<PAGE>
SUPPLEMENT DATED OCTOBER 12, 1999
TO PROSPECTUS DATED MAY 1, 1999
OF
EMERGING MARKETS PORTFOLIO
EMERGING MARKETS DEBT PORTFOLIO
LATIN AMERICAN PORTFOLIO
PORTFOLIOS OF
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS
02208-2798
------------------------
Effective October 1, 1999, the management fee payable by the Emerging Markets
Debt Portfolio is reduced from 1.00% to 0.75%. In addition, the Prospectus is
hereby amended and supplemented to reflect changes in the portfolio management
of the Emerging Markets Debt Portfolio. Thomas L. Bennett no longer shares
primary responsibility for managing the assets of the Emerging Markets Debt
Portfolio. Accordingly, the Prospectus is hereby amended and supplemented as
follows:
The table under "Fees and Expenses of the Portfolios" on page 6 is deleted and
replaced with the following:
1998 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
EMERGING MARKETS
EMERGING MARKETS DEBT LATIN AMERICAN
PORTFOLIO PORTFOLIO(+) PORTFOLIO
MANAGEMENT FEES
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
CLASS A 1.25% 0.75% 1.10%
- -----------------------------------------------------------------------------------------
CLASS B 1.25% 0.75% 1.10%
12B-1 FEE
- -----------------------------------------------------------------------------------------
CLASS A NONE NONE NONE
- -----------------------------------------------------------------------------------------
CLASS B 0.25% 0.25% 0.25%
OTHER EXPENSES
- -----------------------------------------------------------------------------------------
CLASS A 0.56% 1.38% 0.71%
- -----------------------------------------------------------------------------------------
CLASS B 0.56% 1.38% 0.71%
TOTAL ANNUAL FUND OPERATING EXPENSES
- -----------------------------------------------------------------------------------------
CLASS A 1.81% 2.13% 1.81%
- -----------------------------------------------------------------------------------------
CLASS B 2.06% 2.38% 2.06%
</TABLE>
(+)TOTAL ANNUAL FUND OPERATING EXPENSES FOR THE EMERGING MARKETS DEBT PORTFOLIO
HAVE BEEN RESTATED TO REFLECT A REDUCTION IN MANAGEMENT FEES FROM 1.00% TO
0.75%.
*THE MANAGEMENT FEES FOR THE PORTFOLIOS SHOWN IN THE TABLE ABOVE ARE THE HIGHEST
THAT COULD BE CHARGED. THIS TABLE DOES NOT SHOW THE EFFECTS OF MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. MSDW
INVESTMENT MANAGEMENT HAS VOLUNTARILY AGREED TO WAIVE A PORTION OF ITS FEES
AND/OR REIMBURSE EXPENSES IF ANNUAL OPERATING EXPENSES, EXCLUDING CERTAIN
INVESTMENT RELATED EXPENSES DESCRIBED BELOW, EXCEED 1.75% FOR THE CLASS A
SHARES AND 2.00% FOR THE CLASS B SHARES OF THE EMERGING MARKETS AND EMERGING
MARKETS DEBT PORTFOLIOS AND 1.70% FOR THE CLASS A SHARES AND 1.95% FOR THE
CLASS B SHARES OF THE LATIN AMERICAN PORTFOLIO.
IN DETERMINING THE ACTUAL AMOUNT OF VOLUNTARY MANAGEMENT FEE WAIVER AND/OR
EXPENSE REIMBURSEMENT FOR THE PORTFOLIOS, IF ANY, CERTAIN INVESTMENT RELATED
EXPENSES, SUCH AS FOREIGN COUNTRY TAX EXPENSE AND INTEREST EXPENSE ON
BORROWINGS ARE EXCLUDED FROM ANNUAL OPERATING EXPENSES. IF THESE EXPENSES WERE
INCURRED, THE PORTFOLIOS' TOTAL OPERATING EXPENSES AFTER VOLUNTARY FEE WAIVERS
AND/OR REIMBURSEMENTS WOULD EXCEED THE EXPENSE RATIOS SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1998, THE TOTAL OPERATING EXPENSES FOR THE
PORTFOLIOS, EXCLUDING CERTAIN INVESTMENT RELATED EXPENSES, DID NOT EXCEED THE
AMOUNTS SHOWN IN THE ABOVE PARAGRAPH, AND, ACCORDINGLY, THERE WERE NO FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS FOR 1998.
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS ARE VOLUNTARY AND MSDW INVESTMENT
MANAGEMENT RESERVES THE RIGHT TO TERMINATE ANY WAIVER AND/ OR REIMBURSEMENT AT
ANY TIME AND WITHOUT NOTICE.
------------------------------
<PAGE>
The table under "EXAMPLE" on page 7 is deleted and replaced with the following:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EMERGING MARKETS PORTFOLIO
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
CLASS A $184 $569 $980 $2,127
- ----------------------------------------------------------------------
CLASS B $209 $646 $1,108 $2,390
EMERGING MARKETS DEBT PORTFOLIO(+)
- ----------------------------------------------------------------------
CLASS A $216 $667 $1,144 $2,462
- ----------------------------------------------------------------------
CLASS B $241 $742 $1,270 $2,716
LATIN AMERICAN PORTFOLIO
- ----------------------------------------------------------------------
CLASS A $184 $569 $980 $2,127
- ----------------------------------------------------------------------
CLASS B $204 $630 $1,083 $2,338
</TABLE>
(+)THE COST OF INVESTING IN THE EMERGING MARKETS DEBT PORTFOLIO HAS BEEN
RESTATED TO REFLECT A REDUCTION IN MANAGEMENT FEES FROM 1.00% TO 0.75%.
The table under "Management Fees" on page 7 is deleted and replaced with the
following:
<TABLE>
<CAPTION>
EMERGING EMERGING LATIN
MARKETS MARKETS DEBT AMERICAN
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
---------------------------------------------------------
MANAGEMENT FEE PAID IN
FISCAL YEAR ENDED
DECEMBER 31, 1998 1.25% 1.25% 1.00%(+) 1.00%(+) 1.10% 1.10%
(NET OF WAIVERS AND AS A
PERCENTAGE OF AVERAGE
NET ASSETS)
</TABLE>
(+)THE MANAGEMENT FEES PAYABLE BY THE EMERGING MARKETS DEBT PORTFOLIO HAVE BEEN
REDUCED FROM 1.00% TO 0.75% EFFECTIVE OCTOBER 1, 1999.
------------------------------
The paragraph "EMERGING MARKETS DEBT PORTFOLIO" on page 8 is hereby deleted and
replaced with the following:
EMERGING MARKETS DEBT PORTFOLIO
STEPHEN F. ESSER AND ABIGAIL L. MCKENNA
Stephen F. Esser, a Managing Director of Morgan Stanley, joined MSDW Investment
Management in 1996 and has been a Portfolio Manager with MSDW Investment
Management's affiliated institutional investment management company, Miller
Anderson & Sherrerd, LLP since 1988. Mr. Esser is a member of the New York
Society of Security Analysts and holds a B.S. degree (SUMMA CUM LAUDE AND PHI
BETA KAPPA) from the University of Delaware. Abigail L. McKenna is a Principal
of MSDW Investment Management and Morgan Stanley. Ms. McKenna focuses primarily
on the trading and management of the emerging markets debt portfolios. Prior to
joining MSDW Investment Management, she was a Senior Portfolio Manager at MIMCO
from 1995 to 1996 and a Limited Partner at Weiss Peck & Greer from 1991 to 1995,
where she was responsible for the trading and management of Corporate Bond
Portfolios. Ms. McKenna holds a B.A. in International Relations from Georgetown
University and is a Chartered Financial Analyst. Mr. Esser and Ms. McKenna have
shared primary responsibility for managing the Portfolio's assets since October
1998.
------------------------
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 1999 AS SUPPLEMENTED THROUGH OCTOBER 12, 1999
- -------------------------------------------------------------------------------
PORTFOLIOS OF [LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
EQUITY GROWTH PORTFOLIO
THE EQUITY GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF MEDIUM AND LARGE
CAPITALIZATION COMPANIES.
FOCUS EQUITY PORTFOLIO
THE FOCUS EQUITY PORTFOLIO SEEKS CAPITAL APPRECIATION BY INVESTING PRIMARILY IN
EQUITY SECURITIES.
SMALL COMPANY GROWTH PORTFOLIO
THE SMALL COMPANY GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF SMALL COMPANIES.
VALUE EQUITY PORTFOLIO
THE VALUE EQUITY PORTFOLIO SEEKS HIGH TOTAL RETURN BY INVESTING PRIMARILY IN
EQUITY SECURITIES WHICH THE INVESTMENT ADVISER BELIEVES TO BE UNDERVALUED
RELATIVE TO THE STOCK MARKET IN GENERAL AT THE TIME OF PURCHASE.
TECHNOLOGY PORTFOLIO
THE TECHNOLOGY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF COMPANIES THAT THE INVESTMENT ADVISER EXPECTS
TO BENEFIT FROM THEIR INVOLVEMENT IN TECHNOLOGY AND TECHNOLOGY-RELATED
INDUSTRIES.
INVESTMENT ADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
DISTRIBUTOR
MORGAN STANLEY & CO. INCORPORATED
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC. (THE "FUND") IS A NO-LOAD
MUTUAL FUND THAT IS DESIGNED TO MEET THE INVESTMENT NEEDS OF DISCERNING
INVESTORS WHO PLACE A PREMIUM ON QUALITY AND PERSONAL SERVICE. THE FUND MAKES
AVAILABLE TO INSTITUTIONAL INVESTORS A SERIES OF PORTFOLIOS WHICH BENEFIT FROM
THE INVESTMENT EXPERTISE AND COMMITMENT TO EXCELLENCE ASSOCIATED WITH MORGAN
STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC. ("MSDW INVESTMENT MANAGEMENT")
AND ITS AFFILIATES. THIS PROSPECTUS OFFERS CLASS A AND CLASS B SHARES OF THE
PORTFOLIOS LISTED ABOVE (EACH A "PORTFOLIO" AND COLLECTIVELY THE "PORTFOLIOS").
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
EQUITY GROWTH PORTFOLIO 1
FOCUS EQUITY PORTFOLIO 2
SMALL COMPANY GROWTH PORTFOLIO 3
VALUE EQUITY PORTFOLIO 4
TECHNOLOGY PORTFOLIO 5
ADDITIONAL RISK FACTORS AND INFORMATION 6
FEES AND EXPENSES OF THE PORTFOLIOS 8
INVESTMENT ADVISER 9
MANAGEMENT FEES 9
PORTFOLIO MANAGERS 10
DISTRIBUTION OF PORTFOLIO SHARES 11
SHAREHOLDER INFORMATION 11
FINANCIAL HIGHLIGHTS 14
EQUITY GROWTH PORTFOLIO 15
FOCUS EQUITY PORTFOLIO 16
SMALL COMPANY GROWTH PORTFOLIO 17
VALUE EQUITY PORTFOLIO 18
TECHNOLOGY PORTFOLIO 19
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
EQUITY GROWTH PORTFOLIO
- -------------------------------------------------------------------------------
THE EQUITY GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF MEDIUM AND LARGE
CAPITALIZATION COMPANIES.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maximize long-term capital appreciation by
investing primarily in the equity securities of U.S. and, to a limited extent,
foreign companies that exhibit strong or accelerating earnings growth. The
universe of eligible companies generally includes those with market
capitalizations of $1 billion or more. MSDW Investment Management emphasizes
individual security selection and may focus the Portfolio's holdings within the
limits permissible for a diversified fund.
PROCESS
MSDW Investment Management follows a flexible investment program in looking for
companies with above average capital appreciation potential. MSDW Investment
Management focuses on companies with consistent or rising earnings growth
records and compelling business strategies. MSDW Investment Management
continually and rigorously studies company developments, including business
strategy, management focus and financial results, to identify companies with
earnings growth and business momentum. In addition, MSDW Investment Management
closely monitors analysts' expectations to identify issuers that have the
potential for positive earnings surprises versus consensus expectations.
Valuation is of secondary importance and is viewed in the context of prospects
for sustainable earnings growth and the potential for positive earnings
surprises in relation to consensus expectations. The Portfolio considers selling
securities of issuers that no longer meet MSDW Investment Management's criteria.
RISK
Investing in the Equity Growth Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in equity securities
in the hope of earning superior returns. In general, prices of equity securities
are more volatile than those of fixed income securities. The prices of equity
securities will rise and fall in response to a number of different factors. In
particular, prices of equity securities will respond to events that affect
entire financial markets or industries (changes in inflation or consumer demand,
for example) and to events that affect particular issuers (news about the
success or failure of a new product, for example). In addition, at times the
Portfolio's market sector, mid- to large-capitalization growth-oriented equity
securities, may underperform relative to other sectors.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C> <C>
COMMENCED OPERATIONS ON APRIL 2, 1991
1992 7.13%
1993 4.33%
1994 3.26%
1995 45.02%
1996 30.97%
1997 31.32%
1998 19.04%
HIGH (QUARTER)
10/98 - 12/98
22.67%
LOW (QUARTER)
7/98 - 9/98
- -16.09%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED
OPERATIONS ON OPERATIONS ON S&P 500 INDEX*
APRIL 2, 1991) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
PAST ONE YEAR 19.04% 18.71% 28.57% 28.57%
- --------------------------------------------------------------------------------------
PAST FIVE YEARS 25.12% N/A 24.06% N/A
- --------------------------------------------------------------------------------------
SINCE INCEPTION 19.09% 26.47% 19.13% 27.95%
</TABLE>
THE BAR CHART AND TABLE ABOVE SHOW THE PERFORMANCE OF THE PORTFOLIO YEAR-BY-YEAR
AND AS AN AVERAGE OVER DIFFERENT PERIODS OF TIME. TOGETHER, THE BAR CHART AND
TABLE DEMONSTRATE THE VARIABILITY OF PERFORMANCE OVER TIME AND PROVIDE AN
INDICATION OF THE RISKS OF INVESTING IN THE PORTFOLIO. IN ADDITION, THE TABLE
COMPARES THE PERFORMANCE OF THE PORTFOLIO TO AN INDEX OF SIMILAR SECURITIES. AN
INDEX IS A HYPOTHETICAL MEASURE OF PERFORMANCE BASED ON THE UPS AND DOWNS OF
SECURITIES THAT MAKE UP A PARTICULAR MARKET. THE INDEX DOES NOT SHOW ACTUAL
INVESTMENT RETURNS OR REFLECT PAYMENT OF MANAGEMENT OR BROKERAGE FEES, WHICH
WOULD LOWER THE INDEX'S PERFORMANCE. THE TABLE SEPARATELY COMPARES CLASS A AND
CLASS B SHARES TO THE INDEX SO THAT YOU CAN COMPARE PERFORMANCE FOR EACH CLASS
FROM ITS COMMENCEMENT DATE. THE INDEX ITSELF DOES NOT ACTUALLY HAVE TWO CLASSES.
HOW THE PORTFOLIO HAS PERFORMED IN THE PAST DOES NOT NECESSARILY INDICATE HOW
THE PORTFOLIO WILL PERFORM IN THE FUTURE.
*THE S&P 500 IS A STOCK INDEX COMPRISED OF 500 LARGE-CAP U.S. COMPANIES WITH
MARKET CAPITALIZATION OF $1 BILLION OR MORE. THESE 500 COMPANIES ARE A
REPRESENTATIVE SAMPLE OF SOME 100 INDUSTRIES, CHOSEN MAINLY FOR MARKET SIZE,
LIQUIDITY AND INDUSTRY GROUP REPRESENTATION.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
FOCUS EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
THE FOCUS EQUITY PORTFOLIO SEEKS CAPITAL APPRECIATION BY INVESTING PRIMARILY IN
EQUITY SECURITIES.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maximize capital appreciation by investing
in equity securities of U.S., and to a limited extent, foreign companies that
exhibit strong or accelerating earnings growth. The universe of eligible
companies mainly includes those with market capitalizations of $1 billion or
more but may also include smaller companies. MSDW Investment Management
emphasizes individual security selection. The Portfolio generally concentrates
its holdings in a relatively small number of companies and may invest up to 25%
of its assets in a single issuer.
PROCESS
MSDW Investment Management follows a flexible investment program in looking for
companies with above average capital appreciation potential. Fundamental equity
research drives the process. MSDW Investment Management focuses on companies
with consistent or rising earnings growth records and compelling business
strategies. MSDW Investment Management continually and rigorously studies
company developments, including business strategy, management focus and
financial results, to identify companies with earnings growth and business
momentum. In addition, MSDW Investment Management closely monitors analysts'
expectations to identify issuers that have the potential for positive earnings
surprises versus consensus expectations. Valuation is of secondary importance
and is viewed in the context of prospects for sustainable earnings growth and
the potential for positive earnings surprises in relation to consensus
expectations. The Portfolio considers selling securities of issuers that no
longer meet MSDW Investment Management's criteria. MSDW Investment Management's
focus on individual security selection may lead to an emphasis on particular
industry sectors.
RISK
Investing in the Focus Equity Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in a non-diversified
portfolio of equity securities in the hope of earning superior returns. In
general, prices of equity securities are more volatile than those of fixed
income securities. The prices of equity securities will rise and fall in
response to a number of different factors. In particular, equity securities will
respond to events that affect entire financial markets or industries (changes in
inflation or consumer demand, for example) and to events that affect particular
issuers (news about the success or failure of a new product, for example). In
addition, at times the Portfolio's market sector, mid- to large-capitalization
growth-oriented equity securities, may underperform relative to other sectors.
THE RISKS OF INVESTING IN THE PORTFOLIO MAY BE INTENSIFIED BECAUSE THE PORTFOLIO
IS NON-DIVERSIFIED, WHICH MEANS THAT IT MAY INVEST IN SECURITIES OF A LIMITED
NUMBER OF ISSUERS. AS A RESULT, THE PERFORMANCE OF A PARTICULAR INVESTMENT OR A
SMALL GROUP OF INVESTMENTS MAY AFFECT THE PORTFOLIO'S PERFORMANCE MORE THAN IF
THE PORTFOLIO WERE DIVERSIFIED. IN ADDITION, THE PORTFOLIO MAY SELL SHORT. IN A
SHORT SALE TRANSACTION, THE PORTFOLIO SELLS A BORROWED SECURITY IN ANTICIPATION
OF A DECLINE IN THE MARKET VALUE OF THAT SECURITY, HOPING TO PROFIT FROM THE
DIFFERENCE BETWEEN THE AMOUNT RECEIVED FROM THE SALE AND THE COST OF REPLACING
THE BORROWED SECURITY. IF MSDW INVESTMENT MANAGEMENT INCORRECTLY PREDICTS THAT
THE PRICE OF THE BORROWED SECURITY WILL DECLINE, THE PORTFOLIO MAY LOSE MONEY
BECAUSE THE AMOUNT NECESSARY TO REPLACE THE BORROWED SECURITY WILL BE GREATER
THAN THE AMOUNT RECEIVED FROM THE SALE.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON MARCH 8, 1995
1996 40.90%
1997 33.31%
1998 15.35%
HIGH (QUARTER)
10/98 - 12/98
26.17%
LOW (QUARTER)
7/98 - 9/98
- -19.22%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED
OPERATIONS ON OPERATIONS ON S&P 500 INDEX*
MARCH 8, 1995) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PAST ONE YEAR 15.35% 15.15% 28.57% 28.57%
- -----------------------------------------------------------------------------------------------
SINCE INCEPTION 34.03% 28.86% 30.29% 27.95%
</TABLE>
THE BAR CHART AND TABLE ABOVE SHOW THE PERFORMANCE OF THE PORTFOLIO YEAR-BY-YEAR
AND AS AN AVERAGE OVER DIFFERENT PERIODS OF TIME. TOGETHER, THE BAR CHART AND
TABLE DEMONSTRATE THE VARIABILITY OF PERFORMANCE OVER TIME AND PROVIDE AN
INDICATION OF THE RISKS OF INVESTING IN THE PORTFOLIO. IN ADDITION, THE TABLE
COMPARES THE PERFORMANCE OF THE PORTFOLIO TO AN INDEX OF SIMILAR SECURITIES. AN
INDEX IS A HYPOTHETICAL MEASURE OF PERFORMANCE BASED ON THE UPS AND DOWNS OF
SECURITIES THAT MAKE UP A PARTICULAR MARKET. THE INDEX DOES NOT SHOW ACTUAL
INVESTMENT RETURNS OR REFLECT PAYMENT OF MANAGEMENT OR BROKERAGE FEES, WHICH
WOULD LOWER THE INDEX'S PERFORMANCE. THE TABLE SEPARATELY COMPARES CLASS A AND
CLASS B SHARES TO THE INDEX SO THAT YOU CAN COMPARE PERFORMANCE FOR EACH CLASS
FROM ITS COMMENCEMENT DATE. THE INDEX ITSELF DOES NOT ACTUALLY HAVE TWO CLASSES.
HOW THE PORTFOLIO HAS PERFORMED IN THE PAST DOES NOT NECESSARILY INDICATE HOW
THE PORTFOLIO WILL PERFORM IN THE FUTURE.
*THE S&P 500 IS A STOCK INDEX COMPRISED OF 500 LARGE-CAP U.S. COMPANIES WITH
MARKET CAPITALIZATION OF $1 BILLION OR MORE. THESE 500 COMPANIES ARE A
REPRESENTATIVE SAMPLE OF SOME 100 INDUSTRIES, CHOSEN MAINLY FOR MARKET SIZE,
LIQUIDITY AND INDUSTRY GROUP REPRESENTATION.
2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO
- -------------------------------------------------------------------------------
THE SMALL COMPANY GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF SMALL COMPANIES.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of small U.S. and, to a limited
extent, foreign companies. The Portfolio generally will invest in companies with
market capitalizations of less than $2 billion.
PROCESS
MSDW Investment Management invests in companies that it believes are
underfollowed by market analysts and that exhibit some or all of the following
characteristics: (i) superior growth prospects, (ii) accelerating returns on
invested capital, (iii) sustainable competitive advantages, and (iv) experienced
and incentivized management teams. The process for investing is research
intensive and MSDW Investment Management focuses primarily on bottom-up
fundamental analysis, rather than employing a top-down approach. The majority of
the research is generated internally by portfolio managers and their analysts.
MSDW Investment Management closely tracks companies' earnings quality through
detailed financial modeling to ensure that reported results accurately reflect
the underlying economics and trends in the business. In addition, MSDW
Investment Management utilizes an extensive network of industry contacts and
access to management teams to monitor changes in the competitive position of the
companies in the Portfolio.
RISK
Investing in the Small Company Growth Portfolio may be appropriate for you if
you are willing to accept the risks and uncertainties of investing in the equity
securities of growth-oriented small companies in the hope of earning superior
returns. In general, prices of equity securities are more volatile than those of
fixed income securities. The prices of equity securities will rise and fall in
response to a number of different factors. In particular, equity securities will
respond to events that affect entire financial markets or industries (changes in
inflation or consumer demand, for example) and to events that affect particular
issuers (news about the success or failure of a new product, for example).
THE RISK OF INVESTING IN EQUITY SECURITIES IS INTENSIFIED IN THE CASE OF THE
SMALL COMPANIES IN WHICH THE PORTFOLIO WILL INVEST. MARKET PRICES FOR SUCH
COMPANIES' EQUITY SECURITIES TEND TO BE MORE VOLATILE THAN THOSE OF LARGER, MORE
ESTABLISHED COMPANIES. SUCH COMPANIES MAY THEMSELVES BE MORE VULNERABLE TO
ECONOMIC OR COMPANY SPECIFIC PROBLEMS. BECAUSE OF HIGH VALUATIONS PLACED ON
COMPANIES WITH GROWTH PROSPECTS WITHIN CERTAIN SECTORS, SUCH AS TECHNOLOGY,
BIOTECHNOLOGY AND INTERNET, THE PORTFOLIO MAY OWN SECURITIES OF COMPANIES THAT
HAVE SIGNIFICANT MARKET CAPITALIZATIONS DESPITE A GENERAL LACK OF OPERATING
HISTORY AND/OR POSITIVE EARNINGS. IN ADDITION, AT TIMES THE PORTFOLIO'S MARKET
SECTOR, GROWTH-ORIENTED EQUITY SECURITIES OF SMALL COMPANIES, MAY UNDERPERFORM
RELATIVE TO OTHER SECTORS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C> <C>
COMMENCED OPERATIONS ON NOVEMBER 1, 1989
1990 3.78%
1991 66.79%
1992 -11.03%
1993 0.00%
1994 -0.62%
1995 33.31%
1996 3.72%
1997 11.36%
1998 27.54%
HIGH (QUARTER)
1/91 - 3/91
27.36%
LOW (QUARTER)
7/90 - 9/90
- -22.43%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
CLASS A CLASS B NASDAQ COMPOSITE INDEX**
(COMMENCED (COMMENCED RUSSELL 2000 INDEX*
OPERATIONS ON OPERATIONS ON
NOVEMBER 1, 1989) JANUARY 2, 1996) CLASS A CLASS B CLASS A CLASS B
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PAST ONE YEAR 27.54% 26.86% -2.55% -2.55% 39.63% 39.63%
- ----------------------------------------------------------------------------------------------------------------
PAST FIVE YEARS 14.31% N/A 11.87% N/A 23.06% N/A
- ----------------------------------------------------------------------------------------------------------------
SINCE INCEPTION 13.49% 13.46% 12.42% 11.51% 18.70% 27.53%
</TABLE>
THE BAR CHART AND TABLE ABOVE SHOW THE PERFORMANCE OF THE PORTFOLIO YEAR-BY-YEAR
AND AS AN AVERAGE OVER DIFFERENT PERIODS OF TIME. TOGETHER, THE BAR CHART AND
TABLE DEMONSTRATE THE VARIABILITY OF PERFORMANCE OVER TIME AND PROVIDE AN
INDICATION OF THE RISKS OF INVESTING IN THE PORTFOLIO. IN ADDITION, THE TABLE
COMPARES THE PERFORMANCE OF THE PORTFOLIO TO AN INDEX OF SIMILAR SECURITIES. AN
INDEX IS A HYPOTHETICAL MEASURE OF PERFORMANCE BASED ON THE UPS AND DOWNS OF
SECURITIES THAT MAKE UP A PARTICULAR MARKET. THE INDEX DOES NOT SHOW ACTUAL
INVESTMENT RETURNS OR REFLECT PAYMENT OF MANAGEMENT OR BROKERAGE FEES, WHICH
WOULD LOWER THE INDEX'S PERFORMANCE. THE TABLE SEPARATELY COMPARES CLASS A AND
CLASS B SHARES TO THE INDEX SO THAT YOU CAN COMPARE PERFORMANCE FOR EACH CLASS
FROM ITS COMMENCEMENT DATE. THE INDEX ITSELF DOES NOT ACTUALLY HAVE TWO CLASSES.
HOW THE PORTFOLIO HAS PERFORMED IN THE PAST DOES NOT NECESSARILY INDICATE HOW
THE PORTFOLIO WILL PERFORM IN THE FUTURE.
*RUSSELL 2000 INDEX IS AN UNMANAGED INDEX COMPRISED OF 2000 OF THE SMALLEST
COMPANIES IN THE RUSSELL 3000 INDEX AND REPRESENTS APPROXIMATELY 11% OF THE
APPROXIMATELY 98% OF THE INVESTIBLE U.S. EQUITY MARKET.
**THE NASDAQ COMPOSITE INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS.
3
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
VALUE EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO SEEKS HIGH TOTAL RETURN BY INVESTING PRIMARILY IN
EQUITY SECURITIES WHICH MSDW INVESTMENT MANAGEMENT BELIEVES TO BE UNDERVALUED
RELATIVE TO THE STOCK MARKET IN GENERAL AT THE TIME OF PURCHASE.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to construct a diversified portfolio of equity
securities of U.S. and, to a limited extent, foreign issuers that will
outperform the market over the long term. MSDW Investment Management emphasizes
a bottom-up approach to investing that seeks to identify securities of
undervalued issuers.
PROCESS
MSDW Investment Management selects securities from a universe comprised of the
500 largest companies in the U.S. market. The selection process focuses on
companies with distinctively below average price-to-earnings and price-to-book
value ratios and high dividend yields. MSDW Investment Management conducts
additional fundamental analysis to ascertain financial soundness. The Portfolio
then purchases securities of companies that research indicates sell below their
estimated value. The Portfolio will typically sell securities when prices revert
to MSDW Investment Management's estimated value.
RISK
Investing in the Value Equity Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in equity securities
of U.S. issuers in the hope of earning superior returns. In general, prices of
equity securities are more volatile than those of fixed income securities. The
prices of equity securities will rise and fall in response to a number of
different factors. In particular, prices of equity securities will respond to
events which affect entire financial markets or industries (changes in inflation
or consumer demand, for example) and to events that affect particular issuers
(news about the success or failure of a new product, for example). In addition,
at times the Portfolio's market sector, undervalued equity securities of
large-capitalization companies, may underperform relative to other sectors.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C> <C>
COMMENCED OPERATIONS ON JANUARY 31, 1990
1991 23.60%
1992 10.17%
1993 15.14%
1994 -1.29%
1995 33.69%
1996 19.73%
1997 29.20%
1998 8.79%
HIGH (QUARTER)
10/98 - 12/98
18.45%
LOW (QUARTER)
7/98 - 9/98
- -17.09%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED
OPERATIONS ON OPERATIONS ON S&P 500 INDEX*
JANUARY 31, 1990) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
PAST ONE YEAR 8.79% 8.59% 28.57% 28.57%
- --------------------------------------------------------------------------------------------------
PAST FIVE YEARS 17.30% N/A 24.06% N/A
- --------------------------------------------------------------------------------------------------
SINCE INCEPTION 14.19% 18.35% 19.01% 27.95%
</TABLE>
THE BAR CHART AND TABLE ABOVE SHOW THE PERFORMANCE OF THE PORTFOLIO YEAR-BY-YEAR
AND AS AN AVERAGE OVER DIFFERENT PERIODS OF TIME. TOGETHER, THE BAR CHART AND
TABLE DEMONSTRATE THE VARIABILITY OF PERFORMANCE OVER TIME AND PROVIDE AN
INDICATION OF THE RISKS OF INVESTING IN THE PORTFOLIO. IN ADDITION, THE TABLE
COMPARES THE PERFORMANCE OF THE PORTFOLIO TO AN INDEX OF SIMILAR SECURITIES. AN
INDEX IS A HYPOTHETICAL MEASURE OF PERFORMANCE BASED ON THE UPS AND DOWNS OF
SECURITIES THAT MAKE UP A PARTICULAR MARKET. THE INDEX DOES NOT SHOW ACTUAL
INVESTMENT RETURNS OR REFLECT PAYMENT OF MANAGEMENT OR BROKERAGE FEES, WHICH
WOULD LOWER THE INDEX'S PERFORMANCE. THE TABLE SEPARATELY COMPARES CLASS A AND
CLASS B SHARES TO THE INDEX SO THAT YOU CAN COMPARE PERFORMANCE FOR EACH CLASS
FROM ITS COMMENCEMENT DATE. THE INDEX ITSELF DOES NOT ACTUALLY HAVE TWO CLASSES.
HOW THE PORTFOLIO HAS PERFORMED IN THE PAST DOES NOT NECESSARILY INDICATE HOW
THE PORTFOLIO WILL PERFORM IN THE FUTURE.
*THE S&P 500 IS A STOCK INDEX COMPRISED OF 500 LARGE-CAP U.S. COMPANIES WITH
MARKET CAPITALIZATION OF $1 BILLION OR MORE. THESE 500 COMPANIES ARE A
REPRESENTATIVE SAMPLE OF SOME 100 INDUSTRIES, CHOSEN MAINLY FOR MARKET SIZE,
LIQUIDITY AND INDUSTRY GROUP REPRESENTATION.
4
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
TECHNOLOGY PORTFOLIO
- -------------------------------------------------------------------------------
THE TECHNOLOGY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF COMPANIES THAT MSDW INVESTMENT MANAGEMENT
EXPECTS TO BENEFIT FROM THEIR INVOLVEMENT IN TECHNOLOGY AND TECHNOLOGY-RELATED
INDUSTRIES.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maximize long-term capital appreciation by
identifying significant long-term technology trends and by investing primarily
in companies MSDW Investment Management believes are positioned to benefit
materially from these trends.
PROCESS
MSDW Investment Management extensively researches technology trends in order to
identify industry sectors and issuers with strong prospects and leading market
share. The Portfolio invests in a broad range of technology-related industries,
including: computers; software and peripheral products; electronics;
communications equipment and services; entertainment; multimedia; and
information services. The Portfolio seeks to overweight investment in the best-
positioned sectors, while underweighting the sectors exposed to the greatest
risk in comparison to potential return. MSDW Investment Management looks to
invest in issuers with strong management teams, reasonable valuation relative to
growth prospects and whose competitors face sustainable barriers to market
entry. The Portfolio may participate in the global technology market by
investing up to 35% of its total assets in the equity or fixed income securities
of foreign issuers, including those located in emerging markets.
RISK
Investing in the Technology Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in equity securities
of companies in the technology sector in the hope of earning superior returns
and diversifying your investment portfolio. Because the Portfolio invests
primarily in technology-related issuers, there is an additional risk that
economic events may affect a substantial portion of the Portfolio's investments.
Historically, the price of securities in this sector have tended to be volatile.
In general, prices of equity securities are more volatile than those of fixed
income securities. The prices of equity securities will rise and fall in
response to a number of different factors. In particular, prices of equity
securities will respond to events which affect entire financial markets or
industries (changes in inflation or consumer demand, for example) and to events
that affect a particular issuer (news about the success or failure of a new
product, for example). In addition, at times the Portfolio's market sector,
equity securities of technology-related issuers, may underperform relative to
other sectors.
THE PORTFOLIO MAY INVEST IN THE EQUITY SECURITIES OF BOTH LARGE AND SMALL
COMPANIES. WHILE MSDW INVESTMENT MANAGEMENT BELIEVES THAT SMALLER COMPANIES MAY
PROVIDE GREATER GROWTH POTENTIAL THAN LARGER, MORE ESTABLISHED FIRMS, INVESTING
IN THE SECURITIES OF SMALLER COMPANIES ALSO INVOLVES GREATER RISK AND PRICE
VOLATILITY.
THE RISKS OF INVESTING IN THE PORTFOLIO MAY BE INTENSIFIED BECAUSE THE PORTFOLIO
IS NON-DIVERSIFIED, WHICH MEANS THAT IT MAY INVEST IN SECURITIES OF A LIMITED
NUMBER OF ISSUERS. AS A RESULT, THE PERFORMANCE OF A PARTICULAR INVESTMENT OR A
SMALL GROUP OF INVESTMENTS MAY AFFECT THE PORTFOLIO'S PERFORMANCE MORE THAN IF
THE PORTFOLIO WERE DIVERSIFIED. IN ADDITION, THE PORTFOLIO MAY SELL SHORT. IN A
SHORT SALE TRANSACTION, THE PORTFOLIO SELLS A BORROWED SECURITY IN ANTICIPATION
OF A DECLINE IN THE MARKET VALUE OF THAT SECURITY, HOPING TO PROFIT FROM THE
DIFFERENCE BETWEEN THE AMOUNT RECEIVED FROM THE SALE AND THE COST OF REPLACING
THE BORROWED SECURITY. IF MSDW INVESTMENT MANAGEMENT INCORRECTLY PREDICTS THAT
THE PRICE OF THE BORROWED SECURITY WILL DECLINE, THE PORTFOLIO MAY LOSE MONEY
BECAUSE THE AMOUNT NECESSARY TO REPLACE THE BORROWED SECURITY WILL BE GREATER
THAN THE AMOUNT RECEIVED FROM THE SALE.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON SEPTEMBER 16, 1996
1997 37.27%
1998 53.90%
HIGH (QUARTER)
10/98 - 12/98
44.76%
LOW (QUARTER)
7/98 - 9/98
- -12.37%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED
OPERATIONS ON OPERATIONS ON
SEPTEMBER 16, 1996) SEPTEMBER 16, 1996) S&P 500 INDEX*
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PAST ONE YEAR 53.90% 53.52% 28.57%
- -----------------------------------------------------------------------------------------------
SINCE INCEPTION 42.83% 42.51% 31.38%
</TABLE>
THE BAR CHART AND TABLE ABOVE SHOW THE PERFORMANCE OF THE PORTFOLIO YEAR-BY-YEAR
AND AS AN AVERAGE OVER DIFFERENT PERIODS OF TIME. TOGETHER, THE BAR CHART AND
TABLE DEMONSTRATE THE VARIABILITY OF PERFORMANCE OVER TIME AND PROVIDE AN
INDICATION OF THE RISKS OF INVESTING IN THE PORTFOLIO. IN ADDITION, THE TABLE
COMPARES THE PERFORMANCE OF THE PORTFOLIO TO AN INDEX OF SIMILAR SECURITIES. AN
INDEX IS A HYPOTHETICAL MEASURE OF PERFORMANCE BASED ON THE UPS AND DOWNS OF
SECURITIES THAT MAKE UP A PARTICULAR MARKET. THE INDEX DOES NOT SHOW ACTUAL
INVESTMENT RETURNS OR REFLECT PAYMENT OF MANAGEMENT OR BROKERAGE FEES, WHICH
WOULD LOWER THE INDEX'S PERFORMANCE. HOW THE PORTFOLIO HAS PERFORMED IN THE PAST
DOES NOT NECESSARILY INDICATE HOW THE PORTFOLIO WILL PERFORM IN THE FUTURE.
*THE S&P 500 IS A STOCK INDEX COMPRISED OF 500 LARGE-CAP U.S. COMPANIES WITH
MARKET CAPITALIZATION OF $1 BILLION OR MORE. THESE 500 COMPANIES ARE A
REPRESENTATIVE SAMPLE OF SOME 100 INDUSTRIES, CHOSEN MAINLY FOR MARKET SIZE,
LIQUIDITY AND INDUSTRY GROUP REPRESENTATION.
5
<PAGE>
- --------------------------
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATED TO THE
PORTFOLIOS. THE PORTFOLIOS' INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED
IN MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION, WHICH LEGALLY IS A
PART OF THIS PROSPECTUS. FOR DETAILS ABOUT HOW TO OBTAIN A COPY OF THE STATEMENT
OF ADDITIONAL INFORMATION AND OTHER REPORTS AND INFORMATION, SEE THE BACK COVER
OF THIS PROSPECTUS.
PRICE VOLATILITY
The value of your investment in a Portfolio is based on the market prices of the
securities the Portfolio holds. These prices change daily due to economic and
other events that affect markets generally, as well as those that affect
particular industries and companies. These price movements, sometimes called
volatility, may be greater or lesser depending on the types of securities the
Portfolio owns and the markets in which the securities trade. Over time, equity
securities have generally shown superior gains, although they tended to be more
volatile in the short term. Fixed income securities, regardless of credit
quality, also experience price volatility, especially in response to interest
rate changes. As a result of price volatility, there is a risk that you may lose
money by investing in a Portfolio.
FOREIGN INVESTING
To the extent that a Portfolio invests in foreign countries, there is the risk
that news and events unique to a country or region will affect those markets and
their issuers. These same events will not necessarily have an effect on the U.S.
economy or similar issuers located in the United States. In addition, a
Portfolio's investments in foreign countries generally will be denominated in
foreign currencies. As a result, changes in the value of a country's currency
compared to the U.S. dollar may affect the value of a Portfolio's investments.
These changes may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. These
risks may be intensified for the Technology Portfolio's investments in emerging
markets countries. MSDW Investment Management may invest in certain instruments,
such as derivatives, and may use certain techniques, such as hedging, to manage
these risks. However, MSDW Investment Management cannot guarantee that it will
be practical to hedge these risks in certain markets or under particular
conditions or that it will succeed in doing so.
DERIVATIVES
The Portfolios may use various instruments that derive their values from those
of specified securities, indices, currencies or other points of reference for
both hedging and non-hedging purposes. Derivatives include futures, options,
forward contracts, swaps, and structured notes. These derivatives, including
those used to manage risk, are themselves subject to risks of the different
markets in which they trade and, therefore, may not serve their intended
purposes.
The primary risks of derivatives are: (i) changes in the market value of
securities held by a Portfolio, and of derivatives relating to those securities,
may not be proportionate, (ii) there may not be a liquid market for a Portfolio
to sell a derivative, which could result in difficulty closing a position and
(iii) certain derivatives can magnify the extent of losses incurred due to
changes in the market value of the securities to which they relate. In addition,
some derivatives are subject to counterparty risk. To minimize this risk, a
Portfolio may enter into derivatives transactions only with counterparties that
meet certain requirements for credit quality and collateral. Also, a Portfolio
may invest in certain derivatives that require the Portfolio to segregate some
or all of its cash or liquid securities to cover its obligations under those
instruments. At certain levels, this can cause the Portfolio to lose flexibility
in managing its investments properly, responding to shareholder redemption
requests, or meeting other obligations. If the Portfolio is in that position, it
could be forced to sell other securities that it wanted to retain.
A Portfolio will limit its use of derivatives for non-hedging purposes to
33 1/3% of its total assets measured by the aggregate notional amount of
outstanding derivatives. While the use of derivatives may be advantageous to a
Portfolio, if MSDW Investment Management is not successful in
6
<PAGE>
employing them, the Portfolio's performance may be worse than if it did not make
such investments. See the Statement of Additional Information for more about the
risks of different types of derivatives.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
YEAR 2000 RISK
The advisory and distribution services that MSDW Investment Management and
Morgan Stanley & Co. Incorporated ("Morgan Stanley") provide to the Fund depend
on the smooth operation of their computer systems. Many computer and software
systems in use today cannot recognize the year 2000, but revert to 1900 or some
other date, due to the manner in which dates were encoded and calculated. That
failure could have a negative impact on the handling of securities trades,
pricing and account services. MSDW Investment Management and Morgan Stanley have
been actively working on necessary changes to their own computer systems to deal
with the year 2000 problem and expect that their systems will be adapted before
that date. There can be no assurance, however, that they will be successful. In
addition, other unaffiliated service providers may be faced with similar
problems. MSDW Investment Management and Morgan Stanley are monitoring their
remedial efforts, but there can be no assurance that they and the services they
provide will not be adversely affected.
In addition, it is possible that the markets for securities in which the
Portfolios invest may be detrimentally affected by computer failures throughout
the financial services industry beginning January 1, 2000. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Portfolios' investments may be
adversely affected.
TEMPORARY DEFENSIVE
INVESTMENTS
When MSDW Investment Management believes that changes in economic, financial or
political conditions warrant, each Portfolio may invest without limit in certain
short- and medium-term fixed income securities for temporary defensive purposes.
If MSDW Investment Management incorrectly predicts the effects of these changes,
such defensive investments may adversely affect a Portfolio's performance and
the Portfolio may not achieve its investment objective.
PORTFOLIO TURNOVER
Consistent with its investment policies, a Portfolio will purchase and sell
securities without regard to the effect on portfolio turnover. Higher portfolio
turnover (e.g. over 100% per year) will cause a Portfolio to incur additional
transaction costs and may result in taxable gains being passed through to
shareholders.
7
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
The Securities and Exchange Commission (the "Commission") requires that the Fund
disclose in the table below the fees and expenses that you may pay if you buy
and hold shares of the Portfolios. The Portfolios do not charge any sales loads
or similar fees when you purchase or redeem shares. The Annual Fund Operating
Expenses in the table below do not reflect voluntary fee waivers and/or expense
reimbursements from MSDW Investment Management.
1998 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
EQUITY FOCUS VALUE
GROWTH EQUITY SMALL COMPANY GROWTH EQUITY TECHNOLOGY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
MANAGEMENT FEES
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A 0.60% 0.80% 1.00% 0.50% 1.00%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B 0.60% 0.80% 1.00% 0.50% 1.00%
12b-1 FEE
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A NONE NONE NONE NONE NONE
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B 0.25% 0.25% 0.25% 0.25% 0.25%
OTHER EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A 0.20% 0.23% 0.35% 0.32% 0.82%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B 0.20% 0.23% 0.35% 0.32% 0.83%
TOTAL ANNUAL FUND OPERATING
EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A 0.80% 1.03% 1.35% 0.82% 1.82%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B 1.05% 1.28% 1.60% 1.07% 2.08%
</TABLE>
*THE MANAGEMENT FEES FOR THE PORTFOLIOS SHOWN IN THE TABLE ABOVE ARE THE HIGHEST
THAT COULD BE CHARGED. THIS TABLE DOES NOT SHOW THE EFFECTS OF MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS.
MSDW INVESTMENT MANAGEMENT HAS VOLUNTARILY AGREED TO REDUCE ITS MANAGEMENT FEE
AND/OR REIMBURSE THE PORTFOLIO, SO THAT TOTAL ANNUAL OPERATING EXPENSES WILL NOT
EXCEED 0.80% FOR CLASS A SHARES AND 1.05% FOR CLASS B SHARES OF THE EQUITY
GROWTH PORTFOLIO; 1.00% FOR CLASS A SHARES AND 1.25% FOR CLASS B SHARES OF THE
FOCUS EQUITY PORTFOLIO; 1.25% FOR CLASS A SHARES AND 1.50% FOR CLASS B SHARES OF
THE SMALL COMPANY GROWTH AND TECHNOLOGY PORTFOLIOS; AND 0.70% FOR CLASS A SHARES
AND 0.95% FOR CLASS B SHARES OF THE VALUE EQUITY PORTFOLIO.
IN DETERMINING THE ACTUAL AMOUNT OF VOLUNTARY MANAGEMENT FEE WAIVER AND/OR
EXPENSE REIMBURSEMENT FOR A PORTFOLIO, IF ANY, CERTAIN INVESTMENT RELATED
EXPENSES, SUCH AS FOREIGN COUNTRY TAX EXPENSE AND INTEREST EXPENSE ON BORROWING
ARE EXCLUDED FROM ANNUAL OPERATING EXPENSES. IF THESE EXPENSES WERE INCURRED,
THE PORTFOLIOS' TOTAL OPERATING EXPENSES AFTER VOLUNTARY FEE WAIVERS AND/OR
EXPENSE REIMBURSEMENTS COULD EXCEED THE EXPENSE RATIOS SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1998, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSES REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES, EXCLUDING CERTAIN INVESTMENT RELATED EXPENSES,
INCURRED BY INVESTORS WERE: EQUITY GROWTH PORTFOLIO CLASS A -- 0.80%, CLASS B --
1.05%; FOCUS EQUITY PORTFOLIO CLASS A -- 1.01%, CLASS B -- 1.26%; SMALL COMPANY
GROWTH PORTFOLIO CLASS A -- 1.25%, CLASS B -- 1.50%; VALUE EQUITY PORTFOLIO
CLASS A -- 0.70%, CLASS B -- 0.95%; TECHNOLOGY PORTFOLIO CLASS A -- 1.29%, CLASS
B -- 1.55%.
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS ARE VOLUNTARY AND MSDW INVESTMENT
MANAGEMENT RESERVES THE RIGHT TO TERMINATE ANY WAIVER AND/OR REIMBURSEMENT AT
ANY TIME AND WITHOUT NOTICE.
8
<PAGE>
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN EACH
PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS HAVING SIMILAR
INVESTMENT OBJECTIVES.
The example assumes that you invest $10,000 in each Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example assumes that your investment has a 5% return each year and
that each Portfolio's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EQUITY GROWTH PORTFOLIO
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
CLASS A $82 $255 $444 $990
- ----------------------------------------------------------------------
CLASS B $107 $334 $579 $1,283
FOCUS EQUITY PORTFOLIO
- ----------------------------------------------------------------------
CLASS A $105 $328 $569 $1,259
- ----------------------------------------------------------------------
CLASS B $130 $406 $702 $1,545
SMALL COMPANY GROWTH PORTFOLIO
- ----------------------------------------------------------------------
CLASS A $137 $428 $739 $1,624
- ----------------------------------------------------------------------
CLASS B $163 $505 $871 $1,900
VALUE EQUITY PORTFOLIO
- ----------------------------------------------------------------------
CLASS A $84 $262 $455 $1,014
- ----------------------------------------------------------------------
CLASS B $109 $340 $590 $1,306
TECHNOLOGY PORTFOLIO
- ----------------------------------------------------------------------
CLASS A $185 $573 $985 $2,137
- ----------------------------------------------------------------------
CLASS B $211 $652 $1,119 $2,410
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
- -------------------------------------------------------------------------------
Morgan Stanley Dean Witter Investment Management Inc. ("MSDW Investment
Management"), with principal offices at 1221 Avenue of the Americas, New York,
New York 10020, conducts a worldwide portfolio management business and provides
a broad range of portfolio management services to customers in the United States
and abroad. Morgan Stanley Dean Witter & Co. ("MSDW") is the direct parent of
MSDW Investment Management and Morgan Stanley. MSDW is a preeminent global
financial services firm that maintains leading market positions in each of its
three primary businesses -- securities, asset management and credit services. At
December 31, 1998, MSDW Investment Management, together with its affiliated
institutional asset management companies, managed assets of approximately $163.4
billion, including assets under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1998, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
EQUITY GROWTH FOCUS SMALL COMPANY
EQUITY PORTFOLIO VALUE EQUITY TECHNOLOGY
PORTFOLIO GROWTH PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
MANAGEMENT FEE CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
-------------------------------------------------------------------------------------------------
PAID IN FISCAL YEAR
ENDED DECEMBER 31, 1998 0.60% 0.60% 0.78% 0.78% 0.90% 0.90% 0.39% 0.39% 0.48% 0.48%
(NET OF WAIVERS AND AS A
PERCENTAGE OF AVERAGE
NET ASSETS)
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
THE FOLLOWING INDIVIDUALS HAVE PRIMARY DAY-TO-DAY PORTFOLIO MANAGEMENT
RESPONSIBILITY FOR THE PORTFOLIOS:
EQUITY GROWTH PORTFOLIO
PHILIP W. FRIEDMAN, MARGARET K. JOHNSON AND WILLIAM S. AUSLANDER
Philip W. Friedman is a Managing Director of MSDW Investment Management and
Morgan Stanley and is head of the Institutional Equity Group of MSDW Investment
Management. In addition to portfolio management, his equity research
responsibilities include capital goods, consumer durables, multi-industry and
transportation. Prior to joining MSDW Investment Management in 1997, he was the
North American Director of Equity Research at Morgan Stanley. From 1990 to 1995,
he was a member of Morgan Stanley's Equity Research team. Mr. Friedman graduated
from Rutgers University with a B.A. (PHI BETA KAPPA AND SUMMA CUM LAUDE) in
Economics. He also holds a Masters of Management from the J.L. Kellogg School of
Management at Northwestern University. Margaret K. Johnson is a Principal of
MSDW Investment Management and Morgan Stanley and a Portfolio Manager in the
Institutional Equity Group. She joined MSDW Investment Management in 1984. She
holds a B.A. degree from Yale College and is a Chartered Financial Analyst.
William S. Auslander is a Principal of MSDW Investment Management and Morgan
Stanley and a Portfolio Manager in the Institutional Equity Group. He joined
MSDW Investment Management in 1995 as an equity analyst in the Institutional
Equity Group. Prior to joining MSDW Investment Management, he worked at Icahn &
Co. for nine years as an equity analyst. He graduated from the University of
Wisconsin at Madison with a B.A. in Economics and received an M.B.A. from
Columbia University. Margaret K. Johnson has shared primary responsibility for
managing the Portfolio's assets since its inception. Messrs. Friedman and
Auslander have shared primary responsibility for managing the Portfolio's assets
since September 1998.
FOCUS EQUITY PORTFOLIO
PHILIP W. FRIEDMAN AND WILLIAM S. AUSLANDER
Information about Philip W. Friedman and William S. Auslander is included under
the Equity Growth Portfolio above. Messrs. Friedman and Auslander have shared
primary responsibility for managing the Portfolio's assets since September 1998.
SMALL COMPANY GROWTH PORTFOLIO
ALEXANDER L. UMANSKY AND DENNIS P. LYNCH
Alexander L. Umansky is a Vice President of MSDW Investment Management and
Morgan Stanley and a Portfolio Manager in the Institutional Equity Group. He
joined MSDW Investment Management in 1994 as a Compliance Analyst and in 1996,
he became a research analyst in the Institutional Equity Group focusing
primarily on technology. Prior to joining MSDW Investment Management, Mr.
Umansky was a financial analyst in Morgan Stanley's Global Risk Management
department. He graduated from New York University's Stern School of Business
with a B.S. in Computer Science and Finance. Dennis P. Lynch joined MSDW
Investment Management in 1998 as a Research Analyst. Prior to joining MSDW
Investment Management, Mr. Lynch worked as a research analyst for JP Morgan
Securities from 1994 to 1996. He earned a B.A. from Hamilton College in 1993 and
an M.B.A. with honors from Columbia University in 1998. Messrs. Umansky and
Lynch have shared primary responsibility for managing the Portfolio's assets
since January 1999.
10
<PAGE>
VALUE EQUITY PORTFOLIO
STEPHEN C. SEXAUER
Stephen C. Sexauer is a Principal of MSDW Investment Management and Morgan
Stanley and is a Portfolio Manager in the Institutional Equity Group of MSDW
Investment Management. In addition to portfolio management, his equity research
responsibilities include telecommunications, technology, finance and utilities.
Mr. Sexauer joined MSDW Investment Management in 1989 after three years as Vice
President at Salomon Brothers. Previously, he was with Merrill Lynch Economics
and Wharton Econometrics. Mr. Sexauer received a B.S. in Economics from the
University of Illinois and an M.B.A. in Economics and Statistics from the
University of Chicago. Mr. Sexauer has had primary responsibility for managing
the Portfolio's assets since January 1992.
TECHNOLOGY PORTFOLIO
ALEXANDER L. UMANSKY AND STEPHEN C. SEXAUER
Information about Alexander L. Umansky is included under the Small Company
Growth Portfolio above. Information about Stephen C. Sexauer is included under
the Value Equity Portfolio above. Messrs. Umansky and Sexauer have had primary
responsibility for managing the Portfolio's assets since September 1998 and
January 1998, respectively.
- -------------------------------------------------------------------------------
DISTRIBUTION OF PORTFOLIO SHARES
- -------------------------------------------------------------------------------
Morgan Stanley is the exclusive Distributor of Class A shares and Class B shares
of each Portfolio. Morgan Stanley receives no compensation for distributing
Class A shares of the Portfolios. The Fund has adopted a Plan of Distribution
with respect to the Class B shares of each Portfolio pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, (the "Plan"). Under the
Plan, each Portfolio pays the Distributor a distribution fee of 0.25% of the
Class B shares' average daily net assets on an annualized basis. The
distribution fee compensates the Distributor for marketing and selling Class B
shares. The Distributor may pay others for providing distribution-related and
other services, including account maintenance services. Over time the
distribution fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
- -------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
ABOUT NET ASSET VALUE
The net asset value ("NAV") per share of a class of shares of a Portfolio is
determined by dividing the total market value of the Portfolio's investments and
other assets attributable to the class, less any liabilities attributable to the
class, by the total number of outstanding shares of that class of the Portfolio.
In making this calculation, the Portfolio generally values securities at market
price. If market prices are unavailable or may be unreliable because of events
occurring after the close of trading, fair value prices may be determined in
good faith using methods approved by the Board of Directors. The Portfolios may
hold portfolio securities that are listed on foreign exchanges. These securities
may trade on weekends or other days when the Portfolios do not calculate NAV. As
a result, the value of these investments may change on days when you cannot
purchase or sell shares.
PRICING OF PORTFOLIO SHARES
You may buy or sell (redeem) Class A and Class B shares of each Portfolio at the
net asset value next determined for the class after receipt of your order. The
Fund determines net asset value as of the close of the New York Stock Exchange
("NYSE") (normally 4:00 p.m. Eastern Time) on each day that the NYSE is open for
business (the "Pricing Time").
11
<PAGE>
HOW TO PURCHASE SHARES
You may purchase Class A shares and Class B shares of each Portfolio directly
from the Fund, from the Distributor or through certain third parties ("Financial
Intermediaries") on each day that the NYSE is open.
The minimum initial investment generally is $500,000 for Class A shares and
$100,000 for Class B shares of each Portfolio, except that the minimum initial
investment is $250,000 for Class A shares and $50,000 for Class B shares of the
Technology Portfolio. The minimum additional investment generally is $1,000 for
each account that you have. If the value of your account falls below the minimum
initial investment amount for Class A shares or Class B shares as a result of
share redemptions, the Fund will notify you. Your account may be subject to
involuntary conversion from Class A shares to Class B shares or involuntary
redemption in the case of Class B shares if the value of your account remains
below the minimum initial investment amount for 60 consecutive days. MSDW
Investment Management may waive the minimum initial investment and involuntary
conversion or redemption features for certain investors, including individuals
purchasing through a Financial Intermediary.
You may arrange to purchase shares directly from the Fund by calling
1-800-548-7786 or by returning a completed Account Registration Form with
payment for your purchase. The price you pay will be the net asset value
calculated at the Pricing Time following receipt of your purchase order and
payment.
To purchase shares through the Distributor or a Financial Intermediary, you
should contact the Distributor or your Financial Intermediary for details.
Generally, the price of shares purchased through the Distributor or a Financial
Intermediary is the price calculated at the next Pricing Time after the Fund
receives your order from the Distributor or your Financial Intermediary. Certain
Financial Intermediaries have made arrangements with the Fund so that you may
purchase shares at the price calculated at the next Pricing Time after your
Financial Intermediary receives your purchase order. Your Financial Intermediary
may charge an additional service or transaction fee.
HOW TO REDEEM SHARES
You may redeem Portfolio shares directly from the Fund, through the Distributor
or through your Financial Intermediary, each as described above under "How to
purchase shares." The redemption price will be the net asset value per share
calculated at the next Pricing Time, which may be more or less than the purchase
price of your shares. The Fund will ordinarily distribute redemption proceeds in
cash within one business day of your redemption request, but it may take up to
seven business days. However, if you purchased shares by check, the Fund will
not distribute redemption proceeds until it has collected your purchase payment,
which may take up to eight days. In certain circumstances, for example, if
payment of redemption proceeds in cash would be detrimental to the remaining
shareholders, a Portfolio may pay redemption proceeds by a distribution-in-kind
of readily marketable portfolio securities.
12
<PAGE>
EXCHANGE FEATURES
You may exchange Portfolio shares for shares of other available portfolios of
the Fund. To obtain a prospectus for another portfolio, call the Fund at
1-800-548-7786 or contact your Financial Intermediary. If you purchased
Portfolio shares through a Financial Intermediary, certain portfolios may be
unavailable for exchange. Contact your Financial Intermediary to determine which
portfolios are available for exchange. The Fund currently consists of the
following portfolios:
<TABLE>
<S> <C>
U.S. EQUITY GLOBAL AND INTERNATIONAL EQUITY
Focus Equity Portfolio Active International Allocation
Small Company Growth Portfolio Portfolio
Equity Growth Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Technology Portfolio China Growth Portfolio+
U.S. Equity Plus Portfolio Emerging Markets Portfolio
U.S. Real Estate Portfolio European Equity Portfolio
Value Equity Portfolio European Real Estate Portfolio
Global Equity Portfolio
Gold Portfolio+
FIXED INCOME International Equity Portfolio*
Emerging Markets Debt Portfolio International Magnum Portfolio
Fixed Income Portfolio International Small Cap Portfolio
Global Fixed Income Portfolio Japanese Equity Portfolio
High Yield Portfolio Latin American Portfolio
Mortgage-Backed Securities Portfolio+
Municipal Bond Portfolio MONEY MARKET
Money Market Portfolio
Municipal Money Market Portfolio
</TABLE>
*PORTFOLIO IS CURRENTLY CLOSED TO NEW INVESTORS
+PORTFOLIO IS NOT OPERATIONAL
When you exchange for shares of another portfolio, your transaction will be
treated the same as an initial purchase. You will be subject to the same minimum
initial investment and account size as an initial purchase. Accordingly, you
will not necessarily receive the same class of shares that you tendered for
exchange. Your exchange price will be the price calculated at the next Pricing
Time after the Fund receives your exchange order. Frequent trades in your
account(s) can disrupt management of a Portfolio and raise its expenses.
Therefore, the Fund may bar a shareholder who trades excessively from making
further exchanges or purchases.
DIVIDENDS AND DISTRIBUTIONS
It is the policy of each of the Equity Growth, Focus Equity and Value Equity
Portfolios to distribute to shareholders substantially all of its taxable net
investment income in the form of a quarterly dividend. It is the policy of each
of the Small Company Growth and Technology Portfolios to distribute to
shareholders substantially all of its taxable net investment income in the form
of an annual dividend. Each Portfolio's policy is to distribute to shareholders
net capital gains on an annual basis.
The Fund automatically reinvests all dividends and distributions in additional
shares. However, you may elect to receive distributions in cash by giving
written notice to the Fund or your Financial Intermediary or by checking the
appropriate box in the Distribution Option section on the Account Registration
Form.
TAXES
The dividends and distributions you receive from a Portfolio may be subject to
Federal, state and local taxation, depending on your tax situation. The tax
treatment of dividends and distributions is the same whether or not you reinvest
them. Dividends are taxed as ordinary income, long-term capital gains
distributions are taxed at a maximum rate of 20%, and short-term capital gains
distributions are taxed at ordinary income rates. The Fund will tell you
annually how to treat dividends and distributions.
13
<PAGE>
If you redeem shares of a Portfolio, you will be subject to tax on any gains you
earn based on your holding period for the shares. An exchange of shares of a
Portfolio for shares of another portfolio is a sale of Portfolio shares for tax
purposes. Conversions of shares between classes will not result in taxation.
Because each investor's tax circumstances are unique and the tax laws may
change, you should consult your tax advisor about your investment.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following financial highlights tables are intended to help you understand
the financial performance of the Class A shares and Class B shares of each
Portfolio for the past five years or, if less than five years, the life of the
Portfolio or Class. Certain information reflects financial results for a single
Portfolio share. The total returns in the tables represent the rate that an
investor would have earned (or lost) on an investment in each Portfolio
(assuming reinvestment of all dividends and distributions). This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, are incorporated by reference into the Fund's Statement of
Additional Information and are included in the Fund's December 31, 1998 Annual
Report to Shareholders. The Annual Report and the financial statements therein,
as well as the Statement of Additional Information, are available at no cost
from the Fund at the toll free number noted on the back cover to this
Prospectus.
14
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
EQUITY GROWTH PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.93 $ 14.94 $ 14.14 $ 12.02 $ 12.14
--------- --------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.04 0.06 0.17 0.22 0.17
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 3.17 4.48 4.07 4.93 0.21
--------- --------- --------- --------- --------
TOTAL FROM INVESTMENT OPERATIONS 3.21 4.54 4.24 5.15 0.38
--------- --------- --------- --------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.03) (0.06) (0.17) (0.28) (0.13)
IN EXCESS OF NET INVESTMENT INCOME -- (0.00)+ -- -- --
NET REALIZED GAIN (0.64) (2.49) (3.27) (2.75) (0.37)
IN EXCESS OF NET REALIZED GAIN (0.43) -- -- -- --
--------- --------- --------- --------- --------
TOTAL DISTRIBUTIONS (1.10) (2.55) (3.44) (3.03) (0.50)
--------- --------- --------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 19.04 $ 16.93 $ 14.94 $ 14.14 $ 12.02
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
TOTAL RETURN 19.04% 31.32% 30.97% 45.02% 3.26%
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $784,565 $591,789 $352,703 $158,112 $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) 0.22% 0.35% 1.12% 1.57% 1.44%
PORTFOLIO TURNOVER RATE 156% 177% 186% 186% 146%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE
LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.00+ $0.00+ $0.01 $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.80% 0.82% 0.88% 0.88% 0.89%
NET INVESTMENT INCOME TO AVERAGE
NET
ASSETS 0.22% 0.33% 1.04% 1.49% 1.35%
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------
PERIOD FROM
YEAR ENDED DECEMBER JANUARY 2,
31, 1996*** TO
------------------- DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.91 $ 14.92 $ 14.22
-------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.00+ 0.04 0.13
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 3.15 4.46 3.99
-------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 3.15 4.50 4.12
-------- -------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.02) (0.02) (0.15)
NET REALIZED GAIN (0.64) (2.49) (3.27)
IN EXCESS OF NET REALIZED GAIN (0.43) -- --
-------- -------- -------
TOTAL DISTRIBUTIONS (1.09) (2.51) (3.42)
-------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 18.97 $ 16.91 $ 14.92
-------- -------- -------
-------- -------- -------
TOTAL RETURN 18.71% 31.05% 29.92%
-------- -------- -------
-------- -------- -------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $83,330 $27,879 $5,498
RATIO OF EXPENSES TO AVERAGE NET ASSETS
(2) 1.05% 1.05% 1.05%**
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS (2) (0.02)% 0.10% 0.91%**
PORTFOLIO TURNOVER RATE 156% 177% 186%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.00+ $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.05% 1.07% 1.12%**
NET INVESTMENT INCOME TO AVERAGE
NET ASSETS (0.02)% 0.08% 0.84%**
- ------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+AMOUNT IS LESS THAN $0.01 PER SHARE.
15
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
FOCUS EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------
PERIOD FROM
MARCH 8,
YEAR ENDED DECEMBER 31, 1995* TO
-------------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1998 1997 1996 1995
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.78 $ 14.43 $ 12.17 $10.00
--------- --------- -------- --------------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.00+ 0.01 0.18 0.15
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2.42 4.58 4.73 3.95
--------- --------- -------- --------------
TOTAL FROM INVESTMENT OPERATIONS 2.42 4.59 4.91 4.10
--------- --------- -------- --------------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.01) (0.17) (0.15)
IN EXCESS OF NET INVESTMENT INCOME -- (0.00)+ -- --
NET REALIZED GAIN (0.38) (3.23) (2.48) (1.78)
IN EXCESS OF NET REALIZED GAIN (0.32) -- -- --
--------- --------- -------- --------------
TOTAL DISTRIBUTIONS (0.70) (3.24) (2.65) (1.93)
--------- --------- -------- --------------
NET ASSET VALUE, END OF PERIOD $ 17.50 $ 15.78 $ 14.43 $12.17
--------- --------- -------- --------------
--------- --------- -------- --------------
TOTAL RETURN 15.35% 33.31% 40.90% 41.25%
--------- --------- -------- --------------
--------- --------- -------- --------------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $130,734 $155,087 $68,480 $28,548
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.01% 1.02% 1.00% 1.00%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
DIVIDEND EXPENSE ON SECURITIES SOLD SHORT 1.00% 1.00% N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 0.01% 0.08% 1.26% 1.64%**
PORTFOLIO TURNOVER RATE 373% 302% 380% 309%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.01 $0.03 $0.06
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.03% 1.08% 1.24% 1.59%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS (0.01)% 0.02% 1.02% 1.05%**
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------
PERIOD FROM
YEAR ENDED DECEMBER JANUARY 2,
31, 1996*** TO
------------------- DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.72 $ 14.42 $ 12.25
-------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (2) (0.06) (0.01) 0.13
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 2.44 4.55 4.67
-------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.38 4.54 4.80
-------- -------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.01) (0.15)
IN EXCESS OF NET INVESTMENT INCOME -- (0.00)+ --
NET REALIZED GAIN (0.38) (3.23) (2.48)
IN EXCESS OF NET REALIZED GAIN (0.32) -- --
-------- -------- -------
TOTAL DISTRIBUTIONS (0.70) (3.24) (2.63)
-------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 17.40 $ 15.72 $ 14.42
-------- -------- -------
-------- -------- -------
TOTAL RETURN 15.15% 32.90% 39.72%
-------- -------- -------
-------- -------- -------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $16,682 $18,277 $8,805
RATIO OF EXPENSES TO AVERAGE NET ASSETS
(2) 1.26% 1.27% 1.25%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING DIVIDEND EXPENSE
ON SECURITIES SOLD SHORT 1.25% 1.25% N/A
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (2) (0.26)% (0.18)% 0.95%**
PORTFOLIO TURNOVER RATE 373% 302% 380%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME (LOSS) $0.00+ $0.00+ $0.03
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.28% 1.33% 1.47%**
NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (0.28)% (0.24)% 0.73%**
- ------------------------------------------------------------------------------
</TABLE>
*COMMENCEMENT OF OPERATIONS
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+AMOUNT IS LESS THAN $0.01 PER SHARE.
16
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.72 $ 13.50 $ 21.49 $ 16.12 $ 16.22
-------- -------- -------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (1) 0.09 (0.07) (0.19) (0.18) (0.09)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 1.97 1.09 0.89 5.55 (0.01)
-------- -------- -------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 2.06 1.02 0.70 5.37 (0.10)
-------- -------- -------- --------- ---------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.09) -- -- -- --
NET REALIZED GAIN (1.62) (6.80) (8.69) -- --
-------- -------- -------- --------- ---------
TOTAL DISTRIBUTIONS (1.71) (6.80) (8.69) -- --
-------- -------- -------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 8.07 $ 7.72 $ 13.50 $ 21.49 $ 16.12
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
TOTAL RETURN 27.54% 11.36% 3.72% 33.31% (0.62)%
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $73,276 $57,777 $62,793 $119,378 $117,669
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.25% 1.25% 1.25% 1.25% 1.25%
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE
NET ASSETS (1) 1.06% (0.87)% (0.88)% (0.76)% (0.61)%
PORTFOLIO TURNOVER RATE 331% 228% 33% 25% 24%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT LOSS $0.01 $0.01 $0.01 $0.003 $0.002
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.35% 1.34% 1.30% 1.26% 1.26%
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET
ASSETS 0.96% (0.95)% (0.92)% (0.77)% (0.62)%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------
PERIOD FROM
YEAR ENDED JANUARY 2,
DECEMBER 31, 1996*** TO
----------------- DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.63 $ 13.45 $ 21.47
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (2) 0.09 (0.06) (0.15)
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 1.90 1.04 0.82
------- ------- -------
TOTAL FROM OPERATIONS 1.99 0.98 0.67
------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.07) -- --
NET REALIZED GAIN (1.62) (6.80) (8.69)
------- ------- -------
TOTAL DISTRIBUTIONS (1.69) (6.80) (8.69)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 7.93 $ 7.63 $ 13.45
------- ------- -------
------- ------- -------
TOTAL RETURN 26.86% 11.13% 3.58%
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $1,282 $1,313 $3,997
RATIO OF EXPENSES TO AVERAGE NET ASSETS
(2) 1.50% 1.50% 1.50%**
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (2) 0.88% (1.12)% (1.09)%**
PORTFOLIO TURNOVER RATE 331% 228% 33%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
LOSS $0.01 $0.00+ $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.60% 1.58% 1.54%**
NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS 0.78% (1.21)% (1.14)%**
- ----------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+AMOUNT IS LESS THAN $0.01 PER SHARE.
17
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
VALUE EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.62 $ 13.89 $ 13.94 $ 11.50 $ 12.63
-------- -------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.20 0.35 0.41 0.38 0.40
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 0.98 3.51 2.27 3.30 (0.55)
-------- -------- --------- --------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.18 3.86 2.68 3.68 (0.15)
-------- -------- --------- --------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.21) (0.35) (0.41) (0.47) (0.40)
NET REALIZED GAIN (3.81) (3.78) (2.32) (0.77) (0.58)
-------- -------- --------- --------- --------
TOTAL DISTRIBUTIONS (4.02) (4.13) (2.73) (1.24) (0.98)
-------- -------- --------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 10.78 $ 13.62 $ 13.89 $ 13.94 $ 11.50
-------- -------- --------- --------- --------
-------- -------- --------- --------- --------
TOTAL RETURN 8.79% 29.20% 19.73% 33.69% (1.29)%
-------- -------- --------- --------- --------
-------- -------- --------- --------- --------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $57,543 $86,054 $106,128 $147,365 $73,406
RATIO OF EXPENSES TO AVERAGE NET ASSETS
(1) 0.70% 0.70% 0.70% 0.70% 0.70%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS (1) 1.36% 2.15% 2.62% 3.01% 3.37%
PORTFOLIO TURNOVER RATE 153% 36% 42% 43% 33%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE
LIMITATION DURING THEPERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.02 $0.02 $0.01 $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.82% 0.80% 0.78% 0.77% 0.80%
NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 1.25% 2.06% 2.55% 2.94% 3.27%
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------
PERIOD FROM
YEAR ENDED JANUARY 2,
DECEMBER 31, 1996*** TO
----------------- DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.59 $ 13.89 $ 14.06
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.07 0.28 0.29
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 1.08 3.51 2.25
------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.15 3.79 2.54
------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.17) (0.31) (0.39)
NET REALIZED GAIN (3.81) (3.78) (2.32)
------- ------- -------
TOTAL DISTRIBUTIONS (3.98) (4.09) (2.71)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.76 $ 13.59 $ 13.89
------- ------- -------
------- ------- -------
TOTAL RETURN 8.59% 28.70% 18.57%
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $1,045 $2,246 $2,555
RATIO OF EXPENSES TO AVERAGE NET ASSETS
(2) 0.95% 0.95% 0.95%**
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS (2) 1.12% 1.86% 2.33%**
PORTFOLIO TURNOVER RATE 153% 36% 42%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.02 $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.07% 1.04% 1.03%**
NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 1.01% 1.77% 2.26%**
- ------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
18
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
TECHNOLOGY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------
PERIOD FROM
YEAR ENDED DECEMBER SEPTEMBER 16,
31, 1996* TO
------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1998++ 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.73 $ 10.71 $ 10.00
-------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (1) (0.13) 0.07 (0.02)
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 6.45 3.75 0.73
-------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 6.32 3.82 0.71
-------- -------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.26) --
NET REALIZED GAIN (0.07) (1.28) --
IN EXCESS OF NET REALIZED GAIN -- (1.00) --
RETURN OF CAPITAL -- (0.26) --
-------- -------- -------
TOTAL DISTRIBUTIONS (0.07) (2.80) --
-------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 17.98 $ 11.73 $ 10.71
-------- -------- -------
-------- -------- -------
TOTAL RETURN 53.90% 37.27% 7.10%
-------- -------- -------
-------- -------- -------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $27,506 $31,788 $3,595
RATIO OF EXPENSES TO AVERAGE NET ASSETS
(1) 1.29% 1.25% 1.25%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.25% N/A N/A
RATIO OF NET INVESTMENT LOSS TO AVERAGE
NET ASSETS (1) (0.95)% (1.07)% (0.70)%**
PORTFOLIO TURNOVER RATE 265% 622% 77%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE
LIMITATION DURING THEPERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
LOSS $0.07 $0.08 $0.22
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.82% 2.47% 8.51%**
NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (1.47)% (2.30)% (7.96)%**
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------
PERIOD FROM
YEAR ENDED SEPTEMBER 16
DECEMBER 31, 1996* TO
----------------- DECEMBER 31,
1998++ 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.72 $ 10.71 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (2) (0.16) 0.04 (0.02)
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 6.43 3.74 0.73
------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 6.27 3.78 0.71
------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.25) --
NET REALIZED GAIN (0.07) (1.28) --
IN EXCESS OF NET REALIZED GAIN -- (1.00) --
RETURN OF CAPITAL -- (0.24) --
------- ------- -------
TOTAL DISTRIBUTIONS (0.07) (2.77) --
------- ------- -------
NET ASSET VALUE, END OF PERIOD $17.92 $ 11.72 $ 10.71
------- ------- -------
------- ------- -------
TOTAL RETURN 53.52% 36.90% 7.10%
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $ 850 $ 2,394 $ 1,487
RATIO OF EXPENSES TO AVERAGE NET ASSETS
(2) 1.55% 1.50% 1.50%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.50% N/A N/A
RATIO OF NET INVESTMENT LOSS TO AVERAGE
NET ASSETS (2) (1.32)% (1.41)% (1.00)%**
PORTFOLIO TURNOVER RATE 265% 622% 77%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
LOSS $0.07 $0.04 $0.19
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 2.08% 2.72% 9.14%**
NET INVESTMENT LOSS TO AVERAGE NET
ASSETS (1.84)% (2.63)% (8.65)%**
- -----------------------------------------------------------------------------
</TABLE>
*COMMENCEMENT OF OPERATIONS
**ANNUALIZED
++PER SHARE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 1998 ARE BASED ON AVERAGE
SHARES OUTSTANDING.
19
<PAGE>
<TABLE>
<S> <C>
EQUITY GROWTH PORTFOLIO
FOCUS EQUITY PORTFOLIO
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER SMALL COMPANY GROWTH
INSTITUTIONAL FUND, INC. PORTFOLIO
VALUE EQUITY PORTFOLIO
TECHNOLOGY PORTFOLIO
</TABLE>
ACCOUNT REGISTRATION FORM
ACCOUNT INFORMATION
If you need assistance in filling out this form for
Morgan Stanley Dean Witter Institutional Fund, Inc.,
please contact your Morgan Stanley representative or
call us toll free 1-800-548-7786. Please print all
items except signature, and mail to the Fund at the
address on the back cover. Fill in where appropriate
below.
REGISTRATION
/ / INDIVIDUAL
-----------------------------------------------------
FIRST NAME MIDDLE INITIAL LAST NAME
/ / JOINT TENANTS (RIGHTS OF SURVIVORSHIP PRESUMED
UNLESS TENANCY IN COMMON IS INDICATED)
-----------------------------------------------------
FIRST NAME MIDDLE INITIAL LAST NAME
/ / CORPORATIONS, TRUSTS AND OTHERS Please call the
Fund for additional documents that may be required
to set up account and to authorize transactions.
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Type of Registration: / / Incorporated/ / Unincorporated Association/ / Partnership
/ / Uniform Gift/Transfer to Minor
(ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / Trust ------ / / Other (SPECIFY) ------
</TABLE>
MAILING ADDRESS
Please fill in completely, including telephone
number(s).
/ / UNITED STATES CITIZEN / / RESIDENT ALIEN
-----------------------------------------------------
STREET OR P.O. BOX
-----------------------------------------------------
CITY STATE ZIP CODE
-----------------------------------------------------
HOME TELEPHONE NUMBER BUSINESS TELEPHONE NUMBER
/ / NON-RESIDENT ALIEN
Permanent Address (WHERE YOU RESIDE PERMANENTLY FOR
TAX PURPOSES)
-----------------------------------------------------
STREET OR P.O. BOX
-----------------------------------------------------
CITY COUNTRY POSTAL CODE
-----------------------------------------------------
HOME TELEPHONE NUMBER BUSINESS TELEPHONE NUMBER
Current Mailing Address (IF DIFFERENT FROM PERMANENT
ADDRESS)
-----------------------------------------------------
STREET OR P.O. BOX
-----------------------------------------------------
CITY COUNTRY POSTAL CODE
-----------------------------------------------------
HOME TELEPHONE NUMBER BUSINESS TELEPHONE NUMBER
TAXPAYER IDENTIFICATION NUMBER
Enter your Taxpayer Identification Number. For most
individual taxpayers, this is your Social Security
Number.
/ / INDIVIDUAL
--------------------------------- OR
---------------------------------
TAXPAYER IDENTIFICATION NUMBER ("TIN")
SOCIAL SECURITY NUMBER ("SSN")
/ / JOINT TENANTS (RIGHTS OF SURVIVORSHIP PRESUMED
UNLESS TENANCY IN COMMON IS INDICATED)
--------------------------------- OR
---------------------------------
TAXPAYER IDENTIFICATION NUMBER ("TIN")
SOCIAL SECURITY NUMBER ("SSN")
--------------------------------- OR
---------------------------------
TAXPAYER IDENTIFICATION NUMBER ("TIN")
SOCIAL SECURITY NUMBER ("SSN")
For Custodian account of a minor (Uniform
Gifts/Transfers to Minor Acts), give the Social
Security Number of the minor.
IMPORTANT TAX INFORMATION
You (as a payee) are required by law to provide us (as
payor) with your correct TIN(s) or SSN(s). Accounts
that have a missing or incorrect TIN(s) or SSN(s) will
be subject to backup withholding at a 31% rate on
dividends, distributions and other payments. If you
have not provided us with your correct TIN(s) or
SSN(s), you may be subject to a $50 penalty imposed by
the Internal Revenue Service ("IRS").
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.
<PAGE>
PORTFOLIO AND CLASS SECTION
Class A shares minimum $500,000 for each Portfolio
($250,000 for Technology Portfolio) and Class B shares
minimum $100,000 for each Portfolio ($50,000 for
Technology Portfolio).
Please indicate Portfolio, class and amount for
purchase of the following Portfolio(s):
<TABLE>
<C> <S> <C>
EQUITY GROWTH PORTFOLIO / / Class A Shares (058) $--------- / / Class B Shares (036) $ ------
FOCUS EQUITY PORTFOLIO / / Class A Shares (084) $--------- / / Class B Shares (088) $ ------
SMALL COMPANY GROWTH PORTFOLIO / / Class A Shares (062) $--------- / / Class B Shares (037) $ ------
VALUE EQUITY PORTFOLIO / / Class A Shares (064) $--------- / / Class B Shares (039) $ ------
TECHNOLOGY PORTFOLIO / / Class A Shares (091) $--------- / / Class B Shares (092) $ ------
Total Initial Investment $---------
</TABLE>
METHOD OF INVESTMENT
Please indicate Portfolio and manner of payment.
/ / Check (MAKE CHECK PAYABLE TO MORGAN STANLEY DEAN
WITTER INSTITUTIONAL FUND, INC.--PORTFOLIO NAME)
/ / Exchange $
--------------------------------
From
--------------------------------
--------------------------------
NAME OF PORTFOLIO ACCOUNT NUMBER
Account previously established by:
/ / Phone exchange / / Wire on
--------------------------------
--------------------------------
DATE ACCOUNT NUMBER
(PREVIOUSLY ASSIGNED BY THE FUND)
DISTRIBUTION OPTION
Income dividends and capital gains distributions (if
any) to be reinvested in additional shares unless
either box below is checked.
/ / Income dividends to be paid in cash, capital gains
distributions (if any) in shares.
/ / Income dividends and capital gains distributions
(if any) to be paid in cash.
TELEPHONE REDEMPTION
Please select at time of initial application if you
wish to redeem or exchange shares by telephone. A
SIGNATURE GUARANTEE IS REQUIRED IF BANK ACCOUNT IS NOT
REGISTERED IDENTICALLY TO YOUR FUND ACCOUNT.
TELEPHONE REQUESTS FOR REDEMPTIONS OR EXCHANGE WILL
NOT BE HONORED UNLESS THE BOX IS CHECKED.
<TABLE>
<S> <C> <C>
/ / I/we hereby authorize the Fund and its agents to honor any
telephone requests to wire redemption proceeds to the
commercial bank indicated at right and/or mail redemption --------
proceeds to the name and address in which my/our fund account NAME OF COMMERCIAL BANK (NOT SAVINGS
is registered if such requests are believed to be authentic. BANK)
The Fund and the Fund's Transfer Agent will employ reasonable --------
procedures to confirm that instructions communicated by BANK ACCOUNT NUMBER
telephone are genuine. These procedures include requiring the --------
investor to provide certain personal identification BANK ABA NUMBER
information at the time an account is opened and prior to --------
effecting each transaction requested by telephone. In NAME(S) IN WHICH YOUR BANK ACCOUNT IS
addition, all telephone transaction requests will be recorded ESTABLISHED
and investors may be required to provide additional telecopied --------
written instructions of transaction requests. Neither the Fund BANK'S STREET ADDRESS
nor the Transfer Agent will be responsible for any loss, --------
liability, cost or expense for following instructions received CITY STATE ZIP CODE
by telephone that it reasonably believes to be genuine.
</TABLE>
INTERESTED PARTY OPTION
/ / In addition to the account statement sent to
my/our registered address, I/we hereby authorize
the Fund to mail duplicate statements to the name
and address provided below.
-----------------------------------------------------
NAME STREET OR P.O. BOX
-----------------------------------------------------
CITY STATE ZIP CODE
DEALER INFORMATION
--------------------------------------------------
REPRESENTATIVE NAME REPRESENTATIVE NUMBER BRANCH
NUMBER
SIGNATURE OF ALL HOLDERS
AND TAXPAYER CERTIFICATION
The undersigned certify that I/we have full authority
and legal capacity to purchase and redeem shares of
the Fund and affirm that I/we have received a current
Prospectus of Morgan Stanley Dean Witter Institutional
Fund, Inc. and agree to be bound by its terms. By
signing this application, I/we hereby certify under
penalties of perjury that the information on this
application is complete and correct and that as
required by federal law (please check applicable boxes
below):
U.S. CITIZEN(S)/TAXPAYER(S):
/ / I/We certify that (1) the number(s) shown above on
this form is/are the correct SSN(s) or TIN(s) and
(2) I/we are not subject to any backup withholding
either because (a) I/we are exempt from backup
withholding; (b) I/we have not been notified by
the IRS that I/we are subject to backup
withholding as a result of a failure to report all
interest or dividends; or (c) the IRS has notified
me/us that I am/we are no longer subject to backup
withholding.
/ / If no TIN(s) or SSN(s) has/have been provided
above, I/we have applied, or intend to apply, to
the IRS or the Social Security Administration for
a TIN or a SSN and I/we understand that if I/we do
not provide either number to Chase Global Funds
Services Company ("CGFSC") within 60 days of the
date of this application or if I/we fail to
furnish my/ our correct SSN(s) or TIN(s), I/we may
be subject to a penalty and a 31% backup
withholding on distributions and redemption
proceeds. (Please provide either number on IRS
Form W-9). You may request such form by calling
CGFSC at 800-282-4404.
NON-U.S. CITIZEN(S)/TAXPAYER(S):
/ / Under penalties of perjury, I/we certify that I/we
are not U.S. citizens or residents and I/we are
exempt foreign persons as defined by the Internal
Revenue Service.
The IRS does not require your consent to any provision
of this document other than the certifications
required to avoid backup withholding.
SIGN HERE -->
--------------------------------
--------------------------------
SIGNATURE DATE
SIGNATURE (IF JOINT ACCOUNT, BOTH MUST
SIGN) DATE
<PAGE>
- -------------------------------------------------------------------------------
WHERE TO FIND ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
In addition to this Prospectus, the Fund has a Statement of Additional
Information, dated May 1, 1999, which contains additional, more detailed
information about the Fund and the Portfolios. The Statement of Additional
Information is incorporated by reference into this Prospectus and, therefore,
legally forms a part of this Prospectus.
SHAREHOLDER REPORTS
The Fund publishes annual and semi-annual reports containing financial
statements. These reports contain additional information about each Portfolio's
investments. In the Fund's shareholder reports, you will find a discussion of
the market conditions and the investment strategies that significantly affected
each Portfolio's performance during that period.
For additional Fund information, including information regarding the investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the Statement of Additional Information and shareholder reports
without charge by contacting the Fund at the toll-free number above. If you
purchased shares through a Financial Intermediary, you may also obtain these
documents, without charge, by contacting your Financial Intermediary.
Information about the Fund, including the Statement of Additional Information,
and the annual and semi-annual reports, may be obtained from the Securities and
Exchange Commission in any of the following ways: (1) In person: you may review
and copy documents in the Commission's Public Reference Room in Washington D.C.
(for information call 1-800-SEC-0330); (2) On-line: you may retrieve information
from the Commission's web site at "http://www.sec.gov"; or (3) By mail: you may
request documents, upon payment of a duplicating fee, by writing to Securities
and Exchange Commission, Public Reference Section, Washington, D.C. 20549-6009.
To aid you in obtaining this information, the Fund's Investment Company Act
registration number is 811-05624.
[LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
P.O. Box 2798
Boston, Massachusetts 02208-2798
FOR INFORMATION CALL 1-800-548-7786
