<PAGE>
As filed with the Securities and Exchange Commission on November 3, 1995
File No. 33-23166
811-5624
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT (NO. 33-23166)
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 28
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 29
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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)
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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
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IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
/ / ON ________________ PURSUANT TO PARAGRAPH (b)
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)
/X/ 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.
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<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
CROSS REFERENCE SHEET
PART A - INFORMATION REQUIRED IN A PROSPECTUS
Location in Prospectus for the Fixed Income, Global Fixed Income,
Form N-1A Municipal Bond, Mortgage-Backed Securities, High Yield, Money
Item Number Market and Municipal Money Market Portfolios
- ----------- -----------------------------------------------------------------
Item 1. Cover Page -- Cover Page
Item 2. Synopsis-- Fund Expenses (Estimated for Municipal Bond 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 -- *
Form N-1A Location in Prospectus for the Small Cap Value Equity, Value
Item Number Equity and Balanced Portfolios
- ----------- -----------------------------------------------------------------
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.
<PAGE>
Form N-1A Location in Prospectus for the Active Country Allocation
Item Number Portfolio
- ----------- -----------------------------------------------------------------
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 -- *
Form N-1A
Item Number Location in Prospectus for Gold Portfolio
- ----------- -----------------------------------------------------------------
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.
<PAGE>
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
- ----------- -----------------------------------------------------------------
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 -- *
Form N-1A Location in Prospectus for the Emerging Markets and Emerging
Item Number Markets Debt Portfolios
- ----------- -----------------------------------------------------------------
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.
<PAGE>
Form N-1A
Item Number Location in Prospectus for the China Growth Portfolio
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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 -- *
Form N-1A Location in Prospectus for the Equity Growth, Emerging Growth,
Item Number MicroCap and Aggressive Equity Portfolios
- ----------- -----------------------------------------------------------------
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.
<PAGE>
Form N-1A Location in Prospectus for the Equity Growth, Emerging Growth
Item Number and Aggressive Equity Portfolios
- ----------- --------------------------------------------------------------
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 -- *
Form N-1A
Item Number Location in Prospectus for the U.S. Real Estate Portfolio
- ----------- -----------------------------------------------------------------
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.
<PAGE>
Form N-1A
Item Number Location in Prospectus for the International Magnum Portfolio
- ----------- -----------------------------------------------------------------
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses (Estimated)
Item 3. Condensed Financial 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.
<PAGE>
PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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 Markets Debt, China Growth, Equity
Form N-1A Growth, Emerging Growth, Aggressive Equity and U.S.
Item Number Real Estate Portfolios
- ----------- -----------------------------------------------------------------
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
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 Markets Debt, China Growth, Equity
Form N-1A Growth, Emerging Growth, MicroCap, Aggressive Equity and U.S.
Item Number Real Estate Portfolios.
- ----------- -------------------------------------------------------------
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.
<PAGE>
Form N-1A Location in Statement of Additional Information for the Active
Item Number Country Allocation Portfolio
- ----------- -----------------------------------------------------------------
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
Form N-1A Location in Statement of Additional Information for the
Item Number International Magnum Portfolio
- ----------- -----------------------------------------------------------------
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 -- *
PART C - OTHER INFORMATION
Part C contains the information required by the items contained therein
under the items set forth in the form.
- ---------------
* Omitted since the answer is negative or the Item is not applicable.
<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 form via EDGAR under Rule 497(e) on June 30, 1995, and
supplemented purusuant 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 via EDGAR under Rule 497(e) on June 30,
1995, and supplemented pursuant to Rule 497(e) on September 6, 1995 and
pursuant to Rule 497(e) on October 20, 1995, is hereby incorporated by
reference as if set forth in full herein.
The Prospectus for the Active Country Allocation Portfolio, 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 on November 1, 1995, is hereby incorporated
by reference as if set forth in full herein.
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 under 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 under 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 under 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 on August 1, 1995, is hereby incorporated by reference
as if set forth in full herein.
The Propectus 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 via EDGAR 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 Growth Portfolios, 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 October 13, 1995, is hereby incorporated by reference as 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 under Rule 497(e) on June 30, 1995, and supplemented pursuant to Rule
497(e) on September 6, 1995 and pursuant to Rule 497(e) 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
- --------------------------------------------------------------------------------
INTERNATIONAL MAGNUM 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-eight 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 International
Magnum Portfolio (the "Portfolio"). The Class A shares and the 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 charges or exchange or redemption fee (with the exception of one of the
portfolios).
The INTERNATIONAL MAGNUM PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers in accordance with
EAFE country (as defined in "Investment Objective and Policies") weightings
determined by the Portfolio's investment adviser.
INVESTORS SHOULD NOTE THAT THE PORTFOLIO MAY INVEST UP TO 10% OF ITS TOTAL
ASSETS IN RESTRICTED SECURITIES, AND UP TO 25% OF ITS TOTAL ASSETS IN RESTRICTED
SECURITIES THAT ARE RULE 144A SECURITIES. SEE "ADDITIONAL INVESTMENT
INFORMATION -- NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED
SECURITIES." INVESTMENTS IN RESTRICTED SECURITIES IN EXCESS OF 5% OF THE
PORTFOLIO'S TOTAL ASSETS MAY BE CONSIDERED A SPECULATIVE ACTIVITY, MAY INVOLVE
GREATER RISK AND MAY INCREASE THE PORTFOLIO'S EXPENSES.
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 Magnum, International Small Cap, Japanese Equity and Latin
1
<PAGE>
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. This information is incorporated herein by
reference. The Statement of Additional Information and the prospectuses
pertaining to the other 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.
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FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of
the International Magnum Portfolio will incur:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.48%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.48%
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.13%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.13%
Other Expenses
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.24%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.24%
-----
Total Operating Expenses (Net of Fee Waivers)*
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.25%
-----
-----
- ---------------
* 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 0.80%. Absent the fee waiver
and/or expense reimbursement, the Portfolio's total operating expenses are
expected to be 1.32% of the average daily net assets of the Class A shares
and 1.57% 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."
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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 and Class B expenses and fees for the Portfolio are
based on estimates, assuming that the average daily net assets of the Class A
shares and Class B shares will be $[ ] and [____________],
respectively. "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.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
International Magnum Portfolio
Class A . . . . . . . . . . . . . . . . $10 $32 $ * $ *
Class B . . . . . . . . . . . . . . . . $13 $41 $ * $ *
- ---------------
* Because the Portfolio has not yet become operational, the Fund has not
projected expenses for the Portfolio beyond the 3-year period shown.
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.
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PROSPECTUS SUMMARY
THE FUND
The Fund consists of twenty-eight 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 International
Magnum Portfolio.
- The INTERNATIONAL MAGNUM PORTFOLIO seeks long-term capital
appreciation by investing primarily in equity securities of non-U.S.
issuers in accordance with EAFE country (as defined in "Investment
Objective and Policies") weightings determined by the Adviser.
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 ACTIVE COUNTRY ALLOCATION PORTFOLIO seeks 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 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.
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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 common stocks 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.
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<PAGE>
- 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.
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.
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
7
<PAGE>
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.
8
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of International Magnum Portfolio is described
below, together with the policies the Fund employs in its efforts to achieve
this objective. The 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 Portfolio 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 Portfolio is to provide long-term
capital appreciation. The production of any current income is incidental to
this objective. The Portfolio seeks to achieve its objective by investing
primarily in equity securities of non-U.S. issuers in accordance with the
EAFE country (defined below) weightings determined by the Adviser. With
respect to the Portfolio, equity securities include common and preferred
stocks, convertible securities, and rights and warrants to purchase common
stocks. The equity securities in which the Portfolio may invest may be
denominated in any currency. At least 65% of the total assets of the
Portfolio will be invested in such equity securities under normal
circumstances.
The countries in which the Portfolio will invest are those comprising the
Morgan Stanley Capital International EAFE Index (the "Index"), which includes
Australia, Japan, New Zealand, most nations located in Western Europe and
certain developed countries in Asia, such as Hong Kong and Singapore (each an
"EAFE country," and collectively the "EAFE countries").
By analyzing a variety of macroeconomic and political factors, the Adviser
develops fundamental projections on comparative interest rates, currencies,
corporate profits and economic growth among the various regions represented in
the Index. Once regional projections are developed, the Adviser will utilize
such projections to develop specific country projections. These regional and
country projections are used to determine what the Adviser believes to be a fair
value for the stock market of each EAFE 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.
The Adviser's approach in selecting investments among the issuers in a
particular EAFE country, which is oriented to individual stock selection and is
value driven, is similar to the approach described in the International Equity
Portfolio discussed above. Within a particular EAFE country, the Adviser will
attempt to identify those securities which it believes to be undervalued in
relation to the issuer's assets, cash flow, earnings and revenues. While the
Portfolio is not subject to any specific geographic diversification
requirements, it currently intends to diversify investments among countries to
reduce currency risk.
Although the Portfolio intends to invest primarily in equity securities
listed on a stock exchange in an EAFE country, the Portfolio may invest in
equity securities that are traded over the counter or that are not admitted to
listing on a stock exchange or dealt in on a regulated market. As a result of
the absence of a public trading market, such securities may pose liquidity
risks. The Portfolio may also invest in private placements or initial public
offerings in the form of oversubscriptions. Such investments generally entail
short-term liquidity risks. See "Additional Investment Information - Non-
Publicly Traded Securities, Private Placements and Restricted Securities."
The Portfolio may invest up to 10% of its total assets in (i) investment
funds with investment objectives similar to that of the Portfolio and (ii) for
temporary purposes, money market funds and pooled investment vehicles. If the
Portfolio invests in other investment funds, stockholders will bear not only
their proportionate share of the expenses of the Portfolio (including operating
expenses and fees of the Investment Adviser), but also will indirectly bear
similar expenses of the underlying investment fund.
9
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Although the Portfolio anticipates being fully invested in equity
securities of EAFE countries, the Portfolio may invest, under normal
circumstances for cash management purposes, up to 35% of its total assets in
certain short-term (less than twelve months to maturity) and medium-term (not
greater than five years to maturity) debt securities or hold cash. In addition,
for temporary defensive purposes during periods in which the Adviser believes
changes in economic, financial or political conditions make it advisable, the
Portfolio may invest up to 100% of its total assets in such short-term and
medium-term debt securities or hold cash. See "Additional Investment
Information - Temporary Investments." Up to 35% of the total assets of the
Portfolio may be invested in securities and obligations that are set forth in
"Additional Investment Information" below.
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% under normal circumstances. For a
description of other types of investments and investment strategies in which the
Portfolios may engage, see "Additional Investment Information" on the following
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-dominated securities of foreign issuers.] Investment in securities of
foreign issuers and in foreign branches of domestic banks involves somewhat
different investment risks than those affecting securities of U.S. domestic
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 and other reporting standards and
requirements comparable to those applicable to U.S. 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 domestic 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 Portfolio
by U.S. companies[, and it is 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.] 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. [Many of the emerging or developing
countries may have less stable political environments than more developed
countries. Also, it may be more difficult to obtain a judgment in a court
outside the United States.]
Investments in securities of foreign issuers are frequently denominated in
foreign currencies, and the Portfolio may temporarily hold uninvested reserves
in bank deposits in foreign currencies. Therefore, 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 ("forward contracts") that provide
for the purchase of or sale of an amount of a specified 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 fluctuations. 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. [Except in circumstances where
segregated accounts are not required by the 1940 Act and the rules adopted
thereunder, the Portfolio'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 foreign 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 at least equal to the amount of the
Portfolio's commitments with respect to such contracts.] See "Investment
Objective and Policies -- Forward Foreign Currency Exchange Contracts" in the
Statement of Additional Information.
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INVESTMENT COMPANIES. Some foreign countries have laws and regulations that
currently preclude direct foreign investment in the securities of their
companies. However, indirect foreign investment in the securities of companies
listed and traded on the stock exchanges in these countries is permitted by
certain foreign countries through investment companies which have been
specifically authorized. The Portfolio may invest in these investment companies
subject to the provisions of the Investment Company Act of 1940, as amended (the
"1940 Act"), and other applicable laws as discussed below under "Investment
Restrictions." If the Portfolio invests in such investment companies, the
Portfolio's shareholders will bear not only their proportionate share of the
expenses of the Portfolio (including operating expenses and the fees of the
Adviser), but also will indirectly bear similar expenses of the underlying
investment companies.
Certain of the investment companies referred to in the preceding paragraph
are advised by the Adviser. The Portfolio may, to the extent permitted under the
1940 Act and other applicable law, invest in these investment companies. If the
Portfolio does elect to make an investment in such an investment company, it
will only purchase the securities of such investment company in the secondary
market.
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 Objective 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 U.S.
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.
NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED SECURITIES.
The Portfolio may invest in securities that are neither listed on a stock
exchange nor traded over-the-counter, including privately placed securities.
Such unlisted equity securities may involve a higher degree of business and
financial risk that can result in substantial losses. As a result of the absence
of a public trading market for these securities, they may be less liquid than
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized from these sales could be less than
those originally paid by the Portfolio or less than what may be considered the
fair value of such securities. Further, more companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements which might be applicable if their securities were
publicly traded. If such securities are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Portfolio
may be required to bear the expenses of registration. As a general matter, the
Portfolio may not invest more than 15% of its total assets in illiquid
securities, including securities for which there is no readily available
secondary market, nor more than 10% of its total assets in securities that are
restricted from sale to the public without registration ("Restricted
Securities") under the Securities Act of 1933, as amended (the "1933 Act").
Nevertheless, subject to the foregoing limit on illiquid securities, the
Portfolio may invest up to 25% of its total assets in Restricted Securities that
can be offered and sold to qualified institutional buyers under Rule 144A under
that Act ("144A Securities"). The Board of Directors has adopted guidelines and
delegated to the Adviser, subject to the supervision of the Board of Directors,
the daily function of determining and monitoring the liquidity of 144A
securities. Rule 144A securities may become illiquid if qualified institutional
buyers are not interested in acquiring the securities. Investors should note
that investments of 5% of the Portfolio's total assets may be considered a
speculative activity and may involve greater risk and expense to the Portfolio.
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REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
brokers, dealers or banks that meet the credit guidelines established by the
Fund's Board of 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."
TEMPORARY INVESTMENTS. During periods in which the Adviser believes changes in
economic, financial or political conditions make it advisable, for temporary
defensive purposes the Portfolio may reduce its holdings in equity and other
securities and may invest in certain short-term (less than twelve months to
maturity) and medium-term (not greater than five years to maturity) debt
securities or may hold cash.
The short-term and medium-term debt securities in which the Portfolio
may invest consist of (a) obligations of governments, agencies or
instrumentalities of any member state of the Organization for Economic
Cooperation and Development ("OECD"), including the United States; (b) bank
deposits and bank obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks organized under the laws of any
member state of the OECD, including the United States, denominated in any
currency; (c) finance company and corporate commercial paper and other
short-term corporate debt obligations of corporations organized under the
laws of any member state of the OECD, including the United States, meeting
the Portfolio's credit quality standards, provided that no more than 20% of
the Portfolio's assets is invested in any one of such issuers. The
Portfolio's short-term and medium-term debt securities in which the Portfolio
may invest will be rated investment grade by recognized rating services such
as Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings
Group ("S&P") (in the case of Moody's and S&P, meaning rated A or higher by
either), or if unrated, will be determined to be of comparable quality by the
Adviser.
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 equity 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, among other factors, 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.
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INVESTMENT LIMITATIONS
The International Magnum Portfolio is a non-diversified investment company
under the 1940 Act, which means that the Portfolio is not limited by the 1940
Act in the proportion of its total assets that may be invested in the
obligations of a single issuer. Thus, the Portfolio may invest a greater
proportion of its total assets in the securities of a smaller number of issuers
and, as a result, will be subject to greater risk with respect to its respective
portfolio securities. The Portfolio, however, intends to comply with the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended, for qualification as regulated investment companies. See "Taxes."
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 15% of the market value of the Portfolio's
total assets would be invested in these 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.
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 International Magnum Portfolio an annual investment advisory fee,
payable quarterly, equal to 0.80% 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. 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 1.00% of the average daily net assets of the Class A shares
of the Portfolio and 1.25% of the average daily net assets of the Class B shares
of the Portfolio.
The Adviser, with principal offices at 1221 Avenue of the Americas, New
York, New York 10020, conducts a worldwide portfolio management business,
provides 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 MANAGER. FRANCINE J. BOVICH. 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
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Company. She holds a B.A. in Economics from Connecticut College 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
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, 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 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 United States
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 delegates its
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, 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 Fund. Under its Distribution Agreement with the Fund, Morgan Stanley
sells shares of the Portfolio 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 Portfolio 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 for its expenses, and the Distributor may retain
any portion of the fee that it does not expend in fulfillment of its obligation
to the Portfolio.
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EXPENSES. The Portfolio is responsible for payment of certain other fees and
expenses (including legal fees, accountant's 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.
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.
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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. --
International Magnum Portfolio", to:
Morgan Stanley Institutional Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
Payment will be accepted only in United States dollars, unless prior
approval for payment in other currencies is given by the Fund. The
Portfolio 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.
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):
The 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 the funds.
C. Complete and sign the Account Registration Form and mail it to
the address shown thereon.
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 for each portfolio, 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 -- [portfolio name]") 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(s) 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 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 regular 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
regular 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 asset
values and dividends. The net asset value of Class B shares will generally be
lower than 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
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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 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.
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.
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 the 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
within any 120-day period. As an example, 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 of the Fund and again exchanging the 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 regular 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 redemptions. 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
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<PAGE>
courier should be addressed to Morgan Stanley Institutional Fund, Inc., c/o
Chase Global Funds Services Company, 73 Tremont Street, 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.
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 regular
mail or express mail and it 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. 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".
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
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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 any 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 or telephone. The privilege to exchange shares by telephone is automatic
and is made available without shareholder election. Before you make an exchange,
you should read the prospectus of the new 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 the shareholders.
BY MAIL
In order to exchange shares by mail, you should include in the exchange
request the name and account number of your current 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, Massachusetts 02208-2798.
BY TELEPHONE
When exchanging shares by telephone, have ready the name and account number
of your current portfolio, the name of the portfolio 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. (Eastern Time) 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 regular close
19
<PAGE>
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 not readily available are valued
at a price 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 average 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 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 the prices in
accordance with the above-stated procedures 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 for 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 the "total return" of the
Portfolio. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE.
The Portfolio may advertise "total return" which shows what an investment
in a 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
Portfolios' shares, including 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.
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
20
<PAGE>
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.
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(b) under the Securities Exchange
Act of 1934, as amended, on the next monthly client statement following such
purchase of shares. Consequently, confirmation 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 (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.
TAXES
The following summary of 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 Portfolios or their shareholders.
Accordingly, shareholders are urged to consult their tax advisers 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 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 gain (the excess of net long-term capital gain
over net short-term capital loss) are taxable to shareholders as long-term
capital gain, regardless of how long shareholders have held their shares. The
Portfolio sends reports annually to its 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),
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<PAGE>
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 in 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 or sold 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.
Shareholders are urged to consult with their tax advisors 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 Portfolio or who act as agents in the purchase of shares of
the Portfolio 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
such other clients in a manner deemed fair and reasonable by the Adviser.
Although there is no
22
<PAGE>
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 the Fund's portfolio
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 Portfolio, 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 those
Directors who are not "interested persons," as defined in the 1940 Act, 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 1940 Act, of Morgan Stanley when such entities are acting as principals,
except to the extent permitted by law.
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 Articles of Incorporation, 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 pre-emptive rights. The shares of the Portfolio
have non-cumulative 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 the Portfolio may be presumed to "control" (as defined in
the 1940 Act) the 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, the Fund or the 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.
23
<PAGE>
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 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
The Fund is not involved in any litigation.
24
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25
<PAGE>
___________________ ___________________
___________________ ___________________
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
PAGE
----
Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . 9
Additional Investment Information. . . . . . . . . . . . . . . . . . . 10
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . 13
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 13
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 17
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . 19
Valuation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . 20
Dividends and Capital Gains Distributions. . . . . . . . . . . . . . . 21
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 22
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Account Registration Form
INTERNATIONAL MAGNUM PORTFOLIO
A PORTFOLIO OF THE
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
Common Stock
($.001 PAR VALUE)
--
PROSPECTUS
--
Investment Adviser
26
<PAGE>
Morgan Stanley
Asset Management Inc.
Distributor
Morgan Stanley & Co.
Incorporated
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798, BOSTON, MA 02208-2798
___________________ ___________________
___________________ ___________________
27
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. Box 2798, Boston, MA 02208-2798
<TABLE>
<CAPTION>
<S> <C>
ACCOUNT REGISTRATION FORM
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 MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / TRUST ___ / / OTHER (Specify) ___
B) MAILING ADDRESS
Please fill in completely, including telephone
number(s).
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 __
28
<PAGE>
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 tax liability of persons subject to backup
WITHHOLDING withholding will be reduced by the amount of tax
/ / Check this box if you withheld. If withholding results in an overpayment
are NOT subject to Backup of taxes, a refund may be obtained.
Withholding under the You may be notified that you are subject to
provisions of Section backup withholding under Section 3406(a)(1)(C) of
3406(a)(1)(C) of the the Internal Revenue Code because you have
Internal Revenue Code. 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 SECTION
(Class A Shares minimum $500,000 and Class B
shares minimum $100,000). Please indicate
amount.
International Magnum Portfolio:
/ / CLASS A SHARES $ ______________
/ / CLASS B SHARES $ ______________
E) METHOD OF
INVESTMENT
Please indicate manner of payment.
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND, INC.-- INTERNATIONAL MAGNUM PORTFOLIO)
/ / Exchange $ __________ From __________ __________ -- __
29
<PAGE>
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on __ __________ -- __
Account No. (Check
(Previously assigned by the
Date Fund) Digit)
30
<PAGE>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to be reinvested in
OPTION 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.
G) TELEPHONE / / I/we hereby authorize the Fund ________________ __
REDEMPTION and its agents to honor any Name of COMMERCIAL Bank (Not Savings
AND EXCHANGE telephone requests to wire Bank) Bank Account No.
OPTION redemption proceeds to the __
Please select at time of initial application if commercial bank indicated at
you wish to redeem or exchange shares by right and/or mail redemption Bank ABA No.
telephone. A SIGNATURE GUARANTEE IS REQUIRED IF proceeds to the name and __
BANK ACCOUNT IS NOT REGISTERED IDENTICALLY TO address in which my/our fund Name(s) in which your BANK Account
YOUR FUND ACCOUNT. account is registered if such is Established
TELEPHONE REQUESTS FOR REDEMPTIONS OR EXCHANGES requests are believed to be __
WILL NOT BE HONORED UNLESS THE BOX IS CHECKED. authentic. Bank's Street Address
THE FUND AND THE FUND'S TRANSFER __
AGENT WILL EMPLOY REASONABLE City State Zip
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.
31
<PAGE>
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>
32
<PAGE>
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33
<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.
The Statement of Additional Information for the Active Country Allocation
Portfolio, included as part of Post-Effective Amendment No. 27 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
November 1, 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-eight
portfolios representing 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 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 International Magnum Portfolio (the "Portfolio"), one of the twenty-eight
portfolios.
This Statement is not a prospectus but should be read in conjunction
with the prospectus of the Portfolio (the "Prospectus"). To obtain the
Prospectus or the prospectus and/or Statement of Additional Information
relating to any of the other portfolios, please call the Morgan Stanley
Institutional Fund, Inc. Services Group at 1-800-548-7786.
TABLE OF CONTENTS
PAGE
----
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . 2
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Special Tax Considerations Relating to Foreign Investments . . . . . . 6
Taxes and Foreign Shareholders . . . . . . . . . . . . . . . . . . . . 6
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 7
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . 8
Determining Maturities of Certain Instruments. . . . . . . . . . . . . 9
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 10
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . 20
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Description of Securities and Ratings. . . . . . . . . . . . . . . . . 24
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 26
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY __, 1996, RELATING TO THE
PROSPECTUS OF THE INTERNATIONAL MAGNUM PORTFOLIO, DATED JANUARY __, 1996.
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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
the Portfolio's commitments with respect to such 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.
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
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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 the transactions with regard
to its 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.
SPECIAL RISKS ASSOCIATED WITH FORWARD CONTRACTS
Transactions in forward 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 in 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, 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 in the manner set forth
above and in the Prospectus could be restricted.
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
The investment objective of the International Magnum 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
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.
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The Morgan Stanley Capital International EAFE Index is based on the
share prices of 1,066 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.
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 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 income 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
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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 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) forward contracts (other than forward contracts on foreign
currencies), and (C) foreign currencies (or forward contracts on foreign
currencies) that are not directly related to the Portfolio's principal
business of investing in stocks 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 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.
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. Realized gain or loss
attributable to a foreign currency forward contract is treated as 100%
ordinary income.
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
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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 forward contracts, derived with respect to its
business of investing in stock, securities or currencies. 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, 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.
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 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 observance of the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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 (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.
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
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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 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) 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);
(5) 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;
(6) 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
(7) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
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;
(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;
8
<PAGE>
(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 limitations as
described in the Prospectus) 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.
The Portfolio will diversify its holdings so that, at the close of each
quarter of its taxable year, (i) at least 50% of the market value of the
Portfolio's total assets is represented by cash (including cash items and
receivables), U.S. Government securities, and other securities, with such other
securities limited, in respect of any one issuer, for purposes of this
calculation to an amount not greater than 5% of the value of the Portfolio's
total assets and 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 of any one issuer (other than U.S. Government securities).
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:
(a) 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 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.
9
<PAGE>
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. Directors and
officers of the Fund are also directors and 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:
10
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
- --------------------- ------------------ ---------------------------
Barton M. Biggs* Chairman and Chairman and Director of
1221 Avenue of the Director Morgan Stanley Asset
Americas Management Inc. and
New York, NY 10020 Morgan Stanley Asset
(62) Management Limited; Managing
Director of Morgan
Stanley & Co. Incorporated;
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;
Americas Principal
New York, NY 10020 of Morgan Stanley Asset
(39) Management Inc.; President
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.
11
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
- --------------------- ------------------ ---------------------------
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 CEO, Pinacle L.L.C.
Fresno Street (investment firm);
Fresno, CA 93720 Director, Pacific Gas and
(61) 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.
Frederick B. Whittemore* Director Advisory Director of Morgan
1251 Avenue of the Stanley & Co. Incorporated;
Americas, 30th Flr. Vice-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.
12
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
- --------------------- ------------------ ---------------------------
James W. Grisham Vice President Principal of Morgan Stanley
1221 Avenue of the & Co Incorporated;
Americas Principal of Morgan Stanley
New York, NY 10020 Asset 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.
Harold J. Schaaff, Jr. Vice President Principal of Morgan Stanley
1221 Avenue of the & Co. Incorporated;
Americas Principal, General Counsel
New York, NY 10020 and Secretary of Morgan
(35) Stanley Asset Management
Inc.; 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.
13
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
- --------------------- ------------------ ---------------------------
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
(41) (accounting); 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.
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)].
14
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
- --------------------- ------------------ ---------------------------
James R. Rooney Treasurer Assistant Vice President,
73 Tremont Street Chase Global Funds
Boston, MA 02108-3913 Services Company; Manager
(37) of Fund 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.
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.
- ---------------
* "Interested Person" within the meaning of the 1940 Act.
REMUNERATION OF DIRECTORS AND OFFICERS
Effective June 28, 1995, the Open-end Fund Complex will pay each of the
nine Durectors 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 for
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
15
<PAGE>
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.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------
(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
EXPENSES 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 85,584.11
Director
Peter E. deSvastich,** 15,750 40,058
Director
Warren J. Olsen,* N/A N/A
Director and President
</TABLE>
_______________
* 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.
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,
16
<PAGE>
1992, the two 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 the 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 Thompson Consumer Electronics, 235 West Schrock Road,
Westerville, OH 43081, owned 7% of such Portfolio's total outstanding shares.
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.
17
<PAGE>
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 Bienfaissance Et De Retraite Des
Policiers De La Communaute Urbaine De Montreal, 480 Gilford Street, Montreal,
Quebec H2JIN#, 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.
18
<PAGE>
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 Riverville 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 Road, 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 10% 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.
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.
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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 Bldg., 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.
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.
These figures were calculated according to the following formula:
P(1 + T) to the ninth power = ERV
where:
P = a hypothetical initial payment of $1,000
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.
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(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.
(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.
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(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 and 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 1,066
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.
(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.
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<PAGE>
(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
Portfolio 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-eight Portfolios (China Growth, Mortgage-Backed
Securities, MicroCap and International Magnum 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.
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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 and principal payments or of maintenance of other terms of the
contract 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.
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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 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.
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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 portfolios 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
There are no financial statements for the International Magnum Portfolio
because the International Magnum Portfolio has just become operational as of the
date of this SAI.
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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, MicroCap and International Magnum 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 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 forth in Part A and are
incorporated herein by reference. The Fund's Mortgage-Backed
Securities, China Growth, MicroCap and International Magnum
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 as set forth in Part A (the
"October, 1995 SAIs"), and are incorporated by reference into
Part B for the Active County Allocation Portfolio filed with the
SEC as part of Post-Effective Amendment No. 27 to the
Registrant's Registration Statement on Form N-1A (File No. 33-
23166 and 811-5624) on November 1, 1995 (the "Active Country
SAI"). Included in such financial statements are the following:
<PAGE>
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,
MicroCap and International Magnum 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.
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, MicroCap
and International Magnum 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.
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.
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<PAGE>
(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.
(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
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<PAGE>
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.
(o) Supplement to Investment Advisory Agreement between Registrant
and Morgan Stanley Asset Management, Inc. (adding the
International Magnum Portfolio), filed herewith.
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 is incorporated by
reference to Post-Effective Amendment No. 27 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 November 1, 1995.
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 is
incorporated by reference to Post-Effective Amendment No. 27 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 November 1, 1995.
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,
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<PAGE>
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, U.S. Real Estate and International Magnum
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 is incorporated by
reference to Post-Effective Amendment No. 27 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 November 1, 1995.
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
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<PAGE>
Emerging Markets Debt Portfolio. . . . . . . 589
Gold Portfolio . . . . . . . . . . . . . . . 065
China Growth Portfolio . . . . . . . . . . . 0
MicroCap Portfolio . . . . . . . . . . . . . 0
International Magnum 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 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 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
C-6
<PAGE>
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
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
C-7
<PAGE>
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
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).
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<PAGE>
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 Services 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.
ITEM 31. MANAGEMENT SERVICES
The Registrant has entered into 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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<PAGE>
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 3, 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.
Signature Title Date
- --------- ----- ----
/s/ Warren J. Olsen Director, President November 3, 1995
- ---------------------------- (Principal Executive
Warren J. Olsen Officer)
*/s/ Barton M. Biggs Director (Chairman) November 3, 1995
- ----------------------------
Barton M. Biggs
*/s/ Fergus Reid Director November 3, 1995
- ----------------------------
Fergus Reid
*/s/ Frederick O. Robertshaw Director November 3, 1995
- ----------------------------
Frederick O. Robertshaw
*/s/ Andrew McNally IV Director November 3, 1995
- ----------------------------
Andrew McNally IV
*/s/ John D. Barrett II Director November 3, 1995
- ----------------------------
John D. Barrett II
*/s/ Gerard E. Jones Director November 3, 1995
- ----------------------------
Gerard E. Jones
*/s/ Samuel T. Reeves Director November 3, 1995
- ----------------------------
Samuel T. Reeves
*/s/ Frederick B. Whittemore Director November 3, 1995
- ----------------------------
Frederick B. Whittemore
*/s/ James R. Rooney Treasurer November 3, 1995
- ----------------------------
James R. Rooney (Principal
Accounting
Officer)
*By: /s/ Warren J. Olsen
--------------------
Warren J. Olsen
Attorney-In-Fact
<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
<PAGE>
N-1A (File Nos. 33-23166 and 811-5624), as filed with the
SEC via EDGAR on August 1, 1995.
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.
2
<PAGE>
EX-99.B 5 (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.
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 5 (o) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management, Inc. (adding
the International Magnum Portfolio), filed herewith.
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 is
incorporated by reference to Post-Effective Amendment No. 27
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 November 1, 1995.
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.
3
<PAGE>
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 of Distribution Pursuant to Rule 12b-1 for
Class B Shares (the "Class B Plan") of the Active Country
Allocation Portfolio is incorporated by reference to Post-
Effective Amendment No. 27 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 November 1, 1995. 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, U.S. Real
Estate and International Magnum Portfolios.
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 is incorporated
by reference to Post-Effective Amendment No. 27 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
November 1, 1995.
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-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.
4
<PAGE>
EXHIBIT 5(a)
MORGAN STANLEY INSTITUTIONAL FUND, INC.
SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
INTERNATIONAL MAGNUM PORTFOLIO
SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT (the "Agreement") dated as
of October 1, 1988 between Morgan Stanley Institutional Fund, Inc. (the "Fund")
and Morgan Stanley Asset Management Inc. (the "Adviser").
RECITALS
The Fund has executed and delivered the Investment Advisory Agreement,
dated as of October 1, 1988 (the "Agreement"), between the Fund and the Adviser.
The Agreement sets forth the rights and obligation of the parties with respect
to the management of the Portfolios of the Fund. The Fund has created one
additional portfolio: the International Magnum Portfolio (the "Additional
Portfolio").
AGREEMENTS
Now, therefore, the parties agree as follows:
The percentage rate in Paragraph 3 of the Agreement with respect to
the Additional Portfolio will be as set forth below:
Portfolio Percentage Rate
--------- ---------------
International Magnum 0.80%
This agreement 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.
The parties listed below have executed this Agreement as of the 29th
day of June, 1995.
MORGAN STANLEY ASSET
MANAGEMENT INC.
/s/ Peter A. Nadosy
-------------------
President
MORGAN STANLEY INSTITUTIONAL
FUND, INC.
/s/ Warren J. Olsen
-------------------
Vice President
<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. 28 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
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<NUMBER-OF-SHARES-SOLD> 1,816
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<SHARES-REINVESTED> 87
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<ACCUMULATED-GAINS-PRIOR> 974
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 228
<AVERAGE-NET-ASSETS> 28,288
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<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
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<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 1,192,202
<INVESTMENTS-AT-VALUE> 1,450,589
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<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 15
<NAME> INTERNATIONAL SMALL CAP PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
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<ACCUM-APPREC-OR-DEPREC> (4,295)
<NET-ASSETS> 187,018
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<NET-INVESTMENT-INCOME> 2,496
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<NET-CHANGE-IN-ASSETS> 26,917
<ACCUMULATED-NII-PRIOR> 703
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<PAGE>
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<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 20
<NAME> JAPANESE EQUITY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
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<NET-INVESTMENT-INCOME> (8)
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<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 25
<NAME> LATIN AMERICAN PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-18-1995
<PERIOD-END> JUN-30-1995
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<EXPENSES-NET> (132)
<NET-INVESTMENT-INCOME> 21
<REALIZED-GAINS-CURRENT> (754)
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<NET-CHANGE-FROM-OPS> (709)
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</TABLE>
<TABLE> <S> <C>
<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
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<S> <C>
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<NET-INVESTMENT-INCOME> 78
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> EMERGING GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
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<EXPENSES-NET> (780)
<NET-INVESTMENT-INCOME> (423)
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<PAGE>
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<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 11
<NAME> EQUITY GROWTH PORTFOLIO
<MULTIPLIER> 1,000
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUND, INC.
<SERIES>
<NUMBER> 17
<NAME> SMALL CAP VALUE EQUITY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 26
<NAME> U.S. REAL ESTATE PORTFOLIO
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<TABLE> <S> <C>
<PAGE>
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<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUND, INC.
<SERIES>
<NUMBER> 5
<NAME> VALUE EQUITY PORTFOLIO
<MULTIPLIER> 1,000
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<PER-SHARE-DIVIDEND> (0.19)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUND, INC.
<SERIES>
<NUMBER> 6
<NAME> BALANCED PORTFOLIO
<MULTIPLIER> 1,000
<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
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<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
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<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)
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<PER-SHARE-NAV-END> 9.73
<EXPENSE-RATIO> 0.70
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 21
<NAME> EMERGING MARKETS DEBT PORTFOLIO
<MULTIPLIER> 1,000
<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
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<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>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 7
<NAME> THE FIXED INCOME PORTFOLIO
<MULTIPLIER> 1,000
<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
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<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>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 10
<NAME> GLOBAL FIXED INCOME PORTFOLIO
<MULTIPLIER> 1,000
<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
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<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>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 16
<NAME> HIGH YIELD PORTFOLIO
<MULTIPLIER> 1,000
<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>
<TABLE> <S> <C>
<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
<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
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<OTHER-ITEMS-ASSETS> 44
<TOTAL-ASSETS> 44,439
<PAYABLE-FOR-SECURITIES> 562
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<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>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000836487
<NAME> MORGAN STANLEY INSTITUTIONAL FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> THE MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<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
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 829,654
<PAYABLE-FOR-SECURITIES> 0
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<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)
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