVERSION FROM CLASS A TO CLASS B
SHARES
For accounts opened on or after January 1, 1996 ("New Accounts"), the
minimum initial investment and minimum account size are $500,000 for Class A
shares and $100,000 Class B shares. TFM Accounts may purchase Class A shares
without being subject to any minimum initial investment or minimum account size
requirements. Officers of the Adviser and its affiliates may purchase
Class B shares subject to a minimum initial investment and minimum account
size of $5,000.
If the value of a New Account containing Class A shares falls below
$500,000 (but remains at or above $100,000) because of shareholder
redemption(s), the Fund will notify the shareholder, and if the account
value remains below $500,000 for any continuous 60-day period, the Class A
shares in the New Account will automatically convert to Class B shares and
will be subject to the distribution fee and other features applicable to the
Class B shares. Under current tax law, such conversion is not a taxable
event to the shareholder. The Fund, however, will not automatically convert
Class A shares based solely upon changes in the market that reduce the net
asset value of shares.
There are no minimum account size requirements applicable to
Grandfathered Class A Accounts, Grandfathered Class B Accounts or TFM
Accounts, provided, however, that Grandfathered Class B Accounts held by
officers of the Adviser or its affiliates are subject to a minimum account
size of $5,000.
The Fund reserves the right to modify or terminate the conversion
features of the shares as stated above at any time upon 60-days' notice to
shareholders.
MINIMUM ACCOUNT SIZES AND INVOLUNTARY REDEMPTION OF SHARES
If the value of a New Account falls below $100,000 because of
shareholder redemption(s), the Fund will notify the shareholder, and if the
account value remains below $100,000 for any continuous 60-day period, the
Fund will redeem the shares in the New Account and the net asset value of
such shares will be promptly paid to the shareholder. The Fund, however, will
not automatically redeem shares based solely upon changes in the market that
reduce the net asset value of shares.
For purposes of involuntary redemption, the foregoing minimum account
size requirements do not apply to Class B share accounts held by officers of
the Adviser or its affiliates. However, if the value of a Class B share
account held by an officer of the Adviser or its affiliates falls below
$5,000 because of shareholder redemption(s), the Fund will notify the
shareholder, and if the account value remains $5,000 for any continuous
60-day period, the Fund will redeem the shares in the account and the net
asset value of such shares will be promptly paid to the shareholder.
Grandfathered Class A Accounts, Grandfathered Class B Accounts (unless
held by officers of the Adviser or its affiliates, as set forth above) and TFM
Accounts are not subject to involuntary redemption.
The Fund reserves the right to modify or terminate the involuntary
redemption features of the shares as stated above at any time upon 60-days'
notice to shareholders.
CONVERSION FROM CLASS B TO CLASS A SHARES
If the value of Class B shares of a portfolio in a shareholder account
remains at $500,000 or more for a continuous period of 60 days or more, the
Class B shares will be automatically converted to Class A shares. Under
current tax law, such conversion is not a taxable event to the shareholder.
Class A shares converted from Class B shares are subject to the same minimum
account size requirements as stated above. The Fund reserves the right to
modify or terminate this conversion feature at any time upon 60-days' notice
to shareholders.
INITIAL PURCHASES DIRECTLY FROM THE FUND
1) BY CHECK. An account may be opened by completing and signing an Account
Registration Form and mailing it, together with a check ($500,000 minimum
for Class A shares of the Portfolio and $100,000 for Class B shares of the
Portfolio, with certain exceptions for [Morgan Stanley employees and select
customers]) payable to "Morgan Stanley Institutional Fund, Inc. -- Active
Country Allocation Portfolio", to:
Morgan Stanley Institutional Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
Payment will be accepted only in U.S. dollars, unless prior approval for
payment by other currencies is given by the Fund. The Portfolio(s) to be
purchased should be designated on the Account Registration Form. For purchases
by check, the Fund is ordinarily credited with Federal Funds within one business
day. Thus your purchase of shares by check is ordinarily credited to your
account at the net asset value per share of the Portfolio determined on the next
business day after receipt.
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<PAGE>
2) BY FEDERAL FUNDS WIRE. Purchases may be made by having your bank wire
Federal Funds to the Fund's bank account. In order to ensure prompt receipt
of your Federal Funds Wire, it is important that you follow these steps:
A. Telephone the Fund (toll free: 1-800-548-7786) and provide us with
your name, address, telephone number, Social Security or Tax
Identification Number, the portfolio(s) selected, the amount being
wired, and by which bank. We will then provide you with a Fund account
number. (Investors with existing accounts should also notify the Fund
prior to wiring funds.)
B. Instruct your bank to wire the specified amount to the Fund's Wire
Concentration Bank Account (be sure to have your bank include the name
of the portfolio(s) selected and the account number assigned to you):
Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA#021000021
DDA# 910-2-733293
Attn: Morgan Stanley Institutional Fund, Inc.
Ref: (Portfolio name, your account number, your account name)
Please call the Fund at 1-800-548-7786 prior to wiring funds.
C. Complete and sign the Account Registration Form and mail it to the
address shown thereon.
[Purchase orders for shares of the Portfolio which are received prior to
the regular close of the NYSE (currently 4:00 p.m. Eastern Time) will be
executed at the price computed on the date of receipt as long as the
Transfer Agent receives payment by check or in Federal Funds prior to the
regular close of the NYSE on such day.]
Federal Funds purchase orders will be accepted only on a day on which the
Fund and Chase (the "Custodian Bank") are open for business. Your bank may
charge a service fee for wiring funds.
3) BY BANK WIRE. The same procedure outlined under "By Federal Funds Wire"
above must be followed in purchasing shares by bank wire. However, money
transferred by bank wire may or may not be converted into Federal Funds the
same day, depending on the time the money is received and the bank handling
the wire. Prior to such conversion, an investor's money will not be
invested and, therefore, will not be earning dividends. Your bank may
charge a service fee for wiring funds.
ADDITIONAL INVESTMENTS
You may add to your account at any time (minimum additional investment
$1,000, except for automatic reinvestment of dividends and capital gains
distributions for which there are no minimums) by purchasing shares at net asset
value by mailing a check to the Fund (payable to "Morgan Stanley Institutional
Fund, Inc. -- Active Country Allocation Portfolio") at the above address or by
wiring monies to the Custodian Bank as outlined above. It is very important that
your account name and the portfolio name be specified in the letter or wire to
assure proper crediting to your account. In order to ensure that your wire
orders are invested promptly, you are requested to notify one of the Fund's
representatives (toll-free: 1-800-548-7786) prior to the wire date.
OTHER PURCHASE INFORMATION
The purchase price of the Class A and Class B shares of the Portfolio is
the net asset value next determined after the order is received. See "Valuation
of Shares." An order received prior to the close of the New York Stock Exchange
("NYSE"), which is currently 4:00 p.m. Eastern Time, will be executed at the
price computed on the date of receipt; an order received after the close of the
NYSE will be executed at the price computed on the next day the NYSE is open as
long as the Transfer Agent receives payment by check or in Federal Funds prior
to the regular close of the NYSE on such day.
Although the legal rights of Class A and Class B shares will be
identical, the different expenses borne by each class will result in
different net assets values and dividends. The net asset value of Class B
shares will generally be lower then the net asset value of Class A shares as
a result of the distribution fee charged to Class B shares. It is expected,
however, that the net asset value per share of the two classes will tend to
converge immediately after the recording of dividends which will differ by
approximately the amount of the distribution expense accrual differential
between the classes.
In the interest of economy and convenience, and because of the operating
procedures of the Fund, certificates representing shares of the Portfolio will
not be issued. All shares purchased are confirmed to you and credited to your
account on the Fund's books maintained by the Adviser or its agents. You will
have the same rights and ownership with respect to such shares as if
certificates had been issued.
To ensure that checks are collected by the Fund, withdrawals of investments
made by check are not presently permitted until payment for the purchase has
been received, which may take up to [eight] [fifteen] business days after the
date of purchase. As a condition of this offering, if a purchase is cancelled
due to nonpayment or because your check does not clear, you will be responsible
for any loss the Fund or its agents incur. If you are already a shareholder, the
Fund may redeem shares from your account(s) to reimburse the Fund or its agents
for any loss. In addition, you may be prohibited or restricted from making
future investments in the Fund.
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Investors may also invest in the Fund by purchasing shares through
registered broker-dealers. Broker-dealers who make purchases for their customers
may charge a fee for such services. See "Purchase of Shares" in the Statement of
Additional Information.
EXCESSIVE TRADING
Frequent trades involving either substantial portfolio assets or a
substantial portion of your account or accounts controlled by you can disrupt
management of a portfolio and raise its expenses. Consequently, in the
interest of all the stockholders of the Portfolio and the Portfolio's
performance, the Fund may in its discretion bar a stockholder that engages in
excessive trading of shares of a portfolio from further purchases of shares
of the Fund for an indefinite period. The Fund considers excessive trading
to be more than one purchase and sale involving shares of the same portfolio
of the Fund within any 120-day period. As an exchanging shares of portfolios
of the Fund as follows amounts to excessive trading: exchanging shares of
Portfolio A for shares of Portfolio B, then exchanging shares of Portfolio B
for shares of Portfolio C and again exchanging shares of Portfolio C for
shares of Portfolio B within a 120-day period. Two types of transactions are
exempt from these excessive trading restrictions: (1) trades exclusively
between money market portfolios; and (2) trades done in connection with an
asset allocation service managed or advised by MSAM and/or any of its
affiliates.
REDEMPTION OF SHARES
You may withdraw all or any portion of the amount in your account by
redeeming shares at any time. Please note that purchases made by check are
not permitted to be redeemed until payment of the purchase has been
collected, which may take up to eight business days after purchase. The Fund
will redeem shares of the Portfolio at its next determined net asset value.
On days that both the NYSE and the Custodian Bank are open for business, the
net asset value per share of the Portfolio is determined at the close of
trading of the NYSE (currently 4:00 p.m. Eastern Time). Shares of the
Portfolio may be redeemed by mail or telephone. No charge is made for
redemption. Any redemption proceeds may be more or less than the purchase
price of your shares depending on, among other factors, the market value of
the investment securities held by the Portfolio.
BY MAIL
The Portfolio will redeem its shares at the net asset value determined on
the date the request is received, if the request is received in "good order"
before the regular close of the NYSE. Your request should be addressed to Morgan
Stanley Institutional Fund, Inc., P.O. Box 2798, Boston, Massachusetts
02208-2798, except that deliveries by overnight courier should be addressed to
Morgan Stanley Institutional Fund, Inc., c/o Chase Global Funds Services
Company, 73 Tremont St., Boston, Massachusetts 02108-3913.
"Good order" means that the request to redeem shares must include the
following documentation:
(a) A letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered owners of the
shares in the exact names in which they are registered;
(b) Any required signature guarantees (see "Further Redemption
Information" below); and
(c) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit-sharing
plans and other organizations.
20
<PAGE>
Shareholders who are uncertain of requirements for redemption should
consult with a Morgan Stanley Institutional Fund representative.
BY TELEPHONE
Provided you have previously elected the Telephone Redemption Option on the
Account Registration Form, you can request a redemption of your shares by
calling the Fund and requesting the redemption proceeds be mailed to you or
wired to your bank. Please contact one of Morgan Stanley Institutional Fund's
representatives for further details. In times of drastic market conditions, the
telephone redemption option may be difficult to implement. If you experience
difficulty in making a telephone redemption, your request may be made by mail or
overnight courier and will be implemented at the net asset value next determined
after it is received. Redemption requests sent to the Fund through express mail
must be mailed to the address of the Dividend Disbursing and Transfer Agent
listed under "General Information." The Fund and the Fund's transfer agent (the
"Transfer Agent") will employ reasonable procedures to confirm that the
instructions communicated by telephone are genuine. These procedures include
requiring the investor to provide certain personal identification information at
the time an account is opened and prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written
instructions regarding transaction requests. Neither the Fund nor the Transfer
Agent will be responsible for any loss, liability, cost or expense for following
instructions received by telephone that either of them reasonably believes to be
genuine.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Fund at the address above.
Requests to change the bank or account must be signed by each shareholder and
each signature must be guaranteed.
FURTHER REDEMPTION INFORMATION
Normally the Fund will make payment for all shares redeemed within one
business day of receipt of the request, but in no event will payment be made
more than seven days after receipt of a redemption request in good order.
However, payments to investors redeeming shares which were purchased by check
will not be made until payment for the purchase has been collected, which may
take up to eight days after the date of purchase. The Fund may suspend the
right of redemption or postpone the date upon which redemptions are effected
at times when the NYSE is closed, or under any emergency circumstances as
determined by the Securities and Exchange Commission (the "Commission").
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Portfolio to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of securities held by the Portfolio in lieu of
cash in conformity with applicable rules of the Commission.
Distributions-in-Kind will be made in readily marketable securities. Investors
may incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
To protect your account, the Fund and its agents from fraud, signature
guarantees are required for certain redemptions to verify the identity of the
person who has authorized a redemption from your account. Please contact the
Fund for further information. See "Redemption of Shares" in the Statement of
Additional Information.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
You may exchange shares that you own in the Portfolio for shares of the
same class of any other available portfolio(s) of the Fund (except for the
International Equity Portfolio). Shares of the portfolios may be exchanged by
mail
21
<PAGE>
or telephone. The privilege to exchange shares by telephone is automatic and
made available without shareholder election. Before you make an exchange, you
should read the prospectus of the portfolio(s) in which you seek to invest.
Because an exchange transaction is treated as a redemption followed by a
purchase, an exchange would be considered a taxable event for shareholders
subject to tax. The exchange privilege is only available with respect to
portfolios that are registered for sale in a shareholder's state of
residence. The exchange privilege may be modified or terminated by the Fund
at any time upon 60 days' notice to shareholders.
BY MAIL
In order to exchange shares by mail, you should include in the exchange
request the name and account number of the Portfolio, the name of the
portfolio(s) into which you intend to exchange shares, and the signatures of all
registered account holders. Send the exchange request to Morgan Stanley
Institutional Fund, Inc., P.O. Box 2798, Boston, MA 02208-2798.
BY TELEPHONE
When exchanging shares by telephone, have ready the name and account number
of the current portfolio, the name of the portfolio(s) into which you intend to
exchange shares, your Social Security number or Tax I.D. number, and your
account address. Requests for telephone exchanges received prior to 4:00 p.m.
(Eastern Time) are processed at the close of business that same day based on the
net asset value of each of the portfolios at the close of business. Requests
received after 4:00 p.m. are processed the next business day based on the net
asset value determined at the close of business on such day. For additional
information regarding responsibility for the authenticity of telephoned
instructions, see "Redemption of Shares -- By Telephone" above.
TRANSFER OF REGISTRATION
You may transfer the registration of any of your Fund shares to another
person by writing to Morgan Stanley Institutional Fund, Inc., P.O. Box 2798,
Boston, Massachusetts 02208-2798. As in the case of redemptions, the written
request must be received in good order before any transfer can be made.
VALUATION OF SHARES
The net asset value per share of the Portfolio is determined by dividing
the total market value of the Portfolio's investments and other assets, less
any liabilities, by the total number of outstanding shares of the Portfolio.
Net asset value is calculated separately for each class of the Portfolio. Net
asset value per share is determined as of the close of the NYSE on each day
that the NYSE is open for business. Price information on listed securities is
taken from the exchange where the security is primarily traded. Securities
listed on a U.S. securities exchange for which market quotations are
available are valued at the last quoted sale price on the day the valuation
is made. Securities listed on a foreign exchange are valued at their closing
price. Unlisted securities and listed securities not traded on the valuation
date for which market quotations are readily available are valued at a price
that is considered to best represent fair value within a range not exceeding
the current asked price nor less than the current bid price. The current bid
and asked prices are determined based on the bid and asked prices quoted on
such valuation date by reputable brokers.
Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market. Net asset value includes interest on fixed income
securities, which is accrued daily. In addition, bonds and other fixed income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed to reflect the fair market value of such
securities. The prices provided by a pricing service are determined without
regard to bid or last sale prices, but take into
22
<PAGE>
account institutional size trading in similar groups of securities and any
developments related to the specific securities. Securities not priced in this
manner are valued at the most recently quoted bid price, or, when securities
exchange valuations are used, at the latest quoted sale price on the day of
valuation. If there is no such reported sale, the latest quoted bid price will
be used. Securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. In the event
that amortized cost does not approximate market value, market prices as
determined above will be used.
The value of other assets and securities for which no quotations are
readily available (including restricted and unlisted foreign securities) and
those securities for which it is inappropriate to determine prices in
accordance with the above-stated procedure are determined in good faith at
fair value using methods determined by the Board of Directors. For purposes
of calculating net asset value per share, all assets and liabilities
initially expressed in foreign currencies will be translated into U.S.
dollars at the mean of the bid price and asked price of such currencies
against the U.S. dollar last quoted by any major bank.
Although the legal rights of Class A and Class B shares will be identical,
the different expenses borne by each class will result in different net asset
values and dividends. Dividends will differ by approximately the amount of the
distribution expense accrual differential among the classes. The net asset
value of Class B shares will generally be lower than the net asset value of the
Class A shares as a result of the distribution fee charged to Class B shares.
PERFORMANCE INFORMATION
The Fund may from time to time advertise total return of the Portfolio.
THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE. The "total return" shows what an investment in the Portfolio
would have earned over a specified period of time (such as one, five or ten
years), assuming that all distributions and dividends by the Portfolio were
reinvested on the reinvestment dates during the period. Total return does not
take into account any federal or state income taxes that may be payable on
dividends and distributions or on redemption. The Fund may also include
comparative performance information in advertising or marketing the Portfolio's
shares. Such performance information may include data from Lipper Analytical
Services, Inc., other industry publications, business periodicals, rating
services and market indices.
The performance figures for Class B shares will generally be lower than
those for Class A shares because of the distribution fee charged to Class B
shares.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All income dividends and capital gains distributions will automatically
be reinvested in additional shares at net asset value, except that, upon
written notice to the Fund or by checking off the appropriate box in the
Distribution Option Section on the Account Registration Form, a shareholder
may elect to receive income dividends and capital gains distributions in
cash. The Portfolio expects to distribute substantially all of its net
investment income in the form of annual dividends. Net realized gains, if
any, after reduction for any available tax loss carryforwards will also be
distributed annually. Confirmations of the purchase of shares of the
Portfolio through the automatic reinvestment of income dividends and capital
gains distributions will be provided, pursuant to Rule 10b-10 under the
Securities Exchange Act of 1934, as amended, on the next monthly client
statement following such purchase of shares. Consequently, confirmations of
such purchases will not be provided at the time of completion of such
purchases as might otherwise be required by Rule 10b-10.
Undistributed net investment income [and undistributed realized gains are]
[is] included in the Portfolio's net assets for the purpose of calculating net
asset value per share. Therefore, on the "ex-dividend" date, the net asset value
per share excludes the dividend [or distribution] (i.e., is reduced by the per
share amount of the dividend). Dividends [and distributions] paid shortly after
the purchase of shares by an investor, although in effect a return of capital,
are taxable to shareholders subject to income tax.
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Because of the distribution fee, [potential shareholder servicing fee,]
and any other expenses that may be attributable to the Class B shares, the
net income attributable to and the dividends payable on Class B shares will
be lower than the net income attributable to and the dividends payable on
Class A shares. As a result, the net asset value per share of the classes of
the Portfolio will differ at times. Expenses of the Portfolio allocated to a
particular class of shares thereof will be borne on a pro rata basis by each
outstanding share of that class.
TAXES
GENERAL
The following summary of certain federal income tax consequences is
based on current tax laws and regulations, which may be changed by
legislative, judicial, or administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state and local income taxes.
The Portfolio is treated as a separate entity for federal income tax
purposes and is not combined with the Fund's other portfolios. The Portfolio
intends to qualify for the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), so that the Portfolio will be relieved of federal income tax on
that part of its net investment income and net capital gain that is distributed
to shareholders.
The Portfolio distributes substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Dividends from the Portfolio's net investment income are taxable to shareholders
as ordinary income, whether received in cash or reinvested in additional shares.
Such dividends paid by the Portfolio will generally qualify for the 70%
dividends-received deduction for corporate shareholders only to the extent of
the aggregate qualifying dividend income received by the Portfolio from U.S.
corporations. The Portfolio will report annually to its shareholders the amount
of dividend income qualifying for such treatment.
Distributions of net capital gains (i.e., net long-term capital gains in
excess of net short-term capital losses) are taxable to shareholders as
long-term capital gains, regardless of how long the shareholder has held the
Portfolio's shares. The Portfolio sends reports annually to shareholders of the
federal income tax status of all distributions made during the preceding year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary income and capital gain net income (the excess of
short-term and long-term capital gains over short-term and long-term capital
losses), including any available capital loss carryforwards, prior to the end of
each calendar year to avoid liability for federal excise tax.
Dividends and other distributions declared by the Portfolio in October,
November or December of any year and payable to shareholders of record on a date
in such month will be deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if the distributions are paid by
the Portfolio at any time during the following January.
The sale or redemption of shares may result in taxable gain or loss to the
redeeming shareholder, depending upon whether the fair market value of the
redemption proceeds exceeds or is less than the shareholder's adjusted basis in
the redeemed shares. If capital gain distributions have been made with respect
to shares that are sold at a loss after being held for six months or less, then
the loss is treated as a long-term capital loss to the extent of the capital
gain distributions.
The conversion of Class A shares to Class B shares should not be a taxable
event to the shareholder.
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<PAGE>
Shareholders are urged to consult with their tax advisers concerning the
application of state and local income taxes to investments in the Portfolio,
which may differ from the federal income tax consequences described above.
Investment income received by the Portfolio from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To the
extent that the Portfolio is liable for foreign income taxes so withheld, the
Portfolio intends to operate so as to meet the requirements of the Code to pass
through to the shareholders credit for foreign income taxes paid. Although the
Portfolio intends to meet Code requirements to pass through credit for such
taxes, there can be no assurance that the Portfolio will be able to do so.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE PORTFOLIO.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best available price and most favorable execution with respect to all
transactions for the Portfolio. The Fund has authorized the Adviser to pay
higher commissions in recognition of brokerage services which, in the opinion of
the Adviser, are necessary for the achievement of better execution, provided the
Adviser believes this to be in the best interest of the Fund.
Since shares of the Portfolio are not marketed through intermediary brokers
or dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of shares which may be made through such firms.
However, the Adviser may place portfolio orders with qualified broker-dealers
who recommend the Fund's portfolios or who act as agents in the purchase of
shares of the Fund's portfolios for their clients.
In purchasing and selling securities for the Portfolio, it is the Fund'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 Portfolio, 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, and
the brokerage and research services which they provide to the Fund. Some
securities considered for investment by the Portfolio may also be appropriate
for other clients served by the Adviser. If purchase or sale of securities
consistent with the investment policies of the Portfolio and one or more of
these other clients served by the 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 Adviser, and the results of such allocations, are subject to
periodic review by the Fund's Board of Directors.
Subject to the overriding objective of obtaining the best possible
execution of orders, the Adviser may allocate a portion of each portfolio's
brokerage transactions to Morgan Stanley or broker affiliates of Morgan Stanley.
In order for Morgan Stanley or its affiliates to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration received
by Morgan Stanley or such affiliates must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time. Furthermore, the Board
of Directors of the Fund, including a majority of the Directors who are not
"interested persons," have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to Morgan Stanley
or such affiliates are consistent with the foregoing standard.
Portfolio securities will not be purchased from, or through, or sold to or
through, the Adviser or Morgan Stanley or any "affiliated persons," as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"), of Morgan
Stanley when such entities are acting as principals, except to the extent
permitted by law.
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Although the Portfolio will not invest for short-term trading purposes,
investment securities may be sold from time to time without regard to the length
of time they have been held. It is anticipated that the annual turnover rate of
the Portfolio will not exceed 100% in normal circumstances.
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
The Fund was organized as a Maryland corporation on June 16, 1988. The
Articles of Incorporation, as amended and restated, permit the Fund to issue
up to 34,000,000,000 shares of common stock, with $.001 par value per share.
Pursuant to the Fund's By-Laws, the Board of Directors may increase the
number of shares the Fund is authorized to issue without the approval of the
shareholders of the Fund. The Board of Directors has the power to designate
one or more classes of shares of common stock and to classify and reclassify
any unissued shares with respect to such classes. The Fund's shares of
common stock are currently classified into two classes, the Class A shares
and the Class B shares.
The shares of the Portfolio, when issued, will be fully paid,
nonassessable, fully transferable and redeemable at the option of the holder.
The shares have no preference as to conversion, exchange, dividends, retirement
or other features and have no preemptive rights. The shares of the Portfolio
have non-cumulative voting rights, which means that the holders of more than 50%
of the shares voting for the election of Directors can elect 100% of the
Directors if they choose to do so. Persons or organizations owning 25% or more
of the outstanding shares of a portfolio may be presumed to "control" (as that
term is defined in the 1940 Act) that Portfolio. Under Maryland law, the Fund is
not required to hold an annual meeting of its shareholders unless required to do
so under the 1940 Act.
REPORTS TO SHAREHOLDERS
The Fund will send to its shareholders annual and semi-annual reports; the
financial statements appearing in annual reports are audited by independent
accountants. Monthly unaudited portfolio data is also available from the Fund
upon request.
In addition, Morgan Stanley Asset Management Inc., or its agent, as
Transfer Agent, will send to each shareholder having an account directly with
the Fund a monthly statement showing transactions in the account, the total
number of shares owned, and any dividends or distributions paid.
CUSTODIAN
As of September 1, 1995, domestic securities and cash are held by Chase,
which replaced U.S. Trust as the Fund's domestic custodian. Chase is not an
affiliate of the Adviser or the Distributor. Morgan Stanley Trust Company,
Brooklyn, New York ("MSTC"), an affiliate of the Adviser and the Distributor,
acts as the Fund's custodian for foreign assets held outside the United States
and employs subcustodians who were approved by the Board of Directors of the
Fund in accordance with regulations of the Securities and Exchange Commission
for the purpose of providing custodial services for such assets. MSTC may also
hold certain domestic assets for the Fund. For more information on the
custodians, see "General Information -- Custody Arrangements" in the Statement
of Additional Information.
DIVIDEND DISBURSING AND TRANSFER AGENT
CGFSC, 73 Tremont Street, Boston, Massachusetts 02108-3913, acts as
Dividend Disbursing and Transfer Agent for the Fund.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as independent accountants for the Fund and
audits its annual financial statements.
LITIGATION
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The Fund is not involved in any litigation.
___________________ ___________________
___________________ ___________________
27
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER BY THE FUND OR THE DISTRIBUTOR TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
___________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . . 11
Additional Investment Information. . . . . . . . . . . . . . . . . . . . . 13
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Valuation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Dividends and Capital Gains Distributions. . . . . . . . . . . . . . . . . 23
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 25
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Account Registration Form
</TABLE>
ACTIVE COUNTRY ALLOCATION PORTFOLIO
A PORTFOLIO OF THE
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
Common Stock
($.001 PAR VALUE)
_
PROSPECTUS
_
Investment Adviser
Morgan Stanley
28
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ASSET MANAGEMENT INC.
DISTRIBUTOR
MORGAN STANLEY & CO.
INCORPORATED
___________________ ___________________
___________________ ___________________
29
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(This page has been left blank intentionally.)
30
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MORGAN STANLEY INSTITUTIONAL FUND, INC. -- ACTIVE COUNTRY ALLOCATION PORTFOLIO
P.O. Box 2798, Boston, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<S> <C>
ACCOUNT INFORMATION If you need assistance in filling out this form for the Morgan Stanley
Fill in where applicable Institutional Fund, please contact your Morgan Stanley representative or call
us toll free 1-(800)-548-7786. Please print all items except signature, and
mail to the Fund at the address above.
A) REGISTRATION
1. INDIVIDUAL
2. JOINT TENANTS
(RIGHTS OF SURVIVORSHIP PRESUMED UNLESS
TENANCY IN COMMON
IS INDICATED)
1.
First Name Initial Last Name
2.
First Name Initial Last Name
First Name Initial Last Name
3. CORPORATIONS, TRUSTS AND OTHERS
Please call the Fund for additional documents
that may be required to set up account and to
authorize transactions.
3.
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO
ASSOCIATION MINOR
(ONLY ONE CUSTODIAN AND MINOR
PERMITTED)
/ / TRUST _____ / / OTHER (Specify) _____
B) MAILING ADDRESS
Please fill in completely, including telephone
number(s).
</TABLE>
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<TABLE>
<S> <C>
Street or P.O. Box
City State Zip
-
Home Telephone No. Business Telephone No.
- - - -
/ / United States Citizen / / Resident Alien / / Non-Resident Alien: Indicate Country of Residence________________
C) TAXPAYER PART 1. Enter your IMPORTANT TAX INFORMATION
IDENTIFICATION Taxpayer Identification You (as a payee) are required by law to provide
NUMBER Number. For most us (as payer) with your correct taxpayer
If the account is in more than one name, individual taxpayers, this identification number. Accounts that have a
CIRCLE THE NAME OF THE PERSON WHOSE TAXPAYER is your Social Security missing or incorrect taxpayer identification
IDENTIFICATION NUMBER IS PROVIDED IN SECTION Number. number will be subject to backup withholding at a
A) ABOVE. If no name is circled, the number TAXPAYER IDENTIFICATION 31% rate on dividends, distributions and other
will be considered to be that of the last NUMBER payments. If you have not provided us with your
name listed. For Custodian account of a minor ----------------------- correct taxpayer identification number, you may be
(Uniform Gifts/Transfers to Minors Acts), OR subject to a $50 penalty imposed by the Internal
give the Social Security Number of the minor. SOCIAL SECURITY NUMBER Revenue Service.
----------------------- Backup withholding is not an additional tax; the
PART 2. BACKUP WITHHOLDING tax liability of persons subject to backup
/ / Check this box if you withholding will be reduced by the amount of tax
are NOT subject to Backup withheld. If withholding results in an overpayment
Withholding under the of taxes, a refund may be obtained.
provisions of Section You may be notified that you are subject to
3406(a)(1)(C) of the backup withholding under Section 3406(a)(1)(C) of
Internal Revenue Code. the Internal Revenue Code because you have
underreported interest or dividends or you were
required to but failed to file a return which
would have included a reportable interest or
dividend payment. IF YOU HAVE NOT BEEN SO
NOTIFIED, CHECK THE BOX IN PART 2 AT LEFT.
- -
D) PORTFOLIO AND CLASS SELECTION (CLASS A
SHARES MINIMUM $500,000 AND CLASS B SHARES
MINIMUM $100,000). PLEASE INDICATE AMOUNT.
Active Country Allocation Portfolio
Class A Shares $______________
Class B Shares $______________
/ / For purchase of $ _______ of the Active Country Allocation Portfolio
E) METHOD OF INVESTMENT
Please indicate manner of payment.
</TABLE>
32
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<TABLE>
<S> <C> <C>
Payment by:
/ / check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND, INC.-- ACTIVE COUNTRY ALLOCATION PORTFOLIO)
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/ / Exchange $__ From_____________ ------------------------
Name of Portfolio Account Number
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/ / Account previously established by: --------------------------
/ / Phone exchange / / Wire on___ ------------------------
Account Number (Check
(Previously assigned by
the Fund Digit)
Date
F) DISTRIBUTION Income dividends and capital gains distributions (if any) will be reinvested
OPTION in additional shares unless either box below is checked.
/ / Income dividends to be paid in cash, capital gains distributions (if any)
in shares.
/ / Income dividends and capital gains distributions (if any) to be paid in
cash.
</TABLE>
33
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<TABLE>
<S> <C> <C>
G) TELEPHONE / / I/we hereby authorize the
REDEMPTION Fund and its agents to honor Name of Commercial Bank Bank Account No.
OPTION any telephone requests to wire (Not Savings Bank)
Please select at time of initial application redemption proceeds to the
if you wish to redeem shares by telephone. A commercial bank indicated at Bank ABA No.
signature guarantee is required if bank right and/or mail redemption
account is not registered identically to your proceeds to the name and Name(s) in which your Bank Account is
Fund Account. address in which my/our fund Established
TELEPHONE REQUESTS FOR REDEMPTIONS OR account is registered if such
EXCHANGES WILL NOT BE HONORED UNLESS THE requests are believed to be Bank's Street Address
APPLICABLE BOX IS CHECKED. authentic.
City State Zip
THE FUND AND THE FUND'S
TRANSFER AGENT WILL EMPLOY
REASONABLE PROCEDURES TO
CONFIRM THAT INSTRUCTIONS
COMMUNICATED BY TELEPHONE ARE
GENUINE. THESE PROCEDURES
INCLUDE REQUIRING THE INVESTOR
TO PROVIDE CERTAIN PERSONAL
IDENTIFICATION INFORMATION AT
THE TIME AN ACCOUNT IS OPENED
AND PRIOR TO EFFECTING EACH
TRANSACTION REQUESTED BY
TELEPHONE. IN ADDITION, ALL
TELEPHONE TRANSACTION REQUESTS
WILL BE RECORDED AND INVESTORS
MAY BE REQUIRED TO PROVIDE
ADDITIONAL TELECOPIED WRITTEN
INSTRUCTIONS OF TRANSACTION
REQUESTS. NEITHER THE FUND NOR
THE TRANSFER AGENT WILL BE
RESPONSIBLE FOR ANY LOSS,
LIABILITY, COST OR EXPENSE FOR
FOLLOWING INSTRUCTIONS RECEIVED
BY TELEPHONE THAT IT REASONABLY
BELIEVES TO BE GENUINE.
</TABLE>
34
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<TABLE>
<S> <C> <C>
H) INTERESTED PARTY ---------------------------------
OPTION Name
In addition to the account statement sent to ---------------------------------
my/our registered address, I/we hereby ---------------------------------
authorize the fund to mail duplicate Address
statements to the name and address provided ---------------------------------
at right. City State Zip Code
I) DEALER - - -
INFORMATION
Representative Name Representative No. Branch No.
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here
The undersigned certify that I/we have full authority and legal capacity to purchase and redeem shares of the Fund and affirm that
I/we have received a current Prospectus of the Morgan Stanley Institutional Fund, Inc. and agree to be bound by its terms.
Under the penalties of perjury, I/we certify that the information provided in Section C) above is true, correct and complete.
(X) (X)
- ---------------------------------- ----------------------------------
Signature Date Signature Date
</TABLE>
35
<PAGE>
The Statement of Additional Information for the Fixed Income, Global Fixed
Income, Municipal Bond, Mortgage-Backed Securities, High Yield, Real Yield,
Money Market, Municipal Money Market, Small Cap Value Equity, Value Equity,
Balanced, Active Country Allocation, Gold, Global Equity, International
Equity, International Small Cap, Asian Equity, European Equity, Japanese
Equity, Latin American, Emerging Markets, Emerging Market Debt, China Growth,
Equity Growth, Emerging Growth, MicroCap, Aggressive Equity and U.S. Real
Estate Portfolios, included as part of Post-Effective Amendment No. 26 to the
Registration Statement on Form N-1A of the Fund (File No.33-23166) filed with
the Securities and Exchange Commission via EDGAR on October 13, 1995 is hereby
incorporated by reference as if set forth in full herein.
The Statement of Additional Information for the Fixed Income, Global Fixed
Income, Municipal Bond, Mortgage-Backed Securities, High Yield, Real Yield,
Money Market, Municipal Money Market, Small Cap Value Equity, Value Equity,
Balanced, Active Country Allocation, Gold, Global Equity, International
Equity, International Small Cap, Asian Equity, European Equity, Japanese
Equity, Latin American, Emerging Markets, Emerging Market Debt, China Growth,
Equity Growth, Emerging Growth, Aggressive Equity and U.S. Real Estate
Portfolios, included as part of Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A of the Fund (File No. 33-23166) filed
with the Securities and Exchange Commission on March 1, 1995 and in final
form pursuant to Rule 497(c) via EDGAR on October 20, 1995, is hereby
incorporated by reference as if set forth in full herein.
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
Morgan Stanley Institutional Fund, Inc. (the "Fund") is a no-load, open-end
management investment company with diversified and non-diversified series
("portfolios"). The Fund currently consists of twenty-seven portfolios offering
a broad range of investment choices. The Fund is designed to provide clients
with attractive alternatives for meeting their investment needs. Shares of the
portfolios are offered with no sales charge or exchange or redemption fee (with
the exception of the International Small Cap Portfolio). The Portfolio
redesignated its single class of shares as the Class A shares on _______, 1995
and began offering a second class of shares designated as the Class B shares
on _______, 1995. The Class A shares and Class B shares currently offered by
the portfolios have different minimum investment requirements and fund expenses.
This Statement of Additional Information ("SAI") addresses information of the
Fund applicable to Class A shares and Class B shares of the Active Country
Allocation Portfolio (the "Portfolio"), one of the twenty-seven portfolios.
The remainder of the portfolios are the U.S. Real Estate Fixed Income, Global
Fixed Income, Municipal Bond, Mortgage-Backed Securities, High Yield, Money
Market, Municipal Money Market, Equity Growth, Emerging Growth, MicroCap,
Aggressive Equity, Small Cap Value Equity, Value Equity, Balanced, Global
Equity, International Equity, International Small Cap, Asian Equity, European
Equity, Japanese Equity, Latin American, Emerging Markets, Emerging Markets
Debt, Gold and China Growth Portfolios. The Mortgage-Backed Securities,
China Growth, and MicroCap Portfolios have not commenced offering shares.
This Statement is not a prospectus but should be read in conjunction with
the prospectus of the Active Country Allocation Portfolio (the "Prospectus").
To obtain the prospectus and Statement of Additional Information pertaining to
any of the other portfolios, please call the Morgan Stanley Institutional Fund,
Inc. Services Group at 1-800-548-7786.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . . 2
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Special Tax Considerations Relating to Foreign Investments . . . . . . . . 9
Taxes and Foreign Shareholders . . . . . . . . . . . . . . . . . . . . . . 10
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Determining Maturities of Certain Instruments. . . . . . . . . . . . . . . 13
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . 25
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Description of Securities and Ratings. . . . . . . . . . . . . . . . . . . 29
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY __, 1995, RELATING TO THE
PROSPECTUS OF THE ACTIVE COUNTRY ALLOCATION PORTFOLIO, DATED DECEMBER __, 1995.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies
set forth in the Prospectus:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the Portfolio may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Portfolio may incur costs in connection
with conversions between various currencies. The Portfolio will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades.
The Portfolio may enter into forward foreign currency exchange contracts in
several circumstances. When the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Portfolio anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, the Portfolio may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment, as the case may be. By entering into a forward contract
for a fixed amount of dollars, for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.
Additionally, when the Portfolio anticipates that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
the Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The Portfolio intends to enter into such
forward contracts to protect the value of portfolio securities on a continuous
basis.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the management of the
Fund believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the performance
of the Portfolio will thereby be served. Except under circumstances where a
segregated account is not required under the 1940 Act or the rules adopted
thereunder, the Fund's Custodian will place cash, U.S. government securities, or
high-grade debt securities into a segregated account of the Portfolio in an
amount equal to the value of the Portfolio's total assets committed to the
consummation of forward currency exchange contracts. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will be equal to the amount of such Portfolio's commitments with
respect to the contracts.
The Portfolio generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, the Portfolio
may either sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its contractual obligation
to deliver the foreign currency by purchasing an "offsetting" contract with the
same currency trader obligating it to purchase, on the same maturity date, the
same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for the Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that the Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.
2
<PAGE>
If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract prices.
Should forward prices decline during the period between the Portfolio's entering
into a forward contract for the sale of a foreign currency and the date it
enters into an offsetting contract for the purchase of the foreign currency, the
Portfolio will realize a gain to the extent that the price of the currency it
has agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Portfolio would suffer a loss to the extent
that the price of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.
The Portfolio is not required to enter into such transactions with regard
to their foreign currency-denominated securities. It also should be realized
that this method of protecting the value of portfolio securities against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange
which one can achieve at some future point in time. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time, they tend to limit any potential gain which
might result should the value of such currency increase.
FUTURES CONTRACTS
The Portfolio may enter into futures contracts and options on futures
contracts for the purpose of remaining fully invested and reducing transactions
costs. The Portfolio may also enter into futures contracts for hedging
purposes. The Portfolio will not enter into futures contracts or options
thereon for speculative purposes. Futures contracts provide for the future sale
by one party and purchase by another party of a specified amount of a specific
security at a specified future time and at a specified price. Futures
contracts, which are standardized as to maturity date and underlying financial
instrument, are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission ("CFTC"), a U.S. government agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities or currencies, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold" or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract is bought
or sold.
Futures contracts on securities indices or other indices do not require the
physical delivery of securities, but merely provide for profits and losses
resulting from changes in the market value of a contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date a final cash
settlement occurs and the futures position is simply closed out. Changes in the
market value of a particular futures contract reflect changes in the level of
the index on which the futures contract is based.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold for prices that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of an
additional "variation" margin will be required. Conversely, a change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Portfolio
expects to earn interest income on their margin deposits. With respect to each
long position in a futures contract or option thereon, the underlying commodity
value of such contract will always be covered by cash and cash equivalents set
aside plus accrued profits held at the futures commission merchant.
The Portfolio may purchase and write call and put options on futures
contracts, which are traded on a U.S. Exchange, and may enter into closing
transactions with respect to such options to terminate an existing position. An
option on a futures contract gives the purchaser the right (in return for the
premium paid) to assume a position in a futures contract (a long position if the
option
3
<PAGE>
is a call and a short position if the option is a put) at a specified exercise
price at any time during the term of the option. Upon exercise of the option,
the delivery of the accumulated balance in the writer's futures margin account,
which represents the amount by which the market price of the futures contract at
the time of exercise exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract.
The Portfolio will purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of a
futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the underlying securities with futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from market
fluctuations. The Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Portfolio requires that all
futures transactions constitute bona fide hedging transactions except that a
Portfolio may engage in futures transactions that do not constitute bona fide
hedging to the extent that not more than 5% of the liquidation value of the
Portfolio's total assets are required as margin deposits or premiums for such
transactions. The Portfolio will sell futures contracts only to protect
securities owned against declines in price or purchase contracts to protect
against an increase in the price of securities intended for purchase. As
evidence of this hedging interest, the Portfolio expects that approximately 75%
of its futures contracts will be "completed"; that is, equivalent amounts of
related securities will have been purchased or are being purchased by the
Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolios' exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this exposure.
While the Portfolio will incur commission expenses in both opening and closing
out futures positions, these costs are lower than transaction costs incurred in
the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS. The Portfolio will enter into
futures contract transactions to the extent that, immediately thereafter, the
sum of its initial margin deposits on open contracts exceeds 5% of the market
value of its total assets. In addition, the Portfolio will not enter into
futures contracts to the extent that its outstanding obligations to purchase
securities, under options, futures contracts and options on futures contracts
would exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contracts at any specific time. Thus, it may
not be possible to close a futures position. In the event of adverse price
movements, the Portfolio would continue to be required to make daily cash
payments to maintain its required margin. In such situations, if the Portfolio
has insufficient cash, it may have to sell portfolio securities to meet its
daily margin requirement at a time when it may be disadvantageous to do so. In
addition, the Portfolio may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the Portfolio's ability
to effectively hedge.
The Portfolio will minimize the risk that it will be unable to close out a
futures contract by entering only into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if, at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
Portfolio engages in futures strategies only for hedging purposes, the Adviser
does not believe that the Portfolio is subject to the risks of loss frequently
associated with futures transactions. The Portfolio would presumably have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying security or currency and sold it after the decline.
4
<PAGE>
Utilization of futures transactions by the Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities or currencies being
hedged. It is also possible that the Portfolio could both lose money on futures
contracts and also experience a decline in value of its portfolio securities.
There is also the risk of loss by the Portfolio of margin deposits in the event
of bankruptcy of a broker with whom the Portfolio has an open position in a
futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
SPECIAL RISKS ASSOCIATED WITH FORWARD CONTRACTS AND FUTURES CONTRACTS.
Transactions in forward contracts and futures contracts are subject to the
risk of governmental actions affecting trading in or the prices of currencies
underlying such contracts, which could restrict or eliminate trading and could
have a substantial adverse effect on the value of positions held by the
Portfolio. In addition, the value of such positions could be adversely affected
by a number of other complex political and economic factors applicable to the
countries issuing the underlying currencies.
Furthermore, unlike trading in most other types of instruments, there is no
systematic reporting of last sale information with respect to the foreign
currencies underlying forward contracts, futures contracts and options. As a
result, the available information on which the Portfolio's trading systems will
be based may not be as complete as the comparable data on which the Portfolio
makes investment and trading decisions in connection with securities and other
transactions. Moreover, because the foreign currency market is a global,
twenty-four hour market, events could occur on that market which will not be
reflected in the forward, futures or options markets until the following day,
thereby preventing the Portfolio from responding to such events in a timely
manner.
Settlements of over-the-counter forward contracts generally must occur
within the country issuing the underlying currency, which in turn requires
parties to such contracts to accept or make delivery of such currencies in
conformity with any United States or foreign restrictions and regulations
regarding the maintenance of foreign banking relationships, fees, taxes or other
charges.
In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Portfolio's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Portfolio.
Where no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the
trading of over-the-counter contracts, and the Portfolio may be unable to close
out options purchased or written, or forward contracts entered into, until their
exercise, expiration or maturity. This in turn could limit the Portfolio's
ability to realize profits or to reduce losses on open positions and could
result in greater losses.
Furthermore, over-the-counter transactions are not backed by the guarantee
of an exchange's clearing corporation. The Portfolio will therefore be subject
to the risk of default by, or the bankruptcy of, the financial institution
serving as its counterparty. One or more of such institutions also may decide
to discontinue its role as market-maker in a particular currency, thereby
restricting the Portfolio's ability to enter into desired hedging transactions.
The Portfolio will enter into over-the-counter transactions only with parties
whose creditworthiness has been reviewed and found satisfactory by the Adviser.
Forward contracts and currency swaps are not presently subject to
regulation by the CFTC, although the CFTC may in the future assert or be granted
authority to regulate such instruments. In such event, the Portfolio's ability
to utilize forward contracts and currency swaps in the manner set forth above
and in the Prospectus could be restricted.
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
The investment objective of the Active Country Allocation Portfolio is to
provide long-term capital appreciation by investing in accordance with country
weightings determined by the Adviser in common stocks of non-U.S. issuers. The
Adviser determines country allocations for the Portfolio on an ongoing basis
within policy ranges dictated by each country's market capitalization and
liquidity. The Portfolio will invest in industrialized countries throughout the
world that comprise the Morgan Stanley Capital
5
<PAGE>
International EAFE (Europe, Australia and the Far East) Index. The EAFE Index
is one of seven International Indices, twenty National Indices and thirty-eight
International Industry Indices making up the Morgan Stanley Capital
International Indices.
The Morgan Stanley Capital International EAFE Index is based on the share
prices of 1066 companies listed on the stock exchanges of Europe, Australia, New
Zealand and the Far East. "Europe" includes Austria, Belgium, Denmark, Finland,
France, Germany, Italy, The Netherlands, Norway, Spain, Sweden, Switzerland and
the United Kingdom. "Far East" includes Japan, Hong Kong and
Singapore/Malaysia.
OPTIONS TRANSACTIONS
GENERAL INFORMATION. As stated in the Prospectus, the Portfolio may purchase
and sell options on equity securities. Additional information with respect
to option transactions is set forth below. Call and put options on equity
securities are listed on various U.S. and foreign securities exchanges
("listed options") and are written in over-the-counter transactions ("OTC
Options").
Listed options are issued or guaranteed by the exchange on which they trade
or by a clearing corporation, such as Options Clearing Corporation ("OCC") in
the United States. Ownership of a listed call option gives the fund the right
to buy from the clearing corporation or exchange, the underlying security
covered by the option at the state exercise price (the price per unit of the
underlying security or currency) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then
have the obligation to sell to the clearing corporation or exchange, the
underlying security or currency at that exercise price prior to the expiration
date of the option, regardless of its current market price. Ownership of
listed put option would give the Portfolio the right to sell the underlying
security or currency to the clearing corporation or exchange at the state
exercise price. Upon notice of exercise of the put option, the writer of the
option would have the obligation to purchase the underlying security from the
clearing corporation or exchange at the exercise price.
OTC options are purchased from or sold (written) to dealers of financial
institutions which have entered into direct agreements with the Portfolio. With
OTC options, such variables as expiration date exercise price and premium will
be agreed upon between the Portfolio and the transactions dealer, without the
intermediate of a third party such as a clearing corporation or exchange. If
the transacting dealer fails to make or take delivery of the securities
underlying an option it has written, in accordance with the terms of that
option, the Portfolio would lose the premium paid for the option as well as any
anticipated benefit of the transaction.
COVERED CALL WRITING. The Portfolio may write (i.e., sell) covered call options
on portfolio securities. By doing so, the Portfolio would become obligated
during the terms of the option to deliver the securities underlying the option
should the option holder choose to exercise the option before the option's
termination date. In return for the call it has written, the Portfolio will
receive from the purchaser (or option holder) a premium which is the price of
the option, less a commission charged by a broker. The Portfolio will keep the
premium regardless of whether the option is exercised. A call option is
"covered" if the Portfolio owns the security underlying the option it has
written or has an absolute or immediate right to acquire the security by holding
a call option on such security, or maintains a sufficient amount of cash, cash
equivalents or liquid securities to purchase the underlying security. When the
Portfolio writes covered call options, it augments its income by the premiums
received and is thereby hedged to the extent of that amount against a decline in
the price of the underlying securities and the premiums received will offset a
portion of the potential loss incurred by the Portfolio if the securities
underlying the options are ultimately sold by the Portfolio at a loss. However,
during the option period, the Portfolio has, in return for the premium on the
option, given up the opportunity for capital appreciation above the
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exercise price should the market price of the underlying security increase, but
has retained the risk of loss should the price of the underlying security
decline. The size of premiums will fluctuate with varying market conditions.
COVERED PUT WRITING. The Portfolio may write covered put options on portfolio
securities. By doing so, the Portfolio incurs an obligation to buy the security
underlying the option from the purchaser of the put at the option's exercise
price at any time during the option period, at the purchaser's election (certain
listed and OTC options written by the Portfolio will be exercisable by the
purchaser only on a specific date). Generally, a put option is "covered" if the
Portfolio maintains cash, U.S. Government securities or other high grade debt
obligations equal to the exercise price of the option or if the Portfolio holds
a put option on the same underlying security with a similar or higher exercise
price.
The Portfolio will write put options to receive the premiums paid by
purchasers; when the Adviser wishes to purchase the security underlying the
option at a price lower than its current market price, in which case it will
write the covered put at an exercise price reflecting the lower purchase price
sought; and to close out long put option position.
PURCHASE OF PUT AND CALL OPTIONS. The Portfolio may purchase listed or OTC put
or call options on its portfolio securities in amounts exceeding no more than 5%
of its total assets. When the Portfolio purchases a call option it acquires the
right to purchase a designated security at a designated price (the "exercise
price"), and when the Portfolio purchases a put option it acquires the right to
sell a designated security at the exercise price, in each case on or before
a specified date (the "termination date"), usually not more than nine months
from the date the option is issued.
The Portfolio may purchase call options to close out a covered call
position or to protect against an increase in the price of a security it
anticipates purchasing. The Portfolio may purchase put options on securities
which it holds in its portfolio only to protect itself against a decline in the
value of the security. If the value of the underlying security were to fall
below the exercise price of the put purchased in an amount greater than the
premium paid for the option, the Portfolio would incur no additional loss. The
Portfolio may also purchase put options to close out written put positions in a
manner similar to call option closing purchase transactions.
The amount the Portfolio pays to purchase an option is called a "premium",
and the risk assumed by the Portfolio when it purchases an option is the loss of
this premium. Because the price of an option tends to move with that of its
underlying security, if the Portfolio is to make a profit, the price of the
underlying security must change and the change must be sufficient to cover the
premium and commissions paid. A price change in the security underlying the
option does not assure a profit since prices in the options market may not
always reflect such a change.
PORTFOLIO TURNOVER
The portfolio turnover rate for a year is the lesser of the value of the
purchases or sales for the year divided by the average monthly market value
of the Portfolio for the year, excluding securities with maturities of one
year or less. The rate of portfolio turnover will not be a limiting factor
when the Portfolio deems it appropriate to purchase or sell securities for
the Portfolio. However, the U.S. federal tax requirement that the Portfolio
derive less than 30% of its gross income from the sale or disposition of
securities held less than three months may limit the Portfolio's ability to
dispose of its securities. See "Taxes."
SECURITIES LENDING
The Portfolio may lend its investment securities to qualified institutional
investors who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, the Portfolio attempts to increase its net investment income through
the receipt of interest on the loan. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be for
the account of the Portfolio. The Portfolio may lend its investment securities
to qualified brokers, dealers, domestic and foreign banks or other financial
institutions, so long as the terms, structure and the aggregate amount of such
loans are not inconsistent with the Investment Company Act of 1940, as amended
(the "1940 Act"), or the Rules and Regulations or interpretations of the
Securities and Exchange Commission (the "Commission") thereunder, which
currently require that (a) the borrower pledge and maintain with the Portfolio
collateral consisting of cash, an irrevocable letter of credit issued by a
domestic U.S. bank, or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value of the
securities loaned, (b) the borrower
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add to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio
receive reasonable interest on the loan (which may include the Portfolio
investing any cash collateral in interest bearing short-term investments), any
distributions on the loaned securities and any increase in their market value.
There may be risks of delay in recovery of the securities or even loss of rights
in the collateral should the borrower of the securities fail financially.
However, loans will only be made to borrowers deemed by the Advisor to be of
good standing and when, in the judgment of the Advisor, the consideration which
can be earned currently from such securities loans justifies the attendant risk.
All relevant facts and circumstances, including the creditworthiness of the
broker, dealer or institution, will be considered in making decisions with
respect to the lending of securities, subject to review by the Board of
Directors of the Fund.
At the present time, the staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Board of Directors. In addition, voting
rights may pass with the loaned securities, but if a material event will occur
affecting an investment on loan, the loan must be called and the securities
voted.
TAXES
The following is only a summary of certain additional federal tax
considerations generally affecting the Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the federal, state or local tax treatment of the Fund or its
shareholders, and the discussion here and in the Prospectus is not intended
as a substitute for careful tax planning.
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
Each Portfolio within the Fund is generally treated as a separate
corporation for federal income tax purposes, and thus the provisions of the Code
generally will be applied to each Portfolio separately, rather than to the Fund
as a whole.
The Portfolio intends to qualify and elect to be treated for each taxable
year as a regulated investment company ("RIC") under Subchapter M of the Code.
Accordingly, the Portfolio must, among other things, (a) derive at least 90% of
its gross income each taxable year from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, and certain other related income, including,
generally, certain gains from options, futures and forward contracts; (b) derive
less than 30% of its gross income each taxable year from the sale or other
disposition of the following items if held less than three months (A) stock or
securities, (B) options, futures or forward contracts (other than options,
futures or forward contracts on foreign currencies), and (C) foreign currencies
(or options, futures, or forward contracts on foreign currencies) that are not
directly related to the Portfolio's principal business of investing in stocks or
securities (or options or futures with respect to stock or securities) (the
"short-short test") and (c) diversify its holdings so that, at the end of each
fiscal quarter of the Portfolio's taxable year, (i) at least 50% of the market
value of the Portfolio's total assets is represented by cash and cash items,
United States Government securities, securities of other RICs, and other
securities, with such other securities limited, in respect to any one issuer, to
an amount not greater than 5% of the value of the Portfolio's total assets or
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets is invested in the securities (other than
United States Government securities or securities of other RICs) of any one
issuer or two or more issuers which the Portfolio controls and which are engaged
in the same, similar, or related trades or business. For purposes of the 90% of
gross income requirement described above, foreign currency gains which are not
directly related to the Portfolio's principal business of investing in stock or
securities (or options or futures with respect to stock or securities) may be
excluded from income that qualifies under the 90% requirement.
In addition to the requirements described above, in order to qualify as a
RIC, the Portfolio must distribute at least 90% of its net investment income
(which generally includes dividends, taxable interest, and the excess of net
short-term capital gains over net long-term capital losses less operating
expenses) and at least 90% of its net tax-exempt interest income, if any, to
shareholders. If the Portfolio meets all of the RIC requirements, it will not
be subject to federal income tax on any of its net investment income or capital
gains that it distributes to shareholders.
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If the Portfolio fails to qualify as a RIC for any year, all of its income
will be subject to tax at corporate rates, and its distributions (including
capital gains distributions) will be taxable as ordinary income dividends to its
shareholders to the extent of the Portfolio's current and accumulated earnings
and profits, and will be eligible for the corporate dividends received deduction
for corporate shareholders.
The Portfolio will decide whether to distribute or to retain all or part of
any net capital gains (the excess of net long-term capital gains over net short-
term capital losses) in any year for reinvestment. If any such gains are
retained, the Portfolio will pay federal income tax thereon, and, if the
Portfolio makes an election, the shareholders will include such undistributed
gains in their income, will increase their basis in Portfolio shares by 65% of
the amount included in their income and will be able to claim their share of the
tax paid by the Portfolio as a refundable credit against their federal income
tax liability.
A gain or loss realized by a shareholder on the sale or exchange of shares
of the Portfolio held as a capital asset will be capital gain or loss, and such
gain or loss will be long-term if the holding period for the shares exceeds one
year, and otherwise will be short-term. Any loss realized on a sale or exchange
of shares of the Portfolio will be disallowed to the extent the shares disposed
of are replaced within the 61-day period beginning 30 days before and ending 30
days after the shares are disposed of. Any loss realized by a shareholder on
the disposition of shares held 6 months or less is treated as a long-term
capital loss to the extent of any distributions of net long-term capital gains
received by the shareholder with respect to such shares or any inclusion of
undistributed capital gain with respect to such shares.
The Portfolio will generally be subject to a nondeductible 4% federal
excise tax to the extent it fails to distribute by the end of any calendar year
at least 98% of its ordinary income for that year and 98% of its capital gain
net income (the excess of short- and long-term capital gains over short- and
long-term capital losses) for the one-year period ending on October 31 of that
year, plus certain other amounts.
The Portfolio is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions, and
redemptions) paid to shareholders who have not certified on the Account
Registration Form or on a separate form supplied by the Portfolio, that the
Social Security or Taxpayer Identification Number provided is correct and that
the shareholder is exempt from backup withholding or is not currently subject to
backup withholding.
For certain transactions, the Portfolio is required for federal income tax
purposes to recognize as gain or loss its net unrealized gains and losses on
forward currency and futures contracts as of the end of each taxable year, as
well as those actually realized during the year. In most cases, any such gain
or loss recognized with respect to a regulated futures contract is considered to
be 60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the contract. Realized gain or loss
attributable to a foreign currency forward contract is treated as 100% ordinary
income. Furthermore, foreign currency futures contracts which are intended to
hedge against a change in the value of securities held by the Portfolio may
affect the holding period of such securities and, consequently, the nature of
the gain or loss on such securities upon disposition.
As discussed above, in order for the Portfolio to continue to qualify for
federal income tax treatment as a RIC, at least 90% of its gross income for a
taxable year must be derived from certain qualifying income, including
dividends, interest, income derived from loans of securities, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
related income, including gains from options, futures and forward contracts,
derived with respect to its business of investing in stock, securities or
currencies. Any net gain realized from the closing out of futures contracts
will therefore generally be qualifying income for purposes of the 90%
requirement. Qualification as a RIC also requires that less than 30% of a
Portfolio's gross income be derived from the sale or other disposition of stock,
securities, options, futures or forward contracts (including certain foreign
currencies not directly related to the Fund's business of investing in stock or
securities) held less than three months. In order to avoid realizing excessive
gains on futures contracts held less than three months, the Portfolio may be
required to defer the closing out of futures contracts beyond the time when it
would otherwise be advantageous to do so.
SPECIAL TAX CONSIDERATIONS RELATING TO FOREIGN INVESTMENTS
Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates that occur between the time the Portfolio
accrues interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Portfolio actually collects
such receivables or pays such liabilities are treated as ordinary income or
ordinary loss to the
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Portfolio. Similarly, gains or losses on disposition of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gain or loss to the Portfolio.
These gains or losses increase or decrease the amount of the Portfolio's net
investment income available to be distributed as ordinary income to its
shareholders.
It is expected that the Portfolio will be subject to foreign withholding
taxes with respect to its dividend and interest income from foreign countries,
and the Portfolio may be subject to foreign income taxes with respect to other
income. So long as more than 50% in value of the Portfolio's total assets at
the close of the taxable year consists of stock or securities of foreign
corporations, the Portfolio may elect to treat certain foreign income taxes
imposed on it for United States federal income tax purposes as paid directly by
its shareholders. The Portfolio will make such an election only if it deems it
to be in the best interest of its shareholders and will notify shareholders in
writing each year if it makes an election and of the amount of foreign income
taxes, if any, to be treated as paid by the shareholders. If the Portfolio
makes the election, shareholders will be required to include in income their
proportionate shares of the amount of foreign income taxes treated as imposed on
the Portfolio and will be entitled to claim either a credit (subject to the
limitations discussed below) or, if they itemize deductions, a deduction, for
their shares of the foreign income taxes in computing their federal income tax
liability.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes will be subject to a number of complex limitations regarding the
availability and utilization of the credit. Because of these limitations,
shareholders may be unable to claim a credit for the full amount of their
proportionate shares of the foreign income taxes paid by the Portfolio.
Shareholders are urged to consult their tax advisors regarding the application
of these rules to their particular circumstances.
TAXES AND FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, a foreign trust or estate, a foreign corporation, or a foreign
partnership ("Foreign Shareholder") depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Portfolio is not effectively connected with a U.S.
trade or business carried on by a Foreign Shareholder, distributions of net
investment income plus the excess of net short-term capital gains over net
long-term capital losses will be subject to U.S. withholding tax at the rate of
30% (or such lower treaty rate as may be applicable) upon the gross amount of
the dividend. Furthermore, Foreign Shareholders will generally be exempt from
U.S. federal income tax on gains realized on the sale of shares of the
Portfolio, distributions of net long-term capital gains, and amounts retained by
the Fund which are designated as undistributed capital gains.
If the income from the Portfolio is effectively connected with a U.S. trade
or business carried on by a Foreign Shareholder, then distributions from the
Portfolio and any gains realized upon the sale of shares of the Portfolio, will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens
and residents or domestic corporations.
The Portfolio may be required to withhold U.S. federal income tax on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless the Foreign Shareholder complies with Internal
Revenue Service certification requirements.
The tax consequences to a Foreign Shareholder entitled to claim the
benefits of an applicable tax treaty may differ from those described here.
Furthermore, Foreign Shareholders are strongly urged to consult their own tax
advisors with respect to the particular tax consequences to them of an
investment in the Portfolio, including the potential application of the
provisions of the Foreign Investment in Real Estate Property Tax Act of 1980, as
amended.
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PURCHASE OF SHARES
The following supplements the Purchase of Shares section in the Prospectus.
The purchase price of shares of the Portfolio is the net asset value
next determined after the order is received. An order received prior to the
regular close of the New York Stock Exchange (the "NYSE") will be executed at
the price computed on the date of receipt; and an order received after the
regular close of the NYSE will be executed at the price computed on the next
day the NYSE is open. Shares of the Fund may be purchased on any day the
NYSE is open. The NYSE will be closed on the following days: Labor Day,
September 4, 1995; Thanksgiving Day, November 23, 1995; Christmas Day,
December 25, 1995; New Year's Day, January 1, 1996; Presidents' Day, February
19, 1996; and Good Friday, April 5, 1996; Memorial Day, May 27, 1996;
Independence Day, July 4, 1996.
The Portfolio reserves the right in its sole discretion (i) to suspend the
offering of its shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (iii) to
reduce or waive the minimum for initial and subsequent investments for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of the Portfolio's shares.
REDEMPTION OF SHARES
The following supplements the Redemption of Shares section in the
Prospectus.
The Portfolio may suspend redemption privileges or postpone the date of payment
(i) during any period that the NYSE is closed, or trading on the NYSE is
restricted as determined by the Commission, (ii) during any period when an
emergency exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for the Portfolio to dispose of securities
owned by it, or fairly to determine the value of its assets, and (iii) for such
other periods as the Commission may permit.
No charge is made by the Portfolio for redemptions. Any redemption may be
more or less than the shareholder's cost depending on the market value of the
securities held by the Portfolio.
To protect your account and the Fund from fraud, signature guarantees are
required for certain redemptions. Signature guarantees enable the Fund to
verify the identity of the person who has authorized a redemption from your
account. Signature guarantees are required in connection with: (1) all
redemptions, regardless of the amount involved, when the proceeds are to be paid
to someone other than the registered owner(s) and/or registered address; and
(2) share transfer requests.
A guarantor must be a bank, a trust company, a member firm of a domestic
stock exchange, or a foreign branch of any of the foregoing. Notaries public
are not acceptable guarantors.
The signature guarantees must appear either: (1) on the written request
for redemption; (2) on a separate instrument for assignment ("stock power")
which should specify the total number of shares to be redeemed; or (3) on all
stock certificates tendered for redemption and, if shares held by the Fund are
also being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the Shareholder Services section in the
Prospectus.
EXCHANGE PRIVILEGE
Shares of the Portfolio may be exchanged for shares of the same class of
shares of any other Portfolio of the Fund (except the International Equity
Portfolio). Exchange requests should be sent to Morgan Stanley Institutional
Fund, Inc., P.O. Box 2798, Boston, Massachusetts 02208-2798.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange, a shareholder should consider the investment objectives of
the Portfolio to be purchased.
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Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after these times will be processed
on the next business day. Exchanges may be subject to limitations as to amounts
or frequency, and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For federal income tax purposes an exchange between Portfolios is a taxable
event for shareholders subject to tax, and, accordingly, a gain or loss may be
realized. The exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Portfolio to another person by
making a written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Redemption
of Shares." As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The Portfolio has adopted the following restrictions which are fundamental
policies and may not be changed without the approval of the lesser of: (1) at
least 67% of the voting securities of the Portfolio present at a meeting if the
holders of more than 50% of the outstanding voting securities of the Portfolio
are present or represented by proxy, or (2) more than 50% of the outstanding
voting securities of the Portfolio. The Portfolio will not:
(1) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (except this shall not prevent the
Portfolio from purchasing or selling options or futures contracts or from
investing in securities or other instruments backed by physical commodities);
(2) purchase or sell real estate, although it may purchase and sell
securities of companies that deal in real estate and may purchase and sell
securities that are secured by interests in real estate;
(3) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or repurchase agreements;
(4) (i) purchase more than 10% of any class of the outstanding voting
securities of any issuer and (ii) purchase securities of an issuer (except
obligations of the U.S. Government and its agencies and instrumentalities) if as
a result, with respect to 75% of its total assets, more than 5% of the
Portfolio's total assets, at market value, would be invested in the securities
of such issuer;
(5) issue senior securities and will not borrow, except from banks and as
a temporary measure for extraordinary or emergency purposes and then, in no
event, in excess of 33 1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings);
(6) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the 1933 Act in
the disposition of restricted securities;
(7) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the Portfolio's total
assets would be invested in securities of companies within such industry;
provided, however, that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities; and
(8) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
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In addition, the Portfolio has adopted non-fundamental investment
limitations as stated below and in its Prospectus. Such limitations may be
changed without shareholder approval. The Portfolio will not:
(1) purchase on margin or sell short, except (i) the Portfolio may
enter into option transactions to the extent that not more than 5% of the
Portfolio's total assets are required as deposits to secure obligations under
options and not more than 20% of its total assets are invested in options,
futures contracts and options on futures contracts at any time, and (ii) as
specified above in Fundamental Policy No. (1);
(2) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment adviser owning more than 1/2 of 1% of
such securities together own more than 5% of such securities;
(3) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(4) invest for the purpose of exercising control over management of any
company;
(5) invest its assets in securities of any investment company, except by
purchase in the open market involving only customary brokers' commissions or in
connection with mergers, acquisitions of assets or consolidations and except as
may otherwise be permitted by the 1940 Act;
(6) invest more than 5% of its total assets in securities of companies
which have (with predecessors) a record of less than three years' continuous
operation;
(7) purchase warrants if, by reason of such purchase, more than 5% of the
value of the Portfolio's net assets (taken at market value) would be invested in
warrants, valued at the lower of cost or market. Included within this amount,
but not to exceed 2% of the value of the Portfolio's net assets, may be warrants
that are not listed on a recognized stock exchange;
(8) invest in real estate limited partnership interests;
(9) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the limitation as
described in the Prospectuses) that are publicly distributed, and (ii) by
lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent with the
1940 Act or the Rules and Regulations or interpretations of the Commission
thereunder;
(10) invest in oil, gas or other mineral leases; and
(11) purchase puts, calls, straddles, spreads and any combination thereof
if for any reason thereof the value of its aggregate investment in such classes
of securities will exceed 5% of its total assets, except that the Portfolio may
enter into option transactions to the extent that not more than 5% of the
Portfolio's total assets are required as deposits to secure obligations under
options and not more than 20% of its total assets are invested in options,
futures contracts and options on futures contracts at any time.
The percentage limitations contained in these restrictions apply at the
time of purchase of securities.
DETERMINING MATURITIES OF CERTAIN INSTRUMENTS
Generally, the maturity of a portfolio instrument shall be deemed to be the
period remaining until the date noted on the face of the instrument as the date
on which the principal amount must be paid, or in the case of an instrument
called for redemption, the date on which the redemption payment must be made.
However, instruments having variable or floating interest rates or demand
features may be deemed to have remaining maturities as follows: (1) a
Government Obligation with a variable rate of interest readjusted no less
frequently than annually may be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate; (b) an instrument
with a variable rate of interest, the principal amount of which is scheduled on
the face of the instrument to be paid in one year or less, may be deemed to have
a maturity equal to the period remaining until the next readjustment
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of the interest rate; (c) an instrument with a variable rate of interest that is
subject to a demand feature may be deemed to have a maturity equal to the longer
of the period remaining until the next readjustment of the interest rate or the
period remaining until the principal amount can be recovered through demand;
(d) an instrument with a floating rate of interest that is subject to a demand
feature may be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand; and (e) a repurchase agreement
may be deemed to have a maturity equal to the period remaining until the date on
which the repurchase of the underlying securities is scheduled to occur, or
where no date is specified, but the agreement is subject to demand, the notice
period applicable to a demand for the repurchase of the securities.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and choose its officers. Three Directors and all of the officers
of the Fund are directors, officers or employees of the Fund's adviser,
distributor or administrative services provider. The Directors are also
directors of other open-end funds advised by Morgan Stanley Asset Management
Inc. (collectively with the Fund, the "Open-end Fund Complex"). Officers of the
Fund are also officers of some or all of the other investment companies managed,
administered, advised or distributed by Morgan Stanley Asset Management Inc. or
its affiliates. The other Directors have no affiliation with the Fund's
adviser, distributor or administrative services provider. A list of the
Directors and officers of the Fund and a brief statement of their present
positions and principal occupations during the past five years is set forth
below:
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE POSITION WITH FUND PAST FIVE YEARS
- --------------------- ------------------ ---------------------------
<S> <C> <C>
Barton M. Biggs* Chairman and Chairman and Director of
1221 Avenue of the Director Morgan Stanley Asset
Americas Management Incorporated and
New York, NY 10020 Morgan Stanley Asset Management
(62) Limited; Managing Director
of Morgan Stanley & Co.,
Inc.; Director of Morgan
Stanley Group Inc.; Member
of International Advisory
Counsel of the Thailand
Fund; Chairman and Director
of The Brazilian Investment
Fund, Inc., The Latin
American Discovery Fund,
Inc., The Malaysia Fund,
Inc., Morgan Stanley Africa
Investment Fund, Inc.,
Morgan Stanley Asia-Pacific
Fund, Inc., Morgan Stanley
Emerging Markets Debt Fund,
Inc., Morgan Stanley
Emerging Markets Fund,
Inc., Morgan Stanley Fund
Inc., Morgan Stanley Global
Opportunity Bond Fund,
Inc., Morgan Stanley High
Yield Fund, Inc., Morgan
Stanley India Investment
Fund, Inc., Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
Warren J. Olsen* Director and Principal of Morgan Stanley
1221 Avenue of the President & Co. Incorporated; Principal
Americas of Morgan Stanley Asset
New York, NY 10020 Management Inc.; President
(39) and Director of The
Brazilian Investment Fund,
Inc., The Latin American
Discovery Fund, Inc., The
Malaysia Fund, Inc., Morgan
Stanley Africa Investment
Fund, Inc., Morgan Stanley
Asia-Pacific Fund, Inc.,
Morgan Stanley Emerging
Markets Debt Fund, Inc.,
Morgan Stanley Emerging
Markets Fund, Inc., Morgan
Stanley Fund, Inc., Morgan
Stanley Global Opportunity
Bond Fund, Inc., Morgan
Stanley High Yield Fund,
Inc., Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc., and The Turkish
Investment Fund, Inc.
John D. Barrett, II Director Chairman and Director of
521 Fifth Avenue Barrett Associates, Inc.
New York, NY 10135 (investment counseling);
(60) Director of the Ashforth
Company (real estate);
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE POSITION WITH FUND PAST FIVE YEARS
- --------------------- ------------------ ---------------------------
<S> <C> <C>
Gerard E. Jones Director Partner in Richards &
43 Arch Street O'Neil L.L.P. (law firm);
Greenwich, CT 06830 Director of the Morgan
(58) Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
Andrew McNally IV Director Chairman and Chief
8255 North Central Executive Officer of Rand
Park Avenue McNally (Publication);
Skokie, IL 60076 Director of Allendale
(54) Insurance Co., Mercury
Finance (consumer finance);
Zenith Electronics,
Hubbell, Inc. (industrial
electronics); Director of
the Morgan Stanley Fund,
Inc., Morgan Stanley
Institutional Fund, Inc.
and PCS Cash Fund, Inc.
Samuel T. Reeves Director Chairman of the Board and
8211 North Fresno Street CEO, Pinacle L.L.C.
Fresno, CA 93720 (investment firm);
(61) Director, Pacific Gas and
Electric and PG&E
Enterprises (utilities);
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
Fergus Reid Director Chairman and Chief
85 Charles Colman Blvd Executive Officer of
Pawling, NY 12564 LumeLite Corporation
(63) (injection molding firm);
Trustee and Director of
Vista Mutual Fund Group;
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
Frederick O. Robertshaw Director Of Counsel, Bryan, Cave
2800 North Central Avenue (law firm); Previously
Phoenix, AZ 85004 associated with Copple,
(61) Chamberlin & Boehm, P.C.
and Rake, Copple, Downey &
Black, P.C. (law firms);
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE POSITION WITH FUND PAST FIVE YEARS
- --------------------- ------------------ ---------------------------
<S> <C> <C>
Frederick B. Whittemore* Director Advisory Director of Morgan
1251 Avenue of the Stanley & Co. Incorporated; Vice-
Americas, 30th Flr. Chairman and Director of
New York, NY 10020 The Brazilian Investment
(65) Fund, Inc., The Latin
American Discovery Fund,
Inc., The Malaysia Fund,
Inc., Morgan Stanley Africa
Investment Fund, Inc.,
Morgan Stanley Asia-Pacific
Fund, Inc., Morgan Stanley
Emerging Markets Debt Fund,
Inc., Morgan Stanley
Emerging Markets Fund,
Inc., Morgan Stanley Fund,
Inc., Morgan Stanley Global
Opportunity Bond Fund,
Inc., Morgan Stanley High
Yield Fund, Inc., Morgan
Stanley India Investment
Fund, Inc., Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
James W. Grisham Vice President Principal of Morgan Stanley
1221 Avenue of the & Co. Incorporated; Principal
Americas of Morgan Stanley Asset
New York, NY 10020 Management Inc.; Vice
(54) President of The Brazilian
Investment Fund, Inc., The
Latin American Discovery
Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley
Africa Investment Fund,
Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan
Stanley Emerging Markets
Debt Fund, Inc., Morgan
Stanley Emerging Markets
Fund, Inc., Morgan Stanley
Fund, Inc., Morgan Stanley
Global Opportunity Bond
Fund, Inc., Morgan Stanley
High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE POSITION WITH FUND PAST FIVE YEARS
- --------------------- ------------------ ---------------------------
<S> <C> <C>
Harold J. Schaaff, Jr. Vice President Principal of Morgan Stanley
1221 Avenue of the & Co. Incorporated; Principal,
Americas General Counsel and Secretary of Morgan
New York, NY 10020 Stanley Asset Management Inc.; Vice
(35) President of The Brazilian
Investment Fund, Inc., The
Latin American Discovery
Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley
Africa Investment Fund,
Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan
Stanley Emerging Markets
Debt Fund, Inc., Morgan
Stanley Emerging Markets
Fund, Inc., Morgan Stanley
Fund, Inc., Morgan Stanley
Global Opportunity Bond
Fund, Inc., Morgan Stanley
High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
Joseph P. Stadler Vice President Vice President of Morgan
1221 Avenue of the Stanley Asset Management
Americas Inc.; Previously with Price
New York, NY 10020 Waterhouse LLP (accounting);
(41) Vice President of The
Brazilian Investment Fund,
Inc., The Latin American
Discovery Fund, Inc., The
Malaysia Fund, Inc., Morgan
Stanley Africa Investment
Fund, Inc., Morgan Stanley
Asia-Pacific Fund, Inc.,
Morgan Stanley Emerging
Markets Debt Fund, Inc.,
Morgan Stanley Emerging
Markets Fund, Inc., Morgan
Stanley Fund, Inc., Morgan
Stanley Global Opportunity
Bond Fund, Inc., Morgan
Stanley High Yield Fund,
Inc., Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE POSITION WITH FUND PAST FIVE YEARS
- --------------------- ------------------ ---------------------------
<S> <C> <C>
Valerie Y. Lewis Secretary Vice President of Morgan
1221 Avenue of the Stanley Asset Management
Americas Inc.; Previously with
New York, NY 10020 Citicorp (banking);
(39) Secretary of The Brazilian
Investment Fund, Inc., The
Latin American Discovery
Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley
Africa Investment Fund,
Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan
Stanley Emerging Markets
Debt Fund, Inc., Morgan
Stanley Emerging Markets
Fund, Inc., Morgan Stanley
Fund, Inc., Morgan Stanley
Global Opportunity Bond
Fund, Inc., Morgan Stanley
High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
Karl O. Hartmann Assistant Secretary Senior Vice President,
73 Tremont Street Secretary and General
Boston, MA 02108-3913 Counsel of Chase Global
(40) Funds Services Company;
Previously with Leland, O'Brien,
Rubinstein Associates, Inc.
[(investments)].
James R. Rooney Treasurer Assistant Vice President,
73 Tremont Street Chase Global Funds Services
Boston, MA 02108-3913 Company; Manager of Fund
(37) Administration; Previously
with Scudder, Stevens &
Clark, Inc. (investments);
and Ernst & Young LLP
(accounting); Treasurer of
The Brazilian Investment
Fund, Inc., The Latin
American Discovery Fund, Inc.,
The Malaysia Fund, Inc.,
Morgan Stanley Africa
Investment Fund, Inc., Morgan
Stanley Asia-Pacific Fund,
Inc., Morgan Stanley Emerging
Markets Debt Fund, Inc.,
Morgan Stanley Emerging
Markets Fund, Inc., Morgan
Stanley Fund, Inc., Morgan
Stanley Global Opportunity
Bond Fund, Inc., Morgan
Stanley High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE POSITION WITH FUND PAST FIVE YEARS
- --------------------- ------------------ ---------------------------
<S> <C> <C>
Joanna Haigney Assistant Treasurer Supervisor of Fund
73 Tremont Street Administration and
Boston, MA 02108-3913 Compliance, Chase Global
(29) Funds Services Company;
Previously with Coopers &
Lybrand L.L.P.; Assistant
Treasurer of The Brazilian
Investment Fund, Inc., The
Latin American Discovery
Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley
Africa Investment Fund,
Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan
Stanley Emerging Markets
Debt Fund, Inc., Morgan
Stanley Emerging Markets
Fund, Inc., Morgan Stanley
Fund, Inc., Morgan Stanley
Global Opportunity Bond
Fund, Inc., Morgan Stanley
High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
<FN>
______________
* "Interested Person" within the meaning of the 1940 Act.
</TABLE>
REMUNERATION OF DIRECTORS AND OFFICERS
Effective June 28, 1995, the Open-end Fund Complex will pay each of the
nine Directors who is not an "interested person" an annual aggregate fee of
$55,000, plus out-of-pocket expenses. The Open-end Fund Complex will pay each
of the members of the Fund's Audit Committee, which consists of the Fund's
Directors who are not "interested persons," an additional annual aggregate fee
of $10,000 for serving on such committee. The allocation of such fees will be
among the three funds in the Open-end Fund Complex in direct proportion to their
respective average net assets. For the fiscal year ended December 31, 1994, the
Fund paid approximately $83,000 in Directors' fees and expenses. Directors who
are also officers or affiliated persons receive no remuneration for their
services as Directors. The Fund's officers are paid by the Adviser or its
agents. As of February 1, 1995, to Fund management's knowledge, the Directors
and officers of the Fund, as a group, owned less than 1% of the outstanding
common stock of each portfolio of the Fund. The following table shows
aggregate compensation paid to each of the Fund's Directors by the Fund and
the Fund Complex, respectively, in the fiscal year ended December 31, 1994.
20
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
PERSON, COMPENSATION RETIREMENT ANNUAL COMPENSATION
POSITION FROM BENEFITS ACCRUED BENEFITS FROM REGISTRANT
REGISTRANT AS PART OF FUND UPON AND FUND COMPLEX
EXPENSE RETIREMENT PAID TO DIRECTORS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frederick B. Whittemore,* $15,750 $ $ $67,800
Director and Chairman of
the Board
John P. Britton,** 16,500 27,550
Director
George R. Bunn, Jr.,** 18,350 29,400
Director
A. Macdonald Caputo,** N/A N/A
Director
Gerard E. Jones,* 15,750 85,584
Director
Peter E. deSvastich,** 15,750 40,058
Director
Warren J. Olsen,* N/A N/A
Director and President
<FN>
_______________
* As of June 28, 1995, the following persons were elected Directors of the
Fund: Barton M. Biggs, John D. Barrett II, Gerard E. Jones, Andrew McNally
IV, Warren J. Olsen, Samuel T. Reeves, Fergus Reid, Frederick O. Robertshaw
and Frederick B. Whittemore.
** Resigned effective June 28, 1995.
</TABLE>
INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENTS
Morgan Stanley Asset Management Inc. ("MSAM" or the "Adviser") is a
wholly-owned subsidiary of Morgan Stanley Group Inc. The principal offices of
Morgan Stanley Group Inc. are located at 1221 Avenue of the Americas, New York,
NY 10020. As compensation for advisory services for the year ended October 31,
1992, the two months ended December 31, 1992, the fiscal years ended December
31, 1993 and December 31, 1994, the Adviser earned fees of approximately
$8,312,000, $1,725,000, $17,539,000 and $34,338,000, respectively, and from
such fees voluntarily waived fees of $962,000, $600,000, $3,037,000 and
$2,640,000, respectively. For the year ended October 31, 1992, the two months
ended December 31, 1992, the fiscal years ended December 31, 1993 and December
31, 1994, the Fund paid brokerage commissions of approximately $3,477,000,
$370,000, $5,827,000 and $7,287,293, respectively. For the year ended
October 31, 1992, the two months ended December 31, 1992, the fiscal years ended
December 31, 1993 and December 31, 1994, the Fund paid in the aggregate $66,600,
$4,000, $797,000 and $796,000, respectively, as brokerage commissions to Morgan
Stanley & Co. Incorporated, an affiliated broker-dealer, which represented 2%,
1%, 13% and 11% of the total amount of brokerage commissions paid in each
respective period. For the year ended October 31, 1992, the two
21
<PAGE>
months ended December 31, 1992 and the fiscal years ended December 31, 1993 and
December 31, 1994, the Fund paid administrative fees to MSAM of approximately
$2,624,000, $542,000, $4,662,000 and $4,458,000, respectively.
Pursuant to the MSAM Administration Agreement between the Adviser and the
Fund, the Adviser provides Administrative Services. For its services under the
Administration Agreement, the Fund pays the Adviser a monthly fee which on an
annual basis equals 0.15 of 1% of the average daily net assets of each
portfolio.
Under an Agreement between the Adviser and The Chase Manhattan Bank, N.A.
("Chase", successor in interest to United States Trust Company of New York,)
Chase Global Funds Services Company ("CGFSC", formerly Mutual Funds Service
Company, and now a Chase subsidiary) provides certain administrative services
to the Fund. CGFSC provides operational and administrative services to
investment companies with approximately $61 billion in assets and having
approximately 217,452 shareholder accounts as of September 30, 1995. CGFSC's
business address is 73 Tremont Street, Boston, Massachusetts 02108-3913.
CODE OF ETHICS
The Board of Directors of the Fund has adopted a Code of Ethics under Rule
17j-1 of the 1940 Act which incorporates the Code of Ethics of the Adviser
(together, the "Codes"). The Codes significantly restrict the personal
investing activities of all employees of the Adviser and, as described below,
impose additional, more onerous, restrictions on the Fund's investment
personnel.
The Codes require that all employees of the Adviser preclear any personal
securities investment (with limited exceptions, such as government securities).
The preclearance requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the proposed investment.
The substantive restrictions applicable to all employees of the Adviser include
a ban on acquiring any securities in a "hot" initial public offering and a
prohibition from profiting on short-term trading in securities. In addition, no
employee may purchase or sell any security that at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any fund advised by the Adviser.
Furthermore, the Codes provide for trading "blackout periods" that prohibit
trading by investment personnel of the Fund within periods of trading by the
Fund in the same (or equivalent) security.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The names and addresses of the holders of 5% or more of the outstanding
shares of any class of the Fund as of October 23, 1995 and the percentage of
outstanding shares of such classes owned beneficially or of record by such
shareholders as of such date are, to Fund management's knowledge, as follows:
ACTIVE COUNTRY ALLOCATION PORTFOLIO: The Trustees of Columbia University in the
City of New York, 475 Riverside Drive, Suite 401, New York, NY 10115, owned 16%
of such Portfolio's total outstanding shares.
Oglebay Norton Company, 1100 Superior Avenue, Cleveland, OH 44114-2598, owned
11% of such Portfolio's total outstanding shares.
City of New York Deferred Compensation Plan, 40 Rector Street, 3rd Floor, New
York, NY 10006, owned 12% of such Portfolio's total outstanding shares.
The Finn Foundation, Northern Trust Co., Master Trust Dept., P.O. Box 92984,
Chicago, IL 60675, owned 8% of such Portfolio's total outstanding shares.
Strafe & Co., F/A/O/ in Thomson Consumer Electronics, 235 West Schrock Road,
Westerville, OH 43081, owned 7% of such Portfolio's total outstanding shares.
22
<PAGE>
Sahara Enterprises, Inc., 3 First National Plaza, Suite 2000, Chicago, IL 60602-
4260, owned 6% of such Portfolio's total outstanding shares.
AGGRESSIVE EQUITY PORTFOLIO: Kinghugh S.A. C/O Office of Directors Apt. A,
11th floor, Chin Lan Bldg., 306 Tun HWA Rd. South Taipei, owned 13% of such
Portfolio's total outstanding shares.
Valassis Enterprises - Equity, C/O Franklin Enterprises, 520 Lake Cook Road
Suite 380, Deerfield, IL 60015, owned 17% of such Portfolio's total
outstanding shares.
Heinz C. Prechter, ASC Incorporated C/O Mr. David Treadwell, One Heritage
Place Suite 400, Southgate, MI 48195, owned 8% of such Portfolio's total
outstanding shares.
ASIAN EQUITY PORTFOLIO: Association De Biefsaissance Et De Retraite Des
Pollciers De La Communaute Urbaine De Montreal, 480 Gilford Street, Montreal,
Quebec H2l1N3, owned 9% of such Portfolio's total outstanding shares.
BALANCED PORTFOLIO: The American Roentgen Ray Society, 1891 Preston White
Drive, Reston, VA 22091-5431, owned 21% of such Portfolio's total outstanding
shares.
EMERGING GROWTH PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley
Profit Sharing Plan, P.O. Box 92956, Chicago, IL 60675-2956, owned 18% of such
Portfolio's total outstanding shares.
Allendale Mutual Insurance Co., P.O. Box 7500, Johnston, RI 02919-0750, owned 7%
of such Portfolio's total outstanding shares.
Claude Worthington Benedum Foundation, 1400 Benedum Trees Building, Pittsburgh,
PA 15222, owned 6% of such Portfolio's total outstanding shares.
EMERGING MARKETS DEBT PORTFOLIO: Northwestern University, 633 Clark Street,
Evanston, IL 60208-1122, owned 13% of such Portfolio's total outstanding shares.
Swarthmore College, 500 College Avenue, Swarthmore, PA 19081-1110, owned 7% of
such Portfolio's total outstanding shares.
EMERGING MARKETS PORTFOLIO: Ministers & Missionaries Benefit Board of the
American Baptist Churches, 475 Riverside Drive, New York, NY 10115, owned 11%
of such Portfolio's total outstanding shares.
Ewing Marion Kauffman Foundation, 4900 Oak Street, Kansas City, MO 11227,
owned 9% of such Portfolio's total outstanding shares.
EQUITY GROWTH PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley
Profit Sharing Plan, P.O. Box 92956, Chicago, IL 60675, owned 30% of such
Portfolio's total outstanding shares.
FIXED INCOME PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley
Profit Sharing Plan, P.O. Box 92956, Chicago, IL 60675-2956, owned 23% of such
Portfolio's total outstanding shares.
Brooks School, c/o Mr. Frank Marino, North Andover, MA 01845, owned 6% of such
Portfolio's total outstanding shares.
GLOBAL EQUITY PORTFOLIO: Robert College of Istanbul Turkey C/O Morgan
Stanley Asset Management, 25 Cabot Square, London, England E144QA, owned 43%
of such Portfolio's total outstanding shares.
Boston Safe Deposit and Trust Company as Custodian for the MBTA Retirement
Fund, 99 Summer Street Suite 1700, Boston, MA 02110, owned 22% of such
Portfolio's total outstanding shares.
JM Kaplan Fund, Inc., 880 Third Avenue 3rd floor, New York, NY 10022, owned
10% of such Portfolio's total outstanding shares.
Divtex and Company FBO, Pritchard Hubble and Herr C/O Texas Commerce Bank,
P.O. Box 951405, Dallas, TX 75395, owned 8% of such Portfolio's total
outstanding shares.
Leonard X Bosach U Bettie Kruger Foundation C/O David C. Soward & Capital
Inc., 8422 - 154th Avenue NE, Redmond, WA 98052, owned 6% of such Portfolio's
total outstanding shares.
GLOBAL FIXED INCOME PORTFOLIO: Farm Credit Bank Retirement Plan, Columbia
District American Industries Trust Company Trustee, 5700 NW Central Drive,
4th Floor, Houston, TX 77092, owned 14% of such Portfolio's total outstanding
shares.
Northern Trust Company as Custodian FBO The Lund Foundation, P.O. Box 92956,
Chicago, IL 60675, owned 12% of such Portfolio's total outstanding shares.
The Northern Trust Customer FBO Resort Condominiums International, P.O. Box
92956, Chicago, IL 60675-2956, owned 7% of such Portfolio's total outstanding
shares.
Divtex and Co., FBO Pritchard Hubble and Herr, c/o Texas Commerce Bank, P.O. Box
951405, Dallas, TX 75395-1405, owned 6% of such Portfolio's total outstanding
shares.
GOLD PORTFOLIO: Judith L. Biggs, 390 Riversville Road, Greenwich, CT 06831,
owned 23% of such Portfolio's total outstanding shares.
Ms. Charlotte Beers Ogilvy & Mather, 309 West 49th Street 12th floor, New
York, NY 10019, owned 13% of such Portfolio's total outstanding shares.
Trust U/A Sixth Will of Howard Ross, c/o James H. Ross, Rossrock Company, Inc.,
150 East 52nd Street, New York, NY 10020, owned 11% of such Portfolio's total
outstanding shares.
Richard L. Davis, 14450 TC Jester Suite 170, Houston, TX 77014, owned 6% of
such Portfolio's total outstanding shares.
HIGH YIELD PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley Profit
Sharing Plan, P.O. Box 92956, Chicago, IL 60675-2956, owned 26% of such
Portfolio's total outstanding shares.
Valassis Enterprises - Equity, c/o Franklin Enterprises, 520 Lake Cook Road,
Suite 380, Deerfield, IL 60015, owned 18% of such Portfolio's total outstanding
shares.
Stockton Trust Partnership, 7373 North Scottsdale Raod, A-188, Scottsdale, AZ
85253, owned 8% of such Portfolio's total outstanding shares.
INTERNATIONAL EQUITY PORTFOLIO: William Penn Foundation, 1630 Locust Street,
Philadelphia, PA 19103, owned 5% of such Portfolio's total outstanding shares.
INTERNATIONAL SMALL CAP PORTFOLIO: The Short Brothers Pension Fund, P.O. Box
241, Airport Road, Belfast, N. Ireland, owned 10% of such portfolio's total
outstanding shares.
The Casey Family Program, 1300 Dexter Avenue, Suite 400, Seattle, WA 98109-3547,
owned 8% of such Portfolio's total outstanding shares.
Trustees of Boston College Attn: Paul Haran Associates Treasurer, St. Thomas
More Hall 310, Chestnut Hill, MA 02167, owned 7% of such Portfolio's total
outstanding shares.
General Mills Inc., Master Trust: Pooled International Fund, One General Mills
Blvd., Minneapolis, MN 55426, owned 7% of such Portfolio's total outstanding
shares.
LATIN AMERICA: Barton M. Biggs, 390 Riversville Road, Greenwich, CT 06830,
owned 5% of such Portfolio's total outstanding shares.
MUNICIPAL BOND PORTFOLIO: Kevin W. Smith, 570 Arvida Parkway, Coral Gables, FL
33156, owned 11% of such Portfolio's total outstanding shares.
Daniel F. McDonald and Maria J. McDonald, 850 Old Dominion Drive, McLean, VA
22102, owned 11% of such Portfolio's total outstanding shares.
23
<PAGE>
James A. Rutherford, c/o Wingset Inc., 15 S. High Street, P.O. Box 166, New
Albany, OH 43054-0166, owned 6% of such Portfolio's total outstanding shares.
Cushman Trust, c/o Cambrian Services, 358 Fifth Avenue, New York, NY 10001,
owned 6% of such Portfolio's total outstanding shares.
Arnold E. Bellowe & Jill I. Bellowe, Rev Tr Dtd 12/26/94, 915 Park Lane,
Montecito, CA 93108-1421, owned 5% of such Portfolio's total outstanding shares.
SMALL CAP VALUE EQUITY PORTFOLIO: Morgan Stanley & Co. Pension Fund, c/o U.S.
Trust Company of New York, 770 Broadway Street, New York, NY 10003, owned 12% of
such Portfolio's total outstanding shares.
U.S. REAL ESTATE PORTFOLIO: European Patent Organization Pension Reserve
Fund, Erhardtstrasse 27 Munich, Germany 80298, owned 6% of such Portfolio's
total outstanding shares.
Kinghugh S.A., c/o Office of Directors, Chin Lan Building, 306 Tun Hwa Road,
South Taipei, owned 6% of such Portfolio's total outstanding shares.
VALUE EQUITY PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley
Profit Sharing Plan, P.O. Box 92956, Chicago, IL 60675, owned 16% of such
Portfolio's total outstanding shares.
24
<PAGE>
PERFORMANCE INFORMATION
The Fund may from time to time quote various performance figures to
illustrate the Portfolio's past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quotations.
In the case of total return, non-standardized performance quotations may be
furnished by the Fund but must be accompanied by certain standardized
performance information computed as required by the Commission. Current yield
and average annual compounded total return quotations used by the Fund are based
on the standardized methods of computing performance mandated by the Commission.
An explanation of those and other methods used by the Fund to compute or express
performance follows.
TOTAL RETURN
From time to time the Portfolio may advertise total return. Total return
figures are based on historical earnings and are not intended to indicate future
performance. The average annual total return is determined by finding the
average annual compounded rates of return over 1-, 5-, and 10-year periods (or
over the life of the Portfolio) that would equate an initial hypothetical $1,000
investment to its ending redeemable value. The calculation assumes that all
dividends and distributions are reinvested when paid. The quotation assumes the
amount was completely redeemed at the end of each 1-, 5-, and 10-year period (or
over the life of the Portfolio) and the deduction of all applicable Fund
expenses on an annual basis.
The average annual compounded rates of return (unless otherwise noted)
for the Portfolio for the one year period ended June 30, 1995 and
for the period from inception through June 30, 1995 are as follows:
<TABLE>
<CAPTION>
NAME OF PORTFOLIO SINCE DATE
AND DATE OF INCEPTION ONE YEAR OF INCEPTION
--------------------- -------- ------------
<S> <C> <C>
Active Country Allocation
January 17, 1992 [_____] [_____]
<FN>
______________
* Total return since inception.
</TABLE>
These figures were calculated according to the following formula: P(1 + T)n =
ERV
where:
P = a hypothetical initial payment of $1,000
25
<PAGE>
T = average annual total return
n = number of years
ERV = ending redeemable value of hypothetical $1,000 payment made at the
beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-,
or 10-year periods (or fractional portion thereof).
COMPARISONS
To help investors better evaluate how an investment in the Portfolio might
satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance as reported by various financial
publications. Advertisements may also compare performance (as calculated above)
to performance as reported by other investments, indices and averages. The
following publications may be used:
(a) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. -- analyzes price, current yield, risk, total
return and average rate of return (average annual compounded
growth rate) over specified time periods for the mutual fund
industry.
(b) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest,
Financial Times, Global Investor, Investor's Daily, Lipper
Analytical Services, Inc., Morningstar, Inc., New York Times,
Personal Investor, Wall Street Journal and Weisenberger
Investment Companies Service -- publications that rate fund
performance over specified time periods.
(c) Historical data supplied by the research departments of First
Boston Corporation, the J.P. Morgan companies, Salomon Brothers,
Merrill Lynch, Pierce, Fenner & Smith, Lehman Brothers and
Bloomberg L.P.
(d) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed
Income Fund Performance Analysis -- measures total return and
average current yield for the mutual fund industry. Ranks
individual mutual fund performance over specified time periods,
assuming reinvestment of all distributions, exclusive of any
applicable sales charges.
(e) Mutual Fund Source Book, published by Morningstar, Inc. --
analyzes price, yield, risk and total return for equity funds.
(f) Stocks, Bonds, Bills and Inflation, published by Hobson
Associates -- historical measure of yield, price and total return
for common and small company stock, long-term government bonds,
U.S. Treasury bills and inflation.
(g) Savings and Loan Historical Interest Rates -- as published in the
U.S. Savings & Loan League Fact Book.
The following indices and averages may also be used:
(a) Composite Indices -- 70% Standard & Poor's 500 Stock Index and
30% NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock
Index and 65% Salomon Brothers High Grade Bond Index; and 65%
Standard & Poor's 500 Stock Index and 35% Salomon Brothers High
Grade Bond Index.
(b) Consumer Price Index (or Cost of Living Index), published by the
U.S. Bureau of Labor Statistics -- a statistical measure of
change, over time, in the price of goods and services in major
expenditure groups.
(c) Donoghue's Money Fund Average -- an average of all major money
market fund yields, published weekly for 7- and 30-day yields.
(d) Dow Jones Composite Average or its component averages -- an
unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company
stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.
26
<PAGE>
(e) First Boston High Yield Index -- generally includes over 180
issues with an average maturity range of seven to ten years with
a minimum capitalization of $100 million. All issues are
individually trader-priced monthly.
(f) First Boston Upper/Middle Tier High Yield Index -- an unmanaged
index of bonds rated B to BBB.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated
by screening for convertible issues of 100 million or greater in
market capitalization. The index is priced monthly.
(h) IFC Global Total Return Composite Index -- an unmanaged index of
common stocks which includes 18 developing countries in Latin
America, East and South Asia, Europe, the Middle East and Africa
(net of dividends reinvested).
(i) Indata Balanced-Median Index -- an unmanaged index which includes
an asset allocation of 5% cash, 42% bonds and 53% equity based on
$52.7 billion in assets among 547 portfolios for the six months
ended June 30, 1995. (assumes dividends reinvested).
(j) Indata Equity-Median Stock Index -- an unmanaged index which
includes an average asset allocation of 5% cash and 95% equity
based on $364.7 billion in assets among 1,163 portfolios for the
quarter ended June 30, 1995.
(k) J.P. Morgan Emerging Markets Bond Index -- a market-weighted
index composed of all Brady bonds outstanding which includes
Argentina, Brazil, Mexico, Nigeria, the Philippines and
Venezuela.
(l) J.P. Morgan Traded Global Bond Index -- an unmanaged index of
securities which includes Australia, Belgium, Canada, Denmark,
France, Germany, Italy, Japan, The Netherlands, Spain, Sweden,
United Kingdom and the United States.
(m) Lehman Brothers Aggregate Bond Index -- an unmanaged index made
up of the Government/Corporate Index, the Mortgage-Backed
Securities Index and the Asset-Backed Securities Index.
(n) Lehman Brothers LONG-TERM Treasury Bond -- composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with
maturities of 10 years or greater.
(o) Morgan Stanley Capital International Combined Far East Free ex
Japan Index -- a market-capitalization weighted index comprising
stocks in Hong Kong, Indonesia, Korea, Malaysia, Philippines,
Singapore and Thailand. Korea is included in the MSCI Combined
Far East Free ex Japan Index at 20% of its market capitalization.
(p) Morgan Stanley Capital International EAFE Index -- an arithmetic,
market value-weighted average of the performance of over 900
securities on the stock exchanges of countries in Europe,
Australia and the Far East.
(q) Morgan Stanley Capital International Europe Index -- an unmanaged
index of common stocks which includes 14 countries throughout
Europe.
(r) Morgan Stanley Capital International Japan Index -- an unmanaged
index of common stocks.
(s) Morgan Stanley Capital International World Index -- an
arithmetic, market value-weighted average of the performance of
over 1,470 securities listed on the stock exchanges of countries
in Europe, Australia, the Far East, Canada and the United States.
(t) NASDAQ Industrial Index -- composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change
only and does not include income.
(u) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation
and finance company stocks listed on the New York Stock Exchange.
27
<PAGE>
(v) Philadelphia Gold and Silver Index -- an unmanaged index
comprised of seven leading companies involved in the mining of
gold and silver.
(w) Russell 2500 Index -- comprised of the bottom 500 stocks in the
Russell 1000 Index which represents the universe of stocks from
which most active money managers typically select; and all the
stocks in the Russell 2000 Index. The largest security in the
index has a market capitalization of approximately $1.3 billion.
(x) Salomon Brothers GNMA Index -- includes pools of mortgages
originated by private lenders and guaranteed by the mortgage
pools of the Government National Association.
(y) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA.
It a is value-weighted, total return index, including
approximately 800 issues with maturities of 12 years or greater.
(z) Salomon Brothers Broad Investment Grade Bond -- a market-weighted
index that contains approximately 4700 individually priced
investment grade corporate bonds rated BBB or better, U.S.
Treasury/agency issues and mortgage pass-through securities.
(aa) Standard & Poor's 500 Stock Index or its component indices --
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
(bb) Wilshire 5000 Equity Index or its component indices -- represents
the return on the market value of all common equity securities
for which daily pricing is available. Comparisons of performance
assume reinvestment of dividends.
(cc) Morgan Stanley Capital International Emerging Markets Global
Latin American Index -- an unmanaged, arithmetic market value-
weighted average of the performance of over 196 securities on the
stock exchanges of Argentina, Brazil, Chile, Colombia, Mexico,
Peru and Venezuela (Assumes reinvestment of dividends).
(dd) National Association of Real Estate Investment Trusts (NAREIT)
Index -- an unmanaged market weighted index of tax qualified
REITs (excluding healthcare REITs) listed on the New York Stock
Exchange, American Stock Exchange and the NASDAQ National
Market System including dividends.
(ee) The Lehman 7 Year Municipal Bond Index -- an unmanaged index
which consists of investment grade bonds with maturities between
6-8 years rated Baa or better. All bonds have been taken from
deals done within the last 5 years, with assets of $50 million
or larger.
(ff) EMBI+ -- expanding on the EMBI, which includes only Bradys, the
EMBI+ includes a broader group of Brady Bonds, loans, Eurobonds
and U.S. Dollar local markets instruments. A more
comprehensive benchmark than eMBI, the EMBI+ covers 49
instruments from 14 countries. At $96 billion, its market cap
is nearly 50% higher than the EMBI's. The EMBI+ is not, however,
intended to replace the EMBI but rather to complement it. The
EMBI continues to represent the most liquid, most easily traded
segment of the market, while the EMBI+ represents the broader
market, including more of the assets that investors typically
hold in their portfolios. Both of these indices are published
daily.
(gg) Morgan Stanley Capital International Latin America Global
Index -- a broad based market cap weighted composite index
covering at least 50% of markets in Mexico, Argentina, Brazil,
Chile, Colombia, Peru and Venezuela (assumes dividends
reinvested).
(hh) Lipper Capital Appreciation Index -- a composite of mutual funds
managed for maximum capital gains.
(ii) NASDAQ Composite Index -- an unmanaged index of common stocks.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Portfolio,
that the averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Fund to calculate its futures. In addition, there can be no assurance that the
Fund will continue this performance as compared to such other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund's Articles of Incorporation, as supplemented, permit the Directors
to issue 34,000,000,000 shares of common stock, par value $.001 per share, from
an unlimited number of classes ("portfolios") of shares. Currently the Fund
consists of shares of twenty-seven portfolios (China Growth, Mortgage-Backed
Securities and MicroCap Portfolios are not currently offering shares).
The shares of each portfolio of the Fund are fully paid and nonassessable,
and have no preference as to conversion, exchange, dividends, retirement or
other features. The shares of each portfolio of the Fund have no pre-emptive
rights. The shares of the Fund have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Directors can elect 100% of the Directors if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Fund.
28
<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute annually substantially all of the
Portfolio's net investment income, if any. The Fund may also distribute any
net realized capital gains in the amount and at the times that will avoid
both income (including taxable gains) taxes on it and the imposition of the
federal excise tax on income and capital gains (see discussion under "Taxes"
in this Statement of Additional Information). However, the Fund may also
choose to retain net realized capital gains and pay taxes on such gains. The
amounts of any income dividends or capital gains distributions cannot be
predicted.
Any dividend or distribution paid shortly after the purchase of shares of
the Portfolio by an investor may have the effect of reducing the per share net
asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes for shareholders subject to tax
as set forth herein and in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividends and capital gains distributions are automatically
received in additional shares of the Portfolio at net asset value (as of the
business day following the record date). This automatic reinvestment of
dividends and distributions will remain in effect until the Fund is notified by
the shareholder in writing at least three days prior to the record date that
either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected.
CUSTODY ARRANGEMENTS
Chase serves as the Fund's domestic custodian. Chase is not affiliated
with Morgan Stanley & Co. Incorporated. Morgan Stanley Trust Company, Brooklyn,
NY, acts as the Fund's custodian for foreign assets held outside the United
States and employs subcustodians who were approved by the Directors of the Fund
in accordance with Rule 17f-5 adopted by the Commission under the 1940 Act.
Morgan Stanley Trust Company is an affiliate of Morgan Stanley & Co.
Incorporated. In the selection of foreign subcustodians, the Directors consider
a number of factors, including, but not limited to, the reliability and
financial stability of the institution, the ability of the institution to
provide efficiently the custodial services required for the Fund, and the
reputation of the institution in the particular country or region.
DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
EXCERPTS FROM MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") DESCRIPTION OF
BOND RATINGS: Aaa - Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Aa -
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. Moody's
applies numerical modifiers 1, 2 and 3 in the Aa and A rating categories. The
modifier 1 indicates that the security ranks at a higher end of the rating
category, modifier 2 indicates a mid-range rating and the modifier 3 indicates
that the issue ranks at the lower end of the rating category. A - Bonds which
are rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future. Baa - Bonds
which are rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Ba - Bonds which are rated Ba are judged
to have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B - Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance
of interest
29
<PAGE>
and principal payments or of maintenance of other terms of the contact over any
long period of time may be small. Caa - Bonds which are rated Caa are of poor
standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest. Ca - Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. C - Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
EXCERPTS FROM STANDARD & POOR'S CORPORATION ("S&P") DESCRIPTION OF BOND
RATINGS: AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation and indicate an extremely strong capacity to pay
principal and interest. AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only to a
small degree. A - Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories. BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than for debt in higher rated
categories. BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. C - The rating C is reserved for income bonds
on which no interest is being paid. D - Debt rated D is in default, and payment
of interest and/or repayment of principal is in arrears.
DESCRIPTION OF MOODY'S RATINGS OF STATE AND MUNICIPAL NOTES: Moody's
ratings for state and municipal notes and other short-term obligations are
designated Moody's Investment Grade ("MIG"). Symbols used are as follows:
MIG-1 -- best quality, enjoying strong protection from established cash flows of
funds for their servicing or from established broad-based access to the market
for refinancing, or both; MIG-2 -- high quality with margins of protection ample
although not so large as in the preceding group; MIG-3 - favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades.
DESCRIPTION OF MOODY'S HIGHEST COMMERCIAL PAPER RATING: Prime-1 ("P1") --
Judged to be of the best quality. Their short-term debt obligations carry the
smallest degree of investment risk.
EXCERPT FROM S&P'S RATING OF MUNICIPAL NOTE ISSUES: S-1+ -- very strong
capacity to pay principal and interest; SP-2 -- strong capacity to pay principal
and interest.
DESCRIPTION OF S&P'S HIGHEST COMMERCIAL PAPER RATINGS: A-1+ -- this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 -- this designation indicates the degree of safety regarding
timely payment is very strong.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the U.S. Government, and by various
instrumentalities which have been established or sponsored by the U.S.
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain agencies and instrumentalities,
such as the Government National Mortgage Associates, are, in effect, backed by
the full faith and credit of the United States through provisions in their
charters that they may make "indefinite and unlimited" drawings on the Treasury,
if needed to service debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S. Treasury
to purchase certain amounts of their securities to assist the institution in
meeting its debt obligations. However, the U.S. Treasury has no lawful
obligation to assume the financial liabilities of these
30
<PAGE>
agencies or others. Finally, other agencies and instrumentalities, such as the
Farm Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency organized
under Federal charter with Government supervision. Instrumentalities issuing or
guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Immediate Credit
Banks, and the Federal National Mortgage Association.
III. FOREIGN INVESTMENTS
The Portfolio may invest in securities of foreign issuers. Investors
should recognize that investing in such foreign securities involves certain
special considerations which are not typically associated with investing in U.S.
issuers. For a description of the effect on the Portfolio of currency exchange
rate fluctuation, see "Investment Objectives and Policies -- Forward Foreign
Currency Exchange Contracts" above. As foreign issuers are not generally
subject to uniform accounting, auditing and financial reporting standards and
may have policies that are not comparable to those of domestic issuers, there
may be less information available about certain foreign companies than about
domestic issuers. Securities of some foreign issuers are generally less liquid
and more volatile than securities of comparable domestic issuers. There is
generally less government supervision and regulation of stock exchanges, brokers
and listed issuers than in the U.S. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. Foreign securities not listed
on a recognized domestic or foreign exchange are regarded as not readily
marketable and therefore such investments will be limited to 15% of the
Portfolio's net asset value at the time of purchase.
Although the Portfolio will endeavor to achieve the most favorable
execution costs in its portfolio transactions, fixed commissions on many foreign
stock exchanges are generally higher than negotiated commissions on U.S.
exchanges.
Certain foreign governments levy withholding or other taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. It is not expected that
the Portfolio or its shareholders would be able to claim a credit for U.S. tax
purposes with respect to any such foreign taxes. However, these foreign
withholding taxes may not have a significant impact on the Portfolio, because
the Portfolio's investment objective is to seek long-term capital appreciation
and any dividend or interest income should be considered incidental.
FINANCIAL STATEMENTS
The following are (i) the audited financial statements for the fiscal year
ended December 31, 1994 and the Report of Price Waterhouse LLP, independent
accountants, dated February 17, 1995 (the "December 1994 Statements and
Report") relating to the financial statements and financial highlights of
each of the portfolios except for the Municipal Bond, Mortgage-Backed
Securities, China Growth, U.S. Real Estate, Latin American, MicroCap and
Aggressive Equity Portfolios, which had not commenced operation as of
December 31, 1994; and (ii) the unaudited financial statements for the
six-month period ended June 30, 1995 relating to the financial statements and
financial highlights of each of the portfolios except for the Mortgage-Backed
Securities, China Growth and MicroCap Portfolios, which had not commenced
operation as of June 30, 1995 (the "June 1995 Statements").
The December 1994 Statements and Report and the June 1995 Statements included
in the Statement of Additional Information filed as part of Post-Effective
Amendment No. 26 to the Registration Statement on Form N-1A of the Fund (File
No. 33-23166) filed with the Securities and Exchange Commission via EDGAR on
October 13, 1995 (Accession No. 0000912057-008594) are hereby incorporated by
reference as if set forth in full herein.
31
<PAGE>
PART C
MORGAN STANLEY INSTITUTIONAL FUND, INC.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENT AND EXHIBITS
- ------------------------------------------
(A) FINANCIAL STATEMENTS
--------------------
1. INCLUDED IN PART A (PROSPECTUSES)
The Registrant's audited financial highlights for the Money Market,
Municipal Money Market, Emerging Growth, Equity Growth, Value Equity,
Small Cap Value Equity, Balanced, Active Country Allocation, Global
Equity, International Equity, International Small Cap, European
Equity, Asian Equity, Emerging Markets, Gold, Japanese Equity,
Emerging Markets Debt, Fixed Income, Global Fixed Income and High
Yield Portfolios, respectively, for the fiscal year ended December 31,
1994, are included in the prospectuses of the foregoing portfolios
which were filed with the SEC as set forth in Part A and are
incorporated herein by reference. The Fund's Municipal Bond,
Mortgage-Backed Securities, Latin American, China Growth, U.S. Real
Estate, Aggressive Equity and MicroCap Portfolios were not operational
as of December 31, 1994. Accordingly, no audited financial highlights
are included in the respective prospectus of each of the
foregoing portfolios.
The Registrant's unaudited financial highlights for such portfolios,
except the Active Country Allocation Portfolio, and for the Municipal
Bond, Latin American, U.S. Real Estate and Aggressive Equity
Portfolios, respectively, for periods of up to six months ended
June 30, 1995, are included in the prospectuses of the foregoing
portfolios which were filed with the SEC as set in Part A and are
incorporated herein by reference. The Registrant's unaudited
financial highlights for the Active Country Allocation Portfolio for
the six-month period ended June 30, 1995 are filed herewith. The
Fund's Mortgage-Backed Securities, China Growth and MicroCap
Portfolios were not operational as of June 30, 1995. Accordingly,
no unaudited financial highlights are included in the respective
prospectus of each of the foregoing portfolios.
2. INCLUDED IN PART B (STATEMENTS OF ADDITIONAL INFORMATION)
The Registrant's audited financial statements for the Money Market,
Municipal Money Market, Emerging Growth, Equity Growth, Value
Equity, Small Cap Value Equity, Balanced, Active Country Allocation,
Global Equity, International Equity, International Small Cap,
European Equity, Asian Equity, Emerging Markets, Gold, Japanese
Equity, Emerging Markets Debt, Fixed Income, Global Fixed Income and
High Yield Portfolios, respectively, for the fiscal year ended
December 31, 1994, including Price Waterhouse LLP's report thereon,
are included in the Statements of Additional Information relating to
the foregoing portfolios which were filed with the SEC set forth in
Part A (the "October, 1995 SAIs") and are incorporated by reference
into Part B for the Active Country Allocation Portfolio filed herewith
(the "Active Country SAI"). Included in such financial statements are
the following:
1. Report of Independent Accountants
2. Statement of Net Assets and Liabilities at December 31, 1994
3. Statement of Operations for the period ended December 31, 1994
4. Statement of Changes in Net Assets for the respective periods
presented ended in the two year period ended December 31, 1994
5. Financial Highlights for the respective periods presented ended
in the five year period ended December 31, 1994
6. Notes to Financial Statements
The Fund's Municipal Bond, Mortgage-Backed Securities, Latin
American, China Growth, U.S. Real Estate, Aggressive Equity and
MicroCap Portfolios were not operational as of December 31, 1994.
Accordingly, no audited financial statements are included in the
respective Part B of each of the foregoing portfolios.
<PAGE>
Registrant's unaudited financial statements for the Money Market,
Municipal Money Market, Emergency Growth, Equity Growth, Value
Equity, Small Cap Value Equity, Balanced, Active County Allocation,
Global Equity, Asian Equity, Emerging Markets, Gold, Japanese Equity,
Emerging Markets Debt, Fixed Income, Global First Income, High Yield,
Municipal Bond, Latin American, Aggressive Equity and U.S. Real
Estate Portfolios, respectively, for the six-month or other period
ended June 30, 1995 are included in the October, 1995 SAIs and are
incorporated by reference into the Active County SAI. Included in
such financial statements are the following:
1. Statement of Net Assets at June 30, 1995 (unaudited)
2. Statement of Operations for the periods ended June 30, 1995
(unaudited)
3. Statement of Changes in Net Assets (unaudited)
4. Financial Highlights for the respective periods from
commencement of operations through June 30, 1995 (unaudited)
5. Notes to Financial Statements
The Fund's Mortgage-Backed Securities, China Growth and MicroCap
Portfolios were not operational as of June 30, 1995. Accordingly, no
unaudited financial statements are included in the respective Part B
of each of the foregoing portfolios.
(B) EXHIBITS
--------
1 Articles of Amendment and Restatement are incorporated by
reference to Post-Effective Amendment No. 26 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and 811-5624),
as filed with the SEC via EDGAR on October 13, 1995.
2 Amended and Restated By-laws are incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the SEC
via EDGAR on August 1, 1995.
3 Not Applicable.
4 Registrant's Form of Specimen Security was previously filed and is
incorporated herein by reference.
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<PAGE>
5 (a) Investment Advisory Agreement between Registrant and Morgan
Stanley Asset Management Inc. is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
(b) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding Registrant's
Equity, Balanced and Fixed Income Portfolios) is incorporated by
reference to Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and 811-
5624), as filed with the SEC via EDGAR on August 1, 1995.
(c) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Global
Equity, Global Fixed Income, European Equity and Equity Growth
Portfolios) is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the
SEC via EDGAR on August 1, 1995.
(d) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Asian Equity
Portfolio) is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the
SEC via EDGAR on August 1, 1995.
(e) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Active
Country Allocation Portfolio) is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
(f) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Emerging
Markets, High Yield and International Small Cap Portfolios) is
incorporated by reference to Post-Effective Amendment No. 25 to
the Registrant's Registration Statement on Form N-1A (File Nos.
33-23166 and 811-5624), as filed with the SEC via EDGAR on August
1, 1995.
(g) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Small Cap
Value Equity Portfolio) is incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
(h) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Emerging
Markets Debt, Mortgage-Backed Securities, Municipal Bond and
Japanese Equity Portfolios) is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
(i) Sub-Advisory Agreement among Registrant, Morgan Stanley Asset
Management Inc. and Sun Valley Gold Company (with respect to the
Gold Portfolio) is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the
SEC via EDGAR on August 1, 1995.
(j) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the China Growth
Portfolio) is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the
SEC via EDGAR on August 1, 1995.
(k) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Latin
American Portfolio) is incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
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<PAGE>
(l) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Contrarian
Portfolio) is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the
SEC via EDGAR on August 1, 1995.
(m) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the Aggressive
Equity and U.S. Real Estate Portfolios) is incorporated by
reference to Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and 811-
5624), as filed with the SEC via EDGAR on August 1, 1995.
(n) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management Inc. (adding the MicroCap
Portfolio) is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the
SEC via EDGAR on August 1, 1995.
6 (a) Distribution Agreement between Registrant and Morgan Stanley &
Co. Incorporated is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the
SEC via EDGAR on August 1, 1995.
(b) Form of Supplement to Distribution Agreement between Registrant
and Morgan Stanley & Co. Incorporated, filed herewith.
8 (a) Mutual Fund Custody Agreement (Domestic Custody Agreement)
between Registrant and United States Trust Company of New York
dated March 10, 1994 is incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
(b) Registrant's Custody Agreement (International), dated July 31,
1989, as amended on ____________, 1995 is incorporated by
reference to Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and 811-
5624), as filed with the SEC via EDGAR on August 1, 1995.
9 (a) Administration Agreement between Registrant and Morgan Stanley
Asset Management Inc. (the "MSAM Administration Agreement") is
incorporated by reference to Post-Effective Amendment No. 25 to
the Registrant's Registration Statement on Form N-1A (File Nos.
33-23166 and 811-5624), as filed with the SEC via EDGAR on
August 1, 1995.
(b) U.S. Trust Administration Agreement is incorporated by reference
to Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and 811-
5624), as filed with the SEC via EDGAR on August 1, 1995.
10 Opinion of Counsel is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the SEC
via EDGAR on August 1, 1995.
11 Consent of Independent Accountants, filed herewith.
13 Purchase Agreement is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the SEC
via EDGAR on August 1, 1995.
15 Form of Plan of Distribution Pursuant to Rule 12b-1 for Class B Shares
(the "Class B Plan") of the Active Country Allocation Portfolio, filed
herewith. The following Class B Plans have been omitted because they
are substantially identical to the one filed herewith. The omitted
Class B Plans differ from the Class B Plan filed herewith only in
references to the portfolio to which the Class B Plan relates: Fixed
Income, Global Fixed Income, Municipal Bond, Mortgage-Backed
Securities, High Yield, Money Market, Municipal Money Market, Small
Cap Value Equity, Value Equity, Balanced, Gold, Global Equity,
International Equity, International Small Cap, Asian Equity, European
Equity, Japanese Equity, Latin American, Emerging Markets, Emerging
Markets Debt, China Growth, Equity Growth, Emerging Growth, MicroCap,
Aggressive Equity and U.S. Real Estate Portfolios.
16 Schedule of Computation of Performance Information is incorporated by
reference to Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and 811-5624),
as filed with the SEC via EDGAR on August 1, 1995.
19 Registrant's Rule 18F-3 Multiple Class Plan, filed herewith.
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<PAGE>
24 Powers of Attorney are incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-23166 and 811-5624), as filed with the SEC
via EDGAR on August 1, 1995.
27 Financial Data Schedules for the six-month or other period ended
June 30, 1995 for Registrant's portfolios in operation during such
periods (See Item 24(A)), filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is not controlled by or under common control with any
person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (ON SEPTEMBER 25, 1995)
Active Country Allocation Portfolio. . . . . . . . . . 170
Aggressive Equity Portfolio. . . . . . . . . . . . . . 114
Asian Equity Portfolio . . . . . . . . . . . . . . . . 925
Balanced Portfolio . . . . . . . . . . . . . . . . . . 116
Emerging Growth Portfolio. . . . . . . . . . . . . . . 693
Emerging Markets Portfolio . . . . . . . . . . . . . . 1,209
Equity Growth Portfolio. . . . . . . . . . . . . . . . 530
Fixed Income Portfolio . . . . . . . . . . . . . . . . 334
Global Equity Portfolio. . . . . . . . . . . . . . . . 056
Global Fixed Income Portfolio. . . . . . . . . . . . . 135
High Yield Portfolio . . . . . . . . . . . . . . . . . 400
International Equity Portfolio . . . . . . . . . . . . 418
International Small Cap Portfolio. . . . . . . . . . . 167
Latin American Portfolio . . . . . . . . . . . . . . . 388
Money Market Portfolio . . . . . . . . . . . . . . . . 283
Municipal Money Market Portfolio . . . . . . . . . . . 195
Small Cap Value Equity Portfolio . . . . . . . . . . . 446
U.S. Real Estate Portfolio . . . . . . . . . . . . . . 420
Value Equity Portfolio . . . . . . . . . . . . . . . . 488
European Equity Portfolio. . . . . . . . . . . . . . . 493
Municipal Bond Portfolio . . . . . . . . . . . . . . . 101
Mortgage-Backed Securities Portfolio . . . . . . . . . 0
Japanese Equity Portfolio. . . . . . . . . . . . . . . 558
Emerging Markets Debt Portfolio. . . . . . . . . . . . 589
Gold Portfolio . . . . . . . . . . . . . . . . . . . . 065
China Growth Portfolio . . . . . . . . . . . . . . . . 0
MicroCap Portfolio . . . . . . . . . . . . . . . . . . 0
ITEM 27. INDEMNIFICATION
Reference is made to Article TEN of the Registrant's Articles of
Incorporation. Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses
C-5
<PAGE>
incurred or paid by a trustee, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS WITH INVESTMENT ADVISER
Reference is made to the caption "The Investment Adviser" in the
Prospectus constituting Part A of this Registration Statement and "Investment
Advisory Services" in Part B of the Registration Statement.
Listed below are the officers and Directors of Morgan Stanley Asset Management
Inc. ("MSAM"). The information as to any other business, profession, vocation,
or employment of substantial nature engaged in by the Chairman, President and
Directors during the past two fiscal years, is incorporated by reference to
Schedules A and D of Form ADV filed by MSAM pursuant to the Advisers Act (SEC
File No. 801-15757).
Barton M. Biggs, Chairman and Director
Peter A. Nadosy, President, Director and Managing Director
James M. Allwin, Chief Operating Officer and Managing Director
F. Dominic Caldecott, Managing Director (MSAM), - UK
A. Macdonald Caputo, Managing Director
Ean Wah Chin, Managing Director (MSAM) and Vice President - Singapore
Garry B. Crowder, Managing Director and Vice President
Michael A. Crowe, Managing Director and Vice President
Madhav Dhar, Vice President and Managing Director
Kurt A. Feuerman, Managing Director
Gordon S. Gray, Vice President, Managing Director and Director
Gary D. Latainer, Managing Director
Dennis G. Sherva, Vice President, Managing Director and Director
Richard G. Woolworth, Jr., Vice President and Managing Director
Richard B. Fisher, Director
Donald H. McAllister, Director
Robert E. Angevine, Vice President and Principal
Gerald P. Barth, Vice President and Principal
S. Nicoll Benjamin, Jr., Vice President
Josephine M. Glass, Vice President
Richard S. Brody, Vice President
Terence P. Carmichael, Vice President and Principal
Mary T. Coughlin, Vice President
Eileen F. Cresham, Vice President and Principal
Pierre J. deVegh, Vice President
Abigail J. Feder, Vice President
Robert P. Follert, Vice President
George W. Gardner, Vice President
Geoffrey C. Getman, Vice President
James W. Grisham, Vice President and Principal
Perry E. Hall, II, Vice President and Principal
Bruce S. Ives, Vice President and Principal
Paul J. Jackson, Vice President
Margaret A. Kinsley, Vice President and Principal
John D. Knox, Vice President
Christopher A. H. Lewis, Vice President
Marianne J. Lippmann, Vice President and Principal
C-6
<PAGE>
Gary J. Mangino, Vice President and Principal
Winslow M. Marston, Vice President
Walter Maynard, Jr., Vice President and Principal
Amr M. Nosseir, Vice President
Warren J. Olsen, Vice President and Principal
Anthony J. Pesce, Vice President
Christopher G. Petrow, Vice President and Principal
Robin H. Prince, Vice President
Gail H. Reeke, Vice President and Principal
Thomas A. Rorro, Vice President
Bruce R. Sandberg, Vice President and Principal
Vinod R. Sethi, Vice President and Principal
Steven C. Sexauer, Vice President and Principal
Kim I. Spellman, Vice President
Joseph P. Stadler, Vice President
Kenneth E. Tanaka, Vice President
Susan I. Tuomi, Vice President
Philip W. Warner, Vice President and Principal
Philip W. Winters, Vice President and Principal
Alford E. Zick, Jr., Vice President and Principal
Marshall T. Bassett, Vice President
Jeffrey G. Boudy, Vice President
L. Kenneth Brooks, Vice President
Andrew C. Brown, Vice President (MSAM) - UK
Frances Campion, Vice President (MSAM) - UK
Carl Kuo-Wei Chien, Vice President (MSAM) - Hong Kong
Lori A. Cohane, Vice President
James Colmenares, Vice President
Kate Cornish-Bowden, Vice President (MSAM) - UK
Bertrand Le PanDe Ligny, Vice President (MSAM) - UK
Christine H. du Bois, Vice President
Raye L. Dube, Vice President
Maureen A. Grover, Vice President
Kenneth R. Holley, Vice President
Nan B. Levy, Vice President
Valerie Y. Lewis, Vice President
Gordon W. Loery, Vice President
Yvonne Longley, Vice President (MSAM) - UK
Jeffrey Margolis, Vice President
Paula J. Morgan, Vice President (MSAM) - UK
Clare K. Mutone, Vice President
Martin O. Pearce, Vice President (MSAM) - UK
Alexander A. Pena, Vice President
David J. Polansky, Vice President
Denise Saber, Vice President (MSAM) - UK
Michael James Smith, Vice President (MSAM) - UK
Christian K. Stadlinger, Vice President
Catherine Steinhardt, Vice President
Kunihiko Sugio, Vice President (MSAM) - Tokyo
Joseph Y.S. Tern, Vice President (MSAM) - Singapore
Ann D. Thivierge, Vice President
Richard Boon Hwee Toh, Vice President (MSAM) - Singapore
C-7
<PAGE>
K.N. Vaidyanathan, Vice President (MSAM) - Bombay
Kevin V. Wasp, Vice President
Warren Ackerman, III, Principal
John R. Alkire, Principal (MSAM) - Tokyo
Francine J. Bovich, Principal
Stuart J.M. Breslow, Principal
Arthur Certosimo, Principal
James K.K. Cheno, Principal (MSAM) - Singapore
Stephen C. Cordy, Principal
Jacqueline A. Day, Principal (MSAM) - UK
Paul B. Ghaffari, Principal
Marianne Laing Hay, Principal (MSAM) - UK
Kathryn Jonas Kasanoff, Principal
Debra A.F. Kushma, Principal
M. Paul Martin, Principal
Robert L. Meyer, Principal
Margaret P. Naylor, Principal (MSAM) - UK
Russell C. Platt, Principal
Christine T. Reilly, Principal
Robert A. Sargent, Principal (MSAM) - UK
Harold J. Schaaff, Jr., Secretary, Principal and General Counsel
Kiat Seng Seah, Principal (MSAM) - Singapore
Robert M. Smith, Principal
Charles B. Hintz, Treasurer
Madeline Diaz, Assistant Secretary
Madeline D. Barkhorn, Assistant Secretary
Charlene R. Herzer, Assistant Secretary
In addition, MSAM acts as investment adviser to the following
registered investment companies: American Advantage International Equity Fund;
The Brazilian Investment Fund, Inc.; certain portfolios of The Enterprise Group
of Funds, Inc.; Fountain Square International Equity Fund; General American
Capital Co.; The Latin American Discovery Fund, Inc., certain portfolios of The
Legends Fund, Inc.; The Malaysia Fund, Inc.; Morgan Stanley Africa Investment
Fund, Inc.; Morgan Stanley Asia-Pacific Fund, Inc.; Morgan Stanley Emerging
Markets Debt Fund, Inc.; Morgan Stanley Emerging Markets Fund, Inc.; all funds
of the Morgan Stanley Fund, Inc.; Morgan Stanley Global Opportunity Bond Fund,
Inc.; The Morgan Stanley High Yield Fund, Inc.; Morgan Stanley India Investment
Fund, Inc.; The Pakistan Investment Fund, Inc.; PCS Cash Fund, Inc.; SEI
Institutional Managed Trust - Balanced Portfolio; The Thai Fund, Inc. and The
Turkish Investment Fund, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS
Morgan Stanley & Co. Incorporated ("MS&Co.") is distributor for Morgan
Stanley Institutional Fund, Inc., Morgan Stanley Fund, Inc., and PCS Cash Fund,
Inc. The information required by this Item 29 with respect to each Director and
officer of MS&Co. is incorporated by reference to Schedule A of Form BD filed by
MS&Co. pursuant to the Securities and Exchange Act of 1934 (SEC File No. 8-
15869).
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a)
under the Investment Company Act of 1940 and the rules promulgated thereunder
are maintained in the physical possession of the Registrant; Registrant's
Transfer Agent, Chase Global Funds Service Company, formerly Mutual Funds
Service Company, P.O. Box 2798, Boston, Massachusetts 02208-2798; MSAM;
MS&Co.; and the Registrant's custodian banks, including sub-custodians.
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ITEM 31. MANAGEMENT SERVICES
The Registrant has a Service Agreement with The Chase Manhattan Bank,
N.A., successor in interest to United States Trust Company of New York, which
was filed as Exhibit No. 9(b) to Post-Effective Amendment No. 25 to the Fund's
Registration Statement and is incorporated herein by reference.
ITEM 32. UNDERTAKINGS
1. Registrant hereby undertakes that whenever a Shareholder or
Shareholders who meet the requirements of Section 16(c) of the Investment
Company Act of 1940 inform the Board of Directors of his or their desire to
communicate with other Shareholders of the Fund, the Directors will inform such
Shareholder(s) as to the approximate number of Shareholders of record and the
approximate costs of mailing or afford said Shareholders access to a list of
Shareholders.
2. Registrant hereby undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified,
for the MicroCap Portfolio within four to six months of the effective date of
Post-Effective Amendment No. 25 or the commencement of operations, whichever is
later.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York, on November 1, 1995.
MORGAN STANLEY INSTITUTIONAL FUND, INC.
By: /s/ Warren J. Olsen
--------------------
Warren J. Olsen
PRESIDENT AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Warren J. Olsen Director, President November 1, 1995
- ---------------------------- (Principal Executive
Warren J. Olsen Officer)
*/s/ Barton M. Biggs Director (Chairman) November 1, 1995
- ----------------------------
Barton M. Biggs
*/s/ Fergus Reid Director November 1, 1995
- ----------------------------
Fergus Reid
*/s/ Frederick O. Robertshaw Director November 1, 1995
- ----------------------------
Frederick O. Robertshaw
*/s/ Andrew McNally IV Director November 1, 1995
- ----------------------------
Andrew McNally IV
*/s/ John D. Barrett II Director November 1, 1995
- ----------------------------
John D. Barrett II
*/s/ Gerard E. Jones Director November 1, 1995
- ----------------------------
Gerard E. Jones
*/s/ Samuel T. Reeves Director November 1, 1995
- ----------------------------
Samuel T. Reeves
*/s/ Frederick B. Whittemore Director November 1, 1995
- ----------------------------
Frederick B. Whittemore
*/s/ James R. Rooney Treasurer November 1, 1995
- ---------------------------- (Principal Accounting
James R. Rooney Officer)
*By: /s/ Warren J. Olsen
-----------------------
Warren J. Olsen
Attorney-In-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EDGAR
EXHIBIT
NUMBER DESCRIPTION
EX-99.B 1 Articles of Amendment and Restatement are incorporated by
reference to Post-Effective Amendment No. 26 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on October 13, 1995.
EX-99.B 2 Amended and Restated By-laws are incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
EX-99.B 4 Registrant's Form of Specimen Security was previously filed and
is incorporated herein by reference.
EX-99.B 5 (a) Investment Advisory Agreement between Registrant and Morgan
Stanley Asset Management Inc. is incorporated by reference
to Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 5 (b) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
Registrant's Equity, Balanced and Fixed Income Portfolios)
is incorporated by reference to Post-Effective Amendment No.
25 to the Registrant's Registration Statement on Form N-1A
(File Nos. 33-23166 and 811-5624), as filed with the SEC via
EDGAR on August 1, 1995.
EX-99.B 5 (c) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Global Equity, Global Fixed Income, European Equity and
Equity Growth Portfolios) is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 5 (d) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Asian Equity Portfolio) is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 5 (e) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Active Country Allocation Portfolio) is incorporated by
reference to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A (File Nos.
33-23166 and 811-5624), as filed with the SEC via EDGAR on
August 1, 1995.
1
<PAGE>
EX-99.B 5 (f) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Emerging Markets, High Yield and International Small Cap
Portfolios) is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-23166 and 811-5624), as filed
with the SEC via EDGAR on August 1, 1995.
EX-99.B 5 (g) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Small Cap Value Equity Portfolio) is incorporated by
reference to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A (File Nos.
33-23166 and 811-5624), as filed with the SEC via EDGAR on
August 1, 1995.
EX-99.B 5 (h) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Emerging Markets Debt, Mortgage-Backed Securities,
Municipal Bond and Japanese Equity Portfolios) is
incorporated by reference to Post-Effective Amendment No.
25 to the Registrant's Registration Statement on Form N-1A
(File Nos. 33-23166 and 811-5624), as filed with the SEC via
EDGAR on August 1, 1995.
EX-99.B 5 (i) Sub-Advisory Agreement among Registrant, Morgan Stanley
Asset Management Inc. and Sun Valley Gold Company (with
respect to the Gold Portfolio) is incorporated by reference
to Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 5 (j) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the China Growth Portfolio) is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 5 (k) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Latin American Portfolio) is incorporated by reference
to Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 5 (l) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Contrarian Portfolio) is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 5 (m) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Aggressive Equity
2
<PAGE>
and U.S. Real Estate Portfolios) is incorporated by
reference to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A (File Nos.
33-23166 and 811-5624), as filed with the SEC via EDGAR on
August 1, 1995.
EX-99.B 5 (n) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management, Inc. (adding
the MicroCap Portfolio) is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 6 (a) Distribution Agreement between Registrant and Morgan Stanley
& Co. Incorporated is incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
EX-99.B 6 (b) Form of Supplement to Distribution Agreement between
Registrant and Morgan Stanley & Co. Incorporated, filed
herewith.
EX-99.B 8 (a) Mutual Fund Custody Agreement (Domestic Custody Agreement)
between Registrant and United States Trust Company of New
York dated March 10, 1994 is incorporated by reference to
Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-23166 and
811-5624), as filed with the SEC via EDGAR on August 1,
1995.
EX-99.B 8 (b) Registrant's Custody Agreement (International), dated July
31, 1989, as amended on _____________, 1995 is incorporated
by reference to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A (File Nos.
33-23166 and 811-5624), as filed with the SEC via EDGAR on
August 1, 1995.
EX-99.B 9 (a) Administration Agreement between Registrant and Morgan
Stanley Asset Management Inc. (the "MSAM Administration
Agreement") is incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-23166 and 811-5624), as filed
with the SEC via EDGAR on August 1, 1995.
EX-99.B 9 (b) U.S. Trust Administration Agreement is incorporated by
reference to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A (File Nos.
33-23166 and 811-5624), as filed with the SEC via EDGAR on
August 1, 1995.
EX-99.B 10 Opinion of Counsel is incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
EX-99.B 11 Consent of Independent Accountants, filed herewith.
EX-99.B 13 Purchase Agreement is incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
EX-99.B 15 Form of Plan Distribution Pursuant to Rule 12b-1 for Class B
Shares (the "Class B Plan") of the Active Country Allocation
Portfolio, filed herewith. The following Class B Plans have
been omitted because they are substantially identical to the
one filed herewith. The omitted Class B Plans differ from
the Class B Plan filed herewith only in references to the
Portfolio to which the Class B Plan relates: Fixed Income,
Global Fixed Income, Municipal Bond, Mortgage-Backed
Securities, High Yield, Money Market, Municipal Money
Market, Small Cap Value Equity, Value Equity, Balanced,
Gold, Global Equity, International Equity, International
Small Cap, Asian Equity, European Equity, Japanese Equity,
Latin American, Emerging Markets, Emerging Markets Debt,
China Growth, Equity Growth, Emerging Growth, MicroCap,
Aggressive Equity and U.S. Real Estate Portfolios.
3
<PAGE>
EX-99.B 16 Schedule of Computation of Performance Information is
incorporated by reference to Post-Effective Amendment No. 25
to the Registrant's Registration Statement on Form N-1A
(File Nos. 33-23166 and 811-5624), as filed with the SEC via
EDGAR on August 1, 1995.
EX-99.B 19 Registrant's Rule 18F-3 Multiple Class Plan, filed
herewith.
EX-99.B 24 Powers of Attorney are incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-23166 and 811-5624), as
filed with the SEC via EDGAR on August 1, 1995.
EX-99.B 27 Financial Data Schedules for the six month of other period
ended June 30,1995 for Registrant's portfolios in operation
during such periods (See Item 24(A)), filed herewith.
4
<PAGE>
Exhibit 6(b)
FORM OF
SUPPLEMENT TO DISTRIBUTION AGREEMENT
OF
MORGAN STANLEY INSTITUTIONAL FUND, INC.
(CLASS B SHARES)
Supplement dated as of _____________, 1995 (the "Supplement") to
Distribution Agreement dated as of October 1, 1988 (the "Agreement") among
Morgan Stanley Institutional Fund, Inc., a Maryland corporation (the "Fund"),
and Morgan Stanley & Co. Incorporated, a Delaware corporation (the
"Distributor").
RECITALS
The Fund has executed and delivered a Distribution Agreement, dated as
of October 1, 1988, between the Fund and the Distributor. The Agreement
appoints the Distributor in connection with the offering and sale of the shares
of common stock, par value $0.001, of the Fund and sets forth the rights and
obligations of the parties with respect to the distribution of the shares.
AGREEMENTS
NOW, therefore, the parties agree that the rights and obligations set
forth in the Distribution Agreement shall be applicable to the Class B Shares of
the Fund and that with respect to such shares, the Agreement is amended and
supplemented by the following:
COMPENSATION
For the services to be rendered and the expenses
assumed by the Distributor with respect to the Class B
Shares, the Fund shall pay to the Distributor, compensation
at the annual rate of .25% of the average daily net assets
of the Class B Shares. Except as hereinafter set forth,
continuing compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly in arrears within ten days
after the end of the month. If this Agreement becomes
effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for
that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculations of the
fees as set forth above. Payment of the Distributor's
compensation for the preceding month shall be made as
promptly as possible, but in no event later than ten days
after the end of the month.
This Supplement may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
The parties listed below have executed this Supplement as of ___________, 1995.
MORGAN STANLEY & CO.
INCORPORATED
By:
------------------------------------------
Name:
Title:
MORGAN STANLEY INSTITUTIONAL
FUND, INC.
By:
------------------------------------------
Name:
Title:
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
inclusion or incorporation by reference in the Statements of Additional
Information constituting parts of this Post-Effective Amendment No. 27 to the
registration statement on Form N-1A (the "Registration Statement") of our
report dated February 17, 1995, relating to the financial statements and
financial highlights appearing in the December 31, 1994 Annual Report to
Shareholders of Morgan Stanley Institutional Fund, Inc., which are also
incorporated by reference into or included in the Registration Statement. We
also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in the Prospectuses and under the
heading "Financial Statements" in the Statements of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 30, 1995
<PAGE>
Exhibit 15
FORM OF
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
MORGAN STANLEY INSTITUTIONAL FUND, INC.
(___________________ PORTFOLIO - CLASS B SHARES)
WHEREAS, Morgan Stanley Institutional Fund, Inc. (the "Fund") intends to
engage in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to Rule
12b-1 under the Act with respect to shares of its common stock, par value $.001
per share, that are classified and allocated to its __________________________
Portfolio Class B (the "Shares") and the Board of Directors has determined that
there is a reasonable likelihood that adoption of this Plan of Distribution will
benefit the Fund and its stockholders; and
WHEREAS, the Fund intends to employ Morgan Stanley & Co. Incorporated (the
"Distributor") as distributor of the Shares; and
WHEREAS, the Fund and the Distributor have entered into a Distribution
Agreement with the Fund for Shares, pursuant to which the Fund will employ the
Distributor as distributor for the continuous offering of Shares;
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby agrees
to the terms of, this Plan of Distribution (the "Plan") in accordance with Rule
12b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the
Shares, compensation for distribution of the Shares at the annual rate not to
exceed .25% of the average daily net assets of the _____________________
Portfolio Class B. The amount of such compensation shall be agreed upon by the
Board of Directors of the Fund and by the Distributor and shall be calculated
and accrued daily and paid monthly or at such other intervals as the Board of
Directors and the Distributor shall mutually agree.
2. The amount set forth in Paragraph 1 of this Plan shall be paid for the
Distributor's services as distributor of the Shares. Such amount may be spent
by the Distributor on any activities or expenses primarily intended to result in
the sale of Shares, including, but not limited to: compensation to and
expenses, including overhead and telephone expenses, of employees of the
Distributor who engage in or support distribution of the Shares; printing of
prospectuses and reports for other than existing stockholders; preparation,
printing and distribution of sales literature and advertising materials; and
compensation to broker/dealers who sell Shares. The Distributor may negotiate
with any such broker/dealer the services to be provided by the broker/dealer to
stockholders in connection with the sale of Shares, and all or any portion of
the compensation paid to the Distributor under Paragraph 1 of this Plan may be
reallocated by the Distributor to broker/dealers who sell Shares.
3. This Plan shall not take effect until it has been approved by a vote
of at least a majority (as defined in the Act) of the outstanding Shares.
<PAGE>
4. In addition to the approval required by Paragraph 3 above, this Plan
shall not take effect until it has been approved, together with any related
agreements, by votes of a majority of both (a) the Board of Directors of the
Fund and (b) those Directors of the Fund who are not "interested persons" of the
Fund (as defined in the Act) and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan and such related agreements.
5. This Plan shall continue in effect for a term of one year.
Thereafter, this Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in Paragraph 4.
6. The Distributor shall provide to the Board of Directors of the Fund
and the Board of Directors shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and the purposes for which such
expenditures were made, including commissions, advertising, printing, interest,
carrying charges and allocated overhead expenses.
7. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by a vote of a majority of the outstanding Shares.
8. This Plan may not be amended to increase materially the amount of
compensation provided for in Paragraph 1 hereof unless such amendment is
approved in the manner provided for initial approval in Paragraph 3 hereof, and
no material amendment to the Plan of any kind, including an amendment which
would increase materially the amount of such compensation, shall be made unless
approved in the manner provided for approval and annual renewal in Paragraph 4
hereof.
9. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the then current Directors who are not
interested persons (as defined in the Act) of the Fund.
10. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 6 hereof for a period of not less
than six years from the date of this Plan, such agreements or such reports, as
the case may be, the first two years in an easily accessible place.
<PAGE>
Exhibit 19
MORGAN STANLEY INSTITUTIONAL FUND, INC.
RULE 18F-3 MULTIPLE CLASS PLAN
FOR
CLASS A AND B
Adopted September 20, 1995
I. INTRODUCTION.
A. AUTHORITY. Pursuant to Rule 18f-3 (that became effective on April 1,
1995) under the Investment Company Act of 1940, as amended (the "1940 Act"),
this Rule 18f-3 Multiple Class Plan (the "Plan") has been adopted by the Board
of Directors (the "Board") of the Morgan Stanley Institutional Fund, Inc. (the
"Fund"), including a majority of the Directors of the Fund who are not
"interested persons" of the Fund as defined in the 1940 Act (the "Independent
Directors").
B. HISTORY. The Fund is entitled to rely on an exemptive order dated
December 29, 1992, applicable to the Fund (Inv. Co. Act Release No. IC-19189)
(the "Order"). On September 20, 1995, the Fund elected to rely on Rule 18f-3
rather than the Order, as permitted by Rule 18f-3 subject to certain conditions,
and created a multiple class distribution arrangement for two classes of shares
of the common stock of each of the series (each, a "Series") of the Fund. The
multiple class distribution arrangement will be effective on the date of
effectiveness of the post-effective amendment to the Fund's registration
statement that incorporates the arrangement. The initial two classes of each
Series were named the Class A Shares and Class B Shares.
C. ADOPTION OF PLAN; AMENDMENT OF PLAN; AND PERIODIC REVIEW. Pursuant to
Rule 18f-3, the Fund is required to create a written plan specifying all of the
differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
covered by the Plan. This Plan must be amended to properly describe (through
additional exhibits hereto or otherwise) each additional class of shares
approved by the Fund's Board of Directors after the date hereof. Before any
material amendment of the Plan, the Fund is required to obtain a finding by a
majority of the Board, and a majority of the Independent Directors, that the
Plan as proposed to be amended, including the
<PAGE>
expense allocations, is in the best interests of each class individually and the
Fund as a whole.
II. ATTRIBUTES OF SHARE CLASSES
A. The rights of each existing class of the Fund are not being changed
hereby, and the rights, obligations and features of each of the classes of the
Fund shall be as set forth in the Fund's Articles of Incorporation and Bylaws,
incorporated by reference to Exhibit No. 1 and Exhibit No. 2 filed with this
Post-Effective Amendment No. 26, as each such document is amended or restated to
date, the resolutions that are adopted with respect to the classes of the Fund
and that are adopted pursuant to the Plan to date, and related materials of the
Board, as set forth in Exhibit A hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal PRO RATA interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (E.G., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (E.G., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, consistent with rulings and other published
statements of position by the Internal Revenue Service, the expenses of the
Fund's operation that are directly attributable to such class ("Class
Expenses")1/; and (v) each class may have conversion
- ---------------
1/ Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC
2
<PAGE>
features unique to such class, permitting conversion of shares of such class to
shares of another class, subject to the requirements set forth in Rule 18f-3.
III. EXPENSE ALLOCATIONS
Expenses of each class created after the date hereof must be allocated
as follows: (i) distribution and shareholder servicing payments associated with
any Rule 12b-1 Plan or servicing agreement, if any, relating to each respective
class of shares (including any costs relating to implementing such plans or any
amendment thereto) will be borne exclusively by that class; (ii) any incremental
transfer agency fees relating to a particular class will be borne exclusively by
that class; and (iii) Class Expenses relating to a particular class will be
borne exclusively by that class.
The methodology and procedures for calculating the net asset value and
dividends and distributions of the various classes of shares of the Fund and the
proper allocation of income and expenses among the various classes of shares of
the Fund are required to comply with the Fund's internal control structure
pursuant to applicable auditing standards, including Statement on Auditing
Standards No. 55, and to be reviewed as part of the independent accountants'
review of such internal control structure. The independent accountants' report
on the Fund's system of internal controls required by Form N-SAR, Item 77B, is
not required to refer expressly to the procedures for calculating the classes'
net asset values.
- ---------------
registration fees incurred by a class of shares, (v) expenses of administrative
personnel and services as required to support the shareholders of a specific
class, (vi) directors' fees or expenses incurred as a result of issues relating
solely to a class of shares, (vii) account expenses relating solely to a class
of shares, (viii) auditors' fees, litigation expenses, and legal fees and
expenses relating solely to a class of shares, and (ix) expenses incurred in
connection with shareholder meetings as a result of issues relating solely to a
class of shares.
3
<PAGE>
Exhibit A
INITIAL APPROVALS FOR NEW CLASS OF SHARES (MORGAN STANLEY INSTITUTIONAL FUND,
INC.)
APPROVAL AND DESIGNATION OF NEW CLASS OF SHARES FOR MORGAN STANLEY INSTITUTIONAL
FUND, INC.
RESOLVED, that the total number of shares of Common Stock that Morgan Stanley
Institutional Fund, Inc. (the "Fund") is authorized to issue is hereby increased
from 17,000,000,000 to 34,000,000,000 and that of such increased amount, the
Fund is hereby authorized to designate and classify the currently authorized and
designated shares of the Fund as Class A shares and to designate and classify 17
billion shares for addition as Class B Shares to the Fund's Portfolios as
follows:
Number of Shares
of Common Stock
Classified and
Name of Class Allocated
------------- ---------------
1. Money Market Portfolio Class B Shares . . . . . . . . . 2,000,000,000
2. Municipal Money Market Portfolio Class B Shares . . . . 2,000,000,000
3. Emerging Growth Portfolio Class B Shares . . . . . . . 500,000,000
4. International Equity Portfolio Class B Shares . . . . . 500,000,000
5. Value Equity Portfolio Class B Shares . . . . . . . . . 500,000,000
6. Fixed Income Portfolio Class B Shares . . . . . . . . . 500,000,000
7. Balanced Portfolio Class B Shares . . . . . . . . . . . 500,000,000
8. Global Equity Portfolio Class B Shares . . . . . . . . 500,000,000
9. Global Fixed Income Portfolio Class B Shares . . . . . 500,000,000
10. European Equity Portfolio Class B Shares . . . . . . . 500,000,000
11. Equity Growth Portfolio Class B Shares . . . . . . . . 500,000,000
12. Asian Equity Portfolio Class B Shares . . . . . . . . . 500,000,000
13. Active Country Allocation Portfolio Class B Shares . . 500,000,000
14. International Small Cap Portfolio Class B Shares . . . 500,000,000
15. High Yield Portfolio Class B Shares . . . . . . . . . . 500,000,000
16. Emerging Markets Portfolio Class B Shares . . . . . . . 500,000,000
17. Small Cap Value Equity Portfolio Class B Shares . . . . 500,000,000
18. Emerging Markets Debt Portfolio Class B Shares . . . . 500,000,000
19. Mortgage-Backed Securities Portfolio Class B Shares . . 500,000,000
20. Municipal Bond Portfolio Class B Shares . . . . . . . . 500,000,000
21. Japanese Equity Portfolio Class B Shares . . . . . . . 500,000,000
22. Gold Portfolio Class B Shares . . . . . . . . . . . . . 500,000,000
23. China Growth Portfolio Class B Shares . . . . . . . . . 500,000,000
24. Latin American Portfolio Class B Shares . . . . . . . . 500,000,000
25. Aggressive Equity Portfolio Class B Shares . . . . . . 500,000,000
26. U.S. Real Estate Portfolio Class B Shares . . . . . . . 500,000,000
27. MicroCap Portfolio Class B Shares . . . . . . . . . . . 500,000,000
28. International Magnum Portfolio Class B Shares . . . . . 500,000,000
FURTHER RESOLVED, that the Fund's Articles of Incorporation, as supplemented to
date, be amended and restated to effect the purposes of the foregoing resolution
and all previous supplements;
FURTHER RESOLVED, that the Fund's Amended and Restated Articles of
Incorporation, in substantially the form attached hereto as Annex __ be, and
they hereby are approved and adopted;
4
<PAGE>
FURTHER RESOLVED, that the proper officers of the Fund be, and hereby are
authorized and directed to cause such Articles to be filed with the State of
Maryland;
FURTHER RESOLVED, that the proper officers of the Fund be, and hereby are,
authorized and directed in the name and on behalf of the Fund to make all
appropriate filings with the Securities and Exchange Commission (the
"Commission") with respect to the establishment of such new class of shares and
the related Distribution Agreement approved at this meeting of this Board of
Directors, including, the filing of a post-effective amendment under the
Securities Act of 1933, as amended (the "1933 Act") and under the Investment
Company Act of 1940, as amended (the "1940 Act") to the Fund's Registration
Statement on Form N-1A, and all necessary exhibits and other instruments
relating thereto (collectively, the "Registration Statement"), procuring all
other necessary signatures thereon, and filing the appropriate exhibits thereto
with the Commission under the 1933 Act and the 1940 Act;
FURTHER RESOLVED, that the proper officers of the Fund be, and hereby are,
authorized and directed to appear, together with legal counsel, on behalf of the
Fund, before the Commission in connection with any matter relating to the
Registration Statement and to take such other actions, including Blue Sky
filings as may be required in connection with the establishment of the new
class; and
FURTHER RESOLVED, that the proper officers of the Fund be, and they hereby are,
authorized and directed in the name and, on behalf of the Fund, to take any
other action that the officer so acting may deem necessary or appropriate in
connection with the establishment and registration of the new class, the taking
of any such action to establish conclusively such officer's authority therefore
and the approval and ratification thereof by the Fund;
FURTHER RESOLVED, that any filings previously made and any actions previously
taken by the appropriate officers of the Fund in connection with the
establishment and registration of the new class be, and hereby are ratified,
confirmed and approved as the act and deed of such Fund.
ADOPTION OF THE FUND'S DISTRIBUTION AGREEMENT, AS AMENDED AND SUPPLEMENTED WITH
RESPECT TO THE CLASS B SHARES AND APPROVAL OF PLANS OF DISTRIBUTION
RESOLVED, that the terms and conditions of the Distribution Agreement dated
September 27, 1988 between Morgan Stanley Institutional Fund, Inc. (the "Fund")
and Morgan Stanley & Co. Incorporated, as amended and supplemented with respect
to the Class B Shares in substantially the form of the Supplement attached
hereto as Annex ___, is deemed to encompass the Class B Shares of the Fund.
FURTHER RESOLVED, that each of the proposed Plans of Distribution (the "Plans")
in substantially the form attached hereto as Annex __, with each Plan relating
to the Class B Shares of a separate portfolio of the Fund has been determined by
the Directors, including at least a majority of the Directors who are not
"interested persons" as such term is defined in the Investment Company Act of
1940, as amended (the "1940 Act"), to be reasonably likely to benefit the Fund
and the shareholders of the Class B Shares of the respective portfolios;
FURTHER RESOLVED, that based on information reasonably available to the
Directors, the expenditures contemplated by the Plans are comparable to
expenditures for other similar funds; and
FURTHER RESOLVED, that the Plans be, and the same hereby are, approved by the
Directors, including a majority of the Directors who are not interested persons
as that term is defined in the 1940 Act and who have no direct or indirect
financial interest in the operation of the Plans or in any agreements related to
the Plans.
5
<PAGE>
RATIFICATION OF RULE 18F-3 PLAN
RESOLVED, that, upon review of the Rule 18f-3 Plan of Morgan Stanley
Institutional Fund, Inc. (the "Fund") in substantially the form attached hereto
as Annex __, such Plan be, and it hereby is, ratified, confirmed and approved.
6
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 14
[NAME] ACTIVE COUNTRY ALLOCATION PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 162,287
[INVESTMENTS-AT-VALUE] 168,988
[RECEIVABLES] 2,540
[ASSETS-OTHER] 677
[OTHER-ITEMS-ASSETS] 12
[TOTAL-ASSETS] 172,217
[PAYABLE-FOR-SECURITIES] (17,601)
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 369
[TOTAL-LIABILITIES] 17,970
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 149,477
[SHARES-COMMON-STOCK] 14,021
[SHARES-COMMON-PRIOR] 15,712
[ACCUMULATED-NII-CURRENT] 2,927
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (5,596)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7,439
[NET-ASSETS] 154,247
[DIVIDEND-INCOME] 2,055
[INTEREST-INCOME] 113
[OTHER-INCOME] 0
[EXPENSES-NET] (659)
[NET-INVESTMENT-INCOME] 1,509
[REALIZED-GAINS-CURRENT] (6,595)
[APPREC-INCREASE-CURRENT] 2,751
[NET-CHANGE-FROM-OPS] (2,335)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (6,990)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,939
[NUMBER-OF-SHARES-REDEEMED] (7,224)
[SHARES-REINVESTED] 594
[NET-CHANGE-IN-ASSETS] (28,730)
[ACCUMULATED-NII-PRIOR] 1,418
[ACCUMULATED-GAINS-PRIOR] 7,989
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 535
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 965
[AVERAGE-NET-ASSETS] 166,019
[PER-SHARE-NAV-BEGIN] 11.65
[PER-SHARE-NII] 0.12
[PER-SHARE-GAIN-APPREC] (0.33)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.44)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.00
[EXPENSE-RATIO] 0.80
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 112
[NAME] ASIAN EQUITY PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 240,653
[INVESTMENTS-AT-VALUE] 292,377
[RECEIVABLES] 6,936
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 19
[TOTAL-ASSETS] 299,332
[PAYABLE-FOR-SECURITIES] 566
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8,369
[TOTAL-LIABILITIES] 8,935
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 228,703
[SHARES-COMMON-STOCK] 14,195
[SHARES-COMMON-PRIOR] 12,854
[ACCUMULATED-NII-CURRENT] 2,191
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 7,784
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 51,719
[NET-ASSETS] 290,397
[DIVIDEND-INCOME] 3,075
[INTEREST-INCOME] 492
[OTHER-INCOME] 0
[EXPENSES-NET] (1,383)
[NET-INVESTMENT-INCOME] 2,184
[REALIZED-GAINS-CURRENT] 4,467
[APPREC-INCREASE-CURRENT] 16,643
[NET-CHANGE-FROM-OPS] 23,294
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1,879)
[DISTRIBUTIONS-OF-GAINS] (29,033)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 18,577
[NUMBER-OF-SHARES-REDEEMED] (18,717)
[SHARES-REINVESTED] 1,481
[NET-CHANGE-IN-ASSETS] 13,491
[ACCUMULATED-NII-PRIOR] 1,886
[ACCUMULATED-GAINS-PRIOR] 32,350
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,105
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,611
[AVERAGE-NET-ASSETS] 279,062
[PER-SHARE-NAV-BEGIN] 21.54
[PER-SHARE-NII] 0.16
[PER-SHARE-GAIN-APPREC] 1.17
[PER-SHARE-DIVIDEND] (0.15)
[PER-SHARE-DISTRIBUTIONS] (2.26)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 20.46
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 13
[NAME] THE EMERGING MARKETS PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 995,340
[INVESTMENTS-AT-VALUE] 988,509
[RECEIVABLES] 19,198
[ASSETS-OTHER] 70
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,007,777
[PAYABLE-FOR-SECURITIES] 33,187
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4,959
[TOTAL-LIABILITIES] 38,146
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 976,865
[SHARES-COMMON-STOCK] 68,213
[SHARES-COMMON-PRIOR] 57,016
[ACCUMULATED-NII-CURRENT] 3,250
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,128)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (7,626)
[NET-ASSETS] 969,631
[DIVIDEND-INCOME] 9,391
[INTEREST-INCOME] 2,491
[OTHER-INCOME] 0
[EXPENSES-NET] 7,577
[NET-INVESTMENT-INCOME] 4,305
[REALIZED-GAINS-CURRENT] (15,789)
[APPREC-INCREASE-CURRENT] (54,529)
[NET-CHANGE-FROM-OPS] (66,013)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (52,592)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 18,239
[NUMBER-OF-SHARES-REDEEMED] (10,416)
[SHARES-REINVESTED] 3,374
[NET-CHANGE-IN-ASSETS] 39,993
[ACCUMULATED-NII-PRIOR] (785)
[ACCUMULATED-GAINS-PRIOR] 65,253
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 5,433
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 8,024
[AVERAGE-NET-ASSETS] 877,947
[PER-SHARE-NAV-BEGIN] 16.30
[PER-SHARE-NII] 0.07
[PER-SHARE-GAIN-APPREC] (1.24)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.92)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.12
[EXPENSE-RATIO] 1.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 9
[NAME] EUROPEAN EQUITY PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 45,489
[INVESTMENTS-AT-VALUE] 48,813
[RECEIVABLES] 546
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 49,359
[PAYABLE-FOR-SECURITIES] 490
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 245
[TOTAL-LIABILITIES] 735
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 44,215
[SHARES-COMMON-STOCK] 3,443
[SHARES-COMMON-PRIOR] 1,982
[ACCUMULATED-NII-CURRENT] 545
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 673
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,191
[NET-ASSETS] 48,624
[DIVIDEND-INCOME] 618
[INTEREST-INCOME] 96
[OTHER-INCOME] 0
[EXPENSES-NET] (194)
[NET-INVESTMENT-INCOME] 520
[REALIZED-GAINS-CURRENT] 387
[APPREC-INCREASE-CURRENT] 3,390
[NET-CHANGE-FROM-OPS] 4,297
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (6)
[DISTRIBUTIONS-OF-GAINS] (2,445)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,194
[NUMBER-OF-SHARES-REDEEMED] (910)
[SHARES-REINVESTED] 177
[NET-CHANGE-IN-ASSETS] 20,990
[ACCUMULATED-NII-PRIOR] 31
[ACCUMULATED-GAINS-PRIOR] 2,731
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 155
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 256
[AVERAGE-NET-ASSETS] 39,149
[PER-SHARE-NAV-BEGIN] 13.94
[PER-SHARE-NII] 0.15
[PER-SHARE-GAIN-APPREC] 1.27
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (1.24)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.12
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 8
[NAME] GLOBAL EQUITY PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 75,298
[INVESTMENTS-AT-VALUE] 81,420
[RECEIVABLES] 1,137
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 4
[TOTAL-ASSETS] 82,561
[PAYABLE-FOR-SECURITIES] 137
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 739
[TOTAL-LIABILITIES] 876
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 70,269
[SHARES-COMMON-STOCK] 5,538
[SHARES-COMMON-PRIOR] 5,889
[ACCUMULATED-NII-CURRENT] 731
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 4,572
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 6,113
[NET-ASSETS] 81,685
[DIVIDEND-INCOME] 1,084
[INTEREST-INCOME] 15
[OTHER-INCOME] 0
[EXPENSES-NET] (411)
[NET-INVESTMENT-INCOME] 688
[REALIZED-GAINS-CURRENT] 4,107
[APPREC-INCREASE-CURRENT] 4,554
[NET-CHANGE-FROM-OPS] 9,349
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (330)
[DISTRIBUTIONS-OF-GAINS] (1,103)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,342
[NUMBER-OF-SHARES-REDEEMED] (1,799)
[SHARES-REINVESTED] 106
[NET-CHANGE-IN-ASSETS] 2,750
[ACCUMULATED-NII-PRIOR] 373
[ACCUMULATED-GAINS-PRIOR] 1,568
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 328
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 483
[AVERAGE-NET-ASSETS] 82,810
[PER-SHARE-NAV-BEGIN] 13.40
[PER-SHARE-NII] 0.13
[PER-SHARE-GAIN-APPREC] 1.47
[PER-SHARE-DIVIDEND] (0.06)
[PER-SHARE-DISTRIBUTIONS] (0.19)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.75
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUND, INC.
[SERIES]
[NUMBER] 19
[NAME] GOLD PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 21,348
[INVESTMENTS-AT-VALUE] 20,401
[RECEIVABLES] 439
[ASSETS-OTHER] 1
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 20,841
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 287
[TOTAL-LIABILITIES] 287
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 21,127
[SHARES-COMMON-STOCK] 2,157
[SHARES-COMMON-PRIOR] 3,313
[ACCUMULATED-NII-CURRENT] (62)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 436
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (947)
[NET-ASSETS] 20,554
[DIVIDEND-INCOME] 46
[INTEREST-INCOME] 69
[OTHER-INCOME] 0
[EXPENSES-NET] (176)
[NET-INVESTMENT-INCOME] (61)
[REALIZED-GAINS-CURRENT] 267
[APPREC-INCREASE-CURRENT] 1,862
[NET-CHANGE-FROM-OPS] 2,068
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (37)
[DISTRIBUTIONS-OF-GAINS] (805)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,816
[NUMBER-OF-SHARES-REDEEMED] (3,059)
[SHARES-REINVESTED] 87
[NET-CHANGE-IN-ASSETS] (9,689)
[ACCUMULATED-NII-PRIOR] 36
[ACCUMULATED-GAINS-PRIOR] 974
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 140
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 228
[AVERAGE-NET-ASSETS] 28,288
[PER-SHARE-NAV-BEGIN] 9.13
[PER-SHARE-NII] (0.03)
[PER-SHARE-GAIN-APPREC] 0.68
[PER-SHARE-DIVIDEND] (0.01)
[PER-SHARE-DISTRIBUTIONS] (0.24)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.53
[EXPENSE-RATIO] 1.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 4
[NAME] INTERNATIONAL EQUITY PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 1,192,202
[INVESTMENTS-AT-VALUE] 1,450,589
[RECEIVABLES] 21,212
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 86
[TOTAL-ASSETS] 1,471,887
[PAYABLE-FOR-SECURITIES] 4,685
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 28,899
[TOTAL-LIABILITIES] 33,584
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1,137,916
[SHARES-COMMON-STOCK] 94,285
[SHARES-COMMON-PRIOR] 85,071
[ACCUMULATED-NII-CURRENT] 22,297
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 44,515
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 233,575
[NET-ASSETS] 1,438,303
[DIVIDEND-INCOME] 20,022
[INTEREST-INCOME] 1,853
[OTHER-INCOME] 0
[EXPENSES-NET] (6,661)
[NET-INVESTMENT-INCOME] 15,214
[REALIZED-GAINS-CURRENT] 42,203
[APPREC-INCREASE-CURRENT] 7,737
[NET-CHANGE-FROM-OPS] 65,154
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (68,023)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 142,813
[NUMBER-OF-SHARES-REDEEMED] (72,833)
[SHARES-REINVESTED] 66,422
[NET-CHANGE-IN-ASSETS] 133,533
[ACCUMULATED-NII-PRIOR] 7,083
[ACCUMULATED-GAINS-PRIOR] 70,335
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 5,326
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,856
[AVERAGE-NET-ASSETS] 1,343,219
[PER-SHARE-NAV-BEGIN] 15.34
[PER-SHARE-NII] 0.15
[PER-SHARE-GAIN-APPREC] 0.56
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.80)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.25
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 15
[NAME] INTERNATIONAL SMALL CAP PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 191,248
[INVESTMENTS-AT-VALUE] 189,319
[RECEIVABLES] 1,367
[ASSETS-OTHER] 71
[OTHER-ITEMS-ASSETS] 8
[TOTAL-ASSETS] 190,765
[PAYABLE-FOR-SECURITIES] 858
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,889
[TOTAL-LIABILITIES] 3,747
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 186,362
[SHARES-COMMON-STOCK] 12,117
[SHARES-COMMON-PRIOR] 10,566
[ACCUMULATED-NII-CURRENT] 2,919
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2,032
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (4,295)
[NET-ASSETS] 187,018
[DIVIDEND-INCOME] 3,188
[INTEREST-INCOME] 328
[OTHER-INCOME] 0
[EXPENSES-NET] (1,020)
[NET-INVESTMENT-INCOME] 2,496
[REALIZED-GAINS-CURRENT] 4,021
[APPREC-INCREASE-CURRENT] (2,754)
[NET-CHANGE-FROM-OPS] 3,763
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (280)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,492
[NUMBER-OF-SHARES-REDEEMED] (955)
[SHARES-REINVESTED] 14
[NET-CHANGE-IN-ASSETS] 26,917
[ACCUMULATED-NII-PRIOR] 703
[ACCUMULATED-GAINS-PRIOR] (1,989)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 842
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,111
[AVERAGE-NET-ASSETS] 178,822
[PER-SHARE-NAV-BEGIN] 15.15
[PER-SHARE-NII] 0.20
[PER-SHARE-GAIN-APPREC] 0.11
[PER-SHARE-DIVIDEND] (0.03)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.43
[EXPENSE-RATIO] 1.15
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 20
[NAME] JAPANESE EQUITY PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 23,876
[INVESTMENTS-AT-VALUE] 21,566
[RECEIVABLES] 389
[ASSETS-OTHER] 642
[OTHER-ITEMS-ASSETS] 3
[TOTAL-ASSETS] 22,600
[PAYABLE-FOR-SECURITIES] 496
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 358
[TOTAL-LIABILITIES] 854
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 29,172
[SHARES-COMMON-STOCK] 2,655
[SHARES-COMMON-PRIOR] 5,121
[ACCUMULATED-NII-CURRENT] (269)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (4,569)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (2,588)
[NET-ASSETS] 21,746
[DIVIDEND-INCOME] 159
[INTEREST-INCOME] 2
[OTHER-INCOME] 0
[EXPENSES-NET] (169)
[NET-INVESTMENT-INCOME] (8)
[REALIZED-GAINS-CURRENT] (4,569)
[APPREC-INCREASE-CURRENT] (2,373)
[NET-CHANGE-FROM-OPS] (6,950)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,855
[NUMBER-OF-SHARES-REDEEMED] (6,321)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (28,586)
[ACCUMULATED-NII-PRIOR] (261)
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 136
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 225
[AVERAGE-NET-ASSETS] 34,083
[PER-SHARE-NAV-BEGIN] 9.83
[PER-SHARE-NII] (0.05)
[PER-SHARE-GAIN-APPREC] (1.59)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.19
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 25
[NAME] LATIN AMERICAN PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-18-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 13,933
[INVESTMENTS-AT-VALUE] 13,957
[RECEIVABLES] 567
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 1
[TOTAL-ASSETS] 14,525
[PAYABLE-FOR-SECURITIES] 510
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 62
[TOTAL-LIABILITIES] 572
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 14,662
[SHARES-COMMON-STOCK] 1,586
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 21
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (754)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 24
[NET-ASSETS] 13,953
[DIVIDEND-INCOME] 120
[INTEREST-INCOME] 33
[OTHER-INCOME] 0
[EXPENSES-NET] (132)
[NET-INVESTMENT-INCOME] 21
[REALIZED-GAINS-CURRENT] (754)
[APPREC-INCREASE-CURRENT] 24
[NET-CHANGE-FROM-OPS] (709)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,956
[NUMBER-OF-SHARES-REDEEMED] (370)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 13,953
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 57
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 205
[AVERAGE-NET-ASSETS] 11,556
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.01
[PER-SHARE-GAIN-APPREC] (1.21)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.80
[EXPENSE-RATIO] 2.56
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[LEGEND]
This schedule contains summary financial information extracted from Morgan
Stanley Institutional Fund, Inc. Form NSAR B 12/31/94 and is qualified in
its entirety by reference to such financial statements.
[/LEGEND]
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUND, INC.
[SERIES]
[NUMBER] 27
[NAME] AGGRESSIVE EQUITY PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] MAR-08-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 16,722
[INVESTMENTS-AT-VALUE] 17,889
[RECEIVABLES] 946
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 18,835
[PAYABLE-FOR-SECURITIES] 531
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 49
[TOTAL-LIABILITIES] 580
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 16,328
[SHARES-COMMON-STOCK] 1,546
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 62
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 711
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1,154
[NET-ASSETS] 18,255
[DIVIDEND-INCOME] 79
[INTEREST-INCOME] 36
[OTHER-INCOME] 0
[EXPENSES-NET] (37)
[NET-INVESTMENT-INCOME] 78
[REALIZED-GAINS-CURRENT] 711
[APPREC-INCREASE-CURRENT] 1,154
[NET-CHANGE-FROM-OPS] 1,943
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (16)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,584
[NUMBER-OF-SHARES-REDEEMED] (39)
[SHARES-REINVESTED] 1
[NET-CHANGE-IN-ASSETS] 18,255
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 29
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 84
[AVERAGE-NET-ASSETS] 11,785
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.06
[PER-SHARE-GAIN-APPREC] 1.77
[PER-SHARE-DIVIDEND] (0.02)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.81
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 3
[NAME] EMERGING GROWTH PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 104,964
[INVESTMENTS-AT-VALUE] 143,637
[RECEIVABLES] 1,158
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 7
[TOTAL-ASSETS] 144,802
[PAYABLE-FOR-SECURITIES] 78
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,048
[TOTAL-LIABILITIES] 1,216
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 113,726
[SHARES-COMMON-STOCK] 7,870
[SHARES-COMMON-PRIOR] 7,301
[ACCUMULATED-NII-CURRENT] (423)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (8,390)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 38,673
[NET-ASSETS] 143,586
[DIVIDEND-INCOME] 115
[INTEREST-INCOME] 242
[OTHER-INCOME] 0
[EXPENSES-NET] (780)
[NET-INVESTMENT-INCOME] (423)
[REALIZED-GAINS-CURRENT] 2,535
[APPREC-INCREASE-CURRENT] 13,677
[NET-CHANGE-FROM-OPS] 15,789
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,765
[NUMBER-OF-SHARES-REDEEMED] (4,196)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 25,917
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (10,925)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 623
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 799
[AVERAGE-NET-ASSETS] 125,878
[PER-SHARE-NAV-BEGIN] 16.12
[PER-SHARE-NII] (0.05)
[PER-SHARE-GAIN-APPREC] 2.17
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 18.24
[EXPENSE-RATIO] 1.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 11
[NAME] EQUITY GROWTH PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 126,248
[INVESTMENTS-AT-VALUE] 144,573
[RECEIVABLES] 3,586
[ASSETS-OTHER] 1
[OTHER-ITEMS-ASSETS] 5
[TOTAL-ASSETS] 148,165
[PAYABLE-FOR-SECURITIES] 1,108
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 284
[TOTAL-LIABILITIES] 1,392
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 121,369
[SHARES-COMMON-STOCK] 10,363
[SHARES-COMMON-PRIOR] 8,090
[ACCUMULATED-NII-CURRENT] 633
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 6,446
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 18,325
[NET-ASSETS] 146,773
[DIVIDEND-INCOME] 1,083
[INTEREST-INCOME] 404
[OTHER-INCOME] 0
[EXPENSES-NET] (474)
[NET-INVESTMENT-INCOME] 1,013
[REALIZED-GAINS-CURRENT] 6,369
[APPREC-INCREASE-CURRENT] 17,570
[NET-CHANGE-FROM-OPS] 24,952
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (841)
[DISTRIBUTIONS-OF-GAINS] (3,382)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,036
[NUMBER-OF-SHARES-REDEEMED] (2,098)
[SHARES-REINVESTED] 335
[NET-CHANGE-IN-ASSETS] 49,514
[ACCUMULATED-NII-PRIOR] 461
[ACCUMULATED-GAINS-PRIOR] 3,459
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 356
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 535
[AVERAGE-NET-ASSETS] 119,645
[PER-SHARE-NAV-BEGIN] 12.02
[PER-SHARE-NII] 0.10
[PER-SHARE-GAIN-APPREC] 2.56
[PER-SHARE-DIVIDEND] (0.10)
[PER-SHARE-DISTRIBUTIONS] (0.42)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.16
[EXPENSE-RATIO] 0.80
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUND, INC.
[SERIES]
[NUMBER] 17
[NAME] SMALL CAP VALUE EQUITY PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 45,637
[INVESTMENTS-AT-VALUE] 48,822
[RECEIVABLES] 88
[ASSETS-OTHER] 3
[OTHER-ITEMS-ASSETS] 1
[TOTAL-ASSETS] 48,914
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 102
[TOTAL-LIABILITIES] 102
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 45,022
[SHARES-COMMON-STOCK] 4,239
[SHARES-COMMON-PRIOR] 3,707
[ACCUMULATED-NII-CURRENT] 339
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 266
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,185
[NET-ASSETS] 48,812
[DIVIDEND-INCOME] 768
[INTEREST-INCOME] 51
[OTHER-INCOME] 0
[EXPENSES-NET] (214)
[NET-INVESTMENT-INCOME] 605
[REALIZED-GAINS-CURRENT] (4)
[APPREC-INCREASE-CURRENT] 4,111
[NET-CHANGE-FROM-OPS] 4,712
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (547)
[DISTRIBUTIONS-OF-GAINS] (1,214)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,171
[NUMBER-OF-SHARES-REDEEMED] (789)
[SHARES-REINVESTED] 150
[NET-CHANGE-IN-ASSETS] 8,779
[ACCUMULATED-NII-PRIOR] 281
[ACCUMULATED-GAINS-PRIOR] 1,484
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 182
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 272
[AVERAGE-NET-ASSETS] 43,207
[PER-SHARE-NAV-BEGIN] 10.80
[PER-SHARE-NII] 0.15
[PER-SHARE-GAIN-APPREC] 1.03
[PER-SHARE-DIVIDEND] (0.14)
[PER-SHARE-DISTRIBUTIONS] (0.33)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.51
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 26
[NAME] U.S. REAL ESTATE PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] FEB-24-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 39,216
[INVESTMENTS-AT-VALUE] 40,516
[RECEIVABLES] 1,632
[ASSETS-OTHER] 1
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 42,149
[PAYABLE-FOR-SECURITIES] 2,185
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 44
[TOTAL-LIABILITIES] 2,229
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 37,595
[SHARES-COMMON-STOCK] 3,685
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 715
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 310
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1,300
[NET-ASSETS] 39,920
[DIVIDEND-INCOME] 742
[INTEREST-INCOME] 59
[OTHER-INCOME] 0
[EXPENSES-NET] (86)
[NET-INVESTMENT-INCOME] 715
[REALIZED-GAINS-CURRENT] 310
[APPREC-INCREASE-CURRENT] 1,300
[NET-CHANGE-FROM-OPS] 2,325
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,882
[NUMBER-OF-SHARES-REDEEMED] (197)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 39,920
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 68
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 144
[AVERAGE-NET-ASSETS] 25,442
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.19
[PER-SHARE-GAIN-APPREC] 0.64
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.83
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUND, INC.
[SERIES]
[NUMBER] 5
[NAME] VALUE EQUITY PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 104,047
[INVESTMENTS-AT-VALUE] 113,006
[RECEIVABLES] 675
[ASSETS-OTHER] 5
[OTHER-ITEMS-ASSETS] 1
[TOTAL-ASSETS] 113,687
[PAYABLE-FOR-SECURITIES] 5,448
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 159
[TOTAL-LIABILITIES] 5,607
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 95,574
[SHARES-COMMON-STOCK] 8,274
[SHARES-COMMON-PRIOR] 6,383
[ACCUMULATED-NII-CURRENT] 760
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2,787
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 8,959
[NET-ASSETS] 108,080
[DIVIDEND-INCOME] 1,616
[INTEREST-INCOME] 113
[OTHER-INCOME] 0
[EXPENSES-NET] (312)
[NET-INVESTMENT-INCOME] 1,417
[REALIZED-GAINS-CURRENT] 2,940
[APPREC-INCREASE-CURRENT] 11,254
[NET-CHANGE-FROM-OPS] 15,611
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1,300)
[DISTRIBUTIONS-OF-GAINS] (2,460)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,733
[NUMBER-OF-SHARES-REDEEMED] (1,144)
[SHARES-REINVESTED] 302
[NET-CHANGE-IN-ASSETS] 34,674
[ACCUMULATED-NII-PRIOR] 643
[ACCUMULATED-GAINS-PRIOR] 2,307
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 223
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 364
[AVERAGE-NET-ASSETS] 89,892
[PER-SHARE-NAV-BEGIN] 11.50
[PER-SHARE-NII] 0.18
[PER-SHARE-GAIN-APPREC] 1.95
[PER-SHARE-DIVIDEND] (0.19)
[PER-SHARE-DISTRIBUTIONS] (0.38)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.06
[EXPENSE-RATIO] 0.70
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUND, INC.
[SERIES]
[NUMBER] 6
[NAME] BALANCED PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 19,792
[INVESTMENTS-AT-VALUE] 21,168
[RECEIVABLES] 297
[ASSETS-OTHER] 1
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 21,466
[PAYABLE-FOR-SECURITIES] 104
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 49
[TOTAL-LIABILITIES] 153
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 19,336
[SHARES-COMMON-STOCK] 2,189
[SHARES-COMMON-PRIOR] 2,064
[ACCUMULATED-NII-CURRENT] 224
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 377
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1,376
[NET-ASSETS] 21,313
[DIVIDEND-INCOME] 180
[INTEREST-INCOME] 321
[OTHER-INCOME] 0
[EXPENSES-NET] (71)
[NET-INVESTMENT-INCOME] 430
[REALIZED-GAINS-CURRENT] 412
[APPREC-INCREASE-CURRENT] 1,872
[NET-CHANGE-FROM-OPS] 2,714
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (420)
[DISTRIBUTIONS-OF-GAINS] (530)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 270
[NUMBER-OF-SHARES-REDEEMED] (234)
[SHARES-REINVESTED] 89
[NET-CHANGE-IN-ASSETS] 2,821
[ACCUMULATED-NII-PRIOR] 214
[ACCUMULATED-GAINS-PRIOR] 495
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 51
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 114
[AVERAGE-NET-ASSETS] 20,503
[PER-SHARE-NAV-BEGIN] 8.96
[PER-SHARE-NII] 0.19
[PER-SHARE-GAIN-APPREC] 1.03
[PER-SHARE-DIVIDEND] (0.19)
[PER-SHARE-DISTRIBUTIONS] (0.26)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.73
[EXPENSE-RATIO] 0.70
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 21
[NAME] EMERGING MARKETS DEBT PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 163,213
[INVESTMENTS-AT-VALUE] 167,445
[RECEIVABLES] 39,450
[ASSETS-OTHER] 7
[OTHER-ITEMS-ASSETS] 284
[TOTAL-ASSETS] 207,186
[PAYABLE-FOR-SECURITIES] 26,817
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 826
[TOTAL-LIABILITIES] 27,643
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 166,877
[SHARES-COMMON-STOCK] 19,902
[SHARES-COMMON-PRIOR] 16,881
[ACCUMULATED-NII-CURRENT] 13,669
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (5,195)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 4,192
[NET-ASSETS] 179,543
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 14,720
[OTHER-INCOME] 0
[EXPENSES-NET] (1,191)
[NET-INVESTMENT-INCOME] 13,529
[REALIZED-GAINS-CURRENT] (2,868)
[APPREC-INCREASE-CURRENT] 13,649
[NET-CHANGE-FROM-OPS] 24,310
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (8,182)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 16,070
[NUMBER-OF-SHARES-REDEEMED] (13,800)
[SHARES-REINVESTED] 751
[NET-CHANGE-IN-ASSETS] 34,594
[ACCUMULATED-NII-PRIOR] 8,322
[ACCUMULATED-GAINS-PRIOR] (2,327)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 814
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,191
[AVERAGE-NET-ASSETS] 164,259
[PER-SHARE-NAV-BEGIN] 8.59
[PER-SHARE-NII] 0.67
[PER-SHARE-GAIN-APPREC] 0.24
[PER-SHARE-DIVIDEND] (0.48)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.02
[EXPENSE-RATIO] 1.46
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 7
[NAME] THE FIXED INCOME PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 159,244
[INVESTMENTS-AT-VALUE] 166,479
[RECEIVABLES] 2,637
[ASSETS-OTHER] 15
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 169,131
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,113
[TOTAL-LIABILITIES] 3,113
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 170,366
[SHARES-COMMON-STOCK] 15,752
[SHARES-COMMON-PRIOR] 21,313
[ACCUMULATED-NII-CURRENT] 1,156
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (12,739)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7,235
[NET-ASSETS] 166,018
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,084
[OTHER-INCOME] 0
[EXPENSES-NET] (428)
[NET-INVESTMENT-INCOME] 6,656
[REALIZED-GAINS-CURRENT] 1,415
[APPREC-INCREASE-CURRENT] 12,075
[NET-CHANGE-FROM-OPS] 20,146
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (6,774)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,187
[NUMBER-OF-SHARES-REDEEMED] (10,276)
[SHARES-REINVESTED] 528
[NET-CHANGE-IN-ASSETS] (43,313)
[ACCUMULATED-NII-PRIOR] 1,274
[ACCUMULATED-GAINS-PRIOR] (14,154)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 333
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 570
[AVERAGE-NET-ASSETS] 191,754
[PER-SHARE-NAV-BEGIN] 9.82
[PER-SHARE-NII] 0.36
[PER-SHARE-GAIN-APPREC] 0.71
[PER-SHARE-DIVIDEND] (0.35)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.54
[EXPENSE-RATIO] 0.45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 10
[NAME] GLOBAL FIXED INCOME PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 83,741
[INVESTMENTS-AT-VALUE] 87,448
[RECEIVABLES] 3,593
[ASSETS-OTHER] 9
[OTHER-ITEMS-ASSETS] 195
[TOTAL-ASSETS] 91,245
[PAYABLE-FOR-SECURITIES] 2,098
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 281
[TOTAL-LIABILITIES] 2,379
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 92,989
[SHARES-COMMON-STOCK] 7,971
[SHARES-COMMON-PRIOR] 12,704
[ACCUMULATED-NII-CURRENT] 980
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (8,685)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,582
[NET-ASSETS] 88,866
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 3,659
[OTHER-INCOME] 0
[EXPENSES-NET] (236)
[NET-INVESTMENT-INCOME] 3,423
[REALIZED-GAINS-CURRENT] (2,752)
[APPREC-INCREASE-CURRENT] 10,244
[NET-CHANGE-FROM-OPS] 10,915
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (4,056)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,727
[NUMBER-OF-SHARES-REDEEMED] (6,799)
[SHARES-REINVESTED] 339
[NET-CHANGE-IN-ASSETS] (41,809)
[ACCUMULATED-NII-PRIOR] 1,613
[ACCUMULATED-GAINS-PRIOR] (5,933)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 188
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 351
[AVERAGE-NET-ASSETS] 94,953
[PER-SHARE-NAV-BEGIN] 10.29
[PER-SHARE-NII] 0.39
[PER-SHARE-GAIN-APPREC] 0.87
[PER-SHARE-DIVIDEND] (0.40)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.15
[EXPENSE-RATIO] 0.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 16
[NAME] HIGH YIELD PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 63,971
[INVESTMENTS-AT-VALUE] 61,954
[RECEIVABLES] 5,070
[ASSETS-OTHER] 6
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 67,030
[PAYABLE-FOR-SECURITIES] 3,127
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 622
[TOTAL-LIABILITIES] 3,749
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 69,684
[SHARES-COMMON-STOCK] 6,145
[SHARES-COMMON-PRIOR] 10,181
[ACCUMULATED-NII-CURRENT] 391
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (4,777)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (2,017)
[NET-ASSETS] 63,281
[DIVIDEND-INCOME] 49
[INTEREST-INCOME] 4,262
[OTHER-INCOME] 0
[EXPENSES-NET] (268)
[NET-INVESTMENT-INCOME] 4,043
[REALIZED-GAINS-CURRENT] (3,196)
[APPREC-INCREASE-CURRENT] 8,636
[NET-CHANGE-FROM-OPS] 9,483
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (4,383)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,134
[NUMBER-OF-SHARES-REDEEMED] (8,509)
[SHARES-REINVESTED] 339
[NET-CHANGE-IN-ASSETS] (33,942)
[ACCUMULATED-NII-PRIOR] 731
[ACCUMULATED-GAINS-PRIOR] (1,581)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 178
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 311
[AVERAGE-NET-ASSETS] 71,934
[PER-SHARE-NAV-BEGIN] 9.55
[PER-SHARE-NII] 0.57
[PER-SHARE-GAIN-APPREC] 0.76
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.58)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.30
[EXPENSE-RATIO] 0.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[LEGEND]
This schedule contains summary financial information extracted from Morgan
Stanley Institutional Fund, Inc. Form NSAR B 12/31/94 and is qualified in
its entirety by reference to such financial statements.
[/LEGEND]
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUND, INC.
[SERIES]
[NUMBER] 23
[NAME] MUNICIPAL BOND PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-18-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 42,728
[INVESTMENTS-AT-VALUE] 43,467
[RECEIVABLES] 928
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 44
[TOTAL-ASSETS] 44,439
[PAYABLE-FOR-SECURITIES] 562
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 47
[TOTAL-LIABILITIES] 609
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 42,717
[SHARES-COMMON-STOCK] 4,723
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 196
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 178
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 739
[NET-ASSETS] 43,830
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 990
[OTHER-INCOME] 0
[EXPENSES-NET] (89)
[NET-INVESTMENT-INCOME] 901
[REALIZED-GAINS-CURRENT] 178
[APPREC-INCREASE-CURRENT] 739
[NET-CHANGE-FROM-OPS] 1,818
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (705)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5,480
[NUMBER-OF-SHARES-REDEEMED] (1,273)
[SHARES-REINVESTED] 66
[NET-CHANGE-IN-ASSETS] 43,830
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 69
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 151
[AVERAGE-NET-ASSETS] 44,072
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.21
[PER-SHARE-GAIN-APPREC] 0.21
[PER-SHARE-DIVIDEND] (0.16)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.26
[EXPENSE-RATIO] 0.45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 1
[NAME] THE MONEY MARKET PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 827,358
[INVESTMENTS-AT-VALUE] 827,358
[RECEIVABLES] 2,252
[ASSETS-OTHER] 44
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 829,654
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,664
[TOTAL-LIABILITIES] 2,664
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 827,003
[SHARES-COMMON-STOCK] 827,005
[SHARES-COMMON-PRIOR] 690,597
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (13)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 826,990
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 24,336
[OTHER-INCOME] 0
[EXPENSES-NET] (2,012)
[NET-INVESTMENT-INCOME] 22,324
[REALIZED-GAINS-CURRENT] 79
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 22,403
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (22,324)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,669
[NUMBER-OF-SHARES-REDEEMED] (3,554)
[SHARES-REINVESTED] 21
[NET-CHANGE-IN-ASSETS] 136,487
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (92)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,218
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,012
[AVERAGE-NET-ASSETS] 819,934
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.030
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.030)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.49
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000836487
[NAME] MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
[SERIES]
[NUMBER] 2
[NAME] THE MUNICIPAL MONEY MARKET PORTFOLIO
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] JUN-30-1995
[INVESTMENTS-AT-COST] 352,836
[INVESTMENTS-AT-VALUE] 352,836
[RECEIVABLES] 2,514
[ASSETS-OTHER] 20
[OTHER-ITEMS-ASSETS] 13
[TOTAL-ASSETS] 355,383
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 835
[TOTAL-LIABILITIES] 835
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 827,003
[SHARES-COMMON-STOCK] 354,531
[SHARES-COMMON-PRIOR] 359,426
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (9)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 354,548
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,333
[OTHER-INCOME] 0
[EXPENSES-NET] (960)
[NET-INVESTMENT-INCOME] 6,373
[REALIZED-GAINS-CURRENT] (1)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 6,372
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (6,373)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,327
[NUMBER-OF-SHARES-REDEEMED] (1,338)
[SHARES-REINVESTED] 6
[NET-CHANGE-IN-ASSETS] (4,896)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (8)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 557
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 960
[AVERAGE-NET-ASSETS] 375,059
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.020
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.020)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.52
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
