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P R O S P E C T U S
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INTERNATIONAL MAGNUM PORTFOLIO
A PORTFOLIO OF THE
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798, BOSTON, MASSACHUSETTS 02208-2798
FOR INFORMATION CALL 1-800-548-7786
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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 International Magnum Portfolio (the "Portfolio"). The Class A and
Class B shares currently offered by the Portfolio have different minimum
investment requirements and fund expenses. Shares of the portfolios are offered
with no sales charge or exchange or redemption fee (with the exception of one of
the portfolios).
The 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 Portfolio's investment adviser.
INVESTORS SHOULD NOTE THAT THE PORTFOLIO MAY INVEST UP TO 10% OF ITS TOTAL
ASSETS IN RESTRICTED SECURITIES, AND UP TO 25% OF ITS TOTAL ASSETS IN RESTRICTED
SECURITIES THAT ARE RULE 144A SECURITIES. SEE "ADDITIONAL INVESTMENT INFORMATION
- -- NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED
SECURITIES." INVESTMENTS IN RESTRICTED SECURITIES IN EXCESS OF 5% OF THE
PORTFOLIO'S TOTAL ASSETS MAY BE CONSIDERED A SPECULATIVE ACTIVITY, MAY INVOLVE
GREATER RISK AND MAY INCREASE THE PORTFOLIO'S EXPENSES.
The Fund is designed to meet the investment needs of discerning investors
who place a premium on quality and personal service. With Morgan Stanley Asset
Management Inc. as Adviser and Administrator (the "Adviser" and the
"Administrator"), and with Morgan Stanley & Co. Incorporated ("Morgan Stanley")
as Distributor, the Fund makes available to institutional and high net worth
individual investors a series of portfolios which benefit from the investment
expertise and commitment to excellence associated with Morgan Stanley and its
affiliates.
This Prospectus is designed to set forth concisely the information about the
Fund that a prospective investor should know before investing and it should be
retained for future reference. The Fund offers additional portfolios which are
described in other prospectuses and under "Prospectus Summary" below. The Fund
currently offers the following portfolios: (i) GLOBAL AND INTERNATIONAL EQUITY
- -- Active Country Allocation, Asian Equity, China Growth, Emerging Markets,
European Equity, Global Equity, Gold, International Equity, International Small
Cap, Japanese Equity, Latin American and International Magnum 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 January 29, 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 JANUARY 23, 1996.
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FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of
the International Magnum 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
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------------------
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<S> <C>
Management Fee (Net of Fee Waiver)*
Class A................................................................................... 0.48%
Class B................................................................................... 0.48%
12b-1 Fees
Class A................................................................................... None
Class B................................................................................... 0.25%
Other Expenses
Class A................................................................................... 0.52%
Class B................................................................................... 0.52%
Total Operating Expenses (Net of Fee Waivers)*
Class A................................................................................... 1.00%
Class B................................................................................... 1.25%
---------
---------
</TABLE>
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*The Adviser has agreed to waive its advisory fees and/or to reimburse the
Portfolio, if necessary, if such fees would cause the Portfolio's total annual
operating expenses, as a percentage of average daily net assets, to exceed the
percentages set forth in the table above. Absent the fee waiver, the investment
advisory fee would be 0.80%. Absent the fee waiver and/or expense
reimbursement, the Portfolio's total operating expenses are expected to be
1.32% of the average daily net assets of the Class A shares and 1.57% of the
average daily net assets of the Class B shares. As a result of this reduction,
the Investment Advisory Fee stated above is lower than the contractual fee
stated under "Management of the Fund." The Adviser reserves the right to
terminate any of its fee waivers and/or expense reimbursements at any time in
its sole discretion. For further information on Fund expenses, see "Management
of the Fund."
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The purpose of the table above is to assist the investor in understanding
the various expenses that an investor in the Portfolio will bear directly or
indirectly. The Class A and Class B expenses and fees for the Portfolio are
based on estimates, assuming that the average daily net assets of the Class A
shares and Class B shares will [each 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>
International Magnum Portfolio
Class A.......................................................... $ 10 $ 32 $ * $ *
Class B.......................................................... $ 13 $ 41 $ * $ *
</TABLE>
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*Because the Portfolio has recently commenced operations, the Fund has not
projected expenses for the Portfolio beyond the 3-year period shown.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The Fund intends to comply with all state laws that restrict investment
company expenses. Currently, the most restrictive state law requires that the
aggregate annual expenses of an investment company shall not exceed two and
one-half percent (2 1/2%) of the first $30 million of average net assets, two
percent (2%) of the next $70 million of average net assets, and one and one-half
percent (1 1/2%) of the remaining net assets of such investment company.
The Adviser has agreed to a reduction in the amounts payable to it, and to
reimburse the Portfolio, if necessary, if in any fiscal year the sum of the
Portfolio's expenses exceeds the limit set by applicable state law.
3
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PROSPECTUS SUMMARY
THE FUND
The Fund consists of twenty-eight portfolios, offering institutional
investors and high net worth individual investors a broad range of investment
choices coupled with the advantages of a no-load mutual fund with Morgan Stanley
and its affiliates providing customized services as Adviser, Administrator and
Distributor. Each portfolio offers Class A 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 International Magnum Portfolio.
-The INTERNATIONAL MAGNUM PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers in accordance
with EAFE country (as defined in "Investment Objective and Policies" below)
weightings determined by the Adviser.
The other portfolios of the Fund are described in other prospectuses which
may be obtained from the Fund at the address and phone number noted on the cover
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 United States issuers.
-The GOLD PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of foreign and domestic issuers engaged in
gold-related activities.
-The INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of non-United States issuers.
-The INTERNATIONAL SMALL CAP PORTFOLIO seeks long-term capital appreciation
by investing primarily in equity securities of non-United States issuers
with equity market capitalizations of less than $500 million.
-The JAPANESE EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of Japanese issuers.
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-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 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.
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-The MUNICIPAL BOND PORTFOLIO seeks to produce a high level of current
income consistent with the preservation of principal through investment
primarily in municipal obligations, the interest on which is exempt from
federal income tax.
MONEY MARKET:
-The MONEY MARKET PORTFOLIO seeks to maximize current income and preserve
capital while maintaining high levels of liquidity through investing in
high quality money market instruments with remaining maturities of one year
or less.
-The MUNICIPAL MONEY MARKET PORTFOLIO seeks to maximize current tax-exempt
income and preserve capital while maintaining high levels of liquidity
through investing in high-quality money market instruments with remaining
maturities of one year or less which are exempt from federal income tax.
INVESTMENT MANAGEMENT
Morgan Stanley Asset Management Inc., a wholly owned subsidiary of Morgan
Stanley Group Inc., which, together with its affiliated asset management
companies, at December 31, 1995 had approximately [$ ] billion in assets under
management as an investment manager or as a fiduciary adviser, acts as
investment adviser to the Fund and each of its portfolios. See "Management of
the Fund -- Investment Adviser" and "Management of the Fund -- Administrator."
HOW TO INVEST
Class A shares of the Portfolio are offered directly to investors at net
asset value with no sales commission or 12b-1 charges. Class B shares 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. 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 officers of
the Adviser and 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. 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."
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 a Portfolio account are subject to
6
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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, regardless of the
value of such accounts. Class A shares in a Portfolio 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 Portfolio 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 Portfolio 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.
7
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the International Magnum Portfolio is described
below, together with the policies the Fund employs in its efforts to achieve
this objective. The Portfolio's investment objective is a fundamental policy
which may not be changed without the approval of a majority of the Portfolio's
outstanding voting securities. There is no assurance that the Portfolio will
attain its objective. The investment policies described below are not
fundamental policies and may be changed without shareholder approval.
The investment objective of the Portfolio is to provide long-term capital
appreciation. The production of any current income is incidental to this
objective. The Portfolio seeks to achieve its objective by investing primarily
in equity securities of non-U.S. issuers in accordance with the EAFE country
(defined below) weightings determined by the Adviser. With respect to the
Portfolio, equity securities include common and preferred stocks, convertible
securities, and rights and warrants to purchase common stocks. The equity
securities in which the Portfolio may invest may be denominated in any currency.
The countries in which the Portfolio will invest are those comprising the
Morgan Stanley Capital International EAFE Index (the "Index"), which includes
Australia, Japan, New Zealand, most nations located in Western Europe and
certain developed countries in Asia, such as Hong Kong and Singapore (each an
"EAFE country," and collectively the "EAFE countries"). At least 65% of the
total assets of the Portfolio will be invested in equity securities of issuers
in at least three different EAFE countries under normal circumstances.
By analyzing a variety of macroeconomic and political factors, the Adviser
develops fundamental projections on comparative interest rates, currencies,
corporate profits and economic growth among the various regions represented in
the Index. Once regional projections are developed, the Adviser will utilize
such projections to develop specific country projections. These regional and
country projections are used to determine what the Adviser believes to be a fair
value for the stock market of each EAFE country. Discrepancies between actual
value and fair value as determined by the Adviser provide an expected return for
each stock market. The expected return is adjusted by currency return
expectations derived from the Adviser's purchasing-power parity exchange rate
model to arrive at an expected total return in U.S. dollars. The final country
allocation decision is then arrived at by considering the expected total return
in light of various country-specific considerations such as market size,
volatility, liquidity and country risk.
The Adviser's approach in selecting investments among the issuers in a
particular EAFE country, which is oriented to individual stock selection and is
value driven, is similar to the approach described in the International Equity
Portfolio discussed above. Within a particular EAFE country, the Adviser will
attempt to identify those securities which it believes to be undervalued in
relation to the issuer's assets, cash flow, earnings and revenues. While the
Portfolio is not subject to any specific geographic diversification
requirements, it currently intends to diversify investments among countries to
reduce currency risk.
Although the Portfolio intends to invest primarily in equity securities
listed on a stock exchange in an EAFE country, the Portfolio may invest in
equity securities that are traded over the counter or that are not admitted to
listing on a stock exchange or dealt in on a regulated market. As a result of
the absence of a public trading market, such securities may pose liquidity
risks. The Portfolio may also invest in private placements or initial public
offerings in the form of oversubscriptions. Such investments generally entail
short-term liquidity risks. See "Additional Investment Information --
Non-Publicly Traded Securities, Private Placements and Restricted Securities."
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The Portfolio may invest up to 10% of its total assets in (i) investment
funds with investment objectives similar to that of the Portfolio and (ii) for
temporary purposes, money market funds and pooled investment vehicles. If the
Portfolio invests in other investment funds, stockholders will bear not only
their proportionate share of the expenses of the Portfolio (including operating
expenses and fees of the Investment Adviser), but also will indirectly bear
similar expenses of the underlying investment fund.
Although the Portfolio anticipates being fully invested in equity securities
of EAFE countries, the Portfolio may invest, under normal circumstances for cash
management purposes, up to 35% of its total assets in certain short-term (less
than twelve months to maturity) and medium-term (not greater than five years to
maturity) debt securities or hold cash. In addition, for temporary defensive
purposes during periods in which the Adviser believes changes in economic,
financial or political conditions make it advisable, the Portfolio may invest up
to 100% of its total assets in such short-term and medium-term debt securities
or hold cash. See "Additional Investment Information -- Temporary Investments."
[The Portfolio will not invest in debt securities that are not rated at least
investment grade by either Standard & Poor's Corporation or Moody's Investment
Service, Inc.]
Although the Portfolio will not invest for short-term trading purposes,
investment securities may be sold from time to time without regard to the length
of time they have been held. It is anticipated that the annual turnover rate of
the Portfolio will not exceed 100% under normal circumstances.
Any remaining assets of the Portfolio may be invested in certain securities
and obligations, including derivative securities, as set forth in "Additional
Investment Information" below.
ADDITIONAL INVESTMENT INFORMATION
DERIVATIVES. The Portfolio may invest in certain derivatives, which are
financial products or instruments that derive their value from the value of an
underlying asset, reference rate or index. The following are derivatives in
which the Portfolio may invest: convertible securities, warrants, [depositary
receipts,] forward foreign currency exchange contracts, foreign currency futures
contracts, stock options, stock index futures contracts and when-issued and
delayed delivery securities. See elsewhere in this "Additional Investment
Information" section for descriptions of these various instruments, and see
"Investment Objectives and Policies" for more information regarding any
investment policies or limitations applicable to their use.
FOREIGN INVESTMENT. The Portfolio may invest in U.S. dollar-denominated
securities of foreign issuers trading in U.S. markets and in non-U.S.
dollar-denominated securities of foreign issuers. Investment in securities of
foreign issuers and in foreign branches of domestic banks involves somewhat
different investment risks than those affecting securities of U.S. domestic
issuers. There may be limited publicly available information with respect to
foreign issuers, and foreign issuers are not generally subject to uniform
accounting, auditing and financial and other reporting standards and
requirements comparable to those applicable to U.S. companies. There may also be
less government supervision and regulation of foreign securities exchanges,
brokers and listed companies than in the U.S. Many foreign securities markets
have substantially less volume than U.S. national securities exchanges, and
securities of some foreign issuers are less liquid and more volatile than
securities of comparable domestic issuers. Brokerage commissions and other
transaction costs on foreign securities exchanges are generally higher than in
the U.S. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, which may decrease the net return on
foreign investments as compared to
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dividends and interest paid to the Portfolio by U.S. companies[, and it is
expected that the Portfolio or its shareholders would be able to claim a credit
for U.S. tax purposes with respect to any such foreign taxes.] See "Taxes."
Additional risks include future political and economic developments, the
possibility that a foreign jurisdiction might impose or change withholding taxes
on income payable with respect to foreign securities, possible seizure,
nationalization or expropriation of the foreign issuer or foreign deposits and
the possible adoption of foreign governmental restrictions such as exchange
controls. Many of the emerging or developing countries may have less stable
political environments than more developed countries. Also, it may be more
difficult to obtain a judgment in a court outside the United States. Investments
in securities of foreign issuers are frequently denominated in foreign
currencies, and the Portfolio may temporarily hold uninvested reserves in bank
deposits in foreign currencies. Therefore, the value of the Portfolio's assets
as measured in U.S. dollars may be affected favorably or unfavorably by changes
in currency rates and in exchange control regulations, and the Portfolio may
incur costs in connection with conversions between various currencies.
FORWARD CURRENCY HEDGING TRANSACTIONS. In order to hedge against foreign
currency exchange rate risks, the Portfolio may enter into forward foreign
currency exchange contracts ("forward contracts"), foreign currency futures
contracts and options on such contracts, and purchase put or call options on
foreign currencies. A forward contract involves an obligation to purchase or
sell an amount of a specified currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. Forward contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks). Except when used for hedging, the Portfolio's custodian will
place cash, U.S. government securities, or high-grade debt securities into a
segregated account of the Portfolio in an amount equal to the value of the
Portfolio's total assets committed to the consummation of forward contracts. If
the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account on a daily basis so
that the value of the account will be at least equal to the amount of the
Portfolio's commitments with respect to such contracts. See "Investment
Objective and Policies -- Forward Foreign Currency Exchange Contracts" in the
Statement of Additional Information.
A foreign currency futures contract is a standardized contract for the
future delivery of a specified amount of a foreign currency at a future date at
a price set at the time of the contract. Foreign currency futures contracts
traded in the U.S. are traded on regulated exchanges. Parties to a futures
contract must make initial "margin" deposits to secure performance of the
contract, which generally range from 2% to 5% of the contract price. There also
are requirements to make "variation" margin deposits as the value of the futures
contract fluctuates. The Portfolio may not enter into foreign currency futures
contracts if the aggregate amount of initial margin deposits on the Portfolio's
futures positions, including stock index futures contracts (which are discussed
below), would exceed 5% of the value of the Portfolio's total assets. The
Portfolio also will be required to segregate assets to cover its futures
contracts obligations.
At the maturity of a forward or futures contract, the Portfolio may either
accept or make delivery of the currency specified in the contract or, prior to
maturity, enter into a closing purchase transaction involving the purchase or
sale of an offsetting contract. Closing purchase transactions with respect to
forward contracts are usually effected with the currency trader who is a party
to the original forward contract. Closing purchase transactions with respect to
futures contracts are effected on an exchange. The Portfolio will only enter
into such
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a forward or futures contract if it is expected that there will be a liquid
market in which to close out such contract. There can, however, be no assurance
that such a liquid market will exist in which to close a forward or futures
contract, in which case the Portfolio may suffer a loss.
Purposes for which such contracts may be used include protecting against a
decline in a foreign currency against the U.S. dollar between the trade date and
settlement date when the Portfolio purchases or sells securities, locking in the
U.S. dollar value of dividends declared on securities held by the Portfolio and
generally protecting the U.S. dollar value of securities held by the Portfolio
against exchange rate fluctuations. Such contracts will be used only as a
protective measure against the effects of fluctuating rates of currency exchange
and exchange control regulations. While such 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.
The 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 such Investment Funds the right to sell a currency at the
exercise price until the expiration of the option. A call option gives the
Investment Fund the right to purchase a currency at the exercise price until the
expiration of the option.
INVESTMENT COMPANIES. Some foreign countries have laws and regulations that
currently preclude direct foreign investment in the securities of their
companies. However, indirect foreign investment in the securities of companies
listed and traded on the stock exchanges in these countries is permitted by
certain foreign countries through investment companies which have been
specifically authorized. The Portfolio may invest in these investment companies
subject to the provisions of the Investment Company Act of 1940, as amended (the
"1940 Act"), and other applicable laws as discussed below under "Investment
Restrictions." If the Portfolio invests in such investment companies, the
Portfolio's shareholders will bear not only their proportionate share of the
expenses of the Portfolio (including operating expenses and the fees of the
Adviser), but also will indirectly bear similar expenses of the underlying
investment companies. Certain of the investment companies referred to in the
preceding paragraph are advised by the Adviser. The Portfolio may, to the extent
permitted under the 1940 Act and other applicable law, invest in these
investment companies. If the Portfolio does elect to make an investment in such
an investment company, it will only purchase the securities of such investment
company in the secondary market.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend its securities to
brokers, dealers, domestic and foreign banks or other financial institutions for
the purpose of increasing its net investment income. These loans must be secured
continuously by cash or equivalent collateral or by a letter of credit at least
equal to the market value of the securities loaned plus accrued interest or
income. There may be risks of delay in recovery of the securities or even loss
of rights in the collateral should the borrower of the securities fail
financially. The Portfolio will not enter into securities loan transactions
exceeding, in the aggregate, 33 1/3% of the market value of the Portfolio's
total assets. For more detailed information about securities lending, see
"Investment Objective and Policies" in the Statement of Additional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money
market instruments, although the Portfolio intends to stay invested in
securities satisfying its primary investment objective to the extent practical.
The Portfolio may make money market investments pending other investment or
settlement for liquidity, or in adverse market conditions. The money market
investments permitted for the Portfolio include
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obligations of the U.S. Government and its agencies and instrumentalities,
obligations of foreign sovereignties, other debt securities, commercial paper
including bank obligations, certificates of deposit (including Eurodollar
certificates of deposit) and repurchase agreements. For more detailed
information about these money market investments, see "Description of Securities
and Ratings" in the Statement of Additional Information.
NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED
SECURITIES. The Portfolio may invest in securities that are neither listed on a
stock exchange nor traded over-the-counter, including privately placed
securities. Such unlisted equity securities may involve a higher degree of
business and financial risk that can result in substantial losses. As a result
of the absence of a public trading market for these securities, they may be less
liquid than publicly traded securities. Although these securities may be resold
in privately negotiated transactions, the prices realized from these sales could
be less than those originally paid by the Portfolio or less than what may be
considered the fair value of such securities. Further, more companies whose
securities are not publicly traded may not be subject to the disclosure and
other investor protection requirements which might be applicable if their
securities were publicly traded. If such securities are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Portfolio may be required to bear the expenses of registration. As a
general matter, the Portfolio may not invest more than 15% of its 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, as amended (the "1933 Act").
Nevertheless, subject to the foregoing limit on illiquid securities, the
Portfolio may invest up to 25% of its total assets in Restricted Securities that
can be offered and sold to qualified institutional buyers under Rule 144A under
that Act ("144A Securities"). The Board of Directors has adopted guidelines and
delegated to the Adviser, subject to the supervision of the Board of Directors,
the daily function of determining and monitoring the liquidity of 144A
securities. Rule 144A securities may become illiquid if qualified institutional
buyers are not interested in acquiring the securities. Investors should note
that investments of 5% of the Portfolio's total assets in restricted securities
may be considered a speculative activity and may involve greater risk and
expense to the Portfolio.
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 AND INDEX FUTURES CONTRACTS. The Portfolio may utilize stock
options and stock index futures contracts with respect to securities in which
the Portfolio may invest in order to implement regional allocation strategies or
to hedge a portion of the Portfolio's investments. The Portfolio will engage
only in transactions in stock options and stock index futures contracts which
are traded on a recognized securities or futures exchange.
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<PAGE>
The Portfolio may write (i.e., sell) covered call options on portfolio
securities which give the purchaser the right to buy the underlying security
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 securities subject to the
option, or (ii) securities convertible or exchangeable without the payment of
any consideration into the securities subject to the option. 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. 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. As a matter of operating policy, the value of the
underlying securities on which stock options will be written at any one time
will not exceed 5% of the Portfolio's total assets.
The Portfolio may also write (i.e., sell) covered put options. Generally, a
put option is "covered" if the Portfolio maintains cash, U.S. Government
securities or other high grade debt obligations equal to the exercise price of
the option or if the Portfolio holds a put option on the same underlying
security with a similar or higher exercise price. 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).
The Portfolio may sell put options to receive the premiums paid by purchasers
and to close out a long put option position. In addition, when the Adviser
wishes to purchase a security at a price lower than its current market price,
the Portfolio may write a covered put option at an exercise price reflecting the
lower purchase price sought.
The Portfolio may also purchase put or call options on individual securities
or baskets of 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"), usually not more than nine months from
the date the option is issued. The Portfolio may purchase call options to close
out a covered call position or to protect against an increase in the price of a
security it anticipates purchasing. The Portfolio may purchase put options on
securities which it holds in its portfolio to protect itself against a decline
in the value of the security. If the value of the underlying security were to
fall below the exercise price of the put purchased in an amount greater than the
premium paid for the option, the Portfolio would incur no additional loss. The
Portfolio may also purchase put options to close out written put positions in a
manner similar to call option closing purchase transactions.
The primary 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 prices of options relating to the securities purchased
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<PAGE>
or sold by the Portfolio; and (ii) possible lack of a liquid secondary market
for an option. 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.
The Portfolio may purchase and sell stock index futures contracts [and
options on such futures contracts]. A stock index 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. The Portfolio may utilize stock index futures contracts in order to
hedge against fluctuations in the price of a security it holds or intends to
acquire, to remain fully invested and to reduce transaction costs, but not for
speculation or for achieving leverage. The Portfolio may enter into stock index
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 stock
index futures contracts. [Successful use of stock index futures will be subject
to the Adviser's ability to predict correctly movements in the direction of the
relevant stock market. No assurance can be given that the Adviser's judgment in
this respect will be correct.]
TEMPORARY INVESTMENTS. During periods in which the Adviser believes changes
in economic, financial or political conditions make it advisable, for temporary
defensive purposes the Portfolio may reduce its holdings in equity and other
securities and may invest in certain short-term (less than twelve months to
maturity) and medium-term (not greater than five years to maturity) debt
securities or may hold cash. The short-term and medium-term debt securities in
which the Portfolio may invest consist of (a) obligations of governments,
agencies or instrumentalities of any member state of the Organization for
Economic Cooperation and Development ("OECD"), including the United States; (b)
bank deposits and bank obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks organized under the laws of any
member state of the OECD, including the United States, denominated in any
currency; (c) finance company and corporate commercial paper and other
short-term corporate debt obligations of corporations organized under the laws
of any member state of the OECD, including the United States, meeting the
Portfolio's credit quality standards, provided that no more than 20% of the
Portfolio's assets is invested in any one of such issuers. The Portfolio's
short-term and medium-term debt securities in which the Portfolio may invest
will be rated investment grade by recognized rating services such as Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P")
(in the case of Moody's and S&P, meaning rated A or higher by either), or if
unrated, will be determined to be of comparable quality by the Adviser.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. In such transactions,
instruments are bought with payment and delivery taking place in the future in
order to secure what is considered to be an advantageous yield or price at the
time of the transaction. Delivery of and payment for these securities may take
as long as a month or more after the date of the purchase commitment but will
take place no more than 120 days after the trade date. The Portfolio will
maintain with the custodian a separate account with a segregated portfolio of
high-grade debt securities or equity securities or cash in an amount at least
equal to these commitments. The payment obligation and the interest rates that
will be received are each fixed at the time the Portfolio enters into the
commitment and no interest accrues to the Portfolio until settlement. Thus, it
is possible that the market value at the time of settlement could be higher or
lower than the purchase price if, among other factors, the general level of
interest
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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
The International Magnum Portfolio is a non-diversified investment company
under the 1940 Act, which means that the Portfolio is not limited by the 1940
Act in the proportion of its total assets that may be invested in the
obligations of a single issuer. Thus, the Portfolio may invest a greater
proportion of its total assets in the securities of a smaller number of issuers
and, as a result, will be subject to greater risk with respect to its respective
portfolio securities. The Portfolio, however, intends to comply with the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended, for qualification as regulated investment companies. See "Taxes."
The Portfolio also operates under certain investment restrictions that are
deemed fundamental limitations and may be changed only with the approval of the
holders of a majority of the Portfolio's outstanding shares. See "Investment
Limitations" in the Statement of Additional Information. In addition, the
Portfolio operates under certain non-fundamental investment limitations as
described below and in the Statement of Additional Information. The Portfolio
may not (i) enter into repurchase agreements with more than seven days to
maturity if, as a result, more than 15% of the market value of the Portfolio's
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 International Magnum Portfolio an annual management fee, payable
quarterly, equal to 0.80% of the average daily net assets of the Portfolio.
The fees of the Portfolio, which involves international investments, are
higher than those of most investment companies but comparable to those of
investment companies with similar objectives. The Adviser has agreed to a
reduction in the fees payable to it and to reimburse the Portfolio, if
necessary, if such fees would cause total annual operating expenses of the
Portfolio to exceed 1.00% of the average daily net assets of the Class A shares
of the Portfolio and 1.25% of the average daily net assets of the Class B shares
of the Portfolio.
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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, including advisory services to [ ] open-end investment
companies and [ ] closed-end investment companies. At December 31, 1996, the
Adviser, together with its affiliated asset management companies, managed
investments totaling approximately [$ ] billion, including approximately [$ ]
billion under active management and [$ ] billion as Named Fiduciary or Fiduciary
Adviser. See "Management of the Fund" in the Statement of Additional
Information.
PORTFOLIO MANAGER. FRANCINE J. BOVICH. Francine Bovich joined the Adviser
as a Principal in 1993. She is responsible for product development, portfolio
management and communication of the Adviser's asset allocation strategy to
institutional investor clients. Previously, Ms. Bovich was a Principal and
Executive Vice President of Westwood Management Corp. ("Westwood"), a registered
investment adviser. Before joining Westwood, she was a Managing Director of
Citicorp Investment Management, Inc. (now Chancellor Capital Management), where
she was responsible for the Institutional Investment Management group. Ms.
Bovich began her investment career with Banker's Trust Company. She holds a B.A.
in Economics from Connecticut College and an M.B.A. in Finance from New York
University.
ADMINISTRATOR. The Adviser also provides the Fund with administrative
services pursuant to an Administration Agreement. The services provided under
the Administration Agreement are subject to the supervision of the Officers and
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 the Portfolio.
In a merger completed on September 1, 1995, The Chase Manhattan Bank, N.A.
("Chase") succeeded to all of the rights and obligations under the U.S. Trust
Administration Agreement between the Adviser and the United States Trust Company
of New York ("U.S. Trust"), pursuant to which U.S. Trust had agreed to provide
certain administrative services to the Fund. Pursuant to a delegation clause in
the U.S. Trust Administration Agreement, U.S. Trust delegated its administration
responsibilities to Chase Global Funds Services Company ("CGFSC"), formerly
known as Mutual Funds Service Company, which after the merger with Chase is a
subsidiary of Chase and will continue to provide certain administrative services
to the Fund. The Adviser supervises and monitors such administrative services
provided by CGFSC. The services provided under the Administration Agreement and
the U.S. Trust Administration Agreement are also subject to the supervision of
the Board of Directors of the Fund. The Board of Directors of the Fund has
approved the provision of services described above pursuant to the
Administration Agreement and the U.S. Trust Administration Agreement as being in
the best interests of the Fund. CGFSC's business address is 73 Tremont Street,
Boston, Massachusetts 02108-3913. For additional information regarding the
Administration Agreement or the U.S. Trust Administration Agreement, see
"Management of the Fund" in the Statement of Additional Information.
DIRECTORS AND OFFICERS. Pursuant to the Fund's Articles of Incorporation,
the Board of Directors decides upon matters of general policy and reviews the
actions of the Fund's Adviser, Administrator and Distributor. The Officers of
the Fund conduct and supervise its daily business operations.
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<PAGE>
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.
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 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.
Officers of the Adviser and its affiliates are subject to the minimums for a
Portfolio account, except they may purchase Class B shares subject to a minimum
initial investment and minimum account size of $5,000 for a Portfolio account.
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.
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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.
For purposes of redemptions by the Fund, the foregoing minimum account size
requirements do not apply to Portfolios accounts containing Class B shares held
by officers of the Adviser or its affiliates. However, if the value of such
account held by an officer of the Adviser or its affiliates falls below $5,000
because of shareholder redemption(s), the Fund will notify the shareholder, and
if the account value remains $5,000 for 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. 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 Portfolio 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.
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. --
International Magnum 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
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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.
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. -- International Magnum 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
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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 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
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<PAGE>
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
(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
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<PAGE>
"Transfer Agent") will employ reasonable procedures to confirm that the
instructions communicated by telephone are genuine. These procedures include
requiring the investor to provide certain personal identification information at
the time an account is opened and prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written
instructions regarding transaction requests. Neither the Fund nor the Transfer
Agent will be responsible for any loss, liability, cost or expense for following
instructions received by telephone that either of them reasonably believes to be
genuine.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Fund at the address above.
Requests to change the bank or account must be signed by each shareholder and
each signature must be guaranteed.
FURTHER REDEMPTION INFORMATION
Normally the Fund will make payment for all shares redeemed within one
business day of receipt of the request, but in no event will payment be made
more than seven days after receipt of a redemption request in good order.
However, payments to investors redeeming shares which were purchased by check
will not be made until payment for the purchase has been collected, which may
take up to eight days after the date of purchase. The Fund may suspend the right
of redemption or postpone the date upon which redemptions are effected at times
when the NYSE is closed, or under any emergency circumstances as determined by
the Securities and Exchange Commission (the "Commission").
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Portfolio to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of securities held by the Portfolio in lieu of
cash in conformity with applicable rules of the Commission.
Distributions-in-kind will be made in readily marketable securities. Investors
may incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
To protect your account, the Fund and its agents from fraud, signature
guarantees are required for certain redemptions to verify the identity of the
person who has authorized a redemption from your account. Please contact the
Fund for further information. See "Redemption of Shares" in the Statement of
Additional Information.
SHAREHOLDER SERVICES
EXCHANGE 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
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<PAGE>
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 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 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.
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
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<PAGE>
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 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
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<PAGE>
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 advisers regarding
specific questions as to federal, state and local income taxes.
The Portfolio is treated as a separate entity for federal income tax
purposes and is not combined with the Fund's other portfolios. The Portfolio
intends to qualify for the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), so that the Portfolio will be relieved of federal income tax on
that part of its net investment income and net capital gain that is distributed
to shareholders.
The Portfolio distributes substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Dividends from the Portfolio's net investment income are taxable to shareholders
as ordinary income, whether received in cash or 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.
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Dividends and other distributions declared by the Portfolio in October,
November or December of any year and payable to shareholders of record on a date
in such month will be deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if the distributions are paid by
the Portfolio at any time during the following January.
The sale or redemption of shares may result in taxable gain or loss to the
redeeming shareholder, depending upon whether the fair market value of the
redemption proceeds exceeds or is less than the shareholder's adjusted basis in
the redeemed 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.
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
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<PAGE>
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," 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 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
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of the Portfolio may be presumed to "control" (as that term is 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.
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.
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MORGAN STANLEY INSTITUTIONAL FUND, INC. -- INTERNATIONAL MAGNUM PORTFOLIO
P.O. BOX 2798, BOSTON, MA 02208-2798
ACCOUNT REGISTRATION FORM
<TABLE>
ACCOUNT INFORMATION
Fill in where applicable
If you need assistance in filling out this form for the Morgan Stanley Institutional
Fund, please contact your Morgan Stanley representative or call us toll
free 1-(800)-548-7786. Please print all items except signature, and
<C> <S> <C>
A) REGISTRATION
1. INDIVIDUAL ____________________________________________________________________________________
2. JOINT TENANTS 1. First Name Initial Last Name
(RIGHTS OF SURVIVORSHIP ____________________________________________________________________________________
PRESUMED UNLESS 2. First Name Initial Last Name
TENANCY IN COMMON ____________________________________________________________________________________
IS INDICATED) First Name Initial Last Name
3. CORPORATIONS,
TRUSTS AND OTHERS 3.
Please call the Fund for ____________________________________________________________________________________
additional documents that
may be required to set up ____________________________________________________________________________________
account and to authorize
transactions ____________________________________________________________________________________
Type of / / INCORPORATED / / UNINCORPORATED / / PARTNERSHIP / / UNIFORM GIFT/
Registration: ASSOCIATION TRANSFER TO MINOR
(ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / TRUST __________ / / OTHER (Specify) __________
B) MAILING ADDRESS
Please fill in completely, Street or P.O. Box____________________________________________________________________
including telephone City_______________________________ State ________________ Zip________________________
number(s).
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
IDENTIFICATION Identification Number. For most
NUMBER individual taxpayers, this is your
If the account is in more Social Security Number.
than one name, CIRCLE THE TAXPAYER IDENTIFICATION NUMBER
NAME OF THE PERSON WHOSE __________________________________
TAXPAYER IDENTIFICATION OR
NUMBER IS PROVIDED IN
SECTION A) ABOVE. If no SOCIAL SECURITY NUMBER
name is circled, the number
will be considered to be ___________________________________
that of the last name PART 2. BACKUP WITHHOLDING
listed. For Custodian / / Check this box if you are NOT
account of a minor (Uniform subject to Backup Withholding under
Gifts/Transfers to Minors the provisions of Section
Act), give the Social 3406(a)(1)(C) of the Internal Revenue
Security Number of the Code.
minor.
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as payer) with your
correct taxpayer identification number. Accounts that have a missing or
incorrect taxpayer identification number 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 taxpayer 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 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. IF YOU HAVE NOT BEEN SO NOTIFIED, CHECK THE BOX IN
PART 2 AT LEFT.
D) PORTFOLIO AND CLASS For Purchase of the following Portfolio:
SELECTION
(Class A shares minimum International Magnum Portfolio / / Class A Shares $______________
$500,000 and Class B shares
minimum $100,000). Please / / Class B Shares $_________________
indicate class and amount. Total Initial Investment $__________________
E) METHOD OF
INVESTMENT Payment by:
Please indicate manner of / / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY INSTITUTIONAL FUND, INC.
payment. --INTERNATIONAL MAGNUM PORTFOLIO)
/ / Exchange $________________ From ____________________ __________________________
Name of Portfolio Account Number
/ / Account previously established by:
/ / Phone exchange / / Wire on _________________________ _____________________________
Date Account Number (Check
(Previously assigned Digit)
</TABLE>
<PAGE>
<TABLE>
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F) DISTRIBUTION Income dividends and capital gains distributions (if any) will be reinvested in
OPTION additional shares unless either box below is checked.
/ / Income dividends to be paid in cash, capital gains distributions
(if any) in shares.
/ / Income dividends and capital gains distributions (if any) to be paid in cash.
G) TELEPHONE / / I/we hereby authorize the Fund and its agents to
REDEMPTION honor any telephone requests to wire redemption
OPTION proceeds to the commercial bank indicated at right
Please select at time of and/or mail redemption proceeds to the name and
initial application if you address in which my/our fund account is registered
wish to redeem shares by if such requests are believed to be authentic.
telephone. A SIGNATURE THE FUND AND THE FUND'S TRANSFER AGENT WILL EMPLOY
GUARANTEE IS REQUIRED IF REASONABLE PROCEDURES TO CONFIRM THAT INSTRUCTIONS
BANK ACCOUNT IS NOT COMMUNICATED BY TELEPHONE ARE GENUINE. THESE
REGISTERED IDENTICALLY TO PROCEDURES INCLUDE REQUIRING THE INVESTOR TO
YOUR FUND ACCOUNT. PROVIDE CERTAIN PERSONAL IDENTIFICATION INFORMATION
TELEPHONE REQUESTS FOR AT THE TIME AN ACCOUNT IS OPENED AND PRIOR TO
REDEMPTIONS OR EXCHANGES EFFECTING EACH TRANSACTION REQUESTED BY TELEPHONE.
WILL NOT BE HONORED UNLESS IN ADDITION, ALL TELEPHONE TRANSACTION REQUESTS
THE APPLICABLE BOX IS WILL BE RECORDED AND INVESTORS MAY BE REQUIRED TO
CHECKED. 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.
_______________________ ____________________________
Name of COMMERCIAL Bank Bank Account No.
(Not Savings Bank)
___________________________
Bank ABA No.
_________________________________________________________________
Name(s) in which your BANK Account is Established
_________________________________________________________________
Bank's Street Address
_________________________________________________________________
City State Zip
H) INTERESTED PARTY
OPTION
In addition to the account ________________________________________________________________
statement sent to my/our Name
registered address, I/we ________________________________________________________________
hereby authorize the fund
to mail duplicate ________________________________________________________________
statements to the name and Address
address provided at right. ________________________________________________________________
City State Zip Code
I) DEALER ______________________ ______________________ _________________
INFORMATION Representative Name Representative No. Branch No.
J) SIGNATURE OF The undersigned certify that I/we have full authority and legal capacity to purchase
ALL HOLDERS and redeem shares of the Fund and affirm that I/we have
AND TAXPAYER received a current Prospectus of the Morgan Stanley Institutional Fund, Inc.
CERTIFICATION 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
Sign Here --> TRUE, CORRECT AND COMPLETE.
(X) (X)
_______________________________________ _________________________________________
Signature Date Signature Date
(X) (X)
_______________________________________ _________________________________________
Signature Date Signature Date
</TABLE>
<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
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Fund Expenses..................................... 2
Prospectus Summary................................ 4
Investment Objective and Policies................. 8
Additional Investment Information................. 9
Investment Limitations............................ 15
Management of the Fund............................ 15
Purchase of Shares................................ 17
Redemption of Shares.............................. 21
Shareholder Services.............................. 22
Valuation of Shares............................... 23
Performance Information........................... 24
Dividends and Capital Gains Distributions......... 24
Taxes............................................. 25
Portfolio Transactions............................ 26
General Information............................... 27
Account Registration Form......................... 29
</TABLE>
INTERNATIONAL MAGNUM 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
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798, BOSTON, MA 02208-2798
- -------------------------------------------
- -------------------------------------------
- -------------------------------------------
- -------------------------------------------
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
Morgan Stanley Institutional Fund, Inc. (the "Fund") is a no-load,
open-end management investment company with diversified and non-diversified
series ("Portfolios"). The Fund currently consists of twenty-eight
Portfolios offering a broad range of investment choices. The Fund is
designed to provide clients with attractive alternatives for meeting their
investment needs. Each Portfolio, except the Money Market, Municipal Money
Market, International Small Cap and China Growth Portfolios, offers
two classes of shares, the Class A shares and the Class B shares (each, a
"Multiclass Portfolio"). Each Multiclass Portfolio, except the International
Magnum Portfolio, offered one class of shares until January 2, 1996, when
all shares of such Portfolios owned prior to January 2, 1996 were redesignated
Class A shares. The Class A shares and the Class B shares currently offered by
each Multiclass Portfolio have different minimum investment requirements and
fund expenses. Shares of each Portfolio are offered with no sales charge or
exchange or redemption fee (with the exception of the International Small Cap
Portfolio). This Statement of Additional Information addresses information
of the Fund applicable to each of the twenty-eight Portfolios.
This Statement is not a prospectus but should be read in conjunction with
the several prospectuses of the Fund's Portfolios (the "Prospectuses"). To
obtain any of the Prospectuses, please call the Morgan Stanley Institutional
Fund, Inc. Services Group at 1-800-548-7786.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Special Tax Considerations Relating to Municipal Bond and Municipal Money Market Portfolios . . . . . . . . . . . . . 14
Special Tax Considerations Relating to Foreign Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Taxes and Foreign Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Determining Maturities of Certain Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Net Asset Value for Money Market Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Description of Securities and Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 29, 1996 RELATING TO:
Prospectus for the International Magnum Portfolio, dated January 23, 1996
Prospectus for the U.S. Real Estate Portfolio, dated January 2, 1996
Prospectus for the Fixed Income Portfolio, Global Fixed Income Portfolio,
Municipal Bond Portfolio, Mortgage-Backed Securities Portfolio, High Yield
Portfolio, Money Market Portfolio and Municipal Money Market Portfolio,
dated January 2, 1996
Prospectus for the Equity Growth Portfolio, Emerging Growth Portfolio,
MicroCap Portfolio and Aggressive Equity Portfolio, dated January 2, 1996
Prospectus for the Small Cap Value Equity Portfolio, Value Equity Portfolio
and Balanced Portfolio, dated January 2, 1996
Prospectus for the Global Equity Portfolio, International Equity Portfolio,
International Small Cap Portfolio, Asian Equity Portfolio, European Equity
Portfolio, Japanese Equity Portfolio and Latin American Portfolio, dated
January 2, 1996
Prospectus for the Emerging Markets Portfolio and Emerging Markets Debt
Portfolio, dated January 2, 1996
Prospectus for the Active Country Allocation Portfolio, dated January 2,
1996
Prospectus for the Gold Portfolio, dated January 2, 1996
Prospectus for the China Growth Portfolio, dated April 13, 1994.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies
set forth in the Fund's Prospectuses:
CURRENCY SWAPS
The China Growth Portfolio may enter into currency swaps for hedging
purposes and non-hedging purposes. Inasmuch as swaps are entered into for
good faith hedging purposes and are offset by a segregated account as
described below, the Portfolio believes that swaps do not constitute senior
securities as defined in the 1940 Act and, accordingly, will not treat them
as being subject to the Portfolio's borrowing restrictions. An amount of
cash or liquid high grade debt securities (i.e., securities rated in one of
the top three ratings categories by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"), or, if unrated, deemed
by the Adviser to be of comparable credit quality) having an aggregate net
asset value at least equal to the gross payments which the Portfolio is
obligated to make under the currency swap will be maintained in a segregated
account by the Fund's Custodian. The Portfolio will not enter into any
currency swap unless the credit quality of the unsecured senior debt or the
claims-paying ability of the other party thereto is considered to be
investment grade by the Adviser. If there is a default by the other party to
such a transaction, the Portfolio will have contractual remedies pursuant to
the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively
liquid in comparison with the markets for other similar instruments which are
traded in the interbank market.
EMERGING COUNTRY EQUITY AND DEBT SECURITIES
GENERAL. Each of the Emerging Markets and Emerging Markets Debt Portfolio's
definition of emerging country equity or debt securities includes securities of
companies that may have characteristics and business relationships common to
companies in a country or countries other than an emerging country. As a result,
the value of the securities of such companies may reflect economic and market
forces applicable to other countries, as well as to an emerging country. Morgan
Stanley Asset Management Inc. (the "Adviser") believes, however, that investment
in such companies will be appropriate because the Portfolio will invest only in
those companies which, in its view, have sufficiently strong exposure to
economic and market forces in an emerging country such that their value will
tend to reflect developments in such emerging country to a greater extent than
developments in another country or countries. For example, the Portfolio may
invest in companies organized and located in countries other than an emerging
country, including companies having their entire production facilities outside
of an emerging country, when securities of such companies meet one or more
elements of the Portfolio's definition of an emerging country equity or debt
security and so long as the Adviser believes at the time of investment that the
value of the company's securities will reflect principally conditions in such
emerging country.
The Emerging Markets Debt Portfolio is 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 value of debt securities held by the
Portfolio generally will vary inversely to changes in prevailing interest rates.
The Portfolio's investments in fixed-rated debt securities with longer terms to
maturity are subject to greater volatility than the Portfolio's investments in
shorter-term obligations. Debt obligations acquired at a discount are subject
to greater fluctuations of market value in response to changing interest rates
than debt obligations of comparable maturities which are not subject to such
discount.
Investments in emerging country government debt securities involve special
risks. Certain emerging countries have historically experienced, and may
continue to experience, high rates of inflation, high interest rates, exchange
rate fluctuations, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. The issuer or governmental
authority that controls the repayment of an emerging country's debt may not be
able or willing to repay the principal and/or interest when due in accordance
with the terms of such debt. As a result of the foregoing, a government obligor
may default on its obligations. If such an event occurs, the Portfolio may have
limited legal recourse against the issuer and/or guarantor. Remedies must, in
some cases, be pursued in the courts of the defaulting party itself, and the
ability of the holder of foreign government debt securities to obtain recourse
may be subject to the political climate in the relevant country. In addition,
no assurance can be given that the holders of commercial bank debt will not
contest payments to the holders of other foreign government debt obligations in
the event of default under their commercial bank loan agreements.
2
<PAGE>
BRADY BONDS. The Emerging Markets Debt Portfolio may 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 restructuring under a plan introduced by
former U.S. Secretary of the Treasury Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently, and, accordingly, do not have a long
payment history. They may be collateralized or uncollateralized and issued in
various currencies (although most are U.S. dollar-denominated) and they are
actively traded in the over-the-counter secondary market. The Portfolio may
purchase Brady Bonds either in the primary or secondary markets. The price and
yield of Brady Bonds purchased in the secondary market will reflect the market
conditions at the time of purchase, regardless of the stated face amount and the
stated interest rate. With respect to Brady Bonds with no or limited
collateralization, the Portfolio will rely for payment of interest and principal
primarily on the willingness and ability of the issuing government to make
payment in accordance with the terms of the bonds.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed
rate par bonds or floating rate discount bonds, are generally collateralized
in full as to principal due at maturity by U.S. Treasury zero coupon
obligations which have the same maturity as the Brady Bonds. Interest
payments on these Brady Bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments
based on the applicable interest rate at that time and is adjusted at regular
intervals thereafter. Certain Brady Bonds are entitled to "value recovery
payments" in certain circumstances, which in effect constitute supplemental
interest payments but generally are not collateralized. Brady Bonds are
often viewed as having three or four valuation components: (i) the
collateralized repayment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In the
event of a default with respect to collateralized Brady Bonds as a result of
which the payment obligations of the issuer are accelerated, the U.S.
Treasury zero coupon obligations held as collateral for the payment of
principal will not be distributed to investors, nor will such obligations be
sold and the proceeds distributed. The collateral will be held to the
scheduled maturity of the defaulted Brady Bonds by the collateral agent, at
which time the face amount of the collateral will equal the principal
payments which would have then been due on the Brady Bonds in the normal
course. In addition, in light of the residual risk of the Brady Bonds and,
among other factors, the history of defaults with respect to commercial bank
loans by public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds should be viewed as speculative.
Brady Plan debt restructuring totalling approximately $73 billion have been
implemented to date in Argentina, Bulgaria, Costa Rica, Ecuador, Mexico,
Nigeria, the Philippines, Uruguay and Venezuela, with the largest proportion of
Brady Bonds having been issued to date by Mexico and Venezuela. Brazil and
Poland have announced plans to issue Brady Bonds aggregating approximately $52
billion, based on current estimates. There can be no assurance that the
circumstances regarding the issuance of Brady Bonds by these countries will not
change.
STRUCTURED SECURITIES. The Emerging Markets Debt Portfolio may also invest a
portion of its assets in interests 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. Certain issuers of Structured
Securities may be deemed to be "investment companies" as defined in the 1940
Act. As a result, the Portfolio's investment in these Structured Securities
may be limited by restrictions contained in the 1940 Act. Structured Securities
are typically sold in private placement transactions, and there currently is no
active trading market for Structured Securities.
3
<PAGE>
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Emerging Markets Debt Portfolio may
also invest in fixed 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 participations in Loans
("Participations") and assignments of all or a portion of Loans ("Assignments")
from third parties. The Portfolio's investment in Participations typically will
result in the Portfolio having a contractual relationship only with the Lender
and not with the borrower. The Portfolio will have the right to 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 connection with purchasing Participations, the
Portfolio generally will have no right to enforce compliance by the borrower
with the terms of the loan agreement relating to the Loan, nor any rights of
set-off against the borrower, and the Portfolio may not directly benefit from
any collateral supporting the Loan in which it has purchased the Participation.
As a result, the Portfolio may be subject to the credit risk of both the
borrower and the Lender that is selling the Participation. 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, but 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
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. Because Assignments are
arranged through private negotiations between potential assignees and
potential assignors, however, 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. The assignability of
certain sovereign debt obligations is restricted by the governing
documentation as to the nature of the assignee such that the only way in
which the Portfolio may acquire an interest in a loan is through a
Participation and not an Assignment. The Portfolio may have difficulty
disposing of Assignments and Participations because to do so it will have to
assign such securities to a third party. 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 securities and calculating its net asset value.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the Global Equity, International
Equity, International Small Cap, Asian Equity, European Equity, Japanese
Equity, Latin American, International Magnum, Global Fixed Income, Active
Country Allocation, China Growth, Emerging Markets, Emerging Markets Debt and
Gold Portfolios and, to the extent they invest in securities denominated in
foreign currencies, the assets of the Emerging Growth, MicroCap, Aggressive
Equity, Small Cap Value Equity, Value Equity, Balanced, Fixed Income and High
Yield Portfolios may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the
Portfolios may incur costs in connection with conversions between various
currencies. The Portfolios will conduct their foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or through entering into forward
contracts to purchase or sell foreign currencies. A forward currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades. The Gold Portfolio may
also enter into precious metals forward contracts. See "Precious Metals Forward
and Futures Contracts and Options" below.
The Portfolios may enter into forward foreign currency exchange contracts
in several circumstances. When a Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when a
Portfolio anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, the Portfolio may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment, as the case may be. By entering into a forward contract
for a fixed amount of dollars, for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.
4
<PAGE>
Additionally, when any of these Portfolios anticipates that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
such Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. None of the Portfolios intend to enter
into such forward contracts to protect the value of portfolio securities on a
continuous basis.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the management of the
Fund believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the performance
of each Portfolio will thereby be served. Except under circumstances where a
segregated account is not required under the 1940 Act or the rules adopted
thereunder, the Fund's Custodian will place cash, U.S. government securities, or
high-grade debt securities into a segregated account of a Portfolio in an amount
equal to the value of such Portfolio's total assets committed to the
consummation of forward currency exchange contracts. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will be equal to the amount of such Portfolio's commitments with
respect to such contracts.
The Portfolios generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, a Portfolio
may either sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its contractual obligation
to deliver the foreign currency by purchasing an "offsetting" contract with the
same currency trader obligating it to purchase, on the same maturity date, the
same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for a Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that such Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction, such Portfolio will incur a gain or a loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between a Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, such Portfolio
will realize a gain to the extent that the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, such Portfolio would suffer a loss to the extent that
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
The Portfolios are not required to enter into such transactions with regard
to their foreign currency-denominated securities. It also should be realized
that this method of protecting the value of portfolio securities against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange
which one can achieve at some future point in time. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time, they tend to limit any potential gain which
might result should the value of such currency increase.
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FUTURES CONTRACTS
The Equity Growth, Aggressive Equity, Value Equity, Balanced, Small Cap
Value Equity, Active Country Allocation, Gold, Latin American, U.S. Real
Estate, Emerging Markets, Emerging Markets Debt, International Magnum and
China Growth Portfolios may enter into futures contracts and options on
futures contracts for the purpose of remaining fully invested and reducing
transactions costs. The Fixed Income, Municipal Bond, Mortgage-Backed
Securities, High Yield, Money Market, Municipal Money Market, Active County
Allocation, Equity Growth, Aggressive Equity Gold, Latin American, U.S. Real
Estate, Emerging Markets, Emerging Markets Debt, International Magnum and China
Growth Portfolios may also enter into futures contracts for hedging purposes.
No Portfolio will enter into futures contracts or options thereon for
speculative purposes. The Gold Portfolio may also enter into futures
contracts and options thereon on precious metals. See "Precious Metals
Forward and Futures Contracts and Options" below. The China Growth and Latin
American Portfolios may also enter into futures and options thereon on stock
and other securities indices and currencies. Futures contracts provide for the
future sale by one party and purchase by another party of a specified amount of
a specific security at a specified future time and at a specified price. Futures
contracts, which are standardized as to maturity date and underlying financial
instrument, are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission ("CFTC"), a U.S. government agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities or currencies, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold" or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract is bought
or sold.
Futures contracts on securities indices or other indices do not require the
physical delivery of securities, but merely provide for profits and losses
resulting from changes in the market value of a contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date a final cash
settlement occurs and the futures position is simply closed out. Changes in the
market value of a particular futures contract reflect changes in the level of
the index on which the futures contract is based.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold for prices that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of an
additional "variation" margin will be required. Conversely, a change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The
Portfolios expect to earn interest income on their margin deposits. With
respect to each long position in a futures contract or option thereon, the
underlying commodity value of such contract will always be covered by cash and
cash equivalents set aside plus accrued profits held at the futures commission
merchant.
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The Portfolios may purchase and write call and put options on futures
contracts which are traded on a U.S. Exchange (and in the case of the China
Growth and Latin American Portfolios, on any recognized securities or futures
exchange to the extent permitted by the CFTC) 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 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. Upon exercise of the
option, the delivery of the accumulated balance in the writer's futures margin
account, which represents the amount by which the market price of the futures
contract at the time of exercise exceeds, in the case of a call, or is less
than, in the case of a put, the exercise price of the option on the futures
contract.
The Portfolios will purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of a
futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the underlying securities with futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from market
fluctuations. The Portfolios intend to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Portfolios require that all
futures transactions constitute bona fide hedging transactions except that a
Portfolio may engage in futures transactions that do not constitute bona fide
hedging to the extent that not more than 5% of the liquidation value of a
Portfolio's total assets are required as margin deposits or premiums for such
transactions. The Portfolios will only sell futures contracts to protect
securities owned against declines in price or purchase contracts to protect
against an increase in the price of securities intended for purchase. As
evidence of this hedging interest, the Portfolios expect that approximately 75%
of their futures contracts will be "completed"; that is, equivalent amounts of
related securities will have been purchased or are being purchased by the
Portfolios upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolios' exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this exposure.
While the Portfolios will incur commission expenses in both opening and closing
out futures positions, these costs are lower than transaction costs incurred in
the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS. None of the Portfolios will enter
into futures contract transactions to the extent that, immediately thereafter,
the sum of its initial margin deposits on open contracts exceeds 5% of the
market value of its total assets. In addition, none of the Portfolios will
enter into futures contracts to the extent that its outstanding obligations to
purchase securities under futures contracts and options on futures contracts
(and in the case of the Active County Allocation, Equity Growth, Gold, Latin
American and China Growth Portfolios, under options, futures contracts and
options on futures contracts) would exceed 20% of its respective total assets.
RISK FACTORS IN FUTURES TRANSACTIONS. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contracts at any specific time. Thus, it may
not be possible to close a futures position. In the event of adverse price
movements, the Portfolios would continue to be required to make daily cash
payments to maintain their required margin. In such situations, if a Portfolio
has insufficient cash, it may have to sell portfolio securities to meet its
daily margin requirement at a time when it may be disadvantageous to do so. In
addition, a Portfolio may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the Portfolio's ability
to effectively hedge.
The Portfolios will minimize the risk that they will be unable to close out
a futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if, at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
Portfolios engage in futures strategies only for hedging purposes, the Adviser
does not believe that the Portfolios are subject to the risks of loss frequently
associated with futures transactions. A Portfolio would presumably have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying security or currency and sold it after the decline.
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Utilization of futures transactions by the Portfolios does involve the
risk of imperfect or no correlation where the securities underlying futures
contracts have different maturities than the portfolio securities or
currencies being hedged. It is also possible that a Portfolio could both
lose money on futures contracts and also experience a decline in value of its
portfolio securities. There is also the risk of loss by a Portfolio of
margin deposits in the event of bankruptcy of a broker with whom the
Portfolio has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
The investment objective of the Active Country Allocation Portfolio and
the International Magnum Portfolio is to provide long-term capital appreciation.
The Active Country Allocation Portfolio seeks to achieve its objective by
investing in equity securities of non-U.S. issuers which, in the aggregate,
replicate broad country indices, in accordance with country weightings
determined by the Adviser. The Adviser utilizes a top-down approach in
selecting investments for the Active Country Allocation Portfolio that
emphasizes country selection and weighting rather than individual stock
selection. The Active Country Allocation Portfolio invests, INTER ALIA, in
industrialized countries throughout the world that comprise the Morgan
Stanley Capital International EAFE (Europe, Australia and the Far East) Index
(the "EAFE Index"). The International Magnum Portfolio seeks to achieve its
objective by investing primarily in equity securities of non-U.S. issuers in
accordance with the EAFE country (defined below) weightings determined by the
Adviser. After establishing regional allocation strategies, the Adviser then
selects equity securities among issuers of a region. The International Magnum
Portfolio invests in countries comprising the EAFE Index (each an "EAFE
country").
The EAFE Index is one of seven International Indices, twenty National
Indices and thirty-eight International Industry Indices making up the Morgan
Stanley Capital International Indices. The EAFE Index is based on the share
prices of 1,066 companies listed on the stock exchanges of Europe, Australia,
New Zealand and the Far East. "Europe" includes Austria, Belgium, Denmark,
Finland, France, Germany, Italy, The Netherlands, Norway, Spain, Sweden,
Switzerland and the United Kingdom. "Far East" includes Japan, Hong Kong and
Singapore/Malaysia.
OPTIONS TRANSACTIONS
GENERAL INFORMATION. As stated in the applicable Prospectus, the Active County
Allocation, Emerging Markets, Emerging Markets Debt, Equity Growth, Aggressive
Equity, Gold, Small Cap Value Equity, Value Equity, Balanced, Latin American,
U.S. Real Estate, International Magnum and China Growth Portfolios may purchase
and sell options on equity securities and the China Growth and Latin American
Portfolios also may purchase and sell options on securities indices.
Additional information with respect to option transactions is set forth below.
Call and put options on equity securities are listed on various U.S. and foreign
securities exchanges ("listed options") and are written in over-the-counter
transaction ("OTC Options").
Listed options are issued or guaranteed by the exchange on which they trade
or by a clearing corporation, such as Options Clearing Corporation ("OCC") in
the United States. Ownership of a listed call option gives the fund the right
to buy from the clearing corporation or exchange, the underlying security
covered by the option at the state exercise price (the price per unit of the
underlying security or currency) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then
have the obligation to sell to the clearing corporation or exchange, the
underlying security or currency at that exercise price prior to the expiration
date of the option, regardless of its the current market price. Ownership of
listed put option would give the Portfolio the right to sell the underlying
security or currency to the clearing corporation or exchange at the state
exercise price. Upon notice of exercise of the put option, the writer of the
option would have the obligation to purchase the underlying security from the
clearing corporation or exchange at the exercise price.
OTC options are purchased from or sold (written) to dealers of financial
institutions which have entered into direct agreements with the Portfolio. With
OTC options, such variables as expiration date exercise price and premium will
be agreed upon between the Portfolio and the transactions dealer, without the
intermediate of a third party such as a clearing corporation or exchange. If
the transacting dealer fails to make or take delivery of the securities
underlying an option it has written, in accordance with the terms of that
option, the Portfolio would lose the premium paid for the option as well as any
anticipated benefit of the transaction.
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COVERED CALL WRITING. Each of the Portfolios may write (i.e., sell) covered
call options on portfolio securities. By doing so, the Portfolio would become
obligated during the terms of the option to deliver the securities underlying
the option should the option holder choose to exercise the option before the
option's termination date. In return for the call it has written, the Portfolio
will receive from the purchaser (or option holder) a premium which is the price
of the option, less a commission charged by a broker. The Portfolio will keep
the premium regardless of whether the option is exercised. A call option is
"covered" if the Portfolio owns the security underlying the option it has
written or has an absolute or immediate right to acquire the security by holding
a call option on such security, or maintains a sufficient amount of cash, cash
equivalents or liquid securities to purchase the underlying security. When the
Portfolio writes covered call options, it augments its income by the premiums
receive and is thereby hedged to the extent of that amount against a decline in
the price of the underlying securities and the premiums received will offset a
portion of the potential loss incurred by the Portfolio if the securities
underlying the options are ultimately sold by the Portfolio at a loss. However,
during the option period, the Portfolio has, in return for the premium on the
option, given up the opportunity for capital appreciation above the exercise
price should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security decline.
The size of premiums will fluctuate with varying market conditions.
COVERED PUT WRITING. Each of the Portfolios may write covered put options on
portfolio securities. By doing so, the Portfolio incurs an obligation to buy
the security underlying the option from the purchaser of the put at the option's
exercise price at any time during the option period, at the purchaser's election
(certain listed and OTC options written by the Portfolio will be exercisable by
the purchaser only on a specific date). Generally, a put option is "covered" if
the Portfolio maintains cash, U.S. Government securities or other high grade
debt obligations equal to the exercise price of the option or if the Portfolio
holds a put option on the same underlying security with a similar or higher
exercise price.
Each of the Portfolios will write put options to receive the premiums paid
by purchasers; when the Adviser (and also the Sub-Adviser with respect to the
Gold Portfolio) wishes to purchase the security underlying the option at a price
lower than its current market price, in which case it will write the covered put
at an exercise price reflecting the lower purchase price sought; and to close
out long put option position.
PURCHASE OF PUT AND CALL OPTIONS. Each of the Portfolios may purchase listed
or OTC put or call options on its portfolio securities in amounts exceeding
no more than 5% of its total assets. When the Portfolio purchases a call
option it acquires the right to sell a designated security at a designated
price (the "exercise price"), and when the Portfolio purchases a put option
it acquires the right to purchase a designated security at the exercise
price, in each case on or before a specified date (the "termination date"),
usually not more than nine months from the date the option is issued.
The Portfolio may purchase call options to close out a covered call
position or to protect against an increase in the price of a security it
anticipates purchasing. The Portfolio may purchase put options on securities
which it holds in its portfolio only to protect itself against a decline in the
value of the security. If the value of the underlying security were to fall
below the exercise price of the put purchased in an amount greater than the
premium paid for the option, the Portfolio would incur no additional loss. The
Portfolio may also purchase put options to close out written put positions in a
manner similar to call option closing purchase transactions.
The amount the Portfolio pays to purchase an option is called a "premium",
and the risk assumed by the Portfolio when it purchases an option is the loss of
this premium. Because the price of an option tends to move with that of its
underlying security, if the Portfolio is to make a profit, the price of the
underlying security must change and the change must be sufficient to cover the
premium and commissions paid. A price change in the security underlying the
option does not assure a profit since prices in the options market may not
always reflect such a change.
OPTIONS ON SECURITIES INDICES. The China Growth and Latin American Portfolios
may purchase and write put and call options on securities indices and enter into
a related closing transactions in order to hedge against the risk of market
price fluctuations or to increase income to the Portfolio.
Call and put options on indices are similar to options on securities except
that, rather than the right to purchase or sell particular securities at a
specified price, options on an index give the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the underlying
index is greater than (or less than, in the case of puts) the exercise price of
the option. This amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option, expressed in dollars
multiplied by a specified number. Thus, unlike options on individual
securities, all settlements are in cash, and gain or loss depends on price
movements in the particular market represented by the index generally (or in a
particular industry or segment of the market) rather than the price movements in
individual securities.
All options written on indices must be covered. When the Portfolio writes
an option on an index, it will establish a segregated account containing cash,
U.S. government securities or other high quality liquid debt securities with its
custodian in an amount at least equal to the market value of the option and will
maintain the account while the option is open or will otherwise cover the
transaction.
The Portfolio may choose to terminate an option position by entering into a
closing transaction. The ability of the Portfolio to enter into closing
transactions depends upon the existence of a liquid secondary market for such
transactions.
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OPTIONS ON CURRENCIES. The China Growth and Latin American Portfolios may
purchase and write put and call options on foreign currencies (traded on U.S.
and foreign exchanges or over-the-counter markets) to manage the Portfolio's
exposure to changes in dollar exchange rates. Call options on foreign currency
written by the Portfolio will be "covered," which means that the Portfolio will
own an equal amount of the underlying foreign currency. With respect to put
options on foreign currency written by the Portfolio, the Portfolio will
establish a segregated account with the Fund's Custodian consisting of cash,
U.S. government securities or other high quality liquid debt securities in an
amount equal to the amount the Portfolio would be required to pay upon exercise
of the put.
PORTFOLIO TURNOVER
The portfolio turnover rate for a year is the lesser of the value of the
purchases or sales for the year divided by the average monthly market value of
the Portfolio for the year, excluding U.S. Government securities and securities
with maturities of one year or less. The portfolio turnover rate for a year is
calculated by dividing the lesser of sales or the average monthly value of the
Portfolio's portfolio purchases of portfolio securities during that year by
securities, excluding money market instruments. The rate of portfolio turnover
will not be a limiting factor when the Portfolio deems it appropriate to
purchase or sell securities for the Portfolio. However, the U.S. federal tax
requirement that the Portfolio derive less than 30% of its gross income from the
sale or disposition of securities held less than three months may limit the
Portfolio's ability to dispose of its securities. See "Taxes."
PRECIOUS METALS FORWARD AND FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Gold Portfolio may enter into futures contacts on precious ("precious
metals futures") metals as a hedge against changes in the prices of precious
metals held or intended to be acquired by the Portfolio, but not for speculation
or for achieving leverage. The Portfolio's hedging activities may include
purchases of futures contracts as an offset against the effect of anticipated
increases in the price of a precious metal which the Portfolio intends to
acquire ("anticipatory hedge") or sales of futures contracts as an offset
against the effect of anticipated declines in the price of precious metal which
the Portfolio owns ("hedge against an existing position").
The Portfolio will enter into precious metals forward contracts which are
similar to precious metals futures contracts, in that they provide for the
purchase or sale of precious metals at an agreed price with delivery to take
place at an agreed future time. However, unlike futures contracts, forward
contracts are negotiated contracts which are primarily used in the dealer
market. Unlike the futures contract market, which is regulated by the CFTC and
by the regulations of the commodity exchanges, the forward contract market is
unregulated. The Portfolio will use forward contracts for the same hedging
purposes as those applicable to futures contracts, as described above. When the
Portfolio enters into a forward contract it will establish with the custodian a
segregated account consisting of cash, cash equivalents or bullion equal to the
market value of the forward contract purchased.
Precious metals futures and forward contract prices can be volatile and are
influenced principally by changes in spot market prices, which in turn are
affected by a variety of political and economic factors. In addition,
expectations of changing market conditions may at times influence the prices of
such futures and forward contracts, and changes in the cost of holding physical
precious metals, including storage, insurance and interest expense, will also
affect the relationship between spot and futures or forward prices. While the
correlation between changes in prices of futures and forward contracts and
prices of the precious metals being hedged by such contracts has historically
been very strong, the correlation may at times be imperfect and even a well
conceived hedge may be unsuccessful to some degree because of market behavior or
unexpected precious metals price trends. To the extent that interest rates move
in a direction opposite to that anticipated, the Portfolio may realize a loss on
a futures transaction not offset by an increase in the value of portfolio
securities. Moreover there is a possibility of a lack of a liquid secondary
market for closing out a futures position or futures option. The success of any
hedging technique depends upon the Adviser's and Sub-Adviser's accuracy in
predicting the direction of a market. If these predictions are incorrect, the
Portfolio may realize a loss.
The Portfolio may also purchase (buy) and write (sell) covered call or put
options on precious metals futures contracts. Such options would be purchased
solely for hedging purposes similar to those applicable to the purchase and sale
of futures contracts. Call options might be purchased to hedge against an
increase in the price of precious metals the Portfolio intends to acquire, and
put options may be purchased to hedge against a decline in the price of precious
metals owned by the Portfolio. As is the case with futures contracts, options
on precious metals futures may facilitate the Portfolio's acquisition of
precious metals or permit the Portfolio to defer disposition of precious metals
for tax or other purposes. The Portfolio may not purchase options on precious
metals and precious metals futures contracts if the premiums paid for all such
options, together with margin deposits on precious metals future contracts,
would exceed 5% of the Portfolio's total assets at the time of option is
purchased.
One of the risks which may arise in employing futures contracts to protect
against the price volatility of the Portfolio's assets is that the price of
precious metals subject of futures contracts (and thereby the futures contracts
prices) may correlate imperfectly with the prices of such assets. A correlation
may also be distorted by the fact that the futures market is dominated by short-
term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions are
generally minor and would diminish as the contract approached maturity.
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SECURITIES LENDING
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its net investment income through
the receipt of interest on the loan. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be for
the account of the Portfolio. Each Portfolio may lend its investment securities
to qualified brokers, dealers, domestic and foreign banks or other financial
institutions, so long as the terms, structure and the aggregate amount of such
loans are not inconsistent with the Investment Company Act of 1940, as amended
(the "1940 Act"), or the Rules and Regulations or interpretations of the
Securities and Exchange Commission (the "Commission") thereunder, which
currently require that (a) the borrower pledge and maintain with the Portfolio
collateral consisting of cash, an irrevocable letter of credit issued by a
domestic U.S. bank, or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value of the
securities loaned, (b) the borrower add to such collateral whenever the price of
the securities loaned rises (i.e., the borrower "marks to the market" on a daily
basis), (c) the loan be made subject to termination by the Portfolio at any
time, and (d) the Portfolio receive reasonable interest on the loan (which may
include the Portfolio investing any cash collateral in interest bearing
short-term investments), any distributions on the loaned securities and any
increase in their market value. There may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will only be made to borrowers
deemed by the Advisor to be of good standing and when, in the judgment of the
Advisor, the consideration which can be earned currently from such securities
loans justifies the attendant risk. All relevant facts and circumstances,
including the creditworthiness of the broker, dealer or institution, will be
considered in making decisions with respect to the lending of securities,
subject to review by the Board of Directors of the Fund.
At the present time, the staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Board of Directors. In addition, voting
rights may pass with the loaned securities, but if a material event will occur
affecting an investment on loan, the loan must be called and the securities
voted.
SHORT SALES
The Emerging Markets Debt, Latin American and Aggressive Equity Portfolios
may from time to time sell securities short without limitation but consistent
with applicable legal requirements, although initially the Portfolio does not
intend to sell securities short. A short sale is a transaction in which the
Portfolio would sell securities it 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 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 its custodian, or designated
sub-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). Until it replaces the borrowed
securities, the Portfolio will maintain the segregated account daily at a level
so that (1) the amount deposited in the account plus the amount deposited with
the broker (not including the proceeds from the short sale) will equal the
current market value of the securities sold short and (2) the amount deposited
in the account plus the amount deposited with the broker (not including the
proceeds from the short sale) will not be less than the market value of the
securities at the time they were sold short.
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.
SPECIAL RISKS ASSOCIATED WITH FORWARD CONTRACTS, FOREIGN CURRENCY FUTURES
CONTRACTS AND OPTIONS THEREON AND OPTIONS ON FOREIGN CURRENCIES.
Transactions in forward contracts, as well as futures and options on
foreign currencies, are subject to the risk of governmental actions affecting
trading in or the prices of currencies underlying such contracts, which could
restrict or eliminate trading and could have a substantial adverse effect on the
value of positions held by the Portfolios permitted to engage in such hedging
transactions. In addition, the value of such positions could be adversely
affected by a number of other complex political and economic factors applicable
to the countries issuing the underlying currencies.
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Furthermore, unlike trading in most other types of instruments, there is
no systematic reporting of last sale information with respect to the foreign
currencies underlying forward contracts, futures contracts and options. As a
result, the available information on which a Portfolio's trading systems will
be based may not be as complete as the comparable data on which such
Portfolio makes investment and trading decisions in connection with
securities and other transactions. Moreover, because the foreign currency
market is a global, twenty-four hour market, events could occur on that
market which will not be reflected in the forward, futures or options markets
until the following day, thereby preventing a Portfolio from responding to
such events in a timely manner.
Settlements of over-the-counter forward contracts or of the exercise of
foreign currency options generally must occur within the country issuing the
underlying currency, which in turn requires parties to such contracts to accept
or make delivery of such currencies in conformity with any United States or
foreign restrictions and regulations regarding the maintenance of foreign
banking relationships, fees, taxes or other charges.
Unlike currency futures contracts and exchange-traded options, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) the Commission. In an over-the-counter trading environment, many of
the protections associated with transactions on exchanges will not be available.
For example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, an option writer could lose amounts substantially in excess of its
initial investment due to the margin and collateral requirements associated with
such option positions. Similarly, there is no limit on the amount of potential
losses on forward contracts to which a Portfolio is a party.
In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of a
Portfolio's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with such Portfolio.
Where no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the
trading of over-the-counter contracts, and a Portfolio may be unable to close
out options purchased or written, or forward contracts entered into, until their
exercise, expiration or maturity. This in turn could limit a Portfolio's
ability to realize profits or to reduce losses on open positions and could
result in greater losses.
Furthermore, over-the-counter transactions are not backed by the guarantee
of an exchange's clearing corporation. A Portfolio will therefore be subject to
the risk of default by, or the bankruptcy of, the financial institution serving
as its counterparty. One or more of such institutions also may decide to
discontinue its role as market-maker in a particular currency, thereby
restricting a Portfolio's ability to enter into desired hedging transactions. A
Portfolio will enter into over-the-counter transactions only with parties whose
creditworthiness has been reviewed and found satisfactory by the Adviser.
Over-the-counter options on foreign currencies, like exchange-traded
commodity futures contracts and commodity option contracts, are within the
exclusive regulatory jurisdiction of the CFTC. The CFTC currently permits the
trading of such options, but only subject to a number of conditions regarding
the commercial purpose of the purchaser of such options. The China Growth and
Latin American Portfolios are not able to determine at this time whether or to
what extent the CFTC may impose additional restrictions on the trading of over-
the-counter options on foreign currencies at some point in the future, or the
effect that any restrictions may have on the hedging strategies to be
implemented by the Portfolio. Forward contracts and currency swaps are not
presently subject to regulation by the CFTC, although the CFTC may in the future
assert or be granted authority to regulate such instruments. In such event, a
Portfolio's ability to utilize forward contracts and currency swaps in the
manner set forth above and in the applicable Prospectus could be restricted.
Options on foreign currencies traded on a national securities exchange are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency options positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter market,
potentially permitting a Portfolio to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on
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the OCC or its clearing member, impose special procedures for exercise and
settlement, such as technical changes in the mechanics of delivery of currency,
the fixing of dollar settlement prices or prohibitions on exercise.
TAXES
The following is only a summary of certain additional federal tax
considerations generally affecting the Fund and its shareholders that are not
described in the Prospectuses. No attempt is made to present a detailed
explanation of the federal, state or local tax treatment of the Fund or its
shareholders, and the discussion here and in the Fund's Prospectuses is not
intended as a substitute for careful tax planning.
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
Each Portfolio within the Fund is generally treated as a separate
corporation for federal income tax purposes, and thus the provisions of the Code
generally will be applied to each Portfolio separately, rather than to the Fund
as a whole.
Each Portfolio intends to qualify and elect to be treated for each taxable
year as a regulated investment company ("RIC") under Subchapter M of the Code.
Accordingly, each Portfolio must, among other things, (a) derive at least 90% of
its gross income each taxable year from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, and certain other related income, including,
generally, certain gains from options, futures and forward contracts; (b) derive
less than 30% of its gross income each taxable year from the sale or other
disposition of the following items if held less than three months (A) stock or
securities, (B) options, futures or forward contracts (other than options,
futures or forward contracts on foreign currencies), and (C) foreign currencies
(or options, futures, or forward contracts on foreign currencies) that are not
directly related to the Portfolio's principal business of investing in stocks or
securities (or options or futures with respect to stock or securities) (the
"short-short test") and (c) diversify its holdings so that, at the end of each
fiscal quarter of the Portfolio's taxable year, (i) at least 50% of the market
value of the Portfolio's total assets is represented by cash and cash items,
United States Government securities, securities of other RICs, and other
securities, with such other securities limited, in respect to any one issuer, to
an amount not greater than 5% of the value of the Portfolio's total assets or
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets is invested in the securities (other than
United States Government securities or securities of other RICs) of any one
issuer or two or more issuers which the Portfolio controls and which are engaged
in the same, similar, or related trades or business. For purposes of the 90% of
gross income requirement described above, foreign currency gains which are not
directly related to a Portfolio's principal business of investing in stock or
securities (or options or futures with respect to stock or securities) may be
excluded from income that qualifies under the 90% requirement.
In addition to the requirements described above, in order to qualify as a
RIC, a Portfolio must distribute at least 90% of its net investment income
(which generally includes dividends, taxable interest, and the excess of net
short-term capital gains over net long-term capital losses less operating
expenses) and at least 90% of its net tax-exempt interest income, if any, to
shareholders. If a Portfolio meets all of the RIC requirements, it will not be
subject to federal income tax on any of its net investment income or capital
gains that it distributes to shareholders.
If a Portfolio fails to qualify as a RIC for any year, all of its income
will be subject to tax at corporate rates, and its distributions (including
capital gains distributions) will be taxable as ordinary income dividends to its
shareholders to the extent of the Portfolio's current and accumulated earnings
and profits, and will be eligible for the corporate dividends received deduction
for corporate shareholders.
Each Portfolio will decide whether to distribute or to retain all or part
of any net capital gains (the excess of net long-term capital gains over net
short-term capital losses) in any year for reinvestment. If any such gains are
retained, the Portfolio will pay federal income tax thereon, and, if the
Portfolio makes an election, the shareholders will include such undistributed
gains in their income, will increase their basis in Portfolio shares by 65% of
the amount included in their income and will be able to claim their share of the
tax paid by the Portfolio as a refundable credit against their federal income
tax liability.
A gain or loss realized by a shareholder on the sale or exchange of shares
of a Portfolio held as a capital asset will be capital gain or loss, and such
gain or loss will be long-term if the holding period for the shares exceeds one
year, and otherwise will be short-
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term. Any loss realized on a sale or exchange of shares of a Portfolio will be
disallowed to the extent the shares disposed of are replaced within the 61-day
period beginning 30 days before and ending 30 days after the shares are disposed
of. Any loss realized by a shareholder on the disposition of shares held 6
months or less is treated as a long-term capital loss to the extent of any
distributions of net long-term capital gains received by the shareholder with
respect to such shares or any inclusion of undistributed capital gain with
respect to such shares.
The conversion of Class A shares to Class B shares should not be a taxable
event to the shareholder.
Each Portfolio will generally be subject to a nondeductible 4% federal
excise tax to the extent it fails to distribute by the end of any calendar year
at least 98% of its ordinary income for that year and 98% of its capital gain
net income (the excess of short- and long-term capital gains over short- and
long-term capital losses) for the one-year period ending on October 31 of that
year, plus certain other amounts.
Each Portfolio is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions, and
redemptions) paid to shareholders who have not certified on the Account
Registration Form or on a separate form supplied by the Portfolio, that the
Social Security or Taxpayer Identification Number provided is correct and that
the shareholder is exempt from backup withholding or is not currently subject to
backup withholding.
For certain transactions, each Portfolio is required for federal income tax
purposes to recognize as gain or loss its net unrealized gains and losses on
forward currency and futures contracts as of the end of each taxable year, as
well as those actually realized during the year. In most cases, any such gain
or loss recognized with respect to a regulated futures contract is considered to
be 60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the contract. Realized gain or loss
attributable to a foreign currency forward contract is treated as 100% ordinary
income. Furthermore, foreign currency futures contracts which are intended to
hedge against a change in the value of securities held by a Portfolio may affect
the holding period of such securities and, consequently, the nature of the gain
or loss on such securities upon disposition.
As discussed above, in order for each Portfolio to continue to qualify for
federal income tax treatment as a RIC, at least 90% of its gross income for a
taxable year must be derived from certain qualifying income, including
dividends, interest, income derived from loans of securities, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
related income, including gains from options, futures and forward contracts,
derived with respect to its business of investing in stock, securities or
currencies. Any net gain realized from the closing out of futures contracts
will therefore generally be qualifying income for purposes of the 90%
requirement. Qualification as a RIC also requires that less than 30% of a
Portfolio's gross income be derived from the sale or other disposition of stock,
securities, options, futures or forward contracts (including certain foreign
currencies not directly related to the Fund's business of investing in stock or
securities) held less than three months. In order to avoid realizing excessive
gains on futures contracts held less than three months, the Portfolio may be
required to defer the closing out of futures contracts beyond the time when it
would otherwise be advantageous to do so.
Short sales engaged in by a Portfolio may reduce the holding property held
by a Portfolio which is substantially identical to the property sold short.
This rule may make it more difficult for the Portfolio to satisfy the short-
short test. This rule may also have the effect of converting capital gains
recognized by the Portfolio from long-term to short-term as well as converting
capital losses recognized by the Portfolio from short-term to long-term.
SPECIAL TAX CONSIDERATIONS RELATING TO
MUNICIPAL BOND AND
MUNICIPAL MONEY MARKET PORTFOLIOS
Each of the Municipal Bond Portfolio and the Municipal Money Market
Portfolio will qualify to pay "exempt interest dividends" to its shareholders
provided that, at the close of each quarter of its taxable year at least 50% of
the value of its total assets consists of obligations the interest on which is
exempt from federal income tax. Current federal tax law limits the types and
volume of bonds qualifying for federal income tax exemption of interest, which
may have an effect on the ability of these Portfolios to purchase sufficient
amounts of tax-exempt securities to satisfy this requirement. Any loss on the
sale or exchange of shares of the Municipal Bond Portfolio or the Municipal
Money Market Portfolio held for six months or less will be disallowed to the
extent of any exempt-interest dividends received by the selling shareholder with
respect to such shares.
As noted in the Prospectus for the Municipal Bond Portfolio and the
Municipal Money Market Portfolio, exempt-interest dividends are excludable from
a shareholder's gross income for regular Federal income tax purposes. Exempt-
interest dividends may
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nevertheless be subject to the alternative minimum tax (the "Alternative Minimum
Tax") imposed by Section 55 of the Code or the environmental tax (the
"Environmental Tax") imposed by Section 59A of the Code. The Alternative
Minimum Tax is imposed at the rate of up to 28% in the case of non-corporate
taxpayers and at the rate of 20% in the case of corporate taxpayers, to the
extent it exceeds the taxpayer's regular tax liability. The Environmental Tax
is imposed at the rate of 0.12% and applies only to corporate taxpayers. The
Alternative Minimum Tax and the Environmental Tax may be affected by the receipt
of exempt-interest dividends in two circumstances. First, exempt-interest
dividends derived from certain "private activity bonds" issued after August 7,
1986, will generally be an item of tax preference and therefore potentially
subject to the Alternative Minimum Tax and the Environmental Tax. The
Portfolios intend, when possible, to avoid investing in private activity bonds.
Second, in the case of exempt-interest dividends received by corporate
shareholders, all exempt-interest dividends, regardless of when the bonds from
which they are derived were issued or whether they are derived from private
activity bonds, will be included in the corporation's "adjusted current
earnings," as defined in Section 56(g) of the Code, in calculating the
corporation's alternative minimum taxable income for purposes of determining the
Alternative Minimum Tax and the Environmental Tax.
The percentage of income that constitutes "exempt-interest dividends" will
be determined for each year for the Municipal Bond Portfolio and the Municipal
Money Market Portfolio and will be applied uniformly to all dividends declared
with respect to the Portfolios during that year. This percentage may differ
from the actual percentage for any particular day.
Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of the Municipal Bond Portfolio or the Municipal Money Market
Portfolio will not be deductible for federal income tax purposes. The deduction
otherwise allowable to property and casualty insurance companies for "losses
incurred" will be reduced by an amount equal to a portion of exempt-interest
dividends received or accrued during any taxable year. Foreign corporations
engaged in a trade or business in the United States will be subject to a "branch
profits tax" on their "dividend equivalent amount" for the taxable year, which
will include exempt-interest dividends. Certain Subchapter S corporations may
also be subject to taxes on their "passive investment income," which could
include exempt-interest dividends. Up to 85% of the Social Security benefits or
railroad retirement benefits received by an individual during any taxable year
will be included in the gross income of such individual if the individual's
"modified adjusted gross income" (which includes exempt-interest dividends) plus
one-half of the Social Security benefits or railroad retirement benefits
received by such individual during that taxable year exceeds the base amount
described in Section 86 of the Code.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds or
private activity bonds should consult their tax advisors before purchasing
shares of the Municipal Bond Portfolio or the Municipal Money Market Portfolio.
"Substantial user" is defined generally for these purposes as including a "non-
exempt person" who regularly uses in trade or business a part of a facility
financed from the proceeds of such bonds.
Issuers of bonds purchased by the Municipal Bond Portfolio (or the
beneficiary of such bonds) may have made certain representations or covenants in
connection with the issuance of such bonds to satisfy certain requirements of
the Code that must be satisfied subsequent to the issuance of such bonds.
Investors should be aware that exempt-interest dividends derived from such bonds
may become subject to federal income taxation retroactively to the date thereof
if such representations are determined to have been inaccurate or if the issuer
of such bonds (or the beneficiary of such bonds) fails to comply with such
covenants.
SPECIAL TAX CONSIDERATIONS RELATING TO FOREIGN INVESTMENTS
Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates that occur between the time a Portfolio accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Portfolio actually collects
such receivables or pays such liabilities are treated as ordinary income or
ordinary loss to the Portfolio. Similarly, gains or losses on disposition of
debt securities denominated in a foreign currency attributable to fluctuations
in the value of the foreign currency between the date of acquisition of the
security and the date of disposition also are treated as ordinary gain or loss
to the Portfolio. These gains or losses increase or decrease the amount of a
Portfolio's net investment income available to be distributed to its
shareholders as ordinary income.
It is expected that each Portfolio will be subject to foreign withholding
taxes with respect to its dividend and interest income from foreign countries,
and a Portfolio may be subject to foreign income taxes with respect to other
income. So long as more than 50% in value of a Portfolio's total assets at the
close of the taxable year consists of stock or securities of foreign
corporations, the Portfolio may elect to treat certain foreign income taxes
imposed on it for United States federal income tax purposes as paid directly by
its shareholders. A Portfolio will make such an election only if it deems it to
be in the best interest of its shareholders and will
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notify shareholders in writing each year if it makes an election and of the
amount of foreign income taxes, if any, to be treated as paid by the
shareholders. If a Portfolio makes the election, shareholders will be required
to include in income their proportionate shares of the amount of foreign income
taxes treated as imposed on the Portfolio and will be entitled to claim either a
credit (subject to the limitations discussed below) or, if they itemize
deductions, a deduction, for their shares of the foreign income taxes in
computing their federal income tax liability.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes will be subject to a number of complex limitations regarding the
availability and utilization of the credit. Because of these limitations,
shareholders may be unable to claim a credit for the full amount of their
proportionate shares of the foreign income taxes paid by a Portfolio.
Shareholders are urged to consult their tax advisors regarding the application
of these rules to their particular circumstances.
TAXES AND FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, a foreign trust or estate, a foreign corporation, or foreign a
partnership ("Foreign Shareholder") depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Portfolio is not effectively connected with a U.S.
trade or business carried on by a Foreign Shareholder, distributions of net
investment income plus the excess of net short-term capital gains over net
long-term capital losses will be subject to U.S. withholding tax at the rate of
30% (or such lower treaty rate as may be applicable) upon the gross amount of
the dividend. Furthermore, Foreign Shareholders will generally be exempt from
U.S. federal income tax on gains realized on the sale of shares of the
Portfolio, distributions of net long-term capital gains, and amounts retained by
the Fund which are designated as undistributed capital gains.
If the income from the Portfolio is effectively connected with a U.S. trade
or business carried on by a Foreign Shareholder, then distributions from the
Portfolio and any gains realized upon the sale of shares of the Portfolio, will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens
and residents or domestic corporations.
The Portfolio may be required to withhold U.S. federal income tax on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless the Foreign Shareholder complies with Internal
Revenue Service certification requirements.
The tax consequences to a Foreign Shareholder entitled to claim the
benefits of an applicable tax treaty may differ from those described here.
Furthermore, Foreign Shareholders are strongly urged to consult their own tax
advisors with respect to the particular tax consequences to them of an
investment in a Portfolio, including the potential application of the provisions
of the Foreign Investment in Real Estate Property Tax Act of 1980, as amended.
PURCHASE OF SHARES
The purchase price of the Class A shares of each Portfolio of the Fund,
except the Money Market and Municipal Money Market Portfolios, and the Class
B shares of each Multiclass Portfolio of the Fund is the net asset value next
determined after the order is received. For each Portfolio of the Fund other
then the Money Market or Municipal Market Portfolios, an order received prior
to the regular close of the New York Stock Exchange (the "NYSE") will be
executed at the price computed on the date of receipt; and an order received
after the regular close of the NYSE will be executed at the price computed on
the next day the NYSE is open as long as the Fund's transfer agent receives
payment by check or in Federal Funds prior to the regular close of the NYSE
on such day. Shares of the Money Market and Municipal Money Market Portfolios
may be purchased at the net asset value per share at the price next
determined after Federal Funds are available to such Portfolios. Shares of
the Fund may be purchased on any day the NYSE is open. The NYSE will be
closed on the following days: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each Portfolio reserves the right in its sole discretion (i) to suspend the
offering of its shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (iii) to
reduce or waive the minimum for initial and subsequent investments for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares. The
International Equity Portfolio is currently limiting investments in the
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Portfolio to: (i) reinvested dividends and distributions by existing
shareholders of the Portfolio; (ii) additional investments by existing
shareholders of the Portfolio; (iii) investments by employees of Morgan Stanley;
and (iv) investors who were in the process of becoming shareholders of the
Portfolio at the time the Portfolio limited further investments.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (i) during any period that the NYSE is closed, or trading on the NYSE is
restricted as determined by the Commission, (ii) during any period when an
emergency exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for a Portfolio to dispose of securities owned
by it, or fairly to determine the value of its assets, and (iii) for such other
periods as the Commission may permit.
No charge is made by any Portfolio for redemptions except for the 1%
transaction fee assessed upon redemption of the International Small Cap
Portfolio. Any redemption may be more or less than the shareholder's cost
depending on the market value of the securities held by the Portfolio.
To protect your account and the Fund from fraud, signature guarantees are
required for certain redemptions. Signature guarantees enable the Fund to
verify the identity of the person who has authorized a redemption from your
account. Signature guarantees are required in connection with: (1) all
redemptions, regardless of the amount involved, when the proceeds are to be paid
to someone other than the registered owner(s) and/or registered address; and
(2) share transfer requests.
A guarantor must be a bank, a trust company, a member firm of a domestic
stock exchange, or a foreign branch of any of the foregoing. Notaries public
are not acceptable guarantors.
The signature guarantees must appear either: (1) on the written request
for redemption; (2) on a separate instrument for assignment ("stock power")
which should specify the total number of shares to be redeemed; or (3) on all
stock certificates tendered for redemption and, if shares held by the Fund are
also being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
EXCHANGE FEATURES
Shares of each Portfolio of the Fund may be exchanged for shares of any
other available Portfolio (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 a shareholder receives in
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.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange, a shareholder should consider the investment objectives of
the Portfolio to be purchased.
Exchange requests may be made either by mail or telephone. Exchange
requests by mail should be sent to Morgan Stanley Institutional Fund, Inc.,
P.O. Box 2798, Boston, Massachusetts 02208-2798. Telephone exchanges will be
accepted only if the certificates for the shares to be exchanged are held by
the Fund for the account of the shareholder and the registration of the two
accounts will be identical. Requests for exchanges received prior to 10:00
am. (Eastern Time) for the Municipal Money Market Portfolio, 11:00 a.m.
(Eastern Time) for the Money Market Portfolio, and 4:00 p.m. (Eastern Time)
for the remaining Portfolios will be processed as of the close of business on
the same day. Requests received after these times will be processed on the
next business day. Exchanges may be subject to limitations as to amounts or
frequency, and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For federal income tax purposes an exchange between Portfolios is a taxable
event for shareholders subject to tax, and, accordingly, a gain or loss may be
realized. The exchange privilege may be modified or terminated by the Fund
at any time upon 60-days' notice to shareholders.
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TRANSFER OF SHARES
Shareholders may transfer shares of the Fund's Portfolios to another person
by making a written request to the Fund. The request should clearly identify
the account and number of shares to be transferred, and include the signature of
all registered owners and all stock certificates, if any, which are subject to
the transfer. The signature on the letter of request, the stock certificate or
any stock power must be guaranteed in the same manner as described under
"Redemption of Shares." As in the case of redemptions, the written request must
be received in good order before any transfer can be made. Transferring shares
may affect the eligibility of an account for a given class of the Portfolio's
shares and may result in involuntary conversion or redemption of such shares.
INVESTMENT LIMITATIONS
Each current Portfolio has adopted the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) at least 67% of the voting securities of the Portfolio present at a
meeting if the holders of more than 50% of the outstanding voting securities of
the Portfolio are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Portfolio. Each Portfolio of the Fund will
not:
(1) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (except this shall not prevent the
Portfolio from purchasing or selling options or futures contracts or from
investing in securities or other instruments backed by physical commodities),
and except that the Gold Portfolio may invest in gold bullion in accordance with
its investment objectives and policies;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies that deal in real estate and may purchase and sell
securities that are secured by interests in real estate;
(3) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or repurchase agreements;
(4) except with respect to the Global Fixed Income, Emerging Markets,
Emerging Markets Debt, China Growth, Latin American, MicroCap, Aggressive
Equity, U.S. Real Estate Portfolios (i) purchase more than 10% of any class
of the outstanding voting securities of any issuer and (ii) purchase
securities of an issuer (except obligations of the U.S. Government and its
agencies and instrumentalities) if as a result, with respect to 75% of its
total assets, more than 5% of the Portfolio's total assets, at market value,
would be invested in the securities of such issuer;
(5) issue senior securities and will not borrow, except from banks and as
a temporary measure for extraordinary or emergency purposes and then, in no
event, in excess of 33 1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings), except that each of the Emerging
Markets Debt and Latin American Portfolios may borrow from banks or other
entities in amounts not in excess of 33 1/3% of its total assets (including the
amount borrowed) less liabilities in accordance with its investment objectives
and policies;
(6) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the 1933 Act in
the disposition of restricted securities;
(7) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the Portfolio's total
assets would be invested in securities of companies within such industry;
provided, however, that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, or (in the case of the Money Market Portfolio or the
Municipal Money Market Portfolio) instruments issued by U.S. Banks, except that
the Latin American Portfolio may invest more than 25% of its total assets in
companies involved in the telecommunications industry or financial services
industry, and except that the U.S. Real Estate Portfolio may invest more than
25% of its total assets in the U.S. real estate industry, respectively, as
provided in their respective Prospectuses; and
(8) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
In addition, each current Portfolio of the Fund has adopted non-fundamental
investment limitations as stated below and in their respective Prospectuses.
Such limitations may be changed without shareholder approval. Each current
Portfolio of the Fund will not:
(1) purchase on margin or sell short, except (i) that the Emerging Markets
Debt, Latin American and Aggressive Equity Portfolios may from time to time sell
securities short without limitation but consistent with applicable legal
requirements as stated in
18
<PAGE>
its Prospectus, (ii) that each of the Active Country Allocation, Equity Growth,
Gold, China Growth and Aggressive Equity Portfolios may enter into option
transactions to the extent that not more than 5% of the Portfolio's total assets
are required as deposits to secure obligations under options and not more than
20% of its total assets are invested in options, futures contracts and options
on futures contracts at any time, and (iii) as specified above in Fundamental
Restriction No. (1);
(2) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment adviser owning more than 1/2 of 1% of
such securities together own more than 5% of such securities;
(3) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(4) invest for the purpose of exercising control over management of any
company;
(5) invest its assets in securities of any investment company, except by
purchase in the open market involving only customary brokers' commissions or in
connection with mergers, acquisitions of assets or consolidations and except as
may otherwise be permitted by the 1940 Act;
(6) invest more than 5% of its total assets in securities of companies
which have (with predecessors) a record of less than three years' continuous
operation;
(7) purchase warrants if, by reason of such purchase, more than 5% of the
value of the Portfolio's net assets (taken at market value) would be invested in
warrants, valued at the lower of cost or market. Included within this amount,
but not to exceed 2% of the value of the Portfolio's net assets, may be warrants
that are not listed on a recognized stock exchange;
(8) except for the U.S. Real Estate Portfolio, invest in real estate
limited partnership interests, and the U.S. Real Estate Portfolio may not invest
in such interests that are not publicly traded;
(9) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the limitations as
described in the respective Prospectuses) that are publicly distributed, and
(ii) by lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent with the 1940
Act or the Rules and Regulations or interpretations of the Commission
thereunder;
(10) invest in oil, gas or other mineral leases; and
(11) purchase puts, calls, straddles, spreads and any combination thereof
if for any reason thereof the value of its aggregate investment in such classes
of securities will exceed 5% of their respective total assets, except that each
of the Active Country Allocation, Equity Growth, Gold, China Growth and
Aggressive Equity Portfolios may enter into option transactions to the extent
that not more than 5% of the Portfolio's total assets are required as deposits
to secure obligations under options and not more than 20% of its total assets
are invested in options, futures contracts and options on futures contracts at
any time.
The Balanced, Fixed Income and Value Equity Portfolios will only issue
shares for securities or assets other than cash in a bona fide reorganization,
statutory merger, or in other acquisitions of portfolio securities (except for
municipal debt securities issued by state political subdivisions or their
agencies or instrumentalities) which (i) meet their respective investment
objectives; (ii) are acquired for investment and not for resale.
Each of the Global Fixed Income, Emerging Markets, Emerging Markets Debt,
China Growth, Latin American, Aggressive Equity and U.S. Real Estate Portfolios
will diversify its holdings so that, at the close of each quarter of its taxable
year, (i) at least 50% of the market value of the Portfolio's total assets is
represented by cash (including cash items and receivables), U.S. Government
securities, and other securities, with such other securities limited, in respect
of any one issuer, for purposes of this calculation to an amount not greater
than 5% of the value of the Portfolio's total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities).
The percentage limitations contained in these restrictions apply at the
time of purchase of securities. Future Portfolios of the Fund may adopt
different limitations.
19
<PAGE>
DETERMINING MATURITIES OF CERTAIN INSTRUMENTS
Generally, the maturity of a portfolio instrument shall be deemed to be the
period remaining until the date noted on the face of the instrument as the date
on which the principal amount must be paid, or in the case of an instrument
called for redemption, the date on which the redemption payment must be made.
However, instruments having variable or floating interest rates or demand
features may be deemed to have remaining maturities as follows: (1) a
Government Obligation with a variable rate of interest readjusted no less
frequently than annually may be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate; (b) an instrument
with a variable rate of interest, the principal amount of which is scheduled on
the face of the instrument to be paid in one year or less, may be deemed to have
a maturity equal to the period remaining until the next readjustment of the
interest rate; (c) an instrument with a variable rate of interest that is
subject to a demand feature may be deemed to have a maturity equal to the longer
of the period remaining until the next readjustment of the interest rate or the
period remaining until the principal amount can be recovered through demand;
(d) an instrument with a floating rate of interest that is subject to a demand
feature may be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand; and (e) a repurchase agreement
may be deemed to have a maturity equal to the period remaining until the date on
which the repurchase of the underlying securities is scheduled to occur, or
where no date is specified, but the agreement is subject to demand, the notice
period applicable to a demand for the repurchase of the securities.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and choose its officers. Three Directors and all of the officers
of the Fund are directors, officers or employees of the Fund's adviser,
distributor or administrative services provider. Directors and officers of the
Fund are also directors and officers of some or all of the other investment
companies managed, administered, advised or distributed by Morgan Stanley Asset
Management Inc. or its affiliates. The other Directors have no affiliation with
the Fund's adviser, distributor or administrative services provider. A list of
the Directors and officers of the Fund and a brief statement of their present
positions and principal occupations during the past five years is set forth
below:
20
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
--------------------- ------------------ ----------------------------
<S> <C> <C>
Barton M. Biggs Chairman and Chairman and Director of Morgan Stanley Asset
1221 Avenue of the Director Management Inc. and Morgan Stanley Asset
Americas Management Limited; Managing Director of Morgan
New York, NY 10020 Stanley & Co., Inc.; Director of Morgan Stanley
(63) Group Inc.; Member of International Advisory
Counsel of the Thailand Fund; Chairman and
Director of The Brazilian Investment Fund,
Inc., The Latin American Discovery Fund, Inc.,
The Malaysia Fund, Inc., Morgan Stanley Africa
Investment Fund, Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan Stanley Emerging
Markets Debt Fund, Inc., Morgan Stanley
Emerging Markets Fund, Inc., Morgan Stanley
Fund Inc., Morgan Stanley Global Opportunity
Bond Fund, Inc., Morgan Stanley High Yield
Fund, Inc., Morgan Stanley India Investment
Fund, Inc., Morgan Stanley Institutional Fund,
Inc., The Pakistan Investment Fund, Inc.,
PCS Cash Fund, Inc., The Thai Fund, Inc. and
The Turkish Investment Fund, Inc.
Warren J. Olsen Director and President Principal of Morgan Stanley & Co., Inc.;
1221 Avenue of the Principal of Morgan Stanley Asset Management
Americas Inc.; President and Director of The Brazilian
New York, NY 10020 Investment Fund, Inc., The Latin American
(39) Discovery Fund, Inc., The Malaysia Fund, Inc.,
Morgan Stanley Africa Investment Fund, Inc.,
Morgan Stanley Asia-Pacific Fund, Inc., Morgan
Stanley Emerging Markets Debt Fund, Inc.,
Morgan Stanley Emerging Markets Fund, Inc.,
Morgan Stanley Fund, Inc., Morgan Stanley
Global Opportunity Bond Fund, Inc., Morgan
Stanley High Yield Fund, Inc., Morgan Stanley
India Investment Fund, Inc., Morgan Stanley
Institutional Fund, Inc., The Pakistan
Investment Fund, Inc., PCS Cash Fund, Inc.,
The Thai Fund, Inc., and The Turkish Investment
Fund, Inc.
John D. Barrett, II Director Chairman and Director of Barrett Associates,
521 Fifth Avenue Inc. (investment counseling); Director of the
New York, NY 10135 Ashforth Company (real estate); Director of the
(60) Morgan Stanley Fund, Inc., Morgan Stanley
Institutional Fund, Inc. and PCS Cash Fund,
Inc.
21
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
--------------------- ------------------ ----------------------------
Gerard E. Jones Director Partner in Richards & O'Neil LLP (law firm);
43 Arch Street Director of the Morgan Stanley Fund, Inc.,
Greenwich, CT 06830 Morgan Stanley Institutional Fund, Inc. and PCS
(58) Cash Fund, Inc.
Andrew McNally IV Director Chairman and Chief Executive Officer of Rand
8255 North Central McNally (publication); Director of Allendale
Park Avenue Insurance Co., Mercury Finance (consumer
Skokie, IL 60076 finance); Zenith Electronics, Hubbell, Inc.
(56) (industrial electronics); Director of the
Morgan Stanley Fund, Inc., Morgan Stanley
Institutional Fund, Inc. and PCS Cash Fund,
Inc.; Director of the Morgan Stanley Fund,
Inc., Morgan Stanley Institutional Fund, Inc.
and PCS Cash Fund, Inc.
Samuel T. Reeves Director Chairman of the Board and CEO, Pinacle L.L.C.
8211 North (investment firm); Director, Pacific Gas and
Fresno Street Electric and PG&E Enterprises (utilities);
Fresno, CA 93720 Director of the Morgan Stanley Fund, Inc.,
(61) Morgan Stanley Institutional Fund, Inc. and PCS
Cash Fund, Inc.
Fergus Reid Director Chairman and Chief Executive Officer of
85 Charles Colman Blvd LumeLite Corporation (injection molding firm);
Pawling, NY 12564 Trustee and Director of Vista Mutual Fund
(63) Group; Director of the Morgan Stanley Fund,
Inc., Morgan Stanley Institutional Fund, Inc.
and PCS Cash Fund, Inc.
Frederick O. Robertshaw Director Of Counsel, Bryan, Cave (law firm); Previously
2800 North Central Avenue associated with Copple, Chamberlin & Boehm,
Phoenix, AZ 85004 P.C. and Rake, Copple, Downey & Black, P.C.
(61) (law firms); Director of the Morgan Stanley
Fund, Inc., Morgan Stanley Institutional Fund,
Inc. and PCS Cash Fund, Inc.
22
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
--------------------- ------------------ ----------------------------
Frederick B. Whittemore Director Advisory Director of Morgan Stanley & Co.,
1251 Avenue of the Inc.; Vice-Chairman and Director of The
Americas, 30th Flr. Brazilian Investment Fund, Inc., The Latin
New York, NY 10020 American Discovery Fund, Inc., The Malaysia
(65) Fund, Inc., Morgan Stanley Africa Investment
Fund, Inc., Morgan Stanley Asia-Pacific Fund,
Inc., Morgan Stanley Emerging Markets Debt
Fund, Inc., Morgan Stanley Emerging Markets
Fund, Inc., Morgan Stanley Fund, Inc., Morgan
Stanley Global Opportunity Bond Fund, Inc.,
Morgan Stanley High Yield Fund,Inc., Morgan
Stanley India Investment Fund, Inc., Morgan
Stanley Institutional Fund, Inc., The Pakistan
Investment Fund, Inc., PCS Cash Fund, Inc.,
The Thai Fund, Inc. and The Turkish Investment
Fund, Inc.
James W. Grisham Vice President Principal of Morgan Stanley & Co., Inc.;
1221 Avenue of the Principal of Morgan Stanley Asset Management
Americas Inc.; Vice President of The Brazilian
New York, NY 10020 Investment Fund, Inc., The Latin American
(54) Discovery Fund, Inc., The Malaysia Fund, Inc.,
Morgan Stanley Africa Investment Fund, Inc.,
Morgan Stanley Asia-Pacific Fund, Inc., Morgan
Stanley Emerging Markets Debt Fund, Inc.,
Morgan Stanley Emerging Markets Fund, Inc.,
Morgan Stanley Fund, Inc., Morgan Stanley
Global Opportunity Bond Fund, Inc., Morgan
Stanley High Yield Fund, Inc., Morgan Stanley
India Investment Fund, Inc., Morgan Stanley
Institutional Fund, Inc., The Pakistan
Investment Fund, Inc., PCS Cash Fund, Inc.,
The Thai Fund, Inc. and The Turkish Investment
Fund, Inc.
23
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
--------------------- ------------------ ----------------------------
Harold J. Schaaff, Jr. Vice President Principal of Morgan Stanley & Co.; General
1221 Avenue of the Counsel and Secretary of Morgan Stanley Asset
Americas Management Inc.; Vice President of The
New York, NY 10020 Brazilian Investment Fund, Inc., The Latin
(35) American Discovery Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley Africa Investment
Fund, Inc., Morgan Stanley Asia-Pacific Fund,
Inc., Morgan Stanley Emerging Markets Debt
Fund, Inc., Morgan Stanley Emerging Markets
Fund, Inc., Morgan Stanley Fund, Inc., Morgan
Stanley Global Opportunity Bond Fund, Inc.,
Morgan Stanley High Yield Fund, Inc., Morgan
Stanley India Investment Fund, Inc., Morgan
Stanley Institutional Fund, Inc., The Pakistan
Investment Fund, Inc., PCS Cash Fund, Inc.,
The Thai Fund, Inc. and The Turkish Investment
Fund, Inc.
Joseph P. Stadler Vice President Vice President of Morgan Stanley Asset
1221 Avenue of the Management Inc.; Previously with Price
Americas Waterhouse (accounting); Vice President of The
New York, NY 10020 Brazilian Investment Fund, Inc., The Latin
(41) American Discovery Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley Africa Investment
Fund, Inc., Morgan Stanley Asia-Pacific Fund,
Inc., Morgan Stanley Emerging Markets Debt
Fund, Inc., Morgan Stanley Emerging Markets
Fund, Inc., Morgan Stanley Fund, Inc., Morgan
Stanley Global Opportunity Bond Fund, Inc.,
Morgan Stanley High Yield Fund, Inc., Morgan
Stanley India Investment Fund, Inc., Morgan
Stanley Institutional Fund, Inc., The Pakistan
Investment Fund, Inc., PCS Cash Fund, Inc.,
The Thai Fund, Inc. and The Turkish Investment
Fund, Inc.
24
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
--------------------- ------------------ ----------------------------
Valerie Y. Lewis Secretary Vice President of Morgan Stanley Asset
1221 Avenue of the Management Inc.; Previously with Citicorp
Americas (banking); Secretary of The Brazilian
New York, NY 10020 Investment Fund, Inc., The Latin American
(39) Discovery Fund, Inc., The Malaysia Fund, Inc.,
Morgan Stanley Africa Investment Fund, Inc.,
Morgan Stanley Asia-Pacific Fund, Inc., Morgan
Stanley Emerging Markets Debt Fund, Inc.,
Morgan Stanley Emerging Markets Fund, Inc.,
Morgan Stanley Fund, Inc., Morgan Stanley
Global Opportunity Bond Fund, Inc., Morgan
Stanley High Yield Fund, Inc., Morgan Stanley
India Investment Fund, Inc., Morgan Stanley
Institutional Fund, Inc., The Pakistan
Investment Fund, Inc., PCS Cash Fund, Inc.,
The Thai Fund, Inc. and The Turkish Investment
Fund, Inc.
Karl O. Hartmann Assistant Secretary Senior Vice President, Secretary and General
73 Tremont Street Counsel of Chase Global Funds Services Company;
Boston, MA 02108-3913 Previously with Leland, O' Brien, Rubenstein
(40) Associates, Inc. (investments).
James R. Rooney Treasurer Assistant Vice President, Chase Global Funds
73 Tremont Street Services Company; Manager of Fund
Boston, MA 02108-3913 Administration; Officer of various investment
(37) companies managed by Morgan Stanley Asset
Management Inc.; Previously with Scudder,
Stevens & Clark, Inc. (investments) and Ernst
& Young LLP (accounting); Treasurer of The
Brazilian Investment Fund, Inc., The Latin
American Discovery Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley Africa Investment
Fund, Inc., Morgan Stanley Asia-Pacific Fund,
Inc., Morgan Stanley Emerging Markets Debt Fund,
Inc., Morgan Stanley Emerging Markets Fund,
Inc., Morgan Stanley Fund, Inc., Morgan Stanley
Global Opportunity Bond Fund, Inc., Morgan
Stanley High Yield Fund, Inc., Morgan Stanley
India Investment Fund, Inc., Morgan Stanley
Institutional Fund, Inc., The Pakistan
Investment Fund, Inc., The Thai Fund, Inc. and
The Turkish Investment Fund, Inc.
25
<PAGE>
Principal Occupation During
Name, Address and Age Position with Fund Past Five Years
--------------------- ------------------ ----------------------------
Joanna Haigney Assistant Treasurer Supervisor of Fund Administration and
73 Tremont Street Compliance, Chase Global Funds Services Company;
Boston, MA 02108-3913 Previously with Coopers & Lybrand LLP;
(29) Assistant Treasurer of The Brazilian Investment
Fund, Inc., The Latin American Discovery Fund,
Inc., The Malaysia Fund, Inc., Morgan Stanley
Africa Investment Fund, Inc., Morgan Stanley
Asia-Pacific Fund, Inc., Morgan Stanley
Emerging Markets Debt Fund, Inc., Morgan
Stanley Emerging Markets Fund, Inc., Morgan
Stanley Fund, Inc., Morgan Stanley Global
Opportunity Bond Fund, Inc., Morgan Stanley
High Yield Fund, Inc., Morgan Stanley India
Investment Fund, Inc., Morgan Stanley
Institutional Fund, Inc., The Pakistan
Investment Fund, Inc., The Thai Fund, Inc. and
The Turkish Investment Fund, Inc.
<FN>
_______
* "Interested Person" within the meaning of the 1940 Act.
</TABLE>
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director who is not also an officer or affiliated person
and in addition, Mr. Whittemore, an Interested Person, an annual fee, plus
travel and other expenses incurred in attending Board meetings. For the fiscal
year December 31, 1994, the Fund paid approximately $83,000 in Directors' fees
and expenses. Directors who are also officers or affiliated persons receive no
remuneration for their services as Directors. The Fund's officers and employees
are paid by the Adviser or its agents. As of December 18, 1995, to Fund
management's knowledge, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of each Portfolio of the
Fund. The following table shows aggregate compensation paid to each of the
Fund's Directors by the Fund and the Fund Complex, respectively, in the fiscal
year ended December 31, 1994.
26
<PAGE>
COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
PERSON, COMPENSATION RETIREMENT ANNUAL COMPENSATION
POSITION FROM BENEFITS ACCRUED BENEFITS FROM REGISTRANT
REGISTRANT AS PART OF FUND UPON AND FUND COMPLEX
EXPENSES RETIREMENT PAID TO DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frederick B. Whittemore,* $15,750 $ $ $67,800
Director and Chairman of
the Board
John P. Britton,** 16,500 27,550
Director
George R. Bunn, Jr.,** 18,350 29,400
Director
A. Macdonald Caputo,** N/A N/A
Director
Gerard E. Jones,* 15,750 85,584.11
Director
Peter E. deSvastich,** 15,750 40,058
Director
Warren J. Olsen,* N/A N/A
Director and President
<FN>
_______________
* As of June 28, 1995, the following persons were elected Directors of the
Fund: Barton M. Biggs, John D. Barrett II, Gerard E. Jones, Andrew McNally
IV, Warren J. Olsen, Samuel T. Reeves, Fergus Reid, Frederick O. Robertshaw
and Frederick B. Whittemore.
** Resigned effective June 28, 1995.
</TABLE>
INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENTS
Morgan Stanley Asset Management Inc. ("MSAM" or the "Adviser") is a
wholly-owned subsidiary of Morgan Stanley Group Inc. The principal offices of
Morgan Stanley Group Inc. are located at 1221 Avenue of the Americas, New York,
NY 10020. As compensation for advisory services for the year ended October 31,
1992, the two months ended December 31, 1992, the fiscal years ended December
31, 1993 and December 31, 1994, the Adviser earned fees of approximately
$8,312,000, $1,725,000, $17,539,000 and $34,338,000, respectively, and from
such fees voluntarily waived fees of $962,000, $600,000, $3,037,000 and
$2,640,000, respectively. For the year ended October 31, 1992, the two months
ended December 31, 1992, the fiscal years ended December 31, 1993 and December
31, 1994, the Fund paid brokerage commissions of approximately $3,477,000,
$370,000, $5,827,000 and $7,287,293, respectively. For the year ended
October 31, 1992, the two months ended December 31, 1992, the fiscal years ended
December 31, 1993 and December 31, 1994, the Fund paid in the aggregate $66,600,
$4,000, $797,000 and $796,000, respectively, as brokerage commissions to Morgan
Stanley & Co. Incorporated, an affiliated broker-dealer, which represented 2%,
1%, 13% and 11% of the total amount of brokerage commissions paid in each
respective period. For the year ended October 31, 1992, the two months ended
December 31, 1992 and the fiscal years ended December 31, 1993 and December 31,
1994, the Fund paid administrative fees to MSAM of approximately $2,624,000,
$542,000, $4,662,000 and $4,458,000, respectively.
The Sub-Adviser, Sun Valley Gold Company, with principal offices at 620 Sun
Valley Road, Sun Valley, Idaho, serves as the investment sub-adviser of the Gold
Portfolio, pursuant to a sub-advisory agreement among the Fund, the Adviser and
the Sub-Adviser (the "Sub-Advisory Agreement"). The Adviser and the Sub-Adviser
have entered into an indemnification agreement under
27
<PAGE>
which, generally, the Sub-Adviser has agreed to indemnify the Adviser and the
Fund for claims or losses in connection with any failure by the Sub-Adviser to
comply with its obligations under the Sub-Advisory Agreement or related
agreements or any act or omission that amounts to negligence, misfeasance or bad
faith, and the Adviser has agreed to indemnify the Sub-Adviser for claims or
losses in connection with any failure by the Adviser to comply with its
obligations under the Sub-Advisory Agreement or related agreements. For the
year ended December 31, 1994, the Fund paid $8,000 as brokerage commissions to
Sun Valley.
Pursuant to the MSAM Administration Agreement between the Adviser and the
Fund, the Adviser provides Administrative Services. For its services under the
Administration Agreement, the Fund pays the Adviser a monthly fee which on an
annual basis equals 0.15 of 1% of the average daily net assets of each
Portfolio.
Under the Agreement between the Adviser and The Chase Manhattan Bank,
N.A. ("Chase," successor in interest to United States Trust Company of New
York), Chase Global Fund Services Company ("CGFSC," formerly Mutual Funds
Service Company and now a Chase subsidiary) provides certain administrative
services to the Fund. CGFSC provides operational and administrative services
to investment companies with approximately $60 billion in assets and having
approximately 151,504 shareholder accounts as of December 31, 1995. CGFSC's
business address is 73 Tremont Street, Boston, Massachusetts 02108-3913.
CODE OF ETHICS
The Board of Directors of the Fund has adopted a Code of Ethics under Rule
17j-1 of the 1940 Act which incorporates the Code of Ethics of the Adviser
(together, the "Codes"). The Codes significantly restrict the personal
investing activities of all employees of the Adviser and, as described below,
impose additional, more onerous, restrictions on the Fund's investment
personnel.
The Codes require that all employees of the Adviser preclear any personal
securities investment (with limited exceptions, such as government securities).
The preclearance requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the proposed investment.
The substantive restrictions applicable to all employees of the Adviser include
a ban on acquiring any securities in a "hot" initial public offering and a
prohibition from profiting on short-term trading in securities. In addition, no
employee may purchase or sell any security that at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any fund advised by the Adviser.
Furthermore, the Codes provide for trading "blackout periods" that prohibit
trading by investment personnel of the Fund within periods of trading by the
Fund in the same (or equivalent) security.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The names and addresses of the holders of 5% or more of the outstanding
shares of any class of the Fund as of June 30, 1995 and the percentage of
outstanding shares of such classes owned beneficially or of record by such
shareholders as of such date are, to Fund management's knowledge, as follows:
ACTIVE COUNTRY ALLOCATION PORTFOLIO: The Trustees of Columbia University in the
City of New York, 475 Riverside Drive, Suite 401, New York, NY 10115, owned 16%
of such Portfolio's total outstanding shares.
City of New York Deferred Compensation Plan, 40 Rector Street, 3rd Floor, New
York, NY 10006, owned 13% of such Portfolio's total outstanding shares.
Oglebay Norton Company, 1100 Superior Avenue, Cleveland, OH 44114-2598, owned
12% of such Portfolio's total outstanding shares.
The Finn Foundation, Northern Trust Co., Master Trust Dept., P.O. Box 92984,
Chicago, IL 60675, owned 8% of such Portfolio's total outstanding shares.
Strafe & Co., F/A/O In: Thompson Consumer Electronics, 235 West Schrock Road,
Westerville, OH 43081, owned 7% of such Portfolio's total outstanding shares.
28
<PAGE>
Sahara Enterprises, Inc., 3 First National Plaza, Suite 2000, Chicago, IL 60602-
4260, owned 6% of such Portfolio's total outstanding shares.
ASIAN EQUITY PORTFOLIO: Association De Bienfaisance Et De Retraite Des Policiers
De La Communaute Urbaine De Montreal, 480 Gilford Street, Montreal, Quebec
H2J1N3, owned 9% of such Portfolio's total outstanding shares.
BALANCED PORTFOLIO: The American Roentgen Ray Society, 1891 Preston White
Drive, Reston, VA 22091-5431, owned 21% of such Portfolio's total outstanding
shares.
EMERGING GROWTH PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley
Profit Sharing Plan, P.O. Box 92956, Chicago, IL 60675-2956, owned 22% of such
Portfolio's total outstanding shares.
Allendale Mutual Insurance Co., P.O. Box 7500, Johnston, RI 02919-0750, owned 8%
of such Portfolio's total outstanding shares.
Claude Worthington Benedum Foundation, 1400 Benedum Trees Building, Pittsburgh,
PA 15222, owned 7% of such Portfolio's total outstanding shares.
EMERGING MARKETS DEBT PORTFOLIO: Northwestern University, 633 Clark Street,
Evanston, IL 60208-1122, owned 13% of such Portfolio's total outstanding shares.
Swarthmore College, 500 College Avenue, Swarthmore, PA 19081-1110, owned 7% of
such Portfolio's total outstanding shares.
EMERGING MARKETS PORTFOLIO: Ministers & Missionaries Benefit Board of the
American Baptist Churches, 475 Riverside Drive, New York, NY 10115, owned 11%
of such Portfolio's total outstanding shares.
EQUITY GROWTH PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley
Profit Sharing Plan, P.O. Box 92956, Chicago, IL 60675, owned 31% of such
Portfolio's total outstanding shares.
FIXED INCOME PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley
Profit Sharing Plan, P.O. Box 92956, Chicago, IL 60675-2956, owned 23% of such
Portfolio's total outstanding shares.
Brooks School, c/o Mr. Frank Marino, North Andover, MA 01845, owned 6% of such
Portfolio's total outstanding shares.
GLOBAL EQUITY PORTFOLIO: Robert College of Istanbul Turkey C/O Morgan Stanley
Asset Management, 25 Cabot Square, London, England E144QA, owned 42% of such
Portfolio's total outstanding shares.
Boston Safe Deposit and Trust Company as Custodian for the MBTA Retirement Fund,
99 Summer Street Suite 1700, Boston, MA 02110, owned 22% of such Portfolio's
total outstanding shares.
JM Kaplan Fund, Inc., 880 Third Avenue 3rd floor, New York, NY 10022, owned 10%
of such Portfolio's total outstanding shares.
Divtex and Company FBO, Pritchard Hubble and Herr C/O Texas Commerce Bank, P.O.
Box 951405, Dallas, TX 75395, owned 8% of such Portfolio's total outstanding
shares.
GLOBAL FIXED INCOME PORTFOLIO: Farm Credit Bank Retirement Plan, Columbia
District American Industries Trust Company Trustee, 5700 NW Central Drive,
4th Floor, Houston, TX 77092, owned 14% of such Portfolio's total outstanding
shares.
Northern Trust Company as Custodian FBO The Lund Foundation, P.O. Box 92956,
Chicago, IL 60675, owned 11% of such Portfolio's total outstanding shares.
The Northern Trust Customer FBO Resort Condominiums International, P.O. Box
92956, Chicago, IL 60675-2956, owned 6% of such Portfolio's total outstanding
shares.
Divtex and Co., FBO Pritchard Hubble and Herr, c/o Texas Commerce Bank, P.O. Box
951405, Dallas, TX 75395-1405, owned 6% of such Portfolio's total outstanding
shares.
HIGH YIELD PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley Profit
Sharing Plan, P.O. Box 92956, Chicago, IL 60675-2956, owned 26% of such
Portfolio's total outstanding shares.
Valassis Enterprises - Equity, c/o Franklin Enterprises, 520 Lake Cook Road,
Suite 380, Deerfield, IL 60015, owned 19% of such Portfolio's total outstanding
shares.
INTERNATIONAL EQUITY PORTFOLIO: William Penn Foundation, 1630 Locust Street,
Philadelphia, PA 19103, owned 5% of such Portfolio's total outstanding shares.
INTERNATIONAL SMALL CAP PORTFOLIO: The Short Brothers Pension Fund, P.O. Box
241, Airport Road, Belfast, N. Ireland, owned 11% of such Portfolio's total
outstanding shares.
The Casey Family Program, 1300 Dexter Avenue, Suite 400, Seattle, WA 98109-3547,
owned 8% of such Portfolio's total outstanding shares.
Trustees of Boston College Attn: Paul Haran Associates Treasurer, St. Thomas
More Hall 310, Chestnut Hill, MA 02167, owned 7% of such Portfolio's total
outstanding shares.
General Mills, Inc. Master Trust: Pooled International Fund, One General Mills
Blvd., Minneapolis, MN 55426, owned 7% of such Portfolio's total outstanding
shares.
MUNICIPAL BOND PORTFOLIO: Kevin W. Smith, 570 Arvida Parkway, Coral Gables, FL
33156, owned 12% of such Portfolio's total outstanding shares.
Daniel J. McDonald and Maria J. McDonald, 850 Old Dominion Drive, McLean, VA
22102, owned 11% of such Portfolio's total outstanding shares.
29
<PAGE>
SMALL CAP VALUE EQUITY PORTFOLIO: Morgan Stanley & Co. Pension Fund, c/o U.S.
Trust Company of New York, 770 Broadway Street, New York, NY 10003, owned 12% of
such Portfolio's total outstanding shares.
U.S. REAL ESTATE PORTFOLIO: European Patent Organization Pension Reserve Fund,
Erhardtstrasse 27, Munich, Germany 80298, owned 9% of such Portfolio's total
outstanding shares.
VALUE EQUITY PORTFOLIO: Northern Trust Company Trustee, FBO Morgan Stanley
Profit Sharing Plan, P.O. Box 92956, Chicago, IL 60675, owned 16% of such
Portfolio's total outstanding shares.
NET ASSET VALUE FOR MONEY MARKET PORTFOLIOS
The Money Market Portfolio and the Municipal Money Market Portfolio seek to
maintain a stable net asset value per share of $1.00. These Portfolios use the
amortized cost method of valuing their securities, which does not take into
account unrealized gains or losses. The use of amortized cost and the
maintenance of each Portfolio's per share net asset value at $1.00 is based on
the Portfolio's election to operate under the provisions of Rule 2a-7 under the
1940 Act. As a condition of operating under that Rule, each of the Money Market
Portfolios must maintain a dollar-weighted average portfolio maturity of 90 days
or less, purchase only instruments having remaining maturities of 397 days or
less, and invest only in securities which are of "eligible quality" as
determined in accordance with regulations of the Commission.
The Rule also requires that the Directors, as a particular responsibility
within the overall duty of care owed to shareholders, establish procedures
reasonably designed, taking into account current market conditions and each
Portfolio's investment objectives, to stabilize the net asset value per share as
computed for the purposes of sales and redemptions at $1.00. These procedures
include periodic review, as the Directors deem appropriate and at such intervals
as are reasonable in light of current market conditions, of the relationship
between the amortized cost value per share and a net asset value per share based
upon available indications of market value. In such review, investments for
which market quotations are readily available are valued at the most recent bid
price or quoted yield available for such securities or for securities of
comparable maturity, quality and type as obtained from one or more of the major
market makers for the securities to be valued. Other investments and assets are
valued at fair value, as determined in good faith by the Directors.
In the event of a deviation of over 1/2 of 1% between a Portfolio's net
asset value based upon available market quotations or market equivalents and
$1.00 per share based on amortized cost, the Directors will promptly consider
what action, if any, should be taken. The Directors will also take such action
as they deem appropriate to eliminate or to reduce to the extent reasonably
practicable any material dilution or other unfair results which might arise from
differences between the two. Such action may include redemption in kind,
selling instruments prior to maturity to realize capital gains or losses or to
shorten the average maturity, withholding dividends, paying distributions from
capital or capital gains or utilizing a net asset value per share as determined
by using available market quotations.
There are various methods of valuing the assets and of paying dividends and
distributions from a money market fund. Each of the Money Market and Municipal
Money Market Portfolios values its assets at amortized cost while also
monitoring the available market bid price, or yield equivalents. Since
dividends from net investment income will be declared daily and paid monthly,
the net asset value per share of each Portfolio will ordinarily remain at $1.00,
but each Portfolio's daily dividends will vary in amount. Net realized gains,
if any, will normally be declared and paid monthly.
PERFORMANCE INFORMATION
The Fund may from time to time quote various performance figures to
illustrate the Portfolios' past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quotations.
In the case of total return, non-standardized performance quotations may be
furnished by the Fund but must be accompanied by certain standardized
performance information computed as required by the Commission. Current
30
<PAGE>
yield and average annual compounded total return quotations used by the Fund are
based on the standardized methods of computing performance mandated by the
Commission. An explanation of those and other methods used by the Fund to
compute or express performance follows.
TOTAL RETURN
From time to time each Portfolio, except the Money Market and Municipal
Money Markets Portfolios, may advertise total return for each class of shares
of the Portfolio. Total return figures are based on historical earnings and
are not intended to indicate future performance. The average annual total
return is determined by finding the average annual compounded rates of return
over 1-, 5-, and 10-year periods (or over the life of the Portfolio) that
would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes that all dividends and
distributions are reinvested when paid. The quotation assumes the amount was
completely redeemed at the end of each 1-, 5-, and 10-year period (or over
the life of the Portfolio) and the deduction of all applicable Fund expenses
on an annual basis.
The average annual compounded rates of return (unless otherwise noted) for
the Fund's Portfolios for the one year and five year periods ended December 31,
1994 and for the period from inception through December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Name of Portfolio Since Date
and Date of Inception One Year Five Year of Inception
--------------------- -------- --------- ------------
<S> <C> <C> <C>
International Equity
August 4, 1989. . . . . . . . 7.76% 9.08% 10.59%
Emerging Growth
November 1, 1989. . . . . . . 28.18 9.24 11.36
Value Equity
January 31, 1990. . . . . . . 18.77 11.32 10.69
Balanced
February 28, 1990 . . . . . . 13.86 9.98 9.75
Equity Growth
April 2, 1991 . . . . . . . . 30.74 N/A 11.76
Global Fixed Income
May 1, 1991 . . . . . . . . . 13.22 N/A 8.56
Fixed Income
May 15, 1991. . . . . . . . . 12.50 N/A 8.60
Asian Equity
July 1, 1991. . . . . . . . . (9.64) N/A 24.98
Active Country Allocation
January 17, 1992. . . . . . . (2.48) N/A 6.04
Global Equity
July 15, 1992 . . . . . . . . 12.95 N/A 19.31
Emerging Markets
September 25, 1992. . . . . . (7.35) N/A 18.25
High Yield
September 28, 1992. . . . . . 12.00 N/A 11.60
International Small Cap
December 15, 1992 . . . . . . (5.23) N/A 19.58
31
<PAGE>
Name of Portfolio Since Date
and Date of Inception One Year Five Year of Inception
--------------------- -------- --------- ------------
Small Cap Value Equity
December 17, 1992 . . . . . . 15.59% N/A 10.56%
European Equity
April 2, 1993 . . . . . . . . 12.15 N/A 22.94
Emerging Markets Debt
February 1, 1994. . . . . . . 17.19 N/A (3.13)
Gold
February 1, 1994. . . . . . . 10.62 N/A (1.18)
Japanese Equity
April 25, 1994. . . . . . . . (21.33) N/A (15.56)
Latin American
January 18, 1995. . . . . . . N/A N/A (12.00)
Municipal Bond
January 18, 1995. . . . . . . N/A N/A 4.22
U.S. Real Estate
February 24, 1995 . . . . . . N/A N/A 8.30
Aggresive Equity
March 8, 1995 . . . . . . . . N/A N/A 18.33
MicroCap
January 2, 1996 . . . . . . . N/A N/A N/A
</TABLE>
These figures were calculated according to the following
n
formula: P(1 + T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of hypothetical $1,000 payment made at the
beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-,
or 10-year periods (or fractional portion thereof).
CALCULATION OF YIELD FOR NON-MONEY MARKET PORTFOLIOS
From time to time certain of the Fund's Portfolios may advertise yield.
Current yield reflects the income per share earned by a Portfolio's investments.
Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period.
The respective yields for certain of the Fund's Portfolios for the 30-day
period ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
PORTFOLIO NAME 30-DAY YIELD
-------------- ------------
<S> <C>
Emerging Markets Debt. . . . . . . 12.06%
Fixed Income . . . . . . . . . . . 6.92%
Global Fixed Income. . . . . . . . 6.79%
32
<PAGE>
High Yield . . . . . . . . . . . . 11.00%
Municipal Bond . . . . . . . . . . 4.33%
</TABLE>
These figures were obtained using the following formula:
6
Yield = 2[( a - b + 1 ) - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the
period.
CALCULATION OF YIELD FOR MONEY MARKET PORTFOLIOS
The current yield of the Money Market and Municipal Money Market Portfolios
is calculated daily on a base period return for a hypothetical account having a
beginning balance of one share for a particular period of time (generally 7
days). The return is determined by dividing the net change (exclusive of any
capital changes in such account) by its average net asset value for the period,
and then multiplying it by 365/7 to determine the annualized current yield. The
calculation of net change reflects the value of additional shares purchased with
the dividends by the Portfolio, including dividends on both the original share
and on such additional shares. The yields of the Money Market and Municipal
Money Market Portfolios for the 7-day period ended June 30, 1995 were 5.45%
and 3.71%, respectively. An effective yield, which reflects the effects of
compounding and represents an annualization of the current yield with all
dividends reinvested, may also be calculated for each Portfolio by dividing the
base period return by 7, adding 1 to the quotient, raising the sum to the 365th
power, and subtracting 1 from the result. The effective yields of the Money
Market Portfolios and the Municipal Money Market Portfolio for the 7-day period
ended June 30, 1995 were 5.59% and 3.78%, respectively.
The yield of a Portfolio will fluctuate. The annualization of a week's
dividend is not a representation by the Portfolio as to what an investment in
the Portfolio will actually yield in the future. Actual yields will depend on
such variables as investment quality, average maturity, the type of instruments
the Portfolio invests in, changes in interest rates on instruments, changes in
the expenses of the Fund and other factors. Yields are one basis investors may
use to analyze the Portfolios of the Fund, and other investment vehicles;
however, yields of other investment vehicles may not be comparable because of
the factors set forth in the preceding sentence, differences in the time periods
compared, and differences in the methods used in valuing portfolio instruments,
computing net asset value and calculating yield.
TAXABLE EQUIVALENT YIELD FOR THE MUNICIPAL BOND AND MUNICIPAL MONEY MARKET
PORTFOLIO
It is easy to calculate your own taxable equivalent yield if you know your
tax bracket. The formula is:
Tax Free Yield
---------------------
1 - Your Tax Bracket = Your Taxable Equivalent Yield
For example, if you are in the 28% tax bracket and can earn a tax-free
yield of 7.5%, the taxable equivalent yield would be 10.42%.
The table below indicates the advantages of investments in Municipal Bonds
for certain investors. Tax-exempt rates of interest payable on a Municipal Bond
(shown at the top of each column) are equivalent to the taxable yields set forth
opposite the respective income tax levels, based on income tax rates effective
for the tax year 1995 under the Internal Revenue Code. There can, of course, be
no guarantee that the Municipal Bond Portfolio or Municipal Money Market
Portfolio will achieve a specific yield. Also, it is possible that some portion
of the Portfolio's dividends may be subject to Federal income taxes. A
substantial portion, if not all, of such dividends may be subject to state and
local taxes.
33
<PAGE>
TAXABLE EQUIVALENT YIELD TABLE
<TABLE>
<CAPTION>
SAMPLE LEVEL OF TAXABLE EQUIVALENT RATES
TAXABLE INCOME* BASED ON TAX-EXEMPT YIELD OF:
-------------- -----------------------------
FEDERAL
INCOME
JOINT SINGLE TAX
RETURN RETURN BRACKET 3% 4% 5% 6% 7% 8% 9% 10% 11%
------ ------ ------- -- -- -- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-39,000 $0-23,350 15.0% 3.5% 4.7% 5.9% 7.1% 8.2% 9.4% 10.6% 11.8% 12.9%
39,000- 94,250 23,350-56,550 28.0 4.2 5.6 6.9 8.3 9.7 11.1 12.5 13.9 15.3
94,250-143,600 56,550-117,950 31.0 4.3 5.8 7.2 8.7 10.1 11.6 13.0 14.5 15.9
143,600-256,500 117,950-256,500 36.0 4.7 6.3 7.8 9.4 10.9 12.5 14.1 15.6 17.2
over 256,500 over 256,500 39.6 5.0 6.6 8.3 9.9 11.6 13.2 14.9 16.6 18.2
<FN>
* Net amount subject to 1995 Federal Income Tax after deductions and exemptions,
not indexed for 1995 income tax rates.
</TABLE>
The taxable equivalent yields for the Municipal Money Market and Municipal
Bond Portfolios for the seven days ended December 31, 1994, assuming a
Federal income tax rate of 39.6% (maximum rate), were 6.14% and 7.88%,
respectively. The taxable equivalent effective yields for the Municipal
Money Market and Municipal Bond Portfolios for the seven days ended June 30,
1995, assuming the same tax rate, were 6.26% and 8.06%, respectively.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of
Morgan Stanley Institutional Fund, Inc. might satisfy their investment
objective, advertisements regarding the Fund may discuss various measures of
Fund performance as reported by various financial publications. Advertisements
may also compare performance (as calculated above) to performance as reported by
other investments, indices and averages. The following publications may
be used:
(a) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. -- analyzes price, current yield, risk, total
return and average rate of return (average annual compounded
growth rate) over specified time periods for the mutual fund
industry.
(b) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest,
Financial Times, Global Investor, Investor's Daily, Lipper
Analytical Services, Inc., Morningstar, Inc., New York Times,
Personal Investor, Wall Street Journal and Weisenberger
Investment Companies Service -- publications that rate fund
performance over specified time periods.
(c) Historical data supplied by the research departments of First
Boston Corporation, the J.P. Morgan companies, Salomon Brothers,
Merrill Lynch, Pierce, Fenner & Smith, Lehman Brothers and
Bloomberg L.P.
(d) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed
Income Fund Performance Analysis -- measures total return and
average current yield for the mutual fund industry. Ranks
individual mutual fund performance over specified time periods,
assuming reinvestment of all distributions, exclusive of any
applicable sales charges.
(e) Mutual Fund Source Book, published by Morningstar, Inc. --
analyzes price, yield, risk and total return for equity funds.
(f) Savings and Loan Historical Interest Rates -- as published in the
U.S. Savings & Loan League Fact Book.
(g) Stocks, Bonds, Bills and Inflation, published by Hobson
Associates -- historical measure of yield, price and total return
for common and small company stock, long-term government bonds,
U.S. Treasury bills and inflation.
The following indices and averages may also be used:
(a) Composite Indices -- 70% Standard & Poor's 500 Stock Index and
30% NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock
Index and 65% Salomon Brothers High Grade Bond Index; and 65%
Standard & Poor's 500 Stock Index and 35% Salomon Brothers High
Grade Bond Index.
(b) Consumer Price Index (or cost of Living Index), published by the
U.S. Bureau of Labor Statistics -- a statistical measure of
change, over time, in the price of goods and services in major
expenditure groups.
(c) Donoghue's Money Fund Average -- an average of all major
money market fund yields, published weekly for 7 and 30-day
yields.
34
<PAGE>
(d) Dow Jones Composite Average or its component averages -- an
unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company
stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.
(e) EMBI+ -- Expanding on the EMBI, which includes only Bradys, the
EMBI+ includes a broader group of Brady Bonds, loans, Eurobonds
and U.S. Dollar local markets instruments. A more comprehensive
benchmark than EMBI, the EMBI+ covers 49 instruments from 14
countries. At $96 billion, its market cap is nearly 50% higher
than the EMBI's. The EMBI+ is not, however, intended to replace
the EMBI but rather to complement it. The EMBI continues to
represent the most liquid, most easily traded segment of the
market, while the EMBI+ represents the broader market, including
more of the assets that investors typically hold in their
portfolios. Both of these indices are published daily.
(f) First Boston High Yield Index -- generally includes over 180
issues with an average maturity range of seven to ten years with
a minimum capitalization of $100 million. All issues are
individually trader-priced monthly.
(g) First Boston Upper/Middle Tier High Yield Index -- an unmanaged
index of bonds rated B to BBB.
(h) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated
by screening for convertible issues of 100 million or greater in
market capitalization. The index is priced monthly.
(i) IFC Global Total Return Composite Index -- an unmanaged index
of common stocks and includes 18 developing countries in Latin
America, East and South Asia, Europe, the Middle East and Africa
(net of dividends reinvested).
(j) Indata Balanced-Median Index -- an unmanaged index and includes
an asset allocation of 5% cash, 42% bonds and 53% equity based on
$52.7 billion in assets among 547 portfolios for the six months
ended June 30, 1995. (assumes dividends reinvested).
(k) Indata Equity-Median Stock Index -- an unmanaged index which
includes an average asset allocation of 5% cash and 95% equity
based on $364.7 billion in assets among 1,163 portfolios for the
six months ended June 30, 1995.
(l) J.P. Morgan Emerging Markets Bond Index -- a market-weighted
index composed of all Brady bonds outstanding and includes
Argentina, Brazil, Mexico, Nigeria, the Philippines and
Venezuela.
(m) J.P. Morgan Traded Global Bond Index -- an unmanaged index of
securities and includes Australia, Belgium, Canada, Denmark,
France, Germany, Italy, Japan, The Netherlands, Spain, Sweden,
United Kingdom and the United States.
(n) Lehman Brothers Aggregate Bond Index -- an unmanaged index made
up of the Government/Corporate Index, the Mortgage Backed
Securities Index and the Asset-Backed Securities Index.
(o) Lehman Brothers LONG-TERM Treasury Bond -- composed of all
bonds covered by the Lehman Brothers Treasury Bond Index with
maturities of 10 years or greater.
(p) The Lehman 7 Year Municipal Bond Index -- an unmanaged index
which consists of investment grade bonds with maturities between
6-8 years rated BAA or better. All bonds have been taken from
deals done within the last 5 years, with assets of $50 million or
larger.
(q) Lipper Capital Appreciation Index -- a composite of mutual funds
managed for maximum capital gains.
(r) Morgan Stanley Capital International Combined Far East Free ex
Japan Index -- a market-capitalization weighted index comprising
stocks in Hong Kong, Indonesia, Korea, Malaysia, Philippines,
Singapore and Thailand. Korea is included in the MSCI Combined
Far East Free ex Japan Index at 20% of its market
capitalization.
(s) Morgan Stanley Capital International EAFE Index -- an arithmetic,
market value-weighted average of the performance of over 900
securities on the stock exchanges of countries in Europe,
Australia and the Far East.
(t) Morgan Stanley Capital International Emerging Markets Global
Latin American Index -- an unmanaged, arithmetic market value
weighted average of the performance of over 196 securities on
the stock exchanges of Argentina, Brazil, Chile, Columbia,
Mexico, Peru and Venezuela (Assumes reinvestment of dividends).
(u) Morgan Stanley Capital International Europe Index -- an
unmanaged index of common stocks and includes 14 countries
throughout Europe.
35
<PAGE>
(v) Morgan Stanley Capital International Japan Index -- an
unmanaged index of common stocks.
(w) Morgan Stanley Capital International Latin American Global
Index -- a broad-based market capitalization-weighted composite
index covering at least 60% of markets in Mexico, Argentina,
Brazil, Chile, Colombia, Peru and Venezuela (assumes dividends
reinvested).
(x) Morgan Stanley Capital International World Index -- an
arithmetic, market value-weighted average of the performance of
over 1,470 securities listed on the stock exchanges of countries
in Europe, Australia, the Far East, Canada and the United States.
(y) NASDAQ Composite Index -- an unmanaged index of common stocks.
(z) NASDAQ Industrial Index -- a capitalization-weighted index
composed of more than 3,000 domestic stocks taken from the
following industry sectors: agriculture, mining, construction,
manufacturing, electronic components, services and public
administration enterprises. It is a value-weighted index
calculated on price change only and does not include income.
(aa) National Association of Real Estate Investment Trusts ("NAREIT")
Index -- an unmanaged market weighted index of tax qualified
REITs (excluding healthcare REITs)listed on the New York Stock
Exchange, American Stock Exchange and the NASDAQ National Market
System including dividends.
(bb) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation
and finance company stocks listed on the New York Stock Exchange.
(cc) Philadelphia Gold and Silver Index -- an unmanaged index
comprised of seven leading companies involved in the mining of
gold and silver.
(dd) Russell 2500 Index -- comprised of the bottom 500 stocks is in
the Russell 1000 Index which represents the universe of stocks
from which most active money managers typically select; and all
the stocks in the Russell 2000 Index. The largest security in
the index has a market capitalization of approximately 1.3
billion.
(ee) Salomon Brothers GNMA Index -- includes pools of mortgages
originated by private lenders and guaranteed by the mortgage
pools of the Government National Association.
(ff) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA.
It is value-weighted, total return index, including approximately
800 issues with maturities of 12 years or greater.
(gg) Salomon Brothers Broad Investment Grade Bond -- is a
market-weighted index that contains approximately 4700
individually priced investment grade corporate bonds rated BBB or
better, U.S. Treasury/agency issues and mortgage pass-through
securities.
(hh) Standard & Poor's 500 Stock Index or its component indices --
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
(ii) Standard & Poor's Small Cap 600 Index - a capitalization-weighted
index of 600 domestic stocks having market capitalizations which
reside within the 50th and the 83rd percentiles of the market
capitalization of the entire stock market, chosen for certain
liquidity characteristics and for industry representation.
(jj) Wilshire 5000 Equity Index or its component indices -- represents
the return on the market value of all common equity securities
for which daily pricing is available. Comparisons of performance
assume reinvestment of dividends.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its futures. In addition, there can be no
assurance that the Fund will continue this performance as compared to such other
averages.
36
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund's Articles of Incorporation, as amended and restated, permit
the Directors to issue 34 billion shares of common stock, par value $.001 per
share, from an unlimited number of classes ("Portfolios") of shares.
Currently the Fund consists of shares of twenty-eight Portfolios (the China
Growth and Mortgage-Backed Securities Portfolios are not currently offering
shares).
The shares of each Portfolio of the Fund are fully paid and
nonassessable, and have no preference as to conversion, exchange, dividends,
retirement or other features. The shares of each Portfolio of the Fund have
no pre-emptive rights. The shares of the Fund have non-cumulative voting
rights, which means that the holders of more than 50% of the shares voting
for the election of Directors can elect 100% of the Directors if they choose
to do so. A shareholder is entitled to one vote for each full share held
(and a fractional vote for each fractional share held), then standing in his
name on the books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's
net investment income, if any. The Fund may also distribute any net realized
capital gains in the amount and at the times that will avoid both income
(including taxable gains) taxes on it and the imposition of the federal excise
tax on income and capital gains (see discussion under "Taxes" in this Statement
of Additional Information). However, the Fund may also choose to retain net
realized capital gains and pay taxes on such gains. The amounts of any income
dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net asset
value of that Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes for shareholders subject to tax as set
forth herein and in the applicable Prospectus.
As set forth in the Prospectuses, unless the shareholder elects otherwise
in writing, all dividends and capital gains distributions for a class of
shares are automatically received in additional shares of such class of that
Portfolio of the Fund at net asset value (as of the business day following
the record date). This automatic reinvestment of dividends and distributions
will remain in effect until the Fund is notified by the shareholder in
writing at least three days prior to the record date that either the Income
Option (income dividends in cash and capital gains distributions in
additional shares at net asset value) or the Cash Option (both income
dividends and capital gains distributions in cash) has been elected.
CUSTODY ARRANGEMENTS
Chase serves as the Fund's domestic custodian. Chase is not affiliated
with Morgan Stanley & Co. Incorporated. Morgan Stanley Trust Company,
Brooklyn, NY, acts as the Fund's custodian for foreign assets held outside
the United States and employs subcustodians who were approved by the
Directors of the Fund in accordance with Rule 17f-5 adopted by the Commission
under the 1940 Act. Morgan Stanley Trust Company is an affiliate of Morgan
Stanley & Co. Incorporated. In the selection of foreign subcustodians, the
Directors consider a number of factors, including, but not limited to, the
reliability and financial stability of the institution, the ability of the
institution to provide efficiently the custodial services required for the
Fund, and the reputation of the institution in the particular country or
region.
DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
EXCERPTS FROM MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") DESCRIPTION OF
BOND RATINGS: Aaa - Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Aa -
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. Moody's
applies numerical modifiers 1, 2 and 3 in the Aa and A rating categories. The
modifier 1 indicates that the security ranks at a higher end of the rating
category, modifier 2 indicates a mid-range rating and the modifier 3 indicates
that the issue ranks at the lower end of the rating category. A - Bonds which
are rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future. Baa - Bonds
which are rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Ba - Bonds which are rated Ba are judged
to have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate,
and
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thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B - Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance
of interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small. Caa - Bonds which are rated
Caa are of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest. Ca - Bonds which are
rated Ca represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings. C - Bonds which
are rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
EXCERPTS FROM STANDARD & POOR'S CORPORATION ("S&P") DESCRIPTION OF BOND
RATINGS: AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation and indicate an extremely strong capacity to pay
principal and interest. AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only to a
small degree. A - Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories. BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than for debt in higher rated
categories. BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. C - The rating C is reserved for income bonds
on which no interest is being paid. D - Debt rated D is in default, and payment
of interest and/or repayment of principal is in arrears.
DESCRIPTION OF MOODY'S RATINGS OF STATE AND MUNICIPAL NOTES: Moody's
ratings for state and municipal notes and other short-term obligations are
designated Moody's Investment Grade ("MIG"). Symbols used are as follows:
MIG-1 -- best quality, enjoying strong protection from established cash flows
of funds for their servicing or from established broad-based access to the
market for refinancing, or both; MIG-2 -- high quality with margins of
protection ample although not so large as in the preceding group; MIG-3 -
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades.
DESCRIPTION OF MOODY'S HIGHEST COMMERCIAL PAPER RATING: Prime-1 ("P1") --
Judged to be of the best quality. Their short-term debt obligations carry the
smallest degree of investment risk.
EXCERPT FROM S&P'S RATING OF MUNICIPAL NOTE ISSUES: S-1+ -- very strong
capacity to pay principal and interest; SP-2 -- strong capacity to pay principal
and interest.
DESCRIPTION OF S&P'S HIGHEST COMMERCIAL PAPER RATINGS: A-1+ -- this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 -- this designation indicates the degree of safety regarding
timely payment is very strong.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the U.S. Government, and by various
instrumentalities which have been established or sponsored by the U.S.
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain agencies and instrumentalities,
such as the Government National Mortgage Associates, are, in effect, backed by
the full faith and credit of the United States through provisions in their
charters that they may make "indefinite and unlimited" drawings on the Treasury,
if needed to service debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S. Treasury
to purchase certain amounts of their securities to assist the institution in
meeting its debt obligations. However, the U.S. Treasury has no lawful
obligation to assume the financial liabilities of these agencies or others.
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Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under Government supervision, but their debt securities are backed
only by the creditworthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency organized
under Federal charter with Government supervision. Instrumentalities issuing or
guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Immediate Credit
Banks, and the Federal National Mortgage Association.
III. DESCRIPTION OF MUNICIPAL BONDS
Municipal Bonds generally include debt obligations issued by states and
their political subdivisions, and duly constituted authorities and corporations,
to obtain funds to construct, repair or improve various public facilities such
as airports, bridges, highways, hospitals, housing, schools, streets and water
and sewer works. Municipal Bonds may also be issued to refinance outstanding
obligations as well as to obtain funds for general operating expenses and for
loans to other public institutions and facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" or "special tax" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue or special tax bonds are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise or other tax, but not
from general tax revenues. The Municipal Bond Portfolio and the Municipal Money
Market Portfolio may also invest in tax-exempt industrial development bonds,
short-term municipal obligations, project notes, demand notes and tax-exempt
commercial paper in accordance with the Portfolio's investment objectives and
policies.
Industrial revenue bonds (i.e., private activity bonds) in most cases are
revenue bonds and generally do not have the pledge of the credit of the issuer.
The payment of the principal and interest on such industrial revenue bonds is
dependent solely on the ability of the user of the facilities financed by the
bonds to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment. Short-term
municipal obligations issued by states, cities, municipalities or municipal
agencies include Tax Anticipation Notes, Revenue Anticipation Notes, Bond
Anticipation Notes, Construction Loan Notes and Short-Term Discount Notes.
Project Notes are instruments guaranteed by the Department of Housing and Urban
Development but issued by a state or local housing agency. While the issuing
agency has the primary obligation on such Project notes, they are also secured
by the full faith and credit of the United States.
Note obligations with demand or put options may have a stated maturity in
excess of one year, but allow any holder to demand payment of principal plus
accrued interest upon a specified number of days' notice. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. The issuer of such notes normally has a
corresponding right, after a given period, to repay in its discretion the
outstanding principal of the notes plus accrued interest upon a specific number
of days' notice to the bondholders. The interest rate on a demand note may be
based upon a known lending rate, such as a bank's prime rate, and be adjusted
when such rate changes, or the interest rate on a demand note may be a market
rate that is adjusted at specified intervals. The demand notes in which the
Municipal Money Market Portfolio will invest are payable on not more than one
year's notice.
The yields of Municipal Bonds depend on, among other things, general money
market conditions, conditions in the Municipal Bond market, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue. The ratings of Moody's and S&P represent their opinions of the quality
of the Municipal Bonds. It should be emphasized that such ratings are general
and are not absolute standards of quality. Consequently, Municipal Bonds with
the same maturity, coupon and rating may have different yields, while Municipal
Bonds of the same maturity and coupon, but with different ratings, may have the
same yield. It will be the responsibility of the Adviser to appraise
independently the fundamental quality of the bonds held by the Municipal Bond
Portfolio and the Municipal Money Market Portfolio.
Municipal Bonds are sometimes purchased on a "when issued" basis meaning
the buyer has committed to purchasing certain specified securities at an
agreed-upon price when they are issued. The period between commitment date and
issuance date can be a month or more. It is possible that the securities will
never be issued and the commitment canceled.
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From time to time proposals have been introduced before Congress to
restrict or eliminate the Federal income tax exemption for interest on Municipal
Bonds. Similar proposals may be introduced in the future. If any such proposal
were enacted, it might restrict or eliminate the ability of either the Municipal
Bond Portfolio or the Municipal Money Market Portfolio to achieve its investment
objective. In that event, the Fund's Directors and officers would reevaluate
its investment objective and policies and consider recommending to its
shareholders changes in such objective and policies.
Similarly, from time to time proposals have been introduced before State
and local legislatures to restrict or eliminate the State and local income tax
exemption (to the extent such an exemption applies, which may not apply in all
cases) for interest on Municipal Bonds. Similar proposals may be introduced in
the future. If any such proposal were enacted, it might restrict or eliminate
the ability of either of the Municipal Bond Portfolio or the Municipal Money
Market Portfolio to achieve its investment objective. In that event, the Fund's
Directors and officers would reevaluate the Portfolio's investment objective and
policies and consider recommending to its shareholders changes in such objective
and policies.
IV. DESCRIPTION OF MORTGAGE-BACKED SECURITIES
"Mortgage-Backed Securities" are securities that, directly or indirectly,
represent a participation in, or are secured by and payable from, mortgage loans
on real property. Mortgage-backed securities include collateralized mortgage
obligations ("CMOs"), pass-through securities issued or guaranteed by agencies
or instrumentalities of the U.S. government or by private sector entities.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations
("CMOs") are debt obligations or multiclass pass-through certificates issued by
agencies or instrumentalities of the U.S. government or by private originators
or investors in mortgage loans. They are backed by Mortgage Pass-Through
Securities (discussed below) or whole loans (all such assets, the "Mortgage
Assets") and are evidenced by a series of bonds or certificates issued in
multiple classes or "tranches." The principal and interest on the underlying
Mortgage Assets may be allocated among the several classes of a series of CMOs
in many ways.
CMOs may be issued by agencies or instrumentalities of the U.S. government,
or by private originators of, or investors in, mortgage loans, including savings
and loan associations, mortgage bankers, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. CMOs that are issued by private
sector entities and are backed by assets lacking a guarantee of an entity having
the credit status of a governmental agency or instrumentality are generally
structured with one or more types of credit enhancement as described below. An
issuer of CMOs may elect to be treated, for federal income tax purposes, as a
Real Estate Mortgage Investment Conduit (a "REMIC"). An issuer of CMOs issued
after 1991 must elect to be treated as a REMIC or it will be taxable as a
corporation under rules regarding taxable mortgage pools.
In a CMO, a series of bonds or certificates are issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," may be issued with a
specific fixed or floating coupon rate and has a stated maturity or final
scheduled distribution date. Principal prepayments on the underlying Mortgage
Assets may cause the CMOs to be retired substantially earlier than their stated
maturities or final scheduled distribution dates. Interest is paid or accrues
on CMOs on a monthly, quarterly or semi-annual basis. The principal of and
interest on the Mortgage Assets may be allocated among the several classes of a
CMO in many ways. The general goal in allocating cash flows on Mortgage Assets
to the various classes of a CMO is to create certain tranches on which the
expected cash flows have a higher degree of predictability than the underlying
Mortgage Assets. As a general matter, the more predictable the cash flow is on
a particular CMO tranche, the lower the anticipated yield will be on that
tranche at the time of issuance relative to prevailing market yields on Assets.
As part of the process of creating more predictable cash flows on certain
tranches of a CMO, one or more tranches generally must be created that absorb
most of the changes in the cash flows on the underlying Mortgage Assets. The
yields on these tranches are generally higher than prevailing market yields on
Mortgage-Backed Securities with similar average lives. Because of the
uncertainty of the cash flows on these tranches, the market prices of and yields
on these tranches are more volatile.
Included within the category of CMOs are PAC Bonds. PAC Bonds are a type
of CMO tranche or series designed to provide relatively predictable payments of
principal provided that, among other things, the actual prepayment experience on
the underlying mortgage loans falls within a predefined range. If the actual
prepayment experience on the underlying mortgage loans is at a rate faster or
slower than the predefined range or if deviations from other assumptions occur,
principal payments on the PAC Bond may be earlier or later than predicted. The
magnitude of the predefined range varies from one PAC Bond to another; a
narrower range increases the risk that prepayments on the PAC Bond will be
greater or smaller than predicted. Because of these features, PAC Bonds
generally are less subject to the risks of prepayment than are other types of
mortgage-backed securities.
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MORTGAGE PASS-THROUGH SECURITIES. Mortgage pass-through securities in
which the Mortgage-Backed Securities Portfolio may invest include pass-through
securities issued or guaranteed by agencies or instrumentalities of the U.S.
government or by private sector entities. Mortgage pass-through securities
issued or guaranteed by private sector originators of or investors in mortgage
loans and are structured similarly to governmental pass-through securities.
Because private pass-throughs typically lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality, they are generally
structured with one or more types of credit enhancement described below. FNMA
and FHLMC obligations are not backed by the full faith and credit of the U.S.
government as GNMA certificates are, but FNMA and FHLMC securities are supported
by the instrumentalities' right to borrow from the United States Treasury. Each
of GNMA, GNMA and FHLMC guarantees timely distributions of interest to
certificate holders. Each of GNMA and FNMA also guarantees timely distributions
of scheduled principal. FHLMC has in the past guaranteed only the ultimate
collection of principal of the underlying mortgage loan; however, FHLMC now
issued Mortgage-Backed Securities (FHLMC Gold Pcs) which also guarantee timely
payment of monthly principal reductions. REFCORP obligations are backed, as to
principal payments, by zero coupon U.S. Treasury bonds, and as to interest
payment, ultimately by the U.S. Treasury. Obligations issued by such U.S.
governmental agencies and instrumentalities are described more fully below.
GINNIE MAE CERTIFICATES. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and Urban
Development. The National Housing Act of 1934, as amended (the "Housing Act"),
authorizes Ginnie Mae to guarantee the timely payment of the principal of and
interest on certificates that are based on and backed by a pool of mortgage
loans insured by the Federal Housing Administration under the Housing Act, or
Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed by the
Department of Veterans Affairs under the Servicemen's Readjustment Act of 1944,
as amended ("VA Loans"), or by pools of other eligible mortgage loans. The
Housing Act provides that the full faith and credit of the United States
government is pledged to the payment of all amounts that may be required to be
paid under any guaranty. In order to meet its obligations under such guaranty,
Ginnie Mae is authorized to borrow from the United States Treasury with no
limitations as to amount.
Each Ginnie Mae Certificate will represent a pro rata interest in one or
more of the following types of mortgage loans: (i) fixed rate level payment
mortgage loans; (ii) fixed rate graduated payment mortgage loans; (iii) fixed
rate growing equity mortgage loans; (iv) fixed rate mortgage loans secured by
manufactured (mobile) homes; (v) mortgage loans on multi-family residential
properties under construction; (vi) mortgage loans on completed multi-family
projects; (vii) fixed rate mortgage loans as to which escrowed funds are used to
reduce the borrower's monthly payments during the early years of the mortgage
loans ("buydown" mortgage loans); (viii) mortgage loans that provide for
adjustments in payments based on periodical changes in interest rates or in
other payment terms of the mortgage loans; and (ix) mortgage-backed serial
notes. All of these mortgage loans will be FHA Loans or VA Loans and, except as
otherwise specified above, will be fully-amortizing loans secured by first liens
on one- to four-family housing units.
FANNIE MAE CERTIFICATES. Fannie Mae is a federally chartered and privately
owned corporation organized and existing under the Federal National Mortgage
Association Charter Act of 1938. The obligations of Fannie Mae are not backed
by the full faith and credit of the United States government.
Each Fannie Mae Certificate will represent a pro rata interest in one or
more pools of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (i) fixed rate level payment mortgage loans; (ii) fixed rate
growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed rate and adjustable mortgage loans secured by
multi-family projects.
FREDDIE MAC CERTIFICATES. Freddie Mac is a corporate instrumentality of
the United States created pursuant to the Emergency Home Finance Act of 1970, as
amended (the "FHLMC Act"). The obligations of Freddie Mac are obligations
solely of Freddie Mac and are not backed by the full faith and credit of the
U.S. government.
Freddie Mac Certificates represent a pro rata interest in a group of
mortgage loans (a "Freddie Mac Certificate group") purchased by Freddie Mac.
The mortgage loans underlying the Freddie Mac Certificates will consist of fixed
rate or adjustable rate mortgage loans with original terms to maturity of
between ten and thirty years, substantially all of which are secured by first
liens on one- to four-family residential properties or multi-family projects.
Each mortgage loan must meet the applicable standards set forth in the FHLMC
Act. A Freddie Mac Certificate group may include whole loans, participation
interests in whole loans and undivided interests in whole loans and
participations comprising another Freddie Mac Certificate group.
CREDIT ENHANCEMENT. Mortgage-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties. To
lessen the effect of failure by obligors on underlying assets to make payments,
such securities may contain
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elements of credit support. Such credit support falls into two categories: (i)
liquidity protection and (ii) protection against losses resulting from ultimate
default by an obligor on the underlying assets. Liquidity protection generally
refers to the provision of advances, typically by the entity administering the
pool of assets, to ensure that the pass-through of payments due on the
underlying pool occurs in a timely fashion. Protection against losses resulting
from ultimate default enhances the likelihood of ultimate payment of the
obligations on at least a portion of the assets in the pool. Such protection
may be provided through guarantees, insurance policies or letters of credit
obtained by the issuer or sponsor from third parties (referred to herein as
"third party credit support), through various means of structuring the
transaction or through a combination of such approaches. The Mortgage-Backed
Securities Portfolio will not pay any additional fees for such credit support,
although the existence of credit support may increase the price the Portfolio
pays for a security.
The ratings of mortgage-backed securities for which third-party credit
enhancement provides liquidity protection or protection against losses from
default are generally dependent upon the continued creditworthiness of the
provider of the credit enhancement. The ratings of such securities could be
subject to reduction in the event of deterioration in the creditworthiness of
the credit enhancement provider even in cases where the delinquency and loss
experience on the underlying pool of assets is better than expected.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with defaults on the underlying assets being borne first
by the holders of the most subordinated class), creation of "reserve funds"
(where cash or investments, sometimes funded from a portion of the payments on
the underlying assets, are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed those required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each security is generally based on historical information with
respect to the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that which is anticipated could adversely
affect the return on an investment in such a security.
V. FOREIGN INVESTMENTS
The Active Country Allocation, International Equity, International Fixed
Income, Global Equity, Global Fixed Income, Asian Equity, European Equity,
Japanese Equity, International Small Cap, Latin American and China Growth
Portfolios will invest, and the Emerging Growth, Emerging Markets, Emerging
Markets Debt, Value Equity, Equity Growth, MicroCap, Balanced, Small Cap
Value Equity, Fixed Income, High Yield and Gold Portfolios may invest, in
securities of foreign issuers. Investors should recognize that investing in
such foreign securities involves certain special considerations which are not
typically associated with investing in U.S. issuers. For a description of the
effect on the Portfolios of currency exchange rate fluctuation, see
"Investment Objectives and Policies -- Forward Foreign Currency Exchange
Contracts" above. As foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards and may have policies
that are not comparable to those of domestic issuers, there may be less
information available about certain foreign companies than about domestic
issuers. Securities of some foreign issuers are generally less liquid and
more volatile than securities of comparable domestic issuers. There is
generally less government supervision and regulation of stock exchanges,
brokers and listed issuers than in the U.S. In addition, with respect to
certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries. Foreign
securities not listed on a recognized domestic or foreign exchange are
regarded as not readily marketable and therefore such investments will be
limited to 15% of a Portfolio's net asset value at the time of purchase.
Although the Portfolios will endeavor to achieve the most favorable
execution costs in their portfolio transactions, fixed commissions on many
foreign stock exchanges are generally higher than negotiated commissions on U.S.
exchanges.
Certain foreign governments levy withholding or other taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. Except in the case of
the International Equity, Global Equity, European Equity, Japanese Equity, Asian
Equity, Global Fixed Income, International Fixed Income, International Small
Cap, Latin American and China Growth Portfolios, 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. However, these foreign
withholding taxes may not have a significant impact on such Portfolios, because
each Portfolio's investment objective is to seek long-term capital appreciation
and any dividend or interest income should be considered incidental.
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FINANCIAL STATEMENTS
The following are (i) the audited Financial Statements for the fiscal year
ended December 31, 1994 and the Report of Price Waterhouse LLP, independent
accountants, dated February 17, 1995 relating to the financial statements and
financial highlights of each of the Portfolios except for the Municipal Bond,
Mortgage-Backed Securities, China Growth, U.S. Real Estate, Latin American,
MicroCap, Aggressive Equity and International Magnum Portfolios, which had not
commenced operation as of December 31, 1994; and (ii) the unaudited financial
statements for the six-month period ended June 30, 1995 relating to the
financial statements and financial highlights of each of the Portfolios except
for the Mortgage-Backed Securities, MicroCap, China Growth and International
Magnum Portfolios, which had not commenced operations as of June 30, 1995.
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[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
COMMON STOCKS (100.6%)
AUSTRALIA (4.8%)
57,000 Amcor Ltd............................................... $ 412
26,012 Ampolex Ltd............................................. 70
44,844 Australian National Industries Ltd...................... 50
92,700 Boral Ltd. (Bon Shares Plan)............................ 245
17,700 Brambles Industries Ltd................................. 169
124,092 Broken Hill Proprietary Co., Ltd........................ 1,884
49,628 Burns, Philip & Co., Ltd................................ 117
22,755 Coca-Cola Amatil Ltd.................................... 145
98,755 Coles Myer Ltd.......................................... 335
45,900 CRA Ltd................................................. 634
72,121 CSR Ltd................................................. 249
252,500 Fosters Brewing Corp.................................... 219
58,404 General Property Trust.................................. 103
100,693 Goodman Fielder Ltd..................................... 89
31,900 ICI Australia Ltd....................................... 268
19,738 Lend Lease Corp., Ltd................................... 244
116,100 MIM Holdings Ltd........................................ 194
101,569 National Australia Bank Ltd............................. 815
23,500 Newcrest Mining Ltd..................................... 105
145,152 News Corp., Ltd......................................... 569
62,650 North Broken Hill Peko Ltd.............................. 165
87,801 Pacific Dunlop Ltd...................................... 234
69,500 Pioneer International Ltd............................... 172
+22,000 Renison Goldfields Consolidated Ltd..................... 84
49,338 Santos Ltd.............................................. 133
56,460 Southcorp Holdings Ltd.................................. 127
+34,300 TNT Ltd................................................. 59
74,700 Western Mining Corp. Holdings Ltd....................... 433
17,057 Westfield Trust......................................... 9
6,098 Westfield Trust (New)................................... 10
142,972 Westpac Banking Corp.................................... 481
---------
8,823
---------
BELGIUM (7.7%)
9,600 AG Financiere et de Reassurance du Groupe............... 813
600 Bekaert S.A............................................. 425
15,100 Delhaize Freres et Cie, 'Le Lion', S.A.................. 613
16,250 Electrabel S.A.......................................... 2,892
4,650 Generale de Banque S.A.................................. 1,184
211 Generale de Banque S.A. (New)........................... 53
6,600 Gevaert Photo-Producten S.A............................. 310
1,836 Glaverbel S.A........................................... 245
7,100 Groupe Bruxelles Lambert S.A............................ 839
4,200 Kredietbank S.A......................................... 881
650 Kredietbank S.A. (Participating Certificates)........... 135
6,940 Petrofina S.A........................................... 2,053
4,175 Reunies Electrobel & Tractebel S.A...................... 1,261
4,200 Royale Belge............................................ 659
2,500 Solvay et Cie S.A....................................... 1,191
+7,800 Union Miniere S.A....................................... 606
---------
14,160
---------
FRANCE (12.1%)
2,343 Accor S.A............................................... 255
13,269 Alcatel Alsthom......................................... $ 1,134
13,942 AXA S.A................................................. 646
18,952 Banque Nationale de Paris............................... 872
1,400 BIC Corp................................................ 176
2,640 Bouygues................................................ 253
6,700 B.S.N. S.A.............................................. 940
2,250 Carrefour Supermarche S.A............................... 932
500 Chargeurs S.A........................................... 109
2,050 Cie Bancaire S.A........................................ 198
7,388 Cie de Saint Gobain..................................... 850
16,100 Cie de Suez S.A......................................... 739
10,302 Cie Financiere de Paribas, Class A...................... 685
9,846 Cie Generale des Eaux................................... 957
22,305 Elf Aquitaine........................................... 1,571
8,700 Elf Sanofi.............................................. 401
2,750 Eridania Beghin-Say S.A................................. 362
6,796 Etablissements Economiques du Casino.................... 192
4,900 Havas S.A............................................... 383
7,929 Lafarge Coppee S.A...................................... 565
6,933 L'Air Liquide........................................... 927
270 Legrand................................................. 328
5,600 L'Oreal................................................. 1,143
7,190 LVMH Moet Hennessy Louis Vuitton........................ 1,136
6,342 Lyonnaise des Eaux Demez................................ 557
+9,700 Michelin CGDE, Class B.................................. 353
5,010 Pernod-Ricard........................................... 293
1,700 Pinault-Printemps S.A................................... 302
1,800 Promodes................................................ 335
+4,300 PSA Peugeot Citroen S.A................................. 590
25,100 Rhone-Poulenc S.A., Class A............................. 583
450 SAGEM................................................... 224
900 Saint Louis S.A......................................... 232
4,750 Schneider S.A........................................... 315
2,450 Simco S.A............................................... 211
400 Societe Eurafrance S.A.................................. 123
8,226 Societe Generale........................................ 865
+12,300 Thomson CSF............................................. 368
18,124 Total S.A., Class B..................................... 1,053
---------
22,158
---------
HONG KONG (2.5%)
22,000 Applied International Holdings.......................... 3
26,513 Bank of East Asia....................................... 106
105,000 Cathay Pacific Airways Ltd.............................. 153
75,000 Cheung Kong Holdings Ltd................................ 305
71,500 China Light & Power Co., Ltd............................ 305
54,000 Chinese Estates Holdings................................ 43
27,000 Dickson Concepts International Ltd...................... 18
42,000 Hang Lung Development Co................................ 60
65,980 Hang Seng Bank Ltd...................................... 473
6,800 Hong Kong Aircraft Engineering Co. Ltd.................. 23
66,480 Hong Kong & China Gas Co. Ltd........................... 107
43,000 Hong Kong & Shanghai Hotel.............................. 50
378,000 Hong Kong Telecommunications Ltd........................ 721
152,775 Hopewell Holdings Ltd................................... 126
123,000 Hutchison Whampoa Ltd................................... 497
35,000 Hysan Development Ltd................................... 69
14,000 Johnson Electric Holdings Ltd........................... 32
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ACTIVE COUNTRY ALLOCATION PORTFOLIO
44
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
HONG KONG (CONT.)
20,000 Miramar Hotel & Investment Ltd.......................... 43
51,993 New World Development Co., Ltd.......................... 139
39,400 Shangri-La Asia Ltd..................................... 56
56,000 Shun Tak Holdings Ltd................................... 40
64,000 South China Morning Post................................ 37
38,000 Stelux Holdings Ltd..................................... 11
77,500 Sun Hung Kai Properties Ltd............................. 463
55,000 Swire Pacific Ltd., Class A............................. 342
15,000 Television Broadcasting Ltd............................. 60
74,000 Wharf Holdings Ltd...................................... 250
5,300 Wing Lung Bank Ltd...................................... 38
---------
4,570
---------
INDONESIA (3.2%)
218,000 Bank Dagang Nasional (Foreign)......................... 365
1,248,000 Barito Pacific Timber (Foreign)........................ 1,973
353,000 Gadjah Tunggal (Foreign)............................... 482
401,000 Hanajaya Mandala Sampoerna............................. 1,970
344,000 Jakarta International Hotel & Development.............. 446
37,000 Matahari Putra Prima................................... 69
+34,000 Panbrothers Tex (Foreign).............................. 17
187,000 Sinar Mas Agro......................................... 238
123,000 United Tractors (Foreign).............................. 263
---------
5,823
---------
ITALY (7.7%)
+100,000 Alitalia S.p.A......................................... 62
116,520 Assicurazioni Generali S.p.A........................... 2,742
266,000 Banca Commerciale Italiana............................. 570
+50,000 Banca Nazionaia Deli................................... 89
87,000 Banco Ambrosiano Ven................................... 231
29,000 Benetton Group S.p.A................................... 339
+14,000 Cartiere Burgo......................................... 93
+26,000 Cogefar................................................ 26
338,000 Credito Italiano....................................... 349
99,000 Edison S.p.A........................................... 434
+8,000 Falck Italian.......................................... 18
+368,000 Fiat S.p.A............................................. 1,367
110,000 Fiat S.p.A. Di Risp (NCS).............................. 245
37,500 Fidis Italian.......................................... 82
+40,000 Gilardini.............................................. 96
109,500 Istituto Bancario San Paolo............................ 642
13,500 Italcementi............................................ 47
30,500 Italcementi Di Risp.................................... 214
109,000 Italgas................................................ 300
73,500 Mediobanca S.p.A....................................... 598
+780,000 Montedison S.p.A....................................... 588
+135,000 Montedison S.p.A. Di Risp (NCS)........................ 86
+185,000 Olivetti S.A........................................... 236
188,500 Parmalat Finanziaria S.p.A............................. 198
+240,000 Pirelli S.p.A.......................................... 320
40,400 R.A.S. S.p.A........................................... 411
15,600 R.A.S. S.p.A. Di Risp (NCS)............................ 94
24,000 Rinascente............................................. 135
2,700 Risanamento Di Napoli.................................. 40
+7,000 Saffa.................................................. 21
19,000 SAI.................................................... $ 214
+65,000 Saipan................................................. 119
15,000 Sasib.................................................. 75
35,500 Sirti S.p.A............................................ 230
59,000 SME Meridonale......................................... 145
+95,000 SNIA BPO S.p.A......................................... 108
810,000 Telecom Italia S.p.A................................... 2,109
235,000 Telecom Italia S.p.A. Di Risp (NCS).................... 469
---------
14,142
---------
JAPAN (30.5%)
32,000 Ajinomoto Co........................................... 411
16,000 Aoki Corp.............................................. 70
2,000 Aoyama Trading Co...................................... 46
64,000 Asahi Bank Ltd......................................... 745
16,000 Asahi Breweries Ltd.................................... 177
48,000 Asahi Chemical Industry Co., Ltd....................... 368
48,000 Asahi Glass Co......................................... 593
48,000 Bank of Tokyo.......................................... 742
32,000 Bank of Yokohama....................................... 271
11,000 Banyu Pharmaceutical................................... 113
16,000 Bridgestone Co......................................... 251
51,000 Canon, Inc............................................. 865
30,000 Casio Computer Co...................................... 380
32,000 Chiba Bank............................................. 292
6,000 Chiyoda Corp........................................... 81
16,000 Chugai Pharmaceutical Ltd.............................. 169
34,000 Citizen Watch Co....................................... 263
16,000 Cosmo Oil Co., Ltd..................................... 120
74,000 Dai-Ichi Kangyo Bank................................... 1,397
16,000 Daikin Industries Ltd.................................. 142
32,000 Dai Nippon Printing Co., Ltd........................... 546
+7,000 Daishowa Paper Manufacturing Co., Ltd.................. 49
16,000 Daiwa Housing Industry Co.............................. 227
32,000 Daiwa Securities Co., Ltd.............................. 463
11,000 Ebara.................................................. 186
9,300 Fanuc Co............................................... 438
73,000 Fuji Bank.............................................. 1,613
26,000 Fuji Photo Film Ltd.................................... 603
103,000 Fujitsu Ltd............................................ 1,044
26,000 Furukawa Electric Co................................... 169
32,000 Hankyu Corp............................................ 187
16,000 Hazama Corp............................................ 69
138,000 Hitachi Ltd............................................ 1,370
47,000 Honda Motor Co......................................... 835
55,000 Industrial Bank of Japan............................... 1,629
12,000 Ito Yokado Ltd......................................... 642
+64,000 Japan Airlines Co...................................... 452
40,000 Japan Energy Corp...................................... 158
16,000 Jusco Co., Ltd......................................... 357
32,000 Kajima Corp............................................ 274
11,100 Kansai Electric Power Co............................... 267
32,000 Kao Corp............................................... 363
+82,000 Kawasaki Steel Corp.................................... 343
48,000 Kinki Nippon Railway................................... 397
32,000 Kirin Brewery Co., Ltd................................. 357
+96,000 Kobe Steel Ltd......................................... 300
82,000 Komatsu Ltd............................................ 741
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ACTIVE COUNTRY ALLOCATION PORTFOLIO
45
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
JAPAN (CONT.)
48,000 Kubota Corp............................................ $ 344
32,000 Kumagai Gumi Co........................................ 166
7,000 Kyocera Corp........................................... 519
16,000 Kyowa Hakko Kogyo...................................... 158
12,000 Kyushu Matsushita Electric............................. 294
17,000 Makita Corp............................................ 307
48,000 Marubeni Corp.......................................... 265
16,000 Marui Co............................................... 292
72,000 Matsushita Electric Industries Ltd..................... 1,186
45,000 Mitsubishi Corp........................................ 592
58,000 Mitsubishi Electric Co................................. 412
48,000 Mitsubishi Estate Co., Ltd............................. 516
128,000 Mitsubishi Heavy Industries Ltd........................ 977
48,400 Mitsubishi Chemical Corp............................... 266
38,000 Mitsubishi Materials Corp.............................. 202
31,000 Mitsubishi Trust and Banking Co........................ 464
48,000 Mitsui & Co............................................ 410
32,000 Mitsukoshi Ltd......................................... 337
3,000 Mochida Pharmaceutical................................. 61
20,100 Murata Manufacturing Co., Ltd.......................... 777
86,000 NEC Corp............................................... 984
32,000 New Oji Paper Co., Ltd................................. 337
16,000 NGK Insulators......................................... 164
16,000 Nippon Denso Co., Ltd.................................. 337
32,000 Nippon Express Co., Ltd................................ 321
16,000 Nippon Fire & Marine Insurance Co...................... 111
16,000 Nippon Meat Packers, Inc............................... 210
48,000 Nippon Oil Co.......................................... 320
32,000 Nippon Paper Industries Co............................. 235
178,000 Nippon Steel Co........................................ 670
48,000 Nippon Yusen........................................... 315
63,000 Nissan Motor Co........................................ 521
+94,000 NKK Corp............................................... 260
48,000 Nomura Securities Co................................... 998
32,000 Obayashi Corp.......................................... 205
32,000 Odakyu Electric Railway Co............................. 235
30,000 Olympus Optical Co., Ltd............................... 328
96,000 Osaka Gas Co........................................... 386
16,000 Penta-Ocean Construction............................... 88
15,000 Pioneer Electric Corp.................................. 362
80,000 Sakura Bank............................................ 1,076
16,000 Sankyo Co., Ltd........................................ 398
48,000 Sanyo Electric Co., Ltd................................ 276
4,000 Secom Co., Ltd......................................... 249
3,800 Sega Enterprises....................................... 219
18,000 Sekisui Chemical Co.................................... 179
16,000 Sekisui House Co., Ltd................................. 178
9,000 Seven-Eleven Japan..................................... 724
61,000 Sharp Corp............................................. 1,103
16,000 Shin - Etsu Chemical Co................................ 318
23,000 Shinizu Corp........................................... 227
15,000 Shiseido Co............................................ 178
32,000 Shizuoka Bank.......................................... 395
+32,000 Showa Denko............................................ 112
15,000 Sony Corp.............................................. 851
80,000 Sumitomo Bank.......................................... 1,526
+64,000 Sumitomo Chemical Co................................... 366
32,000 Sumitomo Corp.......................................... 328
22,000 Sumitomo Electric Ind.................................. 314
7,000 Sumitomo Forestry Co................................... 112
+112,000 Sumitomo Metal Ind..................................... 363
32,000 Taisei Corp., Ltd...................................... 199
32,000 Takeda Chemical Ind.................................... 389
7,000 TDK Corp............................................... 339
32,000 Teijin Ltd............................................. 169
32,000 Tobu Railway Co........................................ 187
50,000 Tokai Bank............................................. 602
48,000 Tokio Marine & Fire Insurance Co....................... 588
7,000 Tokyo Dome Corp........................................ 128
35,300 Tokyo Electric Power Co................................ 985
5,000 Tokyo Electron Ltd..................................... 156
96,000 Tokyo Gas Co........................................... 416
32,000 Tokyo Corp............................................. 212
22,000 Toppan Printing Co., Ltd............................... 307
48,000 Toray Industries Inc................................... 349
73,000 Toshiba Corp........................................... 530
16,000 Toto Ltd............................................... 262
32,000 Toyobo Co.............................................. 128
9,000 Toyoda Automatic Loom Works............................ 185
74,000 Toyota Motor Corp...................................... 1,560
+32,000 Ube Industries Ltd..................................... 124
32,000 Yamaichi Securities Co................................. 242
16,000 Yamanouchi Pharmaceutical Co........................... 329
+8,000 Yamazaki Baking Co..................................... 161
32,000 Yasuda Trust & Banking Co.............................. 255
---------
55,801
---------
MEXICO (3.7%)
+15,600 Aerovias de Mexico S.A. CPO............................ 2
17,700 Apasco S.A., Class A................................... 90
54,800 Cemex.................................................. 288
14,100 Cemex CPO ADR.......................................... 71
152,000 Cifra S.A. de C.V., Class B............................ 308
100,800 Cifra S.A. de C.V., Class C............................ 192
65,940 Controladoro Commercial Mexicana, Class B.............. 56
13,100 Empresas ICA Sociedad Controladora S.A. de C.V......... 216
58,000 Empresas la Moderna S.A., Class ACP.................... 251
71,650 FEMSA, Class B......................................... 187
11,300 FEMSA, Class L......................................... 27
115,200 Grupo Carso S.A., Class A1............................. 853
5,100 Grupo de Modelo S.A., Class C.......................... 95
32,900 Grupo Financiero Banamex Accival, Class B.............. 93
58,200 Grupo Financiero Banamex Accival, Class C.............. 168
48,800 Grupo Financiero Bancomer, Class B..................... 23
164,700 Grupo Financiero Bancomer, Class C..................... 97
4,900 Grupo Financiero Banorte, Class C...................... 12
24,300 Grupo Financiero Serfin, Class BCP..................... 46
+140,900 Grupo Gigante S.A., Class B............................ 47
21,900 Grupo Industrial Alfa S.A., Class A.................... 207
52,200 Grupo Industrial Maseca, Class B2...................... 57
+21,500 Grupo Sidek S.A., Class B.............................. 47
+44,082 Grupo Situr S.A. de C.V., Class BCP.................... 90
28,363 Grupo Televisa S.A. CPO................................ 457
+18,200 Grupo Tribasa S.A. CPO................................. 160
14,559 Kimberly Clark de Mexico, Series A..................... 170
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ACTIVE COUNTRY ALLOCATION PORTFOLIO
46
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
MEXICO (CONT.)
1,002,700 Telefonos de Mexico S.A., Class L...................... $ 2,076
18,500 Tolmex S.A., Class B2.................................. 156
37,800 Vitro S.A.............................................. 176
---------
6,718
---------
NETHERLANDS (3.6%)
12,300 ABN Amro Holdings N.V.................................. 428
3,100 Akzo Nobel N.V......................................... 358
26,200 Elsevier N.V........................................... 273
1,550 Heineken N.V........................................... 234
11,000 Internationale Nederlanden Groep N.V................... 520
+3,300 KLM Royal Dutch Airlines N.V........................... 81
4,900 Koninklijke Ahold N.V.................................. 152
4,100 Koninklijke KNP BT N.V................................. 117
1,200 Koninklijke Nederlandsche Hoogovens N.V................ 55
19,800 Koninklijke PTT Nederland N.V.......................... 668
+950 Nedlloyd Groep N.V..................................... 31
13,300 Philips Electronics N.V................................ 394
21,300 Royal Dutch Petroleum Co............................... 2,320
1,150 Stork N.V.............................................. 30
6,400 Unilever N.V........................................... 752
2,800 Wolters Kluwer N.V..................................... 207
---------
6,620
---------
NEW ZEALAND (2.2%)
793,636 Brierly Investments Ltd................................ 574
494,164 Carter Holt Harvey Ltd................................. 1,012
14,200 Ceramco Corp., Ltd..................................... 31
30,902 Fisher & Paykel Industries Ltd......................... 90
119,400 Fletcher Challenge Ltd................................. 280
29,800 Fletcher Challenge Ltd. (Forestry Shares).............. 36
40,200 Lion Nathan Ltd........................................ 77
552,500 Telecom Corp. of New Zealand Ltd....................... 1,804
8,100 Wilson & Horton Ltd.................................... 46
---------
3,950
---------
PORTUGAL (2.0%)
45,200 Banco Chemical S.A. (Registered)....................... 469
75,000 Banco Commercial Portugues (Registered)................ 981
25,000 Banco Portugues de Investimento (New).................. 374
5,100 Companhia Portuguesa Radio Marconi S.A................. 174
5,500 Companhia Portuguesa Radio Marconi S.A. (Registered)... 188
+4,900 Corticeira Amorim S.A.................................. 82
9,000 Jeronimo Martins....................................... 385
18,300 Lisnave-Estaleiros Navais de Lisboa S.A................ 90
6,200 Mota e Companhia S.A................................... 127
27,000 Sonae Investmentos..................................... 621
6,600 UNICER-Uniao Cervejeira S.A............................ 91
---------
3,582
---------
SPAIN (7.9%)
2,420 Acerinox S.A........................................... $ 253
23,900 Argentaria S.A......................................... 847
40,777 Autopistas Concesionaria............................... 315
46,700 Banco Bilbao Vizcaya S.A............................... 1,159
30,400 Banco Central Hispano Americano S.A.................... 728
30,100 Banco de Santander S.A................................. 1,153
2,100 Carburos Metalicos S.A................................. 76
4,100 Corporacion Financiera Alba............................ 174
14,800 Dragados y Construccion S.A............................ 208
11,100 Ebro Agricolas S.A..................................... 122
51,200 Empresa Nacional de Electricdad S.A.................... 2,085
+20,200 Ercros S.A............................................. 19
3,625 FASA Renault S.A....................................... 121
3,000 Fomento Construction Contractas S.A.................... 294
7,400 Gas Natural SDG S.A.................................... 636
585 Gines Navarro Construction............................. 8
174,300 Iberdrola S.A.......................................... 1,075
850 Inmobilaria Metropolitana Vasco Central S.A............ 27
5,300 Mapfre S.A............................................. 221
272 Mapfre S.A. (New)...................................... 10
2,200 Portland Valderrivas S.A............................... 162
62,100 Repsol S.A............................................. 1,684
7,400 Tabacalera S.A., Class A............................... 197
183,300 Telefonica Nacional de Espana S.A...................... 2,165
60,700 Union Electrica Fenosa S.A............................. 253
+8,100 Uralita S.A............................................ 79
10,223 Vallehermoso S.A....................................... 177
5,750 Viscofan Envolturas Celulosicas S.A.................... 87
1,650 Zardoya Otis S.A....................................... 172
---------
14,507
---------
THAILAND (2.9%)
7,200 Asia Credit Co., Ltd. (Foreign)........................ 60
103,200 Bangkok Bank Ltd. (Foreign)............................ 1,102
2,050 Bangkok Insurance Co., Ltd. (Foreign).................. 36
61,900 Bangkok Land Co., Ltd. (Foreign)....................... 154
40,500 Bank of Ayudhya Ltd. (Foreign)......................... 166
4,800 Banpu Public Co. Ltd. (Foreign)........................ 105
12,300 Charoen Pokphand Feedmill Co., Ltd. (Foreign).......... 83
+6,100 CMIC Finance & Securities Co., Ltd. (Foreign).......... 59
6,100 Dhana Siam Finance & Securities Co., Ltd. (Foreign).... 43
13,100 Finance One Co., Ltd. (Foreign)........................ 204
54,000 Industrial Finance Corp. of Thailand (Foreign)......... 115
15,500 Land & House Co., Ltd. (Foreign)....................... 277
6,400 National Finance & Securities Co., Ltd. (Foreign)...... 35
+7,700 Nava Finance & Securities Co., Ltd. (Foreign).......... 54
25,000 Phatra Thanakit Co., Ltd. (Foreign).................... 193
14,200 Shinawatra Computer Co., Ltd. (Foreign)................ 310
12,000 Siam Cement Co., Ltd. (Foreign)........................ 719
12,000 Siam City Cement Co., Ltd. (Foreign)................... 205
31,500 Siam Commercial Bank (Foreign)......................... 288
31,600 Tanayong Co. Ltd. (Foreign)............................ 72
82,300 Thai Farmers Bank, Ltd. (Foreign)...................... 669
+23,750 TPI Polene Co., Ltd. (Foreign)......................... 212
17,500 Wattachak Co., Ltd. (Foreign).......................... 35
---------
5,196
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ACTIVE COUNTRY ALLOCATION PORTFOLIO
47
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
UNITED KINGDOM (9.8%)
48,300 Abbey National plc..................................... $ 326
35,000 Argyll Group plc....................................... 147
33,900 Arjo Wiggins Appleton plc.............................. 126
13,700 Associated British Foods plc........................... 121
51,981 Barclays plc........................................... 497
25,300 Bass plc............................................... 204
83,916 BAT Industries plc..................................... 567
16,100 BICC plc............................................... 91
30,232 Blue Circle Industries plc............................. 134
15,300 BOC Group plc.......................................... 169
29,700 Boots Co. plc.......................................... 234
13,600 Bowater plc............................................ 93
20,400 BPB Industries plc..................................... 94
16,006 British Aerospace plc.................................. 107
27,700 British Airways plc.................................... 155
135,500 British Gas plc........................................ 666
161,384 British Petroleum Co. plc.............................. 1,076
82,200 British Steel plc...................................... 198
163,400 British Telecommunications plc......................... 966
100,400 BTR plc................................................ 462
6,881 Burmah Castrol plc..................................... 88
60,200 Cable & Wireless plc................................... 355
28,990 Cadbury Schweppes plc.................................. 196
18,600 Caradon plc............................................ 73
20,400 Coats Viyella plc...................................... 60
12,518 Commercial Union plc................................... 100
11,900 Courtaulds plc......................................... 86
8,500 De La Rue Co. plc...................................... 125
14,400 Eastern Electricity plc................................ 175
29,900 Forte plc.............................................. 112
16,600 General Accident plc................................... 131
90,700 General Electric plc................................... 391
12,700 GKN plc................................................ 117
66,700 Glaxo Holdings plc..................................... 692
65,252 Grand Metropolitan plc................................. 416
28,900 Great Universal Stores plc............................. 245
39,184 Guardian Royal Exchange plc............................ 102
49,200 Guinness plc........................................... 347
145,124 Hanson plc............................................. 525
29,634 Harrisons & Crossfields plc............................ 65
56,666 HSBC Holdings plc...................................... 616
20,400 Imperial Chemical Industries plc....................... 239
40,616 Ladbroke Group plc..................................... 109
17,800 Land Securities plc.................................... 166
+25,358 Lasmo plc.............................................. 58
33,280 Lloyds Bank plc........................................ 288
20,887 Lonrho plc............................................. 50
82,200 Marks and Spencer plc.................................. 512
13,600 MEPC plc............................................... 81
36,400 National Power plc..................................... 279
15,300 North West Water Group plc............................. 130
24,600 Peninsular & Oriental Steam Navigation Co.............. 235
33,900 Pilkington plc......................................... 88
61,089 Prudential Corp. plc................................... 302
12,700 Rank Organization plc.................................. 83
19,025 Redland plc............................................ 137
22,400 Reed International plc................................. 280
44,600 Reuters Holdings plc................................... 327
7,600 RMC Group plc.......................................... 111
25,400 Royal Bank of Scotland Group plc....................... 156
21,400 Royal Insurance Holdings plc........................... 94
34,700 RTZ Corp. plc.......................................... 450
47,762 Sainsbury (J) plc...................................... 308
21,300 Scottish Power plc..................................... 117
44,100 Sears plc.............................................. 76
19,700 Sedgwick Group plc..................................... 46
10,200 Slough Estates plc..................................... 38
36,900 SmithKline Beecham plc, Class A........................ 262
9,100 Southern Electricity plc............................... 115
32,504 Tarmac plc............................................. 61
17,134 Taylor Woodrow plc..................................... 34
45,483 Tesco plc.............................................. 177
16,362 Thames Water plc....................................... 124
14,442 THORN EMI plc.......................................... 234
11,918 TI Group plc........................................... 71
30,500 Trafalgar House plc.................................... 36
18,200 Unilever plc........................................... 330
29,700 Vodafone Group plc..................................... 99
17,400 Zeneca Group plc....................................... 240
---------
17,993
---------
TOTAL COMMON STOCKS (Cost $178,920)............................... 184,043
---------
PREFERRED STOCKS (0.3%)
AUSTRALIA (0.1%)
72,576 News Corp., Ltd........................................ 250
ITALY (0.2%)
+140,000 Fiat S.p.A............................................. 322
---------
NETHERLANDS (0.0%)
453 Koninklijke KNP BT N.V................................. 2
---------
TOTAL PREFERRED STOCKS (Cost $658)................................ 574
---------
NO. OF
RIGHTS
- ---------
RIGHTS (0.3%)
PORTUGAL (0.0%)
+6,600 UNICER-Uniao Cervejeira S.A............................ 91
---------
SPAIN (0.2%)
**+30,100 Banco de Santander..................................... 324
---------
THAILAND (0.1%)
**+18,300 Dhana Siam Finance & Securities Co., Ltd., expiring 3/02/95.... 114
+19,200 National Finance & Securities Co., Ltd., expiring 1/95......... 86
---------
200
---------
TOTAL RIGHTS (Cost $286)............................................. 615
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ACTIVE COUNTRY ALLOCATION PORTFOLIO
48
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
NO. OF VALUE
WARRANTS (000)
- ------------------------------------------------------------------------------
WARRANTS (0.0%)
BELGIUM (0.0%)
+347 Petrofina S.A., expiring 6/03/97........................ $ 7
---------
HONG KONG (0.0%)
+4,400 Applied International Holdings, expiring 12/30/99....... --
---------
ITALY (0.0%)
+24,000 Credito Italiano, expiring 12/31/97..................... --
---------
TOTAL WARRANTS (Cost $0)........................................... 7
---------
NO. OF
UNITS
- ---------
UNITS (0.2%)
UNITED KINGDOM (0.1%)
35,700 SmithKline Beecham plc................................... 236
---------
AUSTRALIA (0.1%)
66,443 Westfield Trust.......................................... 116
---------
TOTAL UNITS (Cost $343)............................................. 352
---------
TOTAL FOREIGN SECURITIES (101.4%) (Cost $180,207)................... 185,591
---------
FACE
AMOUNT
(000)
- ------------
SHORT-TERM INVESTMENT (1.3%)
REPURCHASE AGREEMENT (1.3%)
$ 2,351 U.S. Trust, 5.50%, dated 12/30/94, due
1/03/95, to be repurchased at $2,352, collateralized
by $2,440 United States Treasury Notes, 3.875%, due
3/31/95, valued at $2,430 (Cost $2,351).................... 2,351
---------
FOREIGN CURRENCY (1.2%)
A$ 203 Australian Dollar................................... 157
BF 12,207 Belgian Franc....................................... 384
L 191 British Pound....................................... 300
DM 3 Deutsche Mark....................................... 2
FF 12 French Franc........................................ 2
HK$ 1,007 Hong Kong Dollar.................................... 130
IN 3,936 Indonesian Rupiah................................... 2
Y 48,747 Japanese Yen........................................ 490
MP 7 Mexican Peso........................................ 1
NG 403 Netherlands Guilder................................. 232
NZ$ 402 New Zealand Dollar.................................. 257
PE 134 Portuguese Escudo................................... 1
SP 37,165 Spanish Peseta...................................... 282
TB 622 Thai Baht........................................... 25
---------
TOTAL FOREIGN CURRENCY (Cost $2,258).............................. 2,265
---------
TOTAL INVESTMENTS (103.9%) (Cost $184,816)........................ 190,207
---------
OTHER ASSETS (0.4%)
Receivable for Portfolio Shares Sold.................... $ 318
Dividends Receivable.................................... 249
Foreign Withholding Tax Reclaim Receivable.............. 204
Interest Receivable..................................... 1
Other................................................... 19 791
-----
LIABILITIES (-4.3%$)
Payable for Investments Purchased...........................(6,653)
Net Unrealized Loss on Forward Foreign Currency Contracts... (597)
Payable for Portfolio Shares Redeemed....................... (318)
Investment Advisory Fees Payable............................ (243)
Bank Overdraft.............................................. (97)
Custodian Fees Payable...................................... (32)
Administrative Fees Payable................................. (29)
Directors' Fees & Expenses.................................. (1)
Other Liabilities........................................... (51) $(8,021)
------ ---------
NET ASSETS (100%)............................................. $ 182,977
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 15,711,763 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................ $11.65
-----------
-----------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at December 31,
1994, the portfolio is obligated to deliver or is to receive foreign
currency in exchange for US dollars as indicated below:
IN NET
CURRENCY TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------- --------- ----------- --------------- --------- ------------
$ 16 $ 16 1/03/95 IL 26,814 $ 16 $ --
$ 6 6 1/04/95 IL 9,510 6 --
$ 6,476 6,476 1/31/95 IL 10,707,379 6,593 117
$ 12,000 12,000 4/28/95 Y 1,183,560 12,070 70
FF 107,060 20,014 4/28/95 $ 20,000 20,000 (14)
Y 6,518,185 66,476 4/28/95 $ 65,000 65,000 (1,476)
SP 1,894,800 14,294 4/28/95 $ 15,000 15,000 706
--------- --------- ------
$ 119,282 $ 118,685 $ (597)
--------- --------- ------
--------- --------- ------
- ------------------------------------------------------------------------------
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
NCS -- Non Convertible Shares
FF -- French Franc
IL -- Italian Lira
Y -- Japanese Yen
SP -- Spanish Peseta
- ----------------------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
(UNAUDITED)
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- -----------------------------------------------------------------------------
Capital Equipment..................................... $ 17,260 9.4%
Consumer Goods........................................ 33,843 18.5
Energy................................................ 26,505 14.5
Finance............................................... 48,295 26.4
Gold Mines............................................ 105 0.1
Materials............................................. 23,609 12.9
Multi-Industry........................................ 6,832 3.7
Services.............................................. 29,142 15.9
--------- -----
$ 185,591 101.4%
--------- -----
--------- -----
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ACTIVE COUNTRY ALLOCATION PORTFOLIO
49
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
COMMON STOCKS (94.1%)
AUSTRALIA (0.0%)
+75,000 Odin Mining & Investment Co., Ltd.... $ 22
---------
CHINA (2.0%)
890,400 China Merchants Shekou Port Services,
Class B............................ 489
4,351,000 Maanshan Iron & Steel Co., Class H... 917
200,000 Shanghai Diesel Engine Co., Ltd.,
Class B............................ 160
265,000 Shanghai Erfanji Co., Ltd., Class
B.................................. 53
313,235 Shanghai Jin Jiang Tower Ltd., Class
B.................................. 163
1,601,600 Shanghai Jinqiao, Class B............ 1,121
590,900 Shanghai Phoenix Bicycle Ltd., Class
B.................................. 304
500,000 Shanghai Refrigerator Compressor,
Class B............................ 173
638,000 Shanghai Tyre & Rubber Co., Class
B.................................. 242
120,000 Shanghai Yaohua Pilkington Glass,
Class B............................ 118
180,400 Shenzhen Chiwan Wharf Holdings, Class
B.................................. 70
4,965,000 Yizheng Chemical Fibre Co., Class
H.................................. 1,845
---------
5,655
---------
HONG KONG (23.2%)
1,837,000 Cheung Kong Holdings Ltd............. 7,479
580,000 China Light & Power Co., Ltd......... 2,474
1,758,500 Citic Pacific Ltd.................... 4,239
4,200,000 C.P. Pokphand Co., Ltd............... 982
9,312,000 Guangdong Investments Ltd............ 4,603
610,000 Harbin Power Equipment Co............ 205
860,500 Hong Kong Electric Holdings Ltd...... 2,352
538,000 Hong Kong & Shanghai Bank
Holdings plc....................... 5,806
5,414,000 Hong Kong Telecommunications Ltd..... 10,321
1,523,000 Hopewell Holdings Ltd................ 1,260
1,842,000 Hutchison Whampoa Ltd................ 7,451
1,735,000 New World Development Co., Ltd....... 4,630
51,000 Shandong Huaneng Power Co., Ltd.
ADR................................ 491
200,000 Sum Cheong International............. 111
612,100 Sun Hung Kai Properties Ltd.......... 3,655
661,560 Swire Pacific Ltd., Class A.......... 4,121
1,026,000 Varitronix International Ltd......... 1,459
2,160,000 Wai Kee Holdings Ltd................. 502
607,000 Wharf Holdings Ltd................... 2,048
---------
64,189
---------
INDIA (1.2%)
38,000 Grasim Industries Ltd. GDR........... 912
51,000 Hindaico Industries Ltd. GDR......... 1,721
34,000 SIV Industries Ltd. GDR.............. 612
---------
3,245
---------
INDONESIA (6.8%)
600,000 Asiana Imi Industries (Foreign)...... 573
378,000 Bank International Indonesia
(Foreign).......................... 1,204
450,000 Barito Pacific Timber (Foreign)...... 711
310,913 Charoen Pokphand (Foreign)........... 1,273
517,500 Duta Pertiwi PT (Foreign)............ $ 747
125,000 Indocement Tunggal (Foreign)......... 512
700,000 Indosat PT (Foreign)................. 2,508
513,000 Jembo Cable Co. (Foreign)............ 817
351,600 Kalbe Farma (Foreign)................ 1,448
210,000 Keramika Indonesia Association
(Foreign).......................... 272
377,750 Modern Photo Film Co. (Foreign)...... 1,598
500,000 Ometraco (Foreign)................... 785
267,000 Polysindo Eka Perkasa (Foreign)...... 504
458,400 Sona Topas Tourism (Foreign)......... 1,481
208,000 Sorini Corp. (Foreign)............... 852
85,000 Suba Indah (Foreign)................. 77
184,200 Tempo Scan Pacific (Foreign)......... 884
**1,250,000 Ultra Jaya Milk (Foreign)............ 1,183
644,800 United Tractors (Foreign)............ 1,379
---------
18,808
---------
KOREA (1.7%)
44,900 Korea Electric Power (Foreign)....... 1,549
+81,200 Pohang Iron & Steel Co., Ltd. ADR.... 2,375
14,267 Samsung Electronics Co. GDR.......... 699
---------
4,623
---------
MALAYSIA (22.3%)
696,000 Bandar Raya Developments Bhd......... 1,177
761,500 Genting Bhd.......................... 6,531
+480,000 Granite Industries Bhd............... 1,015
600,000 Land & General Holdings Bhd.......... 2,491
714,000 Magnum Corp. Bhd..................... 1,281
1,642,500 Malayan Banking Bhd.................. 9,906
655,316 Malaysian International Shipping
(Foreign).......................... 1,873
+1,347,000 Malaysian Resources Corp. Bhd........ 2,490
667,333 Mulpha International Bhd............. 852
1,000,000 Renong Bhd........................... 1,238
1,144,000 Resorts World Bhd.................... 6,720
650,000 Sime Darby Bhd....................... 1,489
1,161,000 Tanjong plc.......................... 3,455
810,000 Tan & Tan Development Bhd............ 1,085
+373,000 Technology Resources Industries
Bhd................................ 1,191
1,203,000 Telekom Malaysia Bhd................. 8,150
1,236,000 Tenaga Nasional Bhd.................. 4,889
500,000 Time Engineering Bhd................. 1,243
967,757 United Engineers Ltd. (Malaysia)..... 4,775
---------
61,851
---------
PAKISTAN (0.4%)
7,300 Pakistan Telecommunications GDR...... 989
---------
PHILIPPINES (5.4%)
1,421,000 Aboitiz Equity Ventures.............. 332
708,000 Ayala Corp., Class B................. 1,161
1,148,500 Ayala Land Inc., Class B............. 1,789
+366,600 International Container Terminal
Services, Class B.................. 293
2,579,000 JG Summit Holding, Class B........... 951
133,300 Manila Electric Co., Class B......... 1,830
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO
50
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
PHILIPPINES (CONT.)
2,194,400 Petron Corp.......................... $ 1,933
18,125 Philippine Long Distance Telephone
Co., ADR........................... 999
15,430 Philippine Long Distance Telephone
Co., Class B....................... 860
82,540 Philippine National Bank, Class B.... 1,167
244,000 San Miguel Corp., Class B............ 1,280
3,860,000 SM Prime Holdings, Inc., Class B..... 1,266
1,381,500 Universal Robina..................... 991
---------
14,852
---------
SINGAPORE (15.7%)
252,000 British-American Tobacco Co.......... 1,193
875,080 City Developments Ltd................ 4,893
400,000 DBS Land Ltd......................... 1,191
572,500 Development Bank of Singapore Ltd.
(Foreign).......................... 5,892
248,800 Fraser & Neave Ltd................... 2,578
800,000 IPC Corp............................. 546
93,750 Jurong Engineering Ltd............... 643
738,000 Keppel Corp., Ltd.................... 6,279
717,166 Oversea-Chinese Banking Corp.
(Foreign).......................... 7,381
32,000 Resources Development Corp., Ltd..... 126
183,000 Sembawang Shipyards Corp............. 1,369
146,000 Singapore Airlines Ltd. (Foreign).... 1,342
169,500 Singapore Press Holdings (Foreign)... 3,082
1,949,000 Singapore Technologies Industrial
Corp............................... 2,340
532,000 Straits Steamship Land Ltd........... 1,825
500,000 Straits Trading Co., Ltd............. 1,194
155,000 United Overseas Bank Ltd............. 1,637
---------
43,511
---------
TAIWAN (0.6%)
140,000 Hocheng Group Corp................... 674
170,000 Taiwan Semiconductor Mfg. Co......... 1,009
---------
1,683
---------
THAILAND (14.8%)
60,000 Advanced Information Services Co.
(Foreign).......................... 832
760,000 Bangkok Bank Ltd..................... 6,236
194,500 Bangkok Bank Ltd. (Foreign).......... 2,076
27,000 Banpu Public Co., Ltd................ 591
50,000 Charoen Pokphand Feedmill Co., Ltd.
(Foreign).......................... 313
290,300 Finance One Co., Ltd. (Foreign)...... 4,510
5,500 International Engineering Co.,
Ltd................................ 46
214,700 International Engineering Co., Ltd.
(Foreign).......................... 1,881
98,200 Land & House Co., Ltd. (Foreign)..... 1,752
324,000 MDX Co., Ltd......................... 897
13,000 MDX Co., Ltd. (Foreign).............. 44
**45,200 National Finance & Securities Co.,
Ltd. (Foreign)..................... 247
185,800 Phatra Thanakit Co., Ltd.
(Foreign).......................... 1,436
116,600 Shinawatra Computer Co., Ltd
(Foreign).......................... 2,545
28,500 Siam Cement Co., Ltd................. 1,626
33,000 Siam Cement Co., Ltd. (Foreign)...... 1,977
105,500 Siam Commercial Bank................. $ 857
221,300 Siam Commercial Bank (Foreign)....... 2,027
79,400 Singer Thailand Ltd.................. 677
158,100 Somprasong Land Co., Ltd.
(Foreign).......................... 608
291,300 Telecomasia Corp. (Foreign).......... 1,120
834,570 Thai Farmers Bank Ltd................ 5,751
118,570 Thai Farmers Bank, Ltd. (Foreign).... 963
586,000 Thai Petrochemical Co., Ltd.......... 1,284
+375,000 Wongpaitoon Footwear Co., Ltd.
(Foreign).......................... 844
---------
41,140
---------
TOTAL COMMON STOCKS (Cost $225,998).............. 260,568
---------
NO. OF
RIGHTS
- ----------
RIGHTS (0.7%)
INDONESIA (0.0%)
**+69,333 Sorini Corp., expiring 1/18/95....... --
---------
THAILAND (0.7%)
**+336,000 National Finance & Securities Co.,
Ltd., expiring 1/95................ 1,459
**+135,600 National Finance & Securities Co.,
Ltd., (Foreign) expiring 1/95...... 605
---------
2,064
---------
TOTAL RIGHTS (Cost $1,578)....................... 2,064
---------
NO. OF
WARRANTS
- ----------
WARRANTS (0.2%)
HONG KONG (0.0%)
+432,000 Wai Kee Holdings Ltd., expiring
12/31/96........................... 7
---------
THAILAND (0.2%)
+66,050 Finance One Co., Ltd., expiring
3/15/99............................ 553
---------
TOTAL WARRANTS (Cost $0).........................
560
---------
FACE
AMOUNT
(000)
- ------------
CONVERTIBLE DEBENTURES (0.4%)
KOREA (0.4%)
$ 1,700 Daewoo Corp., 0.00%, 12/31/04
(Cost $1,732)...................... 1,207
---------
TOTAL FOREIGN SECURITIES (95.4%) (Cost $229,308)...
264,399
---------
SHORT-TERM INVESTMENTS (3.3%)
GOVERNMENT AND AGENCY OBLIGATIONS (1.8%)
UNITED STATES (1.8%)
5,000 Federal Farm Credit Bank Discount
Note, 5.95%, 1/03/95 (Cost
$4,998)............................ 4,997
---------
REPURCHASE AGREEMENT (1.5%)
4,031 U.S. Trust, 5.50%, dated 12/30/94,
due 1/03/95, to be repurchased at
$4,033, collateralized by $4,180
United States Treasury Notes
3.875%, due 3/31/95, valued at
$4,163 (Cost $4,031)............... 4,031
---------
TOTAL SHORT-TERM INVESTMENTS (Cost $9,029)......... 9,028
TOTAL FOREIGN & US SECURITIES (98.7%) (Cost
$238,337).......................................... 273,427
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO
51
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
FOREIGN CURRENCY (1.5%)
HK$ 466 Hong Kong Dollar..................... $ 60
IN 4,470,122 Indonesian Rupiah.................... 2,034
KW 24 Korean Won........................... --
MA 52 Malaysian Ringgit.................... 20
S$ 132 Singapore Dollar..................... 91
T$ 36,963 Taiwan Dollar........................ 1,406
TB 11,953 Thai Baht............................ 476
---------
TOTAL FOREIGN CURRENCY (Cost $4,099)............... 4,087
---------
TOTAL INVESTMENTS (100.2%) (Cost $242,436)......... 277,514
---------
OTHER ASSETS (0.3%)
Receivable for Portfolio Shares Sold.... $ 563
Dividends Receivable.................... 337
Foreign Withholding Tax Reclaim
Receivable............................. 10
Interest Receivable..................... 1
Other................................... 27 938
--------- ---------
LIABILITIES (-0.5%)
Payable for Portfolio Shares Redeemed... (801)
Investment Advisory Fees Payable........ (418)
Custodian Fees Payable.................. (224)
Administrative Fees Payable............. (38)
Unrealized Loss on Forward Foreign
Currency Contract...................... (3)
Directors' Fees & Expenses.............. (1)
Other Liabilities....................... (61) (1,546)
--------- ---------
NET ASSETS (100%).................................. $ 276,906
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 12,854,374 outstanding $.001 par
value shares (authorized 500,000,000 shares)....... $21.54
---------
---------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at
December 31, 1994, the Portfolio is obligated to deliver
foreign currency in exchange for US dollars as indicated
below:
IN
CURRENCY EXCHANGE UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
- ------------- --------- ----------- ---------- --------- --------------
IN 4,449,489 $ 2,025 1/03/95 $ 2,022 $ 2,022 $ (3)
--------- --------- ----------
--------- --------- ----------
- ------------------------------------------------------------
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
IN -- Indonesian Rupiah
Interest rates disclosed for U.S. Government & Agency Discount Notes represent
effective yields.
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
(UNAUDITED)
VALUE PERCENT OF NET
INDUSTRY (000) ASSETS
- ---------------------------------------------------------------
Capital Equipment.................. $ 20,043 7.2%
Consumer Goods..................... 18,064 6.5
Energy............................. 16,314 5.9
Finance............................ 102,218 36.9
Materials.......................... 20,392 7.4
Multi-Industry..................... 21,962 7.9
Services........................... 65,406 23.6
--------- -----
$ 264,399 95.4%
--------- -----
--------- -----
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO
52
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
COMMON STOCKS (80.3%)
ARGENTINA (4.8%)
+6 Acindar Industrial S.A............. $ --
+987,398 Alpargatas S.A..................... 681
81,501 Banco de Galicia y Buenos Aires.... 326
368,143 Banco de Galicia y Buenos Aires
ADR.............................. 6,350
185,816 Banco del Sud Argentina............ 1,412
135,400 Banco Frances ADS.................. 2,894
+193,932 Banesto Banco Shaw S.A............. 620
57,642 Capex S.A., Class A................ 481
119,200 Capex S.A. ADR..................... 1,788
13,000 Central Costanera ADR.............. 345
8,000 Central Puerto S.A................. 40
45,330 Central Puerto S.A. ADR............ 1,281
484,827 CIADEA (Renault) S.A............... 4,242
757,100 Cia Naviera Perez Companc, Class
B................................ 3,119
42,200 Inversiones y Representacion S.A.
GDR.............................. 1,129
89,537 Massalin Particulares.............. 1,030
392,235 Quilmes Industrial S.A............. 9,021
3,804,600 Siderca............................ 2,815
317,450 YPF S.A. ADR....................... 6,785
---------
44,359
---------
BRAZIL (6.0%)
18,483,200 Banco Nacional S.A................. 487
111,995,000 Cia Energetica de Minas Gerais
ADR.............................. 2,716
3,635,480 Cia Energetica de Sao Paulo........ 4,721
46,678 Cia Energetica de Sao Paulo, Class
B................................ 61
+58,807,000 Cia Paulista de Forca E Luz........ 5,207
132,425,000 Cia Siderurgica Nacional........... 4,510
34,000 Cigarros Souza Cruz................ 281
3,800,000 Eletrobras......................... 1,341
9,012,000 Light Servicos de Eletricidade
S.A.............................. 3,256
9,400,000 Rhodia-Ster ADS.................... 135
197,453,000 Telecomunicacoes Brasileiras....... 8,509
462,564,000 Telecomunicacoes Brasileiras ADR... 20,700
5,175,000 Telecomunicacoes de Sao Paulo...... 849
+251,300,000 Usinas Siderurgicas de Minas Gerais
ADR.............................. 3,330
---------
56,103
---------
CHILE (0.3%)
129,810 Banco Osorno y La Union ADR........ 1,396
48,875 Sociedad Quimica y Minera de Chile
S.A. ADR......................... 1,423
---------
2,819
---------
CHINA (1.5%)
750,000 Beiren Printing Machine, Class H... 208
3,008,400 China Merchants Shekou Port
Services, Class B................ 1,652
11,144,000 Maanshan Iron & Steel Co., Class
H................................ 2,348
1,862,000 Shanghai Diesel Engine Co., Ltd.,
Class B.......................... 1,490
803,000 Shanghai Erfanji Co., Ltd., Class
B................................ 161
500,000 Shanghai Industries Sewing Machine,
Class B.......................... 200
949,975 Shanghai Jin Jiang Tower Ltd.,
Class B.......................... 494
3,618,680 Shanghai Jinqiao, Class B.......... 2,533
1,200,000 Shanghai Lujiazui Finance & Trade
Development Co................... $ 972
+1,062,750 Shanghai Outer Gaoqiao Free Zone,
Class B.......................... 627
14,550 Shanghai Petrochemical Co. ADR..... 418
903,800 Shanghai Phoenix Bicycle Ltd.,
Class B.......................... 465
962,000 Shanghai Refrigerator Compressor,
Class B.......................... 332
450,000 Shanghai Shangling Electric, Class
B................................ 387
986,000 Shanghai Tyre & Rubber Co., Class
B................................ 375
354,000 Shanghai Yaohua Pilkington Glass,
Class B.......................... 347
1,874,400 Shenzhen Chiwan Wharf Holdings,
Class B.......................... 727
---------
13,736
---------
COLOMBIA (1.2%)
171,300,000 Banco de Colombia.................. 8,858
78,070 Cementos Paz Del Rio ADR........... 1,561
23,700 Gran Cadena Almacanae Co. ADS...... 385
---------
10,804
---------
GREECE (1.4%)
298,380 Aegek.............................. 5,592
83,700 Ergo Bank S.A...................... 3,449
115,520 Hellenic Bottling Co. S.A.......... 4,090
---------
13,131
---------
HONG KONG (6.2%)
1,123,000 Cheung Kong Holdings Ltd........... 4,572
1,981,000 Citic Pacific Ltd.................. 4,774
11,254,000 C.P. Pokphand Co., Ltd............. 2,632
65,800 Great Wall Electric Ltd. ADR....... 288
9,008,000 Guangdong Investments Ltd.......... 4,453
528,000 Hang Seng Bank Ltd................. 3,787
2,220,000 Harbin Power Equipment Co.......... 746
1,966,000 Hong Kong Telecommunications
Ltd.............................. 3,748
5,230,000 Hopewell Holdings Ltd.............. 4,326
1,715,000 Hutchison Whampoa Ltd.............. 6,938
1,789,000 New World Development Co., Ltd..... 4,775
160,000 Shandong Huaneng Power Co. Ltd.
ADR.............................. 1,540
566,000 Sun Hung Kai Properties Ltd........ 3,380
857,000 Swire Pacific Ltd., Class A........ 5,339
2,004,000 Varitronix International Ltd....... 2,849
2,700,000 Wai Kee Holdings Ltd............... 628
912,000 Wharf Holdings Ltd................. 3,076
---------
57,851
---------
HUNGARY (0.3%)
65,000 Egis............................... 1,379
102,500 Gedeon Richter Ltd................. 1,589
---------
2,968
---------
INDIA (12.6%)
230,000 American Dry Fruits................ 449
120 Andhra Valley Power Supply, Class
B................................ 4
100,000 AP Rayon, Class B.................. 239
100,000 Aruna Sugars & Enterprises, Class
B................................ 239
88,000 Bajaj Auto Ltd., Class A........... 1,992
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
53
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
INDIA (CONT.)
987,500 Balaji Foods & Feeds............... $ 866
15,000 Ballapur Industries Ltd., Class
B................................ 122
20,000 Baroda Rayon Corp.................. 427
269,334 Bharat Forge Co., Ltd., Class A.... 1,545
3,300,000 Bharat Heavy Electricals........... 18,410
12,800 Bharat Petroleum Corp., Ltd........ 157
250,000 Bharat Pipes & Fittings Ltd., Class
B................................ 249
100,000 BPL Ltd............................ 733
27,400 Cable Corp. of India Ltd........... 157
195,000 Carrier Aircon Ltd., Class B....... 870
90,000 Cosmo Films Ltd.................... 474
25,000 Crompton Greaves................... 143
77,000 DCM Shriram Industries Ltd......... 388
38,800 Delta Industries Ltd............... 167
185,000 Essab India Ltd.................... 619
2,700 Fabworth (India) Ltd............... 3
57,166 Flex Industries Ltd................ 460
5,000 Fuller............................. 133
371,800 Garware Plastics & Polyester,
Class A.......................... 3,556
314,500 Geekay Exim Ltd.................... 2,306
475,000 Godrej Soaps Ltd................... 2,953
47,500 Hero Honda, Class B................ 470
120,200 Hindustan Petroleum Corp........... 1,422
105,280 Housing Development Finance
Corp............................. 8,558
@*+78,000 India Magnum Fund, Class A
(acquired 11/25/92-3/01/94, Cost
$3,782).......................... 4,524
@+55,194 India Magnum Fund, Class B......... 3,284
644,650 India Organic Chemical Ltd......... 1,516
5,600 Indian Rayon & Industries Ltd.,
Class A.......................... 109
46,000 Indian Seamless Metal Tubes, Class
B................................ 280
40,000 Indian Seamless Steel & Alloys..... 38
60,000 Indo Gulf Fertilizer & Chemical,
Class A.......................... 179
380,800 Indo Rama Synthetic, Class B....... 1,275
100,000 Infosys Technology Ltd............. 1,498
160,200 ITC Argotech, Class B.............. 1,328
2,850 ITW Signode Ltd., Class B.......... 27
134,400 Jai Parabolic Springs Ltd.......... 321
237,600 JK Synthetics Ltd.................. 311
200,000 Kirloskar Oil Engine, Class B...... 893
1,200 Lakme Ltd., Class B................ 14
145,000 Laser Lamp......................... 139
150,000 Lekshima Precision................. 550
770,000 Mahanagar Telephone Nigam.......... 4,787
81,334 Mahavir Spinning Mills Ltd......... 713
22,300 Mahindra Ugine Steel, Class B...... 34
700,000 Maikaal Fibres..................... 669
200,000 Mardia Chemicals Ltd............... 1,148
20 Motor Industries Co., Ltd., Class
A................................ 4
73,650 MRF Ltd., Class B.................. 5,459
24,000 Mukand Iron & Steel Works, Class
A................................ 245
21,606 Nahar Spinning Mills Ltd., Class
B................................ 689
72,000 Nath Pulp & Paper Mills Ltd........ 166
25,000 OM Sindoori Hotels Ltd............. 57
500,000 Orkay Industries Ltd............... 446
250,000 Patheja Forgings & Auto, Class B... 1,016
401,000 PCS Data Products Ltd., Class B.... $ 352
67,500 Pentafour Products Ltd., Class B... 108
254,200 Philips India, Ltd................. 2,836
275,000 Polar Latex........................ 351
232,700 Priyadarshini Cement Ltd., Class
B................................ 289
7,000 Pudumjee........................... 118
350,000 PVD Plastic Mouldings Inds. Ltd.,
Class B.......................... 446
50,000 Rallis Ltd......................... 510
6,450 Ranbaxy Laboratories Ltd., Class
B................................ 137
10,200 Raymond Synthetics Ltd., Class B... 7
3,770 Reliance Industries Ltd. GDS....... 74
73,581 Reliance Industries Ltd. GDS
(New)............................ 1,692
265,400 Reliance Industries Ltd., Class
A................................ 2,887
100,000 Rossel Industries Ltd.............. 351
100,000 Saurashtra Cement & Chemicals,
Class B.......................... 335
535,000 SCICI Ltd., Class B................ 1,620
50,000 Secals Ltd......................... 151
30,000 Shanti Gears Ltd., Class B......... 191
108,000 Sharp Industries Ltd............... 189
360,000 Shipping Corp. of India............ 689
57,860 Shree Vindhya Paper Mills.......... 304
13,200 S.K.F. Bearings Ltd................ 1,452
45,000 Sri Venkatesa Mills Ltd............ 222
1,008,500 State Bank of India................ 7,266
34,000 Sundaram Finance, Class B.......... 470
1,000,000 Super Forgings & Steels............ 1,913
233,300 Tata Engineering & Loco, Class A... 3,868
3,935 Tata Hydro Electric Power.......... 141
2,620 Tata Power Co., Ltd................ 117
100 Teneja Aerospace Aviation.......... --
450,000 Tilagarli Steel.................... 932
1,600 T.P.I. India Ltd................... 3
10,000 T.V.S. Suzuki...................... 67
205,000 Uniworth International Ltd., Class
B................................ 258
783,000 Uttam Galva Steels Ltd., Class B... 1,030
16,604 Videocon International Ltd., Class
A................................ 82
81,600 Videsh Sanchar Nigam Ltd........... 2,406
710,040 VXL Ltd............................ 1,245
34,500 Vysya Bank......................... 2,420
---------
117,359
---------
INDONESIA (5.4%)
26,400 Astra International................ 50
72,000 Astra International (Foreign)...... 96
1,373,000 Bank Bali (Foreign)................ 3,873
1,673,000 Barito Pacific Timber (Foreign).... 2,645
1,662,049 Charoen Pokphand (Foreign)......... 6,805
***200,000 Citra Marga Nusaphala (Foreign).... 237
612,500 Duta Pertiwi PT (Foreign).......... 885
1,046,000 Indocement Tunggal (Foreign)....... 4,283
1,200,000 Indosat PT (Foreign)............... 4,299
1,308,600 Jembo Cable Co. (Foreign).......... 2,084
1,398,200 Kalbe Farma (Foreign).............. 5,757
468,000 Keramika Indonesia Association
(Foreign)........................ 607
925,500 Modern Photo Film Co. (Foreign).... 3,916
534,000 Polysindo Eka Perkasa (Foreign).... 1,008
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
54
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT).
- ------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------
INDONESIA (CONT.)
693,200 Sona Topas Tourism (Foreign)....... $ 2,239
973,500 Sorini Corp. (Foreign)............. 3,986
150,000 Suba Indah (Foreign)............... 137
584,000 Tempo Scan Pacific (Foreign)....... 2,803
2,109,000 United Tractors (Foreign).......... 4,510
---------
50,220
---------
ISRAEL (1.5%)
40,166 Elbit Ltd.......................... 2,733
1,300 First International Bank........... 153
413,335 Israel Land Development............ 1,460
16,800 Koor Industries Ltd................ 1,286
146,500 Osem Investment Ltd................ 937
+137,336 PEC Israel Economic Corp........... 3,880
54,397 Scitex Ltd......................... 904
152,948 Super Sol Ltd., Class B............ 2,605
---------
13,958
---------
MALAYSIA (0.2%)
835,000 Bandar Raya Development Bhd........ 1,413
---------
MEXICO (10.4%)
359,112 Apasco S.A., Class A............... 1,790
3,031,850 Banacci, Class B................... 8,959
438,912 Banacci, Class L................... 1,270
676,890 Cemex CPO ADR...................... 6,681
12,500 Desc Sociedad de Fomento Industrial
S.A. de C.V...................... 295
3,370 FEMSA ADR.......................... 83
694,000 FEMSA, Class B..................... 1,777
21,500 Grupo Carso, S.A., Class A1........ 158
+609,355 Grupo Carso ADR.................... 8,836
801,000 Grupo Financiero Banamex Accival,
Class C.......................... 2,367
670,603 Grupo Financiero Bancomer ADR...... 7,544
3,973,500 Grupo Financiero Bancomer, Class B. 1,909
2,336,000 Grupo Financiero Bancomer, Class C. 1,268
1,868,000 Grupo Financiero Bancrecer, Class
B................................ 1,577
69,380 Grupo Financiero GBM Atlantico ADR. 520
1,248,360 Grupo Financiero Probursa, Class B. 289
3,873,060 Grupo Financiero Probursa, Class C. 1,868
120,800 Grupo Financiero Serfin S.A. ADR... 906
2,254,000 Grupo Herdez, Class A.............. 1,087
55,000 Grupo Iusacell S.A. ADR, Class D... 880
5,000 Grupo Iusacell S.A. ADR, Class L... 93
+182,571 Grupo Mexicano Desarrollo ADR,
Class B.......................... 1,392
42,960 Grupo Mexicano Desarrollo, Class L. 381
+52,600 Grupo Sidek S.A. ADR............... 460
+1,451,800 Grupo Sidek S.A., Class A.......... 3,181
+987,000 Grupo Sidek S.A., Class B.......... 2,182
55,344 Grupo Sidek S.A., Class L.......... 145
180,600 Grupo Televisa S.A. ADR............ 5,734
435,952 Grupo Tribasa S.A. ADR............. 7,248
68,060 Hylsamex S.A. ADR.................. 1,149
310,400 Interceramica, Class C............. 1,030
+30,600 Interceramica ADR.................. 627
82,600 Panamerican Beverages, Inc., Class
A................................ 2,612
385,425 Telefonos de Mexico S.A. ADR, Class
L................................ $ 15,802
547,000 Tolmex S.A., Class B2.............. 4,618
---------
96,718
---------
MOROCCO (0.9%)
41,100 Ona Group.......................... 1,673
146,300 Sni Maroc.......................... 6,726
---------
8,399
---------
PAKISTAN (2.8%)
78,120 Adamjee Insurance Co., Ltd......... 472
1,040,900 Bank of Punjub..................... 1,861
825,814 Cherat Cement Ltd.................. 2,926
13,126 Crescent Investment Bank........... 22
247,600 Crescent Textile Mills Ltd......... 241
275,000 Dewan Salman Fibre................. 1,251
380,100 D.G. Khan Cement Ltd............... 766
3,017,900 Fauji Fertilizer Co., Ltd.......... 8,043
475,860 Imperial Chemical Industries....... 3,743
595,725 Muslim Commercial Bank Ltd......... 1,384
679,297 Nishat Mills Ltd................... 1,231
13,090 Pakistan Telecommunications........ 1,723
13,900 Pakistan Telecommunications GDR.... 1,883
97,850 Philips Electrical................. 636
298,000 Zahur Textile Mills................ 61
---------
26,243
---------
PERU (0.8%)
169,394 Banco de Credito del Peru.......... 375
323,646 Cementos Norte Pacasmayo, Class
T................................ 1,252
***497,000 Cementos Yura...................... 3,109
12,325 Cerveceria Backus y Johnson, Class
C................................ 250
+396,386 Nacional de Cerveza, Class T....... 301
+428,659 Southern Peru Copper, Class T...... 2,389
---------
7,676
---------
PHILIPPINES (3.2%)
3,133,250 Ayala Land Inc., Class B........... 4,880
7,772,250 JG Summit Holding, Class B......... 2,867
306,465 Manila Electric Co., Class B....... 4,207
1,000,000 Negros Navigation Co., Inc......... 481
6,800,000 Petron Corp........................ 5,992
47,490 Philippine Long Distance Telephone
Co. ADR.......................... 2,618
2,000 Philippine Long Distance Telephone
Co., Class B..................... 111
226,858 Philippine National Bank, Class
B................................ 3,208
8,472,500 SM Prime Holdings, Inc., Class B... 2,778
419,500 San Miguel Corp., Class B.......... 2,201
---------
29,343
---------
POLAND (0.8%)
***33,400 Eastbridge......................... 2,245
13,762 Elektrim........................... 647
2,028,000 International UNP Holdings......... 1,229
186,870 Mostostal Exports, Class A......... 1,216
15,000 Okocim............................. 423
8,925 Wedel S.A.......................... 608
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
55
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- -------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- -------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT).
- -------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------
POLAND (CONT.)
15,735 Zwyeic............................. $ 1,089
---------
7,457
---------
PORTUGAL (0.1%)
13,800 Jeronimo Martins................... 591
@8,990 Portuguese Investment Fund......... 598
---------
1,189
---------
RUSSIA (0.8%)
***313,000 Russian Telecom Development
Corp............................. 3,130
***400,000 SFMT Inc........................... 4,000
---------
7,130
---------
SOUTH AFRICA (2.5%)
44,000 Anglo American Industrial
Corporation Ltd.................. 2,269
700,000 Bidvest Group Ltd.................. 2,836
1,223,150 Gencor Ltd......................... 4,386
796,900 Liberty Life Strategic
Investments...................... 2,495
131,300 Randcoal Ltd....................... 887
929,146 Sasol Ltd.......................... 7,701
311,500 Trans Natal Coal Corp., Ltd........ 2,372
---------
22,946
---------
SRI LANKA (0.1%)
19,575 Aitken Spence & Co., Ltd........... 117
113,000 Distillers Corp. S.A. Ltd.......... 21
81,200 John Keells Holdings Ltd........... 442
---------
580
---------
TAIWAN (3.4%)
2,196,600 Hocheng Group Corp................. 10,570
1,696,000 Taiwan Semiconductor Mfg. Co....... 10,065
2,223,891 United Micro Electronics Corp.,
Ltd.............................. 10,617
---------
31,252
---------
THAILAND (7.9%)
293,250 Advanced Information Services Co.
(Foreign)........................ 4,065
1,720,600 Bangkok Bank Ltd................... 14,119
419,500 Bangkok Bank Ltd. (Foreign)........ 4,478
862,600 Finance One Co., Ltd. (Foreign).... 13,400
315,560 International Engineering Co.,
Ltd.............................. 2,665
427,240 International Engineering Co., Ltd.
(Foreign)........................ 3,744
144,400 Land & House Co., Ltd. (Foreign)... 2,577
598,300 MDX Co., Ltd....................... 1,656
234,635 Phatra Thanakit Co., Ltd........... 1,813
546,265 Phatra Thanakit Co., Ltd.
(Foreign)........................ 4,221
85,000 SeaFresh Industry Co., Ltd.
(Foreign)........................ 542
141,800 Shinawatra Computer Co., Ltd
(Foreign)........................ 3,095
94,300 Siam Cement Co., Ltd............... 5,379
15,000 Siam Commercial Bank (Foreign)..... 138
1,671,000 Thai Farmers Bank Ltd.............. 11,515
---------
73,407
---------
TURKEY (4.7%)
2,095,000 Borusan............................ $ 1,516
13,001,600 Ege Biracilik Ve Malt Sanayii...... 8,231
+2,514,000 Ege Seramik Sanayii Ve Ticaret
A.S.............................. 877
6,776,000 Koc Yatirim Ve Sanayii Mamulleri... 5,253
812,000 Migros Turk TAS.................... 1,553
13,510,000 Sarkuysan.......................... 7,855
3,551,000 Tat Konserue....................... 4,863
9,401,000 Tofas Turk Otomobil Fabrikasi...... 8,016
120,000 Tofas Turk Otomobil Fabrikasa ADR,
Class E.......................... 494
1,302,075 Turkas Petroculuk A.S.............. 328
1,085,600 Turkiye Garanti Bankasi ADR........ 2,719
24,085,000 Yapi Ve Kredi Bankasi A.S.......... 2,085
---------
43,790
---------
UNITED KINGDOM (0.2%)
900,924 Lonrho plc......................... 2,145
---------
ZIMBABWE (0.3%)
1,980,000 Trans Zambezi Industries Ltd....... 2,574
---------
TOTAL COMMON STOCKS (Cost $725,564)..............
745,570
---------
PREFERRED STOCKS (13.4%)
BRAZIL (13.4%)
1,059,142,183 Banco Bradesco..................... 9,003
323,910,000 Banco do Brasil.................... 6,386
18,800,000 Banco do Estado Sao Paulo.......... 269
31,814,000 Banco Itau......................... 8,902
304,098,880 Banco Nacional S.A................. 7,719
20,516,870 Bombril............................ 569
21,189,000 Brasmotor.......................... 8,581
62,724,850 Centrais Eletricas Brasileiras,
Class B.......................... 21,772
17,440,160 Cia Acos Especiais Itabira......... 1,483
13,825,000 Cia Cervejaria Brahma.............. 4,552
26,422,494 Cia Energetica de Minas Gerais..... 2,402
1,410,000 Cia Energetica de Sao Paulo........ 1,923
54,149 Cia Energetica de Sao Paulo, Class
B................................ 83
245,160,000 Cia Energetica de Sao Paulo ADR.... 3,248
+6,800,000 Cia Paulista de Forca E Luz........ 466
+904,000 Cia Siderurgica Paulista, Class
B................................ 2,631
37,930,101 Lojas Americanas S.A............... 1,120
+105,758 Lojas Americanas (Bonus)........... 15
104,153,333 Petrobras.......................... 13,156
77,529,000 Petrobras Distribuidora............ 4,165
12,500 Sadia Concordia.................... 17
158,099,175 Telecomunicacoes Brasileiras....... 7,074
162,600 Telecomunicacoes de Sao Paulo...... 73
44,998,215 Telecomunicacoes de Sao Paulo...... 6,402
5,521,151,000 Usinas Siderurgicas de Minas
Gerais........................... 7,496
26,163,000 Vale Do Rio Doce................... 5,004
---------
TOTAL PREFERRED STOCKS (Cost $85,280)............
124,511
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
56
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
NO. OF VALUE
RIGHTS (000)
- ------------------------------------------------------------
RIGHTS (0.0%)
INDIA (0.0%)
**+7,142 Indian Seamless Metal Tubes........ $ 9
**+2,500 Pentafour Products Ltd., Class B... --
---------
9
---------
INDONESIA (0.0%)
**+229,500 Sorini Corp., expiring 1/18/95..... --
---------
PAKISTAN (0.0%)
**+6,398 Crescent Investment Bank, expiring
1/30/95.......................... 7
**+92,643 Muslim Commercial Bank Ltd......... 95
---------
102
---------
TOTAL RIGHTS (Cost $12).......................... 111
---------
NO. OF
WARRANTS
- ------------
WARRANTS (0.1%)
HONG KONG (0.0%)
+540,000 Wai Kee Holdings Ltd., expiring
12/31/96......................... 9
---------
INDIA (0.0%)
**+33,571 Bharat Forge Co., Ltd., expiring
1995............................. --
**+27,383 Flex Industries Ltd................ --
---------
--
---------
POLAND (0.0%)
**+1,014,000 International UNP Holdings,
expiring 12/31/95................ --
---------
THAILAND (0.1%)
+138,660 Finance One Co., Ltd., expiring
3/15/99.......................... 1,160
---------
TOTAL WARRANTS (Cost $0)......................... 1,169
---------
NO. OF
UNITS
- ------------
UNITS (0.6%)
HUNGARY (0.5%)
42,000 Mol Magyar Olay-ES................. 4,715
---------
MEXICO (0.1%)
302,800 Interceramica...................... 974
---------
TOTAL UNITS (Cost $5,789)........................ 5,689
---------
SHARES
- ------------
PURCHASED OPTIONS (0.0%)
BRAZIL (0.0%)
37,300,000 Cia Paulista de Forca E Luz, strike
price BRL 70, expiring 10/16/95
(Cost $0)........................ 388
---------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
CONVERTIBLE DEBENTURES (0.8%)
COLOMBIA (0.4%)
$ 4,115 Banco de Colombia 5.20%, 2/01/99... $ 4,017
---------
INDIA (0.3%)
IR ***25 Bharat Pipes & Fittings Ltd.,
Series A, Zero Coupon,
12/31/99......................... 80
***25 Bharat Pipes & Fittings Ltd.,
Series B, Zero Coupon,
12/31/99......................... 80
336 DCM Shriram Industries Ltd., Zero
Coupon, 3/01/00.................. 641
***15 Indian Seamless 10.00%, 10/12/99... 60
***134 Jai Parabolic Ltd., Series A, Zero
Coupon, 4/01/95.................. 300
***134 Jai Parabolic Ltd., Series B, Zero
Coupon, 4/01/95.................. 300
1,467 Mahavir Spinning Mills Ltd., Series
A, Zero Coupon, 12/31/99......... 51
783 Uttam Galva Steels, Zero Coupon,
12/01/10......................... 874
---------
2,386
---------
THAILAND (0.1%)
TB 880 Banpu Public Co., Ltd. 3.50%,
8/25/04.......................... 1,034
---------
TOTAL CONVERTIBLE DEBENTURES (Cost $7,543)....... 7,437
---------
NON-CONVERTIBLE DEBENTURES (0.5%)
INDIA (0.5%)
IR ***34 Bharat Forge Co., Ltd., 14.50%,
1/01/01.......................... 54
341 DCM Shriram Industries Ltd.,
16.50%, 3/01/00.................. 542
4,470 Garware Plastics & Polyester,
16.00%, 1/01/01.................. 138
8 Mahavir Spinning Mills Ltd., Series
B, Zero Coupon, 12/31/99......... 28
500 Raymond Wollen Mills, 16.00%,
12/31/99......................... 1,546
70 Saurashtra Cement & Chemicals, Zero
Coupon, 12/31/99................. 2,165
***173 VST Tillers Tractors, Zero Coupon,
1/01/96.......................... 612
---------
TOTAL NON-CONVERTIBLE DEBENTURES (Cost $5,641)... 5,085
---------
LOAN AGREEMENTS (3.6%)
ECUADOR (0.4%)
$#~##5,950 Republic of Ecuador Extension and
Refinancing Agreement (Floating
Rate) (Participation: Merrill
Lynch, Chemical Bank)............ 2,736
#~##1,200 Republic of Ecuador New Money
(Floating Rate) (Participation:
Merrill Lynch)................... 552
---------
3,288
---------
PANAMA (1.1%)
$ ++19,400 Republic of Panama Unrestructured
Loans (Floating Rate)............ 10,427
---------
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
57
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
RUSSIA (2.1%)
CHF ++1,910 Bank for Foreign Economic Affairs
(Floating Rate).................. $ 380
$ ++25,657 Bank for Foreign Economic Affairs
(Floating Rate).................. 7,055
++9,293 Bank for Foreign Economic Affairs,
Series A (Floating Rate)......... 2,556
++32,090 Bank for Foreign Economic Affairs,
Series B (Floating Rate)......... 8,825
++1,000 Bank for Foreign Economic Affairs,
Series C (Floating Rate)......... 275
++1,913 Bank for Foreign Economic Affairs,
Series E (Floating Rate)......... 526
---------
19,617
---------
TOTAL LOAN AGREEMENTS (Cost $41,762)............. 33,332
---------
TOTAL FOREIGN & US SECURITIES (99.3%) (Cost
$871,591)........................................ 923,292
---------
FOREIGN CURRENCY (2.3%)
APS 106 Argentine Peso..................... 106
BLR 134 Brazilian Real..................... 158
CP 220,527 Colombian Peso..................... 265
DM 759 Deutsche Mark...................... 490
HK$ 2,874 Hong Kong Dollar................... 371
IR 336,780 Indian Rupee....................... 10,736
IN 65,248 Indonesian Rupiah.................. 30
MD 639 Moroccan Dhiram.................... 72
PR 173,193 Pakistani Rupee.................... 5,629
PS 1 Peruvian Sol....................... 1
PZ 54,496 Polish Zloty....................... 2
AR 86 South African Commercial Rand...... 24
SA 107 South African Financial Rand....... 26
SL 32 Sri Lankan Rupee................... 1
T$ 63,654 Taiwan Dollar...................... 2,421
TL 15,301,470 Turkish Lira....................... 395
---------
TOTAL FOREIGN CURRENCY (Cost $20,728)............ 20,727
---------
TOTAL INVESTMENTS (101.6%) (Cost $892,319)....... 944,019
---------
OTHER ASSETS (1.5%)
Receivable for Investments Sold....... $ 8,771
Receivable for Portfolio Shares 4,365
Sold.................................
Dividends Receivable.................. 944
Interest Receivable................... 102
Foreign Withholding Tax Reclaim 16
Receivable...........................
Other................................. 90 $ 14,288
---------
LIABILITIES (-3.1%)
Bank Overdraft........................ (11,323)
Payable for Investments Purchased..... (6,689)
Deferred India Taxes.................. (4,779)
Investment Advisory Fees Payable...... (3,224)
Payable for India Taxes............... (1,159)
Payable for Portfolio Shares (598)
Redeemed.............................
Custodian Fees Payable................ (540)
Administrative Fees Payable........... (128)
Sub-Administrative Fees Payable....... (14)
Directors' Fees & Expenses............ (1)
Other Liabilities..................... (214) (28,669)
--------- ---------
NET ASSETS (100%).................................. $ 929,638
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 57,016,212 outstanding $.001 par
value shares (authorized 500,000,000 shares)..... $16.30
---------
---------
- --------------------------------------------------------------
+ -- Non-income producing securities
++ -- Non-income producing securities -- in default
* -- Restricted as to public resale. Total value of restricted securities
at December 31, 1994 was $4,524 or 0.5% of net assets.
** -- Security is valued at fair value -- See Note A-1
*** -- Security is valued at cost -- See Note A-1
@ -- The fund is advised by an affiliate
~ -- The security is currently making partial interest payments.
# -- Participation interests were acquired through the financial
institutions listed parenthetically. All other loan agreements are
assignments. See Note A-7.
## -- Under restructuring at December 31, 1994.
ADR -- American Depositary Receipt
ADS -- American Depositary Shares
GDR -- Global Depositary Receipt
GDS -- Global Depositary Shares
NCS -- Non Convertible Shares
TB -- Thai Baht
CHF -- Swiss Franc
IR -- Indian Rupee
TL -- Turkish Lira
Floating Rate Securities. Interest rate changes on these instruments are based
on changes in a designated base rate.
SUMMARY OF FOREIGN & US SECURITIES BY INDUSTRY CLASSIFICATION
(UNAUDITED)
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ----------------------------------------------------------------
Capital Equipment..................... $ 63,803 6.9%
Consumer Goods........................ 127,015 13.7
Energy................................ 114,476 12.3
Finance............................... 241,236 25.9
Loan Agreements....................... 33,332 3.6
Materials............................. 142,231 15.3
Multi-Industry........................ 74,544 8.0
Services.............................. 126,655 13.6
--------- ---
$ 923,292 99.3%
--------- ---
--------- ---
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
58
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- --------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO
- --------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------
COMMON STOCKS (93.9%)
BELGIUM (4.7%)
+3,400 Arbed, S.A.............................. $ 510
11,000 Delhaize Freres et Cie, 'Le Lion',
S.A................................... 447
8,300 G.I.B. Holdings, Ltd.................... 327
55 G.I.B. Holdings, Ltd. (New)............. 2
---------
1,286
---------
DENMARK (1.2%)
+8,500 Unidanmark A/S, Class A (Registered).... 327
---------
FINLAND (4.3%)
22,000 Amer-Yhtymae Oy, Class A................ 381
17,500 Huhtamaki Oy, Series 1.................. 580
+40,600 Kansallis-Osake Pankki.................. 48
17,000 Pohjola Insurance Co., Ltd., Class B.... 185
---------
1,194
---------
FRANCE (12.6%)
600 Bongrain S.A............................ 317
3,000 Cie de Saint Gobain..................... 345
+7,300 Credit Lyonnais CDI..................... 604
6,800 Elf Aquitaine........................... 479
2,400 Eridania Beghin-Say S.A................. 316
2,700 Precision Mecaniques Labinal S.A........ 344
+3,805 Legris Industries S.A................... 234
+18,000 Thomson CSF............................. 539
5,400 Total S.A., Class B..................... 314
---------
3,492
---------
GERMANY (11.7%)
3,100 BASF AG................................. 631
1,760 Bayer AG................................ 408
8,000 Bremer Vulkan Verbund AG................ 492
1,500 Commerzbank AG.......................... 316
575 Karstadt AG............................. 210
1,200 Mannesmann AG........................... 325
+1,500 Varta AG................................ 281
1,700 Veba AG................................. 589
---------
3,252
---------
ITALY (6.0%)
5,000 Editoriale L'Expresso S.p.A............. 13
+162,637 Impregilo S.p.A......................... 163
20,305 Safilo S.p.A............................ 127
191,500 Stet Di Risp (NCS)...................... 454
205,500 Telecom Italia S.p.A.................... 535
10,000 Telecom Italia S.p.A. Di Risp (NCS)..... 20
100,000 Unicem Di Risp (NCS).................... 339
---------
1,651
---------
NETHERLANDS (10.8%)
16,000 ABN Amro Holdings N.V................... 556
2,000 Akzo Nobel N.V.......................... 231
2,200 Hollandsche Beton Groep N.V............. 340
12,500 Internationale Nederlanden Groep N.V.... 591
6,000 Koninklijke Bijenkorf Beheer N.V........ 339
10,000 Koninklijke Van Ommeren N.V............. 263
2,350 Oce-Van Der Grinten N.V................. $ 105
18,500 Philips Electronics N.V................. 548
---------
2,973
---------
NORWAY (3.2%)
+100,000 Den Norske Bank A/S, Class A Free....... 268
16,000 Hafslund Nycomed, Class B............... 336
28,000 Saga Petroleum A/S, Class B............. 290
---------
894
---------
PORTUGAL (0.5%)
+@1,905 Portuguese Investment Fund.............. 127
---------
SPAIN (6.2%)
+11,100 Asturiana de Zinc S.A................... 121
9,520 Banco Espana de Credito S.A............. 67
4,760 Banco Espana de Credito S.A. (New)...... 32
7,615 Bodegas y Bebidas S.A................... 208
+7,870 Grupo Duro Felguera S.A................. 37
90,000 Iberdrola S.A........................... 555
28,000 Sevillana de Electricidad S.A........... 132
47,000 Telefonica Nacional de Espana S.A....... 555
---------
1,707
---------
SWEDEN (1.9%)
+48,000 Skandinaviska Enskilda Banken, Class
A..................................... 274
+16,000 S.K.F. AB, Class B...................... 264
---------
538
---------
SWITZERLAND (14.6%)
650 Alusuisse-Lonza Holdings Ltd.
(Registered).......................... 325
+200 Ascom Holdings AG (Bearer).............. 212
300 Bobst AG (Bearer)....................... 346
900 Ciba Geigy AG (Bearer).................. 538
115 Ciba Geigy AG (Registered).............. 69
500 Forbo Holdings AG (Registered).......... 420
700 Hero AG (Bearer)........................ 340
500 Holderbank Glarus AG (Bearer)........... 379
750 Magazine Globus (Participating
Certificates)......................... 449
700 Moevenpick Holding AG (Participating
Certificates)......................... 265
470 Schweizerische Industrie-Gesellschaft
Holdings (Registered)................. 431
+450 SwissAir (Registered)................... 265
---------
4,039
---------
UNITED KINGDOM (16.2%)
130,500 Asprey plc.............................. 284
75,000 Associated British Foods plc............ 663
+249,990 Automated Security Holdings plc......... 254
20,000 Bass plc................................ 161
200,000 BET plc................................. 318
152,550 Christian Salvesen plc.................. 650
37,400 Hillsdown Holdings plc.................. 105
118,856 John Mowlem & Co. plc................... 188
70,000 Kwik Save Group plc..................... 603
24,895 McAlpine (Alfred) plc................... 67
41,875 Nurdin & Peacock plc.................... 107
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EUROPEAN EQUITY PORTFOLIO
59
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- --------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO (CONT).
- --------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------
UNITED KINGDOM (CONT.)
30,000 Reckitt & Colman plc.................... $ 276
37,401 Rolls-Royce plc......................... 105
120,795 Royal Insurance Holdings plc............ 528
95,165 Sketchley plc........................... 139
+253,775 Wembley plc............................. 20
---------
4,468
---------
TOTAL COMMON STOCKS (Cost $26,082)................. 25,948
---------
PREFERRED STOCKS (5.3%)
GERMANY (5.3%)
1,400 RWE AG.................................. 316
2,500 Spar Handels AG......................... 525
2,800 Volkswagen AG........................... 615
---------
TOTAL PREFERRED STOCKS (Cost $1,518)............... 1,456
---------
CUMULATIVE UNSECURED LOAN STOCK (0.7%)
UNITED KINGDOM (0.7%)
36,000 Reckitt & Colman plc (Cost $186)........ 191
---------
NO. OF
RIGHTS
- ---------
RIGHTS (0.0%)
SPAIN (0.0%)
**7,615 Bodegas y Bebidas, expiring 1/24/95
(Cost $0)............................. 1
---------
TOTAL FOREIGN SECURITIES (99.9%) (Cost $27,786).... 27,596
---------
FACE
AMOUNT
(000)
- ------------
FOREIGN CURRENCY (0.8%)
L 142 British Pound......................... 223
IL 20,882 Italian Lira.......................... 13
NG 1 Netherlands Guilder................... --
---------
TOTAL FOREIGN CURRENCY (Cost $236).................. 236
---------
TOTAL INVESTMENTS (100.7%) (Cost $28,022)........... 27,832
---------
OTHER ASSETS (1.8%)
Receivable for Investments Sold........ $ 450
Dividends Receivable................... 40
Foreign Withholding Tax Reclaim
Receivable............................ 15
Other.................................. 1 506
---------
LIABILITIES (-2.5%)
Bank Overdraft......................... (505)
Payable for Portfolio Shares Redeemed.. (114)
Investment Advisory Fees Payable....... (19)
Payable for Investments Purchased...... (14)
Net Unrealized Loss on Forward Foreign
Currency Contracts................... (9)
Custodian Fees Payable................. (8)
Filing and Registration Fees Payable... (5)
Administrative Fees Payable............ (5)
Directors' Fees & Expenses............. (1)
Other Liabilities...................... (24) $ (704)
--------- --------
NET ASSETS (100%)........................ $ 27,634
--------
--------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 1,981,678 outstanding $.001 par value shares
(authorized 500,000,000 shares).............................. $13.94
------
------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at December
31, 1994, the Portfolio is obligated to deliver foreign currency in
exchange for US dollars as indicated below:
IN NET
CURRENCY TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
- ------------ ----------- ----------- ----------- ----------- ------------
L 142 $ 223 1/04/95 $ 222 $ 222 $ (1)
DM 400 261 8/09/95 $ 253 253 (8)
----- ----- --
$ 484 $ 475 $ (9)
----- ----- --
----- ----- --
- ------------------------------------------------------------
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
@ -- The fund is advised by an affiliate.
NCS -- Non Convertible Shares
L -- British Pound
DM -- Deutsche Mark
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
(UNAUDITED)
VALUE PERCENT OF NET
INDUSTRY (000) ASSETS
- ------------------------------------------------------------------
Capital Equipment..................... $ 4,788 17.3%
Consumer Goods........................ 5,560 20.1
Energy................................ 2,120 7.7
Finance............................... 4,216 15.3
Materials............................. 4,892 17.7
Multi-Industry........................ 544 2.0
Services.............................. 5,476 19.8
--------- ---
$ 27,596 99.9%
--------- ---
--------- ---
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EUROPEAN EQUITY PORTFOLIO
60
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- --------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO
- --------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------
COMMON STOCKS (99.6%)
AUSTRALIA (0.9%)
+400,000 McPhersons Ltd.......................... $ 68
190,488 Westpac Banking Corp.................... 641
---------
709
---------
BELGIUM (2.0%)
38,000 Delhaize Freres et Cie 'Le Lion' S.A.... 1,543
---------
CANADA (0.7%)
+200,000 Canadian Pioneer Energy................. 456
70,000 Northern Reef Exploration Ltd........... 130
---------
586
---------
DENMARK (0.1%)
+1,200 Unidanmark A/S, Class A (Registered).... 46
---------
FRANCE (5.5%)
1,050 Bongrain S.A............................ 555
+12,000 Credit Lyonnais CDI..................... 994
18,573 Elf Aquitaine........................... 1,308
+5,500 Legris Industries S.A................... 339
7,200 Precision Mecaniques Labinal S.A........ 917
6,000 Sediver S.A............................. 247
---------
4,360
---------
GERMANY (8.0%)
4,700 BASF AG................................. 957
5,372 Bayer AG................................ 1,245
18,000 Bremer Vulkan Verbund AG................ 1,106
1,000 Karstadt AG............................. 365
2,212 Mannesmann AG........................... 600
2,764 Sinn AG................................. 593
+3,825 Varta AG................................ 716
1,910 Veba AG................................. 662
260 Volkswagen AG........................... 71
---------
6,315
---------
HONG KONG (0.9%)
220,000 Jardine Strategic Holdings, Inc......... 722
---------
IRELAND (2.8%)
710,680 Anglo Irish Bank Corp. plc.............. 604
73,900 Arnotts plc............................. 257
470,000 Avonmore Foods plc, Class A............. 894
230,000 Green Property plc...................... 473
---------
2,228
---------
ITALY (3.2%)
500,000 Stet Di Risp (NCS)...................... 1,186
36,240 Stet-Societa Finanziaria Telefonica..... 107
620,000 Telecom Italia S.p.A. Di Risp (NCS)..... 1,237
---------
2,530
---------
JAPAN (9.8%)
80,000 Fuji Photo Film Ltd..................... 1,855
24,000 Hitachi Ltd............................. 238
110,000 Kao Corp................................ 1,248
800 Murata Manufacturing Co., Ltd........... 31
130,000 Nichido Fire & Marine Insurance Co...... 1,126
18,000 Sony Corp............................... 1,021
30,000 Stanley Electric Co..................... 227
72,100 Sumitomo Rubber Industries.............. 700
5,000 TDK Corp................................ 243
30,000 Toyo Seikan Kaisha Ltd.................. 1,000
---------
7,689
---------
NETHERLANDS (8.2%)
46,222 ABN Amro Holdings N.V................... 1,607
2,050 Hollandsche Beton Groep N.V............. 317
31,393 Internationale Nederlanden Groep N.V.... 1,484
30,000 Koninklijke Van Ommern N.V.............. 788
+15,160 Nedlloyd Groep N.V...................... 497
15,500 Oce-Van Der Grinten N.V................. 694
37,690 Philips Electronics N.V................. 1,117
---------
6,504
---------
SPAIN (1.7%)
112,300 Telefonica Nacional de Espana S.A....... 1,328
---------
SWEDEN (1.4%)
+188,000 Skandinaviska Enskilda Banken, Class
A..................................... 1,075
---------
SWITZERLAND (5.5%)
+450 Ascom Holdings AG (Bearer).............. 478
500 Bobst AG (Bearer)....................... 577
1,200 Ciba-Geigy AG (Registered).............. 716
700 Forbo Holdings AG (Registered).......... 588
250 Grands Magasins Jelmoli (Bearer)........ 140
450 Grands Magasins Jelmoli (Registered).... 46
780 Holderbank Sin Glarus (Bearer).......... 591
195 Kuoni Riesebuero AG (Participating
Certificates)......................... 252
600 Magazine Globus (Participating
Certificates)......................... 359
70 Nestle S.A. (Registered)................ 67
600 Schweizerische Industrie-Gesellschaft
Holdings (Registered)................. 550
---------
4,364
---------
UNITED KINGDOM (12.7%)
700,000 ASDA Group plc.......................... 740
101,443 Barclays plc............................ 970
165,000 Bass plc................................ 1,330
265,000 Christian Salvesen plc.................. 1,129
200,000 Forte plc............................... 752
196,000 Hillsdown Holdings plc.................. 550
219,726 John Mowlem & Co. plc................... 348
80,000 Kwik Save Group plc..................... 689
180,000 Matthew (Bernard) plc................... 322
49,900 McAlpine (Alfred) plc................... 134
+653,333 Pentos plc.............................. 148
93,333 Perry Group plc......................... 235
257,157 Pilkington plc.......................... 669
60,674 Rolls-Royce plc......................... 171
130,000 Tate & Lyle plc......................... 861
52,000 Unilever plc............................ 943
+260,200 Wembley plc............................. 20
---------
10,011
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
61
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- --------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO (CONT).
- --------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------
UNITED STATES (36.2%)
+89,000 Addington Resources, Inc................ $ 868
10,500 Aluminum Company of America............. 910
30,000 American Pacific Corp................... 210
43,800 American Premier Underwriters, Inc...... 1,133
17,050 AMR Corp................................ 908
59,975 Aviall, Inc............................. 457
50,500 Beazer Homes USA, Inc................... 587
7,900 Boise Cascade Corp...................... 211
23,000 Brooklyn Bancorp, Inc................... 696
+150,000 Cadiz Land Co., Inc..................... 778
48,100 Comsat Corp............................. 896
+44,500 Cray Research, Inc...................... 701
+60,000 Data General Corp....................... 600
+110,000 Egghead, Inc............................ 1,292
48,100 Enhance Financial Services Group,
Inc................................... 823
24,000 Gap, Inc................................ 732
+110,000 GenRad, Inc............................. 591
16,000 Georgia Pacific Corp.................... 1,144
31,200 GFC Financial Corp...................... 991
+20,100 Hartmarx Corp........................... 118
50,000 Johnstown America Industries, Inc....... 819
+31,000 Kaiser Steel Resources, Inc............. 194
31,500 Mellon Bank Corp........................ 965
+65,000 Mercer International, Inc............... 886
42,500 Midlantic Corp.......................... 1,126
21,600 MMI Cos., Inc........................... 343
20,600 National Gypsum Co...................... 839
+20,000 Pacific Bank N.A. (New)................. 255
15,000 Paco Pharmaceutical Services, Inc....... 131
20,000 Philip Morris Cos., Inc................. 1,150
12,000 Prime Retail, Inc....................... 159
+32,000 Rohr, Inc............................... 332
35,000 Ryder Systems, Inc...................... 770
52,000 Sierra Tucson Cos., Inc................. 149
25,000 Sun Co., Inc............................ 719
+20,000 Sun Microsystems, Inc................... 710
+25,000 Team, Inc............................... 47
13,100 Tecumseh Products Co., Class A.......... 589
+98,400 Unionfed Financial Corp. (New).......... 43
29,200 US Shoe Corp............................ 548
+20,000 UST Corp................................ 205
55,000 Waban, Inc.............................. 976
+270,000 WorldCorp, Inc.......................... 1,958
---------
28,559
---------
TOTAL COMMON STOCKS (Cost $77,013)................. 78,569
---------
CONVERTIBLE PREFERRED SECURITIES (0.0%)
HONG KONG (0.0%)
21,000 Jardine Strategic Holdings, Inc. IDR,
7.50%, 5/07/97........................ 26
---------
NETHERLANDS (0.0%)
293 ABN Amro Holdings N.V................... 1
---------
TOTAL CONVERTIBLE PREFERRED SECURITIES (Cost $23).. 27
---------
NO. OF VALUE
WARRANTS (000)
- ------------------------------------------------------------
WARRANTS (0.0%)
NETHERLANDS (0.0%)
3,024 Internationale Nederlanden Groep N.V.
expiring 3/15/01.................... $ 6
---------
SWITZERLAND (0.0%)
500 Forbo Holdings (Registered), expiring
11/1/95............................. 1
1,250 Grands Magasins Jelmoli (Bearer),
expiring 3/29/96.................... 2
450 Grands Magasins Jelmoli (Registered),
expiring 3/29/96.................... 1
---------
4
---------
TOTAL WARRANTS (Cost $2)............................ 10
---------
TOTAL FOREIGN & US SECURITIES (99.6%) (Cost $77,038). 78,606
---------
FACE
AMOUNT
(000)
- ------------
SHORT-TERM INVESTMENT (2.5%)
REPURCHASE AGREEMENT (2.5%)
$ 2,008 U.S. Trust 5.50% dated 12/30/94, due
1/03/95 to be repurchased at $2,009,
collateralized by $2,085 United
States Treasury Notes, 3.875%, due
3/31/95, valued at $2,077 (Cost
$2,008)............................. 2,008
---------
FOREIGN CURRENCY (0.1%)
BF 401 Belgian Franc......................... 13
L 15 British Pound......................... 23
Y 1,138 Japanese Yen.......................... 11
---------
TOTAL FOREIGN CURRENCY (Cost $47)................... 47
---------
TOTAL INVESTMENTS (102.2%) (Cost $79,093)........... 80,661
---------
OTHER ASSETS (0.3%)
Cash.................................... $ 3
Dividends Receivable.................... 167
Foreign Withholding Tax Reclaim
Receivable............................. 35
Other................................... 6 211
---------
LIABILITIES (-2.5%)
Payable for Investments Purchased....... (1,751)
Investment Advisory Fees Payable........ (115)
Administrative Fees Payable............. (10)
Custodian Fees Payable.................. (8)
Unrealized Loss on Forward Foreign
Currency Contract...................... (2)
Directors' Fees & Expenses.............. (1)
Other Liabilities....................... (50) (1,937)
--------- ---------
NET ASSETS (100%)......................... $ 78,935
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 5,889,277 outstanding $.001 par value
shares (authorized 500,000,000 shares)............. $13.40
------
------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
62
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO (CONT).
- ------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at
December 31, 1994, the Portfolio is to receive foreign
currency in exchange for US dollars as indicated below:
IN
CURRENCY TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
- ----------- ----- ----------- ---------- ----- ---------------
$136 $ 136 1/03/95 A$ 173 $ 134 $ (2)
----- ----- --
----- ----- --
- ------------------------------------------------------------
+ -- Non-income producing securities
IDR -- International Depositary Receipt
NCS -- Non Convertible Shares
A$ -- Australian Dollar
- ------------------------------------------------------------
SUMMARY OF FOREIGN & US SECURITIES BY INDUSTRY CLASSIFICATION
(UNAUDITED)
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ------------------------------------------------------------
Capital Equipment..................... $ 15,004 19.0%
Consumer Goods........................ 11,592 14.7
Energy................................ 4,143 5.2
Finance............................... 18,120 23.0
Materials............................. 7,258 9.2
Multi-Industry........................ 4,601 5.8
Services.............................. 17,888 22.7
--------- -----
$ 78,606 99.6%
--------- -----
--------- -----
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
63
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- --------------------------------------------------------------
THE GOLD PORTFOLIO
- --------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------
COMMON STOCKS (91.0%)
AUSTRALIA (15.9%)
200,000 Acacia Resources Ltd.................... $ 365
500,000 Central Norseman Gold Corporation
Ltd................................... 310
+418,000 Delta Gold N.L.......................... 914
462,100 Gold Mines of Kalgoorlie Ltd............ 358
390,000 Great Central Mines N.L................. 832
25,000 Great Central Mines N.L. ADR............ 150
321,000 Newcrest Mining Ltd..................... 1,431
+500,000 Wiluna Mines Ltd........................ 446
---------
4,806
---------
CANADA (41.3%)
98,047 American Barrick Resources Corp......... 2,182
230,400 Bema Gold Corp.......................... 411
+25,000 BGR Precious Metals, Inc., Class A...... 250
100,000 Bolivar Goldfields Ltd.................. 168
60,000 Cambior, Inc............................ 690
+500,000 Campbell Resources, Inc................. 267
+105,800 Dakota Mining Corp...................... 145
102,500 Echo Bay Mines Ltd...................... 1,090
126,700 Goldcorp., Inc., Class A................ 711
131,300 Hemlo Gold Mines, Inc................... 1,329
45,500 Kinross Gold Corp....................... 235
351,500 Miramar Mining.......................... 1,504
56,946 Placer Dome, Inc........................ 1,239
+80,600 Prime Resource Group, Inc............... 582
367,814 Royal Oak Mines, Inc.................... 1,195
+75,000 TVX Gold, Inc........................... 508
---------
12,506
---------
UNITED STATES (33.8%)
+86,200 Amax Gold, Inc.......................... 517
52,314 Battle Mountain Gold Co................. 575
125,000 Freeport McMoran, Inc................... 2,219
2,266 Freeport McMoran Copper & Gold, Inc.,
Class A............................... 49
97,400 Gold Reserve Corp....................... 823
+45,950 Helca Mining Co......................... 465
72,700 Homestake Mining Co..................... 1,245
63,800 Newmont Gold Co......................... 2,273
10,000 Newmont Mining Corp..................... 360
+35,985 Pegasus Gold, Inc....................... 409
100,000 Santa Fe Pacific Gold Corp.............. 1,288
---------
10,223
---------
TOTAL COMMON STOCKS (Cost $30,257)................. 27,535
---------
NO. OF
WARRANTS
- ---------
WARRANTS (0.1%)
UNITED STATES (0.1%)
25,000 Gold Reserve Corp., expiring 3/15/95
(Cost $0)........................... 18
---------
FACE VALUE
AMOUNT (000)
- ------------------------------------------------------------
CONVERTIBLE BONDS (1.9%)
CANADA (1.3%)
+++**$400 Bema Gold Corp. 7.50%, 9/28/99.......... $ 404
---------
UNITED STATES (0.6%)
250 Canyon Resources 6.00%, 6/01/98......... 177
---------
TOTAL CONVERTIBLE BONDS (Cost $686)................ 581
---------
TOTAL FOREIGN & US SECURITIES (93.0%) (Cost
$30,943)........................................... 28,134
---------
SHORT-TERM INVESTMENT (8.4%)
REPURCHASE AGREEMENT (8.4%)
2,540 U.S. Trust 5.50%, dated 12/30/94, due
1/03/95 to be repurchased at $2,541,
collateralized by $2,640 United States
Treasury Notes, 3.875%, due 3/31/95,
valued at $2,629 (Cost $2,540)........ 2,540
---------
TOTAL INVESTMENTS (101.4%) (Cost $33,483).......... 30,674
---------
OTHER ASSETS (0.1%)
Interest Receivable...................... $ 10
Other.................................... 1 11
--------
LIABILITIES (-1.5%)
Payable for Investments Purchased........ (317)
Payable for Portfolio Shares Redeemed.... (40)
Investment Sub-Advisory Fees Payable..... (29)
Investment Advisory Fees Payable......... (14)
Administrative Fees Payable.............. (4)
Custodian Fees Payable................... (3)
Directors' Fees & Expenses............... (1)
Other Liabilities........................ (34) (442)
--------- --------
NET ASSETS (100%)......................... $ 30,243
--------
--------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 3,313,487 outstanding $.001 par value
shares (authorized 500,000,000 shares)......... . $9.13
- ------------------------------------------------------------
+ -- Non-income producing securities
+++ -- Security is subject to delayed delivery -- See Note A-6
** -- Security is valued at fair value -- See Note A-1
ADR -- American Depositary Receipt
- ------------------------------------------------------------
SUMMARY OF FOREIGN & US SECURITIES BY INDUSTRY CLASSIFICATION
(UNAUDITED)
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- -----------------------------------------------------------------
Gold Mines............................. $ 28,134 93.0%
--------- ---
--------- ---
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
GOLD PORTFOLIO
64
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ----------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ----------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO
- ----------------------------------------------------------
VALUE
SHARES (000)
- ----------------------------------------------------------
COMMON STOCKS (88.3%)
AUSTRALIA (4.0%)
3,000,000 Brambles Industries Ltd........... $ 28,664
3,000,000 CSR Ltd........................... 10,354
+1,500,000 McPhersons Ltd.................... 256
3,934,882 Westpac Banking Corp.............. 13,244
---------
52,518
---------
BELGIUM (1.7%)
+63,700 Arbed S.A......................... 9,552
155,500 Delhaize Freres et Cie, 'Le Lion',
S.A............................. 6,316
160,000 G.I.B. Holdings, Ltd.............. 6,317
2,156 G.I.B. Holdings, Ltd. (New)....... 84
---------
22,269
---------
CANADA (0.4%)
+273,000 Cominco Ltd....................... 4,842
---------
DENMARK (1.1%)
236,000 Danisco........................... 8,422
+140,000 Unidanmark A/S, Class A
(Registered).................... 5,387
---------
13,809
---------
FINLAND (1.5%)
350,000 Huhtamaki Oy, Series 1............ 11,603
+361,000 Kansallis-Osake Pankki............ 422
721,000 Pohjola Insurance Co., Ltd., Class
B............................... 7,856
---------
19,881
---------
FRANCE (5.6%)
7,200 Bongrain S.A...................... 3,804
111,560 Cie de Saint Gobain............... 12,834
+148,000 Credit Lyonnais CDI............... 12,256
186,724 Elf Aquitaine..................... 13,150
25,800 Salomon S.A., Series A............ 10,320
+242,500 Thomson CSF....................... 7,260
224,170 Total S.A., Class B............... 13,028
---------
72,652
---------
GERMANY (10.3%)
110,000 BASF AG........................... 22,392
105,000 Bayer AG.......................... 24,337
105,000 Bremer Vulkan Verbund AG.......... 6,453
46,200 Commerzbank AG.................... 9,739
16,700 Hoechst AG........................ 3,520
55,000 Karstadt AG....................... 20,063
73,125 Mannesmann AG..................... 19,828
+17,030 Varta AG.......................... 3,189
75,000 Veba AG........................... 25,993
---------
135,514
---------
HONG KONG (1.9%)
90,600 China Light & Power Co. Ltd....... 427
7,300,000 Jardine Strategic Holdings,
Inc............................. 23,964
---------
24,391
---------
ITALY (3.3%)
2,910,000 Olivetti Di Risp (NCS)............ $ 2,781
2,568,000 SME Meridonale.................... 6,329
9,000,000 Stet Di Risp (NCS)................ 21,348
4,720,000 Telecom Italia S.p.A.............. 12,287
---------
42,745
---------
JAPAN (18.4%)
470,000 Aisin Seiki Co., Ltd.............. 6,559
800,000 Canon, Inc........................ 13,574
1,259,000 Daibiru Corp...................... 13,272
2,700 East Japan Railway Co............. 13,500
1,650,000 Fuji Photo Film, Ltd.............. 38,268
1,700,000 Hitachi Ltd....................... 16,880
1,180,000 Kao Corp.......................... 13,388
600,000 Kirin Brewery Co., Ltd............ 6,687
1,440,000 Matsushita Electric Industries
Ltd............................. 23,711
81,400 Murata Manufacturing Co., Ltd..... 3,146
2,302,000 Nichido Fire & Marine Insurance
Co.............................. 19,946
660 Nippon Telegraph & Telephone
Corp............................ 5,838
290,000 Sony Corp......................... 16,451
672,000 Stanley Electric Co............... 5,074
1,946,700 Sumitomo Rubber Industries........ 18,900
165,000 TDK Corp.......................... 8,002
500,000 Toyo Seikan Kaisha................ 16,667
---------
239,863
---------
NETHERLANDS (11.8%)
769,281 ABN Amro Holdings N.V............. 26,739
112,500 Akzo Nobel N.V.................... 12,996
79,082 Hollandsche Beton Groep N.V....... 12,227
629,362 Internationale Nederlanden Groep
N.V............................. 29,748
247,500 Koninklijke Bijenkorf Beheer
N.V............................. 13,981
+153,050 Nedlloyd Groep N.V................ 5,020
256,600 Oce-Van Der Grinten N.V........... 11,493
1,122,000 Philips Electronics N.V........... 33,244
61,200 Randstad Holdings N.V............. 3,313
8,915 Unilever N.V...................... 1,043
30,500 Unilever N.V. (Certificate)....... 3,585
---------
153,389
---------
NEW ZEALAND (0.5%)
2,098,671 Fisher & Paykel Industries Ltd.... 6,113
392,500 Smith City Group Ltd.............. --
---------
6,113
---------
NORWAY (1.4%)
+2,265,000 Den Norske Bank A/S, Class A
Free............................ 6,065
600,000 Hafslund Nycomed, Class B......... 12,605
---------
18,670
---------
SINGAPORE (0.3%)
3,265,000 Neptune Orient Lines Ltd.
(Foreign)....................... 4,480
---------
SPAIN (2.8%)
404,600 Banco Espana de Credito S.A....... 2,843
202,300 Banco Espana de Credito S.A.
(New)........................... 1,422
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
65
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ----------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ----------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO (CONT.)
- ----------------------------------------------------------
VALUE
SHARES (000)
- ----------------------------------------------------------
SPAIN (CONT.)
+297,500 Grupo Duro Felguera S.A........... $ 1,379
889,500 Iberdrola SA...................... 5,487
294,000 Sevillana de Electricidad S.A..... 1,389
2,000,000 Telefonica Nacional de Espana
S.A............................. 23,628
---------
36,148
---------
SWEDEN (2.1%)
+2,251,800 Skandinaviska Enskilda Banken,
Class A......................... 12,879
+473,000 S.K.F. AB, Class B................ 7,798
401,200 Svenska Cellulosa AB, Class B..... 6,290
---------
26,967
---------
SWITZERLAND (7.9%)
29,583 Alusuisse-Lonza Holdings Ltd.
(Registered).................... 14,808
2,605 Ascom Holdings AG (Bearer)........ 2,767
25,000 Ciba-Geigy AG (Registered)........ 14,922
8,000 Forbo Holdings AG (Registered).... 6,725
1,650 Grands Magasins Jelmoli
(Bearer)........................ 921
19,585 Grands Magasins Jelmoli
(Registered).................... 2,006
33,210 Holderbank Glarus (Bearer)........ 25,152
27,740 Moevenpick Holding AG
(Participating Certificates).... 10,494
7,620 Nestle S.A. (Registered).......... 7,262
31,500 SwissAir (Registered)............. 18,536
---------
103,593
---------
UNITED KINGDOM (13.3%)
8,103,000 ASDA Group plc.................... 8,568
1,065,000 Associated British Foods plc...... 9,409
+1,360,104 Automated Security Holdings plc... 1,385
2,028,870 Barclays plc...................... 19,403
1,820,000 Bass plc.......................... 14,668
1,236,785 BOC Group plc..................... 13,639
786,436 British Aerospace plc............. 5,267
1,992,000 Christian Salvesen plc............ 8,488
2,748,221 Forte plc......................... 10,332
1,675,000 Grand Metropolitan plc............ 10,679
3,440,000 Hillsdown Holdings plc............ 9,646
4,841,985 John Mowlem & Co. plc............. 7,661
229,723 Kleinwort Benson plc.............. 1,990
1,100,000 Kwik Save Group plc............... 9,477
943,000 McAlpine (Alfred) plc............. 2,526
1,871,543 Pilkington plc.................... 4,867
290,500 Reckitt & Colman plc.............. 2,671
2,074,588 Rolls-Royce plc................... 5,834
3,345,205 Royal Insurance Holdings plc...... 14,620
755,000 Unilever plc...................... 13,696
---------
174,826
---------
TOTAL COMMON STOCKS (Cost $932,804)............ 1,152,670
---------
PREFERRED STOCKS (4.2%)
GERMANY (4.2%)
32,750 Fag Kugelficsher AG............... $ 4,757
100,000 RWE AG............................ 22,597
29,525 Spar Handels AG................... 6,195
100,000 Volkswagen AG..................... 21,983
---------
TOTAL PREFERRED STOCKS (Cost $47,077).......... 55,532
---------
CONVERTIBLE PREFERRED SECURITIES (0.3%)
HONG KONG (0.3%)
1,863,000 Jardine Strategic Holdings, Inc.
IDR, 7.50%, 5/07/97............. 2,268
---------
NETHERLANDS (0.0%)
1,506 ABN Amro Holdings N.V............. 6
2,196 International Nederlanden Groep
N.V............................. 9
---------
15
---------
TOTAL CONVERTIBLE PREFERRED SECURITIES (Cost
$1,923)........................................ 2,283
---------
CUMULATIVE UNSECURED LOAN STOCK (0.4%)
UNITED KINGDOM (0.4%)
863,500 Reckitt & Colman plc (Cost
$4,717)......................... 4,586
---------
NO. OF
RIGHTS
- -----------
RIGHTS (0.0%)
FINLAND (0.0%)
361,000 Kansallis-Osake Pankki (Cost
$0)............................. 179
---------
NO. OF
WARRANTS
- -----------
WARRANTS (0.0%)
SWITZERLAND (0.0%)
120 Ciba-Geigy AG, expiring 6/06/95... --
7,280 Forbo Holding AG (Registered),
expiring 11/01/95............... 18
---------
TOTAL WARRANTS (Cost $1).......................
18
---------
TOTAL FOREIGN SECURITIES (93.2%) (Cost
$986,522)...................................... 1,215,268
---------
FACE
AMOUNT
(000)
- ------------
SHORT-TERM INVESTMENTS (7.1%)
US GOVERNMENT AND AGENCY OBLIGATIONS (3.4%)
$ 20,000 US Treasury Bill, 1/19/95.......... 19,950
25,000 Federal Farm Credit Bank, Discount
Note, 5.95%, 1/03/95............. 24,985
---------
44,935
---------
REPURCHASE AGREEMENT (3.7%)
47,996 Goldman Sachs, 5.30%, dated
12/30/94, due 1/03/95, to be
repurchased at $48,010,
collateralized by $48,530 United
States Treasury Notes, 7.875%,
due 11/15/99, valued at
$49,074.......................... 47,996
---------
TOTAL SHORT-TERM INVESTMENTS (Cost $92,938)...... 92,931
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
66
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
FOREIGN CURRENCY (0.2%)
A$ 2 Australian Dollar................ $ 2
L 359 British Pound.................... 562
C$ 1,156 Canadian Dollar.................. 824
DK 2,156 Danish Krone..................... 355
DM 591 Deutsche Mark.................... 382
Y 110,270 Japanese Yen..................... 1,107
NG 18 Netherlands Guilder.............. 11
NZ$ 1 New Zealand Dollar............... --
-------
TOTAL FOREIGN CURRENCY (Cost $3,219).............. 3,243
---------
TOTAL INVESTMENTS (100.5%)
(Cost $1,082,679)............................... 1,311,442
---------
OTHER ASSETS (0.5%)
Cash.................................. $ 17
Dividends Receivable.................. 2,529
Receivable for Investments Sold....... 1,695
Receivable for Portfolio Shares
Sold................................. 1,458
Foreign Withholding Tax Reclaim
Receivable........................... 1,095
Interest Receivable................... 14
Other................................. 125 6,933
---------
LIABILITIES (-1.0%)
Payable for Investments Purchased..... (7,437)
Net Unrealized Loss on Forward Foreign
Currency Contracts................... (2,962)
Investment Advisory Fees Payable...... (2,434)
Payable for Portfolio Shares
Redeemed............................. (334)
Administrative Fees Payable........... (170)
Custodian Fees Payable................ (85)
Directors' Fees & Expenses............ (1)
Other Liabilities..................... (182) (13,605)
--------- ---------
NET ASSETS (100%).................................. $1,304,770
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 85,070,714 outstanding $.001 par
value shares (authorized 500,000,000 shares)..... $15.34
---------
---------
- ------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open
at December 31, 1994, the Portfolio is obligated to deliver
or is to receive foreign currency in exchange for US dollars
or foreign currency as indicated below:
IN NET
CURRENCY TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------- --------- ----------- ----------- --------- -------------
C$ 1,156 $ 824 1/03/95 $ 823 $ 823 $ (1)
$ 663 663 1/03/95 Y 66,214 664 1
DM 590 381 1/03/95 $ 381 381 --
$ 454 454 1/03/95 SK 3,389 456 2
L 3,407 5,333 1/18/95 $ 5,000 5,000 (333)
C$ 80,352 57,254 3/01/95 Y 5,750,000 58,170 916
Y 5,750,000 58,170 3/01/95 C$ 75,648 53,902 (4,268)
SP 4,100,000 30,860 6/01/95 $ 31,079 31,079 219
DM 40,000 26,096 8/09/95 $ 25,252 25,252 (844)
Y 6,115,000 63,832 9/27/95 $ 64,627 64,627 795
CHF 66,500 52,128 11/14/95 $ 52,749 52,749 621
FF 206,000 38,811 11/20/95 $ 38,741 38,741 (70)
--------- --------- -------------
$ 334,806 $ 331,844 $ (2,962)
--------- --------- -------------
--------- --------- -------------
- ------------------------------------------------------------
+ -- Non-income producing securities
IDR -- International Depositary Receipt
NCS -- Non Convertible Shares
L -- British Pound
C$ -- Canadian Dollar
DM -- Deutsche Mark
FF -- French Franc
SP -- Spanish Peseta
SK -- Swedish Krona
CHF -- Swiss Franc
Y -- Japanese Yen
The interest rate disclosed for the Federal Farm Credit Bank Discount Note
represents effective yield.
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
(UNAUDITED)
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ----------------------------------------------------------------
Capital Equipment................. $ 232,575 17.8%
Consumer Goods.................... 242,951 18.6
Energy............................ 59,475 4.6
Finance........................... 224,292 17.2
Materials......................... 214,019 16.4
Multi-Industry.................... 41,254 3.2
Services.......................... 200,702 15.4
--------- ---
$1,215,268 93.2%
--------- ---
--------- ---
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
67
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO
- ------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------
COMMON STOCKS (96.0%)
AUSTRALIA (10.7%)
990,079 Bains Harding Ltd.................... $ 560
2,430,385 BRL Hardy Ltd........................ 2,903
140,833 BRL Hardy Ltd. (New)................. 57
2,106,000 Burswood Property Trust.............. 2,156
2,351,732 Country Road Ltd..................... 2,152
+3,099,000 McPhersons Ltd....................... 529
1,096,000 Palmer Tube Mills Ltd................ 867
5,138,265 Parbury Ltd.......................... 2,590
1,249,957 S.E.A.S. Sapfor Ltd.................. 4,120
1,527,800 Solution 6 Holdings Ltd.............. 1,126
---------
17,060
---------
DENMARK (1.2%)
53,900 SYD-Sonderjylland Holdings........... 1,861
---------
FINLAND (2.5%)
85,500 Amer-Yhtymae Oy, Class A............. 1,480
180,000 Hartwall Oy, Class A................. 2,547
---------
4,027
---------
FRANCE (9.3%)
29,400 Dauphin O.T.A........................ 1,763
5,400 De Dietrich et Compagnie............. 2,893
4,980 Galeries Layfayette.................. 2,137
+39,000 Legris Industries S.A................ 2,400
24,500 Precision Mecaniques Labinal S.A..... 3,121
61,700 Sediver S.A.......................... 2,543
---------
14,857
---------
GERMANY (6.5%)
11,345 Duerr Beteiligungs AG................ 4,285
10,688 Sinn AG.............................. 2,291
+15,880 Varta AG............................. 2,973
2,210 Vossloh AG........................... 799
---------
10,348
---------
HONG KONG (1.0%)
5,200,000 Pico Far East Holdings Ltd........... 564
5,000,000 Tungtex Holdings Co., Ltd............ 582
1,218,000 Vitasoy International Holdings
Ltd................................ 421
---------
1,567
---------
IRELAND (3.2%)
1,042,003 Anglo Irish Bank Corp. plc (Irish
Pound Shares)...................... 886
275,110 Arnotts plc.......................... 957
990,000 Avonmore Foods plc, Class A.......... 1,882
687,000 Green Property plc................... 1,413
---------
5,138
---------
ITALY (1.7%)
34,200 Pininfarina S.p.A.................... 367
30,000 Safilo S.p.A......................... 187
444,000 Unicem Di Risp (NCS)................. 1,507
30,000 Vincenzo Zucchi S.p.A................ 161
212,500 Vincenzo Zucchi S.p.A. (NCS)......... $ 577
---------
2,799
---------
JAPAN (11.5%)
15,000 Daikin Manufacturing Ltd............. 316
231,000 Foster Electric Co., Ltd............. 1,749
707,000 Japan Oil Transportation............. 4,848
213,000 Japan Vilene Co., Ltd................ 1,495
99,000 Kansei Corp.......................... 937
87,000 Nifco, Inc........................... 1,328
179,000 Toc Co............................... 3,594
442,000 Tokai Senko K.K...................... 2,751
170,000 Toyoda Gosei Co...................... 1,417
---------
18,435
---------
NETHERLANDS (9.7%)
15,700 Ahrend Groep N.V..................... 1,645
11,790 Holdingsmij de Telegraaf N.V......... 1,359
23,000 Hollandsche Beton Groep N.V.......... 3,553
28,885 Industriemij Welna N.V............... 783
36,200 Konin Nijverdal-Ten Carte N.V........ 1,649
124,600 Koninklijke Van Ommeren N.V.......... 3,275
8,450 Polynorm N.V......................... 830
44,400 Randstad Holdings N.V................ 2,403
---------
15,497
---------
NEW ZEALAND (2.5%)
645,592 Fisher & Paykel Industries Ltd....... 1,881
359,600 Wilson & Horton Ltd.................. 2,060
---------
3,941
---------
NORWAY (2.0%)
9,100 Adelsten, Class B.................... 1,548
228,020 Oceanor.............................. 641
14,350 Simrad A/S Nokio, Class A............ 159
90,000 Simrad A/S Nokio, Class B............ 906
---------
3,254
---------
SPAIN (4.1%)
+65,500 Asturiana del Zinc S.A............... 712
61,693 Bodegas y Bebidas S.A................ 1,687
73,300 Gas y Electricidad S.A............... 3,108
25,545 Prosegur Comp Securidad S.A.......... 485
40,285 Viscofan Envolturas Celulosicas
S.A................................ 612
---------
6,604
---------
SWITZERLAND (14.1%)
3,385 Bobst AG (Bearer).................... 3,906
7,060 Elco Looser Holding AG
(Registered)....................... 2,698
885 Grands Magasins Jelmoli (Bearer)..... 494
3,800 Hero AG.............................. 1,844
995 Kuoni Riesebuero AG (Participating
Certificates)...................... 1,285
5,424 Magazine Globus (Participating
Certificates)...................... 3,245
5,850 Porst Holding AG (Bearer)............ 975
590 Schweizerische Industrie-Gesellschaft
Holdings (Bearer).................. 1,118
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP PORTFOLIO
68
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
SWITZERLAND (CONT.)
4,140 Schweizerische Industrie-Gesellschaft
Holdings (Registered).............. $ 3,797
+4,775 Zellweger Uster AG (Bearer).......... 3,284
---------
22,646
---------
UNITED KINGDOM (16.0%)
3,500,000 Anglo Irish Bank Corp. plc (British
Pound Shares)...................... 2,961
392,000 Asprey plc........................... 854
+1,449,216 Blagden Industries plc............... 2,338
212,000 Bluebird Toys plc.................... 760
447,000 Burtonwood Brewery plc............... 1,232
3,790,000 Casket plc........................... 1,544
214,300 Church & Co. plc..................... 1,611
162,120 Davis Service Group plc.............. 610
+3,045,850 Donelon Tyson plc.................... 573
952,000 GEI International plc................ 1,148
212,000 Hadleigh Industries Group plc........ 442
390,000 Hornby Group plc..................... 819
877,294 John Mowlem & Co. plc................ 1,388
206,335 Mallett plc.......................... 272
854,805 Matthew (Bernard) plc................ 1,527
98,000 Moss Bros. Group plc................. 520
32,000 Nurdin & Peacock plc................. 82
117,905 Partridge Fine Arts plc.............. 144
+2,659,393 Pentos plc........................... 604
345,526 Perry Group plc...................... 871
3,120,000 Shandwick plc........................ 1,979
691,000 Sketchley plc........................ 1,007
1,370,000 The 600 Group plc.................... 1,717
418,735 Waterman Partnership Holdings plc.... 354
+1,497,300 Wembley plc.......................... 117
804,695 YRM plc.............................. 214
---------
25,688
---------
TOTAL COMMON STOCKS (Cost $155,094).............. 153,722
---------
PREFERRED STOCKS (1.7%)
GERMANY (1.7%)
1,385 Jil Sander AG........................ 791
7,745 Shaerf AG............................ 1,925
---------
TOTAL PREFERRED STOCKS (Cost $2,710)............. 2,716
---------
NO. OF
RIGHTS
- ----------
RIGHTS (0.0%)
SPAIN (0.0%)
**61,693 Bodegas y Bebidas S.A., expiring
1/24/95 (Cost $0).................. 7
---------
NO. OF
WARRANTS
- ----------
WARRANTS (0.0%)
HONG KONG (0.0%)
452,000 Pico Far East Holdings Ltd, expiring
4/30/96 (Cost $0).................. 6
---------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
CONVERTIBLE DEBENTURES (0.2%)
ITALY (0.2%)
IL 518,000 Mediobanca S.p.A. 5.50%, 1/01/00
(Cost $328)........................ $ 275
---------
TOTAL FOREIGN SECURITIES (97.9%) (Cost
$158,132)........................................ 156,726
---------
SHORT-TERM INVESTMENT (2.3%)
REPURCHASE AGREEMENT (2.3%)
$ 3,725 U.S. Trust 5.50%, dated 12/30/94, due
1/03/95, to be repurchased at
$3,727, collateralized by $3,875
United States Treasury Notes,
3.875%, due 4/30/95, valued at
$3,845 (Cost $3,725)............... 3,725
---------
FOREIGN CURRENCY (0.2%)
L 140 British Pound........................ 220
Y 3 Japanese Yen......................... --
CHF 85 Swiss Franc.......................... 65
---------
TOTAL FOREIGN CURRENCY (Cost $285)............... 285
---------
TOTAL INVESTMENTS (100.4%) (Cost $162,142)....... 160,736
---------
OTHER ASSETS (0.2%)
Dividends Receivable................... $ 156
Foreign Withholding Tax Reclaim
Receivable............................ 109
Interest Receivable.................... 9
Receivable for Portfolio Shares Sold... 3
Other.................................. 13 290
------
LIABILITIES (-0.6%)
Investment Advisory Fees Payable....... (302)
Payable for Investments Purchased..... (285)
Net Unrealized Loss on Forward Foreign
Currency Contracts................... (139)
Bank Overdraft........................ (86)
Custodian Fees Payable................ (21)
Administrative Fees Payable........... (20)
Directors' Fees & Expenses............ (1)
Other Liabilities..................... (71) (925)
------- ---------
NET ASSETS (100%)....................... $ 160,101
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 10,566,294 outstanding $.001 par
value shares (authorized 500,000,000 shares)...... $15.15
---------
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP PORTFOLIO
69
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at
December 31, 1994, the Portfolio is obligated to deliver or
is to receive foreign currency in exchange for US dollars or
foreign currency as indicated below:
IN NET
CURRENCY TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------ --------- ----------- --------- --------- -------------
Y 400,000 $ 4,047 3/01/95 C$ 5,262 $ 3,750 $ (297)
C$ 5,590 3,983 3/01/95 Y400,000 4,047 64
Y 725,000 7,568 9/27/95 $ 7,662 7,662 94
--------- --------- -----
$ 15,598 $ 15,459 $ (139)
--------- --------- -----
--------- --------- -----
- ------------------------------------------------------------
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
NCS -- Non Convertible Shares
C$ -- Canadian Dollar
IL -- Italian Lira
Y -- Japanese Yen
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
(UNAUDITED)
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ----------------------------------------------------------------------
Capital Equipment........................... $ 41,203 25.7%
Consumer Goods.............................. 32,010 20.0
Energy...................................... 3,819 2.4
Finance..................................... 13,368 8.4
Materials................................... 20,684 12.9
Multi-Industry.............................. 3,094 1.9
Services.................................... 42,548 26.6
--------- -----
$ 156,726 97.9%
--------- -----
--------- -----
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP PORTFOLIO
70
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- --------------------------------------------------------------
THE JAPANESE EQUITY PORTFOLIO
- --------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------
COMMON STOCKS (97.6%)
CAPITAL EQUIPMENT (19.9%)
80,000 Amada Co., Ltd......................... $ 1,004
40,000 Daifuku................................ 675
91,000 Daikin Industries Ltd.................. 808
31,000 Fuji Machine Manufacturing Co.......... 1,021
100,000 Kyudenko Co., Ltd...................... 1,255
100,000 Matsui Construction.................... 859
120,000 Mitsubishi Heavy Industries Ltd........ 916
56,000 Nifco, Inc............................. 855
80,000 Ricoh Co., Ltd......................... 795
100,000 Taisei Corp., Ltd...................... 620
111,000 Teijin Seiki Co., Ltd.................. 641
100,000 Tsubakimoto Chain...................... 542
---------
9,991
---------
CONSUMER GOODS (16.5%)
40,000 Aoyama Trading Co...................... 912
35,000 Fuji Photo Film Ltd.................... 812
15,000 Ito Yokado Co., Ltd.................... 803
100,000 Japan Vilene Co., Ltd.................. 702
20,000 Nintendo Corp. Ltd..................... 1,082
150,000 Nissan Motor Co........................ 1,239
25,000 Sankyo Co., Ltd........................ 622
130,000 Suzuki Motor Co., Ltd.................. 1,527
30,000 Yamanouchi Pharmaceutical Co........... 617
---------
8,316
---------
ELECTRICAL & ELECTRONICS (24.7%)
44,000 CMK.................................... 826
170,000 Hitachi Ltd............................ 1,688
12,000 Kyocera Corp........................... 890
100,000 Matsushita Electric Industries Ltd..... 1,647
80,000 Mitsumi Electric Co., Ltd.............. 1,124
100,000 NEC Corp............................... 1,145
34,000 Nitto Denko Corp....................... 539
16,000 Sony Corp.............................. 908
120,000 Stanley Electric Co.................... 906
27,000 TDK Corp............................... 1,309
200,000 Toshiba Corp........................... 1,452
---------
12,434
---------
FINANCE (13.5%)
85,000 Daiwa Securities Co., Ltd.............. 1,229
48,000 Keihanshin Real Estate................. 429
80,000 Mitsubishi Estate Co., Ltd............. 859
85,000 Nichido Fire & Marine Insurance........ 736
60,000 Nomura Securities Co................... 1,247
64,000 Sumitomo Corporation's Leasing......... 598
95,000 Sumitomo Marine & Fire Insurance....... 820
150,000 Sumitomo Realty & Development.......... 889
---------
6,807
---------
MATERIALS (9.5%)
50,000 Asahi Tec Corp......................... 470
120,000 Kaneka Corp............................ 898
100,000 Kansei Corp............................ 947
100,000 Okura Industrial Co., Ltd.............. 813
98,000 Sekisui Chemical Co.................... 974
20,000 Toyo Seikan Kaisha..................... 667
---------
4,769
---------
MULTI-INDUSTRY (1.7%)
14,000 FamilyMart............................. 864
---------
SERVICES (11.8%)
50,000 Dai Nippon Printing Co., Ltd........... $ 853
60,000 Inabata & Co........................... 491
85,000 Nippon Konpo Unyu Soko................. 777
47,000 Nishio Rent All Co..................... 1,175
26,000 Sangetsu Co., Ltd...................... 783
16,000 Secom Co., Ltd......................... 996
130,000 Tokyu Corp............................. 861
---------
5,936
---------
TOTAL COMMON STOCKS (Cost $49,593)................. 49,117
---------
FACE
AMOUNT
(000)
- ------------
SHORT-TERM INVESTMENTS (2.2%)
REPURCHASE AGREEMENT (1.6%)
$ 829 U.S. Trust, 5.50%, dated 12/30/94, due
1/03/95, to be repurchased at $830,
collateralized by $865 United States
Treasury Notes, 3.875%, due,
3/31/95, valued at $861............. 829
---------
TIME DEPOSIT (0.6%)
Y 28,842 Sanwa Bank 2.25%, 1/04/95............. 290
---------
TOTAL SHORT-TERM INVESTMENTS (Cost $1,119).......... 1,119
---------
FOREIGN CURRENCY (0.2%)
Y 11,560 Japanese Yen (Cost $116).............. 116
---------
TOTAL INVESTMENTS (100%) (Cost $50,828)............. 50,352
---------
OTHER ASSETS (0.6%)
Unrealized Gain on Forward Foreign
Currency Contract...................... $ 261
Dividends Receivable.................... 14
Other................................... 5 280
---------
LIABILITIES (-0.6%)
Payable for Portfolio Shares Redeemed... (163)
Investment Advisory Fees Payable........ (76)
Administrative Fees Payable............. (7)
Custodian Fees Payable.................. (6)
Directors' Fees & Expenses Payable...... (1)
Other Liabilities....................... (47) (300)
--------- ---------
NET ASSETS (100%)....................................
$ 50,332
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 5,120,660 outstanding $.001 par value
shares (authorized 500,000,000 shares)............. $9.83
-----
-----
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at
December 31, 1994, the portfolio is obligated to deliver
foreign currency in exchange for US dollars as indicated
below:
CURRENCY TO IN EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN
(000) (000) DATE (000) (000) (000)
- ------------- --------- ----------- ------------ --------- ---------------
Y 1,795,000 $ 18,363 5/22/95 $ 18,624 $ 18,624 $ 261
--------- ------------ --------- -----
--------- ------------ --------- -----
- ------------------------------------------------------------
Y -- Japanese Yen
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
JAPANESE EQUITY PORTFOLIO
71
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
COMMON STOCKS (95.6%)
CAPITAL GOODS/CONSTRUCTION (0.9%)
ELECTRICAL EQUIPMENT (0.3%)
10,000 Molex, Inc., Class A.................. $ 310
---------
ENVIRONMENTAL CONTROLS (0.6%)
+48,000 Western Waste Industries.............. 720
---------
TOTAL CAPITAL GOODS/CONSTRUCTION............... 1,030
---------
CONSUMER CYCLICAL (22.9%)
AUTOMOTIVE (1.6%)
60,000 Pep Boys-Manny, Moe & Jack............ 1,860
---------
BROADCAST-RADIO & TELEVISION (1.3%)
44,700 Lee Enterprises, Inc.................. 1,542
---------
FOOD SERVICE & LODGING (8.1%)
+100,000 Bertucci's, Inc....................... 1,100
+59,700 Brinker International, Inc............ 1,082
+80,000 Cheesecake Factory, Inc............... 1,220
90,000 Cracker Barrel Old Country Store, Inc. 1,642
48,700 Hospitality Franchise Systems, Inc.... 1,291
+75,000 ShoLodge, Inc......................... 1,594
+80,000 Sonic Corp............................ 1,620
---------
9,549
---------
GAMING & LODGING (0.0%)
4,740 National Gaming Corp.................. 57
---------
PUBLISHING (1.3%)
+29,700 Scholastic Corp....................... 1,507
---------
RETAIL - GENERAL (10.6%)
+70,000 Bed, Bath & Beyond, Inc............... 2,100
80,000 Central Tractor Farm & Country, Inc... 1,160
+70,000 Dress Barn, Inc....................... 744
+70,000 General Nutrition Cos., Inc........... 2,030
65,000 Heilig Meyers Co...................... 1,641
+40,000 Kohl's Corp........................... 1,590
+80,000 Lechters, Inc......................... 1,340
+80,000 Sunglass Hut International, Inc....... 1,840
---------
12,445
---------
TOTAL CONSUMER CYCLICAL........................ 26,960
---------
CONSUMER STAPLES (26.4%)
DRUGS (6.2%)
+60,000 Alza Corp. (Delaware), Class A........ 1,080
50,000 Forest Laboratories, Inc.............. 2,331
+5,400 Genzyme Corp. - Tissue Repair......... 20
+40,000 Genzyme Corp. - General Division...... 1,240
+80,000 Immucor, Inc.......................... 400
+50,000 Scherer (R.P.) Corp................... 2,269
---------
7,340
---------
HEALTH CARE SUPPLIES & SERVICES (20.2%)
50,000 Arrow International, Inc.............. 1,687
41,600 Ballard Medical Products.............. 442
+100,000 Biomet, Inc........................... 1,375
+50,000 Coastal Healthcare Group, Inc......... $ 1,369
+80,000 Haemonetics Corp...................... 1,380
+47,400 Health Management, Inc................ 847
+65,000 Health Management Systems, Inc........ 2,112
+60,000 Healthsource, Inc..................... 2,453
+55,000 HEALTHSOUTH Rehabilitation Corp....... 2,035
+50,000 IDEXX Laboratories, Inc............... 1,800
+75,000 Mariner Health Group, Inc............. 1,622
+50,000 Physician Corp. of America............ 1,025
+60,000 Quantum Health Resources, Inc......... 1,710
+65,000 Vencor, Inc........................... 1,812
+75,000 Vivra, Inc............................ 2,100
---------
23,769
---------
TOTAL CONSUMER STAPLES......................... 31,109
---------
FINANCE (7.4%)
BANKING (1.1%)
45,000 State Street Boston Corp.............. 1,282
---------
FINANCIAL SERVICES (3.8%)
100,000 CashAmerica Investments, Inc.......... 988
35,000 First Financial Management Corp....... 2,157
75,000 SEI Corp.............................. 1,256
---------
4,401
---------
INSURANCE (2.5%)
50,000 Mutual Risk Management Ltd............ 1,313
50,000 NAC Re Corp........................... 1,675
---------
2,988
---------
TOTAL FINANCE.................................. 8,671
---------
MATERIALS (3.7%)
MISCELLANEOUS MATERIALS & COMMODITIES (3.7%)
+85,000 Viking Office Products, Inc........... 2,593
90,000 X-Rite, Inc........................... 1,778
---------
TOTAL MATERIALS................................ 4,371
---------
SERVICES (9.4%)
PROFESSIONAL SERVICES (9.4%)
60,000 Cintas Corp........................... 2,100
+90,000 CUC International, Inc................ 3,015
110,000 G & K Services, Inc., Class A......... 1,829
+50,000 Medaphis Corp......................... 2,300
50,000 Premier Industrial Corp............... 1,181
+46,800 Vallen Corp........................... 643
---------
TOTAL SERVICES................................. 11,068
---------
TECHNOLOGY (24.9%)
ELECTRONICS (11.3%)
+39,200 Electroglas, Inc...................... 1,308
46,200 Fusion Systems Corp................... 1,213
+24,600 Level One Communications, Inc......... 369
60,000 Linear Technology, Inc................ 2,955
+62,000 Maxim Integrated Products, Inc........ 2,170
40,000 Sensormatic Electronics............... 1,440
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
72
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------
THE EMERGING GROWTH PORTFOLIO (CONT.)
- ------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------
ELECTRONICS (CONT.)
+65,000 Xilinx, Inc........................... $ 3,835
---------
13,290
---------
OFFICE EQUIPMENT (13.0%)
+70,000 BISYS Group, Inc...................... 1,549
+55,000 Compuware Corp........................ 1,966
+60,000 Concord EFS Corp...................... 1,485
+60,000 EMC Corp.............................. 1,298
+90,000 Informix Corp......................... 2,891
+50,000 Progress Software Corp................ 1,888
+50,000 SPS Transaction Services, Inc......... 1,312
+55,000 SunGard Data Systems, Inc............. 2,090
+20,000 Wall Data, Inc........................ 795
---------
15,274
---------
TELECOMMUNICATIONS (0.6%)
+40,000 Mobile Telecommunications Technologies
Corp................................ 780
---------
TOTAL TECHNOLOGY............................... 29,344
---------
TOTAL COMMON STOCKS (Cost $87,557)........... 112,553
---------
FACE
AMOUNT
(000)
- ---------
SHORT-TERM INVESTMENT (3.9%)
REPURCHASE AGREEMENT (3.9%)
$4,566 U.S. Trust, 5.50%, dated 12/30/94, due
1/03/95, to be repurchased at
$4,569, collateralized by $4,735
United States Treasury Notes 3.875%,
due 3/31/95-4/30/95, valued at
$4,712 (Cost $4,566)................ 4,566
---------
TOTAL INVESTMENTS (99.5%) (Cost $92,123)......... 117,119
---------
VALUE
(000)
- -------------------------------------------------------------
OTHER ASSETS (1.6%)
Cash................................... $ 1
Receivable for Portfolio Shares Sold... 1,784
Dividends Receivable................... 32
Interest Receivable.................... 1
Other.................................. 10 $ 1,828
---------
LIABILITIES (-1.1%)
Payable for Portfolio Shares
Redeemed.............................. (914)
Investment Advisory Fees Payable....... (289)
Payable for Investments Purchased...... (26)
Administrative Fees Payable............ (15)
Custodian Fees Payable................. (6)
Directors' Fees & Expenses............. (1)
Other Liabilities...................... (27) (1,278)
--------- ---------
NET ASSETS (100%)................................... $ 117,669
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 7,301,095 outstanding $.001 par
value shares (authorized 500,000,000 shares)...... $16.12
---------
---------
- ------------------------------------------------------------
+ -- Non-income producing securities
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
73
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- -------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- -------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO
- -------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------
COMMON STOCKS (88.2%)
CAPITAL GOODS/CONSTRUCTION (13.5%)
AEROSPACE & DEFENSE (10.4%)
17,700 General Dynamics Corp................. $ 770
28,600 General Motors Corp., Class H......... 998
22,100 Loral Corp............................ 837
21,900 McDonnell Douglas Corp................ 3,110
37,600 Rockwell International Corp........... 1,344
49,500 United Technologies Corp.............. 3,112
---------
10,171
---------
BUILDING & CONSTRUCTION (0.7%)
+34,700 USG Corp.............................. 677
---------
ELECTRICAL EQUIPMENT (1.6%)
30,000 General Electric Co................... 1,530
---------
MACHINERY (0.8%)
13,500 Caterpillar, Inc...................... 744
---------
TOTAL CAPITAL GOODS/CONSTRUCTION.................. 13,122
---------
CONSUMER-CYCLICAL (20.8%)
AUTOMOTIVE (4.5%)
42,800 Chrysler Corp......................... 2,097
39,500 Ford Motor Co......................... 1,106
34,200 Goodyear Tire & Rubber Co............. 1,150
---------
4,353
---------
BROADCAST-RADIO & TELEVISION (3.6%)
6,400 Capital Cities ABC, Inc............... 546
6,940 CBS, Inc.............................. 384
70,500 New World Communications.............. 828
31,700 Turner Broadcasting System, Inc.,
Class B............................. 519
+3,104 Viacom, Inc., Class A................. 129
+25,918 Viacom, Inc., Class B................. 1,053
---------
3,459
---------
FOOD SERVICE & LODGING (3.4%)
+41,150 Boston Chicken, Inc................... 715
65,100 Cracker Barrel Old Country Store,
Inc................................. 1,204
54,000 Hospitality Franchise Systems, Inc.... 1,431
---------
3,350
---------
GAMING & LODGING (1.4%)
+29,250 Mirage Resorts, Inc................... 600
4,950 National Gaming Corp.................. 59
+22,600 Promus Cos., Inc...................... 701
---------
1,360
---------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.8%)
17,700 Duracell International, Inc........... 768
---------
LEISURE RELATED (1.2%)
24,600 Eastman Kodak Co...................... 1,175
---------
PUBLISHING (1.5%)
12,100 Gannett Co., Inc...................... 644
22,600 Time Warner, Inc...................... 794
---------
1,438
---------
RETAIL-GENERAL (4.4%)
+50,800 Autozone, Inc......................... $ 1,232
+43,100 General Nutrition Cos., Inc........... 1,250
23,400 Home Depot, Inc....................... 1,076
20,800 Lowe's Cos., Inc...................... 723
---------
4,281
---------
TOTAL CONSUMER-CYCLICAL........................... 20,184
---------
CONSUMER-STAPLES (16.9%)
BEVERAGES & TOBACCO (8.1%)
45,500 Coca Cola Co.......................... 2,343
34,400 PepsiCo, Inc.......................... 1,247
46,400 Philip Morris Cos., Inc............... 2,668
+115,400 RJR Nabisco Holdings Corp............. 635
36,450 UST, Inc.............................. 1,011
---------
7,904
---------
DRUGS (3.5%)
21,700 Merck & Co., Inc...................... 828
17,750 Pfizer, Inc........................... 1,371
15,800 Schering-Plough Corp.................. 1,169
---------
3,368
---------
FOOD (1.9%)
10,500 Kellogg Co............................ 610
32,500 Ralcorp Holdings, Inc................. 723
9,900 Wrigley (Wm.) Jr. Co.................. 489
---------
1,822
---------
HEALTH CARE SUPPLIES & SERVICES (2.8%)
29,400 Columbia/HCA Healthcare Corp.......... 1,073
+6,800 Foundation Health Corp................ 211
+33,900 Humana, Inc........................... 767
15,900 United Healthcare Corp................ 717
---------
2,768
---------
PERSONAL CARE PRODUCTS (0.6%)
8,100 Gillette Co........................... 606
---------
TOTAL CONSUMER-STAPLES............................ 16,468
---------
DIVERSIFIED (2.0%)
57,000 AlliedSignal, Inc..................... 1,938
---------
ENERGY (4.1%)
COAL, GAS, & OIL (4.1%)
10,400 Exxon Corp............................ 632
13,900 Mobil Corp............................ 1,171
12,400 Royal Dutch Petroleum Co.............. 1,333
9,900 Tenneco, Inc.......................... 421
18,900 Williams Cos., Inc.................... 475
---------
TOTAL ENERGY...................................... 4,032
---------
FINANCE (18.1%)
BANKING (7.4%)
18,800 Citicorp.............................. 778
9,500 First Interstate Bancorp.............. 642
26,300 Morgan (J.P.) & Co., Inc.............. 1,473
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EQUITY GROWTH PORTFOLIO
74
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- -------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- -------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO (CONT.)
- -------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------
BANKING (CONT.)
29,800 Wells Fargo & Co...................... $ 4,321
---------
7,214
---------
FINANCIAL SERVICES (10.7%)
18,300 Dean Witter Discover & Co............. 620
68,400 Federal Home Loan Mortgage Corp....... 3,454
42,100 Federal National Mortgage
Association......................... 3,068
15,600 Franklin Resources, Inc............... 556
10,350 Loews Corp............................ 899
8,800 Salomon, Inc.......................... 330
25,900 Student Loan Marketing Association.... 842
19,400 Travelers, Inc........................ 631
---------
10,400
---------
TOTAL FINANCE..................................... 17,614
---------
MATERIALS (2.4%)
BUILDING MATERIALS & COMPONENTS (0.6%)
+13,800 Applied Material, Inc................. 583
---------
CHEMICALS (1.8%)
11,600 Hercules, Inc......................... 1,338
5,900 Monsanto Co........................... 416
---------
1,754
---------
TOTAL MATERIALS................................... 2,337
---------
SERVICES (1.0%)
PROFESSIONAL SERVICES (1.0%)
+27,800 CUC International, Inc................ 931
---------
TECHNOLOGY (9.4%)
COMPUTERS (2.1%)
+13,350 Cabletron Systems, Inc................ 621
+13,800 Compaq Computer Corp.................. 545
11,200 International Business Machines Corp.. 823
---------
1,989
---------
ELECTRONICS (4.6%)
15,850 Intel Corp............................ 1,012
8,800 Linear Technology, Inc................ 436
10,700 Motorola, Inc......................... 619
67,700 Watkins-Johnson Co.................... 2,014
+6,400 Xilinx, Inc........................... 379
---------
4,460
---------
SOFTWARE SERVICES (0.4%)
+9,600 Oracle System Corp.................... 424
---------
TELECOMMUNICATIONS (2.3%)
+15,900 Airtouch Communications............... 463
27,200 American Telephone & Telegraph Corp... 1,367
11,100 Telefonos de Mexico S.A. ADR, Class L. 455
---------
2,285
---------
TOTAL TECHNOLOGY................................ $ 9,158
---------
TOTAL COMMON STOCKS (Cost $84,907)................ 85,784
---------
NO. OF
RIGHTS
- ----------
RIGHTS (0.1%)
BROADCAST-RADIO & TELEVISION (0.1%)
+38,800 Viacom, Inc., expiring 7/07/95 (Cost
$168)............................... 44
---------
FACE
AMOUNT
(000)
- ----------
SHORT-TERM INVESTMENTS
US GOVERNMENT AND AGENCY OBLIGATIONS (12.4%)
$ 4,500 Federal Farm Credit Bank
Discount Note 5.95%, 1/03/95........... 4,497
7,600 Federal Home Loan Bank
Discount Note 5.75%, 1/03/95........... 7,600
---------
TOTAL US GOVERNMENT AND AGENCY OBLIGATIONS (Cost
$12,096)......................................... 12,097
---------
TOTAL INVESTMENTS (100.7%) (Cost $97,171)............ 97,925
---------
OTHER ASSETS (2.1%)
Cash.................................... $ 45
Receivable for Investments Sold......... 1,080
Receivable for Portfolio Shares Sold.... 705
Dividends Receivable.................... 168
Other................................... 8 2,006
---------
LIABILITIES (-2.8%)
Payable for Investments Purchased....... (2,512)
Investment Advisory Fees Payable........ (108)
Administrative Fees Payable............. (13)
Custodian Fees Payable.................. (9)
Payable for Portfolio Shares Redeemed... (1)
Directors' Fees & Expenses.............. (1)
Other Liabilities....................... (28) (2,672)
--------- ---------
NET ASSETS (100%).................................... $ 97,259
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 8,089,923 outstanding $.001 par value
shares (authorized 500,000,000 shares)............. $12.02
------
------
- ------------------------------------------------------------
+ -- Non-income producing securities
ADR -- American Depositary Receipt
Interest rates disclosed for US Government and Agency Obligations represent
effective yields.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EQUITY GROWTH PORTFOLIO
75
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- -------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- -------------------------------------------------------------
THE SMALL CAP VALUE EQUITY PORTFOLIO
- -------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------
COMMON STOCKS (96.7%)
AEROSPACE (3.4%)
32,900 AAR Corp.............................. $ 440
18,000 Thiokol Corp.......................... 502
85,300 United Industrial Corp................ 416
---------
1,358
---------
BANKING (9.0%)
13,300 BB&T Financial Corp................... 372
15,000 Deposit Guaranty Corp................. 452
16,950 First Security Corp. (Delaware)....... 386
13,700 Fourth Financial Corp................. 425
11,400 Mercantile Bancorp.................... 356
16,000 Onbancorp, Inc........................ 372
16,000 Standard Federal Bank................. 382
22,110 Summit Bancorp., Inc.................. 428
15,200 Union Bank of San Francisco........... 407
---------
3,580
---------
BUILDING (3.3%)
14,300 Ameron, Inc. (Delaware)............... 416
29,800 Gilbert Associates, Inc., Class A..... 425
24,500 Pratt & Lambert, Inc.................. 459
---------
1,300
---------
CAPITAL GOODS (3.2%)
20,803 Binks Manufacturing Co................ 385
19,800 Cascade Corp.......................... 470
19,500 Starret (L.S.) Co., Class A........... 436
---------
1,291
---------
CHEMICALS (4.4%)
29,920 Aceto Corp............................ 419
20,600 Dexter Corp........................... 448
24,100 Learonal, Inc......................... 443
23,800 Quaker Chemical Corp.................. 446
---------
1,756
---------
COMMUNICATIONS (1.1%)
23,600 Comsat Corp........................... 440
---------
COMPUTERS (0.8%)
24,400 Gerber Scientific, Inc................ 317
---------
CONSUMER-DURABLES (3.2%)
18,000 Arvin Industries, Inc................. 419
23,298 Knape & Vogt Manufacturing Co......... 454
31,300 Oneida Ltd............................ 407
---------
1,280
---------
CONSUMER-RETAIL (5.8%)
25,300 CPI Corp.............................. 452
58,500 Deb Shops, Inc........................ 175
18,800 Edison Brothers Stores, Inc........... 348
21,700 Guilford Mills, Inc................... 483
12,800 Springs Industries, Inc., Class A..... 474
34,500 Venture Stores, Inc................... 401
---------
2,333
---------
CONSUMER-STAPLES (5.8%)
19,300 American Maize Products Co., Class A.. $ 490
13,802 Block Drug Co., Inc., Class A......... 525
25,700 Coors (Adolph), Inc., Class B......... 430
25,900 International Multifoods Corp......... 476
25,300 Nash Finch Co......................... 417
---------
2,338
---------
ENERGY (2.2%)
17,000 Diamond Shamrock, Inc................. 440
17,300 Ultramar Corp......................... 441
---------
881
---------
FINANCIAL-DIVERSIFIED (2.2%)
10,100 GATX Corp............................. 445
13,300 GFC Financial Corp.................... 422
---------
867
---------
HEALTH CARE (6.6%)
15,500 Beckman Instruments, Inc.............. 432
22,600 Bergen Brunswig Corp., Class A........ 472
31,500 Bindley Western Industries............ 488
18,700 Diagnostic Products Corp.............. 491
53,200 Hooper Holmes, Inc.................... 339
63,700 Kinetic Concepts, Inc................. 438
---------
2,660
---------
INDUSTRIAL (6.6%)
15,200 American Filtrona Corp................ 410
11,400 Barnes Group, Inc..................... 433
33,700 GenCorp, Inc.......................... 400
44,500 Kaman Corp., Class A.................. 490
32,900 Zero Corp. (Delaware)................. 461
24,300 Zurn Industries, Inc.................. 437
---------
2,631
---------
INSURANCE (5.1%)
14,200 Argonaut Group, Inc................... 401
25,000 Enhance Financial Services Group, Inc. 428
15,500 Provident Life & Accident Co. of
America, Class B.................... 337
16,900 Selective Insurance Group, Inc........ 427
13,300 USLife Corp........................... 464
---------
2,057
---------
METALS (2.1%)
7,700 Carpenter Technology Corp............. 431
11,400 Cleveland-Cliffs Iron Co.............. 422
---------
853
---------
PAPER & PACKAGING (3.5%)
15,500 Ball Corp............................. 488
11,400 Potlatch Corp......................... 425
27,300 Sealright Co., Inc.................... 498
---------
1,411
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY PORTFOLIO
76
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE SMALL CAP VALUE EQUITY PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
SERVICES (10.8%)
20,500 ABM Industries, Inc................... $ 477
16,600 Angelica Corp......................... 459
2,100 Bowne & Co............................ 36
25,700 Cross (A.T.) Co., Class A............. 350
27,800 Gibson Greetings, Inc................. 410
40,000 Handleman Co.......................... 455
16,200 National Service Industries, Inc...... 415
23,900 New England Business Services, Inc.... 448
51,400 Piccadilly Cafeterias, Inc............ 411
29,500 Russ Berrie & Co., Inc................ 406
16,100 Wallace Computer Services, Inc........ 467
---------
4,334
---------
TECHNOLOGY (6.9%)
88,200 American Software, Inc................ 265
11,500 Avnet, Inc............................ 426
5,600 CTS Corp.............................. 155
21,800 Cubic Corp............................ 387
15,900 Joslyn Corp........................... 403
17,100 Kuhlman Corp.......................... 207
18,000 MTS Systems Corp...................... 396
33,500 National Computer Systems, Inc........ 519
---------
2,758
---------
TRANSPORTATION (2.4%)
20,800 Overseas Shipholding Group, Inc....... 478
19,800 Yellow Corp........................... 473
---------
951
---------
UTILITIES (8.3%)
17,700 Central Hudson Gas & Electric......... 469
35,000 Central Maine Power Co................ 481
10,100 Commonwealth Energy Systems Cos....... 368
15,000 Eastern Enterprises................... 394
22,900 Oneok, Inc............................ 412
13,700 Orange & Rockland Utilities, Inc...... 445
10,900 SJW Corp.............................. 352
28,500 Washington Water Power Co............. 388
---------
3,309
---------
TOTAL COMMON STOCKS (Cost $39,631)................ 38,705
---------
SHORT-TERM INVESTMENT (3.1%)
REPURCHASE AGREEMENT (3.1%)
$1,239 U.S. Trust, 5.50%, dated 12/30/94, due
1/03/95, to be repurchased at $1,240,
collateralized by $1,295 United States
Treasury Notes, 3.875%, due 4/30/95,
valued at $1,285 (Cost $1,239)....... $ 1,239
---------
TOTAL INVESTMENTS (99.8%) (Cost $40,870).......... 39,944
---------
OTHER ASSETS (1.6%)
Receivable for Investments Sold........ $ 521
Dividends Receivable................... 111
Other.................................. 4 636
---------
LIABILITIES (-1.4%)
Payable for Investments Purchased...... (456)
Investment Advisory Fees Payable....... (50)
Custodian Fees Payable................. (6)
Administrative Fees Payable............ (6)
Directors' Fees & Expenses Payable..... (1)
Other Liabilities...................... (28) (547)
--------- ---------
NET ASSETS (100%).................................. $ 40,033
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 3,706,877 outstanding $.001 par
value shares (authorized 500,000,000 shares)..... $10.80
---------
---------
- -------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY PORTFOLIO
77
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- -------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- -------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
- -------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------
COMMON STOCKS (96.8%)
AEROSPACE (2.3%)
27,100 United Technologies Corp.............. $ 1,704
---------
BANKING (9.7%)
28,650 BankAmerica Corp...................... 1,132
20,200 Bankers Trust (New York) Corp......... 1,118
29,200 Boatmens Bancshares, Inc.............. 792
48,100 Chemical Banking Corp................. 1,726
37,650 Mellon Bank Corp...................... 1,153
21,700 Morgan (J.P.) & Co., Inc.............. 1,215
---------
7,136
---------
CAPITAL GOODS (1.9%)
21,300 Deere & Co............................ 1,411
---------
CHEMICALS (4.0%)
31,775 Eastman Chemical Co................... 1,605
19,100 Monsanto Co........................... 1,346
---------
2,951
---------
COMMUNICATIONS (7.1%)
36,500 NYNEX Corp............................ 1,341
33,100 SBC Communications, Inc............... 1,336
49,800 Sprint Corp........................... 1,376
31,800 U.S. West, Inc........................ 1,133
---------
5,186
---------
CONSUMER-DURABLES (4.7%)
53,900 Ford Motor Co......................... 1,509
46,300 General Motors Corp................... 1,956
---------
3,465
---------
CONSUMER-RETAIL (4.6%)
79,000 Kmart Corp............................ 1,027
26,500 V.F. Corp............................. 1,289
72,000 Woolworth Corp........................ 1,080
---------
3,396
---------
CONSUMER-SERVICE & GROWTH (5.9%)
50,400 Deluxe Corp........................... 1,336
34,800 Eastman Kodak Co...................... 1,662
71,500 Ogden Corp............................ 1,340
---------
4,338
---------
CONSUMER-STAPLES (10.1%)
39,000 American Brands, Inc.................. 1,462
28,200 Anheuser Busch Cos., Inc.............. 1,435
27,200 CPC International, Inc................ 1,448
61,400 Fleming Cos., Inc..................... 1,428
44,600 Heinz (H.J.) Co....................... 1,639
---------
7,412
---------
ENERGY (7.9%)
38,300 Ashland Oil, Inc...................... 1,321
18,350 Mobil Corp............................ 1,546
13,050 Royal Dutch Petroleum Co.............. 1,403
25,550 Texaco, Inc........................... 1,530
---------
5,800
---------
FINANCIAL-DIVERSIFIED (1.8%)
40,650 Student Loan Marketing Association.... $ 1,321
---------
HEALTH CARE (12.4%)
38,500 Bausch & Lomb, Inc.................... 1,304
64,700 Baxter International, Inc............. 1,828
24,200 Becton Dickinson & Co................. 1,162
24,700 Bristol-Myers Squibb Co............... 1,430
45,200 Merck & Co., Inc...................... 1,723
54,800 Upjohn Co............................. 1,685
---------
9,132
---------
INDUSTRIAL (3.8%)
70,400 Hanson plc ADR........................ 1,267
42,700 Rockwell International Corp........... 1,527
---------
2,794
---------
INSURANCE (5.7%)
48,800 American General Corp................. 1,378
38,500 Aon Corp.............................. 1,232
35,300 St. Paul Cos., Inc.................... 1,580
---------
4,190
---------
METALS (1.7%)
19,800 Phelps Dodge Corp..................... 1,225
---------
TECHNOLOGY (3.7%)
40,200 Harris Corp........................... 1,709
13,200 International Business Machines Corp.. 970
---------
2,679
---------
TRANSPORTATION (2.2%)
34,000 Burlington Northern, Inc.............. 1,636
---------
UTILITIES (7.3%)
68,600 General Public Utilities Corp......... 1,801
60,600 Northern Indiana Public Service Co.... 1,803
53,900 Texas Utilities Co.................... 1,725
---------
5,329
---------
TOTAL COMMON STOCKS (Cost $73,400)................ 71,105
---------
NO. OF
WARRANTS
- ----------
WARRANTS (0.0%)
BANKING (0.0%)
23 Chase Manhattan Corp., expiring
6/30/96 (Cost $0)................... --
---------
FACE
AMOUNT
(000)
- ----------
SHORT-TERM INVESTMENT (1.8%)
REPURCHASE AGREEMENT (1.8%)
$1,306 U.S. Trust, 5.50%, dated 12/30/94, due
1/03/95, to be repurchased at
$1,307, collateralized by $1,370
United States Treasury Notes,
3.875%, due 4/30/95, valued at
$1,360 (Cost $1,306)................ 1,306
---------
TOTAL INVESTMENTS (98.6%) (Cost $74,706).......... 72,411
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
VALUE EQUITY PORTFOLIO
78
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
OTHER ASSETS (1.5%)
Receivable for Portfolio Shares Sold................ $ 796
Dividends Receivable................................ 321
Other............................................... 7 $ 1,124
-------
LIABILITIES (-0.1%)
Investment Advisory Fees Payable.................... (73)
Administrative Fees Payable......................... (10)
Custodian Fees Payable.............................. (5)
Payable for Portfolio Shares Redeemed............... (1)
Directors' Fees & Expenses Payable.................. (1)
Other Liabilities................................... (39) (129)
------- -------
NET ASSETS (100%)............................................... $73,406
-------
-------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 6,382,908 outstanding $.001 par value
shares (authorized 500,000,000 shares)........................ $11.50
------
------
- ------------------------------------------------
ADR -- American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
VALUE EQUITY PORTFOLIO
79
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
COMMON STOCKS (49.5%)
AEROSPACE (1.1%)
3,100 United Technologies Corp................. $ 195
---------
BANKING (5.1%)
3,900 BankAmerica Corp......................... 154
2,900 Bankers Trust (New York) Corp............ 160
3,400 Boatmens Bancshares, Inc................. 92
6,400 Chemical Banking Corp.................... 230
5,100 Mellon Bank Corp......................... 156
2,800 Morgan (J.P.) & Co., Inc................. 157
---------
949
---------
CAPITAL GOODS (1.1%)
3,000 Deere & Co............................... 198
---------
CHEMICALS (2.0%)
3,425 Eastman Chemical Co...................... 173
2,700 Monsanto Co.............................. 190
---------
363
---------
COMMUNICATIONS (3.8%)
4,600 NYNEX Corp............................... 169
4,500 SBC Communications, Inc.................. 182
7,100 Sprint Corp.............................. 196
4,400 U.S. West, Inc........................... 157
---------
704
---------
CONSUMER-DURABLES (2.4%)
6,900 Ford Motor Co............................ 193
6,100 General Motors Corp...................... 258
---------
451
---------
CONSUMER-RETAIL (2.6%)
11,600 Kmart Corp............................... 151
3,600 V.F. Corp................................ 175
10,400 Woolworth Corp........................... 156
---------
482
---------
CONSUMER-SERVICE & GROWTH (3.0%)
6,900 Deluxe Corp.............................. 183
3,900 Eastman Kodak Co......................... 186
9,400 Ogden Corp............................... 176
---------
545
---------
CONSUMER-STAPLES (5.3%)
7,100 American Brands, Inc..................... 266
3,600 Anheuser Busch Cos., Inc................. 183
3,300 CPC International, Inc................... 176
8,600 Fleming Cos., Inc........................ 200
4,000 Heinz (H.J.) Co.......................... 147
---------
972
---------
ENERGY (3.5%)
5,200 Ashland Oil, Inc......................... 179
1,650 Mobil Corp............................... 139
1,550 Royal Dutch Petroleum Co................. 167
2,700 Texaco, Inc.............................. 162
---------
647
---------
FINANCIAL-DIVERSIFIED (1.0%)
5,700 Student Loan Marketing Association....... $ 185
---------
HEALTH CARE (5.8%)
5,600 Bausch & Lomb, Inc....................... 190
6,500 Baxter International, Inc................ 184
3,200 Becton Dickinson & Co.................... 153
2,700 Bristol-Myers Squibb Co.................. 156
5,800 Merck & Co., Inc......................... 221
5,400 Upjohn Co................................ 166
---------
1,070
---------
INDUSTRIAL (2.2%)
11,100 Hanson plc ADR........................... 200
5,900 Rockwell International Corp.............. 211
---------
411
---------
INSURANCE (3.0%)
7,900 American General Corp.................... 223
4,950 Aon Corp................................. 159
4,000 St. Paul Cos., Inc....................... 179
---------
561
---------
METALS (0.9%)
2,600 Phelps Dodge Corp........................ 161
---------
TECHNOLOGY (1.7%)
5,800 Harris Corp.............................. 247
1,050 International Business Machines Corp..... 77
---------
324
---------
TRANSPORTATION (1.2%)
4,800 Burlington Northern, Inc................. 231
---------
UTILITIES (3.8%)
9,100 General Public Utilities Corp............ 239
8,000 Northern Indiana Public Service Co....... 238
7,150 Texas Utilities Co....................... 229
---------
706
---------
TOTAL COMMON STOCKS (Cost $9,057).................... 9,155
---------
FACE
AMOUNT
(000)
- ----------
FIXED INCOME SECURITIES (44.2%)
US TREASURY NOTES (44.2%)
$ 4,300 8.25%, 7/15/98........................... 4,353
4,243 5.50%, 4/15/00........................... 3,817
---------
TOTAL FIXED INCOME SECURITIES (Cost $8,764).......... 8,170
---------
SHORT-TERM INVESTMENT (2.5%)
REPURCHASE AGREEMENT (2.5%)
466 U.S. Trust, 5.50%, dated 12/30/94, due
1/03/95, to be repurchased at $466,
collateralized by $490 United States
Treasury Notes, 3.875%, due 3/31/95,
valued at $488 (Cost $466)............. 466
---------
TOTAL INVESTMENTS (96.2%) (Cost $18,287)............. 17,791
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
BALANCED PORTFOLIO
80
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE BALANCED PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
OTHER ASSETS (4.0%)
Cash...................................... $ 1
Receivable for Investments Sold........... 469
Interest Receivable....................... 214
Dividends Receivable...................... 49
Other..................................... 1 $ 734
--------
LIABILITIES (-0.2%)
Custodian Fees Payable.................... (4)
Administrative Fees Payable............... (3)
Investment Advisory Fees Payable.......... (2)
Directors' Fees & Expenses Payable........ (1)
Other Liabilities......................... (23) (33)
-------- --------
NET ASSETS (100%)...................................... $ 18,492
--------
--------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,064,203 outstanding $.001 par value
shares (authorized 500,000,000 shares)............... $8.96
-----
-----
- ------------------------------------------------------------
ADR -- American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
BALANCED PORTFOLIO
81
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
DEBT INSTRUMENTS (100.0%)
ALGERIA (1.3%)
LOAN AGREEMENTS (1.3%)
$ 5,788 Algeria Refinanced Loan
Agreements, Tranche A, (Floating
Rate) 7.875%, 12/31/00.......... $ 1,896
---------
ARGENTINA (26.3%)
BONDS (26.3%)
$ 2,000 Banco Rio de la Plata S.A. 8.75%,
12/15/03........................ 1,400
500 Republic of Argentina (Floating
Rate) 6.50%, 3/31/05............ 319
4,500 Republic of Argentina Local
Markets Trust 13.375%,
8/15/01......................... 3,803
24,750 Republic of Argentina Par Bonds,
Series L 4.25%, 3/31/23......... 10,488
29,250 Republic of Argentina Series L
"Euro" (Floating Rate) 6.50%,
3/31/05......................... 18,665
3,000 Republic of Argentina BOCON PIK
Pre2 (Floating Rate) 4/01/07.... 1,665
2,000 Telefonica de Argentina (Yankee
Bond) 11.875%, 11/01/04......... 1,810
---------
38,150
---------
BRAZIL (26.7%)
BONDS (26.7%)
$ 3,215 Cia Brasil Projectos 12.50%,
12/22/97........................ 3,135
9,700 Federative Republic of Brazil New
Money Bond (Floating Rate)
6.75%, 4/15/09.................. 5,990
12,700 Federative Republic of Brazil Debt
Conversion Bonds Series L
(Floating Rate) 6.75%,
4/15/12......................... 7,604
2,000 Federative Republic of Brazil Par
Bond, Series YL3 4.00%,
4/15/24......................... 811
1,960 Federative Republic of Brazil IDU
"Euro" (Floating Rate) 6.063%,
1/01/01......................... 1,642
3,545 Federative Republic of Brazil
Series C (Floating Rate) 8.00%,
4/15/14......................... 1,699
17,860 Federative Republic of Brazil
Series C "Euro" 8.00%,
4/15/14......................... 8,562
22,750 Federative Republic of Brazil Par
Bond Series Y 4.00%, 4/15/24.... 9,228
---------
38,671
---------
BULGARIA (3.9%)
BONDS (3.9%)
$ 4,500 Bulgaria Discount Series A "Euro"
(Floating Rate) 6.063%,
7/28/24......................... 2,098
2,290 Bulgaria Discount Series A
(Floating Rate) 6.063%,
7/28/24......................... 1,068
762 Bulgaria Discount Series B
(Floating Rate) 6.563%,
7/28/24......................... 355
1,914 Bulgaria Front Loaded Interest
Reduction Bond Series A "Euro"
(Floating Rate) 2.00%,
7/28/12......................... 421
$ 2,086 Reduction Bond Series A
(Floating Rate) 2.00%,
7/28/12......................... $ 459
2,983 Bulgaria Interest Arrears Bonds
(Floating Rate) 6.063%,
7/28/11......................... 1,260
---------
5,661
---------
ECUADOR (3.3%)
LOAN AGREEMENTS (3.3%)
$ #~##4,500 Republic of Ecuador Consolidated
Loan (Floating Rate)
(Participation: Merrill Lynch,
Salomon Brothers)............... 2,071
#~##2,800 Republic of Ecuador Extension and
Refinancing Agreement (Floating
Rate) (Participation: JP Morgan,
U.S. West Master Trust)......... 1,288
#~##2,260 Republic of Ecuador Multi Year
Refinancing Agreement (Floating
Rate) (Participation: Swiss Bank).. 1,040
#~##3,000 Republic of Ecuador New Money
Credit Agreement (Floating Rate)
(Participation: Chemical Bank,
Salomon Brothers)................. 1,380
--------
5,779
--------
LESS PORTION OF INVESTMENTS SOLD
+++3,140 Republic of Ecuador Par Bond
3.25%, 12/19/49 (When-Issued)... (944)
--------
4,835
--------
MEXICO (4.4%)
LOAN AGREEMENTS (4.4%)
$ 5,000 United Mexican States Old New
Money Loans (Floating Rate)
7.4125-7.625%, 3/20/05.......... 3,649
--------
3,664 United Mexican States Multi-Year
Refinancing Agreement 6.625%,
12/31/06........................ 2,675
--------
6,324
--------
MOROCCO (6.2%)
LOAN AGREEMENTS (6.2%)
$ #13,500 Morocco Restructuring and
Consolidating Agreement Tranche
A (Floating Rate) 1/01/09
(Participation: JP Morgan,
Goldman Sachs, Salomon
Brothers)....................... 8,952
---------
PANAMA (7.7%)
LOAN AGREEMENTS (4.2%)
$ ++7,500 Republic of Panama Refinanced Loan
Agreement (Floating Rate)....... 4,031
d*++3,800 Republic of Panama Unrestructured
Loans (Floating Rate)........... 2,043
---------
6,074
---------
BONDS (3.5%)
6,120 Republic of Panama (Floating Rate)
7.125%, 5/10/02................. 5,018
---------
11,092
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING MARKETS DEBT PORTFOLIO
82
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
POLAND (6.7%)
BONDS (6.7%)
$ 10,500 Republic of Poland PDI "Euro"
Bonds (Floating Rate) 3.25%,
10/27/14..................... $ 4,712
10,487 Republic of Poland Interest Arrears
PDI Bonds 3.25%, 10/27/14....... 4,706
500 Republic of Poland Registered
Discount "Euro" Bonds (Floating
Rate) 6.813%, 10/27/24.......... 360
---------
RUSSIA (4.9%)
LOAN AGREEMENTS (4.9%)
$ ++25,500 Bank for Foreign Economic
Affairs (Floating Rate)... 7,108
---------
TRINIDAD & TOBAGO (0.2%)
LOAN AGREEMENTS (0.2%)
Y 27,000 Trinidad & Tobago Loans, Tranche
A (Floating Rate) 7.1425%, 9/30/00... 225
---------
VENEZUELA (8.4%)
BONDS (8.4%)
$ 3,250 Republic of Venezuela Front
Loaded Interest Reduction
Bond Series A (Floating Rate)
7.00%, 3/31/07... 1,499
5,000 Republic of Venezuela Front
Loaded Interest Reduction Bond
Series B (Floating Rate) 7.00%,
3/31/07... 2,306
18,500 Republic of Venezuela Debt Conversion
Bond Series DL (Floating Rate)
7.688%, 12/18/07... 8,406
--------
12,211
--------
TOTAL DEBT INSTRUMENTS (Cost $154,477)........... 144,903
--------
NO. OF
WARRANTS
- -----------
WARRANTS (0.0%)
POLAND (0.0%)
+17 Morgan Grenfell Eastern Europe,
expiring 2/21/95... 1
---------
VENEZUELA (0.0%)
+11 Venezuela Par Bond, expiring 3/01/95.. 1
**+36,480 Venezuela Oil, expiring 3/01/95... --
---------
1
---------
TOTAL WARRANTS (Cost $147)......................... 2
---------
FACE
AMOUNT
(000)
- --------
SHORT-TERM INVESTMENTS (1.6%)
US GOVERNMENT AND AGENCY OBLIGATIONS (1.6%)
$ 2,300 Treasury Bills 1/19/95
(Cost $2,295)... 2,295
FOREIGN CURRENCY (0.0%)
CHF 43 Swiss Franc (Cost $34)........ 33
----------
TOTAL INVESTMENTS (101.6%) (Cost $156,953)... 147,233
----------
VALUE
(000)
- ------------------------------------------------------------
OTHER ASSETS (16.7%)
Cash.................................. $ 922
Receivable for Investments Sold....... 20,209
Interest Receivable................... 2,998
Due from Broker for Premium on Written
Options.............................. 105
Other................................. 12 $ 24,246
---------
LIABILITIES (-18.3%)
Payable for Investments Purchased..... (21,333)
Securities Sold Short................. (4,594)
Investment Advisory Fees Payable...... (365)
Custodian Fees Payable................ (118)
Administrative Fees Payable........... (19)
Written Options Outstanding, at
Value................................ (8)
Directors' Fees & Expenses............ (1)
Other Liabilities..................... (92) (26,530)
--------- ----------
NET ASSETS (100%).................................. $ 144,949
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 16,881,216 outstanding $.001 par
value shares (authorized 500,000,000 shares)..... $8.59
----------
----------
- ------------------------------------------------------------
+ -- Non-income producing securities
++ -- Non-income producing securities -- in default
+++ -- Security is subject to delayed delivery -- See Note
A-6
** -- Security is valued at fair value -- See Note A-1
d -- Terms of loan agreement not final at December 31,
1994.
# -- Participation interests were acquired through the
financial institutions listed parenthetically. All
other loan agreements are assignments. See Note A-7.
## -- Under restructuring at December 31, 1994.
~ -- This security is making partial interest payments.
PIK -- Payment-In-Kind. Income may be received in additional
securities or cash at the discretion of the issuer.
Y -- Japanese Yen
- ------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
SECURITIES SOLD SHORT (NOTE A-8)
MEXICO
BONDS
$ 6,250 United Mexican States Discount
Bonds, Series D (Variable Rate)
7.25%, 12/31/19 (Proceeds
$4,945)......................... 4,594
---------
WRITTEN CALL OPTIONS (NOTE A-9)
VENEZUELA
CALL OPTIONS
15,000 Republic of Venezuela Debt
Conversion Bond 7.688%,
12/18/07, strike price $51.50,
expiring 1/09/95 (Proceeds
$105)........................... 8
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
EMERGING MARKETS DEBT PORTFOLIO
83
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE FIXED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
FIXED INCOME SECURITIES (91.1%)
US GOVERNMENT AND AGENCY OBLIGATIONS (58.7%)
US Treasury Bonds
$ 14,000 8.125%, 8/15/19................... $ 14,186
---------
US Treasury Notes
25,000 4.625%, 2/29/96................... 24,238
8,000 7.50%, 10/31/99................... 7,885
8,000 7.25%, 8/15/04.................... 7,679
---------
39,802
---------
Federal Home Loan Mortgage Corporation
145 8.00%, 12/01/02 (15 Yr. Dwarf).... 141
19 13.00%, 9/01/10................... 22
---------
163
---------
Federal National Mortgage Association
89 8.50%, 12/01/06................... 89
---------
Government National Mortgage Association
212 8.00%, 3/15/04.................... 211
32 14.00%, 6/15/11................... 37
9 11.00%, 12/15/15.................. 10
45 10.50%, 1/15/16................... 48
124 10.00%, 5/15/19-11/15/20.......... 130
27,608 6.00%, 1/15/24-2/15/24............ 23,027
39,157 7.00%, 5/15/24-6/15/24............ 35,143
+++10,000 7.50%, 11/22/24................... 9,978
---------
68,584
---------
TOTAL US GOVERNMENT AND AGENCY OBLIGATIONS....... 122,824
---------
FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS (6.3%)
10,000 Quebec Province 7.50%, 7/15/23.... 8,462
5,000 Hydro Quebec 8.05%, 7/07/24....... 4,807
---------
TOTAL FOREIGN GOVERNMENT AND AGENCY
OBLIGATIONS...................................... 13,269
---------
CORPORATE BONDS AND NOTES (25.5%)
FINANCE (18.6%)
5,000 Abbey National plc 8.20%,
10/15/04........................ 4,881
7,500 American Re 10.875%, 9/15/04...... 7,934
10,000 Ford Motor Credit Co. 5.625%,
3/03/97......................... 9,472
10,000 General Motors Acceptance Corp.
7.375%, 6/22/00................. 9,436
5,000 Goldman Sachs 7.80%, 7/15/02...... 4,744
2,800 Traveler's, Inc. 6.125%,
6/15/00......................... 2,514
---------
38,981
---------
METALS (4.5%)
10,000 USX Corp. 9.125%, 1/15/13......... 9,540
---------
UTILITIES (2.4%)
5,000 Central Maine Power 7.98%,
10/04/96........................ 4,985
---------
TOTAL CORPORATE BONDS AND NOTES.................. 53,506
---------
ASSET BACKED SECURITIES (0.6%)
33 Case Equipment Loan Trust, 92-A
5.40%, 6/15/98.................. 33
$ 255 Collateralized Mortgage Obligation
Trust, 39-Y, 8.65%, 3/01/03...... $ 255
37 Federal Home Loan Mortgage Corp.,
REMIC 16-B 10.00%, 10/15/19...... 37
Federal National Mortgage Association
REMIC:
25 92-59F 6.37%, 8/25/06.......... 25
175 88-17B 9.40%, 10/25/17......... 178
100 Ford Credit Auto Loan Master Trust,
92-1A 6.875%, 1/15/99............. 98
27 General Motors Acceptance Corp.
Trust, 92-DA 5.55%, 5/15/97....... 27
228 Goldman Sachs Trust 2, E-3 8.95%,
8/01/02........................... 229
84 Goldman Sachs Trust 3, C-4 8.00%,
7/07/15........................... 83
217 Ryland Acceptance Corp. 4 REMIC, 80-A,
9.40%, 2/01/16.................... 219
--------
TOTAL ASSET BACKED SECURITIES...................... 1,184
--------
TOTAL FIXED INCOME SECURITIES (Cost $195,665)...... 190,783
--------
SHORT-TERM INVESTMENTS (11.9%)
US GOVERNMENT AND AGENCY OBLIGATIONS (11.9%)
Federal Farm Credit Bank
14,800 Discount Note, 5.95%, 1/03/95....... 14,790
Federal National Mortgage Association
10,045 Discount Note, 5.74%, 1/23/95....... 10,013
--------
TOTAL SHORT-TERM INVESTMENTS (Cost $24,805)........ 24,803
--------
TOTAL INVESTMENTS (103.0%) (Cost $220,470)......... 215,586
--------
OTHER ASSETS (2.3%)
Cash.................................. $ 27
Interest Receivable................... 3,517
Receivable for Portfolio Shares
Sold................................. 1,219
Net Unrealized Gain on Forward Foreign
Currency Contracts................... 44
Receivable for Investments Sold....... 4
Other................................. 23 4,834
---------
LIABILITIES (-5.3%)
Payable for Investments Purchased..... (10,036)
Payable for Portfolio Shares
Redeemed............................. (873)
Investment Advisory Fees Payable...... (106)
Administrative Fees Payable........... (36)
Custodian Fees Payable................ (9)
Directors' Fees & Expenses............ (1)
Other Liabilities..................... (28) (11,089)
--------- ---------
NET ASSETS (100%).................................. $ 209,331
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 21,312,756 outstanding $.001
par value shares (authorized 500,000,000
shares)....................................... $9.82
-----
-----
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
84
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE FIXED INCOME PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open
at December 31, 1994, the Portfolio is obligated to deliver
or is to receive foreign currency in exchange for US dollars
as indicated below:
IN
CURRENCY TO EXCHANGE NET UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------ --------- ----------- ---------- --------- ---------------
$ 5,230 $ 5,230 2/27/95 DM 8,074 $ 5,222 $ (8)
$ 3,075 3,075 2/27/95 DM 4,750 3,072 (3)
DM 12,824 8,294 2/27/95 $ 8,349 8,349 55
--------- --------- ---
$ 16,599 $ 16,643 $ 44
--------- --------- ---
--------- --------- ---
- ------------------------------------------------------------
+++ -- Security is subject to delayed delivery -- See Note A-6
DM -- Deutsche Mark
REMIC -- Real Estate Mortgage Investment Conduit
Interest rates disclosed for US Government & Agency Discount Notes represent
effective yields.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
85
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
FIXED INCOME SECURITIES (87.0%)
AUSTRALIAN DOLLAR (2.7%)
GOVERNMENT BONDS (2.7%)
A$ 4,600 Government of Australia 10.00%,
10/15/02........................... $ 3,559
---------
BRITISH POUND (2.9%)
GOVERNMENT BONDS (2.9%)
L 2,500 United Kingdom Treasury Bond 8.00%,
6/10/03............................ 3,733
---------
CANADIAN DOLLAR (10.7%)
EUROBONDS (8.1%)
C$ 7,000 British Columbia Province 7.75%,
6/16/03............................ 4,536
6,750 Kingdom of Norway 8.375%, 1/27/03.... 4,503
2,500 Export-Import Bank of Japan 7.75%,
10/08/02........................... 1,615
---------
10,654
---------
GOVERNMENT BONDS (2.6%)
5,200 Government of Canada 7.50%,
12/01/03........................... 3,344
---------
13,998
---------
DANISH KRONE (7.6%)
GOVERNMENT BONDS (7.6%)
DK 69,500 Kingdom of Denmark 7.00%, 12/15/04... 9,909
---------
DEUTSCHE MARK (12.4%)
EUROBONDS (7.4%)
DM 12,000 LKB Baden-Wurttemberg 6.50%,
9/15/08............................ 6,740
5,500 Republic of Austria 6.50%, 1/10/24... 2,912
---------
9,652
---------
GOVERNMENT BONDS (5.0%)
8,500 Deutscheland Republic 6.25%,
1/04/24............................ 4,432
3,500 Treuhandanstalt 6.75%, 5/13/04....... 2,125
---------
6,557
---------
16,209
---------
FINNISH MARKKA (1.9%)
GOVERNMENT BONDS (1.9%)
FM 12,000 Finnish Government 9.50%, 3/15/04.... 2,477
---------
FRENCH FRANC (5.1%)
GOVERNMENT BONDS (5.1%)
FF 17,800 France O.A.T. 8.50%, 12/26/12........ 3,347
25,000 France O.A.T. 6.00%, 10/25/25........ 3,366
---------
6,713
---------
ITALIAN LIRA (3.8%)
GOVERNMENT BONDS (3.8%)
IL9,100,000 Republic of Italy Treasury Bond
8.50%, 8/01/99..................... 4,945
---------
JAPANESE YEN (4.7%)
EUROBONDS (4.7%)
Y 255,000 European Investment Bank 6.625%,
3/15/00............................ 2,845
Y 320,000 International Bank for Reconstruction
& Development 5.25%, 3/20/02....... $ 3,355
---------
6,200
---------
NETHERLANDS GUILDER (6.0%)
GOVERNMENT BONDS (6.0%)
NG 14,400 Government of Netherlands 7.50%,
1/15/23............................ 7,807
---------
NEW ZEALAND DOLLAR (3.2%)
GOVERNMENT BONDS (3.2%)
NZ$ 6,800 New Zealand Government 8.00%,
4/15/04............................ 4,222
---------
SPANISH PESETA (3.4%)
GOVERNMENT BONDS (3.4%)
SP 615,000 Spanish Government 10.90%, 8/30/03... 4,433
---------
UNITED STATES DOLLAR (22.6%)
EUROBONDS (2.0%)
$ 2,700 Republic of Italy 6.875%, 9/27/23.... 2,120
500 Statens Bostads 8.50%, 5/30/97....... 552
---------
2,672
---------
US GOVERNMENT AND AGENCY OBLIGATIONS (18.3%)
US Treasury Bonds
500 12.75%, 11/15/10..................... 671
3,800 8.125%, 8/15/19...................... 3,849
1,600 8.00%, 11/15/21...................... 1,581
US Treasury Notes
5,900 7.875%, 2/15/96...................... 5,926
2,900 7.625%, 4/30/96...................... 2,905
400 5.875%, 5/31/96...................... 391
675 7.25%, 5/15/04....................... 648
US Treasury STRIPS
1,600 2/15/98, Principal Only.............. 1,259
1,352 5/15/03, Principal Only.............. 707
Government National Mortgage
Association
+++6,014 ARM 7.50%, 1/15/25................. 5,997
---------
23,934
---------
CORPORATE BONDS AND NOTES (1.5%)
2,000 Salomon, Inc., 6.32%, 2/05/97........ 1,909
---------
YANKEE BONDS (0.8%)
1,000 Hydro Quebec 8.05%, 7/07/24.......... 961
---------
29,476
---------
TOTAL FIXED INCOME SECURITIES (Cost $120,157)..... 113,681
---------
SHORT-TERM INVESTMENTS (14.4%)
DEUTSCHE MARK (5.0%)
TIME DEPOSIT (5.0%)
DM 10,101 Bank of Austria 5.125%, 1/06/95...... 6,522
---------
BRITISH POUND (2.8%)
TIME DEPOSIT (2.8%)
L 2,365 Bank of Austria 5.25%, 1/03/95....... 3,704
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
GLOBAL FIXED INCOME PORTFOLIO
86
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
UNITED STATES DOLLAR (6.6%)
US GOVERNMENT AND AGENCY OBLIGATIONS (3.7%)
$ 4,835 US Treasury Bill 1/19/95.............. $ 4,823
---------
REPURCHASE AGREEMENT (2.9%)
3,778 U.S. Trust, 5.50%, dated 12/30/94,
due 1/03/95, to be repurchased at
$3,780, collateralized by $3,935
United States Treasury Notes 3.875%,
due 4/30/95, 3,778 valued at $3,905... 3,778
---------
8,601
---------
TOTAL SHORT-TERM INVESTMENTS (Cost $18,775)......... 18,827
---------
FOREIGN CURRENCY (0.0%)
DK 2 Danish Krone.......................... 1
IL 2 Italian Lira.......................... --
---------
TOTAL FOREIGN CURRENCY (Cost $1)................... 1
---------
TOTAL INVESTMENTS (101.4%) (Cost $138,933).......... 132,509
---------
OTHER ASSETS (4.0%)
Cash................................... $ 1,916
Interest Receivable.................... 3,323
Other.................................. 12 5,251
---------
LIABILITIES (-5.4%)
Payable for Investments Purchased...... (6,657)
Net Unrealized Loss on Forward Foreign
Currency Contracts.................... (285)
Investment Advisory Fees Payable....... (77)
Custodian Fees Payable................. (14)
Administrative Fees Payable............ (19)
Directors' Fees & Expenses............. (1)
Other Liabilities...................... (32) (7,085)
--------- ---------
NET ASSETS (100%)................................... $ 130,675
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 12,703,651 outstanding $.001 par
value shares (authorized 500,000,000 shares)...... $10.29
---------
---------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at
December 31, 1994, the Portfolio is obligated to deliver or
is to receive foreign currency in exchange for US dollars or
foreign currency as indicated below:
IN NET
CURRENCY TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------- --------- ----------- --------------- --------- -------------
NG 13,000 $ 7,500 1/13/95 $ 7,519 $ 7,519 $ 19
DM 10,000 6,465 2/17/95 $ 6,376 6,376 (89)
SP 280,000 2,121 2/21/95 IL 3,455,620 2,125 4
DK 40,000 6,584 3/07/95 $ 6,493 6,493 (91)
A$ 4,643 3,585 3/20/95 NZ$ 5,642 3,580 (5)
SP 290,000 2,183 6/01/95 $ 2,186 2,186 3
DM 10,000 6,504 6/06/95 $ 6,378 6,378 (126)
--------- --------- -----
$ 34,942 $ 34,657 $ (285)
--------- --------- -----
--------- --------- -----
- ------------------------------------------------------------
+++ -- Security is subject to delayed delivery -- See Note A-6
-- Stripped securities represent the splitting of cash flows into
several classes which vary by the proportion of principal and interest
paid. Holders are entitled to the portion of the payments on the
certificate representing interest only or principal only.
A$ -- Australian Dollar
DK -- Danish Krone
DM -- Deutsche Mark
IL -- Italian Lira
NG -- Netherlands Guilder
NZ$ -- New Zealand Dollar
SP -- Spanish Peseta
- ------------------------------------------------------------
SUMMARY OF FIXED INCOME SECURITES BY INDUSTRY CLASSIFICATION (UNAUDITED)
VALUE PERCENT OF NET
INDUSTRY (000) ASSETS
- -----------------------------------------------------------------
Energy............................. $ 961 0.8%
Finance............................ 17,016 13.0
Foreign Government and Agency
Obligations....................... 71,770 54.9
US Government and Agency
Obligations.................... 23,934 18.3
--------- -----
$ 113,681 87.0%
--------- -----
--------- -----
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
GLOBAL FIXED INCOME PORTFOLIO
87
<PAGE>
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Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
CORPORATE BONDS AND NOTES (84.2%)
AEROSPACE & DEFENSE (1.5%)
$ 1,500 Tracor, Inc., 10.875%, 8/15/01.......... $ 1,444
---------
BROADCAST-RADIO & TELEVISION (10.6%)
2,250 Ackerley Communications, Inc., Series B,
10.75%, 10/01/03...................... 2,124
500 ACT III Broadcasting, Inc., 9.625%,
12/15/03.............................. 454
2,500 American Telecasting, 0.00% to 6/15/99,
12.50% to 6/15/04..................... 1,075
4,250 Bell Cablemedia plc (Yankee Bond), 0.00%
to 7/15/99, 11.95% to 7/15/04......... 2,263
1,000 Cablevision Systems Corp., 9.875%,
2/15/13............................... 905
1,250 Comcast Corp., 9.50%, 1/15/08........... 1,128
1,000 Continental Cablevision, Inc., 9.50%,
8/01/13............................... 912
600 Helicon Group, Series B, 9.00% to
11/01/96, 11.00% to 11/01/03.......... 513
400 Heritage Media, 11.00%, 10/01/02........ 392
500 Katz Corp., 12.75%, 11/15/02............ 526
225 SpectraVision, Inc., (Floating Rate),
11.65%, 12/01/02...................... 34
---------
10,326
---------
BUILDING MATERIALS & COMPONENTS (4.8%)
725 American Standard, 9.25%, 12/01/16...... 663
600 Hillsborough Holdings/Walter
Participating Notes, 7.50%,
12/31/50.............................. 966
2,000 Tarkett International, 9.00%, 3/01/02... 1,858
850 USG Corp., 8.75%, 3/01/17............... 723
++750 Walter Industries Corp., 17.00%,
1/01/96............................... 457
---------
4,667
---------
CHEMICALS (5.1%)
600 Arcadian Partners L.P., Series B,
10.75%, 5/01/05....................... 581
1,000 General Chemical, 9.25%, 8/15/03........ 930
1,000 Plastic Specialties & Technologies,
Inc., 11.25%, 12/01/03................ 875
2,000 Rexene Corp., 11.75%, 12/01/04.......... 2,040
500 Sherritt, Inc., 10.50%, 3/31/14......... 497
---------
4,923
---------
COAL, GAS & OIL (4.5%)
1,300 Clark R&M Holdings, Zero Coupon,
2/15/00............................... 715
++474 Columbia Gas Systems, Inc., Employee
Thrift Plan Obligation, 9.875%,
11/30/01.............................. 512
500 Deeptech International, 12.00%,
12/15/00.............................. 477
500 Ferrell Gas L.P., Series A, 10.00%,
8/01/01............................... 492
2,000 Freeport-McMoRan Resources, 8.75%,
2/15/04............................... 1,755
101 Mesa Capital Corp., Secured Notes, 0.00%
to 6/30/95, 12.75% to 6/30/98......... 87
500 Triton Energy, Zero Coupon, 11/01/97.... 367
---------
4,405
---------
COMPUTERS (0.2%)
200 Unisys Corp., 13.50%, 7/01/97........... 214
---------
DIVERSIFIED (0.9%)
1,000 Sequa Corp., 9.375%, 12/15/03........... $ 848
---------
ELECTRICAL EQUIPMENT (2.0%)
1,500 Pricellular Wire, 0.00% to 11/15/97,
14.00% to 11/15/01.................... 990
1,000 Protection One Alarm, Inc., 12.00%,
11/01/03.............................. 950
---------
1,940
---------
ELECTRONICS (7.3%)
400 ADT Operations, 9.25%, 8/01/03.......... 370
250 Bell & Howell Co., Series B, 10.75%,
10/01/02.............................. 238
4,500 Bell & Howell Co., Series B, 0.00% to
3/01/00, 11.50% to 3/01/05............ 2,194
1,500 Imax Corp., 7.00% to 3/01/97, 10.00% to
3/01/01............................... 1,239
1,500 International Semi-Tech (Yankee Bond),
0.00% to 8/15/00, 11.50% to 8/15/03... 673
2,750 Viacom International, 8.00%, 7/07/06.... 2,358
---------
7,072
---------
ENTERTAINMENT & LEISURE (0.9%)
800 ACT III Theatres, 11.875%, 2/01/03...... 828
---------
FINANCIAL SERVICES (4.2%)
500 Delaware Management Holding, 10.25%,
3/15/04............................... 524
800 GPA Delaware, Inc., 8.75%, 12/15/98..... 615
1,209 GPA Equipment Trust Participating
Certificates (Floating Rate), 9.125%,
12/02/96.............................. 1,103
550 GPA Investments, 6.40%, 11/19/98........ 330
1,189 Tiphook Finance Corp., 8.00%, 3/15/00... 832
886 Tiphook Finance Corp., 10.75%,
11/01/02.............................. 665
---------
4,069
---------
FOOD (1.8%)
750 Americold Corp. 1st Mortgage Bond,
Series B, 11.50%, 3/01/05............. 685
1,150 Pilgrim's Pride Corp., 10.875%,
8/01/03............................... 1,107
---------
1,792
---------
FOOD SERVICE & LODGING (2.8%)
600 Flagstar Corp., 10.75%, 9/15/01......... 558
500 Flagstar Corp., 11.25%, 11/01/04........ 412
400 La Quinta Inns, Inc., 9.25%, 5/15/03.... 379
1,300 Motels of America, 12.00%, 4/15/04...... 1,339
---------
2,688
---------
FOREST PRODUCTS & PAPER (4.6%)
2,000 Doman Industries Ltd., 8.75%, 3/15/04... 1,755
1,750 Stone Consolidated, Senior Secured
Notes, 10.25%, 12/15/00............... 1,706
1,000 S.D. Warren Co., 12.00%, 12/15/04....... 1,025
---------
4,486
---------
GAMING & LODGING (1.9%)
1,250 Casino Magic Finance Corp., 11.50%,
10/15/01.............................. 784
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
88
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
GAMING & LODGING (CONT.)
$ 300 GNF Corp. (Bally), 10.625%, 4/01/03..... $ 198
275 Louisiana Casino Cruises, 11.50%,
12/01/98.............................. 226
800 Trump Plaza 1st Mortgage Notes, 10.875%,
6/15/01............................... 608
---------
1,816
---------
HEALTH CARE SUPPLIES & SERVICES (1.5%)
1,000 American Medical International, Series
B, 9.50%, 4/15/06..................... 986
625 Eyecare Centers of America, 12.00%,
10/01/03.............................. 505
---------
1,491
---------
HOSPITAL MANAGEMENT (1.8%)
500 Charter Medical Corp., 11.25%,
4/15/04............................... 501
150 Healthtrust, Inc., 10.75%, 5/01/02...... 160
1,000 Healthtrust, Inc., 10.25%, 4/15/04...... 1,065
---------
1,726
---------
INSURANCE (1.8%)
500 Nacolah Holding Corp., 9.50%,
12/01/03.............................. 459
1,500 Reliance Group Holdings, 9.75%,
11/15/03.............................. 1,320
---------
1,779
---------
METALS (2.9%)
500 Armco, Inc., 9.375%, 11/01/00........... 453
1,000 Sheffield Steel Corp. 1st Mortgage
Notes, 12.00%, 11/01/01............... 942
1,000 Venture Holdings, 9.75%, 4/01/04........ 881
500 Wolverine Tube, 10.125%, 9/01/02........ 507
---------
2,783
---------
PACKAGING & CONTAINER (3.1%)
1,000 Crown Packaging Holdings, 0.00% to
11/01/00, 12.25% to 11/01/03.......... 471
500 Owens-Illinois, Inc., 10.50%, 6/15/02... 486
500 Owens-Illinois, Inc., 9.75%, 8/15/04.... 473
750 Stone Container Corp., 11.875%,
12/01/98.............................. 775
600 Stone Container Corp., 9.875%,
2/01/01............................... 567
250 Stone Container Corp. 1st Mortgage Note,
10.75%, 10/01/02...................... 250
---------
3,022
---------
PERSONAL CARE PRODUCTS (0.2%)
250 Playtex Family Products, 9.00%,
12/15/03.............................. 219
---------
PROFESSIONAL SERVICES (0.3%)
300 Card Establishment Services, 10.00%,
10/01/03.............................. 312
---------
PUBLISHING (2.1%)
1,000 Marvel III Holdings, Inc., Series B,
9.125%, 2/15/98....................... 871
1,900 Marvel Parent Holdings, Zero Coupon,
4/15/98............................... 1,178
---------
2,049
---------
RETAIL-GENERAL (3.1%)
+++1,000 Federated Department Stores, 11.29%,
6/30/02 (When-Issued)................. 1,009
$ 625 Penn Traffic Co., 9.625%, 4/15/05........ $ 544
2,175 Southland Corp., 5.00%, 12/15/03......... 1,468
---------
3,021
---------
TELECOMMUNICATIONS (4.9%)
500 Allnet Communication Services, 9.00%,
5/15/03................................ 479
4,000 Dial Call Communications, 0.00% to
4/15/99, 12.25% to 4/15/04............. 1,280
450 Horizon Cellular Telephone, 0.00% to
10/01/97, 11.375% to 10/01/00.......... 318
1,000 MFS Communications, 0.00% to 1/15/99,
9.375% to 1/15/04...................... 593
1,500 Nextel Communications, 0.00% to 2/15/99,
9.75% to 8/15/04....................... 525
250 Paging Network, Inc., 8.875%, 2/01/06.... 197
1,500 Telefonica de Argentina (Yankee Bond),
11.875%, 11/01/04...................... 1,354
---------
4,746
---------
TEXTILES & APPAREL (4.0%)
300 ACME Boot Co., Inc., 11.50%, 12/15/00.... 120
839 JPS Textile Group, 10.85%, 6/01/99....... 516
1,000 PT Polysindo Eka Perkasa (Yankee Bond),
13.00%, 6/15/01........................ 975
2,500 Westpoint Stevens, Inc., 9.375%,
12/15/05............................... 2,250
---------
3,861
---------
TRANSPORTATION (2.8%)
++393 America West Airlines, 6.00%, 3/31/97.... 358
2,000 Moran Transportation Co., 11.75%,
7/15/04................................ 1,945
500 Sabreliner Corp., Series A, 12.50%,
4/15/03................................ 450
---------
2,753
---------
UTILITIES (2.6%)
650 AES Corp., 9.75%, 6/15/00................ 622
1,478 Beaver Valley Funding Corp. (Lease
Obligation Bond), 9.00%, 6/01/17....... 1,049
900 First PV Funding Corp., (Lease Obligation
Bond) 10.15%, 1/15/16.................. 846
---------
2,517
---------
TOTAL CORPORATE BONDS AND NOTES (Cost $89,387)....... 81,797
---------
FOREIGN GOVERNMENT (1.0%)
BOND (1.0%)
1,500 Republic of Argentina, Series L,
(Floating Rate), 6.50%, 3/31/05 (Cost
$1,048)................................ 956
---------
SHARES
- ------
COMMON STOCKS (0.1%)
BROADCAST-RADIO & TELEVISION (0.0%)
+16,443 SpectraVision, Inc., Class B............. 4
---------
FINANCIAL SERVICES (0.0%)
729 Duff & Phelps Corp....................... 6
243 Duff & Phelps Credit Rating Co........... 2
+1,268 WestFed Holdings, Inc., Class B.......... --
---------
8
---------
FOOD SERVICE & LODGING (0.1%)
+1,300 Motels of America, Inc................... 112
---------
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
89
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- -----------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- -----------------------------------------------------------------
THE HIGH YIELD PORTFOLIO (CONT.)
- -----------------------------------------------------------------
VALUE
SHARES (000)
- -----------------------------------------------------------------
GAMING & LODGING (0.0%)
+500 Trump Taj Mahal, Class A................. $ 5
---------
MACHINERY (0.0%)
+25 Bucyrus-Erie............................. --
---------
TEXTILES & APPAREL (0.0%)
+3,100 ACME Boot Co............................. 3
---------
TOTAL COMMON STOCKS (Cost $232)....................... 132
---------
PREFERRED STOCKS (1.0%)
COAL, GAS & OIL (0.9%)
50,000 Maxus Energy Corp. 10.00%................ 913
---------
FINANCIAL SERVICES (0.0%)
+3,239 WestFed Holdings, Inc., Series A......... --
---------
TEXTILES & APPAREL (0.1%)
400 ACME Boot Co., Series B, 12.50%,
12/15/03............................... 40
---------
TOTAL PREFERRED STOCKS (Cost $1,704).................. 953
---------
NO. OF
RIGHTS
- -----------
RIGHTS (0.0%)
BROADCAST-RADIO & TELEVISION (0.0%)
+35,000 SpectraVision, Inc., expiring 10/08/97
(Cost $133)............................ 4
---------
NO. OF
WARRANTS
- -----------
WARRANTS (0.2%)
AEROSPACE & DEFENSE (0.0%)
+*500 Sabreliner Corp., expiring 4/15/03
(acquired 6/21/93, cost $10)........... 5
---------
BROADCAST-RADIO & TELEVISION (0.0%)
+12,500 American Telecasting, expiring 6/23/99... 25
---------
ELECTRICAL EQUIPMENT (0.1%)
+28,000 Protection One Alarm, Inc., expiring
11/01/03............................... 105
---------
GAMING & LODGING (0.0%)
+1,250 Capital Gaming International, Inc.,
expiring 2/01/99....................... --
+2,700 Casino Magic Corp., expiring 10/14/96.... --
+825 Louisiana Casino Cruises, expiring
12/01/98............................... 13
---------
13
---------
HEALTH CARE SUPPLIES & SERVICES (0.0%)
+625 Eye Care Centers of America, expiring
10/01/03............................... 3
---------
INSURANCE (0.0%)
+500 Horace Mann Educators Corp., expiring
8/15/99................................ 7
---------
METALS (0.0%)
+5,000 Sheffield Steel Corp., expiring
11/01/01............................... 15
---------
PACKAGING & CONTAINER (0.1%)
+1,000 Crown Packaging Holdings, expiring
11/01/03............................... 40
---------
TELECOMMUNICATIONS (0.0%)
+4,000 Dial Page, Inc., expiring 4/25/99........ --
---------
TOTAL WARRANTS (Cost $214)............................ 213
---------
NO. OF
UNITS VALUE
(000) (000)
- ------------------------------------------------------------
UNITS (7.0%)
AUTOMOTIVE (1.0%)
1,000 Petro PSC Properties L.P., 12.50%,
6/01/02................................ $ 960
---------
GAMING & LODGING (3.7%)
1,750 Casino America, 11.50%, 11/15/01......... 1,470
500 Santa Fe Hotel, Inc., 11.00%, 12/15/00... 436
2,564 Trump Taj Mahal Funding, Inc., PIK,
11.35%, 11/15/99....................... 1,705
---------
3,611
---------
METALS (1.0%)
1,000 Sheffield Steel Corp., 12.00%,
11/01/01............................... 965
---------
TRANSPORTATION (1.3%)
2,208 Maritime Group, 13.50%, 2/15/97.......... 1,281
---------
TOTAL UNITS (Cost $8,807)............................. 6,817
---------
FACE
AMOUNT
(000)
- -----------
SHORT-TERM INVESTMENT (5.7%)
REPURCHASE AGREEMENT (5.7%)
$5,587 U.S. Trust, 5.50%, dated 12/30/94, due
1/03/95, to be repurchased at $5,590,
collateralized by $5,810 United States
Treasury Notes, 3.875%, due 4/30/95,
valued at $5,765 (Cost $5,587)......... 5,587
---------
TOTAL INVESTMENTS (99.2%) (Cost $107,112)............. 96,459
---------
OTHER ASSETS (4.0%)
Interest Receivable..................... $ 1,647
Receivable for Investments Sold......... 1,469
Receivable for Portfolio Shares Sold.... 789
Other................................... 11 3,916
---------
LIABILITIES (-3.2%)
Payable for Investments Purchased....... (2,782)
Payable for Portfolio Shares Redeemed... (193)
Investment Advisory Fees Payable........ (120)
Administrative Fees Payable............. (14)
Custodian Fees Payable.................. (4)
Directors' Fees & Expenses.............. (1)
Other Liabilities....................... (38) (3,152)
--------- ---------
NET ASSETS (100.0%).................................. $ 97,223
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 10,180,900 outstanding $.001 par
value shares (authorized 500,000,000 shares)....... $9.55
-----
-----
- ------------------------------------------------------------
+ -- Non-income producing securities
++ -- Non-income producing securities - in default
+++ -- Security is subject to delayed delivery -- See Note A-6.
* -- Restricted as to public resale. Total value of restricted securities held
at December 31, 1994 was $5 or 0.0% of net assets (Total Cost $10).
PIK -- Payment-In-Kind. Income may be received in additional securities or cash
at the discretion of the issuer.
Floating Rate Security. The interest rate changes on these instruments are based
on changes in a designated base rate. The rates shown are those in effect on
December 31, 1994.
At December 31, 1994 approximately 92% of the Portfolio's net assets consisted
of high yield securities rated below investment grade. Investments in high yield
securities are accompanied by a greater degree of credit risk and the risk tends
to be more sensitive to economic conditions than higher rated securities.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
90
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
MONEY MARKET INSTRUMENTS (81.6%)
US GOVERNMENT & AGENCY OBLIGATIONS (72.9%)
US GOVERNMENT OBLIGATIONS (11.4%)
US Treasury Bills
$ 50,000 3/09/95............................... $ 49,537
30,000 5/04/95............................... 29,499
-----------
79,036
-----------
AGENCY DISCOUNT NOTES (32.7%)
Federal Farm Credit Bank
10,000 5.60%, 1/24/95........................ 9,964
Federal Home Loan Bank
22,410 5.60%, 1/03/95........................ 22,403
14,270 6.06%, 2/27/95........................ 14,133
Federal Home Loan Mortgage Corp.
20,000 5.75%, 1/05/95........................ 19,987
20,000 5.80%, 1/18/95........................ 19,945
27,555 5.80%, 1/30/95........................ 27,426
Federal National Mortgage Association
10,000 5.80%, 1/04/95........................ 9,995
30,000 5.86%, 1/13/95........................ 29,942
30,000 5.35%, 1/20/95........................ 29,915
10,000 5.60%, 2/17/95........................ 9,927
Tennessee Valley Authority
32,000 5.80%, 1/30/95........................ 31,851
-----------
225,488
-----------
AGENCY FLOATING RATE NOTES (28.8%)
Federal National Mortgage Association
25,000 5.54%, 10/16/95....................... 24,996
65,000 5.79%, 9/02/97........................ 65,000
25,000 6.53%, 6/02/99........................ 25,000
13,000 6.53%, 7/26/99........................ 12,937
25,000 6.53%, 9/22/99........................ 25,000
Student Loan Marketing Association
46,000 6.07%, 10/30/97....................... 46,075
-----------
199,008
-----------
TOTAL US GOVERNMENT & AGENCY OBLIGATIONS (Cost
$503,532)........................................ 503,532
-----------
COMMERCIAL PAPER (3.6%)
FINANCE (3.6%)
15,000 Commerzbank AG (New York) 6.00%,
1/30/95............................. 14,928
10,000 Societe Generale 5.55%, 1/04/95....... 9,995
-----------
TOTAL COMMERCIAL PAPER (Cost $24,923)............ 24,923
-----------
CORPORATE FLOATING RATE NOTES (5.1%)
FINANCE (5.1%)
$ 10,000 Bank of New York Co., Inc. 5.64%,
6/07/95............................. $ 9,998
25,000 Merrill Lynch 5.69%, 7/12/95.......... 25,000
-----------
TOTAL CORPORATE FLOATING RATE NOTES
(Cost $34,998).................................. 34,998
-----------
TOTAL MONEY MARKET INSTRUMENTS (Cost $563,453)... 563,453
-----------
VALUE
(000)
-----------
SHORT TERM INVESTMENT (18.4%)
REPURCHASE AGREEMENT (18.4%)
127,002 Goldman Sachs 5.50%, dated 12/30/94,
due 1/03/95, to be repurchased at
$127,080, collateralized by $133,200
United States Treasury Notes 7.625%,
due 11/15/22, valued at $129,954
(Cost $127,002)..................... 127,002
-----------
TOTAL INVESTMENTS (100.0%) (Cost $690,455)....... 690,455
-----------
OTHER ASSETS (0.4%)
Cash................................... $ 1
Interest Receivable.................... 2,368
Other.................................. 77 2,446
---------
LIABILITIES (-0.4%)
Distributions Payable.................. (1,639)
Investment Advisory Fees Payable....... (530)
Administrative Fees Payable............ (101)
Custodian Fees Payable................. (50)
Directors' Fees & Expenses Payable..... (1)
Other Liabilities...................... (77) (2,398)
--------- ---------
NET ASSETS (100%)................................... $ 690,503
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 690,597,424 outstanding $.001 par
value shares (authorized 1,000,000,000 shares).... $1.00
---------
---------
- ------------------------------------------------------------
Floating Rate Notes. The interest rate changes on these instruments are based on
changes in a designated base rate. The rates shown were those in effect at
December 31, 1994.
Maturity dates disclosed for Floating Rate Instruments are the ultimate maturity
dates. The effective maturity dates for such securities are the next interest
reset dates.
Interest rates disclosed for Commercial Paper and Agency Discount Notes
represent effective yields.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
91
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[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
TAX-EXEMPT INSTRUMENTS (98.4%)
FIXED RATE INSTRUMENTS (50.6%)
NOTES (2.7%)
$ 1,000 Harris County, Texas, 9.25%, 8/01/14,
Prerefunded 2/01/95 at 103........... $ 1,035
3,000 Illinois State Certificates, 4.75%,
6/15/95.............................. 3,009
500 Triborough Bridge & Tunnel Authority,
New York, Convention Center Project,
Series 85D, 9.00%, 7/01/95........... 523
5,000 Wisconsin State 4.50%, 6/15/95......... 4,998
-----------
9,565
-----------
PUT OPTION BONDS (0.4%)
1,500 Putnam County, Florida, Development
Authority, Pollution Control Revenue,
Seminole Electric, 3.75%, 3/15/14
(Putable on 3/15/95)................. 1,500
-----------
TAX & REVENUE ANTICIPATION NOTES (6.5%)
6,450 Colorado State General Fund, 4.50%,
6/27/95, TRANS....................... 6,464
3,000 Idaho State, 4.50%, 6/29/95, TANS...... 3,004
1,015 Los Angeles County, California, 4.50%,
6/30/95, TRANS....................... 1,017
8,810 Maine State, 4.50%, 6/30/95, TANS...... 8,825
4,000 Texas State, 5.00%, 8/31/95, TRANS..... 4,005
-----------
23,315
-----------
COMMERCIAL PAPER (41.0%)
3,000 Beaver County, Pennsylvania, Industrial
Development Authority, Duquesne Light
Series 90C, 3.55%, 2/23/95........... 3,000
1,100 Brazos River, Texas, Harbor &
Navigation District, Series 90,
3.40%, 1/19/95....................... 1,100
2,500 Burke County, Georgia, Development
Authority, Oglethorpe, Series 92A,
3.80%, 2/13/95....................... 2,500
4,600 Burlington, Kansas, Kansas City Power &
Light Co., 3.50%, 1/18/95............ 4,600
3,500 City of Austin, Texas, Series A, 3.55%,
2/16/95.............................. 3,500
4,530 City of Dallas, Texas, Series A, 4.20%,
3/13/95.............................. 4,530
1,200 Connecticut State Health & Education
Facilities Authority, Yale
University, Series N, 3.75%,
3/10/95.............................. 1,200
1,000 Converse County, Wyoming, Pacificorp
Series 88, 3.80%, 3/10/95............ 1,000
3,500 East Baton Rouge Parish, Louisiana,
3.45%, 1/25/95....................... 3,500
4,500 Emery County, Utah, Pacificorp Series
91, 3.55%, 2/23/95................... 4,500
1,000 Florida Municipal Power, Series A,
3.50%, 1/12/95....................... 1,000
2,525 Gainesville, Florida, 3.60%, 2/27/95... 2,525
2,000 Illinois Development Finance Authority,
Series 94A, 3.60%, 3/08/95........... 2,000
1,000 Illinois Health Facilities Authority,
Series 89A, 3.85%, 2/24/95........... 1,000
4,400 Intermountain Power Agency, Utah,
Series E, 3.70%, 3/09/95............. 4,400
3,100 Intermountain Power Agency, Utah,
Series E, 4.00%, 3/16/95............. 3,100
700 Intermountain Power Agency, Utah,
Series F2, 4.00%, 2/28/95............ 700
1,500 Intermountain Power Agency, Utah,
Series 85F, 4.00%, 2/28/95........... 1,500
7,700 Jacksonville, Florida, Electric
Authority, 3.80%, 3/08/95............ 7,700
3,600 Jasper County, Indiana, Series 88B,
3.60%, 1/18/95....................... 3,600
2,000 Jasper County, Indiana, Series 88C,
3.55%, 2/16/95....................... 2,000
1,100 Lehigh County, Pennsylvania, General
Purpose Authority, Series A, 3.60%,
2/27/95.............................. 1,100
3,000 Maricopa County, Arizona, So. Cal. Ed.,
Series 85C, 3.60%, 2/07/95........... 3,000
6,600 Massachusetts Health & Education
Facilities Authority, Harvard
University, 3.50%, 1/18/95........... 6,600
1,500 Michigan State Strategic Fund, Dow
Chemical Series, 3.85%, 2/24/95...... 1,500
2,520 Montgomery, Alabama, Industrial
Development Board, General Electric
Series, 3.80%, 1/11/95............... 2,520
3,500 Montgomery, Alabama, Industrial
Development Board, General Electric
Series, 3.50%, 2/17/95............... 3,500
1,000 Mount Vernon, Indiana, General Electric
Series 89A, 3.80%, 2/21/95........... 1,000
3,000 Mount Vernon, Indiana, General Electric
Series 89A, 3.75%, 2/21/95........... 3,000
3,685 Municipal Electric Authority of
Georgia, Series 1, 3.70%, 1/11/95.... 3,685
3,500 Municipal Electric Authority of
Georgia, Series 2, 3.60%, 1/19/95.... 3,500
2,300 Municipal Electric Authority of
Georgia, Series 3, 3.70%, 1/11/95.... 2,300
1,000 North Carolina Eastern Municipal Power,
3.65%, 2/07/95....................... 1,000
3,025 North Carolina Eastern Municipal Power,
3.60%, 2/09/95....................... 3,025
300 Northeastern Pennsylvania Hospital
Authority, Series B, 3.50%,
2/17/95.............................. 300
3,290 Omaha, Nebraska, Public Power District,
3.75%, 2/21/95....................... 3,290
1,000 Petersburg, Indiana, Indiana Power &
Light, Series 91, 3.50%, 2/22/95..... 1,000
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
92
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE MUNICPAL MONEY MARKET PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
COMMERCIAL PAPER (CONT.)
$2,000 Petersburg, Indiana, Indiana Power &
Light, Series 91, 4.20%, 3/14/95 $2,000
2,200 Platte River Authority, Colorado,
4.00%, 1/26/95......................... 2,200
1,000 Port of Corpus Christi, Texas, Union
Pacific Series, 3.65%, 2/13/95......... 1,000
1,500 Rochester, Minnesota, Health Facilities,
Mayo Clinic, Series C, 3.90%, 2/28/95.. 1,500
1,500 Rochester, Minnesota, Health Facilities,
Mayo Clinic, Series F, 3.65%, 2/07/95.. 1,500
1,065 Rochester, Minnesota, Health Facilities,
Mayo Clinic, Series E, 3.90%, 2/28/95.. 1,065
2,000 Salt River, Arizona, 3.50%, 1/12/95...... 2,000
4,000 Salt River, Arizona, 3.60%, 1/13/95...... 4,000
2,000 Salt River, Arizona, 3.55%, 2/23/95...... 2,000
2,000 Sunshine State, Florida, Government
Finance Authority, Series 86,
3.55%, 2/27/95......................... 2,000
2,000 Texas Municipal Power Agency,
3.85%, 2/24/95......................... 2,000
6,600 Texas Municipal Power Agency,
3.80%, 3/06/95......................... 6,600
5,000 Trimble County, Kentucky, Louisville
Gas & Electric Series, 3.85%, 2/15/95.. 5,000
1,000 Trimble County, Kentucky, Louisville
Gas & Electric Series, 3.50%, 2/22/95.. 1,000
5,500 University of Minnesota, Series A,
3.65%, 3/09/95......................... 5,500
2,000 University of North Carolina at Chapel
Hill, School of Medicine,
3.65%, 2/09/95......................... 2,000
1,100 University of North Carolina at Chapel
Hill, 3.80%, 3/10/95................... 1,100
3,000 University of Texas, Series A,
3.70%, 3/07/95......................... 3,000
2,500 Vanderbilt University, Tennessee,
Series 89A, 3.60%, 2/24/95............. 2,500
----------
147,240
----------
TOTAL FIXED RATE INSTRUMENTS.......................... 181,620
----------
VARIABLE/FLOATING RATE INSTRUMENTS (47.8%)
DAILY VARIABLE RATE BONDS (29.9%)
400 California Pollution Control Financing
Authority, Southern Edison,
Series 87D, 5.00%, 2/28/08............. 400
4,000 Chattanooga-Hamilton County, Tennessee,
Hospital Authority Revenue, Erlanger
Medical Center, 5.95%, 10/01/17........ 4,000
4,600 District of Columbia, Series 92A-6,
5.40%, 10/01/07........................ 4,600
2,400 Farmington, New Mexico, Pollution
Control Revenue Bonds, Series A,
5.85%, 5/01/24......................... 2,400
5,000 Hapeville, Georgia, Industrial
Development Authority, Series 85,
6.05%, 11/01/15........................ 5,000
$4,200 Harris County, Texas, Health Facilities
Development Corp., Methodist Hospital,
5.85%, 12/01/25........................ $4,200
1,400 Harris County, Texas, Health Facilities
Development Corp., St. Luke's
Episcopal, Series B, 5.85%, 2/15/16.... 1,400
4,200 Harris County, Texas, Health Facilities
Development Corp., St. Luke's
Episcopal, Series D, 5.85%, 2/15/16.... 4,200
2,200 Jackson County, Mississippi, Pollution
Control Revenue, Chevron Project,
Series 93, 5.20%, 6/01/23.............. 2,200
8,100 Jackson County, Mississippi, Port
Facility, Chevron Project, Series 93,
5.20%, 6/01/23......................... 8,100
1,930 Joliet, Illinois, Regional Port District,
Industrial Revenue, 6.05%, 7/15/03..... 1,930
900 Kansas City, Kansas, Industrial
Development Authority, PQ Corp.,
6.05%, 8/01/15......................... 900
1,900 Lake Charles, Louisiana, Harbor &
Terminal District Port Facilities,
Series 84, 5.30%, 11/01/11............. 1,900
1,500 Lincoln County, Wyoming, Pollution
Control Revenue, Exxon Project
Series 84A, 6.00%, 11/01/14............ 1,500
2,820 Louisiana Public Facilities Authority,
Industrial Development, Kenner Hotel
Series, 6.05%, 12/01/15................ 2,820
4,500 Maricopa County, Arizona, Pollution
Control Revenue, Series B,
5.20%, 5/01/29......................... 4,500
1,500 Massachusetts Health & Education
Facilities Authority, Series B,
5.20%, 7/01/05......................... 1,500
2,600 Massachusetts Health & Education
Facilities Authority, Series C,
5.20%, 7/01/05......................... 2,600
6,700 Michigan State Strategic Fund, Consumers
Power Series 88A, 5.25%, 4/15/18....... 6,700
1,570 Missouri State Health & Educational
Facilities Authority Revenue,
Washington University, Series 89A
5.95%, 3/01/17......................... 1,570
3,300 New York City, New York, Water Finance
Authority, Water and Sewer System
Revenue, Series 92C, 6.00%, 6/15/22.... 3,300
3,600 New York City, New York, Water Finance
Authority, Water and Sewer System
Revenue, Series 94C, 6.00%, 6/15/23.... 3,600
5,900 New York State Energy Research &
Development Authority, Pollution
Control Revenue, Niagara Mohawk Power,
Series A, 5.00%, 7/01/15............... 5,900
2,700 Nueces River Authority, Texas, Pollution
Control Revenue, Series 85,
6.05%, 12/01/99........................ 2,700
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
93
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE MUNICPAL MONEY MARKET PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
DAILY VARIABLE RATE BONDS (CONT.)
$2,480 Peninsula Ports Authority, Virginia,
Coal Revenue, 5.30%, 7/01/16........... $ 2,480
4,000 Phoenix, Arizona, Series 1,
5.85%, 6/01/18......................... 4,000
3,800 Platte County, Wyoming, Pollution Control
Revenue, Series A, 6.05%, 7/01/14...... 3,800
900 Platte County, Wyoming, Pollution Control
Revenue, Series B, 6.05%, 7/01/14...... 900
1,600 Port of Saint Helens, Oregon, Pollution
Control Revenue, Portand General
Electric Co., Series B,
5.30%, 6/01/10......................... 1,600
1,400 Saint Charles Parish, Louisiana,
Pollution Control Revenue, Shell Oil
Project, 5.20%, 10/01/22............... 1,400
4,800 Southwest, Texas, Higher Education
Authority Revenue, Southern Methodist
University Series 85, 5.30%, 7/01/15... 4,800
4,000 Sublette County, Wyoming, Pollution
Control Revenue, Exxon Project,
5.20%, 11/01/14........................ 4,000
6,700 Valdez, Alaska, Marine Terminal
Authority, Exxon. Series 85,
5.20%, 10/01/25........................ 6,700
----------
107,600
----------
WEEKLY VARIABLE RATE BONDS (17.9%)
1,000 Beaver County, Pennsylvania, Industrial
Development Authority, Duquesne Light
Series 90A, 5.65%, 8/01/20............. 1,000
1,000 Beaver County, Pennsylvania, Industrial
Development Authority, Duquesne Light
Series 90B, 5.65%, 8/01/09............. 1,000
1,000 Brunswick & Glynn County, Georgia,
Development Authority, Series 85,
5.00%, 12/01/15........................ 1,000
7,000 Burke County, Georgia, Development
Authority, Oglethorpe, Series 93A,
4.95%, 1/01/16......................... 7,000
7,900 Charlotte, North Carolina, Airport,
Series 93A, 4.95%, 7/01/16............. 7,900
2,500 City of Columbia, Missouri, Special
Revenue Bonds, Series 88A,
5.00%, 6/01/08......................... 2,500
1,500 City of Columbia, Missouri, Water &
Electric Revenue Bonds, Series 85B,
5.00%, 12/01/15........................ 1,500
300 City of Forsyth, Montana, Pollution
Control Revenue, Series B,
5.65%, 6/01/13......................... 300
700 City of Forsyth, Montana, Pollution
Control Revenue, Series D,
5.65%, 6/01/13......................... 700
2,600 City of Midlothian, Texas, Industrial
Development Corp., Pollution Control
Revenue, Box-Crow Cement Co. Project,
5.40%, 12/01/09........................ 2,600
7,900 Clark County, Nevada, Airport Revenue
Bonds, Series 93A, 4.95%, 7/01/12...... 7,900
$ 1,530 Clear Creek County, Colorado, Revenue
Bonds, Colorado Finance Pool Program,
5.00%, 6/01/98......................... $ 1,530
600 Colorado Student Obligation Bond
Authority, Student Loan Revenue,
Series 91C1, 4.90%, 8/01/00............ 600
7,300 Dade County, Florida, Water & Sewer
Revenue Bonds, 4.95%, 10/05/22......... 7,300
1,200 Delaware County, Pennsylvania, Industrial
Development Authority, Scott Paper
Series D, 5.65%, 12/01/18.............. 1,200
500 Delaware County, Pennsylvania, Industrial
Development Authority, Scott Paper
Series E, 5.65%, 12/01/18.............. 500
1,000 Emmaus, Pennsylvania, General Authority,
Series D5, 5.65%, 3/01/24.............. 1,000
2,500 Emmaus, Pennsylvania, General Authority,
Series E5, 5.65%, 3/01/24.............. 2,500
300 Illinois Development Finance Authority,
A.E. Staley Manufacturing Series 85,
4.90%, 12/01/05........................ 300
1,000 Lehigh County, Pennsylvania, Allegheny
Electric Cooperative, 5.40%, 12/01/15.. 1,000
600 Louisiana Public Facilities Authority,
Hospital Revenue, Series 85,
5.50%, 12/01/00........................ 600
1,000 Massachusetts Health & Education
Facilities Authority, Series G-1,
4.50%, 1/01/19......................... 1,000
1,100 Mobile, Alabama, Industrial Development
Board, Scott Paper Series A,
5.65%, 12/01/19........................ 1,100
1,500 Mobile, Alabama, Industrial Development
Board, Scott Paper Series B,
5.65%, 12/01/19........................ 1,500
3,900 Nueces County, Texas, Health Facilities,
Driscoll Childrens' Foundation,
5.55%, 7/01/15......................... 3,900
1,500 Person County, North Carolina, Carolina
Power& Light, 5.55%, 11/01/19.......... 1,500
235 Pinellas County, Florida, Health
Facilities, Bayfront Medical Center,
Series 89, 4.95%, 6/01/98.............. 235
540 Polk County, Iowa, Hospital Equipment &
Improvement Authority,
5.50%, 12/01/05........................ 540
800 Port Development Corporation Marine
Terminal, Texas, Series 89,
4.95%, 1/15/14......................... 800
1,500 Port of Corpus Christi, Texas, Marine
Terminal, R.J. Reynolds Metals Series,
5.40%, 9/01/14......................... 1,500
650 Putnam County, Florida, Development
Authority, Seminole Electric
Series 84H1, 5.55%, 3/15/14............ 650
1,000 Rapides Parish, Louisiana, Central
Louisiana Electric Series,
5.40%, 7/01/18......................... 1,000
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
94
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
THE MUNICPAL MONEY MARKET PORTFOLIO (CONT.)
- ------------------------------------------------------------------------------
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
WEEKLY VARIABLE RATE BONDS (CONT.)
$ 700 Sheboygan, Wisconsin, Wisconsin Power &
Light Series , 5.40%, 8/01/14.......... $ 700
----------
64,355
----------
TOTAL VARIABLE/FLOATING RATE INSTRUMENTS.............. 171,955
----------
TOTAL TAX-EXEMPT INSTRUMENTS (Cost $353,575).......... 353,575
----------
TAXABLE INSTRUMENTS (1.2%)
US GOVERNMENT & AGENCY OBLIGATIONS (1.2%)
Federal Farm Credit Bank
2,045 Discount Note, 5.75%, 1/20/95............ 2,039
Federal Home Loan Bank
700 Discount Note, 5.77%, 1/17/95............ 698
1,550 Discount Note, 5.96%, 2/06/95............ 1,541
----------
TOTAL TAXABLE INSTRUMENTS (Cost $4,278)............... 4,278
----------
TOTAL INVESTMENTS (99.6%) (Cost $357,853)............. 357,853
----------
VALUE
(000)
- ---------------------------------------------------------------------
OTHER ASSETS (0.7%)
Cash......................................... $ 97
Interest Receivable.......................... 2,485
Other........................................ 34 $ 2,616
------
LIABILITIES (-0.3%)
Distributions Payable........................ (613)
Investment Advisory Fees Payable............. (252)
Administrative Fees Payable.................. (66)
Custodian Fees Payable....................... (27)
Director's Fees & Expenses................... (1)
Other Liabilities............................ (66) (1,025)
------ --------
NET ASSETS (100%)......................................... $359,444
--------
--------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 359,426,006 outstanding $.001
par value shares (authorized 1,000,000,000
shares)...................................... $1.00
-----
-----
- --------------------------------------------------------------------------------
TANS -- Tax Anticipation Notes
TRANS -- Tax & Revenue Anticipation Notes
Variable/Floating Rate Instruments. The interest rate changes on these
instruments are based on changes in a designated base rate. These instruments
are payable on demand and are secured by a letter of credit or other support
agreements.
Maturity dates disclosed for Variable/Floating Rate Instruments are the
ultimate maturity dates. The effective maturity dates for such securities are
the next interest reset dates which are seven days or less.
Interest rates disclosed for US Government & Agency Obligations represent
effective yields.
At December31, 1994, approximately 15% of the net assets were invested in
Texas municipal securities. Economic changes affecting the state and certain
of its public bodies and municipalities may affect the ability of issuers to
pay the required principal and interest payments of the municipal securities.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
95
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACTIVE
COUNTRY ASIAN EMERGING EUROPEAN GLOBAL
ALLOCATION EQUITY MARKETS EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994 1994
(000) (000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 4,271 $ 3,652 $ 10,163 $ 301 $ 955
Interest 312 801 3,744 82 97
Less Foreign Taxes Withheld (454) (348) (719) (42) (87)
------------ ------------ ------------- ------------ ------------
Total Income 4,129 4,105 13,188 341 965
------------ ------------ ------------- ------------ ------------
EXPENSES:
Investment Advisory Fees:
Basic Fees -- Adviser 1,202 2,168 11,082 146 414
Less: Fees Waived (367) (535) -- (112) (126)
------------ ------------ ------------- ------------ ------------
Investment Advisory Fees -- Net 835 1,633 11,082 34 288
Administrative Fees 346 433 1,388 45 90
Sub - Administrative Fees -- -- 158 -- --
Custodian Fees 168 519 1,752 45 43
Filing and Registration Fees 31 31 123 21 35
Insurance 8 9 24 -- 1
Directors' Fees and Expenses 4 4 4 4 4
Legal Fees 16 14 40 1 2
Audit Fees 31 35 59 24 32
Shareholder Reports 35 27 82 7 19
Brazilian Tax Expense -- -- 632 -- --
Other Expenses 3 3 146 1 1
------------ ------------ ------------- ------------ ------------
Total Expenses 1,477 2,708 15,490 182 515
------------ ------------ ------------- ------------ ------------
NET INVESTMENT INCOME (LOSS) 2,652 1,397 (2,302) 159 450
------------ ------------ ------------- ------------ ------------
NET REALIZED GAIN (LOSS):
Investments Sold 12,714 32,350 68,650 2,757 1,568
Foreign Currency Transactions (4,567) 498 (1,826) (151) (75)
------------ ------------ ------------- ------------ ------------
Total Net Realized Gain 8,147 32,848 66,824 2,606 1,493
------------ ------------ ------------- ------------ ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (12,455) (80,975) (168,042) (1,886) (1,816)
------------ ------------ ------------- ------------ ------------
TOTAL NET REALIZED GAIN AND CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) (4,308) (48,127) (101,218) 720 (323)
------------ ------------ ------------- ------------ ------------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ (1,656) $ (46,730) $ (103,520) $ 879 $ 127
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
96
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JAPANESE
GOLD INTERNATIONAL INTERNATIONAL EQUITY
PORTFOLIO EQUITY SMALL CAP PORTFOLIO
FEBRUARY 1, PORTFOLIO PORTFOLIO APRIL 25,
1994* TO YEAR ENDED YEAR ENDED 1994* TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 199 $ 25,000 $ 2,775 $ 161
Interest 118 3,310 336 138
Less Foreign Taxes Withheld (2) (2,929) (321) (24)
------------ ------------ ------------- ------------
Total Income 315 25,381 2,790 275
------------ ------------ ------------- ------------
EXPENSES:
Investment Advisory Fees:
Basic Fees -- Adviser 114 9,581 1,139 244
Basic Fees -- Sub Adviser 76 -- -- --
Less: Fees Waived -- Adviser (55) (344) (174) (80)
Fees Waived -- Sub Adviser (36) -- -- --
------------ ------------ ------------- ------------
Investment Advisory Fees -- Net 99 9,237 965 164
Administrative Fees 32 1,888 192 50
Custodian Fees 12 496 114 22
Filing and Registration Fees 26 88 51 26
Insurance -- 51 3 1
Directors' Fees and Expenses 4 4 4 3
Legal Fees 4 56 5 6
Audit Fees 25 46 28 27
Shareholder Reports 34 85 14 7
Other Expenses 2 24 1 --
------------ ------------ ------------- ------------
Total Expenses 238 11,975 1,377 306
------------ ------------ ------------- ------------
NET INVESTMENT INCOME (LOSS) 77 13,406 1,413 (31)
------------ ------------ ------------- ------------
NET REALIZED GAIN (LOSS):
Investments Sold 974 70,494 (1,638) 4
Foreign Currency Transactions (3) (5,962) (704) (531)
------------ ------------ ------------- ------------
Total Net Realized Gain (Loss) 971 64,532 (2,342) (527)
------------ ------------ ------------- ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (2,809) 46,399 (5,180) (215)
------------ ------------ ------------- ------------
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) (1,838) 110,931 (7,522) (742)
------------ ------------ ------------- ------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ (1,761) $ 124,337 $ (6,109) $ (773)
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
<FN>
- ---------------
*Commencement of operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
97
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING EQUITY SMALL CAP VALUE
GROWTH GROWTH VALUE EQUITY EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994 1994
(000) (000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 300 $ 1,566 $ 1,221 $ 2,785 $ 467
Interest 411 445 85 84 688
------ ------------ ------------- ------------ ------------
Total Income 711 2,011 1,306 2,869 1,155
------ ------------ ------------- ------------ ------------
EXPENSES:
Investment Advisory Fees:
Basic Fees -- Adviser 1,110 538 302 352 120
Less: Fees Waived (16) (83) (94) (73) (60)
------ ------------ ------------- ------------ ------------
Investment Advisory Fees -- Net 1,094 455 208 279 60
Administrative Fees 179 147 67 115 43
Custodian Fees 28 35 25 29 16
Filing and Registration Fees 22 25 18 24 16
Insurance 5 3 2 3 2
Directors' Fees and Expenses 4 4 4 4 4
Legal Fees 6 5 2 3 2
Audit Fees 17 17 17 17 17
Shareholder Reports 21 25 11 17 6
Other Expenses 8 2 1 2 2
------ ------------ ------------- ------------ ------------
Total Expenses 1,384 718 355 493 168
------ ------------ ------------- ------------ ------------
NET INVESTMENT INCOME (LOSS) (673) 1,293 951 2,376 987
------ ------------ ------------- ------------ ------------
NET REALIZED GAIN:
Investments Sold 1,331 3,710 1,484 2,378 496
------ ------------ ------------- ------------ ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (891) (2,690) (1,598) (6,089) (1,998)
------ ------------ ------------- ------------ ------------
TOTAL NET REALIZED GAIN AND CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) 440 1,020 (114) (3,711) (1,502)
------ ------------ ------------- ------------ ------------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ (233) $ 2,313 $ 837 $ (1,335) $ (515)
------ ------------ ------------- ------------ ------------
------ ------------ ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
98
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING
MARKETS GLOBAL MUNICIPAL
DEBT FIXED FIXED HIGH MONEY MONEY
PORTFOLIO INCOME INCOME YIELD MARKET MARKET
FEBRUARY 1, PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
1994* TO YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994 1994 1994
(000) (000) (000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $ -- $ 171 $ -- $ --
Interest 9,786 13,397 10,192 9,914 30,383 9,915
Less Foreign Taxes Withheld -- -- (168) -- -- --
------------ ------------ ------------- ------------ ------------ ------
Total Income 9,786 13,397 10,024 10,085 30,383 9,915
------------ ------------ ------------- ------------ ------------ ------
EXPENSES:
Investment Advisory Fees:
Basic Fees -- Adviser 853 758 586 496 2,127 1,006
Less: Fees Waived -- (276) (238) (7) -- --
------------ ------------ ------------- ------------ ------------ ------
Investment Advisory Fees -- Net 853 482 348 489 2,127 1,006
Administrative Fees 135 372 234 169 1,111 534
Custodian Fees 139 48 71 23 73 62
Filing and Registration Fees 63 17 14 29 43 49
Insurance 2 12 7 2 26 11
Directors' Fees and Expenses 4 4 4 4 4 4
Legal Fees 6 11 8 5 42 19
Audit Fees 42 17 24 22 18 16
Shareholder Reports 13 7 17 -- 34 18
Other Expenses 18 6 6 1 25 10
------------ ------------ ------------- ------------ ------------ ------
Total Expenses 1,275 976 733 744 3,503 1,729
------------ ------------ ------------- ------------ ------------ ------
NET INVESTMENT INCOME 8,511 12,421 9,291 9,341 26,880 8,186
------------ ------------ ------------- ------------ ------------ ------
NET REALIZED GAIN (LOSS):
Investments Sold (2,514) (14,132) (5,933) (1,581) (26) (6)
Foreign Currency Transactions (189) (747) (3,142) -- -- --
Securities Sold Short 187 -- -- -- -- --
------------ ------------ ------------- ------------ ------------ ------
Total Net Realized Loss (2,516) (14,879) (9,075) (1,581) (26) (6)
------------ ------------ ------------- ------------ ------------ ------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) (9,457) (5,219) (10,682) (12,785) -- --
------------ ------------ ------------- ------------ ------------ ------
TOTAL NET REALIZED LOSS AND CHANGE IN
UNREALIZED APPRECIATION (DEPRECIATION) (11,973) (20,098) (19,757) (14,366) (26) (6)
------------ ------------ ------------- ------------ ------------ ------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (3,462) $ (7,677) $ (10,466) $ (5,025) $ 26,854 $ 8,180
------------ ------------ ------------- ------------ ------------ ------
------------ ------------ ------------- ------------ ------------ ------
<FN>
- ---------------
* Commencement of operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
99
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,356 $ 2,652
Net Realized Gain 4,501 8,147
Change in Unrealized Appreciation (Depreciation) 19,159 (12,455)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 25,016 (1,656)
------------ ------------
DISTRIBUTIONS:
Net Investment Income (644) (1,773)
In Excess of Net Investment Income (585) --
Net Realized Gain -- (4,419)
In Excess of Net Realized Gain (472) --
------------ ------------
Total Distributions (1,701) (6,192)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 109,834 169,994
Distributions Reinvested 1,360 5,395
Redeemed (33,889) (135,418)
------------ ------------
Net Increase from Capital Share Transactions 77,305 39,971
------------ ------------
Total Increase in Net Assets 100,620 32,123
NET ASSETS:
Beginning of Period 50,234 150,854
------------ ------------
End of Period (2) $ 150,854 $ 182,977
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 9,943 14,259
Shares Issued on Distributions Reinvested 137 458
Shares Redeemed (2,968) (11,357)
------------ ------------
Net Increase in Capital Shares Outstanding 7,112 3,360
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 128,911 $ 168,882
Undistributed Net Investment Income 660 1,418
Accumulated Net Realized Gain 4,140 7,989
Unrealized Appreciation 17,143 4,688
------------ ------------
$ 150,854 $ 182,977
------------ ------------
------------ ------------
</TABLE>
- -------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,046 $ 1,397
Net Realized Gain 5,788 32,848
Change in Unrealized Appreciation (Depreciation) 111,553 (80,975)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 118,387 (46,730)
------------ ------------
DISTRIBUTIONS:
Net Investment Income (42) (972)
In Excess of Net Investment Income (422) --
Net Realized Gain (593) (5,840)
In Excess of Net Realized Gain (631) --
------------ ------------
Total Distributions (1,688) (6,812)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 177,134 213,200
Distributions Reinvested 1,532 6,036
Redeemed (50,207) (175,924)
------------ ------------
Net Increase from Capital Share Transactions 128,459 43,312
------------ ------------
Total Increase (Decrease) in Net Assets 245,158 (10,230)
NET ASSETS:
Beginning of Period 41,978 287,136
------------ ------------
End of Period (2) $ 287,136 $ 276,906
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 10,206 9,345
Shares Issued on Distributions Reinvested 102 233
Shares Redeemed (2,549) (7,685)
------------ ------------
Net Increase in Capital Shares Outstanding 7,759 1,893
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 164,282 $ 207,594
Undistributed Net Investment Income 940 1,886
Accumulated Net Realized Gain 5,863 32,350
Unrealized Appreciation 116,051 35,076
------------ ------------
$ 287,136 $ 276,906
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
100
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Loss $ (194) $ (2,302)
Net Realized Gain (Net of India tax of $1,159 on net realized gains for the Year Ended
December 31, 1994.) 37,580 66,824
Change in Unrealized Appreciation (Depreciation) 212,433 (168,042)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 249,819 (103,520)
------------ ------------
DISTRIBUTIONS:
Net Realized Gain -- (37,393)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 430,127 579,390
Distributions Reinvested -- 35,730
Redeemed (18,813) (279,921)
------------ ------------
Net Increase from Capital Share Transactions 411,314 335,199
------------ ------------
Total Increase in Net Assets 661,133 194,286
NET ASSETS:
Beginning of Period 74,219 735,352
------------ ------------
End of Period (2) $ 735,352 $ 929,638
------------ ------------
------------ ------------
<FN>
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 32,725 32,685
Shares Issued on Distributions Reinvested -- 1,974
Shares Redeemed (1,289) (16,342)
------------ ------------
Net Increase in Capital Shares Outstanding 31,436 18,317
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 483,068 $ 818,267
Accumulated Net Investment Loss -- (785)
Accumulated Net Realized Gain 37,339 65,253
Unrealized Appreciation (Net of India tax of $4,779 on unrealized appreciation on
investments at December 31, 1994.) 214,945 46,903
------------ ------------
$ 735,352 $ 929,638
------------ ------------
------------ ------------
</TABLE>
- ------------------------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 2, 1993* TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 75 $ 159
Net Realized Gain 260 2,606
Change in Unrealized Appreciation (Depreciation) 1,687 (1,886)
------- ------------
Net Increase in Net Assets Resulting from Operations 2,022 879
------- ------------
DISTRIBUTIONS:
Net Investment Income -- (87)
Net Realized Gain -- (251)
------- ------------
Total Distributions -- (338)
------- ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 12,366 39,425
Distributions Reinvested -- 337
Redeemed (1,707) (25,350)
------- ------------
Net Increase from Capital Share Transactions 10,659 14,412
------- ------------
Total Increase in Net Assets 12,681 14,953
NET ASSETS:
Beginning of Period -- 12,681
------- ------------
End of Period (2) $ 12,681 $ 27,634
------- ------------
------- ------------
<FN>
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 1,122 2,791
Shares Issued on Distributions Reinvested -- 27
Shares Redeemed (140) (1,818)
------- ------------
Net Increase in Capital Shares Outstanding 982 1,000
------- ------------
------- ------------
(2) Net Assets were comprised of:
Paid in Capital $ 10,659 $ 25,071
Undistributed Net Investment Income 84 31
Accumulated Net Realized Gain 251 2,731
Unrealized Appreciation (Depreciation) 1,687 (199)
------- ------------
$ 12,681 $ 27,634
------- ------------
------- ------------
- -----------------
* Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
101
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 128 $ 450
Net Realized Gain 1,796 1,493
Change in Unrealized Appreciation (Depreciation) 3,624 (1,816)
------------ ------------
Net Increase in Net Assets Resulting from Operations 5,548 127
------------ ------------
DISTRIBUTIONS:
Net Investment Income (36) (170)
In Excess of Net Investment Income (40) --
Net Realized Gain (111) (1,756)
------------ ------------
Total Distributions (187) (1,926)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 3,441 72,166
Distributions Reinvested 188 1,926
Redeemed (811) (13,276)
------------ ------------
Net Increase from Capital Share Transactions 2,818 60,816
------------ ------------
Total Increase in Net Assets 8,179 59,017
NET ASSETS:
Beginning of Period 11,739 19,918
------------ ------------
End of Period (2) $ 19,918 $ 78,935
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 281 5,281
Shares Issued on Distributions Reinvested 17 154
Shares Redeemed (66) (982)
------------ ------------
Net Increase in Capital Shares Outstanding 232 4,453
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 14,619 $ 75,435
Undistributed Net Investment Income 168 373
Accumulated Net Realized Gain 1,756 1,568
Unrealized Appreciation 3,375 1,559
------------ ------------
$ 19,918 $ 78,935
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
THE GOLD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1, 1994* TO
DECEMBER 31, 1994
(000)
- --------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 77
Net Realized Gain 971
Change in Unrealized Depreciation (2,809)
--------
Net Decrease in Net Assets Resulting from Operations (1,761)
--------
DISTRIBUTIONS:
Net Investment Income (38)
--------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 40,892
Distributions Reinvested 32
Redeemed (8,882)
--------
Net Increase from Capital Share Transactions 32,042
--------
Total Increase in Net Assets 30,243
NET ASSETS:
Beginning of Period --
--------
End of Period (2) $ 30,243
--------
--------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 4,264
Shares Issued on Distributions Reinvested 3
Shares Redeemed (954)
--------
Net Increase in Capital Shares Outstanding 3,313
--------
--------
(2) Net Assets were comprised of:
Paid in Capital $ 32,042
Undistributed Net Investment Income 36
Accumulated Net Realized Gain 974
Unrealized Depreciation (2,809)
--------
$ 30,243
--------
--------
- --------------------
*Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
102
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 8,833 $ 13,406
Net Realized Gain 27,684 64,532
Change in Unrealized Appreciation (Depreciation) 221,419 46,399
------------ ------------
Net Increase in Net Assets Resulting from Operations 257,936 124,337
------------ ------------
DISTRIBUTIONS:
Net Investment Income (571) (11,956)
In Excess of Net Investment Income (6,863) --
Net Realized Gain (15,370) (18,019)
------------ ------------
Total Distributions (22,804) (29,975)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 251,210 330,843
Distributions Reinvested 19,481 25,762
Redeemed (69,505) (93,242)
------------ ------------
Net Increase from Capital Share Transactions 201,186 263,363
------------ ------------
Total Increase in Net Assets 436,318 357,725
NET ASSETS:
Beginning of Period 510,727 947,045
------------ ------------
End of Period (2) $ 947,045 $ 1,304,770
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 20,089 22,148
Shares Issued on Distributions Reinvested 1,763 1,872
Shares Redeemed (5,819) (6,156)
------------ ------------
Net Increase in Capital Shares Outstanding 16,033 17,864
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 737,361 $ 1,001,514
Undistributed Net Investment Income 11,557 7,083
Accumulated Net Realized Gain 18,688 70,335
Unrealized Appreciation 179,439 225,838
------------ ------------
$ 947,045 $ 1,304,770
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 142 $ 1,413
Net Realized Gain (Loss) 775 (2,342)
Change in Unrealized Appreciation (Depreciation) 3,647 (5,180)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 4,564 (6,109)
------------ ------------
------------ ------------
DISTRIBUTIONS:
Net Investment Income (4) (96)
In Excess of Net Investment Income (35) --
Net Realized Gain -- (794)
------------ ------------
Total Distributions (39) (890)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 45,462 132,287
Distributions Reinvested 34 763
Redeemed (1,011) (18,784)
------------ ------------
Net Increase from Capital Share Transactions 44,485 114,266
------------ ------------
Total Increase in Net Assets 49,010 107,267
NET ASSETS:
Beginning of Period 3,824 52,834
------------ ------------
End of Period (2) $ 52,834 $ 160,101
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 3,336 8,068
Shares Issued on Distributions Reinvested 3 52
Shares Redeemed (108) (1,164)
------------ ------------
Net Increase in Capital Shares Outstanding 3,231 6,956
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 48,311 $ 162,928
Undistributed Net Investment Income 90 703
Accumulated Net Realized Gain (Loss) 794 (1,989)
Unrealized Appreciation (Depreciation) 3,639 (1,541)
------------ ------------
$ 52,834 $ 160,101
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
103
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE JAPANESE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 25, 1994* TO
DECEMBER 31, 1994
(000)
- --------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Loss $ (31)
Net Realized Loss (527)
Change in Unrealized Depreciation (215)
--------
Net Decrease in Net Assets Resulting from Operations (773)
--------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 69,015
Redeemed (17,910)
--------
Net Increase from Capital Share Transactions 51,105
--------
Total Increase in Net Assets 50,332
NET ASSETS:
Beginning of Period --
--------
End of Period (2) $ 50,332
--------
--------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 6,910
Shares Redeemed (1,789)
--------
Net Increase in Capital Shares Outstanding 5,121
--------
--------
(2) Net Assets were comprised of:
Paid in Capital $ 50,808
Accumulated Net Investment Loss (261)
Unrealized Depreciation (215)
--------
$ 50,332
--------
--------
- -----------------
*Commencement of operations.
</TABLE>
- ------------------------------------------------------------------------------
THE EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Loss $ (703) $ (673)
Net Realized Gain (Loss) (8,842) 1,331
Change in Unrealized Appreciation (Depreciation) 11,279 (891)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 1,734 (233)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 50,836 85,970
Redeemed (43,110) (71,689)
------------ ------------
Net Increase from Capital Share Transactions 7,726 14,281
------------ ------------
Total Increase in Net Assets 9,460 14,048
NET ASSETS:
Beginning of Period 94,161 103,621
------------ ------------
End of Period (2) $ 103,621 $ 117,669
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 3,441 5,433
Shares Redeemed (2,856) (4,522)
------------ ------------
Net Increase in Capital Shares Outstanding 585 911
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 89,990 $ 103,598
Accumulated Net Realized Loss (12,256) (10,925)
Unrealized Appreciation 25,887 24,996
------------ ------------
$ 103,621 $ 117,669
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
104
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 864 $ 1,293
Net Realized Gain 2,813 3,710
Change in Unrealized Appreciation (Depreciation) (190) (2,690)
------------ ------------
Net Increase in Net Assets Resulting from Operations 3,487 2,313
------------ ------------
DISTRIBUTIONS:
Net Investment Income (864) (952)
In Excess of Net Investment Income (47) --
Net Realized Gain -- (2,220)
------------ ------------
Total Distributions (911) (3,172)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 69,561 47,456
Distributions Reinvested 880 3,096
Redeemed (45,213) (26,223)
------------ ------------
Net Increase from Capital Share Transactions 25,228 24,329
------------ ------------
Total Increase in Net Assets 27,804 23,470
NET ASSETS:
Beginning of Period 45,985 73,789
------------ ------------
End of Period (2) $ 73,789 $ 97,259
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 6,049 3,964
Shares Issued on Distributions Reinvested 76 267
Shares Redeemed (3,918) (2,218)
------------ ------------
Net Increase in Capital Shares Outstanding 2,207 2,013
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 68,255 $ 92,584
Undistributed Net Investment Income 120 461
Accumulated Net Realized Gain 1,969 3,459
Unrealized Appreciation 3,445 755
------------ ------------
$ 73,789 $ 97,259
------------ ------------
------------ ------------
</TABLE>
- ------------------------------------------------------------------------------
THE SMALL CAP VALUE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 467 $ 951
Net Realized Gain 720 1,484
Change in Unrealized Appreciation (Depreciation) 603 (1,598)
------------ ------------
Net Increase in Net Assets Resulting from Operations 1,790 837
------------ ------------
DISTRIBUTIONS:
Net Investment Income (309) (831)
Net Realized Gain -- (720)
------------ ------------
Total Distributions (309) (1,551)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 26,738 25,447
Distributions Reinvested 301 1,464
Redeemed (7,719) (12,939)
------------ ------------
Net Increase from Capital Share Transactions 19,320 13,972
------------ ------------
Total Increase in Net Assets 20,801 13,258
NET ASSETS:
Beginning of Period 5,974 26,775
------------ ------------
End of Period (2) $ 26,775 $ 40,033
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 2,513 2,358
Shares Issued on Distributions Reinvested 28 137
Shares Redeemed (718) (1,200)
------------ ------------
Net Increase in Capital Shares Outstanding 1,823 1,295
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 25,222 $ 39,194
Undistributed Net Investment Income 161 281
Accumulated Net Realized Gain 720 1,484
Unrealized Appreciation (Depreciation) 672 (926)
------------ ------------
$ 26,775 $ 40,033
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
105
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,381 $ 2,376
Net Realized Gain 2,718 2,378
Change in Unrealized Appreciation (Depreciation) 1,999 (6,089)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 6,098 (1,335)
------------ ------------
DISTRIBUTIONS:
Net Investment Income (1,169) (2,189)
Net Realized Gain -- (2,504)
------------ ------------
Total Distributions (1,169) (4,693)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 44,906 45,372
Distributions Reinvested 1,049 4,395
Redeemed (23,827) (24,931)
------------ ------------
Net Increase from Capital Share Transactions 22,128 24,836
------------ ------------
Total Increase in Net Assets 27,057 18,808
NET ASSETS:
Beginning of Period 27,541 54,598
------------ ------------
End of Period (2) $ 54,598 $ 73,406
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 3,767 3,798
Shares Issued on Distributions Reinvested 89 372
Shares Redeemed (1,969) (2,109)
------------ ------------
Net Increase in Capital Shares Outstanding 1,887 2,061
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 47,884 $ 72,751
Undistributed Net Investment Income 442 643
Accumulated Net Realized Gain 2,478 2,307
Unrealized Appreciation (Depreciation) 3,794 (2,295)
------------ ------------
$ 54,598 $ 73,406
------------ ------------
------------ ------------
</TABLE>
- ------------------------------------------------------------------------------
THE BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,390 $ 987
Net Realized Gain 3,879 496
Change in Unrealized (Depreciation) (1,029) (1,998)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 4,240 (515)
------------ ------------
DISTRIBUTIONS:
Net Investment Income (1,390) (1,257)
In Excess of Net Investment Income (258) --
Net Realized Gain (201) (3,880)
In Excess of Net Realized Gain (3,044) --
------------ ------------
Total Distributions (4,893) (5,137)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 3,110 4,396
Distributions Reinvested 4,366 4,725
Redeemed (17,033) (14,661)
------------ ------------
Net Decrease from Capital Share Transactions (9,557) (5,540)
------------ ------------
Total Decrease in Net Assets (10,210) (11,192)
NET ASSETS:
Beginning of Period 39,894 29,684
------------ ------------
End of Period (2) $ 29,684 $ 18,492
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 290 470
Shares Issued on Distributions Reinvested 420 502
Shares Redeemed (1,571) (1,574)
------------ ------------
Net Decrease in Capital Shares Outstanding (861) (602)
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 23,819 $ 18,279
Undistributed Net Investment Income 505 214
Accumulated Net Realized Gain 3,858 495
Unrealized Appreciation (Depreciation) 1,502 (496)
------------ ------------
$ 29,684 $ 18,492
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
106
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1, 1994* TO
DECEMBER 31,
1994
(000)
- --------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 8,511
Net Realized Loss (2,516)
Change in Unrealized Depreciation (9,457)
--------
Net Decrease in Net Assets Resulting from Operations (3,462)
--------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 190,661
Redeemed (42,250)
--------
Net Increase from Capital Share Transactions 148,411
--------
Total Increase in Net Assets 144,949
NET ASSETS:
Beginning of Period --
--------
End of Period (2) $ 144,949
--------
--------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 21,753
Shares Redeemed (4,872)
--------
Net Increase in Capital Shares Outstanding 16,881
--------
--------
(2) Net Assets were comprised of:
Paid in Capital $ 148,411
Undistributed Net Investment Income 8,322
Accumulated Net Realized Loss (2,327)
Unrealized Depreciation (9,457)
--------
$ 144,949
--------
--------
- -----------------
*Commencement of operations.
</TABLE>
- ------------------------------------------------------------------------------
THE FIXED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSSETS
OPERATIONS:
Net Investment Income $ 10,095 $ 12,421
Net Realized Gain (Loss) 8,090 (14,879)
Change in Unrealized Appreciation (Depreciation) (2,112) (5,219)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 16,073 (7,677)
------------ ------------
DISTRIBUTIONS:
Net Investment Income (10,095) (11,181)
In Excess of Net Investment Income (146) --
Net Realized Gain (3,669) (8,092)
In Excess of Net Realized Gain -- (22)
------------ ------------
Total Distributions (13,910) (19,295)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 135,882 91,618
Distributions Reinvested 12,353 16,756
Redeemed (63,940) (112,739)
------------ ------------
Net Increase (Decrease) from Capital Share Transactions 84,295 (4,365)
------------ ------------
Total Increase (Decrease) in Net Assets 86,458 (31,337)
NET ASSETS:
Beginning of Period 154,210 240,668
------------ ------------
End of Period (2) $ 240,668 $ 209,331
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 12,327 9,049
Shares Issued on Distributions Reinvested 1,135 1,625
Shares Redeemed (5,784) (11,150)
------------ ------------
Net Increase (Decrease) in Capital Shares Outstanding 7,678 (476)
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 231,416 $ 227,051
Undistributed Net Investment Income 781 1,274
Accumulated Net Realized Gain (Loss) 8,092 (14,154)
Unrealized Appreciation (Depreciation) 379 (4,840)
------------ ------------
$ 240,668 $ 209,331
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
107
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 7,832 $ 9,291
Net Realized Gain (Loss) 4,506 (9,075)
Change in Unrealized Appreciation (Depreciation) 5,277 (10,682)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 17,615 (10,466)
------------ ------------
DISTRIBUTIONS:
Net Investment Income (7,831) (5,595)
In Excess of Net Investment Income (2,164) --
Net Realized Gain (1,320) (4,564)
------------ ------------
Total Distributions (11,315) (10,159)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 113,012 96,510
Distributions Reinvested 9,424 9,111
Redeemed (49,165) (126,789)
------------ ------------
Net Increase (Decrease) from Capital Share Transactions 73,271 (21,168)
------------ ------------
Total Increase (Decrease) in Net Assets 79,571 (41,793)
NET ASSETS:
Beginning of Period 92,897 172,468
------------ ------------
End of Period (2) $ 172,468 $ 130,675
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 9,941 8,912
Shares Issued on Distributions Reinvested 869 833
Shares Redeemed (4,300) (11,801)
------------ ------------
Net Increase (Decrease) in Capital Shares Outstanding 6,510 (2,056)
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 162,825 $ 141,657
Undistributed Net Investment Income 1,060 1,613
Accumulated Net Realized Gain (Loss) 4,563 (5,933)
Unrealized Appreciation (Depreciation) 4,020 (6,662)
------------ ------------
$ 172,468 $ 130,675
------------ ------------
------------ ------------
</TABLE>
- ------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 3,465 $ 9,341
Net Realized Gain (Loss) 1,550 (1,581)
Change in Unrealized Appreciation (Depreciation) 2,151 (12,785)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 7,166 (5,025)
------------ ------------
DISTRIBUTIONS:
Net Investment Income (3,128) (9,097)
Net Realized Gain -- (1,413)
------------ ------------
Total Distributions (3,128) (10,510)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 56,684 72,764
Distributions Reinvested 3,050 8,869
Redeemed (9,466) (43,375)
------------ ------------
Net Increase from Capital Share Transactions 50,268 38,258
------------ ------------
Total Increase in Net Assets 54,306 22,723
NET ASSETS:
Beginning of Period 20,194 74,500
------------ ------------
End of Period (2) $ 74,500 $ 97,223
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 5,224 6,882
Shares Issued on Distributions Reinvested 286 858
Shares Redeemed (863) (4,235)
------------ ------------
Net Increase in Capital Shares Outstanding 4,647 3,505
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 70,468 $ 108,726
Undistributed Net Investment Income 487 731
Accumulated Net Realized Gain (Loss) 1,413 (1,581)
Unrealized Appreciation (Depreciation) 2,132 (10,653)
------------ ------------
$ 74,500 $ 97,223
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
108
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 18,116 $ 26,880
Net Realized Gain (Loss) 16 (26)
------------ ------------
Net Increase in Net Assets Resulting from Operations 18,132 26,854
------------ ------------
DISTRIBUTIONS:
Net Investment Income (18,116) (26,888)
In Excess of Net Investment Income (35) --
------------ ------------
Total Distributions (18,151) (26,888)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 4,443,610 4,547,025
Distributions Reinvested 16,202 24,451
Redeemed (4,401,802) (4,538,102)
------------ ------------
Net Increase from Capital Share Transactions 58,010 33,374
------------ ------------
Total Increase in Net Assets 57,991 33,340
NET ASSETS:
Beginning of Period 599,172 657,163
------------ ------------
End of Period (2) $ 657,163 $ 690,503
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 4,443,610 4,547,025
Shares Issued on Distributions Reinvested 16,202 24,451
Shares Redeemed (4,401,802) (4,538,102)
------------ ------------
Net Increase in Capital Shares Outstanding 58,010 33,374
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 657,221 $ 690,595
Undistributed Net Investment Income 8 --
Accumulated Net Realized Loss (66) (92)
------------ ------------
$ 657,163 $ 690,503
------------ ------------
------------ ------------
</TABLE>
- ------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSSETS
OPERATIONS:
Net Investment Income $ 4,402 $ 8,186
Net Realized Loss (2) (6)
------------ ------------
Net Increase in Net Assets Resulting from Operations 4,400 8,180
------------ ------------
DISTRIBUTIONS:
Net Investment Income (4,402) (8,186)
In Excess of Net Realized Gain (27) --
------------ ------------
Total Distributions (4,429) (8,186)
------------ ------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 1,780,153 2,267,352
Distributions Reinvested 3,955 7,587
Redeemed (1,726,421) (2,182,013)
------------ ------------
Net Increase from Capital Share Transactions 57,687 92,926
------------ ------------
Total Increase in Net Assets 57,658 92,920
NET ASSETS:
Beginning of Period 208,866 266,524
------------ ------------
End of Period (2) $ 266,524 $ 359,444
------------ ------------
------------ ------------
<FN>
- --------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 1,780,153 2,267,352
Shares Issued on Distributions Reinvested 3,955 7,587
Shares Redeemed (1,726,421) (2,182,013)
------------ ------------
Net Increase in Capital Shares Outstanding 57,687 92,926
------------ ------------
------------ ------------
(2) Net Assets were comprised of:
Paid in Capital $ 266,524 $ 359,452
Accumulated Net Realized Loss -- (8)
------------ ------------
$ 266,524 $ 359,444
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
109
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- ------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM TWO MONTHS
JANUARY 17, ENDED YEAR ENDED
1992* TO DECEMBER YEAR ENDED DECEMBER
OCTOBER 31, 31, DECEMBER 31,
1992 1992 31, 1993 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.37 $ 9.59 $ 12.21
----------- ----- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.11 0.02 0.13 0.19
Net Realized and Unrealized Gain (Loss) on Investments (0.74) 0.20 2.75 (0.25)
----------- ----- ----------- -----------
Total from Investment Operations (0.63) 0.22 2.88 (.06)
----------- ----- ----------- -----------
DISTRIBUTIONS
Net Investment Income -- -- (0.09) (0.14)
In Excess of Net Investment Income -- -- (0.08) --
Net Realized Gain -- -- -- (0.36)
In Excess of Net Realized Gain -- -- (0.09) --
----------- ----- ----------- -----------
Total Distributions -- -- (0.26) (0.50)
----------- ----- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.37 $ 9.59 $ 12.21 $ 11.65
----------- ----- ----------- -----------
----------- ----- ----------- -----------
TOTAL RETURN (6.30)% 2.35% 30.72% (0.52)%
----------- ----- ----------- -----------
----------- ----- ----------- -----------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $47,534 $50,234 $150,854 $182,977
Ratio of Expenses to Average Net Assets (1) 0.88%** 0.80%** 0.80% 0.80%
Ratio of Net Investment Income to Average Net Assets (1) 2.32%** 1.22%** 1.29% 1.43%
Portfolio Turnover Rate %62 % 2 %53 %51
<FN>
- -----------------
(1) Effect of voluntary expense limitation during the
period:
Per share benefit to net investment income $ 0.03 $ 0.01 $ 0.05 $ 0.03
Ratios before expense limitation:
Expenses to Average Net Assets 1.58%** 1.70%** 1.33% 1.00%
Net Investment Income to Average Net Assets 1.62%** 0.32%** 0.76% 1.23%
*Commencement of operations.
**Annualized
</TABLE>
- ------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1991* TO YEAR ENDED TWO MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.67 $ 13.63 $ 13.11 $ 26.20
---------------- ----------- ---------------- ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.03 0.14 0.01 0.10 0.11
Net Realized and Unrealized Gain (Loss) on
Investments (0.36) 3.86 (0.53) 13.38 (4.15)
---------------- ----------- ---------------- ------------ ------------
Total from Investment Operations (0.33) 4.00 (0.52) 13.48 (4.04)
---------------- ----------- ---------------- ------------ ------------
DISTRIBUTIONS
Net Investment Income -- (0.04) -- (0.01) (0.09)
In Excess of Net Investment Income -- -- -- (0.13) --
Net Realized Gain -- -- -- (0.12) (0.53)
In Excess of Net Realized Gain -- -- -- (0.13) --
---------------- ----------- ---------------- ------------ ------------
Total Distributions -- (0.04) -- (0.39) (0.62)
---------------- ----------- ---------------- ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 9.67 $ 13.63 $ 13.11 $ 26.20 $ 21.54
---------------- ----------- ---------------- ------------ ------------
---------------- ----------- ---------------- ------------ ------------
TOTAL RETURN (3.30)% 41.50% (3.82)% 105.71% (15.81)%
---------------- ----------- ---------------- ------------ ------------
---------------- ----------- ---------------- ------------ ------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $10,719 $41,017 $41,978 $287,136 $276,906
Ratio of Expenses to Average Net Assets (1) 1.00%** 1.00% 1.00%** 1.00% 1.00%
Ratio of Net Investment Income to Average Net
Assets (1) 1.13%** 1.53% 0.61%** 0.83% 0.52%
Portfolio Turnover Rate 2% 33% 10% 18% 47%
<FN>
- -----------------
(1) Effect of voluntary expense limitation during
the period:
Per share benefit to net investment income $ 0.02 $ 0.06 $ 0.02 $ 0.05 $ 0.04
Ratios before expense limitation:
Expenses to Average Net Assets 2.52%** 1.63% 2.02%** 1.38% 1.20%
Net Investment Income (Loss) to Average Net
Assets (0.39 %** 0.90% (0.41 %** 0.45% 0.32%
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
110
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- ------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER TWO MONTHS
25, 1992* ENDED YEAR ENDED YEAR ENDED
TO OCTOBER DECEMBER DECEMBER DECEMBER
31, 31, 31, 31,
1992 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.11 $ 10.22 $ 19.00
----------- ----- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss (1) -- -- (0.01) (0.04)
Net Realized and Unrealized Gain (Loss) on
Investments 0.11 0.11 8.79 (2.56)
----------- ----- ----------- -----------
Total from Investment Operations 0.11 0.11 8.78 (2.60)
----------- ----- ----------- -----------
DISTRIBUTIONS
Net Realized Gain -- -- -- (0.10)
----------- ----- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 10.22 $ 19.00 $ 16.30
----------- ----- ----------- -----------
----------- ----- ----------- -----------
TOTAL RETURN 1.10% 1.09% 85.91% (9.63)%
----------- ----- ----------- -----------
----------- ----- ----------- -----------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $28,806 $74,219 $735,352 $929,638
Ratio of Expenses to Average Net Assets (1) 1.75%** 1.75%** 1.75% 1.75%
Ratio of Net Investment Loss to Average Net Assets (1) (0.53)%** (0.33)%** (0.06)% (0.26)%
Portfolio Turnover Rate 0% 2% 52% 32%
<FN>
- ---------------
(1) Effect of voluntary expense limitation during the
period:
Per share benefit to net investment income $ 0.02 $ 0.00 $ 0.01 N/A
Ratios before expense limitation:
Expenses to Average Net Assets 4.82%** 2.48%** 1.79% N/A
Net Investment Loss to Average Net Assets (3.60)%** (1.06)%** (0.10)% N/A
*Commencement of operations.
**Annualized.
</TABLE>
- ------------------------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 2, 1993* YEAR ENDED
TO DECEMBER 31, DECEMBER 31,
1993 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 12.91
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.08 0.08
Net Realized and Unrealized Gain on Investments 2.83 1.29
------- -------
Total from Investment Operations 2.91 1.37
------- -------
DISTRIBUTIONS
Net Investment Income -- (0.09)
Net Realized Gain -- (0.25)
------- -------
Total Distributions -- (0.34)
------- -------
NET ASSET VALUE, END OF PERIOD $ 12.91 $ 13.94
------- -------
------- -------
TOTAL RETURN 29.10% 10.88%
------- -------
------- -------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $12,681 $27,634
Ratio of Expenses to Average Net Assets (1) 1.00%** 1.00%
Ratio of Net Investment Income to Average Net Assets (1) 1.23%** 0.87%
Portfolio Turnover Rate 15% 79%
<FN>
- ---------------
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $ 0.09 $ 0.06
Ratios before expense limitation:
Expenses to Average Net Assets 2.43%** 1.62%
Net Investment Income (Loss) to Average Net Assets (0.21)%** 0.25%
*Commencement of operations.
**Annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
111
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1992* TWO MONTHS ENDED YEAR ENDED YEAR ENDED
TO OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1992 1993 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.35 $ 9.75 $ 13.87
------ ----- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.02 0.01 0.08 0.08
Net Realized and Unrealized Gain (Loss) on Investments (0.67) 0.39 4.18 0.79
------ ----- ------ ------
Total from Investment Operations (0.65) 0.40 4.26 0.87
------ ----- ------ ------
DISTRIBUTIONS
Net Investment Income -- -- (0.02) (0.12)
In Excess of Net Investment Income -- -- (0.03) --
Net Realized Gain -- -- (0.09) (1.22)
------ ----- ------ ------
Total Distributions -- -- (0.14) (1.34)
------ ----- ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.35 $ 9.75 $ 13.87 $ 13.40
------ ----- ------ ------
------ ----- ------ ------
TOTAL RETURN (6.50)% 4.28% 44.24% 6.95%
------ ----- ------ ------
------ ----- ------ ------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $11,257 $11,739 $19,918 $78,935
Ratio of Expenses to Average Net Assets (1) 1.00%** 1.00%** 1.00% 1.00%
Ratio of Net Investment Income to Average Net Assets (1) 1.00%** 0.69%** 0.84% 0.87%
Portfolio Turnover Rate 10% 5% 42% 12%
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C>
(1) Effect of voluntary expense limitation during the
period:
Per share benefit to net investment income $ 0.08 $ 0.02 $ 0.01 $ 0.02
Ratios before expense limitation:
Expenses to Average Net Assets 5.22%** 2.49%** 1.66% 1.24%
Net Investment Income (Loss) to Average Net Assets (3.22)%** (0.80)%** 0.18% 0.63%
</TABLE>
*Commencement of operations.
**Annualized
- --------------------------------------------------------------------------------
THE GOLD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1,
1994*
TO DECEMBER
31,
1994
- ----------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.03
Net Realized and Unrealized Loss on Investments (0.88)
------
Total from Investment Operations (0.85)
------
DISTRIBUTIONS
Net Investment Income (0.02)
------
NET ASSET VALUE, END OF PERIOD $ 9.13
------
------
TOTAL RETURN (8.49)%
------
------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $30,243
Ratio of Expenses to Average Net Assets (1) 1.25%**
Ratio of Net Investment Income to Average Net Assets (1) 0.41%**
Portfolio Turnover Rate 56%
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $ 0.04
Ratios before expense limitation:
Expenses to Average Net Assets 1.72%**
Net Investment Loss to Average Net Assets (0.06)%**
</TABLE>
*Commencement of operations.
**Annualized
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
112
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWO MONTHS
YEAR ENDED 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 $ 9.72 $ 10.05 $ 10.52 $ 9.83 $ 9.98 $ 14.09
------ ------ ------ ----- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.19 0.12 0.12 0.01 0.15 0.16
Net Realized and Unrealized Gain (Loss) on
Investments 0.20 0.58 (0.59) 0.14 4.36 1.54
------ ------ ------ ----- ------ ------
Total from Investment Operations 0.39 0.70 (0.47) 0.15 4.51 1.70
------ ------ ------ ----- ------ ------
DISTRIBUTIONS
Net Investment Income (0.06) (0.15) (0.17) -- (0.01) (0.18)
In Excess of Net Investment Income -- -- -- -- (0.13) --
Net Realized Gain -- (0.08) (0.05) -- (0.26) (0.27)
------ ------ ------ ----- ------ ------
Total Distributions (0.06) (0.23) (0.22) -- (0.40) (0.45)
------ ------ ------ ----- ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.05 $ 10.52 $ 9.83 $ 9.98 $ 14.09 $ 15.34
------ ------ ------ ----- ------ ------
------ ------ ------ ----- ------ ------
TOTAL RETURN 3.99% 7.17% (4.56)% 1.53% 46.50% 12.39%
------ ------ ------ ----- ------ ------
------ ------ ------ ----- ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $110,716 $283,776 $486,836 $510,727 $947,045 $1,304,770
Ratio of Expenses to Average Net Assets (1) 1.03% 1.00% 1.00% 1.00%** 1.00% 1.00%
Ratio of Net Investment Income to Average Net
Assets (1) 3.51% 2.27% 1.46% 0.68%** 1.25% 1.12%
Portfolio Turnover Rate 38% 22% 12% 5% 23% 16%
</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 $ 0.01 $ 0.01 $ 0.00 $ 0.00 $ 0.01 $ 0.004
Ratios before expense limitation:
Expenses to Average Net Assets 1.24% 1.09% 1.02% 1.14%** 1.06% 1.03%
Net Investment Income to Average Net
Assets 3.30% 2.18% 1.44% 0.54%** 1.19% 1.09%
</TABLE>
**Annualized
- --------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 15,
1992*
TO DECEMBER YEAR ENDED YEAR ENDED
31, DECEMBER 31, DECEMBER 31,
1992 1993+ 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.09 $ 14.64
------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.01 0.09 0.14
Net Realized and Unrealized Gain on Investments (2) 0.08 4.48 0.62
------ ------------ ------------
Total from Investment Operations 0.09 4.57 0.76
------ ------------ ------------
DISTRIBUTIONS
Net Investment Income -- 0.00 (0.03)
In Excess of Net Investment Income -- (0.02) --
Net Realized Gain -- -- (0.22)
------ ------------ ------------
Total Distributions -- (0.02) (0.25)
------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 10.09 $ 14.64 $ 15.15
------ ------------ ------------
------ ------------ ------------
TOTAL RETURN 0.90% 45.34% 5.25%
------ ------------ ------------
------ ------------ ------------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $3,824 $52,834 $160,101
Ratio of Expenses to Average Net Assets (1) 1.15%** 1.15% 1.15%
Ratio of Net Investment Income to Average Net Assets (1) 1.37%** 0.66% 1.18%
Portfolio Turnover Rate 0% 14% 8%
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C>
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $ 0.16 $ 0.10 $ 0.02
Ratios before expense limitation:
Expenses to Average Net Assets 21.67%** 1.86% 1.29%
Net Investment Income (Loss) to Average Net Assets (19.15)%** (0.05)% 1.04%
</TABLE>
(2) Reflects a 1% transaction fee on purchases and redemptions of capital
shares.
+Per share amounts for the year ended December 31, 1993 are based on average
outstanding shares.
*Commencement of operations.
**Annualized
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
113
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
S Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE JAPANESE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 25, 1994*
TO DECEMBER 31,
1994
- ---------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss (1) (0.01)
Net Realized and Unrealized Loss on Investments (0.16)
------
Total from Investment Operations (0.17)
------
NET ASSET VALUE, END OF PERIOD $ 9.83
------
------
TOTAL RETURN (1.70)%
------
------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $50,332
Ratio of Expenses to Average Net Assets (1) 1.00%**
Ratio of Net Investment Loss to Average Net Assets (1) (0.10)%**
Portfolio Turnover Rate 1%
</TABLE>
- ---------------
<TABLE>
<S> <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 1.27%**
Net Investment Loss to Average Net Assets (0.37)%**
</TABLE>
*Commencement of operations.
**Annualized
- --------------------------------------------------------------------------------
THE EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 1, 1989* YEAR ENDED YEAR ENDED TWO MONTHS ENDED YEAR ENDED YEAR ENDED
TO 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)%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
RATIOS 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) 1.26%** 1.25% 1.25% 1.25%** 1.25% 1.25%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (1) 0.64%** 0.00% (0.66)% (0.68)%** (0.77)% (0.61)%
Portfolio Turnover Rate 19% 2% 17% 1% 25% 24%
</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 $ 0.01 $ 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)%
</TABLE>
+Per share amounts for the year ended October 31, 1991 are based on average
outstanding shares.
*Commencement of operations.
**Annualized
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
114
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 2, 1991* YEAR ENDED TWO MONTHS ENDED YEAR ENDED YEAR ENDED
TO OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.66 $11.44 $11.88 $12.14
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.05 0.16 0.03 0.22 0.17
Net Realized and Unrealized Gain on Investments 0.61 0.82 0.41 0.28 0.21
------- ------- ------- ------- -------
Total from Investment Operations 0.66 0.98 0.44 0.50 0.38
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income -- (0.20) -- (0.23) (0.13)
In Excess of Net Investment Income -- -- -- (0.01) --
Net Realized Gain -- -- -- -- (0.37)
------- ------- ------- ------- -------
Total Distributions -- (0.20) -- (0.24) (0.50)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.66 $11.44 $11.88 $12.14 $12.02
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN 6.60% 9.26% 3.85% 4.33% 3.26%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 18,139 $ 36,558 $ 45,985 $ 73,789 $ 97,259
Ratio of Expenses to Average Net Assets (1) 0.80%** 0.80% 0.80%** 0.80% 0.80%
Ratio of Net Investment Income to Average Net
Assets (1) 2.34%** 1.73% 1.93%** 1.59% 1.44%
Portfolio Turnover Rate 3% 38% 1% 172% 146%
</TABLE>
- -----------------
<TABLE>
<S> <C> <C> <C> <C> <C>
(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
Ratios before expense limitation:
Expenses to Average Net Assets 1.37%** 1.01% 1.11%** 0.93% 0.89%
Net Investment Income to Average Net Assets 1.77%** 1.52% 1.62%** 1.46% 1.35%
</TABLE>
*Commencement of operations.
**Annualized
- --------------------------------------------------------------------------------
THE SMALL CAP VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17, 1992* YEAR ENDED YEAR ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1993 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.14 $11.10
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.01 0.24 0.28
Net Realized and Unrealized Gain (Loss) on Investments 0.13 0.90 (0.01)
------- ------- -------
Total from Investment Operations 0.14 1.14 0.27
------- ------- -------
DISTRIBUTIONS
Net Investment Income -- (0.18) (0.27)
Net Realized Gain -- -- (0.30)
------- ------- -------
Total Distributions -- (0.18) (0.57)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.14 $11.10 $10.80
------- ------- -------
------- ------- -------
TOTAL RETURN 1.40% 11.33% 2.53%
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 5,974 $ 26,775 $ 40,033
Ratio of Expenses to Average Net Assets (1) 1.00%** 1.00% 1.00%
Ratio of Net Investment Income to Average Net Assets (1) 1.64%** 2.56% 2.67%
Portfolio Turnover Rate 0% 29% 22%
</TABLE>
- -----------------
<TABLE>
<S> <C> <C> <C>
(1) Effect of voluntary expense limitation during the
period:
Per share benefit to net investment income $ 0.13 $ 0.06 $ 0.03
Ratios before expense limitation:
Expenses to Average Net Assets 23.14%** 1.68% 1.26%
Net Investment Income (Loss) to Average Net Assets (20.50)%** 1.88% 2.41%
</TABLE>
*Commencement of operations.
**Annualized
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
115
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 31, 1990* YEAR ENDED YEAR ENDED TWO MONTHS ENDED YEAR ENDED YEAR ENDED
TO 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 $ 8.59 $ 10.24 $ 10.71 $ 11.31 $ 12.63
------ ------ ----------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (1) 0.37 0.46 0.38 0.08 0.37 0.40
Net Realized and Unrealized
Gain (Loss) on Investments (1.45) 1.67 0.48 0.52 1.31 (0.55)
------ ------ ----------- ------ ------ ------
Total from Investment
Operations (1.08) 2.13 0.86 0.60 1.68 (0.15)
------ ------ ----------- ------ ------ ------
DISTRIBUTIONS
Net Investment Income (0.33) (0.48) (0.39) -- (0.36) (0.40)
Net Realized Gain -- -- -- -- -- (0.58)
------ ------ ----------- ------ ------ ------
Total Distributions (0.33) (0.48) (0.39) -- (0.36) (0.98)
------ ------ ----------- ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 8.59 $ 10.24 $ 10.71 $ 11.31 $ 12.63 $ 11.50
------ ------ ----------- ------ ------ ------
------ ------ ----------- ------ ------ ------
TOTAL RETURN (11.05)% 25.34% 8.51% 5.60% 15.14% (1.29)%
------ ------ ----------- ------ ------ ------
------ ------ ----------- ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $18,178 $16,304 $25,013 $27,541 $54,598 $73,406
Ratio of Expenses to Average
Net Assets (1) 0.70%** 0.70% 0.70% 0.70%** 0.70% 0.70%
Ratio of Net Investment
Income to Average Net Assets
(1) 5.46%** 4.57% 3.72% 4.41%** 3.23% 3.37%
Portfolio Turnover Rate 70% 90% 56% 9% 51% 33%
</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 $ 0.01 $ 0.02 $ 0.01 $ 0.01 $ 0.03 $ 0.01
Ratios before expense
limitation:
Expenses to Average Net
Assets 0.88%** 0.87% 0.84% 1.20%** 0.95% 0.80%
Net Investment Income
to Average Net Assets 5.28%** 4.40% 3.58% 3.91%** 2.98% 3.27%
</TABLE>
*Commencement of operations.
**Annualized
- --------------------------------------------------------------------------------
THE BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 20, 1990* YEAR ENDED YEAR ENDED TWO MONTHS ENDED YEAR ENDED YEAR ENDED
TO 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 $ 9.62 $ 10.61 $ 11.00 $ 11.31 $ 11.13
------ ----------- ----------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (1) 0.40 0.59 0.58 0.10 0.44 0.42
Net Realized
and
Unrealized
Gain (Loss)
on
Investments (0.46) 1.03 0.42 0.21 0.79 (0.64)
------ ----------- ----------- ------ ------ ------
Total from
Investment
Operations (0.06) 1.62 1.00 0.31 1.23 (0.22)
------ ----------- ----------- ------ ------ ------
DISTRIBUTIONS
Net Investment
Income (0.32) (0.63) (0.58) -- (0.41) (0.49)
In Excess of
Net
Investment
Income -- -- -- -- (0.08) --
Net Realized
Gain -- -- (0.03) -- (0.06) (1.46)
In Excess of
Net Realized
Gain -- -- -- -- (0.86) --
------ ----------- ----------- ------ ------ ------
Total
Distributions (0.32) (0.63) (0.61) -- (1.41) (1.95)
------ ----------- ----------- ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 9.62 $ 10.61 $ 11.00 $ 11.31 $ 11.13 $ 8.96
------ ----------- ----------- ------ ------ ------
------ ----------- ----------- ------ ------ ------
TOTAL RETURN (0.63)% 17.31% 9.57% 2.82% 12.09% (2.32)%
------ ----------- ----------- ------ ------ ------
------ ----------- ----------- ------ ------ ------
RATIOS AND
SUPPLEMENTAL
DATA:
Net Assets, End
of Period
(Thousands) $37,444 $51,334 $40,332 $39,984 $29,684 $18,492
Ratio of
Expenses to
Average Net
Assets (1) 0.70%** 0.70% 0.70% 0.70%** 0.70% 0.70%
Ratio of Net
Investment
Income to
Average Net
Assets (1) 6.81%** 5.99% 5.21% 5.29%** 3.88% 4.13%
Portfolio
Turnover Rate 19% 67% 40% 4% 136% 44%
</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 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.04 $ 0.03
Ratios before
expense
limitation:
Expenses
to Average
Net Assets 0.90%** 0.78% 0.79% 1.00%** 1.02% 0.95%
Net
Investment
Income to
Average
Net Assets 6.61%** 5.91% 5.12% 4.99%** 3.56% 3.88%
</TABLE>
*Commencement of operations.
**Annualized
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
116
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1, 1994*
TO DECEMBER 31,
1994
- --------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.50
Net Realized and Unrealized Loss on Investments (1.91)
------
Total from Investment Operations (1.41)
------
NET ASSET VALUE, END OF PERIOD $ 8.59
------
------
TOTAL RETURN (14.10)%
------
------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $144,949
Ratio of Expenses to Average Net Assets 1.49%**
Ratio of Net Investment Income to Average Net Assets 9.97%**
Portfolio Turnover Rate 273%
</TABLE>
- ---------------
*Commencement of operations.
**Annualized
- --------------------------------------------------------------------------------
THE FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
MAY 15, 1991* YEAR ENDED TWO MONTHS ENDED YEAR ENDED YEAR ENDED
TO OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.55 $ 10.92 $ 10.93 $ 11.05
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.22 0.69 0.10 0.54 0.59
Net Realized and Unrealized Gain (Loss) on
Investments 0.49 0.39 0.01 0.41 (0.92)
------ ------ ------ ------ ------
Total from Investment Operations 0.71 1.08 0.11 0.95 (0.33)
------ ------ ------ ------ ------
DISTRIBUTIONS
Net Investment Income (0.16) (0.69) (0.10) (0.56) (0.53)
In Excess of Net Investment Income -- -- -- (0.01) --
Net Realized Gain -- (0.02) -- (0.26) (0.37)
In Excess of Net Realized Gain -- -- -- -- (0.00)
------ ------ ------ ------ ------
Total Distributions (0.16) (0.71) (0.10) (0.83) (0.90)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.55 $ 10.92 $ 10.93 $ 11.05 $ 9.82
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN 7.12% 10.61% 1.02% 9.07% (3.10)%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $72,326 $146,546 $154,210 $240,668 $209,331
Ratio of Expenses to Average Net Assets (1) 0.45%** 0.45% 0.45%** 0.45% 0.45%
Ratio of Net Investment Income to Average Net
Assets (1) 7.29%** 6.59% 5.56%** 4.97% 5.73%
Portfolio Turnover Rate 48% 105% 15% 240% 388%
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
(1) Effect of voluntary expense limitation
during
the period:
Per share benefit to net investment
income $ 0.01 $ 0.02 $ 0.01 $ 0.02 $ 0.01
Ratios before expense limitation:
Expenses to Average Net Assets 0.81%** 0.59% 0.75%** 0.60% 0.58%
Net Investment Income to Average Net
Assets 6.93%** 6.45% 5.26%** 4.82% 5.60%
</TABLE>
*Commencement of operations.
**Annualized
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
117
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
MAY 1, 1991* YEAR ENDED TWO MONTHS ENDED YEAR ENDED YEAR ENDED
TO OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.61 $11.41 $11.26 $11.68
------- ------------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.16 0.53 0.14 0.69 0.70
Net Realized and Unrealized Gain (Loss) on
Investments 0.45 0.55 (0.29) 0.90 (1.38)
------- ------------- ------- ------ ------
Total from Investment Operations 0.61 1.08 (0.15) 1.59 (0.68)
------- ------------- ------- ------ ------
DISTRIBUTIONS
Net Investment Income -- (0.27) -- (0.79) (0.40)
In Excess of Net Investment Income -- -- -- (0.22) --
Net Realized Gain -- (0.01) -- (0.16) (0.31)
------- ------------- ------- ------ ------
Total Distributions -- (0.28) -- (1.17) (0.71)
------- ------------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $10.61 $11.41 $11.26 $11.68 $10.29
------- ------------- ------- ------ ------
------- ------------- ------- ------ ------
TOTAL RETURN 6.10% 10.29% (1.31)% 15.34% (6.08)%
------- ------------- ------- ------ ------
------- ------------- ------- ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $28,236 $94,847 $92,897 $172,468 $130,675
Ratio of Expenses to Average Net Assets (1) 0.50%** 0.50% 0.50%** 0.50% 0.50%
Ratio of Net Investment Income to Average Net
Assets (1) 7.24%** 6.92% 6.99%** 5.99% 6.34%
Portfolio Turnover Rate 20% 144% 9% 108% 171%
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
(1) Effect of voluntary expense limitation
during the period:
Per share benefit to net investment
income $ 0.02 $ 0.03 $ 0.01 $ 0.02 $ 0.02
Ratios before expense limitation:
Expenses to Average Net Assets 1.62%** 0.86% 0.90%** 0.70% 0.66%
Net Investment Income to Average Net
Assets 6.12%** 6.56% 6.59%** 5.79% 6.18%
</TABLE>
*Commencement of operations.
**Annualized
- --------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 28, 1992* TWO MONTHS ENDED YEAR ENDED YEAR ENDED
TO OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1992 1993 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $9.77 $9.95 $11.16
------ ------ ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.08 0.14 0.90 0.97
Net Realized and Unrealized Gain (Loss) on
Investments (0.31) 0.19 1.21 (1.40)
------ ------ ------------- -------------
Total from Investment Operations (0.23) 0.33 2.11 (0.43)
------ ------ ------------- -------------
DISTRIBUTIONS
Net Investment Income -- (0.15) (0.90) (0.97)
Net Realized Gain -- -- -- (0.21)
------ ------ ------------- -------------
Total Distributions -- (0.15) (0.90) (1.18)
------ ------ ------------- -------------
NET ASSET VALUE, END OF PERIOD $9.77 $9.95 $11.16 $9.55
------ ------ ------------- -------------
------ ------ ------------- -------------
TOTAL RETURN (2.30)% 3.41% 22.11% (4.18)%
------ ------ ------------- -------------
------ ------ ------------- -------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $16,950 $20,194 $74,500 $97,223
Ratio of Expenses to Average Net Assets (1) 0.75%** 0.75%** 0.75% 0.75%
Ratio of Net Investment Income to Average Net
Assets (1) 9.89%** 8.96%** 8.70% 9.42%
Portfolio Turnover Rate 9% 24% 104% 74%
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C>
(1) Effect of voluntary expense limitation
during the period:
Per share benefit to net investment
income $ 0.01 $ 0.01 $ 0.02 $ 0.001
Ratios before expense limitation:
Expenses to Average Net Assets 1.23%** 1.62%** 0.96% 0.76%
Net Investment Income to Average Net
Assets 9.41%** 8.09%** 8.49% 9.41%
</TABLE>
*Commencement of operations.
**Annualized
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
118
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWO MONTHS
YEAR ENDED 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 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------- ------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.079 0.062 0.039 0.005 0.027 0.040
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS
Net Investment Income (0.079) (0.062) (0.039) (0.005) (0.027) (0.040)
In Excess of Net Investment
Income -- -- -- -- (0.000) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.079) (0.062) (0.039) (0.005) (0.027) (0.040)
------------- ------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
TOTAL RETURN 8.16% 6.37% 3.77% 0.50% 2.76% 3.84%
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $516,182 $607,087 $612,968 $599,172 $657,163 $690,503
Ratio of Expenses to Average Net
Assets (1) 0.55% 0.53% 0.52% 0.55%** 0.53% 0.49%
Ratio of Net Investment Income to
Average Net Assets (1) 7.87% 6.11% 3.74% 3.11%** 2.71% 3.77%
</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 $ 0.000 N/A N/A $ 0.000 $ 0.000 N/A
Ratios before expense
limitation:
Expenses to Average Net Assets 0.58% N/A N/A 0.59%** 0.54% N/A
Net Investment Income to
Average
Net Assets 7.85% N/A N/A 3.07%** 2.70% N/A
</TABLE>
**Annualized
- --------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWO MONTHS
YEAR ENDED 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 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------- ------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.054 0.043 0.026 0.004 0.019 0.020
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS
Net Investment Income (0.054) (0.043) (0.026) (0.004) (0.019) (0.020)
In Excess of Net Investment
Income -- -- -- -- (0.000) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.054) (0.043) (0.026) (0.004) (0.019) (0.020)
------------- ------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
TOTAL RETURN 5.51% 4.35% 2.74% 0.37% 1.91% 2.44%
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $102,195 $166,953 $206,691 $208,866 $266,524 $359,444
Ratio of Expenses to Average Net
Assets (1) 0.51% 0.56% 0.55% 0.57%** 0.54% 0.51%
Ratio of Net Investment Income to
Average Net Assets (1) 5.38% 4.18% 2.66% 2.31%** 1.89% 2.42%
</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 $ 0.001 N/A N/A $ 0.000 $ 0.000 N/A
Ratios before expense
limitation:
Expenses to Average Net Assets 0.63% N/A N/A 0.67%** 0.56% N/A
Net Investment Income to
Average
Net Assets 5.26% N/A N/A 2.21%** 1.87% N/A
</TABLE>
**Annualized
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------------
119
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as an open-end investment company. As of
December 31, 1994 the Fund was comprised of 20 separate active, diversified
and non-diversified portfolios (each referred to as the "Portfolio"). During
the year ended December 31, 1994, the Fund commenced operations of the Gold
and Emerging Markets Debt Portfolios on February 1, 1994, and the Japanese
Equity Portfolio on April 25, 1994, respectively. Additionally, effective
August 19, 1994, the Fund ceased offering shares of the Real Yield Portfolio.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of the
financial statements.
1. SECURITY VALUATION: Equity securities listed on an exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price.
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 the mean
between the current bid and asked prices obtained from reputable brokers.
Bonds and other fixed income securities may be valued according to the
broadest and most representative market. In addition, bonds and other fixed
income securities may be valued on the basis of prices provided by a pricing
service which are based primarily on institutional size trading in similar
groups of securities. Debt securities purchased with remaining maturities of
60 days or less are valued at amortized cost, if it approximates market
value. Money market and municipal money market securities are stated at
amortized cost, which approximates market value. All other securities and
assets for which market values are not readily available, including
restricted securities, are valued at fair value as determined in good faith
by the Board of Directors, although the actual calculations may be done by
others.
2. INCOME TAXES: It is each Portfolio's intention to qualify as a regulated
investment company and distribute all of its taxable and tax-exempt income.
Accordingly, no provision for Federal income taxes is required in the
financial statements.
Each Portfolio may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on either income or gains earned or
repatriated. The Portfolio accrues such taxes when the related income is
earned. For investments in Indian securities a capital gains tax is accrued
based on the relative amounts of net realized gains and net unrealized
appreciation of such securities. Effective January 1, 1994 the Brazilian
Government announced a 0.25% tax on banking transaction debits (withdrawals).
This tax was subsequently repealed on January 1, 1995. The Brazilian
government also assesses a 1% tax on all settlements of foreign currency used
to purchase listed equity securities.
Paid in capital, undistributed net investment income (loss) and accumulated
gain (loss) are adjusted for permanent book tax differences.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, the value of which exceeds the principal amount of the
repurchase transaction, including accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. In the event of default or bankruptcy by the
counter-party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and
records of the Fund are maintained in United States dollars. Foreign currency
amounts are translated into US dollars at the mean of the bid and asked
prices of such currencies against US dollars last quoted by a major US or
foreign bank. Although the net assets of the Fund are presented at the
foreign exchange rates and market values at the close of the period, the Fund
does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of the securities held at period end.
Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) are included in the reported net
realized and unrealized gains (losses) on investment transactions and
balances. However, pursuant to US Federal income tax regulations, gains and
losses from certain foreign currency transactions are treated as ordinary
income for US Federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from forward foreign currency contracts,
disposition of
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NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, and the difference
between the amount of investment income and foreign withholding taxes
recorded on the Fund's books and the US dollar equivalent amounts actually
received or paid and certain currency related amounts of realized gains or
losses from the sale of foreign denominated debt securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of US dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities
markets and the possibility of political or economic instability.
5. FORWARD FOREIGN CURRENCY CONTRACTS: Each Portfolio, except the Money
Market Portfolio and Municipal Money Market Portfolio, may enter into forward
currency contracts to attempt to protect securities and related receivables
and payables against changes in future foreign exchange rates. A forward
currency contract is an agreement between two parties to buy or sell currency
at a set price on a future date. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily using the forward rate and the change in market value
is recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the time
it was closed. Risk may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts
and is generally limited to the amount of the unrealized gain on the
contracts (if any) at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the US
dollar.
6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: Each
Portfolio may make forward commitments to purchase or sell securities.
Payment and delivery for securities which have been purchased or sold on a
forward commitment basis can take place a month or more (not to exceed 120
days) after the date of the transaction. Additionally, certain portfolios may
purchase securities on a when-issued or delayed-delivery basis. Securities
purchased on a when-issued or delayed delivery basis are purchased for
delivery beyond the normal settlement date at a stated price and yield, and
no income accrues to the Portfolio on such securities prior to delivery. When
the Portfolio enters into a purchase transaction on a when-issued or delayed
delivery basis, it establishes a segregated account in which it maintains
liquid assets in an amount at least equal in value to the Portfolio's
commitments to purchase such securities. Purchasing securities on a forward
commitment or when-issued or delayed-delivery basis may involve a risk that
the market price at the time of delivery may be lower than the agreed-upon
purchase price, in which case there could be an unrealized loss at the time
of delivery.
At December 31, 1994, the Republic of Ecuador was in the process of
restructuring its loans under its Brady Plan debt restructuring. As a result,
the Emerging Markets Debt Portfolio has recorded the value of the underlying
loan participations based on the amount of Brady Bonds the Adviser has
estimated the Portfolio will receive and the market value of such Brady Bonds
trading on a "when-issued" basis at December 31, 1994. A portion of the
"when-issued" Brady Bonds expected to be received as a result of the
restructuring have been sold on a delayed delivery basis and are noted on the
portfolio of investments.
7. LOAN AGREEMENTS: The Emerging Markets, Emerging Markets Debt and High
Yield Portfolios may invest in fixed and floating rate loans ("Loans")
arranged through private negotiations between an issuer of sovereign debt
obligations and one or more financial institutions ("Lenders") deemed to be
creditworthy by the investment adviser. The Portfolio's investments in Loans
may be in the form of participations in Loans ("Participations") or
assignments of all or a portion of Loans ("Assignments") from third parties.
The Portfolio's investment in Participations typically results in the
Portfolio having a contractual relationship with only the Lender and not with
the borrower. The Portfolio has the right to 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. The Portfolio generally has no right to enforce compliance by
the borrower with the terms of the loan agreement. As a result, the Portfolio
may be subject to the credit risk of both the borrower and the Lender that is
selling the Participation. When the Portfolio purchases Assignments from
Lenders, it acquires direct rights against the borrower on the Loan. 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.
8. SHORT SALES: The Emerging Markets Debt Portfolio may sell securities
short. A short sale is a transaction in which the Portfolio sells securities
it does not own,
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NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
but has borrowed, in anticipation of a decline in the market
price of the securities. The Portfolio is obligated to replace the borrowed
securities at the market price at the time of replacement. The Portfolio may
have to pay a premium to borrow the securities as well as 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 generally 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. 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 cannot exceed the total
amount invested.
9. PURCHASED AND WRITTEN OPTIONS: The Active Country Allocation, Gold, Equity
Growth and Emerging Markets Debt Portfolios may write covered call options.
Premiums are received and are recorded as liabilities, and subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are canceled in closing purchase
transactions are offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. By writing a call option,
each Portfolio foregoes in exchange for the premium the opportunity for
capital appreciation above the exercise price should the market price of the
underlying security increase. Possible losses from written options may be
unlimited.
The Active Country Allocation, Gold, and Equity Growth Portfolios may also
purchase call options on their portfolio securities. Each portfolio may
purchase call options to close out covered call positions or to protect
against an increase in the price of the security it anticipates purchasing.
Possible losses from purchased options cannot exceed the total amount
invested.
10. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses on
the sale of investment securities are those of specific securities sold.
Dividend income is recorded on the ex-dividend date. Interest income is
recognized on the accrual basis except where collection is in doubt.
Discounts and premiums on securities purchased (other than mortgage-backed
securities) are amortized according to the effective yield method over their
respective lives. Most expenses of the Fund can be directly attributed to a
particular Portfolio. Expenses which cannot be directly attributed are
apportioned among the Portfolios based upon relative net assets. Dividends
from the Money Market and the Municipal Money Market Portfolios are accrued
daily and are distributed on or about the 15th of each month. Distributions
from the remaining Portfolios are recorded on the ex-date.
Income distributions and capital gain distributions are determined in
accordance with tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for mortgage-backed securities, foreign currency transactions, net
operating losses, deferral of wash sales and post October losses and
realization of gains and losses on certain investments including forward
foreign currency contracts, options and futures contracts.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in 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. As a result, an
additional class of shares (identified as "Foreign" in the Statement of Net
Assets) may be created and offered for investment. The "local" and "foreign"
shares' market values may differ.
A transaction fee of one percent is charged on subscriptions and redemptions
of capital shares of the International Small Cap Portfolio. Such fees are
paid to or retained by the Portfolio and included in paid in capital. During
the year ended December 31, 1994, such transaction fees totaled approximately
$1,463,000.
B. Morgan Stanley Asset Management Inc. ("MSAM") provides the Fund with
investment advisory services at a fee calculated at the annual rates of
average daily net assets indicated below. MSAM has agreed to reduce fees
payable to it and to reimburse the Portfolios, if
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NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
necessary, if the annual operating expenses, expressed as a percentage of
average daily net assets, exceed the maximum ratios indicated below:
MAXIMUM
ADVISORY EXPENSE
PORTFOLIO FEE RATIO
----------- ------------
Active Country Allocation............ .65% .80%
Asian Equity......................... .80 1.00
Emerging Markets..................... 1.25 1.75
European Equity...................... .80 1.00
Global Equity........................ .80 1.00
Gold................................. 1.00 1.25
International Equity................. .80 1.00
International Small Cap.............. .95 1.15
Japanese Equity...................... .80 1.00
Emerging Growth...................... 1.00 1.25
Equity Growth........................ .60 .80
Small Cap Value Equity............... .85 1.00
Value Equity......................... .50 .70
Balanced............................. .50 .70
Emerging Markets Debt................ 1.00 1.75
Fixed Income......................... .35 .45
Global Fixed Income.................. .40 .50
High Yield........................... .50 .75
Money Market......................... .30 .55
Municipal Money Market............... .30 .57
Sun Valley Gold Company is the sub-adviser ("Sub-Adviser") of the Gold
Portfolio. The Sub-Adviser is entitled to receive from MSAM an annual
sub-advisory fee in an amount equal to .40% of the average daily net assets
of the Portfolio. The Sub-Adviser has agreed to a proportionate reduction in
its fees if the Adviser is required to waive its fees or to reimburse the
Portfolio.
C. MSAM also provides the Fund with administrative services pursuant to an
administrative agreement, for a monthly fee which on an annual basis equals
0.15% of the average daily net assets of each Portfolio plus reimbursement of
out-of-pocket expenses. Under an agreement between MSAM and The United States
Trust Company of New York ("US Trust"), Mutual Funds Service Company
("MFSC"), a wholly owned subsidiary of US Trust, provides certain
administrative services to the Fund. For such services, MSAM pays US Trust a
portion of the fee MSAM receives from the Fund.
D. Morgan Stanley Trust Company ("MSTC") acts as custodian for the Fund's
assets held outside the United States in accordance with a custodian
agreement. Custodian fees are computed and payable monthly based on
securities held, investment purchases and sales activity, an account
maintenance fee, plus reimbursement for certain out-of-pocket expenses. MSTC
and the Adviser are wholly owned subsidiaries of Morgan Stanley Group, Inc.
Effective March 22, 1994, US Trust replaced Morgan Guaranty Trust Company as
custodian for the Fund's assets held inside the United States.
- ------------------------------------------------------------------------------
Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
During the year ended December 31, 1994, the following Portfolios incurred
custody fees and had amounts payable to MSTC at December 31, 1994 totaling:
MSTC CUSTODY
FEES FEES PAYABLE TO
INCURRED MSTC
(000) (000)
--------------- -----------------
Active Country
Allocation............. $ 162 $ 30
Asian Equity............ 495 221
Emerging Markets........ 1,741 536
European Equity......... 40 7
Global Equity........... 35 6
Gold.................... 3 1
International Equity.... 484 81
International Small
Cap.................... 106 19
Japanese Equity......... 17 4
Emerging Markets Debt... 131 115
Global Fixed Income..... 60 10
E. During the year ended December 31, 1994, purchases and sales of investment
securities other than long-term US Government securities and short-term
investments were:
(000)
----------------------
PORTFOLIO PURCHASES SALES
----------- ---------
Active Country Allocation............ $ 127,784 $ 90,248
Asian Equity......................... 155,981 117,321
Emerging Markets..................... 610,738 265,585
European Equity...................... 27,766 13,398
Global Equity........................ 64,979 5,746
Gold................................. 41,035 11,058
International Equity................. 373,602 180,373
International Small Cap.............. 120,630 9,130
Japanese Equity...................... 50,134 545
Emerging Growth...................... 35,945 24,123
Equity Growth........................ 133,517 116,543
Small Cap Value Equity............... 20,127 7,265
Value Equity......................... 44,425 22,714
Balanced............................. 4,258 8,196
Emerging Markets Debt................ 368,381 247,457
Fixed Income......................... 185,167 185,079
Global Fixed Income.................. 147,827 174,818
High Yield........................... 98,022 66,421
Purchases and sales during the year ended December 31, 1994 of long-term US
Government securities occurred only in the Balanced, Fixed Income and Global
Fixed Income Portfolios and amounted to:
(000)
----------------------
PORTFOLIO PURCHASES SALES
----------- ---------
Balanced...................... $ 5,922 $ 11,056
Fixed Income.................. 565,162 569,388
Global Fixed Income........... 82,393 88,979
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NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
During the year ended December 31, 1994, the following Portfolios incurred
brokerage commissions to Morgan Stanley & Co., Incorporated, an affiliated
broker/dealer, of approximately:
(000)
---------------
BROKERAGE
PORTFOLIO COMMISSION
---------------
Active Country Allocation......................... $ 87
Asian Equity...................................... 397
Emerging Markets.................................. 115
Global Equity..................................... 13
Gold.............................................. 15
Japanese Equity................................... 165
Equity Growth..................................... 4
During the year ended December 31, 1994, the Gold Portfolio incurred
brokerage commissions to Sun Valley Gold Company, an affiliated
broker/dealer, of approximately $8,425.
F. At December 31, 1994, cost and unrealized appreciation (depreciation) for
Federal income tax purposes of the investments of each Portfolio were:
(000) NET
------------------------------- APPREC.
PORTFOLIO COST APPREC. DEPREC. (DEPREC.)
--------- --------- --------- -----------
Active Country Allocation.. $ 182,640 $ 13,080 $ (7,778) $ 5,302
Asian Equity............... 238,789 48,446 (13,808) 34,638
Emerging Markets........... 873,136 163,816 (113,660) 50,156
European Equity............ 27,838 1,033 (1,275) (242)
Global Equity.............. 79,046 6,324 (4,756) 1,568
Gold....................... 33,540 135 (3,001) (2,866)
International Equity....... 1,079,618 252,688 (24,107) 228,581
International Small Cap.... 161,857 11,311 (12,717) (1,406)
Japanese Equity............ 50,712 1,638 (2,114) (476)
Emerging Growth............ 92,186 29,775 (4,842) 24,933
Equity Growth.............. 97,708 4,522 (4,305) 217
Small Cap Value Equity..... 40,872 2,377 (3,305) (928)
Value Equity............... 74,832 3,430 (5,851) (2,421)
Balanced................... 18,309 747 (1,265) (518)
Emerging Markets Debt...... 158,715 1,820 (13,335) (11,515)
Fixed Income............... 220,486 390 (5,290) (4,900)
Global Fixed Income........ 139,143 660 (7,295) (6,635)
High Yield................. 107,112 768 (11,421) (10,653)
Money Market............... 690,455 -- -- --
Municipal Money Market..... 357,853 -- -- --
At December 31, 1994, the following Portfolios had available capital loss
carryforwards to offset future net capital gains, to the extent provided by
regulation, through the indicated expiration dates:
EXPIRATION DATE
DECEMBER 31,
(000)
------------------------------------------
PORTFOLIO 1998 1999 2000 2001 2002 TOTAL
- ------------------------- ------- ------- -------- ------- ------- -------
International Small Cap.. $ -- $ -- $ -- $ -- $ 1,764 $ 1,764
Emerging Growth.......... 441 360 1,838 7,476 746 10,861
Emerging Markets Debt.... -- -- -- -- 531 531
Fixed Income............. -- -- -- -- 13,870 13,870
High Yield............... -- -- -- -- 497 497
Global Fixed............. -- -- -- -- 5,293 5,293
Money Market............. -- 66 -- -- 26 92
Municipal Money Market... -- -- -- 1 7 8
To the extent that capital loss carryovers are used to offset any future net
capital gains realized during the carryover period as provided by Federal
income tax regulations, no capital gains tax liability will be incurred by a
Portfolio for gains realized and not distributed. It is unlikely that the
gains so offset would be distributed to shareholders because such
distributions may be taxable to Portfolio shareholders as ordinary income.
Net capital and net currency losses incurred after October 31 and within the
taxable year are deemed to arise on the first business day of the Portfolio's
next taxable year. For the period from November 1, 1994 to December 31, 1994
the Portfolio's incurred and elected to defer to January 1, 1995 for Federal
income tax purposes net capital and net currency losses of approximately:
CAPITAL CURRENCY
LOSSES LOSSES
PORTFOLIO (000) (000)
- ----------------------------- ----------- -----------
Emerging Markets............. $ -- $ 393
Global Equity................ -- 5
Gold......................... -- 1
European Equity.............. -- 4
International Small Cap...... 225 --
Balanced..................... 12 --
Emerging Markets Debt........ -- 7
Fixed Income................. 269 --
Global Fixed Income.......... 429 897
High Yield................... 1,084 --
G. During the year ended December 31, 1994, the written options outstanding
at December 31, 1993 for the Equity Growth Portfolio expired unexercised and
the Portfolio realized a gain of $101,000.
At December 31, 1994, the Emerging Markets Debt Portfolio had 15 written
covered call option contracts outstanding with a premium of $105,000.
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NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
H. OTHER. At December 31, 1994, the net assets of certain Portfolios were
substantially comprised of foreign denominated securities and currency.
Changes in currency exchange rates will affect the US dollar value of and
investment income from such securities.
During the year ended December 31, 1994, the International Small Cap
Portfolio realized gains from in-kind redemptions of approximately $350,000.
- ------------------------------------------------------------------------------
Morgan Stanley
Institutional Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1994
- ------------------------------------------------------------------------------
Portfolio securities and foreign currency holdings were translated at the
following exchange rates as of December 31, 1994:
Argentine Peso......................... 1.00005 = $1.00
Australian Dollar...................... 1.28941 = 1.00
Belgian Franc.......................... 31.81000 = 1.00
Brazilian Real......................... 0.84700 = 1.00
British Pound.......................... 0.63837 = 1.00
Canadian Dollar........................ 1.40245 = 1.00
Colombian Peso......................... 831.60000 = 1.00
Danish Krone........................... 6.08100 = 1.00
Deutsche Mark.......................... 1.54890 = 1.00
Finnish Markka......................... 4.73565 = 1.00
French Franc........................... 5.33750 = 1.00
Hong Kong Dollar....................... 7.73750 = 1.00
Indian Rupee........................... 31.36875 = 1.00
Indonesian Rupiah...................... 2,198.00000 = 1.00
Irish Punts............................ 0.64687 = 1.00
Italian Lira........................... 1,621.00000 = 1.00
Japanese Yen........................... 99.60000 = 1.00
Korean Won............................. 788.50000 = 1.00
Malaysian Ringgit...................... 2.55350 = 1.00
Mexican Peso........................... 4.97500 = 1.00
Moroccan Dhiram........................ 8.91795 = 1.00
Netherlands Guilder.................... 1.73480 = 1.00
New Zealand Dollar..................... 1.56213 = 1.00
Norwegian Krone........................ 6.75950 = 1.00
Pakistani Rupee........................ 30.76920 = 1.00
Peruvian Sol........................... 2.18400 = 1.00
Polish Zloty........................... 23,200.00000 = 1.00
Portuguese Escudo...................... 159.05000 = 1.00
Singapore Dollar....................... 1.45750 = 1.00
South African Commercial Rand.......... 3.54000 = 1.00
South African Financial Rand........... 4.07200 = 1.00
Spanish Peseta......................... 131.62500 = 1.00
Sri Lankan Rupee....................... 49.62000 = 1.00
Swedish Krona.......................... 7.43080 = 1.00
Swiss Franc............................ 1.30850 = 1.00
Taiwan Dollar.......................... 26.28800 = 1.00
Thai Baht.............................. 25.10500 = 1.00
Turkish Lira........................... 38,700.00000 = 1.00
During December 1994, the Board of Directors of the Fund declared dividends
and capital gain distributions payable on January 6, 1995 to shareholders of
record on December 30, 1994 as follows:
NET SHORT-TERM LONG-TERM
INVESTMENT REALIZED REALIZED
PORTFOLIO INCOME GAINS GAINS
- -------------------------------- ------------- ------------ -------------
Active Country Allocation....... $ -- $ -- $ 0.44
Asian Equity.................... 0.15 1.03 1.23
Emerging Markets................ -- 0.44 0.48
European Equity................. -- 1.09 0.14
Global Equity................... 0.06 0.09 0.10
Gold............................ 0.01 0.24 --
International Equity............ -- 0.09 0.71
International Small Cap......... 0.03 -- --
Equity Growth................... 0.06 0.39 0.03
Small Cap Value Equity.......... 0.08 0.20 0.13
Value Equity.................... 0.10 0.10 0.28
Balanced........................ 0.10 -- 0.26
Emerging Markets Debt........... 0.48 -- --
Fixed Income.................... 0.06 -- --
Global Fixed Income............. 0.19 -- --
High Yield...................... 0.10 -- --
I. SUBSEQUENT EVENT. On January 18, 1995 the Fund commenced operations of the
Latin American and Municipal Bond Portfolios.
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REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Morgan Stanley Institutional Fund, Inc.
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position
of the Active Country Allocation Portfolio, Asian Equity Portfolio, Emerging
Markets Portfolio, European Equity Portfolio, Global Equity Portfolio, Gold
Portfolio, International Equity Portfolio, International Small Cap Portfolio,
Japanese Equity Portfolio, Emerging Growth Portfolio, Equity Growth
Portfolio, Small Cap Value Equity Portfolio, Value Equity Portfolio, Balanced
Portfolio, Emerging Markets Debt Portfolio, Fixed Income Portfolio, Global
Fixed Income Portfolio, High Yield Portfolio, Money Market Portfolio and
Municipal Money Market Portfolio (constituting the Morgan Stanley
Institutional Fund, Inc., hereafter referred to as the "Fund") at December
31, 1994, and the results of each of their operations, the changes in each of
their net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1994, by correspondence with the
custodians and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 17, 1995
- ------------------------------------------------------------------------------
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MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- -------------------------------------------------------------
THE AGGRESSIVE EQUITY PORTFOLIO
- -------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------
COMMON STOCK (91.8%)
CAPITAL GOODS/CONSTRUCTION (14.3%)
AEROSPACE & DEFENSE (14.3%)
+7,200 Litton Industries, Inc. $ 266
15,800 Lockheed Martin Corp. 997
9,200 McDonnell Douglas Corp. 706
8,200 United Technologies Corp. 641
--------------
TOTAL CAPITAL GOODS/CONSTRUCTION 2,610
--------------
CONSUMER CYCLICAL (9.2%)
FOOD SERVICE & LODGING (1.7%)
8,900 Hospitality Franchise Systems, Inc. 308
--------------
LEISURE RELATED (1.4%)
4,300 Eastman Kodak Co. 261
--------------
PUBLISHING (1.6%)
5,300 Gannett Co., Inc. 288
--------------
RETAIL - GENERAL (4.5%)
+6,500 Autozone, Inc. 163
+12,300 General Nutrition Cos., Inc. 432
5,500 Home Depot, Inc. 223
--------------
818
--------------
TOTAL CONSUMER CYCLICAL 1,675
--------------
CONSUMER STAPLES (32.7%)
BEVERAGES & TOBACCO (24.8%)
8,400 Coca Cola Co. 536
4,200 PepsiCo, Inc. 192
51,000 Philip Morris Cos., Inc. 3,793
--------------
4,521
--------------
FOOD (2.1%)
5,400 Kellogg Co. 385
--------------
HEALTH CARE SUPPLIES & SERVICES (5.8%)
5,200 American Home Products Corp. 402
6,300 Columbia/HCA Healthcare Corp. 272
9,400 United Healthcare Corp. 389
--------------
1,063
--------------
TOTAL CONSUMER STAPLES 5,969
--------------
ENERGY (0.5%)
COAL, GAS, & OIL (0.5%)
3,900 Occidental Petroleum Corp. 89
--------------
FINANCE (23.6%)
BANKING (5.2%)
9,900 Citicorp 573
13,900 H.F. Ahmanson & Co. 306
300 Wells Fargo & Co. 54
--------------
933
--------------
The accompanying notes are an integral part of the financial statements.
127
<PAGE>
VALUE
SHARES (000)
- -------------------------------------------------------------
FINANCIAL SERVICES (10.8%)
16,700 American Express Co. $ 586
7,600 Federal Home Loan Mortgage Corp. 522
5,000 Federal National Mortgage Association 472
8,800 Franklin Resources, Inc. 392
--------------
1,972
--------------
INSURANCE (7.6%)
15,400 Ace, Ltd. 447
15,500 Exel Ltd. 806
5,400 PartnerRe Holdings, Ltd. 141
--------------
1,394
--------------
TOTAL FINANCE 4,299
--------------
MATERIALS (2.9%)
FOREST PRODUCTS & PAPER (2.9%)
6,700 Champion International Corp. 349
+8,400 Stone Container Corp. 179
--------------
TOTAL MATERIALS 528
--------------
TECHNOLOGY (8.6%)
COMPUTERS (5.3%)
7,300 International Business Machines Corp. 701
+3,000 Microsoft, Inc. 271
--------------
972
--------------
ELECTRONICS (3.3%)
+2,000 Applied Material, Inc. 173
3,000 Intel Corp. 190
1,800 Texas Instruments, Inc. 241
--------------
604
--------------
TOTAL TECHNOLOGY 1,576
--------------
TOTAL COMMON STOCK (Cost $15,576) 16,746
--------------
- --------------------------------------------------------------
PURCHASED OPTION (0.0%)
CONSUMER STAPLES (0.0%)
BEVERAGES & TOBACCO (0.0%)
+20,000 Philip Morris Cos., Inc. (Cost $8) 4
--------------
FACE
AMOUNT
(000)
- --------
SHORT - TERM INVESTMENTS (6.2%)
US GOVERNMENT OBLIGATION (2.7%)
$ 500 U.S. Treasury Bill, 8/17/95 497
--------------
REPURCHASE AGREEMENT (3.5%)
642 U.S. Trust, 5.90%, dated 6/30/95, due
7/3/95, to be repurchased at $642,
collateralized by $675 United States
Treasury Bills, due 7/27/95, valued
at $672 (Cost $642) 642
--------------
TOTAL SHORT-TERM INVESTMENTS (Cost $1,138) 1,139
--------------
TOTAL INVESTMENTS (98.0%) (Cost $16,722) 17,889
--------------
The accompanying notes are an integral part of the financial statements.
128
<PAGE>
OTHER ASSETS (5.2%)
Receivable for Investments Sold $829
Receivable for Portfolio Shares
Sold 63
Dividends Receivable 37
Expense Reimbursement Receivable 17 $946
--------
LIABILITIES (-3.2%)
Payable for Investments Purchased (531)
Written Options at Market Value (22)
Custodian Fees Payable (2)
Administrative Fees Payable (2)
Directors' Fees & Expenses (1)
Other Liabilities (22) (580)
-------- ---------
NET ASSETS (100%) $18,255
---------
---------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 1,546,129 outstanding
$.001 par value shares (authorized
500,000,000 shares) $11.81
OPEN WRITTEN COVERED CALL OPTIONS:
The following is a schedule of open written covered call
options which comprise the balance outstanding at
June 30, 1995
NO. OF EXERCISE EXPIRATION VALUE
DESCRIPTION CONTRACTS PRICE DATE (000)
- ----------------------------------------------------------------
McDonnell Douglas Corp. 40 $125 7/31/95 $12
Coca Cola Co. 15 88 8/30/95 3
Coca Cola Co. 37 88 8/30/95 7
--------
$22
________________________________________________________________
+ - Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
129
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- ----------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- ----------------------------------------------------------
AGGRESSIVE
EQUITY
PORTFOLIO
MARCH 8,
1995* TO
JUNE 30,
1995
(000)
- ----------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 79
Interest 36
----------------
Total Income 115
----------------
EXPENSES:
Investment Advisory Fees:
Basic Fees - Adviser 29
Less: Fees Waived (29)
----------------
Investment Advisory Service Fees - Net -
Administrative Fees: 6
Custodian Fees 5
Filing and Registration Fees 15
Directors' Fees and Expenses 2
Legal Fees 11
Audit Fees 8
Shareholder Reports 7
Other Expenses 1
Expenses Reimbursed by Adviser (18)
----------------
Total Expenses 37
----------------
NET INVESTMENT INCOME 78
----------------
NET REALIZED GAIN (LOSS):
Investments Sold 716
Written Options (3)
Securities Sold Short (2)
----------------
Total Net Realized Gain 711
----------------
CHANGE IN UNREALIZED APPRECIATION 1,154
----------------
TOTAL NET REALIZED GAIN AND CHANGE
IN UNREALIZED APPRECIATION 1,865
----------------
Net Increase in Net Assets Resulting
from Operations $ 1,943
----------------
----------------
_______________
* Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
130
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- --------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------
THE AGGRESSIVE EQUITY PORTFOLIO
- --------------------------------------------------------
PERIOD FROM
MARCH 8, 1995*
TO JUNE 30 1995
(UNAUDITED)
(000)
- --------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 78
Net Realized Gain 711
Change in Unrealized Appreciation 1,154
----------
Net Increase in Net Assets Resulting
from Operations 1,943
----------
DISTRIBUTIONS:
Net Investment Income (16)
----------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 16,751
Distributions Reinvested 15
Redeemed (438)
----------
Net Increase from Capital Share Transactions 16,328
----------
Total Increase in Net Assets 18,255
NET ASSETS:
Beginning of Period -
----------
End of Period (2) $ 18,255
----------
----------
____________________________________________________________
(1) Capital Share Transactions:
Shares Subscribed 1,584
Shares Issued on Distributions Reinvested 1
Shares Redeemed (39)
----------
Net Increase in Capital Shares Outstanding 1,546
----------
----------
(2) Net Assets were Comprised of:
Paid in Capital $ 16,328
Undistributed Net Investment Income 62
Accumulated Net Realized Gain 711
Unrealized Appreciation 1,154
----------
$ 18,255
----------
----------
_________________
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
131
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- -------------------------------------------------------------
THE AGGRESSIVE EQUITY PORTFOLIO
- -------------------------------------------------------------
PERIOD FROM
MARCH 8, 1995* TO
JUNE 30, 1995
(UNAUDITED)
- -------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.06
Net Realized and Unrealized Gain on
Investments 1.77
-------------
Total from Investment Operations 1.83
-------------
DISTRIBUTIONS
Net Investment Income (0.02)
-------------
NET ASSET VALUE, END OF PERIOD $11.81
-------------
-------------
TOTAL RETURN
18.3%
-------------
-------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $18,255
Ratio of Expenses to Average Net Assets (1) 1.00%**
Ratio of Net Investment Income to Average
Net Assets (1) 2.10%**
Portfolio Turnover Rate 80%
__________________________
(1) Effect of voluntary expense limitation
during the period:
Per share benefit to net investment income $0.04
Ratios before expense limitation:
Expenses to Average Net Assets 2.26%**
Net Investment Income to Average Net Assets 0.83%**
__________________________
* Commencement of operations.
** Annualized.
The accompanying notes are an integral part of the financial statements.
132
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 1995
Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company which offers redeemable shares of twenty-four diversified
and non-diversified investment portfolios. These notes pertain only to the
unaudited financial statements dated June 30, 1995 for one such investment
portfolio, the Aggressive Equity Portfolio (the "Portfolio").
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Portfolio in the preparation of the
financial statements.
1. SECURITY VALUATION: Equity securities listed on an exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price.
Unlisted securities and listed securities not traded on the valuation date
for which market quotations are readily available are valued at the mean
between the current bid and asked prices obtained from reputable brokers.
Bonds and other fixed income securities are valued according to the broadest
and most representative market. In addition, bonds and other fixed income
securities may be valued on the basis of prices provided by a pricing service
which are based primarily on institutional size trading in similar groups of
securities. Securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. Money
market securities are stated at amortized cost, which approximates market
value. All other securities and assets for which market values are not
readily available, including restricted securities, are valued at fair value
as determined in good faith by the Board of Directors, although the actual
calculations may be done by others.
2. INCOME TAXES: It is the Portfolio's intention to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as a custodian for the Portfolio takes possession of the
underlying securities, the value of which is at least equal to the principal
amount of the repurchase transaction, including accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value of
the collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
133
<PAGE>
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and
records of the Portfolio are maintained in United States dollars. Foreign
currency amounts are translated into U.S. dollars at the bid prices of such
currencies against U.S. dollars last quoted by a major U.S. or foreign bank.
Although the net assets of the Portfolio are presented at the foreign
exchange rates and market values at the close of the period, the Portfolio
does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of the securities held at period end.
Similarly the Portfolio does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) are included in the reported net
realized and unrealized gains (losses) on investment transactions and
balances. However, pursuant to U.S. Federal income tax regulations, gains
and losses from certain foreign currency transactions are treated as ordinary
income for U.S. Federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from forward foreign currency contracts,
disposition of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, the difference
between the amount of investment income and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent amount actually
received or paid, and certain currency related amounts of realized gains or
losses from the sale of foreign denominated debt securities.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, the possibly
lower level of governmental supervision and regulation of foreign securities
markets and the possibility of political or economic instability.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolio may enter into
forward foreign currency contracts to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates. A forward currency contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily using the forward rate and the change in
market value is recorded by the Portfolio as unrealized gain or loss. The
Portfolio records realized gains or losses when the contract is closed equal
to the difference between the value of the contract at the time it was opened
and the value at the time it was closed. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of their contracts and is generally limited to the amount of the
unrealized gain on the contracts (if any) at the date of default. Risks may
arise from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The
Portfolio may make forward commitments to purchase or sell securities.
Payment and delivery
134
<PAGE>
for securities which have been purchased or sold on a forward
commitment basis can take place a month or more (not to exceed 120 days)
after the date of the transaction. Additionally, the Portfolio may purchase
securities on a when-issued or delayed delivery basis. Securities purchased
on a when-issued or delayed delivery basis are purchased for delivery beyond
the normal settlement date at a stated price and yield, and no income accrues
to the Portfolio on such securities prior to delivery. When the Portfolio
enters into a purchase transaction on a when-issued or delayed delivery
basis, it establishes a segregated account in which it maintains liquid
assets in an amount at least equal in value to the Portfolio's commitments to
purchase such securities. Purchasing securities on a forward commitment or
when-issued or delayed delivery basis may involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase
price, in which case there could be an unrealized loss at the time of
delivery.
7. PURCHASED AND WRITTEN OPTIONS: The Portfolio may write covered call
options. Premiums are received and are recorded as liabilities, and
subsequently adjusted to the current value of the options written. Premiums
received from writing options which expire are treated as realized gains.
Premiums received from writing options which are exercised or canceled in
closing purchase transactions are offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. By writing a call
option, the Portfolio foregoes in exchange for the premium the opportunity
for capital appreciation above the exercise price should the market price of
the underlying security increase. Possible losses from written options may be
unlimited.
The Portfolio may also purchase call options on it's portfolio securities.
The Portfolio may purchase call options to close out covered call positions
or to protect against an increase in the price of the security it anticipates
purchasing. Possible losses from purchased options cannot exceed the total
amount invested.
8. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
Dividend income is recorded on the ex-dividend date. Interest income is
recognized on the accrual basis except where collection is in doubt.
Discounts and premiums on securities purchased are amortized according to the
effective yield method over their respective lives. Distributions are
recorded on the ex-distribution date. Most expenses of the Fund can be
directly attributed to a particular Portfolio. Expenses which cannot be
directly attributed are apportioned among the Portfolios based upon relative
net assets.
Income distributions and capital gain distributions are determined in
accordance with tax regulations which may differ from generally accepted
accounting principles.
B. Morgan Stanley Asset Management Inc. ("MSAM") provides the Portfolio with
investment advisory services at a fee calculated at the annual rate of
average daily net assets indicated below. MSAM has agreed to reduce fees
payable to it and to reimburse the
135
<PAGE>
Portfolio, if necessary, if the annual operating expenses, expressed as a
percentage of average daily net assets, exceed the maximum ratio indicated
below.
MAXIMUM
ADVISORY EXPENSE
FEE RATIO
-------- ---------
Aggressive Equity Portfolio .......................... 0.80% 1.00%
C. MSAM also provides the Portfolio with administrative services pursuant to
an Administrative Agreement for a monthly fee which on an annual basis equals
0.15% of the average daily net assets of each Portfolio plus reimbursement of
out-of-pocket expenses. Under an agreement between MSAM and U.S. Trust
Company of New York ("U.S. Trust"), Mutual Funds Service Company ("MFSC"), a
subsidiary of U.S. Trust, provides certain administrative services to the
Fund. For such services, MSAM pays U.S. Trust a portion of the fee MSAM
receives from the Fund.
D. CUSTODIANS: Morgan Stanley Trust Company ("MSTC") acts as custodian for
the Portfolio's assets held outside the United States in accordance with a
Custodian Agreement. U.S. Trust acts as custodian for the Fund's domestic
assets in accordance with a Custodian Agreement. Custodian fees are computed
and payable monthly based on investment purchases and sales activity, an
account maintenance fee, plus reimbursement for certain out-of-pocket
expenses. MSTC and MSAM are wholly-owned subsidiaries of Morgan Stanley
Group, Inc.
E. PURCHASES AND SALES: During the period March 8, 1995 through June 30,
1995, purchases and sales of investment securities other than U.S. Government
securities and short-term investments were:
PURCHASES SALES
--------- ------
(000) (000)
$24,134 $9,273
F. At June 30, 1995, the Portfolio's cost for Federal income tax purposes was
$16,722,000. Net unrealized appreciation for Federal income tax purposes
aggregated $1,167,000 of which $1,222,000 related to appreciated securities
and $55,000 related to depreciated securities.
136
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- -------------------------------------------------------------------------------
THE LATIN AMERICAN PORTFOLIO
- -------------------------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------
COMMON STOCKS (59.3%)
ARGENTINA (8.6%)
2,150 Banco del Sud Argentina, Class B $ 13
+133,372 Banco del Suquia, Class B 193
+3,500 Buenos Aires Embotelladora ADR 88
32,970 Capex S.A. ADR 507
25,000 CIADEA (Renault) S.A. 121
14,424 Quilmes Industrial S.A. 281
-------
1,203
-------
BRAZIL (19.0%)
22,850,000 Cia Acos Especiais Itabira 148
1,584 Cia Energetica de Minas Gerias ADR 31
7,422 Cia Energetica de Minas Gerias GDR 145
3,637,000 Cia Energetica de Sao Paulo 119
1,446,000 Cia Paulista de Forca E Luz 72
9,580,000 Cia Siderurgica Nacional 219
1,440,000 Eletrobras 375
+30,700 Eletrobras ADR 415
20,000 Rhodia-Ster GDR 280
375,000 Servicos de Eletricdade 118
11,400 Telecomunicacoes Brasileiras ADR 376
1,604,500 Telecomunicacoes de Sao Paulo 204
13,420 Usinas Siderurgicas de Minas Gerias ADR 149
-------
2,651
-------
CHILE (2.7%)
9,310 Empresa Nacional de electridad S.A. ADR 247
6,350 Maderas y Sinteticos S.A. ADR 119
-------
366
-------
MEXICO (26.5%)
10,950 ALFA S.A. de C.V., Class A 133
+72,000 Apasco S.A. 286
198,880 Banacci, Class B 305
34,829 Banacci, Class L 53
38,970 Cemex CPO ADR 265
17,060 Empresas ICA S.A. ADR 175
186,000 FEMSA, Class B 434
+5,000 Grupo Carso S.A. ADR 55
67,970 Grupo Financiero Bancomer ADR 408
+33,831 Grupo Financiero Bancomer, Class L 9
91,500 Grupo Financiero Banorte, Class C 119
+11,770 Grupo Mexicano Desarrollo ADR, Class B 46
+47,750 Grupo Sidek S.A., Class B 43
6,450 Grupo Simec S.A. ADR, Class B 64
+1,350 Grupo Tribasa S.A. ADR 11
15,800 Hylsamex S.A. ADR 288
The accompanying notes are an integral part of the financial statements.
137
<PAGE>
9,615 Panamerican Beverages, Inc., Class A $ 288
10,620 Telefonos de Mexico S.A. ADR, Class L 313
102,400 Tolmex S.A., Class B2 400
-------
3,695
-------
PERU (2.5%)
44,200 Banco de Credito del Peru 77
158,600 Telefonica del Peru S.A., Class B 271
-------
348
-------
TOTAL COMMON STOCKS (Cost $8,044) 8,263
-------
PREFERRED STOCKS (31.7%)
BRAZIL (31.7%)
61,870,000 Banco Bradesco 524
3,550,000 Banco Nacional S.A. 69
14,770,000 Banco do Brasil 177
4,820,000 Banco do Estado Sao Paulo 27
1,158,173 Brahma 380
360,000 Brasmotor 67
+230,000 Centrais Eletricas de Santa Catarina,
Class B 186
6,600 Cia Energetica de Sao Paulo ADR 75
1,540,000 Cia Energetica de Sao Paulo 61
5,760,000 Cia Paulista de Forca E Luz 189
4,000,000 Continental 2001 87
550,000 Coteminas 173
169,000 Dixie Laleka S.A. 132
583,000 Eletrobras 155
1,590,400 Itaubanco 484
99,000 Multibras S.A. 82
4,550,000 Petrobras 386
58,300,000 Refrigeracao Parana 113
8,650,000 Lojas Renner 147
6,232,000 Telecomunicacoes Brasileiras 205
3,149,000 Telecomunicacoes de Sao Paulo 390
1,142,000 Vale Do Rio Doce 173
320,000 WEG S.A. 146
-------
TOTAL PREFERRED STOCKS (Cost $4,560) 4,428
-------
FACE
AMOUNT
- ----------------------
CONVERTIBLE DEBENTURES
COLOMBIA (2.3%)
$ 430 Banco de Columbia 5.20%, 2/01/99
(Cost $389) 327
-------
NO. OF
RIGHTS
------
RIGHTS (0.0%)
BRAZIL
+1,117,250 Banco Bradesco (Cost $0) 1
-------
The accompanying notes are an integral part of the financial statements.
138
<PAGE>
FACE VALUE
AMOUNT (000)
- ---------------- -------
SHORT - TERM INVESTMENT (4.4%)
REPURCHASE AGREEMENT (4.4%)
$ 613 U.S. Trust 5.90% dated 6/30/95,
due 7/03/95 to be repurchased at
$613, collateralized by $645
United States Treasury Bills,
due 7/27/95, valued at $642
(Cost $613) $ 613
-------
FOREIGN CURRENCY (2.3%)
APS 33 Argentine Peso 33
BLR 62 Brazilian Real 67
MP 1,400 Mexican New Peso 224
PS 3 Peruvian Sol 1
-------
TOTAL FOREIGN CURRENCY (Cost $327) 325
-------
TOTAL INVESTMENTS (100%) (Cost $13,933) 13,957
-------
OTHER ASSETS (4.1%)
Cash $ 1
Receivable for Portfolio Shares
Sold 355
Receivable for Investments Sold 161
Dividends Receivable 18
Interest Receivable 10
Expense Reimbursement
Receivable 23 568
--------
LIABILITIES (-4.1%)
Payable for Investments Purchased (510)
Custodian Fees Payable (22)
Administrative Fees Payable (2)
Sub-Administrative Fees Payable (2)
Directors' Fees & Expenses (2)
Other Liabilties (34) (572)
-------- -------
NET ASSETS (100%) $13,953
-------
-------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 1,586,250 outstanding $.001
par value shares (authorized 500,000,000
shares) $8.80
-------
-------
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of forward foreign currency contracts open at
June 30, 1995, the Portfolio is obligated to receive foreign currency
in exchange for US dollars as indicated below:
IN
CURRENCY EXCHANGE UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
- ---------- ----- ---------- -------- ----- ----------
US$ 8 $ 8 7/3/95 BLR 7 $ 8 -
----- ----- ----------
___________________________________________________________________________
+ - Non-income producing securities.
ADR - American Depositary Receipt.
ADS - American Depositary Shares.
GDR - Global Depositary Receipt.
The accompanying notes are an integral part of the financial statements.
139
<PAGE>
___________________________________________________________________________
SUMMARY OF FOREIGN & U.S. SECURITIES BY INDUSTRY CLASSIFICATION
VALUE PERCENTAGE OF
INDUSTRY (000) NET ASSETS
- -------------------------------------------------------------------
Capital Equipment $ 558 4.0%
Consumer Goods 2,339 16.8
Energy 3,227 23.1
Finance 2,668 19.1
Materials 2,564 18.4
Multi-Industry 175 1.2
Services 1,488 10.7
------- ----
$13,019 93.3%
------- ----
------- ----
The accompanying notes are an integral part of the financial statements.
140
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------------------------
LATIN
AMERICAN
PORTFOLIO
JANUARY 18,
1995* TO
JUNE 30,
1995
(000)
- ----------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 132
Interest 33
Less Foreign Taxes Withheld (12)
-------------
Total Income 153
-------------
EXPENSES:
Investment Advisory Fees:
Basic Fees - Adviser 57
Less: Fees Waived (57)
-------------
Investment Advisory Service Fees - Net -
Administrative Fees 10
Sub-Administrative Fees 4
Custodian Fees 39
Filing and Registration Fees 21
Directors' Fees and Expenses 2
Audit Fees 19
Brazilian Tax Expense 45
Other Expenses 8
Expenses Reimbursed by Adviser (16)
-------------
Total Expenses 132
-------------
NET INVESTMENT INCOME 21
-------------
NET REALIZED LOSS:
Investments Sold (747)
Foreign Currency Transactions (7)
-------------
Total Net Realized Loss (754)
-------------
CHANGE IN UNREALIZED APPRECIATION 24
-------------
TOTAL NET REALIZED LOSS AND CHANGE
IN UNREALIZED APPRECIATION (730)
-------------
Net Decrease in Net Assets Resulting
from Operations $ (709)
-------------
-------------
______________________________
* Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
_______________________________________________________________________________
141
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
THE LATIN AMERICAN PORTFOLIO
- -------------------------------------------------------------------------------
PERIOD FROM
JANUARY 18, 1995*
TO JUNE 30 1995
(UNAUDITED)
(000)
- -----------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 21
Net Realized Loss (754)
Change in Unrealized Appreciation 24
---------
Net Decrease in Net Assets Resulting from
Operations (709)
---------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 17,894
Distributions Reinvested -
Redeemed (3,232)
---------
Net Increase from Capital Share Transactions 14,662
---------
Total Increase in Net Assets 13,953
NET ASSETS:
Beginning of Period -
---------
End of Period (2) $ 13,953
---------
---------
________________________________________________________________
(1) Capital Share Transactions:
Shares Subscribed 1,956
Shares Issued on Distributions Reinvested -
Shares Redeemed (370)
---------
Net Increase in Capital Shares Outstanding 1,586
---------
---------
(2) Net Assets were Comprised of:
Paid in Capital $ 14,662
Undistributed Net Investment Income 21
Accumulated Net Realized Loss (754)
Unrealized Appreciation 24
---------
$ 13,953
---------
---------
_________________
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
142
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS :
- -------------------------------------------------------------------------------
THE LATIN AMERICAN PORTFOLIO
- -------------------------------------------------------------------------------
PERIOD FROM
JANUARY 18, 1995*
TO JUNE 30, 1995
(UNAUDITED)
- -------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
--------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.01
Net Realized and Unrealized Loss on Investment (1.21)
--------
Total from Investment Operations (1.20)
--------
NET ASSET VALUE, END OF PERIOD $8.80
--------
--------
TOTAL RETURN (12.00)%
--------
--------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $13,953
Ratio of Expenses to Average Net Assets (1) 2.54%**+
Ratio of Net Investment Income to Average Net Assets (1) 0.40%**
Portfolio Turnover Rate 62%
__________________________
(1)Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $0.05
Ratios before expense limitation:
Expenses to Average Net Assets 3.95 %**
Net Investment Loss to Average Net Assets (1.00)%**
__________________________
* Commencement of operations.
** Annualized.
+ The ratio of expenses to average net assets includes Brazilian tax expense.
Without the effect of the Brazilian tax expense, the ratio of expenses to
average net assets would have been 1.68%**.
The accompanying notes are an integral part of the financial statements.
143
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 1995
Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company which offers redeemable shares of twenty-four diversified
and non-diversified investment portfolios. These notes pertain only to the
unaudited financial statements dated June 30, 1995 for one such investment
portfolio, the Latin American Portfolio (the "Portfolio").
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Portfolio in the preparation of the
financial statements.
1. SECURITY VALUATION: Equity securities listed on an exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price.
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 the mean
between the current bid and asked prices obtained from reputable brokers.
Bonds and other fixed income securities are valued according to the broadest
and most representative market. In addition, bonds and other fixed income
securities may be valued on the basis of prices provided by a pricing service
which are based primarily on institutional size trading in similar groups of
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. Money market and municipal
money market securities are stated at amortized cost, which approximates
market value. All other securities and assets for which market values are
not readily available, including restricted securities, are valued at fair
value as determined in good faith by the Board of Directors, although the
actual calculations may be done by others.
2. INCOME TAXES: It is the Portfolio's intention to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required in the financial statements.
The Portfolio may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on either income earned or
repatriated. The Portfolio accrues such taxes when the related income is
earned.
The Brazilian government assesses a 1% tax on all settlements of foreign
currency used to purchase listed equity securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as a custodian for the Portfolio takes possession of the
underlying securities, the value of
144
<PAGE>
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily
basis to determine the adequacy of the collateral. In the event of default on
the obligation to repurchase, the Portfolio has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. In the
event of default or bankruptcy by counter-party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and
records of the Portfolio are maintained in United States dollars. Foreign
currency amounts are translated into U.S. dollars at the mean of the bid and
asked prices of such currencies against U.S. dollars last quoted by a major
U.S. or foreign bank. Although the net assets of the Portfolio are presented
at the foreign exchange rates and market values at the close of the period,
the Portfolio does not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the
fluctuations arising from changes in the market prices of the securities held
at period end. Similarly the Portfolio does not isolate the effect of
changes in foreign exchange rates from the fluctuations arising from changes
in the market prices of securities sold during the period. Accordingly,
realized and unrealized foreign currency gains (losses) are included in the
reported net realized and unrealized gains (losses) on investment
transactions and balances. However, pursuant to U.S. Federal income tax
regulations, gains and losses from certain foreign currency transactions are
treated as ordinary income for U.S. Federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from forward foreign currency contracts,
disposition of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, the difference
between the amount of investment income and foreign withholding taxes
recorded on the Portfolio's books and the U.S. dollar equivalent amount
actually received or paid, and certain currency related amounts of realized
gains or losses from the sale of foreign denominated debt securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibly lower level of
governmental supervision and regulation of foreign securities markets and the
possibility of political or economic instability.
5. FORWARD FOREIGN CURRENCY CONTRACTS: The Portfolio may enter into forward
foreign currency contracts to attempt to protect securities and related
receivables and payables against changes in future foreign exchange rates. A
forward currency contract is an agreement between two parties to buy or sell
currency at a set price on a future date. The market value of the contract
will fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily using the forward rate and the change in market value
is recorded by the Portfolio as unrealized gain or loss. The Portfolio
records realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it
145
<PAGE>
was opened and the value at the time it was closed. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and is generally limited to the amount
of the unrealized gain on the contracts (if any) at the date of default.
Risks may arise from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The
Portfolio may make forward commitments to purchase or sell securities.
Payment and delivery for securities which have been purchased or sold on a
forward commitment basis can take place a month or more (not to exceed 120
days) after the date of the transaction. Additionally, the Portfolio may
purchase securities on a when-issued or delayed delivery basis. Securities
purchased on a when-issued or delayed delivery basis are purchased for
delivery beyond the normal settlement date at a stated price and yield, and
no income accrues to the Portfolio on such securities prior to delivery.
When the Portfolio enters into a purchase transaction on a when-issued or
delayed delivery basis, it establishes a segregated account in which it
maintains liquid assets in an amount at least equal in value to the
Portfolio's commitments to purchase such securities. Purchasing securities
on a forward commitment or when-issued or delayed delivery basis may involve
a risk that the market price at the time of delivery may be lower than the
agreed-upon purchase price, in which case there could be an unrealized loss
at the time of delivery.
7. SHORT SALES: The Portfolio may sell securities short. A short sale is a
transaction in which the Portfolio sells securities it does not own, but has
borrowed, in anticipation of a decline in the price of the securities. The
Portfolio is obligated to replace the borrowed securities at the market price
at the time of replacement. The Portfolio may have to pay a premium to
borrow the securities as well as 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 generally 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) ant 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 cannot exceed the total amount invested.
8. PURCHASED AND WRITTEN OPTIONS: The Portfolio may write covered call
options. Premiums are received and are recorded as liabilities, and
subsequently adjusted to the current value of the options written. Premiums
received from writing options which expire are treated as realized gains.
Premiums received from writing options which are exercised or canceled in
closing purchase transactions are offset against the proceeds or amount paid
on the transaction
146
<PAGE>
to determine the realized gain or loss. By writing a call option, the
Portfolio foregoes in exchange for the premium the opportunity for capital
appreciation above the exercise price should the market price of the
underlying security increase. Possible losses from written options may be
unlimited.
The Portfolio may also purchase call options on It's portfolio securities.
The Portfolio may purchase call options to close out covered call positions
or to protect against an increase in the price of the security it anticipates
purchasing. Possible losses from purchased options cannot exceed the total
amount invested.
9. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining realized gains
and losses on the sale of investment securities are those of specific
securities sold. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis except where collection is
in doubt. Discounts and premiums on securities purchased are amortized
according to the effective yield method over their respective lives.
Distributions are recorded on the ex-distribution date. Most expenses of the
Fund can be directly attributed to a particular Portfolio. Expenses which
cannot be directly attributed are apportioned among the Portfolios based upon
relative net assets.
Income distributions and capital gain distributions are determined in
accordance with tax regulations which may differ from generally accepted
accounting principles.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in 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. As a result, an
additional class of shares (identified as "Foreign" in the Portfolio
Valuation) may be created and offered for investment. The "local" and
"foreign" shares' market values may vary.
B. Morgan Stanley Asset Management Inc. ("MSAM") provides the Portfolio with
investment advisory services at a fee calculated at the annual rate of
average daily net assets indicated below. MSAM has agreed to reduce fees
payable to it and to reimburse the Portfolio, if necessary, if the annual
operating expenses, expressed as a percentage of average daily net assets,
exceed the maximum ratio indicated below.
Maximum
Advisory Expense
Fee Ratio
-------- -------
Latin American Portfolio . . . . . . . . . . . 1.10% 1.70%
147
<PAGE>
C. MSAM also provides the Portfolio with administrative services pursuant to
an Administrative Agreement for a monthly fee which on an annual basis equals
0.15% of the average daily net assets of each Portfolio plus reimbursement of
out-of-pocket expenses. Under an agreement between MSAM and U.S. Trust
Company of New York ("U.S. Trust"), Mutual Funds Service Company ("MFSC"), a
subsidiary of U.S. Trust, provides certain administrative services to the
Portfolio. For such services, MSAM pays U.S. Trust a portion of the fee MSAM
receives from the Portfolio.
Bice Chileconsult Agente de Valores S.A. (the "Chilean Administrator") acts
as the Portfolios' legal representative in Chile pursuant to an
administrative agreement (the "Chilean Administrative Agreement"). The
Chilean Administrator provides various services to the Portfolio for a
monthly fee which on an annual basis is equal to the greater of 0.125% of the
Portfolios' average weekly net assets invested in Chile or $20,000.
Unibanco-Uniao (the "Brazilian Administrator") provides the Portfolio with
administrative services pursuant to an Administrative Agreement (the
"Brazilian Administration Agreement") for a monthly fee which on an annual
basis equals 0.125% of the Portfolio's average weekly net assets invested in
Brazil.
D. Morgan Stanley Trust Company ("MSTC") acts as custodian for the
Portfolio's assets held outside the United States in accordance with a
Custodian Agreement. U.S. Trust acts as custodian for the Portfolio's
domestic assets in accordance with a Custodian Agreement. Custodian fees are
computed and payable monthly based on securities held, investment purchases
and sales activity, an account maintenance fee, plus reimbursement for
certain out-of-pocket expenses. MSTC and MSAM are wholly-owned subsidiaries
of Morgan Stanley Group, Inc..
During the period January 18, 1995 through June 30, 1995 the Portfolio
incurred custody fees and had amounts payable to MSTC at June 30, 1995 of:
MSTC
Custody Fees Fees Payable to
Incurred MSTC
-------- ----
(000) (000)
$36 $21
E. During the period January 18, 1995 through June 30, 1995, purchases and
sales of investment securities other than U.S. Government securities and
short-term investments were:
Purchases Sales
--------- -----
(000) (000)
$20,744 $6,992
148
<PAGE>
F. At June 30, 1995, the Portfolio's cost for Federal income tax purposes
was $13,606,000. Net unrealized appreciation for Federal income tax purposes
aggregated $26,000 of which $1,004,000 related to appreciated securities and
$978,000 related to depreciated securities.
149
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
TAX-EXEMPT INSTRUMENTS (99.2%)
DAILY VARIABLE RATE BONDS (11.2%)
$900 Hapeville, Georgia, Industrial
Development Authority, Series 85,
4.35%, 11/01/15 $ 900
1,500 Jackson County, Mississippi, Port
Facility, Chevron Project, Series 93,
4.20%, 6/01/23 1,500
500 Lincoln County, Wyoming, Pollution
Control Revenue, Exxon Project Series 84A,
4.25%, 11/01/14 500
300 New York City, New York, Water Finance
Authority, Water and Sewer System Revenue,
Series 94C, 4.25%, 6/15/22 300
1,000 Platte County, Wyoming, Pollution
Control Revenue, Series A, 4.35%,
7/01/14 1,000
700 Valdez, Alaska, Marine Terminal
Authority, Exxon, Series 85, 4.20%,
10/01/25 700
----------
TOTAL DAILY VARIABLE RATE BONDS 4,900
----------
FIXED RATE INSTRUMENTS (88.0%)
1,000 Columbus, Ohio, General Obligation
Bonds, 5.80%, 1/01/00 1,053
1,000 Connecticut State Special Obligation,
Tax Revenue Bonds, Transportation,
6.50%, 7/01/09, Prerefunded 7/01/99 at 102 1,090
1,000 De Kalb County, Georgia, General
Obligation Bonds, 7.30%, 1/01/00,
Prerefunded 1/01/97 at 102 1,066
1,000 De Kalb County, Georgia, Water & Sewer
Revenue Bonds 7.00%, 10/01/06 1,068
1,000 Georgia State, General Obligation Bonds,
Series E, 6.75%, 12/01/02 1,129
500 Hawaii State, General Obligation Bonds,
Series BS, 6.70%, 9/01/97 527
1,000 Hawaii State, General Obligation Bonds,
Series CJ, 6.20%, 1/01/12 1,022
1,000 Howard County, Maryland, Consolidated
Public Improvement General Obligation
Bonds, Series A, 7.20%, 8/01/03,
Prerefunded 8/01/96 at 102 1,054
1,500 Intermountain Power Agency, Utah, Power
Supply Revenue Bonds, Series D, 8.38%,
7/01/12 1,636
1,000 Kentucky State Housing Corp. Revenue
Bonds, Series A, 6.00%, 7/01/10 1,012
1,155 Maryland State Department of
Transportation, Construction Revenue Bonds,
Second Issue, 6.80%, 11/01/05,
Prerefunded 11/01/99 at 102 1,278
1,000 Massachusetts State, Consolidated Loan,
Series A, 7.50%, 3/01/03, Prerefunded
3/01/00 at 102 1,133
500 Massachusetts State Consolidated Loan,
Series A, 7.63%, 6/01/08,
Prerefunded 6/01/01 at 102 582
1,625 Michigan State Housing Development
Authority Revenue Bonds, Series A, 6.75%,
12/01/14 1,698
1,500 Minnesota State General Obligation
Bonds, 7.00%, 8/01/99,
Prerefunded 8/01/96 at 100 1,550
1,400 Mississippi State General Obligation
Bonds, 6.00%, 2/01/09 1,440
1,000 Mobile Alabama, Water & Sewer Revenue
Bonds, Series B, 7.25%, 1/01/06 1,036
1,475 Montana State General Obligation Bonds,
Long Range Building Program, Series C,
6.00%, 8/01/13 1,498
The accompanying notes are an integral part of the financial statements.
150
<PAGE>
$1,500 Municipal Assistance Corp. for City of
New York, New York, Refunding
Revenue Bonds, Series 56, 7.90%,
7/01/98, Prerefunded 7/01/96 at 102 $ 1,589
1,000 New Castle County, Delaware, General
Obligation Bonds, 6.25%, 10/15/01 1,078
1,500 North Little Rock, Arkansas, Electric
Revenue Refunding Bonds, Murray Lock & Dam
Hydro, 7.40%, 7/01/15, Prerefunded 7/01/96
at 102 1,581
500 Ohio State General Obligation Bonds,
6.20%, 8/01/12 521
1,000 Ohio State Housing Finance Agency,
Residential Mortgage Revenue Bonds,
Series A-1, 6.20%, 9/01/14 1,011
1,000 Pennsylvania State Higher Educational
Facilities Authority, Colleges & Universities
Revenue Bonds, 6.50%, 9/01/02 1,095
1,000 Reedy Creek Improvement District,
Florida, District Florida Utility
Revenue Bonds, Series 91-1, 6.50%,
10/01/16, Prerefunded 10/01/01 at 101 1,108
1,000 Redmond, Washington, General Obligation 1,038
Bonds, 5.75%, 12/01/05
1,400 Rhode Island Depositors Economic
Protection Corp., Special Obligation Revenue
Bonds, Series A, 7.25%, 8/01/21,
Prerefunded 8/01/96 at 102 1,477
1,350 San Antonio, Texas General Obligation
Bonds, 6.50%, 8/01/14 1,408
1,000 Tulsa, Oklahoma, General Obligation
Bonds, 6.38%, 2/01/02 1,084
1,000 Virginia Beach, Virginia General
Obligation Bonds, 6.00%, 9/01/10 1,022
500 Virginia State Housing Development
Authority, Commonwealth Mortgage Revenue
Bonds, Series B, 6.60%, 1/01/12 519
1,000 Virginia State Housing Development
Authority, Commonwealth Mortgage Revenue
Bonds, Series B, 6.65%, 1/01/13 1,038
1,500 Washington State General Obligation
Bonds, Series 86-D, 8.00%, 9/01/09,
Prerefunded 9/01/96 at 100 1,571
500 Washington Suburban Sanitary District,
General Obligation Revenue Bonds, 6.50%,
11/01/05, Prerefunded 11/01/01 at 102 555
----------
TOTAL FIXED RATE INSTRUMENTS 38,567
----------
TOTAL TAX-EXEMPT INSTRUMENTS (99.2%)
(Cost $42,728) 43,467
----------
TOTAL INVESTMENTS (99.2%) (Cost $42,728) 43,467
----------
OTHER ASSETS (2.2%)
Cash $44
Interest Receivable 928 972
-----------
LIABILITIES (-1.4%)
Payable for Investments
Purchased (562)
Administrative Fees Payable (5)
Investment Advisory Fees Payable (4)
Custodian Fees Payable (2)
Directors Fees and Expense
Payable (2)
Other Liabilities (34) (609)
----------- ----------
NET ASSETS (100%) $43,830
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 4,723,159 outstanding
$.001 par value shares (authorized
500,000,000 shares) $10.26
----------
----------
- ------------------------------------------------------------
Variable/Floating Rate Instruments. The interest rate
changes on these instruments are
based upon a designated base rate. These instruments
are payable on demand and are
secured by a letter of credit or other support
agreements. Maturity dates disclosed for
Variable/Floating Rate Instruments are the ultimate
maturity dates. The effective maturity
dates for such securities are the next interest reset
dates which are seven days or less.
The accompanying notes are an integral part of the financial statements.
151
<PAGE>
Prerefunded Bonds. Outstanding bonds have been
refunded to the first call date
(prerefunded date) by the issuance of new bonds.
Principal and interest are paid from
monies escrowed in U.S. Treasury securities.
Prerefunded bonds are generally re-rated
AAA due to the U.S. Treasury escrow.
The accompanying notes are an integral part of the financial statements.
152
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
MUNICIPAL
BOND
PORTFOLIO
JANUARY 18,
1995* TO
JUNE 30,
1995
(000)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 990
--------------
Total Income 990
--------------
EXPENSES:
Investment Advisory Fees:
Basic Fees - Adviser 69
Less: Fees Waived (62)
--------------
Investment Advisory Service Fees - Net 7
Administrative Fees: 32
Custodian Fees 5
Filing and Registration Fees 20
Directors' Fees and Expenses 2
Legal Fees 1
Audit Fees 10
Shareholder Reports 11
Other Expenses 1
--------------
Total Expenses 89
--------------
NET INVESTMENT INCOME 901
--------------
NET REALIZED GAIN:
Investments Sold 178
--------------
Total Net Realized Gain 178
--------------
CHANGE IN UNREALIZED APPRECIATION 739
--------------
TOTAL NET REALIZED GAIN AND CHANGE
IN UNREALIZED APPRECIATION 917
--------------
Net Increase in Net Assets Resulting
from Operations $ 1,818
--------------
--------------
* Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
153
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
PERIOD FROM
JANUARY 18, 1995*
TO JUNE 30 1995
(UNAUDITED)
(000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 901
Net Realized Gain 178
Change in Unrealized Appreciation 739
----------
Net Increase in Net Assets Resulting from
Operations 1,818
----------
DISTRIBUTIONS:
Net Investment Income (705)
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 55,060
Distributions Reinvested 672
Redeemed (13,015)
----------
Net Increase from Capital Share
Transactions 42,717
----------
Total Increase in Net Assets 43,830
NET ASSETS:
Beginning of Period --
----------
End of Period (2) $ 43,830
----------
----------
________________________________________________________
(1) Capital Share Transactions:
Shares Subscribed 5,480
Shares Issued on Distributions Reinvested 66
Shares Redeemed (1,273)
----------
Net Increase in Capital Shares Outstanding 4,273
----------
----------
(2) Net Assets were Comprised of:
Paid in Capital $ 42,717
Undistributed Net Investment Income 196
Accumulated Net Realized Gain 178
Unrealized Appreciation 739
----------
$ 43,830
----------
----------
- --------------
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
154
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS :
- --------------------------------------------------------------------------------
THE MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
PERIOD FROM
JANUARY 18, 1995*
TO JUNE 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.21
Net Realized and Unrealized Gain on Invest 0.21
-------------
Total from Investment Operations 0.42
-------------
DISTRIBUTIONS
Net Investment Income (0.16)
-------------
NET ASSET VALUE, END OF PERIOD $10.26
-------------
-------------
TOTAL RETURN 4.2%
-------------
-------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $43,830
Ratio of Expenses to Average Net Assets (1) 0.45%**
Ratio of Net Investment Income to Average Net Assets (1) 4.55%**
Portfolio Turnover Rate 124%
- -------------------
(1)Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $0.01
Ratios before expense limitation:
Expenses to Average Net Assets 0.76%**
Net Investment Income (Loss) to Average Net Assets 4.24%**
- ----------------
* Commencement of operations.
** Annualized.
155
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company which offers redeemable shares of twenty-four diversified
and non-diversified investment portfolios. These Notes pertain only to the
unaudited financial statements dated June 30, 1995 for one such investment
portfolio, the Municipal Bond Portfolio (the "Portfolio").
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Portfolio in the preparation of the
financial statements.
1. SECURITY VALUATION: Bonds and other fixed income securities are valued
according to the broadest and most representative market. In addition, bonds
and other fixed income securities may be valued on the basis of prices
provided by a pricing service which are based primarily on institutional size
trading in similar groups of 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.
Municipal money market securities are stated at amortized cost, which
approximates market value. All other securities and assets for which market
values are not readily available, including restricted securities, are valued
at fair value as determined in good faith by the Board of Directors, although
the actual calculations may be done by others.
2. INCOME TAXES: It is the Portfolio's intention to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required in the financial statements.
The Portfolio may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on either income earned or
repatriated. The Portfolio accrues such taxes when the related income is
earned.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as a custodian for the Portfolio takes possession of the
underlying securities, the value of which exceeds the principal amount of the
repurchase transaction, including accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. In the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of the collateral
or proceeds may be subject to legal proceedings.
156
<PAGE>
4. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The
Portfolio may make forward commitments to purchase or sell securities.
Payment and delivery for securities which have been purchased or sold on a
forward commitment basis can take place a month or more (not to exceed 120
days) after the date of transaction. Additionally, the Portfolio may
purchase securities on a when-issued or delayed delivery basis. Securities
purchased on a when-issued or delayed delivery basis are purchased for
delivery beyond the normal settlement date at a stated price and yield, and
no income accrues to the Portfolio on such securities prior to delivery date.
When the Portfolio enters into a purchase transaction on a when-issued or
delayed delivery basis, it establishes a segregated account in which it
maintains liquid assets in an amount at least equal in value to the
Portfolio's commitments to purchase such securities. Purchasing securities
on a forward commitment or when-issued or delayed delivery basis may involve
a risk that the market price at the time of delivery may be lower than the
agreed-upon purchase price, in which case there could be an unrealized loss
at the time of delivery.
5. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining realized gains
and losses on the sale of investment securities are those of specific
securities sold. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis except where collection is
in doubt. Discounts and premiums on securities purchased are amortized
according to the effective yield method over their respective lives.
Distributions are recorded on the ex-distribution date. Most expenses of the
Fund can be directly attributed to a particular Portfolio. Expenses which
cannot be directly attributed are apportioned among the Portfolios based upon
relative net assets.
Income distributions and capital gain distributions are determined in
accordance with tax regulations which may differ from generally accepted
accounting principles.
B. Morgan Stanley Asset Management Inc. ("MSAM") provides the Portfolio with
investment advisory services at a fee calculated at the annual rate of
average daily net assets indicated below. MSAM has agreed to reduce fees
payable to it and to reimburse the Portfolio, if necessary, if the annual
operating expenses, expressed as a percentage of average daily net assets,
exceed the maximum ratio indicated below.
Advisory Maximum Expense
Fee Ratio
-------- ---------------
Municipal Bond Portfolio 0.35% 0.45%
C. MSAM also provides the Portfolio with administrative services pursuant to
an Administrative Agreement for a monthly fee which on an annual basis equals
0.15% of the average daily net assets of each Portfolio plus reimbursement of
out-of-pocket expenses.
157
<PAGE>
Under an agreement between MSAM and U.S. Trust Company of New York ("U.S.
Trust"), Mutual Funds Service Company ("MFSC"), a subsidiary of U.S. Trust,
provides certain administrative services to the Fund. For such services,
MSAM pays U.S. Trust a portion of the fee MSAM receives from the Fund. MSAM
is a wholly-owned subsidiary of Morgan Stanley Group, Inc..
D. U.S. Trust acts as custodian for the Portfolio's assets in accordance
with a Custodian Agreement. Custodian fees are computed and payable monthly
based on securities held, investment purchases and sales activity, an account
maintenance fee, plus reimbursement for certain out-of-pocket expenses.
E. During the period January 18, 1995 through June 30, 1995, purchases and
sales of investment securities other than U.S. Government securities and
short-term investments were:
Purchases Sales
--------- ------
(000) (000)
$99,205 $56,492
F. At June 30, 1995, the Portfolio's cost for Federal income tax purposes
was $42,728,000. Net realized appreciation for Federal income tax purposes
aggregated $739,000 of which $763,000 related to appreciated securities and
$24,000 related to depreciated securities.
158
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- -------------------------------------------------------------------------------
THE U.S. REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------
COMMON STOCKS (97.1%)
APARTMENT (28.4%)
44,200 Associated Estates Realty Corp. $ 934
45,700 Avalon Properties, Inc. 908
82,600 Bay Apartment Communities, Inc. 1,611
66,500 Equity Residential Properties Trust 1,854
56,600 Evans Withycombe Residential, Inc. 1,153
53,100 Home Properties of New York, Inc. 936
63,400 Irvine Apartment Communities, Inc. 1,094
60,000 Walden Residential Properties, Inc. 1,102
76,000 Wellsford Residential Property Trust 1,729
-----------
11,321
-----------
LODGING/LEISURE (4.7%)
+98,600 Host Marriot Corp. 1,048
+36,000 Starwood Lodging Trust 846
-----------
1,894
-----------
MANUFACTURED HOME (7.7%)
66,500 Atlantic Gulf Communities Corp. 432
20,000 Chateau Properties, Inc. 418
60,300 ROC Communities, Inc. 1,334
36,200 Sun Communities, Inc. 905
-----------
3,089
-----------
OFFICE (9.9%)
64,400 Beacon Properties Corp. 1,280
44,400 Cali Realty Corp. 860
73,100 Carr Realty Corp. 1,261
+64,900 Koger Equity, Inc. 568
-----------
3,969
-----------
OFFICE AND INDUSTRIAL (16.0%)
75,700 Bedford Property Investors, Inc. 435
60,100 Duke Realty Investments, Inc. 1,698
7,500 First Industrial Realty Trust, Inc. 154
71,400 Liberty Property Trust 1,401
31,500 Reckson Associates Realty Corp. 764
86,400 Spieker Properties, Inc. 1,933
-----------
6,385
-----------
SELF STORAGE (4.2%)
102,00 Storage Equities, Inc. 1,670
-----------
SHOPPING CENTER (26.2%)
FACTORY OUTLET CENTER (1.4%)
20,800 Chelsea GCA Realty, Inc. 561
-----------
REGIONAL MALL (19.8%)
98,200 Alexander Haagen Properties, Inc. 1,129
50,000 CBL & Associates Properties, Inc. 994
99,700 Crown American Realty Trust 1,259
93,400 DeBartolo Realty Corp. 1,366
76,200 Glimcher Realty Trust 1,581
The accompanying notes are an integral part of the financial statements.
159
<PAGE>
79,500 Macerich Co. $ 1,560
-----------
7,889
-----------
STRIP CENTER (5.0%)
29,800 Developers Diversified Realty Corp. 857
37,900 Price REIT, Inc., Series B 1,132
-----------
1,989
-----------
TOTAL SHOPPING CENTER 10,439
-----------
TOTAL COMMON STOCKS (Cost $37,467) 38,767
-----------
FACE
AMOUNT
(000)
- --------
SHORT-TERM INVESTMENT (4.4%)
REPURCHASE AGREEMENT (4.4%)
$1,749 U.S. Trust, 5.90%, dated 6/30/95,
due 7/03/95, to be repurchased at $1,750,
collateralized by $1,820 United States
Treasury Bills, due 7/27/95, valued at
$1,813 (Cost $1,749) 1,749
-----------
TOTAL INVESTMENTS (101.5%) (Cost $39,216) 40,516
-----------
OTHER ASSETS (4.1%)
Receivable for Portfolio Shares Sold $1,000
Receivable for Investments Sold 347
Dividends Receivable 285
Other 1 1,633
-----------
LIABILITIES (-5.6%)
Payable for Investments Purchased (2,185)
Investment Advisory Fees Payable (11)
Administrative Fees Payable (4)
Custodian Fees Payable (3)
Directors' Fees & Expenses (1)
Other Liabilities (25) (2,229)
----------- -----------
NET ASSETS (100%) $39,920
-----------
-----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 3,684,831 outstanding $.001
par value shares (authorized 500,000,000
shares) $10.83
-----------
-----------
_______________________________________________________________________________
+ - Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
160
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------------------------
U.S. REAL
ESTATE
PORTFOLIO
FEBRUARY 24,
1995* TO
JUNE 30,
1995
(000)
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 742
Interest 59
------------
Total Income 801
------------
EXPENSES:
Investment Advisory Fees:
Basic Fees - Adviser 68
Less: Fees Waived (58)
------------
Investment Advisory Fees - Net 10
Administrative Fees: 13
Custodian Fees 9
Filing and Registration Fees 23
Directors' Fees and Expenses 2
Legal Fees 11
Audit Fees 8
Shareholder Reports 9
Other Expenses 1
------------
Total Expenses 86
------------
NET INVESTMENT INCOME 715
------------
NET REALIZED GAIN:
Investments Sold 310
------------
CHANGE IN UNREALIZED APPRECIATION 1,300
------------
TOTAL NET REALIZED GAIN AND CHANGE
IN UNREALIZED APPRECIATION 1,610
------------
Net Increase in Net Assets Resulting
from Operations $ 2,325
------------
------------
_____________
* Commencement of Operations
The accompanying notes are an integral part of the financial statements.
161
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE U.S. REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
PERIOD FROM
FEBRUARY 24, 1995*
TO JUNE 30 1995
(UNAUDITED)
(000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 715
Net Realized Gain 310
Change in Unrealized Appreciation 1,300
---------
Net Increase in Net Assets Resulting from Operations 2,325
---------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 39,627
Distributions Reinvested -
Redeemed (2,032)
---------
Net Increase from Capital Share Transactions 37,595
---------
Total Increase in Net Assets 39,920
NET ASSETS:
Beginning of Period -
---------
End of Period (2) $ 39,920
---------
---------
_______________________________________________________________________________
(1) Capital Share Transactions:
Shares Subscribed 3,882
Shares Issued on Distributions Reinvested -
Shares Redeemed (197)
---------
Net Increase in Capital Shares Outstanding 3,685
---------
---------
(2) Net Assets were Comprised of:
Paid in Capital $ 37,595
Undistributed Net Investment Income 715
Accumulated Net Realized Gain 310
Unrealized Appreciation 1,300
---------
$ 39,920
---------
---------
_________________
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
162
<PAGE>
MORGAN STANLEY
INSTITUTIONAL FUND, INC.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS :
- -------------------------------------------------------------------------------
THE U.S. REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
PERIOD FROM
FEBRUARY 24, 1995*
TO JUNE 30, 1995
(UNAUDITED)
- -------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.19
Net Realized and Unrealized Gain on Investments 0.64
----------
Total from Investment Operations 0.83
----------
NET ASSET VALUE, END OF PERIOD $10.83
----------
----------
TOTAL RETURN 8.3%
----------
----------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $39,920
Ratio of Expenses to Average Net Assets (1) 0.97%**
Ratio of Net Investment Income to Average Net Assets (1) 8.08%**
Portfolio Turnover Rate 41%
_________________________
(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 1.63 %**
Net Investment Income to Average Net Assets 7.42 %**
_________________________
* Commencement of operations.
** Annualized.
The accompanying notes are an integral part of the financial statements.
163
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company which offers redeemable shares of twenty-four diversified
and non-diversified investment portfolios. These Notes pertain only to the
unaudited financial statements dated June 30, 1995 for one such investment
portfolio, the U.S. Real Estate Portfolio (the "Portfolio").
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Portfolio in the preparation of the
financial statements.
1. SECURITY VALUATION: Equity securities listed on an exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price.
Unlisted securities and listed securities not traded on the valuation date
for which market quotations are readily available are valued at the mean
between the current bid and asked prices obtained from reputable brokers.
Bonds and other fixed income securities are valued according to the broadest
and most representative market. In addition, bonds and other fixed income
securities may be valued on the basis of prices provided by a pricing service
which are based primarily on institutional size trading in similar groups of
securities. Securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. Money
market securities are stated at amortized cost, which approximates market
value. All other securities and assets for which market values are not
readily available, including restricted securities, are valued at fair value
as determined in good faith by the Board of Directors, although the actual
calculations may be done by others.
2. INCOME TAXES: It is the Portfolio's intention to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as a custodian for the Portfolio takes possession of the
underlying securities, the value of which is at least equal to the principal
amount of the repurchase transaction, including accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value of
the collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
164
<PAGE>
4. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The
Portfolio may make forward commitments to purchase or sell securities.
Payment and delivery for securities which have been purchased or sold on a
forward commitment basis can take place a month or more (not to exceed 120
days) after the date of the transaction. Additionally, the Portfolio may
purchase securities on a when-issued or delayed-delivery basis. Securities
purchased on a when-issued or delayed delivery basis are purchased for
delivery beyond the normal settlement date at a stated price and yield, and
no income accrues to the Portfolio on such securities prior to delivery. When
the Portfolio enters into a purchase transaction on a when-issued or delayed
delivery basis, it establishes a segregated account in which it maintains
liquid assets in an amount at least equal in value to the Portfolio's
commitments to purchase such securities. Purchasing securities on a forward
commitment or when-issued or delayed-delivery basis may involve a risk that
the market price at the time of delivery may be lower than the agreed-upon
purchase price, in which case there could be an unrealized loss at the time
of delivery.
5. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining realized gains
and losses on the sale of investment securities are those of specific
securities sold. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis except where collection is
in doubt. Discounts and premiums on securities purchased (other than
mortgage-backed securities) are amortized according to the effective yield
method over their respective lives. Distributions are recorded on the
ex-distribution date. Most expenses of the Fund can be directly attributed to
a particular Portfolio. Expenses which cannot be directly attributed are
apportioned among the Portfolios based upon relative net assets.
Income distributions and capital gain distributions are determined in
accordance with tax regulations which may differ from generally accepted
accounting principles.
B. Morgan Stanley Asset Management Inc. ("MSAM") provides the Portfolio
with investment advisory services at a fee calculated at the annual rate of
average daily net assets indicated below. MSAM has agreed to reduce fees
payable to it and to reimburse the Portfolio, if necessary, if the annual
operating expenses, expressed as a percentage of average daily net assets,
exceed the maximum ratio indicated below.
Maximum
Advisory Expense
Fee Ratio
-------- -------
U.S. Real Estate Portfolio . . . . . . . . 0.80% 1.00%
C. MSAM also provides the Portfolio with administrative services pursuant
to an Administrative Agreement for a monthly fee which on an annual basis
equals 0.15% of the average daily net assets of each Portfolio plus
reimbursement of out-of-pocket expenses.
165
<PAGE>
Under an agreement between MSAM and U.S. Trust Company of New York ("U.S.
Trust"), Mutual Funds Service Company ("MFSC"), a subsidiary of U.S. Trust,
provides certain administrative services to the Portfolio. For such
services, MSAM pays U.S. Trust a portion of the fee MSAM receives from the
Portfolio. MSAM is a wholly-owned subsidiary of Morgan Stanley Group, Inc.
D. CUSTODIANS: U.S. Trust acts as custodian for the Portfolio's assets in
accordance with a Custodian Agreement. Custodian fees are computed and
payable monthly based on investment purchases and sales activity, an account
maintenance fee, plus reimbursement for certain out-of-pocket expenses.
E. PURCHASES AND SALES: During the period February 24, 1995 through June
30, 1995, purchases and sales of investment securities other than U.S.
Government securities and short-term investments were:
Purchases Sales
--------- -----
(000) (000)
$48,607 $11,450
F. At June 30, 1995, the Portfolio's cost for Federal income tax purposes
was $39,216,000. Net realized appreciation for Federal income tax purposes
aggregated $1,300,000 of which $1,373,000 related to appreciated securities
and $73,000 related to depreciated securities.
166
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
SHARES VALUE
(000)
- ------------------------------------------------------
COMMON STOCKS (92.9%)
AUSTRALIA (1.9%)
16,200 Amcor Ltd..................... $ 120
9,200 Ampolex Ltd................... 21
15,200 Australian National Industries
Ltd......................... 13
26,000 Boral Ltd. (Bon Shares
Plan)....................... 65
6,400 Brambles Industries Ltd....... 61
49,348 Broken Hill Proprietary Co.,
Ltd......................... 607
16,800 Burns, Philip & Co., Ltd...... 35
8,725 Coca-Cola Amatil Ltd.......... 54
33,300 Coles Myer Ltd................ 104
16,700 CRA Ltd....................... 227
26,200 CSR Ltd....................... 82
82,400 Fosters Brewing Corp.......... 73
21,763 General Property Trust........ 37
34,700 Goodman Fielder Ltd........... 29
9,200 ICI Australia Ltd............. 60
7,349 Lend Lease Corp., Ltd......... 94
44,590 MIM Holdings Ltd.............. 55
37,018 National Australia Bank
Ltd......................... 292
+8,500 Newcrest Mining Ltd........... 36
50,132 News Corp., Ltd............... 280
22,100 North Broken Hill Peko Ltd.... 53
30,200 Pacific Dunlop Ltd............ 64
25,200 Pioneer International Ltd..... 63
8,342 Renison Goldfields
Consolidated Ltd............ 26
4,278 Renison Goldfields
Consolidated Ltd. (New)..... 10
16,100 Santos Ltd.................... 39
19,200 Southcorp Holdings Ltd........ 38
+12,400 TNT Ltd....................... 16
27,100 Western Mining Corp. Holdings
Ltd......................... 149
17,057 Westfield Trust............... 10
45,800 Westpac Banking Corp.......... 166
--------
2,979
--------
BELGIUM (4.0%)
260 Baekaert S.A.................. 206
450 Cimenteries CBR
Cementbedrijven............. 184
5,900 Delhaize Freres et Cie, 'Le
Lion', S.A.................. 265
5,050 Electrabel S.A................ 1,066
1,100 Electrabel S.A. (New) -
VVPR........................ 235
3,900 Fortis AG..................... 412
108 Fortis AG - VVPR.............. 12
1,670 Generale de Banque S.A........ 536
2,900 Gevaert Photo-Producten
S.A......................... 159
586 Glaverbel S.A................. 77
+36 Glaverbel S.A. - VVPR......... --
2,650 Groupe Bruxelles Lambert
S.A......................... 355
1,550 Kredietbank S.A............... 367
2,620 Petrofina S.A................. 791
1,450 Reunies Electrobel & Tractebel
S.A......................... 526
1,500 Royale Belge.................. 283
950 Solvay et Cie S.A............. 526
+2,850 Union Miniere S.A............. 186
--------
6,186
--------
SHARES
VALUE
(000)
- ------------------------------------------------------
BRAZIL (0.4%)
550,000 Cia Paulista de Forca E Luz... $ 27
1,300,000 Cia Siderurgica Nacional...... 30
1,600,000 Eletrobras.................... 417
250,000 Servicos de Eletricdade....... 79
--------
553
--------
FRANCE (7.8%)
1,200 Accor S.A..................... 160
6,700 Alcatel Alsthom............... 603
7,000 AXA S.A....................... 378
8,300 Banque Nationale de Paris..... 400
350 BIC Corp...................... 58
1,200 Bouygues...................... 144
1,150 Carrefour Supermarch S.A...... 589
290 Chargeurs S.A................. 57
916 Cie Bancaire S.A.............. 110
3,700 Cie de Saint Gobain........... 447
7,100 Cie de Suez S.A............... 395
5,279 Cie Financiere de Paribas,
Class A..................... 317
4,900 Cie Generale des Eaux......... 545
11,000 Elf Aquitaine................. 813
3,700 Elf Sanofi.................... 205
1,400 Eridania Beghin-Say S.A....... 216
3,400 Etablissements Economiques du
Casino...................... 99
3,400 Groupe Danone................. 572
2,500 Havas S.A..................... 198
4,000 Lafarge Coppee S.A............ 311
3,200 L'Air Liquide................. 511
1,400 Legrand....................... 222
2,700 L'Oreal....................... 677
3,400 LVMH Moet Hennessy Louis
Vuitton..................... 612
3,100 Lyonnaise des Eaux Demez...... 293
+4,900 Michelin CGDE, Class B........ 217
2,300 Pernod-Ricard................. 151
+800 Pinault-Printemps S.A......... 172
900 Promodes...................... 205
+2,200 PSA Peugeot Citrogen S.A...... 305
11,100 Rhone-Poulenc S.A., Class A... 250
250 SAGEM......................... 144
450 Saint Louis S.A............... 139
2,400 Schneider S.A................. 190
1,250 Simco S.A..................... 109
200 Societe Eurafrance S.A........ 66
3,700 Societe Generale.............. 433
+6,300 Thomson CSF................... 141
9,100 Total S.A., Class B........... 548
--------
12,002
--------
GERMANY (3.8%)
90 AGIV AG....................... 29
390 Allianz AG Holdi.............. 695
70 AMB Aachener & Muenchener
Beteiligungs AG............. 49
70 Asko Deutsche Kaufhaus AG..... 44
1,200 BASF AG....................... 256
1,325 Bayer AG...................... 329
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Active Country Allocation Portfolio
6
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
SHARES
VALUE
(000)
- ------------------------------------------------------
GERMANY (CONT.)
450 Bayerische Hypotheken und
Wechsel Bank AG............. $ 123
470 Bayerische Vereinsbank AG..... 142
90 Beiersdorf AG................. 71
80 Brau Und Brunnen AG........... 15
980 Daimler Benz AG............... 451
180 Degussa AG.................... 56
8,950 Deutsche Bank AG.............. 435
+670 Deutsche Lufthansa AG......... 97
8,200 Dresdner Bank AG.............. 237
80 Heidelberger Zement AG........ 69
210 Hochtief AG................... 118
170 Karstadt AG................... 74
120 Kaufhof Holding AG............ 43
+310 Kloeckner-Humboldt-Deutz AG... 10
180 Linde AG...................... 107
250 MAN AG........................ 64
780 Mannesmann AG................. 238
130 Muenchener Rueckver AG........ 285
290 Preussag AG................... 87
660 RWE AG........................ 229
110 SAP AG........................ 146
1,300 Schering AG................... 91
1,050 Siemens AG.................... 520
+640 Thyssen AG.................... 119
930 Veba AG....................... 365
390 Viag AG....................... 153
550 Volkswagen AG................. 158
--------
5,905
--------
HONG KONG (5.0%)
32,000 Applied International
Holdings.................... 3
40,592 Bank of East Asia Ltd......... 122
152,000 Cathay Pacific Airways Ltd.... 222
114,000 Cheung Kong Holdings Ltd...... 564
103,000 China Light & Power Co.,
Ltd......................... 530
82,000 Chinese Estates Holdings...... 59
41,000 Dickson Concepts International
Ltd......................... 25
32,000 Giordano Holdings Ltd......... 24
65,000 Hang Lung Development Co...... 103
99,500 Hang Seng Bank Ltd............ 759
10,000 Hong Kong Aircraft Engineering
Co., Ltd.................... 26
100,800 Hong Kong & China Gas Co.,
Ltd......................... 161
66,000 Hong Kong & Shanghai Hotel
Ltd......................... 81
562,000 Hong Kong Telecommunications
Ltd......................... 1,111
222,486 Hopewell Holdings Ltd......... 188
187,000 Hutchison Whampoa Ltd......... 904
55,000 Hysan Development Ltd......... 126
20,000 Johnson Electric Holdings
Ltd......................... 40
30,000 Miramar Hotel & Investment
Ltd......................... 61
79,656 New World Development Co.,
Ltd......................... 265
74,000 Oriental Press Group Ltd...... 30
20,500 Peregrine Investment Holdings
Ltd......................... 29
56,340 Shangri-La Asia Ltd........... 67
86,000 Shun Tak Holdings Ltd......... 68
SHARES
VALUE
(000)
- ------------------------------------------------------
96,000 South China Morning Post
Holdings.................... $ 58
54,000 Stelux Holdings Ltd........... 16
119,000 Sun Hung Kai Properties
Ltd......................... 881
83,500 Swire Pacific Ltd., Class A... 637
22,000 Television Broadcasts Ltd..... 77
18,000 Winsor Industrial Corp.
Ltd......................... 24
113,000 Wharf Holdings Ltd............ 369
7,900 Wing Lung Bank Ltd............ 45
--------
7,675
--------
INDONESIA (4.4%)
**218,000 Bank Dagang Nasional
(Foreign)................... 382
**1,248,000 Barito Pacific Timber
(Foreign)................... 1,793
**353,000 Gadjah Tunggal (Foreign)...... 507
**401,000 Hanajaya Mandala Sampoerna
(Foreign)................... 3,151
**344,000 Jakarta International Hotel &
Development (Foreign)....... 433
**37,000 Matahari Putra Prima
(Foreign)................... 59
**+34,000 Panbrothers Tex (Foreign)..... 11
**+187,000 Sinar Mas Agro (Foreign)...... 197
**123,000 United Tractors (Foreign)..... 262
--------
6,795
--------
ITALY (2.0%)
+20,000 Alitalia S.p.A................ 10
24,270 Assicurazioni Generali
S.p.A....................... 571
50,000 Banca Commerciale Italiana.... 113
+10,000 Banca Nazionaia Deli.......... 8
16,000 Banco Ambrosiano Ven.......... 53
5,500 Benetton Group S.p.A.......... 54
3,000 Cartiere Burgo................ 20
70,500 Credito Italiano.............. 82
19,000 Edison S.p.A.................. 85
+2,000 Falck Italian................. 3
+96,000 Fiat S.p.A.................... 339
+23,000 Fiat S.p.A. Di Risp (NCS)..... 49
7,500 Fidis Italian................. 16
20,900 Gilardini..................... 40
+5,000 Impregilo S.p.A............... 5
22,000 Istituto Bancario San Paolo... 119
+2,750 Italcementi................... 8
+6,250 Italcementi Di Risp........... 43
21,000 Italgas....................... 55
14,500 Mediobanca S.p.A.............. 105
+160,000 Montedison S.p.A.............. 114
+25,000 Montedison S.p.A Di Risp
(NCS)....................... 16
+37,500 Olivetti S.A.................. 37
35,500 Parmalat Finanziaria S.p.A.... 32
+50,000 Pirelli S.p.A................. 66
8,150 R.A.S. S.p.A.................. 86
3,350 R.A.S. S.p.A Di Risp (NCS).... 21
5,000 Rinascente.................... 28
600 Risanamento Di Napoli......... 8
+2,000 Saffa......................... 7
3,000 SAI........................... 32
12,500 Saipan........................ 25
3,000 Sasib......................... 14
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Active Country Allocation Portfolio
7
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
SHARES
VALUE
(000)
- ------------------------------------------------------
ITALY (CONT.)
7,000 Sirti S.p.A................... $ 52
12,000 SME Meridonale................ 30
+20,000 SNIA BPO S.p.A................ 23
190,000 Telecom Italia S.p.A.......... 515
50,000 Telecom Italia S.p.A. Di Risp
(NCS)....................... 106
--------
2,990
--------
JAPAN (28.3%)
3,000 Advantest Corp................ 113
27,000 Ajinomoto Co.................. 277
14,000 Aoki Corp..................... 51
2,000 Aoyama Trading Co............. 33
55,000 Asahi Bank Ltd................ 587
14,000 Asahi Breweries Ltd........... 161
41,000 Asahi Chemical Industry Co.,
Ltd......................... 269
41,000 Asahi Glass Co., Ltd.......... 452
41,000 Bank of Tokyo................. 657
14,000 Bridgestone Co................ 206
47,000 Canon, Inc.................... 765
28,000 Casio Computer Co............. 253
27,000 Chiba Bank.................... 245
5,000 Chiyoda Corp.................. 42
14,000 Chugai Pharmaceuticals Co..... 142
34,000 Citizen Watch Co., Ltd........ 210
63,000 Dai-Ichi Kangyo Bank.......... 1,136
14,000 Daikin Industries Ltd......... 113
27,000 Dai Nippon Printing Co.,
Ltd......................... 430
+6,000 Daishowa Paper Manufacturing
Co., Ltd.................... 27
14,000 Daiwa House Industry.......... 215
27,000 Daiwa Securities Co., Ltd..... 285
9,000 Ebara......................... 109
8,000 Fanuc......................... 345
62,000 Fuji Bank..................... 1,250
24,000 Fuji Photo Film Ltd........... 569
95,000 Fujitso Ltd................... 946
22,000 Furukawa Electric Co.......... 104
27,000 Hankyu Corp................... 162
14,000 Hazama Corp................... 58
124,000 Hitachi Ltd................... 1,235
43,000 Honda Motor Co................ 659
47,000 Industrial Bank of Japan...... 1,225
10,000 Ito-Yokado Co., Ltd........... 527
+55,000 Japan Airlines Co............. 365
34,000 Japan Energy Corp............. 110
15,000 Joyo Bank..................... 127
14,000 Jusco Co., Ltd................ 291
27,000 Kajima Corp................... 268
8,900 Kansai Electric Power Co...... 239
27,000 Kao Corp...................... 325
+70,000 Kawasaki Steel Corp........... 229
41,000 Kinki Nippon Railway.......... 360
27,000 Kirin Brewery Co., Ltd........ 286
+82,000 Kobe Steel Ltd................ 195
77,000 Komatsu Ltd................... 587
41,000 Kubota Corp................... 261
SHARES
VALUE
(000)
- ------------------------------------------------------
27,000 Kumagai Gumi Co............... $ 113
7,000 Kyocera Ltd................... 576
14,000 Kyowa Hakko Kogyo............. 135
12,000 Kyushu Matsushita Electric.... 208
17,000 Makita Corp................... 232
41,000 Marubeni Corp................. 208
14,000 Marui Co., Ltd................ 223
65,000 Matsushita Electric Industries
Ltd......................... 1,012
41,000 Mitsubishi Chemical Corp...... 175
38,000 Mitsubishi Corp............... 432
49,000 Mitsubishi Electric Co........ 344
30,000 Mitsubishi Estate Co., Ltd.... 338
110,000 Mitsubishi Heavy Industries
Ltd......................... 747
28,000 Mitsubishi Materials Corp..... 125
26,000 Mitsubishi Trust & Banking
Co.......................... 368
41,000 Mitsui & Co................... 320
+27,000 Mitsui Engineering &
Shipbuilding................ 59
23,000 Mitsui Fudosan Co............. 263
27,000 Mitsukoshi Ltd................ 193
2,800 Mochida Pharmaceutical........ 43
13,000 Murata Manufacturing Co.,
Ltd......................... 492
79,000 NEC Corp...................... 865
27,000 New Oji Paper Co., Ltd........ 259
14,000 NGK Insulators................ 127
14,000 Nippon Denso Co., Ltd......... 254
27,000 Nippon Express Co., Ltd....... 248
14,000 Nippon Fire & Marine Insurance
Co.......................... 88
13,000 Nippon Light Metal............ 59
14,000 Nippon Meat Packers, Inc...... 205
41,000 Nippon Oil Co................. 258
27,000 Nippon Paper Industries Co.... 175
103,000 Nippon Steel Co............... 335
41,000 Nippon Yusen.................. 230
52,000 Nissan Motor Co............... 332
+80,000 NKK Corp...................... 188
41,000 Nomura Securities Co.......... 715
27,000 Obayashi Corp................. 208
27,000 Odakyu Electric Railway Co.... 196
30,000 Olympus Optical Co., Ltd...... 247
82,000 Osaka Gas Co.................. 303
14,000 Penta-Ocean Construction...... 89
9,000 Pioneer Electric Corp......... 153
3,000 Rohm Co....................... 155
68,000 Sakura Bank................... 709
13,900 Sankyo Co., Ltd............... 323
41,000 Sanyo Electric Co., Ltd....... 202
3,000 Secom Co., Ltd................ 189
3,300 Sega Enterprises.............. 117
14,000 Sekisui House Co., Ltd........ 173
7,000 Seven-Eleven Japan............ 501
56,000 Sharp Corp.................... 739
14,000 Shin-Etsu Chemical Co......... 246
20,000 Shinizu Corp.................. 193
6,000 Shiseido Co., Ltd............. 68
27,000 Shizuoka Bank................. 337
+27,000 Showa Denko................... 80
13,000 Sony Corp..................... 624
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Active Country Allocation Portfolio
8
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
SHARES
VALUE
(000)
- ------------------------------------------------------
JAPAN (CONT.)
69,000 Sumitomo Bank................. $ 1,196
14,000 Sumitomo Cement............... 51
55,000 Sumitomo Chemical Co.......... 215
27,000 Sumitomo Corp. Ind............ 246
18,000 Sumitomo Electric Ind......... 214
6,000 Sumitomo Forestry Co., Ltd.... 100
96,000 Sumitomo Metal Ind............ 250
13,000 Sumitomo Metal & Mining....... 96
27,000 Taisei Corp., Ltd............. 159
27,000 Takeda Chemical............... 356
7,000 TDK Corp...................... 319
27,000 Teijin Ltd.................... 129
27,000 Tobu Railway Co............... 168
43,000 Tokai Bank.................... 477
41,000 Tokio Marine & Fire Insurance
Co.......................... 470
6,000 Tokyo Dome Corp............... 92
30,200 Tokyo Electric Power Co....... 926
5,000 Tokyo Electron Ltd............ 171
82,000 Tokyo Gas Co.................. 323
27,000 Tokyu Corp.................... 173
19,000 Toppan Printing Co., Ltd...... 249
41,000 Toray Industries Inc.......... 255
73,000 Toshiba Corp.................. 462
14,000 Toto Ltd...................... 200
27,000 Toyoba Co..................... 89
64,000 Toyota Motor Corp............. 1,268
+27,000 Ube Industries Ltd............ 94
27,000 Yamaichi Securities Co........ 145
14,000 Yamanouchi Pharmaceutical
Co.......................... 315
27,000 Yasuda Trust & Banking Co..... 177
--------
43,682
--------
MALAYSIA (1.9%)
6,000 AMMB Holdings Bhd............. 71
20,000 Amsteel Corp. Bhd............. 30
6,000 Aokam Perdana Bhd............. 15
20,000 Berjaya Group Bhd............. 18
7,000 Commerce Asset Holding Bhd.... 36
22,000 DCB Holdings Bhd.............. 64
6,000 Edaran Otomobil Nasional
Bhd......................... 59
32,000 Faber Group Bhd............... 31
28,000 Golden Hope Plantations Bhd... 51
+5,000 Golden Plus Holdings Bhd...... 11
10,000 Guinness Anchor Bhd........... 18
19,000 Highlands & Lowlands Bhd...... 36
4,000 Hong Leong Industries Bhd..... 25
24,000 Hong Leong Properties Bhd..... 32
7,000 Hume Industries (Malaysia)
Bhd......................... 38
+21,000 Idris Hydraulic (Malaysia)
Bhd......................... 29
21,000 IGB Corp. Bhd................. 20
27,000 IOI Corp. Bhd................. 35
15,000 Kedah Cement Bhd.............. 24
5,000 Kian Joo Can Factory Bhd...... 20
13,000 Land & General Bhd............ 43
12,000 Leader Universal Holdings
Bhd......................... 43
29,000 Magnum Corp. Bhd.............. 68
SHARES
VALUE
(000)
- ------------------------------------------------------
30,000 Malayan Banking Bhd........... $ 237
20,000 Malayan United Industries
Bhd......................... 34
18,000 Malaysian Airline System
Bhd......................... 61
24,000 Malaysian International
Shipping Bhd (Foreign)...... 70
15,000 Malaysian Mining Corp. Bhd.... 27
3,000 Malaysian Oxygen Bhd.......... 12
19,000 Malaysian Resources Corp.
Bhd......................... 33
26,000 Metroplex Bhd................. 25
19,000 Mulpha International Bhd...... 23
22,000 Multi-Purpose Holdings Bhd.... 39
5,000 Nestle (Malaysia) Bhd......... 38
5,000 Oriental Holdings Bhd......... 27
8,000 Perlis Plantations Bhd........ 27
14,000 Perusahaan Otomobil Nasional
Bhd......................... 51
9,000 Petaling Garden Bhd........... 12
26,000 Public Bank Bhd............... 58
9,000 Rashid Hussein Bhd............ 29
29,000 Resorts World Bhd............. 170
8,000 R.J. Reynolds Bhd............. 15
7,000 Rothmans of Pall Mall
(Malaysia) Bhd.............. 55
11,000 Selangor Properties Bhd....... 12
8,000 Shell Refining Co. (Malaysia)
Bhd......................... 27
55,000 Sime Darby Bhd................ 153
22,000 Tan Chong Motor Holdings
Bhd......................... 25
+18,000 Technology Resources
Industries Bhd.............. 52
52,000 Telekom Malaysia Bhd.......... 395
78,000 Tenaga Nasional Bhd........... 318
9,000 UMW Holdings Bhd.............. 26
15,000 United Engineers Ltd.
(Malaysia).................. 95
--------
2,963
--------
NETHERLANDS (5.0%)
12,500 ABN Amro Holdings N.V......... 482
3,200 Akzo Nobel N.V................ 382
26,700 Elsevier N.V.................. 315
2,350 Heineken N.V.................. 356
11,200 Internationale Nederlanden
Groep N.V................... 620
+3,400 KLM Royal Dutch Airlines
N.V......................... 110
5,144 Koninklijke Ahold N.V......... 184
4,200 Koninklijke KNP BT N.V........ 126
1,150 Koninklijke Nederlandsche
Hoogovens N.V............... 46
20,868 Koninklijke PTT Nederland
N.V......................... 750
950 Nedlloyd Groep N.V............ 32
13,500 Philips Electronics N.V....... 572
21,600 Royal Dutch Petroleum Co...... 2,638
1,200 Stork N.V..................... 33
6,500 Unilever N.V.................. 846
2,800 Wolters Kluwer N.V............ 247
--------
7,739
--------
PORTUGAL (2.6%)
45,200 Banco Chemical S.A.
(Registered)................ 454
75,000 Banco Commercial Portugues
(Registered)................ 993
25,000 Banco Portugues de
Investimento (New).......... 437
4,900 Corticeira Amorim S.A......... 74
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Active Country Allocation Portfolio
9
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
SHARES
VALUE
(000)
- ------------------------------------------------------
PORTUGAL (CONT.)
9,000 Jeronimo Martins.............. $ 455
18,300 Lisnave-Estaleiros Navais de
Lisboa S.A.................. 88
6,200 Mota e Companhia S.A.......... 131
24,607 Portugal Telecom S.A.
(Registered)................ 471
27,000 Sonae Investmentos............ 646
13,200 UNICER-Uniao Cervejeira
S.A......................... 223
--------
3,972
--------
SINGAPORE (2.9%)
23,000 Amcol Holdings Ltd............ 67
62,000 City Developments Ltd......... 379
18,000 Cycle & Carriage Ltd.......... 161
65,000 DBS Land Ltd.................. 204
32,000 Development Bank of Singapore
Ltd. (Foreign).............. 364
16,000 First Capital Corp. Ltd....... 50
19,000 Fraser & Neave Ltd............ 219
25,000 Hai Sun Hup Group Ltd......... 15
33,000 Hotel Properties Ltd.......... 58
15,000 Inchcape Bhd.................. 49
9,000 Jurong Shipyard Ltd........... 64
40,000 Keppel Corp., Ltd............. 326
22,000 Natsteel Ltd.................. 46
63,000 Neptune Orient Lines Ltd...... 73
47,000 Oversea-Chinese Banking Corp.
(Foreign)................... 521
12,000 Overseas Union Entrprise
Ltd......................... 73
25,000 Parkway Holdings Ltd.......... 61
4,000 Robinson & Co. Ltd............ 16
13,000 Shangri-La Hotel Ltd.......... 52
59,000 Singapore Airlines Ltd.
(Foreign)................... 545
16,800 Singapore Press Holdings
(Foreign)................... 251
47,000 Straits Steamship Land Ltd.... 163
31,000 Straits Trading Co., Ltd...... 78
125,000 United Industrial Corp.
Ltd......................... 121
49,000 United Overseas Bank Ltd.
(Foreign)................... 463
--------
4,419
--------
SPAIN (2.9%)
600 Acerinox S.A.................. 74
6,700 Argentaria S.A................ 248
11,000 Autopistas Concesionaria
Espanola S.A................ 107
12,800 Banco Bilbao Vizcaya S.A...... 370
8,500 Banco Central Hispano
Americano S.A............... 180
8,500 Banco de Santander S.A........ 335
1,150 Corporacion Financiera Alba... 59
1,258 Corporacion Mapfre............ 62
272 Corporacion Mapfre (New)...... 13
3,800 Dragados y Construccion
S.A......................... 55
3,100 Ebro Agricolas S.A............ 32
+1,200 Empresa Nacional de Cellulosas
S.A......................... 31
14,200 Empresa Nacional de
Electricdad S.A............. 701
5,700 Ercros S.A.................... 6
1,300 FASA Renault S.A.............. 39
850 Fomento Construction
Contractas S.A.............. 72
2,050 Gas Natural SDG S.A........... 245
SHARES
VALUE
(000)
- ------------------------------------------------------
49,000 Iberdrola S.A................. $ 369
200 Inmobilaria Metro Vasco
Central S.A................. 6
550 Portland Valderrivas S.A...... 38
16,400 Repsol S.A.................... 516
2,100 Tabacalera S.A., Class A...... 79
51,500 Telefonica Nacional de Espana
S.A......................... 664
17,100 Union Electrica Fenosa S.A.... 80
+2,300 Uralita S.A................... 28
2,500 Vallehermoso S.A.............. 43
1,400 Viscofan Envolturas
Celulosicas S.A............. 21
400 Zardoya Otis S.A.............. 41
--------
4,514
--------
SWITZERLAND (3.1%)
+75 Adia S.A. (Bearer)............ 16
50 Alusuisse-Lonza Holdings Ltd.
(Bearer).................... 31
100 Alusuisse-Lonza Holdings Ltd.
(Registered)................ 63
165 BBC Brown Boveri AG
(Bearer).................... 171
90 Ciba Geigy AG (Bearer)........ 66
450 Ciba Geigy AG (Registered).... 330
2,275 CS Holding AG (Registered).... 208
10 Georg Fischer AG (Bearer)..... 13
135 Holderbank Glarus AG
(Bearer).................... 111
100 Merkur Holding AG
(Registered)................ 28
710 Nestle S.A. (Registered)...... 739
30 Roche Holding AG (Bearer)..... 334
130 Roche Holding AG
(Registered)................ 838
630 Sandoz AG (Registered)........ 434
70 SMH AG (Bearer)............... 45
300 SMH AG (Registered)........... 40
35 Societe Generale de
Surveillance Holding S.A.
(Bearer).................... 61
70 Sulzer AG (Registered)........ 47
+50 SwissAir (Registered)......... 35
450 Swiss Bank Corp. (Bearer)..... 159
700 Swiss Bank Corp.
(Registered)................ 124
300 Swiss Reinsurance
(Registered)................ 231
390 Union Bank of Switzerland
(Bearer).................... 404
430 Union Bank of Switzerland
(Registered)................ 95
100 Zurich Versicherung
(Registered)................ 126
--------
4,749
--------
THAILAND (1.9%)
14,500 Advanced Information Services
Co., Ltd.................... 215
32,400 Bangchak Petroleum Co.,
Ltd......................... 65
44,300 Bangkok Metropolitan Bank
Ltd......................... 53
11,800 CMIC Finance & Securities Co.,
Ltd......................... 45
15,700 Dhana Siam Finance &
Securities Co., Ltd......... 92
8,400 General Finance & Securities
Co., Ltd.................... 41
15,500 Italian-Thai Development Co.,
Ltd......................... 167
20,700 Jasmine International Co.,
Ltd. (Foreign).............. 130
83,500 Krung Thai Bank Ltd.
(Foreign)................... 338
19,600 National Finance & Securities
Co., Ltd.................... 97
19,200 National Petrochemical Co..... 50
+9,900 One Holding Co., Ltd.......... 31
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Active Country Allocation Portfolio
10
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
SHARES
VALUE
(000)
- ------------------------------------------------------
THAILAND (CONT.)
16,900 Phatra Thanakit Co., Ltd.
(Foreign)................... $ 141
19,200 PTT Exploration & Production
Co., Ltd.................... 207
31,700 Sahaviriya Steel Industry..... 78
8,600 Shinawatra Computer Co.,
Ltd......................... 213
+21,700 Shinawatra Satellite Co.,
Ltd......................... 50
74,600 Siam City Bank Ltd.
(Foreign)................... 103
138,000 TelecomAsia Corp., Ltd.
(Foreign)................... 517
26,500 Thai Military Bank Ltd.
(Foreign)................... 107
14,500 United Communications
Industry.................... 212
--------
2,952
--------
UNITED KINGDOM (15.0%)
58,300 Abbey National plc............ 434
42,300 Argyll Group plc.............. 226
40,900 Arjo Wiggins Appleton plc..... 167
16,500 Associated British Foods
plc......................... 174
48,500 Barclays plc.................. 521
30,500 Bass plc...................... 292
100,177 BAT Industries plc............ 767
19,400 BICC plc...................... 92
35,800 Blue Circle Industries plc.... 160
17,400 BOC Group plc................. 222
35,800 Boots Co. plc................. 290
16,400 Bowater plc................... 126
24,600 BPB Industries plc............ 122
14,300 British Aerospace plc......... 128
33,400 British Airways plc........... 219
163,600 British Gas plc............... 754
178,800 British Petroleum Co. plc..... 1,282
63,400 British Steel plc............. 173
194,000 British Telecommunications
plc......................... 1,210
121,200 BTR plc....................... 616
8,280 Burmah Castrol plc............ 120
73,323 Cable & Wireless plc.......... 502
34,500 Cadbury Schweppes plc......... 252
22,500 Caradon plc................... 85
25,109 Coats Viyella plc............. 74
+14,700 Commercial Union plc.......... 137
14,300 Courtaulds plc................ 102
10,200 De La Rue Co. plc............. 152
15,700 Eastern Electricity plc....... 162
36,100 Forte plc..................... 131
20,000 General Accident plc.......... 183
109,500 General Electric plc.......... 535
15,400 GKN plc....................... 157
91,335 Glaxo Holdings plc............ 1,121
70,010 Grand Metropolitan plc........ 429
34,900 Great Universal Stores plc.... 327
46,700 Guardian Royal Exchange plc... 154
59,400 Guinness plc.................. 447
172,901 Hanson plc.................... 605
34,800 Harrisons & Crossfields plc... 79
67,500 HSBC Holdings plc............. 870
24,600 Imperial Chemical Industries
plc......................... 301
48,100 Ladbroke Group plc............ 129
SHARES
VALUE
(000)
- ------------------------------------------------------
21,500 Land Securities plc........... $ 208
30,700 Lasmo plc..................... 84
40,300 Lloyds Bank plc............... 400
25,200 Lonrho plc.................... 59
87,046 Marks and Spencer plc......... 560
16,400 MEPC plc...................... 100
44,000 National Power plc............ 312
18,400 North West Water Group plc.... 162
29,700 Peninsular & Oriental Steam
Navigation Co............... 274
40,900 Pilkington plc................ 114
72,100 Prudential Corp. plc.......... 384
15,400 Rank Organization plc......... 97
22,897 Redland plc................... 150
27,000 Reed International plc........ 379
53,800 Reuters Holdings plc.......... 449
9,200 RMC Group plc................. 155
30,700 Royal Bank of Scotland Group
plc......................... 209
24,200 Royal Insurance Holdings
plc......................... 119
41,900 RTZ Corp. plc................. 547
57,940 Sainsbury (J) plc............. 407
25,800 Scottish Power plc............ 133
53,200 Sears plc..................... 84
16,600 Sedgwick Group plc............ 36
12,300 Slough Estates plc............ 43
41,600 SmithKline Beecham plc, Class
A........................... 377
10,900 Southern Electricity plc...... 111
38,706 Tarmac plc.................... 69
20,500 Taylor Woodrow plc............ 38
55,079 Tesco plc..................... 254
19,400 Thames Water plc.............. 147
17,400 THORN EMI plc................. 361
14,300 TI Group plc.................. 89
36,800 Trafalgar House plc........... 26
22,000 Unilever plc.................. 445
35,800 Vodafone Group plc............ 133
9,000 Warburg (S.G.) Group plc...... 104
29,100 Zeneca Group plc.............. 492
--------
23,140
--------
UNITED STATES (0.0%)
1,167 U.S. Industries, Inc.......... 16
--------
TOTAL COMMON STOCKS (Cost $136,932)......... 143,231
--------
PREFERRED STOCKS (1.3%)
AUSTRALIA (0.1%)
25,693 News Corp., Ltd............... 127
--------
BRAZIL (1.0%)
18,666,000 Aracruz Celulose S.A., Class
B........................... 44
11,100,000 Banco Bradesco................ 94
2,500,000 Banco do Brasil............... 30
1,100,000 Banco do Estado Sao Paulo..... 6
145,000 Brahma........................ 48
700,000 Ceval Alimentos S.A........... 8
1,050,000 Cia Brasileira de Petroleo
Ipiranga.................... 12
2,372,500 Cia Energetica de Minas
Gerais...................... 46
60,000 Cia Energetica de Sao Paulo... 2
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Active Country Allocation Portfolio
11
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
SHARES
VALUE
(000)
- ------------------------------------------------------
BRAZIL (CONT.)
70,000 Cia Siderurgica de Tubarao.... $ 52
1,550,000 Eletrobras.................... 413
15,000 Industrias Klabin de Papel e
Celulose S.A................ 21
210,000 Itaubanco..................... 64
+65,000 Itausa Investimentos Itau
S.A......................... 37
2,200,000 Petrobras..................... 186
16,000 Sadia Concordia............... 15
7,300,000 Telecomunicacoes
Brasileiras................. 240
375,000 Telecomunicacoes de Sao
Paulo....................... 47
33,500,000 Usinas Siderurgicas de Minas
Gerias...................... 38
1,150,000 Vale Do Rio Doce.............. 174
--------
1,577
--------
GERMANY (0.2%)
380 RWE AG........................ 105
80 SAP AG........................ 101
--------
206
--------
ITALY (0.0%)
29,000 Fiat S.p.A.................... 63
--------
TOTAL PREFERRED STOCKS (Cost $1,695)........ 1,973
--------
NO. OF
RIGHTS
- ------------
RIGHTS (0.0%)
AUSTRALIA (0.0%)
**+2,181 Coca-Cola Amatil Ltd.,
expiring 7/26/95............ 3
--------
BRAZIL (0.0%)
**+200,000 Banco Bradesco................ --
**+2,663 Brahma........................ 1
+254,000 Telebras...................... --
--------
1
--------
FRANCE (0.0%)
**+1,346 Cie Bancaire S.A.............. 16
--------
INDONESIA (0.0%)
**+18,500 Matahari Putra Prima, expiring
8/04/95..................... 18
--------
SPAIN (0.0%)
+400 Zardoya Otis S.A., expiring
7/26/95..................... 4
--------
TOTAL RIGHTS (Cost $16)..................... 42
--------
NO. OF
WARRANTS
- ------------
WARRANTS (0.0%)
BELGIUM (0.0%)
+347 Petrofina S.A., expiring
6/03/97..................... 5
--------
HONG KONG (0.0%)
+4,400 Applied International
Holdings, expiring
12/30/99.................... --
--------
ITALY (0.0%)
+2,950 R.A.S. S.p.A., expiring
12/31/97.................... 12
NO. OF VALUE
WARRANTS (000)
- ------------------------------------------------------
+1,550 R.A.S. S.p.A., Savings Shares,
expiring 12/31/97........... $ 4
--------
16
--------
THAILAND (0.0%)
*+3,050 CMIC Finance & Securities Co.,
Ltd. (Foreign), expiring
1999........................ 1
+6,400 National Finance & Securities
Co., Ltd., expiring
11/15/99.................... --
--------
1
--------
TOTAL WARRANTS (Cost $1).................... 22
--------
NO. OF
UNITS
- ------------
UNITS (0.3%)
AUSTRALIA (0.0%)
+34,929 Westfield Trust............... 61
--------
UNITED KINGDOM (0.3%)
534 British Aerospace plc......... 6
40,200 SmithKline Beecham plc........ 357
--------
363
--------
TOTAL UNITS (Cost $346)..................... 424
--------
FACE
AMOUNT
(000)
- ------------
CONVERTIBLE DEBENTURES (0.0%)
FRANCE (0.0%)
FF *600 Sanofi 4.00%, 1/01/00 (Cost
$38)........................ 38
--------
TOTAL FOREIGN AND US SECURITIES (94.5%)
(Cost $139,028)............................. 145,730
--------
SHORT-TERM INVESTMENT (14.7%)
REPURCHASE AGREEMENT (14.7%)
$ 22,660 Goldman Sachs, 6.00%, dated
6/30/95, due 7/03/95, to be
repurchased at $22,671,
collateralized by $22,950
United States Treasury Notes
6.375%, due 6/30/97, valued
at $23,172 (Cost $22,660)... 22,660
--------
FOREIGN CURRENCY (0.4%)
BF 389 Belgian Franc................. 14
L 4 British Pound................. 7
IL 5,434 Italian Lira.................. 3
Y 6,079 Japanese Yen.................. 72
MA 907 Malaysian Ringgit............. 372
S$ 11 Singapore Dollar.............. 7
SP 2,737 Spanish Peseta................ 23
CHF 4 Swiss Franc................... 3
TB 2,398 Thai Baht..................... 97
--------
TOTAL FOREIGN CURRENCY (Cost $599).......... 598
--------
TOTAL INVESTMENTS (109.6%) (Cost
$162,287)................................... 168,988
--------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Active Country Allocation Portfolio
12
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
VALUE
(000)
- ----------------------------------------------------
OTHER ASSETS (2.1%)
Receivable for Portfolio
Shares Sold................ $ 1,580
Net Unrealized Gain on
Foreign Forward Currency
Contracts.................. 677
Dividends Receivable........ 632
Foreign Withholding Tax
Reclaim Receivable......... 252
Receivable for Investments
Sold....................... 72
Interest Receivable......... 4
Other....................... 12 $ 3,229
----------
LIABILITIES (-11.7%)
Payable for Investments
Purchased.................. (17,601)
Custodian Fees Payable...... (86)
Payable for Portfolio Shares
Redeemed................... (85)
Investment Advisory Fees
Payable.................... (67)
Payable to Custodian........ (57)
Administrative Fees
Payable.................... (24)
Directors' Fees and Expenses
Payable.................... (1)
Other Liabilities........... (49) (17,970)
---------- --------
NET ASSETS (100%)......................... $154,247
--------
--------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 14,021,360 outstanding
$.001 par value shares (authorized
500,000,000 shares)..................... $11.00
--------
--------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT
INFORMATION:
Under the terms of forward foreign currency
contracts open at June 30, 1995, the Portfolio is
obligated to deliver or is to receive foreign
currency in exchange for US dollars as indicated
below:
<TABLE>
<CAPTION>
NET
CURRENCY TO IN EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------ --------- ----------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
$ 83 $ 83 7/03/95 MA 204 $ 83 $ --
IL 22,491 14 7/03/95 $ 14 14 --
$ 30 30 7/05/95 MA 73 30 --
$ 8,026 8,026 7/06/95 L 4,996 7,949 (77)
IL 6,047 4 7/31/95 $ 4 4 --
$ 1,900 1,900 4/30/96 BF 54,274 1,921 21
$ 7,378 7,378 4/30/96 Y 606,988 7,459 81
BF 225,256 7,973 4/30/96 $ 8,000 8,000 27
Y 2,268,600 27,875 4/30/96 $ 28,500 28,500 625
--------- --------- -----
$ 53,283 $ 53,960 $ 677
--------- --------- -----
--------- --------- -----
</TABLE>
- ------------------------------------------------------------
+ -- Non-income producing
securities
* -- Security is valued at cost --
See Note A-1
** -- Security is valued at fair
value -- See Note A-1
NCS -- Non Convertible Shares
BF -- Belgian Franc
L -- British Pound
FF -- French Franc
IL -- Italian Lira
Y -- Japanese Yen
MA -- Malaysian Ringgit
- ------------------------------------------------
SUMMARY OF FOREIGN AND US SECURITIES BY INDUSTRY CLASSIFICATION
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- --------------------------------------------------------
Capital Equipment............. $ 17,616 11.4%
Consumer Goods................ 24,913 16.2
Energy........................ 17,908 11.6
Finance....................... 36,935 23.9
Gold Mines.................... 95 0.1
Materials..................... 18,547 12.0
Multi-Industry................ 8,464 5.5
Services...................... 21,252 13.8
---------- ---
$ 145,730 94.5%
---------- ---
---------- ---
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Active Country Allocation Portfolio
13
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (98.3%)
CHINA (2.2%)
890,400 China Merchants Shekou Port Services, Class B..... $ 483
28,200 Jilin Chemical Co. Ltd. ADR....................... 543
5,505,000 Maanshan Iron & Steel Co., Class H................ 1,153
51,000 Shandong Huaneng Power Co., Ltd. ADR.............. 389
200,000 Shanghai Diesel Engine Co., Ltd., Class B......... 124
265,000 Shanghai Erfanji Co., Ltd., Class B............... 39
313,235 Shanghai Jin Jiang Tower Ltd., Class B............ 100
1,601,600 Shanghai Jinqiao, Class B......................... 769
590,900 Shanghai Phoenix Bicycle Ltd., Class B............ 128
+650,000 Shanghai Refrigerator Compressor, Class B......... 233
638,000 Shanghai Tyre & Rubber Co., Class B............... 191
120,000 Shanghai Yaohua Pilkington Glass, Class B......... 120
180,400 Shenzhen Chiwan Wharf Holdings, Class B........... 90
**1,000,000 Shenzhen North Jainshe Motorcycle................. 485
4,265,000 Yizheng Chemical Fibre Co., Class H............... 1,488
----------
6,335
----------
HONG KONG (25.6%)
2,637,000 Cheung Kong Holdings Ltd.......................... 13,052
358,000 China Light & Power Co., Ltd...................... 1,841
1,209,500 Citic Pacific Ltd................................. 3,040
4,180,000 C.P. Pokphand Co., Ltd............................ 1,472
11,712,000 Guangdong Investments Ltd......................... 6,395
610,000 Harbin Power Equipment Co......................... 195
462,369 Hong Kong & Shanghai Bank Holdings plc............ 5,931
815,500 Hong Kong Electric Holdings Ltd................... 2,772
4,999,000 Hong Kong Telecommunications Ltd.................. 9,885
3,648,000 Hopewell Holdings Ltd............................. 3,088
1,927,000 Hutchison Whampoa Ltd............................. 9,314
1,805,000 New World Development Co., Ltd.................... 6,007
200,000 Sum Cheong International.......................... 114
612,100 Sun Hung Kai Properties Ltd....................... 4,529
661,560 Swire Pacific Ltd., Class A....................... 5,044
906,000 Varitronix International Ltd...................... 1,587
----------
74,266
----------
INDIA (0.8%)
38,000 Grasim Industries Ltd. GDR........................ 912
51,000 Hindalco Industries Ltd. GDR...................... 1,479
----------
2,391
----------
INDONESIA (6.4%)
**600,000 Asiana Imi Industries (Foreign)................... 256
**378,000 Bank International Indonesia (Foreign)............ 1,167
**450,000 Barito Pacific Timber (Foreign)................... 647
**5,160,000 Bimantara Citra................................... 2,896
**621,826 Charoen Pokphand (Foreign)........................ 1,354
**517,500 Duta Pertiwi (Foreign)............................ 523
**268,000 Indocement Tunggal (Foreign)...................... 1,053
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
**700,000 Indosat (Foreign)................................. $ 2,656
**351,600 Kalbe Farma (Foreign)............................. 1,610
**210,000 Keramika Indonesia Assosiasi (Foreign)............ 283
**1,000,000 Ometraco (Foreign)................................ 718
**601,000 Polysindo Eka Perkasa (Foreign)................... 337
**916,800 Sona Topas Tourism (Foreign)...................... 1,235
**277,333 Sorini Corp. (Foreign)............................ 1,326
**85,000 Suba Indah (Foreign).............................. 42
**1,250,000 Ultra Jaya Milk (Foreign)......................... 1,123
**644,800 United Tractors (Foreign)......................... 1,375
----------
18,601
----------
KOREA (3.2%)
53,900 Korea Electric Power (Foreign).................... 2,019
+**900 Korea Mobile Telecom (Foreign).................... 949
81,200 Pohang Iron & Steel Co., Ltd. ADR................. 2,395
**14,100 Samsung Electronics............................... 2,904
679 Samsung Electronics GDS........................... 49
16,411 Samsung Electronics GDS (Non-voting shares)....... 866
----------
9,182
----------
MALAYSIA (21.4%)
651,000 Bandar Raya Developments Bhd...................... 1,415
811,500 Genting Bhd....................................... 8,022
609,000 Land & General Holdings Bhd....................... 2,036
1,437,500 Malayan Banking Bhd............................... 11,380
955,316 Malaysian International Shipping Bhd. (Foreign)... 2,802
2,280,000 Renong Bhd........................................ 4,246
1,144,000 Resorts World Bhd................................. 6,710
650,000 Sime Darby Bhd.................................... 1,813
987,000 Tan & Tan Development Bhd......................... 1,230
544,000 Technology Resources Industries Bhd............... 1,562
1,103,000 Telekom Malaysia Bhd.............................. 8,370
1,206,000 Tenaga Nasional Bhd............................... 4,922
500,000 Time Engineering Bhd.............................. 1,682
932,757 United Engineers Ltd. (Malaysia).................. 5,930
----------
62,120
----------
PAKISTAN (0.2%)
7,300 Pakistan Telecommunications GDR................... 741
----------
PHILIPPINES (6.1%)
+285,200 Aboitiz Equity Ventures........................... 58
1,559,200 Ayala Corp., Class B.............................. 1,740
1,435,625 Ayala Land, Inc., Class B......................... 1,658
+108,250 International Container Terminal Services, Class
B............................................... 74
5,352,800 JG Summit Holding, Class B........................ 1,593
378,450 Manila Electric Co., Class B...................... 3,038
4,823,500 Petron Corp....................................... 3,116
18,125 Philippine Long Distance Telephone Co. ADR........ 1,300
15,430 Philippine Long Distance Telephone Co., Class B... 1,103
82,540 Philippine National Bank, Class B................. 961
**215,000 Pilipino Telephone Corp........................... 168
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Asian Equity Portfolio
17
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
PHILIPPINES (CONT.)
317,200 San Miguel Corp., Class B......................... $ 1,316
+5,018,000 SM Prime Holdings, Inc., Class B.................. 1,375
277,800 Universal Robina.................................. 144
----------
17,644
----------
SINGAPORE (15.4%)
252,000 British-American Tobacco Co....................... 1,150
875,080 City Developments Ltd............................. 5,354
727,000 DBS Land Ltd...................................... 2,279
470,500 Development Bank of Singapore Ltd. (Foreign)...... 5,353
248,800 Fraser & Neave Ltd................................ 2,866
707,000 Keppel Corp., Ltd................................. 5,767
+75,000 Odin Mining & Investment.......................... 25
599,166 Oversea-Chinese Banking Corp. (Foreign)........... 6,645
374,000 Sembawang Corp. Ltd............................... 2,275
111,000 Singapore Airlines Ltd. (Foreign)................. 1,025
178,400 Singapore Press Holdings (Foreign)................ 2,668
1,949,000 Singapore Technologies Industrial Corp............ 2,957
532,000 Straits Steamship Land Ltd........................ 1,842
500,000 Straits Trading Co., Ltd.......................... 1,252
361,200 United Overseas Bank Ltd.......................... 3,412
----------
44,870
----------
TAIWAN (2.7%)
+612,000 Advanced Semiconductor
Engineering, Inc................................ 1,777
+648,000 Taiwan Semiconductor Manufacturing Co............. 3,149
+550,000 United Micro Electronics Corp., Ltd............... 2,822
----------
7,748
----------
THAILAND (14.3%)
109,000 Advanced Information Services Co. (Foreign)....... 1,616
554,500 Bangkok Bank Ltd. (Foreign)....................... 6,110
712,900 Finance One Co., Ltd.(Foreign).................... 5,256
174,900 International Engineering Co., Ltd. (Foreign)..... 1,311
202,800 National Finance & Securities Co. Ltd.
(Foreign)....................................... 1,002
185,800 Phatra Thanakit Co., Ltd. (Foreign)............... 1,551
111,100 Shinawatra Computer Co., Ltd (Foreign)............ 2,754
45,000 Siam Cement Co., Ltd. (Foreign)................... 2,873
294,300 Siam Commercial Bank (Foreign).................... 2,814
1,538,300 TelecomAsia Corp. (Foreign)....................... 5,764
586,270 Thai Farmers Bank Ltd. (Foreign).................. 5,605
320,000 Thai Telephone & Telecom (Foreign)................ 2,800
101,000 United Communications (Foreign)................... 1,483
375,000 Wongpaitoon Footware Co., Ltd. (Foreign).......... 577
----------
41,516
----------
TOTAL COMMON STOCKS (Cost $233,405)............................. 285,414
----------
<CAPTION>
NO. OF VALUE
RIGHTS (000)
</TABLE>
- ------------------------------------------------------------
<TABLE>
<C> <S> <C>
RIGHTS (0.0%)
INDONESIA (0.0%)
**+400,000 Ometraco, expiring 8/29/95........................ $ --
**+1,833,600 Sona Topas Tourism, expiring 7/13/95.............. --
----------
TOTAL RIGHTS (Cost $0).......................................... --
----------
<CAPTION>
NO. OF
WARRANTS
- ------------
<C> <S> <C>
WARRANTS (0.0%)
HONG KONG (0.0%)
+432,000 Wai Kee Holdings Ltd., expiring 12/31/96.......... 6
THAILAND (0.0%)
+157,200 National Finance & Securities Co. Ltd., expiring
11/15/99........................................ --
----------
TOTAL WARRANTS (Cost $0)........................................ 6
----------
<CAPTION>
NO. OF
UNITS
- ------------
<C> <S> <C>
UNITS (0.1%)
INDIA (0.1%)
34,000 SIV Industries Ltd. GDR (Cost $649)............... 357
----------
TOTAL FOREIGN SECURITIES (98.4%) (Cost $234,054)................ 285,777
----------
<CAPTION>
AMOUNT (000)
- ------------
<C> <S> <C>
FOREIGN CURRENCY (2.3%)
HK$ 21,700 Hong Kong Dollar.................................. 2,804
MA 2,479 Malaysian Ringgit................................. 1,017
T$ 2,221 Taiwan Dollar..................................... 86
TB 66,471 Thai Baht......................................... 2,693
----------
TOTAL FOREIGN CURRENCY (Cost $6,599)............................ 6,600
----------
TOTAL INVESTMENTS (100.7%) (Cost $240,653)...................... 292,377
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (2.4%)
Receivable for Investments Sold................. $ 3,924
Receivable for Portfolio Shares Sold............ 2,289
Dividends Receivable............................ 710
Foreign Withholding Tax Reclaim Receivable...... 13
Other........................................... 19 6,955
----------
LIABILITIES (-3.1%)
Payable to Custodian............................ (7,691)
Payable for Investments Purchased............... (566)
Investment Advisory Fees Payable................ (483)
Custodian Fees Payable.......................... (104)
Administrative Fees Payable..................... (41)
Net Unrealized Loss on Forward Foreign Currency
Contracts...................................... (5)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (44) (8,935)
---------- ----------
NET ASSETS (100%)............................................. $ 290,397
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Asian Equity Portfolio
18
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(000)
- ------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 14,194,574 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $20.46
----------
----------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at June 30,
1995, the Portfolio is obligated to deliver foreign currency in exchange
for US dollars as indicated below:
</TABLE>
<TABLE>
<CAPTION>
NET
CURRENCY TO IN EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------ --------- ----------- ------------ --------- ---------------
<S> <C> <C> <C> <C> <C>
HK$ 21,700 $ 2,804 7/03/95 $ 2,804 $ 2,804 $ --
MA 5,529 2,268 7/03/95 $ 2,266 2,266 (2)
TB 66,471 2,693 7/03/95 $ 2,690 2,690 (3)
--------- --------- -----
$ 7,765 $ 7,760 $ (5)
--------- --------- -----
--------- --------- -----
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
GDS -- Global Depositary Shares
HK$ -- Hong Kong Dollar
MA -- Malaysian Ringgit
TB -- Thai Baht
</TABLE>
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
<S> <C> <C>
- ----------------------------------------------------------------
Capital Equipment..................... $ 30,570 10.5%
Consumer Goods........................ 16,192 5.6
Energy................................ 18,292 6.3
Finance............................... 107,365 37.0
Materials............................. 15,861 5.5
Mining................................ 25 --
Multi-Industry........................ 26,874 9.2
Services.............................. 70,598 24.3
--------- -----
$ 285,777 98.4 %
--------- -----
--------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Asian Equity Portfolio
19
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (79.9%)
ARGENTINA (2.3%)
+6 Acindar Industrial S.A., Class B.................. $ --
72,161 Banco de Galicia y Buenos Aires, Class B.......... 287
279,933 Banco de Galicia y Buenos Aires ADR............... 4,409
39,995 Banco del Sud Argentina, Class B.................. 248
2,872 Banco Frances del Rio de la Plata, Class B........ 17
+193,932 Banesto Banco Shaw S.A., Class B.................. 621
18,286 Buenos Aires Embotelladora ADR.................... 460
67,858 Capex S.A., Class A............................... 526
120,670 Capex S.A. ADR.................................... 1,855
440,360 Cia Naviera Perez Companc, Class B................ 1,850
493,926 CIADEA (Renault) S.A.............................. 2,396
89,537 Massalin Particulares, Class B.................... 864
431,533 Quilmes Industrial S.A............................ 8,415
--------
21,948
--------
BRAZIL (5.2%)
18,483,200 Banco Nacional S.A................................ 401
105,160,000 Cia Acos Especiais Itabira........................ 682
696 Cia Energetica de Minas Gerais ADR................ 14
106,283 Cia Energetica de Minas Gerais GDR................ 2,072
117,687,740 Cia Energetica de Sao Paulo....................... 3,835
265,309 Cia Energetica de Sao Paulo ADR................... 3,018
62,407,000 Cia Paulista de Forca E Luz....................... 3,125
132,425,000 Cia Siderurgica Nacional.......................... 3,020
34,000 Cigarros Souza Cruz............................... 257
7,340,000 Eletrobras........................................ 1,914
144,985 Rhodia-Ster ADS................................... 2,030
26,329 Rhodia-Ster GDS................................... 369
9,012,000 Servicos de Eletricdade........................... 2,839
191,153,000 Telebras.......................................... 5,420
545,464 Telebras ADR...................................... 18,000
5,175,000 Telecomunicacoes de Sao Paulo..................... 658
264,236 Usiminas Siderurgicas de Minas Gerais ADR......... 2,940
--------
50,594
--------
CHINA (2.1%)
750,000 Beiren Printing Machine, Class H.................. 154
3,036,400 China Merchants Shekou Port Services, Class B..... 1,648
91,500 Jilin Chemical Co. Ltd. ADR....................... 1,761
11,305,000 Maanshan Iron & Steel Co., Class H................ 2,367
162,400 Shandong Huaneng Power Co., Ltd. ADR.............. 1,238
1,907,500 Shanghai Diesel Engine Co., Ltd., Class B......... 1,183
+803,000 Shanghai Erfanji Co., Ltd., Class B............... 119
500,000 Shanghai Industries Sewing Machine, Class B....... 92
949,975 Shanghai Jin Jiang Tower Ltd., Class B............ 304
3,673,680 Shanghai Jinqiao, Class B......................... 1,763
+1,062,750 Shanghai Outer Gaoqiao Free Zone, Class B......... 448
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
14,550 Shanghai Petrochemical Co. ADR.................... $ 457
903,800 Shanghai Phoenix Bicycle Ltd., Class B............ 195
+1,304,030 Shanghai Refrigerator Compressor, Class B......... 467
450,000 Shanghai Shangling Electric, Class B.............. 374
986,000 Shanghai Tyre & Rubber Co., Class B............... 296
354,000 Shanghai Yaohua Pilkington Glass, Class B......... 354
1,200,000 Shangkai Lujiazui Finance & Trade Development Co.,
Class B......................................... 842
2,707,400 Shenzhen Chiwan Wharf Holdings, Class B........... 1,347
13,590,000 Yizheng Chemical Fibre Co., Class H............... 4,742
+68,000 Zhuhai Lizhu Pharmaceutical Group Inc., Class B... 30
--------
20,181
--------
COLOMBIA (0.8%)
17,130,000 Banco de Colombia................................. 6,496
53,070 Cementos Paz Del Rio ADR.......................... 895
--------
7,391
--------
GREECE (3.0%)
+303,645 Aegek............................................. 6,746
90,000 Alpha Credit Bank of Athens....................... 4,995
176,798 Delta Dairy S.A................................... 3,677
116,670 Ergo Bank S.A..................................... 5,366
294,955 Hellenic Bottling Co. S.A......................... 8,755
--------
29,539
--------
HONG KONG (8.3%)
1,294,000 Cheung Kong Holdings Ltd.......................... 6,405
2,015,000 Citic Pacific Ltd................................. 5,065
14,327,000 C.P. Pokphand Co., Ltd............................ 5,045
65,800 Great Wall Electric Ltd. ADR...................... 280
11,244,000 Guangdong Investments Ltd......................... 6,139
931,400 Hang Seng Bank Ltd................................ 7,102
2,336,000 Harbin Power Equipment Co......................... 747
2,331,000 Hong Kong Telecommunications Ltd.................. 4,609
8,849,000 Hopewell Holdings Ltd............................. 7,491
2,668,000 Hutchison Whampoa Ltd............................. 12,896
2,244,000 New World Development Co., Ltd.................... 7,468
286,000 Sun Hung Kai Properties Ltd....................... 2,116
1,164,000 Swire Pacific Ltd., Class A....................... 8,875
2,619,000 Varitronix International Ltd...................... 4,586
7,180,000 Wai Kee Holdings Ltd.............................. 1,364
--------
80,188
--------
HUNGARY (0.2%)
15,945 Egis.............................................. 346
104,558 Gedeon Richter Ltd................................ 1,673
--------
2,019
--------
INDIA (9.1%)
230,000 American Dry Fruits............................... 315
1,200 Andhra Valley Power Supply, Class B............... 4
100,000 AP Rayon, Class B................................. 260
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Portfolio
22
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
INDIA (CONT.)
100,000 Aruna Sugars & Enterprises, Class B............... $ 131
1,200 Bajaj Auto Ltd., Class A.......................... 28
917,000 Balaji Foods & Feeds.............................. 496
15,000 Ballapur Industries Ltd., Class B................. 87
20,000 Baroda Rayon Corp................................. 303
102,284 Bharat Forge Co., Ltd., Class A................... 319
***33,571 Bharat Forge Co., Ltd. (New)...................... 53
200,000 Bharat Heavy Electricals, Class B................. 771
**3,100,000 Bharat Heavy Electricals (New).................... 11,798
12,800 Bharat Petroleum Corp., Ltd....................... 119
375,000 Bharat Pipes & Fittings Ltd., Class B............. 215
**125,000 Bharat Pipes & Fittings Ltd. (New)................ 66
100,000 BPL Ltd........................................... 379
27,400 Cable Corp. of India Ltd.......................... 76
195,000 Carrier Aircon Ltd., Class B...................... 981
90,000 Cosmo Films Ltd................................... 430
25,000 Crompton Greaves.................................. 147
77,000 DCM Shriram Industries Ltd........................ 478
38,800 Delta Industries Ltd.............................. 173
185,000 Essab India Ltd................................... 395
50,000 Essel Packaging................................... 346
5,400 Fabworth (India) Ltd.............................. 5
2,400 Flex Industries Ltd., Class B..................... 14
**34,766 Flex Industries Ltd. (New)........................ 193
5,000 Fuller............................................ 79
371,800 Garware Plastics & Polyester, Class A............. 2,901
314,500 Geekay Exim Ltd................................... 1,152
475,000 Godrej Soaps Ltd.................................. 2,420
28,100 Hero Honda, Class B............................... 172
1,700 Hindustan Petroleum Corp.......................... 20
108,280 Housing Development Finance Corp.................. 8,224
@*78,000 India Magnum Fund, Class A (acquired
11/25/92-3/01/94, Cost $3,782).................. 3,822
@55,194 India Magnum Fund, Class B........................ 2,594
644,625 India Organic Chemical Ltd........................ 965
43,590 Indian Aluminum GDR............................... 474
100 Indian Rayon & Industries Ltd., Class A........... 1
40,000 Indian Seamless Steel & Alloys.................... 18
9,000 Indo Gulf Fertilizer & Chemical, Class A.......... 17
571,200 Indo Rama Synthetic, Class B...................... 873
100,000 Infosys Technology Ltd............................ 1,509
158,100 ITC Agrotech, Class B............................. 498
450 ITW Signode Ltd., Class B......................... 2
225 ITW Signode Ltd. (New)............................ 1
377,200 Jai Parabolic Springs Ltd......................... 384
**268,800 Jai Parabolic Springs Ltd. (New).................. 260
5,292 JCT Ltd. GDR...................................... 94
212,550 JK Synthetics Ltd................................. 218
98,500 Kiloskar Oil Engine, Class B...................... 427
550 Lakme Ltd., Class B............................... 5
150,000 Lakshmi Precision................................. 399
145,000 Laser Lamp........................................ 101
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
770,000 Mahanagar Telephone Nigam......................... $ 4,046
88,484 Mahavir Spinning Mills Ltd........................ 420
570,700 Maikaal Fibres.................................... 236
180,700 Mardia Chemicals Ltd.............................. 581
@19,389 Morgan Stanley India Investment Fund, Inc......... 199
20 Motor Industries Co., Ltd., Class A............... 4
73,650 MRF Ltd., Class B................................. 4,081
24,000 Mukand Iron & Steel Works, Class A................ 206
17,606 Nahar Spinning Mills Ltd., Class B................ 264
25,000 OM Sindoori Hotels Ltd............................ 61
391,650 Orkay Industries Ltd.............................. 234
100,000 Patheja Forgings & Auto Parts, Class B............ 318
150,000 Patheja Forgings & Auto Parts (New)............... 478
318,935 PCS Data Products Ltd., Class B................... 203
900 Pentafour Products Ltd., Class B.................. 1
240,700 Philips India, Ltd................................ 2,346
275,000 Polar Latex....................................... 182
232,700 Priyadarshini Cement Ltd., Class B................ 263
14,000 Pudumjee.......................................... 93
350,000 PVD Plastic Mouldings Inds. Ltd., Class B......... 268
850 Ranbaxy Laboratories Ltd., Class B................ 18
1,100 Raymond Synthetics Ltd., Class B.................. --
150 Reliance Industries Ltd., Class A................. 1
3,770 Reliance Industries Ltd. GDS...................... 69
73,581 Reliance Industries Ltd. GDS (New)................ 1,343
84,500 Rossel Industries Ltd............................. 209
100,000 Saurashtra Cement & Chemicals, Class B............ 290
331,000 SCICI Ltd., Class B............................... 722
50,000 Secals Ltd........................................ 119
30,000 Shanti Gears Ltd., Class B........................ 134
108,000 Sharp Industries Ltd.............................. 72
360,000 Shipping Corp. of India........................... 367
25,000 Shree Vindhya Paper Mills......................... 70
125,636 Shree Vindhya Paper Mills (New)................... 352
13,200 S.K.F. Bearings Ltd............................... 1,093
45,000 Sri Venkatesa Mills Ltd........................... 229
1,499,550 State Bank of India............................... 8,930
16,850 Sundaram Finance, Class B......................... 203
928,500 Super Forgings & Steels........................... 1,190
233,300 Tata Engineering & Locomotive, Class A............ 4,190
28,350 Tata Hydro Electric Power......................... 84
2,200 Tata Power Co., Ltd............................... 8
450,000 Titagarh Steels Ltd............................... 644
1,600 T.P.I. India Ltd.................................. 2
10,000 T.V.S. Suzuki..................................... 78
838 United Phosphorus Ltd. GDR........................ 18
202,500 Uniworth International Ltd., Class B.............. 163
783,000 Uttam Steels Ltd., Class A........................ 692
783,000 Uttam Steels Ltd. (New)........................... 711
4,604 Videocon International Ltd., Class A.............. 15
81,600 Videsh Sanchar Nigam Ltd.......................... 2,017
710,040 VXL Ltd........................................... 803
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Portfolio
23
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
INDIA (CONT.)
34,500 Vysya Bank........................................ $ 2,802
--------
88,334
--------
INDONESIA (5.9%)
6,027 Asia Pulp & Paper Co. Ltd. ADR.................... 76
1,373,000 Bank Bali (Foreign)............................... 3,483
**1,703,500 Barito Pacific Timber (Foreign)................... 2,448
**16,740,000 Bimantara Citra................................... 9,396
**3,359,598 Charoen Pokphand (Foreign)........................ 7,317
**624,500 Duta Pertiwi (Foreign)............................ 631
**1,077,000 Indocement Tunggal (Foreign)...................... 4,232
**1,227,500 Indosat (Foreign)................................. 4,658
**1,008,100 Jembo Cable Co. (Foreign)......................... 905
**1,424,700 Kalbe Farma (Foreign)............................. 6,525
**481,000 Keramika Indonesia Assosiasi (Foreign)............ 648
**2,196,000 Polysindo Eka Perkasa (Foreign)................... 1,233
**1,445,400 Sona Topas Tourism (Foreign)...................... 1,947
**1,220,000 Sorini Corp. (Foreign)............................ 5,834
**150,000 Suba Indah (Foreign).............................. 74
**733,800 Tempo Scan Pacific (Foreign)...................... 3,789
**2,145,500 United Tractors (Foreign)......................... 4,576
--------
57,772
--------
ISRAEL (2.7%)
52,530 Elbit Ltd......................................... 3,944
2,860 First International Bank of Israel, Class 1....... 354
16,900 First International Bank of Israel, Class 5....... 2,086
524,467 Israel Land Development Co........................ 1,572
80,819 Koor Industries Ltd............................... 6,882
424,625 Osem Investment Ltd............................... 3,276
+137,336 PEC Israel Economic Corp.......................... 3,691
54,397 Scitex Ltd........................................ 1,169
164,365 Super Sol Ltd., Class B........................... 3,141
--------
26,115
--------
KOREA (1.1%)
**36,500 Samsung Electronics (Foreign)..................... 7,517
5,099 Samsung Electronics (New)......................... 1,037
48,000 Yukong Ltd. (Foreign)............................. 2,007
--------
10,561
--------
MALAYSIA (0.2%)
735,000 Bandar Raya Developments Bhd...................... 1,598
--------
MEXICO (8.9%)
+364,612 Apasco S.A., Class A.............................. 1,447
4,877,920 Banacci, Class B.................................. 7,492
763,553 Banacci, Class L.................................. 1,161
1,719,214 Cemex CPO ADR..................................... 11,689
5,300 Cemex S.A., Class A............................... 18
513,519 Empresas ICA S.A. ADR............................. 5,264
3,153,550 FEMSA, Class B.................................... 7,367
+200,005 Grupo Carso ADR................................... 2,185
+6,953,900 Grupo Financiero Bancomer, Class B................ 2,036
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
+986,340 Grupo Financiero Bancomer, Class L................ $ 260
1,246,140 Grupo Financiero Bancomer ADR..................... 7,477
+934,000 Grupo Financiero Bancrecer, Class B............... 217
+69,380 Grupo Financiero GBM Atlantico ADR................ 193
+3,906,660 Grupo Financiero Probursa, Class C................ 1,725
809,370 Grupo Herdez, Class A............................. 239
50 Grupo Iusacell S.A. ADR, Class D.................. 1
+147,592 Grupo Mexicano Desarrollo ADR, Class B............ 572
42,960 Grupo Mexicano Desarrollo ADR, Class L............ 193
52,600 Grupo Sidek S.A. ADR.............................. 243
+1,473,700 Grupo Sidek S.A., Class A......................... 1,330
+1,195,400 Grupo Sidek S.A., Class B......................... 1,071
55,344 Grupo Sidek S.A., Class L......................... 58
+385,288 Grupo Tribasa S.A. ADR............................ 3,275
145,460 Hylsamex S.A. ADR................................. 2,655
6,203 Hylsamex S.A. GDR................................. 113
310,400 Interceramica, Class C............................ 511
+30,600 Interceramica ADR................................. 241
231,555 Panamerican Beverages, Inc., Class A.............. 6,947
372,363 Telefonos de Mexico S.A. ADR, Class L............. 11,031
2,334,730 Tolmex S.A., Class B2............................. 9,115
--------
86,126
--------
MOROCCO (1.3%)
20,000 Banque Marocaine du Commerce Exterieur............ 864
55,123 ONA Group......................................... 2,283
146,300 SNI Maroc......................................... 7,640
58,221 Wafabank.......................................... 2,376
--------
13,163
--------
PAKISTAN (2.3%)
41,850 Adamjee Insurance Co., Ltd........................ 153
720,976 Cherat Cement Ltd................................. 1,164
6,135 Crescent Investment Bank.......................... 7
42,205 Crescent Textile Mills Ltd........................ 34
1,049,500 Dewan Salman Fibre................................ 3,455
1,379,500 D.G. Khan Cement Ltd.............................. 1,948
3,017,900 Fauji Fertilizer Co., Ltd......................... 5,942
1,700,000 Karachi Electric Supply Corp...................... 1,468
80,977 Muslim Commercial Bank Ltd........................ 109
781,191 Nishat Mills Ltd.................................. 725
125,900 Pakistan State Oil Co., Ltd....................... 1,524
32,230 Pakistan Telecommunications....................... 3,433
26,900 Pakistan Telecommunications GDR................... 2,730
298,000 Zahur Textile Mills............................... 36
--------
22,728
--------
PERU (0.5%)
35 Cementos Lima S.A................................. --
141,356 Cementos Norte Pacasmayo, Class T................. 408
***497,000 Cementos Yura..................................... 3,109
12,325 Cerveceria Backus y Johnston, Class C............. 272
+396,386 Nacional de Cerveza, Class T...................... 267
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Portfolio
24
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
PERU (CONT.)
+94,833 Southern Peru Copper, Class T..................... $ 427
--------
4,483
--------
PHILIPPINES (3.5%)
3,985,562 Ayala Land, Inc., Class B......................... 4,604
12,448,530 JG Summit Holding, Class B........................ 3,704
661,698 Manila Electric Co., Class B...................... 5,311
15,645,916 Petron Corp....................................... 10,108
2,515 Philippine Long Distance Telephone Co., Class B... 180
1,203,120 San Miguel Corp., Class B......................... 4,993
+18,157,168 SM Prime Holdings, Inc., Class B.................. 4,977
--------
33,877
--------
POLAND (0.7%)
20,000 Bank Rozwoju Eksportu S.A......................... 320
45,000 Debica............................................ 634
***33,400 Eastbridge........................................ 2,246
+137,620 Elektrim.......................................... 485
2,085,038 International UNP Holdings........................ 789
+373,740 Mostostal Exports, Class A........................ 942
11,125 Wedel S.A......................................... 651
15,735 Zwyeic............................................ 1,190
--------
7,257
--------
PORTUGAL (0.9%)
150,800 Banco Totta & Acores, Class B..................... 3,195
120,000 Filmes Lusmundo................................... 1,312
14,271 Jeronimo Martins.................................. 727
@9,945 Portuguese Investment Fund........................ 654
140,000 UNICER-Uniao Cervejeira S.A....................... 2,364
--------
8,252
--------
RUSSIA (2.1%)
***462,150 Alliance Cellulose Ltd............................ 9,295
***54,035 Alliance Cellulose Ltd., Class B.................. 1,500
***317,851 Russian Telecom Development Corp.................. 3,179
***400,000 SFMT, Inc......................................... 4,000
*/***990 Storyfirst Communications, Inc., Class C (acquired
3/01/95, Cost $660)............................. 660
*/***2,640 Storyfirst Communications, Inc., Class D (acquired
3/01/95, Cost $1,980)........................... 1,980
--------
20,614
--------
SOUTH AFRICA (2.7%)
44,830 Anglo American Industrial Corp., Ltd.............. 2,219
700,000 Bidvest Group Ltd................................. 3,609
1,450,439 Gencor Ltd........................................ 4,986
796,900 Liberty Life Strategic Investments................ 2,685
953,959 Sasol Ltd......................................... 9,143
433,000 Trans Natal Coal Corp., Ltd....................... 3,334
--------
25,976
--------
SRI LANKA (0.0%)
19,575 Aitken Spence & Co., Ltd.......................... 75
113,000 Distillers Corp. S.A. Ltd......................... 17
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
81,200 John Keells Holdings Ltd.......................... $ 308
--------
400
--------
TAIWAN (3.6%)
+2,309,000 Advanced Semiconductor Engineering Inc............ 6,705
+3,052,800 Taiwan Semiconductor Manufacturing Co............. 14,834
+2,603,891 United Micro Electronics Corp., Ltd............... 13,358
--------
34,897
--------
THAILAND (6.9%)
298,550 Advanced Information Services Co. (Foreign)....... 4,426
1,287,700 Bangkok Bank Ltd.................................. 11,268
428,200 Bangkok Bank Ltd. (Foreign)....................... 4,718
2,608,500 Finance One Co., Ltd. (Foreign)................... 19,232
146,200 Land & House Co., Ltd. (Foreign).................. 3,080
9,335 Phatra Thanakit Co., Ltd.......................... 74
780,965 Phatra Thanakit Co., Ltd. (Foreign)............... 6,517
144,600 Shinawatra Computer Co., Ltd. (Foreign)........... 3,585
71,200 Siam Cement Co., Ltd. (Foreign)................... 4,546
1,244,700 Thai Farmers Bank Ltd............................. 9,026
--------
66,472
--------
TURKEY (5.1%)
1,573,000 Aksa.............................................. 1,388
8,913,000 Borusan........................................... 3,477
+13,186,600 Ege Biracilik Ve Malt Sanayii..................... 15,508
4,014,000 Ege Seramik Sanayi Ve Ticaret A.S................. 1,952
1,666,000 Migros Turk TAS................................... 1,865
14,346,000 Sarkuysan......................................... 3,812
8,340,000 Tat Konserve...................................... 6,508
+9,754,000 Tofas Turk Otomobil Fabrikasi..................... 8,604
124,572 Tofas Turk Otomobil Fabrikasi GDR, Class E........ 529
1,354,075 Turkas Petroculuk A.S............................. 490
220,482 Turkiye Garanti Bankasi ADR....................... 2,991
38,305,200 Yapi Ve Kredi Bankasi A.S......................... 2,469
--------
49,593
--------
UNITED KINGDOM (0.2%)
909,844 Lonrho plc........................................ 2,142
--------
ZIMBABWE (0.3%)
1,980,000 Trans Zambezi Industries Ltd...................... 2,970
35,281 Trans Zambezi Industries Ltd., Class S............ 53
--------
3,023
--------
TOTAL COMMON STOCKS (Cost $794,609).............................. 775,243
--------
PREFERRED STOCKS (10.8%)
BRAZIL (10.8%)
1,527,714,183 Banco Bradesco.................................... 12,945
387,910,000 Banco do Brasil................................... 4,636
18,800,000 Banco do Estado Sao Paulo......................... 106
298,898,880 Banco Nacional S.A................................ 5,813
3,000,000 Bombril........................................... 63
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Portfolio
25
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
BRAZIL (CONT.)
34,992,000 Brahma............................................ $ 11,480
21,189,000 Brasmotor S.A..................................... 3,913
118,244,284 Cia Acos Especiais Itabira........................ 880
96,442,103 Cia Energetica de Minas Gerais.................... 1,886
46,744,470 Cia Energetica de Sao Paulo....................... 1,848
16,959,000 Cia Paulista de Forca E Luz....................... 557
+470,000,000 Cia Siderurgica Paulista, Class B................. 781
72,579,850 Eletrobras........................................ 19,318
39,130,800 Itaubanco......................................... 11,903
37,930,101 Lojas Americanas S.A.............................. 845
105,758 Lojas Americanas S.A. (Bonus)..................... 15
270,000 Multibras S.A..................................... 223
104,394,333 Petrobras......................................... 8,846
12,500 Sadia Concordia................................... 12
135,699,175 Telecomunicacoes Brasileiras...................... 4,467
49,160,815 Telecomunicacoes de Sao Paulo..................... 6,088
2,621,051,000 Usinas Siderurgicas de Minas Gerais............... 2,961
30,873,000 Vale Do Rio Doce.................................. 4,662
--------
104,248
--------
INDIA (0.0%)
2,700 Fabworth (India) Ltd.............................. 2
--------
PORTUGAL (0.0%)
35,340 Filmes Lusmundo................................... 328
--------
TOTAL PREFERRED STOCKS (Cost $92,142)............................ 104,578
--------
<CAPTION>
NO. OF
RIGHTS
- -------------
<C> <S> <C>
RIGHTS (0.1%)
BRAZIL (0.0%)
**+27,013,689 Banco Bradesco.................................... 29
+291,030 Brahma............................................ 95
--------
124
--------
INDIA (0.0%)
**+674 Flex Industries Ltd............................... --
--------
INDONESIA (0.0%)
**+2,890,800 Sona Topas Tourism, expiring 7/13/95.............. --
--------
PAKISTAN (0.0%)
**+6,330 Crescent Textile Mills Ltd........................ 2
**+20,625 Dewan Salman Fibre................................ --
+92,643 Muslim Commercial Bank Ltd........................ 125
+78,119 Nishat Mills Ltd., expiring 9/30/95............... 22
--------
149
--------
TURKEY (0.1%)
**+833,000 Migros Turk TAS, expiring 8/01/95................. 914
--------
TOTAL RIGHTS (Cost $1,131)....................................... 1,187
--------
<CAPTION>
NO. OF VALUE
WARRANTS (000)
- ------------------------------------------------------------
<C> <S> <C>
WARRANTS (0.1%)
HONG KONG (0.0%)
+540,000 Wai Kee Holdings Ltd., expiring 12/31/96.......... $ 7
--------
INDIA (0.1%)
+27,383 Flex Industries Ltd., expiring 11/23/97........... 155
+44,702 Garware Plastics & Polyesters, expiring 4/04/98... 584
+25,726 Tata Engineering & Locomotive Ltd., expiring
3/08/96......................................... 122
--------
861
--------
POLAND (0.0%)
**+1,014,000 International UNP Holdings, expiring 12/31/95..... --
--------
THAILAND (0.0%)
+10 Finance One Co., Ltd., expiring 3/15/99........... --
--------
TOTAL WARRANTS (Cost $84)........................................ 868
--------
<CAPTION>
NO. OF
UNITS
- -------------
<C> <S> <C>
UNITS (0.1%)
MEXICO (0.1%)
308,100 Interceramica (Cost $1,525)....................... 508
--------
<CAPTION>
SHARES
- -------------
<C> <S> <C>
PURCHASED OPTIONS (0.0%)
BRAZIL (0.0%)
+37,900,000 Cia Paulista de Forca E Luz, strike price BRL 70,
expiring 10/16/95 (Cost $2)..................... 59
--------
<CAPTION>
FACE
AMOUNT
(000)
- -------------
<C> <S> <C>
BONDS (0.1%)
ECUADOR (0.1%)
$ 3,716 Republic of Ecuador PDI Bonds, (Floating Rate)
7.25%, 2/27/15
(Cost $1,005)................................... 1,236
--------
CONVERTIBLE DEBENTURES (0.5%)
COLOMBIA (0.4%)
5,615 Banco de Colombia 5.20%, 2/01/99.................. 4,267
--------
INDIA (0.1%)
IR 336 DCM Shriram Industries, Zero Coupon, 2/21/02...... 501
17 Indian Seamless, 10.00%, 10/12/99................. 50
130 Tata Iron & Steel, 2.25%, 4/01/99................. 121
--------
672
--------
TOTAL CONVERTIBLE DEBENTURES (Cost $6,053)....................... 4,939
--------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Portfolio
26
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
NON-CONVERTIBLE DEBENTURES (0.5%)
INDIA (0.5%)
IR 34 Bharat Forge Co., Ltd., 14.50%, 3/04/00........... $ 49
341 DCM Shriram Industries Ltd., 16.50%, 2/21/02...... 671
4,470 Garware Plastics & Polyester, 16.00%, 4/04/98..... 142
1,467 Mahavir Spinning Mills Ltd., Series A, 14.00%,
12/31/99........................................ 121
500 Raymond Ltd., 16.00%, 12/31/99.................... 1,593
70 Saurashtra Cement & Chemicals Ltd., 18.00%,
12/31/99........................................ 2,229
--------
TOTAL NON-CONVERTIBLE DEBENTURES (Cost $5,071)................... 4,805
--------
LOAN AGREEMENTS (5.1%)
POLAND (0.0%)
$ 54 Republic of Poland Interest Arrears PDI Bonds,
3.25%, 10/27/14................................. 32
--------
RUSSIA (5.1%)
CHF ++1,910 Bank for Foreign Economic Affairs (Floating
Rate)........................................... 502
$ ++150,503 Bank for Foreign Economic Affairs (Floating
Rate)........................................... 48,914
--------
49,416
--------
TOTAL LOAN AGREEMENTS (Cost $48,022)............................. 49,448
--------
TOTAL FOREIGN SECURITIES (97.2%) (Cost $949,644)................. 942,871
--------
SHORT-TERM INVESTMENTS (3.5%)
US GOVERNMENT AND AGENCY OBLIGATION (2.4%)
$23,000 US Treasury Bill, 8/24/95......................... 22,803
--------
REPURCHASE AGREEMENT (1.1%)
10,975 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $10,980, collateralized by
$11,360 United States Treasury Bills, due
7/27/95, valued at $11,315...................... 10,975
--------
TOTAL SHORT-TERM INVESTMENTS (Cost $33,778)...................... 33,778
--------
<CAPTION>
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
FOREIGN CURRENCY (1.2%)
APS 2,012 Argentine Peso.................................... $ 2,012
BLR 458 Brazilian Real.................................... 497
CP 385,379 Colombian Peso.................................... 438
HK$ 427 Hong Kong Dollar.................................. 55
HU 95,794 Hungarian Forint.................................. 779
IR 80,927 Indian Rupee...................................... 2,577
IN 1,850,558 Indonesian Rupiah................................. 831
MP 1,619 Mexican New Peso.................................. 259
PR 46,842 Pakistani Rupee................................... 1,512
PZ 593 Polish Zlotey..................................... 253
T$ 60,781 Taiwan Dollar..................................... 2,353
TB 3,262 Thai Baht......................................... 132
TL 7,173,000 Turkish Lira...................................... 162
--------
TOTAL FOREIGN CURRENCY (Cost $11,918)............................ 11,860
--------
TOTAL INVESTMENTS (101.9%) (Cost $995,340)....................... 988,509
--------
</TABLE>
<TABLE>
<CAPTION>
OTHER ASSETS (2.0%)
<S> <C> <C>
Receivable for Investments Sold................. $ 11,113
Receivable for Portfolio Shares Sold............ 4,705
Dividends Receivable............................ 2,849
Interest Receivable............................. 510
Foreign Withholding Tax Reclaim Receivable...... 21
Net Unrealized Gain on Forward Foreign Currency 7
Contracts......................................
Other........................................... 63 19,268
-------------
LIABILITIES (-3.9%)
Payable for Investments Purchased............... (33,187)
Investment Advisory Fees Payable................ (2,423)
Custodian Fees Payable.......................... (1,153)
Deferred India Taxes............................ (771)
Payable for India Taxes......................... (222)
Administrative Fees Payable..................... (120)
Payable to Custodian............................ (94)
Payable for Portfolio Shares Redeemed........... (29)
Sub-Administrative Fees Payable................. (25)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (121) (38,146)
------------- --------
NET ASSETS (100%)................................................ $969,631
--------
--------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
Applicable to 68,213,334 outstanding $.001 par value shares
(authorized 500,000,000 shares)................................ $14.21
--------
--------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Portfolio
27
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at June 30,
1995, the Portfolio is obligated to deliver US dollars in exchange for
foreign currency as indicated below:
</TABLE>
<TABLE>
<CAPTION>
IN NET
CURRENCY EXCHANGE UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE GAIN
(000) (000) DATE (000) (000) (000)
- ----------- --------- ---------- ------------ --------- ---------------
<S> <C> <C> <C> <C> <C>
$ 71 $ 71 7/03/95 BLR 65 $ 71 $ --
$ 491 491 7/03/95 GRD 111,509 495 4
$ 1,317 1,317 7/03/95 PE 193,152 1,320 3
--------- --------- ---
$ 1,879 $ 1,886 $ 7
--------- --------- ---
--------- --------- ---
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
++ -- Non-income producing securities -- in default
* -- Restricted as to public resale. Total value of
restricted securities at June 30, 1995 was $6,462
or 0.7% of net assets. (Total cost $6,422)
** -- Security is valued at fair value -- See Note A-1
*** -- Security is valued at cost -- See Note A-1
@ -- The fund is advised by an affiliate
ADR -- American Depositary Receipt
ADS -- American Depositary Shares
GDR -- Global Depositary Receipt
GDS -- Global Depositary Shares
NCS -- Non Convertible Shares
BLR -- Brazilian Real
GRD -- Greek Drachma
PE -- Portuguese Escudo
Floating Rate Securities. Interest rate changes on these instruments are
based on changes in a designated base rate.
</TABLE>
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
<S> <C> <C>
- ----------------------------------------------------------------
Capital Equipment..................... $ 85,577 8.8%
Consumer Goods........................ 146,772 15.1
Energy................................ 88,131 9.1
Finance............................... 235,333 24.3
Loan Agreements....................... 50,683 5.2
Materials............................. 147,294 15.2
Multi-Industry........................ 89,620 9.2
Services.............................. 99,461 10.3
--------- ---
$ 942,871 97.2%
--------- ---
--------- ---
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Portfolio
28
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (91.0%)
BELGIUM (2.9%)
+4,500 Arbed S.A......................................... $ 656
11,000 Delhaize Freres et Cie, 'Le Lion', S.A............ 495
5,000 G.I.B. Holdings, Ltd.............................. 237
55 G.I.B. Holdings, Ltd. (New)....................... 3
--------
1,391
--------
DENMARK (1.1%)
11,160 Unidanmark A/S, Class A (Registered).............. 547
--------
FINLAND (3.7%)
30,500 Amer-Yhtymae Oy, Class A.......................... 554
17,500 Huhtamaki Oy, Series 1............................ 573
+40,600 Kansallis-Osake Pankki............................ 44
40,000 Pohjola Insurance Co., Ltd., Class B.............. 627
--------
1,798
--------
FRANCE (10.5%)
1,200 Bongrain S.A...................................... 718
3,700 Cie de Saint Gobain............................... 447
+15,500 Credit Lyonnais CDI............................... 893
9,000 Elf Aquitaine..................................... 665
3,400 Eridania Beghin-Say S.A........................... 524
+3,805 Legris Industries S.A............................. 271
2,700 Precision Mecaniques Labinal S.A.................. 476
26,000 Thomson CSF....................................... 583
9,000 Total S.A., Class B............................... 542
--------
5,119
--------
GERMANY (11.5%)
4,500 BASF AG........................................... 960
2,260 Bayer AG.......................................... 561
+9,000 Bremer Vulkan Verbund AG.......................... 524
2,380 Commerzbank AG.................................... 570
1,300 Karstadt AG....................................... 569
1,500 Mannesmann AG..................................... 458
+3,700 Varta AG.......................................... 703
1,700 Veba AG........................................... 667
2,000 Volkswagen AG..................................... 576
--------
5,588
--------
ITALY (6.4%)
+230,000 Editoriale L'Expresso S.p.A....................... 485
+470,000 Impregilo S.p.A................................... 454
20,305 Safilo S.p.A...................................... 141
350,000 Stet Di Risp (NCS)................................ 778
205,500 Telecom Italia S.p.A.............................. 557
10,000 Telecom Italia S.p.A. Di Risp (NCS)............... 21
242,200 Unicem Di Risp (NCS).............................. 697
--------
3,133
--------
NETHERLANDS (10.7%)
23,571 ABN Amro Holdings N.V............................. 910
3,300 Akzo Nobel N.V.................................... 394
3,587 Hollandsche Beton Groep N.V....................... 618
12,812 Internationale Nederlanden Groep N.V.............. 709
6,000 Koninklijke Bijenkorf Beheer N.V.................. 431
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------
<C> <S> <C>
25,000 Koninklijke Van Ommeren N.V....................... $ 768
23,500 Philips Electronics N.V........................... 995
10,000 Royal PTT Nederland N.V........................... 360
--------
5,185
--------
NORWAY (2.3%)
140,000 Den Norske Bank A/S, Class A Free................. 379
16,604 Hafslund Nycomed, Class B......................... 384
28,000 Saga Petroleum A/S, Class B....................... 370
--------
1,133
--------
PORTUGAL (0.3%)
+@1,905 Portuguese Investment Fund........................ 125
--------
SPAIN (8.8%)
+68,000 Asturiana del Zinc S.A............................ 649
+60,000 Banco Espanol de Credito S.A...................... 413
17,000 Banco de Santander S.A............................ 671
9,615 Bodegas y Bebidas S.A............................. 280
1,903 Bodegas y Bebidas S.A. (New)...................... 56
+27,870 Grupo Duro Felguera S.A........................... 115
110,000 Iberdrola S.A..................................... 829
76,000 Sevillana de Electricidad S.A..................... 468
62,000 Telefonica Nacional de Espana S.A................. 799
--------
4,280
--------
SWEDEN (2.3%)
140,000 Skandinaviska Enskilda Banken, Class A............ 727
19,000 S.K.F. AB, Class B................................ 384
--------
1,111
--------
SWITZERLAND (15.4%)
870 Alusuisse-Lonza Holdings Ltd. (Registered)........ 546
+500 Ascom Holdings AG (Bearer)........................ 625
460 Bobst AG (Bearer)................................. 699
700 Ciba Geigy AG (Bearer)............................ 512
275 Ciba Geigy AG (Registered)........................ 202
1,700 Forbo Holding AG (Registered)..................... 830
1,030 Hero AG (Bearer).................................. 564
+500 Holderbank Glarus AG (Bearer)..................... 410
1,200 Magazine Globus (Participating Certificates)...... 844
300 Moevenpick Holding AG (Participating
Certificates)................................... 135
490 Nestle S.A. (Registered).......................... 510
670 Schweizerische Industrie-Gesellschaft Holdings
(Registered).................................... 756
+1,200 SwissAir (Registered)............................. 831
--------
7,464
--------
UNITED KINGDOM (15.1%)
145,500 Asprey plc........................................ 169
70,000 Associated British Foods plc...................... 740
+249,990 Automated Security Holdings plc................... 195
20,000 Bass plc.......................................... 191
200,000 BET plc........................................... 391
70,000 BSM Group plc..................................... 189
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
European Equity Portfolio
31
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (CONT.)
245,900 Christian Salvesen plc............................ $ 1,041
118,856 John Mowlem & Co. plc............................. 132
75,000 Kwik Save Group plc............................... 774
24,895 McAlpine (Alfred) plc............................. 57
67,222 Reckitt & Colman plc.............................. 709
45,014 Rolls-Royce plc................................... 125
174,411 Royal Insurance Holdings plc...................... 857
136,000 Sketchley plc..................................... 245
105,000 Tate & Lyle plc................................... 710
24,000 Unilever plc...................................... 486
+253,775 Wembley plc....................................... 10
175,000 WPP Group plc..................................... 337
--------
7,358
--------
TOTAL COMMON STOCKS (Cost $41,102)............................ 44,232
--------
PREFERRED STOCKS (4.4%)
GERMANY (4.4%)
2,400 RWE AG............................................ 660
3,000 Spar Handels AG................................... 780
3,200 Volkswagen AG..................................... 708
--------
TOTAL PREFERRED STOCKS (Cost $1,963).......................... 2,148
--------
<CAPTION>
NO. OF
WARRANTS
- ----------
<C> <S> <C>
WARRANTS (0.0%)
SWITZERLAND (0.0%)
2,500 Holderbank Glarus AG, expiring 12/20/95 (Cost
$0)............................................. 3
--------
TOTAL FOREIGN SECURITIES (95.4%) (Cost $43,065)............... 46,383
--------
<CAPTION>
FACE
AMOUNT
(000)
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENT (2.0%)
REPURCHASE AGREEMENT (2.0%)
$ 963 U.S. Trust 5.90%, dated 6/30/95, due 7/03/95 to be
repurchased at $963, collateralized by $1,005
United States Treasury Bills, due 7/27/95,
valued at $1,001 (Cost $963).................... 963
--------
FOREIGN CURRENCY (3.0%)
DM 1,372 Deutsche Mark..................................... 991
FF 678 French Franc...................................... 140
IL 49 Italian Lira...................................... --
SP 8 Spanish Peseta.................................... --
SK 2,437 Swedish Krona..................................... 335
CHF 1 Swiss Franc....................................... 1
--------
TOTAL FOREIGN CURRENCY (Cost $1,461).......................... 1,467
--------
TOTAL INVESTMENTS (100.4%) (Cost $45,489)..................... 48,813
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
<S> <C> <C>
------------------------------------------------------------
OTHER ASSETS (1.1%)
Receivable for Portfolio Shares Sold............ $381
Dividends Receivable............................ 94
Foreign Withholding Tax Reclaim Receivable...... 71 $ 546
-----
LIABILITIES (-1.5%)
Payable for Investments Purchased............... (490)
Payable for Portfolio Shares Redeemed........... (25)
Net Unrealized Loss on Forward Foreign Currency
Contracts...................................... (133)
Investment Advisory Fees Payable................ (47)
Administrative Fees Payable..................... (7)
Custodian Fees Payable.......................... (6)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (26) (735)
----- --------
NET ASSETS (100%) $48,624
--------
--------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 3,443,295 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $14.12
--------
--------
------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at June 30,
1995, the Portfolio is obligated to deliver foreign currency in
exchange for US dollars as indicated below:
</TABLE>
<TABLE>
<CAPTION>
NET
CURRENCY IN EXCHANGE UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
- ---------- --------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
DM 400 $ 290 8/09/95 $ 253 $ 253 $ (37)
CHF 2,750 2,444 6/10/96 $ 2,420 2,420 (24)
DM 3,000 2,191 6/10/96 $ 2,152 2,152 (39)
FF 7,100 1,455 6/10/96 $ 1,422 1,422 (33)
--------- --------- -----
$ 6,380 $ 6,247 $ (133)
--------- --------- -----
--------- --------- -----
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
@ -- The fund is advised by an affiliate.
NCS -- Non Convertible Shares
DM -- Deutsche Mark
FF -- French Franc
CHF -- Swiss Franc
</TABLE>
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT
INDUSTRY (000) OF NET ASSETS
<S> <C> <C>
- -----------------------------------------------------------------
Capital Equipment................... $ 7,168 14.7%
Consumer Goods...................... 9,253 19.0
Energy.............................. 3,372 6.9
Finance............................. 7,926 16.3
Materials........................... 9,317 19.2
Multi-Industry...................... 670 1.4
Services............................ 8,677 17.9
--------- ---
$ 46,383 95.4%
--------- ---
--------- ---
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
European Equity Portfolio
32
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (98.8%)
AUSTRALIA (1.6%)
50,000 Brambles Industries Ltd........................... $ 474
+400,000 McPherson's Ltd................................... 34
220,000 Westpac Banking Corp.............................. 796
--------
1,304
--------
BELGIUM (1.1%)
20,000 Delhaize Freres et Cie, 'Le Lion' S.A............. 900
--------
CANADA (0.3%)
+200,000 Canadian Pioneer Energy, Class A.................. 204
70,000 Northern Reef Exploration Ltd..................... 66
--------
270
--------
FRANCE (4.9%)
1,800 Bongrain S.A...................................... 1,078
+12,000 Credit Lyonnaise CDI.............................. 691
18,573 Elf Aquitaine..................................... 1,373
4,900 Precision Mecaniques Labinal S.A.................. 864
--------
4,006
--------
GERMANY (7.4%)
5,200 BASF AG........................................... 1,109
3,822 Bayer AG.......................................... 949
2,700 Karstadt AG....................................... 1,182
3,000 Mannesmann AG..................................... 916
+2,764 Sinn AG........................................... 668
+2,225 Varta AG.......................................... 423
1,910 Veba AG........................................... 749
260 Volkswagen AG..................................... 75
--------
6,071
--------
HONG KONG (0.9%)
220,000 Jardine Strategic Holdings, Inc................... 708
--------
IRELAND (3.1%)
737,397 Anglo Irish Bank Corp. plc........................ 604
73,900 Arnotts plc....................................... 315
470,000 Avonmore Foods plc, Class A....................... 1,031
227,500 Green Property plc................................ 596
--------
2,546
--------
ITALY (3.2%)
500,000 Stet Di Risp (NCS)................................ 1,111
700,000 Telecom Italia S.p.A. Di Risp (NCS)............... 1,481
--------
2,592
--------
JAPAN (9.0%)
65,000 Fuji Photo Film Ltd............................... 1,540
24,000 Hitachi Ltd....................................... 239
110,000 Kao Corp.......................................... 1,323
130,000 Nichido Fire & Marine Insurance Co................ 1,050
18,000 Sony Corp......................................... 864
30,000 Stanley Electric Co............................... 189
100,000 Sumitomo Rubber Industries........................ 743
5,000 TDK Corp.......................................... 228
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
40,000 Toyo Seikan Kaisha Ltd............................ $ 1,169
--------
7,345
--------
NETHERLANDS (8.2%)
42,811 ABN Amro Holdings N.V............................. 1,652
2,101 Hollandsche Beton Groep N.V....................... 362
22,677 Internationale Nederlanden Groep N.V.............. 1,254
40,000 Koninklijke Van Ommern N.V........................ 1,229
15,160 Nedlloyd Groep N.V................................ 516
8,000 Oce-Van Der Grinten N.V........................... 451
30,000 Philips Electronics N.V........................... 1,270
--------
6,734
--------
SPAIN (2.6%)
89,500 Iberdrola S.A..................................... 674
112,300 Telefonica Nacional de Espana S.A................. 1,447
--------
2,121
--------
SWEDEN (1.5%)
230,000 Skandinaviska Enskilda Banken, Class A............ 1,195
--------
SWITZERLAND (7.5%)
+500 Ascom Holdings AG (Bearer)........................ 625
1,000 Bobst AG (Bearer)................................. 1,520
1,800 Ciba-Geigy AG (Registered)........................ 1,319
1,400 Forbo Holdings AG (Registered).................... 683
1,400 Magazine Globus (Participating Certificates)...... 985
900 Schweizerische Industrie-Gesellschaft Holdings
(Registered).................................... 1,016
--------
6,148
--------
UNITED KINGDOM (10.8%)
51,443 Barclays plc...................................... 553
100,000 Bass plc.......................................... 957
298,700 Christian Salvesen plc............................ 1,264
110,000 Forte plc......................................... 398
100,000 John Mowlem & Co. plc............................. 111
150,000 Kwik Save Group plc............................... 1,549
180,000 Matthews (Bernard) plc............................ 312
+**653,333 Pentos plc........................................ --
259,552 Pilkington plc.................................... 720
73,023 Rolls-Royce plc................................... 203
202,325 Tate & Lyle plc................................... 1,368
40,000 Unilever plc...................................... 810
279,000 WPP Group plc..................................... 537
--------
8,782
--------
UNITED STATES (36.7%)
+89,000 Addington Resources, Inc.......................... 1,313
18,000 Aluminum Company of America....................... 902
+15,400 AMR Corp.......................................... 1,149
59,975 Aviall, Inc....................................... 502
50,500 Beazer Homes USA, Inc............................. 840
29,500 Brooklyn Bancorp, Inc............................. 996
+150,000 Cadiz Land Co., Inc............................... 656
116,000 Comsat Corp....................................... 2,277
57,000 Cray Research, Inc................................ 1,389
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Global Equity Portfolio
34
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONT.)
80,000 Data General Corp................................. $ 770
89,500 Egghead, Inc...................................... 1,197
50,000 Enhance Financial Services Group, Inc............. 969
45,000 Finova Group, Inc................................. 1,575
30,000 Gap, Inc.......................................... 1,046
+134,200 GenRad, Inc....................................... 1,023
16,000 Georgia Pacific Corp.............................. 1,388
60,000 Johnstown America Industries, Inc................. 623
+31,000 Kaiser Ventures, Inc.............................. 198
24,300 Lukens, Inc....................................... 784
4,600 MBIA, Inc......................................... 306
40,000 MCI Communications Corp........................... 880
31,300 Mellon Bank Corp.................................. 1,303
+56,500 Mercer International, Inc......................... 1,186
22,000 Midlantic Corp.................................... 880
22,300 Philip Morris Cos., Inc........................... 1,659
12,000 Prime Retail, Inc................................. 147
+47,500 Rohr, Inc......................................... 683
41,300 Sierra Tucson Cos., Inc........................... 181
25,000 Sun Co., Inc...................................... 684
13,100 Tecumseh Products Co., Class A.................... 576
70,000 Waban, Inc........................................ 1,041
88,000 WorldCorp, Inc.................................... 869
--------
29,992
--------
TOTAL COMMON STOCKS (Cost $74,611)........................... 80,714
--------
CONVERTIBLE PREFERRED STOCKS (0.0%)
HONG KONG (0.0%)
21,000 Jardine Strategic Holdings, Inc. IDR, 7.50%,
5/07/97 (Cost $21).............................. 23
--------
PREFERRED STOCKS (0.8%)
GERMANY (0.8%)
3,000 Volkswagen AG (Cost $647)......................... 663
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
- -----------
<C> <S> <C>
WARRANTS (0.0%)
SWITZERLAND (0.0%)
+500 Forbo Holdings (Registered), expiring 11/01/95
(Cost $0)....................................... 1
--------
TOTAL FOREIGN & US SECURITIES (99.6%) (Cost $75,279)........... 81,401
--------
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
(000)
- -----------
<C> <S> <C>
FOREIGN CURRENCY (0.0%)
IL 180 Italian Lira...................................... --
NG 29 Netherlands Guilder............................... 19
--------
TOTAL FOREIGN CURRENCY (Cost $19).............................. 19
--------
TOTAL INVESTMENTS (99.6%) (Cost $75,298)....................... 81,420
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
<S> <C> <C>
- ------------------------------------------------------------
OTHER ASSETS (1.4%)
Receivable for Investments Sold................. $840
Dividends Receivable............................ 208
Foreign Withholding Tax Reclaim Receivable...... 89
Other........................................... 4 $ 1,141
-----------
LIABILITIES (-1.0%)
Payable to Custodian............................ (543)
Payable for Investments Purchased............... (137)
Investment Advisory Fees Payable................ (116)
Unrealized Loss on Forward Foreign Currency (18)
Contracts.....................................
Custodian Fees Payable.......................... (14)
Administrative Fees Payable..................... (11)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (36) (876)
----------- --------
NET ASSETS (100%).............................................. $ 81,685
--------
--------
</TABLE>
<TABLE>
<C> <S> <C>
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 5,538,187 outstanding $.001 par value
shares (authorized 500,00,000 shares)........................ $14.75
--------
--------
</TABLE>
- ------------------------------------------------
<TABLE>
<C> <S> <C>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at June 30,
1995, the Portfolio is obligated to deliver foreign currency in
exchange for US dollars as indicated below:
</TABLE>
<TABLE>
<CAPTION>
IN
CURRENCY TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
- ----------- ----- ----------- ------------- ----- -----------------
<S> <C> <C> <C> <C> <C>
NZ$ 788 $ 526 7/03/95 $ 508 $ 508 $ (18)
----- ----- -----
----- ----- -----
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
IDR -- International Depositary Receipt
NCS -- Non Convertible Shares
NZ$ -- New Zealand Dollar
</TABLE>
- ------------------------------------------------------------
SUMMARY OF FOREIGN & US SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
<S> <C> <C>
- -----------------------------------------------------------------
Capital Equipment...................... $ 17,922 21.9%
Consumer Goods......................... 13,894 17.0
Energy................................. 5,979 7.3
Finance................................ 16,023 19.6
Materials.............................. 7,837 9.6
Multi-Industry......................... 6,161 7.6
Services............................... 13,585 16.6
--------- ---
$ 81,401 99.6%
--------- ---
--------- ---
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Global Equity Portfolio
35
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE GOLD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
COMMON STOCKS (89.9%)
AUSTRALIA (22.7%)
182,200 Acacia Resources Ltd.............................. $ 321
455,600 Central Norseman Gold Corporation Ltd............. 314
+380,800 Delta Gold N.L.................................... 709
421,000 Gold Mines of Kalgoorlie Ltd...................... 377
355,300 Great Central Mines N.L........................... 778
22,800 Great Central Mines N.L. ADR...................... 152
+327,500 Newcrest Mining Ltd............................... 1,389
68,300 Poseidon Gold Ltd................................. 137
+455,600 Wiluna Mines Ltd.................................. 486
--------
4,663
--------
CANADA (29.2%)
34,200 Barrick Gold Corp................................. 864
91,100 Bolivar Goldfields Ltd............................ 119
38,700 Cambior, Inc...................................... 479
66,100 Hemlo Gold Mines, Inc............................. 702
41,500 Kinross Gold Corp................................. 310
123,300 Miramar Mining.................................... 640
34,000 Placer Dome, Inc.................................. 888
+73,400 Prime Resource Group, Inc......................... 508
360,000 Royal Oak Mines, Inc.............................. 1,125
+51,000 TVX Gold, Inc..................................... 367
--------
6,002
--------
SOUTH AFRICA (0.6%)
10,000 Free State Consolidated Gold Mines Ltd. ADR....... 124
--------
UNITED STATES (37.4%)
+149,200 Amax Gold, Inc.................................... 821
+96,400 Dakota Mining Corp................................ 169
3,828 Freeport McMoRan Copper & Gold, Inc., Class A..... 79
113,900 Freeport McMoRan, Inc............................. 2,007
136,700 Gold Reserve Corp................................. 854
66,200 Homestake Mining Co............................... 1,092
58,100 Newmont Gold Co................................... 2,338
+32,785 Pegasus Gold, Inc................................. 332
--------
7,692
--------
TOTAL COMMON STOCKS (Cost $19,404)............................. 18,481
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
- -----------
<C> <S> <C>
WARRANTS (0.1%)
UNITED STATES (0.1%)
+25,000 Gold Reserve Corp., expiring 3/96
(Cost $0)....................................... 20
--------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE BONDS (3.1%)
CANADA (2.2%)
**$ 400 Bema Gold Corp. 7.50%, 9/28/99.................... $ 447
--------
UNITED STATES (0.9%)
250 Canyon Resources 6.00%, 6/01/98................... 190
--------
TOTAL CONVERTIBLE BONDS (Cost $681)............................ 637
--------
TOTAL FOREIGN & US SECURITIES (93.1%) (Cost $20,085)........... 19,138
--------
SHORT-TERM INVESTMENT (6.2%)
REPURCHASE AGREEMENT (6.2%)
1,263 U.S. Trust 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $1,264, collateralized by
$1,320 United States Treasury Bills, due
7/27/95, valued at $1,315 (Cost $1,263)......... 1,263
--------
TOTAL INVESTMENTS (99.3%) (Cost $21,348)....................... 20,401
--------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (2.1%)
Receivable for Investments Sold................. $ 389
Receivable for Portfolio Shares Sold............ 36
Interest Receivable............................. 12
Dividends Receivable............................ 2
Other........................................... 1 440
-----
LIABILITIES (-1.4%)
Payable for Portfolio Shares Redeemed........... (200)
Investment Sub-Advisory Fees Payable............ (37)
Investment Advisory Fees Payable................ (4)
Custodian Fees Payable.......................... (3)
Administrative Fees Payable..................... (3)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (39) (287)
----- --------
NET ASSETS (100%).............................................. $ 20,554
--------
--------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 2,157,065 outstanding $.001 par value shares
(authorized 500,000,000 shares).............................. $9.53
--------
--------
</TABLE>
- ------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
ADR -- American Depositary Receipt
</TABLE>
- ------------------------------------------------
SUMMARY OF FOREIGN & US SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
<S> <C> <C>
- -----------------------------------------------------------------
Gold Mines............................. $ 19,138 93.1%
--------- ---
--------- ---
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Gold Portfolio
38
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (86.6%)
AUSTRALIA (4.3%)
3,535,000 Brambles Industries Ltd........................... $ 33,507
4,380,000 CSR Ltd........................................... 13,694
+1,500,000 McPherson's Ltd................................... 128
3,934,882 Westpac Banking Corp.............................. 14,231
----------
61,560
----------
BELGIUM (1.3%)
+63,700 Arbed S.A......................................... 9,289
39,290 Delhaize Freres et Cie 'Le Lion', S.A............. 1,767
160,000 G.I.B. Holdings Ltd............................... 7,590
2,156 G.I.B. Holdings Ltd. (New)........................ 102
----------
18,748
----------
DENMARK (1.2%)
+80,000 Novo-Nordisk A/S-B................................ 8,530
169,000 Unidanmark A/S, Class A (Registered).............. 8,291
----------
16,821
----------
FINLAND (1.5%)
350,000 Huhtamaki Oy, Series 1............................ 11,463
+505,400 Kansallis-Osake Pankki............................ 550
650,000 Pohjola Insurance Co., Ltd., Class B.............. 10,188
----------
22,201
----------
FRANCE (5.5%)
12,500 Bongrain S.A...................................... 7,483
111,560 Cie de Saint Gobain............................... 13,477
+153,050 Credit Lyonnaise CDI.............................. 8,816
200,000 Elf Aquitaine..................................... 14,781
+50,500 PSA Peugeot Citrogen S.A.......................... 7,007
17,650 Salomon S.A., Series A............................ 7,987
+242,500 Thomson CSF....................................... 5,434
224,170 Total S.A., Class B............................... 13,494
----------
78,479
----------
GERMANY (10.6%)
110,000 BASF AG........................................... 23,463
105,000 Bayer AG.......................................... 26,076
60,250 Bremer Vulkan Verbund AG.......................... 3,505
46,200 Commerzbank AG.................................... 11,066
55,000 Karstadt AG....................................... 24,083
73,125 Mannesmann AG..................................... 22,324
+24,900 Varta AG.......................................... 4,732
75,000 Veba AG........................................... 29,427
25,000 Volkswagen AG..................................... 7,199
----------
151,875
----------
HONG KONG (0.0%)
**90,600 China Light & Power Co., Ltd...................... 410
----------
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------
<C> <S> <C>
ITALY (3.2%)
+2,560,500 Olivetti Di Risp (NCS)............................ $ 1,760
2,568,000 SME Meridonale.................................... 6,406
9,000,000 Stet Di Risp (NCS)................................ 20,003
4,720,000 Telecom Italia S.p.A.............................. 12,799
2,655,000 Telecom Italia S.p.A. Di Risp (NCS)............... 5,617
----------
46,585
----------
JAPAN (20.3%)
643,000 Aisin Seiki Co., Ltd.............................. 7,338
890,000 Canon, Inc........................................ 14,479
1,300,000 Daibiru Corp...................................... 15,142
3,000 East Japan Railway Co............................. 15,385
1,800,000 Fuji Photo Film Ltd............................... 42,653
2,400,000 Hitachi Ltd....................................... 23,908
1,700,000 Kao Corp.......................................... 20,442
1,215,000 Kirin Brewery Co., Ltd............................ 12,891
1,700,000 Matsushita Electric Industries Ltd................ 26,455
81,000 Murata Manufacturing Co., Ltd..................... 3,065
2,400,000 Nichido Fire & Marine Insurance Co................ 19,381
1,800 Nippon Telegraph & Telephone Corp................. 15,066
350,000 Sony Corp......................................... 16,793
750,000 Stanley Electric Co............................... 4,721
2,215,000 Sumitomo Rubber Industries........................ 16,451
360,000 TDK Corp.......................................... 16,382
84,000 Tokuyama Corp..................................... 411
700,000 Toyo Seikan Kaisha................................ 20,466
----------
291,429
----------
NETHERLANDS (10.6%)
689,142 ABN Amro Holdings N.V............................. 26,598
112,500 Akzo Nobel N.V.................................... 13,447
81,059 Hollandsche Beton Groep N.V....................... 13,968
563,750 Internationale Nederlanden Groep N.V.............. 31,182
247,500 Koninklijke Bijenkorf Beheer N.V.................. 17,763
153,050 Nedlloyd Groep N.V................................ 5,216
56,436 Oce-Van Der Grinten N.V........................... 3,183
750,000 Philips Electronics N.V........................... 31,754
61,200 Randstad Holdings N.V............................. 4,329
39,415 Unilever N.V. (Certificate)....................... 5,128
----------
152,568
----------
NEW ZEALAND (0.4%)
2,098,671 Fisher & Paykel Industries Ltd.................... 6,169
392,500 Smith City Group Ltd.............................. --
----------
6,169
----------
NORWAY (1.5%)
2,400,000 Den Norske Bank A/S, Class A Free................. 6,500
622,660 Hafslund Nycomed, Class B......................... 14,390
----------
20,890
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
International Equity Portfolio
43
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------
<C> <S> <C>
SINGAPORE (2.5%)
9,875,000 Jardine Strategic Holdings, Inc................... $ 31,798
3,265,000 Neptune Orient Lines Ltd. (Foreign)............... 3,785
----------
35,583
----------
SPAIN (3.3%)
297,500 Grupo Duro Felguera S.A........................... 1,229
2,345,000 Iberdrola S.A..................................... 17,667
2,250,000 Telefonica Nacional de Espana S.A................. 28,996
----------
47,892
----------
SWEDEN (2.3%)
3,100,000 Skandinaviska Enskilda Banken, Class A............ 16,103
473,000 S.K.F. AB, Class B................................ 9,555
401,200 Svenska Cellulosa AB, Class B..................... 7,443
----------
33,101
----------
SWITZERLAND (7.3%)
29,583 Alusuisse-Lonza Holdings Ltd. (Registered)........ 18,549
+2,605 Ascom Holdings AG (Bearer)........................ 3,258
25,008 Ciba Geigy AG (Registered)........................ 18,330
16,000 Forbo Holdings AG (Registered).................... 7,809
17,600 Holderbank Financiere Glaris AG (Bearer).......... 14,444
22,000 Nestle S.A. (Registered).......................... 22,908
+29,500 SwissAir (Registered)............................. 20,418
----------
105,716
----------
UNITED KINGDOM (10.8%)
630,000 Associated British Foods plc...................... 6,655
+1,360,104 Automated Security Holdings plc................... 1,060
530,000 Barclays plc...................................... 5,695
1,194,500 Bass plc.......................................... 11,431
3,608,000 Christian Salvesen plc............................ 15,269
2,175,221 Forte plc......................................... 7,873
2,138,606 Grand Metropolitan plc............................ 13,117
4,841,985 John Mowlem & Co. plc............................. 5,393
1,100,000 Kwik Save Group plc............................... 11,358
843,000 McAlpine (Alfred) plc............................. 1,918
1,888,979 Pilkington plc.................................... 5,244
1,430,000 Reckitt & Colman plc.............................. 15,084
2,496,884 Rolls-Royce plc................................... 6,932
2,947,100 Royal Insurance Holdings plc...................... 14,489
1,310,441 Tate & Lyle plc................................... 8,861
755,000 Unilever plc...................................... 15,285
5,325,000 WPP Group plc..................................... 10,251
----------
155,915
----------
TOTAL COMMON STOCKS (Cost $1,001,378).......................... 1,245,942
----------
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCKS (4.7%)
GERMANY (4.7%)
+30,450 Fag Kugelficsher AG............................... $ 3,938
100,000 RWE AG............................................ 27,494
29,525 Spar Handels AG................................... 7,680
125,000 Volkswagen AG..................................... 27,638
----------
TOTAL PREFERRED STOCKS (Cost $54,443).......................... 66,750
----------
CONVERTIBLE PREFERRED STOCKS (0.1%)
NETHERLANDS (0.0%)
1,506 ABN Amro Holdings N.V............................. 6
2,196 International Nederlanden Groep N.V............... 11
----------
17
----------
HONG KONG (0.1%)
1,863,000 Jardine Strategic Holdings, Inc. IDR, 7.50%,
5/07/97......................................... 2,031
----------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $1,923)............... 2,048
----------
<CAPTION>
NO. OF
WARRANTS
- -----------
<C> <S> <C>
WARRANTS (0.0%)
SWITZERLAND (0.0%)
+7,280 Forbo Holdings AG (Registered), expiring
11/01/95........................................ 13
+90,700 Holderbank Financiere Glaris AG, expiring
12/20/95........................................ 126
----------
TOTAL WARRANTS (Cost $0)....................................... 139
----------
TOTAL FOREIGN SECURITIES (91.4%) (Cost $1,057,744)............. 1,314,879
----------
<CAPTION>
FACE
AMOUNT
(000)
- -----------
<C> <S> <C>
SHORT-TERM INVESTMENT (2.7%)
REPURCHASE AGREEMENT (2.7%)
$ 39,409 Goldman Sachs, 6.00%, dated 6/30/95, due 7/03/95,
to be repurchased at $39,429, collateralized by
$35,730 United States Treasury Note, 9.25%, due
8/15/98 valued at $40,240 (Cost $39,409)........ 39,409
----------
FOREIGN CURRENCY (6.7%)
A$ 1 Australian Dollar................................. 1
BF 1,072 Belgian Franc..................................... 38
L 7,926 British Pound..................................... 12,610
DM 73,549 Deutsche Mark..................................... 53,144
IL 1,168 Italian Lira...................................... 1
Y 2,502,488 Japanese Yen...................................... 29,502
NG 575 Netherlands Guilder............................... 371
SK 1,288 Swedish Krona..................................... 176
CHF 527 Swiss Franc....................................... 458
----------
TOTAL FOREIGN CURRENCY (Cost $95,049).......................... 96,301
----------
TOTAL INVESTMENTS (100.8%) (Cost $1,192,202)................... 1,450,589
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
International Equity Portfolio
44
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(000)
<S> <C> <C>
------------------------------------------------------------
OTHER ASSETS (1.5%)
Receivable for Investments Sold................. $ 14,358
Dividends Receivable............................ 4,349
Foreign Withholding Tax Reclaim Receivable...... 1,986
Receivable for Portfolio Shares Sold............ 512
Interest Receivable............................. 7
Other........................................... 86 $ 21,298
-----------
LIABILITIES (-2.3%)
Net Unrealized Loss on Forward Foreign Currency
Contracts..................................... (24,888)
Payable for Investments Purchased............... (4,685)
Investment Advisory Fees Payable................ (2,662)
Payable for Portfolio Shares Redeemed........... (943)
Administrative Fees Payable..................... (181)
Custodian Fees Payable.......................... (120)
Payable to Custodian............................ (2)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (102) (33,584)
----------- ----------
NET ASSETS (100%).............................................. $1,438,303
----------
----------
</TABLE>
<TABLE>
<C> <S> <C>
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 94,285,439 outstanding $.001 par value shares
(authorized 500,000,000 shares).............................. $15.25
----------
----------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at June 30,
1995, the Portfolio is obligated to deliver or is to receive foreign
currency in exchange for US dollars or foreign currency as indicated
below:
</TABLE>
<TABLE>
<CAPTION>
NET
IN UNREALIZED
CURRENCY EXCHANGE GAIN
TO DELIVER VALUE SETTLEMENT FOR VALUE (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------------ -------- ----------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
FM 1,241 $ 290 7/03/95 DM 405 $ 292 $ 2
DM 40,000 28,957 8/09/95 $25,252 25,252 (3,705)
Y 6,115,000 73,026 9/27/95 $64,627 64,627 (8,399)
CHF 66,500 58,339 11/14/95 $52,749 52,749 (5,590)
FF 206,000 42,362 11/20/95 $38,741 38,741 (3,621)
SP 5,225,000 42,367 12/01/95 $42,195 42,195 (172)
DM 95,500 69,596 3/01/96 $66,193 66,193 (3,403)
-------- -------- ---------
$314,937 $290,049 ($24,888)
-------- -------- ---------
-------- -------- ---------
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
** -- Security is valued at fair value - See Note A-1
IDR -- International Depositary Receipt
NCS -- Non Convertible Shares
DM -- Deutsche Mark
FM -- Finnish Markka
FF -- French Franc
Y -- Japanese Yen
SP -- Spanish Peseta
CHF -- Swiss Franc
</TABLE>
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT
INDUSTRY (000) OF NET ASSETS
<S> <C> <C>
- ---------------------------------------------------------------
Capital Equipment................. $ 262,045 18.2%
Consumer Goods.................... 324,607 22.6
Energy............................ 75,779 5.3
Finance........................... 203,463 14.1
Materials......................... 177,507 12.3
Multi-Industry.................... 55,627 3.9
Services.......................... 215,851 15.0
--------- ---
$1,314,879 91.4%
--------- ---
--------- ---
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
International Equity Portfolio
45
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
------------------------------------------------------------
COMMON STOCKS (92.2%)
AUSTRALIA (8.0%)
63,410 Arnotts Ltd....................................... $ 374
1,000,000 Auspine Ltd....................................... 3,695
2,340,756 BRL Hardy Ltd..................................... 2,611
990,079 Bains Harding Ltd................................. 183
2,230,000 Burswood Property Trust........................... 2,314
2,351,732 Country Road Ltd.................................. 1,972
+3,099,000 McPhersons Ltd.................................... 264
5,342,529 Parbury Ltd....................................... 2,505
1,721,500 Solution 6 Holdings Ltd........................... 1,101
----------
15,019
----------
DENMARK (2.0%)
+107,000 SYD-Sonderjylland Holdings........................ 3,783
----------
FINLAND (2.6%)
115,000 Amer-Yhtymae Oy, Class A.......................... 2,090
180,000 Hartwall Oy, Class A.............................. 2,653
----------
4,743
----------
FRANCE (10.6%)
53,500 Dauphin O.T.A..................................... 2,658
5,400 De Dietrich et Compagnie.......................... 2,650
18,970 Europeene de Propulsion S.A....................... 1,243
8,100 Galeries Layfayette............................... 3,106
14,000 Omnium de Gestion & Finance....................... 2,508
24,500 Precision Mecaniques Labinal S.A.................. 4,318
88,996 Sediver S.A....................................... 3,302
----------
19,785
----------
GERMANY (6.5%)
14,000 Duerr Beteiligungs AG............................. 4,957
+10,688 Sinn AG........................................... 2,583
+20,000 Varta AG.......................................... 3,801
2,210 Vossloh AG........................................ 850
----------
12,191
----------
HONG KONG (1.7%)
5,200,000 Pico Far East Holdings Ltd........................ 538
2,040,000 Tungtex Holdings Co., Ltd......................... 382
5,800,000 Vitasoy International Holdings Ltd................ 2,305
----------
3,225
----------
IRELAND (2.2%)
1,070,000 Avonmore Foods plc, Class A....................... 2,347
687,000 Green Property plc................................ 1,800
----------
4,147
----------
ITALY (2.3%)
+718,000 Editoriale L'Expresso S.p.A....................... 1,540
621,600 Unicem Di Risp (NCS).............................. 1,788
75,000 Vincenzo Zucchi S.p.A............................. 367
212,500 Vincenzo Zucchi S.p.A. (NCS)...................... 520
----------
4,215
----------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
------------------------------------------------------------
JAPAN (8.1%)
15,000 Daikin Manufacturing Ltd.......................... $ 226
231,000 Foster Electric Co., Ltd.......................... 1,076
707,000 Japan Oil Transportation.......................... 3,709
213,000 Japan Vilene Co., Ltd............................. 1,243
99,000 Kansei Corp....................................... 759
124,000 Nifco, Inc........................................ 1,550
415,000 Toc Co............................................ 3,767
+442,000 Tokai Senko K.K................................... 1,667
170,000 Toyoda Gosei Co................................... 1,223
----------
15,220
----------
NETHERLANDS (9.3%)
23,772 Ahrend Groep N.V.................................. 3,137
23,575 Hollandsche Beton Groep N.V....................... 4,062
28,885 Industriemij Welna N.V............................ 880
36,000 Konin Nijverdal -- Ten Carte N.V.................. 1,801
141,000 Koninklijke Van Ommeren N.V....................... 4,332
8,802 Polynorm N.V...................................... 958
30,000 Randstad Holdings N.V............................. 2,122
----------
17,292
----------
NEW ZEALAND (1.0%)
645,592 Fisher & Paykel Industries Ltd.................... 1,898
----------
NORWAY (1.0%)
11,500 Adelsten, Class B................................. 1,380
228,020 Oceanor........................................... 518
----------
1,898
----------
SPAIN (4.9%)
+334,000 Asturiana del Zinc S.A............................ 3,187
65,393 Bodegas y Bebidas S.A............................. 1,907
15,423 Bodegas y Bebidas S.A. (New)...................... 450
76,262 Gas y Electricidad S.A............................ 3,673
----------
9,217
----------
SWITZERLAND (15.5%)
3,960 Bobst AG (Bearer)................................. 6,018
8,400 Elco Looser Holding AG (Registered)............... 3,115
3,400 Hero AG (Bearer).................................. 1,860
995 Kuoni Reisen Holdings, Class B (Registered)....... 1,599
+1,650 LEM Holdings AG................................... 487
5,424 Magazine Globus (Participating Certificates)...... 3,816
5,850 Porst Holding AG (Bearer)......................... 1,219
590 Schweizerische Industrie-Gesellschaft Holdings
(Bearer)........................................ 1,378
4,400 Schweizerische Industrie-Gesellschaft Holdings
(Registered).................................... 4,968
+4,250 Von Moos Holding AG (Bearer)...................... 568
+4,600 Zellweger Uster AG (Bearer)....................... 3,955
----------
28,983
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
International Small Cap Portfolio
48
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (16.5%)
3,631,578 Anglo Irish Bank Corp. plc (British Pound
Shares)......................................... $ 3,120
559,500 Asprey plc........................................ 650
1,055,000 BSM Group plc..................................... 2,854
31,700 Bespak plc........................................ 141
+1,449,216 Blagden Industries plc............................ 3,020
369,500 Bluebird Toys plc................................. 1,258
3,790,000 Casket plc........................................ 663
214,300 Church & Co. plc.................................. 1,527
+3,045,850 Donelon Tyson plc................................. 363
952,000 GEI International plc............................. 1,742
212,000 Hadleigh Industries Group plc..................... 530
390,000 Hornby Group plc.................................. 856
210,000 International Business Communications (Holdings)
plc............................................. 942
877,294 John Mowlem & Co. plc............................. 977
206,335 Mallett plc....................................... 223
1,637,405 Matthews (Bernard) plc............................ 2,840
+**2,659,393 Pentos plc........................................ --
345,526 Perry Group plc................................... 830
1,600,000 Shandwick plc..................................... 980
691,000 Sketchley plc..................................... 1,242
1,600,000 The 600 Group plc................................. 2,393
345,000 Tibbett & Britten Group plc....................... 2,662
541,700 Waterman Partnership Holdings plc................. 422
+34,505,500 YRM plc........................................... 690
----------
30,925
----------
TOTAL COMMON STOCKS (Cost $174,506)............................. 172,541
----------
PREFERRED STOCKS (1.8%)
GERMANY (1.8%)
2,400 Jil Sander AG..................................... 1,673
7,745 Shaerf AG......................................... 1,707
----------
TOTAL PREFERRED STOCKS (Cost $3,316)............................ 3,380
----------
<CAPTION>
NO. OF
WARRANTS
- ------------
<C> <S> <C>
WARRANTS (0.0%)
HONG KONG (0.0%)
+452,000 Pico Far East Holdings Ltd., expiring 4/30/96..... 3
----------
SWITZERLAND (0.0%)
+4,600 Zellweger Luwa AG, expiring 5/21/97............... 34
----------
TOTAL WARRANTS (Cost $0)........................................ 37
----------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
------------------------------------------------------------
CONVERTIBLE DEBENTURES (0.2%)
ITALY (0.2%)
IL 518,000 Mediobanca S.p.A. 5.50%, 1/01/00 (Cost $328)...... $ 266
----------
TOTAL FOREIGN SECURITIES (94.2%) (Cost $178,150)................ 176,224
----------
SHORT-TERM INVESTMENT (3.2%)
REPURCHASE AGREEMENT (3.2%)
$ 5,984 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $5,987, collateralized by
$6,200 United States Treasury Bills, due
7/27/95, valued at $6,176 (Cost $5,984)......... 5,984
----------
FOREIGN CURRENCY (3.8%)
L 1,010 British Pound..................................... 1,607
DM 4,444 Deutsche Mark..................................... 3,211
HK$ 378 Hong Kong Dollar.................................. 49
IL 74 Italian Lira...................................... --
Y 189,293 Japanese Yen...................................... 2,231
NG 20 Netherlands Guilder............................... 13
SP 1 Spanish Peseta.................................... --
----------
TOTAL FOREIGN CURRENCY (Cost $7,114)............................ 7,111
----------
TOTAL INVESTMENTS (101.2%) (Cost $191,248)...................... 189,319
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (0.8%)
Cash............................................ $ 71
Dividends Receivable............................ 447
Receivable for Investments Sold................. 417
Foreign Withholding Tax Reclaim Receivable...... 366
Receivable for Portfolio Shares Sold............ 129
Interest Receivable............................. 8
Other........................................... 8 1,446
------------
LIABILITIES (-2.0%)
Net Unrealized Loss on Forward Foreign Currency
Contracts..................................... (2,374)
Payable for Investments Purchased............... (858)
Investment Advisory Fees Payable................ (383)
Payable for Portfolio Shares Redeemed........... (45)
Custodian Fees Payable.......................... (27)
Administrative Fees Payable..................... (23)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (36) (3,747)
------------ ----------
NET ASSETS (100%)............................................... $ 187,018
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 12,116,594 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................... $15.43
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
International Small Cap Portfolio
49
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at June 30,
1995, the Portfolio is obligated to deliver foreign currency in exchange
for US dollars as indicated below:
</TABLE>
<TABLE>
<CAPTION>
IN NET
CURRENCY EXCHANGE UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE (LOSS)
(000) (000) DATE (000) (000) (000)
- ----------- --------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
HK$ 377 $ 49 7/03/95 $ 49 $ 49 $ --
Y 725,000 8,658 9/27/95 $ 7,662 7,662 (996)
Y 100,000 1,194 9/27/95 $ 1,057 1,057 (137)
DM 10,300 7,507 3/04/96 $ 7,099 7,099 (408)
SP 675,000 5,412 3/04/96 $ 5,107 5,107 (305)
CHF 8,750 7,732 3/04/96 $ 7,204 7,204 (528)
--------- --------- -------------
$ 30,552 $ 28,178 $ (2,374)
--------- --------- -------------
--------- --------- -------------
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
NCS -- Non Convertible Shares
DM -- Deutsche Mark
HK$ -- Hong Kong Dollar
Y -- Japanese Yen
SP -- Spanish Peseta
CHF -- Swiss Franc
</TABLE>
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
<S> <C> <C>
- ----------------------------------------------------------------
Capital Equipment..................... $ 44,305 23.7%
Consumer Goods........................ 38,094 20.4
Energy................................ 6,860 3.6
Finance............................... 14,231 7.6
Materials............................. 23,866 12.8
Multi-Industry........................ 3,928 2.1
Services.............................. 44,940 24.0
--------- ---
$ 176,224 94.2%
--------- ---
--------- ---
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
International Small Cap Portfolio
50
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE JAPANESE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
COMMON STOCKS (85.6%)
CAPITAL EQUIPMENT (27.2%)
40,000 Amada Co., Ltd.................................... $ 342
35,000 Daifuku........................................... 392
40,000 Daikin Industries Ltd............................. 322
30,000 Dai Nippon Printing Co., Ltd...................... 477
26,000 Fuji Machine Manufacturing Co..................... 794
35,000 Kyudenko Co., Ltd................................. 487
60,000 Matsui Construction............................... 526
70,000 Mitsubishi Heavy Industries Ltd................... 475
24,000 Nifco, Inc........................................ 300
35,000 Ricoh Co., Ltd.................................... 300
80,000 Taisei Corp., Ltd................................. 473
86,000 Teijin Seiki Co., Ltd............................. 385
30,000 Toshiba Engineering & Construction................ 246
85,000 Tsubakimoto Chain................................. 399
----------
5,918
----------
CONSUMER GOODS (11.3%)
50,000 Japan Vilene Co., Ltd............................. 292
9,000 Nintendo Corp., Ltd............................... 517
75,000 Nissan Motor Co................................... 479
11,500 Sankyo Co., Ltd................................... 267
50,000 Suzuki Motor Co., Ltd............................. 557
15,000 Yamanouchi Pharmaceutical Co...................... 338
----------
2,450
----------
ELECTRICAL & ELECTRONICS (19.5%)
20,000 CMK............................................... 259
60,000 Hitachi Ltd....................................... 598
40,000 Matsushita Electric Industries Ltd................ 622
23,000 Mitsumi Electric Co., Ltd......................... 396
56,000 NEC Corp.......................................... 613
8,000 Sony Corp......................................... 384
40,000 Stanley Electric Co............................... 252
12,000 TDK Corp.......................................... 546
90,000 Toshiba Corp...................................... 570
----------
4,240
----------
FINANCE (6.9%)
20,000 Daiwa Securities Co., Ltd......................... 211
41,000 Keihanshin Real Estate............................ 275
30,000 Mitsubishi Estate Co., Ltd........................ 338
35,000 Nichido Fire & Marine Insurance................... 283
10,000 Nomura Securities Co.............................. 174
43,000 Sumitomo Corp. Leasing Ltd........................ 227
----------
1,508
----------
MATERIALS (10.0%)
53,000 Asahi Tec Corp.................................... 362
61,000 Kaneka Corp....................................... 392
48,000 Kansei Corp....................................... 368
58,000 Nippon Konpo Unyu Soko............................ 530
52,000 Okura Industrial Co., Ltd......................... 338
25,000 Sanwa Shutter..................................... 188
----------
2,178
----------
MULTI-INDUSTRY (1.9%)
8,400 FamilyMart........................................ 421
----------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
SERVICES (8.8%)
50,000 Inabata & Co...................................... $ 296
32,000 Nishio Rent All Co................................ 698
20,000 Sangetsu Co., Ltd................................. 531
6,000 Secom Co., Ltd.................................... 377
----------
1,902
----------
TOTAL COMMON STOCKS (Cost $20,927)............................ 18,617
----------
<CAPTION>
FACE
AMOUNT
(000)
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENT (13.6%)
REPURCHASE AGREEMENT (13.6%)
$ 2,949 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $2,950, collateralized by
$2,970 United States Treasury Bills, due
7/20/95-7/27/95, valued at $2,961 (Cost
$2,949)......................................... 2,949
------
FOREIGN CURRENCY (0.0%)
Y 1 Japanese Yen (Cost $0)............................ --
----------
TOTAL INVESTMENTS (99.2%) (Cost $23,876)...................... 21,566
----------
OTHER ASSETS (4.7%)
Cash............................................ $ 642
Receivable for Portfolio Shares Sold............ 235
Dividends Receivable............................ 154
Other........................................... 3 1,034
----------
LIABILITIES (-3.9%)
Payable for Investments Purchased............... (496)
Net Unrealized Loss on Forward Foreign Currency (285)
Contracts......................................
Investment Advisory Fees Payable................ (31)
Custodian Fees Payable.......................... (8)
Administrative Fees Payable..................... (3)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (30) (854)
---------- ----------
NET ASSETS (100%)............................................. $ 21,746
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 2,655,494 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $8.19
----------
----------
</TABLE>
- ------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at June 30, 1995,
the Portfolio is obligated to deliver or is to receive foreign currency in
exchange for US dollars as indicated below:
<TABLE>
<CAPTION>
IN NET
CURRENCY EXCHANGE UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
- ----------- --------- ----------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
$ 2,791 $ 2,791 11/22/95 Y 230,000 $ 2,768 $ (23)
Y 980,000 11,793 11/22/95 $ 11,531 11,531 (262)
--------- --------- -----
$ 14,584 $ 14,299 $ (285)
--------- --------- -----
--------- --------- -----
</TABLE>
- ------------------------------------------------------------
Y -- Japanese Yen
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Japanese Equity Portfolio
53
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE LATIN AMERICAN PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
COMMON STOCKS (59.3%)
ARGENTINA (8.6%)
2,150 Banco del Sud Argentina, Class B.................. $ 13
+133,372 Banco del Suquia, Class B......................... 193
+3,500 Buenos Aires Embotelladora ADR.................... 88
32,970 Capex S.A. ADR.................................... 507
25,000 CIADEA (Renault) S.A.............................. 121
14,424 Quilmes Industrial S.A............................ 281
----------
1,203
----------
BRAZIL (19.0%)
22,850,000 Cia Acos Especiais Itabira........................ 148
1,584 Cia Energetica de Minas Gerias ADR................ 31
7,422 Cia Energetica de Minas Gerias GDR................ 145
3,637,000 Cia Energetica de Sao Paulo....................... 119
1,446,000 Cia Paulista de Forca E Luz....................... 72
9,580,000 Cia Siderurgica Nacional.......................... 219
1,440,000 Eletrobras........................................ 375
+30,700 Eletrobras ADR.................................... 415
20,000 Rhodia-Ster GDR................................... 280
375,000 Servicos de Eletricdade........................... 118
11,400 Telebras ADR...................................... 376
1,604,500 Telecomunicacoes de Sao Paulo..................... 204
13,420 Usiminas Siderurgicas de Minas Gerias ADR......... 149
----------
2,651
----------
CHILE (2.7%)
9,310 Empresa Nacional de Electricidad S.A. ADR......... 247
6,350 Maderas y Sinteticos S.A. ADR..................... 119
----------
366
----------
MEXICO (26.5%)
10,950 ALFA S.A. de C.V., Class A........................ 133
+72,000 Apasco S.A........................................ 286
198,880 Banacci, Class B.................................. 305
34,829 Banacci, Class L.................................. 53
38,970 Cemex CPO ADR..................................... 265
17,060 Empresas ICA S.A. ADR............................. 175
186,000 FEMSA, Class B.................................... 434
+5,000 Grupo Carso S.A. ADR.............................. 55
67,970 Grupo Financiero Bancomer ADR..................... 408
+33,831 Grupo Financiero Bancomer, Class L................ 9
91,500 Grupo Financiero Banorte, Class C................. 119
+11,770 Grupo Mexicano Desarrollo ADR, Class B............ 46
+47,750 Grupo Sidek S.A., Class B......................... 43
6,450 Grupo Simec S.A. ADR, Class B..................... 64
+1,350 Grupo Tribasa S.A. ADR............................ 11
15,800 Hylsamex S.A. ADR................................. 288
9,615 Panamerican Beverages, Inc., Class A.............. 288
10,620 Telefonos de Mexico S.A. ADR, Class L............. 313
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
102,400 Tolmex S.A., Class B2............................. $ 400
----------
3,695
----------
PERU (2.5%)
44,200 Banco de Credito del Peru......................... 77
158,600 Telefonica del Peru S.A., Class B................. 271
----------
348
----------
TOTAL COMMON STOCKS (Cost $8,044)............................. 8,263
----------
PREFERRED STOCKS (31.7%)
BRAZIL (31.7%)
61,870,000 Banco Bradesco.................................... 524
14,770,000 Banco do Brasil................................... 177
4,820,000 Banco do Estado Sao Paulo......................... 27
3,550,000 Banco Nacional S.A................................ 69
1,158,173 Brahma............................................ 380
360,000 Brasmotor......................................... 67
+230,000 Centrais Eletricas de Santa Catarina, Class B..... 186
1,540,000 Cia Energetica de Sao Paulo....................... 61
6,600 Cia Energetica de Sao Paulo ADR................... 75
5,760,000 Cia Paulista de Forca E Luz....................... 189
4,000,000 Continental 2001.................................. 87
550,000 Coteminas......................................... 173
169,000 Dixie Laleka S.A.................................. 132
583,000 Eletrobras........................................ 155
1,590,400 Itaubanco......................................... 484
8,650,000 Lojas Renner...................................... 147
99,000 Multibras S.A..................................... 82
4,550,000 Petrobras......................................... 386
58,300,000 Refrigeracao Parana............................... 113
6,232,000 Telebras.......................................... 205
3,149,000 Telecomunicacoes de Sao Paulo..................... 390
1,142,000 Vale Do Rio Doce.................................. 173
320,000 WEG S.A........................................... 146
----------
TOTAL PREFERRED STOCKS (Cost $4,560).......................... 4,428
----------
<CAPTION>
FACE
AMOUNT
(000)
- ----------
<C> <S> <C>
CONVERTIBLE DEBENTURES (2.3%)
COLOMBIA (2.3%)
$ 430 Banco de Colombia 5.20%, 2/01/99
(Cost $389)..................................... 327
----------
<CAPTION>
NO. OF
RIGHTS
- ----------
<C> <S> <C>
RIGHTS (0.0%)
BRAZIL (0.0%)
+**1,117,250 Banco Bradesco (Cost $0).......................... 1
----------
TOTAL FOREIGN SECURITIES (93.3%) (Cost $12,993)............... 13,019
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Latin American Portfolio
57
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE LATIN AMERICAN PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------
SHORT-TERM INVESTMENT (4.4%)
REPURCHASE AGREEMENT (4.4%)
$ 613 U.S. Trust, 5.90%, dated 6/30/95,
due 7/03/95, to be repurchased at
$613, collateralized by $645
United States Treasury Bills, due
7/27/95, valued at $642 (Cost
$613)............................. $ 613
---------
FOREIGN CURRENCY (2.3%)
APS 33 Argentine Peso...................... 33
BLR 62 Brazilian Real...................... 67
MP 1,400 Mexican New Peso.................... 224
PS 3 Peruvian Sol........................ 1
---------
TOTAL FOREIGN CURRENCY (Cost $327)................. 325
---------
TOTAL INVESTMENTS (100%) (Cost $13,933)............ 13,957
---------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (4.1%)
Cash................................... $ 1
Receivable for Portfolio Shares Sold... 355
Receivable for Investments Sold........ 161
Dividends Receivable................... 18
Interest Receivable.................... 10
Expense Reimbursement Receivable....... 23 568
---------
LIABILITIES (-4.1%)
Payable for Investments Purchased...... (510)
Custodian Fees Payable................. (22)
Administrative Fees Payable............ (2)
Sub-Administrative Fees Payable........ (2)
Directors' Fees and Expenses Payable... (2)
Other Liabilities...................... (34) (572)
--------- ---------
NET ASSETS (100%)................................... $ 13,953
---------
---------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 1,586,250 outstanding $.001 par
value shares (authorized 500,000,000 shares)...... $8.80
---------
---------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT
INFORMATION:
Under the terms of forward foreign currency contracts open at
June 30, 1995, the Portfolio is obligated to deliver US
dollars in exchange for foreign currency as indicated below:
</TABLE>
<TABLE>
<CAPTION>
IN
CURRENCY EXCHANGE UNREALIZED
TO DELIVER SETTLEMENT FOR LOSS
(000) VALUE (000) DATE (000) VALUE (000) (000)
- ---------- ----- ---------- ----------- ----- -------------
<S> <C> <C> <C> <C> <C>
$ 8 $ 8 7/03/95 BLR 7 $ 8 --
-- --
-- --
-----
-----
</TABLE>
- ------------------------------------------------------------
+ -- Non-income producing securities
** -- Security is valued at fair value -- See Note A-1
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
BLR -- Brazilian Real
- ------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
<S> <C> <C>
- -----------------------------------------------------------------
Capital Equipment...................... $ 558 4.0%
Consumer Goods......................... 2,339 16.8
Energy................................. 3,227 23.1
Finance................................ 2,668 19.1
Materials.............................. 2,564 18.4
Multi-Industry......................... 175 1.2
Services............................... 1,488 10.7
--------- ---
$ 13,019 93.3%
--------- ---
--------- ---
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Latin American Portfolio
58
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE AGGRESSIVE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCK (91.8%)
CAPITAL GOODS/CONSTRUCTION (14.3%)
AEROSPACE & DEFENSE (14.3%)
+7,200 Litton Industries, Inc............................ $ 266
15,800 Lockheed Martin Corp.............................. 997
9,200 McDonnell Douglas Corp............................ 706
8,200 United Technologies Corp.......................... 641
----------
TOTAL CAPITAL GOODS/CONSTRUCTION............................ 2,610
----------
CONSUMER CYCLICAL (9.2%)
FOOD SERVICE & LODGING (1.7%)
8,900 Hospitality Franchise Systems, Inc................ 308
----------
LEISURE RELATED (1.4%)
4,300 Eastman Kodak Co.................................. 261
----------
PUBLISHING (1.6%)
5,300 Gannett Co., Inc.................................. 288
----------
RETAIL-GENERAL (4.5%)
+6,500 AutoZone, Inc..................................... 163
+12,300 General Nutrition Cos., Inc....................... 432
5,500 Home Depot, Inc................................... 223
----------
818
----------
TOTAL CONSUMER-CYCLICAL..................................... 1,675
----------
CONSUMER STAPLES (32.7%)
BEVERAGES & TOBACCO (24.8%)
8,400 Coca Cola Co...................................... 536
4,200 PepsiCo, Inc...................................... 192
51,000 Philip Morris Cos., Inc........................... 3,793
----------
4,521
----------
FOOD (2.1%)
5,400 Kellogg Co........................................ 385
----------
HEALTH CARE SUPPLIES & SERVICES (5.8%)
5,200 American Home Products Corp....................... 402
6,300 Columbia/HCA Healthcare Corp...................... 272
9,400 United Healthcare Corp............................ 389
----------
1,063
----------
TOTAL CONSUMER STAPLES...................................... 5,969
----------
ENERGY (0.5%)
COAL, GAS, & OIL (0.5%)
3,900 Occidental Petroleum Corp......................... 89
----------
FINANCE (23.6%)
BANKING (5.2%)
13,900 Ahmanson (H.F.) & Co.............................. 306
9,900 Citicorp.......................................... 573
300 Wells Fargo & Co.................................. 54
----------
933
----------
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (10.8%)
16,700 American Express Co............................... $ 586
7,600 Federal Home Loan Mortgage Corp................... 522
5,000 Federal National Mortgage Association............. 472
8,800 Franklin Resources, Inc........................... 392
----------
1,972
----------
INSURANCE (7.6%)
15,400 Ace, Ltd.......................................... 447
15,500 Exel Ltd.......................................... 806
5,400 PartnerRe Holdings, Ltd........................... 141
----------
1,394
----------
TOTAL FINANCE............................................... 4,299
----------
MATERIALS (2.9%)
FOREST PRODUCTS & PAPER (2.9%)
6,700 Champion International Corp....................... 349
+8,400 Stone Container Corp.............................. 179
----------
TOTAL MATERIALS............................................. 528
----------
TECHNOLOGY (8.6%)
COMPUTERS (5.3%)
7,300 International Business Machines Corp.............. 701
+3,000 Microsoft, Inc.................................... 271
----------
972
----------
ELECTRONICS (3.3%)
+2,000 Applied Material, Inc............................. 173
3,000 Intel Corp........................................ 190
1,800 Texas Instruments, Inc............................ 241
----------
604
----------
TOTAL TECHNOLOGY............................................ 1,576
----------
TOTAL COMMON STOCK (Cost $15,576)............................. 16,746
----------
PURCHASED PUT OPTION (0.0%)
CONSUMER STAPLES (0.0%)
BEVERAGES & TOBACCO (0.0%)
+20,000 Philip Morris Cos., Inc., expiring 7/22/95, strike
price $70 (Cost $8)............................. 4
----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.2%)
US GOVERNMENT OBLIGATION (2.7%)
$500 U.S. Treasury Bill, 8/17/95....................... 497
----------
REPURCHASE AGREEMENT (3.5%)
642 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $642, collateralized by $675
United States Treasury Bills, due 7/27/95,
valued at $672.................................. 642
----------
TOTAL SHORT-TERM INVESTMENTS (Cost $1,138).................... 1,139
----------
TOTAL INVESTMENTS (98.0%) (Cost $16,722)...................... 17,889
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Aggressive Equity Portfolio
61
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE AGGRESSIVE EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(000)
<S> <C> <C>
- ------------------------------------------------------------
OTHER ASSETS (5.2%)
Receivable for Investments Sold................. $ 829
Receivable for Portfolio Shares Sold............ 63
Dividends Receivable............................ 37
Expense Reimbursement Receivable................ 17 $ 946
-----
LIABILITIES (-3.2%)
Payable for Investments Purchased............... (531)
Written Options Outstanding, at Value (premiums
received $9)................................... (22)
Custodian Fees Payable.......................... (2)
Administrative Fees Payable..................... (2)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (22) (580)
----- ----------
NET ASSETS (100%)............................................. $ 18,255
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 1,546,129 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $11.81
----------
----------
</TABLE>
<TABLE>
<S> <C> <C>
OPEN WRITTEN COVERED CALL OPTIONS:
Open written covered call options at June 30, 1995 were:
</TABLE>
<TABLE>
<CAPTION>
NO. OF EXERCISE EXPIRATION VALUE
DESCRIPTION CONTRACTS PRICE DATE (000)
- ------------------------- --------------- ----------- ----------- -----
<S> <C> <C> <C> <C>
McDonnell Douglas Corp... 40 $ 125 7/31/95 $ 12
Coca Cola Co............. 52 88 8/30/95 10
---
(Premiums $9)....................................................... $ 22
---
---
</TABLE>
- ------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Aggressive Equity Portfolio
62
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
------------------------------------------------------------
COMMON STOCKS (92.7%)
CAPITAL GOODS/CONSTRUCTION (2.2%)
ELECTRICAL EQUIPMENT (1.5%)
60,000 Molex, Inc., Class A.............................. $ 2,190
----------
ENVIRONMENTAL CONTROLS (0.7%)
+50,000 Western Waste Industries.......................... 1,006
----------
TOTAL CAPITAL GOODS/CONSTRUCTION............................ 3,196
----------
CONSUMER-CYCLICAL (19.5%)
AUTOMOTIVE (0.9%)
46,100 Pep Boys-Manny, Moe & Jack........................ 1,233
----------
FOOD SERVICE & LODGING (6.8%)
+80,000 Cheesecake Factory, Inc........................... 2,060
100,000 Cracker Barrel Old Country Store, Inc............. 2,062
60,000 Hospitality Franchise Systems, Inc................ 2,078
+90,000 ShoLodge, Inc..................................... 1,339
+85,000 Sonic Corp........................................ 2,295
----------
9,834
----------
PRINTING & PUBLISHING (2.4%)
50,000 Lee Enterprises, Inc.............................. 1,906
+29,700 Scholastic Corp................................... 1,611
----------
3,517
----------
RETAIL-GENERAL (9.4%)
+100,000 Bed, Bath & Beyond, Inc........................... 2,425
+110,000 Central Tractor Farm & Country, Inc............... 1,182
+70,000 General Nutrition Cos., Inc....................... 2,459
75,000 Heilig Meyers Co.................................. 1,913
+30,000 Kohl's Corp....................................... 1,369
+80,000 Lechters, Inc..................................... 1,240
+50,000 OfficeMax, Inc.................................... 1,394
+44,000 Sunglass Hut International, Inc................... 1,529
----------
13,511
----------
TOTAL CONSUMER-CYCLICAL..................................... 28,095
----------
CONSUMER-STAPLES (23.6%)
DRUGS (5.2%)
60,000 Forest Laboratories, Inc.......................... 2,662
50,000 Genzyme Corp. -- General Division................. 1,988
+80,000 Immucor, Inc...................................... 740
+50,000 Scherer (R.P.) Corp............................... 2,113
----------
7,503
----------
HEALTH CARE SUPPLIES & SERVICES (18.4%)
60,000 Arrow International, Inc.......................... 2,490
55,000 Ballard Medical Products.......................... 715
+120,000 Biomet, Inc....................................... 1,845
+60,000 CRA Managed Care, Inc............................. 1,350
+100,000 Haemonetics Corp.................................. 1,925
+6,300 Health Management, Inc............................ 68
+97,500 Health Management Systems, Inc.................... 2,779
+60,000 Healthsource, Inc................................. 2,100
+130,000 HEALTHSOUTH Rehabilitation Corp................... 2,259
+65,000 IDEXX Laboratories, Inc........................... 1,690
+100,000 Mariner Health Group, Inc......................... 1,125
+110,200 Quantum Health Resources, Inc..................... 1,804
+75,000 Research Industries Corp.......................... 1,725
+75,000 Vencor, Inc....................................... 2,362
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
------------------------------------------------------------
+80,000 Vivra, Inc........................................ $ 2,170
----------
26,407
----------
TOTAL CONSUMER-STAPLES...................................... 33,910
----------
FINANCE (5.3%)
FINANCIAL SERVICES (2.9%)
100,000 Cash America International, Inc................... 737
40,000 First Financial Management Corp................... 3,420
----------
4,157
----------
INSURANCE (2.4%)
55,000 Mutual Risk Management Ltd........................ 1,843
50,000 NAC Re Corp....................................... 1,556
----------
3,399
----------
TOTAL FINANCE............................................... 7,556
----------
MATERIALS (2.2%)
MISCELLANEOUS MATERIALS & COMMODITIES (2.2%)
+85,000 Viking Office Products, Inc....................... 3,103
----------
SERVICES (7.7%)
PROFESSIONAL SERVICES (7.7%)
75,000 Cintas Corp....................................... 2,663
+95,000 CUC International, Inc............................ 3,990
115,000 G & K Services, Inc., Class A..................... 2,243
55,000 Premier Industrial Corp........................... 1,299
+46,800 Vallen Corp....................................... 807
----------
TOTAL SERVICES.............................................. 11,002
----------
TECHNOLOGY (32.2%)
ELECTRONICS (14.1%)
+35,000 Electroglas, Inc.................................. 2,004
+60,000 Fusion Systems Corp............................... 2,055
+75,000 Level One Communications, Inc..................... 1,612
70,000 Linear Technology, Inc............................ 4,585
+70,000 Maxim Integrated Products, Inc.................... 3,552
55,000 Sensormatic Electronics........................... 1,953
+47,400 Xilinx, Inc....................................... 4,444
----------
20,205
----------
OFFICE EQUIPMENT (17.2%)
25,000 Adobe Systems, Inc................................ 1,450
+85,000 BISYS Group, Inc.................................. 1,891
+90,000 Compuware Corp.................................... 2,767
+100,000 Concord EFS Corp.................................. 2,625
+70,000 EMC Corp.......................................... 1,697
+180,000 Informix Corp..................................... 4,568
+40,000 Microchip Technology, Inc......................... 1,455
+55,000 Progress Software Corp............................ 2,846
+58,000 SPS Transaction Services, Inc..................... 2,008
+65,000 SunGard Data Systems, Inc......................... 3,396
----------
24,703
----------
TELECOMMUNICATIONS (0.9%)
+50,000 Mobile Telecommunications Technologies Corp....... 1,363
----------
TOTAL TECHNOLOGY............................................ 46,271
----------
TOTAL COMMON STOCKS (Cost $94,460)............................ 133,133
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144 - 152)
- --------------------------------------------------------------------------------
Emerging Growth Portfolio
65
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING GROWTH PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (7.3%)
REPURCHASE AGREEMENT (7.3%)
$ 10,504 Goldman Sachs, 6.00%, dated 6/30/95, due 7/03/95,
to be repurchased at $10,509, collateralized by
$7,820 United States Treasury Notes, 11.875%,
due 11/15/03, valued at $10,744 (Cost
$10,504)........................................ $ 10,504
----------
TOTAL INVESTMENTS (100.0%) (Cost $104,964).................... 143,637
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (0.8%)
Receivable for Investments Sold................. $ 1,134
Dividends Receivable............................ 22
Interest Receivable............................. 2
Other........................................... 7 1,165
----------
LIABILITIES (-0.8%)
Payable for Portfolio Shares Redeemed........... (775)
Investment Advisory Fees Payable................ (309)
Payable for Investments Purchased............... (78)
Administrative Fees Payable..................... (18)
Custodian Fees Payable.......................... (5)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (30) (1,216)
---------- ----------
NET ASSETS (100%)............................................. $ 143,586
----------
----------
</TABLE>
<TABLE>
<C> <S> <C>
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 7,870,255 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $18.24
----------
----------
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing securities
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144 - 152)
- --------------------------------------------------------------------------------
Emerging Growth Portfolio
66
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
COMMON STOCKS (90.3%)
CAPITAL GOODS/CONSTRUCTION (12.0%)
AEROSPACE & DEFENSE (9.9%)
+54,400 Litton Industries, Inc............................ $ 2,006
46,600 Lockheed Martin Corp.............................. 2,942
22,800 Loral Corp........................................ 1,180
40,600 McDonnell Douglas Corp............................ 3,116
30,500 Rockwell International Corp....................... 1,395
48,900 United Technologies Corp.......................... 3,820
----------
14,459
----------
BUILDING & CONSTRUCTION (0.5%)
+34,300 USG Corp.......................................... 815
----------
ELECTRICAL EQUIPMENT (0.8%)
21,200 General Electric Co............................... 1,195
----------
MACHINERY (0.8%)
17,500 Caterpillar, Inc.................................. 1,124
----------
TOTAL CAPITAL GOODS/CONSTRUCTION............................ 17,593
----------
CONSUMER-CYCLICAL (16.5%)
AUTOMOTIVE (2.6%)
21,300 Chrysler Corp..................................... 1,020
29,700 Ford Motor Co..................................... 884
14,300 General Motors Corp............................... 670
30,000 Goodyear Tire & Rubber Co......................... 1,237
----------
3,811
----------
BROADCAST-RADIO & TELEVISION (2.1%)
10,600 CBS, Inc.......................................... 710
59,000 New World Communications.......................... 1,232
+25,918 Viacom, Inc., Class B............................. 1,202
----------
3,144
----------
FOOD SERVICE & LODGING (2.4%)
+33,650 Boston Chicken, Inc............................... 814
47,000 Cracker Barrel Old Country Store, Inc............. 970
49,800 Hospitality Franchise Systems, Inc................ 1,724
----------
3,508
----------
GAMING & LODGING (0.5%)
21,450 National Gaming Corp.............................. 185
38,400 Trump Hotels & Casino Resort...................... 514
----------
699
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.9%)
30,300 Duracell International, Inc....................... 1,310
----------
LEISURE RELATED (2.2%)
30,200 Eastman Kodak Co.................................. 1,831
18,300 Polaroid Corp..................................... 746
35,800 Toy Biz, Inc...................................... 649
----------
3,226
----------
PUBLISHING (1.9%)
33,800 Gannett Co., Inc.................................. 1,834
22,600 Time Warner, Inc.................................. 929
----------
2,763
----------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
RETAIL-GENERAL (3.9%)
+50,300 AutoZone, Inc..................................... $ 1,264
+42,300 General Nutrition Cos., Inc....................... 1,486
24,700 Harcourt General, Inc............................. 1,050
31,400 Home Depot, Inc................................... 1,276
19,600 Lowe's Cos., Inc.................................. 585
----------
5,661
----------
TOTAL CONSUMER-CYCLICAL..................................... 24,122
----------
CONSUMER-STAPLES (20.6%)
BEVERAGES & TOBACCO (11.6%)
50,000 Coca Cola Co...................................... 3,188
33,700 PepsiCo, Inc...................................... 1,538
154,400 Philip Morris Cos., Inc........................... 11,484
26,200 UST, Inc.......................................... 779
----------
16,989
----------
DRUGS (4.2%)
20,900 American Home Products Corp....................... 1,617
22,500 Merck & Co., Inc.................................. 1,103
21,150 Pfizer, Inc....................................... 1,954
32,600 Schering-Plough Corp.............................. 1,438
----------
6,112
----------
FOOD (2.4%)
25,600 Kellogg Co........................................ 1,827
33,200 Ralston Purina Group.............................. 1,693
----------
3,520
----------
HEALTH CARE SUPPLIES & SERVICES (2.0%)
42,500 Columbia/HCA Healthcare Corp...................... 1,838
26,100 United Healthcare Corp............................ 1,080
----------
2,918
----------
PERSONAL CARE PRODUCTS (0.4%)
+66,100 Playtex Products, Inc............................. 653
----------
TOTAL CONSUMER-STAPLES...................................... 30,192
----------
DIVERSIFIED (1.0%)
33,200 AlliedSignal, Inc................................. 1,477
----------
ENERGY (2.7%)
COAL, GAS, & OIL (2.7%)
10,700 Exxon Corp........................................ 755
14,300 Mobil Corp........................................ 1,373
14,900 Occidental Petroleum Corp......................... 341
12,800 Royal Dutch Petroleum Co.......................... 1,560
----------
TOTAL ENERGY................................................ 4,029
----------
FINANCE (18.6%)
BANKING (5.3%)
71,400 Ahmanson (H.F.) & Co.............................. 1,571
47,800 Citicorp.......................................... 2,767
23,800 Morgan (J.P.) & Co., Inc.......................... 1,669
9,600 Wells Fargo & Co.................................. 1,730
----------
7,737
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Equity Growth Portfolio
69
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (9.6%)
15,700 Aetna Life & Casualty Co.......................... $ 987
81,100 American Express Co............................... 2,849
37,100 Countrywide Credit Industries, Inc................ 779
12,900 Dean Witter Discover & Co......................... 606
21,600 Federal Home Loan Mortgage Corp................... 1,485
55,600 Federal National Mortgage Association............. 5,247
30,200 Franklin Resources, Inc........................... 1,344
20,100 Travelers, Inc.................................... 879
----------
14,176
----------
INSURANCE (3.7%)
60,200 Ace, Ltd.......................................... 1,746
54,000 Exel Ltd.......................................... 2,808
32,200 PartnerRe Holdings, Ltd........................... 841
----------
5,395
----------
TOTAL FINANCE............................................... 27,308
----------
MATERIALS (4.0%)
CHEMICALS (1.6%)
31,600 Hercules, Inc..................................... 1,541
9,100 Monsanto Co....................................... 820
----------
2,361
----------
FOREST PRODUCTS & PAPER (2.4%)
35,700 Champion International Corp....................... 1,861
11,100 Mead Corp......................................... 659
+45,300 Stone Container Corp.............................. 963
----------
3,483
----------
TOTAL MATERIALS............................................. 5,844
----------
SERVICES (2.6%)
BUSINESS SERVICES (0.5%)
+33,800 Bell & Howell Holding Co.......................... 684
----------
PROFESSIONAL SERVICES (0.8%)
+28,700 CUC International, Inc............................ 1,205
----------
TRANSPORTATION (1.3%)
+10,800 AMR Corp.......................................... 806
18,400 Burlington Northern, Inc.......................... 1,166
----------
1,972
----------
TOTAL SERVICES.............................................. 3,861
----------
TECHNOLOGY (12.3%)
COMPUTERS (3.6%)
+21,950 Cabletron Systems, Inc............................ 1,169
21,100 Hewlett Packard................................... 1,572
26,500 International Business Machines Corp.............. 2,544
----------
5,285
----------
ELECTRONICS (5.1%)
+14,400 Applied Materials, Inc............................ 1,247
24,100 Intel Corp........................................ 1,526
+26,000 LSI Logic Corp.................................... 1,017
22,700 Motorola, Inc..................................... 1,524
9,600 Texas Instruments, Inc............................ 1,285
21,800 Watkins-Johnson Co................................ 970
----------
7,569
----------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
SOFTWARE SERVICES (1.1%)
+17,200 Microsoft Corp.................................... $ 1,554
----------
TELECOMMUNICATIONS (2.5%)
+42,200 AirTouch Communications........................... 1,203
47,500 American Telephone & Telegraph Corp............... 2,523
----------
3,726
----------
TOTAL TECHNOLOGY............................................ 18,134
----------
TOTAL COMMON STOCKS (Cost $114,109)........................... 132,560
----------
<CAPTION>
NO. OF
RIGHTS
- ----------
<C> <S> <C>
RIGHTS (0.0%)
CONSUMER-CYCLICAL (0.0%)
BROADCAST RADIO & TELEVISION (0.0%)
+38,800 Viacom, Inc., expiring 7/07/95 (Cost $168)........ 58
----------
<CAPTION>
SHARES
- ----------
<C> <S> <C>
PURCHASED OPTION (0.0%)
CONSUMER STAPLES (0.0%)
BEVERAGES & TOBACCO (0.0%)
75,000 Philip Morris Cos., Inc., expiring 7/22/95, strike
price $70 (Cost $30)............................ 14
----------
<CAPTION>
FACE
AMOUNT
(000)
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENT (8.2%)
REPURCHASE AGREEMENT (8.2%)
$ 11,941 Goldman Sachs, 6.05%, dated 6/30/95, due 7/03/95,
to be repurchased at $11,947, collateralized by
$7,690 United States Treasury Bonds 13.875%, due
5/15/11, valued at $12,260 (Cost $11,941)....... 11,941
----------
TOTAL INVESTMENTS (98.5%) (Cost $126,248)..................... 144,573
----------
OTHER ASSETS (2.4%)
Cash............................................ $ 1
Receivable for Investments Sold................. 3,336
Dividends Receivable............................ 248
Interest Receivable............................. 2
Other........................................... 5 3,592
----------
LIABILITIES (-0.9%)
Payable for Investments Purchased............... (1,108)
Investment Advisory Fees Payable................ (160)
Payable for Portfolio Shares Redeemed........... (72)
Administrative Fees Payable..................... (18)
Custodian Fees Payable.......................... (6)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (27) (1,392)
---------- ----------
NET ASSETS (100%)............................................. $ 146,773
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 10,362,996 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $14.16
----------
----------
</TABLE>
- ------------------------------------------------------------
+ -- Non-income producing securities
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Equity Growth Portfolio
70
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE SMALL CAP VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (95.6%)
AEROSPACE (3.6%)
35,000 AAR Corp.......................................... $ 626
18,000 Thiokol Corp...................................... 545
85,300 United Industrial Corp............................ 608
----------
1,779
----------
BANKING (10.0%)
21,450 First Security Corp. (Delaware)................... 601
25,000 Green Point Financial Corp........................ 591
18,600 Onbancorp, Inc.................................... 528
33,000 Peoples Heritage Financial Group, Inc............. 495
16,000 Standard Federal Bank............................. 538
26,610 Summit Bancorp., Inc.............................. 565
12,400 Union Bank of San Francisco....................... 524
20,000 Union Planters Corp............................... 535
21,000 Washington Mutual, Inc............................ 492
----------
4,869
----------
BUILDING (3.1%)
12,300 Ameron, Inc. (Delaware)........................... 446
38,800 Gilbert Associates, Inc., Class A................. 504
24,500 Pratt & Lambert, Inc.............................. 573
----------
1,523
----------
CAPITAL GOODS (3.1%)
21,403 Binks Manufacturing Co............................ 543
30,200 Cascade Corp...................................... 483
21,600 Starret (L.S.) Co., Class A....................... 489
----------
1,515
----------
CHEMICALS (4.0%)
30,720 Aceto Corp........................................ 453
23,400 Dexter Corp....................................... 553
22,000 Learonal, Inc..................................... 465
29,800 Quaker Chemical Corp.............................. 484
----------
1,955
----------
COMMUNICATIONS (1.1%)
28,200 Comsat Corp....................................... 553
----------
CONSUMER-DURABLES (2.8%)
21,200 Arvin Industries, Inc............................. 474
30,298 Knape & Vogt Manufacturing Co..................... 454
31,300 Oneida Ltd........................................ 462
----------
1,390
----------
CONSUMER-RETAIL (6.3%)
28,800 CPI Corp.......................................... 551
+5,360 Dave & Busters, Inc............................... 107
41,900 Deb Shops, Inc.................................... 136
26,800 Edison Brothers Stores, Inc....................... 322
21,700 Guilford Mills, Inc............................... 529
44,000 Ross Stores, Inc.................................. 517
13,100 Springs Industries, Inc., Class A................. 488
40,600 Venture Stores, Inc............................... 401
----------
3,051
----------
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
CONSUMER-STAPLES (4.3%)
14,802 Block Drug Co., Inc., Class A..................... $ 500
30,400 Coors (Adolph), Inc., Class B..................... 498
25,900 International Multifoods Corp..................... 583
31,400 Nash Finch Co..................................... 510
----------
2,091
----------
ENERGY (2.3%)
21,000 Diamond Shamrock, Inc............................. 541
22,900 Ultramar Corp..................................... 578
----------
1,119
----------
FINANCIAL-DIVERSIFIED (3.1%)
14,900 Finova Group, Inc................................. 521
10,100 GATX Corp......................................... 476
33,000 Manufactured Home Communities, Inc................ 507
----------
1,504
----------
HEALTH CARE (4.2%)
18,500 Beckman Instruments, Inc.......................... 516
31,500 Bindley Western Industries........................ 500
73,700 Kinetic Concepts, Inc............................. 525
26,000 United Wisconsin Services, Inc.................... 520
----------
2,061
----------
INDUSTRIAL (6.1%)
17,200 American Filtrona Corp............................ 507
11,400 Barnes Group, Inc................................. 459
40,700 GenCorp, Inc...................................... 438
44,500 Kaman Corp., Class A.............................. 567
34,900 Zero Corp. (Delaware)............................. 523
24,300 Zurn Industries, Inc.............................. 486
----------
2,980
----------
INSURANCE (5.5%)
16,200 Argonaut Group, Inc............................... 514
30,000 Enhance Financial Services Group, Inc............. 581
19,500 Provident Life & Accident Co. of America, Class
B............................................... 453
17,700 Selective Insurance Group, Inc.................... 584
13,300 USLife Corp....................................... 535
----------
2,667
----------
METALS (2.4%)
8,700 Carpenter Technology Corp......................... 593
14,400 Cleveland-Cliffs Iron Co.......................... 554
----------
1,147
----------
PAPER & PACKAGING (3.0%)
15,500 Ball Corp......................................... 541
11,400 Potlatch Corp..................................... 476
25,500 Sealright Co., Inc................................ 427
----------
1,444
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144 - 152)
- --------------------------------------------------------------------------------
Small Cap Value Equity Portfolio
73
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE SMALL CAP VALUE EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
SERVICES (11.4%)
23,200 ABM Industries, Inc............................... $ 536
21,200 Angelica Corp..................................... 530
27,000 Bowne & Co........................................ 462
30,700 Cross (A.T.) Co., Class A......................... 457
43,000 Handleman Co...................................... 414
52,000 Jackpot Enterprises, Inc.......................... 527
18,400 National Service Industries, Inc.................. 531
25,900 New England Business Services, Inc................ 512
55,400 Piccadilly Cafeterias, Inc........................ 485
35,500 Russ Berrie & Co., Inc............................ 493
16,100 Wallace Computer Services, Inc.................... 618
----------
5,565
----------
TECHNOLOGY (10.2%)
28,000 Augat, Inc........................................ 574
11,500 Avnet, Inc........................................ 556
48,000 Core Industries, Inc.............................. 516
21,800 Cubic Corp........................................ 490
33,700 Gerber Scientific, Inc............................ 564
19,900 Joslyn Corp....................................... 522
20,900 MTS Systems Corp.................................. 564
30,500 National Computer Systems, Inc.................... 633
27,000 Scitex Corp. Ltd.................................. 581
----------
5,000
----------
TRANSPORTATION (2.1%)
22,800 Overseas Shipholding Group, Inc................... 473
24,600 SkyWest, Inc...................................... 557
----------
1,030
----------
UTILITIES (7.0%)
18,700 Central Hudson Gas & Electric..................... 505
13,300 Commonwealth Energy Systems Cos................... 502
15,000 Eastern Enterprises............................... 448
25,900 Oneok, Inc........................................ 554
13,700 Orange & Rockland Utilities, Inc.................. 462
13,500 SJW Corp.......................................... 484
28,500 Washington Water Power Co......................... 456
----------
3,411
----------
TOTAL COMMON STOCKS (Cost $43,469)............................ 46,654
----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------
SHORT-TERM INVESTMENT (4.4%)
REPURCHASE AGREEMENT (4.4%)
$ 2,168 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $2,169, collateralized by
$2,250 United States Treasury Bills, due
7/27/95, valued at $2,241 (Cost $2,168)......... $ 2,168
----------
TOTAL INVESTMENTS (100.0%) (Cost $45,637)..................... 48,822
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (0.2%)
Cash............................................ $ 1
Dividends Receivable............................ 88
Other........................................... 3 92
----------
LIABILITIES (-0.2%)
Investment Advisory Fees Payable................ (63)
Administrative Fees Payable..................... (7)
Custodian Fees Payable.......................... (5)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (26) (102)
---------- ----------
NET ASSETS (100%)............................................. $ 48,812
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 4,239,197 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $11.51
----------
----------
</TABLE>
- ------------------------------------------------------------
+ -- Non-income producing security
The accompanying notes are an integral part of the financial statements. (Pages
144 - 152)
- --------------------------------------------------------------------------------
Small Cap Value Equity Portfolio
74
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE U.S. REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (97.1%)
APARTMENT (28.4%)
44,200 Associated Estates Realty Corp.................... $ 934
45,700 Avalon Properties, Inc............................ 908
82,600 Bay Apartment Communities, Inc.................... 1,611
66,500 Equity Residential Properties Trust............... 1,854
56,600 Evans Withycombe Residential, Inc................. 1,153
53,100 Home Properties of New York, Inc.................. 936
63,400 Irvine Apartment Communities, Inc................. 1,094
60,000 Walden Residential Properties, Inc................ 1,102
76,000 Wellsford Residential Property Trust.............. 1,729
----------
11,321
----------
LAND (1.1%)
+66,500 Atlantic Gulf Communities Corp.................... 432
----------
LODGING/LEISURE (4.7%)
+98,600 Host Marriot Corp................................. 1,048
36,000 Starwood Lodging Trust............................ 846
----------
1,894
----------
MANUFACTURED HOME (6.6%)
20,000 Chateau Properties, Inc........................... 418
60,300 ROC Communities, Inc.............................. 1,334
36,200 Sun Communities, Inc.............................. 905
----------
2,657
----------
OFFICE AND INDUSTRIAL (25.9%)
INDUSTRIAL (0.4%)
7,500 First Industrial Realty Trust, Inc................ 154
----------
OFFICE (9.9%)
64,400 Beacon Properties Corp. .......................... 1,280
44,400 Cali Realty Corp.................................. 860
73,100 Carr Realty Corp.................................. 1,261
+64,900 Koger Equity, Inc................................. 568
----------
3,969
----------
OFFICE AND INDUSTRIAL (15.6%)
75,700 Bedford Property Investors, Inc. ................. 435
60,100 Duke Realty Investments, Inc. .................... 1,698
71,400 Liberty Property Trust ........................... 1,401
31,500 Reckson Associates Realty Corp. .................. 764
86,400 Spieker Properties, Inc. ......................... 1,933
----------
6,231
----------
TOTAL OFFICE AND INDUSTRIAL................................. 10,354
----------
SELF STORAGE (4.2%)
102,000 Storage Equities, Inc............................. 1,670
----------
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
SHOPPING CENTER (26.2%)
FACTORY OUTLET CENTER (1.4%)
20,800 Chelsea GCA Realty, Inc........................... $ 561
----------
REGIONAL MALL (17.0%)
50,000 CBL & Associates Properties, Inc.................. 994
99,700 Crown American Realty Trust....................... 1,259
93,400 DeBartolo Realty Corp............................. 1,366
76,200 Glimcher Realty Trust............................. 1,581
79,500 Macerich Co....................................... 1,560
----------
6,760
----------
STRIP CENTER (7.8%)
98,200 Alexander Haagen Properties, Inc.................. 1,129
29,800 Developers Diversified Realty Corp................ 857
37,900 Price REIT, Inc., Series B........................ 1,132
----------
3,118
----------
TOTAL SHOPPING CENTER....................................... 10,439
----------
TOTAL COMMON STOCKS (Cost $37,467)............................ 38,767
----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENT (4.4%)
REPURCHASE AGREEMENT (4.4%)
$ 1,749 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $1,750, collateralized by
$1,820 United States Treasury Bills, due
7/27/95, valued at $1,813 (Cost $1,749)......... 1,749
----------
TOTAL INVESTMENTS (101.5%) (Cost $39,216)..................... 40,516
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (4.1%)
Receivable for Portfolio Shares Sold............ $ 1,000
Receivable for Investments Sold................. 347
Dividends Receivable............................ 285
Other........................................... 1 1,633
----------
LIABILITIES (-5.6%)
Payable for Investments Purchased............... (2,185)
Investment Advisory Fees Payable................ (11)
Administrative Fees Payable..................... (4)
Custodian Fees Payable.......................... (3)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (25) (2,229)
---------- ----------
NET ASSETS (100%)............................................. $ 39,920
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 3,684,831 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $10.83
----------
----------
- ------------------------------------------------------------
+ -- Non-income producing securities
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
U.S. Real Estate Portfolio
78
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
COMMON STOCKS (96.8%)
AEROSPACE (2.4%)
33,100 United Technologies Corp.......................... $ 2,586
----------
BANKING (9.5%)
35,450 BankAmerica Corp.................................. 1,866
32,700 Bankers Trust (New York) Corp..................... 2,027
43,100 Chemical Banking Corp............................. 2,037
61,900 First of America Bank Corp........................ 2,298
48,150 Mellon Bank Corp.................................. 2,004
----------
10,232
----------
CAPITAL GOODS (1.9%)
24,100 Deere & Co........................................ 2,064
----------
CHEMICALS (3.9%)
34,675 Eastman Chemical Co............................... 2,063
24,400 Monsanto Co....................................... 2,199
----------
4,262
----------
COMMUNICATIONS (7.3%)
50,200 NYNEX Corp........................................ 2,020
44,100 SBC Communications, Inc........................... 2,100
68,900 Sprint Corp....................................... 2,317
35,600 U.S. West, Inc.................................... 1,482
----------
7,919
----------
CONSUMER-DURABLES (3.8%)
72,500 Ford Motor Co..................................... 2,157
41,400 General Motors Corp............................... 1,941
----------
4,098
----------
CONSUMER-RETAIL (5.9%)
157,200 Kmart Corp........................................ 2,299
33,500 V.F. Corp......................................... 1,801
153,400 Woolworth Corp.................................... 2,320
----------
6,420
----------
CONSUMER-SERVICE & GROWTH (6.1%)
72,600 Deluxe Corp....................................... 2,405
33,500 Eastman Kodak Co.................................. 2,031
99,700 Ogden Corp........................................ 2,181
----------
6,617
----------
CONSUMER-STAPLES (8.6%)
53,400 American Brands, Inc.............................. 2,123
36,800 Anheuser Busch Cos., Inc.......................... 2,093
16,500 CPC International, Inc............................ 1,019
93,600 Fleming Cos., Inc................................. 2,480
36,900 Heinz (H.J.) Co................................... 1,637
----------
9,352
----------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------
ENERGY (6.7%)
65,300 Ashland Oil, Inc.................................. $ 2,293
15,550 Mobil Corp........................................ 1,493
12,150 Royal Dutch Petroleum Co.......................... 1,481
30,750 Texaco, Inc....................................... 2,018
----------
7,285
----------
FINANCIAL-DIVERSIFIED (2.1%)
47,450 Student Loan Marketing Association................ 2,224
----------
HEALTH CARE (8.4%)
58,000 Bausch & Lomb, Inc................................ 2,407
58,600 Baxter International, Inc......................... 2,132
31,500 Bristol-Myers Squibb Co........................... 2,146
63,400 Upjohn Co......................................... 2,401
----------
9,086
----------
INDUSTRIAL (4.1%)
120,900 Hanson plc ADR.................................... 2,131
47,700 Rockwell International Corp....................... 2,182
5,565 U.S. Industries, Inc.............................. 76
----------
4,389
----------
INSURANCE (5.8%)
64,100 American General Corp............................. 2,163
55,700 Aon Corp.......................................... 2,075
41,900 St. Paul Cos., Inc................................ 2,064
----------
6,302
----------
METALS (2.5%)
45,300 Phelps Dodge Corp................................. 2,673
----------
TECHNOLOGY (4.2%)
48,500 Apple Computer, Inc............................... 2,252
43,200 Harris Corp....................................... 2,230
----------
4,482
----------
TRANSPORTATION (4.1%)
34,600 Burlington Northern, Inc.......................... 2,193
92,500 Ryder System, Inc................................. 2,208
----------
4,401
----------
UTILITIES (9.5%)
84,500 General Public Utilities Corp..................... 2,514
76,600 Northern Indiana Public Service Co................ 2,604
109,800 Pinnacle West Capital Corp........................ 2,690
70,400 Texas Utilities Co................................ 2,420
----------
10,228
----------
TOTAL COMMON STOCKS (Cost $95,661)............................ 104,620
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Value Equity Portfolio
81
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------
SHORT-TERM INVESTMENT (7.8%)
REPURCHASE AGREEMENT (7.8%)
$ 8,386 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $8,390, collateralized by
$8,685 United States Treasury Bills, due
7/27/95, valued at $8,651 (Cost $8,386)......... $ 8,386
----------
TOTAL INVESTMENTS (104.6%) (Cost $104,047).................... 113,006
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (0.6%)
Cash............................................ $ 1
Receivable for Investments Sold................. 407
Dividends Receivable............................ 267
Interest Receivable............................. 1
Other........................................... 5 681
----------
LIABILITIES (-5.2%)
Payable for Investments Purchased............... (5,448)
Investment Advisory Fees Payable................ (90)
Payable for Portfolio Shares Redeemed........... (17)
Administrative Fees Payable..................... (13)
Custodian Fees Payable.......................... (5)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (33) (5,607)
---------- ----------
NET ASSETS (100%)............................................. $ 108,080
----------
----------
</TABLE>
<TABLE>
<C> <S> <C>
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 8,274,269 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $13.06
</TABLE>
- ------------------------------------------------------------
ADR -- American Depositary Receipt
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Value Equity Portfolio
82
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (48.3%)
AEROSPACE (1.2%)
3,300 United Technologies Corp.......................... $ 258
----------
BANKING (4.8%)
3,700 BankAmerica Corp.................................. 195
3,400 Bankers Trust (New York) Corp..................... 211
4,300 Chemical Banking Corp............................. 203
6,100 First of America Bank Corp........................ 226
4,700 Mellon Bank Corp.................................. 196
----------
1,031
----------
CAPITAL GOODS (0.9%)
2,300 Deere & Co........................................ 197
----------
CHEMICALS (1.9%)
3,425 Eastman Chemical Co............................... 204
2,300 Monsanto Co....................................... 207
----------
411
----------
COMMUNICATIONS (4.2%)
5,500 NYNEX Corp........................................ 221
5,000 SBC Communications, Inc........................... 238
7,200 Sprint Corp....................................... 242
4,700 U.S. West, Inc.................................... 196
----------
897
----------
CONSUMER -- DURABLES (2.0%)
7,300 Ford Motor Co..................................... 217
4,300 General Motors Corp............................... 202
----------
419
----------
CONSUMER -- RETAIL (3.1%)
17,100 Kmart Corp........................................ 250
3,200 V.F. Corp......................................... 172
15,300 Woolworth Corp.................................... 231
----------
653
----------
CONSUMER -- SERVICE & GROWTH (3.1%)
7,100 Deluxe Corp....................................... 235
3,400 Eastman Kodak Co.................................. 206
9,600 Ogden Corp........................................ 210
----------
651
----------
CONSUMER -- STAPLES (4.3%)
5,500 American Brands, Inc.............................. 219
3,500 Anheuser Busch Cos., Inc.......................... 199
1,700 CPC International, Inc............................ 105
9,400 Fleming Cos., Inc................................. 249
3,400 Heinz (H.J.) Co................................... 151
----------
923
----------
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<C> <S> <C>
ENERGY (3.3%)
6,400 Ashland, Inc...................................... $ 225
1,350 Mobil Corp........................................ 130
1,250 Royal Dutch Petroleum Co.......................... 152
3,000 Texaco, Inc....................................... 197
----------
704
----------
FINANCIAL -- DIVERSIFIED (1.1%)
5,100 Student Loan Marketing Association................ 239
----------
HEALTH CARE (3.7%)
5,800 Bausch & Lomb, Inc................................ 241
5,100 Baxter International, Inc......................... 185
2,200 Bristol-Myers Squibb Co........................... 150
5,300 Upjohn Co......................................... 201
----------
777
----------
INDUSTRIAL (2.0%)
12,400 Hanson plc ADR.................................... 218
4,400 Rockwell International Corp....................... 201
565 U.S. Industries, Inc.............................. 8
----------
427
----------
INSURANCE (2.7%)
5,900 American General Corp............................. 199
5,300 Aon Corp.......................................... 198
3,800 St. Paul Cos., Inc................................ 187
----------
584
----------
METALS (1.2%)
4,300 Phelps Dodge Corp................................. 254
----------
TECHNOLOGY (2.1%)
4,900 Apple Computer, Inc............................... 228
4,200 Harris Corp....................................... 217
----------
445
----------
TRANSPORTATION (2.0%)
3,400 Burlington Northern, Inc.......................... 215
9,200 Ryder System, Inc................................. 220
----------
435
----------
UTILITIES (4.7%)
7,700 General Public Utilities Corp..................... 229
7,500 Northern Indiana Public Service Co................ 255
11,100 Pinnacle West Capital Corp........................ 272
7,050 Texas Utilities Co................................ 242
----------
998
----------
TOTAL COMMON STOCKS (Cost $8,984)............................. 10,303
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Balanced Portfolio
85
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE BALANCED PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------
FIXED INCOME SECURITIES (46.5%)
US TREASURY NOTES (46.5%)
$ 4,875 8.25%, 7/15/98.................................... $ 5,187
4,803 5.50%, 4/15/00.................................... 4,710
----------
TOTAL FIXED INCOME SECURITIES (Cost $9,840)................... 9,897
----------
SHORT-TERM INVESTMENT (4.5%)
REPURCHASE AGREEMENT (4.5%)
968 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $968, collateralized by $1,010
United States Treasury Bills, due 7/27/95,
valued at $1,006 (Cost $968).................... 968
----------
TOTAL INVESTMENTS (99.3%) (Cost $19,792)...................... 21,168
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (1.4%)
Interest Receivable............................. $ 241
Dividends Receivable............................ 28
Receivable for Investments Sold................. 27
Receivable from Investment Adviser.............. 1
Other........................................... 1 298
-----
LIABILITIES (-0.7%)
Payable for Investments Purchased............... (104)
Payable for Portfolio Shares Redeemed........... (20)
Custodian Fees Payable.......................... (3)
Administrative Fees Payable..................... (3)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (22) (153)
----- ----------
NET ASSETS (100%)............................................. $ 21,313
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 2,189,455 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $9.73
----------
----------
- ------------------------------------------------------------
ADR -- American Depositary Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Balanced Portfolio
86
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------
DEBT INSTRUMENTS (89.2%)
ALGERIA (1.3%)
LOAN AGREEMENTS (1.3%)
$ 5,788 Algeria Refinanced Loan Agreements, Tranche A,
(Floating Rate), 8.313%, 3/04/00................ $ 2,315
----------
ARGENTINA (6.2%)
BONDS (6.2%)
$ 13,000 Republic of Argentina Discount Bonds, (Floating
Rate), 7.313%, 3/31/23.......................... 7,508
5,295 Republic of Argentina, Series L, "Euro" (Floating
Rate), 7.313%, 3/31/05.......................... 3,263
500 Republic of Argentina, Series L, (Floating Rate),
7.313%, 3/31/05................................. 308
----------
11,079
----------
BRAZIL (21.5%)
BONDS (21.5%)
$ 1,600 Federative Republic of Brazil Debt Conversion
Bonds, Series L, (Floating Rate), 7.313%,
4/15/12......................................... 832
7,750 Federative Republic of Brazil EI Bonds, (Floating
Rate), 7.25%, 4/15/06........................... 4,640
12,200 Federative Republic of Brazil New Money Bonds,
Series L, (Floating Rate), 7.313%, 4/15/09...... 6,573
11,000 Federative Republic of Brazil Par Bond, Series
YL3, 4.00%, 4/15/24............................. 4,909
40,170 Federative Republic of Brazil, Series C,
"Euro" (Floating Rate), 4.00%, 4/15/14.......... 19,834
3,615 Federative Republic of Brazil, Series C, (Floating
Rate), 4.00%, 4/15/14........................... 1,785
----------
38,573
----------
BULGARIA (5.5%)
BONDS (5.5%)
$ 491 Bulgaria Discount, Series A, "Euro" (Floating
Rate), 7.563%, 7/28/24.......................... 245
762 Bulgaria Discount, Series B, (Floating Rate),
8.063%, 7/28/24................................. 380
7,750 Bulgaria Front Loaded Interest Reduction Bond,
Series A, (Floating Rate), 2.00%, 7/28/12....... 1,996
14,000 Bulgaria Interest Arrears Bonds, "Euro", (Floating
Rate), 7.563%, 7/28/11.......................... 5,915
2,983 Bulgaria Interest Arrears Bonds, (Floating Rate),
7.563%, 7/28/11................................. 1,260
----------
9,796
----------
ECUADOR (6.6%)
BONDS (6.6%)
$ 12,000 Republic of Ecuador Discount Bonds,
"Euro" (Floating Rate), 7.25%, 2/28/25.......... 5,970
181 Republic of Ecuador Discount Bonds, (Floating
Rate), 7.25%, 2/28/25........................... 90
824 Republic of Ecuador IE Bonds, (Floating Rate),
6.75%, 12/21/04................................. 486
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------
$ 10,000 Republic of Ecuador Par Fund "Euro", (Floating
Rate), 3.00%, 2/28/25........................... $ 3,250
6,407 Republic of Ecuador PDI Bonds, (Floating Rate),
7.25%, 2/27/15.................................. 2,130
----------
11,926
----------
MEXICO (17.3%)
LOAN AGREEMENTS (2.0%)
$ 5,000 United Mexican States Old New Money Loans,
(Floating Rate), 7.263%, 3/20/05................ 3,509
----------
BILLS (2.6%)
MP 13,125 Mexican Cetes, Zero Coupon, 8/24/95............... 1,973
5,513 Mexican Cetes, Zero Coupon, 8/31/95............... 823
6,426 Mexican Cetes, Zero Coupon, 9/07/95............... 951
7,298 Mexican Cetes, Zero Coupon, 2/22/96............... 915
----------
4,662
----------
BONDS (12.7%)
$ 10,000 Banco Nacional de Comercio 7.25%, 2/02/04......... 7,200
3,000 CFE (Petacalco Topolo) 8.125%, 12/15/03........... 2,130
5,000 Mexican Discount Bond Series A, (Floating Rate),
7.219%, 12/31/19 (Value Recovery Rights
Attached)....................................... 3,569
14,700 Petro Mexicanos, 8.625%, 12/01/23................. 9,978
----------
22,877
----------
31,048
----------
MOROCCO (2.6%)
LOAN AGREEMENTS (2.6%)
$ #8,000 Morocco Restructuring and Consolidating Agreement,
Tranche A, (Floating Rate), 7.375%, 1/01/09
(Participation: Chase Manhattan Bank, JP Morgan,
Lehman Brothers, Goldman Sachs, Salomon
Brothers)....................................... 4,710
----------
NIGERIA (6.6%)
BONDS (6.6%)
$ 24,500 Central Bank of Nigeria Par Bonds, (Floating
Rate), 6.25%, 11/15/20 (Warrants Attached)...... 10,841
2,750 Nigeria Promissory Note 4.207%, 1/05/10........... 935
+++250 Nigeria Promissory Note 4.207%, 1/05/10........... 85
----------
11,861
----------
PANAMA (7.1%)
LOAN AGREEMENTS (5.4%)
$ ++16,013 Republic of Panama Refinanced Loan Agreement,
(Floating Rate)................................. 8,166
d++2,800 Republic of Panama Unstructured Loans (Floating
Rate)........................................... 1,428
----------
9,594
----------
BONDS (1.7%)
4,000 Republic of Panama, (Floating Rate) 7.25%,
5/10/02......................................... 3,080
----------
12,674
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Debt Portfolio
89
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------
PERU (1.6%)
LOAN AGREEMENTS (1.6%)
$ ++5,000 Republic of Peru, Non-Citibank Agreement (Floating
Rate)........................................... $ 2,900
----------
POLAND (0.9%)
BONDS (0.9%)
$ 2,644 Republic of Poland Interest Arrears PDI Bonds,
3.25%, 10/27/14................................. 1,583
----------
RUSSIA (11.8%)
LOAN AGREEMENTS (11.8%)
$ ++65,150 Bank for Foreign Economic Affairs, (Floating
Rate)........................................... 21,175
----------
VENEZUELA (0.2%)
BONDS (0.2%)
$ 841 Republic of Venezuela, Discount Bonds, Series A,
(Floating Rate), 7.188%, 3/31/20 (Oil Warrants
Attached)....................................... 439
56 Republic of Venezuela, Discount Bond, Series B,
(Floating Rate), 6.938%, 3/31/20 (Oil Warrants
Attached)....................................... 29
----------
468
----------
TOTAL DEBT INSTRUMENTS (Cost $156,101)........................ 160,108
----------
NO. OF
WARRANTS
- ----------
WARRANTS (1.3%)
BRAZIL (1.3%)
+3,000 Minas Gerais 8.25%, expiring 2/10/00 (Cost
$2,115)......................................... 2,340
----------
FACE
AMOUNT
(000)
- ----------
SHORT-TERM INVESTMENT (2.8%)
REPURCHASE AGREEMENT (2.8%)
$ 4,997 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $4,999, collateralized by
$5,180 United States Treasury Bills, due
7/27/95, valued at $5,160 (Cost $4,997)......... 4,997
----------
TOTAL INVESTMENTS (93.3%) (Cost $163,213)..................... 167,445
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
<S> <C> <C>
- ------------------------------------------------------------
OTHER ASSETS (22.1%)
Cash............................................ $ 284
Receivable for Investments Sold................. 28,035
Receivable for Portfolio Shares Sold............ 7,362
Interest Receivable............................. 4,053
Other........................................... 7 $ 39,741
----------
LIABILITIES (-15.4%)
Payable for Investments Purchased............... (26,817)
Investment Advisory Fees Payable................ (467)
Custodian Fees Payable.......................... (145)
Written Options Outstanding, at Value (premiums (129)
received $87)..................................
Administrative Fees Payable..................... (24)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (60) (27,643)
---------- ----------
NET ASSETS (100%)............................................. $ 179,543
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 19,902,357 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $9.02
----------
----------
</TABLE>
- ------------------------------------------------------------
+ -- Non-income producing security
++ -- Non-income producing securities -- in default
+++ -- Security is subject to delayed delivery -- See Note A-6
d -- Terms of loan agreement not final at June 30, 1995.
# -- Participation interests were acquired through the financial institutions
listed parenthetically. All other loan agreements are assignments. See Note
A-7
MP -- Mexican New Peso
Floating Rate Securities. Interest rate changes on these instruments are based
on changes in a designated base rate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
WRITTEN CALL OPTIONS (NOTE A-9)
ARGENTINA
CALL OPTIONS
4,000 Argentina Floating Rate Bond, 7.313%, 3/31/05,
strike price $59, expiring 7/14/95 (Premiums
$87)............................................ $ 129
-----
-----
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Emerging Markets Debt Portfolio
90
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
FIXED INCOME SECURITIES (99.4%)
US GOVERNMENT AND AGENCY OBLIGATIONS (60.4%)
US Treasury Bonds (2.6%)
$ 4,000 7.50%, 11/15/16................................... $ 4,355
----------
US Treasury Notes (19.1%)
17,000 8.25%, 7/15/98.................................... 18,089
5,000 6.25%, 5/31/00.................................... 5,053
8,000 7.25%, 8/15/04.................................... 8,549
----------
31,691
----------
Federal Home Loan Mortgage Corporation (11.7%)
17 13.00%, 9/01/10................................... 19
18,601 9.00%, 11/01/24 - 2/01/25......................... 19,386
----------
19,405
----------
Government National Mortgage Association (27.0%)
9 11.00%, 12/15/15.................................. 10
18 10.00%, 5/15/19................................... 19
8,074 6.00%, 2/15/24.................................... 7,549
7,457 8.00%, 3/15/24.................................... 7,634
20,022 7.00%, 5/15/24.................................... 19,703
9,690 7.50%, 1/20/25.................................... 9,927
----------
44,842
----------
TOTAL US GOVERNMENT AND AGENCY OBLIGATIONS.................. 100,293
----------
FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS (8.6%)
5,000 Hydro Quebec 8.05%, 7/07/24....................... 5,465
10,000 Republic of Italy 6.875%, 9/27/23................. 8,876
----------
TOTAL FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS............. 14,341
----------
CORPORATE BONDS AND NOTES (24.3%)
FINANCE (18.0%)
7,000 CCP Insurance 10.50%, 12/15/04.................... 7,399
7,500 Farmers Insurance 8.625%, 5/01/24................. 7,247
5,000 Ford Motor Credit Co. 5.625%, 3/03/97............. 4,947
5,000 General Motors Acceptance Corp. 7.375%, 6/22/00... 5,131
5,000 Goldman Sachs Group 7.80%, 7/15/02................ 5,181
----------
29,905
----------
METALS (3.2%)
5,000 USX Corp. 9.125%, 1/15/13......................... 5,301
----------
SERVICES (3.1%)
5,000 News America Holdings, Inc. 7.50%, 3/01/00........ 5,120
----------
TOTAL CORPORATE BONDS AND NOTES............................. 40,326
----------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
ASSET BACKED SECURITIES (6.1%)
$ 16 Case Equipment Loan Trust, 92-A 5.40%, 6/15/98.... $ 16
32 Federal Home Loan Mortgage Corp., REMIC 16-B
10.00%, 10/15/19................................ 33
22 Federal National Mortgage Association REMIC 92-59F
6.494%, 8/25/06................................. 22
100 Ford Credit Auto Loan Master Trust, 92-1A 6.875%,
1/15/99......................................... 101
15 General Motors Acceptance Corp. Trust, 92-DA
5.55%, 5/15/97.................................. 14
4,587 Resolution Trust Corp. 9.00%, 3/25/17............. 4,794
5,000 Standard Credit Card Trust 6.75%, 6/07/00......... 5,059
----------
TOTAL ASSET BACKED SECURITIES............................... 10,039
----------
TOTAL FIXED INCOME SECURITIES (Cost $157,764)................. 164,999
----------
SHORT-TERM INVESTMENT (0.9%)
REPURCHASE AGREEMENT (0.9%)
1,480 Goldman Sachs 6.05%, dated 6/30/95, due 7/03/95,
to be repurchased at $1,481, collateralized by
$960 United States Treasury Bonds, 12.50%, due
8/15/14, valued at $1,523 (Cost $1,480)......... 1,480
----------
TOTAL INVESTMENTS (100.3%) (Cost $159,244).................... 166,479
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (1.6%)
Interest Receivable............................. $ 2,637
Other........................................... 15 2,652
----------
LIABILITIES (-1.9%)
Payable to Custodian............................ (2,962)
Investment Advisory Fees Payable................ (81)
Administrative Fees Payable..................... (28)
Payable for Portfolio Shares Redeemed........... (8)
Custodian Fees Payable.......................... (6)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (27) (3,113)
---------- ----------
NET ASSETS (100%)............................................. $ 166,018
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 15,751,671 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $10.54
----------
----------
</TABLE>
- ------------------------------------------------------------
REMIC -- Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Fixed Income Portfolio
93
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
FIXED INCOME SECURITIES (96.6%)
AUSTRALIAN DOLLAR (2.8%)
GOVERNMENT BONDS (2.8%)
A$ 3,600 Government of Australia 9.00%, 9/15/04............ $ 2,532
--------
BRITISH POUND (6.2%)
GOVERNMENT BONDS (6.2%)
L 3,500 United Kingdom Treasury 8.00%, 12/07/00........... 5,520
--------
CANADIAN DOLLAR (3.2%)
EUROBONDS (3.2%)
C$ 1,500 British Columbia Province 7.75%, 6/16/03.......... 1,073
2,500 Export-Import Bank of Japan 7.75%, 10/08/02....... 1,769
--------
2,842
--------
DANISH KRONE (4.9%)
GOVERNMENT BONDS (4.9%)
DK 26,000 Kingdom of Denmark 7.00%, 12/15/04................ 4,339
--------
DEUTSCHE MARK (14.0%)
GOVERNMENT BONDS (14.0%)
DM 4,500 Deutschland Republic 6.50%, 7/15/03............... 3,152
2,000 Treuhandanstalt 6.25%, 7/29/99.................... 1,456
7,500 Treuhandanstalt 6.875%, 6/11/03................... 5,371
3,500 Treuhandanstalt 6.75%, 5/13/04.................... 2,481
--------
12,460
--------
FINNISH MARKKA (2.2%)
GOVERNMENT BONDS (2.2%)
FM 8,000 Finnish Government 9.50%, 3/15/04................. 1,953
--------
FRENCH FRANC (6.0%)
GOVERNMENT BONDS (6.0%)
FF 26,800 France O.A.T. 6.75%, 10/25/03..................... 5,265
--------
ITALIAN LIRA (4.5%)
GOVERNMENT BONDS (4.5%)
IL 7,395,000 Republic of Italy Treasury Bond 8.50%, 8/01/99.... 4,006
--------
JAPANESE YEN (8.4%)
EUROBONDS (8.4%)
Y 450,000 Republic of Austria 4.75%, 12/20/04............... 6,114
95,000 International Bank for Reconstruction &
Development 5.25%, 3/20/02...................... 1,307
--------
7,421
--------
NETHERLANDS GUILDER (5.1%)
GOVERNMENT BONDS (5.1%)
NG 3,500 Netherlands Government 7.25%, 10/01/04............ 2,300
3,500 Netherlands Government 7.00%, 6/15/05............. 2,253
--------
4,553
--------
NEW ZEALAND DOLLAR (1.7%)
GOVERNMENT BONDS (1.7%)
NZ$ 750 New Zealand Government 6.50%, 2/15/00............. 475
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
NZ$ 1,550 New Zealand Government 8.00%, 4/15/04............. $ 1,061
--------
1,536
--------
SPANISH PESETA (4.1%)
GOVERNMENT BONDS (4.1%)
SP 340,000 Spanish Government 10.25%, 11/30/98............... 2,705
120,000 Spanish Government 10.30%, 6/15/02................ 922
--------
3,627
--------
SWEDISH KRONA (2.0%)
GOVERNMENT BONDS (2.0%)
SK 13,000 Swedish Government 10.25%, 5/05/00................ 1,765
--------
UNITED STATES DOLLAR (31.5%)
EUROBONDS (2.6%)
$ 2,000 Republic of Italy 6.875%, 9/27/23................. 1,782
500 Statens Bostads 8.50%, 5/30/97.................... 519
--------
2,301
--------
US GOVERNMENT AND AGENCY OBLIGATIONS (27.7%)
US TREASURY BONDS
500 12.75%, 11/15/10.................................. 740
3,710 8.125%, 8/15/19................................... 4,328
US TREASURY NOTES
850 7.875%, 2/15/96................................... 861
1,600 7.625%, 4/30/96................................... 1,623
400 5.875%, 5/31/96................................... 400
1,900 6.875%, 2/28/97................................... 1,931
2,000 6.75%, 5/31/97.................................... 2,033
2,030 7.75%, 11/30/99................................... 2,166
350 7.50%, 11/15/01................................... 376
2,070 6.25%, 2/15/03.................................... 2,075
675 7.25%, 5/15/04.................................... 720
US TREASURY STRIPS
/\1,600 2/15/98, Principal Only........................... 1,375
FEDERAL HOME LOAN MORTGAGE CORPORATION
+++300 9.00%, 7/01/25.................................... 313
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
3,246 ARM Pool #8505 7.00%, 9/20/24..................... 3,307
1,556 ARM Pool #8585 7.50%, 1/20/25..................... 1,635
+++700 9.00%, 7/15/25.................................... 735
--------
24,618
--------
YANKEE BONDS (1.2%)
1,000 Hydro Quebec 8.05%, 7/07/24....................... 1,086
--------
28,005
--------
TOTAL FIXED INCOME SECURITIES (Cost $82,117)................... 85,824
--------
SHORT-TERM INVESTMENT (1.8%)
REPURCHASE AGREEMENT (1.8%)
$ 1,624 U.S. Trust, 5.90%, dated 6/30/95, due 7/03/95, to
be repurchased at $1,625, collateralized by
$1,690 United States Treasury Bills, due
7/27/95, valued at $1,683 (Cost $1,624)......... 1,624
--------
TOTAL INVESTMENTS (98.4%) (Cost $83,741)....................... 87,448
--------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Global Fixed Income Portfolio
97
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(000)
<S> <C> <C>
- ------------------------------------------------------------
OTHER ASSETS (4.3%)
Cash............................................ $ 195
Interest Receivable............................. 2,047
Receivable for Investments Sold................. 1,546
Other........................................... 9 $ 3,797
-----------
LIABILITIES (-2.7%)
Payable for Investments Purchased............... (2,098)
Net Unrealized Loss on Forward Foreign Currency
Contracts...................................... (192)
Investment Advisory Fees Payable................ (31)
Custodian Fees Payable.......................... (17)
Administrative Fees Payable..................... (13)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (27) (2,379)
----------- --------
NET ASSETS (100%).............................................. $ 88,866
--------
--------
</TABLE>
<TABLE>
<C> <S> <C>
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 7,971,281 outstanding $.001 par value shares
(authorized 500,000,000 shares).............................. $11.15
--------
--------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open at June 30,
1995, the Portfolio is obligated to deliver or is to receive foreign
currency in exchange for US dollars or foreign currency as indicated
below:
</TABLE>
<TABLE>
<CAPTION>
CURRENCY NET
TO IN EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ---------- --------- ----------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
$ 1,944 $ 1,944 7/13/95 NG 3,054 $ 1,972 $ 28
NG 5,000 3,229 7/13/95 $ 3,195 3,195 (34)
NG 4,000 2,584 7/13/95 $ 2,495 2,495 (89)
DM 4,000 2,899 9/06/95 $ 2,803 2,803 (96)
DK 15,000 2,774 9/07/95 $ 2,721 2,721 (53)
A$ 3,000 2,123 9/20/95 NZ$ 3,274 2,175 52
--------- --------- -----
$ 15,553 $ 15,361 $ (192)
--------- --------- -----
--------- --------- -----
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+++ -- Security is subject to delayed delivery -- See Note
A-6
/\ -- Stripped securities represent the splitting of cash
flows into several classes which vary by the
proportion of principal and interest paid. Holders
are entitled to the portion of the payments on the
certificate representing interest only or principal
only.
A$ -- Australian Dollar
DK -- Danish Krone
DM -- Deutsche Mark
NG -- Netherlands Guilder
NZ$ -- New Zealand Dollar
</TABLE>
- ------------------------------------------------------------
SUMMARY OF FIXED INCOME SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- -----------------------------------------------------------------
<S> <C> <C>
Energy................................. $ 1,086 1.2%
Finance................................ 3,595 4.1
Foreign Government and Agency
Obligations............................ 56,525 63.6
US Government and Agency Obligations... 24,618 27.7
--------- ---
$ 85,824 96.6%
--------- ---
--------- ---
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Global Fixed Income Portfolio
98
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS AND NOTES (84.2%)
AEROSPACE & DEFENSE (3.1%)
$ 500 Sabreliner Corp., Series A, 12.50%, 4/15/03....... $ 400
1,500 Tracor, Inc., 10.875%, 8/15/01.................... 1,539
----------
1,939
----------
AUTOMOTIVE (2.1%)
1,500 Venture Holdings, 9.75%, 4/01/04.................. 1,303
----------
BROADCAST-RADIO & TELEVISION (19.4%)
2,250 Ackerley Communications, Inc., Series B, 10.75%,
10/01/03........................................ 2,337
1,000 Cablevision Systems Corp., 9.875%, 2/15/13........ 1,063
1,250 Continental Cablevision, Inc., 9.50%, 8/01/13..... 1,289
1,600 Helicon Group, Series B, 9.00% to 11/01/96, 11.00%
to 11/01/03..................................... 1,466
400 Heritage Media, 11.00%, 10/01/02.................. 426
500 Katz Corp., 12.75%, 11/15/02...................... 524
3,000 Marcus Cable Co., 0.00% to 6/15/00, 14.25% to
12/15/05........................................ 1,598
850 Rogers Cablesystems, Inc., (Yankee Bond), 10.00%,
3/15/05......................................... 875
++14 SpectraVision, Inc., 11.65%, 12/01/02............. 1
2,750 Viacom International, 8.00%, 7/07/06.............. 2,678
----------
12,257
----------
BUILDING MATERIALS & COMPONENTS (3.3%)
2,000 Tarkett International, 9.00%, 3/01/02............. 1,953
158 Walter Industries, Series B, 12.19%, 3/15/00...... 159
----------
2,112
----------
CHEMICALS (3.7%)
1,000 Harris Chemical, 10.75%, 10/15/03................. 945
1,000 Plastic Specialties & Technologies, Inc., 11.25%,
12/01/03........................................ 911
500 Sherritt, Inc., 10.50%, 3/31/14................... 500
----------
2,356
----------
COAL, GAS & OIL (1.3%)
1,300 Clark R&M Holdings, Zero Coupon, 2/15/00.......... 813
----------
ELECTRONICS (1.4%)
400 ADT Operations, 9.25%, 8/01/03.................... 415
1,000 International Semi-Tech, (Yankee Bond), 0.00% to
8/15/00, 11.50% to 8/15/03...................... 500
----------
915
----------
ENTERTAINMENT & LEISURE (3.4%)
886 Kloster Cruise, 13.00%, 5/01/03................... 682
2,000 Six Flags Theme Park, Inc., 0.00% to 6/15/98,
12.25% to 6/15/05............................... 1,450
----------
2,132
----------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
ENVIRONMENTAL CONTROLS (0.7%)
$ 500 Envirotest Systems Corp., 9.125%, 3/15/01......... $ 415
----------
FINANCIAL SERVICES (5.5%)
1,191 GPA Equipment Trust, 9.125%, 12/02/96............. 1,112
550 GPA Investments, 6.40%, 11/19/98.................. 396
1,000 Terra Nova Holdings, 10.75%, 7/01/05.............. 1,008
1,189 Tiphook Finance Corp., 8.00%, 3/15/00............. 951
----------
3,467
----------
FOOD (2.8%)
750 Americold Corp. 1st Mortgage Bond, Series B,
11.50%, 3/01/05................................. 716
1,150 Pilgrim's Pride Corp., 10.875%, 8/01/03........... 1,081
----------
1,797
----------
FOREST PRODUCTS & PAPER (1.6%)
1,000 United Stationer Supply, 12.75%, 5/01/05.......... 1,016
----------
GAMING & LODGING (0.9%)
575 Louisiana Casino Cruises, 11.50%, 12/01/98........ 535
----------
HEALTH CARE SUPPLIES & SERVICES (0.8%)
625 Eyecare Centers of America, 12.00%, 10/01/03...... 513
----------
METALS (1.8%)
1,250 Algoma Steel, Inc., (Yankee Bond) 12.375%,
7/15/05......................................... 1,150
----------
MULTI-INDUSTRY (1.2%)
750 Day International Group, 11.125%, 6/01/05......... 754
----------
PACKAGING & CONTAINER (4.0%)
500 Owens-Illinois, Inc., 10.50%, 6/15/02............. 519
2,000 Owens-Illinois, Inc., 9.95%, 10/15/04............. 2,040
----------
2,559
----------
PROFESSIONAL SERVICES (1.6%)
1,000 Cabot Safety Corp., 12.50%, 7/15/05............... 1,005
----------
PUBLISHING (3.5%)
1,000 Marvel III Holdings Inc., Series B, 9.125%,
2/15/98......................................... 915
1,900 Marvel Parent Holdings, Zero Coupon, 4/15/98...... 1,335
----------
2,250
----------
RETAIL-GENERAL (2.6%)
2,175 Southland Corp., 5.00%, 12/15/03.................. 1,664
----------
TELECOMMUNICATIONS (8.0%)
3,000 Dial Call Communications, 0.00% to 4/15/99, 12.25%
to 4/15/04...................................... 1,560
450 Horizon Cellular Telephone, 0.00% to 10/01/97,
11.375% to 10/01/00............................. 345
750 Pronet, Inc., 11.875%, 6/15/05.................... 754
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
High Yield Portfolio
101
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS (CONT.)
$ 2,500 Telefonica de Argentina, (Yankee Bond), 11.875%,
11/01/04........................................ $ 2,431
----------
5,090
----------
TEXTILES & APPAREL (4.7%)
1,000 Polysindo Eka Perkasa, (Yankee Bond), 13.00%,
6/15/01......................................... 1,010
2,000 Westpoint Stevens, Inc., 9.375%, 12/15/05......... 1,935
----------
2,945
----------
TRANSPORTATION (0.5%)
319 America West Airlines, 6.00%, 3/31/97............. 300
----------
UTILITIES (6.3%)
650 AES Corp., 9.75%, 6/15/00......................... 665
1,478 Beaver Valley Funding Corp., (Lease Obligation
Bond), 9.00%, 6/01/17........................... 1,241
++474 Columbia Gas Systems, Inc., Employee Thrift Plan
Obligation, 9.875%, 11/30/01.................... 649
1,400 First PV Funding Corp., (Lease Obligation Bond),
10.15%, 1/15/16................................. 1,433
----------
3,988
----------
TOTAL CORPORATE BONDS AND NOTES (Cost $53,038)................ 53,275
----------
FOREIGN GOVERNMENT BONDS(3.2%)
BONDS (3.2%)
1,500 Republic of Argentina, Series L, (Floating Rate),
7.313%, 3/31/05................................. 921
2,500 Republic of Brazil YL4, (Floating Rate), 4.25%,
4/15/24......................................... 1,109
----------
TOTAL FOREIGN GOVERNMENT BONDS (Cost $1,985).................. 2,030
----------
<CAPTION>
SHARES
- ----------
<C> <S> <C>
COMMON STOCKS (0.8%)
BUILDING MATERIALS & COMPONENTS (0.7%)
30,331 Walter Industries, Inc............................ 417
----------
FINANCIAL SERVICES (0.0%)
1,268 WestFed Holdings, Inc., Class B................... --
----------
FOOD SERVICE & LODGING (0.1%)
1,300 Motels of America, Inc............................ 98
----------
GAMING & LODGING (0.0%)
500 Trump Taj Mahal, Class A.......................... 5
----------
MACHINERY (0.0%)
25 Bucyrus-Erie...................................... --
----------
TOTAL COMMON STOCKS (Cost $601)............................... 520
----------
PREFERRED STOCKS (0.0%)
FINANCIAL SERVICES (0.0%)
3,239 WestFed Holdings, Inc., Series A (Cost $57)....... --
----------
<CAPTION>
NO. OF VALUE
RIGHTS (000)
- ------------------------------------------------------------
<C> <S> <C>
RIGHTS (0.0%)
BROADCAST-RADIO & TELEVISION (0.0%)
+35,000 SpectraVision, Inc., expiring 10/08/97 (Cost
$133)........................................... $ 4
----------
<CAPTION>
NO. OF
WARRANTS
- ----------
<C> <S> <C>
WARRANTS (0.5%)
AEROSPACE & DEFENSE (0.0%)
+*500 Sabreliner Corp., expiring 4/15/03 (acquired
6/21/93, cost $10))............................. 5
----------
ELECTRICAL EQUIPMENT (0.3%)
+28,000 Protection One Alarm, Inc., expiring 4/01/03...... 168
----------
GAMING & LODGING (0.0%)
+1,250 Capital Gaming International, Inc., expiring
2/01/99......................................... --
+2,700 Casino Magic Corp., expiring 10/14/96............. --
+1,725 Louisiana Casino Cruises, expiring 12/01/98....... 26
----------
26
----------
HEALTH CARE SUPPLIES & SERVICES (0.0%)
+625 Eye Care Centers of America, expiring 10/01/03.... 3
----------
INSURANCE (0.0%)
+500 Horace Mann Educators Corp., expiring 8/15/99..... 7
----------
METALS (0.1%)
+5,000 Sheffield Steel Corp., expiring 11/01/01.......... 30
----------
PACKAGING & CONTAINER (0.0%)
+1,000 Crown Packaging Holdings, expiring 11/01/03....... 22
----------
REAL ESTATE (0.1%)
+1,000 Petro PSC Properties L.P., expiring 6/01/97....... 34
----------
TELECOMMUNICATIONS (0.0%)
+3,000 Dial Page, Inc., expiring 4/25/99................. --
----------
TOTAL WARRANTS (Cost $221).................................... 295
----------
<CAPTION>
NO. OF
UNITS
- ----------
<C> <S> <C>
UNITS (9.2%)
BROADCAST-RADIO & TELEVISION (3.1%)
2,000 People's Choice TV Corp., 0.00% to 6/01/00,
13.125% to 6/01/04.............................. 967
1,000 Pegasus Media Communications, 12.50%, 7/01/05..... 1,002
----------
1,969
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
High Yield Portfolio
102
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE
UNITS (000)
- ------------------------------------------------------------
GAMING & LODGING (3.6%)
<C> <S> <C>
2,208 Maritime Group, 13.50%, 2/15/97................... $ 773
1,864 Trump Taj Mahal Funding Inc., PIK, 11.35%,
11/15/99........................................ 1,477
----------
2,250
----------
METALS (2.5%)
650 Gulf States Steel, 13.50%, 4/15/03................ 631
1,000 Sheffield Steel Corp., 12.00%, 11/01/01........... 980
----------
1,611
----------
TOTAL UNITS (Cost $7,936)..................................... 5,830
----------
TOTAL INVESTMENTS (97.9%) (Cost $63,971)...................... 61,954
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (8.0%)
Receivable for Investments Sold................. $ 3,993
Interest Receivable............................. 1,076
Receivable for Portfolio Shares Sold............ 1
Other........................................... 6 5,076
----------
LIABILITIES (-5.9%)
Payable for Investments Purchased............... (3,127)
Payable to Custodian............................ (524)
Investment Advisory Fees Payable................ (55)
Custodian Fees Payable.......................... (7)
Administrative Fees Payable..................... (9)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (26) (3,749)
---------- ----------
NET ASSETS (100%)............................................. $ 63,281
----------
----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 6,145,224 outstanding $.001 par value shares
(authorized 500,000,000 shares)............................. $10.30
----------
----------
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
+ -- Non-income producing security
++ -- Non-income producing security -- in default
* -- Restricted as to public resale. Total value of
restricted securities held at June 30, 1995 was $5 or
0.0% of net assets (Total Cost $10).
PIK -- Payment-In-Kind. Income may be received in additional
securities or cash at the discretion of the issuer.
</TABLE>
Floating Rate Security. The interest rate changes on these instruments are based
on changes in a designated base rate. The rates shown are those in effect on
June 30, 1995.
At June 30, 1995, approximately 97% of the Portfolio's net assets consisted of
high yield securities rated below investment grade. Investments in high yield
securities are accompanied by a greater degree of credit risk and the risk tends
to be more sensitive to economic conditions than higher rated securities.
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
High Yield Portfolio
103
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
TAX-EXEMPT INSTRUMENTS (99.2%)
DAILY VARIABLE RATE BONDS (11.2%)
$ 900 Hapeville, Georgia, Industrial Development
Authority, Series 85, 4.35%, 11/01/15........... $ 900
1,500 Jackson County, Mississippi, Port Facility,
Chevron Project, Series 93, 4.20%, 6/01/23...... 1,500
500 Lincoln County, Wyoming, Pollution Control
Revenue, Exxon Project, Series 84A,
4.25%, 11/01/14................................. 500
300 New York City, New York, Water Finance Authority,
Water and Sewer System Revenue, Series 94C,
4.25%, 6/15/22.................................. 300
1,000 Platte County, Wyoming, Pollution Control Revenue,
Series A, 4.35%, 7/01/14........................ 1,000
700 Valdez, Alaska, Marine Terminal Authority, Exxon,
Series 85, 4.20%, 10/01/25...................... 700
----------
TOTAL DAILY VARIABLE RATE BONDS............................... 4,900
----------
FIXED RATE INSTRUMENTS (88.0%)
1,000 Columbus, Ohio, General Obligation Bonds, 5.80%,
1/01/00......................................... 1,053
1,000 Connecticut State Special Obligation, Tax Revenue
Bonds, Transportation, 6.50%, 7/01/09,
Prerefunded 7/01/99 at 102...................... 1,090
1,000 De Kalb County, Georgia, General Obligation Bonds,
7.30%, 1/01/00,
Prerefunded 1/01/97 at 102...................... 1,066
1,000 De Kalb County, Georgia, Water & Sewer Revenue
Bonds 7.00%, 10/01/06........................... 1,068
1,000 Georgia State, General Obligation Bonds, Series E,
6.75%, 12/01/02................................. 1,129
500 Hawaii State, General Obligation Bonds, Series BS,
6.70%, 9/01/97.................................. 527
1,000 Hawaii State, General Obligation Bonds, Series CJ,
6.20%, 1/01/12.................................. 1,022
1,000 Howard County, Maryland, Consolidated Public
Improvement General Obligation Bonds, Series A,
7.20%, 8/01/03,
Prerefunded 8/01/96 at 102...................... 1,054
1,500 Intermountain Power Agency, Utah, Power Supply
Revenue Bonds, Series D, 8.38%, 7/01/12......... 1,636
1,000 Kentucky State Housing Corp. Revenue Bonds, Series
A, 6.00%, 7/01/10............................... 1,012
1,155 Maryland State Department of Transportation,
Construction Revenue Bonds, Second Issue, 6.80%,
11/01/05,
Prerefunded 11/01/99 at 102..................... 1,278
1,000 Massachusetts State, Consolidated Loan, Series A,
7.50%, 3/01/03,
Prerefunded 3/01/00 at 102...................... 1,133
500 Massachusetts State Consolidated Loan, Series A,
7.63%, 6/01/08,
Prerefunded 6/01/01 at 102...................... 582
1,625 Michigan State Housing Development Authority
Revenue Bonds, Series A, 6.75%, 12/01/14........ 1,698
1,500 Minnesota State General Obligation Bonds, 7.00%,
8/01/99,
Prerefunded 8/01/96 at 100...................... 1,550
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
$ 1,400 Mississippi State General Obligation Bonds, 6.00%,
2/01/09......................................... $ 1,440
1,000 Mobile Alabama, Water & Sewer Revenue Bonds,
Series B, 7.25%, 1/01/06........................ 1,036
1,475 Montana State General Obligation Bonds, Long Range
Building Program, Series C, 6.00%, 8/01/13...... 1,498
1,500 Municipal Assistance Corp. for City of New York,
New York, Refunding Revenue Bonds, Series 56,
7.90%, 7/01/98, Prerefunded 7/01/96 at 102...... 1,589
1,000 New Castle County, Delaware, General Obligation
Bonds, 6.25%, 10/15/01.......................... 1,078
1,500 North Little Rock, Arkansas, Electric Revenue
Refunding Bonds, Murray Lock & Dam Hydro, 7.40%,
7/01/15,
Prerefunded 7/01/96 at 102...................... 1,581
500 Ohio State General Obligation Bonds,
6.20%, 8/01/12.................................. 521
1,000 Ohio State Housing Finance Agency, Residential
Mortgage Revenue Bonds, Series A-1, 6.20%,
9/01/14......................................... 1,011
1,000 Pennsylvania State Higher Educational Facilities
Authority, Colleges & Universities Revenue
Bonds, 6.50%, 9/01/02........................... 1,095
1,000 Reedy Creek Improvement District, Florida, Utility
Revenue Bonds, Series 91-1, 6.50%, 10/01/16,
Prerefunded 10/01/01 at 101..................... 1,108
1,000 Redmond, Washington, General Obligation Bonds,
5.75%, 12/01/05................................. 1,038
1,400 Rhode Island Depositors Economic Protection Corp.,
Special Obligation Revenue Bonds, Series A,
7.25%, 8/01/21, Prerefunded 8/01/96 at 102...... 1,477
1,350 San Antonio, Texas, General Obligation Bonds,
6.50%, 8/01/14.................................. 1,408
1,000 Tulsa, Oklahoma, General Obligation Bonds, 6.38%,
2/01/02......................................... 1,084
1,000 Virginia Beach, Virginia General Obligation Bonds,
6.00%, 9/01/10.................................. 1,022
500 Virginia State Housing Development Authority,
Commonwealth Mortgage Revenue Bonds, Series B,
6.60%, 1/01/12.................................. 519
1,000 Virginia State Housing Development Authority,
Commonwealth Mortgage Revenue Bonds, Series B,
6.65%, 1/01/13.................................. 1,038
1,500 Washington State General Obligation Bonds, Series
86-D, 8.00%, 9/01/09,
Prerefunded 9/01/96 at 100...................... 1,571
500 Washington Suburban Sanitary District, General
Obligation Revenue Bonds, 6.50%, 11/01/05,
Prerefunded 11/01/01 at 102..................... 555
----------
TOTAL FIXED RATE INSTRUMENTS.................................. 38,567
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Municipal Bond Portfolio
106
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE MUNICIPAL BOND PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(000)
- ------------------------------------------------------------
<C> <S> <C>
TOTAL TAX-EXEMPT INSTRUMENTS.................................. $ 43,467
----------
TOTAL INVESTMENTS (99.2%) (Cost $42,728)...................... 43,467
----------
</TABLE>
<TABLE>
<CAPTION>
OTHER ASSETS (2.2%)
<S> <C> <C>
Cash............................................ $ 44
Interest Receivable............................. 928 972
-----
<CAPTION>
LIABILITIES (-1.4%)
<S> <C> <C>
Payable for Investments Purchased............... (562)
Administrative Fees Payable..................... (5)
Investment Advisory Fees Payable................ (4)
Custodian Fees Payable.......................... (2)
Directors' Fees and Expenses Payable............ (2)
Other Liabilities............................... (34) (609)
----- ----------
<CAPTION>
NET ASSETS (100%)................................. $43,830
<S> <C> <C>
----------
----------
<CAPTION>
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE
<S> <C> <C>
Applicable to 4,273,159 outstanding $.001 par
value shares (authorized 500,000,000 shares).... $10.26
----------
----------
</TABLE>
- ------------------------------------------------------------
Variable/Floating Rate Instruments. The interest rate changes on these
instruments are based upon a designated base rate. These instruments are payable
on demand and are secured by a letter of credit or other support agreements.
Maturity dates disclosed for Variable/Floating Rate Instruments are the ultimate
maturity dates. The effective maturity dates for such securities are the next
interest reset dates which are seven days or less.
Prerefunded Bonds. Outstanding bonds have been refunded to the first call date
(prerefunded date) by the issuance of new bonds. Principal and interest are paid
from monies escrowed in U.S. Treasury securities. Prerefunded bonds are
generally re-rated AAA due to the U.S. Treasury escrow.
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Municipal Bond Portfolio
107
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
MONEY MARKET INSTRUMENTS (78.9%)
US GOVERNMENT AGENCY OBLIGATIONS (65.1%)
AGENCY DISCOUNT NOTES (41.0%)
Federal Home Loan Mortgage Corp.
$ 25,000 5.91%, 7/14/95.................................... $ 24,947
20,000 5.93%, 7/20/95.................................... 19,938
20,000 5.84%, 7/21/95.................................... 19,935
25,000 6.00%, 7/24/95.................................... 24,906
20,000 5.85%, 8/03/95.................................... 19,893
9,093 5.95%, 8/09/95.................................... 9,035
9,800 5.90%, 8/24/95.................................... 9,715
7,005 5.83%, 9/20/95.................................... 6,914
Federal National Mortgage Association
15,000 5.90%, 7/03/95.................................... 14,995
20,000 5.89%, 7/06/95.................................... 19,984
25,000 5.90%, 7/17/95.................................... 24,935
20,000 6.00%, 8/04/95.................................... 19,888
5,715 5.91%, 8/29/95.................................... 5,660
25,000 5.79%, 9/07/95.................................... 24,731
25,000 5.91%, 9/08/95.................................... 24,722
20,000 5.83%, 9/28/95.................................... 19,715
30,020 5.74%, 10/19/95................................... 29,503
20,000 6.06%, 11/14/95................................... 19,556
----------
338,972
----------
AGENCY FLOATING RATE NOTES (24.1%)
Federal National Mortgage Association
25,000 6.01%, 10/16/95................................... 24,999
65,000 6.02%, 9/02/97.................................... 65,000
25,000 5.58%, 6/02/99.................................... 25,000
13,000 5.58%, 7/26/99.................................... 12,944
25,000 5.58%, 9/22/99.................................... 25,000
Student Loan Marketing Association
46,000 5.86%, 10/30/97................................... 46,063
----------
199,006
----------
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Cost $537,978)............................................. 537,978
----------
COMMERCIAL PAPER (10.8%)
FINANCE (10.8%)
30,000 ABN-Amro Holdings Inc. 6.02%, 10/16/95............ 29,477
30,000 Koch Industries 6.20%, 7/5/95..................... 29,979
30,000 UBS Finance, Inc. 6.13%, 7/5/95................... 29,980
----------
TOTAL COMMERCIAL PAPER (Cost $89,436)......................... 89,436
----------
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
CORPORATE FLOATING RATE NOTES (3.0%)
FINANCE (3.0%)
$ 25,000 General Electric Credit Corp. 6.35%, 2/09/96 -
2/15/96 (Cost $25,000).......................... $ 25,000
----------
TOTAL MONEY MARKET INSTRUMENTS (Cost $652,414)................ 652,414
----------
<CAPTION>
VALUE
(000)
<C> <S> <C>
----------
SHORT TERM INVESTMENT (21.1%)
REPURCHASE AGREEMENT (21.1%)
174,944 Goldman Sachs 6.05%, dated 6/30/95, due 7/03/95,
to be repurchased at $175,032, collateralized by
$112,650 United States Treasury Bonds, 13.875%,
due 5/15/11, valued at $179,062 (Cost
$174,944)....................................... 174,944
----------
TOTAL INVESTMENTS (100.0%) (Cost $827,358).................... 827,358
----------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (0.3%)
Interest Receivable............................. $ 2,252
Other........................................... 44 2,296
----------
LIABILITIES (-0.3%)
Dividends Payable............................... (1,874)
Investment Advisory Fees Payable................ (605)
Administrative Fees Payable..................... (107)
Custodian Fees Payable.......................... (34)
Directors' Fees and Expenses Payable............ (1)
Other Liabilities............................... (43) (2,664)
---------- ----------
NET ASSETS (100%)............................................. $ 826,990
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 827,005,487 outstanding $.001 par value shares
(authorized 1,000,000,000 shares).......................... $1.00
----------
----------
</TABLE>
- ------------------------------------------------------------
Floating Rate Notes. The interest rate changes on these instruments are based on
changes in a designated base rate. The rates shown were those in effect at June
30, 1995.
Maturity dates disclosed for Floating Rate Instruments are the ultimate maturity
dates. The effective maturity dates for such securities are the next interest
reset dates.
Interest rates disclosed for Commercial Paper and Agency Discount Notes
represent effective yields.
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Money Market Portfolio
109
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
TAX-EXEMPT INSTRUMENTS (95.2%)
FIXED RATE INSTRUMENTS (43.0%)
NOTES (2.2%)
$ 2,000 Indiana Bond Bank, Advanced Funding Program,
Series A-1 5.25%, 7/10/95....................... $ 2,000
5,000 New York State Urban Development Correctional
Facilities, 8.00%, 1/01/15 Prerefunded 1/01/96
at 102.......................................... 5,184
500 Triborough Bridge & Tunnel Authority, New York,
Convention Center Project, Series 85D, 9.00%,
7/01/95......................................... 512
----------
7,696
----------
PUT OPTION BONDS (0.3%)
1,000 Putnam County, Florida, Development Authority,
Pollution Control Revenue, Seminole Electric
Series H-3, 4.30%, 3/15/14 (Putable 9/15/95).... 1,000
----------
TAX & REVENUE ANTICIPATION NOTES (2.5%)
4,000 Texas State, 5.00%, 8/31/95, TRANS................ 4,001
5,000 Texas State, 5.00%, 8/31/95, TRANS................ 5,007
----------
9,008
----------
COMMERCIAL PAPER (38.0%)
3,000 Beaver County, Pennsylvania, Industrial
Development Authority, Duquesne Light 4.30%,
7/27/95......................................... 3,000
1,100 Brazos River, Texas, Harbor & Navigation District,
Series 90, 4.15%, 8/14/95....................... 1,100
1,500 Burke County, Georgia, Development Authority,
Oglethorpe, Series 92A, 3.90%, 8/21/95.......... 1,500
2,500 Burke County, Georgia, Development Authority,
Oglethorpe, Series 92A, 3.95%, 8/22/95.......... 2,500
2,600 Burlington, Kansas, Kansas City Power & Light Co.,
4.10%, 9/11/95.................................. 2,600
2,000 Burlington, Kansas, Kansas City Power & Light Co.,
Series 87A, 4.10%, 9/11/95...................... 2,000
3,500 City of Austin, Texas, Series A, 4.20%,
10/05/95........................................ 3,500
4,530 City of Dallas, Texas, Series A, 4.15%, 7/13/95... 4,530
1,200 Connecticut State Health & Education Facilities
Authority, Yale University Series N, 3.05%,
7/17/95......................................... 1,200
1,000 Converse County, Wyoming, Pacificorp Series 88,
4.15%, 8/10/95.................................. 1,000
1,000 Delta County, Michigan, Pollution Control Revenue,
Mead Corp., 3.85%, 8/21/95...................... 1,000
4,500 Emery County, Utah, Pacificorp Series 91, 4.30%,
7/27/95......................................... 4,500
2,525 Gainesville, Florida, Series C, 4.25%, 7/28/95.... 2,525
1,000 Houston, Texas, Water & Sewer, 4.05%, 7/13/95..... 1,000
2,000 Illinois Development Finance Authority, Series
93A, 4.00%, 7/25/95............................. 2,000
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
$ 1,000 Illinois Health & Education, Series 89A, 4.25%,
8/09/95......................................... $ 1,000
4,400 Intermountain Power Agency, Utah, Series E, 4.10%,
8/15/95......................................... 4,400
3,100 Intermountain Power Agency, Utah, Series E, 4.15%,
9/07/95......................................... 3,100
700 Intermountain Power Agency, Utah, Series F2,
4.30%, 7/14/95.................................. 700
1,500 Intermountain Power Agency, Utah, Series 85F,
4.30%, 7/14/95.................................. 1,500
7,700 Jacksonville, Florida, Electric Authority, 4.00%,
7/25/95......................................... 7,700
3,600 Jasper County, Indiana, Series 88B, 4.15%,
8/17/95......................................... 3,600
2,000 Jasper County, Indiana, Series 88C, 4.15%,
8/17/95......................................... 2,000
1,100 Lehigh County, Pennsylvania, General Purpose
Authority, Series A, 4.25%, 7/28/95............. 1,100
6,600 Massachusetts Health & Education Facilities
Authority, Harvard University, 4.05%, 8/04/95... 6,600
1,500 Michigan State Strategic Fund, Dow Chemical
Series, 4.25%, 8/09/95.......................... 1,500
6,020 Montgomery, Alabama, Industrial Development Board,
General Electric Series, 3.95%, 10/10/95........ 6,020
4,000 Mount Vernon, Indiana, General Electric Series
89A, 4.05%, 8/15/95............................. 4,000
4,000 Mount Vernon, Indiana, General Electric Series
89A, 4.10%, 8/18/95............................. 4,000
4,025 North Carolina Eastern Municipal Power, 3.32%,
9/12/95......................................... 4,025
300 Northeastern Pennsylvania Hospital Authority,
Series B, 4.15%, 8/18/95........................ 300
3,290 Omaha, Nebraska, Public Power District, 4.15%,
8/18/95......................................... 3,290
2,000 Petersburg, Indiana, Indiana Power & Light, Series
91, 4.15%, 8/11/95.............................. 2,000
1,000 Petersburg, Indiana, Indiana Power & Light, Series
91, 3.85%, 8/14/95.............................. 1,000
2,200 Platte River Authority, Colorado, 4.20%,
8/17/95......................................... 2,200
1,000 Rochester, Minnesota, Health Facilities, Mayo
Clinic, Series B, 4.20%, 8/16/95................ 1,000
1,500 Rochester, Minnesota, Health Facilities, Mayo
Clinic, Series C, 4.15%, 8/11/95................ 1,500
1,065 Rochester, Minnesota, Health Facilities, Mayo
Clinic, Series E, 4.15%, 8/11/95................ 1,065
1,500 Rochester, Minnesota, Health Facilities, Mayo
Clinic, Series F 4.15%, 9/12/95................. 1,500
2,000 Salt River, Arizona, 4.30%, 7/27/95............... 2,000
6,000 Salt River, Arizona, 4.00%, 10/12/95.............. 6,000
2,000 Sunshine State, Florida, Government Finance
Authority, Series 86, 4.20%, 7/28/95............ 2,000
2,000 Texas Municipal Power Agency, 4.25%, 8/09/95...... 2,000
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Municipal Money Market Portfolio
112
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER (CONT.)
$ 6,600 Texas Municipal Power Agency, 3.30%, 9/19/95...... $ 6,600
1,000 Trimble County, Kentucky, Louisville Gas &
Electric Series, 3.85%, 8/14/95................. 1,000
5,000 Trimble County, Kentucky, Louisville Gas &
Electric Series, 4.10%, 9/11/95................. 5,000
5,500 University of Minnesota, Series A, 4.00%,
8/08/95......................................... 5,500
3,000 University of Texas, Series A, 4.10%, 7/26/95..... 3,000
2,500 Vanderbilt University, Tennessee, Series 89A,
4.25%, 8/09/95.................................. 2,500
----------
134,655
----------
TOTAL FIXED RATE INSTRUMENTS............................ 152,359
----------
VARIABLE/FLOATING RATE INSTRUMENTS (52.2%)
DAILY VARIABLE RATE BONDS (29.6%)
1,500 Ascension Parish, Louisiana, Pollution Control
Revenue Bonds, Shell Oil Project, 4.35%,
9/01/23......................................... 1,500
4,000 Chattanooga-Hamilton County, Tennessee, Hospital
Authority Revenue, Erlanger Medical Center,
4.60%, 10/01/17................................. 4,000
3,000 Chicago, Illinois, O'Hare International Airport
Special Facilities Revenue Bonds, American
Airlines, Series A, 4.50%, 12/01/17............. 3,000
700 Delaware County, Pennsylvania, Industrial
Development Authority, Series 95, 4.35%,
12/01/09........................................ 700
1,700 Delta County, Michigan, Pollution Control Revenue,
Mead Corp., 4.25%, 12/01/23..................... 1,700
5,700 East Baton Rouge Parish, Louisiana, Pollution
Control Revenue, Exxon Project, 4.35%,
3/01/22......................................... 5,700
4,900 Hapeville, Georgia, Industrial Development
Authority, Series 85, 4.35%, 11/01/15........... 4,900
10,600 Harris County, Texas, Health Facilities
Development Corp., Methodist Hospital, 4.50%,
12/01/25........................................ 10,600
2,500 Hurley, New Mexico, Pollution Control Revenue
Bonds, 4.20%, 12/01/15.......................... 2,500
5,300 Jackson County, Mississippi, Port Facility,
Chevron Project, Series 93, 4.20%, 6/01/23...... 5,300
900 Kansas City, Kansas, Industrial Development
Authority, PQ Corp., 4.35%, 8/01/15............. 900
1,900 Lake Charles, Louisiana, Harbor & Terminal
District Port Facilities, Series 84, 4.25%,
11/01/11........................................ 1,900
2,000 Lincoln County, Wyoming, Pollution Control
Revenue, Exxon Project Series 84B, 4.25%,
11/01/14........................................ 2,000
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
$ 1,600 Lincoln County, Wyoming, Pollution Control
Revenue, Exxon Project Series 84D, 4.25%,
11/01/14........................................ $ 1,600
3,500 Lincoln County, Wyoming, Pollution Control
Revenue, Exxon Project Series 85, 4.20%,
8/01/15......................................... 3,500
3,120 Louisiana Public Facilities Authority, Industrial
Development, Kenner Hotel Series, 4.35%,
12/01/15........................................ 3,120
4,500 Maricopa County, Arizona, Pollution Control
Revenue, Series 94B, 4.20%, 5/01/29............. 4,500
2,600 Maricopa County, Arizona, Public Services, Series
94C, 4.50%, 5/01/29............................. 2,600
6,700 Michigan State Strategic Fund, Consumers Power
Series 88A, 4.25%, 4/15/18...................... 6,700
1,570 Missouri State Health & Educational Facilities
Authority Revenue, Washington University, Series
89A, 4.60%, 3/01/17............................. 1,570
500 New York City, New York, Water Finance Authority,
Water and Sewer System Revenue, Series 92C,
4.25%, 6/15/22.................................. 500
2,000 New York City, New York, Water Finance Authority,
Water and Sewer System Revenue, Series 94C,
4.25%, 6/15/23.................................. 2,000
1,000 Nueces River Authority, Texas, Pollution Control
Revenue, Series 85, 4.55%, 12/01/99............. 1,000
700 Peninsula Ports Authority, Virginia, Coal Revenue,
4.25%, 7/01/16.................................. 700
6,200 Philadelphia, Pennsylvania, Childrens Hospital,
Series 92B, 4.35%, 3/01/27...................... 6,200
3,900 Phoenix, Arizona, Series 94-1, 4.50%, 6/01/18..... 3,900
3,800 Platte County, Wyoming, Pollution Control Revenue,
Series A, 4.35%, 7/01/14........................ 3,800
1,000 Platte County, Wyoming, Pollution Control Revenue,
Series B, 4.35%, 7/01/14........................ 1,000
2,000 Port of Saint Helens, Oregon, Pollution Control
Revenue, Portland General Electric Co. Series A,
4.25%, 4/01/10.................................. 2,000
1,600 Port of Saint Helens, Oregon, Pollution Control
Revenue, Portand General Electric Co., Series B,
4.25%, 6/01/10.................................. 1,600
1,400 Saint Charles Parish, Louisiana, Pollution Control
Revenue, Shell Oil Project, 4.20%, 10/01/22..... 1,400
4,900 Southwest, Texas, Higher Education Authority
Revenue, Southern Methodist University Series
85, 4.20%, 7/01/15.............................. 4,900
4,700 Valdez, Alaska, Marine Terminal Authority, Exxon,
Series 85, 4.20%, 10/01/25...................... 4,700
3,000 West Side Calhoun County, Texas, Pollution Control
Revenue, 4.50%, 12/01/15........................ 3,000
----------
104,990
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Municipal Money Market Portfolio
113
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
WEEKLY VARIABLE RATE BONDS (22.6%)
$ 1,000 Albuquerque, New Mexico, Revenue Bond, Series A,
4.20%, 7/01/22.................................. $ 1,000
1,000 Beaver County, Pennsylvania, Industrial
Development Authority, Duquesne Light Series,
4.15%, 8/01/09.................................. 1,000
1,000 Beaver County, Pennsylvania, Industrial
Development Authority, Duquesne Light Series,
4.15%, 8/01/20.................................. 1,000
1,000 Brunswick & Glynn County, Georgia, Development
Authority, Series 85, 4.25%, 12/01/15........... 1,000
7,000 Burke County, Georgia, Development Authority,
Oglethorpe, Series 93A, 4.20%, 1/01/16.......... 7,000
5,900 Charlotte, North Carolina, Airport, Series 93A,
4.20%, 7/01/16.................................. 5,900
2,500 City of Columbia, Missouri, Special Revenue Bonds,
Series 88A, 4.25%, 6/01/08...................... 2,500
1,500 City of Columbia, Missouri, Water & Electric
Revenue Bonds, Series 85B, 4.25%, 12/01/15...... 1,500
300 City of Forsyth, Montana, Pollution Control
Revenue, Series B, 4.15%, 6/01/13............... 300
700 City of Forsyth, Montana, Pollution Control
Revenue, Series D, 4.15%, 6/01/13............... 700
2,600 City of Midlothian, Texas, Industrial Development
Corp., Pollution Control Revenue, Box-Crow
Cement Co., 4.80%, 12/01/09..................... 2,600
7,900 Clark County, Nevada, Airport Revenue Bonds,
Series 93A, 4.40%, 7/01/12...................... 7,900
2,700 Clark County, Nevada, Airport Revenue Bonds,
Series 95-A1, 4.15%, 7/01/25.................... 2,700
305 Clear Creek County, Colorado, Revenue Bonds,
Colorado Finance Pool Program, 4.30%, 6/01/98... 305
600 Colorado Student Obligation Bond Authority,
Student Loan Revenue, Series 91C1, 4.50%,
8/01/00......................................... 600
7,300 Dade County, Florida, Water & Sewer Revenue Bonds,
4.35%, 10/05/22................................. 7,300
1,200 Delaware County, Pennsylvania, Industrial
Development Authority, Scott Paper Series D,
4.15%, 12/01/18................................. 1,200
500 Delaware County, Pennsylvania, Industrial
Development Authority, Scott Paper Series E,
4.15%, 12/01/18................................. 500
3,000 Foothill/Eastern California Toll Road Revenue,
TRANS Series 95C, 4.20%, 1/02/35................ 3,000
5,000 Harris County, Texas, Series 94G, 3.90%,
8/01/26......................................... 5,000
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
<C> <S> <C>
$ 5,000 Harris County, Texas, Series 94H, 3.90%,
8/01/20......................................... $ 5,000
300 Illinois Development Finance Authority, A.E.
Staley Manufacturing Series 85, 4.25%,
12/01/05........................................ 300
1,000 Lehigh County, Pennsylvania, Allegheny Electric
Cooperative, 4.25%, 12/01/15.................... 1,000
2,600 Louisiana Public Facilities Authority, Hospital
Revenue, Series 85, 4.25%, 12/01/00............. 2,600
1,000 Massachusetts Health & Education Facilities
Authority, Series G-1, 3.75%, 1/01/19........... 1,000
1,100 Mobile, Alabama, Industrial Development Board,
Scott Paper Series A, 4.15%, 12/01/19........... 1,100
1,500 Mobile, Alabama, Industrial Development Board,
Scott Paper Series B, 4.15%, 12/01/19........... 1,500
3,900 Nueces County, Texas, Health Facilities, Driscoll
Childrens' Foundation, 4.30%, 7/01/15........... 3,900
1,500 Person County, North Carolina, Carolina Power &
Light, 4.30%, 11/01/19.......................... 1,500
235 Pinellas County, Florida, Health Facilities,
Bayfront Medical Center, Series 89, 4.20%,
6/01/98......................................... 235
1,000 Pinellas County, Florida, Health Facilities,
Bayfront Medical Center, Series 89, 4.20%,
6/01/09......................................... 1,000
500 Polk County, Iowa, Hospital Equipment &
Improvement Authority, 4.25%, 12/01/05.......... 500
800 Port Development Corporation Marine Terminal,
Texas, Series 89, 4.15%, 1/15/14................ 800
1,500 Port of Corpus Christi, Texas, Marine Terminal,
R.J. Reynolds Metals Series, 4.25%, 9/01/14..... 1,500
600 Putnam County, Florida, Development Authority,
Seminole Electric Series 84 H1, 4.30%,
3/15/14......................................... 600
1,000 Rapides Parish, Louisiana, Central Louisiana
Electric Series, 3.95%, 7/01/18................. 1,000
700 Sheboygan, Wisconsin, Wisconsin Power & Light
Series, 4.25%, 8/01/14.......................... 700
1,100 University of North Carolina, Chapel Hill Fund
Inc., Certificates of Participation, 4.30%,
10/01/09........................................ 1,100
2,000 Washington Public Power, Series 93-1A3, 4.15%,
7/01/17......................................... 2,000
----------
80,340
----------
TOTAL VARIABLE/FLOATING RATE INSTRUMENTS.................... 185,330
----------
TOTAL TAX-EXEMPT INSTRUMENTS (Cost $337,689).................. 337,689
----------
</TABLE>
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Municipal Money Market Portfolio
114
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- ------------------------------------------------------------
TAXABLE INSTRUMENTS (4.3%)
<C> <S> <C>
US GOVERNMENT & AGENCY OBLIGATIONS (4.3%)
Federal Home Loan Bank
$ 5,200 Discount Note, 6.00%, 7/06/95................... $ 5,196
10,000 Discount Note, 5.95%, 7/31/95................... 9,951
----------
TOTAL TAXABLE INSTRUMENTS (Cost $15,147)...................... 15,147
----------
TOTAL INVESTMENTS (99.5%) (Cost $352,836)..................... 352,836
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
----------
<S> <C> <C>
OTHER ASSETS (0.7%)
Cash............................................ $ 13
Interest Receivable............................. 2,514
Other........................................... 20 2,547
----------
LIABILITIES (-0.2%)
Dividends Payable............................... (487)
Investment Advisory Fees Payable................ (259)
Administrative Fees Payable..................... (61)
Custodian Fees Payable.......................... (19)
Director's Fees and Expenses Payable............ (1)
Other Liabilities............................... (8) (835)
---------- ----------
NET ASSETS (100%)............................................. $ 354,548
----------
----------
<CAPTION>
VALUE
(000)
- ------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
Applicable to 354,531,447 outstanding $.001 par value shares
(authorized 1,000,000,000 shares)........................... $1.00
----------
----------
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C>
TRANS -- Tax & Revenue Anticipation Notes
</TABLE>
Variable/Floating Rate Instruments. The interest rate changes on these
instruments are based upon a designated base rate. These instruments are payable
on demand and are secured by a letter of credit or other support agreements.
Maturity dates disclosed for Variable/Floating Rate Instruments are the ultimate
maturity dates. The effective maturity dates for such securities are the next
interest reset dates which are seven days or less.
Interest rates disclosed for US Government & Agency Obligations represent
effective yields at June 30, 1995.
At June 30, 1995, approximately 19% of the net assets were invested in Texas
municipal securities. Economic changes affecting the state and certain of its
public bodies and municipalities may affect the ability of issuers to pay the
required principal and interest payments of the municipal securities.
The accompanying notes are an integral part of the financial statements. (Pages
144-152)
- --------------------------------------------------------------------------------
Municipal Money Market Portfolio
115
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACTIVE
COUNTRY ASIAN EMERGING EUROPEAN GLOBAL
ALLOCATION EQUITY MARKETS EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED JUNE ENDED JUNE ENDED JUNE ENDED JUNE ENDED JUNE
30, 1995 30, 1995 30, 1995 30, 1995 30, 1995
(000) (000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,400 $ 3,380 $ 10,644 $ 719 $ 1,207
Interest 113 492 2,491 96 15
Less Foreign Taxes Withheld (345) (305) (1,253) (101) (123)
------------ ----------- ----------- ------ ------
Total Income 2,168 3,567 11,882 714 1,099
------------ ----------- ----------- ------ ------
EXPENSES:
Investment Advisory Fees:
Basic Fees -- Adviser 535 1,105 5,433 155 328
Less: Fees Waived (306) (228) (447) (62) (72)
------------ ----------- ----------- ------ ------
Investment Advisory Fees -- Net 229 877 4,986 93 256
Administrative Fees 157 223 690 39 71
Sub-Administrative Fees -- -- 93 -- --
Custodian Fees 187 197 1,497 18 26
Filing and Registration Fees 19 23 49 16 23
Insurance 10 12 39 1 2
Directors' Fees and Expenses 2 2 2 2 2
Legal Fees 5 8 28 1 3
Audit Fees 21 20 74 19 19
Shareholder Reports 24 15 47 4 7
Brazilian Tax Expense -- -- 5 -- --
Other Expenses 5 6 67 1 2
------------ ----------- ----------- ------ ------
Total Expenses 659 1,383 7,577 194 411
------------ ----------- ----------- ------ ------
NET INVESTMENT INCOME 1,509 2,184 4,305 520 688
------------ ----------- ----------- ------ ------
NET REALIZED GAIN (LOSS):
Investments Sold (53) 4,322 (15,596) 79 4,168
Foreign Currency Transactions (6,542) 145 (193) 308 (61)
------------ ----------- ----------- ------ ------
Total Net Realized Gain (Loss) (6,595) 4,467 (15,789) 387 4,107
------------ ----------- ----------- ------ ------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) 2,751 16,643 (54,529) 3,390 4,554
------------ ----------- ----------- ------ ------
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED
APPRECIATION (DEPRECIATION) (3,844) 21,110 (70,318) 3,777 8,661
------------ ----------- ----------- ------ ------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (2,335) $ 23,294 $ (66,013) $ 4,297 $ 9,349
------------ ----------- ----------- ------ ------
------------ ----------- ----------- ------ ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
116
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL JAPANESE
EQUITY SMALL CAP EQUITY LATIN AMERICAN
GOLD PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
PORTFOLIO SIX SIX MONTHS SIX MONTHS SIX MONTHS JANUARY 18,
MONTHS ENDED ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 1995* TO JUNE
JUNE 30, 1995 1995 1995 30, 1995 30, 1995
(000) (000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 49 $ 23,057 $ 3,633 $ 187 $ 132
Interest 69 1,853 328 2 33
Less Foreign Taxes Withheld (3) (3,035) (445) (28) (12)
------ ------- ------ ------------ -----
Total Income 115 21,875 3,516 161 153
------ ------- ------ ------------ -----
EXPENSES:
Investment Advisory Fees
Basic Fees -- Adviser 84 5,326 842 136 57
Basic Fees -- Sub Adviser 56 -- -- -- --
Less: Fees Waived -- Adviser (31) (195) (91) (56) (57)
Fees Waived -- Sub Adviser (21) -- -- -- --
------ ------- ------ ------------ -----
Investment Advisory Fees -- Net 88 5,131 751 80 --
Administrative Fees 24 1,057 145 31 10
Sub-Administrative Fees -- -- -- -- 4
Custodian Fees 7 241 59 11 39
Filing and Registration Fees 18 25 22 16 21
Insurance 1 56 6 2 --
Directors' Fees and Expenses 2 2 2 2 2
Legal Fees 1 38 5 1 --
Audit Fees 20 31 17 21 19
Shareholder Reports 12 55 10 4 --
Brazilian Tax Expense -- -- -- -- 45
Other Expenses 3 25 3 1 8
Expenses Reimbursed by Adviser -- -- -- -- (16)
------ ------- ------ ------------ -----
Total Expenses 176 6,661 1,020 169 132
------ ------- ------ ------------ -----
NET INVESTMENT INCOME (LOSS) (61) 15,214 2,496 (8) 21
------ ------- ------ ------------ -----
NET REALIZED GAIN (LOSS):
Investments Sold 268 49,958 4,341 (2,999) (747)
Foreign Currency Transactions (1) (7,755) (320) (1,570) (7)
------ ------- ------ ------------ -----
Total Net Realized Gain (Loss) 267 42,203 4,021 (4,569) (754)
------ ------- ------ ------------ -----
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) 1,862 7,737 (2,754) (2,373) 24
------ ------- ------ ------------ -----
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED
APPRECIATION (DEPRECIATION) 2,129 49,940 1,267 (6,942) (730)
------ ------- ------ ------------ -----
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 2,068 $ 65,154 $ 3,763 $ (6,950) $ (709)
------ ------- ------ ------------ -----
------ ------- ------ ------------ -----
<FN>
- ---------------
*Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
117
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE EMERGING EQUITY SMALL CAP U.S. REAL VALUE
EQUITY GROWTH GROWTH VALUE EQUITY ESTATE EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
MARCH 8, SIX MONTHS SIX MONTHS SIX MONTHS FEBRUARY 24, SIX MONTHS SIX MONTHS
1995* TO ENDED ENDED ENDED 1995* TO ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1995 1995 1995 1995 1995 1995
(000) (000) (000) (000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 79 $ 115 $ 1,083 $ 768 $ 742 $ 1,616 $ 180
Interest 36 242 404 51 59 113 321
------ ----------- ----------- ------ ------ ----------- ------
Total Income 115 357 1,487 819 801 1,729 501
------ ----------- ----------- ------ ------ ----------- ------
EXPENSES:
Investment Advisory
Fees:
Basic Fees -- Adviser 29 623 356 182 68 223 51
Less: Fees Waived (29) (19) (61) (58) (58) (52) (43)
------ ----------- ----------- ------ ------ ----------- ------
Investment Advisory
Fees -- Net -- 604 295 124 10 171 8
Administrative Fees 6 101 96 38 13 72 19
Custodian Fees 5 14 20 11 9 14 6
Filing and Registration
Fees 15 18 22 14 23 18 14
Insurance -- 5 4 1 -- 3 1
Directors' Fees and
Expenses 2 2 2 2 2 2 2
Legal Fees 11 3 3 1 11 2 --
Audit Fees 8 13 13 13 8 13 13
Shareholder Reports 7 16 16 8 9 14 6
Other Expenses 1 4 3 2 1 3 2
Expenses Reimbursed by
Adviser (18) -- -- -- -- -- --
------ ----------- ----------- ------ ------ ----------- ------
Total Expenses 37 780 474 214 86 312 71
------ ----------- ----------- ------ ------ ----------- ------
NET INVESTMENT INCOME
(LOSS) 78 (423) 1,013 605 715 1,417 430
------ ----------- ----------- ------ ------ ----------- ------
NET REALIZED GAIN (LOSS):
Investments Sold 716 2,535 6,369 (4) 310 2,940 412
Written Options (3) -- -- -- -- -- --
Securities Sold Short (2) -- -- -- -- -- --
------ ----------- ----------- ------ ------ ----------- ------
Total Net Realized
Gain (Loss) 711 2,535 6,369 (4) 310 2,940 412
------ ----------- ----------- ------ ------ ----------- ------
CHANGE IN UNREALIZED
APPRECIATION
(DEPRECIATION) 1,154 13,677 17,570 4,111 1,300 11,254 1,872
------ ----------- ----------- ------ ------ ----------- ------
TOTAL NET REALIZED GAIN
AND CHANGE IN
UNREALIZED APPRECIATION
(DEPRECIATION) 1,865 16,212 23,939 4,107 1,610 14,194 2,284
------ ----------- ----------- ------ ------ ----------- ------
Net Increase in Net
Assets Resulting from
Operations $ 1,943 $ 15,789 $ 24,952 $ 4,712 $ 2,325 $ 15,611 $ 2,714
------ ----------- ----------- ------ ------ ----------- ------
------ ----------- ----------- ------ ------ ----------- ------
<FN>
- ---------------
*Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
118
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING GLOBAL MUNICIPAL
MARKETS FIXED FIXED BOND MONEY MUNICIPAL
DEBT INCOME INCOME HIGH YIELD PORTFOLIO MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO JANUARY 18, PORTFOLIO PORTFOLIO
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS 1995* TO SIX MONTHS SIX MONTHS
ENDED JUNE ENDED JUNE ENDED JUNE ENDED JUNE JUNE 30, ENDED JUNE ENDED JUNE
30, 1995 30, 1995 30, 1995 30, 1995 1995 30, 1995 30, 1995
(000) (000) (000) (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $ -- $ 49 $ -- $ -- $ --
Interest 14,720 7,084 3,659 4,262 990 24,336 7,333
----------- ----------- ----------- ------------ ------ ----------- ------
Total Income 14,720 7,084 3,659 4,311 990 24,336 7,333
----------- ----------- ----------- ------------ ------ ----------- ------
EXPENSES:
Investment Advisory Fees:
Basic Fees -- Adviser 814 333 188 178 69 1,218 557
Less: Fees Waived -- (142) (115) (43) (62) -- --
----------- ----------- ----------- ------------ ------ ----------- ------
Investment Advisory
Fees --- Net 814 191 73 135 7 1,218 557
Administrative Fees 131 155 77 63 32 631 301
Custodian Fees 82 15 28 13 5 34 29
Filing and Registration Fees 22 13 14 20 20 22 9
Insurance 5 9 6 6 -- 44 19
Directors' Fees and Expenses 2 2 2 2 2 2 2
Legal Fees 5 6 3 2 1 16 10
Audit Fees 49 13 18 16 10 8 11
Shareholder Reports 12 15 11 8 11 19 13
Other Expenses 69 9 4 3 1 18 9
----------- ----------- ----------- ------------ ------ ----------- ------
Total Expenses 1,191 428 236 268 89 2,012 960
----------- ----------- ----------- ------------ ------ ----------- ------
NET INVESTMENT INCOME 13,529 6,656 3,423 4,043 901 22,324 6,373
----------- ----------- ----------- ------------ ------ ----------- ------
NET REALIZED GAIN (LOSS):
Investments Sold (4,292) 1,372 (2,954) (3,196) 178 79 (1)
Foreign Currency
Transactions (65) 43 202 -- -- -- --
Written Options 532 -- -- -- -- -- --
Securities Sold Short 957 -- -- -- -- -- --
----------- ----------- ----------- ------------ ------ ----------- ------
Total Net Realized Gain
(Loss) (2,868) 1,415 (2,752) (3,196) 178 79 (1)
----------- ----------- ----------- ------------ ------ ----------- ------
CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) 13,649 12,075 10,244 8,636 739 -- --
----------- ----------- ----------- ------------ ------ ----------- ------
TOTAL NET REALIZED GAIN (LOSS)
AND CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) 10,781 13,490 7,492 5,440 917 79 (1)
----------- ----------- ----------- ------------ ------ ----------- ------
Net Increase in Net Assets
Resulting
from Operations $ 24,310 $ 20,146 $ 10,915 $ 9,483 $ 1,818 $ 22,403 $ 6,372
----------- ----------- ----------- ------------ ------ ----------- ------
----------- ----------- ----------- ------------ ------ ----------- ------
<FN>
- ---------------
*Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
119
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 2,652 $ 1,509
Net Realized Gain (Loss) 8,147 (6,595)
Change in Unrealized Appreciation (Depreciation) (12,455) 2,751
-------------- --------------
Net Decrease in Net Assets Resulting from Operations (1,656) (2,335)
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (1,773) --
Net Realized Gain (4,419) (6,990)
-------------- --------------
Total Distributions (6,192) (6,990)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 169,994 53,802
Distributions Reinvested 5,395 6,629
Redeemed (135,418) (79,836)
-------------- --------------
Net Increase (Decrease) from Capital Share Transactions 39,971 (19,405)
-------------- --------------
Total Increase (Decrease) in Net Assets 32,123 (28,730)
NET ASSETS:
Beginning of Period 150,854 182,977
-------------- --------------
End of Period (2) $ 182,977 $ 154,247
-------------- --------------
-------------- --------------
<FN>
- --------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 14,259 4,939
Shares Issued on Distributions Reinvested 458 594
Shares Redeemed (11,357) (7,224)
-------------- --------------
Net Increase (Decrease) in Capital Shares Outstanding 3,360 (1,691)
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 168,882 $ 149,477
Undistributed Net Investment Income 1,418 2,927
Accumulated Net Realized Gain (Loss) 7,989 (5,596)
Unrealized Appreciation 4,688 7,439
-------------- --------------
$ 182,977 $ 154,247
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,397 $ 2,184
Net Realized Gain 32,848 4,467
Change in Unrealized Appreciation (Depreciation) (80,975) 16,643
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from
Operations (46,730) 23,294
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (972) (1,879)
Net Realized Gain (5,840) (29,033)
-------------- --------------
Total Distributions (6,812) (30,912)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 213,200 351,505
Distributions Reinvested 6,036 28,066
Redeemed (175,924) (358,462)
-------------- --------------
Net Increase from Capital Share Transactions 43,312 21,109
-------------- --------------
Total Increase (Decrease) in Net Assets (10,230) 13,491
NET ASSETS:
Beginning of Period 287,136 276,906
-------------- --------------
End of Period (2) $ 276,906 $ 290,397
-------------- --------------
-------------- --------------
<FN>
- --------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 9,345 18,577
Shares Issued on Distributions Reinvested 233 1,481
Shares Redeemed (7,685) (18,717)
-------------- --------------
Net Increase in Capital Shares Outstanding 1,893 1,341
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 207,594 $ 228,703
Undistributed Net Investment Income 1,886 2,191
Accumulated Net Realized Gain 32,350 7,784
Unrealized Appreciation 35,076 51,719
-------------- --------------
$ 276,906 $ 290,397
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
120
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ (2,302) $ 4,305
Net Realized Gain (Loss) (Net of India tax of $1,159 and
$725 on net realized gains for the Year Ended December
31, 1994 and the period ended June 30, 1995,
respectively.) 66,824 (15,789)
Change in Unrealized Appreciation (Depreciation) (168,042) (54,529)
-------------- --------------
Net Decrease in Net Assets Resulting from Operations (103,520) (66,013)
-------------- --------------
DISTRIBUTIONS:
Net Realized Gain (37,393) (52,592)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 579,390 249,111
Distributions Reinvested 35,730 50,609
Redeemed (279,921) (141,122)
-------------- --------------
Net Increase from Capital Share Transactions 335,199 158,598
-------------- --------------
Total Increase in Net Assets 194,286 39,993
NET ASSETS:
Beginning of Period 735,352 929,638
-------------- --------------
End of Period (2) $ 929,638 $ 969,631
-------------- --------------
-------------- --------------
<FN>
- --------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 32,685 18,239
Shares Issued on Distributions Reinvested 1,974 3,374
Shares Redeemed (16,342) (10,416)
-------------- --------------
Net Increase in Capital Shares Outstanding 18,317 11,197
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 818,267 $ 976,865
Accumulated Net Investment Income (Loss) (785) 3,520
Accumulated Net Realized Gain (Loss) 65,253 (3,128)
Unrealized Appreciation (Depreciation) (Net of India tax
of $4,779 and $771 on unrealized appreciation on
investments at December 31, 1994 and at June 30, 1995,
respectively.) 46,903 (7,626)
-------------- --------------
$ 929,638 $ 969,631
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 159 $ 520
Net Realized Gain 2,606 387
Change in Unrealized Appreciation (Depreciation) (1,886) 3,390
-------------- --------------
Net Increase in Net Assets Resulting from Operations 879 4,297
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (87) (6)
Net Realized Gain (251) (2,445)
-------------- --------------
Total Distributions (338) (2,451)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 39,425 29,087
Distributions Reinvested 337 2,269
Redeemed (25,350) (12,212)
-------------- --------------
Net Increase from Capital Share Transactions 14,412 19,144
-------------- --------------
Total Increase in Net Assets 14,953 20,990
NET ASSETS:
Beginning of Period 12,681 27,634
-------------- --------------
End of Period (2) $ 27,634 $ 48,624
-------------- --------------
-------------- --------------
<FN>
- --------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 2,791 2,194
Shares Issued on Distributions Reinvested 27 177
Shares Redeemed (1,818) (910)
-------------- --------------
Net Increase in Capital Shares Outstanding 1,000 1,461
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 25,071 $ 44,215
Undistributed Net Investment Income 31 545
Accumulated Net Realized Gain 2,731 673
Unrealized Appreciation (Depreciation) (199) 3,191
-------------- --------------
$ 27,634 $ 48,624
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
121
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 450 $ 688
Net Realized Gain 1,493 4,107
Change in Unrealized Appreciation (Depreciation) (1,816) 4,554
-------------- --------------
Net Increase in Net Assets Resulting from Operations 127 9,349
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (170) (330)
Net Realized Gain (1,756) (1,103)
-------------- --------------
Total Distributions (1,926) (1,433)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 72,166 18,390
Distributions Reinvested 1,926 1,398
Redeemed (13,276) (24,954)
-------------- --------------
Net Increase (Decrease) from Capital Share Transactions 60,816 (5,166)
-------------- --------------
Total Increase in Net Assets 59,017 2,750
NET ASSETS:
Beginning of Period 19,918 78,935
-------------- --------------
End of Period (2) $ 78,935 $ 81,685
-------------- --------------
-------------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 5,281 1,342
Shares Issued on Distributions Reinvested 154 106
Shares Redeemed (982) (1,799)
-------------- --------------
Net Increase (Decrease) in Capital Shares Outstanding 4,453 (351)
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 75,435 $ 70,269
Undistributed Net Investment Income 373 731
Accumulated Net Realized Gain 1,568 4,572
Unrealized Appreciation 1,559 6,113
-------------- --------------
$ 78,935 $ 81,685
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
THE GOLD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1, SIX MONTHS
1994* ENDED
TO DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 77 $ (61)
Net Realized Gain 971 267
Change in Unrealized Appreciation (Depreciation) (2,809) 1,862
------- --------------
Net Increase (Decrease) in Net Assets Resulting from
Operations (1,761) 2,068
------- --------------
DISTRIBUTIONS:
Net Investment Income (38) (37)
Net Realized Gain -- (805)
------- --------------
Total Distributions (38) (842)
------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 40,892 16,036
Distributions Reinvested 32 750
Redeemed (8,882) (27,701)
------- --------------
Net Increase (Decrease) from Capital Share Transactions 32,042 (10,915)
------- --------------
Total Increase (Decrease) in Net Assets 30,243 (9,689)
NET ASSETS:
Beginning of Period -- 30,243
------- --------------
End of Period (2) $ 30,243 $ 20,554
------- --------------
------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 4,264 1,816
Shares Issued on Distributions Reinvested 3 87
Shares Redeemed (954) (3,059)
------- --------------
Net Increase (Decrease) in Capital Shares Outstanding 3,313 (1,156)
------- --------------
------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 32,042 $ 21,127
Accumulated Net Investment Income (Loss) 36 (62)
Accumulated Net Realized Gain 974 436
Unrealized Depreciation (2,809) (947)
------- --------------
$ 30,243 $ 20,554
------- --------------
------- --------------
- -----------------
* Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
122
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 13,406 $ 15,214
Net Realized Gain 64,532 42,203
Change in Unrealized Appreciation (Depreciation) 46,399 7,737
------------ --------------
Net Increase in Net Assets Resulting from Operations 124,337 65,154
------------ --------------
DISTRIBUTIONS:
Net Investment Income (11,956) --
Net Realized Gain (18,019) (68,023)
------------ --------------
Total Distributions (29,975) (68,023)
------------ --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 330,843 142,813
Distributions Reinvested 25,762 66,422
Redeemed (93,242) (72,833)
------------ --------------
Net Increase from Capital Share Transactions 263,363 136,402
------------ --------------
Total Increase in Net Assets 357,725 133,533
NET ASSETS:
Beginning of Period 947,045 1,304,770
------------ --------------
End of Period (2) $ 1,304,770 $ 1,438,303
------------ --------------
------------ --------------
<FN>
- -----------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 22,148 142,813
Shares Issued on Distributions Reinvested 1,872 66,422
Shares Redeemed (6,156) (72,833)
------------ --------------
Net Increase in Capital Shares Outstanding 17,864 136,402
------------ --------------
------------ --------------
(2) Net Assets were comprised of:
Paid in Capital $ 1,001,514 $ 1,137,916
Undistributed Net Investment Income 7,083 22,297
Accumulated Net Realized Gain 70,335 44,515
Unrealized Appreciation 225,838 233,575
------------ --------------
$ 1,304,770 $ 1,438,303
------------ --------------
------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,413 $ 2,496
Net Realized Gain (Loss) (2,342) 4,021
Change in Unrealized Appreciation (Depreciation) (5,180) (2,754)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations (6,109) 3,763
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (96) (280)
In Excess of Net Investment Income (794) --
-------------- --------------
Total Distributions (890) (280)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 132,287 37,771
Distributions Reinvested 763 211
Redeemed (18,784) (14,548)
-------------- --------------
Net Increase from Capital Share Transactions 114,266 23,434
-------------- --------------
Total Increase in Net Assets 107,267 26,917
NET ASSETS:
Beginning of Period 52,834 160,101
-------------- --------------
End of Period (2) $ 160,101 $ 187,018
-------------- --------------
-------------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 8,068 2,492
Shares Issued on Distributions Reinvested 52 14
Shares Redeemed (1,164) (955)
-------------- --------------
Net Increase in Capital Shares Outstanding 6,956 1,551
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 162,928 $ 186,362
Undistributed Net Investment Income 703 2,919
Accumulated Net Realized Gain (Loss) (1,989) 2,032
Unrealized Depreciation (1,541) (4,295)
-------------- --------------
$ 160,101 $ 187,018
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
123
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE JAPANESE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 25, SIX MONTHS
1994* TO ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Loss $ (31) $ (8)
Net Realized Loss (527) (4,569)
Change in Unrealized Appreciation (Depreciation) (215) (2,373)
-------------- --------------
Net Decrease in Net Assets Resulting from Operations (773) (6,950)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 69,015 33,525
Redeemed (17,910) (55,161)
-------------- --------------
Net Increase (Decrease) from Capital Share Transactions 51,105 (21,636)
-------------- --------------
Total Increase (Decrease) in Net Assets 50,332 (28,586)
NET ASSETS:
Beginning of Period -- 50,332
-------------- --------------
End of Period (2) $ 50,332 $ 21,746
-------------- --------------
-------------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 6,910 3,855
Shares Redeemed (1,789) (6,321)
-------------- --------------
Net Increase (Decrease) in Capital Shares Outstanding 5,121 (2,466)
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 50,808 $ 29,172
Accumulated Net Investment Loss (261) (269)
Accumulated Net Realized Loss -- (4,569)
Unrealized Depreciation (215) (2,588)
-------------- --------------
$ 50,332 $ 21,746
-------------- --------------
-------------- --------------
- -----------------
*Commencement of operations.
</TABLE>
- --------------------------------------------------------------------------------
THE LATIN AMERICAN PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 18,
1995*
TO JUNE 30,
1995
(UNAUDITED)
(000)
- -------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 21
Net Realized Loss (754)
Change in Unrealized Appreciation 24
-------
Net Decrease in Net Assets Resulting from Operations (709)
-------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 17,894
Redeemed (3,232)
-------
Net Increase from Capital Share Transactions 14,662
-------
Total Increase in Net Assets 13,953
NET ASSETS:
Beginning of Period --
-------
End of Period (2) $ 13,953
-------
-------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 1,956
Shares Redeemed (370)
-------
Net Increase in Capital Shares Outstanding 1,586
-------
-------
(2) Net Assets were comprised of:
Paid in Capital $ 14,662
Undistributed Net Investment Income 21
Accumulated Net Realized Loss (754)
Unrealized Appreciation 24
-------
$ 13,953
-------
-------
- -----------------
*Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
124
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE AGGRESSIVE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 8, 1995*
TO JUNE 30,
1995
(UNAUDITED)
(000)
- -------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 78
Net Realized Gain 711
Change in Unrealized Appreciation 1,154
-------
Net Increase in Net Assets Resulting from Operations 1,943
-------
DISTRIBUTIONS:
Net Investment Income (16)
-------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 16,751
Distributions Reinvested 15
Redeemed (438)
-------
Net Increase from Capital Share Transactions 16,328
-------
Total Increase in Net Assets 18,255
NET ASSETS:
Beginning of Period --
-------
End of Period (2) $ 18,255
-------
-------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 1,584
Shares Issued on Distributions Reinvested 1
Shares Redeemed (39)
-------
Net Increase in Capital Shares Outstanding 1,546
-------
-------
(2) Net Assets were comprised of:
Paid in Capital $ 16,328
Undistributed Net Investment Income 62
Accumulated Net Realized Gain 711
Unrealized Appreciation 1,154
-------
$ 18,255
-------
-------
- -----------------
*Commencement of operations.
</TABLE>
- --------------------------------------------------------------------------------
THE EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Loss $ (673) $ (423)
Net Realized Gain 1,331 2,535
Change in Unrealized Appreciation (Depreciation) (891) 13,677
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations (233) 15,789
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 85,970 80,818
Redeemed (71,689) (70,690)
-------------- --------------
Net Increase from Capital Share Transactions 14,281 10,128
-------------- --------------
Total Increase in Net Assets 14,048 25,917
NET ASSETS:
Beginning of Period 103,621 117,669
-------------- --------------
End of Period (2) $ 117,669 $ 143,586
-------------- --------------
-------------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 5,433 4,765
Shares Redeemed (4,522) (4,196)
-------------- --------------
Net Increase in Capital Shares Outstanding 911 569
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 103,598 $ 113,726
Accumulated Net Investment Loss -- (423)
Accumulated Net Realized Loss (10,925) (8,390)
Unrealized Appreciation 24,996 38,673
-------------- --------------
$ 117,669 $ 143,586
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
125
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,293 $ 1,013
Net Realized Gain 3,710 6,369
Change in Unrealized Appreciation (Depreciation) (2,690) 17,570
-------------- --------------
Net Increase in Net Assets Resulting from Operations 2,313 24,952
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (952) (841)
Net Realized Gain (2,220) (3,382)
-------------- --------------
Total Distributions (3,172) (4,223)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 47,456 51,425
Distributions Reinvested 3,096 3,894
Redeemed (26,223) (26,534)
-------------- --------------
Net Increase from Capital Share Transactions 24,329 28,785
-------------- --------------
Total Increase in Net Assets 23,470 49,514
NET ASSETS:
Beginning of Period 73,789 97,259
-------------- --------------
End of Period (2) $ 97,259 $ 146,773
-------------- --------------
-------------- --------------
<FN>
- ---------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 3,964 4,036
Shares Issued on Distributions Reinvested 267 335
Shares Redeemed (2,218) (2,098)
-------------- --------------
Net Increase in Capital Shares Outstanding 2,013 2,273
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 92,584 $ 121,369
Undistributed Net Investment Income 461 633
Accumulated Net Realized Gain 3,459 6,446
Unrealized Appreciation 755 18,325
-------------- --------------
$ 97,259 $ 146,773
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
THE SMALL CAP VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 951 $ 605
Net Realized Gain (Loss) 1,484 (4)
Change in Unrealized Appreciation (Depreciation) (1,598) 4,111
-------------- -------
Net Increase in Net Assets Resulting from Operations 837 4,712
-------------- -------
DISTRIBUTIONS:
Net Investment Income (831) (547)
Net Realized Gain (720) (1,214)
-------------- -------
Total Distributions (1,551) (1,761)
-------------- -------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 25,447 12,793
Distributions Reinvested 1,464 1,568
Redeemed (12,939) (8,533)
-------------- -------
Net Increase from Capital Share Transactions 13,972 5,828
-------------- -------
Total Increase in Net Assets 13,258 8,779
NET ASSETS:
Beginning of Period 26,775 40,033
-------------- -------
End of Period (2) $ 40,033 $ 48,812
-------------- -------
-------------- -------
<FN>
- ----------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 2,358 1,171
Shares Issued on Distributions Reinvested 137 150
Shares Redeemed (1,200) (789)
-------------- -------
Net Increase in Capital Shares Outstanding 1,295 532
-------------- -------
-------------- -------
(2) Net Assets were comprised of:
Paid in Capital $ 39,194 $ 45,022
Undistributed Net Investment Income 281 339
Accumulated Net Realized Gain 1,484 266
Unrealized Appreciation (Depreciation) (926) 3,185
-------------- -------
$ 40,033 $ 48,812
-------------- -------
-------------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
126
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE U.S. REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 24,
1995* TO
JUNE 30 1995
(UNAUDITED)
(000)
- -------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 715
Net Realized Gain 310
Change in Unrealized Appreciation 1,300
-------
Net Increase in Net Assets Resulting from Operations 2,325
-------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 39,627
Redeemed (2,032)
-------
Net Increase from Capital Share Transactions 37,595
-------
Total Increase in Net Assets 39,920
NET ASSETS:
Beginning of Period --
-------
End of Period (2) $ 39,920
-------
-------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 3,882
Shares Redeemed (197)
-------
Net Increase in Capital Shares Outstanding 3,685
-------
-------
(2) Net Assets were comprised of:
Paid in Capital $ 37,595
Undistributed Net Investment Income 715
Accumulated Net Realized Gain 310
Unrealized Appreciation 1,300
-------
$ 39,920
-------
-------
- -----------------
*Commencement of operations.
</TABLE>
- --------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 2,376 $ 1,417
Net Realized Gain 2,378 2,940
Change in Unrealized Appreciation (Depreciation) (6,089) 11,254
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations (1,335) 15,611
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (2,189) (1,300)
Net Realized Gain (2,504) (2,460)
-------------- --------------
Total Distributions (4,693) (3,760)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 45,372 33,076
Distributions Reinvested 4,395 3,395
Redeemed (24,931) (13,648)
-------------- --------------
Net Increase from Capital Share Transactions 24,836 22,823
-------------- --------------
Total Increase in Net Assets 18,808 34,674
NET ASSETS:
Beginning of Period 54,598 73,406
-------------- --------------
End of Period (2) $ 73,406 $ 108,080
-------------- --------------
-------------- --------------
<FN>
- ---------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 3,798 2,733
Shares Issued on Distributions Reinvested 372 302
Shares Redeemed (2,109) (1,144)
-------------- --------------
Net Increase in Capital Shares Outstanding 2,061 1,891
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 72,751 $ 95,574
Undistributed Net Investment Income 643 760
Accumulated Net Realized Gain 2,307 2,787
Unrealized Appreciation (Depreciation) (2,295) 8,959
-------------- --------------
$ 73,406 $ 108,080
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
127
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 987 $ 430
Net Realized Gain 496 412
Change in Unrealized Appreciation (Depreciation) (1,998) 1,872
-------------- -------
Net Increase (Decrease) in Net Assets Resulting from Operations (515) 2,714
-------------- -------
DISTRIBUTIONS:
Net Investment Income (1,257) (420)
Net Realized Gain (3,880) (530)
-------------- -------
Total Distributions (5,137) (950)
-------------- -------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 4,396 2,448
Distributions Reinvested 4,725 779
Redeemed (14,661) (2,170)
-------------- -------
Net Increase (Decrease) from Capital Share Transactions (5,540) 1,057
-------------- -------
Total Increase (Decrease) in Net Assets (11,192) 2,821
NET ASSETS:
Beginning of Period 29,684 18,492
-------------- -------
End of Period (2) $ 18,492 $ 21,313
-------------- -------
-------------- -------
<FN>
- --------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 470 270
Shares Issued on Distributions Reinvested 502 89
Shares Redeemed (1,574) (234)
-------------- -------
Net Increase (Decrease) in Capital Shares Outstanding (602) 125
-------------- -------
-------------- -------
(2) Net Assets were comprised of:
Paid in Capital $ 18,279 $ 19,336
Undistributed Net Investment Income 214 224
Accumulated Net Realized Gain 495 377
Unrealized Appreciation (Depreciation) (496) 1,376
-------------- -------
$ 18,492 $ 21,313
-------------- -------
-------------- -------
</TABLE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1, SIX MONTHS
1994* TO ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 8,511 $ 13,529
Net Realized Loss (2,516) (2,868)
Change in Unrealized Appreciation (Depreciation) (9,457) 13,649
--------------- --------------
Net Increase (Decrease) in Net Assets Resulting from
Operations (3,462) 24,310
--------------- --------------
DISTRIBUTIONS:
Net Investment Income -- (8,182)
--------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 190,661 124,700
Distributions Reinvested -- 6,054
Redeemed (42,250) (112,288)
--------------- --------------
Net Increase from Capital Share Transactions 148,411 18,466
--------------- --------------
Total Increase in Net Assets 144,949 34,594
NET ASSETS:
Beginning of Period -- 144,949
--------------- --------------
End of Period (2) $ 144,949 $ 179,543
--------------- --------------
--------------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 21,753 16,070
Shares Issued on Distributions Reinvested -- 751
Shares Redeemed (4,872) (13,800)
--------------- --------------
Net Increase in Capital Shares Outstanding 16,881 3,021
--------------- --------------
--------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 148,411 $ 166,877
Undistributed Net Investment Income 8,322 13,669
Accumulated Net Realized Loss (2,327) (5,195)
Unrealized Appreciation (Depreciation) (9,457) 4,192
--------------- --------------
$ 144,949 $ 179,543
--------------- --------------
--------------- --------------
- -----------------
*Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
128
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 12,421 $ 6,656
Net Realized Gain (Loss) (14,879) 1,415
Change in Unrealized Appreciation (Depreciation) (5,219) 12,075
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations (7,677) 20,146
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (11,181) (6,774)
Net Realized Gain (8,092) --
In Excess of Net Realized Gain (22) --
-------------- --------------
Total Distributions (19,295) (6,774)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 91,618 41,730
Distributions Reinvested 16,756 5,299
Redeemed (112,739) (103,714)
-------------- --------------
Net Decrease from Capital Share Transactions (4,365) (56,685)
-------------- --------------
Total Decrease in Net Assets (31,337) (43,313)
NET ASSETS:
Beginning of Period 240,668 209,331
-------------- --------------
End of Period (2) $ 209,331 $ 166,018
-------------- --------------
-------------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscriptions 9,049 4,187
Shares Issued on Distributions Reinvested 1,625 528
Shares Redeemed (11,150) (10,276)
-------------- --------------
Net Decrease in Capital Shares Outstanding (476) (5,561)
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 227,051 $ 170,366
Undistributed Net Investment Income 1,274 1,156
Accumulated Net Realized Loss (14,154) (12,739)
Unrealized Appreciation (Depreciation) (4,840) 7,235
-------------- --------------
$ 209,331 $ 166,018
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 9,291 $ 3,423
Net Realized Loss (9,075) (2,752)
Change in Unrealized Appreciation (Depreciation) (10,682) 10,244
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations (10,466) 10,915
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (5,595) (4,056)
Net Realized Gain (4,564) --
-------------- --------------
Total Distributions (10,159) (4,056)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 96,510 18,656
Distributions Reinvested 9,111 3,500
Redeemed (126,789) (70,824)
-------------- --------------
Net Decrease from Capital Share Transactions (21,168) (48,668)
-------------- --------------
Total Decrease in Net Assets (41,793) (41,809)
NET ASSETS:
Beginning of Period 172,468 130,675
-------------- --------------
End of Period (2) $ 130,675 $ 88,866
-------------- --------------
-------------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 8,912 1,727
Shares Issued on Distributions Reinvested 833 339
Shares Redeemed (11,801) (6,799)
-------------- --------------
Net Decrease in Capital Shares Outstanding (2,056) (4,733)
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 141,657 $ 92,989
Undistributed Net Investment Income 1,613 980
Accumulated Net Realized Loss (5,933) (8,685)
Unrealized Appreciation (Depreciation) (6,662) 3,582
-------------- --------------
$ 130,675 $ 88,866
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
129
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 9,341 $ 4,043
Net Realized Loss (1,581) (3,196)
Change in Unrealized Appreciation (Depreciation) (12,785) 8,636
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations (5,025) 9,483
-------------- --------------
DISTRIBUTIONS:
Net Investment Income (9,097) (4,383)
Net Realized Gain (1,413) --
-------------- --------------
Total Distributions (10,510) (4,383)
-------------- --------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 72,764 41,311
Distributions Reinvested 8,869 3,305
Redeemed (43,375) (83,658)
-------------- --------------
Net Increase (Decrease) from Capital Share Transactions 38,258 (39,042)
-------------- --------------
Total Increase (Decrease) in Net Assets 22,723 (33,942)
NET ASSETS:
Beginning of Period 74,500 97,223
-------------- --------------
End of Period (2) $ 97,223 $ 63,281
-------------- --------------
-------------- --------------
<FN>
- -------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 6,882 4,134
Shares Issued on Distributions Reinvested 858 339
Shares Redeemed (4,235) (8,509)
-------------- --------------
Net Increase (Decrease) in Capital Shares Outstanding 3,505 (4,036)
-------------- --------------
-------------- --------------
(2) Net Assets were comprised of:
Paid in Capital $ 108,726 $ 69,684
Undistributed Net Investment Income 731 391
Accumulated Net Realized Loss (1,581) (4,777)
Unrealized Depreciation (10,653) (2,017)
-------------- --------------
$ 97,223 $ 63,281
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
THE MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 18,
1995*
TO JUNE 30, 1995
(UNAUDITED)
(000)
- ------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 901
Net Realized Gain 178
Change in Unrealized Appreciation 739
--------
Net Increase in Net Assets Resulting from Operations 1,818
--------
DISTRIBUTIONS:
Net Investment Income (705)
--------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 55,060
Distributions Reinvested 672
Redeemed (13,015)
--------
Net Increase from Capital Share Transactions 42,717
--------
Total Increase in Net Assets 43,830
NET ASSETS:
Beginning of Period --
--------
End of Period (2) $ 43,830
--------
--------
<FN>
- ------------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 5,480
Shares Issued on Distributions Reinvested 66
Shares Redeemed (1,273)
--------
Net Increase in Capital Shares Outstanding 4,273
--------
--------
(2) Net Assets were comprised of:
Paid in Capital $ 42,717
Undistributed Net Investment Income 196
Accumulated Net Realized Gain 178
Unrealized Appreciation 739
--------
$ 43,830
--------
--------
- -----------------
*Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
130
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 26,880 $ 22,324
Net Realized Gain (Loss) (26) 79
------------- -------------
Net Increase in Net Assets Resulting from Operations 26,854 22,403
------------- -------------
DISTRIBUTIONS:
Net Investment Income (26,888) (22,324)
------------- -------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 4,547,025 3,669,165
Distributions Reinvested 24,451 20,718
Redeemed (4,538,102) (3,553,475)
------------- -------------
Net Increase from Capital Share Transactions 33,374 136,408
------------- -------------
Total Increase in Net Assets 33,340 136,487
NET ASSETS:
Beginning of Period 657,163 690,503
------------- -------------
End of Period (2) $ 690,503 $ 826,990
------------- -------------
------------- -------------
<FN>
- -----------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 4,547,025 3,669,165
Shares Issued on Distributions Reinvested 24,451 20,718
Shares Redeemed (4,538,102) (3,553,475)
------------- -------------
Net Increase in Capital Shares Outstanding 33,374 136,408
------------- -------------
------------- -------------
(2) Net Assets were comprised of:
Paid in Capital $ 690,595 $ 827,003
Accumulated Net Realized Loss (92) (13)
------------- -------------
$ 690,503 $ 826,990
------------- -------------
------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
(000) (000)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 8,186 $ 6,373
Net Realized Loss (6) (1)
------------- -------------
Net Increase in Net Assets Resulting from Operations 8,180 6,372
------------- -------------
DISTRIBUTIONS:
Net Investment Income (8,186) (6,373)
------------- -------------
CAPITAL SHARE TRANSACTIONS: (1)
Subscribed 2,267,352 1,326,626
Distributions Reinvested 7,587 6,320
Redeemed (2,182,013) (1,337,841)
------------- -------------
Net Increase (Decrease) from Capital Share Transactions 92,926 (4,895)
------------- -------------
Total Increase (Decrease) in Net Assets 92,920 (4,896)
NET ASSETS:
Beginning of Period 266,524 359,444
------------- -------------
End of Period (2) $ 359,444 $ 354,548
------------- -------------
------------- -------------
<FN>
- -----------------------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 2,267,352 1,326,626
Shares Issued on Distributions Reinvested 7,587 6,320
Shares Redeemed (2,182,013) (1,337,841)
------------- -------------
Net Increase (Decrease) in Capital Shares Outstanding 92,926 (4,895)
------------- -------------
------------- -------------
(2) Net Assets were comprised of:
Paid in Capital $ 359,452 $ 354,557
Accumulated Net Realized Loss (8) (9)
------------- -------------
$ 359,444 $ 354,548
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
131
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE ACTIVE COUNTRY ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
JANUARY 17, 1992* TWO MONTHS ENDED
TO ENDED YEAR ENDED YEAR ENDED JUNE 30,
OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1992 1992 1993 1994 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.37 $ 9.59 $ 12.21 $ 11.65
------ ----- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.11 0.02 0.13 0.19 0.12
Net Realized and Unrealized Gain
(Loss) on Investments (0.74) 0.20 2.75 (0.25) (0.33)
------ ----- ------ ------ ------
Total from Investment Operations (0.63) 0.22 2.88 (0.06) (0.21)
------ ----- ------ ------ ------
DISTRIBUTIONS
Net Investment Income -- -- (0.09) (0.14) --
In Excess of Net Investment Income -- -- (0.08) -- --
Net Realized Gain -- -- -- (0.36) (0.44)
In Excess of Net Realized Gain -- -- (0.09) -- --
------ ----- ------ ------ ------
Total Distributions -- -- (0.26) (0.50) (0.44)
------ ----- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.37 $ 9.59 $ 12.21 $ 11.65 $ 11.00
------ ----- ------ ------ ------
------ ----- ------ ------ ------
TOTAL RETURN (6.30)% 2.35% 30.72% (0.52)% (1.81)%
------ ----- ------ ------ ------
------ ----- ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $47,534 $50,234 $150,854 $182,977 $154,247
Ratio of Expenses to Average Net
Assets 0.88%** 0.80%** 0.80% 0.80% 0.80%**
Ratio of Net Investment Income to
Average Net Assets 2.32%** 1.22%** 1.29% 1.43% 1.83%**
Portfolio Turnover Rate 62% 2% 53% 51% 37%
<FN>
- -----------------
(1)Effect of voluntary expense
limitation during the period:
Per share benefit to net
investment income $0.03 $0.01 $0.05 $0.03 $0.02
Ratios before expense limitation:
Expenses to Average Net Assets 1.58%** 1.70%** 1.33% 1.00% 1.17%**
Net Investment Income to Average
Net Assets 1.62%** 0.32%** 0.76% 1.23% 1.46%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
JULY 1, TWO MONTHS ENDED
1991* TO YEAR ENDED ENDED YEAR ENDED YEAR ENDED JUNE 30,
OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1991 1992 1992 1993 1994 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.00 $ 9.67 $ 13.63 $ 13.11 $ 26.20 $ 21.54
----- ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.03 0.14 0.01 0.10 0.11 0.16
Net Realized and Unrealized Gain
(Loss) on Investments (0.36) 3.86 (0.53) 13.38 (4.15) 1.17
----- ------ ------ ------ ------ ------
Total from Investment
Operations (0.33) 4.00 (0.52) 13.48 (4.04) 1.33
----- ------ ------ ------ ------ ------
DISTRIBUTIONS
Net Investment Income -- (0.04) -- (0.01) (0.09) (0.15)
In Excess of Net Investment
Income -- -- -- (0.13) -- --
Net Realized Gain -- -- -- (0.12) (0.53) (2.26)
In Excess of Net Realized Gain -- -- -- (0.13) -- --
----- ------ ------ ------ ------ ------
Total Distributions -- (0.04) -- (0.39) (0.62) (2.41)
----- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.67 $ 13.63 $ 13.11 $ 26.20 $ 21.54 $ 20.46
----- ------ ------ ------ ------ ------
----- ------ ------ ------ ------ ------
TOTAL RETURN (3.30)% 41.50% (3.82)% 105.71% (15.81)% 7.04%
----- ------ ------ ------ ------ ------
----- ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $10,719 $41,017 $41,978 $287,136 $276,906 $290,397
Ratio of Expenses to Average Net
Assets 1.00%** 1.00% 1.00%** 1.00% 1.00% 1.00%**
Ratio of Net Investment Income to
Average Net Assets 1.13%** 1.53% 0.61%** 0.83% 0.52% 1.58%**
Portfolio Turnover Rate 2% 33% 10% 18% 47% 29%
<FN>
- -----------------
(1)Effect of voluntary expense
limitation during the period:
Per share benefit to net
investment income $0.02 $0.06 $0.02 $0.05 $0.04 $0.02
Ratios before expense limitation:
Expenses to Average Net Assets 2.52%** 1.63% 2.02%** 1.38% 1.20% 1.16%**
Net Investment Income (Loss) to
Average Net Assets (0.39)%** 0.90% (0.41)%** 0.45% 0.32% 1.41%**
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
132
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
SEPTEMBER 25, 1992* TWO MONTHS ENDED
TO ENDED YEAR ENDED YEAR ENDED JUNE 30,
OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1992 1992 1993 1994 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
<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) 0.07
Net Realized and Unrealized Gain
(Loss) on Investments 0.11 0.11 8.79 (1.69) (1.24)
------ ------ ------ ------ ------
Total from Investment
Operations 0.11 0.11 8.78 (1.73) (1.17)
------ ------ ------ ------ ------
DISTRIBUTIONS
Net Realized Gain -- -- -- (0.97) (0.92)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 10.22 $ 19.00 $ 16.30 $ 14.21
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN 1.10% 1.09% 85.91% (9.63)% (7.46)%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $28,806 $74,219 $735,352 $929,638 $969,631
Ratio of Expenses to Average Net
Assets (1) 1.75%** 1.75%** 1.75% 1.75% 1.75%**
Ratio of Net Investment Income
(Loss) to Average Net Assets
(1) (0.53)%** (0.33)%** (0.06)% (0.26)% 0.99%**
Portfolio Turnover Rate 0% 2% 52% 32% 21%
<FN>
- -----------------
(1)Effect of voluntary expense
limitation during the period:
Per share benefit to net
investment income $0.02 $0.00 $0.01 N/A $0.01
Ratios before expense
limitation:
Expenses to Average Net Assets 4.82%** 2.48%** 1.79% N/A 1.85%**
Net Investment Income (Loss)
to Average Net Assets (3.60)%** (1.06)%** (0.10)% N/A 0.89%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 2, 1993* SIX MONTHS ENDED
TO YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, 1995
1993 1994 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 12.91 $ 13.94
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.08 0.08 0.15
Net Realized and Unrealized Gain on Investments 2.83 1.29 1.27
------ ------ ------
Total from Investment Operations 2.91 1.37 1.42
------ ------ ------
DISTRIBUTIONS
Net Investment Income -- (0.09) --
Net Realized Gain -- (0.25) (1.24)
------ ------ ------
Total Distributions -- (0.34) (1.24)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 12.91 $ 13.94 $ 14.12
------ ------ ------
------ ------ ------
TOTAL RETURN 29.10% 10.88% 11.10%
------ ------ ------
------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $12,681 $27,634 $48,624
Ratio of Expenses to Average Net Assets (1) 1.00%** 1.00% 1.00%**
Ratio of Net Investment Income to Average Net Assets
(1) 1.23%** 0.87% 2.68%**
Portfolio Turnover Rate 15% 79% 3%
<FN>
- -----------------
(1)Effect of voluntary expense limitation during the
period:
Per share benefit to net investment income $0.09 $0.06 $0.02
Ratios before expense limitation:
Expenses to Average Net Assets 2.43%** 1.62% 1.32%**
Net Investment Income (Loss) to Average Net Assets (0.21)%** 0.25% 2.36%**
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
133
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
PERIOD FROM TWO MONTHS ENDED
JULY 15, 1992* ENDED YEAR ENDED YEAR ENDED JUNE 30,
TO OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1992 1992 1993 1994 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.00 $ 9.35 $ 9.75 $ 13.87 $ 13.40
------- ----- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.02 0.01 0.08 0.08 0.13
Net Realized and Unrealized Gain
(Loss) on Investments (0.67) 0.39 4.18 0.79 1.47
------- ----- ------------- ------------- -------------
Total from Investment
Operations (0.65) 0.40 4.26 0.87 1.60
------- ----- ------------- ------------- -------------
DISTRIBUTIONS
Net Investment Income -- -- (0.02) (0.12) (0.06)
In Excess of Net Investment
Income -- -- (0.03) -- --
Net Realized Gain -- -- (0.09) (1.22) (0.19)
------- ----- ------------- ------------- -------------
Total Distributions -- -- (0.14) (1.34) (0.25)
------- ----- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 9.35 $ 9.75 $ 13.87 $ 13.40 $ 14.75
------- ----- ------------- ------------- -------------
------- ----- ------------- ------------- -------------
TOTAL RETURN (6.50)% 4.28% 44.24% 6.95% 12.11%
------- ----- ------------- ------------- -------------
------- ----- ------------- ------------- -------------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $11,257 $11,739 $19,918 $78,935 $81,685
Ratio of Expenses to Average Net
Assets (1) 1.00%** 1.00%** 1.00% 1.00% 1.00%**
Ratio of Net Investment Income to
Average Net Assets (1) 1.00%** 0.69%** 0.84% 0.87% 1.68%**
Portfolio Turnover Rate 10% 5% 42% 12% 19%
<FN>
- -----------------
(1)Effect of voluntary expense
limitation during the period:
Per share benefit to net
investment income $ 0.08 $ 0.02 $ 0.01 $ 0.02 $ 0.01
Ratios before expense limitation:
Expenses to Average Net Assets 5.22%** 2.49%** 1.66% 1.24% 1.18%**
Net Investment Income (Loss) to
Average Net Assets (3.22)%** (0.80)%** 0.18% 0.63% 1.50%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE GOLD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
FEBRUARY 1, 1994* JUNE 30,
TO DECEMBER 31, 1995
1994 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.13
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (1) 0.03 (0.03)
Net Realized and Unrealized Gain (Loss) on Investments (0.88) 0.68
------- -------
Total from Investment Operations (0.85) 0.65
------- -------
DISTRIBUTIONS
Net Investment Income (0.02) (0.01)
Net Realized Gain -- (0.24)
------- -------
Total Distributions (0.02) (0.25)
------- -------
NET ASSET VALUE, END OF PERIOD $ 9.13 $ 9.53
------- -------
------- -------
TOTAL RETURN (8.49)% 7.47%
------- -------
------- -------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $30,243 $20,554
Ratio of Expenses to Average Net Assets (1) 1.25%** 1.25%**
Ratio of Net Investment Income (Loss) to Average Net Assets
(1) 0.41%** (0.43)%**
Portfolio Turnover Rate 56% 10%
<FN>
- -----------------
(1)Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $ 0.04 $ 0.02
Ratios before expense limitation:
Expenses to Average Net Assets 1.72%** 1.63%**
Net Investment Loss to Average Net Assets (0.06)%** (0.81)%**
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
134
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWO MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR ENDED ENDED
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER DECEMBER DECEMBER JUNE 30,
OCTOBER 31, OCTOBER 31, OCTOBER 31, 31, 31, 31, 1995
1990 1991 1992 1992 1993 1994 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.72 $ 10.05 $ 10.52 $ 9.83 $ 9.98 $ 14.09 $ 15.34
----------- ----------- ----------- ----- ---------- ---------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (1) 0.19 0.12 0.12 0.01 0.15 0.16 0.15
Net Realized and Unrealized
Gain (Loss) on Investments 0.20 0.58 (0.59) 0.14 4.36 1.54 0.56
----------- ----------- ----------- ----- ---------- ---------- -----------
Total from Investment
Operations 0.39 0.70 (0.47) 0.15 4.51 1.70 0.71
----------- ----------- ----------- ----- ---------- ---------- -----------
DISTRIBUTIONS
Net Investment Income (0.06) (0.15) (0.17) -- (0.01) (0.18) --
In Excess of Net Investment
Income -- -- -- -- (0.13) -- --
Net Realized Gain -- (0.08) (0.05) -- (0.26) (0.27) (0.80)
----------- ----------- ----------- ----- ---------- ---------- -----------
Total Distributions (0.06) (0.23) (0.22) -- (0.40) (0.45) (0.80)
----------- ----------- ----------- ----- ---------- ---------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.05 $ 10.52 $ 9.83 $ 9.98 $ 14.09 $ 15.34 $ 15.25
----------- ----------- ----------- ----- ---------- ---------- -----------
----------- ----------- ----------- ----- ---------- ---------- -----------
TOTAL RETURN 3.99% 7.17% (4.56)% 1.53% 46.50% 12.39% 4.88%
----------- ----------- ----------- ----- ---------- ---------- -----------
----------- ----------- ----------- ----- ---------- ---------- -----------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $110,716 $283,776 $486,836 $510,727 $947,045 $1,304,770 $1,438,303
Ratio of Expenses to Average Net
Assets (1) 1.03% 1.00% 1.00% 1.00%** 1.00% 1.00% 1.00%**
Ratio of Net Investment Income
to Average Net Assets (1) 3.51% 2.27% 1.46% 0.68%** 1.25% 1.12% 2.28%**
Portfolio Turnover Rate 38% 22% 12% 5% 23% 16% 13%
<FN>
- -----------------
(1)Effect of voluntary expense
limitation during the period:
Per share benefit to net
investment income $ 0.01 $ 0.01 $ 0.00 $ 0.00 $ 0.01 $0.004 $0.002
Ratios before expense
limitation:
Expenses to Average Net
Assets 1.24% 1.09% 1.02% 1.14%** 1.06% 1.03% 1.03%**
Net Investment Income to
Average Net Asset 3.30% 2.18% 1.44% 0.54%** 1.19% 1.09% 2.25%**
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
DECEMBER 15, 1992* YEAR ENDED YEAR ENDED JUNE 30,
TO DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1992 1993+ 1994 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.09 $ 14.64 $ 15.15
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.01 0.09 0.14 0.20
Net Realized and Unrealized Gain on
Investments (2) 0.08 4.48 0.62 0.11
------ ------ ------ ------
Total from Investment Operations 0.09 4.57 0.76 0.31
------ ------ ------ ------
DISTRIBUTIONS
Net Investment Income -- 0.00 (0.03) (0.03)
In Excess of Net Investment Income -- (0.02) -- --
Net Realized Gain -- -- (0.22) --
------ ------ ------ ------
Total Distributions -- (0.02) (0.25) (0.03)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.09 $ 14.64 $ 15.15 $ 15.43
------ ------ ------ ------
------ ------ ------ ------
TOTAL RETURN 0.90% 45.34% 5.25% 2.03%
------ ------ ------ ------
------ ------ ------ ------
RATIO AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $3,824 $52,834 $160,101 $187,018
Ratio of Expenses to Average Net Assets
(1) 1.15%** 1.15% 1.15% 1.15%**
Ratio of Net Investment Income to
Average Net Assets (1) 1.37%** 0.66% 1.18% 2.81%**
Portfolio Turnover Rate 0% 14% 8% 14%
<FN>
- -----------------
(1)Effect of voluntary expense
limitation during the period:
Per share benefit to net investment
income $ 0.16 $ 0.10 $ 0.02 $ 0.01
Ratios before expense limitation:
Expenses to Average Net Assets 21.67%** 1.86% 1.29% 1.25%**
Net Investment Income (Loss) to
Average Net Assets (19.15)%** (0.05)% 1.04% 2.71%**
(2)Reflects a 1% transaction fee on purchases and redemptions of capital shares.
+Per share amounts for the year ended December 31, 1993 are based on average outstanding shares.
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
135
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE JAPANESE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 25,
1994*
TO DECEMBER SIX MONTHS ENDED
31, JUNE 30, 1995
1994 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.83
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss (1) (0.01) (0.05)
Net Realized and Unrealized Loss on Investments (0.16) (1.59)
------ ------
Total from Investment Operations (0.17) (1.64)
------ ------
NET ASSET VALUE, END OF PERIOD $ 9.83 $ 8.19
------ ------
------ ------
TOTAL RETURN (1.70)% (16.68)%
------ ------
------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $50,332 $21,746
Ratio of Expenses to Average Net Assets (1) 1.00%** 1.00%**
Ratio of Net Investment Loss to Average Net Assets (1) (0.10)%** (0.05)%**
Portfolio Turnover Rate 1% 11%
<FN>
- ---------------
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $ 0.02 $ 0.35
Ratios before expense limitation:
Expenses to Average Net Assets 1.27%** 1.33%**
Net Investment Loss to Average Net Assets (0.37)%** (0.38)%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE LATIN AMERICAN PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 18, 1995*
TO JUNE 30,
1995
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.01
Net Realized and Unrealized Loss on Investments (1.21)
------
Total from Investment Operations (1.20)
------
NET ASSET VALUE, END OF PERIOD $ 8.80
------
------
TOTAL RETURN (12.00)%
------
------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $13,953
Ratio of Expenses to Average Net Assets (1) 2.56%**+
Ratio of Net Investment Income to Average Net Assets (1) 0.41%**
Portfolio Turnover Rate 62%
<FN>
- ---------------
(1) Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $ 0.05
Ratios before expense limitation:
Expenses to Average Net Assets 3.97%**
Net Investment Loss to Average Net Assets (1.01)%**
*Commencement of operations.
**Annualized
+The ratio of expenses to average net assets includes Brazilian tax expense.
Without the effect of the Brazilian tax expense, the ratio of expenses to
average net assets would have been 1.70%**.
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
136
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE AGGRESSIVE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM MARCH 8,
1995*
TO JUNE 30,
1995
(UNAUDITED)
- ------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.06
Net Realized and Unrealized Gain on Investments 1.77
------
Total from Investment Operations 1.83
------
DISTRIBUTIONS
Net Investment Income (0.02)
------
NET ASSET VALUE, END OF PERIOD $ 11.81
------
------
TOTAL RETURN 18.33%
------
------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $18,255
Ratio of Expenses to Average Net Assets (1) 1.00%**
Ratio of Net Investment Income to Average Net
Assets (1) 2.10%**
Portfolio Turnover Rate 80%
<FN>
- ---------------
(1) Effect of voluntary expense limitation during
the period:
Per share benefit to net investment income $ 0.04
Ratios before expense limitation:
Expenses to Average Net Assets 2.26%**
Net Investment Income to Average Net Assets 0.83%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 1, SIX MONTHS
1989* TWO MONTHS ENDED
TO OCTOBER YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED JUNE 30,
31, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1990 1991+ 1992 1992 1993 1994 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.00 $ 9.03 $ 16.18 $ 14.97 $ 16.22 $ 16.22 $ 16.12
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (1) 0.08 -- (0.09) (0.01) (0.11) (0.09) (0.05)
Net Realized and
Unrealized Gain (Loss)
on Investments (1.00) 7.19 (1.12) 1.26 0.11 (0.01) 2.17
------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations (0.92) 7.19 (1.21) 1.25 0.00 (0.10) 2.12
------ ------ ------ ------ ------ ------ ------
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 $ 18.24
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL RETURN (9.27)% 79.84% (7.48)% 8.35% 0.00% (0.62)% 13.15%
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of Period
(Thousands) $11,261 $54,364 $80,156 $94,161 $103,621 $117,669 $143,586
Ratio of Expenses to
Average Net Assets (1) 1.26%** 1.25% 1.25% 1.25%** 1.25% 1.25% 1.25%**
Ratio of Net Investment
Income (Loss) to Average
Net Assets (1) 0.64%** 0.00% (0.66)% (0.68)%** (0.77)% (0.61)% (0.68)%**
Portfolio Turnover Rate 19% 2% 17% 1% 25% 24% 17%
<FN>
- ---------------
(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 $ 0.002
Ratios before expense
limitation:
Expenses to Average
Net Assets 1.64%** 1.39% 1.29% 1.36%** 1.31% 1.26% 1.28%**
Net Investment Income
(Loss) to
Average Net Assets 0.24%** (0.14)% (0.71)% (0.79)%** (0.83)% (0.62)% (0.71)%**
+Per share amounts for the year ended October 31, 1991 are based on average
outstanding shares.
*Commencement of
operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
137
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 2, SIX MONTHS
1991* TWO MONTHS ENDED
TO OCTOBER YEAR ENDED ENDED YEAR ENDED YEAR ENDED JUNE 30,
31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1991 1992 1992 1993 1994 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
<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 0.10
Net Realized and Unrealized Gain on
Investments 0.61 0.82 0.41 0.28 0.21 2.56
----------- ----------- ------ ------ ------ -----------
Total from Investment Operations 0.66 0.98 0.44 0.50 0.38 2.66
----------- ----------- ------ ------ ------ -----------
DISTRIBUTIONS
Net Investment Income -- (0.20) -- (0.23) (0.13) (0.10)
In Excess of Net Investment Income -- -- -- (0.01) -- --
Net Realized Gain -- -- -- -- (0.37) (0.42)
----------- ----------- ------ ------ ------ -----------
Total Distributions -- (0.20) -- (0.24) (0.50) (0.52)
----------- ----------- ------ ------ ------ -----------
NET ASSET VALUE, END OF PERIOD $ 10.66 $ 11.44 $ 11.88 $ 12.14 $ 12.02 $ 14.16
----------- ----------- ------ ------ ------ -----------
----------- ----------- ------ ------ ------ -----------
TOTAL RETURN 6.60% 9.26% 3.85% 4.33% 3.26% 23.05%
----------- ----------- ------ ------ ------ -----------
----------- ----------- ------ ------ ------ -----------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $18,139 $36,558 $45,985 $73,789 $97,259 $146,773
Ratio of Expenses to Average Net Assets (1) 0.80%** 0.80% 0.80%** 0.80% 0.80% 0.80%**
Ratio of Net Investment Income to Average
Net Assets (1) 2.34%** 1.73% 1.93%** 1.59% 1.44% 1.71%**
Portfolio Turnover Rate 3% 38% 1% 172% 146% 77%
<FN>
- ---------------
(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% 0.90%**
Net Investment Income to Average
Net Assets 1.77%** 1.52% 1.62%** 1.46% 1.35% 1.60%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE SMALL CAP VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17, SIX MONTHS
1992* ENDED
TO DECEMBER YEAR ENDED YEAR ENDED JUNE 30,
31, DECEMBER 31, DECEMBER 31, 1995
1992 1993 1994 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.14 $ 11.10 $ 10.80
------------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.01 0.24 0.28 0.15
Net Realized and Unrealized Gain (Loss) on
Investments 0.13 0.90 (0.01) 1.03
------------ ------ ------ ------
Total from Investment Operations 0.14 1.14 0.27 1.18
------------ ------ ------ ------
DISTRIBUTIONS
Net Investment Income -- (0.18) (0.27) (0.14)
Net Realized Gain -- -- (0.30) (0.33)
------------ ------ ------ ------
Total Distributions -- (0.18) (0.57) (0.47)
------------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.14 $ 11.10 $ 10.80 $ 11.51
------------ ------ ------ ------
------------ ------ ------ ------
TOTAL RETURN 1.40% 11.33% 2.53% 11.44%
------------ ------ ------ ------
------------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $5,974 $26,775 $40,033 $48,812
Ratio of Expenses to Average Net Assets (1) 1.00%** 1.00% 1.00% 1.00%**
Ratio of Net Investment Income to Average Net
Assets (1) 1.64%** 2.56% 2.67% 2.82%**
Portfolio Turnover Rate 0% 29% 22% 17%
<FN>
- ------------------------------
(1) Effect of voluntary expense limitation
during the period:
Per share benefit to net investment income $ 0.13 $ 0.06 $ 0.03 $ 0.01
Ratios before expense limitation:
Expenses to Average Net Assets 23.14%** 1.68% 1.26% 1.27%**
Net Investment Income (Loss) to Average
Net Assets (20.50)%** 1.88% 2.41% 2.55%**
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
138
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE U.S. REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 24, 1995*
TO JUNE 30, 1995
(UNAUDITED)
- ------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.19
Net Realized and Unrealized Gain on Investments 0.64
------
Total from Investment Operations 0.83
------
NET ASSET VALUE, END OF PERIOD $ 10.83
------
------
TOTAL RETURN 8.30%
------
------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $39,920
Ratio of Expenses to Average Net Assets (1) 1.00%**
Ratio of Net Investment Income to Average Net
Assets (1) 8.34%**
Portfolio Turnover Rate 41%
<FN>
- ---------------
(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 1.68%**
Net Investment Income to Average Net Assets 7.66%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 31, SIX MONTHS
1990* TWO MONTHS ENDED
TO OCTOBER YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED JUNE 30,
31, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1990 1991 1992 1992 1993 1994 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.00 $ 8.59 $ 10.24 $ 10.71 $ 11.31 $ 12.63 $ 11.50
------------ ------ ------ ------ ------ ------------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(1) 0.37 0.46 0.38 0.08 0.37 0.40 0.18
Net Realized and
Unrealized Gain (Loss)
on Investments (1.45) 1.67 0.48 0.52 1.31 (0.55) 1.95
------------ ------ ------ ------ ------ ------------ ------
Total from Investment
Operations (1.08) 2.13 0.86 0.60 1.68 (0.15) 2.13
------------ ------ ------ ------ ------ ------------ ------
DISTRIBUTIONS
Net Investment Income (0.33) (0.48) (0.39) -- (0.36) (0.40) (0.19)
Net Realized Gain -- -- -- -- -- (0.58) (0.38)
------------ ------ ------ ------ ------ ------------ ------
Total Distributions (0.33) (0.48) (0.39) -- (0.36) (0.98) (0.57)
------------ ------ ------ ------ ------ ------------ ------
NET ASSET VALUE, END OF
PERIOD $ 8.59 $ 10.24 $ 10.71 $ 11.31 $ 12.63 $ 11.50 $ 13.06
------------ ------ ------ ------ ------ ------------ ------
------------ ------ ------ ------ ------ ------------ ------
TOTAL RETURN (11.05)% 25.34% 8.51% 5.60% 15.14% (1.29)% 19.41%
------------ ------ ------ ------ ------ ------------ ------
------------ ------ ------ ------ ------ ------------ ------
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of Period
(Thousands) $18,178 $16,304 $25,013 $27,541 $54,598 $73,406 $108,080
Ratio of Expenses to
Average Net Assets (1) 0.70%** 0.70% 0.70% 0.70%** 0.70% 0.70% 0.70%**
Ratio of Net Investment
Income to Average Net
Assets (1) 5.46%** 4.57% 3.72% 4.41%** 3.23% 3.37% 3.18%**
Portfolio Turnover Rate 70% 90% 56% 9% 51% 33% 18%
<FN>
- ---------------
(1) Effect of voluntary
expense
limitation during the
period:
Per share benefit to
net
investment income $ 0.01 $ 0.02 $ 0.01 $ 0.01 $ 0.03 $ 0.01 $ 0.01
Ratios before expense
limitation:
Expenses to Average
Net Assets 0.88%** 0.87% 0.84% 1.20%** 0.95% 0.80% 0.82%**
Net Investment Income
to
Average Net Assets 5.28%** 4.40% 3.58% 3.91%** 2.98% 3.27% 3.06%**
*Commencement of
operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
139
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 20, TWO MONTHS SIX MONTHS
1990* ENDED YEAR ENDED YEAR ENDED ENDED
TO OCTOBER YEAR ENDED YEAR ENDED DECEMBER DECEMBER DECEMBER JUNE 30,
31, OCTOBER 31, OCTOBER 31, 31, 31, 31, 1995
1990 1991 1992 1992 1993 1994 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.00 $ 9.62 $ 10.61 $ 11.00 $ 11.31 $ 11.13 $ 8.96
------ ----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(1) 0.40 0.59 0.58 0.10 0.44 0.42 0.19
Net Realized and
Unrealized Gain (Loss)
on Investments (0.46) 1.03 0.42 0.21 0.79 (0.64) 1.03
------ ----------- ----------- ----------- ----------- ----------- -----------
Total from Investment
Operations (0.06) 1.62 1.00 0.31 1.23 (0.22) 1.22
------ ----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
Net Investment Income (0.32) (0.63) (0.58) -- (0.41) (0.49) (0.19)
In Excess of Net
Investment Income -- -- -- -- (0.08) -- --
Net Realized Gain -- -- (0.03) -- (0.06) (1.46) (0.26)
In Excess of Net
Realized Gain -- -- -- -- (0.86) -- --
------ ----------- ----------- ----------- ----------- ----------- -----------
Total Distributions (0.32) (0.63) (0.61) -- (1.41) (1.95) (0.45)
------ ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD $ 9.62 $ 10.61 $ 11.00 $ 11.31 $ 11.13 $ 8.96 $ 9.73
------ ----------- ----------- ----------- ----------- ----------- -----------
------ ----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN (0.63)% 17.31% 9.57% 2.82% 12.09% (2.32)% 14.25%
------ ----------- ----------- ----------- ----------- ----------- -----------
------ ----------- ----------- ----------- ----------- ----------- -----------
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of Period
(Thousands) $37,444 $51,334 $40,332 $39,984 $29,684 $18,492 $21,313
Ratio of Expenses to
Average Net Assets (1) 0.70%** 0.70% 0.70% 0.70%** 0.70% 0.70% 0.70%
Ratio of Net Investment
Income to Average Net
Assets (1) 6.81%** 5.99% 5.21% 5.29%** 3.88% 4.13% 4.23%**
Portfolio Turnover Rate 19% 67% 40% 4% 136% 44% 14%**
<FN>
- ---------------
(1) Effect of voluntary
expense limitation
during the period:
Per share benefit to
net investment
income $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.04 $ 0.03 $ 0.02
Ratios before expense
limitation:
Expenses to Average
Net Assets 0.90%** 0.78% 0.79% 1.00%** 1.02% 0.95% 1.12%**
Net Investment Income
to Average Net
Assets 6.61%** 5.91% 5.12% 4.99%** 3.56% 3.88% 3.81%**
*Commencement of
operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1, SIX MONTHS ENDED
1994* JUNE 30,
TO DECEMBER 31, 1995
1994 (UNAUDITED)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 8.59
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.50 0.67
Net Realized and Unrealized Gain (Loss) on Investments (1.91) 0.24
------ ------
Total from Investment Operations (1.41) 0.91
------ ------
DISTRIBUTIONS
Net Investment Income -- (0.48)
------ ------
NET ASSET VALUE, END OF PERIOD $ 8.59 $ 9.02
------ ------
------ ------
TOTAL RETURN (14.10)% 11.32%
------ ------
------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $144,949 $179,543
Ratio of Expenses to Average Net Assets 1.49%** 1.46%**
Ratio of Net Investment Income to Average Net Assets 9.97%** 16.61%**
Portfolio Turnover Rate 273% 201%
<FN>
- ---------------
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
140
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
MAY 15, TWO MONTHS ENDED
1991* YEAR ENDED ENDED YEAR ENDED YEAR ENDED JUNE 30,
TO OCTOBER OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
31, 1991 1992 1992 1993 1994 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.00 $ 10.55 $ 10.92 $ 10.93 $ 11.05 $ 9.82
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.22 0.69 0.10 0.54 0.59 0.36
Net Realized and Unrealized
Gain (Loss) on Investments 0.49 0.39 0.01 0.41 (0.92) 0.71
------ ------ ------ ------ ------ ------
Total from Investment
Operations 0.71 1.08 0.11 0.95 (0.33) 1.07
------ ------ ------ ------ ------ ------
DISTRIBUTIONS
Net Investment Income (0.16) (0.69) (0.10) (0.56) (0.53) (0.35)
In Excess of Net Investment
Income -- -- -- (0.01) -- --
Net Realized Gain -- (0.02) -- (0.26) (0.37) --
In Excess of Net Realized Gain -- -- -- -- (0.00) --
------ ------ ------ ------ ------ ------
Total Distributions (0.16) (0.71) (0.10) (0.83) (0.90) (0.35)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.55 $ 10.92 $ 10.93 $ 11.05 $ 9.82 $ 10.54
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN 7.12% 10.61% 1.02% 9.07% (3.10)% 11.14%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $72,326 $146,546 $154,210 $240,668 $209,331 $166,018
Ratio of Expenses to Average Net
Assets (1) 0.45%** 0.45% 0.45%** 0.45% 0.45% 0.45%**
Ratio of Net Investment Income to
Average Net Assets (1) 7.29%** 6.59% 5.56%** 4.97% 5.73% 7.00%**
Portfolio Turnover Rate 48% 105% 15% 240% 388% 109%
<FN>
- ---------------
(1) Effect of voluntary expense
limitation
during the period:
Per share benefit to net
investment income $ 0.01 $ 0.02 $ 0.01 $ 0.02 $ 0.01 $ 0.01
Ratios before expense
limitation:
Expenses to Average Net
Assets 0.81%** 0.59% 0.75%** 0.60% 0.58% 0.60%**
Net Investment Income to
Average
Net Assets 6.93%** 6.45% 5.26%** 4.82% 5.60% 6.85%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
MAY 1, 1991* TWO MONTHS ENDED
TO OCTOBER YEAR ENDED ENDED YEAR ENDED YEAR ENDED JUNE 30,
31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1991 1992 1992 1993 1994 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.00 $ 10.61 $ 11.41 $ 11.26 $ 11.68 $ 10.29
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.16 0.53 0.14 0.69 0.70 0.39
Net Realized and Unrealized
Gain (Loss) on Investments 0.45 0.55 (0.29) 0.90 (1.38) 0.87
------ ------ ------ ------ ------ ------
Total from Investment
Operations 0.61 1.08 (0.15) 1.59 (0.68) 1.26
------ ------ ------ ------ ------ ------
DISTRIBUTIONS
Net Investment Income -- (0.27) -- (0.79) (0.40) (0.40)
In Excess of Net Investment
Income -- -- -- (0.22) -- --
Net Realized Gain -- (0.01) -- (0.16) (0.31)
------ ------ ------ ------ ------ ------
Total Distributions -- (0.28) -- (1.17) (0.71) (0.40)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.61 $ 11.41 $ 11.26 $ 11.68 $ 10.29 $ 11.15
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN 6.10% 10.29% (1.31)% 15.34% (6.08)% 12.55%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $28,236 $94,847 $92,897 $172,468 $130,675 $88,866
Ratio of Expenses to Average Net
Assets (1) 0.50%** 0.50% 0.50%** 0.50% 0.50% 0.50%**
Ratio of Net Investment Income to
Average Net Assets (1) 7.24%** 6.92% 6.99%** 5.99% 6.34% 7.27%**
Portfolio Turnover Rate 20% 144% 9% 108% 171% 97%
<FN>
- ---------------
(1) Effect of voluntary expense
limitation
during the period:
Per share benefit to net
investment income $ 0.02 $ 0.03 $ 0.01 $ 0.02 $ 0.02 $ 0.01
Ratios before expense
limitation:
Expenses to Average Net
Assets 1.62%** 0.86% 0.90%** 0.70% 0.66% 0.75%**
Net Investment Income to
Average
Net Assets 6.12%** 6.56% 6.59%** 5.79% 6.18% 7.03%**
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
141
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
SEPTEMBER 28, 1992* TWO MONTHS ENDED YEAR ENDED YEAR ENDED JUNE 30,
TO OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995
1992 1992 1993 1994 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.00 $ 9.77 $ 9.95 $ 11.16 $ 9.55
------- ------ ------------ ------------ -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (1) 0.08 0.14 0.90 0.97 0.57
Net Realized and Unrealized
Gain (Loss) on Investments (0.31) 0.19 1.21 (1.40) 0.76
------- ------ ------------ ------------ -------
Total from Investment
Operations (0.23) 0.33 2.11 (0.43) 1.33
------- ------ ------------ ------------ -------
DISTRIBUTIONS
Net Investment Income -- (0.15) (0.90) (0.97) (0.58)
Net Realized Gain -- -- -- (0.21) --
------- ------ ------------ ------------ -------
-- (0.15) (0.90) (1.18) (0.58)
------- ------ ------------ ------------ -------
NET ASSET VALUE, END OF PERIOD $ 9.77 $ 9.95 $ 11.16 $ 9.55 $ 10.30
------- ------ ------------ ------------ -------
------- ------ ------------ ------------ -------
TOTAL RETURN (2.30)% 3.41% 22.11% (4.18)% 14.43%
------- ------ ------------ ------------ -------
------- ------ ------------ ------------ -------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands) $16,950 $20,194 $74,500 $97,223 $63,281
Ratio of Expenses to Average
Net Assets (1) 0.75%** 0.75%** 0.75% 0.75% 0.75%**
Ratio of Net Investment Income
to Average Net Assets (1) 9.89%** 8.96%** 8.70% 9.42% 11.33%**
Portfolio Turnover Rate 9% 24% 104% 74% 40%
<FN>
- -----------------
(1)Effect of voluntary expense
limitation during the
period:
Per share benefit to net
investment income $ 0.01 $ 0.01 $ 0.02 $0.001 $ 0.01
Ratios before expense
limitation:
Expenses to Average Net
Assets 1.23%** 1.62%** 0.96% 0.76% 0.87%**
Net Investment Income to
Average Net Assets 9.41%** 8.09%** 8.49% 9.41% 11.21%**
*Commencement of operations.
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 18, 1995*
TO JUNE 30, 1995
(UNAUDITED)
- ------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (1) 0.21
Net Realized and Unrealized Gain on Investments 0.21
-------
Total from Investment Operations 0.42
-------
DISTRIBUTIONS
Net Investment Income (0.16)
-------
NET ASSET VALUE, END OF PERIOD $ 10.26
-------
-------
TOTAL RETURN 4.22%
-------
-------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $43,830
Ratio of Expenses to Average Net Assets (1) 0.45%**
Ratio of Net Investment Income to Average Net
Assets (1) 4.55%**
Portfolio Turnover Rate 124%
<FN>
- -----------------
(1)Effect of voluntary expense limitation during
the period:
Per share benefit to net investment income $ 0.01
Ratios before expense limitation:
Expenses to Average Net Assets 0.76%**
Net Investment Income to Average Net Assets 4.24%**
*Commencement of operations.
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
142
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWO MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR ENDED ENDED
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER DECEMBER DECEMBER JUNE 30,
OCTOBER 31, OCTOBER 31, OCTOBER 31, 31, 31, 31, 1995
1990 1991 1992 1992 1993 1994 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(1) 0.079 0.062 0.039 0.005 0.027 0.040 0.030
----------- ----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
Net Investment Income (0.079) (0.062) (0.039) (0.005) (0.027) (0.040) (0.030)
In Excess of Net
Investment Income -- -- -- -- (0.000) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Distributions (0.079) (0.062) (0.039) (0.005) (0.027) (0.040) (0.030)
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN 8.16% 6.37% 3.77% 0.50% 2.76% 3.84% 2.75%
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of Period
(Thousands) $516,182 $607,087 $612,968 $599,172 $657,163 $690,503 $826,990
Ratio of Expenses to
Average Net Assets (1) 0.55% 0.53% 0.52% 0.55%** 0.53% 0.49% 0.49%**
Ratio of Net Investment
Income to Average Net
Assets (1) 7.87% 6.11% 3.74% 3.11%** 2.71% 3.77% 5.49%**
<FN>
- ---------------
(1)Effect of voluntary
expense limitation
during the period:
Per share benefit to
net investment
income $ 0.000 N/A N/A $ 0.000 $ 0.000 N/A N/A
Ratios before expense
limitation:
Expenses to Average
Net Assets 0.58% N/A N/A 0.59%** 0.54% N/A N/A
Net Investment Income
to Average Net
Assets 7.85% N/A N/A 3.07%** 2.70% N/A N/A
**Annualized
</TABLE>
- --------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWO MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR ENDED ENDED
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER DECEMBER DECEMBER JUNE 30,
OCTOBER 31, OCTOBER 31, OCTOBER 31, 31, 31, 31, 1995
1990 1991 1992 1992 1993 1994 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(1) 0.054 0.043 0.026 0.004 0.019 0.020 0.020
----------- ----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
Net Investment Income (0.054) (0.043) (0.026) (0.004) (0.019) (0.020) (0.020)
In Excess of Net
Investment Income -- -- -- -- (0.000) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Distributions (0.054) (0.043) (0.026) (0.004) (0.019) (0.020) (0.020)
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN 5.51% 4.35% 2.74% 0.37% 1.91% 2.44% 1.72%
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of Period
(Thousands) $102,195 $166,953 $206,691 $208,866 $266,524 $359,444 $354,548
Ratio of Expenses to
Average Net Assets (1) 0.51% 0.56% 0.55% 0.57%** 0.54% 0.51% 0.52%**
Ratio of Net Investment
Income to Average Net
Assets (1) 5.38% 4.18% 2.66% 2.31%** 1.89% 2.42% 3.43%**
<FN>
- ---------------
(1)Effect of voluntary
expense limitation
during the period:
Per share benefit to
net investment
income $ 0.001 N/A N/A $ 0.000 $ 0.000 N/A N/A
Ratios before expense
limitation:
Expenses to Average
Net Assets 0.63% N/A N/A 0.67%** 0.56% N/A N/A
Net Investment Income
to Average Net
Assets 5.26% N/A N/A 2.21%** 1.87% N/A N/A
**Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
143
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as an open-end management investment company. As
of June 30, 1995, the Fund was comprised of 24 separate active, diversified and
non-diversified portfolios (each referred to as the "Portfolio"). During the six
months ended June 30, 1995, the following Portfolios commenced operations: Latin
American and Municipal Bond Portfolios on January 18, 1995, the U.S. Real Estate
Portfolio on February 24, 1995, and the Aggressive Equity Portfolio on March 8,
1995.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of the financial
statements.
1. SECURITY VALUATION: Equity securities listed on an exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price.
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 the mean between the
current bid and asked prices obtained from reputable brokers. Bonds and other
fixed income securities may be valued according to the broadest and most
representative market. In addition, bonds and other fixed income securities may
be valued on the basis of prices provided by a pricing service which are based
primarily on institutional size trading in similar groups of securities. Debt
securities purchased with remaining maturities of 60 days or less are valued at
amortized cost, if it approximates market value. Money market and municipal
money market securities are stated at amortized cost, which approximates market
value. All other securities and assets for which market values are not readily
available, including restricted securities, are valued at fair value as
determined in good faith by the Board of Directors, although the actual
calculations may be done by others.
2. INCOME TAXES: It is each Portfolio's intention to qualify as a regulated
investment company and distribute all of its taxable and tax-exempt income.
Accordingly, no provision for Federal income taxes is required in the financial
statements.
The Portfolios may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on either income or gains earned or repatriated.
The Portfolio accrues such taxes when the related income is earned. For
investments in Indian securities a capital gains tax is accrued based on the
relative amounts of net realized gains and net unrealized appreciation of such
securities. The Brazilian government assesses a 1% tax on all settlements of
foreign currency used to purchase listed equity securities. The Brazilian
government repealed this tax on March 10, 1995.
Paid in capital, undistributed net investment income (loss) and accumulated gain
(loss) are adjusted for permanent book-tax differences.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the underlying
securities, with a market value at least equal to the principal amount of the
repurchase transaction, including accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counter party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and records
of the Fund are maintained in United States dollars. Foreign currency amounts
are translated into US dollars at the mean of the bid and asked prices of such
currencies against US dollars last quoted by a major US or foreign bank.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of securities sold during the period.
Accordingly, realized and unrealized foreign currency gains (losses) are
included in the reported net realized and unrealized gains (losses) on
investment transactions and balances. However, pursuant to US Federal income tax
regulations, gains and losses from certain foreign currency transactions are
treated as ordinary income for US Federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from forward foreign currency contracts,
disposition of foreign currencies, currency gains or losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amount of investment income and foreign withholding taxes recorded
on the Fund's books and the US dollar equivalent amounts actually received or
paid and
- --------------------------------------------------------------------------------
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<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
JUNE 30, 1995
- --------------------------------------------------------------------------------
certain currency related amounts of realized gains or losses from the sale of
foreign denominated debt securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of US dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities markets
and the possibility of political or economic instability.
5. FORWARD FOREIGN CURRENCY CONTRACTS: Each Portfolio, except the Equity Growth,
U.S. Real Estate, Municipal Bond, Money Market and Municipal Money Market
Portfolios, may enter into forward currency contracts to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates. A forward currency contract is an agreement between two
parties to buy or sell currency at a set price on a future date. The market
value of the contract will fluctuate with changes in currency exchange rates.
The contract is marked-to-market daily using the forward rate and the change in
market value is recorded by the Fund as unrealized gain or loss. The Fund
records realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and is generally limited to the amount of the unrealized gain on
the contracts (if any) at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the US
dollar.
6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: Each
Portfolio may make forward commitments to purchase or sell securities. Payment
and delivery for securities which have been purchased or sold on a forward
commitment basis can take place a month or more (not to exceed 120 days) after
the date of the transaction. Additionally, certain Portfolios may purchase
securities on a when-issued or delayed-delivery basis. Securities purchased on a
when-issued or delayed delivery basis are purchased for delivery beyond the
normal settlement date at a stated price and yield, and no income accrues to the
Portfolio on such securities prior to delivery. When the Portfolio enters into a
purchase transaction on a when-issued or delayed delivery basis, it establishes
a segregated account in which it maintains liquid assets in an amount at least
equal in value to the Portfolio's commitments to purchase such securities.
Purchasing securities on a forward commitment or when-issued or delayed-delivery
basis may involve a risk that the market price at the time of delivery may be
lower than the agreed-upon purchase price, in which case there could be an
unrealized loss at the time of delivery.
7. LOAN AGREEMENTS: The Emerging Markets, Emerging Markets Debt and High Yield
Portfolios may invest in fixed and floating rate loans ("Loans") arranged
through private negotiations between an issuer of sovereign debt obligations and
one or more financial institutions ("Lenders") deemed to be creditworthy by the
investment adviser. The Portfolio's investments in Loans may be in the form of
participations in Loans ("Participations") or assignments of all or a portion of
Loans ("Assignments") from third parties. The Portfolio's investment in
Participations typically results in the Portfolio having a contractual
relationship with only the Lender and not with the borrower. The Portfolio has
the right to 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. The Portfolio generally has no
right to enforce compliance by the borrower with the terms of the loan
agreement. As a result, the Portfolio may be subject to the credit risk of both
the borrower and the Lender that is selling the Participation. When the
Portfolio purchases Assignments from Lenders, it acquires direct rights against
the borrower on the Loan. 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.
8. SHORT SALES: The Latin American, Aggressive Equity and Emerging Markets Debt
Portfolios may sell securities short. A short sale is a transaction in which the
Portfolio sells securities it does not own, but has borrowed, in anticipation of
a decline in the market price of the securities. The Portfolio is obligated to
replace the borrowed securities at the market price at the time of replacement.
The Portfolio may have to pay a premium to borrow the securities as well as 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 generally 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. government securities or other liquid high grade debt
- --------------------------------------------------------------------------------
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[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
JUNE 30, 1995
- --------------------------------------------------------------------------------
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 cannot exceed the total amount invested.
9. PURCHASED AND WRITTEN OPTIONS: The Active Country Allocation, Gold, Latin
American, Aggressive Equity, Equity Growth, U.S. Real Estate, and Emerging
Markets Debt Portfolios may write covered call options. Premiums are received
and are recorded as liabilities, and subsequently adjusted to the current value
of the options written. Premiums received from writing options which expire are
treated as realized gains. Premiums received from writing options which are
exercised or are canceled in closing purchase transactions are offset against
the proceeds or amount paid on the transaction to determine the realized gain or
loss. By writing a call option, a Portfolio foregoes in exchange for the premium
the opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase. Possible losses from written
options may be unlimited.
The Active Country Allocation, Gold, Latin American, Aggressive Equity, Equity
Growth and U.S. Real Estate Portfolios may also purchase call options on their
portfolio securities. Each portfolio may purchase call options to close out
covered call positions or to protect against an increase in the price of the
security it anticipates purchasing. Possible losses from purchased options
cannot exceed the total amount invested.
10. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses on
the sale of investment securities are those of specific securities sold.
Dividend income is recorded on the ex-dividend date. Interest income is
recognized on the accrual basis except where collection is in doubt. Discounts
and premiums on securities purchased (other than mortgage-backed securities) are
amortized according to the effective yield method over their respective lives.
Most expenses of the Fund can be directly attributed to a particular Portfolio.
Expenses which cannot be directly attributed are apportioned among the
Portfolios based upon relative net assets. Dividends from the Money Market and
the Municipal Money Market Portfolios are accrued daily and are distributed on
or about the 15th of each month. Distributions from the remaining Portfolios are
recorded on the ex-date.
Income distributions and capital gain distributions are determined in accordance
with tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
mortgage-backed securities, foreign currency transactions, net operating losses,
deferral of wash sales and post October losses and realization of gains and
losses on certain investments including forward foreign currency contracts,
options and futures contracts.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in 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. As a result, an additional class of
shares (identified as "Foreign" in the Statement of Net Assets) may be created
and offered for investment. The "local" and "foreign" shares' market values may
differ.
A transaction fee of one percent is charged on subscriptions and redemptions of
capital shares of the International Small Cap Portfolio. Such fees are paid to
or retained by the Portfolio and included in paid in capital. During the six
months ended June 30, 1995, such transaction fees totaled approximately
$518,000.
B. Morgan Stanley Asset Management Inc. ("MSAM") provides the Fund with
investment advisory services at a fee calculated at the annual rates of average
daily net assets indicated below. MSAM has agreed to reduce fees payable to it
and to reimburse the Portfolios, if necessary, if the annual operating
- --------------------------------------------------------------------------------
146
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
JUNE 30, 1995
- --------------------------------------------------------------------------------
expenses, expressed as a percentage of average daily net assets, exceed the
maximum ratios indicated below:
<TABLE>
<CAPTION>
MAXIMUM
ADVISORY EXPENSE
PORTFOLIO FEE RATIO
----------- ------------
<S> <C> <C>
Active Country Allocation............. .65% .80%
Asian Equity.......................... .80 1.00
Emerging Markets...................... 1.25 1.75
European Equity....................... .80 1.00
Global Equity......................... .80 1.00
Gold.................................. 1.00 1.25
International Equity.................. .80 1.00
International Small Cap............... .95 1.15
Japanese Equity....................... .80 1.00
Latin American........................ 1.10 1.70
Aggressive Equity..................... .80 1.00
Emerging Growth....................... 1.00 1.25
Equity Growth......................... .60 .80
Small Cap Value Equity................ .85 1.00
U.S. Real Estate...................... .80 1.00
Value Equity.......................... .50 .70
Balanced.............................. .50 .70
Emerging Markets Debt................. 1.00 1.75
Fixed Income.......................... .35 .45
Global Fixed Income................... .40 .50
High Yield............................ .50 .75
Municipal Bond........................ .35 .45
Money Market.......................... .30 .55
Municipal Money Market................ .30 .57
</TABLE>
Sun Valley Gold Company is the sub-adviser ("Sub-Adviser") of the Gold
Portfolio. The Sub-Adviser is entitled to receive from MSAM an annual sub-
advisory fee in an amount equal to .40% of the average daily net assets of the
Portfolio. The Sub-Adviser has agreed to a proportionate reduction in its fees
if the Adviser is required to waive its fees or to reimburse the Portfolio.
C. MSAM also provides the Fund with administrative services pursuant to an
administrative agreement, for a monthly fee which on an annual basis equals
0.15% of the average daily net assets of each Portfolio plus reimbursement of
out-of-pocket expenses. Under an agreement between MSAM and The United States
Trust Company of New York ("US Trust"), Mutual Funds Service Company ("MFSC"), a
wholly-owned subsidiary of US Trust, provides certain administrative services to
the Fund. For such services, MSAM pays US Trust a portion of the fee MSAM
receives from the Fund.
D. Morgan Stanley Trust Company ("MSTC") acts as custodian for the Fund's assets
held outside the United States in accordance with a custodian agreement.
Custodian fees are computed and payable monthly based on securities held,
investment purchases and sales activity, an account maintenance fee, plus
reimbursement for certain out-of-pocket expenses. MSTC and the Adviser are
wholly-owned subsidiaries of Morgan Stanley Group, Inc.
US Trust acts as custodian for the Fund's assets held in the United States.
During the six months ended June 30, 1995, the following Portfolios incurred
custody fees and had amounts due to MSTC at June 30, 1995 as follow:
<TABLE>
<CAPTION>
MSTC CUSTODY
FEES FEES PAYABLE TO
INCURRED MSTC
(000) (000)
--------------- -----------------
<S> <C> <C>
Active Country Allocation.... $ 183 $ 85
Asian Equity................. 192 102
Emerging Markets............. 1,491 1,152
European Equity.............. 15 5
Global Equity................ 25 14
Gold......................... 1 1
International Equity......... 233 118
International Small Cap...... 54 26
Japanese Equity.............. 9 7
Latin American............... 36 21
Emerging Markets Debt........ 78 144
Global Fixed Income.......... 23 15
</TABLE>
E. During the six months ended June 30, 1995, purchases and sales of investment
securities other than long-term US Government securities and short-term
investments were:
<TABLE>
<CAPTION>
(000)
----------------------
PORTFOLIO PURCHASES SALES
----------- ---------
<S> <C> <C>
Active Country Allocation............... $ 61,153 $ 102,313
Asian Equity............................ 77,607 77,168
Emerging Markets........................ 267,479 173,947
European Equity......................... 15,981 925
Global Equity........................... 15,874 21,800
Gold.................................... 2,718 13,837
International Equity.................... 192,269 169,640
International Small Cap................. 39,203 23,761
Japanese Equity......................... 3,939 29,606
Latin American.......................... 20,744 6,992
Aggressive Equity....................... 24,134 9,273
Emerging Growth......................... 24,855 20,486
Equity Growth........................... 104,577 81,713
Small Cap Value Equity.................. 10,805 6,972
U.S. Real Estate........................ 48,607 11,450
Value Equity............................ 34,602 15,281
Balanced................................ 2,123 2,609
Emerging Markets Debt................... 312,740 313,825
Fixed Income............................ 23,523 9,040
Global Fixed Income..................... 51,243 94,505
High Yield.............................. 27,469 62,732
Municipal Bond.......................... 99,205 56,492
</TABLE>
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147
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
JUNE 30, 1995
- --------------------------------------------------------------------------------
Purchases and sales during the six months ended June 30, 1995 of long-term US
Government securities occurred only in the Balanced, Fixed Income and Global
Fixed Income Portfolios and amounted to:
<TABLE>
<CAPTION>
(000)
----------------------
PORTFOLIO PURCHASES SALES
----------- ---------
<S> <C> <C>
Balanced................................ $ 1,113 $ --
Fixed Income............................ 168,430 197,800
Global Fixed Income..................... 33,415 26,895
</TABLE>
During the six months ended June 30, 1995, the following Portfolios incurred
brokerage commissions related to Morgan Stanley & Co., Incorporated, an
affiliated broker/dealer, of approximately:
<TABLE>
<CAPTION>
(000)
---------------
BROKERAGE
PORTFOLIO COMMISSION
---------------
<S> <C>
Asian Equity................................... $ 78
Emerging Markets............................... 17
European Equity................................ 3
Global Equity.................................. 1
International Equity........................... 59
International Small Cap........................ 1
Japanese Equity................................ 42
Latin American................................. 1
Equity Growth.................................. 1
U.S. Real Estate............................... 2
</TABLE>
F. At June 30, 1995, cost and unrealized appreciation (depreciation) for Federal
income tax purposes of the investments of each Portfolio were:
<TABLE>
<CAPTION>
(000)
--------------------------------------------
NET
APPREC.
PORTFOLIO COST APPREC. DEPREC. (DEPREC.)
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Active Country
Allocation............... $ 161,688 $ 11,290 $ (4,588) $ 6,702
Asian Equity.............. 234,054 59,594 (7,871) 51,723
Emerging Markets.......... 983,422 132,266 (139,039) (6,773)
European Equity........... 44,028 4,618 (1,300) 3,318
Global Equity............. 75,279 9,705 (3,583) 6,122
Gold...................... 21,348 709 (1,656) (947)
International Equity...... 1,097,153 283,779 (26,644) 257,135
International Small Cap... 184,134 16,832 (18,758) (1,926)
Japanese Equity........... 23,876 286 (2,596) (2,310)
Latin American............ 13,606 1,004 (978) 26
Aggressive Equity......... 16,722 1,222 (55) 1,167
Emerging Growth........... 104,964 41,714 (3,041) 38,673
Equity Growth............. 126,248 18,928 (603) 18,325
Small Cap Value Equity.... 45,637 4,711 (1,526) 3,185
U.S. Real Estate.......... 39,216 1,373 (73) 1,300
Value Equity.............. 104,047 10,653 (1,694) 8,959
Balanced.................. 19,792 1,663 (287) 1,376
Emerging Markets Debt..... 163,213 8,530 (4,298) 4,232
Fixed Income.............. 159,244 7,454 (219) 7,235
Global Fixed Income....... 83,741 4,503 (796) 3,707
High Yield................ 63,971 1,809 (3,826) (2,017)
Municipal Bond............ 42,728 763 (24) 739
Money Market.............. 827,358 -- -- --
Municipal Money Market.... 352,836 -- -- --
</TABLE>
At December 31, 1994, the following Portfolios had available capital loss
carryforwards to offset future net capital gains, to the extent provided by
regulation, through the indicated expiration dates:
<TABLE>
<CAPTION>
EXPIRATION DATE
DECEMBER 31,
(000)
-----------------------------------------------------
PORTFOLIO 1998 1999 2000 2001 2002 TOTAL
- ----------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
International
Small Cap....... $ -- $ -- $ -- $ -- $ 1,764 $ 1,764
Emerging Growth.. 441 360 1,838 7,476 746 10,861
Emerging Markets
Debt............ -- -- -- -- 531 531
Fixed Income..... -- -- -- -- 13,870 13,870
High Yield....... -- -- -- -- 497 497
Global Fixed..... -- -- -- -- 5,293 5,293
Money Market..... -- 66 -- -- 26 92
Municipal Money
Market.......... -- -- -- 1 7 8
</TABLE>
To the extent that capital loss carryovers are used to offset any future net
capital gains realized during the carryover period as provided by Federal income
tax regulations, no capital gains tax liability will be incurred by a Portfolio
for gains realized and not distributed. It is unlikely that the gains so offset
would be distributed to shareholders because such distributions may be taxable
to Portfolio shareholders as ordinary income.
Net capital and net currency losses incurred after October 31 and within the
taxable year are deemed to arise on the first business day of the Portfolio's
next taxable year. For the period from November 1, 1994 to December 31, 1994 the
Portfolio's incurred and elected to defer to January 1, 1995 for Federal income
tax purposes net capital and net currency losses of approximately:
<TABLE>
<CAPTION>
CAPITAL
LOSSES CURRENCY
PORTFOLIO (000) LOSSES (000)
- ------------------------------------------- ----------- -------------
<S> <C> <C>
Emerging Markets........................... $ -- $ 393
Global Equity.............................. -- 5
Gold....................................... -- 1
European Equity............................ -- 4
International Small Cap.................... 225 --
Balanced................................... 12 --
Emerging Markets Debt...................... -- 7
Fixed Income............................... 269 --
Global Fixed Income........................ 429 897
High Yield................................. 1,084 --
</TABLE>
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148
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
JUNE 30, 1995
- --------------------------------------------------------------------------------
G. During the six months ended June 30, 1995, the following Portfolios
participated in writing covered call and put options. The Portfolios had option
activity as follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUM
AGGRESSIVE EQUITY PORTFOLIO CONTRACTS (000)
- ----------------------------------- --------------- -------------
<S> <C> <C>
Options outstanding at December 31,
1994.............................. -- $ --
Options written during the
period............................ 446 53
Options cancelled in closing
transactions during the period.... (354) (44)
--- ---
Options outstanding at June 30,
1995.............................. 92 $ 9
--- ---
--- ---
</TABLE>
<TABLE>
<CAPTION>
FACE AMOUNT PREMIUM
EMERGING MARKETS DEBT PORTFOLIO (000) (000)
- ----------------------------------- ------------- -----------
<S> <C> <C>
Options outstanding at December 31,
1994.............................. $ 15,000 $ 105
Options written during the
period............................ 37,900 582
Options cancelled in closing
transactions during the period.... (3,000) (60)
Options expired during the
period............................ (43,900) (508)
Options exercised during the
period............................ (2,000) (32)
------------- -----
Options outstanding at June 30,
1995.............................. $ 4,000 $ 87
------------- -----
------------- -----
</TABLE>
H. OTHER. At June 30, 1995, the net assets of certain Portfolios were
substantially comprised of foreign denominated securities and currency. Changes
in currency exchange rates will affect the US dollar value of and investment
income from such securities.
Portfolio securities and foreign currency holdings were translated at the
following exchange rates as of June 30, 1995:
<TABLE>
<S> <C> <C> <C>
Argentine Peso....................... 0.999750 = $ 1.00
Australian Dollar.................... 1.407360 = 1.00
Belgian Franc........................ 28.460000 = 1.00
Brazilian Real....................... 0.920500 = 1.00
British Pound Sterling............... 0.628540 = 1.00
Colombian Peso....................... 880.600000 = 1.00
Deutsche Mark........................ 1.383950 = 1.00
Finnish Markka....................... 4.274500 = 1.00
French Franc......................... 4.850750 = 1.00
Greek Drachma........................ 225.040000 = 1.00
Hong Kong Dollar..................... 7.737800 = 1.00
Hungarian Forint..................... 123.025000 = 1.00
Indian Rupee......................... 31.400000 = 1.00
Indonesian Rupiah.................... 2,227.000000 = 1.00
Irish Punt........................... 0.610820 = $ 1.00
Italian Lira......................... 1,635.500000 = 1.00
Japanese Yen......................... 84.825000 = 1.00
Korean Won........................... 758.250000 = 1.00
Malaysian Ringgit.................... 2.438000 = 1.00
Mexican New Peso..................... 6.250000 = 1.00
Netherlands Guilder.................. 1.549400 = 1.00
New Zealand Dollar................... 1.496890 = 1.00
Pakistani Rupee...................... 30.979000 = 1.00
Peruvian Sol......................... 2.224500 = 1.00
Philippine Peso...................... 25.540000 = 1.00
Polish Zloty......................... 2.341000 = 1.00
Portuguese Escudo.................... 146.300000 = 1.00
Singapore Dollar..................... 1.397500 = 1.00
South African Rand................... 3.636250 = 1.00
Spanish Peseta....................... 121.050000 = 1.00
Swedish Krona........................ 7.276850 = 1.00
Swiss Franc.......................... 1.151500 = 1.00
Taiwan Dollar........................ 25.828000 = 1.00
Thai Baht............................ 24.685000 = 1.00
Turkish Lira......................... 44,215.000000 = 1.00
</TABLE>
During June 1995, the Board of Directors of the Fund declared dividends and
capital gain distributions payable on July 14, 1995 to shareholders of record on
July 3, 1995 as follows:
<TABLE>
<CAPTION>
SHORT- LONG-
NET TERM TERM
INVESTMENT REALIZED REALIZED
PORTFOLIO INCOME GAINS GAINS
- --------------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Active Country
Allocation................ $ -- $ 0.01 $ 0.07
Asian Equity............... -- 0.08 0.18
Emerging Markets........... -- 0.02 0.19
European Equity............ -- 0.02 0.08
Global Equity.............. -- 0.03 0.06
Gold....................... -- 0.11 --
International Small Cap.... 0.02 -- --
Aggressive Equity.......... 0.03 -- --
Equity Growth.............. 0.06 0.05 0.01
Small Cap Value Equity..... 0.07 0.01 0.05
Value Equity............... 0.09 -- --
Balanced................... 0.10 -- --
Emerging Markets Debt...... 0.01 -- --
Fixed Income............... 0.07 -- --
Global Fixed Income........ 0.21 -- --
High Yield................. 0.10 -- --
Municipal Bond............. 0.05 -- --
</TABLE>
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149
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
JUNE 30, 1995
- --------------------------------------------------------------------------------
I. SUPPLEMENTAL PROXY INFORMATION
On February 1, 1995, a special meeting of the stockholders of Morgan Stanley
Institutional Fund, Inc. (the "Fund") was held for the purpose of voting on the
following matters:
<TABLE>
<S> <C>
Proposal 1: To elect a Board of Directors (voted on by the stockholders of the Fund as a whole).
Proposal 2: To approve or disapprove the amendment of the Fund's Bylaws (voted on by the
stockholders of the Fund as a whole).
Proposal 3: To approve or disapprove the amendment of each Portfolio's fundamental limitation
concerning investments in commodities.
Proposal 4: To approve or disapprove the amendment of each Portfolio's fundamental limitation
concerning loans.
Proposal 5: To approve or disapprove the reclassification as nonfundamental of each Portfolio's
limitation concerning purchases on margin and short sales and to amend certain
language.
Proposal 6: To approve or disapprove the amendment of each Portfolio's fundamental limitation
concerning diversification.
Proposal 7: To approve or disapprove the amendment of each Portfolio's fundamental limitation
concerning borrowing and the issuance of senior securities.
Proposal 8: To approve or disapprove the reclassification as nonfundamental of each Portfolio's
limitation concerning pledging, mortgaging or hypothecating its assets.
Proposal 9: To approve or disapprove the amendment of each Portfolio's fundamental limitation
concerning underwriting the securities of other issuers.
Proposal To approve or disapprove the reclassification as nonfundamental of each Portfolio's
10: limitation concerning investment in restricted securities and illiquid securities.
Proposal To approve or disapprove the reclassification as nonfundamental of each Portfolio's
11: limitation concerning investment in securities of an issuer whose securities are owned
to a certain extent by officers and directors of the Fund.
Proposal To approve or disapprove the reclassification as nonfundamental of each Portfolio's
12: limitation concerning investment in securities for the purpose of exercising control
over management of any company.
Proposal To approve or disapprove the reclassification as nonfundamental of each Portfolio's
13: limitation concerning investment in securities of any investment company.
Proposal To approve or disapprove the reclassification as nonfundamental of each Portfolio's
14: limitation concerning investment of more than 5% of total assets in securities of
companies with less than three years of operating history.
Proposal To approve or disapprove the reclassification as nonfundamental of the limitation
15: applicable to each of the Global Fixed Income, Emerging Markets, Emerging Markets Debt
and Gold Portfolios, concerning diversification of the Portfolio's holdings.
Proposal To approve or disapprove the reclassification as nonfundamental of each Portfolio's
16: limitation concerning investments in repurchase agreements with more than seven days
to maturity.
Proposal To approve or disapprove the reclassification as nonfundamental of each Portfolio's
17: limitation concerning investments in fixed time deposits.
Proposal To approve or disapprove the reclassification as nonfundamental of the limitation
18: applicable to the Money Market Portfolio concerning investments in reverse repurchase
agreements.
Proposal To approve or disapprove the reclassification as nonfundamental of the limitation
19: applicable to the Municipal Money Market Portfolio concerning investments in private
activity bonds.
Proposal To approve or disapprove the voting, in the discretion of the person or persons named
20: as proxy or proxies on any other matters that may properly come before the meeting and
that are deemed appropriate.
</TABLE>
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150
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
JUNE 30, 1995
- --------------------------------------------------------------------------------
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
TOTAL
VOTES VOTES SHARES
FOR WITHHELD VOTED
(000) (000) (000)
--------- --------- -----------
<S> <C> <C> <C>
John P. Britton................................................................. 620,489 124,140 744,629
George R. Bunn Jr............................................................... 620,474 124,155 744,629
A. Macdonald Caputo............................................................. 620,480 124,149 744,629
Peter E. deSvastich............................................................. 620,489 124,140 744,629
Gerard E. Jones................................................................. 620,362 124,267 744,629
Warren J. Olsen................................................................. 620,440 124,189 744,629
Frederick B. Whittemore......................................................... 620,489 124,140 744,629
</TABLE>
The results of the vote on Proposal 2 were as follows:
<TABLE>
<CAPTION>
TOTAL
VOTES VOTES SHARES
FOR AGAINST ABSTAIN VOTED
(000) (000) (000) (000)
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
605,829 10,327 127,421 743,577
</TABLE>
The results of the vote on Proposals 3 through 20 are as follows:
<TABLE>
<CAPTION>
TOTAL TOTAL
SHARES SHARES
VOTED NOT VOTING
VOTES (PER (PER
VOTES AGAINST ABSTAIN PROPOSAL) PROPOSAL)
FOR (%) (%) (%) (000) (000)
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ACTIVE COUNTRY ALLOCATION
PORTFOLIO
Proposals: 3, 4, 6-14, 16,
17......................... 97% 1% 2% 11,331 --
Proposal: 5................. 89% 9% 2% 11,331 --
Proposal: 20................ 85% 13% 2% 11,331 --
ASIAN EQUITY PORTFOLIO
Proposals: 3, 4, 9, 17...... 97% 1% 2% 6,999 211
Proposals: 5, 8, 10, 11, 13,
14......................... 95% 2% 3% 6,999 211
Proposals: 6, 7, 12, 16,
20......................... 96% 1% 3% 6,999 211
BALANCED PORTFOLIO PORTFOLIO
Proposals: 3-14, 16, 17,
20......................... 100% -- -- 1,201 --
EMERGING GROWTH PORTFOLIO
Proposals: 3-14, 16, 17,
20......................... 98% -- 2% 4,710 --
EMERGING MARKETS PORTFOLIO
Proposals: 3, 5, 7, 8, 10,
11-15...................... 79% 10% 11% 30,255 811
Proposals: 4, 6, 9.......... 88% 1% 11% 30,255 811
Proposals: 16, 17........... 80% 9% 11% 30,255 811
Proposal: 20................ 80% 9% 11% 31,066 --
EMERGING MARKETS DEBT
PORTFOLIO
Proposals: 3, 5, 7, 8,
10-17, 20.................. 64% 33% 3% 12,524 --
Proposals: 4, 6, 9.......... 97% -- 3% 12,524 --
EQUITY GROWTH PORTFOLIO
Proposals: 3-7, 9, 11-13,
16, 17, 20................. 97% -- 3% 5,448 --
Proposals: 8, 10, 14........ 94% 3% 3% 5,448 --
EUROPEAN EQUITY PORTFOLIO
Proposals: 3-14, 16, 17,
20......................... 94% 1% 5% 1,039 --
FIXED INCOME PORTFOLIO
Proposals: 3-14, 16, 17,
20......................... 96% -- 4% 12,924 --
GLOBAL EQUITY PORTFOLIO
Proposals: 3-14, 16, 17,
20......................... 100% -- -- 3,910 --
GLOBAL FIXED INCOME PORTFOLIO
Proposals: 3, 4, 6-14, 20... 87% -- 13% 7,549 --
Proposals: 5, 15-17......... 86% 1% 13% 7,549 --
GOLD PORTFOLIO PORTFOLIO
Proposals: 3-17, 20......... 94% -- 6% 1,869 --
</TABLE>
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151
<PAGE>
[LOGO] Morgan Stanley
Institutional Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL TOTAL
SHARES SHARES
VOTED NOT VOTING
VOTES (PER (PER
VOTES AGAINST ABSTAIN PROPOSAL) PROPOSAL)
FOR (%) (%) (%) (000) (000)
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HIGH YIELD PORTFOLIO
Proposals: 3-7, 9, 11-13,
16, 17, 20................. 94% -- 6% 7,506 --
Proposals: 8, 10, 14........ 91% 3% 6% 7,506 --
INTERNATIONAL EQUITY PORTFOLIO
Proposals: 3, 5............. 89% 9% 2% 49,791 --
Proposals: 4, 6, 9.......... 95% 3% 2% 49,791 --
Proposals: 7, 16............ 93% 5% 2% 49,791 --
Proposals: 8, 10, 11, 14.... 90% 8% 2% 49,791 --
Proposals: 12, 13, 17, 20... 92% 6% 2% 49,791 --
INTERNATIONAL SMALL CAP
PORTFOLIO
Proposals: 3, 5, 7, 8, 10,
11, 14..................... 92% 4% 4% 6,913 29
Proposals: 4, 6, 9, 12, 13,
16, 17..................... 93% 3% 4% 6,913 29
Proposal: 20................ 93% 3% 4% 6,942 --
JAPANESE EQUITY PORTFOLIO
Proposals: 3-7, 9, 11-13,
16, 17, 20................. 94% -- 6% 2,965 --
Proposals: 8, 10, 14........ 92% 3% 5% 2,965 --
MONEY MARKET PORTFOLIO
Proposals: 3-14, 16-18,
20......................... 79% 2% 19% 388,882 --
MUNICIPAL MONEY MARKET
Proposals: 3-7, 9, 12, 13,
16, 17, 20................. 75% -- 25% 181,245 --
Proposals: 8, 10, 11, 14,
19......................... 74% 1% 25% 181,245 --
SMALL CAP VALUE EQUITY
PORTFOLIO
Proposals: 3-14, 16, 17,
20......................... 97% -- 3% 2,426 --
VALUE EQUITY PORTFOLIO
Proposals: 3-14, 16, 17,
20......................... 91% -- 9% 4,088 --
</TABLE>
On June 28, 1995, a special meeting of the stockholders of Morgan Stanley
Institutional Fund, Inc. (the "Fund") was held for the purpose of voting to
elect a Board of Directors (voted on by the shareholders of the Fund as a
whole).
The results are as follows:
<TABLE>
<CAPTION>
TOTAL
VOTES VOTES SHARES
FOR WITHHELD VOTED
(000) (000) (000)
--------- --------- -----------
<S> <C> <C> <C>
John D. Barrett II.............................................................. 748,645 2,701 751,346
Barton M. Biggs................................................................. 749,800 1,546 751,346
Gerard E. Jones................................................................. 749,800 1,546 751,346
Andrew McNally, IV.............................................................. 746,835 4,511 751,346
Warren J. Olsen................................................................. 749,766 1,580 751,346
Samuel T. Reeves................................................................ 749,847 1,499 751,346
Fergus Reid..................................................................... 749,097 2,249 751,346
Frederick O. Robertshaw......................................................... 747,361 3,985 751,346
Frederick B. Whittemore......................................................... 747,888 3,458 751,346
</TABLE>
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