<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
MORGAN STANLEY INSTITUTIONAL FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS 02208-2798
March 31, 1997
Dear Shareholder:
The enclosed proxy statement relates to a special meeting of the
Shareholders of Morgan Stanley Institutional Fund, Inc. (the "Fund"). On
February 4, 1997, Morgan Stanley Group Inc., the parent corporation of the
Fund's investment adviser entered into an Agreement and Plan of Merger with Dean
Witter, Discover & Co. Pursuant to the merger agreement, your Fund's investment
adviser will become a direct subsidiary of the merged company, which will be
named Morgan Stanley, Dean Witter, Discover & Co. Your Fund's investment adviser
will continue to provide the Fund with investment advisory and management
services following the merger. The primary purpose of the special meeting is to
permit the Fund's Shareholders to consider a new investment advisory agreement
to take effect following the merger. The new investment advisory agreement
between the Fund and its investment adviser will be identical to the Fund's
current investment advisory agreement, except for the dates of execution,
effectiveness and initial term.
The attached proxy statement seeks Shareholder approval on this item.
Although we encourage you to read carefully the full proxy statement, we have
created a brief question-and-answer section for your convenience.
YOUR VOTE IS IMPORTANT AND YOUR PARTICIPATION
IN THE GOVERNANCE OF THE FUND DOES MAKE A DIFFERENCE.
The proposal has been unanimously approved by the Board of Directors of the
Fund, who recommend you vote "FOR" the proposal. YOUR IMMEDIATE RESPONSE WILL
HELP PREVENT THE NEED FOR ADDITIONAL SOLICITATIONS. We look forward to your
participation, and we thank you for your continued confidence in Morgan Stanley
Institutional Fund, Inc.
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
Sincerely,
Warren J. Olsen
President
<PAGE>
INFORMATION ABOUT YOUR PROXY STATEMENT
Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. The direct parent company of your investment adviser is merging with
another company and, as a result, your consent is being sought on:
/ / approval of a new investment advisory agreement.
Please refer to the proxy statement for a detailed explanation of the
proposed item.
Q. HOW WILL THIS AFFECT MY ACCOUNT?
A. You can expect the same management expertise and Shareholder service you
are currently receiving. The new investment advisory agreement between the
Fund and its investment adviser will be identical to the Fund's current
investment advisory agreement, except for the dates of execution,
effectiveness and initial term.
Q. WHY DO I NEED TO VOTE?
A. Your vote is needed to ensure that the proposal can be acted upon. Your
immediate response on the enclosed proxy card will help prevent the need
for any further solicitations for a Shareholder vote. We encourage all
Shareholders to participate in the governance of their Fund.
Q. HOW DOES THE BOARD OF DIRECTORS SUGGEST THAT I VOTE?
A. After careful consideration, the Board of Directors of the Fund
unanimously recommends that you vote "FOR" the item proposed on the
enclosed proxy card.
Q. WHO IS PAYING FOR EXPENSES RELATED TO THE SHAREHOLDER MEETING?
A. The Fund's investment adviser or its affiliates will pay for expenses
relating to the Shareholder meeting. The Fund will not pay any expenses
relating to the Shareholder meeting.
Q. WHERE DO I MAIL MY PROXY CARD?
A. You may use the enclosed postage-paid envelope or mail your proxy card to:
Proxy Tabulator
P.O. Box 9113
Hingham, MA 02043-9888
Q. WHO DO I CALL IF I HAVE QUESTIONS?
A. We will be happy to answer your questions about the proxy solicitation.
Please call us at 1-800-733-8481 Ext. 453 between 9:00 a.m. and 11:00 p.m.
Eastern Time, Monday through Friday.
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS 02208-2798
--------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
MAY 1, 1997
--------------
A Special Meeting of Shareholders (the "Meeting") of Morgan Stanley
Institutional Fund, Inc. (the "Fund"), will be held at the offices of Morgan
Stanley Asset Management Inc., Conference Room 3, 22nd Floor, 1221 Avenue of the
Americas, New York, New York 10020 on Thursday, May 1, 1997 at 10:30 a.m.
(Eastern Time) for the following purposes:
1. To approve or disapprove a new investment advisory agreement; and
2. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
Shareholders of record at the close of business on March 21, 1997 are
entitled to notice of and to vote at this Meeting or any adjournment thereof.
The enclosed proxy card(s) will enable you to vote with respect to the
Portfolio(s) in which you are a shareholder. (You will receive a separate
solicitation for each account you have with the Fund and a separate proxy card
for each Portfolio in which such accounts have an investment.)
By Order of the Board of Directors
Valerie Y. Lewis, Secretary
March 31, 1997
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS 02208-2798
--------------
PROXY STATEMENT
-------------
SPECIAL MEETING OF SHAREHOLDERS
MAY 1, 1997
This proxy statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Morgan Stanley Institutional Fund, Inc. (the
"Fund") of proxies to be voted at a Special Meeting of Shareholders and all
adjournments thereof (the "Meeting"), to be held at the offices of Morgan
Stanley Asset Management Inc. ("MSAM" or the "Adviser"), Conference Room 3, 22nd
Floor, 1221 Avenue of the Americas, New York, New York 10020 on Thursday, May 1,
1997 at 10:30 a.m. (Eastern Standard Time). The approximate mailing date of this
proxy statement and accompanying form of proxy is March 31, 1997.
The primary purpose of the Meeting is to permit the Fund's Shareholders to
consider a New Advisory Agreement (defined below) to take effect following the
consummation of the transactions contemplated by an Agreement and Plan of
Merger, dated as of February 4, 1997 (the "Merger Agreement"), between Dean
Witter, Discover & Co. ("Dean Witter Discover") and Morgan Stanley Group Inc.
("MS Group"), the direct parent of MSAM, the Fund's investment adviser. Pursuant
to the Merger Agreement, MSAM will become a direct subsidiary of the merged
company, which will be called Morgan Stanley, Dean Witter, Discover & Co. The
Fund's New Advisory Agreement (defined below) is identical to the Fund's Current
Advisory Agreement (defined below), except for the dates of execution,
effectiveness and initial term.
Participating in the Meeting are holders of shares of capital stock, par
value $.001 per share (collectively, the "Shares"), of the Fund. The Board has
fixed the close of business on March 21, 1997, as the record date (the "Record
Date") for the determination of holders of Shares of the Fund entitled to vote
at the Meeting. Shareholders of the Fund on the Record Date will be entitled to
one vote for each Share of the Fund then held and a fraction of a vote equal to
the proportion of a full Share represented by the fractional Share with respect
to the proposal submitted to the Shareholders of the Fund.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR ITS
FISCAL YEAR ENDED DECEMBER 31, 1996 TO ANY SHAREHOLDER REQUESTING SUCH REPORT.
REQUESTS FOR THE ANNUAL REPORT SHOULD BE MADE IN WRITING TO MORGAN STANLEY
INSTITUTIONAL FUND, INC., P.O. BOX 2798 BOSTON, MASSACHUSETTS 02208-2798 OR BY
CALLING 1-800-867-5309.
<PAGE>
At the close of business on March 21, 1997, there were issued and
outstanding 2,462,227,485.379 Shares of the Fund consisting of the following
number of Shares of each of the 29 portfolios of the Fund (each a "Portfolio"
and, collectively, the "Portfolios"):
<TABLE>
<CAPTION>
PORTFOLIO SHARES
- -------------------------------------------------------------- -------------------
<S> <C>
Active Country Allocation Portfolio........................... 16,533,365.069
Aggressive Equity Portfolio................................... 8,065,138.929
Asian Equity Portfolio........................................ 19,151,771.872
Balanced Portfolio............................................ 823,712.905
China Growth Portfolio*....................................... 0
Emerging Growth Portfolio..................................... 4,674,825.324
Emerging Markets Portfolio.................................... 95,731,615.114
Emerging Markets Debt Portfolio............................... 19,976,515.939
Equity Growth Portfolio....................................... 29,279,950.463
European Equity Portfolio..................................... 12,856,732.801
Fixed Income Portfolio........................................ 12,471,029.394
Global Equity Portfolio....................................... 5,208,491.304
Global Fixed Income Portfolio................................. 10,559,989.169
Gold Portfolio................................................ 3,933,386.42
High Yield Portfolio.......................................... 11,814,732.365
International Equity Portfolio................................ 140,273,262.293
International Magnum Portfolio................................ 12,248,927.512
International Small Cap Portfolio............................. 14,058,557.085
Japanese Equity Portfolio..................................... 20,572,249.527
Latin American Portfolio...................................... 4,372,009.867
MicroCap Portfolio*........................................... 0
Money Market Portfolio........................................ 1,280,400,411.590
Mortgage-Backed Securities Portfolio*......................... 0
Municipal Bond Portfolio...................................... 4,203,658.196
Municipal Money Market Portfolio.............................. 707,635,339.910
Small Cap Value Equity Portfolio.............................. 2,611,158.281
Technology Portfolio.......................................... 497,847.571
U.S. Real Estate Portfolio.................................... 16,765,031.124
Value Equity Portfolio........................................ 7,507,775.355
</TABLE>
*The China Growth, MicroCap and Mortgage-Backed Securities Portfolios have not
yet commenced operations and have no Shares outstanding as of the Record Date.
VOTING
To become effective with respect to a Portfolio, the New Advisory Agreement
must be approved by the vote of a majority of the outstanding voting securities
of that Portfolio. The "vote of a majority of the outstanding voting securities"
is defined under the Investment Company Act of 1940, as
2
<PAGE>
amended (the "1940 Act") as the lesser of the vote of (i) 67% or more of the
Shares of the Portfolio entitled to vote thereon present at the Meeting if the
holders of more than 50% of the outstanding Shares are present in person or
represented by proxy; or (ii) more than 50% of the outstanding Shares of the
Portfolio entitled to vote thereon.
The Board recommends that you cast your vote:
- FOR approval of the New Advisory Agreement.
All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon. Proxies received
prior to the Meeting on which no vote is indicated will be voted "FOR" the
proposal as to which it is entitled to vote. Abstentions and proxies signed and
returned by brokers without voting on a proposal ("broker non-votes") will not
be counted for or against the proposal, but WILL BE counted as votes present for
purposes of determining whether a quorum is present. Abstentions and broker
non-votes will be counted as votes present for purposes of determining a
"majority of the outstanding voting securities" present at the Meeting and will,
therefore, have the effect of counting against the Proposal. A majority of the
outstanding Shares entitled to vote on a proposal must be present in person or
by proxy to have a quorum to conduct business at the Meeting.
Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the Fund a written notice of revocation, by delivering a
duly executed proxy bearing a later date or by attending the Meeting and voting
in person.
THE PROPOSAL: APPROVAL OF A NEW ADVISORY AGREEMENT
MORGAN STANLEY ASSET MANAGEMENT INC. (MSAM)
MSAM, located at 1221 Avenue of the Americas, New York, New York 10020, acts
as investment adviser for each Portfolio of the Fund. MSAM has acted as
investment adviser for the Portfolios since each Portfolio commenced its
investment operations.
MSAM currently is a wholly-owned subsidiary of MS Group and provides a broad
range of portfolio management services to customers in the United States and
abroad. At December 31, 1996, MSAM, together with its affiliated asset
management companies managed investments totaling approximately $162 billion.
3
<PAGE>
Set forth below is the name, address and principal occupation of the
principal executive officer and each director of MSAM:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------------------------------------- ------------------------------------
<S> <C>
Barton M. Biggs, Chairman and Managing Director,
CHAIRMAN OF THE BOARD OF DIRECTORS MSAM; Managing Director of Morgan
1221 Avenue of the Americas Stanley & Co. Incorporated; Chairman
New York, New York 10020 of Morgan Stanley Asset Management
Limited
Peter A. Nadosy, Vice Chairman, Director and Managing
VICE-CHAIRMAN OF THE BOARD OF DIRECTORS Director, MSAM; Managing Director of
1221 Avenue of the Americas Morgan Stanley & Co. Incorporated;
New York, New York 10020 Director of Morgan Stanley Asset
Management Limited
James M. Allwin, President, Director and Managing
DIRECTOR AND PRESIDENT Director, MSAM; Managing Director of
1221 Avenue of the Americas Morgan Stanley & Co. Incorporated;
New York, New York 10020 President of Morgan Stanley Realty
Inc.
Gordon S. Gray, Director and Managing Director,
DIRECTOR MSAM; Managing Director of Morgan
1221 Avenue of the Americas Stanley & Co. Incorporated
New York, New York 10020
Dennis G. Sherva, Director and Managing Director,
DIRECTOR MSAM; Managing Director of Morgan
1221 Avenue of the Americas Stanley & Co. Incorporated
New York, New York 10020
</TABLE>
INFORMATION CONCERNING MORGAN STANLEY GROUP INC. (MS GROUP)
MS Group and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co."), a
registered broker-dealer, MSAM, a registered investment adviser, and Morgan
Stanley International, provide a wide range of financial services on a global
basis. Their principal businesses include securities underwriting, distribution
and trading; merger, acquisition, restructuring, real estate, project finance
and other corporate finance advisory activities; merchant banking and other
principal investment activities; stock brokerage and research services; asset
management; the trading of foreign exchange and commodities as well as
derivatives on a broad range of asset categories, rates and indices; real
4
<PAGE>
estate advice, financing and investing; and global custody, securities clearance
services and securities lending.
INFORMATION CONCERNING DEAN WITTER, DISCOVER & CO. (DEAN WITTER DISCOVER)
Dean Witter Discover is a diversified financial services company offering a
broad range of nationally marketed credit and investment products with a primary
focus on individual customers. Dean Witter Discover has two principal lines of
business: credit services and securities. Its credit services business consists
primarily of the issuance, marketing and servicing of general purpose credit
cards and the provision of transaction processing services, private-label credit
card services and real estate secured loans. It is the largest single issuer of
general purpose credit cards in the United States, as measured by number of
accounts and cardmembers and the third largest originator and servicer of credit
card receivables, as measured by managed loans. Dean Witter Discover's
securities business is conducted primarily through its wholly-owned
subsidiaries, Dean Witter Reynolds Inc. ("DWR") and Dean Witter InterCapital
Inc. ("Intercapital"). DWR is a full-service securities firm offering a wide
variety of securities products to serve the investment needs of individual
clients through over 9,100 professional account executives located in 371 branch
offices. DWR is among the largest NYSE members and is a member of other major
securities, futures and options exchanges. Intercapital is a registered
investment adviser that, along with its subsidiaries, services investment
companies, individual accounts and institutional portfolios.
THE MERGER
Pursuant to the Merger Agreement, MS Group will be merged (the "Merger")
with and into Dean Witter Discover and the surviving corporation will be named
Morgan Stanley, Dean Witter, Discover & Co. Following the Merger, MSAM will be a
direct subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Under the terms of the Merger Agreement, each of MS Group's common shares
will be converted into the right to receive 1.65 shares of Morgan Stanley, Dean
Witter, Discover & Co. common stock and each issued and outstanding share of
Dean Witter Discover common stock will remain outstanding and will thereafter
represent one share of Morgan Stanley, Dean Witter, Discover & Co. common stock.
Following the Merger, MS Group's former Shareholders will own approximately 45%
and Dean Witter Discover's former Shareholders will own approximately 55% of the
outstanding shares of common stock of Morgan Stanley, Dean Witter, Discover &
Co.
The Merger is expected to be consummated in mid-1997 and is subject to
certain closing conditions, including certain regulatory approvals and the
approval of Shareholders of both MS Group and Dean Witter Discover.
5
<PAGE>
The Board of Directors of Morgan Stanley, Dean Witter, Discover & Co.
initially will consist of fourteen members, two of whom will be MS Group
insiders and two of whom will be Dean Witter Discover insiders. The remaining
ten directors will be independent directors, with MS Group and Dean Witter
Discover each nominating five of the ten. The Chairman and Chief Executive
Officer of Morgan Stanley, Dean Witter, Discover & Co. will be the current
Chairman and Chief Executive Officer of Dean Witter Discover, Phillip Purcell.
The President and Chief Operating Officer of Morgan Stanley, Dean Witter,
Discover & Co. will be the current President of MS Group, John Mack.
The Adviser does not anticipate any reduction in the quality of services now
provided to the Fund and does not expect that the Merger will result in any
material changes in the business of the Adviser or in the manner in which the
Adviser renders services to the Portfolios. Nor does the Adviser anticipate that
the Merger or any ancillary transactions will have any adverse effect on its
ability to fulfill its obligations under the New Advisory Agreement (as defined
below) with the Fund or to operate its business in a manner consistent with past
business practice.
THE ADVISORY AGREEMENTS
In anticipation of the Merger, a majority of the Directors of the Fund,
including a majority of the Directors who are not (i) parties to the new
investment advisory agreement between the Fund and MSAM (the "New Advisory
Agreement") or (ii) interested persons of any such party, approved the New
Advisory Agreement. The form of the New Advisory Agreement is identical to the
Current Advisory Agreement (defined below), except for the date of execution,
effectiveness and initial term. The holders of a majority of the outstanding
voting securities (within the meaning of the 1940 Act) of each Portfolio are
being asked to approve the New Advisory Agreement. See "The New Advisory
Agreement" below.
The following summary of the Current Advisory Agreement and the New Advisory
Agreement is qualified by reference to Annex A.
THE CURRENT ADVISORY AGREEMENT. The current advisory agreement, dated
October 1, 1988 (the "Current Advisory Agreement"), provides that MSAM will
supply investment research and portfolio management, including the selection of
securities for each Portfolio of the Fund to purchase, hold or sell and the
selection of brokers through whom that Portfolio's portfolio transactions are
executed. The Current Advisory Agreement also provides that, at the request of
the Fund, MSAM may administer the business affairs of the Fund, furnish offices,
necessary facilities and equipment, provide administrative services, and permit
its officers and employees to serve without compensation as Directors and
officers of the Fund if duly elected to such positions.
6
<PAGE>
The Current Advisory Agreement provides that MSAM shall not be liable for
any error of judgment or of law, or for any loss suffered by the Fund in
connection with the matters to which the Current Advisory Agreement relates
except a loss resulting from willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties.
Since the beginning of the last fiscal year, the Board has reviewed the
Current Advisory Agreement on two occasions. At a meeting of the Board held on
January 28, 1996, a majority of the Board, including a majority of the Directors
who are not "interested parties" as defined by the 1940 Act ("Independent
Directors"), approved the Current Advisory Agreement for continuance for the
year beginning April 14, 1996, upon the same terms and conditions as set forth
in the Current Advisory Agreement. At a meeting of the Board held on February
13, 1997, a majority of the Board, including a majority of the Independent
Directors, approved the Current Advisory Agreement for continuance for the year
beginning April 14, 1997, upon the same terms and conditions as set forth in the
Current Advisory Agreement.
Under the Current Advisory Agreement the Fund pays the Adviser as
compensation for the services rendered an annual fee equal to an annual percent
of the average daily net assets of each Portfolio of the Fund. Set forth for
each Portfolio in the table below is: (i) the advisory fee payable as a
percentage of net assets, (ii) the net advisory fee payable after fee waivers or
expense reimbursements as a percentage of net assets, (iii) the net dollar
amount of fees paid, (iv) the dollar amount of fees waived and (v) the date the
Current Advisory Agreement was last effectively approved by Shareholders of each
Portfolio.
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
FEES--FISCAL
YEAR ENDED
DECEMBER 31, 1996
NET ADVISORY FEE ------------------------------ DATE OF LAST
(AFTER EXPENSE NET FEES AMOUNT WAIVED EFFECTIVE
CONTRACTUAL REIMBURSEMENT PAID AND/OR REIMBURSED SHAREHOLDER
PORTFOLIO ADVISORY FEE AND/OR FEE WAIVER) (000) (000) APPROVAL
- ------------------- --------------- ------------------- ----------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Active Country 0.65 0.36 668 501 April 14, 1992
Allocation
Portfolio
Aggressive Equity 0.80 0.56 280 120 March 8, 1995
Portfolio
Asian Equity 0.80 0.55 2,530 848 April 14, 1995
Portfolio
Balanced Portfolio 0.50 0.00 None 95 February 20, 1990
China Growth 1.25 NA NA NA February 2, 1994
Portfolio*
Emerging Growth 1.00 0.95 978 47 November 11, 1989
Portfolio
Emerging Markets 1.25 1.25 15,368 None September 25, 1992
Portfolio
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
FEES--FISCAL
YEAR ENDED
DECEMBER 31, 1996
NET ADVISORY FEE ------------------------------ DATE OF LAST
(AFTER EXPENSE NET FEES AMOUNT WAIVED EFFECTIVE
CONTRACTUAL REIMBURSEMENT PAID AND/OR REIMBURSED SHAREHOLDER
PORTFOLIO ADVISORY FEE AND/OR FEE WAIVER) (000) (000) APPROVAL
- ------------------- --------------- ------------------- ----------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Emerging Markets 1.00 1.00 1,887 None November 12, 1993
Debt Portfolio
Equity Growth 0.60 0.36 1,043 150 April 12, 1992
Portfolio
European Equity 0.80 0.64 832 203 January 31, 1991
Portfolio
Fixed Income 0.35 0.20 323 236 April 14, 1992
Portfolio
Global Equity 0.80 0.65 512 118 January 31, 1991
Portfolio
Global Fixed Income 0.40 0.18 210 227 April 14, 1992
Portfolio
Gold Portfolio 1.00 0.52 145 129 November 12, 1993
High Yield 0.50 0.43 382 57 September 28, 1992
Portfolio
International 0.80 0.78 15,387 474 August 4, 1989
Equity Portfolio
International 0.80 0.26 125 257 March 15, 1996
Magnum Portfolio
International Small 0.95 0.87 1,914 178 December 15, 1992
Cap Portfolio
Japanese Equity 0.80 0.73 1,513 129 November 12, 1993
Portfolio
Latin American 1.10 0.62 166 121 January 18, 1995
Portfolio
MicroCap Portfolio* 1.00 NA NA NA December 29, 1995
Money Market 0.30 0.30 3,343 None November 15, 1988
Portfolio
Mortgage-Backed 0.35 NA NA NA November 12, 1993
Securities
Portfolio*
Municipal Bond 0.35 0.07 30 105 January 18, 1995
Portfolio
Municipal Money 0.30 0.30 1,932 None February 10, 1989
Market Portfolio
Small Cap Value 0.85 0.53 219 126 December 15, 1992
Equity Portfolio
Technology 1.00 0.00 None 99 September 16, 1996
Portfolio
U.S. Real Estate 0.80 0.66 834 184 February 24, 1995
Portfolio
Value Equity 0.50 0.42 562 94 January 31, 1990
Portfolio
</TABLE>
* The China Growth, MicroCap and Mortgage-Backed Securities Portfolios have not
yet commenced operations.
8
<PAGE>
MSAM's activities are subject to the review and supervision of the Board, to
which the Adviser renders periodic reports with respect to the Portfolios'
investment activities. The Current Advisory Agreement may be terminated (i) with
respect to a Portfolio, by any Portfolio at any time, without penalty, by vote
of a majority of the Board or by vote of a majority of the outstanding voting
securities of the Portfolio on 60 days' written notice to the Adviser, or (ii)
by the Adviser, at any time, without penalty, upon 90 days' written notice to
the Fund. The Current Advisory Agreement also provides that it will
automatically terminate in the event of its assignment.
The name, net assets as of December 31, 1996, contractual advisory fee and
advisory fee after fee waivers or expense reimbursements of all registered
investment companies advised by the Adviser, are set forth at Annex B hereto.
THE NEW ADVISORY AGREEMENT. The Board of Directors approved the proposed
New Advisory Agreement between the Fund and MSAM on March 13, 1997, the form of
which is attached as Annex A. The form of the proposed New Advisory Agreement is
identical to the Current Advisory Agreement, except for the dates of execution,
effectiveness and initial term.
The investment advisory fee as a percentage of net assets payable by each
Portfolio will be the same under the New Advisory Agreement as under the Current
Advisory Agreement. If the investment advisory fee under the New Advisory
Agreement had been in effect for each Portfolio's most recently completed fiscal
year, advisory fee paid to the Adviser by each Portfolio would have been
identical to that paid under the Current Advisory Agreement.
The Board held a meeting on March 13, 1997, at which the Board, including
the Independent Directors, unanimously approved the New Advisory Agreement for
the Fund and recommended the New Advisory Agreement for approval by the
Shareholders of the Fund. The New Advisory Agreement would take effect upon the
later to occur of (i) the obtaining of Shareholder approval or (ii) the closing
of the Merger. The New Advisory Agreement will continue in effect for an initial
two year term and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.
In evaluating the New Advisory Agreement, the Board took into account that
the Fund's Current Advisory Agreement and the New Advisory Agreement, including
their terms relating to the services to be provided thereunder by the Adviser
and the fees and expenses payable by the Portfolios, are identical, except for
the dates of execution, effectiveness and initial term. The Board also
considered other possible benefits to the Adviser and Morgan Stanley, Dean
Witter, Discover & Co. that may result from the Merger including the continued
use of Morgan Stanley & Co. and Dean Witter
9
<PAGE>
Discover brokers and their affiliates, to the extent permitted by law, for
brokerage services.
The Board also considered the terms of the Merger Agreement and the possible
effects of the Merger upon the Adviser's organization and upon the ability of
the Adviser to provide advisory services to the Portfolios. The Board considered
the skills and capabilities of the Adviser in this regard and the
representations of MS Group and Dean Witter Discover that no material change was
planned in the current management or facilities of the Adviser. In this regard,
the Board was informed of the resources of Morgan Stanley, Dean Witter, Discover
& Co. to be made available to the Adviser.
The Board also considered the effect on the Fund of MSAM becoming an
affiliated person of Morgan Stanley, Dean Witter, Discover & Co. Following the
Merger, the 1940 Act will prohibit or impose certain conditions on the ability
of the Fund to engage in certain transactions with Morgan Stanley, Dean Witter,
Discover & Co. and its affiliates. For example, absent exemptive relief, the
Fund will be prohibited from purchasing securities from Morgan Stanley & Co. and
DWR in transactions in which Morgan Stanley & Co. or DWR acts as a principal.
Currently the Fund is prohibited from making such purchases in only those
transactions in which Morgan Stanley & Co. or an affiliate acts as principal.
The Fund will also have to satisfy certain conditions in order to engage in
securities transactions in which Morgan Stanley & Co. or DWR is acting as an
underwriter. The Fund is already required to satisfy such conditions when
engaging in transactions in which Morgan Stanley & Co. or an affiliate is acting
as an underwriter. In this connection, management of the Adviser represented to
the Board that it does not believe these prohibitions or conditions will have a
material effect on the management or performance of the Portfolios.
After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the Independent
Directors, unanimously approved the New Advisory Agreement with respect to the
Fund and voted to recommend its approval to the Shareholders of the Portfolios.
In the event that Shareholders of a Portfolio do not approve the New
Advisory Agreement, the Current Advisory Agreement will remain in effect and the
Board will take such action as it deems in the best interest of the Portfolio
and its Shareholders, which may include proposing that Shareholders approve an
agreement in lieu of the New Advisory Agreement. If the Merger is not
consummated, MSAM would continue to serve as investment adviser of each
Portfolio pursuant to the terms of the Current Advisory Agreement.
10
<PAGE>
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS
A VOTE "FOR" APPROVAL
OF THE NEW ADVISORY AGREEMENT.
ADDITIONAL INFORMATION
DIRECTORS AND OFFICERS
Information about the Fund's current Directors and principal executive
officers, including their name, position with the Fund, affiliation with MSAM
(if any), in the case of Directors, the number of shares of each Portfolio
beneficially owned and the percentage of shares of each Portfolio beneficially
owned is set forth in the table below. The Directors and Officers of the Fund as
a group own less than 1.00% of each Portfolio, except that the Directors and
Officers as a group own 1.05% of the Aggressive Equity Portfolio, 3.20% of the
Asian Equity Portfolio, 3.91% of the Gold Portfolio and 2.64% of the Latin
American Portfolio.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND AFFILIATION WITH MSAM SHARES OF PORTFOLIO(S) BENEFICIALLY OWNED OF
POSITION WITH FUND (IF ANY) AS OF FEBRUARY 28, 1997 PORTFOLIO
- --------------------- --------------------- ----------------------------------------- ----------
<S> <C> <C> <C> <C>
Barton M. Biggs Chairman and Director Money Market 8,116,524 shares **
CHAIRMAN OF THE BOARD of MSAM *131,777 shares
Asian Equity 333,409 shares
*165,569 shares
Aggressive Equity 38,714 shares
*6,949 shares
Latin American 110,305 shares
Japanese Equity 32,805 shares
*22,484 shares
Gold *147,525 shares
Emerging Markets 45,748 shares
*2,679 shares
Technology 5,000 shares
High Yield *1,727 shares
International Small Cap *1,910 shares
Value Equity *6,806 shares
Warren J. Olsen Principal of MSAM International Small Cap *672 shares **
DIRECTOR AND Money Market 1,095 shares
PRESIDENT *208,016 shares
John D. Barrett II NA Emerging Markets 9,167 shares **
DIRECTOR
Gerard E. Jones NA Active Country *5,556 shares **
DIRECTOR Allocation *16,084 shares
Asian Equity
Aggressive Equity 11,210 shares
*18,798 shares
Emerging Markets *9,453 shares
High Yield 21,449 shares
*18,761 shares
International Small Cap *6,183 shares
Japanese Equity *32,978 shares
Money Market 4,477 shares
*268,076 shares
U.S. Real Estate *5,517 shares
Value Equity *9,291 shares
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND AFFILIATION WITH MSAM SHARES OF PORTFOLIO(S) BENEFICIALLY OWNED OF
POSITION WITH FUND (IF ANY) AS OF FEBRUARY 28, 1997 PORTFOLIO
- --------------------- --------------------- ----------------------------------------- ----------
<S> <C> <C> <C> <C>
Andrew McNally IV NA None **
DIRECTOR
Samuel T. Reeves NA Asian Equity 51,612 shares **
DIRECTOR *57,242 shares
Emerging Markets 4,003 shares
Emerging Markets Debt 7,079 shares
*68,973 shares
International Equity 19,160 shares
Money Market 26,801 shares
*1,485,770
shares
U.S. Real Estate *139,529 shares
Fergus Reid NA Active Country 14,828 shares **
DIRECTOR Allocation 11,969 shares
Emerging Markets 3,410 shares
Gold Portfolio 15,451 shares
High Yield 6,198 shares
International Small Cap 7,792 shares
Japanese Equity 4,341 shares
Money Market 7,972 shares
U.S. Real Estate
Frederick O. NA None **
Robertshaw
DIRECTOR
James W. Grisham Principal of MSAM NA **
VICE PRESIDENT
Michael F. Klein Principal of MSAM NA **
VICE PRESIDENT
Harold J. Schaaff Principal, General NA **
VICE PRESIDENT Counsel and Secretary
of MSAM
Joseph P. Stadler Vice President of NA **
VICE PRESIDENT MSAM
Valerie Y. Lewis Vice President of NA **
SECRETARY MSAM
Karl O. Hartmann NA NA **
ASSISTANT SECRETARY
James R. Rooney NA NA **
TREASURER
Joanna Haigney NA NA **
ASSISTANT TREASURER
</TABLE>
- ------------------------------
* Indicates shares voting or investing power.
** The Directors and Officers of the Fund as a group own less than 1.00% of each
Portfolio, except that the Directors and Officers as a group own 1.05% of the
Aggressive Equity Portfolio, 3.20% of the Asian Equity Portfolio, 3.91% of
the Gold Portfolio and 2.64% of the Latin American Portfolio.
12
<PAGE>
BENEFICIAL OWNERS
To the knowledge of Fund Management, as of March 21, 1997, there were no
beneficial owners of 5% or more of the outstanding Shares of the Portfolios.
EXPENSES
MSAM or its affiliates will bear the expense of preparing, printing and
mailing the enclosed form of proxy, the accompanying Notice and this Proxy
Statement. The Fund will not pay any expenses relating to the Shareholder
meeting.
In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made by mail, telephone, telegraph, facsimile or personal
interview by representatives of the Fund, the Adviser or by Shareholder
Communications Services, a solicitation firm located in New York, New York that
has been engaged to assist in proxy solicitation at an estimated cost of
approximately $50,000.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Fund does not hold annual Shareholder meetings. Shareholders wishing to
submit proposals for inclusion in a proxy statement for a Shareholder meeting
subsequent to the Meeting, if any, should send their written proposals to the
Secretary of Morgan Stanley Institutional Fund, Inc., c/o Morgan Stanley Asset
Management Inc., Legal Department, 1221 Avenue of the Americas, New York, New
York 10020.
TRANSACTIONS/AGREEMENTS WITH AFFILIATES
ADMINISTRATION
Pursuant to an administration agreement between MSAM and the Fund, MSAM
provides administrative services to the Portfolios. For its services under the
administration agreement with the Fund (the "Administration Agreement"), the
Fund pays MSAM 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. For the fiscal year ended December 31, 1996, the Fund paid
administration fees to MSAM of approximately $11,336,992.
CUSTODIAN
The Chase Manhattan Bank, located at 770 Broadway, New York, NY 10003, is
the Fund's custodian for domestic and certain foreign assets. Morgan Stanley
Trust Company ("MSTC"), a wholly-owned subsidiary of MS Group and an affiliate
of MSAM located at 1 Pierrepont Plaza, Brooklyn, New York
13
<PAGE>
11201, is the Fund's custodian for assets held outside of the United States and
certain domestic assets. For the fiscal year ended December 31, 1996, the Fund
paid custodial fees to MSTC of approximately $5,527,000.
DISTRIBUTION
Morgan Stanley & Co., located at 1221 Avenue of the Americas, New York, New
York 10020, serves as the Fund's Distributor and provides Class B Shareholders
of each applicable Portfolio with distribution services pursuant to a
Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the 1940 Act.
Under the Plan, the Distributor is entitled to receive from each Portfolio,
except the International Small Cap, Money Market and Municipal Money Market
Portfolios, a distribution fee, which is accrued daily and paid quarterly, at an
annual rate of 0.25% of the Class B shares' average daily net assets. The
Distributor has agreed to reduce its fees to 0.15% of the Class B shares'
average daily net assets for the Fixed Income and Global Fixed Income
Portfolios. For the fiscal year ended December 31, 1996, the Fund paid to the
Distributor fees of approximately $178,205 pursuant to the Plan.
PORTFOLIO TRANSACTIONS
MSAM is authorized to select the brokers or dealers that will execute the
purchases and sales of investment securities for the Portfolios and to use its
best efforts to obtain the best available price and most favorable execution
with respect to all transactions for the Portfolios. The Fund has authorized
MSAM to pay higher commissions in recognition of brokerage and research services
which, in the opinion of the Adviser, are necessary for the achievement of
better execution, provided that the Adviser believes this to be in the best
interest of the Fund.
In purchasing and selling securities for the Portfolios, it is the Fund's
policy to seek to obtain quality execution at the most favorable prices, through
responsible broker-dealers. In selecting broker-dealers to execute the
securities transactions for the Portfolios, consideration will be given to such
factors as the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing broker-dealers, and
the brokerage and research services which they provide. Some securities
considered for investment by a Portfolio may also be appropriate for other
clients served by the Adviser. If purchase or sale of securities consistent with
the investment policies of a Portfolio and one or more of these other clients
served by 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
14
<PAGE>
Adviser, and the results of such allocations, are subject to periodic review by
the Board.
Subject to the overriding objective of obtaining the best execution of
orders, the Adviser may allocate a portion of the Portfolio's portfolio
brokerage transactions to Morgan Stanley & Co. or broker affiliates of Morgan
Stanley & Co. and, subsequent to the Merger, to DWR or broker affiliates of DWR,
in each case under procedures adopted by the Board of Directors. For the fiscal
year ended December 31, 1996, the Fund paid brokerage commissions of
approximately $826,686 to Morgan Stanley & Co., an affiliated broker-dealer.
During the same period, the Fund paid brokerage commissions of approximately
$25,718 to DWR. For the fiscal year ended December 31, 1996, commissions paid to
Morgan Stanley & Co. represented approximately 5% of the total amount of
brokerage commissions paid in such period and were paid on transactions that
represented 3.57% of the aggregate dollar amount of transactions that incurred
commissions paid by the Fund during such period. During the same period,
commissions paid to DWR represented approximately 0.2% of the total amount of
brokerage commissions paid in such period and were paid in transactions that
represented 0.65% of the aggregate dollar amount of transactions that incurred
commissions paid by the Fund during such period.
Portfolio securities will not be purchased from or through, or sold to or
through, the Adviser or Morgan Stanley & Co. or, subsequent to the Merger, DWR
or any "affiliated persons," as defined in the 1940 Act, of Morgan Stanley & Co.
and DWR when such entities are acting as principals, except to the extent
permitted by law.
GENERAL
The Fund knows of no business other than the Proposal that will be presented
for consideration at the Meeting. Management of the Fund does not intend to
present and does not have reason to believe that others will present any other
items of business at the Meeting. If any other matters are properly presented,
it is the intention of the persons named on the enclosed proxy to vote proxies
in accordance with their best judgment. In the event a quorum is present at the
Meeting, but sufficient votes to approve the proposal are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies provided they determine that such an
adjournment and additional solicitation is reasonable and in the interest of
Shareholders based on a consideration of all relevant factors, including the
nature of the relevant proposal, the percentage of affirmative votes then cast,
the percentage of negative votes then cast, the nature of the proposed
solicitation activities and the nature of the reasons for such further
solicitation.
15
<PAGE>
A list of Shareholders of the Fund entitled to be present and vote at the
Meeting will be available at the offices of MSAM at 1221 Avenue of the Americas,
New York, New York 10020 for inspection by any Shareholder during regular
business hours for ten days prior to the date of the Meeting.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
VALERIE Y. LEWIS
Secretary
March 31, 1997
16
<PAGE>
ANNEX A
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this by and between Morgan Stanley Institutional
Fund, Inc., a Maryland corporation (the "Fund") and Morgan Stanley Asset
Management Inc., a Delaware corporation (the "Adviser").
1. DUTIES OF ADVISER. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund's Money Market Portfolio, Municipal Money Market
Portfolio, Emerging Growth Portfolio, Emerging Markets Portfolio, Emerging
Markets Debt Portfolio, Active Country Allocation Portfolio, U.S. Real Estate
Portfolio, Equity Growth Portfolio, MicroCap Portfolio, Aggressive Equity
Portfolio, Small Cap Value Equity Portfolio, Value Equity Portfolio, Balanced
Portfolio, Gold Portfolio, Global Equity Portfolio, International Equity
Portfolio, International Small Cap Portfolio, Asian Equity Portfolio, European
Equity Portfolio, Japanese Equity Portfolio, Latin American Portfolio,
International Magnum Portfolio, Fixed Income Portfolio, Global Fixed Income
Portfolio, Municipal Bond Portfolio, Mortgage-Backed Securities Portfolio, High
Yield Portfolio, Technology Portfolio, China Growth Portfolio and such other
Portfolios as may be offered by the Fund, for the period and on such terms set
forth in this Agreement. The Fund employs the Adviser to manage the investment
and reinvestment of the assets of the Fund's Portfolios, to continuously review,
supervise and administer the investment program of each of the Portfolios, to
determine in its discretion the securities to be purchased or sold and the
portion of each such Portfolio's assets to be held uninvested, to provide the
Fund with records concerning the Adviser's activities which the Fund is required
to maintain, and to render regular reports to the Fund's officers and Board of
Directors concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the officers and the Board of Directors of the Fund, and in
compliance with the objectives, policies and limitations set forth in the Fund's
prospectus and applicable laws and regulations. The Adviser accepts such
employment and agrees to render the services and to provide, at its own expense,
the office space, furnishings and equipment and the personnel required by it to
perform the services on the terms and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the brokers
or dealers that will execute the purchases and sales of securities for each of
the Fund's Portfolios and is directed to use its best efforts to obtain the best
available price and most favorable execution, except as prescribed herein.
Unless and until otherwise directed by the Board of Directors of the Fund, the
Adviser may also be authorized to effect individual securities transactions
17
<PAGE>
at commission rates in excess of the minimum commission rates available, if the
Adviser determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage or research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund. The execution of
such transactions shall not be deemed to represent an unlawful act or breach of
any duty created by this Agreement or otherwise. The Adviser will promptly
communicate to the officers and Directors of the Fund such information relating
to portfolio transactions as they may reasonably request.
3. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in Section 1 of this Agreement, the Fund shall pay to the
Adviser at the end of each of the Fund's fiscal quarters, an advisory fee
calculated by applying a quarterly rate, based on the following annual
percentage rates, to each Portfolio's average daily net assets for the quarter:
In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last business
day on which this Agreement is in effect subject to a pro rata adjustment based
on the number of days elapsed in the current fiscal quarter as a percentage of
the total number of days in such quarter as a percentage of the total number of
days in such quarter.
4. OTHER SERVICES. At the request of the Fund, the Adviser in its
discretion may make available to the Fund office facilities, equipment,
personnel and other services. Such office facilities, equipment, personnel and
services shall be provided for or rendered by the Adviser and billed to the Fund
at the Adviser's cost.
5. REPORTS. The Fund and the Adviser agree to furnish to each other
current prospectuses, proxy statements, reports to shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs as each may reasonably request.
6. STATUS OF ADVISER. The services of the Adviser to the Fund are not to
be deemed exclusive, and the Adviser shall be free to render similar services to
others.
7. LIABILITY OF ADVISER. In the absence of (i) willful misfeasance, bad
faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the Investment Company Act of 1940 ("1940
Act"), the Adviser shall not be subject to any liability whatsoever to the Fund,
or to any shareholder of the Fund, for any error or judgment,
18
<PAGE>
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of any Portfolio of the Fund.
8. PERMISSIBLE INTERESTS. Subject to and in accordance with the Articles
of Incorporation of the Fund and the Articles of Incorporation of the Adviser,
Directors, officers, agents and shareholders of the Fund are or may be
interested in the Adviser (or any successor thereof) as Directors, officers,
agents, shareholders or otherwise; Directors, officers, agents and shareholders
of the Adviser are or may be interested in the Fund as Directors, officers,
shareholders or otherwise; and the Adviser (or any successor) is or may be
interested in the Fund as a shareholder or otherwise; and that the effect of any
such interrelationships shall be governed by said Articles of Incorporation and
the provisions of the 1940 Act.
9. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall continue until the earlier of or the date of
the first annual or special meeting of the shareholders of the Fund and, if
approved by a majority of the outstanding voting securities of each Portfolio of
the Fund, thereafter shall continue for periods of one year so long as such
continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board of Directors of the Fund who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of each Portfolio of the Fund; PROVIDED HOWEVER,
that if the holders of any Portfolio fail to approve the Agreement as provided
herein, the Adviser may continue to serve in such capacity in the manner and to
the extent permitted by the 1940 Act and Rules thereunder. This Agreement may be
terminated by any Portfolio of the Fund at any time, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of the Portfolio on
60 days' written notice to the Adviser. This Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days' written
notice to the Fund. This agreement will automatically and immediately terminate
in the event of its assignment, PROVIDED that an assignment to a corporate
successor to all or substantially all of the Adviser's business or to a
wholly-owned subsidiary of such corporate successor which does not result in a
change of actual control of the Adviser's business shall not be deemed to be an
assignment for the purposes of this Agreement. Any notice under this Agreement
shall be given in writing, addressed and delivered or mailed postpaid, to the
other party at any office of such party and shall be deemed given when received
by the addressee.
19
<PAGE>
As used in this Section 9, the terms "assignment", "interested persons", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act.
10. AMENDMENT OF AGREEMENT. This Agreement may be amended by mutual
consent, but the consent of the Fund must be approved (a) by vote of a majority
of those members of the Board of Directors of the Fund who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of each Portfolio of the Fund.
11. USE OF NAME. The Fund agrees that if this Agreement is terminated and
the Adviser shall no longer be the adviser to the Fund, the Fund will, within a
reasonable period of time, change its name to delete reference to "Morgan
Stanley".
12. SEVERABILITY. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
13. APPLICABLE LAW. This Agreement shall be construed in accordance with
the laws of the State of New York, PROVIDED, HOWEVER, that nothing herein shall
be construed as being inconsistent with the 1940 Act.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first written above.
<TABLE>
<S> <C>
MORGAN STANLEY ASSET MANAGEMENT MORGAN STANLEY INSTITUTIONAL
INC. FUND, INC.
By: By:
</TABLE>
20
<PAGE>
ANNEX B
The following tables indicate the name, net assets as of December 31, 1996,
contractual advisory fee and net advisory fee after fee waivers or expense
reimbursements for the last fiscal year for the Portfolios, as well as other
registered investment companies advised by MSAM. Except with respect to the U.S.
Registered Closed-End Funds, MSAM has voluntarily agreed to a reduction in the
fees payable to it and to reimburse each portfolio, if necessary, if payment of
advisory fees would cause the total annual operating expenses of each portfolio
to exceed certain maximums.
MORGAN STANLEY INSTITUTIONAL FUND, INC.
<TABLE>
<CAPTION>
CONTRACTUAL NET ADVISORY FEES
RATE OF AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS OR
PORTFOLIO 12/31/96 FEES(2) FEE WAIVERS
- ------------------------------------ --------------- --------------- -----------------
<S> <C> <C> <C>
Active Country Allocation
Portfolio......................... $ 183,866,164 0.65% 0.36%
Aggressive Equity Portfolio......... 77,289,407 0.80% 0.56%
Asian Equity Portfolio.............. 374,522,755 0.80% 0.55%
Balanced Portfolio.................. 8,189,270 0.50% 0.00%
China Growth Portfolio (1).......... N/A 1.25% N/A
Emerging Growth Portfolio........... 66,789,901 1.00% 0.95%
Emerging Markets Portfolio.......... 1,321,363,055 1.25% 1.25%
Emerging Markets Debt Portfolio..... 156,419,732 1.00% 1.00%
Equity Growth Portfolio............. 66,789,901 0.60% 0.36%
European Equity Portfolio........... 181,009,746 0.80% 0.64%
Fixed Income Portfolio.............. 132,194,980 0.35% 0.20%
Global Equity Portfolio............. 84,224,959 0.80% 0.65%
Global Fixed Income Portfolio....... 114,446,527 0.40% 0.18%
Gold Portfolio...................... 29,180,247 1.00% 0.52%
High Yield Portfolio................ 101,321,211 0.50% 0.43%
International Equity Portfolio...... 2,269,491,236 0.80% 0.78%
International Magnum Portfolio...... 108,463,901 0.80% 0.26%
International Small Cap Portfolio... 234,743,343 0.95% 0.87%
Japanese Equity Portfolio........... 155,659,538 0.80% 0.73%
Latin American Portfolio............ 31,740,977 1.10% 0.62%
MicroCap Portfolio (1).............. N/A 1.00% N/A
Money Market Portfolio.............. 1,284,371,173 0.30% 0.30%
Mortgage-Backed Securities Portfolio
(1)............................... N/A 0.35% N/A
Municipal Bond Portfolio............ 40,295,907 0.35% 0.07%
Municipal Money Market Portfolio.... 721,240,884 0.30% 0.30%
Small Cap Value Equity Portfolio.... 25,659,189 0.85% 0.53%
Technology Portfolio................ 5,077,462 1.00% 0.00%
U.S. Real Estate Portfolio.......... 219,140,369 0.80% 0.66%
Value Equity Portfolio.............. 108,683,175 0.50% 0.42%
</TABLE>
- --------------------------
(1) Portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets
* No fee waiver in effect
21
<PAGE>
MORGAN STANLEY FUND, INC.
<TABLE>
<CAPTION>
NET ADVISORY
CONTRACTUAL FEES AFTER
RATE OF EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS
FUND 12/31/96 FEES(2) OR FEE WAIVERS
- ------------------------------------- ------------- --------------- ---------------
<S> <C> <C> <C>
Aggressive Equity Fund............... $ 19,194,919 0.90% 0.50%
American Value Fund.................. 481,199,603 0.85% 0.54%
Asian Growth Fund.................... 423,229,234 1.00% 1.00%
Emerging Markets Fund................ 128,640,271 1.25% 0.84%
Emerging Markets Debt Fund........... N/A 1.25% N/A
Equity Growth Fund (1)............... N/A 0.70% N/A
European Equity Fund (1)............. N/A 1.00% N/A
Global Equity Fund (1)............... N/A 1.00% N/A
Global Equity Allocation Fund........ 156,402,540 1.00% 0.64%
Global Fixed Income Fund............. 10,452,774 0.75% 0.04%
Government Obligations Money Market
Fund............................... 116,815,884 0.45%(3) 0.41%
0.40%(4)
0.35%(5)
Growth and Income Fund (1)........... N/A 1.00% N/A
High Yield Fund...................... 14,794,857 0.75% 0.42%
International Magnum Fund............ 16,490,305 0.80% 0.80%
Japanese Equity Fund (1)............. N/A 1.00% N/A
Latin American Fund.................. 28,891,074 1.25% 0.07%
Money Market Fund.................... 254,854,113 0.45%(3) 0.36%
0.40%(4)
0.35%(5)
Tax-Free Money Market Fund (1)....... N/A 0.45%(3) N/A
0.40%(4)
0.35%(5)
U.S. Real Estate Fund................ 14,131,988 1.00% 0.70%
Worldwide High Income Fund........... 144,780,814 0.75% 0.61%
</TABLE>
- --------------------------
(1) Portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets
(3) As a percentage of first $250 million
(4) As a percentage of next $250 million
(5) As a percentage of excess over $500 million
22
<PAGE>
MORGAN STANLEY UNIVERSAL FUNDS, INC.
<TABLE>
<CAPTION>
CONTRACTUAL NET ADVISORY FEES
RATE OF AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS OR
PORTFOLIO 12/31/96 FEES(2) FEE WAIVERS
- --------------------------------------- ------------ --------------- -----------------
<S> <C> <C> <C>
Asian Equity Portfolio (1)............. N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Emerging Market Debt Portfolio (1)..... N/A 0.75%(3) N/A
0.70%(4)
0.65%(5)
Emerging Markets Equity Portfolio...... 11,786,569 1.25%(3) 0.31%
1.20%(4)
1.15%(5)
Global Equity Portfolio (1)............ N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Growth Portfolio (1)................... N/A 0.55%(3) N/A
0.50%(4)
0.45%(5)
International Magnum Portfolio (1)..... N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Money Market Portfolio (1)............. N/A 0.30%(3) N/A
0.25%(4)
0.20%(5)
U.S. Real Estate Portfolio............. N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
</TABLE>
- --------------------------
(1) Portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets
(3) As a percentage of first $500 million
(4) As a percentage of next $500 million
(5) As a percentage of excess over $1 billion
23
<PAGE>
U.S. REGISTERED CLOSED-END FUNDS*
<TABLE>
<CAPTION>
CONTRACTUAL
RATE OF
ASSETS AS OF ADVISORY
COMPANY 12/31/96 FEES(1)
- ------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Morgan Stanley Africa Investment Fund, Inc............. $ 260,522,375 1.20%
Morgan Stanley Asia-Pacific Fund, Inc.................. 856,422,087 1.00%
Morgan Stanley Emerging Markets Fund, Inc.............. 358,394,428 1.25%
Morgan Stanley Emerging Markets Debt Fund, Inc......... 372,677,758 1.00%
Morgan Stanley Global Opportunity Fund, Inc............ 61,590,818 1.00%
Morgan Stanley India Investment Fund, Inc.............. 314,423,032 1.10%
Morgan Stanley Russia & New Europe Fund, Inc........... 103,944,599 1.60%
The Brazilian Investment Fund, Inc..................... 48,856,226 0.90%(2)
0.70%(3)
0.50%(4)
The Latin America Discovery Fund, Inc.................. 171,586,180 1.15%
The Malaysia Fund, Inc................................. 187,762,289 0.90%(2)
0.70%(3)
0.50%(4)
The Morgan Stanley High Yield Fund, Inc................ 126,330,034 0.70%
The Pakistan Investment Fund, Inc...................... 55,399,039 1.00%
The Thai Fund, Inc..................................... 204,208,935 0.90%(2)
0.70%(3)
0.50%(4)
The Turkish Investment Fund, Inc....................... 36,937,008 0.95%(2)
0.75%(3)
0.55%(5)
</TABLE>
- --------------------------
(1) As a percentage of average weekly net assets
(2) As a percentage of first $50 million
(3) As a percentage of next $50 million
(4) As a percentage of excess over $100 million
* No voluntary fee waivers are in effect with regard to any U.S. Registered
Closed-End Fund
24
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS, MAY 1, 1997
The undersigned Shareholder(s) of the Morgan Stanley [NAME OF PORTFOLIO]
Portfolio (the "Portfolio") of Morgan Stanley Institutional Fund, Inc. (the
"Fund") hereby appoint(s) Warren J. Olsen, Harold J. Schaaff, Jr., Michael F.
Klein and Valerie Y. Lewis and each of them (with full power of substitution),
the proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders of the Fund to be held on May 1, 1997, and any adjournments
thereof, to vote all of the shares of the Portfolio that the signer would be
entitled to vote if personally present at the Special Meeting of Shareholders on
the following Proposal and on any other matters brought before the Meeting, all
as set forth in the Notice of Special Meeting of Shareholders and Proxy
Statement of the Board of Directors. Said proxies are directed to vote or
refrain from voting pursuant to the Proxy Statement as checked below upon the
following matters:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE FUND
AND WILL BE VOTED "FOR" THE PROPOSAL UNLESS OTHERWISE INDICATED.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
Proposal: Approval of the investment advisory agreement by and between
Morgan Stanley Institutional Fund, Inc. and Morgan Stanley Asset
Management Inc.
/ / FOR / / AGAINST / / ABSTAIN
In accordance with their own discretion, the proxies are authorized to vote
on such other business as may properly come before the Special Meeting.
<PAGE>
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS FOR THE PROPOSAL.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT WITH THIS PROXY OF A COPY OF THE NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT OF THE BOARD OF
DIRECTORS. YOUR PROXY CARD MUST BE SIGNED BELOW FOR YOUR VOTE TO BE COUNTED.
Please date, sign and return promptly.
Dated: ________________________, 1997
YOUR SIGNATURE(S) ON THIS PROXY
SHOULD BE EXACTLY AS YOUR NAME OR
NAMES APPEAR ON THIS PROXY. IF THE
SHARES ARE HELD JOINTLY, EACH HOLDER
SHOULD SIGN. IF SIGNING IS BY
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE PRINT
YOUR FULL TITLE BELOW YOUR SIGNATURE.
_____________________________________
Signature
_____________________________________
Signature
