<PAGE>
SUPPLEMENT DATED DECEMBER 30, 1996
TO THE PROSPECTUS DATED MAY 1, 1996
FIXED INCOME PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
MUNICIPAL BOND PORTFOLIO
MORTGAGE-BACKED SECURITIES
HIGH YIELD PORTFOLIO
MONEY MARKET PORTFOLIO
MUNICIPAL MONEY MARKET PORTFOLIO
PORTFOLIOS OF THE
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS
02208-2798
-------------
The Prospectus as amended and supplemented to date is further amended and
supplemented by replacing:
Under the heading "ADDITIONAL INVESTMENT INFORMATION" on Page 27
under the subheading "FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS," the first two paragraphs are deleted and replaced with the
following:
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. In order to
remain fully invested and to reduce transaction costs, each Portfolio,
except the Money Market and Municipal Money Market Portfolios, may
utilize appropriate futures contracts and options on futures contracts
to a limited extent. Because transaction costs associated with futures
and options may be lower than the costs of investing in stocks directly,
it is expected that the use of futures and options on futures contracts
to facilitate cash flows may reduce a Portfolio's overall transaction
costs.
Each Portfolio, except the Money Market and Municipal Money Market
Portfolios, may enter into futures contracts and options on futures
provided that not more than 5% of its total assets are required as
deposit to secure obligations under such contracts, and provided further
that not more than 20% of its total assets are invested, in the
aggregate, in futures contracts and options on futures.
--------------
Add the following investment policies with respect to the FIXED INCOME AND
GLOBAL FIXED INCOME PORTFOLIOS under the heading "ADDITIONAL INVESTMENT
INFORMATION" on page 28 before the sub-heading "ADDITIONAL INVESTMENT
INFORMATION -- REPURCHASE AGREEMENTS."
OPTIONS TRANSACTIONS. The Fixed Income and Global Fixed Income
Portfolios may write (i.e., sell) covered call options and covered put
options on portfolio securities. By selling a covered call option, a
Portfolio would become obligated during the term of the option to
deliver the securities underlying the option should the option holder
choose to exercise the option before the option's
<PAGE>
termination date. In return for the call it has written, the Portfolio
will receive from the purchaser (or option holder) a premium which is
the price of the option, less a commission charged by a broker. The
Portfolio will keep the premium regardless of whether the option is
exercised. By selling a covered put option, the Portfolio incurs an
obligation to buy the security underlying the option from the purchaser
of the put at the option's exercise price at any time during the option
period, at the purchaser's election (certain options written by the
Portfolio will be exercisable by the purchaser only on a specific date).
A call option is "covered" if the Portfolio owns the security underlying
the option it has written or has an absolute or immediate right to
acquire the security by holding a call option on such security, or
maintains a sufficient amount of cash, cash equivalents or liquid assets
to purchase the underlying security. Generally, a put option is
"covered" if the Portfolio maintains cash, U.S. Government securities or
other liquid assets equal to the exercise price of the option, or if the
Portfolio holds a put option on the same underlying security with a
similar or higher exercise price.
When a Portfolio writes covered call options, it augments its income
by the premiums received and is thereby hedged to the extent of that
amount against a decline in the price of the underlying securities. The
premiums received will offset a portion of the potential loss incurred
by the Portfolio if the securities underlying the options are ultimately
sold by the Portfolio at a loss. However, during the option period, the
Portfolio has, in return for the premium on the option, given up the
opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase, but has retained the
risk of loss should the price of the underlying security decline.
A Portfolio will write covered put options to receive the premiums
paid by purchasers (when the Adviser wishes to purchase the security
underlying the options at a price lower than its current market price,
in which case the Portfolio will write the covered put at an exercise
price reflecting the lower purchase price sought) and to close out a
long put option position. The writer of a covered put option accepts the
risk of a decline in the price of the underlying security.
A Portfolio may also purchase put or call options. When the
Portfolio purchases a call option it acquires the right to buy a
designated security at a designated price (the "exercise price"), and
when the Portfolio purchases a put option it acquires the right to sell
a designated security at the exercise price, in each case on or before a
specified date (the "termination date"), which is usually not more than
nine months from the date the option is issued. The Portfolio may
purchase call options to close out a covered call position or to protect
against an increase in the price of a security it anticipates
purchasing. The Portfolio may purchase put options on securities to
protect itself against a decline in the value of the security. If the
value of the underlying security were to fall below the exercise price
of the put purchased in an amount greater than the premium paid for the
option, the Portfolio would incur no additional loss. The Portfolio may
also purchase put options to close out written put positions in a manner
similar to call option closing purchase transactions. There are no other
limits on the Portfolio's ability to purchase call and put options.
Other risks associated with the use of options are (i) imperfect
correlation between the change in market value of the securities held by
the Portfolio and the price of options relating to the securities
purchased or sold by the Portfolio; and (ii) possible lack of a liquid
secondary market for an option. Options that are not traded on and
exchange (OTC options) are often considered illiquid and may be
difficult to value. In the opinion of the Adviser, the risk that the
Portfolio will be unable to close out an options contract will be
minimized by only entering into options transactions for which there
appears to be a liquid secondary market. For more detailed information
about options transactions, see "Investment Objectives and Policies" in
the Statement of Additional Information.
--------------
<PAGE>
Under the heading "PROSPECTUS SUMMARY" under the subheading "HOW TO INVEST,"
the first paragraph is deleted and replaced with the following:
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 of the Portfolio are offered at net asset value with no sales
commission, but with a 12b-1 fee, which is accrued daily and paid
quarterly, equal to 0.25% of the Class B shares' average daily net
assets on an annualized basis. Share purchases may be made by sending
investments directly to the Fund or through the Distributor. Shares in a
Portfolio account opened prior to January 2, 1996 (each, a "Pre-1996
Account") were designated Class A shares on January 2, 1996. For a
Portfolio account opened on or after January 2, 1996 (a "New Account"),
the minimum initial investment is $500,000 for Class A shares and
$100,000 for Class B shares. Certain exceptions to the foregoing
minimums apply to (1) shares in a Pre-1996 Account with a value of
$100,000 or more on March 1, 1996 (a "Grandfathered Class A Account");
(2) Portfolio accounts held by certain employees of the Adviser and of
its affiliates; and (3) certain advisory or asset allocation accounts,
such as Total Funds Management accounts, managed by Morgan Stanley or
its affiliates, including the Adviser ("Managed Accounts"). The Adviser
reserves the right in its sole discretion to determine which of such
advisory or asset allocation accounts shall be Managed Accounts. For
information regarding Managed Accounts, please contact your Morgan
Stanley account representative or the Fund at the telephone number
provided on the cover of this Prospectus. Shares in a Pre-1996 Account
with a value of less than $100,000 on March 1, 1996 (a "Grandfathered
Class B Account") converted to Class B shares on March 1, 1996. The
minimum investment levels may be waived at the discretion of the Adviser
for (i) certain employees and customers of Morgan Stanley or its
affiliates and certain trust departments, brokers, dealers, agents,
financial planners, financial services firms, or investment advisers
that have entered into an agreement with Morgan Stanley or its
affiliates; and (ii) retirement and deferred compensation plans and
trusts used to fund such plans, including, but not limited to, those
defined in Section 401(a), 403(b) or 457 of the Internal Revenue Code of
1986, as amended, and "rabbi trusts". See "Purchase of Shares Minimum
Investment and Account Sizes; Conversion from Class A to Class B
Shares."
--------------
Under the heading "PURCHASE OF SHARES," under the subheadings "MINIMUM
INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B SHARES" and
"MINIMUM ACCOUNT SIZES AND INVOLUNTARY REDEMPTION OF SHARES," these two sections
are deleted and replaced with the following:
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B
SHARES
For a Portfolio account opened on or after January 2, 1996 (a "New
Account"), the minimum initial investment and minimum account size are
$500,000 for Class A shares and $100,000 for Class B shares. Managed
Accounts may purchase Class A shares without being subject to any
minimum initial investment or minimum account size requirements for a
Portfolio account. Employees of the Adviser and its affiliates may
purchase Class A shares subject to conditions, including lower minimum
initial investment, established by Officers of the Fund.
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 (but remains at or above $100,000) for a
continuous 60-day period, the Class A shares in such account will
convert to Class B shares and will be subject to the distribution fee
and other features applicable to the Class B shares. The Fund, however,
will not
<PAGE>
convert Class A shares to Class B shares based solely upon changes in
the market that reduce the net asset value of shares. Under current tax
law, conversions between share classes are not a taxable event to the
shareholder.
Shares in a Portfolio account opened prior to January 2, 1996 (a
"Pre-1996 Account") were designated Class A shares on January 2, 1996.
Shares in a Pre-1996 Account with a value of $100,000 or more on March
1, 1996 (a "Grandfathered Class A Account") remained Class A shares
regardless of account size thereafter. Except for shares in a Managed
Account, shares in a Pre-1996 Account with a value of less than $100,000
on March 1, 1996 (a "Grandfathered Class B Account") converted to Class
B shares on March 1, 1996. Grandfathered Class A Accounts and Managed
Accounts are not subject to conversion from Class A shares to Class B
shares.
Investors may also invest in the Fund by purchasing shares through a
trust department, broker, dealer, agent, financial planner, financial
services firm or investment adviser. An investor may be charged an
additional service or transaction fee by that institution. The minimum
investment levels may be waived at the discretion of the Adviser for (i)
certain employees and customers of Morgan Stanley or its affiliates and
certain trust departments, brokers, dealers, agents, financial planners,
financial services firms, or investment advisers that have entered into
an agreement with Morgan Stanley or its affiliates; and (ii) retirement
and deferred compensation plans and trusts used to fund such plans,
including, but not limited to, those defined in Section 401(a), 403(b)
or 457 of the Internal Revenue Code of 1986, as amended, and "rabbi
trusts". 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 a continuous 60-day period,
the shares in such account are subject to redemption by the Fund and, if
redeemed, the net asset value of such shares will be promptly paid to
the shareholder. The Fund, however, will not redeem shares based solely
upon changes in the market that reduce the net asset value of shares.
Grandfathered Class A Accounts, Grandfathered Class B Accounts and
Managed 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.
--------------
The Account Registration Form is deleted and replaced with the form enclosed
with this supplement.
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
FIXED INCOME, GLOBAL FIXED INCOME, MUNICIPAL BOND, MORTGAGE-BACKED
SECURITIES,
HIGH YIELD, MONEY MARKET AND MUNICIPAL MONEY MARKET PORTFOLIOS
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First
Name Initial Last Name
2.
First
Name Initial Last Name
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund
for additional documents
that may be required to
set up account and to
authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in
completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number.
NUMBER
1. INDIVIDUAL
2. JOINT TENANTS
(RIGHTS OF
SURVIVORSHIP PRESUMED
UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER SOCIAL SECURITY NUMBER
IDENTIFICATION NUMBER ("SSN")
("TIN")
OR
2. TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
OR
TIN SSN
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SECTION Portfolio(s): / / Class A Shares $
(Class A shares minimum Fixed Income Portfolio / / Class A Shares $ / / Class B Shares $
$500,000 for each Global Fixed Income Portfolio / / Class A Shares $ / / Class B Shares $
Portfolio and Class B Municipal Bond Portfolio / / Class A Shares $ / / Class B Shares $
shares minimum $100,000 Mortgage-Backed Securities / / Class A Shares $ / / Class B Shares $
for the Global Equity, Portfolio / / Class A Shares $ / / Class B Shares $
International Equity, High Yield Portfolio
Asian Equity, European Money Market Portfolio
Equity, Japanese Equity Municipal Money Market
and Latin American Equity Portfolio
Portfolios). Please
indicate Portfolio, class
and amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate
portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From - - - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on - - - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone Name of COMMERCIAL Bank (Not Savings
AND EXCHANGE requests to wire redemption proceeds to Bank)
OPTION the commercial bank indicated at right Bank Account No.
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests Bank
shares by telephone. A are believed to be authentic. ABA
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent No.
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated Name(s) in which your BANK Account is
YOUR FUND ACCOUNT. by telephone are genuine. These Established
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal Bank's Street
NOT BE HONORED UNLESS THE BOX identification information at the time Address
IS CHECKED. an account is opened and prior to
effecting each transaction requested by City State Zip
telephone. In addition, all telephone
transaction requests will be recorded
and investors may be required to provide
additional telecopied written
instructions of transaction requests.
Neither the Fund nor the Transfer Agent
will be responsible for any loss,
liability, cost or expense for following
instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the
account statement sent to
my/our registered Address
address, I/we hereby
authorize the fund to City State Z
mail duplicate statements Code
to the name and address
provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<PAGE>
SUPPLEMENT DATED DECEMBER 30, 1996
TO THE PROSPECTUS DATED MAY 1, 1996
TECHNOLOGY PORTFOLIO
PORTFOLIO OF THE
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS
02208-2798
-------------
The Prospectus as amended and supplemented to date is further amended and
supplemented by changing the following:
Under the heading "PROSPECTUS SUMMARY" under the subheading "HOW TO
INVEST," the first paragraph is deleted and replaced with the following:
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 of the Portfolio are offered at net asset value with no sales
commission, but with a 12b-1 fee, which is accrued daily and paid
quarterly, equal to 0.25%, on an annualized basis, of the Class B
shares' average daily net assets. Share purchases may be made by sending
investments directly to the Fund or through the Distributor. The minimum
initial investment for shares in a Portfolio account is $250,000 for
Class A shares and $50,000 for Class B shares. Certain exceptions to the
foregoing minimums apply to (1) Portfolio accounts held by certain
employees of the Adviser and of its affiliates and (2) certain advisory
or asset allocation accounts, such as Total Funds Management accounts,
managed by Morgan Stanley or its affiliates, including the Adviser
("Managed Accounts"). The Adviser reserves the right in its sole
discretion to determine which of such advisory or asset allocation
accounts shall be Managed Accounts. For information regarding Managed
Accounts, please contact your Morgan Stanley account representative or
the Fund at the telephone number provided on the cover of this
Prospectus. The minimum investment levels may be waived at the
discretion of the Adviser for (i) certain employees and customers of
Morgan Stanley or its affiliates and certain trust departments, brokers,
dealers, agents, financial planners, financial services firms, or
investment advisers that have entered into an agreement with Morgan
Stanley or its affiliates; and (ii) retirement and deferred compensation
plans and trusts used to fund such plans, including, but not limited to,
those defined in Section 401(a), 403(b) or 457 of the Internal Revenue
Code of 1986, as amended, and "rabbi trusts". See "Purchase of Shares --
Minimum Investment and Account Sizes; Conversion from Class A to Class B
Shares."
--------------
<PAGE>
Under the heading "PURCHASE OF SHARES," under the subheadings "MINIMUM
INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B SHARES" and
"MINIMUM ACCOUNT SIZES AND INVOLUNTARY REDEMPTION OF SHARES," these two sections
are deleted and replaced with the following:
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B
SHARES
For a Portfolio account, the minimum initial investment and minimum
account size are $250,000 for Class A shares and $50,000 for Class B
shares. Managed Accounts may purchase Class A shares without being
subject to such minimum initial investment or minimum account size
requirements for a Portfolio account. Employees of the Adviser and of
its affiliates may purchase Class A shares subject to conditions,
including a lower minimum initial investment established by Officers of
the Fund.
If the value of a Portfolio account containing Class A shares falls
below $250,000 (but remains at or above $50,000) because of shareholder
redemption(s), the Fund will notify the shareholder, and if the account
value remains below $250,000 (but remains at or above $50,000) for a
continuous 60-day period, the Class A shares in such account will
convert to Class B shares and will be subject to the distribution fee
and other features applicable to the Class B shares. The Fund, however,
will not convert Class A shares to Class B shares based solely upon
changes in the market that reduce the net asset value of shares. Under
current tax law, conversions between share classes are not a taxable
event to the shareholder. Managed Accounts are not subject to conversion
from Class A shares to Class B shares.
Investors may also invest in the Portfolio by purchasing shares
through a trust department, broker, dealer, agent, financial planner,
financial services firm or investment adviser. An investor may be
charged an additional service or transaction fee by that institution.
The minimum investment levels may be waived at the discretion of the
Adviser for (i) certain employees and customers of Morgan Stanley or its
affiliates and certain trust departments, brokers, dealers, agents,
financial planners, financial services firms, or investment advisers
that have entered into an agreement with Morgan Stanley or its
affiliates; and (ii) retirement and deferred compensation plans and
trusts used to fund such plans, including, but not limited to, those
defined in Section 401(a), 403(b) or 457 of the Internal Revenue Code of
1986, as amended, and "rabbi trusts". 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 Portfolio account falls below $50,000 because of
shareholder redemption(s), the Fund will notify the shareholder, and if
the account value remains below $50,000 for a continuous 60-day period,
the shares in such account are subject to redemption by the Fund and, if
redeemed, the net asset value of such shares will be promptly paid to
the shareholder. The Fund, however, will not redeem shares based solely
upon changes in the market that reduce the net asset value of shares.
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.
--------------
The Account Registration Form is deleted and replaced with the form enclosed
with this supplement.
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
TECHNOLOGY PORTFOLIO
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First
Name Initial Last Name
2.
First
Name Initial Last Name
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund
for additional documents
that may be required to
set up account and to
authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in
completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number.
NUMBER
1. INDIVIDUAL
2. JOINT TENANTS
(RIGHTS OF
SURVIVORSHIP PRESUMED
UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER SOCIAL SECURITY NUMBER
IDENTIFICATION NUMBER ("SSN")
("TIN")
OR
2. TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
OR
TIN SSN
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
D) PORTFOLIO AND For Purchase of the following
CLASS SECTION Portfolio(s): / / Class A Shares
(Class A shares minimum Technology Portfolio $ / / Class B Shares $
$500,000 for each Total Initial Investment
Portfolio and Class B $
shares minimum $100,000
for the Global Equity,
International Equity,
Asian Equity, European
Equity, Japanese Equity
and Latin American Equity
Portfolios). Please
indicate Portfolio, class
and amount.
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate
portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone Name of COMMERCIAL Bank (Not Savings
AND EXCHANGE requests to wire redemption proceeds to Bank)
OPTION the commercial bank indicated at right Bank Account No.
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests Bank
shares by telephone. A are believed to be authentic. ABA
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent No.
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated Name(s) in which your BANK Account is
YOUR FUND ACCOUNT. by telephone are genuine. These Established
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal Bank's Street
NOT BE HONORED UNLESS THE BOX identification information at the time Address
IS CHECKED. an account is opened and prior to
effecting each transaction requested by City State Zip
telephone. In addition, all telephone
transaction requests will be recorded
and investors may be required to provide
additional telecopied written
instructions of transaction requests.
Neither the Fund nor the Transfer Agent
will be responsible for any loss,
liability, cost or expense for following
instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the
account statement sent to
my/our registered Address
address, I/we hereby
authorize the fund to City State Z
mail duplicate statements Code
to the name and address
provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<PAGE>
SUPPLEMENT DATED DECEMBER 30, 1996
TO THE PROSPECTUS DATED MAY 1, 1996
EQUITY GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
MICROCAP PORTFOLIO
AGGRESSIVE EQUITY PORTFOLIO
EMERGING MARKETS PORTFOLIO
EMERGING MARKETS DEBT PORTFOLIO
U.S. REAL ESTATE PORTFOLIO
SMALL CAP VALUE EQUITY PORTFOLIO
VALUE EQUITY PORTFOLIO
BALANCED PORTFOLIO
ACTIVE COUNTRY ALLOCATION PORTFOLIO
GLOBAL EQUITY PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
INTERNATIONAL SMALL CAP PORTFOLIO
ASIAN EQUITY PORTFOLIO
EUROPEAN EQUITY PORTFOLIO
JAPANESE EQUITY PORTFOLIO
LATIN AMERICAN PORTFOLIO
GOLD PORTFOLIO
PORTFOLIOS OF THE
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS
02208-2798
-------------
The Prospectus as amended and supplemented to date is further amended and
supplemented by changing the following:
Under the heading "PROSPECTUS SUMMARY," under the subheading "HOW TO
INVEST," the first paragraph is deleted and replaced with the following:
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 of the Portfolio are offered at net asset value with no sales
commission, but with a 12b-1 fee, which is accrued daily and paid
quarterly, equal to 0.25% of the
<PAGE>
Class B shares' average daily net assets on an annualized basis. Share
purchases may be made by sending investments directly to the Fund or
through the Distributor. Shares in a Portfolio account opened prior to
January 2, 1996 (each, a "Pre-1996 Account") were designated Class A
shares on January 2, 1996. For a Portfolio account opened on or after
January 2, 1996 (a "New Account"), the minimum initial investment is
$500,000 for Class A shares and $100,000 for Class B shares. Certain
exceptions to the foregoing minimums apply to (1) shares in a Pre-1996
Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account"); (2) Portfolio accounts held by certain
employees of the Adviser and of its affiliates; and (3) certain advisory
or asset allocation accounts, such as Total Funds Management accounts,
managed by Morgan Stanley or its affiliates, including the Adviser
("Managed Accounts"). The Adviser reserves the right in its sole
discretion to determine which of such advisory or asset allocation
accounts shall be Managed Accounts. For information regarding Managed
Accounts, please contact your Morgan Stanley account representative or
the Fund at the telephone number provided on the cover of this
Prospectus. Shares in a Pre-1996 Account with a value of less than
$100,000 on March 1, 1996 (a "Grandfathered Class B Account") converted
to Class B shares on March 1, 1996. The minimum investment levels may be
waived at the discretion of the Adviser for (i) certain employees and
customers of Morgan Stanley or its affiliates and certain trust
departments, brokers, dealers, agents, financial planners, financial
services firms, or investment advisers that have entered into an
agreement with Morgan Stanley or its affiliates; and (ii) retirement and
deferred compensation plans and trusts used to fund such plans,
including, but not limited to, those defined in Section 401(a), 403(b)
or 457 of the Internal Revenue Code of 1986, as amended, and "rabbi
trusts". See "Purchase of Shares Minimum Investment and Account Sizes;
Conversion from Class A to Class B Shares."
--------------
Under the heading "PURCHASE OF SHARES," under the subheadings "MINIMUM
INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B SHARES" and
"MINIMUM ACCOUNT SIZES AND INVOLUNTARY REDEMPTION OF SHARES," these two sections
are deleted and replaced with the following:
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B
SHARES
For a Portfolio account opened on or after January 2, 1996 (a "New
Account"), the minimum initial investment and minimum account size are
$500,000 for Class A shares and $100,000 for Class B shares. Managed
Accounts may purchase Class A shares without being subject to any
minimum initial investment or minimum account size requirements for a
Portfolio account. Employees of the Adviser and certain of its
affiliates may purchase Class A shares subject to conditions, including
a lower minimum initial investment, established by Officers of the Fund.
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 (but remains at or above $100,000) for a
continuous 60-day period, the Class A shares in such account will
convert to Class B shares and will be subject to the distribution fee
and other features applicable to the Class B shares. The Fund, however,
will not convert Class A shares to Class B shares based solely upon
changes in the market that reduce the net asset value of shares. Under
current tax law, conversions between share classes are not a taxable
event to the shareholder.
Shares in a Portfolio account opened prior to January 2, 1996 (a
"Pre-1996 Account") were designated Class A shares on January 2, 1996.
Shares in a Pre-1996 Account with a value of $100,000 or
<PAGE>
more on March 1, 1996 (a "Grandfathered Class A Account") remained Class
A shares regardless of account size thereafter. Except for shares in a
Managed Account, shares in a Pre-1996 Account with a value of less than
$100,000 on March 1, 1996 (a "Grandfathered Class B Account") converted
to Class B shares on March 1, 1996. Grandfathered Class A Accounts and
Managed Accounts are not subject to conversion from Class A shares to
Class B shares.
Investors may also invest in the Fund by purchasing shares through a
trust department, broker, dealer, agent, financial planner, financial
services firm or investment adviser. An investor may be charged an
additional service or transaction fee by that institution. The minimum
investment levels may be waived at the discretion of the Adviser for (i)
certain employees and customers of Morgan Stanley or its affiliates and
certain trust departments, brokers, dealers, agents, financial planners,
financial services firms, or investment advisers that have entered into
an agreement with Morgan Stanley or its affiliates; and (ii) retirement
and deferred compensation plans and trusts used to fund such plans,
including, but not limited to, those defined in Section 401(a), 403(b)
or 457 of the Internal Revenue Code of 1986, as amended, and "rabbi
trusts". 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 a continuous 60-day period,
the shares in such account are subject to redemption by the Fund and, if
redeemed, the net asset value of such shares will be promptly paid to
the shareholder. The Fund, however, will not redeem shares based solely
upon changes in the market that reduce the net asset value of shares.
Grandfathered Class A Accounts, Grandfathered Class B Accounts and
Managed 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.
--------------
The Account Registration Form is deleted and replaced with the form enclosed
with this supplement.
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
EQUITY GROWTH, EMERGING GROWTH,
MICROCAP AND AGGRESSIVE EQUITY PORTFOLIOS
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First
Name Initial Last Name
2.
First
Name Initial Last Name
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
Street or P.O. Box
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
City State
Zip
--
Home Telephone
No. Business Telephone No.
-- -- -- --
/ / United States Citizen / / Resident Alien / /
Non-Resident Alien: Indicate Country of Residence ______________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number. OR
NUMBER SOCIAL SECURITY NUMBER
1. INDIVIDUAL 1. TAXPAYER ("SSN")
2. JOINT TENANTS IDENTIFICATION NUMBER
("TIN")
--
(RIGHTS OF SURVIVORSHIP PRESUMED -- -- - - - ------------- -------------
UNLESS -- - - - - - - - ------------- - - - - - - - -
TENANCY IN COMMON -
IS INDICATED) 2. OR TINSSN
For Custodian account
--
of a minor (Uniform -- -- - - - ------------- -------------
Gifts/Transfers to Minor -- - - - - - - - ------------- - - - - - - - -
-
Acts), give the Social OR
Security Number of TIN SSN
the minor
--
-- -- - - - ------------- -------------
- - - - - - - - - ------------- - - - - - - - -
-
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SECTION Portfolio(s): / / Class A Shares $ / / Class B Shares $
(Class A shares minimum $500,000 for Equity Growth Portfolio
each Portfolio and Class B shares Emerging Growth Portfolio
minimum $100,000 for the Global Equity, MicroCap Portfolio
International Equity, Asian Equity, Aggressive Equity Portfolio
European Equity, Japanese Equity and
Latin American Equity Portfolios).
Please indicate Portfolio, class and
amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on - - - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone
AND EXCHANGE requests to wire redemption proceeds to
OPTION the commercial bank indicated at right
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests
shares by telephone. A are believed to be authentic.
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated
YOUR FUND ACCOUNT. by telephone are genuine. These
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal
NOT BE HONORED UNLESS THE BOX identification information at the time
IS CHECKED. 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.
<CAPTION>
G)
Name of COMMERCIAL Bank (Not Savings Bank)
Bank Account No.
Bank ABA No.
Name(s) in which your BANK Account is Established
Bank's Street Address
City State Zip
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY Name
OPTION Address
In addition to the account statement City State Zip Code
sent to my/our registered address, I/we
hereby authorize the fund to mail
duplicate statements to the name and
address provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
EMERGING MARKETS AND EMERGING MARKETS DEBT PORTFOLIOS
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out
this form for the Morgan Stanley
ACCOUNT INFORMATION Institutional Fund, please contact your
Fill in where applicable 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.
</TABLE>
<TABLE>
<C> <S> <C>
A) REGISTRATION
</TABLE>
1.
<TABLE>
<C> <S> <C>
1. INDIVIDUAL
</TABLE>
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
2. JOINT TENANTS
</TABLE>
<TABLE>
<C> <S> <C>
(RIGHTS OF SURVIVORSHIP
</TABLE>
2.
<TABLE>
<C> <S> <C>
PRESUMED UNLESS
</TABLE>
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
TENANCY IN COMMON
</TABLE>
<TABLE>
<C> <S> <C>
IS INDICATED)
</TABLE>
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3.
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST __________ / / OTHER (Specify) __________
<TABLE>
<C> <S> <C>
Street or P.O. Box
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
City State
Zip
--
Home Telephone
No. Business Telephone No.
-- -- -- --
/ / United States Citizen / / Resident Alien / /
Non-Resident Alien: Indicate Country of Residence ______________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER PART 1. Enter your Taxpayer IMPORTANT TAX INFORMATION
IDENTIFICATION Identification Number. For most You (as a payee) are required by law to
NUMBER individual taxpayers, this is your provide us (as payer) with your correct
If the account is in more than one name, Social Security Number. Taxpayer Identification Number. Accounts
CIRCLE THE TAXPAYER IDENTIFICATION NUMBER that have a missing or incorrect
Taxpayer Identification Number will be
subject to backup withholding at a 31%
rate on
</TABLE>
--
<TABLE>
<C> <S> <C> <C>
NAME OF THE PERSON WHOSE TAXPAYER -- -- -- -- -- -- -- -- -- -- -- -- dividends, distributions and other
IDENTIFICATION NUMBER IS PROVIDED IN OR payments. If you have not provided us
SECTION A) ABOVE. If no name is circled, SOCIAL SECURITY NUMBER with your correct taxpayer
the number identification number, you may be
subject to a $50 penalty imposed by the
Internal Revenue Service.
Backup withholding is not an additional
tax; the tax liability of persons
subject to backup withholding will be
reduced by the amount of tax withheld.
If withholding
</TABLE>
-- --
<TABLE>
<C> <S> <C> <C>
will be considered to be that of the -- -- -- -- -- -- -- -- -- -- -- -- results in an overpayment of taxes, a
last name listed. For Custodian account PART 2. BACKUP WITHHOLDING refund may be obtained.
of a minor (Uniform Gift/Transfer to / / Check this box if you are NOT You may be notified that you are subject
Minor Act), give the Social Security subject to Backup Withholding under the to backup withholding under Section
Number of the minor. provisions of Section 3406(a)(1)(C) of 3406(a)(1)(C) of the Internal Revenue
the Internal Revenue Code. Code because you have underreported
interest or dividends or you were
required to but failed to file a return
which would have included a reportable
interest or dividend payment. IF YOU
HAVE NOT BEEN SO NOTIFIED, CHECK THE BOX
IN PART 2 AT LEFT.
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SELECTION Portfolio(s): / / Class A Shares $ / / Class B Shares $
(Class A shares minimum $500,000 and Emerging Markets Portfolio
Class B shares minimum $100,000). Please Emerging Markets Debt
indicate Portfolio, class and amount. Portfolio
Total Initial Investment $
</TABLE>
Payment by:
<TABLE>
<C> <S> <C>
/ / Check (MAKE CHECK PAYABLE TO MORGAN
STANLEY INSTITUTIONAL FUND, INC.--PORTFOLIO NAME)
E) METHOD OF
INVESTMENT
Please indicate manner of payment.
</TABLE>
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone
exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the
Fund) Digit)
Date
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any)
OPTION will be reinvested in additional shares unless either box
below is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone
Please select at time of requests to wire redemption proceeds to
initial application if you the commercial bank indicated at right
wish to redeem shares by and/or mail redemption proceeds to the
telephone. A SIGNATURE name and address in which my/our fund
GUARANTEE IS REQUIRED IF BANK account is registered if such requests
ACCOUNT IS NOT REGISTERED are believed to be authentic.
IDENTICALLY TO YOUR FUND The Fund and the Fund's Transfer Agent
ACCOUNT. will employ reasonable procedures to
TELEPHONE REQUESTS FOR confirm that instructions communicated
REDEMPTIONS WILL NOT BE by telephone are genuine. These
HONORED UNLESS THE BOX IS procedures include requiring the
CHECKED. 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.
<CAPTION>
G)
Name of COMMERCIAL Bank (Not Savings Bank)
Bank Account No.
Bank ABA No.
Name(s) in which your BANK Account is Established
Bank's Street Address
City State Zip
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the account statement
sent to my/our registered address, I/we
hereby authorize the fund to mail Address
duplicate statements to the name and
address provided at right. City State Zip Code
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative
Name Representative
No. Branch
No.
</TABLE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
</TABLE>
<TABLE>
<S> <C>
The undersigned certify(ies) 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.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X) (X)
Signature Date Signature Date
Sign Here ,
</TABLE>
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
U.S. REAL ESTATE PORTFOLIO
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First
Name Initial Last Name
2.
First
Name Initial Last Name
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual taxpayers, this is
IDENTIFICATION your Social Security Number.
NUMBER
1. INDIVIDUAL
2. JOINT TENANTS
(RIGHTS OF SURVIVORSHIP PRESUMED
UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER IDENTIFICATION SOCIAL SECURITY NUMBER
NUMBER ("TIN") ("SSN")
OR
2. TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
OR
TIN SSN
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer) with your correct
TIN(s) or SSN(s). Accounts that have a missing or incorrect TIN(s) or SSN(s) will
be subject to backup withholding at a 31% rate on dividends, distributions and
other payments. If you have not provided us with your correct TIN(s) or SSN(s),
you may be subject to a $50 penalty imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability of persons subject
to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding under Section
3406(a)(1)(C) of the Internal Revenue Code because you have underreported interest
or dividends or you were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SECTION Portfolio:
(Class A shares minimum $500,000 for U.S. Real Estate Portfolio
each Portfolio and Class B shares
minimum $100,000 for the Global Equity,
International Equity, Asian Equity,
European Equity, Japanese Equity and
Latin American Equity Portfolios).
Please indicate Portfolio, class and
amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone
AND EXCHANGE requests to wire redemption proceeds to
OPTION the commercial bank indicated at right
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests
shares by telephone. A are believed to be authentic.
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated
YOUR FUND ACCOUNT. by telephone are genuine. These
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal
NOT BE HONORED UNLESS THE BOX identification information at the time
IS CHECKED. 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.
<CAPTION>
G)
Name of COMMERCIAL Bank (Not Savings Bank)
Bank Account No.
Bank ABA No.
Name(s) in which your BANK Account is Established
Bank's Street Address
City State Zip
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the
account statement sent to
my/our registered Address
address, I/we hereby
authorize the fund to City State Zip Code
mail duplicate statements
to the name and address
provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF PERJURY THAT THE INFORMATION ON THIS APPLICATION IS
COMPLETE AND CORRECT AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE
ARE NOT SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE
HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE ARE SUBJECT TO BACKUP WITHHOLDING AS A
RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED ME/US THAT I AM/WE ARE NO
LONGER SUBJECT TO BACKUP WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE
SOCIAL SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER
TO CHASE GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE DATE OF THIS APPLICATION OR IF I/WE FAIL
TO FURNISH MY/OUR CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY AND A 31% BACKUP WITHHOLDING ON
DISTRIBUTIONS AND REDEMPTION PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU MAY REQUEST SUCH
FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S. CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN
PERSONS AS DEFINED BY THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
(X) (X)
Signature Date Signature (if joint account, both must sign) Date
</TABLE>
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
SMALL CAP VALUE EQUITY, VALUE EQUITY AND BALANCED PORTFOLIOS
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First Name Initial Last Name
2.
First Name Initial Last Name
First Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / /UNINCORPORATED / / PARTNERSHIP / /UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number.
NUMBER
1. INDIVIDUAL
2.JOINT TENANTS
(RIGHTS OF SURVIVORSHIP PRESUMED UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER SOCIAL SECURITY NUMBER
IDENTIFICATION NUMBER ("SSN")
("TIN")
OR
2. TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
OR
TIN SSN
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SECTION Portfolio(s): / / Class A Shares $ / / Class B Shares $
(Class A shares minimum $500,000 for Small Cap Value Equity / / Class A Shares $ / / Class B Shares $
each Portfolio and Class B shares Portfolio
minimum $100,000 for the Global Equity, Value Equity Portfolio
International Equity, Asian Equity, Balanced Portfolio
European Equity, Japanese Equity and
Latin American Equity Portfolios).
Please indicate Portfolio, class and
amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone
AND EXCHANGE requests to wire redemption proceeds to
OPTION the commercial bank indicated at right
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests
shares by telephone. A are believed to be authentic.
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated
YOUR FUND ACCOUNT. by telephone are genuine. These
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal
NOT BE HONORED UNLESS THE BOX identification information at the time
IS CHECKED. 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.
<CAPTION>
G)
Name of COMMERCIAL Bank (Not Savings Bank)
Bank Account No.
Bank ABA No.
Name(s) in which your BANK Account is Established
Bank's Street Address
City State Zip
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the account statement
sent to my/our registered address, I/we
hereby authorize the fund to mail Address
duplicate statements to the name and
address provided at right. City State Zip Code
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
ACTIVE COUNTRY ALLOCATION PORTFOLIO
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First Name Initial Last Name
2.
First Name Initial Last Name
First Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number.
NUMBER
1. INDIVIDUAL
2. JOINT TENANTS
(RIGHTS OF SURVIVORSHIP PRESUMED UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER SOCIAL SECURITY NUMBER
IDENTIFICATION NUMBER ("SSN")
("TIN")
OR
2. TIN SSN
OR
TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following
CLASS SECTION Portfolio(s): / / Class A Shares $ / / Class B Shares $
(Class A shares minimum Active Country Allocation
$500,000 for each Portfolio
Portfolio and Class B
shares minimum $100,000
for the Global Equity,
International Equity,
Asian Equity, European
Equity, Japanese Equity
and Latin American Equity
Portfolios). Please
indicate Portfolio, class
and amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate
portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone Name of COMMERCIAL Bank (Not Savings
AND EXCHANGE requests to wire redemption proceeds to Bank)
OPTION the commercial bank indicated at right Bank Account No.
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests Bank
shares by telephone. A are believed to be authentic. ABA
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent No.
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated Name(s) in which your BANK Account is
YOUR FUND ACCOUNT. by telephone are genuine. These Established
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal Bank's Street
NOT BE HONORED UNLESS THE BOX identification information at the time Address
IS CHECKED. an account is opened and prior to
effecting each transaction requested by City State Zip
telephone. In addition, all telephone
transaction requests will be recorded
and investors may be required to provide
additional telecopied written
instructions of transaction requests.
Neither the Fund nor the Transfer Agent
will be responsible for any loss,
liability, cost or expense for following
instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the
account statement sent to
my/our registered Address
address, I/we hereby
authorize the fund to City State Zip Code
mail duplicate statements
to the name and address
provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<PAGE>
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
GLOBAL EQUITY, INTERNATIONAL EQUITY, INTERNATIONAL SMALL CAP,
ASIAN EQUITY, EUROPEAN EQUITY, JAPANESE EQUITY AND LATIN AMERICAN
PORTFOLIOS
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First
Name Initial Last Name
2.
First
Name Initial Last Name
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund
for additional documents
that may be required to
set up account and to
authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in
completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number.
NUMBER
1. INDIVIDUAL
2.JOINT TENANTS
(RIGHTS OF
SURVIVORSHIP PRESUMED
UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER SOCIAL SECURITY NUMBER
IDENTIFICATION NUMBER ("SSN")
("TIN")
OR
2. TIN SSN
OR
TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SECTION Portfolio(s): / / Class A Shares $
(Class A shares minimum Global Equity Portfolio / / Class A Shares $ / / Class B Shares $
$500,000 for each International Small Cap / / Class A Shares $ / / Class B Shares $
Portfolio and Class B Portfolio / / Class A Shares $ / / Class B Shares $
shares minimum $100,000 European Equity Portfolio / / Class A Shares $ / / Class B Shares $
for the Global Equity, Latin American Portfolio / / Class A Shares $ / / Class B Shares $
International Equity, International Equity Portfolio
Asian Equity, European Asian Equity Portfolio
Equity, Japanese Equity Japanese Equity Portfolio
and Latin American Equity
Portfolios). Please
indicate Portfolio, class
and amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate
portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on - - - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone Name of COMMERCIAL Bank (Not Savings
AND EXCHANGE requests to wire redemption proceeds to Bank)
OPTION the commercial bank indicated at right Bank Account No.
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests Bank
shares by telephone. A are believed to be authentic. ABA
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent No.
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated Name(s) in which your BANK Account is
YOUR FUND ACCOUNT. by telephone are genuine. These Established
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal Bank's Street
NOT BE HONORED UNLESS THE BOX identification information at the time Address
IS CHECKED. an account is opened and prior to
effecting each transaction requested by City State Zip
telephone. In addition, all telephone
transaction requests will be recorded
and investors may be required to provide
additional telecopied written
instructions of transaction requests.
Neither the Fund nor the Transfer Agent
will be responsible for any loss,
liability, cost or expense for following
instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the
account statement sent to
my/our registered Address
address, I/we hereby
authorize the fund to City State Z
mail duplicate statements Code
to the name and address
provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
GOLD PORTFOLIO
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First
Name Initial Last Name
2.
First
Name Initial Last Name
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund
for additional documents
that may be required to
set up account and to
authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in
completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number.
NUMBER
1. INDIVIDUAL
2. JOINT TENANTS
(RIGHTS OF
SURVIVORSHIP PRESUMED
UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER SOCIAL SECURITY NUMBER
IDENTIFICATION NUMBER ("SSN")
("TIN")
OR
2. TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
OR
TIN SSN
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SECTION Portfolio:
(Class A shares minimum Gold Portfolio
$500,000 for each
Portfolio and Class B
shares minimum $100,000
for the Global Equity,
International Equity,
Asian Equity, European
Equity, Japanese Equity
and Latin American Equity
Portfolios). Please
indicate Portfolio, class
and amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate
portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on - - - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone Name of COMMERCIAL Bank (Not Savings
AND EXCHANGE requests to wire redemption proceeds to Bank)
OPTION the commercial bank indicated at right Bank Account No.
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests Bank
shares by telephone. A are believed to be authentic. ABA
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent No.
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated Name(s) in which your BANK Account is
YOUR FUND ACCOUNT. by telephone are genuine. These Established
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal Bank's Street
NOT BE HONORED UNLESS THE BOX identification information at the time Address
IS CHECKED. an account is opened and prior to
effecting each transaction requested by City State Zip
telephone. In addition, all telephone
transaction requests will be recorded
and investors may be required to provide
additional telecopied written
instructions of transaction requests.
Neither the Fund nor the Transfer Agent
will be responsible for any loss,
liability, cost or expense for following
instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the
account statement sent to
my/our registered Address
address, I/we hereby
authorize the fund to City State Z
mail duplicate statements Code
to the name and address
provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<PAGE>
SUPPLEMENT DATED DECEMBER 30, 1996
TO THE PROSPECTUS DATED MAY 1, 1996
INTERNATIONAL MAGNUM PORTFOLIO
PORTFOLIO OF THE
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS
02208-2798
-------------
The Prospectus as amended and supplemented to date is further amended and
supplemented by changing the following:
Under the heading "PROSPECTUS SUMMARY" under the subheading "HOW TO
INVEST," the first paragraph is deleted and replaced with the following:
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 of the Portfolio are offered at net asset value with no sales
commission, but with a 12b-1 fee, which is accrued daily and paid
quarterly, equal to 0.25%, on an annualized basis, of the Class B
shares' average daily net assets. Share purchases may be made by sending
investments directly to the Fund or through the Distributor. The minimum
initial investment for shares in a Portfolio account is $500,000 for
Class A shares and $100,000 for Class B shares. Certain exceptions to
the foregoing minimums apply to (1) Portfolio accounts held by certain
employees of the Adviser and of its affiliates and (2) certain advisory
or asset allocation accounts, such as Total Funds Management accounts,
managed by Morgan Stanley or its affiliates, including the Adviser
("Managed Accounts"). The Adviser reserves the right in its sole
discretion to determine which of such advisory or asset allocation
accounts shall be Managed Accounts. For information regarding Managed
Accounts, please contact your Morgan Stanley account representative or
the Fund at the telephone number provided on the cover of this
Prospectus. The minimum investment levels may be waived at the
discretion of the Adviser for (i) certain employees and customers of
Morgan Stanley or its affiliates and certain trust departments, brokers,
dealers, agents, financial planners, financial services firms, or
investment advisers that have entered into an agreement with Morgan
Stanley or its affiliates; and (ii) retirement and deferred compensation
plans and trusts used to fund such plans, including, but not limited to,
those defined in Section 401(a), 403(b) or 457 of the Internal Revenue
Code of 1986, as amended, and "rabbi trusts". See "Purchase of Shares --
Minimum Investment and Account Sizes; Conversion from Class A to Class B
Shares."
--------------
<PAGE>
Under the heading "PURCHASE OF SHARES," under the subheadings "MINIMUM
INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B SHARES" and
"MINIMUM ACCOUNT SIZES AND INVOLUNTARY REDEMPTION OF SHARES," these two sections
are deleted and replaced with the following:
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B
SHARES
For a Portfolio account, the minimum initial investment and minimum
account size are $500,000 for Class A shares and $100,000 for Class B
shares. Managed Accounts may purchase Class A shares without being
subject to such minimum initial investment or minimum account size
requirements for a Portfolio account. Employees of the Adviser and of
its affiliates may purchase Class A shares subject to conditions,
including a lower minimum initial investment established by Officers of
the Fund.
If the value of a Portfolio 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 (but remains at or above $100,000) for a
continuous 60-day period, the Class A shares in such account will
convert to Class B shares and will be subject to the distribution fee
and other features applicable to the Class B shares. The Fund, however,
will not convert Class A shares to Class B shares based solely upon
changes in the market that reduce the net asset value of shares. Under
current tax law, conversions between share classes are not a taxable
event to the shareholder. Managed Accounts are not subject to conversion
from Class A shares to Class B shares.
Investors may also invest in the Portfolio by purchasing shares
through a trust department, broker, dealer, agent, financial planner,
financial services firm or investment adviser. An investor may be
charged an additional service or transaction fee by that institution.
The minimum investment levels may be waived at the discretion of the
Adviser for (i) certain employees and customers of Morgan Stanley or its
affiliates and certain trust departments, brokers, dealers, agents,
financial planners, financial services firms, or investment advisers
that have entered into an agreement with Morgan Stanley or its
affiliates; and (ii) retirement and deferred compensation plans and
trusts used to fund such plans, including, but not limited to, those
defined in Section 401(a), 403(b) or 457 of the Internal Revenue Code of
1986, as amended, and "rabbi trusts". 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 Portfolio 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 a continuous 60-day period,
the shares in such account are subject to redemption by the Fund and, if
redeemed, the net asset value of such shares will be promptly paid to
the shareholder. The Fund, however, will not redeem shares based solely
upon changes in the market that reduce the net asset value of shares.
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.
--------------
The Account Registration Form is deleted and replaced with the form enclosed
with this supplement.
<PAGE>
<TABLE>
<S> <C>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
INTERNATIONAL MAGNUM PORTFOLIO
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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.
1. INDIVIDUAL
First
Name Initial Last Name
2. JOINT TENANTS
(RIGHTS OF SURVIVORSHIP
2.
PRESUMED UNLESS
First
Name Initial Last Name
TENANCY IN COMMON
IS INDICATED)
First
Name Initial Last Name
3.
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional documents that may be
required to set up account and to authorize transactions
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / TRUST __________ / / OTHER (Specify) __________
Street or P.O. Box
B) MAILING ADDRESS
Please fill in completely, including telephone number(s).
City State
Zip
--
Home Telephone
No. Business Telephone No.
-- -- -- --
/ / United States Citizen / / Resident Alien / /
Non-Resident Alien: Indicate Country of Residence ______________________________
C) TAXPAYER PART 1. Enter your Taxpayer IMPORTANT TAX INFORMATION
IDENTIFICATION Identification Number. For most You (as a payee) are required by law to
NUMBER individual taxpayers, this is your provide us (as payer) with your correct
If the account is in more than one name, Social Security Number. taxpayer identification number. Accounts
CIRCLE THE TAXPAYER IDENTIFICATION NUMBER that have a missing or incorrect
taxpayer identification number will be
subject to backup withholding at a 31%
rate on
--
NAME OF THE PERSON WHOSE TAXPAYER -- -- -- -- -- -- -- -- -- -- -- -- dividends, distributions and other
IDENTIFICATION NUMBER IS PROVIDED IN OR payments. If you have not provided us
SECTION A) ABOVE. If no name is circled, SOCIAL SECURITY NUMBER with your correct taxpayer
the number identification number, you may be
subject to a $50 penalty imposed by the
Internal Revenue Service.
Backup withholding is not an additional
tax; the tax liability of persons
subject to backup withholding will be
reduced by the amount of tax withheld.
If withholding
-- --
will be considered to be that of the -- -- -- -- -- -- -- -- -- -- -- -- results in an overpayment of taxes, a
last name listed. For Custodian account PART 2. BACKUP WITHHOLDING refund may be obtained. You may be
of a minor (Uniform Gifts/ Transfers to / / Check this box if you are NOT notified that you are subject to backup
Minors Acts), give the Social Security subject to Backup Withholding under the withholding under Section 3406(a)(1)(C)
Number of the minor. provisions of Section 3406(a)(1)(C) of of the Internal Revenue Code because you
the Internal Revenue Code. have underreported interest or dividends
or you were required to but failed to
file a return which would have included
a reportable interest or dividend
payment. IF YOU HAVE NOT BEEN SO
NOTIFIED, CHECK THE BOX IN PART 2 AT
LEFT.
D) PORTFOLIO AND For Purchase of the following / / Class A Shares
CLASS SELECTION Portfolio:
(Class A shares minimum International Magnum
$500,000 and Class B shares Portfolio
minimum $100,000). Please
indicate class and amount.
Total Initial Investment $
D) / / Class B Shares
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN
STANLEY INSTITUTIONAL FUND, INC.--INTERNATIONAL MAGNUM PORTFOLIO)
E) METHOD OF
INVESTMENT
Please indicate manner of payment.
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by:
/ / Phone exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
Previously assigned by the
Fund Digit)
Date
</TABLE>
<PAGE>
<TABLE>
<S> <C>
DISTRIBUTION
F) OPTION
Income
dividends
and
capital
gains
distributions
(if any) will
be reinvested
in additional
shares unless
either box
below is
checked.
/ /
Income
dividends
to be
paid in
cash,
capital
gains
distributions
(if any) in
shares.
/ /
Income
dividends
and
capital
gains
distributions
(if any) to
be paid in
cash.
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone Name of COMMERCIAL Bank (Not Savings
OPTION requests to wire redemption proceeds Bank)
Please select at time of initial to the commercial bank indicated at Bank Account No.
application if you wish to redeem shares right and/or mail redemption
by telephone. A SIGNATURE GUARANTEE IS proceeds
REQUIRED IF BANK ACCOUNT IS NOT to Bank
REGISTERED IDENTICALLY TO YOUR FUND the ABA
ACCOUNT. name No.
TELEPHONE REQUESTS FOR REDEMPTIONS OR and
EXCHANGES WILL NOT BE HONORED UNLESS THE address Name(s) in which your BANK Account is
APPLICABLE BOX IS CHECKED. in Established
which
my/our Bank's Street
fund Address
account
is City State Zip
registered
if
such
requests
are
believed
to
be
authentic.
The Fund and the Fund's Transfer Agent
will employ reasonable procedures to
confirm that instructions communicated
by telephone are genuine. These
procedures include requiring the
investor to provide certain personal
identification information at the time
an account is opened and prior to
effecting each transaction requested by
telephone. In addition, all telephone
transaction requests will be recorded
and investors may be required to provide
additional telecopied written
instructions of transaction requests.
Neither the Fund nor the Transfer Agent
will be responsible for any loss,
liability, cost or expense for following
instructions received by telephone that
it reasonably believes to be genuine.
In addition to the account statement sent to my/our
registered address, I/we hereby authorize the fund to mail
duplicate statements to the name and address provided at Address
right. City State Z
Code
I) DEALER
INFORMATION
Representative Name Representative
No. Branch No.
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
J) SIGNATURE OF
received a current Prospectus of the Morgan Stanley Institutional Fund, Inc. and agree to be bound by its terms. UNDER THE
PENALTIES OF ALL HOLDERS
PERJURY, I/WE CERTIFY THAT THE INFORMATION PROVIDED IN SECTION C) ABOVE IS TRUE, CORRECT AND COMPLETE.
AND TAXPAYER
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications
required to CERTIFICATION
avoid backup withholding.
Sign Here ,
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
P R O S P E C T U S
-------------------------------------------------------------------------
EQUITY GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
MICROCAP PORTFOLIO
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIOS 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 Class A and the Class B
shares of the Equity Growth, Emerging Growth, MicroCap and Aggressive Equity
Portfolios (the "Portfolios"). On January 2, 1996, the Portfolios began offering
two classes of shares, the Class A shares and the Class B shares, except for the
Money Market, Municipal Money Market and International Small Cap Portfolios
which only offer Class A Shares. All shares of the Portfolios owned prior to
January 2, 1996 were redesignated Class A shares on January 2, 1996. The Class A
and Class B shares currently offered by the Portfolios have different minimum
investment requirements and fund expenses. Shares of the portfolios are offered
with no sales charge or exchange or redemption fee (with the exception of the
International Small Cap Portfolio).
The EQUITY GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of medium and large
capitalization corporations.
The EMERGING GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of small-to-medium
sized corporations.
The MICROCAP PORTFOLIO seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of small corporations.
The AGGRESSIVE EQUITY PORTFOLIO is a non-diversified portfolio that seeks
long-term capital appreciation by investing primarily in corporate equity and
equity-linked securities.
INVESTORS SHOULD NOTE THAT EACH OF THE EQUITY GROWTH AND AGGRESSIVE EQUITY
PORTFOLIOS MAY INVEST UP TO 10% OF ITS TOTAL ASSETS IN RESTRICTED SECURITIES.
INVESTMENTS IN RESTRICTED SECURITIES IN EXCESS OF 5% OF A 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 investors 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 "Prospectus Summary" below. The Fund
currently offers the following portfolios: (i) GLOBAL AND INTERNATIONAL EQUITY
- -- Active Country Allocation, Asian Equity, Emerging Markets, European Equity,
Global Equity, Gold, International Equity, International Magnum, International
Small Cap, Japanese Equity and Latin American Portfolios; (ii) U.S. EQUITY --
Aggressive Equity, Emerging Growth, Equity Growth, MicroCap, Small Cap Value
Equity, Value Equity and U.S. Real Estate Portfolios; (iii) EQUITY AND FIXED
INCOME -- 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 May 1, 1996, which 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 MAY 1, 1996.
SUPPLEMENTED THROUGH DECEMBER 30, 1996.
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder of
the Portfolios indicated below will incur:
<TABLE>
<CAPTION>
EQUITY EMERGING AGGRESSIVE
GROWTH GROWTH MICROCAP EQUITY
SHAREHOLDER TRANSACTION EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
Class A.............................................. None None None None
Class B.............................................. None None None None
Maximum Sales Load Imposed on Reinvested Dividends
Class A.............................................. None None None None
Class B.............................................. None None None None
Deferred Sales Load
Class A.............................................. None None None None
Class B.............................................. None None None None
Redemption Fees
Class A.............................................. None None None None
Class B.............................................. None None None None
Exchange Fees
Class A.............................................. None None None None
Class B.............................................. None None None None
</TABLE>
<TABLE>
<CAPTION>
EQUITY EMERGING AGGRESSIVE
GROWTH GROWTH MICROCAP EQUITY
ANNUAL FUND OPERATING EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (Net of Fee Waivers)*
Class A.............................................. 0.52% 0.99% 1.05%+ 0.21%
Class B.............................................. 0.52% 0.99% 1.05%+ 0.21%
12b-1 Fees
Class A.............................................. None None None None
Class B.............................................. 0.25% 0.25% 0.25%+ 0.25%
Other Expenses
Class A.............................................. 0.28% 0.26% 0.45%+ 0.79%
Class B.............................................. 0.28% 0.26% 0.45%+ 0.79%
----------- ----------- ----------- -----------
Total Operating Expenses (Net of Fee Waivers)*
Class A.............................................. 0.80% 1.25% 1.50%+ 1.00%
Class B.............................................. 1.05% 1.50% 1.75%+ 1.25%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ------------------------
*The Adviser has agreed to waive its management fees and/or reimburse each
Portfolio, if necessary, if such fees would cause any of the total annual
operating expenses of the Portfolios to exceed a specified percentage of their
respective average daily net assets. Set forth below, for each Portfolio, are
the management fees and total operating expenses absent such fee waivers and/or
expense reimbursements as a percent of average daily net assets of the Class A
shares and Class B shares, respectively, of each Portfolio.
2
<PAGE>
<TABLE>
<CAPTION>
TOTAL OPERATING
EXPENSES ABSENT FEE
WAIVERS
MANAGEMENT FEES ABSENT ----------------------
PORTFOLIO FEE WAIVERS CLASS A CLASS B+
- ----------------------------------------------------------- ------------------------- --------- -----------
<S> <C> <C> <C>
Equity Growth.............................................. 0.60% 0.88% 1.13%
Emerging Growth............................................ 1.00% 1.26% 1.51%
MicroCap................................................... 1.25% 1.50%+ 1.75%
Aggressive Equity.......................................... 0.80% 1.59% 1.84%
</TABLE>
- ------------------------------
+ Estimated.
These reductions became or will become effective as of the inception of each
Portfolio. As a result of these reductions, the Management Fees stated above are
lower than the contractual fees stated under "Management of the Fund." For
further information on Fund expenses, see "Management of the Fund."
The purpose of the table above is to assist the investor in understanding
the various expenses that an investor in the Portfolios will bear directly or
indirectly. The Class A expenses and fees for the Equity Growth and Emerging
Growth Portfolios are based on actual figures for the fiscal year ended December
31, 1995. The Class A expenses and fees for the MicroCap Portfolio are based on
estimates, assuming that the average daily net assets of the Class A shares of
the MicroCap Portfolio will be $50,000,000. The Class B expenses and fees for
each Portfolio are based on estimates, assuming that the average daily net
assets of the Class B shares of each Portfolio will be $50,000,000. "Other
Expenses" include Board of Directors' fees and expenses, amortization of
organizational costs, filing fees, professional fees and costs for shareholder
reports. Due to the continuous nature of Rule 12b-1 fees, long term Class B
shareholders may pay more than the equivalent of the maximum front-end charges
otherwise permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. ("NASD").
3
<PAGE>
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 Portfolios charge
no redemption fees of any kind. The example is based on total operating expenses
of the Portfolios after fee waivers.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Equity Growth Portfolio
Class A.......................................................... $ 8 $ 26 $ 44 $ 99
Class B.......................................................... 11 33 58 128
Emerging Growth Portfolio
Class A.......................................................... 13 40 69 151
Class B.......................................................... 15 47 82 179
MicroCap Portfolio
Class A.......................................................... 15 47 * *
Class B.......................................................... 18 55 * *
Aggressive Equity Portfolio
Class A.......................................................... 10 32 55 122
Class B.......................................................... 13 40 69 151
</TABLE>
- ------------------------------
* Because the MicroCap Portfolio has not yet commenced operations the Fund has
not projected expenses beyond the 3-year period shown for the Portfolio.
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 Portfolios, if necessary, if in any fiscal year the sum of the
Portfolios' expenses exceeds the limit set by applicable state law.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides financial highlights for the Class A shares of
the Equity Growth, Emerging Growth and Aggressive Equity Portfolios for each of
the periods presented. The audited financial highlights for the Class A shares
for the fiscal year ended December 31, 1995 are part of the Fund's financial
statements which appear in the Fund's December 31, 1995 Annual Report to
Shareholders and which are included in the Fund's Statement of Additional
Information. The Portfolios' financial highlights for each of the periods in the
five years ended December 31, 1995 have been audited by Price Waterhouse LLP,
whose unqualified report thereon is also included in the Statement of Additional
Information. Additional performance information for the Class A shares is
included in the Annual Report. The Annual Report and the financial statements
therein, along with the Statement of Additional Information, are available at no
cost from the Fund at the address and telephone number noted on the cover page
of this Prospectus. Financial highlights are not available for the MicroCap
Portfolio nor for the new Class B shares since they were not offered as of
December 31, 1995. Subsequent to October 31, 1992 (the Fund's prior fiscal year
end), the Fund changed its fiscal year end to December 31. The following
information should be read in conjunction with the financial statements and
notes thereto.
5
<PAGE>
EQUITY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
APRIL 2, TWO MONTHS
1991* TO YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993 1994 1995
----------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 10.00 $ 10.66 $ 11.44 $ 11.88 $ 12.14 $ 12.02
----------- ----------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1)......... 0.05 0.16 0.03 0.22 0.17 0.22
Net Realized and Unrealized Gain
on Investments................... 0.61 0.82 0.41 0.28 0.21 4.93
----------- ----------- ------------- ------------- ------------- -------------
Total from Investment
Operations....................... 0.66 0.98 0.44 0.50 0.38 5.15
----------- ----------- ------------- ------------- ------------- -------------
DISTRIBUTIONS
Net Investment Income............. -- (0.20) -- (0.23) (0.13) (0.28)
In Excess of Net Investment
Income........................... -- -- -- (0.01) -- --
Net Realized Gain................. -- -- -- -- (0.37) (2.75)
----------- ----------- ------------- ------------- ------------- -------------
Total Distributions............... -- (0.20) -- (0.24) (0.50) (3.03)
----------- ----------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD...... $ 10.66 $ 11.44 $ 11.88 $ 12.14 $ 12.02 $ 14.14
----------- ----------- ------------- ------------- ------------- -------------
----------- ----------- ------------- ------------- ------------- -------------
TOTAL RETURN........................ 6.60% 9.26% 3.85% 4.33% 3.26% 45.02%
----------- ----------- ------------- ------------- ------------- -------------
----------- ----------- ------------- ------------- ------------- -------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands)........................ $ 18,139 $ 36,558 $ 45,985 $ 73,789 $ 97,259 $ 158,112
Ratio of Expenses to Average Net
Assets (1)(2)...................... 0.80%** 0.80% 0.80%** 0.80% 0.80% 0.80%
Ratio of Net Investment Income to
Average Net Assets (1)(2).......... 2.34%** 1.73% 1.93%** 1.59% 1.44% 1.57%
Portfolio Turnover Rate............. 3% 38% 1% 172% 146% 186%
- ------------------------------
(1) Effect of voluntary expense
limitation during the period:
Per share benefit to net
investment income............. $ 0.03 $ 0.02 $ 0.01 $ 0.02 $ 0.01 $ 0.01
Ratios before expense limitation:
Expenses to Average Net
Assets........................ 1.37%** 1.01% 1.11%** 0.93% 0.89% 0.88%
Net Investment Income to
Average Net Assets............ 1.77%** 1.52% 1.62%** 1.46% 1.35% 1.49%
</TABLE>
(2) Under the terms of an Investment Advisory Agreement, the Adviser is entitled
to receive a management fee calculated at an annual rate of 0.60% of the
average daily net assets of the Equity Growth Portfolio. The Adviser has
agreed to waive a portion of this fee and/or reimburse expenses of the
Equity Growth Portfolio to the extent that the total operating expenses of
the Equity Growth Portfolio exceed 0.80% of the average daily net assets of
the Class A shares and 1.05% of the average daily net assets of the Class B
shares. In the period ended October 31, 1991, the year ended October 31,
1992, the two months ended December 31, 1992, the years ended December 31,
1993, 1994 and 1995, the Adviser waived management fees and/or reimbursed
expenses totalling $23,000, $51,000, $22,000, $68,000, $83,000 and $105,000,
respectively, for the Equity Growth Portfolio.
* Commencement of Operations.
** Annualized.
6
<PAGE>
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
NOVEMBER 1, TWO MONTHS
1989* TO YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1990 1991++ 1992 1992 1993 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 10.00 $ 9.03 $ 16.18 $ 14.97 $ 16.22 $ 16.22
------------- ------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income/
(Loss) (1)................. 0.08 -- (0.09) (0.01) (0.11) (0.09)
Net Realized and Unrealized
Gain/(Loss) on
Investments................ (1.00) 7.19 (1.12) 1.26 0.11 (0.01)
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations................. (0.92) 7.19 (1.21) 1.25 0.00 (0.10)
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS
Net Investment Income....... (0.05) (0.04) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD....................... $ 9.03 $ 16.18 $ 14.97 $ 16.22 $ 16.22 $ 16.12
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
TOTAL RETURN.................. (9.27)% 79.84% (7.48)% 8.35% 0.00% (0.62)%
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands).................. $ 11,261 $ 54,364 $ 80,156 $ 94,161 $ 103,621 $ 117,669
Ratio of Expenses to Average
Net Assets (1)(2)............ 1.26%** 1.25% 1.25% 1.25%** 1.25% 1.25%
Ratio of Net Investment
Income/ (Loss) to Average Net
Assets (1)(2)................ 0.64%** 0.00% (0.66)% (0.68)%** (0.77)% (0.61)%
Portfolio Turnover Rate....... 19% 2% 17% 1% 25% 24%
- ------------------------------
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net
investment income....... $ 0.01 $ 0.02 $ 0.01 $ 0.00 $ 0.01 $ 0.002
Ratios before expense
limitation:
Expenses to Average Net
Assets.................. 1.64% 1.39% 1.29% 1.36%** 1.31% 1.26%
Net Investment Income
(Loss) to Average Net
Assets.................. 0.24% (0.14)% (0.71)% (0.79)%** (0.83)% (0.62)%
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 16.12
-------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income/
(Loss) (1)................. (0.18)
Net Realized and Unrealized
Gain/(Loss) on
Investments................ 5.55
-------------
Total from Investment
Operations................. 5.37
-------------
DISTRIBUTIONS
Net Investment Income....... --
-------------
NET ASSET VALUE, END OF
PERIOD....................... $ 21.49
-------------
-------------
TOTAL RETURN.................. 33.31%
-------------
-------------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands).................. $ 119,378
Ratio of Expenses to Average
Net Assets (1)(2)............ 1.25%
Ratio of Net Investment
Income/ (Loss) to Average Net
Assets (1)(2)................ (0.76)%
Portfolio Turnover Rate....... 25%
- ------------------------------
(1) Effect of voluntary expens
Per share benefit to net
investment income....... $ 0.003
Ratios before expense
limitation:
Expenses to Average Net
Assets.................. 1.26%
Net Investment Income
(Loss) to Average Net
Assets.................. (0.77)%
</TABLE>
(2) Under the terms of an Investment Advisory Agreement, the Adviser is entitled
to receive a management fee calculated at an annual rate of 1.00% of the
average daily net assets of the Emerging Growth Portfolio. The Adviser has
agreed to waive a portion of this fee and/or reimburse expenses of the
Emerging Growth Portfolio to the extent that the total operating expenses of
the Emerging Growth Portfolio exceed 1.25% of the average daily net assets
of the Class A shares and 1.50% of the average daily net assets of the Class
B shares. In the period ended October 31, 1990, the years ended October 31,
1991 and 1992, the two months ended December 31, 1992, the years ended
December 31, 1993, 1994, and 1995 the Adviser waived management fees and/or
reimbursed expenses totalling $28,000, $41,000, $31,000, $18,000, $51,000,
$16,000 and $18,000, respectively, for the Emerging Growth Portfolio.
* Commencement of Operations.
++ Per share amounts for the year ended October 31, 1991 are based on average
outstanding shares.
** Annualized.
7
<PAGE>
AGGRESSIVE EQUITY PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 8, 1995* TO
DECEMBER 31, 1995
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......................................................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1)................................................................... 0.15
Net Realized and Unrealized Gain on Investments............................................. 3.95
-------
Total from Investment Operations.......................................................... 4.10
-------
DISTRIBUTIONS
Net Investment Income....................................................................... (0.15)
Net Realized Gain........................................................................... (1.78)
-------
Total Distributions......................................................................... (1.93)
-------
NET ASSET VALUE, END OF PERIOD................................................................ $ 12.17
-------
-------
TOTAL RETURN.................................................................................. 41.25%
-------
-------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands)......................................................... $ 28,548
Ratio of Expenses to Average Net Assets (1)(2)................................................ 1.00%**
Ratio of Net Investment Income to Average Net Assets (1)(2)................................... 1.64%**
Portfolio Turnover Rate....................................................................... 309%
- ------------------------
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net investment income............................................... $ 0.06
Ratios before expense limitation:
Expenses to Average Net Assets........................................................... 1.59%**
Net Investment Income to Average Net Assets.............................................. 1.05%**
</TABLE>
(2) Under the terms of an Investment Advisory Agreement, the Adviser is entitled
to receive a management fee calculated at an annual rate of 0.80% of the
average daily net assets of the Aggressive Equity Portfolio. The Adviser has
agreed to waive a portion of this fee and/or reimburse expenses of the
Aggressive Equity Portfolio to the extent that the total operating expenses
of the Aggressive Equity Portfolio exceed 1.00% of the average daily net
assets of the Class A Shares and 1.25% of the average daily net assets of
the Class B Shares. In the period ended December 31, 1995, the Adviser
waived management fees and/or reimbursed expenses totalling $96,000 for the
Aggressive Equity Portfolio.
* Commencement of Operations
** Annualized
8
<PAGE>
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 shares and except the International
Small Cap, Money Market and Municipal Money Market Portfolios, offers Class B
shares. Each portfolio has its own investment objective and policies designed to
meet its specific goals. The investment objective of each Portfolio described in
this Prospectus is as follows:
- The EQUITY GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of medium and
large capitalization companies.
- The EMERGING GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of small- to
medium-sized corporations.
- The MICROCAP PORTFOLIO seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of small corporations.
- The AGGRESSIVE EQUITY PORTFOLIO is a non-diversified portfolio that seeks
capital appreciation by investing primarily in corporate equity and
equity-linked securities.
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 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 U.S. 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-U.S. issuers.
9
<PAGE>
- The INTERNATIONAL SMALL CAP PORTFOLIO seeks long-term capital appreciation
by investing primarily in equity securities of non-U.S. issuers with
equity market capitalizations of less than $1 billion.
- 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.
- 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"
below) weightings determined by the Adviser.
U.S. EQUITY:
- The SMALL CAP VALUE EQUITY PORTFOLIO seeks high long-term total return by
investing in undervalued equity securities of small- to medium-sized
companies.
- The U. S. REAL ESTATE PORTFOLIO seeks to provide above average current
income and long-term capital appreciation by investing primarily in equity
securities of companies in the U.S. real estate industry, including real
estate investment trusts.
- The VALUE EQUITY PORTFOLIO seeks high total return by investing in equity
securities which the Adviser believes to be undervalued relative to the
stock market in general at the time of purchase.
EQUITY AND FIXED INCOME:
- The BALANCED PORTFOLIO seeks high total return while preserving capital by
investing in a combination of undervalued equity securities and fixed
income securities.
FIXED INCOME:
- The EMERGING MARKETS DEBT PORTFOLIO seeks high total return by investing
primarily in debt securities of government, government-related and
corporate issuers located in emerging countries.
- The FIXED INCOME PORTFOLIO seeks to produce a high total return consistent
with the preservation of capital by investing in a diversified portfolio
of fixed income securities.
- The GLOBAL FIXED INCOME PORTFOLIO seeks to produce an attractive real rate
of return while preserving capital by investing in fixed income securities
of issuers throughout the world, including U.S. issuers.
- The HIGH YIELD PORTFOLIO seeks to maximize total return by investing in a
diversified portfolio of high yield fixed income securities that offer a
yield above that generally available on debt securities in the three
highest rating categories of the recognized rating services.
- The MORTGAGE-BACKED SECURITIES Portfolio seeks to produce as high a level
of current income as is consistent with the preservation of capital by
investing primarily in a variety of investment-grade mortgage-backed
securities.
- The MUNICIPAL BOND PORTFOLIO seeks to produce a high level of current
income consistent with preservation of principal through investment
primarily in municipal obligations, the interest on which is exempt from
federal income tax.
10
<PAGE>
MONEY MARKET:
- The MONEY MARKET PORTFOLIO seeks to maximize current income and preserve
capital while maintaining high levels of liquidity through investing in
high quality money market instruments with remaining maturities of one
year or less.
- The MUNICIPAL MONEY MARKET PORTFOLIO seeks to maximize current tax-exempt
income and preserve capital while maintaining high levels of liquidity
through investing in high quality money market instruments with remaining
maturities of one year or less which are exempt from federal income tax.
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 December 31, 1995 had approximately $57.4 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 each Portfolio are offered directly to investors at net
asset value with no sales commission or 12b-1 charges. Class B shares of each
Portfolio are offered at net asset value with no sales commission, but with a
12b-1 fee, which is accrued daily and paid quarterly, equal to 0.25% of the
Class B shares' average daily net assets on an annualized basis. Share purchases
may be made by sending investments directly to the Fund or through the
Distributor. Shares in a Portfolio account opened prior to January 2, 1996
(each, a "Pre-1996 Account") were designated Class A shares on January 2, 1996.
For a Portfolio account opened on or after January 2, 1996 (a "New Account"),
the minimum initial investment is $500,000 for Class A shares and $100,000 for
Class B shares. Certain exceptions to the foregoing minimums apply to (1) shares
in a Pre-1996 Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account"); (2) Portfolio accounts held by certain
employees of the Adviser and of its affiliates; and (3) certain advisory or
asset allocation accounts, such as Total Funds Management accounts, managed by
Morgan Stanley or its affiliates, including the Adviser ("Managed Accounts").
The Adviser reserves the right in its sole discretion to determine which of such
advisory or asset allocation accounts shall be Managed Accounts. For information
regarding Managed Accounts, please contact your Morgan Stanley account
representative or the Fund at the telephone number provided on the cover of this
Prospectus. Shares in a Pre-1996 Account with a value of less than $100,000 on
March 1, 1996 (a "Grandfathered Class B Account") converted to Class B shares on
March 1, 1996. The minimum investment levels may be waived at the discretion of
the Adviser for (i) certain employees and customers of Morgan Stanley or its
affiliates and certain trust departments, brokers, dealers, agents, financial
planners, financial services firms, or investment advisers that have entered
into an agreement with Morgan Stanley or its affiliates; and (ii) retirement and
deferred compensation plans and trusts used to fund such plans, including, but
not limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended, and "rabbi trusts". See "Purchase of Shares --
Minimum Investment and Account Sizes; Conversion from Class A to Class B
Shares."
11
<PAGE>
The minimum subsequent investment for each Portfolio account is $1,000
(except for automatic reinvestment of dividends and capital gains distributions
for which there is no minimum). Such subsequent investments will be applied to
purchase additional shares in the same class held by a shareholder in a
Portfolio account. See "Purchase of Shares -- Additional Investments."
HOW TO REDEEM
Class A shares or Class B shares of each Portfolio may be redeemed at any
time, without cost, at the net asset value per share of shares of the applicable
class 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 such account to less than
$100,000 for a continuous 60-day period. Involuntary redemption does not apply
to Managed Accounts, Grandfathered Class A Accounts and Grandfathered Class B
Accounts, regardless of the value of such accounts. Class A shares in a New
Account will convert to Class B shares if shareholder redemption(s) of such
shares reduces the value of such account to less than $500,000 for a continuous
60-day period. Class B shares in a New Account will convert to Class A shares if
shareholder purchases of additional Class B shares or market activity cause the
value of Class B shares in the New Account to increase to $500,000 or more. See
"Purchase of Shares -- Minimum Account Sizes and Involuntary Redemption of
Shares" and "Redemption of Shares."
RISK FACTORS
The investment policies of the Portfolios entail certain risks and
considerations of which an investor should be aware. Because the Emerging Growth
and MicroCap Portfolios seek long-term capital appreciation by investing
primarily in small- to medium-sized companies and small companies, respectively,
both of which types of companies are more vulnerable to financial and other
risks than larger, more established companies, investments in these Portfolios
may involve a higher degree of risk and price volatility than the general equity
markets. The Aggressive Equity Portfolio may invest in small-to medium-sized
companies to a lesser extent. The Equity Growth, Emerging Growth, MicroCap and
Aggressive Equity Portfolios may invest in securities of foreign issuers, which
are subject to certain risks not typically associated with domestic securities.
See "Investment Objectives and Policies" and "Additional Investment
Information." In addition, the Portfolios may invest in repurchase agreements,
lend their portfolio securities and may purchase securities on a when-issued
basis. The Equity Growth and Aggressive Equity Portfolios may invest in covered
call options and may also invest in stock options, stock futures contracts and
options on stock futures contracts, and may invest in forward foreign currency
exchange contracts to hedge currency risk associated with investment in non-U.S.
dollar-denominated securities. The Aggressive Equity Portfolio may invest in
convertible debentures and specialty equity-linked securities, such as PERCS,
ELKS or LYONs, of U.S., and to a limited extent, foreign issuers, which may
involve risks in addition to those associated with equity securities. The
Aggressive Equity Portfolio is a non-diversified portfolio under the Investment
Company Act of 1940, as amended (the "1940 Act") and therefore may invest a
greater proportion of its assets in the securities of a smaller number of
issuers and may, as a result, be subject to greater risk with respect to its
portfolio securities. See "Investment Limitations." See "Additional Investment
Information." Each of these investment strategies involves specific risks which
are described under "Investment Objectives and Policies" and "Additional
Investment Information" herein and under "Investment Objectives and Policies" in
the Statement of Additional Information.
12
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is described below, together with
the policies the Fund employs in its efforts to achieve these objectives. Each
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 Portfolios will attain their
objectives. The investment policies described below are not fundamental policies
and may be changed without shareholder approval.
THE EQUITY GROWTH PORTFOLIO
The Portfolio's investment objective is to provide long-term capital
appreciation by investing primarily in growth-oriented equity securities of
medium and large capitalization U.S. corporations and, to a limited extent, as
described below, foreign corporations. With respect to the Portfolio, equity
securities include common and preferred stocks, convertible securities, and
rights and warrants to purchase common stocks. Under normal circumstances, the
Portfolio will invest at least 65% of the value of its total assets in equity
securities.
The Adviser employs a flexible and eclectic investment process in pursuit of
the Portfolio's investment objectives. In selecting stocks for the Portfolio,
the Adviser concentrates on a universe of rapidly growing, high quality
companies and lower, but accelerating, earnings growth situations. The Adviser's
universe of potential investments generally comprises companies with market
capitalizations of $750 million or more. The Portfolio is not restricted to
investments in specific market sectors. The Adviser uses its research
capabilities, analytical resources and judgment to assess economic, industry and
market trends, as well as individual company developments, to select promising
growth investments for the Portfolio. The Adviser concentrates on companies with
strong, communicative managements and clearly defined strategies for growth. In
addition, the Adviser rigorously assesses company developments, including
changes in strategic direction, management focus and current and likely future
earnings results. Valuation is important to the Adviser but is viewed in the
context of prospects for sustainable earnings growth and the potential for
positive earnings surprises vis-a-vis consensus expectations. The Portfolio is
free to invest in any equity security that, in the Adviser's judgment, provides
above average potential for capital appreciation.
In selecting investments for the Portfolio, the Adviser emphasizes
individual security selection. The Portfolio's investments will generally be
diversified by number of issues but concentrated sector positions may result
from the investment process. The Portfolio has a long-term investment
perspective; however, the Adviser may take advantage of short-term opportunities
that are consistent with the Portfolio's objective by selling recently purchased
securities which have increased in value.
The Portfolio may invest up to 25% of its total assets at the time of
purchase in securities of foreign companies. The Portfolio may invest in
securities of foreign issuers directly or in the form of Depositary Receipts.
Investors should recognize that investing in foreign companies involves certain
special considerations which are not typically associated with investing in U.S.
companies. See "Additional Investment Information" herein and "Investment
Objectives and Policies -- Forward Foreign Currency Exchange Contracts" in the
Statement of Additional Information.
The Portfolio may invest in convertible securities of domestic and, subject
to the above restrictions, foreign issuers on occasions when, due to market
conditions, it is more advantageous to purchase such securities than to
13
<PAGE>
purchase common stock. Since the Portfolio invests in both common stocks and
convertible securities, the risks of investing in the general equity markets may
be tempered to a degree by the Portfolio's investments in convertible securities
which are often not as volatile as common stock.
Any remaining assets may be invested in certain securities or obligations,
including derivative securities, as set forth in "Additional Investment
Information" below.
THE EMERGING GROWTH PORTFOLIO
The Portfolio's investment objective is to provide long-term capital
appreciation by investing primarily in growth-oriented equity securities of
small- to medium-sized domestic corporations and, to a limited extent as
described below, foreign corporations. The production of any current income is
incidental to this objective. Such companies generally have annual gross
revenues ranging from $10 million to $750 million. With respect to the
Portfolio, equity securities include common and preferred stocks, convertible
securities, and rights and warrants to purchase common stocks, and any similar
equity interest, such as trust or partnership interests. Such equity securities
may not pay dividends or distributions and may or may not carry voting rights.
The Adviser employs a flexible investment program in pursuit of the
Portfolio's investment objective. The Portfolio is not restricted to investments
in specific market sectors. The Portfolio will invest in small- to medium-sized
companies that are early in their life cycle, but which have the potential, in
the Adviser's judgment, to become major enterprises. The Adviser uses its
judgment and research capabilities to assess economic, industry, market and
company developments to select investments in promising emerging growth
companies that are expected to benefit from new technology or new products or
services. In addition, the Adviser looks for special developments, such as
research discoveries, changes in customer demand, rejuvenated management or
basic changes in the economic environment. These situations are only
illustrative of the types of investments the Portfolio may make. The Portfolio
is free to invest in any common stock which in the Adviser's judgment provides
above-average potential for capital appreciation.
The Portfolio intends to manage its investments actively to accomplish its
investment objective. Since the Portfolio has a long-term investment
perspective, the Adviser does not intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Adviser may take advantage of short-term opportunities that are
consistent with its objective.
The Portfolio may invest up to 25% of its total assets at the time of
purchase in securities of foreign companies. The Portfolio may invest in
securities of foreign issuers directly or in the form of Depositary Receipts.
See "Additional Investment Information" below. The Portfolio may enter into
forward foreign currency exchange contracts which provide for the purchase or
sale of foreign currencies in connection with the settlement of foreign
securities transactions or to hedge the underlying currency exposure related to
foreign investments. The Portfolio will not enter into these commitments for
speculative purposes. Investors should recognize that investing in foreign
companies involves certain special considerations which are not typically
associated with investing in U.S. companies. See "Additional Investment
Information" herein and "Investment Objectives and Policies -- Forward Currency
Exchange Contracts" in the Statement of Additional Information.
The Portfolio may also invest in convertible securities of domestic and,
subject to the above restrictions, foreign issuers on occasions when, due to
market conditions, it is more advantageous to purchase such securities than to
purchase common stock. The Portfolio will not invest in debt securities that are
not rated at least
14
<PAGE>
investment grade by either Standard & Poor's Ratings Group or Moody's Investors
Service, Inc. Since the Portfolio invests in both common stocks and convertible
securities, the risks of investing in the general equity markets may be tempered
to a degree by the Portfolio's investments in convertible securities, which are
often not as volatile as equity securities.
Any remaining assets may be invested in certain securities or obligations,
including derivative securities, that are set forth in "Additional Investment
Information" below.
THE MICROCAP PORTFOLIO
The Portfolio's investment objective is to provide long-term capital
appreciation by investing primarily in growth-oriented equity securities of
small domestic corporations and, to a limited extent as described below, foreign
corporations. The production of any current income is incidental to this
objective. Such companies generally have, at time of purchase, annual gross
revenues of $150 million or less or market capitalizations of $250 million or
less. With respect to the Portfolio, equity securities include common and
preferred stocks, convertible securities, rights and warrants to purchase common
stocks, and any similar equity interest, such as trust or partnership interests.
Such equity securities may or may not pay dividends or distributions and may or
may not carry voting rights.
The Adviser employs a flexible investment program in pursuit of the
Portfolio's investment objective. The Portfolio is not restricted to investments
in specific market sectors. The Portfolio will invest in equity securities,
including securities purchased in initial public offerings, of small companies
that are early in their life cycle, but which have the potential, in the
Adviser's judgement, to achieve long-term capital appreciation. The Adviser uses
its judgment and research capabilities to assess economic, industry, market and
company developments to select investments in promising companies that are
expected to benefit from new technology or new products or services. In
addition, the Adviser looks for special developments, such as research
discoveries, changes in customer demand, rejuvenated management or basic changes
in the economic environment. These situations are only illustrative of the types
of investments the Portfolio may make. The Portfolio is free to invest in any
equity security which in the Adviser's judgment provides above-average potential
for capital appreciation.
The Portfolio intends to manage its investments actively to accomplish its
investment objective. Since the Portfolio has a long-term investment
perspective, the Adviser does not intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Adviser may take advantage of short-term opportunities that are
consistent with its objective.
The Portfolio may invest up to 25% of its total assets at the time of
purchase in securities of foreign companies. The Portfolio may invest in such
securities of foreign issuers directly or in the form of Depositary Receipts.
See "Additional Investment Information" below. The Portfolio may enter into
forward foreign currency exchange contracts which provide for the purchase or
sale of foreign currencies in connection with the settlement of foreign
securities transactions or to hedge the underlying currency exposure related to
foreign investments. The Portfolio will not enter into these commitments for
speculative purposes. Investors should recognize that investing in foreign
companies involves certain special considerations which are not typically
associated with investing in U.S. companies. See "Additional Investment
Information" herein and "Investment Objectives and Policies -- Forward Currency
Exchange Contracts" in the Statement of Additional Information.
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The Portfolio may invest in convertible securities of domestic and, subject
to the above restrictions, foreign issuers on occasions when, due to market
conditions, it is more advantageous to purchase such securities than to purchase
common stock. The Portfolio will not invest in debt securities that are not
rated at least investment grade by either Standard & Poor's Ratings Group or
Moody's Investors Service, Inc. Since the Portfolio invests in both common
stocks and convertible securities, the risks of investing in the general equity
markets may be tempered to a degree by the Portfolio's investments in
convertible securities, which are often not as volatile as equity securities.
See "Additional Investment Information".
Any remaining assets may be invested in certain securities or obligations,
including derivative securities, as set forth in "Additional Investment
Information" below.
THE AGGRESSIVE EQUITY PORTFOLIO
The Portfolio's investment objective is to provide capital appreciation by
investing primarily in a non-diversified portfolio of corporate equity and
equity-linked securities. With respect to the Portfolio, equity and
equity-linked securities include common and preferred stocks, convertible
securities, rights and warrants to purchase common stocks, options, futures, and
specialty securities, such as ELKS, LYONs, PERCS of U.S., and to a limited
extent, as described below, foreign issuers. The Aggressive Equity Fund is a
non-diversified portfolio and thus can be more heavily weighted in fewer stocks
than the Equity Growth Portfolio, which is a diversified portfolio. See
"Investment Limitations." Under normal circumstances, the Portfolio will invest
at least 65% of the value of its total assets in equity and equity-linked
securities.
The Adviser employs a flexible and eclectic investment process in pursuit of
the Portfolio's investment objective. In selecting securities for the Portfolio,
the Adviser concentrates on a universe of rapidly growing, high quality
companies and lower, but accelerating, earnings growth situations. The Adviser's
universe of potential investments generally comprises companies with market
capitalizations of $500 million or more but smaller market capitalization
securities may be purchased from time to time. The Portfolio is not restricted
to investments in specific market sectors. The Adviser uses its research
capabilities, analytical resources and judgment to assess economic, industry and
market trends, as well as individual company developments, to select promising
investments for the Portfolio. The Adviser concentrates on companies with
strong, communicative managements and clearly defined strategies for growth. In
addition, the Adviser rigorously assesses earnings results. The Adviser seeks
companies which will deliver surprisingly strong earnings growth. Valuation is
of secondary importance to the Adviser and is viewed in the context of prospects
for sustainable earnings growth and the potential for positive earnings
surprises in relation to consensus expectations. The Portfolio is free to invest
in any equity or equity-linked security that, in the Adviser's judgment,
provides above average potential for capital appreciation.
The Portfolio may from time to time and consistent with applicable legal
requirements sell securities short that it owns (i.e., "against the box") or
borrows. See "Additional Investment Information".
In selecting investments for the Portfolio, the Adviser emphasizes
individual security selection. Overweighted sector positions and issuer
positions may result from the investment process. See "Investment Limitations."
The Portfolio has a long-term investment perspective; however, the Adviser may
take advantage of short-term opportunities that are consistent with the
Portfolio's objective by selling recently purchased securities which have
increased in value.
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The Portfolio may invest in equity and equity-linked securities of domestic
and foreign corporations. However, the Portfolio does not expect to invest more
than 25% of its total assets at the time of purchase in securities of foreign
companies. The Portfolio may invest in securities of foreign issuers directly or
in the form of American Depositary Receipts ("ADRs"). Investors should recognize
that investing in foreign companies involves certain special considerations
which are not typically associated with investing in U.S. companies. See
"Additional Investment Information" herein and "Investment Objectives and
Policies -- Forward Foreign Currency Exchange Contracts" in the Statement of
Additional Information.
Any remaining assets may be invested in certain securities or obligations,
including derivative securities, as set forth in "Additional Investment
Information" below.
ADDITIONAL INVESTMENT INFORMATION
CONVERTIBLE SECURITIES, WARRANTS AND EQUITY-LINKED SECURITIES
The Portfolios may invest in securities such as convertible securities,
preferred stock, warrants or other securities exchangeable under certain
circumstances for shares of common stock. Warrants are instruments giving
holders the right, but not the obligation, to buy shares of a company at a given
price during a specified period.
The Aggressive Equity Portfolio may invest in equity-linked securities,
including, among others, PERCS, ELKS or LYONs, which are securities that are
convertible into or the value of which is based upon the value of, equity
securities upon certain terms and conditions. The amount received by an investor
at maturity of such securities is not fixed but is based on the price of the
underlying common stock. It is impossible to predict whether the price of the
underlying common stock will rise or fall. Trading prices of the underlying
common stock will be influenced by the issuer's operational results, by complex,
interrelated political, economic, financial, or other factors affecting the
capital markets, the stock exchanges on which the underlying common stock is
traded and the market segment of which the issuer is a part. In addition, it is
not possible to predict how equity-linked securities will trade in the secondary
market, which is fairly developed and liquid. The market for such securities may
be shallow, however, and high volume trades may be possible only with
discounting. In addition to the foregoing risks, the return on such securities
depends on the creditworthiness of the issuer of the securities, which may be
the issuer of the underlying securities or a third party investment banker or
other lender. The creditworthiness of such third party issuer of equity-linked
securities may, and often does, exceed the creditworthiness of the issuer of the
underlying securities. The advantage of using equity-linked securities over
traditional equity and debt securities is that the former are income producing
vehicles that may provide a higher income than the dividend income on the
underlying equity securities while allowing some participation in the capital
appreciation of the underlying equity securities. Another advantage of using
equity-linked securities is that they may be used for hedging to reduce the risk
of investing in the generally more volatile underlying equity securities.
The following are three examples of equity-linked securities. The Portfolio
may invest in the securities described below or other similar equity-linked
securities.
PERCS. Preferred Equity Redemption Cumulative Stock ("PERCS") technically
are preferred stock with some characteristics of common stock. PERCS are
mandatorily convertible into common stock after a period of time, usually three
years, during which the investors' capital gains are capped, usually at 30%.
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Commonly, PERCS may be redeemed by the issuer at any time or if the issuer's
common stock is trading at a specified price level or better. The redemption
price starts at the beginning of the PERCS duration period at a price that is
above the cap by the amount of the extra dividends the PERCS holder is entitled
to receive relative to the common stock over the duration of the PERCS and
declines to the cap price shortly before maturity of the PERCS. In exchange for
having the cap on capital gains and giving the issuer the option to redeem the
PERCS at any time or at the specified common stock price level, the Portfolio
may be compensated with a substantially higher dividend yield than that on the
underlying common stock. Investors, such as the Portfolio, that seek current
income, find PERCS attractive because a PERCS provides a higher dividend income
than that paid with respect to a company's common stock.
ELKS. Equity-Linked Securities ("ELKS") differ from ordinary debt
securities, in that the principal amount received at maturity is not fixed but
is based on the price of the issuer's common stock. ELKS are debt securities
commonly issued in fully registered form for a term of three years under an
indenture trust. At maturity, the holder of ELKS will be entitled to receive a
principal amount equal to the lesser of a cap amount, commonly in the range of
30% to 55% greater than the current price of the issuer's common stock, or the
average closing price per share of the issuer's common stock, subject to
adjustment as a result of certain dilution events, for the 10 trading days
immediately prior to maturity. Unlike PERCS, ELKS are commonly not subject to
redemption prior to maturity. ELKS usually bear interest during the three-year
term at a substantially higher rate than the dividend yield on the underlying
common stock. In exchange for having the cap on the return that might have been
received as capital gains on the underlying common stock, the Portfolio may be
compensated with the higher yield, contingent on how well the underlying common
stock does. Investors, such as the Portfolio, that seek current income, find
ELKS attractive because ELKS provide a higher dividend income than that paid
with respect to a company's common stock.
LYONS. Liquid Yield Option Notes ("LYONs") differ from ordinary debt
securities, in that the amount received prior to maturity is not fixed but is
based on the price of the issuer's common stock. LYONs are zero-coupon notes
that sell at a large discount from face value. For an investment in LYONs, the
Portfolio will not receive any interest payments until the notes mature,
typically in 15 to 20 years, when the notes are redeemed at face, or par, value.
The yield on LYONs, typically, is lower-than-market rate for debt securities of
the same maturity, due in part to the fact that the LYONs are convertible into
common stock of the issuer at any time at the option of the holder of the LYONs.
Commonly, the LYONs are redeemable by the issuer at any time after an initial
period or if the issuer's common stock is trading at a specified price level or
better, or, at the option of the holder, upon certain fixed dates. The
redemption price typically is the purchase price of the LYONs plus accrued
original issue discount to the date of redemption, which amounts to the
lower-than-market yield. The Portfolio will receive only the lower-than-market
yield unless the underlying common stock increases in value at a substantial
rate. LYONs are attractive to investors, like the Portfolio, when it appears
that they will increase in value due to the rise in value of the underlying
common stock.
DEPOSITARY RECEIPTS. The Portfolios may invest indirectly in securities of
foreign companies through sponsored or unsponsored American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs") and other types of Depositary
Receipts (which, together with ADRs and GDRs, are hereinafter collectively
referred to as "Depositary Receipts"), to the extent such Depositary Receipts
are or become available. Depositary Receipts are not necessarily denominated in
the same currency as the underlying securities. In addition, the issuers of the
securities underlying unsponsored Depositary Receipts are not obligated to
disclose material
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information in the U.S. and, therefore, there may be less information available
regarding such issuers and there may not be a correlation between such
information and the market value of the Depositary Receipts. ADRs are Depositary
Receipts typically issued by a U.S. financial institution which evidence
ownership interests in a security or pool of securities issued by a foreign
issuer. GDRs and other types of Depositary Receipts are typically issued by
foreign banks or trust companies, although they also may be issued by U.S.
financial institutions, and evidence ownership interests in a security or pool
of securities issued by either a foreign or a U.S. corporation. Generally,
Depositary Receipts in registered form are designed for use in the U.S.
securities market and Depositary Receipts in bearer form are designed for use in
securities markets outside the U.S. For purposes of a Portfolio's investment
policies, the Portfolio's investments in Depositary Receipts will be deemed to
be investments in the underlying securities.
FOREIGN INVESTMENT. The Portfolios may invest in U.S. dollar-denominated
securities of foreign issuers trading in U.S. markets and the Emerging Growth
and Aggressive Equity Portfolios may invest in non-U.S. dollar-denominated
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 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 domestic companies. It is not expected that a 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.
Investments in securities of foreign issuers are frequently denominated in
foreign currencies and, since the Emerging Growth and Aggressive Equity
Portfolios may also temporarily hold uninvested reserves in bank deposits in
foreign currencies, the value of the Portfolios' assets measured in U.S. dollars
may be affected favorably or unfavorably by changes in currency exchange rates
and in exchange control regulations, and the Portfolios may incur costs in
connection with conversions between various currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Emerging Growth and
Aggressive Equity Portfolios may enter into forward foreign currency exchange
contracts ("forward contracts"), that provide for the purchase or sale of an
amount of a specified foreign currency at a future date. Purposes for which such
contracts may be used include protecting against a decline in a foreign currency
against the U.S. dollar between the trade date and settlement date when the
Portfolio purchases or sells non-U.S. dollar denominated securities, locking in
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the U.S. dollar value of dividends declared on securities held by the Portfolio
and generally protecting the U.S. dollar value of securities held by the
Portfolio against exchange rate fluctuation. Such contracts may also be used as
a protective measure against the effects of fluctuating rates of currency
exchange and exchange control regulations. While such forward contracts may
limit losses to the Portfolio against exchange rate fluctuations, they will also
limit any gains that may otherwise have been realized. Such forward contracts
are derivative securities, in which the Portfolio may invest for hedging
purposes. See "Investment Objectives and Policies -- Forward Currency Exchange
Contracts" in the Statement of Additional Information.
LOANS OF PORTFOLIO SECURITIES. The Portfolios may lend their 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 a risk of delay in recovery of the securities or even loss
of rights in the collateral should the borrower of the securities fail
financially. A Portfolio will not enter into securities loan transactions
exceeding, in the aggregate, 33 1/3% of the market value of its total assets.
For more detailed information about securities lending, see "Investment
Objectives and Policies" in the Statement of Additional Information.
MONEY MARKET INSTRUMENTS. Each Portfolio is permitted to invest in money
market instruments, although the Portfolios intend to stay invested in
securities satisfying their primary investment objective to the extent
practical. Each 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 Portfolios include obligations of the
United States Government and its agencies and instrumentalities; 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 Equity Growth and Aggressive Equity Portfolios may invest in
securities that are neither listed on a stock exchange nor traded over the
counter. 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 such Portfolios or less than what may be
considered the fair value of such securities. Further, 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 net assets in
illiquid securities, including securities for which there is no readily
available secondary market. Securities that are not registered under the
Securities Act of 1933, as amended, but that can be offered and sold to
qualified institutional buyers under Rule 144A under that Act will not be
included within the foregoing 15% restriction if the securities are determined
to be liquid. 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 Rule 144A securities.
Rule 144A securities may become illiquid if qualified institutional buyers are
not interested in acquiring the securities.
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REPURCHASE AGREEMENTS. The Portfolios 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."
SHORT SALES. The Aggressive Equity Portfolio may from time to time sell
securities short consistent with applicable legal requirements. A short sale is
a transaction in which the Portfolio would sell securities it either owns or has
the right to acquire at no added cost (i.e., "against the box") or does not own
(but has borrowed) in anticipation of a decline in the market price of the
securities. When the Portfolio makes a short sale of borrowed securities, the
proceeds it receives from the sale will be held on behalf of a broker until the
Portfolio replaces the borrowed securities. To deliver the securities to the
buyer, the Portfolio will need to arrange through a broker to borrow the
securities and, in so doing, the Portfolio will become obligated to replace the
securities borrowed at their market price at the time of the replacement,
whatever that price may be. The Portfolio may have to pay a premium to borrow
the securities and must pay any dividends or interest payable on the securities
until they are replaced.
The Portfolio's obligation to replace the securities borrowed in connection
with a short sale will be secured by collateral deposited with the broker that
consists of cash, U.S. Government securities or other liquid, high grade debt
obligations. In addition, if the short sale is not "against the box", the
Portfolio will place in a segregated account with the Custodian an amount of
cash, U.S. Government securities or other liquid, high grade debt obligations
equal to the difference, if any, between (1) the market value of the securities
sold at the time they were sold short and (2) any cash, U.S. Government
securities or other liquid, high grade debt obligations deposited as collateral
with the broker in connection with the short sale (not including the proceeds of
the short sale). Short sales by the Portfolio involve certain risks and special
considerations. Possible losses from short sales differ from losses that could
be incurred from a purchase of a security, because losses from short sales may
be unlimited, whereas losses from purchases can equal only the total amount
invested.
SMALL AND MEDIUM-SIZED COMPANIES. Because the Emerging Growth and MicroCap
Portfolios seek long-term capital appreciation by investing primarily in small-
to medium-sized companies and small companies, respectively, both of which types
of companies are more vulnerable to financial and other risks than larger, more
established companies, investments in these Portfolios may involve a higher
degree of risk and price volatility than the general equity markets. The
Aggressive Equity Portfolio may invest in small- to medium-sized companies to a
lesser extent.
STOCK OPTIONS, FUTURES CONTRACTS AND OPTIONS IN FUTURES CONTRACTS. The
Equity Growth and Aggressive Equity Portfolios may write (i.e., sell) covered
call options on portfolio securities. The Equity Growth and Aggressive Equity
Portfolios may write covered put options on portfolio securities. By selling a
covered call option, the Portfolio would become obligated during the term of the
option to deliver the securities underlying
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the option should the option holder choose to exercise the option before the
option's termination date. In return for the call it has written, the Portfolio
will receive from the purchaser (or option holder) a premium which is the price
of the option, less a commission charged by a broker. The Portfolio will keep
the premium regardless of whether the option is exercised. By selling a covered
put option, the Portfolio incurs an obligation to buy the security underlying
the option from the purchaser of the put at the option's exercise price at any
time during the option period, at the purchaser's election (certain options
written by the Portfolio will be exercisable by the purchaser only on a specific
date). A call option is "covered" if the Portfolio owns the security underlying
the option it has written or has an absolute or immediate right to acquire the
security by holding a call option on such security, or maintains a sufficient
amount of cash, cash equivalents or liquid securities to purchase the underlying
security.
Generally, a put option is "covered" if the Fund maintains cash, U.S.
Government securities or other high grade debt obligations equal to the exercise
price of the option, or if the Fund holds a put option on the same underlying
security with a similar or higher exercise price.
When the Portfolio writes covered call options, it augments its income by
the premiums received and is thereby hedged to the extent of that amount against
a decline in the price of the underlying securities. The premiums received will
offset a portion of the potential loss incurred by the Portfolio if the
securities underlying the options are ultimately sold by the Portfolio at a
loss. However, during the option period, the Portfolio has, in return for the
premium on the option, given up the opportunity for capital appreciation above
the exercise price should the market price of the underlying security increase,
but has retained the risk of loss should the price of the underlying security
decline.
The Equity Growth and the Aggressive Equity Portfolios may write put options
to receive the premiums paid by purchasers (when the Adviser wishes to purchase
the security underlying the option at a price lower than its current market
price, in which case the Portfolio will write the covered put at an exercise
price reflecting the lower purchase price sought) and to close out a long put
option position.
The Equity Growth and the Aggressive Equity Portfolios may also purchase put
options on their portfolio securities or call options. When the Portfolio
purchases a call option it acquires the right to buy a designated security at a
designated price (the "exercise price"), and when the Portfolio purchases a put
option it acquires the right to sell a designated security at the exercise
price, in each case on or before a specified date (the "termination date"),
which is usually not more than nine months from the date the option is issued.
The Portfolio may purchase call options to close out a covered call position or
to protect against an increase in the price of a security it anticipates
purchasing. The Portfolio may purchase put options on securities which it holds
in its portfolio to protect itself against decline in the value of the security.
If the value of the underlying security were to fall below the exercise price of
the put purchased in an amount greater than the premium paid for the option, the
Portfolio would incur no additional loss. The Portfolio may also purchase put
options to close out written put positions in a manner similar to call option
closing purchase transactions. There are no other limits on the Portfolio's
ability to purchase call and put options.
The Equity Growth and the Aggressive Equity Portfolios may enter into
futures contracts and options on futures contracts to remain fully invested and
to reduce transaction costs. The Portfolio may also enter into futures
transactions as a hedge against fluctuations in the price of a security it holds
or intends to acquire, but not for speculation or for achieving leverage. The
Portfolio may enter into futures contracts and options on futures
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contracts provided that not more than 5% of the Portfolio's total assets at the
time of entering into the contract or option is required as deposit to secure
obligations under such contracts and options, and provided that not more than
20% of the Portfolio's total assets in the aggregate is invested in futures
contracts and options on futures contracts (and in options in the case of the
Equity Growth and the Aggressive Equity Portfolios).
The Equity Growth and the Aggressive Equity Portfolios may purchase and
write call and put options on futures contracts that are traded on any
international exchange, traded over-the-counter or which are synthetic options
or futures or equity swaps, and may enter into closing transactions with respect
to such options to terminate an existing position. An option on a futures
contract gives the purchaser the right (in return for the premium paid) to
assume a position in a futures contract (a long position if the option is a call
and a short position if the option is a put) at a specified exercise price at
any time during the term of the option. The Portfolio will purchase and write
options on futures contracts for identical purposes to those set forth above for
the purchase of a futures contract (purchase of a call option or sale of a put
option) and the sale of a futures contract (purchase of a put option or sale of
a call option), or to close out a long or short position in future contracts.
Options, futures and options on futures are derivative securities, in which
the Portfolio may invest for hedging purposes, as well as to remain fully
invested and to reduce transaction costs. Investing for the latter two purposes
may be considered speculative. The primary risks associated with the use of
options, futures and options on futures are (i) imperfect correlation between
the change in market value of the stocks held by the Portfolio and the prices of
futures and options relating to the stocks purchased or sold by the Portfolio;
and (ii) possible lack of a liquid secondary market for an option or a futures
contract and the resulting inability to close a futures position which could
have an adverse impact on the Portfolio's ability to hedge. In the opinion of
the Board of Directors, the risk that the Portfolio will be unable to close out
a futures position or options contract will be minimized by only entering into
futures contracts or options transactions for which there appears to be a liquid
secondary market.
TEMPORARY INVESTMENTS. During periods in which the Adviser believes changes
in economic, financial or political conditions make it advisable, the Portfolios
may reduce their holdings in equity and other securities for temporary defensive
purposes and the Portfolios 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 the United
States or foreign country governments, their respective agencies or
instrumentalities; (b) bank deposits and bank obligations (including
certificates of deposit, time deposits and bankers' acceptances) of United
States or foreign country banks denominated in any currency; (c) floating rate
securities and other instruments denominated in any currency issued by
international development agencies; (d) finance company and corporate commercial
paper and other short-term corporate debt obligations of United States and
foreign country corporations meeting the Portfolio's credit quality standards;
and (e) repurchase agreements with banks and broker-dealers with respect to such
securities. For temporary defensive purposes, the Portfolios intend to invest
only in short-term and medium-term debt securities that the Adviser believes to
be of high quality, i.e., subject to relatively low risk of loss of interest or
principal (there is currently no rating system for debt securities to most
foreign countries).
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolios 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
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transaction. Delivery of and payment for these securities may take as long as a
month or more after the date of the purchase commitment, but will take place no
more than 120 days after the trade date. The Portfolio will maintain with the
Custodian a separate account with a segregated portfolio of high-grade debt
securities or cash in an amount at least equal to these commitments. The payment
obligation and the interest rates that will be received are each fixed at the
time a Portfolio enters into the commitment and no interest accrues to the
Portfolio until settlement. Thus, it is possible that the market value at the
time of settlement could be higher or lower than the purchase price if the
general level of interest rates has changed. It is a current policy of the
Portfolios not to enter into when-issued commitments exceeding, in the
aggregate, 15% of the Portfolio's net assets other than the obligations created
by these commitments.
INVESTMENT LIMITATIONS
Except for the MicroCap and Aggressive Equity Portfolios, each Portfolio is
a diversified investment company and is therefore subject to the following
fundamental limitations: (a) as to 75% of its total assets, a Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the U.S. Government and its agencies and
instrumentalities, and (b) a Portfolio may not own more than 10% of the
outstanding voting securities of any one issuer.
The MicroCap and Aggressive Equity Portfolios are non-diversified portfolios
under the 1940 Act, which means that the Portfolios are not limited by the 1940
Act in the proportion of their assets that may be invested in the obligations of
a single issuer. Thus, the Portfolios may invest a greater proportion of their
assets in the securities of a small number of issuers and as a result will be
subject to greater risk with respect to their portfolio securities. However, the
Portfolios intend to comply with diversification requirements imposed by the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as
regulated investment companies. See "Investment Limitations" in the Statement of
Additional Information.
Each 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 such Portfolio's outstanding shares. See "Investment
Limitations" in the Statement of Additional Information. In addition, each
Portfolio operates under certain non-fundamental investment limitations as
described below and in the Statement of Additional Information. Each 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
net assets would be invested in such repurchase agreements and other investments
for which market quotations are not readily available or which are otherwise
illiquid; (ii) borrow money, except from banks for extraordinary or emergency
purposes, and then only in amounts up to 10% of the value of the Portfolio's
total assets, taken at cost at the time of borrowing; or purchase securities
while borrowings exceed 5% of its total assets; (iii) 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;
(iv) invest in fixed time deposits with a duration of over seven calendar days;
or (v) 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
24
<PAGE>
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 each Portfolio an annual management fee,
payable quarterly, equal to the percentage of average daily net assets set forth
in the table below. However, the Adviser has agreed to a reduction in the fees
payable to it and to reimburse the Portfolios, if necessary, if such fees would
cause the total annual operating expenses of either Portfolio to exceed the
respective percentage of average daily net assets set forth below.
<TABLE>
<CAPTION>
MAXIMUM TOTAL OPERATING
EXPENSES AFTER FEE
WAIVER
------------------------
PORTFOLIO MANAGEMENT FEE CLASS A CLASS B
- --------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Equity Growth Portfolio 0.60% 0.80% 1.05%
Emerging Growth Portfolio 1.00% 1.25% 1.50%
MicroCap Portfolio 1.25% 1.50% 1.75%
Aggressive Equity Portfolio 0.80% 1.00% 1.25%
</TABLE>
The fees payable by the Emerging Growth, MicroCap and Aggressive Equity
Portfolios are higher than the management fees paid by most investment
companies, but the Adviser believes the fees are comparable to those of
investment companies with similar investment objectives.
The Adviser, with principal offices at 1221 Avenue of the Americas, New
York, New York 10020, conducts a worldwide portfolio management business,
providing a broad range of portfolio management services to customers in the
United States and abroad. At December 31, 1995, the Adviser, together with its
affiliated asset management companies, managed investments totaling
approximately $57.4 billion, including approximately $41.9 billion under active
management and $15.5 billion as Named Fiduciary or Fiduciary Adviser. See
"Management of the Fund" in the Statement of Additional Information.
PORTFOLIO MANAGERS. The following persons have primary responsibility for
managing the Portfolios indicated.
EQUITY GROWTH PORTFOLIO -- KURT FEUERMAN AND MARGARET K. JOHNSON. Kurt
Feuerman joined Morgan Stanley Asset Management in July 1993 as a Managing
Director in the Institutional Equity Group. Previously Mr. Feuerman was a
Managing Director of Morgan Stanley & Co., Incorporated's Research Department,
where he was responsible for emerging growth stocks, gaming and restaurants.
Before joining Morgan Stanley, Mr. Feuerman was a Managing Director of Drexel
Burnham Lambert, where he had been an equity analyst since 1984. Over the years,
he has been highly ranked in the Institutional Investor All American Research
Poll in four separate categories: packaged food, tobacco, emerging growth and
gaming. Mr. Feuerman earned an M.B.A. from Columbia University in 1982, an M.A.
from Syracuse University in 1980, and a B.A. from McGill University in 1977.
Margaret Johnson is a Principal of the Adviser and a Portfolio Manager in the
Institutional Equity Group. She joined the Adviser in 1984 and worked as an
Analyst in the Marketing and Fiduciary Advisor areas. Ms. Johnson became an
Equity Analyst in 1986 and a Portfolio Manager in 1989. Prior to joining Morgan
Stanley, she worked for the New York City PBS affiliate, WNET, Channel 13. She
holds a B.A. degree from Yale College and is a Chartered Financial Analyst. Mr.
Feuerman and Ms. Johnson have had primary responsibility for managing the
Portfolio's assets since July 1993 and April 1991, respectively.
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<PAGE>
EMERGING GROWTH PORTFOLIO -- DENNIS G. SHERVA. Dennis Sherva is a Managing
Director of Morgan Stanley & Co., Incorporated and head of emerging growth stock
investments at the Adviser. He has had primary responsibility for managing the
Portfolio's assets since November 1989. Prior to joining the Adviser in 1988,
Mr. Sherva was Morgan Stanley's Director of Worldwide Research activities for
five years and maintained direct responsibility for emerging growth stock
strategy and analysis. As an analyst following emerging growth stocks for the
past decade, he was rated number one in the small growth company category six
times by Institutional Investor magazine's All-America Research Team poll.
Before joining Morgan Stanley in 1977, Mr. Sherva had twelve years of industrial
and investment experience. He serves on the Board of Directors of Morgan Stanley
Venture Capital Inc. and Morgan Stanley R&D Ventures, Inc. Mr. Sherva graduated
from the University of Minnesota and received an M.A. from Wayne State
University. He is also a Chartered Financial Analyst.
MICROCAP PORTFOLIO -- DENNIS G. SHERVA. Information about Mr. Sherva is
included under the Emerging Growth Portfolio above.
AGGRESSIVE EQUITY PORTFOLIO -- KURT FEUERMAN. Information about Mr.
Feuerman is included under the Equity Growth Portfolio above.
ADMINISTRATOR. The Adviser also provides the Fund with administrative
services pursuant to an Administration Agreement. The services provided under
the Administration Agreement are subject to the supervision of the Officers and
the Board of Directors of the Fund and include day-to-day administration of
matters related to the corporate existence of the Fund, maintenance of its
records, preparation of reports, supervision of the Fund's arrangements with its
custodian, and assistance in the preparation of the Fund's registration
statements under Federal and State laws. The Administration Agreement also
provides that the Administrator, through its agents, will provide to 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.
Under an agreement between the Adviser and The Chase Manhattan Bank, N.A.
("Chase"), Chase provides certain administrative services to the Fund. In a
merger completed on September 1, 1995, Chase succeeded to all of the rights and
obligations under the U.S. Trust Administration Agreement between the Adviser
and the United States Trust Company of New York ("U.S. Trust"), pursuant to
which U.S. Trust had agreed to provide certain administrative services to the
Fund. Pursuant to a delegation clause in the U.S. Trust Administration
Agreement, U.S. Trust delegated its administration responsibilities to Chase
Global Funds Services Company ("CGFSC"), formerly known as Mutual Funds Service
Company, which after the merger with Chase is a subsidiary of Chase and will
continue to provide certain administrative services to the Fund. The Adviser
supervises and monitors such administrative services provided by CGFSC. The
services provided under the Administration Agreement and the U.S. Trust
Administration Agreement are also subject to the supervision of the Board of
Directors of the Fund. The Board of Directors of the Fund has approved the
provision of services described above pursuant to the Administration Agreement
and the U.S. Trust Administration Agreement as being in the best interests of
the Fund. CGFSC's business address is 73 Tremont Street, Boston, Massachusetts
02108-3913. For additional information regarding the Administration Agreement or
the U.S. Trust Administration Agreement, see "Management of the Fund" in the
Statement of Additional Information.
26
<PAGE>
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 each 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 any Portfolio.
The Portfolios currently offer only the classes of shares offered by this
Prospectus. The Portfolios may in the future offer one or more classes of shares
with features, distribution expenses or other expenses 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 Portfolios 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 if 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 obligations to
the Fund.
EXPENSES. Each Portfolio is responsible for payment of certain other fees
and expenses (including legal fees, accountants' fees, custodial fees, and
printing and mailing costs) specified in the Administration and Distribution
Agreements.
PURCHASE OF SHARES
Class A and Class B shares of each Portfolio may be purchased, without sales
commission, at the net asset value per share next determined after receipt of
the purchase order by the Portfolio. See "Valuation of Shares."
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B SHARES
For a Portfolio account opened on or after January 2, 1996 (a "New
Account"), the minimum initial investment and minimum account size are $500,000
for Class A shares and $100,000 for Class B shares. Managed Accounts may
purchase Class A shares without being subject to such minimum initial investment
or minimum account size requirements for a Portfolio account. Employees of the
Adviser and of its affiliates may purchase Class A Shares subject to conditions,
including a lower minimum initial investment, established by Officers of the
Fund.
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 (but remains at or above $100,000) for a continuous 60-day period, the
Class A shares in such account will convert to Class B shares and will be
subject to the distribution fee and other features
27
<PAGE>
applicable to the Class B shares. The Fund, however, will not convert Class A
shares to Class B shares based solely upon changes in the market that reduce the
net asset value of shares. Under current tax law, conversions between share
classes are not a taxable event to the shareholder.
Shares in a Portfolio account opened prior to January 2, 1996 (a "Pre-1996
Account") were designated Class A shares on January 2, 1996. Shares in a
Pre-1996 Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account") remained Class A shares regardless of account
size thereafter. Except for shares in a Managed Account, shares in a Pre-1996
Account with a value of less than $100,000 on March 1, 1996 (a "Grandfathered
Class B Account") converted to Class B shares on March 1, 1996. Grandfathered
Class A Accounts and Managed Accounts are not subject to conversion from Class A
shares to Class B shares.
Investors may also invest in the Fund by purchasing shares through a trust
department, broker, dealer, agent, financial planner, financial services firm or
investment adviser. An investor may be charged an additional service or
transaction fee by that institution. The minimum investment levels may be waived
at the discretion of the Adviser for (i) certain employees and customers of
Morgan Stanley or its affiliates and certain trust departments, brokers,
dealers, agents, financial planners, financial services firms, or investment
advisers that have entered into an agreement with Morgan Stanley or its
affiliates; and (ii) retirement and deferred compensation plans and trusts used
to fund such plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as amended, and
"rabbi trusts". 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 a continuous 60-day period, the shares in such
account are subject to redemption by the Fund and, if redeemed, the net asset
value of such shares will be promptly paid to the shareholder. The Fund,
however, will not redeem shares based solely upon changes in the market that
reduce the net asset value of shares.
Grandfathered Class A Accounts, Grandfathered Class B Accounts and Managed
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 in a Portfolio account increases, whether due
to shareholder share purchases or market activity, to $500,000 or more, the
Class B shares will convert 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
that are applicable to New Accounts containing Class A shares, as stated above.
The Fund reserves the right to modify or terminate this conversion feature at
any time upon 60-days' notice to shareholders.
28
<PAGE>
INITIAL PURCHASES DIRECTLY FROM THE FUND
The Fund's determination of an investor's eligibility to purchase shares of
a given class will take precedence over the investor's selection of a class.
Assuming the investor is eligible for the class, the Fund will select the most
favorable class for the investor, if the investor has not done so.
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 Portfolios and $100,000 for Class B shares of the
Portfolios, with certain exceptions for Morgan Stanley employees and select
customers) payable to "Morgan Stanley Institutional Fund, Inc. -- [portfolio
name]", to:
Morgan Stanley Institutional Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
Payment will be accepted only in U.S. dollars, unless prior approval for
payment by other currencies is given by the Fund. The Classes of shares of the
Portfolio(s) to be purchased should be designated on the Account Registration
Form. For purchases by check, the Fund is ordinarily credited with Federal
Funds within one business day. Thus, your purchase of shares by check is
ordinarily credited to your account at the net asset value per share of each
of the relevant Portfolios 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 class 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, the class selected and the account number
assigned to you) as follows:
Chase Manhattan Bank, N.A.
One Manhattan Plaza
New York, NY 10081-1000
ABA #021000021
DDA #91-02-733293
Attn: Morgan Stanley Institutional Fund, Inc.
Ref: (Portfolio name, your account number, your account name)
Please call the Fund at 1-800-548-7786 prior to wiring funds.
C. Complete the Account Registration Form and mail it to the address shown
thereon.
29
<PAGE>
Purchase orders for shares of the Portfolios which are received prior to the
regular close of the NYSE (currently 4:00 p.m. Eastern Time) will be executed
at the price computed on the date of receipt as long as the Transfer Agent
receives payment by check or in Federal Funds prior to the regular close of
the NYSE on such day.
Federal Funds purchase orders will be accepted only on a day on which the Fund
and Chase (the "Custodian Bank") are open for business. Your bank may charge a
service fee for wiring Federal 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.
Your bank may charge a service fee for wiring funds.
ADDITIONAL INVESTMENTS
You may add to your account at any time (minimum additional investment
$1,000 except for automatic reinvestment of dividends and capital gains
distributions for which there are no minimums) by purchasing shares at net asset
value by mailing a check to the Fund (payable to "Morgan Stanley Institutional
Fund, Inc. -- [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,
the portfolio name and the class selected be specified in the letter or wire to
assure proper crediting to your account. In order to insure 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. Additional
investments will be applied to purchase additional shares in the same class held
by a shareholder in a Portfolio account.
OTHER PURCHASE INFORMATION
The purchase price of the Class A and Class B shares of each Portfolio is
the net asset value next determined after the order is received. See "Valuation
of Shares." An order received prior to the close of the New York Stock Exchange
("NYSE"), which is currently 4:00 p.m. Eastern Time, will be executed at the
price computed on the date of receipt; an order received after the close of the
NYSE will be executed at the price computed on the next day the NYSE is open as
long as the Transfer Agent receives payment by check or in Federal Funds prior
to the regular close of the NYSE on such day.
Although the legal rights of Class A and Class B shares will be identical,
the different expenses borne by each class will result in different net 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
expense charged to Class B shares. It is expected, however, that the net asset
value per share of the two classes will tend to converge immediately after the
recording of dividends which will differ by approximately the amount of the
distribution expense accrual differential between the classes.
In the interest of economy and convenience, and because of the operating
procedures of the Fund, certificates representing shares of the Portfolios 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.
30
<PAGE>
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 the
Distributor.
EXCESSIVE TRADING
Frequent trades involving either substantial portfolio assets or a
substantial portion of your account or accounts controlled by you can disrupt
management of a Portfolio and raise its expenses. Consequently, in the interest
of all the stockholders of the Portfolio and the Portfolio's performance, the
Fund may in its discretion bar a stockholder that engages in excessive trading
of shares of a Portfolio from further purchases of shares of the Fund for an
indefinite period. The Fund considers excessive trading to be more than one
purchase and sale involving shares of the same Portfolio within any 120-day
period. For example, 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 amounts to excessive trading. 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 price has been collected,
which may take up to eight business days after purchase. The Fund will redeem
Class A shares or Class B shares of a Portfolio at the next determined net asset
value of shares of the applicable class. On days that both the NYSE and the
Custodian Bank are open for business, the net asset value per share of each of
the Portfolios is determined at the close of trading of the NYSE (currently 4:00
p.m. Eastern Time). Shares of the Portfolios may be redeemed by mail or
telephone. No charge is made for redemption. Any redemption 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 Portfolios.
BY MAIL
Each Portfolio will redeem its Class A shares or Class B shares at the net
asset value determined on the date the request is received, if the request is
received in "good order" before the regular close of the NYSE. Your request
should be addressed to Morgan Stanley Institutional Fund, Inc., P.O. Box 2798,
Boston, Massachusetts 02208-2798, except that deliveries by overnight courier
should be addressed to Morgan Stanley Institutional Fund, Inc., c/o Chase Global
Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108-3913.
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<PAGE>
"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 class
and 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 mail or
overnight courier and will be implemented at the net asset value next determined
after it is received. Redemption requests sent to the Fund through express mail
must be mailed to the address of the Dividend Disbursing and Transfer Agent
listed under "General Information". The Fund and the Fund's transfer agent (the
"Transfer Agent") will employ reasonable procedures to confirm that the
instructions communicated by telephone are genuine. These procedures include
requiring the investor to provide certain personal identification information at
the time an account is opened and prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written
instructions regarding transaction requests. Neither the Fund nor the Transfer
Agent will be responsible for any loss, liability, cost or expense for following
instructions received by telephone that either of them reasonably believes to be
genuine.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Fund at the address above.
Requests to change the bank or account must be signed by each shareholder and
each signature must be guaranteed.
FURTHER REDEMPTION INFORMATION
Normally the Fund will make payment for all shares redeemed within one
business day of receipt of the request, but in no event will payment be made
more than seven days after receipt of a redemption request in good order.
However, payments to investors redeeming shares which were purchased by check
will not be made until payment for the purchase has been collected, which may
take up to eight days after the date of purchase. The Fund may suspend the right
of redemption or postpone the date upon which redemptions are effected at times
when the NYSE is closed, or under any emergency circumstances as determined by
the Securities and Exchange Commission (the "Commission").
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of a Portfolio to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds
32
<PAGE>
in whole or in part by a distribution in-kind of securities held by the
Portfolio in lieu of cash in conformity with applicable rules of the Commission.
Distributions-in-kind will be made in readily marketable securities. Investors
may incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
To protect your account, the Fund and its agents from fraud, signature
guarantees are required for certain redemptions to verify the identity of the
person who has authorized a redemption from your account. Please contact the
Fund for further information. See "Redemption of Shares" in the Statement of
Additional Information.
SHAREHOLDER SERVICES
EXCHANGE FEATURES
You may exchange shares that you own in the Portfolios for shares of any
other available portfolio of the Fund (other than the International Equity
Portfolio, which is closed to new investors). In exchanging for shares of a
portfolio with more than one class, the class of shares you receive in the
exchange will be determined in the same manner as any other purchase of shares
and will not be based on the class of shares surrendered for the exchange.
Consequently, the same minimum initial investment and minimum account size for
determining the class of shares received in the exchange will apply. See
"Purchase of Shares." Shares of the portfolios may be exchanged by mail or
telephone. The privilege to exchange shares by telephone is automatic and made
available without shareholder election. Before you make an exchange, you should
read the prospectus of the portfolio(s) in which you seek to invest. Because an
exchange transaction is treated as a redemption followed by a purchase, an
exchange would be considered a taxable event for shareholders subject to tax.
The exchange privilege is only available with respect to portfolios that are
registered for sale in a shareholder's state of residence. The exchange
privilege may be modified or terminated by the Fund at any time upon 60-days'
notice to shareholders.
BY MAIL
In order to exchange shares by mail, you should include in the exchange
request the name, class of shares and account number of your current portfolio,
the name of the portfolio(s) and the class(es) of shares 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,
P.O. Box 2798, Boston, Massachusetts 02208-2798.
BY TELEPHONE
When exchanging shares by telephone, have ready the name, class of shares
and account number of the current Portfolio, the name(s) of the portfolio(s) and
class(es) of shares 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 the
class(es) 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
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<PAGE>
written request must be received in good order before any transfer can be made.
Transferring the registration of shares may affect the eligibility of your
account for a given class of a Portfolio's shares and may result in involuntary
conversion or redemption of your shares. See "Purchase of Shares" above.
VALUATION OF SHARES
The net asset value per share of a class of shares of each of the Portfolios
is determined by dividing the total market value of the Portfolio's investments
and other assets attributable to such class, less any liabilities attributable
to such class, by the total number of outstanding shares of such class of the
Portfolio. Net asset value is calculated separately for each class of a
Portfolio. Net asset value per share is determined as of the close of the NYSE
on each day that the NYSE is open for business. Price information on listed
securities is taken from the exchange where the security is primarily traded.
Securities listed on a U.S. securities exchange for which market quotations are
available are valued at the last quoted sale price on the day the valuation is
made. Securities listed on a foreign exchange are valued at their closing price.
Unlisted securities and listed securities not traded on the valuation date for
which market quotations are not readily available are valued at a price that is
considered to best represent fair value within a range not in excess of the
current asked price nor less than the current bid price. The current bid and
asked prices are determined based on the bid and asked prices quoted on such
valuation date by reputable brokers.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities, which is
accrued daily. In addition, bonds and other fixed income securities may be
valued on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices, but take into 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 sale price, or
when securities exchange valuations are used, at the latest quoted bid price on
the day of valuation. If there is no such reported sale, the latest quoted bid
price will be used. Securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. In the event
that amortized cost does not approximate market value, market prices as
determined above will be used.
The value of other assets and securities for which no quotations are readily
available (including restricted and unlisted foreign securities) and those
securities for which it is inappropriate to determine prices in accordance with
the above-stated 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 of such currencies against the U.S. dollar as quoted by a 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 for the class. 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 expense charged to
Class B shares.
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<PAGE>
PERFORMANCE INFORMATION
The Fund may from time to time advertise total return for each class of the
Portfolios. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. The "total return" shows what an investment in a
class of 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 in the same class 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 upon redemption. The
Fund may also include comparative performance information in advertising or
marketing the Portfolio's 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.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All income dividends and capital gains distributions for a class of shares
will be automatically reinvested in additional shares of such class 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 Emerging Growth and the MicroCap Portfolios expect to distribute
substantially all of their net investment income in the form of annual dividends
and the Equity Growth and the Aggressive Equity Portfolios expect to distribute
substantially all of their net investment income in the form of quarterly
dividends. Net realized gains for each Portfolio, if any, after reduction for
any available tax loss carryforwards will also be distributed annually.
Confirmations of the purchase of shares of each 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, confirmations of such purchases will not be provided at
the time of completion of such purchases, as might otherwise be required by Rule
10b-10.
Undistributed net investment income is included in each 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 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.
Because of the distribution fee and any other expenses that may be
attributable to the Class B shares, the net income attributable to and the
dividends payable on Class B shares will be lower than the net income
attributable to and the dividends payable on Class A shares. As a result, the
net asset value per share of the classes of the Portfolios will differ at times.
Expenses of the Portfolio allocated to a particular class of shares thereof will
be borne on a pro rata basis by each outstanding share of that class.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial,
or administrative action.
35
<PAGE>
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of a Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state and local income taxes.
Each Portfolio is treated as a separate entity for federal income tax
purposes and is not combined with the Fund's other portfolios. It is each
Portfolio's intent to continue to qualify for the special tax treatment afforded
regulated investment companies under the Code, so that the Portfolio will
continue to be relieved of federal income tax on that part of its net investment
income and net capital gain that is distributed to shareholders.
Each Portfolio distributes substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gain over net
long-term capital loss) to shareholders. Dividends from a Portfolio's net
investment income are taxable to shareholders as ordinary income, whether
received in cash or in additional shares. Such dividends paid by a Portfolio
will generally qualify for the 70% dividends-received deduction for corporate
shareholders to the extent of qualifying dividend income received by the
Portfolio from U.S. corporations. Each 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. Each
Portfolio sends reports annually to its shareholders of the federal income tax
status of all distributions made during the preceding year.
Each 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), prior to the end of each calendar year to avoid liability for federal
excise tax.
Dividends and other distributions declared by a Portfolio in October,
November or December of any year and payable to shareholders of record on a date
in such month will be deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if the distributions are paid by
the Portfolio at any time during the following January.
The sale, redemption, or exchange of shares may result in taxable gain or
loss to the selling, exchanging or redeeming shareholder, depending upon whether
the fair market value of the sale, exchange or redemption proceeds exceeds or is
less than the shareholder's adjusted basis in the sold, exchanged or redeemed
shares. Any such taxable gain or loss generally will be treated as long-term
capital gain or loss if the shares have been held for more than one year and
otherwise generally will be treated as short-term capital gain or loss. 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, however, then the loss is
treated as a long-term capital loss to the extent of the capital gain
distributions.
Investment income received by a Portfolio from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To the
extent that a Portfolio is liable for foreign income taxes so withheld, it is
not expected that a Portfolio or its shareholders would be able to claim a
credit for U.S. tax purposes with respect to any such foreign taxes.
The conversion of Class A shares to Class B shares should not be a taxable
event to the shareholder.
36
<PAGE>
Shareholders are urged to consult with their tax advisors concerning the
application of state and local income taxes to investments in a Portfolio, which
may differ from the federal income tax consequences described above.
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 A 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 Portfolios 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 Portfolios. 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 Portfolios are not marketed through intermediary brokers
or dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of shares which may be made through such firms.
However, the Adviser may place portfolio orders with qualified broker-dealers
who recommend the Fund's portfolios or who act as agents in the purchase of
shares of the Fund's portfolios for their clients.
In purchasing and selling securities for the Portfolios, 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 Portfolios, consideration will be given to such
factors as the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing broker-dealers, and
the brokerage and research services which they provide to the Fund. Some
securities considered for investment by the Portfolios may also be appropriate
for other clients served by the Adviser. If the purchase or sale of securities
consistent with the investment policies of the Portfolios 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 Portfolios and
such other clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Board of Directors.
Subject to the overriding objective of obtaining the best possible execution
of orders, the Adviser may allocate a portion of the Portfolio's brokerage
transactions to Morgan Stanley or broker affiliates of Morgan Stanley. In order
for Morgan Stanley or its affiliates to effect any portfolio transactions for
the Fund, the commissions, fees or other remuneration received by Morgan Stanley
or such affiliates must be reasonable and fair compared to the commissions, fees
or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. Furthermore, the Board
of Directors of the Fund, including a majority of those
37
<PAGE>
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.
Although none of the Portfolios will 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. For the Equity Growth, Emerging Growth and MicroCap
Portfolios, it is anticipated that, under normal circumstances, the annual
portfolio turnover rate will not exceed 100%. However, the annual portfolio
turnover rate of the Equity Growth Portfolio for the fiscal year ended December
31, 1994 was 146%. For the Aggressive Equity Portfolio, the annual portfolio
turnover rate is expected to exceed 100%. High portfolio turnover involves
correspondingly greater transaction costs which will be borne directly by the
respective Portfolio. In addition, high portfolio turnover may result in more
capital gains which would be taxable to the shareholders of the respective
Portfolio. The tables set forth in "Financial Highlights" present the
Portfolios' historical turnover rates.
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 billion 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. Subject to the notice period to shareholders with
respect to shares held by the shareholders, 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 shares of
common stock of each portfolio are currently classified into two classes, the
Class A shares and the Class B shares, except for the International Small Cap,
Money Market and Municipal Money Market Portfolios, which only offer Class A
shares.
The shares of the Portfolios, 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 each portfolio
have non-cumulative voting rights, which means that the holders of more than 50%
of the shares voting for the election of Directors can elect 100% of the
Directors if they choose to do so. Persons or organizations owning 25% or more
of the outstanding shares of a Portfolio may be presumed to "control" (as
defined in the 1940 Act) such 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.
38
<PAGE>
In addition, the Adviser or its agent, as Transfer Agent, will send to each
shareholder having an account directly with the Fund a monthly statement showing
transactions in the account, the total number of shares owned, and any dividends
or distributions paid.
CUSTODIAN
As of September 1, 1995, domestic securities and cash are held by Chase,
which replaced U.S. Trust as the Fund's domestic custodian. Chase is not an
affiliate of the Adviser or the Distributor. Morgan Stanley Trust Company,
Brooklyn, New York ("MSTC"), an affiliate of the Adviser and the Distributor,
acts as the Fund's custodian for foreign assets held outside the United States
and employs subcustodians approved by the Board of Directors of the Fund in
accordance with regulations of the Securities and Exchange Commission for the
purpose of providing custodial services for such assets. MSTC may also hold
certain domestic assets for the Fund. For more information on the custodians,
see "General Information -- Custody Arrangements" in the Statement of Additional
Information.
DIVIDEND DISBURSING AND TRANSFER AGENT
Chase Global Funds Services Company, 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 the annual financial statements of each Portfolio.
LITIGATION
The Fund is not involved in any litigation.
39
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<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
EQUITY GROWTH, EMERGING GROWTH,
MICROCAP AND AGGRESSIVE EQUITY PORTFOLIOS
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
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<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
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1.
First
Name Initial Last Name
2.
First
Name Initial Last Name
First
Name Initial Last Name
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<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
3.
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<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
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<C> <S> <C>
Street or P.O. Box
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
City State
Zip
--
Home Telephone
No. Business Telephone No.
-- -- -- --
/ / United States Citizen / / Resident Alien / /
Non-Resident Alien: Indicate Country of Residence ______________________________
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<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number. OR
NUMBER SOCIAL SECURITY NUMBER
1. INDIVIDUAL 1. TAXPAYER ("SSN")
2. JOINT TENANTS IDENTIFICATION NUMBER
("TIN")
--
(RIGHTS OF SURVIVORSHIP PRESUMED -- -- - - - ------------- -------------
UNLESS -- - - - - - - - ------------- - - - - - - - -
TENANCY IN COMMON -
IS INDICATED) 2. OR TINSSN
For Custodian account
--
of a minor (Uniform -- -- - - - ------------- -------------
Gifts/Transfers to Minor -- - - - - - - - ------------- - - - - - - - -
-
Acts), give the Social OR
Security Number of TIN SSN
the minor
--
-- -- - - - ------------- -------------
- - - - - - - - - ------------- - - - - - - - -
-
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IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
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<PAGE>
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<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SECTION Portfolio(s): / / Class A Shares $ / / Class B Shares $
(Class A shares minimum $500,000 for Equity Growth Portfolio
each Portfolio and Class B shares Emerging Growth Portfolio
minimum $100,000 for the Global Equity, MicroCap Portfolio
International Equity, Asian Equity, Aggressive Equity Portfolio
European Equity, Japanese Equity and
Latin American Equity Portfolios).
Please indicate Portfolio, class and
amount.
Total Initial Investment $
</TABLE>
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<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
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<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on - - - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
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<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
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<C> <S> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone
AND EXCHANGE requests to wire redemption proceeds to
OPTION the commercial bank indicated at right
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests
shares by telephone. A are believed to be authentic.
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated
YOUR FUND ACCOUNT. by telephone are genuine. These
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal
NOT BE HONORED UNLESS THE BOX identification information at the time
IS CHECKED. 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.
<CAPTION>
G)
Name of COMMERCIAL Bank (Not Savings Bank)
Bank Account No.
Bank ABA No.
Name(s) in which your BANK Account is Established
Bank's Street Address
City State Zip
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<C> <S> <C>
H) INTERESTED PARTY Name
OPTION Address
In addition to the account statement City State Zip Code
sent to my/our registered address, I/we
hereby authorize the fund to mail
duplicate statements to the name and
address provided at right.
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<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
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<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<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
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<S> <C>
PAGE
----
Fund Expenses..................................... 2
Financial Highlights.............................. 5
Prospectus Summary................................ 9
Investment Objectives and Policies................ 13
Additional Investment Information................. 17
Investment Limitations............................ 24
Management of the Fund............................ 25
Purchase of Shares................................ 27
Redemption of Shares.............................. 31
Shareholder Services.............................. 33
Valuation of Shares............................... 34
Performance Information........................... 35
Dividends and Capital Gains Distributions......... 35
Taxes............................................. 36
Portfolio Transactions............................ 37
General Information............................... 38
Account Registration Form
</TABLE>
EQUITY GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
MICROCAP PORTFOLIO
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIOS OF THE
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
Common Stock
($.001 PAR VALUE)
-------------
PROSPECTUS
-------------
Investment Adviser
Morgan Stanley
Asset Management Inc.
Distributor
Morgan Stanley & Co.
Incorporated
- ---------------------------------
- ---------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
P R O S P E C T U S
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EMERGING MARKETS PORTFOLIO
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIOS 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 Class A and the Class B
shares of the Emerging Markets Portfolio and the Emerging Markets Debt Portfolio
(the "Portfolios"). On January 2, 1996, the Portfolios began offering two
classes of shares, the Class A shares and the Class B shares, except for the
Money Market, Municipal Money Market and International Small Cap Portfolios
which only offer Class A shares. All shares of the Portfolios owned prior to
January 2, 1996 were redesignated Class A shares on January 2, 1996. The Class A
and Class B shares currently offered by the Portfolios have different minimum
investment requirements and fund expenses. Shares of the portfolios are offered
with no sales charge or exchange or redemption fee (with the exception of the
International Small Cap Portfolio).
The EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of emerging country issuers.
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.
Emerging markets securities are subject to special risks. See "Foreign
Investment Risk Factors."
INVESTORS SHOULD NOTE THAT EACH PORTFOLIO MAY INVEST UP TO 10% OF ITS TOTAL
ASSETS IN RESTRICTED SECURITIES AND UP TO 25% OF ITS NET 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 A
PORTFOLIO'S TOTAL ASSETS MAY BE CONSIDERED A SPECULATIVE ACTIVITY, MAY INVOLVE
GREATER RISK AND MAY INCREASE THE PORTFOLIO'S EXPENSES.
THE EMERGING MARKETS PORTFOLIO MAY INVEST IN EQUITY SECURITIES OF RUSSIAN
COMPANIES. RUSSIA'S SYSTEM OF SHARE REGISTRATION AND CUSTODY INVOLVES CERTAIN
RISKS OF LOSS THAT ARE NOT NORMALLY ASSOCIATED WITH INVESTMENTS IN OTHER
SECURITIES MARKETS. SEE "ADDITIONAL INVESTMENT INFORMATION -- RUSSIAN SECURITIES
TRANSACTIONS."
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 investors 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, Emerging Markets, European
Equity, Global Equity, Gold, International Equity, International Small Cap,
Japanese Equity and Latin American Portfolios; (ii) U.S. EQUITY -- Aggressive
Equity, Emerging Growth, Equity Growth, MicroCap, Small Cap Value Equity, U.S.
Real Estate and Value Equity Portfolios; (iii) BALANCED -- Balanced Portfolio;
(iv) FIXED INCOME -- Emerging Markets Debt, Fixed Income, Global Fixed Income,
High Yield, Mortgage-Backed Securities and Municipal Bond Portfolios; and (v)
MONEY MARKET -- Money Market and Municipal Money Market Portfolios. Additional
information about the Fund is contained in a "Statement of Additional
Information," dated May 1, 1996, which 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 MAY 1, 1996.
SUPPLEMENTED THROUGH DECEMBER 30, 1996.
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder of
the Portfolios indicated below will incur:
<TABLE>
<CAPTION>
EMERGING
EMERGING MARKETS
MARKETS DEBT
SHAREHOLDER TRANSACTION EXPENSES PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
Class A..................................................................... None None
Class B..................................................................... None None
Maximum Sales Load Imposed on Reinvested Dividends
Class A..................................................................... None None
Class B..................................................................... None None
Deferred Sales Load
Class A..................................................................... None None
Class B..................................................................... None None
Redemption Fees
Class A..................................................................... None None
Class B..................................................................... None None
Exchange Fees
Class A..................................................................... None None
Class B..................................................................... None None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------------------------
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<S> <C> <C>
Management Fee*
Class A..................................................................... 1.25% 1.00%
Class B..................................................................... 1.25% 1.00%
12b-1 Fees
Class A..................................................................... None None
Class B..................................................................... 0.25% 0.25%
Other Expenses
Class A..................................................................... 0.47% 0.75%
Class B..................................................................... 0.47% 0.75%
----------- -----------
Total Operating Expenses*
Class A..................................................................... 1.72% 1.75%
Class B..................................................................... 1.97% 2.00%
----------- -----------
----------- -----------
</TABLE>
- ------------------------------
*The Adviser has agreed to waive its management fees and/or to reimburse the
Portfolios, if necessary, if such fees would cause the Portfolios' total annual
operating expenses, as a percentage of average daily net assets, to exceed
1.75% for the Class A shares and 2.00% for the Class B shares. The management
fees are 1.25% for the Emerging Markets Portfolio and 1.00% for the Emerging
Markets Debt Portfolio. 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."
2
<PAGE>
The purpose of the table above is to assist the investor in understanding
the various expenses that an investor in the Portfolios will bear directly or
indirectly. The Class A expenses and fees for the Portfolios are based on actual
figures for the fiscal year ended December 31, 1995. The Class B expenses and
fees for each Portfolio are based on estimates, assuming that the average daily
net assets of the Class B shares of each Portfolio will be $50,000,000. "Other
Expenses" include Board of Directors' fees and expenses, amortization of
organizational costs, filing fees, professional fees and costs for shareholder
reports. Due to the continuous nature of Rule 12b-1 fees, long term Class B
shareholders may pay more than the equivalent of the maximum front-end sales
charges otherwise permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
The following example illustrates the expenses that you would pay on a
$1,000 investment assuming (1) a 5% annual rate of return and (2) redemption at
the end of each time period. As noted in the table above, the Portfolios charge
no redemption fees of any kind. The following example is based on total
operating expenses of the Portfolios after fee waivers.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Emerging Markets Portfolio
Class A.......................................................... $ 17 $ 54 $ 93 $ 203
Class B.......................................................... 20 62 106 230
Emerging Markets Debt Portfolio
Class A.......................................................... 18 55 95 206
Class B.......................................................... 20 63 108 233
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The Fund intends to continue 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 Portfolios, if necessary, if in any fiscal year the sum of the
Portfolio's expenses exceeds the limit set by applicable state laws.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides financial highlights for the Class A shares for
the Emerging Markets and Emerging Markets Debt Portfolios for each of the
periods presented. The audited financial highlights for the Class A shares for
the fiscal year ended December 31, 1995 are part of the Fund's financial
statements which appear in the Fund's December 31, 1995 Annual Report to
Shareholders and which are included in the Fund's Statement of Additional
Information. The Portfolios' financial highlights for each of the periods
presented have been audited by Price Waterhouse LLP, whose unqualified report
thereon is also included in the Statement of Additional Information. Additional
performance information for the Class A shares of the Portfolios is included in
the Annual Report. The Annual Report and the financial statements therein, along
with the Statement of Additional Information, are available at no cost from the
Fund at the address and telephone number noted on the cover page of this
Prospectus. Financial highlights are not available for the new Class B shares
since they were not offered as of December 31, 1995. Subsequent to October 31,
1992 (the Fund's prior fiscal year end), the Fund changed its fiscal year end to
December 31. The following information should be read in conjunction with the
financial statements and notes thereto.
4
<PAGE>
EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
TWO
SEPTEMBER MONTHS YEAR YEAR
25, ENDED ENDED ENDED YEAR
1992* TO DECEMBER DECEMBER DECEMBER ENDED
OCTOBER 31, 31, 31, DECEMBER
31, 1992 1992 1993 1994 31, 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 10.00 $ 10.11 $ 10.22 $ 19.00 $ 16.30
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/(Loss) (1)................... -- -- (0.01) (0.04) 0.08
Net Realized and Unrealized Gain/ (Loss) on
Investments....................................... 0.11 0.11 8.79 (1.69) (2.05)
--------- --------- --------- --------- ---------
Total from Investment Operations................... 0.11 0.11 8.78 (1.73) (1.97)
--------- --------- --------- --------- ---------
DISTRIBUTIONS
Net Investment Income.............................. -- -- -- -- (0.06)
Net Realized Gain.................................. -- -- -- (0.97) (1.13)
--------- --------- --------- --------- ---------
Total Distributions................................ -- -- -- (0.97) (1.19)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD....................... $ 10.11 $ 10.22 $ 19.00 $ 16.30 $ 13.14
--------- --------- --------- --------- ---------
TOTAL RETURN......................................... 1.10% 1.09% 85.91% (9.63)% (12.77)%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands)................ $28,806 $74,219 $735,352 $929,638 $876,591
Ratio of Expenses to Average Net
Assets (1)(2)....................................... 1.75%** 1.75%** 1.75% 1.75% 1.72%
Ratio of Net Investment Gain/(Loss) to Average Net
Assets (1)(2)....................................... (0.53)%** (0.33)%** (0.06)% (0.26)% 0.60%
Portfolio Turnover Rate.............................. 0% 2% 52% 32% 54%
- ------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net investment income........ $ 0.02 $ 0.00 $ 0.01 N/A N/A
Ratios before expense limitation:
Expenses to Average Net Assets.................... 4.82%** 2.48%** 1.79% N/A N/A
Net Investment Gain/(Loss) to Average
Net Assets..................................... (3.60)%** (1.06)%** (0.10)% N/A N/A
</TABLE>
(2) Under the terms of an Investment Advisory Agreement, the Adviser is entitled
to receive a management fee calculated at an annual rate of 1.25% of the
average daily net assets of the Emerging Markets Portfolio. The Adviser has
agreed to waive a portion of this fee and/or reimburse expenses of the
Portfolio to the extent that the total operating expenses of the Portfolio
exceed 1.75% of the average daily net assets of the Class A shares and 2.00%
of the average net assets of the Class B shares. The Adviser did not waive
fees or reimburse expenses for the years ended December 31, 1994 and 1995.
In the period ended October 31, 1992, the two month period ended December
31, 1992 and the year ended December 31, 1993, the Adviser waived advisory
fees and/or reimbursed expenses totalling $58,000, $50,000 and $122,000,
respectively, for the Emerging Markets Portfolio.
* Commencement of Operations.
** Annualized.
5
<PAGE>
EMERGING MARKETS DEBT PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1, 1994* YEAR ENDED
TO DECEMBER 31, DECEMBER 31,
1994 1995
----------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................................ $ 10.00 $ 8.59
-------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income......................................................... 0.50 1.36
Net Realized and Unrealized Gain/(Loss) on Investments........................ (1.91) 0.91
-------- -------------
Total from Investment Operations.............................................. (1.41) 2.27
-------- -------------
DISTRIBUTIONS
Net Investment Income......................................................... -- (1.86)
Net Realized Gain............................................................. (0.41)
-------- -------------
Total Distributions......................................................... -- (2.27)
-------- -------------
NET ASSET VALUE, END OF PERIOD.................................................. $ 8.59 $ 8.59
-------- -------------
-------- -------------
TOTAL RETURN.................................................................... (14.10)% 28.23%
-------- -------------
-------- -------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands)........................................... $ 144,949 $ 181,878
Ratio of Expenses to Average Net Assets......................................... 1.49%** 1.75%
Ratio of Net Investment Income to Average Net Assets............................ 9.97%** 14.70%
Portfolio Turnover Rate......................................................... 273% 406%
- ------------------------
</TABLE>
* Commencement of Operations.
** Annualized.
6
<PAGE>
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 shares and, except for the
International Small Cap, Money Market and Municipal Money Market Portfolios,
also offers Class B shares. Each portfolio has its own investment objective and
policies designed to meet its specific goals. The investment objective of each
Portfolio described in this Prospectus is as follows:
-The EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of emerging country issuers.
-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 other portfolios of
the Fund are described in other prospectuses which may be obtained from the
Fund at the address and telephone 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 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 U.S. 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-U.S. issuers.
-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 Objectives and Policies"
below) weightings determined by the Adviser.
-The INTERNATIONAL SMALL CAP PORTFOLIO seeks long-term capital appreciation
by investing primarily in equity securities of non-U.S. issuers with equity
market capitalizations of under $1 billion.
7
<PAGE>
-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.
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 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.
BALANCED:
-The BALANCED PORTFOLIO seeks high total return while preserving capital by
investing in a combination of undervalued equity securities and fixed
income securities.
FIXED INCOME:
-The 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 U.S. 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.
8
<PAGE>
-The MUNICIPAL BOND PORTFOLIO seeks to produce a high level of current
income consistent with 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 December 31, 1995 had approximately $57.4 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 each Portfolio are offered directly to investors at net
asset value with no sales commission or 12b-1 charges. Class B shares of each
Portfolio are offered at net asset value with no sales commission, but with a
12b-1 fee, which is accrued daily and paid quarterly, equal to 0.25% of the
Class B shares' average daily net assets on an annualized basis. Share purchases
may be made by sending investments directly to the Fund or through the
Distributor. Shares in a Portfolio account opened prior to January 2, 1996
(each, a "Pre-1996 Account") were designated Class A shares on January 2, 1996.
For a Portfolio account opened on or after January 2, 1996 (a "New Account"),
the minimum initial investment is $500,000 for Class A shares and $100,000 for
Class B shares. Certain exceptions to the foregoing minimums apply to (1) shares
in a Pre-1996 Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account"); (2) Portfolio accounts held by certain
employees of the Adviser and of its affiliates; and (3) certain advisory or
asset allocation accounts, such as Total Funds Management accounts, managed by
Morgan Stanley or its affiliates, including the Adviser ("Managed Accounts").
The Adviser reserves the right in its sole discretion to determine which of such
advisory or asset allocation accounts shall be Managed Accounts. For information
regarding Managed Accounts please contact your Morgan Stanley account
representative or the Fund at the telephone number provided on the cover of this
Prospectus. Shares in a Pre-1996 Account with a value of less than $100,000 on
March 1, 1996 (a "Grandfathered Class B Account") converted to Class B shares on
March 1, 1996. The minimum investment levels may be waived at the discretion of
the Adviser for (i) certain employees and customers of Morgan Stanley or its
affiliates and certain trust departments, brokers, dealers, agents, financial
planers, financial services firms or investment advisers that have entered into
an agreement with Morgan Stanley or its affiliates; and (ii) retirement and
deferred compensation plans and trusts, used to fund such plans, including, but
not limited
9
<PAGE>
to, those defined in Section 401(a), 403(b) or 457 of the Internal Revenue Code
of 1986, as amended, and "rabbi trusts". See "Purchase of Shares -- Minimum
Investment and Account Sizes; Conversion from Class A to Class B Shares."
The minimum subsequent investment for each Portfolio account is $1,000
(except for automatic reinvestment of dividends and capital gains distributions
for which there is no minimum). Such subsequent investments will be applied to
purchase additional shares in the same class held by a shareholder in a
Portfolio account. See "Purchase of Shares -- Additional Investments."
HOW TO REDEEM
Class A shares or Class B shares of each Portfolio may be redeemed at any
time, without cost, at the net asset value per share of shares of the applicable
class 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 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 such account to less than $100,000 for a
continuous 60-day period. Involuntary redemption does not apply to Managed
Accounts, Grandfathered Class A Accounts and Grandfathered Class B Accounts,
regardless of the value of such accounts. Class A shares in a New Account will
convert to Class B shares if shareholder redemption(s) of such shares reduces
the value of such account to less than $500,000 for a continuous 60-day period.
Class B shares in a New Account will convert to Class A shares if shareholder
purchases of additional Class B shares or market activity cause the value of the
Class B shares in the New Account to increase to $500,000 or more. See "Purchase
of Shares -- Minimum Account Sizes and Involuntary Redemption of Shares" and
"Redemption of Shares."
RISK FACTORS
Investing in emerging country securities involves certain considerations not
typically associated with investing in securities of U.S. companies, including
(1) restrictions on foreign investment and on repatriation of capital invested
in emerging 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 emerging country securities markets or lack of a
secondary trading market for such securities and (5) political and economic
risks, including the risk of nationalization or expropriation of assets and the
risk of war. In addition, accounting, auditing, financial and other reporting
standards in emerging 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 emerging countries than
in the U.S. There is also generally less governmental regulation of the
securities industry in emerging countries than in the United States. Moreover,
it may be more difficult to obtain a judgment in a court outside the U.S. See
"Investment Objectives and Policies" and "Additional Investment Information." In
addition, each Portfolio may invest in repurchase agreements, lend its portfolio
securities and purchase securities on a when-issued basis. Each Portfolio may
invest in foreign currency futures contracts and options 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 Objectives and Policies" and "Additional Investment Information"
herein and under "Investment Objectives and Policies" in the Statement of
Additional Information.
10
<PAGE>
The Emerging Markets Portfolio may invest in equity securities of Russian
companies. The registration, clearing and settlement of securities transactions
in Russia are subject to significant risks not normally associated with
securities transactions in the United States and other more developed markets.
See "Additional Investment Information -- Russian Securities Transactions."
11
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is described below, together with
the policies the Fund employs in its efforts to achieve these objectives. There
is no assurance that each Portfolio will attain its objective. Each 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. The
investment policies described below are not fundamental policies and may be
changed without shareholder approval.
THE EMERGING MARKETS PORTFOLIO
The investment objective of the Portfolio is to provide long-term capital
appreciation by investing primarily in equity securities of emerging country
issuers. With respect to the Portfolio, equity securities include common and
preferred stocks, convertible securities, rights and warrants to purchase common
stocks. Under normal conditions, at least 65% of the Portfolio's total assets
will be invested in emerging country equity securities. As used in this
Prospectus, the term "emerging country" applies to any country which, in the
opinion of the Adviser, is generally considered to be an emerging or developing
country by the international financial community, which includes the
International Bank for Reconstruction and Development (more commonly known as
the World Bank) and the International Finance Corporation. There are currently
over 130 countries which, in the opinion of the Adviser, are generally
considered to be emerging or developing countries by the international financial
community, approximately 40 of which currently have stock markets. These
countries generally include every nation in the world except the United States,
Canada, Japan, Australia, New Zealand and most nations located in Western
Europe. Currently, investing in many emerging countries is not feasible or may
involve unacceptable political risks. The Portfolio will focus its investments
on those emerging market countries in which it believes the economies are
developing strongly and in which the markets are becoming more sophisticated.
The Portfolio intends to invest primarily in some or all of the following
countries:
<TABLE>
<S> <C> <C> <C>
Argentina Botswana Brazil Chile
China Colombia Greece Hong Kong
Hungary India Indonesia Jamaica
Jordan Kenya Malaysia Mexico
Nigeria Pakistan Peru Philippines
Poland Portugal Russia South Africa
South Korea Sri Lanka Taiwan Thailand
Turkey Venezuela Zimbabwe
</TABLE>
As markets in other countries develop, the Portfolio expects to expand and
further diversify the emerging countries in which it invests. The Portfolio does
not intend to invest in any security in a country where the currency is not
freely convertible to U.S. dollars, unless the Portfolio has obtained the
necessary governmental licensing to convert such currency or other appropriately
licensed or sanctioned contractual guarantees to protect such investment against
loss of that currency's external value, or the Portfolio has a reasonable
expectation at the time the investment is made that such governmental licensing
or other appropriately licensed or sanctioned guarantees would be obtained or
that the currency in which the security is quoted would be freely convertible at
the time of any proposed sale of the security by the Portfolio.
An emerging country security is one issued by a company that, in the opinion
of the Adviser, has one or more of the following characteristics: (i) its
principal securities trading market is in an emerging country,
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(ii) alone, or on a consolidated basis, the company derives 50% or more of its
annual revenue from either goods produced, sales made or services performed in
emerging countries; or (iii) the company is organized under the laws of, and has
a principal office in, an emerging country. The Adviser will base determinations
as to eligibility on publicly available information and inquiries made to the
companies. (See "Foreign Investment Risk Factors" for a discussion of the nature
of information publicly available for non-U.S. companies.)
To the extent that the Portfolio's assets are not invested in emerging
country equity securities, the remainder of the assets may be invested in (i)
debt securities denominated in the currency of an emerging country or issued or
guaranteed by an emerging country company or the government of an emerging
country, (ii) equity or debt securities of corporate or governmental issuers
located in industrialized countries, and (iii) short-term and medium-term debt
securities of the type described below under "Temporary Instruments." The
Portfolio's assets may be invested in debt securities when the Portfolio
believes that, based upon factors such as relative interest rate levels and
foreign exchange rates, such debt securities offer opportunities for long-term
capital appreciation. It is likely that many of the debt securities in which the
Portfolio will invest will be unrated, and whether or not rated, such securities
may have speculative characteristics. When deemed appropriate by the Adviser,
the Portfolio may invest up to 10% of its total assets (measured at the time of
the investment) in lower quality debt securities. Lower quality debt securities,
also known as "junk bonds," are often considered to be speculative and involve
greater risk of default or price changes due to changes in the issuer's
creditworthiness. As of the date of this prospectus, less than 5% of the
Portfolio's total assets were invested in junk bonds. The market prices of these
securities may fluctuate more than those of higher quality securities and may
decline significantly in periods of general economic difficulty, which may
follow periods of rising interest rates. Securities in the lowest quality
category may present the risk of default, or may be in default. For temporary
defensive purposes, the Portfolio may invest less than 65% of its total assets
in emerging country equity securities, in which case the Portfolio may invest in
other equity securities or may invest in debt securities of the kind described
under "Temporary Investments" below.
The Portfolio may invest indirectly in securities of emerging country
issuers through sponsored or unsponsored American Depositary Receipts ("ADRs").
ADRs may not necessarily be denominated in the same currency as the underlying
securities into which they may be converted. In addition, the issuers of the
stock of unsponsored ADRs are not obligated to disclose material information in
the U.S. and, therefore, there may not be a correlation between such information
and the market value of the ADR.
THE EMERGING MARKETS DEBT PORTFOLIO
The investment objective of the Portfolio is to seek high total return. In
seeking to achieve this objective, the Portfolio will seek to invest at least
65% of its total assets in debt securities of government and government-related
issuers located in emerging countries (including participations in loans between
governments and financial institutions), and of entities organized to
restructure outstanding debt of such issuers. In addition, the Portfolio may
invest up to 35% of its total assets in debt securities of corporate issuers
located in or organized under the laws of emerging countries. See "The Emerging
Markets Portfolio" above for a definition of emerging countries.
The Adviser intends to invest the Portfolio's assets in emerging country
debt securities that provide a high level of current income, while at the same
time holding the potential for capital appreciation if the perceived
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creditworthiness of the issuer improves due to improving economic, financial,
political, social or other conditions in the country in which the issuer is
located. Currently, investing in many emerging country securities is not
feasible or may involve unacceptable political risks. Initially, the Portfolio
expects that its investments in emerging country debt securities will be made
primarily in some or all of the following emerging countries:
<TABLE>
<S> <C> <C>
Algeria India Philippines
Argentina Indonesia Poland
Brazil Ivory Coast Portugal
Bulgaria Jamaica Russia
Chile Jordan Slovakia
China Malaysia South Africa
Colombia Mexico Thailand
Costa Rica Morocco Trinidad & Tobago
Czech Republic Nicaragua Tunisia
Dominican Republic Nigeria Turkey
Ecuador Pakistan Uruguay
Egypt Panama Venezuela
Greece Paraguay Zaire
Hungary Peru
</TABLE>
In selecting emerging country debt securities for investment by the Investment
Fund, the Adviser will apply a market risk analysis contemplating assessment of
factors such as liquidity, volatility, tax implications, interest rate
sensitivity, counterparty risks and technical market considerations. Currently,
investing in many emerging country securities is not feasible or may involve
unacceptable political risks. As opportunities to invest in debt securities in
other countries develop, the Portfolio expects to expand and further diversify
the emerging countries in which it invests. While the Portfolio generally is not
restricted in the portion of its assets which may be invested in a single
country or region, it is anticipated that, under normal conditions, the
Portfolio's assets will be invested in issuers in at least three countries.
The Portfolio's investments in government, government-related and
restructured debt securities will consist of (i) debt securities or obligations
issued or guaranteed by governments, governmental agencies or instrumentalities
and political subdivisions located in emerging countries (including
participations in loans between governments and financial institutions), (ii)
debt securities or obligations issued by government owned, controlled or
sponsored entities located in emerging countries, and (iii) interests in issuers
organized and operated for the purpose of restructuring the investment
characteristics of instruments issued by any of the entities described above.
Such type of restructuring involves the deposit with or purchase by an entity of
specific instruments and the issuance by that entity of one or more classes of
securities backed by, or representing interests in, the underlying instruments.
Certain issuers of such structured securities may be deemed to be "investment
companies" as defined in the Investment Company Act of 1940 (the "1940 Act"). As
a result, the Portfolio's investment in such securities may be limited by
certain investment restrictions contained in the 1940 Act. See "Additional
Investment Information -- Structured Securities."
The Portfolio's investments in debt securities of corporate issuers in
emerging countries may include debt securities or obligations issued (i) by
banks located in emerging countries or by branches of emerging country banks
located outside the country or (ii) by companies organized under the laws of an
emerging country.
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<PAGE>
Determinations as to eligibility will be made by the Adviser based on publicly
available information and inquiries made to the issuer. (See "Foreign Investment
Risk Factors" for a discussion of the nature of information publicly available
for non-U.S. issuers.) The Portfolio may also invest in certain debt obligations
customarily referred to as "Brady Bonds," which are created through the exchange
of existing commercial bank loans to foreign entities for new obligations in
connection with debt restructurings under a plan introduced by former U.S.
Secretary of the Treasury Nicholas F. Brady. See "Investment Objectives and
Policies -- Emerging Country Equity and Debt Securities" in the Statement of
Additional Information for further information about Brady Bonds.
Emerging country debt securities held by the Portfolio will take the form of
bonds, notes, bills, debentures, convertible securities, warrants, bank debt
obligations, short-term paper, mortgage and other asset-backed securities, loan
participations, loan assignments and interests issued by entities organized and
operated for the purpose of restructuring the investment characteristics of
instruments issued by emerging country issuers. U.S. dollar-denominated emerging
country debt securities held by the Portfolio will generally be listed but not
traded on a securities exchange, and non-U.S. dollar-denominated securities held
by the Portfolio may or may not be listed or traded on a securities exchange.
Investments in emerging country debt securities entail special investment risks.
See "Additional Investment Information -- Foreign Investment Risk Factors." The
Portfolio will be subject to no restrictions on the maturities of the emerging
country debt securities it holds; those maturities may range from overnight to
30 years.
The Portfolio is not restricted in the portion of its assets which may be
invested in securities denominated in a particular currency and a substantial
portion of the Portfolio's assets may be invested in non-U.S. dollar-denominated
securities. The portion of the Portfolio's assets invested in securities
denominated in currencies other than the U.S. dollar will vary depending on
market conditions. Although the Portfolio is permitted to engage in a wide
variety of investment practices designed to hedge against currency exchange rate
risks with respect to its holdings of non-U.S. dollar-denominated debt
securities, the Portfolio may be limited in its ability to hedge against these
risks. See "Additional Investment Information -- Forward Foreign Currency
Exchange Contracts" and "Foreign Currency Futures Contracts and Options" in the
Statement of Additional Information.
In selecting particular emerging country debt securities for investment by
the Portfolio, the Adviser will apply a market risk analysis contemplating
assessment of factors such as liquidity, volatility, tax implications, interest
rate sensitivity, counterparty risks and technical market considerations.
Emerging country debt securities in which the Portfolio may invest will be
subject to high risk and will not be required to meet a minimum rating standard
and may not be rated for creditworthiness by any internationally recognized
credit rating organization. The Portfolio's investments are expected to be rated
in the lower and lowest rating categories of internationally recognized credit
rating organizations or are expected to be unrated securities of comparable
quality. These types of debt obligations are predominantly speculative with
respect to the capacity to pay interest and repay principal in accordance with
their terms and generally involve a greater risk of default and of volatility in
price than securities in higher rating categories. Ratings of a non-U.S. debt
instrument, to the extent that those ratings are undertaken, are related to
evaluations of the country in which the issuer of the instrument is located.
Ratings generally take into account the currency in which a non-U.S. debt
instrument is denominated. Instruments issued by a foreign government in other
than the local currency, for example, typically have a lower rating than local
currency instruments due to the existence of an additional risk that the
government will be unable to obtain the required foreign currency to service its
foreign currency-denominated debt. In general, the
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<PAGE>
ratings of debt securities or obligations issued by a non-U.S. public or private
entity will not be higher than the rating of the currency or the foreign
currency debt of the central government of the country in which the issuer is
located, regardless of the intrinsic creditworthiness of the issuer.
The Portfolio is authorized to borrow up to 33 1/3% of its total assets
(including the amount borrowed), less all liabilities and indebtedness other
than the borrowing, for investment purposes to increase the opportunity for
greater return and for payment of dividends. Such borrowings would constitute
leverage, which is a speculative characteristic. Leveraging will magnify
declines as well as increases in the net asset value of the Portfolio's shares
and increases in the yield on the Portfolio's investments. See "Additional
Investment Information -- Borrowing and Other Forms of Leverage."
The Portfolio may also invest in zero coupon, pay-in-kind or deferred
payment securities and in securities that may be collateralized by zero coupon
securities (such as Brady Bonds). Zero coupon securities are securities that are
sold at a discount to par value and on which interest payments are not made
during the life of the security. Upon maturity, the holder is entitled to
receive the par value of the security. While interest payments are not made on
such securities, holders of such securities are deemed to have received annually
"phantom income." Because the Portfolio will distribute its "phantom income" to
shareholders, to the extent that shareholders elect to receive dividends in cash
rather than reinvesting such dividends in additional shares, the Portfolio will
have fewer assets with which to purchase income producing securities. The
Portfolio accrues income with respect to these securities prior to the receipt
of cash payments. Pay-in-kind securities are securities that have interest
payable by delivery of additional securities. Upon maturity, the holder is
entitled to receive the aggregate par value of the securities. Deferred payment
securities are securities that remain zero coupon securities until a
predetermined date, at which time the stated coupon rate becomes effective and
interest becomes payable at regular intervals. Zero coupon, pay-in-kind and
deferred payment securities may be subject to greater fluctuation in value and
lesser liquidity in the event of adverse market conditions than comparably rated
securities paying cash interest at regular interest payment periods.
The Portfolio may also invest up to 5% of its total assets in
mortgage-backed securities and in other asset-backed securities issued by
non-governmental entities, such as banks and other financial institutions.
Mortgage-backed securities include mortgage pass-through securities and
collateralized mortgage obligations. Asset-backed securities are collateralized
by such assets as automobile or credit card receivables and are securitized
either in a pass-through structure or in a pay-through structure similar to a
CMO.
The Portfolio's investments in government, government-related and
restructured debt instruments are subject to special risks, including the
inability or unwillingness to repay principal and interest, requests to
reschedule or restructure outstanding debt and requests to extend additional
loan amounts. The Portfolio may have limited recourse in the event of default on
such debt instruments. The Portfolio may invest in loans, assignments of loans
and participations in loans. See "Additional Investment Information."
ADDITIONAL INVESTMENT INFORMATION
AMERICAN DEPOSITARY RECEIPTS. The Portfolios may on occasion invest in
American Depositary Receipts ("ADRs"). ADRs are securities, typically issued by
a U.S. financial institution (a "depositary"), that evidence ownership interests
in a security or a pool of securities issued by a foreign issuer (the
"underlying issuer") and deposited with the depositary. ADRs include American
Depositary Shares and New York Shares and may be
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<PAGE>
"sponsored" or "unsponsored." Sponsored ADRs are established jointly by a
depositary and the underlying issuer, whereas unsponsored ADRs may be
established by a depositary without participation by the underlying issuer.
Holders of an unsponsored ADR generally bear all the costs associated with
establishing the unsponsored ADR. The depositary of an unsponsored ADR is under
no obligation to distribute shareholder communications received from the
underlying issuer or to pass through to the holders of the unsponsored ADR
voting rights with respect to the deposited securities or pool of securities.
The Portfolios may invest in sponsored and unsponsored ADRs.
BORROWING AND OTHER FORMS OF LEVERAGE. The Emerging Markets Debt Portfolio
is authorized to borrow money from banks and other entities in an amount equal
to up to 33 1/3% of the Portfolio's total assets (including the amount borrowed)
less all liabilities and indebtedness other than the borrowing, and may use the
proceeds of the borrowing for investment purposes or to pay dividends.
Borrowings create leverage, which is a speculative characteristic. Although the
Portfolio is authorized to borrow, it will do so only when the Adviser believes
that borrowing will benefit the Portfolio after taking into account
considerations such as the costs of the borrowing and the likely investment
returns on the securities purchased with borrowed monies. Borrowing by the
Portfolio will create the opportunity for increased net income but, at the same
time, will involve special risk considerations. Leveraging resulting from
borrowing will magnify declines as well as increases in the Portfolio's net
asset value per share and net yield. The Portfolio expects that all of its
borrowing will be made on a secured basis. The Portfolio's Custodian will either
segregate the assets securing the borrowing for the benefit of the lenders or
arrangements will be made with a suitable sub-custodian. If assets used to
secure the borrowing decrease in value, the Portfolio may be required to pledge
additional collateral to the lender in the form of cash or securities to avoid
liquidation of those assets.
FOREIGN INVESTMENT. Investment in obligations of foreign issuers and in
foreign branches of domestic banks involves somewhat different investment risks
than those affecting obligations of U.S. issuers. There may be limited publicly
available information with respect to foreign issuers, and foreign issuers are
not generally subject to uniform accounting, auditing and financial standards
and requirements comparable to those applicable to 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 by U.S.
companies. 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, and the possible
adoption of foreign governmental restrictions such as exchange controls.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in certain debt securities and domestic companies may be subject to
limitation in other emerging countries. Foreign ownership limitations also may
be imposed by the charters of individual companies in emerging countries to
prevent, among other concerns, violation of foreign investment limitations.
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Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
emerging countries. The Portfolios could be adversely affected by delays in, or
a refusal to grant, any required governmental registration or approval for such
repatriation. Any investment subject to such repatriation controls will be
considered illiquid if it appears reasonably likely that this process will take
more than seven days.
The economies of individual emerging countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments position. Further, the
economies of developing countries generally are heavily dependent upon
international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been, and may
continue to be, adversely affected by economic conditions in the countries with
which they trade.
With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the value
of each Portfolio's investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the U.S.
Investments in securities of foreign issuers are frequently denominated in
foreign currencies, and because each Portfolio may temporarily hold uninvested
reserves in bank deposits in foreign currencies, the value of each 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 Portfolios
may incur costs in connection with conversions between various currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Portfolios may enter into
forward foreign currency exchange contracts that provide for the purchase or
sale of an amount of a specified foreign currency at a future date. Purposes for
which such contracts may be used include protecting against a decline in a
foreign currency against the U.S. dollar between the trade date and settlement
date when the Portfolio purchases or sells securities, locking in the U.S.
dollar value of dividends declared on securities held by a Portfolio and
generally protecting the U.S. dollar value of securities held by the Portfolio
against exchange rate fluctuation. Such contracts may also be used as a
protective measure against the effects of fluctuating rates of currency exchange
and exchange control regulations. While such forward contracts may limit losses
to the Portfolio as a result of exchange rate fluctuation, they will also limit
any gains that may otherwise have been realized. See "Investment Objectives and
Policies -- Forward Foreign Currency Exchange Contracts" in the Statement of
Additional Information.
As another means of reducing the risks associated with investing in
securities denominated in foreign currencies, the Portfolios may enter into
contracts for the future acquisition or delivery of foreign currencies and may
purchase foreign currency options. These investment techniques are designed
primarily to hedge against anticipated future changes in currency prices, that
otherwise might adversely affect the value of the Portfolio's portfolio
securities. A Portfolio will incur brokerage fees when it purchases or sells
futures contracts or options, and it will be required to maintain margin
deposits. As set forth below, futures contracts and options entail risks, but
the Adviser believes that use of such contracts and options may benefit the
Portfolio by diminishing currency
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risks. A Portfolio will not enter into any futures contract or option if
immediately thereafter the value of all the foreign currencies underlying its
futures contracts and foreign currency options would exceed 10% of the value of
its total assets. In addition, a Portfolio may enter into a futures contract
only if immediately thereafter not more than 5% of its total assets are required
as deposit to secure obligations under such contracts.
The primary risks associated with the use of futures and options are (i)
failure to predict accurately the direction of currency movements and (ii)
market risks (e.g., lack of liquidity or lack of correlation between the change
in value of underlying currencies and that of the value of the Portfolio's
futures or options contracts). The risk that a Portfolio will be unable to close
out a futures position or options contract will be minimized by the Portfolio
only entering into futures contracts or options transactions for which there
appears to be a liquid secondary market. For more detailed information about
futures transactions, see "Investment Objectives and Policies" in the Statement
of Additional Information.
The Emerging Markets Debt Portfolio may attempt to accomplish objectives
similar to those described above with respect to forward and futures contracts
for currency by means of purchasing put or call options on foreign currencies on
exchanges. A put option gives the Portfolio the right to sell a currency at the
exercise price until the expiration of the option. A call option gives the
Portfolio the right to purchase a currency at the exercise price until the
expiration of the option.
The Portfolio's Custodian will place cash, U.S. government securities or
high-grade debt securities into a segregated account of a Portfolio in an amount
equal to the value of such 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 such Portfolio's commitments
with respect to such contracts. See "Investment Objectives and Policies --
Forward Currency Exchange Contracts" in the Statement of Additional Information.
INVESTMENT FUNDS. Some emerging 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 emerging countries through investment funds which have been specifically
authorized. The Portfolios may invest in these investment funds subject to the
provisions of the 1940 Act, and other applicable laws as discussed below under
"Investment Restrictions." If a Portfolio invests in such investment funds, 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 funds.
Certain of the investment funds referred to in the preceding paragraph are
advised by the Adviser. These Portfolios may, to the extent permitted under the
1940 Act and other applicable law, invest in these investment funds. If a
Portfolio does elect to make an investment in such an investment fund, it will
only purchase the securities of such investment fund in the secondary market.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Emerging Markets and Emerging
Markets Debt Portfolios may invest in fixed rate and floating rate loans
("Loans") arranged through private negotiations between an issuer of sovereign
debt obligations and one or more financial institutions ("Lenders"). The
Portfolio's investments in Loans are expected in most instances to be in the
form of participation in Loans ("Participations") and assignments of all or a
portion of Loans ("Assignments") from third parties. The Portfolio will have the
right to
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receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In the event of the insolvency of the
Lender selling a Participation, the Portfolio may be treated as a general
creditor of the Lender and may not benefit from any set-off between the Lender
and the borrower. Certain Participations may be structured in a manner designed
to avoid purchasers of Participations being subject to the credit risk of the
Lender with respect to the Participation. Even under such a structure, in the
event of the Lender's insolvency, the Lender's servicing of the Participation
may be delayed and the assignability of the Participation may be impaired. The
Portfolio will acquire Participations only if the Lender interpositioned between
the Portfolio and the borrower is determined by the Adviser to be creditworthy.
When the Portfolio purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan. However, because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the Portfolio as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender. Because there is no liquid market for such securities, the
Portfolio anticipates that such securities could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market may
have an adverse impact on the value of such securities and the Portfolio's
ability to dispose of particular Assignments or Participations when necessary to
meet the Portfolio's liquidity needs or in response to a specific economic event
such as a deterioration in the creditworthiness of the borrower. The lack of a
liquid secondary market for Assignments and Participations also may make it more
difficult for the Portfolio to assign a value to these securities for purposes
of valuing the Portfolio's portfolio and calculating its net asset value.
LOANS OF PORTFOLIO SECURITIES. The Portfolios may lend securities to
brokers, dealers, domestic and foreign banks or other financial institutions for
the purpose of increasing their 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 a risk of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. Each Portfolio will not enter into securities loan
transactions exceeding in the aggregate, 33 1/3% of the market value of its
total assets. For more detailed information about securities lending see
"Investment Objectives and Policies" in the Statement of Additional Information.
MONEY MARKET INSTRUMENTS. Each Portfolio is permitted to invest in money
market instruments, although each Portfolio intends to stay invested in
securities satisfying its primary investment objective to the extent practical.
The Portfolios may make money market investments pending other investment or
settlement for liquidity, or in adverse market conditions. The money market
investments permitted for the Portfolios include: obligations of the United
States government and its agencies and instrumentalities; obligations of foreign
sovereignties; other debt securities; commercial paper including bank
obligations; certificates of deposit (including Eurodollar certificates of
deposit); and repurchase agreements. For more detailed information about these
money market investments, see "Description of Securities and Ratings" in the
Statement of Additional Information.
NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED
SECURITIES. The Portfolios may invest in securities that are neither listed on
a stock exchange nor traded over-the-counter, including privately placed
securities. Investing in such unlisted emerging country equity securities,
including investments in new and early stage companies, may involve a high
degree of business and financial risk that can result in substantial
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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, 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, each Portfolio may not invest more than 15% of its net
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 (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.
REPURCHASE AGREEMENTS. Each 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."
REVERSE REPURCHASE AGREEMENTS. The Emerging Markets Debt Portfolio may
enter into reverse repurchase agreements with brokers, dealers, domestic and
foreign banks or other financial institutions. In a reverse repurchase
agreement, the Portfolio sells a security and agrees to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. It may also be viewed as the borrowing of money by
the Portfolio. The Portfolio's investment of the proceeds of a reverse
repurchase agreement is the speculative factor known as leverage. The Portfolio
may enter into a reverse repurchase agreement only if the interest income from
investment of the proceeds is greater than the interest expense of the
transaction and the proceeds are invested for a period no longer than the term
of the agreement. The Portfolio will maintain with the Custodian a separate
account with a segregated portfolio of cash, U.S. Government securities or other
liquid high grade debt obligations in an amount at least equal to its purchase
obligations under these agreements. If interest rates rise during a reverse
repurchase agreement, it may adversely affect the Portfolio's ability to
maintain a stable net asset value. The aggregate of these agreements is limited
as set forth under "Investment Limitations." Reverse repurchase agreements are
considered to be borrowings and are subject to the percentage limitations on
borrowings set forth in "Investment Limitations."
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<PAGE>
RUSSIAN SECURITIES TRANSACTIONS. The Emerging Markets Portfolio may invest
in equity securities of Russian companies. The registration, clearing and
settlement of securities transactions in Russia are subject to significant risks
not normally associated with securities transactions in the United States and
other more developed markets. Ownership of shares in Russian companies is
evidenced by entries in a company's share register (except where shares are held
through depositories that meet the requirements of the 1940 Act) and the
issuance of extracts from the register or, in certain limited cases, by formal
share certificates. However, Russian share registers are frequently unreliable
and the Portfolio could possibly lose its registration through oversight,
negligence or fraud. Moreover, Russia lacks a centralized registry to record
securities transactions and registrars located throughout Russia or the
companies themselves maintain share registers. Registrars are under no
obligation to provide extracts to potential purchasers in a timely manner or at
all and are not necessarily subject to effective state supervision. In addition,
while registrars are liable under law for losses resulting from their errors, it
may be difficult for the Portfolio to enforce any rights it may have against the
registrar or issuer of the securities in the event of loss of share
registration. Although Russian companies with more than 1,000 shareholders are
required by law to employ an independent company to maintain share registers, in
practice, such companies have not always followed this law. Because of this lack
of independence of registrars, management of a Russian company may be able to
exert considerable influence over who can purchase and sell the company's shares
by illegally instructing the registrar to refuse to record transactions on the
share register. Furthermore, these practices may prevent the Portfolio from
investing in the securities of certain Russian companies deemed suitable by the
Adviser and could cause a delay in the sale of Russian securities by the
Portfolio if the company deems a purchaser unsuitable, which may expose the
Portfolio to potential loss on its investment.
In light of the risks described above, the Board of Directors of the
Portfolio has approved certain procedures concerning the Portfolio's investments
in Russian securities. Among these procedures is a requirement that the
Portfolio will not invest in the securities of a Russian company unless that
issuer's registrar has entered into a contract with the Portfolio's
sub-custodian containing certain protective conditions including, among other
things, the sub-custodian's right to conduct regular share confirmations on
behalf of the Portfolio. This requirement will likely have the effect of
precluding investments in certain Russian companies that the Portfolio would
otherwise make.
SHORT SALES. The Emerging Markets Debt Portfolio may from time to time sell
securities short without limitation. A short sale is a transaction in which the
Investment Fund would sell securities it does not own (but has borrowed) in
anticipation of a decline in the market price of the securities. When the
Portfolio makes a short sale, the proceeds it receives from the sale will be
held on behalf of a broker until the Portfolio replaces the borrowed securities.
To deliver the securities to the buyer, the Portfolio will need to arrange
through a broker to borrow the securities and, in so doing, the Investment Fund
will become obligated to replace the securities borrowed at their market price
at the time of replacement, whatever that price may be. The Portfolio may have
to pay a premium to borrow the securities and must pay any dividends or interest
payable on the securities until they are replaced.
The Portfolio's obligation to replace the securities borrowed in connection
with a short sale will be secured by collateral deposited with the broker that
consists of cash, U.S. government securities or other liquid, high grade debt
obligations. In addition, the Portfolio will place in a segregated account with
its Custodian an amount of cash, U.S. government securities or other liquid high
grade debt obligations equal to the difference, if any, between (1) the market
value of the securities sold at the time they were sold short and (2) any cash,
U.S.
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<PAGE>
government securities or other liquid high grade debt obligations deposited as
collateral with the broker in connection with the short sale (not including the
proceeds of the short sale). Short sales by the Investment Fund involve certain
risks and special considerations. Possible losses from short sales differ from
losses that could be incurred from a purchase of a security, because losses from
short sales may be unlimited, whereas losses from purchases can equal only the
total amount invested.
STOCK OPTION AND INDEX FUTURES CONTRACTS. Each Portfolio may seek to
increase its return or may hedge all or a portion of its portfolio investments
through stock options and stock index futures contracts with respect to
securities in which the Portfolio may invest. There currently are limited
options and stock index futures markets in emerging countries and the nature of
the strategies adopted by the Adviser and the extent to which those strategies
are used will depend on the development of stock option and stock index futures
contracts by emerging country stock exchanges. Each Portfolio will only engage
in transactions in stock options and stock index futures contracts which are
traded on a recognized securities or futures exchange.
The Emerging Markets Debt Portfolio may write (i.e., sell) covered call
options on securities and loan participations and assignments held in its
portfolio, which options give the purchaser the right to buy the underlying
security, loan participation or assignment covered by the option from the
Portfolio at the stated exercise price. A "covered" call option means that so
long as the Portfolio is obligated as the writer of the option, it will own (i)
the underlying security, loan participation or assignment subject to the option,
or (ii) securities convertible or exchangeable without the payment of any
consideration into the security, loan participation or assignment subject to the
option. As a matter of operating policy, the aggregate value of the underlying
securities, loan participations and assignments on which options will be written
at any one time will not exceed 5% of the total assets of the Portfolio. In
addition, as a matter of operating policy, the Portfolio may purchase put and
call options on securities, loan participations or assignments.
The Portfolio will receive a premium from writing call options, which
increases the Portfolio's return on the underlying security, loan participation
or assignment in the event the option expires unexercised or is closed out at a
profit. By writing a call, the Portfolio will limit its opportunity to profit
from an increase in the market value of the underlying security, loan
participation or assignment above the exercise price of the option for as long
as the Portfolio's obligation as writer of the option continues. Thus, in some
periods the Portfolio will receive less total return and in other periods
greater total return from writing covered call options than it would have
received from its underlying securities, loan participations and assignments had
it not written call options. The Portfolio pays a premium to purchase an option
and the risk assumed by the Portfolio when it purchases an option is the loss of
this premium. Because the price of an option tends to move with that of its
underlying security, if the Portfolio is to make a profit, the price of the
underlying security, loan participation or assignment must change and the change
must be sufficient to cover the premiums and commissions paid. A price change in
the security, loan participation or assignment underlying the option does not
assure a profit because prices in the options markets may not always reflect
such change.
The Emerging Markets Debt Portfolio may purchase and sell indexed financial
futures contracts. An indexed futures contract is an agreement to take or make
delivery of an amount of cash equal to the difference between the value of the
index at the beginning and at the end of the contract period. Successful use of
indexed futures will be subject to the Adviser's ability to predict correctly
movements in the direction of the relevant debt market. No assurance can be
given that the Adviser's judgment in this respect will be correct.
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<PAGE>
The Portfolio may sell indexed financial futures contracts in anticipation
of or during a market decline to attempt to offset the decrease in market value
of securities in its portfolio that might otherwise result. When the Portfolio
is not fully invested in emerging country debt securities and anticipates a
significant market advance, it may purchase indexed futures in order to gain
rapid market exposure that may in part or entirely offset increases in the cost
of securities that it intends to purchase. In a substantial majority of these
transactions, the Portfolio will purchase such securities upon termination of
the futures position but, under unusual market conditions, a futures position
may be terminated without the corresponding purchase of debt securities.
STRUCTURED SECURITIES. The Emerging Markets Debt Portfolio may invest a
portion of its assets in entities organized and operated solely for the purpose
of restructuring the investment characteristics of sovereign debt obligations.
This type of restructuring involves the deposit with, or purchase by, an entity,
such as a corporation or trust, of specified instruments (such as commercial
bank loans or Brady Bonds) and the issuance by that entity of one or more
classes of securities ("Structured Securities") backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued Structured Securities to
create securities with different investment characteristics, such as varying
maturities, payment priorities and interest rate provisions, and the extent of
the payments made with respect to Structured Securities is dependent on the
extent of the cash flow on the underlying instruments. Because Structured
Securities of the type in which the Portfolio anticipates it will invest
typically involve no credit enhancement, their credit risk generally will be
equivalent to that of the underlying instruments. The Portfolio is permitted to
invest in a class of Structured Securities that is either subordinated or
unsubordinated to the right of payment of another class. Subordinated Structured
Securities typically have higher yields and present greater risks than
unsubordinated Structured Securities. Structured Securities are typically sold
in private placement transactions, and there currently is no active trading
market for Structured Securities.
TEMPORARY INVESTMENTS. During periods in which the Adviser believes changes
in economic, financial or political conditions make it advisable, the Emerging
Markets Portfolio may reduce its holdings in equity and other securities, and
the Emerging Markets Debt Portfolio may reduce its holdings in emerging country
debt securities, for temporary defensive purposes, and the Portfolios 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 the U.S. or emerging country governments, their
respective agencies or instrumentalities; (b) bank deposits and bank obligations
(including certificates of deposit, time deposits and bankers' acceptances) of
U.S. or emerging country banks denominated in any currency; (c) floating rate
securities and other instruments denominated in any currency issued by
international development agencies; (d) finance company and corporate commercial
paper and other short-term corporate debt obligations of United States and
emerging country corporations meeting the Portfolio's credit quality standards;
and (e) repurchase agreements with banks and broker-dealers with respect to such
securities. For temporary defensive purposes, the Portfolios intend to invest
only in short-term and medium-term debt securities that the Adviser believes to
be of high quality, i.e., subject to relatively low risk of loss of interest or
principal (there is currently no rating system for debt securities in most
emerging countries).
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each 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
23
<PAGE>
transaction. Each 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 each Portfolio not to enter into when-issued commitments or delayed delivery
securities exceeding, in the aggregate, 15% of the market value of the
Portfolio's total assets less liabilities, other than the obligations created by
these commitments.
INVESTMENT LIMITATIONS
Each Portfolio is a non-diversified portfolio under the 1940 Act, which
means that the Portfolio is not limited by the 1940 Act in the proportion of its
assets that may be invested in the obligations of a single issuer. Thus, each
Portfolio may invest a greater proportion of its assets in the securities of a
smaller number of issuers and, as a result, will be subject to greater risk with
respect to its portfolio securities. However, each Portfolio intends to comply
with the diversification requirements imposed by the Internal Revenue Code of
1986, as amended, for qualification as a regulated investment company. See
"Taxes" below and "Investment Limitations" in the Statement of Additional
Information.
Each Portfolio 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, each
Portfolio operates under certain non-fundamental investment limitations as
described below and in the Statement of Additional Information. Each 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
net assets would be invested in such repurchase agreements and other investments
for which market quotations are not readily available or which are otherwise
illiquid; (ii) borrow money, except from banks for extraordinary or emergency
purposes, and then only in amounts up to 10% of the value of the Portfolio's
total assets taken at cost at the time of borrowing; or purchase securities
while borrowings exceed 5% of its total assets, except the Emerging Markets Debt
Portfolio is not subject to such limits on borrowing and may borrow from banks
and other entities in amounts not in excess of 33 1/3% of its total assets
(including the amount borrowed) less liabilities; (iii) 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;
(iv) invest in fixed time deposits with a duration of over seven calendar days;
or (v) 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.
LOCAL ADMINISTRATOR FOR THE EMERGING MARKETS PORTFOLIO
The Emerging Markets Portfolio is required under Brazilian law to have a
local administrator in Brazil. Unibanco-Uniao (the "Brazilian Administrator"), a
Brazilian corporation, acts as the Portfolio's Brazilian administrator pursuant
to an agreement with the Portfolio (the "Brazilian Administration Agreement).
Under the Brazilian Administration Agreement, the Brazilian Administrator
performs various services for the Portfolio, including effecting the
registration of the Portfolio's foreign capital with the Central Bank of Brazil
effecting all foreign exchange transactions related to the Portfolio's
investments in Brazil and obtaining all approvals required for the Portfolio to
make remittances of income and capital gains and for the repatriation of the
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<PAGE>
Portfolio's investments pursuant to Brazilian law. For its services, the
Brazilian Administrator is paid an annual fee equal to 0.125% of the Portfolio's
average weekly net assets invested in Brazil, paid monthly. The principal office
of the Brazilian Administrator is located at Avenida Eusebio Matoso, 891, Sao
Paulo, S.P, Brazil. The Brazilian Administration Agreement is terminable upon
six months' notice by either party. The Brazilian Administrator may be replaced
only by an entity authorized to act as a joint manager of a managed portfolio of
bonds and securities under Brazilian law.
The Emerging Markets Portfolio is required under Colombian law to have a
local administrator in Colombia. CitiTrust S.A. (the "Colombian Administrator"),
a Colombian Trust Company, acts as the Portfolio's Colombian administrator
pursuant to an agreement with the Portfolio (the "Colombian Agreement"). Under
the Colombian Agreement, the Colombian Administrator performs various services
for the Portfolio, including effecting the registration of the Portfolio's
foreign capital with the Central Bank of Colombia, effecting all foreign
exchange transactions related to the Portfolio's investments in Colombia and
obtaining all approvals required for the Portfolio to make remittances of income
and capital gains and for the repatriation of the Portfolio's investments
pursuant to Colombian law. For its services, the Colombian Administrator is paid
an annual fee of $1000 plus .20% per transaction. The principal office of the
Colombian Administrator is located at Sociedad Fiduciaria International S.A.,
8-89, Piso 2, Santa Fe de Bogota, Colombia. The Colombian Agreement is
terminable upon 30 days' notice by either party. The Colombian Administrator may
be replaced only by an entity authorized to act as a joint manager of a managed
portfolio of bonds and securities under Colombian law.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER. Morgan Stanley Asset Management Inc. is the Investment
Adviser and Administrator of the Fund and each of the 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 each Portfolio an annual management fee, payable quarterly, equal to the
percentage of average daily net assets set forth in the table below. However,
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 the total annual operating
expenses of either Portfolio to exceed the respective percentages of average
daily net assets set forth in the table below.
<TABLE>
<CAPTION>
MAXIMUM TOTAL ANNUAL
OPERATING
EXPENSES AFTER FEE
WAIVERS
MANAGEMENT -------------------------
PORTFOLIO FEE CLASS A CLASS B
- ------------------------------ ----------- --------- ---------
<S> <C> <C> <C>
Emerging Markets Portfolio 1.25% 1.75% 2.00%
Emerging Markets Debt
Portfolio 1.00% 1.75% 2.00%
</TABLE>
The Adviser, with principal offices at 1221 Avenue of the Americas, New
York, New York 10020, conducts a worldwide portfolio management business,
providing a broad range of portfolio management services to customers in the
United States and abroad. At December 31, 1995, the Adviser, together with its
affiliated asset management companies, managed investments totaling
approximately $57.4 billion, including approximately $41.9 billion under active
management and $15.5 billion as Named Fiduciary or Fiduciary Adviser. See
"Management of the Fund" in the Statement of Additional Information.
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<PAGE>
PORTFOLIO MANAGERS. The following individuals have primary responsibility
for the Portfolio indicated below.
EMERGING MARKETS PORTFOLIO -- MADHAV DHAR. Madhav Dhar is a Managing
Director of Morgan Stanley. He joined the Adviser in 1984 to focus on global
asset allocation and investment strategy and now heads the Adviser's emerging
markets group and serves as the group's principal Portfolio Manager. Mr. Dhar
also coordinates the Adviser's developing country funds effort and has been
involved in the launching of the Adviser's country funds. He is a Director of
the Morgan Stanley Emerging Markets Fund, Inc. (a closed-end investment
company). He holds a B.S. (honors) from St. Stephens College, Delhi University
(India), and an M.B.A. from Carnegie-Mellon University. Mr. Dhar has had primary
responsibility for managing the Portfolio's assets since inception.
EMERGING MARKETS DEBT PORTFOLIO -- PAUL GHAFFARI. Paul Ghaffari is a
Principal of Morgan Stanley. He joined the Adviser in June 1993 as a Vice
President and Portfolio Manager for the Morgan Stanley Emerging Markets Debt
Fund (a closed-end investment company). Prior to joining the Adviser, Mr.
Ghaffari was a Vice President in the Fixed Income Division of the Emerging
Markets Sales and Trading Department at Morgan Stanley. From 1983 to 1992, he
worked in LDC Sales and Trading Department and the Mortgage-Backed Securities
Department at J.P. Morgan & Co. Inc. and worked in the Treasury Department at
the Morgan Guaranty Trust Co. He holds a B.A. in International Relations from
Pamona College and an M.S. in Foreign Service from Georgetown University. Mr.
Ghaffari has had primary responsibility for managing the Portfolio's assets
since inception.
ADMINISTRATOR. The Adviser also provides the Fund with administrative
services pursuant to an Administration Agreement. The services provided under
the Administration Agreement are subject to the supervision of the Officers and
the Board of Directors of the Fund and include day-to-day administration of
matters related to the corporate existence of the Fund, maintenance of its
records, preparation of reports, supervision of the Fund's arrangements with its
custodian, and assistance in the preparation of the Fund's registration
statements under federal and state laws. The Administration Agreement also
provides that the Administrator, through its agents, will provide the Fund
dividend disbursing and transfer 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 each Portfolio.
Under an agreement between the Adviser and The Chase Manhattan Bank, N.A.
("Chase"), Chase provides certain administrative services to the Fund. In a
merger completed on September 1, 1995, Chase succeeded to all of the rights and
obligations under the U.S. Trust Administration Agreement between the Adviser
and United States Trust Company of New York ("U.S. Trust"), pursuant to which
U.S. Trust had agreed to provide certain administrative services to the Fund.
Pursuant to a delegation clause in the U.S. Trust Administration Agreement, U.S.
Trust delegated its administration responsibilities to Chase Global Funds
Services Company ("CGFSC"), formerly known as Mutual Funds Service Company,
which after the merger with Chase is a subsidiary of Chase and will continue to
provide certain administrative services to the Fund. The Adviser supervises and
monitors 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 interest of the
26
<PAGE>
Fund. CGFSC's business address is 73 Tremont Street, Boston, Massachusetts
02108-3913. For additional information regarding the Administration Agreement or
the U.S. Trust Administration Agreement, see "Management of the Fund" in the
Statement of Additional Information.
DIRECTORS AND OFFICERS. Pursuant to the Fund's Articles of Incorporation,
the Board of Directors decides upon matters of general policy and reviews the
actions of the Fund's Adviser, Administrator and Distributor. The Officers of
the Fund conduct and supervise its daily business operations.
DISTRIBUTOR. Morgan Stanley serves as the exclusive Distributor of the
shares of the Fund. Under its Distribution Agreement with the Fund, Morgan
Stanley sells shares of each 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 any Portfolio.
The Portfolios currently offer only the classes of shares offered by this
Prospectus. The Portfolio may in the future offer one or more classes of shares
with features, distribution expenses or other expenses 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 for each Portfolio pursuant to Rule 12b-1 under the 1940 Act (each a
"Plan"). Under each Plan, the Distributor is entitled to receive from the
Portfolios 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.
Each 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 obligations to
the Fund.
PAYMENTS TO FINANCIAL INSTITUTIONS. The Adviser or its affiliates may
compensate certain financial institutions for the continued investment of their
customers' assets in the Emerging Markets Portfolio pursuant to the advice of
such financial institutions. These payments will be made directly by the Adviser
or its affiliates from their assets, and will not be made from the assets of the
Fund or by the assessment of a sales charge on shares. Such financial
institutions may also perform certain shareholder or recordkeeping services that
would otherwise be performed by CGFSC. The Adviser may elect to enter into a
contract to pay the financial institutions for such services.
EXPENSES. Each Portfolio is responsible for payment of certain other fees
and expenses (including organizational costs, legal fees, accountant's fees,
custodial fees, and printing and mailing costs) specified in the Administration
and Distribution Agreements.
PURCHASE OF SHARES
Class A and Class B shares of each Portfolio may be purchased, without sales
commission, at the net asset value per share next determined after receipt of
the purchase order by the Portfolio. See "Valuation of Shares."
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<PAGE>
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B SHARES
For an account for either Portfolio opened on or after January 2, 1996 (a
"New Account"), the minimum initial investment and minimum account size are
$500,000 for Class A shares and $100,000 for Class B shares. Managed Accounts
may purchase Class A shares without being subject to any minimum initial
investment or minimum account size requirements for a Portfolio account.
Employees of the Adviser and of its affiliates may purchase Class A Shares
subject to conditions, including a lower minimum initial investment, established
by Officers of the Fund.
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 (but remains at or above $100,000) for a continuous
60-day period, the Class A shares in such account will convert to Class B shares
and will be subject to the distribution fee and other features applicable to the
Class B shares. The Fund, however, will not convert Class A shares to Class B
shares based solely upon changes in the market that reduce the net asset value
of shares. Under current tax law, conversions between share classes are not a
taxable event to the shareholder.
Shares in a Portfolio account opened prior to January 2, 1996 (a "Pre-1996
Account") were designated Class A shares on January 2, 1996. Shares in a
Pre-1996 Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account") remained Class A shares regardless of account
size thereafter. Except for shares in a Managed Account, shares in a Pre-1996
Account with a value of less than $100,000 on March 1, 1996 (a "Grandfathered
Class B Account") converted to Class B shares on March 1, 1996. Grandfathered
Class A Accounts and Managed Accounts are not subject to conversion from Class A
shares to Class B shares.
Investors may also invest in the Fund by purchasing shares through a trust
department, broker, dealer, agent, financial planner, financial services firm or
investment adviser. An investor may be charged an additional service or
transaction fee by that institution. The minimum investment levels may be waived
at the discretion of the Adviser for (i) certain employees and customers of
Morgan Stanley or its affiliates and certain trust departments, brokers,
dealers, agents, financial planers, financial services firms or investment
advisers that have entered into an agreement with Morgan Stanley or its
affiliates; and (ii) retirement and deferred compensation plans and trusts, used
to fund such plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as amended, and
"rabbi trusts". 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 a continuous 60-day period, the shares in such
account are subject to redemption by the Fund and, if redeemed, the net asset
value of such shares will be promptly paid to the shareholder. The Fund,
however, will not redeem shares based solely upon changes in the market that
reduce the net asset value of shares.
28
<PAGE>
Grandfathered Class A Accounts, Grandfathered Class B Accounts and Managed
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 in a Portfolio account increases, whether due
to shareholder share purchases or market activity, to $500,000 or more, the
Class B shares will convert 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
that are applicable to New Accounts containing Class A shares, as stated above.
The Fund reserves the right to modify or terminate this conversion feature at
any time upon 60-days' notice to shareholders.
INITIAL PURCHASES DIRECTLY FROM THE FUND
The Fund's determination of an investor's eligibility to purchase shares of
a given class will take precedence over the investor's selection of a class.
Assuming the investor is eligible for the class, the Fund will select the most
favorable class for the investor, if the investor has not done so.
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 each Portfolio and $100,000 for Class B shares of each
Portfolio, with certain exceptions for Morgan Stanley employees and select
customers) payable to "Morgan Stanley Institutional Fund, Inc. -- [portfolio
name]", to:
Morgan Stanley Institutional Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
Payment will be accepted only in U.S. dollars, unless prior approval for
payment by other currencies is given by the Fund. The Portfolio(s) to be
purchased should be designated on the Account Registration Form. For purchases
by check, the Fund is ordinarily credited with Federal Funds within one
business day. Thus your purchase of shares by check is ordinarily credited to
your account at the net asset value per share of each of the Portfolios
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 class 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.)
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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, the class selected and the account number
assigned to you) as follows:
Chase Manhattan Bank, N.A.
One Manhattan Plaza
New York, NY 10081-1000
ABA#021000021
DDA# 910-2-733293
Attn: Morgan Stanley Institutional Fund, Inc.
Ref: (Portfolio name, your account number, your account name)
Please call the Fund at 1-800-548-7786 prior to wiring funds.
C. Complete and sign the Account Registration Form and mail it to the address
shown thereon.
Purchase orders for shares of each Portfolio which are received prior to the
regular close of the NYSE (currently 4:00 p.m. Eastern Time) will be executed
at the price computed on the date of receipt as long as the Transfer Agent
receives payment by check or in Federal Funds prior to the regular close of
the NYSE on such day.
Federal Funds purchase orders will be accepted only on a day on which the Fund
and Chase (the "Custodian Bank") are open for business. Your bank may charge a
service fee for wiring Federal 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.
Your bank may charge a service fee for wiring funds.
ADDITIONAL INVESTMENTS
You may add to your account at any time (minimum additional investment
$1,000, except for automatic reinvestment of dividends and capital gains
distributions for which there are no minimums) by purchasing shares at net asset
value by mailing a check to the Fund (payable to "Morgan Stanley Institutional
Fund Inc. -- [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 portfolio be specified in the letter or wire to ensure 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. Additional investments will be applied
to purchase additional shares in the same class held by a shareholder in a
Portfolio account.
OTHER PURCHASE INFORMATION
The purchase price of the Class A and Class B shares of the Portfolios 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
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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
expense charged to Class B shares. It is expected, however, that the net asset
value per share of the two classes will tend to converge immediately after the
recording of dividends which will differ by approximately the amount of the
distribution expense accrual differential between the classes.
In the interest of economy and convenience, and because of the operating
procedures of the Fund, certificates representing shares of the Portfolios 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 canceled 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
purchases in the Fund.
Investors may also invest in the Fund by purchasing shares through the
Distributor.
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 each Portfolio and the Portfolio's performance, the
Fund may in its discretion bar a stockholder that engages in excessive trading
of shares of any class of a portfolio from further purchases of shares of the
Fund for an indefinite period. The Fund considers excessive trading to be more
than one purchase and sale involving shares of the same class of a portfolio of
the Fund within any 120-day period. As an example, exchanging shares of
portfolios of the Fund as follows amounts to excessive trading: exchanging Class
A shares of Portfolio A for Class A shares of Portfolio B, then exchanging Class
A shares of Portfolio B for Class A shares of Portfolio C and again exchanging
Class A shares of Portfolio C for Class A 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, such as TFM
Accounts, 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 Class A
shares or Class B shares of each Portfolio at the next determined net asset
value of shares of the applicable class. On days
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that both the NYSE and the Custodian Bank are open for business, the net asset
value per share of each of the Portfolios is determined at the regular close of
trading of the NYSE (currently 4:00 p.m. Eastern Time). Shares of the Portfolios
may be redeemed by mail or telephone. No charge is made for redemption. Any
redemption proceeds may be more or less than the purchase price of your shares
depending on, among other factors, the market value of the investment securities
held by the Portfolio.
BY MAIL
Each Portfolio will redeem its Class A or Class B shares at the net asset
value determined on the date the request is received, if the request is received
in "good order" before the regular close of the NYSE. Your request should be
addressed to Morgan Stanley Institutional Fund, Inc., P.O. Box 2798, Boston,
Massachusetts 02208-2798, except that deliveries by overnight courier should be
addressed to Morgan Stanley Institutional Fund, Inc., c/o Chase Global Funds
Services Company, 73 Tremont 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 class
and 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 mail or
overnight courier and will be implemented at the net asset value next determined
after it is received. Redemption requests sent to the Fund through express mail
must be sent to Morgan Stanley Institutional Fund, Inc., c/o Chase Global Funds
Services Company, 73 Tremont Street, Boston, Massachusetts 02108. The Fund and
the Fund's transfer agent (the "Transfer Agent") will employ reasonable
procedures to confirm that the instructions communicated by telephone are
genuine. These procedures include requiring the investor to provide certain
personal identification information at the time an account is opened and prior
to effecting each transaction requested by telephone. In addition, all telephone
transaction requests will be recorded and investors may be required to provide
additional telecopied written instructions regarding transaction requests.
Neither the Fund nor the Transfer Agent will be responsible for any loss,
liability, cost or expense for following instructions received by telephone that
either of them reasonably believes to be genuine.
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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 a Portfolio to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of securities held by the Portfolio in lieu of
cash in conformity with applicable rules of the Commission.
Distributions-in-kind will be made in readily marketable securities. Investors
may incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
To protect your account, the Fund and its agents from fraud, signature
guarantees are required for certain redemptions to verify the identity of the
person who has authorized a redemption from your account. Please contact the
Fund for further information. See "Redemption of Shares" in the Statement of
Additional Information.
SHAREHOLDER SERVICES
EXCHANGE FEATURES
You may exchange shares that you own in either Portfolio for shares of any
other available portfolio of the Fund (other than the International Equity
Portfolio, which is closed to new investors). In exchanging for shares of a
portfolio with more than one class, the class of shares you receive in the
exchange will be determined in the same manner as any other purchase of shares
and will not be based on the class of shares surrendered for the exchange.
Consequently, the same minimum initial investment and minimum account size for
determining the class of shares received in the exchange will apply. See
"Purchase of Shares." Shares of the portfolios may be exchanged by mail or
telephone. The privilege to exchange shares by telephone is automatic and made
available without shareholder election. Before you make an exchange, you should
read the prospectus of the portfolio(s) in which you seek to invest. Because an
exchange transaction is treated as a redemption followed by a purchase, an
exchange would be considered a taxable event for shareholders subject to tax.
The exchange privilege is only available with respect to portfolios that are
registered for sale in a shareholder's state of residence. The exchange
privilege may be modified or terminated by the Fund at any time upon 60-days'
notice to shareholders.
BY MAIL
In order to exchange shares by mail, you should include in the exchange
request the name, class of shares and account number of your current portfolio,
the names of the portfolio(s) and class(es) of shares 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.
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BY TELEPHONE
When exchanging shares by telephone, have ready the name, class of shares
and account number of your current portfolio, the name(s) of the portfolio(s)
and class(es) of shares 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 the class of
each of the portfolios involved in the exchange of shares 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.
Transferring the registration of shares may affect the eligibility of your
account for a given class of each Portfolio's shares and may result in
involuntary conversion or redemption of your shares. See "Purchase of Shares"
above.
VALUATION OF SHARES
The net asset value per share of a class of shares of the Portfolios is
determined by dividing the total market value of the Portfolio's investments and
other assets attributable to such class, less any liabilities attributable to
such class, by the total number of outstanding shares of such class 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 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 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.
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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 determined 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 of such currencies against the U.S. dollar last quoted by any major
bank.
Although the legal rights of Class A and Class B shares will be identical,
the different expenses borne by each class will result in different net asset
values and dividends for the class. Dividends will differ by approximately the
amount of the distributions 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 expense charged to
Class B shares.
PERFORMANCE INFORMATION
The Fund may from time to time advertise the total return for each class of
the Portfolios. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" shows what an
investment in a class of the Portfolio would have earned over a specified period
of time (such as one, five or ten years), assuming that all distributions and
dividends by the Portfolio were reinvested in the same class 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 upon
redemption. The Fund may also include comparative performance information in
advertising or marketing the Portfolio's 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.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All income dividends and capital gains distributions for a class of shares
will automatically be reinvested in additional shares of such class 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.
Each Portfolio expects to distribute substantially all of its net investment
income in the form of annual dividends. Net realized gains of each Portfolio, if
any, after reduction for any tax loss carryforwards will also be distributed
annually. Confirmations of the purchase of shares of each 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, confirmations of such purchases will not be provided at
the time of completion of such purchases as might otherwise be required by Rule
10b-10.
Undistributed net investment income is included in each 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 paid
shortly after the purchase of shares by an investor, although in effect a return
of capital, are taxable to shareholders subject to income tax.
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Because of the distribution fee and any other expenses that may be
attributable to the Class B shares, the net income attributable to and the
dividends payable on Class B shares will be lower than the net income
attributable to and the dividends payable on Class A shares. As a result, the
net asset value per share of the classes of each Portfolio will differ at times.
Expenses of each Portfolio allocated to a particular class of shares thereof
will be borne on a pro rata basis by each outstanding share of that class.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial,
or administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of a Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state and local income taxes.
Each Portfolio is treated as a separate entity for federal income tax
purposes and is not combined with the Fund's other portfolios. Each 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.
Each Portfolio distributes substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Dividends from a Portfolio's net investment income are taxable to shareholders
as ordinary income, whether received in cash or in additional shares. Such
dividends paid by a Portfolio generally will qualify for the 70%
dividends-received deduction for corporate shareholders. Each 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. Each
Portfolio sends reports annually to shareholders of the federal income tax
status of all distributions made during the preceding year.
Each Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary income and capital gain net income (the excess of
short-term and long-term capital gains over short-term and long-term capital
losses), including any available capital loss carryforwards, prior to the end of
each calendar year to avoid liability for federal excise tax.
Dividends and other distributions declared by a Portfolio in October,
November or December of any year and payable to shareholders of record on a date
in such month will be deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if the distributions are paid by
the Portfolio at any time during the following January.
The sale, exchange or redemption of shares may result in taxable gain or
loss to the selling, exchanging or 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 sold, exchanged or redeemed shares. If
capital gain distributions have been made with respect to shares that are sold
at a loss after being held for six months or less, then the loss is treated as a
long-term capital loss to the extent of the capital gain distributions.
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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 a Portfolio, which
may differ from the federal income tax consequences described above.
Investment income received by a Portfolio from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To the
extent that a Portfolio is liable for foreign income taxes so withheld, each
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 each
Portfolio intends to meet Code requirements to pass through credit for such
taxes, there can be no assurance that each 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 Portfolios 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 Portfolios. 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 Portfolios are not marketed through intermediary brokers
or dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of shares which may be made through such firms.
However, the Adviser may place portfolio orders with qualified broker-dealers
who recommend the Fund's portfolios or who act as agents in the purchase of
shares of the Fund's portfolios for their clients.
In purchasing and selling securities for the Portfolios, 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 Portfolios, consideration will be given to such
factors as the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing broker-dealers, and
the brokerage and research services which they provide to the Fund. Some
securities considered for investment by the Portfolios 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 Portfolios and
such other clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Board of Directors.
Subject to the overriding objective of obtaining the best possible execution
of orders, the Adviser may allocate a portion of the Portfolio brokerage
transactions to Morgan Stanley or broker affiliates of Morgan
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Stanley. In order for Morgan Stanley or its affiliates to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration received
by Morgan Stanley or such affiliates must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time. Furthermore, the Board
of Directors of the Fund, including a majority of those Directors who are not
"interested persons," as defined in the Investment Company Act of 1940 (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.
Although neither Portfolio will 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. The Emerging Markets Portfolio anticipates that,
under normal circumstances, its annual portfolio turnover rate will not exceed
50%. The Emerging Markets Debt Portfolio anticipates that, under normal
circumstances, its annual portfolio turnover rate will not exceed 100%. High
portfolio turnover involves correspondingly greater transaction costs which will
be borne directly by the respective Portfolio. In addition, high portfolio
turnover may result in more capital gains which would be taxable to the
shareholders of the respective Portfolio. The tables set forth in "Financial
Highlights" present the Portfolio's historical turnover rates.
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 billion 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. Subject to the notice period to shareholders with
respect to shares held by the shareholders, 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 shares of
common stock of each portfolio are currently classified into two classes, the
Class A shares and the Class B shares, except for the International Small Cap,
Money Market and Municipal Money Market Portfolios, which only offer Class A
shares.
The shares of the Portfolios, 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 each Portfolio
have non-cumulative voting rights, which means that the holders of more than 50%
of the shares voting for the election of Directors can elect 100% of the
Directors if they choose to do so. Persons or organizations owning 25% or more
of the outstanding shares of a Portfolio may be presumed to "control" (as that
term is defined in the 1940 Act) that Portfolio. Under Maryland law, the Fund is
not required to hold an annual meeting of its shareholders unless required to do
so under the 1940 Act.
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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 Adviser, or its agent, as Transfer Agent, will send to each
shareholder having an account directly with the Fund a monthly statement showing
transactions in the account, the total number of shares owned, and any dividends
or distributions paid.
CUSTODIAN
As of September 1, 1995, domestic securities and cash are held by Chase,
which replaced U.S. Trust as the Fund's domestic custodian. Chase is not an
affiliate of the Adviser or the Distributor. Morgan Stanley Trust Company,
Brooklyn, New York ("MSTC"), an affiliate of the Adviser and the Distributor,
acts as the Fund's custodian for foreign assets held outside the United States
and employs subcustodians approved by the Board of Directors of the Fund in
accordance with regulations of the Securities and Exchange Commission for the
purpose of providing custodial services for such assets. MSTC may also hold
certain domestic assets for the Fund. For more information on the custodians,
see "General Information -- Custody Arrangements" in the Statement of Additional
Information.
DIVIDEND DISBURSING AND TRANSFER AGENT
Chase Global Funds Services Company, 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.
39
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
EMERGING MARKETS AND EMERGING MARKETS DEBT PORTFOLIOS
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out
this form for the Morgan Stanley
ACCOUNT INFORMATION Institutional Fund, please contact your
Fill in where applicable 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.
</TABLE>
<TABLE>
<C> <S> <C>
A) REGISTRATION
</TABLE>
1.
<TABLE>
<C> <S> <C>
1. INDIVIDUAL
</TABLE>
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
2. JOINT TENANTS
</TABLE>
<TABLE>
<C> <S> <C>
(RIGHTS OF SURVIVORSHIP
</TABLE>
2.
<TABLE>
<C> <S> <C>
PRESUMED UNLESS
</TABLE>
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
TENANCY IN COMMON
</TABLE>
<TABLE>
<C> <S> <C>
IS INDICATED)
</TABLE>
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3.
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST __________ / / OTHER (Specify) __________
<TABLE>
<C> <S> <C>
Street or P.O. Box
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
City State
Zip
--
Home Telephone
No. Business Telephone No.
-- -- -- --
/ / United States Citizen / / Resident Alien / /
Non-Resident Alien: Indicate Country of Residence ______________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER PART 1. Enter your Taxpayer IMPORTANT TAX INFORMATION
IDENTIFICATION Identification Number. For most You (as a payee) are required by law to
NUMBER individual taxpayers, this is your provide us (as payer) with your correct
If the account is in more than one name, Social Security Number. Taxpayer Identification Number. Accounts
CIRCLE THE TAXPAYER IDENTIFICATION NUMBER that have a missing or incorrect
Taxpayer Identification Number will be
subject to backup withholding at a 31%
rate on
</TABLE>
--
<TABLE>
<C> <S> <C> <C>
NAME OF THE PERSON WHOSE TAXPAYER -- -- -- -- -- -- -- -- -- -- -- -- dividends, distributions and other
IDENTIFICATION NUMBER IS PROVIDED IN OR payments. If you have not provided us
SECTION A) ABOVE. If no name is circled, SOCIAL SECURITY NUMBER with your correct taxpayer
the number identification number, you may be
subject to a $50 penalty imposed by the
Internal Revenue Service.
Backup withholding is not an additional
tax; the tax liability of persons
subject to backup withholding will be
reduced by the amount of tax withheld.
If withholding
</TABLE>
-- --
<TABLE>
<C> <S> <C> <C>
will be considered to be that of the -- -- -- -- -- -- -- -- -- -- -- -- results in an overpayment of taxes, a
last name listed. For Custodian account PART 2. BACKUP WITHHOLDING refund may be obtained.
of a minor (Uniform Gift/Transfer to / / Check this box if you are NOT You may be notified that you are subject
Minor Act), give the Social Security subject to Backup Withholding under the to backup withholding under Section
Number of the minor. provisions of Section 3406(a)(1)(C) of 3406(a)(1)(C) of the Internal Revenue
the Internal Revenue Code. Code because you have underreported
interest or dividends or you were
required to but failed to file a return
which would have included a reportable
interest or dividend payment. IF YOU
HAVE NOT BEEN SO NOTIFIED, CHECK THE BOX
IN PART 2 AT LEFT.
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SELECTION Portfolio(s): / / Class A Shares $ / / Class B Shares $
(Class A shares minimum $500,000 and Emerging Markets Portfolio
Class B shares minimum $100,000). Please Emerging Markets Debt
indicate Portfolio, class and amount. Portfolio
Total Initial Investment $
</TABLE>
Payment by:
<TABLE>
<C> <S> <C>
/ / Check (MAKE CHECK PAYABLE TO MORGAN
STANLEY INSTITUTIONAL FUND, INC.--PORTFOLIO NAME)
E) METHOD OF
INVESTMENT
Please indicate manner of payment.
</TABLE>
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone
exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the
Fund) Digit)
Date
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any)
OPTION will be reinvested in additional shares unless either box
below is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone
Please select at time of requests to wire redemption proceeds to
initial application if you the commercial bank indicated at right
wish to redeem shares by and/or mail redemption proceeds to the
telephone. A SIGNATURE name and address in which my/our fund
GUARANTEE IS REQUIRED IF BANK account is registered if such requests
ACCOUNT IS NOT REGISTERED are believed to be authentic.
IDENTICALLY TO YOUR FUND The Fund and the Fund's Transfer Agent
ACCOUNT. will employ reasonable procedures to
TELEPHONE REQUESTS FOR confirm that instructions communicated
REDEMPTIONS WILL NOT BE by telephone are genuine. These
HONORED UNLESS THE BOX IS procedures include requiring the
CHECKED. 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.
<CAPTION>
G)
Name of COMMERCIAL Bank (Not Savings Bank)
Bank Account No.
Bank ABA No.
Name(s) in which your BANK Account is Established
Bank's Street Address
City State Zip
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the account statement
sent to my/our registered address, I/we
hereby authorize the fund to mail Address
duplicate statements to the name and
address provided at right. City State Zip Code
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative
Name Representative
No. Branch
No.
</TABLE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
</TABLE>
<TABLE>
<S> <C>
The undersigned certify(ies) 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.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X) (X)
Signature Date Signature Date
Sign Here ,
</TABLE>
<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
<TABLE>
<S> <C>
PAGE
----
Fund Expenses..................................... 2
Financial Highlights.............................. 4
Prospectus Summary................................ 7
Investment Objectives and Policies................ 11
Additional Investment Information................. 15
Investment Limitations............................ 24
Management of the Fund............................ 25
Purchase of Shares................................ 27
Redemption of Shares.............................. 31
Shareholder Services.............................. 33
Valuation of Shares............................... 34
Performance Information........................... 35
Dividends and Capital Gains Distributions......... 35
Taxes............................................. 36
Portfolio Transactions............................ 37
General Information............................... 38
Account Registration Form
</TABLE>
EMERGING MARKETS PORTFOLIO
EMERGING MARKETS DEBT PORTFOLIO
PORTFOLIOS OF THE
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
Common Stock
($.001 PAR VALUE)
-------------
PROSPECTUS
-------------
Investment Adviser
Morgan Stanley
Asset Management Inc.
Distributor
Morgan Stanley & Co.
Incorporated
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
<PAGE>
- --------------------------------------------------------------------------------
P R O S P E C T U S
----------------------------------------------------------------------
U.S. REAL ESTATE PORTFOLIO
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 Class A and the Class B
shares of the U.S. Real Estate Portfolio (the "Portfolio"). On January 2, 1996,
the Portfolio began offering two classes of shares: the Class A shares and the
Class B shares, except for the Money Market, Municipal Money Market and
International Small Cap Portfolios which only offer Class A shares. All shares
of the Portfolio owned prior to January 2, 1996 were redesignated Class A shares
on January 2, 1996. The Class A and Class B shares currently offered by the
Portfolio have different minimum investment requirements and fund expenses.
Shares of the portfolios are offered with no sales charge or exchange or
redemption fee (with the exception of the International Small Cap Portfolio).
INVESTORS SHOULD NOTE THAT THE PORTFOLIO MAY INVEST UP TO 10% OF ITS TOTAL
ASSETS IN RESTRICTED SECURITIES OTHER THAN RULE 144A SECURITIES AND NO MORE THAN
15% 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 A 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 investors 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 "Prospectus Summary" below. The Fund
currently offers the following portfolios: (i) GLOBAL AND INTERNATIONAL EQUITY
- -- Active Country Allocation, Asian Equity, Emerging Markets, European Equity,
Global Equity, Gold, International Equity, International Magnum, International
Small Cap, Japanese Equity and Latin American Portfolios; (ii) U.S. EQUITY --
Emerging Growth, Equity Growth, Aggressive Equity, MicroCap, Small Cap Value
Equity, Value Equity and U.S. Real Estate Portfolios; (iii) EQUITY AND FIXED
INCOME -- 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 May 1, 1996, which 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 MAY 1, 1996.
SUPPLEMENTED THROUGH DECEMBER 30, 1996
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder of
the Portfolio will incur:
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------
<S> <C>
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
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<S> <C>
Management Fee (Net of Fee Waiver)*
Class A......................................... 0.47%
Class B......................................... 0.47%
12b-1 Fees
Class A......................................... None
Class B......................................... 0.25%
Other Expenses
Class A......................................... 0.53%
Class B......................................... 0.53%
---------
Total Operating Expenses (Net of Fee Waivers)*
Class A......................................... 1.00%
Class B......................................... 1.25%
---------
---------
</TABLE>
- ------------------------
*The Adviser has agreed to waive its management 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 management
fee would be 0.80%. Absent the fee waiver and/or expense reimbursement, the
Portfolio's total operating expenses would be 1.33% of the average daily net
assets of the Class A shares and 1.58% of the average daily net assets of the
Class B shares. As a result of this reduction, the Management 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."
2
<PAGE>
The purpose of the table above is to assist the investor in understanding
the various expenses that an investor in the Portfolio will bear directly or
indirectly. The Class A expenses and fees for the Portfolio based on actual
figures for the period ended December 31, 1995. The Class B expenses and fees
for the Portfolio are based on estimates, assuming that the average daily net
assets of the Class B shares of the Portfolio will be $50,000,000. "Other
Expenses" include Board of Directors' fees and expenses, amortization of
organizational costs, filing fees, professional fees and costs for shareholder
reports. Due to the continuous nature of Rule 12b-1 fees, long term Class B
shareholders may pay more than the equivalent of the maximum front-end sales
charges otherwise permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
The following example illustrates the expenses that you would pay on a
$1,000 investment assuming (1) a 5% annual rate of return and (2) redemption at
the end of each time period. As noted in the table above, the Portfolio charges
no redemption fees of any kind. The example is based on total operating expenses
of the Portfolio after fee waivers.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Real Estate Portfolio
Class A.......................................................... $ 10 $ 32 $ 55 $ 122
Class B.......................................................... $ 13 $ 40 $ 69 $ 151
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The Fund intends to comply with all state laws that restrict investment
company expenses. Currently, the most restrictive state law requires that the
aggregate annual expenses of an investment company shall not exceed two and
one-half percent (2 1/2%) of the first $30 million of average net assets, two
percent (2%) of the next $70 million of average net assets, and one and one-half
percent (1 1/2%) of the remaining net assets of such investment company.
The Adviser has agreed to a reduction in the amounts payable to it, and to
reimburse the Portfolio, if necessary, if in any fiscal year the sum of the
Portfolio's expenses exceeds the limit set by applicable state law.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides financial highlights for the Class A shares of
the Portfolio for the period presented. The audited financial highlights for the
Class A shares for the period ended December 31, 1995 are part of the Fund's
financial statements which appear in the Fund's December 31, 1995 Annual Report
to Shareholders and which is included in the Fund's Statement of Additional
Information. The Portfolio's financial highlights for each of the periods
presented have been audited by Price Waterhouse, LLP, whose unqualified report
thereon is also included in the Statement of Additional Information. Additional
performance information for the Class A shares is included in the Annual Report.
The Annual Report and the financial statements therein, along with the Statement
of Additional Information, are available at no cost from the Fund at the address
and telephone number noted on the cover page of this Prospectus. Financial
highlights are not available for the new Class B shares since they were not
offered as of December 31, 1995. The following information should be read in
conjunction with the financial statements and notes thereto.
4
<PAGE>
U.S. REAL ESTATE PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 24,
1995* TO
DECEMBER 31,
1995
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 10.00
-------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1)........ 0.26
Net Realized and Unrealized Gain
on Investments.................. 1.84
-------------
Total from Investment
Operations...................... 2.10
-------------
DISTRIBUTIONS
Net Investment Income............ (0.24)
Net Realized Gain................ (0.44)
-------------
Total Distribution............. (0.68)
-------------
NET ASSET VALUE, END OF PERIOD..... $ 11.42
-------------
-------------
TOTAL RETURN....................... 21.07%
-------------
-------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands)..................... $ 69,509
Ratio of Expenses to Average Net
Assets (1)(2)................... 1.00%**
Ratio of Net Investment Income to
Average Net Assets (1)(2)....... 4.04%**
Portfolio Turnover Rate.......... 158%
</TABLE>
- ------------------------------
<TABLE>
<S> <C> <C>
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net investment income........ $ 0.02
Ratios before expense limitation:
Expenses to Average Net Assets.................... 1.33%**
Net Investment Income to Average Net Assets....... 3.71%**
</TABLE>
(2) Under the terms of an Investment Advisory Agreement, the Adviser is entitled
to receive a management fee calculated at an annual rate of 0.80% of the
average daily net assets of the Portfolio. The Adviser has agreed to waive a
portion of this fee and/or reimburse expenses of the Portfolio to the extent
that the total operating expenses of the Portfolio exceed 1.00% of the
average daily net assets of the Class A shares and 1.25% of the average
daily net assets of the Class B shares. In the period ended December 31,
1995, the Adviser waived management fees and/or reimbursed expenses
totalling $129,000, for the Portfolio.
* Commencement of Operations.
** Annualized.
5
<PAGE>
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 shares and, except the International
Small Cap, Money Market and Municipal Money Market Portfolios, also offers Class
B shares. Each portfolio has its own investment objective and policies designed
to meet specific goals. The investment objective of the U.S. Real Estate
Portfolio is as follows:
-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 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 U.S. 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-U.S. issuers.
-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" below)
weightings determined by the Adviser.
-The INTERNATIONAL SMALL CAP PORTFOLIO seeks long-term capital appreciation
by investing primarily in equity securities of non-U.S. issuers with equity
market capitalizations of less than $1 billion.
-The JAPANESE EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of Japanese issuers.
6
<PAGE>
-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.
U.S. EQUITY:
-The AGGRESSIVE EQUITY PORTFOLIO seeks capital appreciation by investing
primarily in corporate equity and equity-linked securities.
-The EQUITY GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of medium and
large capitalization companies.
-The EMERGING GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of small- to
medium-sized corporations.
-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 VALUE EQUITY PORTFOLIO seeks high total return by investing in equity
securities which the Adviser believes to be undervalued relative to the
stock market in general at the time of purchase.
EQUITY AND FIXED INCOME:
-The BALANCED PORTFOLIO seeks high total return while preserving capital by
investing in a combination of undervalued equity securities and fixed
income securities.
FIXED INCOME:
-The EMERGING MARKETS DEBT PORTFOLIO seeks high total return by investing
primarily in debt securities of government, government-related and
corporate issuers located in emerging countries.
-The FIXED INCOME PORTFOLIO seeks to produce a high total return consistent
with the preservation of capital by investing in a diversified portfolio of
fixed income securities.
-The GLOBAL FIXED INCOME PORTFOLIO seeks to produce an attractive real rate
of return while preserving capital by investing in fixed income securities
of issuers throughout the world, including United States issuers.
-The HIGH YIELD PORTFOLIO seeks to maximize total return by investing in a
diversified portfolio of high yield fixed income securities that offer a
yield above that generally available on debt securities in the three
highest rating categories of the recognized rating services.
-The MORTGAGE-BACKED SECURITIES PORTFOLIO seeks to produce as high a level
of current income as is consistent with the preservation of capital by
investing primarily in a variety of investment-grade mortgage-backed
securities.
-The MUNICIPAL BOND PORTFOLIO seeks to produce a high level of current
income consistent with preservation of principal through investment
primarily in municipal obligations, the interest on which is exempt from
federal income tax.
7
<PAGE>
MONEY MARKET:
-The MONEY MARKET PORTFOLIO seeks to maximize current income and preserve
capital while maintaining high levels of liquidity through investing in
high quality money market instruments with remaining maturities of one year
or less.
-The MUNICIPAL MONEY MARKET PORTFOLIO seeks to maximize current tax-exempt
income and preserve capital while maintaining high levels of liquidity
through investing in high quality money market instruments with remaining
maturities of one year or less which are exempt from federal income tax.
INVESTMENT MANAGEMENT
Morgan Stanley Asset Management Inc., a wholly owned subsidiary of Morgan
Stanley Group Inc., which at December 31, 1995, together with its affiliated
asset management companies, had approximately $57.4 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 of the
Portfolio are offered at net asset value with no sales commission, but with a
12b-1 fee, which is accrued daily and paid quarterly, equal to 0.25% of the
Class B shares' average daily net assets on an annualized basis. Share purchases
may be made by sending investments directly to the Fund or through the
Distributor. Shares in a Portfolio account opened prior to January 2, 1996
(each, a "Pre-1996 Account") were designated Class A shares on January 2, 1996.
For a Portfolio account opened on or after January 2, 1996 (a "New Account"),
the minimum initial investment is $500,000 for Class A shares and $100,000 for
Class B shares. Certain exceptions to the foregoing minimums apply to (1) shares
in a Pre-1996 Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account"); (2) Portfolio accounts held by certain
employees of the Adviser and of its affiliates; and (3) certain advisory or
asset allocation accounts, such as Total Funds Management accounts, managed by
Morgan Stanley or its affiliates, including the Adviser ("Managed Accounts").
The Adviser reserves the right in its sole discretion to determine which of such
advisory or asset allocation accounts shall be Managed Accounts. For information
regarding Managed Accounts please contact your Morgan Stanley account
representative or the Fund at the telephone number provided on the cover of this
Prospectus. Shares in a Pre-1996 Account with a value of less than $100,000 on
March 1, 1996 (a "Grandfathered Class B Account") converted to Class B shares on
March 1, 1996. The minimum investment levels may be waived at the discretion of
the Adviser for (i) certain employees and customers of Morgan Stanley or its
affiliates and certain trust departments, brokers, dealers, agents, financial
planners, financial services firms, or investment advisers that have entered
into an agreement with Morgan Stanley or its affiliates; and (ii) retirement and
deferred compensation plans and trusts used to fund such plans, including, but
not limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended, and "rabbi trusts". See "Purchase of Shares --
Minimum Investment and Account Sizes; Conversion from Class A to Class B
Shares."
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The minimum subsequent investment for a Portfolio account is $1,000 (except
for automatic reinvestment of dividends and capital gains distributions for
which there is no minimum). Such subsequent investments will be applied to
purchase additional shares in the same class held by a shareholder in a
Portfolio account. See "Purchase of Shares -- Additional Investments."
HOW TO REDEEM
Class A shares or Class B shares of the Portfolio may be redeemed at any
time, without cost, at the net asset value per share of shares of the applicable
class 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 such account to less than
$100,000 for any continuous 60-day period. Involuntary redemption does not apply
to Managed Accounts, Grandfathered Class A Accounts and Grandfathered Class B
Accounts, regardless of the value of such accounts. Class A shares in a New
Account will convert to Class B shares if shareholder redemption(s) of such
shares reduces the value of such account to less than $500,000 for any
continuous 60-day period. Class B shares in a New Account will convert to Class
A shares if shareholder purchases of additional Class B shares or market
activity cause the value of the Class B shares in the New Account to increase to
$500,000 or more. 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. Because the Portfolio
invests primarily in the securities of companies principally engaged in the real
estate industry, its investments may be subject to the risks associated with the
direct ownership of real estate. The Portfolio's share price and investment
return fluctuate, and a shareholder's investment when redeemed may be worth more
or less than his original cost. Because it is expected that the Portfolio will
invest a substantial portion of its assets in real estate investment trusts
("REITs"), the Portfolio may also be subject to certain risks associated with
the direct investments of REITs. Because the Portfolio is a non-diversified
portfolio, the Portfolio will invest a greater proportion of its assets in the
securities of a smaller number of issuers and, as a result, will be subject to a
greater risk with respect to its portfolio securities. See "Investment Objective
and Policies -- Risk Factors."
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the 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 objectives.
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 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 ("REITs"). Equity securities include common stocks,
shares or units of beneficial interest of REITs, limited partnership interests
in master limited partnerships, rights or warrants to purchase common stocks,
securities convertible into common stocks, and preferred stock.
Under normal circumstances, at least 65% of the Portfolio's total assets
will be invested in income producing equity securities of companies principally
engaged in the U.S. real estate industry. For purposes of the Portfolio's
investment policies, a company is "principally engaged" in the real estate
industry if (i) it derives at least 50% of its revenues or profits from the
ownership, construction, management, financing or sale of residential,
commercial or industrial real estate or (ii) it has at least 50% of the fair
market value of its assets invested in residential, commercial or industrial
real estate. Companies in the real estate industry may include among others:
REITs, master limited partnerships that invest in interests in real estate, real
estate operating companies, and companies with substantial real estate holdings,
such as hotel companies, residential builders and land-rich companies. The
Portfolio seeks to invest in equity securities of companies that provide a
dividend yield that exceeds the composite dividend yield of securities
comprising the Standard & Poor's Stock Price Index ("S&P 500").
A substantial portion of the Portfolio's total assets will be invested in
securities of REITs. REITs pool investors' funds for investment primarily in
income producing real estate or real estate related loans or interests. A REIT
is not taxed on income distributed to its shareholders or unitholders if it
complies with regulatory requirements relating to its organization, ownership,
assets and income, and with a regulatory requirement that it distribute to its
shareholders or unitholders at least 95% of its taxable income for each taxable
year. Generally, REITs can be classified as Equity REITs, Mortgage REITs or
Hybrid REITs. Equity REITs invest the majority of their assets directly in real
property and derive their income primarily from rents and capital gains from
appreciation realized through property sales. Equity REITs are further
categorized according to the types of real estate securities they own, e.g.,
apartment properties, retail shopping centers, office and industrial properties,
hotels, health-care facilities, manufactured housing and mixed-property types.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive their income primarily from interest payments. Hybrid REITs combine the
characteristics of both Equity and Mortgage REITs. The Portfolio will invest
primarily in Equity REITs. A shareholder in the Portfolio should realize that by
investing in REITs indirectly through the Portfolio, he will bear not only his
proportionate share of the expenses of the Portfolio, but also indirectly, the
management expenses of underlying REITs.
Under normal circumstances, the Portfolio may invest up to 35% of its total
assets in debt securities issued or guaranteed by real estate companies or
secured by real estate assets and rated, at time of purchase, in one of the four
highest rating categories by a nationally recognized statistical rating
organization ("NRSRO") or
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determined by the Adviser to be of comparable quality at the time of purchase,
high quality money market instruments, such as notes, certificates of deposit or
bankers' acceptances issued by domestic or foreign insures, or high-grade debt
securities, consisting of corporate debt securities and United States Government
securities. Securities rated in the lowest category of investment grade
securities have speculative characteristics. Investment grade securities are
securities that are rated in one of the four highest rating categories by an
NRSRO.
Any remaining assets not invested as described above may be invested in
certain securities or obligations, including derivative securities, as set forth
in "Additional Investment Information" below. The Portfolio may concentrate in
the U.S. real estate industry, but may not invest more than 25% of its total
assets in securities of companies in any one other industry (for these purposes
the U.S. Government and its agencies and instrumentalities are not considered an
industry).
RISK FACTORS
The investment policies of the Portfolio entail certain risks and
considerations of which an investor should be aware. Because the Portfolio
invests primarily in the securities of companies principally engaged in the real
estate industry, its investments may be subject to the risks associated with the
direct ownership of real estate. These risks include: the cyclical nature of
real estate values, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, demographic trends and variations in rental income, changes
in zoning laws, casualty or condemnation losses, environmental risks, regulatory
limitations on rents, changes in neighborhood values, related party risks,
changes in the appeal of properties to tenants, increases in interest rates and
other real estate capital market influences. Generally, increases in interest
rates will increase the costs of obtaining financing, which could directly and
indirectly decrease the value of the Portfolio's investments. The Portfolio's
share price and investment return fluctuate, and a shareholder's investment when
redeemed may be worth more or less than his original cost.
Because it is expected that the Portfolio will invest a substantial portion
of its assets in REITs, the Portfolio will also be subject to certain risks
associated with the direct investments of REITs. REITs may be affected by
changes in the value of their underlying properties and by defaults by borrowers
or tenants. Mortgage REITs may be affected by the quality of the credit
extended. Furthermore, REITs are dependent on specialized management skills.
Some REITs may have limited diversification and may be subject to risks inherent
in investments in a limited number of properties, in a narrow geographic area,
or in a single property type. REITs depend generally on their ability to
generate cash flow to make distributions to shareholders or unitholders, and may
be subject to defaults by borrowers and to self-liquidations. In addition, the
performance of a REIT may be affected by its failure to qualify for tax-free
pass-through of income under the Internal Revenue Code of 1986, as amended (the
"Code"), or its failure to maintain exemption from registration under the
Investment Company Act of 1940, as amended (the "1940 Act"). Changes in
prevailing interest rates may inversely affect the value of the debt securities
in which the Portfolio will invest. Changes in the value of portfolio securities
will not necessarily affect cash income derived from these securities but will
affect a Portfolio's net asset value.
Because the Portfolio is a non-diversified portfolio, the Portfolio is not
limited by the 1940 Act in the proportion of its assets that may be invested in
the obligations of a single issuer. Thus, the Portfolio may invest a greater
proportion of its assets in the securities of a smaller number of issuers and,
as a result, will be subject to a greater risk with respect to its portfolio
securities. Any economic, political, or regulatory developments affecting
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the value of the securities the Portfolio holds could have a greater impact on
the total value of the Portfolio's holdings than would be the case if the
Portfolio's securities were diversified among more issuers. The Portfolio,
however, intends to comply with the diversification requirements imposed by the
Code for qualification as a regulated investment company. See "Taxes" and
"Investment Limitations."
ADDITIONAL INVESTMENT INFORMATION
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend their 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 a risk of delay in recovery of the securities or even loss
of rights in the collateral should the borrower of the securities fail
financially. A Portfolio will not enter into securities loan transactions
exceeding, in the aggregate, 33 1/3% of the market value of its total assets.
For more detailed information about securities lending, see "Investment
Objectives and Policies" in the Statement of Additional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money
market instruments, although the Portfolio intends to stay invested in
securities satisfying its primary investment objective to the extent practical.
The Portfolio may make money market investments pending other investment or
settlement for liquidity, or in adverse market conditions. The money market
investments permitted for the Portfolio include obligations of the United States
Government and its agencies and instrumentalities, other debt securities,
commercial paper including bank obligations, 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. Furthermore, 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. The
Portfolio may not invest more than 15% of its net assets in illiquid securities,
including securities for which there is not 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 15%
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. 144A
Securities may become illiquid if qualified institutional buyers are not
interested in acquiring the securities.
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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."
STOCK OPTIONS, FUTURES CONTRACTS AND OPTIONS IN FUTURES CONTRACTS. The
Portfolio may write (i.e., sell) covered call options on portfolio securities.
The Portfolio may write covered put options on portfolio securities. By selling
a covered call option, the Portfolio would become obligated during the term of
the option to deliver the securities underlying the option should the option
holder choose to exercise the option before the option's termination date. In
return for the call it has written, the Portfolio will receive from the
purchaser (or option holder) a premium which is the price of the option, less a
commission charged by a broker. The Portfolio will keep the premium regardless
of whether the option is exercised. By selling a covered put option, the
Portfolio incurs an obligation to buy the security underlying the option from
the purchaser of the put at the option's exercise price at any time during the
option period, at the purchaser's election (certain options written by the
Portfolio will be exercisable by the purchaser only on a specific date). A call
option is "covered" if the Portfolio owns the security underlying the option it
has written or has an absolute or immediate right to acquire the security by
holding a call option on such security, or maintains a sufficient amount of
cash, cash equivalents or liquid securities to purchase the underlying security.
Generally, a put option is "covered" if the Fund maintains cash, U.S. Government
securities or other high grade debt obligations equal to the exercise price of
the option, or if the Fund holds a put option on the same underlying security
with a similar or higher exercise price.
When the Portfolio writes covered call options, it augments its income by
the premiums received and is thereby hedged to the extent of that amount against
a decline in the price of the underlying securities. The premiums received will
offset a portion of the potential loss incurred by the Portfolio if the
securities underlying the options are ultimately sold by the Portfolio at a
loss. However, during the option period, the Portfolio has, in return for the
premium on the option, given up the opportunity for capital appreciation above
the exercise price should the market price of the underlying security increase,
but has retained the risk of loss should the price of the underlying security
decline.
The Portfolio will write put options to receive the premiums paid by
purchasers (when the Adviser wishes to purchase the security underlying the
option at a price lower than its current market price, in which case the
Portfolio will write the covered put at an exercise price reflecting the lower
purchase price sought) and to close out a long put option position.
The Portfolio may also purchase put options on its portfolio securities or
call options. When the Portfolio purchases a call option it acquires the right
to buy a designated security at a designated price (the "exercise price"), and
when the Portfolio purchases a put option it acquires the right to sell a
designated security at the exercise price, in each case on or before a specified
date (the "termination date"), which is usually not more than
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nine months from the date the option is issued. The Portfolio may purchase call
options to close out a covered call position or to protect against an increase
in the price of a security it anticipates purchasing. The Portfolio may purchase
put options on securities which it holds in its portfolio to protect itself
against decline in the value of the security. If the value of the underlying
security were to fall below the exercise price of the put purchased in an amount
greater than the premium paid for the option, the Portfolio would incur no
additional loss. The Portfolio may also purchase put options to close out
written put positions in a manner similar to call option closing purchase
transactions. There are no other limits on the Portfolio's ability to purchase
call and put options.
The Portfolio may enter into futures contracts and options on futures
contracts to remain fully invested and to reduce transaction costs. The
Portfolio may also enter into futures transactions as a hedge against
fluctuations in the price of a security it holds or intends to acquire, but not
for speculation or for achieving leverage. The Portfolio may enter into futures
contracts and options on futures contracts provided that not more than 5% of the
Portfolio's total assets at the time of entering into the contract or option is
required as deposit to secure obligations under such contracts and options, and
provided that not more than 20% of the Portfolio's total assets in the aggregate
is invested in futures contracts and options on futures contracts.
The Portfolio may purchase and write call and put options on futures
contracts that are traded on any international exchange, traded over-the-counter
or which are synthetic options or futures or equity swaps, and may enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. The
Portfolio will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in future contracts.
Options, futures and options on futures are derivative securities, in which
the Portfolio may invest for hedging purposes, as well as to remain fully
invested and to reduce transaction costs. Investing for the latter two purposes
may be considered speculative. The primary risks associated with the use of
options, futures and options on futures are (i) imperfect correlation between
the change in market value of the stocks held by the Portfolio and the prices of
futures and options relating to the stocks purchased or sold by the Portfolio;
and (ii) possible lack of a liquid secondary market for an option or a futures
contract and the resulting inability to close a futures position which could
have an adverse impact on the Portfolio's ability to hedge. In the opinion of
the Board of Directors, the risk that the Portfolio will be unable to close out
a futures position or options contract will be minimized by only entering into
futures contracts or options transactions for which there appears to be a liquid
secondary market.
TEMPORARY INVESTMENTS. For temporary defensive purposes, when the Adviser
determines that market conditions warrant, the Portfolio may invest up to 100%
of its assets in money market instruments consisting of securities issued or
guaranteed by the United States Government, its agencies or instrumentalities,
repurchase agreements, certificates of deposit and bankers' acceptances issued
by banks or savings and loan associations having net assets of at least $500
million as of the end of their most recent fiscal year, high-grade commercial
paper rated, at time of purchase, in the top two categories by a national rating
agency or determined to be of
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comparable quality by the Adviser at the time of purchase and other long- and
short-term debt instruments which are rated A or higher by Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") at the time
of purchase, and may hold a portion of its assets in cash.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. In such transactions,
instruments are bought with payment and delivery taking place in the future in
order to secure what is considered to be an advantageous yield or price at the
time of the transaction. Delivery of and payment for these securities may take
as long as a month or more after the date of the purchase commitment, but will
take place no more than 120 days after the trade date. The Portfolio will
maintain with the Custodian a separate account with a segregated portfolio of
high-grade debt securities or cash in an amount at least equal to these
commitments. The payment obligation and the interest rates that will be received
are each fixed at the time the Portfolio enters into the commitment and no
interest accrues to the Portfolio until settlement. Thus, it is possible that
the market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed. It is a
current policy of the Portfolio not to enter into when-issued commitments
exceeding, in the aggregate, 15% of the market value of the Portfolio's total
assets less liabilities other than the obligations created by these commitments.
INVESTMENT LIMITATIONS
As a non-diversified investment company, 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 portfolio
securities. However, the Portfolio intends to comply with the diversification
requirements imposed by the Internal Revenue Code of 1986, as amended, for
qualification a regulated investment company. See "Investment Limitations" in
the Statement of Additional Information.
The Portfolio 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
net assets would be invested in such repurchase agreements and other investments
for which market quotations are not readily available or which are otherwise
illiquid; (ii) invest more than 10% of its total assets in Restricted
Securities, except that the Portfolio may invest up to 15% of its total assets
in Restricted Securities that are 144A Securities, subject to the limitation on
illiquid securities described above; (iii) 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; (iv)
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 total assets at
the time of borrowing; (v) invest in fixed time deposits with a duration of over
seven calendar days; or (vi) invest in fixed timed deposits with a duration of
from two business days to seven calendar days if more than 10% of the
Portfolio's total assets would be invested in these deposits.
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MANAGEMENT OF THE FUND
INVESTMENT ADVISER. Morgan Stanley Asset Management Inc. is the Investment
Adviser and Administrator of the Fund and each of its portfolios. The Adviser
provides investment advice and portfolio management services pursuant to an
Investment Advisory Agreement and, subject to the supervision of the Fund's
Board of Directors, makes the Portfolio's day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Portfolio's investments. The Adviser is entitled to receive from the Portfolio
an annual management fee, payable quarterly, equal to the percentage of average
daily net assets set forth in the table below. However, 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 the total annual operating expenses of the
Portfolio to exceed the respective percentage of average daily net assets set
forth below.
<TABLE>
<CAPTION>
MAXIMUM TOTAL ANNUAL
OPERATING
MANAGEMENT EXPENSES AFTER FEE
FEE WAIVERS
----------- -------------------------
PORTFOLIO CLASS A CLASS B
- ------------------------------ --------- ---------
<S> <C> <C> <C>
U.S. Real Estate Portfolio 0.80% 1.00% 1.25%
</TABLE>
The fee payable by the Portfolio is higher than the management fee paid by
most investment companies, but the Adviser believes the fee is comparable to
those of investment companies with similar investment objectives.
The Adviser, with principal offices at 1221 Avenue of the Americas, New
York, New York 10020, conducts a worldwide portfolio management business,
providing a broad range of portfolio management services to customers in the
United States and abroad. At December 31, 1995, the Adviser, together with its
affiliated asset management companies, managed investments totaling
approximately $57.4 billion, including approximately $41.9 billion under active
management and $15.5 billion as Named Fiduciary or Fiduciary Adviser. See
"Management of the Fund" in the Statement of Additional Information.
PORTFOLIO MANAGER. -- RUSSELL C. PLATT. Mr. Platt joined Morgan Stanley in
1982 and currently is a Principal of the Firm. Russell Platt has primary
responsibility for managing the real estate securities investment business for
Morgan Stanley Asset Management ("MSAM") and serves as a member of the
Investment Committee of The Morgan Stanley Real Estate Fund ("MSREF").
Previously, Mr. Platt served as a Director of MSREF, where he was involved in
capital raising, acquisitions, oversight of investments and investor relations.
MSREF is a privately held limited partnership engaged in the acquisition of real
estate assets, portfolios and real estate operating companies with gross assets
of approximately $3.5 billion as of December 1994. From 1991 to 1993, Mr. Platt
was head of Morgan Stanley's Transaction Development Group, which was
responsible for identifying and structuring real estate investment opportunities
for the Firm and its clients worldwide. As part of these responsibilities, Mr.
Platt directed Morgan Stanley Realty's activities in Latin America and served as
U.S. liaison for Morgan Stanley Realty's Japanese real estate clients. From 1990
to 1991, Mr. Platt was based in Morgan Stanley Realty's London Office, where he
was responsible for European transaction development. Prior to this, he had
extensive transaction responsibilities involving portfolio, retail, office,
hotel and apartment sales and financings. Mr. Platt graduated from Williams
College in 1982 with a B.A. in Economics and received his M.B.A. from Harvard
Business School in 1986. Mr. Platt is a member of the Board of Trustees of The
National Multi
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Housing Council and The Wharton Real Estate Center, and a member of The Urban
Land Institute (International Council), the National Association of Real Estate
Investment Trusts and the Pension Real Estate Association.
THEODORE R. BIGMAN. Mr. Bigman joined Morgan Stanley Asset Management in
1995 as a Vice President. Together with Russell Platt, he is responsible for
MSAM's real estate securities research. Prior to joining MSAM, he was a Director
at CS First Boston, where he worked for eight years in the Real Estate Group.
Since 1992, Mr. Bigman established and managed the REIT effort at CS First
Boston, including primary responsibility for $2.5 billion of initial public
offering by real estate investment trusts. Previously, Mr. Bigman had extensive
real estate experience in a wide variety of transactions involving the financing
and sale of both individual assets and portfolios of real estate assets as well
as the acquisition and sale of several real estate companies. Mr. Bigman
graduated from Brandeis University in 1983 with a B.A. in Economics and received
his M.B.A. from Harvard University in 1987. He is a member of the National
Association of Real Estate Investment Trusts and International Council of
Shopping Centers.
ADMINISTRATOR. The Adviser also provides the Fund with administrative
services pursuant to an Administration Agreement. The services provided under
the Administration Agreement are subject to the supervision of the Officers and
the Board of Directors of the Fund and include day-to-day administration of
matters related to the corporate existence of the Fund, maintenance of its
records, preparation of reports, supervision of the Fund's arrangements with its
custodian, and assistance in the preparation of the Fund's registration
statements under Federal and State laws. The Administration Agreement also
provides that the Administrator, through its agents, will provide to 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.
Under an agreement between the Adviser and The Chase Manhattan Bank, N.A.
("Chase"), Chase provides certain administrative services to the Fund. In a
merger completed on September 1, 1995, Chase succeeded to all of the rights and
obligations under the U.S. Trust Administration Agreement between the Adviser
and the United States Trust Company of New York ("U.S. Trust"), pursuant to
which U.S. Trust had agreed to provide certain administrative services to the
Fund. Pursuant to a delegation clause in the U.S. Trust Administration
Agreement, U.S. Trust delegated its administrative responsibilities to Chase
Global Funds Services Company ("CGFSC"), formerly known as Mutual Funds Service
Company, which after the merger with Chase is a subsidiary of Chase and will
continue to provide certain administrative services to the Fund. The Adviser
supervises and monitors such administrative services provided by CGFSC. The
services provided under the Administration Agreement and the U.S. Trust
Administration Agreement are also subject to the supervision of the Board of
Directors of the Fund. The Board of Directors of the Fund has approved the
provision of services described above pursuant to the Administration Agreement
and the U.S. Trust Administration Agreement, as being in the best interests of
the Fund. CGFSC's business address is 73 Tremont Street, Boston, Massachusetts
02108-3913. For additional information regarding the Administration Agreement or
the U.S. Trust Administration Agreement, see "Management of the Fund" in the
Statement of Additional Information.
DIRECTORS AND OFFICERS. Pursuant to the Fund's Articles of Incorporation,
the Board of Directors decides upon matters of general policy and reviews the
actions of the Fund's Adviser, Administrator and Distributor. The Officers of
the Fund conduct and supervise its daily business operations.
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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.
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 features, distribution expenses or other expenses 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 obligations to
the Fund.
EXPENSES. The Portfolio is responsible for payment of certain other fees
and expenses (including legal fees, accountants' fees, custodial fees, and
printing and mailing costs) specified in the Administration and Distribution
Agreements.
PURCHASE OF SHARES
Class A and Class B shares of the Portfolio may be purchased, without sales
commission, at the net asset value per share next determined after receipt of
the purchase order by the Portfolio. See "Valuation of Shares."
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B SHARES
For an account for the Portfolio opened on or after January 2, 1996 (a "New
Account"), the minimum initial investment and minimum account size are $500,000
for Class A shares and $100,000 for Class B shares. Managed Accounts may
purchase Class A shares without being subject to any minimum initial investment
or minimum account size requirements for a Portfolio account. Employees of the
Adviser and of its affiliates may purchase Class A Shares subject to conditions,
including a lower minimum initial investment, established by Officers of the
Fund.
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 (but remains at or above $100,000) for a continuous
60-day period, the Class A shares in such account will convert to Class B shares
and will be subject to the distribution fee and other features applicable to the
Class B shares. The Fund, however, will not convert Class A shares to Class B
shares based solely upon changes in the market that reduce the net asset value
of shares. Under current tax law, conversions between share classes are not a
taxable event to the shareholder.
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Shares in a Portfolio account opened prior to January 2, 1996 (a "Pre-1996
Account") were designated Class A shares on January 2, 1996. Shares in a
Pre-1996 Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account") remain Class A shares regardless of account
size thereafter. Except for shares in a Managed Account, shares in a Pre-1996
Account with a value of less than $100,000 on March 1, 1996 (a "Grandfathered
Class B account") convert to Class B shares on March 1, 1996. Grandfathered
Class A Accounts and Managed Accounts are not subject to conversion from Class A
shares to Class B shares.
Investors may also invest in the Fund by purchasing shares through a trust
department, broker, dealer, agent, financial planner, financial services firm or
investment adviser. An investor may be charged an additional service or
transaction fee by that institution. The minimum investment levels may be waived
at the discretion of the Adviser for (i) certain employees and customers of
Morgan Stanley or its affiliates and certain trust departments, brokers,
dealers, agents, financial planners, financial services firms, or investment
advisers that have entered into an agreement with Morgan Stanley or its
affiliates; and (ii) retirement and deferred compensation plans and trusts used
to fund such plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as amended, and
"rabbi trusts". 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 a continuous 60-day period, the shares in such
account are subject to redemption by the Fund and, if redeemed, the net asset
value of such shares will be promptly paid to the shareholder. The Fund,
however, will not redeem shares based solely upon changes in the market that
reduce the net asset value of shares.
Grandfathered Class A Accounts, Grandfathered Class B Accounts and Managed
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 in a Portfolio account increases, whether due
to shareholder share purchases or market activity, to $500,000 or more, the
Class B shares will convert 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
that are applicable to New Accounts containing Class A shares, 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
The Fund's determination of an investor's eligibility to purchase shares of
a given class will take precedence over the investor's selection of a class.
Assuming the investor is eligible for the class, the Fund will select the most
favorable class for the investor, if the investor has not done so.
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. -- U.S. Real
Estate Portfolio", to:
Morgan Stanley Institutional Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
Payment will be accepted only in U.S. dollars, unless prior approval for
payment by other currencies is given by the Fund. The class(es) of shares of
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 class 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, the class selected, and the account number
assigned to you) as follows:
Chase Manhattan Bank, N.A.
One Manhattan Plaza
New York, NY 10081-1000
ABA #021000021
DDA #910-2-733293
Attn: Morgan Stanley Institutional Fund, Inc.
Ref: (Portfolio name, your account number, your account name)
Please call the Fund at 1-800-548-7786 prior to wiring funds.
C. Complete and sign the Account Registration Form and mail it to the address
shown thereon.
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Purchase orders for shares of the Portfolio which are received prior to the
regular close of the NYSE (currently 4:00 p.m. Eastern Time) will be executed
at the price computed on the date of receipt as long as the Transfer Agent
receives payment by check or in Federal Funds prior to the regular close of
the NYSE on such day.
Federal Funds purchase orders will be accepted only on a day on which the Fund
and Chase (the "Custodian Bank") are open for business. Your bank may charge a
service fee for wiring Federal 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.
Your bank may charge a service fee for wiring funds.
ADDITIONAL INVESTMENTS
You may add to your account at any time (minimum additional investment
$1,000 except for automatic reinvestment of dividends and capital gains
distributions for which there are no minimums) by purchasing shares at net asset
value by mailing a check to the Fund (payable to "Morgan Stanley Institutional
Fund, Inc. -- U.S. Real Estate Portfolio" at the above address or by wiring
monies to the Custodian Bank as outlined above. It is very important that your
account name, the portfolio name and the class selected be specified in the
letter or wire to assure proper crediting to your account. In order to insure
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.
Additional investments will be applied to purchase additional shares in the same
class held by a shareholder in a Portfolio account.
OTHER PURCHASE INFORMATION
The purchase price of the Class A and Class B shares of the Portfolio is the
net asset value next determined after the order is received. See "Valuation of
Shares." An order received prior to the close of the New York Stock Exchange
("NYSE"), which is currently 4:00 p.m. Eastern Time, will be executed at the
price computed on the date of receipt; an order received after the close of the
NYSE will be executed at the price computed on the next day the NYSE is open as
long as the Transfer Agent receives payment by check or in Federal Funds prior
to the regular close of the NYSE on such day.
Although the legal rights of Class A and Class B shares will be identical,
the different expenses borne by each class will result in different net 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
expense charged to Class B shares. It is expected, however, that the net asset
value per share of the two classes will tend to converge immediately after the
recording of dividends which will differ by approximately the amount of the
distribution expense accrual differential between the classes.
In the interest of economy and convenience, and because of the operating
procedures of the Fund, certificates representing shares of the Portfolio will
not be issued. All shares purchased are confirmed to you and credited to your
account on the Fund's books maintained by the Adviser or its agents. You will
have the same rights and ownership with respect to such shares as if
certificates had been issued.
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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 the
Distributor. See "Purchase of Shares" in the Statement of Additional
Information.
EXCESSIVE TRADING
Frequent trades involving either substantial portfolio assets or a
substantial portion of your account or accounts controlled by you can disrupt
management of a portfolio and raise its expenses. Consequently, in the interest
of all the stockholders of the Portfolio and the Portfolio's performance, the
Fund may in its discretion bar a stockholder that engages in excessive trading
of shares of any class of a portfolio from further purchases of shares of the
Fund for an indefinite period. The Fund considers excessive trading to be more
than one purchase and sale involving shares of the same class of a portfolio of
the Fund within any 120-day period. As an example, exchanging shares of
portfolios of the Fund as follows amounts to excessive trading: exchanging Class
A shares of Portfolio A for Class A shares of Portfolio B, then exchanging Class
A shares of Portfolio B for Class A shares of Portfolio C and again exchanging
Class A shares of Portfolio C for Class A 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, such as TFM
Accounts, 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 price has been collected,
which may take up to eight business days after purchase. The Fund will redeem
Class A shares or Class B shares of the Portfolio at the next determined net
asset value of shares of the applicable class. On days that both the NYSE and
the Custodian Bank are open for business, the net asset value per share of the
Portfolio is determined at the close of trading of the NYSE (currently 4:00 p.m.
Eastern time). Shares of the Portfolio may be redeemed by mail or telephone. No
charge is made for redemption. Any redemption 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 Class A shares or Class B shares at the net
asset value determined on the date the request is received, if the request is
received in "good order" before the regular close of the NYSE. Your request
should be addressed to Morgan Stanley Institutional Fund, Inc., P.O. Box 2798,
Boston, Massachusetts 02208-2798, except that deliveries by overnight courier
should be addressed to Morgan Stanley Institutional Fund, Inc., c/o Chase Global
Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108-3913.
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"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 mail or
overnight courier and will be implemented at the net asset value next determined
after it is received. Redemption requests sent to the Fund through express mail
must be mailed to the address of the Dividend Disbursing and Transfer Agent
listed under "General Information". The Fund and the Fund's transfer agent (the
"Transfer Agent") will employ reasonable procedures to confirm that the
instructions communicated by telephone are genuine. These procedures include
requiring the investor to provide certain personal identification information at
the time an account is opened and prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written
instructions regarding transaction requests. Neither the Fund nor the Transfer
Agent will be responsible for any loss, liability, cost or expense for following
instructions received by telephone that either of them reasonably believes to be
genuine.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Fund at the address above.
Requests to change the bank or account must be signed by each shareholder and
each signature must be guaranteed.
FURTHER REDEMPTION INFORMATION
Normally the Fund will make payment for all shares redeemed within one
business day of receipt of the request, but in no event will payment be made
more than seven days after receipt of a redemption request in good order.
However, payments to investors redeeming shares which were purchased by check
will not be made until payment for the purchase has been collected, which may
take up to eight days after the date of purchase. The Fund may suspend the right
of redemption or postpone the date upon which redemptions are effected at times
when the NYSE is closed, or under any emergency circumstances as determined by
the Securities and Exchange Commission (the "Commission").
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Portfolio to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of securities held by the Portfolio in lieu of
cash in
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conformity with applicable rules of the Commission. Distributions-in-kind will
be made in readily marketable securities. Investors may incur brokerage charges
on the sale of portfolio securities so received in payment of redemptions.
To protect your account, the Fund and its agents from fraud, signature
guarantees are required for certain redemptions to verify the identity of the
person who has authorized a redemption from your account. Please contact the
Fund for further information. See "Redemption of Shares" in the Statement of
Additional Information.
SHAREHOLDER SERVICES
EXCHANGE FEATURES
You may exchange shares that you own in the Portfolio for shares of any
other available portfolio of the Fund (other than the International Equity
Portfolio, which is closed to new investors). In exchanging for shares of a
portfolio with more than one class, the class of shares you receive in the
exchange will be determined in the same manner as any other purchase of shares
and will not be based on the class of shares surrendered for the exchange.
Consequently, the same minimum initial investment and minimum account size for
determining the class of shares received in the exchange will apply. See
"Purchase of Shares." Shares of the portfolios may be exchanged by mail or
telephone. The privilege to exchange shares by telephone is automatic and made
available without shareholder election. Before you make an exchange, you should
read the prospectus of the portfolio(s) in which you seek to invest. Because an
exchange transaction is treated as a redemption followed by a purchase, an
exchange would be considered a taxable event for shareholders subject to tax.
The exchange privilege is only available with respect to portfolios that are
registered for sale in a shareholder's state of residence. The exchange
privilege may be modified or terminated by the Fund at any time upon 60-days'
notice to shareholders.
BY MAIL
In order to exchange shares by mail, you should include in the exchange
request the name, class of shares and account number of your current portfolio,
the names of the portfolio(s) and class(es) of shares into which you intend to
exchange shares, and the signatures of all registered account holders. Send the
exchange request to Morgan Stanley Institutional Fund, P.O. Box 2798, Boston,
Massachusetts 02208-2798.
BY TELEPHONE
When exchanging shares by telephone, have ready the name, class of shares
and account number of the current Portfolio, the names of the portfolio(s) and
class(es) of shares 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 the class of
the Portfolios involved in the exchange of the shares 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
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written request must be received in good order before any transfer can be made.
Transferring the registration of shares may affect the eligibility of your
account for a given class of the Portfolio's shares and may result in
involuntary conversion or redemption of your shares. See "Purchase of Shares"
above.
VALUATION OF SHARES
The net asset value per share of a class of shares of the Portfolio is
determined by dividing the total market value of the Portfolio's investments and
other assets attributable to such class, less any liabilities attributable to
such class, by the total number of outstanding shares of such class of the
Portfolio. Net asset value is calculated separately for each class of the
Portfolio. Net asset value per share is determined as of the close of the NYSE
on each day that the NYSE is open for business. Price information on listed
securities is taken from the exchange where the security is primarily traded.
Securities listed on a U.S. securities exchange for which market quotations are
available are valued at the last quoted sale price on the day the valuation is
made. Securities listed on a foreign exchange are valued at their closing price.
Unlisted securities and listed securities not traded on the valuation date for
which market quotations are not readily available are valued at a price that is
considered to best represent fair value within a range not in excess of the
current asked price nor less than the current bid price. The current bid and
asked prices are determined based on the bid and asked prices quoted on such
valuation date by reputable brokers.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities, which is
accrued daily. In addition, bonds and other fixed income securities may be
valued on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices, but take into 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 sale price, or
when securities exchange valuations are used, at the latest quoted bid price on
the day of valuation. If there is no such reported sale, the latest quoted bid
price will be used. Securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. In the event
that amortized cost does not approximate market value, market prices as
determined above will be used.
The value of other assets and securities for which no quotations are readily
available (including restricted and unlisted foreign securities) and those
securities for which it is inappropriate to determine prices in accordance with
the above-stated 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 bid price of such
currencies against the U.S. dollar last quoted by any major bank.
Although the legal rights of Class A and Class B shares will be identical,
the different expenses borne by each class will result in different net asset
values and dividends for the class. 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 expense charged to
Class B shares.
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PERFORMANCE INFORMATION
The Fund may from time to time advertise total return for each class of the
Portfolio. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. The "total return" shows what an investment in a
class of the Portfolio would have earned over a specified period of time (such
as one, five or ten years), assuming that all distributions and dividends by the
Portfolio were reinvested in the same class 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 upon redemption. The
Fund may also include comparative performance information in advertising or
marketing the Portfolio's 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.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All income dividends and capital gains distributions for a class of shares
will be automatically reinvested in additional shares of such class 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 quarterly dividends beginning with a distribution at the
end of the first calendar quarter of 1996. Net realized gains for the Portfolio,
if any, after reduction for any 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, confirmations of such purchases will not be provided at
the time of completion of such purchases, as might otherwise be required by Rule
10b-10.
Undistributed net investment income 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 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.
Because of the distribution fee and any other expenses that may be
attributable to the Class B shares, the net income attributable to and the
dividends payable on Class B shares will be lower than the net income
attributable to and the dividends payable on Class A shares. As a result, the
net asset value per share of the classes of the Portfolio will differ at times.
Expenses of the Portfolio allocated to a particular class of shares thereof will
be borne on a pro rata basis by each outstanding share of that class.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial,
or administrative action.
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No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax 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. It is the
Portfolio's intent to continue to qualify for the special tax treatment afforded
regulated investment companies under Subchapter M of the Code, so that the
Portfolio will continue to 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, the excess of net short-term capital gain over net
long-term capital loss) 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. The Portfolio will report annually to
its shareholders the amount of dividend income qualifying for the corporate
dividend received deduction.
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) prior to the end of each calendar year to avoid liability for federal
excise tax.
Dividends and other distributions declared by the Portfolio in October,
November or December of any year and payable to shareholders of record on a date
in such month will be deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if the distributions are paid by
the Portfolio at any time during the following January.
The sale, redemption or exchange of shares may result in taxable gain or
loss to the selling, exchanging or redeeming shareholder, depending upon whether
the fair market value of the sale, exchange or redemption proceeds exceeds or is
less than the shareholder's adjusted basis in the redeemed, exchanged or sold
shares. Any such taxable gain or loss generally will be treated as long-term
capital gain or loss if the shares have been held for more than one year and
otherwise generally will be treated as short-term capital gain or loss. 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, however, 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.
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.
27
<PAGE>
Shareholders are urged to consult with their tax advisers concerning the
application of state and local income taxes to investments in the Portfolio,
which may differ from the federal income tax consequences described above.
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 A 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 Fund's portfolios for their clients.
In purchasing and selling securities for the Portfolio, it is the Fund's
policy to seek to obtain quality execution at the most favorable prices through
responsible broker-dealers. In selecting broker-dealers to execute the
securities transactions for the Portfolio, consideration will be given to such
factors as the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing broker-dealers, and
the brokerage and research services which they provide to the Fund. Some
securities considered for investment by the Portfolio may also be appropriate
for other clients served by the Adviser. If the 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 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 Portfolio's brokerage
transactions to Morgan Stanley or broker affiliates of Morgan Stanley. In order
for Morgan Stanley or its affiliates to effect any portfolio transactions for
the Fund, the commissions, fees or other remuneration received by Morgan Stanley
or such affiliates must be reasonable and fair compared to the commissions, fees
or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. Furthermore, the Board
of Directors of the Fund, including a majority of those
28
<PAGE>
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.
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 under normal circumstances,
the annual portfolio turnover rate will not exceed 100%. High portfolio turnover
involves correspondingly greater transaction costs which will be borne directly
by the respective Portfolio. In addition, high portfolio turnover may result in
more capital gains which would be taxable to the shareholders of the Portfolio.
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 billion 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. Subject to the notice period to shareholders with
respect to shares held by the shareholders, 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 shares of
common stock of each portfolio are currently classified into two classes, the
Class A shares and the Class B shares, except for the International Small Cap,
Money Market and Municipal Money Market Portfolios, which only offer Class A
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 voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the Directors
if they choose to do so. Persons or organizations owning 25% or more of the
outstanding shares of 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 Adviser, or its agent, as Transfer Agent, will send to each
shareholder having an account directly with the Fund a monthly statement showing
transactions in the account, the total number of shares owned, and any dividends
or distributions paid.
29
<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 approved by the Board of Directors of the Fund in
accordance with regulations of the Securities and Exchange Commission for the
purpose of providing custodial services for such assets. MSTC may also hold
certain domestic assets for the Fund. For more information on the custodians,
see "General Information -- Custody Arrangements" in the Statement of Additional
Information.
DIVIDEND DISBURSING AND TRANSFER AGENT
Chase Global Funds Services Company, 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 the annual financial statements of each portfolio.
LITIGATION
The Fund is not involved in any litigation.
30
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
U.S. REAL ESTATE PORTFOLIO
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First
Name Initial Last Name
2.
First
Name Initial Last Name
First
Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual taxpayers, this is
IDENTIFICATION your Social Security Number.
NUMBER
1. INDIVIDUAL
2. JOINT TENANTS
(RIGHTS OF SURVIVORSHIP PRESUMED
UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER IDENTIFICATION SOCIAL SECURITY NUMBER
NUMBER ("TIN") ("SSN")
OR
2. TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
OR
TIN SSN
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer) with your correct
TIN(s) or SSN(s). Accounts that have a missing or incorrect TIN(s) or SSN(s) will
be subject to backup withholding at a 31% rate on dividends, distributions and
other payments. If you have not provided us with your correct TIN(s) or SSN(s),
you may be subject to a $50 penalty imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability of persons subject
to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding under Section
3406(a)(1)(C) of the Internal Revenue Code because you have underreported interest
or dividends or you were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following / / Class A Shares $ / / Class B Shares $
CLASS SECTION Portfolio:
(Class A shares minimum $500,000 for U.S. Real Estate Portfolio
each Portfolio and Class B shares
minimum $100,000 for the Global Equity,
International Equity, Asian Equity,
European Equity, Japanese Equity and
Latin American Equity Portfolios).
Please indicate Portfolio, class and
amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone
AND EXCHANGE requests to wire redemption proceeds to
OPTION the commercial bank indicated at right
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests
shares by telephone. A are believed to be authentic.
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated
YOUR FUND ACCOUNT. by telephone are genuine. These
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal
NOT BE HONORED UNLESS THE BOX identification information at the time
IS CHECKED. 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.
<CAPTION>
G)
Name of COMMERCIAL Bank (Not Savings Bank)
Bank Account No.
Bank ABA No.
Name(s) in which your BANK Account is Established
Bank's Street Address
City State Zip
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the
account statement sent to
my/our registered Address
address, I/we hereby
authorize the fund to City State Zip Code
mail duplicate statements
to the name and address
provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF PERJURY THAT THE INFORMATION ON THIS APPLICATION IS
COMPLETE AND CORRECT AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE
ARE NOT SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE
HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE ARE SUBJECT TO BACKUP WITHHOLDING AS A
RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED ME/US THAT I AM/WE ARE NO
LONGER SUBJECT TO BACKUP WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE
SOCIAL SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER
TO CHASE GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE DATE OF THIS APPLICATION OR IF I/WE FAIL
TO FURNISH MY/OUR CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY AND A 31% BACKUP WITHHOLDING ON
DISTRIBUTIONS AND REDEMPTION PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU MAY REQUEST SUCH
FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S. CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN
PERSONS AS DEFINED BY THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
(X) (X)
Signature Date Signature (if joint account, both must sign) Date
</TABLE>
<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
<TABLE>
<S> <C>
PAGE
----
Fund Expenses..................................... 2
Financial Highlights.............................. 4
Prospectus Summary................................ 6
Investment Objective and Policies................. 10
Additional Investment Information................. 12
Investment Limitations............................ 15
Management of the Fund............................ 16
Purchase of Shares................................ 18
Redemption of Shares.............................. 22
Shareholder Services.............................. 24
Valuation of Shares............................... 25
Performance Information........................... 26
Dividends and Capital Gains Distributions......... 26
Taxes............................................. 26
Portfolio Transactions............................ 28
General Information............................... 29
Account Registration Form
</TABLE>
U.S. REAL ESTATE PORTFOLIO
PORTFOLIO OF THE
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
Common Stock
($.001 PAR VALUE)
-------------
PROSPECTUS
-------------
Investment Adviser
Morgan Stanley
Asset Management Inc.
Distributor
Morgan Stanley & Co.
Incorporated
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
P.O. BOX 2798, BOSTON, MA 02208-2798
- ---------------------------------------
- ---------------------------------------
- ---------------------------------------
- ---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
P R O S P E C T U S
----------------------------------------------------------------------
ACTIVE COUNTRY ALLOCATION PORTFOLIO
A PORTFOLIO OF THE
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798, BOSTON, MASSACHUSETTS 02208-2798
FOR INFORMATION CALL 1-800-548-7786
----------------
Morgan Stanley Institutional Fund, Inc. (the "Fund") is a no-load, open-end
management investment company, or mutual fund, which offers redeemable shares in
a series of diversified and non-diversified investment portfolios
("portfolios"). The Fund currently consists of twenty-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 Class A and the Class B
shares of the Active Country Allocation Portfolio (the "Portfolio"). On January
2, 1996, the Portfolio began offering two classes of shares, the Class A shares
and the Class B shares, except for the Money Market, Municipal Money Market and
International Small Cap Portfolios which only offer Class A shares. All shares
of the Portfolio owned prior to January 2, 1996 were redesignated Class A shares
on January 2, 1996. The Class A and Class B shares currently offered by the
Portfolio have different minimum investment requirements and fund expenses.
Shares of the portfolios are offered with no sales charge or exchange or
redemption fee (with the exception of the International Small Cap Portfolio).
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 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 "Prospectus Summary" below. The Fund
currently offers the following portfolios: (i) GLOBAL AND INTERNATIONAL EQUITY
- -- Active Country Allocation, Asian Equity, Emerging Markets, European Equity,
Global Equity, Gold, International Equity, International Magnum, International
Small Cap, Japanese Equity and Latin American Portfolios; (ii) U.S. EQUITY --
Aggressive Equity, Emerging Growth, Equity Growth, MicroCap, Small Cap Value
Equity, U.S. Real Estate and Value Equity Portfolios; (iii) EQUITY AND FIXED
INCOME -- 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 May 1, 1996, which 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 MAY 1, 1996.
SUPPLEMENTED THROUGH DECEMBER 30, 1996.
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder of
the Active Country Allocation Portfolio will incur:
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C>
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (Net of Fee Waiver)*
Class A................................................................................. 0.27%
Class B................................................................................. 0.27%
12b-1 Fees
Class A................................................................................. None
Class B................................................................................. 0.25%
Other Expenses
Class A................................................................................. 0.53%
Class B................................................................................. 0.53%
-----------
Total Operating Expenses (Net of Fee Waivers)*
Class A................................................................................. 0.80%
Class B................................................................................. 1.05%
-----------
-----------
</TABLE>
- ------------------------
*The Adviser has agreed to waive its management 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 management
fee would be 0.65%. Absent the fee waiver and/or expense reimbursement, the
Portfolio's total operating expenses would be 1.18% of the average daily net
assets of the Class A shares and 1.43% of the average daily net assets of the
Class B shares. As a result of this reduction, the Management 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."
2
<PAGE>
The purpose of the table above is to assist the investor in understanding
the various expenses that an investor in the Portfolio will bear directly or
indirectly. The Class A expenses and fees for the Portfolio are based on actual
figures for the fiscal year ended December 31, 1995. The Class B expenses and
fees for the Portfolio are based on estimates, assuming that the average daily
net assets of the Class B shares of the Portfolio will be $50,000,000. "Other
Expenses" include Board of Directors' fees and expenses, amortization of
organizational costs, filing fees, professional fees and costs for shareholder
reports. Due to the continuous nature of Rule 12b-1 fees, long term Class B
shareholders may pay more than the equivalent of the maximum front-end sales
charges otherwise permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
The following example illustrates the expenses that you would pay on a
$1,000 investment assuming (1) a 5% annual rate of return and (2) redemption at
the end of each time period. As noted in the table above, the Fund charges no
redemption fees of any kind. The following example is based on the total
operating expenses of the Portfolio after fee waivers.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Active Country Allocation Portfolio
Class A.......................................................... $ 8 $ 26 $ 44 $ 99
Class B.......................................................... 11 33 58 128
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The Fund intends to comply with all state laws that restrict investment
company expenses. Currently, the most restrictive state law requires that the
aggregate annual expenses of an investment company shall not exceed two and
one-half percent (2 1/2%) of the first $30 million of average net assets, two
percent (2%) of the next $70 million of average net assets, and one and one-half
percent (1 1/2%) of the remaining net assets of such investment company.
The Adviser has agreed to a reduction in the amounts payable to it, and to
reimburse the Portfolio, if necessary, if in any fiscal year the sum of the
Portfolio's expenses exceeds the limit set by applicable state law.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides financial highlights for the Class A shares of
the Portfolio for each of the periods presented. The audited financial
highlights for the Class A shares for the fiscal year ended December 31, 1995
are part of the Fund's financial statements which appear in the Fund's December
31, 1995 Annual Report to Shareholders and which are included in the Fund's
Statement of Additional Information. The Portfolio's financial highlights for
each of the periods presented have been audited by Price Waterhouse LLP, whose
unqualified report thereon is also included in the Statement of Additional
Information. Additional performance information for the Class A shares is
included in the Annual Report. The Annual Report and the financial statements
therein, along with the Statement of Additional Information, are available at no
cost from the Fund at the address and telephone number noted on the cover page
of this Prospectus. Financial highlights are not available for the new Class B
shares since they were not offered as of December 31, 1995. Subsequent to
October 31, 1992 (the Fund's prior fiscal year end), the Fund changed its fiscal
year end to December 31. The following information should be read in conjunction
with the financial statements and notes thereto.
4
<PAGE>
ACTIVE COUNTRY ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
JANUARY 17,
1992* TWO MONTHS
TO OCTOBER ENDED
31, DECEMBER 31, YEARS ENDED DECEMBER 31,
1992 1992 1993 1994 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 10.00 $ 9.37 $ 9.59 $ 12.21 $ 11.65
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1)........ 0.11 0.02 0.13 0.19 0.17
Net Realized and Unrealized Gain/
(Loss) on Investments........... (0.74) 0.20 2.75 (0.25) 1.00
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations...................... (0.63) 0.22 2.88 (0.06) 1.17
------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS
Net Investment Income............ -- -- (0.09) (0.14) (0.25)
In Excess of Net Investment
Income.......................... -- -- (0.08) -- (0.10)
Net Realized Gain................ -- -- -- (0.36) (0.84)
In Excess of Net Realized Gain... -- -- (0.09) -- --
------------- ------------- ------------- ------------- -------------
Total Distributions.............. -- -- (0.26) (0.50) (1.19)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD..... $ 9.37 $ 9.59 $ 12.21 $ 11.65 $ 11.63
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN....................... (6.30)% 2.35% 30.72% (0.52)% 10.57%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands)....................... $ 47,534 $ 50,234 $ 150,854 $ 182,977 $ 170,663
Ratio of Expenses to Average Net
Assets (1)(2)..................... 0.88%** 0.80%** 0.80% 0.80% 0.80%
Ratio of Net Investment Income to
Average Net Assets (1)(2)......... 2.32%** 1.22%** 1.29% 1.43% 1.26%
Portfolio Turnover Rate............ 62% 2% % 53 % 51 % 72
- ------------------------------
(1) Effect of voluntary expense
limitation during the period:
Per share benefit to net
investment income............ $ 0.03 $ 0.01 $ 0.05 $ 0.03 $ 0.05
Ratios before expense
limitation:
Expenses to Average Net
Assets....................... 1.58%** 1.70%** 1.33% 1.00% 1.18%
Net Investment Income to
Average Net Assets........... 1.62%** 0.32%** 0.76% 1.23% 0.88%
</TABLE>
(2) Under the terms of an Investment Advisory Agreement, the Adviser is entitled
to receive a management fee calculated at an annual rate of 0.65% of the
average daily net assets of the Portfolio. The Adviser has agreed to waive a
portion of this fee and/or reimburse expenses of the Portfolio to the extent
that the total operating expenses of the Portfolio exceed 0.80% of the
average daily net assets of the Class A shares and 1.05% of the average
daily net assets of the Class B shares. In the period ended October 31,
1992, the two months ended December 31, 1992, and the years ended December
31, 1993, 1994 and 1995, the Adviser waived management fees and/or
reimbursed expenses totalling $164,000, $72,000, $552,000, $367,000 and
$618,000, respectively, for the Portfolio.
* Commencement of Operations.
** Annualized.
5
<PAGE>
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 shares and, except the International
Small Cap, Money Market and Municipal Money Market Portfolios, also offers Class
B shares. Each portfolio has its own investment objective and policies designed
to meet its specific goals. This Prospectus pertains to the Class A and Class B
shares of the Active Country Allocation Portfolio.
-The ACTIVE COUNTRY ALLOCATION PORTFOLIO seeks long-term capital
appreciation by investing in accordance with country weightings determined
by the Adviser in equity securities of non-U.S. issuers which, in the
aggregate, replicate broad country indices.
The other portfolios of the Fund are described in other prospectuses which
may be obtained from the Fund at the address and phone number noted on the cover
page of this Prospectus. The objectives of these other portfolios are listed
below:
GLOBAL AND INTERNATIONAL EQUITY:
-The ASIAN EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in the 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 the equity securities of European issuers.
-The GLOBAL EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in the 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 the equity securities of non-United States issuers.
-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 Objectives and Policies"
below) weightings determined by the Adviser.
-The INTERNATIONAL SMALL CAP PORTFOLIO seeks long-term capital appreciation
by investing primarily in the equity securities of non-United States
issuers with equity market capitalizations of less than $1 billion.
-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.
6
<PAGE>
US EQUITY:
-The AGGRESSIVE EQUITY PORTFOLIO seeks capital appreciation by investing
primarily in corporate equity and equity-linked securities.
-The EMERGING GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of small- to
medium-sized corporations.
-The EQUITY GROWTH PORTFOLIO seeks long-term capital appreciation by
investing in growth-oriented equity securities of medium and large
capitalization companies.
-The MICROCAP PORTFOLIO seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of small corporations.
-The SMALL CAP VALUE EQUITY PORTFOLIO seeks high long-term total return by
investing in undervalued equity securities of small- to medium-sized
companies.
-The U.S. REAL ESTATE PORTFOLIO seeks to provide above average current
income and long-term capital appreciation by investing primarily in equity
securities of companies in the U.S. real estate industry, including real
estate investment trusts.
-The VALUE EQUITY PORTFOLIO seeks high total return by investing in equity
securities which the Adviser believes to be undervalued relative to the
stock market in general at the time of purchase.
EQUITY AND FIXED INCOME:
-The BALANCED PORTFOLIO seeks high total return while preserving capital by
investing in a combination of undervalued equity securities and fixed
income securities.
FIXED INCOME:
-The EMERGING MARKETS DEBT PORTFOLIO seeks high total return by investing
primarily in debt securities of government, government-related and
corporate issuers located in emerging countries.
-The FIXED INCOME PORTFOLIO seeks to produce a high total return consistent
with the preservation of capital by investing in a diversified portfolio of
fixed income securities.
-The GLOBAL FIXED INCOME PORTFOLIO seeks to produce an attractive real rate
of return while preserving capital by investing in fixed income securities
of issuers throughout the world, including United States issuers.
-The HIGH YIELD PORTFOLIO seeks to maximize total return by investing in a
diversified portfolio of high yield fixed income securities that offer a
yield above that generally available on debt securities in the three
highest rating categories of the recognized rating services.
-The MORTGAGE-BACKED SECURITIES PORTFOLIO seeks to produce as high a level
of current income as is consistent with the preservation of capital by
investing primarily in a variety of investment-grade mortgage-backed
securities.
-The MUNICIPAL BOND PORTFOLIO seeks to produce a high level of current
income consistent with the preservation of principal through investment
primarily in municipal obligations, the interest on which is exempt from
federal income tax.
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.
7
<PAGE>
-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 December 31, 1995 had approximately $57.4 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 of the
Portfolio are offered at net asset value with no sales commission, but with a
12b-1 fee, which is accrued daily and paid quarterly, equal to 0.25% of the
Class B shares' average daily net assets on an annualized basis. Share purchases
may be made by sending investments directly to the Fund or through the
Distributor. Shares in a Portfolio account opened prior to January 2, 1996
(each, a "Pre-1996 Account") were designated Class A shares on January 2, 1996.
For a Portfolio account opened on or after January 2, 1996 (a "New Account"),
the minimum initial investment is $500,000 for Class A shares and $100,000 for
Class B shares. Certain exceptions to the foregoing minimums apply to (1) shares
in a Pre-1996 Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account"); (2) Portfolio accounts held by certain
employees of the Adviser and its affiliates; and (3) certain advisory or asset
allocation accounts, such as Total Funds Management accounts, managed by Morgan
Stanley or its affiliates, including the Adviser ("Managed Accounts"). The
Adviser reserves the right in its sole discretion to determine which of such
advisory or asset allocation accounts shall be Managed Accounts. For information
regarding Managed Accounts, please contact your Morgan Stanley account
representative or the Fund at the telephone number provided on the cover of this
Prospectus. Shares in a Pre-1996 Account with a value of less than $100,000 on
March 1, 1996 (a "Grandfathered Class B Account") converted to Class B shares on
March 1, 1996. The minimum investment levels may be waived at the discretion of
the Adviser for (i) certain employees and customers of Morgan Stanley or its
affiliates and certain trust departments, brokers, dealers, agents, financial
planners, financial services firms, or investment advisers that have entered
into an agreement with Morgan Stanley or its affiliates; and (ii) retirement and
deferred compensation plans and trusts used to fund such plans, including, but
not limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended, and "rabbi trusts." See "Purchase of Shares --
Minimum Investment and Account Sizes; Conversion from Class A to Class B
Shares."
The minimum subsequent investment for a Portfolio account is $1,000 (except
for automatic reinvestment of dividends and capital gains distributions for
which there is no minimum). Such subsequent investments will be applied to
purchase additional shares in the same class held by a shareholder in a
Portfolio account. See "Purchase of Shares -- Additional Investments."
8
<PAGE>
HOW TO REDEEM
Class A shares or Class B shares of the Portfolio may be redeemed at any
time, without cost, at the net asset value per share of shares of the applicable
class 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 such account to less than
$100,000 for a continuous 60-day period. Involuntary redemption does not apply
to Managed Accounts, Grandfathered Class A Accounts and Grandfathered Class B
Accounts, regardless of the value of such accounts. Class A shares in a New
Account will convert to Class B shares if shareholder redemption(s) of such
shares reduces the value of such account to less than $500,000 for a continuous
60-day period. Class B shares in a New Account will automatically convert to
Class A shares if shareholder purchases of additional Class B shares or market
activity cause the value of the Class B shares in the New Account to increase to
$500,000 or more. See "Purchase of Shares -- Minimum Account Sizes and
Involuntary Redemption of Shares" and "Redemption of Shares."
RISK FACTORS
The investment policies of the Portfolio entail certain risks and
considerations of which an investor should be aware. The Portfolio will invest
in securities of foreign issuers, including issuers in emerging countries, which
are subject to certain risks not typically associated with domestic securities,
including (1) restrictions on foreign investment and on repatriation of capital
invested in foreign countries, (2) currency fluctuations, (3) the cost of
converting foreign currency into U.S. dollars, (4) potential price volatility
and lesser liquidity of shares traded on foreign country securities markets or
lack of a secondary trading market for such securities and (5) political and
economic risks, including the risk of nationalization or expropriation of assets
and the risk of war. In addition, accounting, auditing, financial and other
reporting standards in foreign countries are not equivalent to U.S. standards
and therefore, disclosure of certain material information may not be made and
less information may be available to investors investing in foreign countries
than in the United States. There is also generally less governmental regulation
of the securities industry in foreign countries than the United States.
Moreover, it may be more difficult to obtain a judgment in a court outside the
United States. See "Investment Objective and Policies" and "Additional
Investment Information." In addition, the Portfolio may invest in repurchase
agreements, lend its portfolio securities, purchase securities on a when-issued
basis and invest in forward foreign currency exchange contracts to hedge
currency risk associated with investment in non-U.S. dollar denominated
securities. Each of these investment strategies involves specific risks which
are described under "Investment Objective and Policies" and "Additional
Investment Information" herein and under "Investment Objectives and Policies" in
the Statement of Additional Information.
9
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Active Country Allocation Portfolio is
described below, together with the policies the Fund employs in its efforts to
achieve this objective. The Active Country Allocation Portfolio's investment
objective is a fundamental policy which may not be changed without the approval
of a majority of the Portfolio's outstanding voting securities. There is no
assurance that the Fund will attain its objective. The investment policies
described below are not fundamental policies and may be changed without
shareholder approval.
The investment objective of the Active Country Allocation Portfolio is to
provide long-term capital appreciation by investing in accordance with country
weightings determined by the Adviser in equity securities of non-U.S. issuers
which, in the aggregate, replicate broad country indices. The Adviser utilizes a
top-down approach in selecting investments for the Portfolio that emphasizes
country selection and weighting rather than individual stock selection. This
approach reflects the Adviser's philosophy that a diversified selection of
securities representing exposure to world markets, based upon the economic
outlook and current valuation levels for each country, is an effective way to
maximize the return and minimize the risk associated with international
investment.
The Adviser determines country allocations for the Portfolio on an ongoing
basis within policy ranges dictated by each country's market capitalization and
liquidity. The Portfolio will invest in the industrialized countries throughout
the world that comprise the Morgan Stanley Capital International EAFE (Europe,
Australia and the Far East) Index. The Portfolio will also invest in emerging
country equity securities. With respect to the Portfolio, the term "emerging
country" applies to any country which, in the opinion of the Adviser, is
generally considered to be an emerging or developing country by the
international financial community, including the International Bank for
Reconstruction and Development (more commonly known as the World Bank) and the
International Finance Corporation. There are currently over 130 countries which,
in the opinion of the Adviser, are generally considered to be emerging or
developing countries by the international financial community, approximately 40
of which currently have stock markets. These countries generally include every
nation in the world except the United States, Canada, Japan, Australia, New
Zealand and most nations located in Western Europe. Currently, investing in many
emerging countries is not feasible or may involve unacceptable political risks.
The Portfolio will focus its investments on those emerging market countries in
which it believes the economies are developing strongly and in which the markets
are becoming more sophisticated. With respect to the portion of the Portfolio
that is invested in emerging country equity securities, the Portfolio initially
intends to invest primarily in some or all of the following countries:
<TABLE>
<S> <C>
Argentina Portugal
Brazil Philippines
India South Africa
Indonesia South Korea
Malaysia Thailand
Mexico Turkey
</TABLE>
As markets in other countries develop, the Portfolio expects to expand and
further diversify the emerging countries in which it invests. The Portfolio does
not intend to invest in any security in a country where the currency is not
freely convertible to U.S. dollars, unless the Portfolio has obtained the
necessary governmental
10
<PAGE>
licensing to convert such currency or other appropriately licensed or sanctioned
contractual guarantee to protect such investment against loss of that currency's
external value, or the Portfolio has a reasonable expectation at the time the
investment is made that such governmental licensing or other appropriately
licensed or sanctioned guarantee would be obtained or that the currency in which
the security is quoted would be freely convertible at the time of any proposed
sale of the security by the Portfolio.
An emerging country security is one issued by a company that, in the opinion
of the Adviser, has one or more of the following characteristics: (i) its
principal securities trading market is in an emerging country, (ii) alone or on
a consolidated basis it derives 50% or more of its annual revenue from either
goods produced, sales made or services performed in emerging countries; or (iii)
it is organized under the laws of, and has a principal office in, an emerging
country. The Adviser will base determinations as to eligibility on publicly
available information and inquiries made to the companies. (See "Foreign
Investment Risk Factors and Special Considerations" for a discussion of the
nature of information publicly available for non-U.S. companies.)
By analyzing a variety of macroeconomic and political factors, the Adviser
develops fundamental projections on interest rates, currencies, corporate
profits and economic growth for each country. These country projections are used
then to determine what the Adviser believes to be a fair value for the stock
market of each country. Discrepancies between actual value and fair value as
determined by the Adviser provide an expected return for each stock market. The
expected return is adjusted by currency return expectations derived from the
Adviser's purchasing-power parity exchange rate model to arrive at an expected
total return in U.S. dollars. The final country allocation decision is then
arrived at by considering the expected total return in light of various country
specific considerations such as market size, volatility, liquidity and country
risk.
Within a particular country, investments are made through the purchase of
equity securities which, in aggregate, replicate a broad market index, which in
most cases will be the Morgan Stanley Capital International index for the given
country. The Adviser may overweight or underweight an industry segment of a
particular index if it concludes this would be advantageous to the Portfolio.
With respect to the Portfolio, equity securities include common and preferred
stock, convertible securities, and rights and warrants to purchase common
stocks. Indexation of the Portfolio's stock selection reduces stock-specific
risk through diversification and minimizes transaction costs, which can be
substantial in foreign markets.
Common stocks purchased for the Portfolio normally will be listed on a major
stock exchange in the subject country. The Portfolio will not invest in the
stocks of U.S. issuers. For a description of special considerations and certain
risks associated with investments in foreign issuers, see "Additional Investment
Information." The Portfolio may temporarily reduce its equity holdings in
response to adverse market conditions and invest in domestic, Eurodollar and
foreign short-term money market instruments for defensive purposes. See
"Investment Objective and Policies" in the Statement of Additional Information.
Any remaining assets of the Portfolio not invested as described above may be
invested in certain securities or obligations as set forth in "Additional
Investment Information" below.
11
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
FOREIGN INVESTMENT. Investment in obligations of foreign issuers and in
foreign branches of domestic banks involves somewhat different investment risks
than those affecting obligations of U.S. issuers. There may be limited publicly
available information with respect to foreign issuers, and foreign issuers are
not generally subject to uniform accounting, auditing and financial standards
and requirements comparable to those applicable to domestic companies. There may
also be less government supervision and regulation of foreign securities
exchanges, brokers and listed companies than in the U.S. Many foreign securities
markets have substantially less volume than U.S. national securities exchanges,
and securities of some foreign issuers are less liquid and more volatile than
securities of comparable U.S. issuers. Brokerage commissions and other
transaction costs on foreign securities exchanges are generally higher than in
the U.S. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, which may decrease the net return on
foreign investments as compared to dividends and interest paid to the Portfolios
by domestic companies. See "Taxes". Additional risks include future political
and economic developments, the possibility that a foreign jurisdiction might
impose or change withholding taxes on income payable with respect to foreign
securities, possible seizure, nationalization or expropriation of the foreign
issuer or foreign deposits, and the possible adoption of foreign governmental
restrictions such as exchange controls.
Such investments in securities of foreign issuers are frequently denominated
in foreign currencies, and since the Portfolio may temporarily hold uninvested
reserves in bank deposits in foreign currencies, the value of the Portfolio's
assets as measured in U.S. dollars may be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and the Portfolio
may incur costs in connection with conversions between various currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Portfolio may enter into
forward foreign currency exchange contracts, that provide for the purchase or
sale of an amount of a specified foreign currency at a future date. Purposes for
which such contracts may be used include protecting against a decline in a
foreign currency against the U.S. dollar between the trade date and settlement
date when the Portfolio purchases or sells securities, locking in the U.S.
dollar value of dividends declared on securities held by the Portfolio and
generally protecting the U.S. dollar value of securities held by the Portfolio
against exchange rate fluctuation. Such contracts may also be used as a
protective measure against the effects of fluctuating rates of currency exchange
and exchange control regulations. While such forward contracts may limit losses
to the Portfolio as a result of exchange rate fluctuation, they will also limit
any gains that may otherwise have been realized. See "Investment Objectives and
Policies -- Forward Foreign Currency Contracts" in the Statement of Additional
Information.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend its securities to
brokers, dealers, domestic and foreign banks or other financial institutions for
the purpose of increasing its net investment income. These loans must be secured
continuously by cash or equivalent collateral or by a letter of credit at least
equal to the market value of the securities loaned plus accrued interest or
income. There may be risks of delay in recovery of the securities or even loss
of rights in the collateral should the borrower of the securities fail
financially. The Portfolio will not enter into securities loan transactions
exceeding, in the aggregate, 33 1/3% of the market value of the Portfolio's
total assets. For more detailed information about securities lending, see
"Investment Objectives and Policies" in the Statement of Additional Information.
12
<PAGE>
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money
market instruments, although the Portfolio intends to stay invested in
securities satisfying its primary investment objective to the extent practical.
The Portfolio may make money market investments pending other investment or
settlement for liquidity, or in adverse market conditions. The money market
investments permitted for the Portfolio include obligations of the United States
Government and its agencies and instrumentalities; obligations of foreign
sovereignties; other debt securities; commercial paper including bank
obligations; certificates of deposit (including Eurodollar certificates of
deposit); and repurchase agreements. For more detailed information about these
money market investments, see "Description of Securities and Ratings" in the
Statement of Additional Information.
OPTIONS AND FUTURES. The Portfolio may write (i.e., sell) covered call
options and covered put options on portfolio securities. By selling a covered
call option, the Portfolio would become obligated during the term of the option
to deliver the securities underlying the option should the option holder choose
to exercise the option before the option's termination date. In return for the
call it has written, the Portfolio will receive from the purchaser (or option
holder) a premium which is the price of the option, less a commission charged by
a broker. The Portfolio will keep the premium regardless of whether the option
is exercised. By selling a covered put option, the Portfolio incurs an
obligation to buy the security underlying the option from the purchaser of the
put at the option's exercise price at any time during the option period, at the
purchaser's election (certain options written by the Portfolio will be
exercisable by the purchaser only on a specific date). A call option is
"covered" if the Portfolio owns the security underlying the option it has
written or has an absolute or immediate right to acquire the security by holding
a call option on such security, or maintains a sufficient amount of cash, cash
equivalents or liquid securities to purchase the underlying security. Generally,
a put option is "covered" if the Fund maintains cash, U.S. Government securities
or other high grade debt obligations equal to the exercise price of the option,
or if the Fund holds a put option on the same underlying security with a similar
or higher exercise price.
When the Portfolio writes covered call options, it augments its income by
the premiums received and is thereby hedged to the extent of that amount against
a decline in the price of the underlying securities. The premiums received will
offset a portion of the potential loss incurred by the Portfolio if the
securities underlying the options are ultimately sold by the Portfolio at a
loss. However, during the option period, the Portfolio has, in return for the
premium on the option, given up the opportunity for capital appreciation above
the exercise price should the market price of the underlying security increase,
but has retained the risk of loss should the price of the underlying security
decline.
The Portfolio will write covered put options to receive the premiums paid by
purchasers (when the Adviser wishes to purchase the security underlying the
option at a price lower than its current market price, in which case the
Portfolio will write the covered put at an exercise price reflecting the lower
purchase price sought) and to close out a long put option position.
The Portfolio may also purchase put or call options on its portfolio
securities. When the Portfolio purchases a call option it acquires the right to
buy a designated security at a designated price (the "exercise price"), and when
the Portfolio purchases a put option it acquires the right to sell a designated
security at the exercise price, in each case on or before a specified date (the
"termination date"), which is usually not more than nine months from the date
the option is issued. The Portfolio may purchase call options to close out a
covered call position or to protect against an increase in the price of a
security it anticipates purchasing. The Portfolio may purchase put
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options on securities which it holds in its portfolio to protect itself against
a decline in the value of the security. If the value of the underlying security
were to fall below the exercise price of the put purchased in an amount greater
than the premium paid for the option, the Portfolio would incur no additional
loss. The Portfolio may also purchase put options to close out written put
positions in a manner similar to call option closing purchase transactions.
There are no other limits on the Portfolio's ability to purchase call and put
options.
The Portfolio may enter into futures contracts and options on futures
contracts as a hedge against fluctuations in the price of a security it holds or
intends to acquire, but not for speculation or for achieving leverage. The
Portfolio may also enter into futures transactions to remain fully invested and
to reduce transaction costs. The Portfolio may enter into futures contracts and
options on futures contracts provided that not more than 5% of the Portfolio's
total assets at the time of entering into the contract or option is required as
deposit to secure obligations under all such contracts and options, and provided
that not more than 20% of the Portfolio's total assets in the aggregate is
invested in options, futures contracts and options on futures contracts.
The Portfolio may purchase and write call and put options on futures
contracts that are traded on any international exchange, traded over the counter
or which are synthetic options or futures or equity swaps, and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in the futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the term of the option.
The Portfolio will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts.
The primary risks associated with the use of futures and options are (i)
imperfect correlation between the change in market value of the stocks held by
the Portfolio and the prices of futures and options relating to the stocks
purchased or sold by the Portfolio; and (ii) possible lack of a liquid secondary
market for a futures contract and the resulting inability to close a futures
position which could have an adverse impact on the Portfolio's ability to hedge.
In the opinion of the Board of Directors, the risk that the Portfolio will be
unable to close out a futures position or options contract will be minimized by
only entering into futures contracts or options transactions for which there
appears to be a liquid secondary market.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
with brokers, dealers or banks that meet the credit guidelines adopted by the
Fund's Directors. In a repurchase agreement, the Portfolio buys a security from
a seller that has agreed to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of the agreement. The
term of these agreements is usually from overnight to one week and never exceeds
one year. Repurchase agreements may be viewed as a fully collateralized loan of
money by the Portfolio to the seller. The Portfolio always receives securities
with a market value at least equal to the purchase price (including accrued
interest) as collateral and this value is maintained during the term of the
agreement. If the seller defaults and the collateral value declines, the
Portfolio might incur a loss. If bankruptcy proceedings are commenced with
respect to the seller, the Portfolio's realization upon the collateral may be
delayed or limited. The aggregate of certain repurchase agreements and certain
other investments is limited as set forth under "Investment Limitations."
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WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. In such transactions,
instruments are bought with payment and delivery taking place in the future in
order to secure what is considered to be an advantageous yield or price at the
time of the transaction. Delivery of and payment for these securities may take
as long as a month or more after the date of the purchase commitment but will
take place no more than 120 days after the trade date. The Portfolio will
maintain with the Custodian a separate account with a segregated portfolio of
high-grade debt securities or cash in an amount at least equal to these
commitments. The payment obligation and the interest rates that will be received
are each fixed at the time the Portfolio enters into the commitment and no
interest accrues to the Portfolio until settlement. Thus, it is possible that
the market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed. It is a
current policy of the Portfolio not to enter into when-issued commitments
exceeding, in the aggregate, 15% of the market value of the Portfolio's total
assets less liabilities other than the obligations created by these commitments.
INVESTMENT LIMITATIONS
As a diversified investment company, the Portfolio is subject to the
following limitations: (a) as to 75% of its total assets, the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the United States Government and its agencies and
instrumentalities, and (b) the Portfolio may not own more than 10% of the
outstanding voting securities of any one issuer.
The Portfolio also operates under certain investment restrictions that are
deemed fundamental limitations and may be changed only with the approval of the
holders of a majority of the Portfolio's outstanding shares. See "Investment
Limitations" in the Statement of Additional Information. In addition, the
Portfolio operates under certain non-fundamental investment limitations as
described below and in the Statement of Additional Information. The Portfolio
may not (i) enter into repurchase agreements with more than seven days to
maturity if, as a result, more than 10% of the market value of the Portfolio's
net assets would be invested in such repurchase agreements and other investments
for which market quotations are not readily available or which are otherwise
illiquid; (ii) borrow money, except from banks for extraordinary or emergency
purposes, and then only in amounts up to 10% of the value of the Portfolio's
total assets, taken at cost at the time of borrowing; or purchase securities
while borrowings exceed 5% of its total assets; (iii) 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;
(iv) invest in fixed time deposits with a duration of over seven calendar days;
or (v) 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 Active Country Allocation Portfolio an annual management fee, payable
quarterly, equal to 0.65% of the average daily net assets of the Portfolio.
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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 0.80% of the average daily net assets of the Class A shares
of the Portfolio and 1.05% 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,
providing a broad range of portfolio management services to customers in the
United States and abroad. At December 31, 1995, the Adviser, together with its
affiliated asset management companies, managed investments totaling
approximately $57.4 billion, including approximately $41.9 billion under active
management and $15.5 billion as Named Fiduciary or Fiduciary Adviser. See
"Management of the Fund" in the Statement of Additional Information.
PORTFOLIO MANAGERS. BARTON M. BIGGS, MADHAV DHAR, FRANCINE J. BOVICH AND
ANN D. THIVIERGE. Barton Biggs has been Chairman and a director of the Adviser
since 1980 and a Managing Director of Morgan Stanley since 1975. He is also a
director of Morgan Stanley Group Inc. and a director and officer of several
registered investment companies to which the Adviser and certain of its
affiliates provide investment advisory services. Mr. Biggs holds a B.A. from
Yale University and an M.B.A. from New York University. Madhav Dhar is a
Managing Director of Morgan Stanley. He joined the Adviser in 1984 to focus on
global asset allocation and investment strategy and now heads the Adviser's
emerging markets group and serves as the group's principal portfolio manager.
Mr. Dhar also coordinates the Adviser's developing country funds effort and has
been involved in the launching of the Adviser's country funds. He is the
portfolio manager of the Fund's Emerging Markets Portfolio, the Emerging Markets
and Global Equity Allocation Funds of the Morgan Stanley Fund, Inc., and the
Morgan Stanley Emerging Markets Fund, Inc. (a closed-end investment company
listed on the New York Stock Exchange). Mr. Dhar is also a director of the
Morgan Stanley Emerging Markets Fund, Inc. He holds a B.S. (honors) from St.
Stephens College, Delhi University (India), and an M.B.A. from Carnegie-Mellon
University. Francine Bovich joined the Adviser as a Principal in 1993. She is
responsible for product development, portfolio management and communication of
the Adviser's asset allocation strategy to institutional investor clients.
Previously, Ms. Bovich was a Principal and Executive Vice President of Westwood
Management Corp. ("Westwood"), a registered investment adviser. Before joining
Westwood, she was a Managing Director of Citicorp Investment Management, Inc.
(now Chancellor Capital Management), where she was responsible for the
Institutional Investment Management group. Ms. Bovich began her investment
career with Banker's Trust Company. She holds a B.A. in Economics from
Connecticut College and an M.B.A. in Finance from New York University. Ann
Thivierge is a Principal of the Adviser. She is a member of the Adviser's asset
allocation committee, primarily representing the Total Fund Management team
since its inception in 1991. Prior to joining the Adviser in 1986, she spent two
years at Edgewood Management Company, a privately held investment management
firm. Ms. Thivierge holds a B.A. in International Relations from James Madison
College, Michigan State University, and an M.B.A. in Finance from New York
University.
ADMINISTRATOR. The Adviser also provides the Fund with administrative
services pursuant to an Administration Agreement. The services provided under
the Administration Agreement are subject to the supervision of the Officers and
the Board of Directors of the Fund and include day-to-day administration of
matters related to the corporate existence of the Fund, maintenance of its
records, preparation of reports, supervision of the Fund's arrangements with its
custodian and assistance in the preparation of the Fund's registration
statements under
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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.
Under an agreement between the Adviser and The Chase Manhattan Bank, N.A.
("Chase"), Chase provides certain administrative services to the Fund. In a
merger completed on September 1, 1995, Chase succeeded to all of the rights and
obligations under the U.S. Trust Administration Agreement between the Adviser
and the United States Trust Company of New York ("U.S. Trust"), pursuant to
which U.S. Trust had agreed to provide certain administrative services to the
Fund. Pursuant to a delegation clause in the U.S. Trust Administration
Agreement, U.S. Trust delegated its administration responsibilities to Chase
Global Funds Services Company ("CGFSC"), formerly known as Mutual Funds Service
Company, which after the merger with Chase is a subsidiary of Chase and will
continue to provide certain administrative services to the Fund. The Adviser
supervises and monitors such administrative services provided by CGFSC. The
services provided under the Administration Agreement and the U.S. Trust
Administration Agreement are also subject to the supervision of the Board of
Directors of the Fund. The Board of Directors of the Fund has approved the
provision of services described above pursuant to the Administration Agreement
and the U.S. Trust Administration Agreement as being in the best interests of
the Fund. CGFSC's business address is 73 Tremont Street, Boston, Massachusetts
02108-3913. For additional information regarding the Administration Agreement or
the U.S. Trust Administration Agreement, see "Management of the Fund" in the
Statement of Additional Information.
LOCAL ADMINISTRATOR FOR THE PORTFOLIO. The Portfolio is required under
Brazilian law to have a local administrator in Brazil. Unibanco-Uniao (the
"Brazilian Administrator"), a Brazilian corporation, acts as the Portfolio's
Brazilian administrator pursuant to an agreement with the Portfolio (the
"Brazilian Administration Agreement"). Under the Brazilian Administration
Agreement, the Brazilian Administrator performs various services for the
Portfolio, including effecting the registration of the Portfolio's foreign
capital with the Central Bank of Brazil, effecting all foreign exchange
transactions related to the Portfolio's investments in Brazil and obtaining all
approvals required for the Portfolio to make remittances of income and capital
gains and for the repatriation of the Portfolio's investments pursuant to
Brazilian law. For its services, the Brazilian Administrator is paid an annual
fee equal to 0.125% of the Portfolio's average weekly net assets invested in
Brazil, paid monthly. The principal office of the Brazilian Administrator is
located at Avenida Eusebio Matoso, 891, Sao Paulo, S.P., Brazil. The Brazilian
Administration Agreement is terminable upon six months' notice by either party.
The Brazilian Administrator may be replaced only by an entity authorized to act
as a joint manager of a managed portfolio of bonds and securities under
Brazilian law.
DIRECTORS AND OFFICERS. Pursuant to the Fund's Articles of Incorporation,
the Board of Directors decides upon matters of general policy and review 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 Fund upon the terms and at the current offering
price described in this Prospectus. Morgan Stanley is not obligated to sell any
certain number of shares of the Fund.
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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 features, distribution expenses or other expenses 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 obligations to
the Fund.
EXPENSES. The Portfolio is responsible for payment of certain other fees
and expenses (including legal fees, accountants' fees, custodial fees and
printing and mailing costs) specified in the Administration and Distribution
Agreements.
PURCHASE OF SHARES
Class A and Class B shares of the Portfolio may be purchased, without sales
commission, at the net asset value per share next determined after receipt of
the purchase order by the Portfolio. See "Valuation of Shares."
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO CLASS B SHARES
For an account for the Portfolio opened on or after January 2, 1996 (a "New
Account"), the minimum initial investment and minimum account size are $500,000
for Class A shares and $100,000 for Class B shares. Managed Accounts may
purchase Class A shares without being subject to such minimum initial investment
or minimum account size requirements for a Portfolio account. Employees of the
Adviser and of its affiliates may purchase Class A Shares subject to conditions,
including a lower minimum investment, established by Officers of the Fund.
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 (but remains at or above $100,000) for a continuous
60-day period, the Class A shares in such account will convert to Class B shares
and will be subject to the distribution fee and other features applicable to the
Class B shares. The Fund, however, will not convert Class A shares to Class B
shares based solely upon changes in the market that reduce the net asset value
of shares. Under current tax law, conversions between share classes are not a
taxable event to the shareholder.
Shares in a Portfolio account opened prior to January 2, 1996 (a "Pre-1996
Account") were designated Class A shares on January 2, 1996. Shares in a
Pre-1996 Account with a value of $100,000 or more on March 1, 1996 (a
"Grandfathered Class A Account") remained Class A shares regardless of account
size thereafter. Except
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for shares in a Managed Account, shares in a Pre-1996 Account with a value of
less than $100,000 on March 1, 1996 (a "Grandfathered Class B Account")
converted to Class B shares on March 1, 1996. Grandfathered Class A Accounts and
Managed Accounts are not subject to conversion from Class A shares to Class B
shares.
Investors may also invest in the Fund by purchasing shares through a trust
department, broker, dealer, agent, financial planner, financial services firm or
investment adviser. An investor may be charged an additional service or
transaction fee by that institution. The minimum investment levels may be waived
at the discretion of the Adviser for (i) certain employees and customers of
Morgan Stanley or its affiliates and certain trust departments, brokers,
dealers, agents, financial planners, financial services firms, or investment
advisers that have entered into an agreement with Morgan Stanley or its
affiliates; and (ii) retirement and deferred compensation plans and trusts used
to fund such plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as amended, and
"rabbi trusts." Broker-dealers who make purchases for their customers may charge
a fee for such services.
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 a continuous 60-day period, the shares in such
account are subject to redemption by the Fund and, if redeemed, the net asset
value of such shares will be promptly paid to the shareholder. The Fund,
however, will not redeem shares based solely upon changes in the market that
reduce the net asset value of shares.
Grandfathered Class A Accounts, Grandfathered Class B Accounts and Managed
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 in a Portfolio account increases, whether due
to shareholder share purchases or market activity, to $500,000 or more, the
Class B shares will convert 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
that are applicable to New Accounts containing Class A shares, as stated above.
The Fund reserves the right to modify or terminate this conversion feature at
any time upon 60-days' notice to shareholders.
INITIAL PURCHASES DIRECTLY FROM THE FUND
The Fund's determination of an investor's eligibility to purchase shares of
a given class will take precedence over the investor's selection of a class.
Assuming the investor is eligible for the class, the Fund will select the most
favorable class for the investor, if the investor has not done so.
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INITIAL INVESTMENTS
1) BY CHECK. An account may be opened by completing and signing an Account
Registration Form and mailing it, together with a check ($500,000 minimum for
Class A shares of the Portfolio and $100,000 for Class B shares of the
Portfolio, with certain exceptions for Morgan Stanley employees and select
customers) payable to "Morgan Stanley Institutional Fund, Inc. -- Active
Country Allocation Portfolio", to:
Morgan Stanley Institutional Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
Payment will be accepted only in U.S. dollars, unless prior approval for
payment by other currencies is given by the Fund. The Class(es) of shares of
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 class 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, the class selected and the account number
assigned to you) as follows:
Chase Manhattan Bank, N.A.
One Manhattan Plaza
New York, NY 10081-1000
ABA #021000021
DDA #910-2-733293
Attn: Morgan Stanley Institutional Fund, Inc.
Ref: (Portfolio name, your account number, your account name)
Please call the Fund at 1-800-548-7786 prior to wiring funds.
C. Complete and sign the Account Registration Form and mail it to the address
shown thereon.
Purchase orders for shares of the Portfolio which are received prior to the
regular close of the NYSE (currently 4:00 p.m. Eastern Time) will be executed
at the price computed on the date of receipt as long as the Transfer Agent
receives payment by check or in Federal Funds prior to the regular close of
the NYSE on such day.
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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 Federal Funds.
3) BY BANK WIRE. The same procedure outlined under "By Federal Funds Wire"
above must be followed in purchasing shares by bank wire. However, money
transferred by bank wire may or may not be converted into Federal Funds the
same day, depending on the time the money is received and the bank handling
the wire. Prior to such conversion, an investor's money will not be invested
and, therefore, will not be earning dividends. Your bank may charge a service
fee for wiring funds.
ADDITIONAL INVESTMENTS
You may add to your account at any time (minimum additional investment
$1,000, except for automatic reinvestment of dividends and capital gains
distributions for which there are no minimums) by purchasing shares at net asset
value by mailing a check to the Fund (payable to "Morgan Stanley Institutional
Fund, Inc. -- Active Country Allocation Portfolio") at the above address or by
wiring monies to the Custodian Bank as outlined above. It is very important that
your account name, the portfolio name and the class selected 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.
Additional investments will be applied to purchase additional shares in the same
class held by a shareholder in a Portfolio account.
OTHER PURCHASE INFORMATION
The purchase price of the Class A and Class B shares of the Portfolio is the
net asset value next determined after the order is received. See "Valuation of
Shares." An order received prior to the close of the New York Stock Exchange
("NYSE"), which is currently 4:00 p.m. Eastern Time, will be executed at the
price computed on the date of receipt; an order received after the close of the
NYSE will be executed at the price computed on the next day the NYSE is open as
long as the Transfer Agent receives payment by check or in Federal Funds prior
to the regular close of the NYSE on such day.
Although the legal rights of Class A and Class B shares will be identical,
the different expenses borne by each class will result in different net 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
expense charged to Class B shares. It is expected, however, that the net asset
value per share of the two classes will tend to converge immediately after the
recording of dividends which will differ by approximately the amount of the
distribution expense accrual differential between the classes.
In the interest of economy and convenience, and because of the operating
procedures of the Fund, certificates representing shares of the Portfolio will
not be issued. All shares purchased are confirmed to you and credited to your
account on the Fund's books maintained by the Adviser or its agents. You will
have the same rights and ownership with respect to such shares as if
certificates had been issued.
To ensure that checks are collected by the Fund, withdrawals of investments
made by check are not presently permitted until payment for the purchase has
been received, which may take up to eight business days after the date of
purchase. As a condition of this offering, if a purchase is cancelled due to
nonpayment or
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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 the
Distributor.
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 any class of a portfolio from further purchases of shares of the
Fund for an indefinite period. The Fund considers excessive trading to be more
than one purchase and sale involving shares of the same class of a portfolio of
the Fund within any 120-day period. As an example, exchanging shares of
portfolios of the Fund as follows amounts to excessive trading: exchanging Class
A shares of Portfolio A for Class A shares of Portfolio B, then exchanging Class
A shares of Portfolio B for Class A shares of Portfolio C and again exchanging
Class A shares of Portfolio C for Class A 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, such as TFM
Accounts, 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 Class A
shares or Class B shares of the Portfolio at the next determined net asset value
of shares of the applicable class. On days that both the NYSE and the Custodian
Bank are open for business, the net asset value per share of the Portfolio is
determined at the close of trading of the NYSE (currently 4:00 p.m. Eastern
Time). Shares of the Portfolio may be redeemed by mail or telephone. No charge
is made for redemption. Any redemption proceeds may be more or less than the
purchase price of your shares depending on, among other factors, the market
value of the investment securities held by the Portfolio.
BY MAIL
The Portfolio will redeem its Class A shares or Class B shares at the net
asset value determined on the date the request is received, if the request is
received in "good order" before the regular close of the NYSE. Your request
should be addressed to Morgan Stanley Institutional Fund, Inc., P.O. Box 2798,
Boston, Massachusetts 02208-2798, except that deliveries by overnight courier
should be addressed to Morgan Stanley Institutional Fund, Inc., c/o Chase Global
Funds Services Company, 73 Tremont 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 class
and 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
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(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 mail or
overnight courier and will be implemented at the net asset value next determined
after it is received. Redemption requests sent to the Fund through express mail
must be mailed to the address of the Dividend Disbursing and Transfer Agent
listed under "General Information." The Fund and the Fund's transfer agent (the
"Transfer Agent") will employ reasonable procedures to confirm that the
instructions communicated by telephone are genuine. These procedures include
requiring the investor to provide certain personal identification information at
the time an account is opened and prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written
instructions regarding transaction requests. Neither the Fund nor the Transfer
Agent will be responsible for any loss, liability, cost or expense for following
instructions received by telephone that either of them reasonably believes to be
genuine.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Fund at the address above.
Requests to change the bank or account must be signed by each shareholder and
each signature must be guaranteed.
FURTHER REDEMPTION INFORMATION
Normally the Fund will make payment for all shares redeemed within one
business day of receipt of the request, but in no event will payment be made
more than seven days after receipt of a redemption request in good order.
However, payments to investors redeeming shares which were purchased by check
will not be made until payment for the purchase has been collected, which may
take up to eight days after the date of purchase. The Fund may suspend the right
of redemption or postpone the date upon which redemptions are effected at times
when the NYSE is closed, or under any emergency circumstances as determined by
the Securities and Exchange Commission (the "Commission").
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Portfolio to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of securities held by the Portfolio in lieu of
cash in conformity with applicable rules of the Commission.
Distributions-in-Kind will be made in readily marketable securities. Investors
may incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
23
<PAGE>
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 FEATURES
You may exchange shares that you own in the Portfolio for shares of any
other available portfolio of the Fund (other than the International Equity
Portfolio, which is closed to new investors). In exchanging for shares of a
portfolio with more than one class, the class of shares you receive in the
exchange will be determined in the same manner as any other purchase of shares
and will not be based on the class of shares surrendered for the exchange.
Consequently, the same minimum initial investment and minimum account size for
determining the class of shares received in the exchange will apply. See
"Purchase of Shares." Shares of the portfolios may be exchanged by mail or
telephone. The privilege to exchange shares by telephone is automatic and made
available without shareholder election. Before you make an exchange, you should
read the prospectus of the portfolio(s) in which you seek to invest. Because an
exchange transaction is treated as a redemption followed by a purchase, an
exchange would be considered a taxable event for shareholders subject to tax.
The exchange privilege is only available with respect to portfolios that are
registered for sale in a shareholder's state of residence. The exchange
privilege may be modified or terminated by the Fund at any time upon 60-days'
notice to shareholders.
BY MAIL
In order to exchange shares by mail, you should include in the exchange
request the name and account number of the Portfolio, the name(s) of the
portfolio(s) and class(es) of shares into which you intend to exchange shares,
and the signatures of all registered account holders. Send the exchange request
to Morgan Stanley Institutional Fund, Inc., P.O. Box 2798, Boston, MA
02208-2798.
BY TELEPHONE
When exchanging shares by telephone, have ready the name, class of shares
and account number of the current portfolio, the names of the portfolio(s) and
class(es) of shares 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 the class of
the portfolios involved in the exchange of shares at the close of business.
Requests received after 4:00 p.m. are processed the next business day based on
the net asset value determined at the close of business on such day. For
additional information regarding responsibility for the authenticity of
telephoned instructions, see "Redemption of Shares -- By Telephone" above.
TRANSFER OF REGISTRATION
You may transfer the registration of any of your Fund shares to another
person by writing to Morgan Stanley Institutional Fund, Inc., P.O. Box 2798,
Boston, Massachusetts 02208-2798. As in the case of redemptions, the written
request must be received in good order before any transfer can be made.
Transferring the registration of shares may affect the eligibility of your
account for a given class of the Portfolio's shares and may result in
involuntary conversion or redemption of your shares. See "Purchase of Shares"
above.
24
<PAGE>
VALUATION OF SHARES
The net asset value per share of a class of shares of the Portfolio is
determined by dividing the total market value of the Portfolio's investments and
other assets attributable to such class, less any liabilities attributable to
such class, by the total number of outstanding shares of such class of the
Portfolio. Net asset value is calculated separately for each class of the
Portfolio. Net asset value per share is determined as of the close of the NYSE
on each day that the NYSE is open for business. Price information on listed
securities is taken from the exchange where the security is primarily traded.
Securities listed on a U.S. securities exchange for which market quotations are
available are valued at the last quoted sale price on the day the valuation is
made. Securities listed on a foreign exchange are valued at their closing price.
Unlisted securities and listed securities not traded on the valuation date for
which market quotations are readily available are valued at a price that is
considered to best represent fair value within a range not exceeding the current
asked price nor less than the current bid price. The current bid and asked
prices are determined based on the bid and asked prices quoted on such valuation
date by reputable brokers.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities, which is
accrued daily. In addition, bonds and other fixed income securities may be
valued on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices, but take into account institutional size trading in similar groups of
securities and any developments related to the specific securities. Securities
not priced in this manner are valued at the most recently quoted bid price, or
when securities exchange valuations are used, at the latest quoted sale price on
the day of valuation. If there is no such reported sale, the latest quoted bid
price will be used. Securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. In the event
that amortized cost does not approximate market value, market prices as
determined above will be used.
The value of other assets and securities for which no quotations are readily
available (including restricted and unlisted foreign securities) and those
securities for which it is inappropriate to determine prices in accordance with
the above-stated procedure are determined in good faith at fair value using
methods determined by the Board of Directors. For purposes of calculating net
asset value per share, all assets and liabilities initially expressed in foreign
currencies will be translated into U.S. dollars at the mean of the bid price and
asked price of such currencies against the U.S. dollar last quoted by any major
bank.
Although the legal rights of Class A and Class B shares will be identical,
the different expenses borne by each class will result in different net asset
values and dividends for the class. 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 expense charged to
Class B shares.
PERFORMANCE INFORMATION
The Fund may from time to time advertise total return for each class of the
Portfolio. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. The "total return" shows what an investment in a
class of the Portfolio would have earned over a specified period of time (such
as one, five or ten
25
<PAGE>
years), assuming that all distributions and dividends by the Portfolio were
reinvested in the same class on the reinvestment dates during the period. Total
return does not take into account any federal or state income taxes that may be
payable on dividends and distributions or on redemption. The Fund may also
include comparative performance information in advertising or marketing the
Portfolio's shares. Such performance information may include data from Lipper
Analytical Services, Inc., other industry publications, business periodicals,
rating services and market indices.
The performance figures for Class B shares will generally be lower than
those for Class A shares because of the distribution fee charged to Class B
shares.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All income dividends and capital gains distributions for a class of shares
will automatically be reinvested in additional shares of such class at net asset
value, except that, upon written notice to the Fund or by checking off the
appropriate box in the Distribution Option Section on the Account Registration
Form, a shareholder may elect to receive income dividends and capital gains
distributions in cash. The Portfolio expects to distribute substantially all of
its net investment income in the form of annual dividends. Net realized gains,
if any, after reduction for any available tax loss carryforwards will also be
distributed annually. Confirmations of the purchase of shares of the Portfolio
through the automatic reinvestment of income dividends and capital gains
distributions will be provided, pursuant to Rule 10b-10 under the Securities
Exchange Act of 1934, as amended, on the next monthly client statement following
such purchase of shares. Consequently, confirmations of such purchases will not
be provided at the time of completion of such purchases as might otherwise be
required by Rule 10b-10.
Undistributed net investment income 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 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.
Because of the distribution fee and any other expenses that may be
attributable to the Class B shares, the net income attributable to and the
dividends payable on Class B shares will be lower than the net income
attributable to and the dividends payable on Class A shares. As a result, the
net asset value per share of the classes of the Portfolio will differ at times.
Expenses of the Portfolio allocated to a particular class of shares thereof will
be borne on a pro rata basis by each outstanding share of that class.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial,
or administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state and local income taxes.
The Portfolio is treated as a separate entity for federal income tax
purposes and is not combined with the Fund's other portfolios. The Portfolio
intends to qualify for the special tax treatment afforded regulated
26
<PAGE>
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), so that the Portfolio will be relieved of federal income
tax on that part of its net investment income and net capital gain that is
distributed to shareholders.
The Portfolio distributes substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Dividends from the Portfolio's net investment income are taxable to shareholders
as ordinary income, whether received in cash or reinvested in additional shares.
Such dividends paid by the Portfolio will generally not qualify for the 70%
dividends-received deduction for corporate shareholders. The Portfolio will
report annually to its shareholders the amount of dividend income qualifying for
such treatment.
Distributions of net capital gains (i.e., net long-term capital gains in
excess of net short-term capital losses) are taxable to shareholders as
long-term capital gains, regardless of how long the shareholder has held the
Portfolio's shares. The Portfolio sends reports annually to shareholders of the
federal income tax status of all distributions made during the preceding year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary income and capital gain net income (the excess of
short-term and long-term capital gains over short-term and long-term capital
losses), including any available capital loss carryforwards, prior to the end of
each calendar year to avoid liability for federal excise tax.
Dividends and other distributions declared by the Portfolio in October,
November or December of any year and payable to shareholders of record on a date
in such month will be deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if the distributions are paid by
the Portfolio at any time during the following January.
The sale, exchange or redemption of shares may result in taxable gain or
loss to the selling, exchanging or 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, exchanged 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 advisers concerning the
application of state and local income taxes to investments in the Portfolio,
which may differ from the federal income tax consequences described above.
Investment income received by the Portfolio from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To the
extent that the Portfolio is liable for foreign income taxes so withheld, the
Portfolio intends to operate so as to meet the requirements of the Code to pass
through to the shareholders credit for foreign income taxes paid. Although the
Portfolio intends to meet Code requirements to pass through credit for such
taxes, there can be no assurance that the Portfolio will be able to do so.
27
<PAGE>
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE PORTFOLIO.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best available price and most favorable execution with respect to all
transactions for the Portfolio. The Fund has authorized the Adviser to pay
higher commissions in recognition of brokerage services which, in the opinion of
the Adviser, are necessary for the achievement of better execution, provided the
Adviser believes this to be in the best interest of the Fund.
Since shares of the Portfolio are not marketed through intermediary brokers
or dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of shares which may be made through such firms.
However, the Adviser may place portfolio orders with qualified broker-dealers
who recommend the Fund's portfolios or who act as agents in the purchase of
shares of the Fund's portfolios for their clients.
In purchasing and selling securities for the Portfolio, it is the Fund's
policy to seek to obtain quality execution at the most favorable prices, through
responsible broker-dealers. In selecting broker-dealers to execute the
securities transactions for the Portfolio, consideration will be given to such
factors as the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing broker-dealers, and
the brokerage and research services which they provide to the Fund. Some
securities considered for investment by the Portfolio may also be appropriate
for other clients served by the Adviser. If purchase or sale of securities
consistent with the investment policies of the Portfolio and one or more of
these other clients served by the Adviser is considered at or about the same
time, transactions in such securities will be allocated among the Portfolio and
clients in a manner deemed fair and reasonable by the Adviser. Although there is
no specified formula for allocating such transactions, the various allocation
methods used by the Adviser, and the results of such allocations, are subject to
periodic review by the Fund's Board of Directors.
Subject to the overriding objective of obtaining the best possible execution
of orders, the Adviser may allocate a portion of each portfolio's brokerage
transactions to Morgan Stanley or broker affiliates of Morgan Stanley. In order
for Morgan Stanley or its affiliates to effect any portfolio transactions for
the Fund, the commissions, fees or other remuneration received by Morgan Stanley
or such affiliates must be reasonable and fair compared to the commissions, fees
or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. Furthermore, the Board
of Directors of the Fund, including a majority of the Directors who are not
"interested persons," have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to Morgan Stanley
or such affiliates are consistent with the foregoing standard.
28
<PAGE>
Portfolio securities will not be purchased from, or through, or sold to or
through, the Adviser or Morgan Stanley or any "affiliated persons," as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"), of Morgan
Stanley when such entities are acting as principals, except to the extent
permitted by law.
Although the Portfolio will not invest for short-term trading purposes,
investment securities may be sold from time to time without regard to the length
of time they have been held. It is anticipated that the annual turnover rate of
the Portfolio will not exceed 100% in normal circumstances.
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
The Fund was organized as a Maryland corporation on June 16, 1988. The
Articles of Incorporation, as amended and restated, permit the Fund to issue up
to 34 billion 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. Subject to the notice period to shareholders with
respect to shares held by shareholders, 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 shares of
common stock of each portfolio are currently classified into two classes, the
Class A shares and the Class B shares, except for the International Small Cap,
Money Market and Municipal Money Market Portfolios, which only offer Class A
shares.
The shares of the Portfolio, when issued, will be fully paid, nonassessable,
fully transferable and redeemable at the option of the holder. The shares have
no preference as to conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of the Portfolio have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the Directors
if they choose to do so. Persons or organizations owning 25% or more of the
outstanding shares of a portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) that Portfolio. Under Maryland law, the Fund is not
required to hold an annual meeting of its shareholders unless required to do so
under the 1940 Act.
REPORTS TO SHAREHOLDERS
The Fund will send to its shareholders annual and semi-annual reports; the
financial statements appearing in annual reports are audited by independent
accountants. Monthly unaudited portfolio data is also available from the Fund
upon request.
In addition, the Adviser or its agent, as Transfer Agent, will send to each
shareholder having an account directly with the Fund a monthly statement showing
transactions in the account, the total number of shares owned, and any dividends
or distributions paid.
CUSTODIAN
As of September 1, 1995, domestic securities and cash are held by Chase,
which replaced U.S. Trust as the Fund's domestic custodian. Chase is not an
affiliate of the Adviser or the Distributor. Morgan Stanley Trust Company,
Brooklyn, New York ("MSTC"), an affiliate of the Adviser and the Distributor,
acts as the Fund's custodian for foreign assets held outside the United States
and employs subcustodians approved by the Board of Directors of the Fund in
accordance with regulations of the Securities and Exchange Commission for the
29
<PAGE>
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
Chase Global Funds Services Company, 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.
30
<PAGE>
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
ACTIVE COUNTRY ALLOCATION PORTFOLIO
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
<C> <S> <C>
If you need assistance in filling out this form for the
ACCOUNT INFORMATION Morgan Stanley Institutional Fund, please contact your
Fill in where applicable 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)
</TABLE>
1.
First Name Initial Last Name
2.
First Name Initial Last Name
First Name Initial Last Name
<TABLE>
<C> <S> <C>
3. CORPORATIONS,
TRUSTS AND OTHERS
Please call the Fund for additional
documents that may be required to set up
account and to authorize transactions.
</TABLE>
3.
<TABLE>
<S> <C> <C> <C> <C>
Type of Registration: / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/TRANSFER TO MINOR
ASSOCIATION (ONLY ONE CUSTODIAN AND MINOR PERMITTED)
</TABLE>
/ / TRUST ________________________ / / OTHER (Specify) ________________________
<TABLE>
<C> <S> <C>
B) MAILING ADDRESS
Please fill in completely, including
telephone number(s).
</TABLE>
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 ___________________________________________________________
<TABLE>
<C> <S> <C> <C>
C) TAXPAYER Enter your Taxpayer Identification Number. For most individual
IDENTIFICATION taxpayers, this is your Social Security Number.
NUMBER
1. INDIVIDUAL
2. JOINT TENANTS
(RIGHTS OF SURVIVORSHIP PRESUMED UNLESS
TENANCY IN COMMON
IS INDICATED)
For Custodian account
of a minor (Uniform
Gifts/Transfers to Minor
Acts), give the Social
Security Number of
the minor
OR
1. TAXPAYER SOCIAL SECURITY NUMBER
IDENTIFICATION NUMBER ("SSN")
("TIN")
OR
2. TIN SSN
OR
TIN SSN
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer)
with your correct TIN(s) or SSN(s). Accounts that have a
missing or incorrect TIN(s) or SSN(s) will be subject to
backup withholding at a 31% rate on dividends, distributions
and other payments. If you have not provided us with your
correct TIN(s) or SSN(s), you may be subject to a $50 penalty
imposed by the Internal Revenue Service.
Backup withholding is not an additional tax; the tax liability
of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
You may be notified that you are subject to backup withholding
under Section 3406(a)(1)(C) of the Internal Revenue Code
because you have underreported interest or dividends or you
were required to, but failed to, file a return which would
have included a reportable interest or dividend payment.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
D) PORTFOLIO AND For Purchase of the following
CLASS SECTION Portfolio(s): / / Class A Shares $ / / Class B Shares $
(Class A shares minimum Active Country Allocation
$500,000 for each Portfolio
Portfolio and Class B
shares minimum $100,000
for the Global Equity,
International Equity,
Asian Equity, European
Equity, Japanese Equity
and Latin American Equity
Portfolios). Please
indicate Portfolio, class
and amount.
Total Initial Investment $
</TABLE>
<TABLE>
<C> <S> <C>
E) METHOD OF
INVESTMENT
Please indicate
portfolio, manner of
payment.
</TABLE>
Payment by:
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND,
INC.--PORTFOLIO NAME)
<TABLE>
<S> <C>
/ / Exchange $ From -- - - - - - - - - - -- - -
Name of Portfolio Account No.
/ / Account previously established by: / / Phone exchange / / Wire on -- - - - - - - - - - -- - -
Account No. (Check
(Previously assigned by the Fund) Digit)
Date
</TABLE>
<TABLE>
<C> <S> <C>
F) DISTRIBUTION Income dividends and capital gains distributions (if any) to
OPTION be reinvested in additional shares unless either box below
is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions (if
any) to be paid in cash.
</TABLE>
<TABLE>
<C> <S> <C> <C>
G) TELEPHONE / / I/we hereby authorize the Fund and
REDEMPTION its agents to honor any telephone Name of COMMERCIAL Bank (Not Savings
AND EXCHANGE requests to wire redemption proceeds to Bank)
OPTION the commercial bank indicated at right Bank Account No.
Please select at time of and/or mail redemption proceeds to the
initial application if you name and address in which my/our fund
wish to redeem or exchange account is registered if such requests Bank
shares by telephone. A are believed to be authentic. ABA
SIGNATURE GUARANTEE IS The Fund and the Fund's Transfer Agent No.
REQUIRED IF BANK ACCOUNT IS will employ reasonable procedures to
NOT REGISTERED IDENTICALLY TO confirm that instructions communicated Name(s) in which your BANK Account is
YOUR FUND ACCOUNT. by telephone are genuine. These Established
TELEPHONE REQUESTS FOR procedures include requiring the
REDEMPTIONS OR EXCHANGE WILL investor to provide certain personal Bank's Street
NOT BE HONORED UNLESS THE BOX identification information at the time Address
IS CHECKED. an account is opened and prior to
effecting each transaction requested by City State Zip
telephone. In addition, all telephone
transaction requests will be recorded
and investors may be required to provide
additional telecopied written
instructions of transaction requests.
Neither the Fund nor the Transfer Agent
will be responsible for any loss,
liability, cost or expense for following
instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
<TABLE>
<C> <S> <C>
H) INTERESTED PARTY
OPTION Name
In addition to the
account statement sent to
my/our registered Address
address, I/we hereby
authorize the fund to City State Zip Code
mail duplicate statements
to the name and address
provided at right.
</TABLE>
<TABLE>
<C> <S> <C>
I) DEALER
INFORMATION
Representative Name Representative
No. Branch
No.
</TABLE>
<TABLE>
<C> <S> <C>
J) SIGNATURE OF
ALL HOLDERS
AND TAXPAYER
CERTIFICATION
Sign Here ,
</TABLE>
<TABLE>
<S> <C>
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.
BY SIGNING THIS APPLICATION, I/WE HEREBY CERTIFY UNDER PENALTIES OF
PERJURY THAT THE INFORMATION ON THIS APPLICATION IS COMPLETE AND CORRECT
AND THAT AS REQUIRED BY FEDERAL LAW (PLEASE CHECK APPLICABLE BOXES
BELOW):
/ / U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ABOVE ON THIS FORM
IS/ARE THE CORRECT SSN(S) OR TIN(S) AND (2) I/WE ARE NOT
SUBJECT TO ANY BACKUP WITHHOLDING EITHER BECAUSE (A) I/WE ARE
EXEMPT FROM BACKUP WITHHOLDING; (B) I/WE HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I/WE
ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE IRS HAS NOTIFIED
ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
/ / IF NO TIN(S) OR SSN(S) HAS/HAVE BEEN PROVIDED ABOVE, I/WE
HAVE APPLIED, OR INTEND TO APPLY, TO THE IRS OR THE SOCIAL
SECURITY ADMINISTRATION FOR A TIN OR A SSN AND I/WE
UNDERSTAND THAT IF I/WE DO NOT PROVIDE EITHER NUMBER TO CHASE
GLOBAL FUNDS SERVICES COMPANY ("CGFSC") WITHIN 60 DAYS OF THE
DATE OF THIS APPLICATION OR IF I/WE FAIL TO FURNISH MY/OUR
CORRECT SSN(S) OR TIN(S), I/WE MAY BE SUBJECT TO A PENALTY
AND A 31% BACKUP WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION
PROCEEDS. (PLEASE PROVIDE EITHER NUMBER ON IRS FORM W-9). YOU
MAY REQUEST SUCH FORM BY CALLING CGFSC AT 800-282-4404.
/ / NON-U.S. CITIZEN(S)/TAXPAYER(S):
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES:
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S.
CITIZENS OR RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY
THE INTERNAL REVENUE SERVICE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
(X)
(X) Signature (if joint account, both
Signature Date must sign) Date
</TABLE>
<PAGE>
<PAGE>
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER BY THE FUND OR THE DISTRIBUTOR TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
--------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
----
Fund Expenses..................................... 2
Financial Highlights.............................. 4
Prospectus Summary................................ 6
Investment Objective and Policies................. 10
Additional Investment Information................. 12
Investment Limitations............................ 15
Management of the Fund............................ 15
Purchase of Shares................................ 18
Redemption of Shares.............................. 22
Shareholder Services.............................. 24
Valuation of Shares............................... 25
Performance Information........................... 26
Dividends and Capital Gains Distributions......... 26
Taxes............................................. 27
Portfolio Transactions............................ 28
General Information............................... 29
Account Registration Form
</TABLE>
ACTIVE COUNTRY ALLOCATION PORTFOLIO
A PORTFOLIO OF THE
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
Common Stock
($.001 PAR VALUE)
-------------
PROSPECTUS
-------------
Investment Adviser
Morgan Stanley
Asset Management Inc.
Distributor
Morgan Stanley & Co.
Incorporated
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