<PAGE>
As Filed With the Securities and Exchange Commission on April __, 2000
File No. 33-23166
811-5624
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 43 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 44 /X/
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
----------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1221 Avenue of the Americas
New York, New York 10020
------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 548-7786
--------------
Harold J. Schaaff, Jr., Esq.
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas, New York, New York 10020
-----------------------------------------------------------------
(Name and Address of Agent for Service)
Copy to:
<TABLE>
<CAPTION>
<S> <C>
Harold J. Schaaff, Jr. Esq. Richard W. Grant, Esq.
Morgan Stanley Dean Witter Investment Management Inc. Morgan, Lewis & Bockius LLP
1221 Avenue of the Americas 1701 Market Street
New York, NY 10020 Philadelphia, PA 19103
</TABLE>
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
X on May 1, 2000 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
----
75 days after filing pursuant to paragraph (a)(2)
----
on [ date] pursuant to paragraph (a) of Rule 485.
----
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<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
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 LARGE CAPITALIZATION
COMPANIES.
FOCUS EQUITY PORTFOLIO
THE FOCUS EQUITY PORTFOLIO SEEKS CAPITAL APPRECIATION BY INVESTING PRIMARILY IN
EQUITY SECURITIES THAT EXHIBIT STRONG OR ACCELERATED EARNINGS GROWTH.
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 THAT 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
WILL 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 (THE "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 PAGE
- -------------------------------------------------------------------------------
<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 LARGE CAPITALIZATION
COMPANIES.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maximize long-term capital appreciation by
investing primarily 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 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, large-capitalization growth-oriented equity
securities, may underperform relative to other sectors.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
PERFORMANCE
(CLASS A
SHARES)
COMMENCED
OPERATIONS
ON APRIL
2, 1991
<S> <C> <C>
1992 7.13%
1993 4.33%
1994 3.26%
1995 45.02%
1996 30.97%
1997 31.32%
1998 19.04%
1999 39.89%
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, 1999)
<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 39.89% 39.61% 21.04% 21.04%
- -------------------------------------------------------------------------------------
PAST FIVE YEARS 32.93% N/A 28.55% N/A
- -------------------------------------------------------------------------------------
SINCE INCEPTION 21.28% 29.63% 19.35% 26.18%
</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 INDEX IS COMPRISED OF THE STOCKS OF 500 LARGE-CAP U.S. COMPANIES
WITH MARKET CAPITALIZATIONS OF $1 BILLION OR MORE. THESE 500 COMPANIES
REPRESENT APPROXIMATELY 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 THAT EXHIBIT STRONG OR ACCELERATED EARNINGS GROWTH.
- ----------------------------------------------------------------------------
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 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.
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%
1999 46.44%
HIGH (QUARTER)
10/98 - 12/98
26.17%
LOW (QUARTER)
7/98 - 9/98
- -19.27%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1999)
<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 46.44% 46.13% 21.04% 21.04%
- -------------------------------------------------------------------------------------
SINCE INCEPTION 36.58% 32.98% 28.31% 26.18%
</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 INDEX IS COMPRISED OF THE STOCKS OF 500 LARGE-CAP U.S. COMPANIES
WITH MARKET CAPITALIZATION OF $1 BILLION OR MORE. THESE 500 COMPANIES REPRESENT
APPROXIMATELY 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. MSDW Investment Management selects issues from a
universe comprised of approximately 2000 small cap companies, most with market
capitalization of generally less than $2.5 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). In
addition, at times the Portfolio's market sector, growth-oriented equity
securities of small companies, may underperform relative to other sectors.
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.
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%
1999 96.45%
HIGH (QUARTER)
10/99 - 12/99
48.70%
LOW (QUARTER)
7/90 - 9/90
- -22.43%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED RUSSELL 2000
OPERATIONS ON OPERATIONS ON INDEX*
NOVEMBER 1, 1989) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
PAST ONE YEAR 96.45% 95.97% 21.26% 21.26%
- ----------------------------------------------------------------------------------------------------
PAST FIVE YEARS 31.00% N/A 16.69% N/A
- ----------------------------------------------------------------------------------------------------
PAST TEN YEARS 19.43% N/A 13.40% N/A
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION 19.78% 30.09% 13.26% 13.87%
</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.
3
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
VALUE EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO SEEKS HIGH TOTAL RETURN BY INVESTING PRIMARILY IN
EQUITY SECURITIES THAT 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 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, 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%
1999 11.63%
HIGH (QUARTER)
4/99 - 6/99
16.08%
LOW (QUARTER)
7/98 - 9/98
- -17.09%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1999)
<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 11.63% 11.22% 21.04% 21.04%
- ---------------------------------------------------------------------------------------
PAST FIVE YEARS 20.22% N/A 28.55% N/A
- ---------------------------------------------------------------------------------------
SINCE INCEPTION 13.93% 16.53% 19.21% 26.18%
</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 INDEX IS COMPRISED OF THE STOCKS OF 500 LARGE-CAP U.S. COMPANIES
WITH MARKET CAPITALIZATION OF $1 BILLION OR MORE. THESE 500 COMPANIES REPRESENT
APPROXIMATELY 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 WILL 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.
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 that 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 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. THE PORTFOLIO MAY INVEST IN THE EQUITY
SECURITIES OF ANY SIZE. 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.
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%
1999 160.62%
HIGH (QUARTER)
10/99 - 12/99
69.79%
LOW (QUARTER)
7/98 - 9/98
- -12.37%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE YEAR ENDED DECEMBER 31, 1999)
<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 160.62% 160.26% 21.04%
- ----------------------------------------------------------------------------------------
SINCE INCEPTION 71.47% 71.13% 28.15%
</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 INDEX IS COMPRISED OF THE STOCKS OF 500 LARGE-CAP U.S. COMPANIES
WITH MARKET CAPITALIZATION OF $1 BILLION OR MORE. THESE 500 COMPANIES REPRESENT
APPROXIMATELY 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 RELATING TO THE
PORTFOLIOS. THE PORTFOLIOS' INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED
IN MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY
IS A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI 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 regions, countries, industries, companies or governments. 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 gains
superior to fixed income securities, although they have 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
market countries. These countries may be more likely to experience political
turmoil or rapid changes in economic conditions than more developed countries,
and the financial condition of issuers in emerging market countries may be more
precarious than in other 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 a Portfolio is in that position, it
could be forced to sell other securities that it wanted to retain.
6
<PAGE>
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 employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
INVESTMENT DISCRETION
In pursuing the Portfolios' investment objectives, MSDW Investment Management
has considerable leeway in deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading stategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolios' performance.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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 will cause a Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders. The Equity Growth,
Focus Equity, Small Company Growth and Technology Portfolios may engage in
frequent trading of securities to achieve their investment objectives.
7
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
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, which are described in the footnotes below,
and/or expense reimbursements from MSDW Investment Management.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
EQUITY FOCUS SMALL COMPANY VALUE
GROWTH EQUITY 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% 0.27% 0.43% 0.36% 0.28%
- ----------------------------------------------------------------------------------------------------
CLASS B 0.20% 0.27% 0.41% 0.36% 0.28%
TOTAL ANNUAL FUND OPERATING
EXPENSES
- ----------------------------------------------------------------------------------------------------
CLASS A 0.80% 1.07% 1.43% 0.86% 1.28%
- ----------------------------------------------------------------------------------------------------
CLASS B 1.05% 1.32% 1.66% 1.11% 1.53%
</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 WOULD EXCEED THE EXPENSE RATIOS SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSE REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES INCURRED BY INVESTORS WERE 1.25% FOR CLASS A SHARES AND
1.50% FOR CLASS B SHARES OF THE SMALL COMPANY GROWTH PORTFOLIO. THE TOTAL
OPERATING EXPENSES INCURRED BY INVESTORS, INCLUDING CERTAIN INVESTMENT RELATED
EXPENSES, WERE 1.01% FOR CLASS A SHARES AND 1.26% FOR CLASS B SHARES OF THE
FOCUS EQUITY PORTFOLIO, 0.73% FOR CLASS A SHARES AND 0.98% FOR CLASS B SHARES OF
THE VALUE EQUITY PORTFOLIO AND 1.26% FOR CLASS A SHARES AND 1.51% FOR CLASS B
SHARES OF THE TECHNOLOGY PORTFOLIO. EXCLUDING INVESTMENT RELATED EXPENSES, THE
OPERATING EXPENSES AFTER FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS WERE 1.00%
FOR CLASS A SHARES AND 1.25% FOR CLASS B SHARES OF THE FOCUS EQUITY PORTFOLIO;
0.70% FOR CLASS A SHARES AND 0.95% FOR CLASS B SHARES OF THE VALUE EQUITY
PORTFOLIO; AND 1.25% FOR CLASS A SHARES AND 1.50% FOR CLASS B SHARES OF THE
TECHNOLOGY PORTFOLIO. TOTAL OPERATING EXPENSES FOR THE EQUITY GROWTH PORTFOLIO
DID NOT EXCEED THE AMOUNTS SHOWN IN THE FIRST PARAGRAPH AND, ACCORDINGLY, TOTAL
OPERATING EXPENSES INCURRED BY INVESTORS IN THE PORTFOLIO WERE SHOWN IN THE
TABLE ABOVE.
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
<S> <C> <C> <C> <C>
EQUITY GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------
CLASS A $82 $255 $444 $990
- ---------------------------------------------------------------------------------------------
CLASS B $107 $334 $579 $1,283
FOCUS EQUITY PORTFOLIO
- ---------------------------------------------------------------------------------------------
CLASS A $109 $340 $590 $1,306
- ---------------------------------------------------------------------------------------------
CLASS B $134 $418 $723 $1,590
SMALL COMPANY GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------
CLASS A $146 $452 $782 $1,713
- ---------------------------------------------------------------------------------------------
CLASS B $169 $523 $902 $1,965
VALUE EQUITY PORTFOLIO
- ---------------------------------------------------------------------------------------------
CLASS A $88 $274 $477 $1,061
- ---------------------------------------------------------------------------------------------
CLASS B $113 $353 $612 $1,352
TECHNOLOGY PORTFOLIO
- ---------------------------------------------------------------------------------------------
CLASS A $130 $406 $702 $1,545
- ---------------------------------------------------------------------------------------------
CLASS B $156 $483 $834 $1,824
</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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies, managed assets of approximately
$184.8 billion, including assets under fiduciary advice.
- ----------------------------------------------------------------
MANAGEMENT FEES
- ----------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
SMALL
EQUITY FOCUS COMPANY
GROWTH EQUITY GROWTH VALUE EQUITY TECHNOLOGY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
-----------------------------------------------------------------------------------------------------------
MANAGEMENT FEE PAID
IN FISCAL YEAR ENDED
DECEMBER 31, 1999 0.60% 0.60% 0.74% 0.74% 0.82% 0.82% 0.37% 0.37% 0.98% 0.98%
(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 AND WILLIAM S. AUSLANDER
Philip W. Friedman is a Managing Director of MSDW Investment Management and
Morgan Stanley. Currently, he 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 1995 to 1997.
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 degree from the
J.L. Kellogg School of Management at Northwestern University. William S.
Auslander, a Principal of MSDW Investment Management and Morgan Stanley, joined
MSDW Investment Management in 1995 as an equity analyst in the Institutional
Equity Group. Currently, he is a Portfolio Manager in the Institutional Equity
Group. Prior to joining MSDW Investment Management, he worked at Icahn & Co. for
nine years as an equity analyst. Mr. Auslander graduated from the University of
Wisconsin at Madison with a B.A. in Economics and received an M.B.A. from
Columbia University. 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, a Vice President of MSDW Investment Management and Morgan
Stanley, joined MSDW Investment Management in 1994 as a Compliance Analyst.
Currently, he is a Portfolio Manager in the Institutional Equity Group. In 1996,
he became a research analyst in the Institutional Equity Group focusing
primarily on technology. Prior to joining MSDW Investment Management, he was a
financial analyst in Morgan Stanley's Global Risk Management department. Mr.
Umansky graduated from New York University's Stern School of Business with a
B.S. in Computer Science and Finance. Dennis P. Lynch, a Vice President of MSDW
Investment Management and Morgan Stanley, joined MSDW Investment Management in
1998 as a Research Analyst. Currently, he is a Portfolio Manager in the
Institutional Equity Group. Prior to joining MSDW Investment Management, he
worked as a research analyst for JP Morgan Securities from 1994 to 1996. Mr.
Lynch 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, a Principal of MSDW Investment Management and Morgan
Stanley, joined MSDW Investment Management in 1989. Currently, he 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. Prior to joining MSDW
Investment Management, he worked as Vice President at Salomon Brothers for three
years. Previous to that, 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 (the
"Plan") under the Investment Company Act of 1940. 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
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolios 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 NAV 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 NAV 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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity 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, in its sole discretion, 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, if any, at least annually.
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 SAI and are
included in the Fund's December 31, 1999 Annual Report to Shareholders. The
Annual Report and the Fund's financial statements, as well as the SAI, 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 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.04 $ 16.93 $ 14.94 $ 14.14 $ 12.02
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (1) (0.02) 0.04 0.06 0.17 0.22
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 7.49 3.17 4.48 4.07 4.93
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 7.47 3.21 4.54 4.24 5.15
-------- -------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.03) (0.06) (0.17) (0.28)
IN EXCESS OF NET INVESTMENT INCOME (0.00)+ -- (0.00)+ -- --
NET REALIZED GAIN (1.47) (0.64) (2.49) (3.27) (2.75)
IN EXCESS OF NET REALIZED GAIN -- (0.43) -- -- --
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (1.47) (1.10) (2.55) (3.44) (3.03)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 25.04 $ 19.04 $ 16.93 $ 14.94 $ 14.14
======== ======== ======== ======== ========
TOTAL RETURN 39.89% 19.04% 31.32% 30.97% 45.02%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $977,005 $784,565 $591,789 $352,703 $158,112
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 0.80% 0.80% 0.80% 0.80% 0.80%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (1) (0.10)% 0.22% 0.35% 1.12% 1.57%
PORTFOLIO TURNOVER RATE 91% 156% 177% 186% 186%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.00+ $0.00+ $0.00+ $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.80% 0.80% 0.82% 0.88% 0.88%
NET INVESTMENT INCOME (LOSS) TO AVERAGE
NET ASSETS (0.10)% 0.22% 0.33% 1.04% 1.49%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
------------------------------ DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.97 $ 16.91 $ 14.92 $14.22
-------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (2) (0.04) 0.00+ 0.04 0.13
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 7.44 3.15 4.46 3.99
-------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 7.40 3.15 4.50 4.12
-------- ------- ------- ------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.02) (0.02) (0.15)
IN EXCESS OF NET INVESTMENT INCOME (0.00)+ -- -- --
NET REALIZED GAIN (1.47) (0.64) (2.49) (3.27)
IN EXCESS OF NET REALIZED GAIN -- (0.43) -- --
-------- ------- ------- ------
TOTAL DISTRIBUTIONS (1.47) (1.09) (2.51) (3.42)
-------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 24.90 $ 18.97 $ 16.91 $14.92
======== ======= ======= ======
TOTAL RETURN 39.61% 18.71% 31.05% 29.92%
======== ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $246,889 $83,330 $27,879 $5,498
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.05% 1.05% 1.05% 1.05%**
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET
ASSETS (2) (0.34)% (0.02)% 0.10% 0.91%**
PORTFOLIO TURNOVER RATE 91% 156% 177% 186%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.00+ $0.00+ $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.05% 1.05% 1.07% 1.12%**
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (0.34)% (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 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.50 $ 15.78 $ 14.43 $ 12.17 $ 10.00
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (1) (0.06) 0.00+ 0.01 0.18 0.15
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 7.89 2.42 4.58 4.73 3.95
-------- -------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 7.83 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 (5.63) (0.38) (3.23) (2.48) (1.78)
IN EXCESS OF NET REALIZED GAIN -- (0.32) -- -- --
-------- -------- -------- ------- -------
TOTAL DISTRIBUTIONS (5.63) (0.70) (3.24) (2.65) (1.93)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 19.70 $ 17.50 $ 15.78 $ 14.43 $ 12.17
======== ======== ======== ======= =======
TOTAL RETURN 46.44% 15.35% 33.31% 40.90% 41.25%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $136,128 $130,734 $155,087 $68,480 $28,548
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.01% 1.01% 1.02% 1.00% 1.00%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.00% 1.00% 1.00% N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS (1) (0.33)% 0.01% 0.08% 1.26% 1.64%**
PORTFOLIO TURNOVER RATE 155% 373% 302% 380% 309%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.01 $0.01 $0.01 $0.03 $0.06
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.07% 1.03% 1.08% 1.24% 1.59%**
NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (0.39)% (0.01)% 0.02% 1.02% 1.05%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
----------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.40 $ 15.72 $ 14.42 $12.25
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (2) (0.08) (0.06) (0.01) 0.13
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 7.81 2.44 4.55 4.67
------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 7.73 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 (5.63) (0.38) (3.23) (2.48)
IN EXCESS OF NET REALIZED GAIN -- (0.32) -- --
------- ------- ------- ------
TOTAL DISTRIBUTIONS (5.63) (0.70) (3.24) (2.63)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 19.50 $ 17.40 $ 15.72 $14.42
======= ======= ======= ======
TOTAL RETURN 46.13% 15.15% 32.90% 39.72%
======= ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $22,168 $16,682 $18,277 $8,805
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.26% 1.26% 1.27% 1.25%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
INTEREST EXPENSE 1.25% 1.25% 1.25% N/A
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET
ASSETS (2) (0.58)% (0.26)% (0.18)% 0.95%**
PORTFOLIO TURNOVER RATE 155% 373% 302% 380%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.00+ $0.00+ $0.03
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.32% 1.28% 1.33% 1.47%**
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (0.64)% (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 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.07 $ 7.72 $ 13.50 $ 21.49 $ 16.12
------- ------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (1) (0.05) 0.09 (0.07) (0.19) (0.18)
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 7.40 1.97 1.09 0.89 5.55
------- ------- ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 7.35 2.06 1.02 0.70 5.37
------- ------- ------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.09) -- -- --
NET REALIZED GAIN (2.10) (1.62) (6.80) (8.69) --
------- ------- ------- -------- --------
TOTAL DISTRIBUTIONS (2.10) (1.71) (6.80) (8.69) --
------- ------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 13.32 $ 8.07 $ 7.72 $ 13.50 $ 21.49
======= ======= ======= ======== ========
TOTAL RETURN 96.45% 27.54% 11.36% 3.72% 33.31%
======= ======= ======= ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $77,193 $73,276 $57,777 $62,793 $119,378
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.25% 1.25% 1.25% 1.25% 1.25%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS (1) (0.59)% 1.06% (0.87)% (0.88)% (0.76)%
PORTFOLIO TURNOVER RATE 204% 331% 228% 33% 25%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.01 $0.01 $0.01 $0.003
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.43% 1.35% 1.34% 1.30% 1.26%
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET
ASSETS (0.78)% 0.96% (0.95)% (0.92)% (0.77)%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
--------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.93 $ 7.63 $13.45 $21.47
------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (2) (0.08) 0.09 (0.06) (0.15)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 7.26 1.90 1.04 0.82
------- ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 7.18 1.99 0.98 0.67
------- ------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.07) -- --
NET REALIZED GAIN (2.10) (1.62) (6.80) (8.69)
------- ------ ------ ------
TOTAL DISTRIBUTIONS (2.10) (1.69) (6.80) (8.69)
------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 13.01 $ 7.93 $ 7.63 $13.45
======= ====== ====== ======
TOTAL RETURN 95.97% 26.86% 11.13% 3.58%
======= ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $14,775 $1,282 $1,313 $3,997
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.50% 1.50% 1.50% 1.50%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) (0.87)% 0.88% (1.12)% (1.09)%**
PORTFOLIO TURNOVER RATE 204% 331% 228% 33%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.02 $0.01 $0.00+ $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.66% 1.60% 1.58% 1.54%**
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (1.03)% 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 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.78 $ 13.62 $ 13.89 $ 13.94 $ 11.50
------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.26 0.20 0.35 0.41 0.38
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 0.97 0.98 3.51 2.27 3.30
------- ------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.23 1.18 3.86 2.68 3.68
------- ------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.17) (0.21) (0.35) (0.41) (0.47)
NET REALIZED GAIN (2.09) (3.81) (3.78) (2.32) (0.77)
IN EXCESS OF NET REALIZED GAIN (0.12) -- -- -- --
------- ------- -------- -------- --------
TOTAL DISTRIBUTIONS (2.38) (4.02) (4.13) (2.73) (1.24)
------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.63 $ 10.78 $ 13.62 $ 13.89 $ 13.94
======= ======= ======== ======== ========
TOTAL RETURN 11.63% 8.79% 29.20% 19.73% 33.69%
======= ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $46,768 $57,543 $86,054 $106,128 $147,365
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 0.73% 0.70% 0.70% 0.70% 0.70%
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
INTEREST EXPENSE 0.70% N/A N/A N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 1.25% 1.36% 2.15% 2.62% 3.01%
PORTFOLIO TURNOVER RATE 80% 153% 36% 42% 43%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.03 $0.02 $0.02 $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.86% 0.82% 0.80% 0.78% 0.77%
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 1.12% 1.25% 2.06% 2.55% 2.94%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
-------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.76 $13.59 $13.89 $14.06
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.20 0.07 0.28 0.29
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 0.99 1.08 3.51 2.25
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.19 1.15 3.79 2.54
------ ------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.13) (0.17) (0.31) (0.39)
NET REALIZED GAIN (2.02) (3.81) (3.78) (2.32)
IN EXCESS OF NET REALIZED GAIN (0.20) -- -- --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (2.35) (3.98) (4.09) (2.71)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.60 $10.76 $13.59 $13.89
====== ====== ====== ======
TOTAL RETURN 11.22% 8.59% 28.70% 18.57%
====== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $ 921 $1,045 $2,246 $2,555
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 0.98% 0.95% 0.95% 0.95%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING INTEREST
EXPENSE 0.95% N.A N.A N.A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 1.01% 1.12% 1.86% 2.33%**
PORTFOLIO TURNOVER RATE 80% 153% 36% 42%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.03 $0.02 $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.11% 1.07% 1.04% 1.03%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.87% 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
SEPTEMBER 16,
YEAR ENDED DECEMBER 31, 1996* TO
----------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998++ 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.98 $ 11.73 $ 10.71 $10.00
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (1) (0.28) (0.13) 0.07 (0.02)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 28.07 6.45 3.75 0.73
------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 27.79 6.32 3.82 0.71
------- ------- ------- ------
DISTRIBUTIONS
NET INVESTMENT INCOME -- -- (0.26) --
NET REALIZED GAIN (6.86) (0.07) (1.28) --
IN EXCESS OF NET REALIZED GAIN -- -- (1.00) --
RETURN OF CAPITAL -- -- (0.26) --
------- ------- ------- ------
TOTAL DISTRIBUTIONS (6.86) (0.07) (2.80) --
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 38.91 $ 17.98 $ 11.73 $10.71
======= ======= ======= ======
TOTAL RETURN 160.62% 53.90% 37.27% 7.10%
======= ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $82,190 $27,506 $31,788 $3,595
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.26% 1.29% 1.25% 1.25%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
INTEREST EXPENSE 1.25% 1.25% N/A N/A
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS (1) (1.06)% (0.95)% (1.07)% (0.70)%**
PORTFOLIO TURNOVER RATE 250% 265% 622% 77%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.00+ $0.07 $0.08 $0.22
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.28% 1.82% 2.47% 8.51%**
NET INVESTMENT LOSS TO AVERAGE NET ASSETS (1.09)% (1.47)% (2.30)% (7.96)%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
PERIOD FROM
SEPTEMBER 16
YEAR ENDED DECEMBER 31, 1996* TO
---------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998++ 1997 1996
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $17.92 $11.72 $10.71 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (2) (0.35) (0.16) 0.04 (0.02)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 27.98 6.43 3.74 0.73
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 27.63 6.27 3.78 0.71
------ ------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME -- -- (0.25) --
NET REALIZED GAIN (6.86) (0.07) (1.28) --
IN EXCESS OF NET REALIZED GAIN -- -- (1.00) --
RETURN OF CAPITAL -- -- (0.24) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (6.86) (0.07) (2.77) --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $38.69 $17.92 $11.72 $10.71
====== ====== ====== ======
TOTAL RETURN 160.26% 53.52% 36.90% 7.10%
====== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $4,192 $ 850 $2,394 $1,487
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.51% 1.55% 1.50% 1.50%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING INTEREST
EXPENSE 1.50% 1.50% N/A N/A
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS (2) (1.31)% (1.32)% (1.41)% (1.00)%**
PORTFOLIO TURNOVER RATE 250% 265% 622% 77%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.00+ $0.07 $0.04 $0.19
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.53% 2.08% 2.72% 9.14%**
NET INVESTMENT LOSS TO AVERAGE NET ASSETS (1.32)% (1.84)% (2.63)% (8.65)%**
- --------------------------------------------------------------------------------------------------------------
</TABLE>
*COMMENCEMENT OF OPERATIONS
**ANNUALIZED
+AMOUNT IS LESS THAN $0.01 PER SHARE.
++PER SHARE AMOUNTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 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.
------------------------------------------------------------------------------
Type of Registration: / / Incorporated / / Unincorporated Association
/ / Partnership / / Uniform Gift/Transfer to Minor
(ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / Trust -------------------- / / Other (SPECIFY) --------------------
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 SSN 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 is registered if such requests are ------------------------
believed to be authentic. NAME OF COMMERCIAL BANK (NOT SAVINGS BANK)
The Fund and the Fund's Transfer Agent will employ ------------------------
reasonable procedures to confirm that instructions BANK ACCOUNT NUMBER
communicated by telephone are genuine. These procedures ------------------------
include requiring the investor to provide certain BANK ABA NUMBER
personal identification information at the time an ------------------------
account is opened and prior to effecting each NAME(S) IN WHICH YOUR BANK ACCOUNT IS ESTABLISHED
transaction requested by telephone. In addition, all ------------------------
telephone transaction requests will be recorded and BANK'S STREET ADDRESS
investors may be required to provide additional ------------------------
telecopied written instructions of transaction CITY STATE ZIP CODE
requests. Neither the Fund nor the Transfer Agent will
be responsible for any loss, liability, cost or expense
for following instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
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 800-548-7786.
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 IRS.
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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the
Portfolios. The SAI 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 investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. 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
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
FIXED INCOME PORTFOLIO
THE FIXED INCOME PORTFOLIO SEEKS TO PRODUCE A HIGH TOTAL RETURN CONSISTENT WITH
THE PRESERVATION OF CAPITAL BY INVESTING PRIMARILY IN A DIVERSIFIED PORTFOLIO OF
FIXED INCOME SECURITIES.
MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO SEEKS TO MAXIMIZE CURRENT INCOME AND PRESERVE CAPITAL
WHILE MAINTAINING HIGH LEVELS OF LIQUIDITY.
MUNICIPAL MONEY MARKET PORTFOLIO
THE MUNICIPAL MONEY MARKET PORTFOLIO SEEKS TO MAXIMIZE CURRENT TAX-EXEMPT INCOME
AND PRESERVE CAPITAL.
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"),
EXCEPT THAT THE MUNICIPAL MONEY MARKET PORTFOLIO OFFERS ONLY CLASS A SHARES.
THE SECURITIES AND EXCHANGE COMMISSION (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
FIXED INCOME PORTFOLIO 1
MONEY MARKET PORTFOLIO 2
MUNICIPAL MONEY MARKET PORTFOLIO 3
ADDITIONAL RISK FACTORS AND INFORMATION 4
FEES AND EXPENSES OF THE PORTFOLIOS 6
INVESTMENT ADVISER AND SUB-ADVISER 7
MANAGEMENT FEES 7
PORTFOLIO MANAGERS 8
DISTRIBUTION OF PORTFOLIO SHARES 8
SHAREHOLDER INFORMATION 9
FINANCIAL HIGHLIGHTS 11
FIXED INCOME PORTFOLIO 12
MONEY MARKET PORTFOLIO 13
MUNICIPAL MONEY MARKET PORTFOLIO 13
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
- -------------------------------------------------------------------------------
THE FIXED INCOME PORTFOLIO SEEKS TO PRODUCE A HIGH TOTAL RETURN CONSISTENT WITH
THE PRESERVATION OF CAPITAL BY INVESTING PRIMARILY IN A DIVERSIFIED PORTFOLIO OF
FIXED INCOME SECURITIES.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to preserve capital and produce an attractive
real rate of return by investing primarily in a diversified mix of
dollar-denominated fixed income securities, particularly U.S. Government,
corporate and mortgage securities. The Portfolio ordinarily maintains an average
weighted maturity in excess of five years. Although there is no minimum or
maximum maturity for any individual security, MSDW Investment Management
actively manages the interest rate risk of the Portfolio within a range relative
to the benchmark index. The Portfolio invests exclusively in securities that
carry an investment grade rating at the time of purchase, and may invest up to
15% of its assets in fixed income securities denominated in foreign currencies.
PROCESS
MSDW Investment Management employs a value approach toward managing the
Portfolio. The MSDW Investment Management's research teams seek to identify
relative attractiveness among corporate, mortgage and U.S. Government
securities, and also may consider the relative attractiveness of non-dollar
denominated issues. MSDW Investment Management relies upon value measures to
guide its decisions regarding sector, security and country selection, such as
the relative attractiveness of the extra yield offered by securities other than
those issued by the U.S. Treasury. MSDW Investment Management also measures
various types of risk, focusing on the level of real interest rates, the shape
of the yield curve, credit risk, prepayment risk, country risk and currency
valuations. MSDW Investment Management's team builds an investment portfolio
designed to take advantage of its judgment of these factors, while balancing the
overall risk of the Portfolio, and may sell securities when it believes that
expected risk-adjusted return is low compared to other investment opportunities.
RISK
Investing in the Fixed Income Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in fixed income
securities in the hope of earning an attractive rate of return while generally
preserving capital. Although the Portfolio invests primarily in fixed income
securities that are rated in the two highest rating categories, or believed by
MSDW Investment Management to be of equivalent quality, credit risk and market
risk, particularly changes in interest rates, will still affect the prices of
fixed income securities. To the extent that the Portfolio invests in securities
denominated in a foreign currency, changes in the value of that country's
currency compared to the U.S. dollar will affect the value of the Portfolio's
investments. In addition, at times the Portfolio's market sector, U.S. fixed
income 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 MAY
15, 1991
1992 6.82%
1993 9.07%
1994 -3.10%
1995 18.76%
1996 4.61%
1997 9.54%
1998 7.93%
1999 -1.56%
HIGH (QUARTER)
4/95 - 6/95
6.30%
LOW (QUARTER)
1/94 - 3/94
- -3.13%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B LEHMAN
(COMMENCED (COMMENCED AGGREGATE
OPERATIONS ON OPERATIONS ON BOND INDEX*
MAY 15, 1991) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
PAST ONE YEAR -1.56% -1.76% -0.82% -0.82%
- ----------------------------------------------------------------------------------------------------
PAST FIVE YEARS 7.65% N/A 7.73% N/A
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION 7.24% 4.89% 7.41% 5.21%
</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 LEHMAN AGGREGATE BOND INDEX IS AN UNMANAGED INDEX COMPRISED OF THE
GOVERNMENT/CORPORATE BOND INDEX, THE MORTGAGE-BACKED SECURITIES INDEX AND THE
ASSET-BACKED SECURITIES INDEX.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- -------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO SEEKS TO MAXIMIZE CURRENT INCOME AND PRESERVE CAPITAL
WHILE MAINTAINING HIGH LEVELS OF LIQUIDITY.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management and Morgan Stanley Dean Witter Advisors Inc. ("MSDW
Advisors"), as investment sub-adviser, seek to maximize current income and
preserve capital while maintaining liquidity by investing in money market
instruments with effective maturities of 397 days or less. In selecting
investments, MSDW Investment Management and MSDW Advisors seek to maintain a
share price of $1.00 per share.
PROCESS
MSDW Advisors assesses current and projected market and economic conditions,
particularly interest rates. Based on this analysis and the shape of the money
market yield curve, MSDW Advisors uses gradual shifts in average maturity to
manage the Portfolio. MSDW Advisors selects particular money market securities
that it believes offer the most attractive risk/return trade-off. Portfolio
investments are primarily U.S. government and agency obligations, or corporate
debt and bank obligations that pay fixed or variable rates of interest.
RISK
Investing in the Money Market Portfolio may be appropriate for you if you want
to minimize the risk of loss of principal and maintain liquidity of your
investment, and at the same time receive a return on your investment. The
Portfolio invests only in money market instruments that MSDW Investment
Management and MSDW Advisors believe present minimal credit risk. However, an
investment in the Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Portfolio
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
THE PORTFOLIO WILL INVEST IN A DIVERSIFIED PORTFOLIO OF HIGH QUALITY, SHORT-TERM
MONEY MARKET INSTRUMENTS. MONEY MARKET INSTRUMENTS MAY INCLUDE CERTIFICATES OF
DEPOSITS, BANKERS' ACCEPTANCES, COMMERCIAL PAPER, U.S. TREASURY SECURITIES, AND
SOME MUNICIPAL SECURITIES AND REPURCHASE AGREEMENTS. IN SELECTING THESE
INVESTMENTS, MSDW INVESTMENT MANAGEMENT AND MSDW ADVISORS FOLLOW STRICT RULES
ABOUT CREDIT RISK, MATURITY AND DIVERSIFICATION OF THE PORTFOLIO'S INVESTMENTS.
FOR EXAMPLE, THE PORTFOLIO'S MONEY MARKET INSTRUMENTS WILL BE RATED WITHIN THE
TWO HIGHEST CATEGORIES ASSIGNED BY A RECOGNIZED RATING ORGANIZATION OR, IF NOT
RATED, ARE OF COMPARABLE QUALITY AS DETERMINED BY MSDW ADVISORS. IN ADDITION,
THESE INSTRUMENTS WILL HAVE A MAXIMUM REMAINING MATURITY OF 397 DAYS OR LESS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
NOVEMBER 15, 1988
1989 9.12%
1990 8.03%
1991 5.89%
1992 3.46%
1993 2.76%
1994 3.84%
1995 5.51%
1996 5.03%
1997 5.20%
1998 5.20%
1999 4.80%
HIGH (QUARTER)
4/89 - 6/89
2.34%
LOW (QUARTER)
4/93 - 6/93
0.67%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (HAVE NOT
OPERATIONS ON YET COMMENCED
NOVEMBER 15, 1988) OPERATIONS)
<S> <C> <C>
- ----------------------------------------------------------------------------------
SINCE INCEPTION 5.37% N/A
- ----------------------------------------------------------------------------------
PAST ONE YEAR 4.80% N/A
- ----------------------------------------------------------------------------------
PAST FIVE YEARS 5.15% N/A
- ----------------------------------------------------------------------------------
PAST TEN YEARS 5.03% N/A
</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. HOW THE PORTFOLIO HAS
PERFORMED IN THE PAST DOES NOT NECESSARILY INDICATE HOW THE PORTFOLIO WILL
PERFORM IN THE FUTURE.
YOU MAY OBTAIN THE CURRENT 7-DAY YIELD OF THE MONEY MARKET PORTFOLIO BY CALLING
1-800-548-7786.
2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
- -------------------------------------------------------------------------------
THE MUNICIPAL MONEY MARKET PORTFOLIO SEEKS TO MAXIMIZE CURRENT TAX-EXEMPT INCOME
AND PRESERVE CAPITAL.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management and MSDW Advisors, as investment sub-adviser, seek to
maximize current income and preserve capital while maintaining liquidity by
investing in money market instruments, with effective maturities of 397 days or
less, that pay interest that is exempt from federal taxation. In selecting
investments, MSDW Investment Management and MSDW Advisors seek to maintain a
share price of $1.00 per share.
PROCESS
MSDW Advisors assesses current and projected market and economic conditions,
particularly interest rates. Based on this analysis, MSDW Advisors uses gradual
shifts in average maturity to manage the Portfolio. MSDW Advisors selects
particular municipal money market securities that it believes offer the most
attractive risk/return trade-off. Individual portfolio securities are money
market obligations issued by various states, territories and possessions of the
United States and the District of Columbia, and their political subdivisions,
agencies and instrumentalities. Typically, the Portfolio will invest at least
80% of its assets in tax-exempt municipal obligations. The Portfolio will not
invest in municipal obligations that pay interest subject to the alternative
minimum tax.
RISK
Investing in the Municipal Money Market Portfolio may be appropriate for you if
you want to minimize the risk of loss of principal and maintain liquidity of
your investment, and at the same time receive a return on your investment that
is exempt from federal income tax. The Portfolio invests only in municipal money
market instruments that MSDW Investment Management and MSDW Advisors believe
present minimal credit risk. However, an investment in the Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolio.
THE PORTFOLIO WILL INVEST IN A PORTFOLIO OF HIGH QUALITY, SHORT-TERM MUNICIPAL
SECURITIES AND REPURCHASE AGREEMENTS. IN SELECTING THESE INVESTMENTS, MSDW
INVESTMENT MANAGEMENT AND MSDW ADVISORS FOLLOW STRICT RULES ABOUT CREDIT RISK,
MATURITY AND DIVERSIFICATION OF THE PORTFOLIO'S INVESTMENTS. FOR EXAMPLE, THE
PORTFOLIO'S MONEY MARKET INSTRUMENTS WILL BE RATED WITHIN THE TWO HIGHEST
CATEGORIES ASSIGNED BY A RECOGNIZED RATING ORGANIZATION OR, IF NOT RATED, ARE OF
COMPARABLE QUALITY AS DETERMINED BY MSDW ADVISORS. IN ADDITION, THESE
INSTRUMENTS WILL HAVE A MAXIMUM REMAINING MATURITY OF 397 DAYS OR LESS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
FEBRUARY 10, 1989
1990 5.39%
1991 4.06%
1992 2.48%
1993 1.91%
1994 2.44%
1995 3.44%
1996 3.02%
1997 3.17%
1998 3.00%
1999 2.77%
HIGH (QUARTER)
4/89 - 6/89
1.57%
LOW (QUARTER)
1/94 - 3/94
0.46%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A
(COMMENCED
OPERATIONS ON
FEBRUARY 10, 1989)
<S> <C>
- --------------------------------------------------------------------------------
SINCE INCEPTION 3.40%
- --------------------------------------------------------------------------------
PAST ONE YEAR 2.77%
- --------------------------------------------------------------------------------
PAST FIVE YEARS 3.08%
- --------------------------------------------------------------------------------
PAST TEN YEARS 3.17%
</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. HOW THE PORTFOLIO HAS
PERFORMED IN THE PAST DOES NOT NECESSARILY INDICATE HOW THE PORTFOLIO WILL
PERFORM IN THE FUTURE.
YOU MAY OBTAIN THE CURRENT 7-DAY YIELD OF THE MUNICIPAL MONEY MARKET PORTFOLIO
BY CALLING 1-800-548-7786.
3
<PAGE>
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIOS. THE PORTFOLIOS' INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED
IN MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY
IS A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI AND
OTHER REPORTS AND INFORMATION, SEE THE BACK COVER OF THIS PROSPECTUS.
- ----------------------------------------------------------------------------
PRICE VOLATILITY
The value of your investment in the Fixed Income 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, companies or governments. 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. Fixed income securities, regardless of credit quality,
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 any of these Portfolios.
FIXED INCOME SECURITIES
Investments in fixed income securities are subject to credit risk and market
risk. Credit risk is the possibility that an issuer may be unable to meet its
scheduled principal and interest payments. Market risk is the possibility that a
change in interest rates or the market's perception of an issuer's prospects may
adversely affect the value of a fixed income security. Generally, fixed income
securities decrease in value as interest rates rise and vice versa. Prices of
longer term securities also are generally more volatile, so the average maturity
of the securities in the Portfolios affects risk.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are fixed-income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase and its market price will
decrease. When interest rates fall, however, mortgage-backed securities may not
gain as much in market value because additional mortgage prepayments must be
reinvested at lower interest rates. Prepayment risk may make it difficult to
calculate the average maturity of a portfolio of mortgage-backed securities and,
therefore, to assess the volatility risk of that portfolio.
DERIVATIVES
The Fixed Income Portfolio 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 the
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, the Portfolio may enter into derivatives transactions only with
counterparties that meet certain requirements for credit quality and collateral.
Also, the 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.
4
<PAGE>
The 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 the
Portfolio, if MSDW Investment Management is not successful in employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
INVESTMENT DISCRETION
In pursuing the Portfolios' investment objectives, MSDW Investment Management
and MSDW Advisors have considerable leeway in deciding which investments it
buys, holds or sells on a day-to-day basis, and which trading strategies it
uses. For example, MSDW Investment Management and MSDW Advisors may determine to
use some permitted trading strategies while not using others. The success or
failure of such decisions will affect the Portfolios' performance.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
TEMPORARY DEFENSIVE
INVESTMENTS
When MSDW Investment Management or MSDW Advisors 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 or MSDW Advisors
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 will cause a Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders. The Fixed Income
Portfolio may engage in frequent trading of securities to achieve its investment
objective.
5
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
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, which are described in the footnotes below,
and/or expense reimbursements from MSDW Investment Management. No fee waivers
are in effect for the Money Market and Municipal Money Market Portfolios.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
MUNICIPAL
FIXED MONEY MONEY
INCOME MARKET MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
MANAGEMENT FEES
- ----------------------------------------------------------------------------------------------------
CLASS A 0.35% 0.30% 0.30%
- ----------------------------------------------------------------------------------------------------
CLASS B 0.35% 0.30% N/A
12b-1 FEE
- ----------------------------------------------------------------------------------------------------
CLASS A NONE NONE NONE
- ----------------------------------------------------------------------------------------------------
CLASS B 0.15%+ 0.25% N/A
OTHER EXPENSES
- ----------------------------------------------------------------------------------------------------
CLASS A 0.22% 0.20% 0.20%
- ----------------------------------------------------------------------------------------------------
CLASS B 0.22% 0.20%++ N/A
TOTAL ANNUAL FUND OPERATING EXPENSES
- ----------------------------------------------------------------------------------------------------
CLASS A 0.57% 0.50% 0.50%
- ----------------------------------------------------------------------------------------------------
CLASS B 0.72% 0.75%++ N/A
</TABLE>
+THE ACTUAL 12b-1 FEE PAID BY THE PORTFOLIO FOR THE LAST FISCAL YEAR WAS 0.15%
BECAUSE MORGAN STANLEY HAS VOLUNTARILY AGREED TO WAIVE 0.10% OF THE 0.25%
DISTRIBUTION FEE IT IS ENTITLED TO RECEIVE.
++ESTIMATED.
*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 PORTFOLIOS SO THAT TOTAL ANNUAL OPERATING EXPENSES WILL
NOT EXCEED 0.45% FOR CLASS A SHARES AND 0.60% FOR CLASS B SHARES OF THE FIXED
INCOME PORTFOLIO; 0.55% FOR CLASS A SHARES AND 0.80% FOR CLASS B SHARES OF THE
MONEY MARKET PORTFOLIO; AND 0.57% FOR CLASS A SHARES OF THE MUNICIPAL MONEY
MARKET 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 WOULD EXCEED THE EXPENSE RATIO SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSE REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES INCURRED BY INVESTORS WERE 0.45% FOR CLASS A SHARES
AND 0.60% FOR CLASS B SHARES OF THE FIXED INCOME PORTFOLIO. TOTAL OPERATING
EXPENSES FOR THE MONEY MARKET AND MUNICIPAL MONEY MARKET PORTFOLIOS DID NOT
EXCEED THE AMOUNTS SHOWN IN THE FIRST PARAGRAPH AND, ACCORDINGLY, TOTAL
OPERATING EXPENSES INCURRED BY INVESTORS IN THESE PORTFOLIOS WERE AS SHOWN IN
THE TABLE ABOVE.
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.
6
<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
<S> <C> <C> <C> <C>
FIXED INCOME PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $58 $183 $318 $714
- ----------------------------------------------------------------------------------------------------
CLASS B $74 $230 $401 $894
MONEY MARKET PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $51 $160 $280 $628
- ----------------------------------------------------------------------------------------------------
CLASS B+ $77 $240 N/A N/A
MUNICIPAL MONEY MARKET PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $51 $160 $280 $628
</TABLE>
+THE FUND HAS NOT PROJECTED EXPENSES BEYOND THE THREE YEAR PERIOD SHOWN BECAUSE
THE CLASS B SHARES OF THE MONEY MARKET PORTFOLIO WERE NOT OPERATIONAL AS OF
DECEMBER 31, 1999.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND SUB-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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies, managed assets of approximately
$184.8 billion, including assets under fiduciary advice.
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), which also is a
subsidiary of MSDW, located at Two World Trade Center, New York, New York 10048,
serves as investment sub-adviser and manager for the Money Market and Municipal
Money Market Portfolios on a day-to-day basis. MSDW Advisors selects, buys and
sells securities for these Portfolios under the supervision of MSDW Investment
Management.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
MUNICIPAL
MONEY MONEY
FIXED INCOME MARKET MARKET
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, 1999 0.23% 0.23% 0.30% N/A 0.30% N/A
(NET OF WAIVER AND AS A PERCENTAGE OF AVERAGE NET ASSETS)
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
THE FOLLOWING INDIVIDUALS HAVE PRIMARY DAY-TO-DAY PORTFOLIO MANAGEMENT
RESPONSIBILITY FOR THE FIXED INCOME PORTFOLIO:
- ----------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
WARREN ACKERMAN, III, THOMAS L. BENNETT, KENNETH B. DUNN, ROBERTO M. SELLA AND
W. DAVID ARMSTRONG
Warren Ackerman is a Principal of MSDW Investment Management and Morgan Stanley.
Prior to joining MSDW Investment Management in 1993, he spent over 14 years with
Bankers Trust Company as a Managing Director responsible for institutional
active fixed income management. Mr. Ackerman is a graduate of Monmouth College
with a B.S. in Economics. Thomas L. Bennett, a Managing Director of Morgan
Stanley, joined MSDW Investment Management's affiliated institutional investment
management company, Miller Anderson & Sherrerd, LLP ("MAS") in 1984. He is
Chairman of the Board of Trustees of MAS Funds, a member of the Executive
Committee of MAS and a Director of MAS Fund Distributors, Inc. Mr. Bennett holds
a B.S. in Chemistry and an M.B.A. from the University of Cincinnati. Kenneth B.
Dunn, a Managing Director of Morgan Stanley, joined MAS in 1987. Mr. Dunn
received a B.S. and M.B.A. from The Ohio State University and a Ph.D. from
Purdue University. Roberto M. Sella, a Managing Director of Morgan Stanley,
joined MAS in 1992. He served as a Financial Analyst from 1992 to 1998 and as a
Portfolio Manager beginning in 1998. Mr. Sella graduated from the University of
Wisconsin (PHI BETA KAPPA) in 1987 and received an M.B.A. from The Wharton
School of the University of Pennsylvania in 1993. W. David Armstrong is a
Managing Director of Morgan Stanley and joined MSDW Investment Management in
1998 as a Portfolio Manager. He joined the management team for the MAS Funds
Fixed Income and Special Purpose Fixed Income Portfolios in 2000. He served as a
Senior Vice President and Manager of U.S. proprietary trading at Lehman Brothers
from 1995 to 1997. Mr. Armstrong received a degree in Economics from the State
University of New York (SUNY) at Plattsburg in 1981 and an M.B.A. from the
Wharton School of the University of Pennsylvania in 1986. Mr. Ackerman has had
primary responsibility for managing the Portfolio's assets since March 1994.
Messrs. Bennett, Dunn, Sella and Armstrong have shared primary responsibility
for managing the Portfolio's assets since May 2000.
- -------------------------------------------------------------------------------
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 (the
"Plan") under the Investment Company Act of 1940. 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. Morgan Stanley has agreed to waive
0.10% of the 0.25% distribution fee it is entitled to receive from the Fixed
Income Portfolio. 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.
8
<PAGE>
- -------------------------------------------------------------------------------
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 calculating NAV, the Fixed Income 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 Portfolio
may hold portfolio securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Portfolio does not
calculate NAV. As a result, the value of these investments may change on days
when you cannot purchase or sell shares.
The Money Market and Municipal Money Market Portfolios seek to maintain a stable
NAV per share of $1.00 by valuing portfolio securities using "amortized cost."
Amortized cost involves valuing a portfolio security at cost and, thereafter,
assuming a constant amortization to maturity of any discount or premium. This
method of valuation does not take into account any unrealized gains or losses or
the impact of fluctuating interest rates on the market value of portfolio
securities. While using amortized cost provides certainty in valuation, it may
result in periods during which the value as determined by amortized cost is
higher or lower than the price the Portfolio would receive if it sold the
security.
PRICING OF PORTFOLIO SHARES
You may buy or sell (redeem) Class A and Class B shares of each Portfolio at the
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Fixed Income Portfolio as of the close of the New
York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern Time) and for the Money
Market and Municipal Money Market Portfolios as of 12:00 noon Eastern Time and
11:00 a.m. Eastern Time, respectively, on each day that the NYSE is open for
business (the "Pricing Time").
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"), except for Class B shares of the Money Market Portfolio, which
may be purchased only through a Financial Intermediary. You may purchase shares
of the Portfolios 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 the Fixed Income Portfolio and $100,000 for
Class A shares of the Money Market and Municipal Money Market Portfolios. There
is no minimum initial investment for Class B shares of the Money Market
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 NAV calculated at the
Pricing Time following receipt of your purchase order and payment.
9
<PAGE>
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 NAV 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.
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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
10
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The policy of the Fixed Income Portfolio is to distribute to shareholders
substantially all of its taxable net investment income in the form of a monthly
dividend and to distribute net capital gains, if any, at least annually.
Each of the Money Market and Municipal Money Market Portfolios computes net
investment income and declares a dividend as of 1:00 p.m. Eastern Time on each
day. These dividends accrue daily and are distributed on the 15th day of each
month, or the next business day if the 15th is a holiday or weekend. The Money
Market and Municipal Money Market Portfolios will distribute capital gains, if
any, at least annually.
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.
The Municipal Money Market Portfolio generally distributes income that is exempt
from federal taxation, however, the Portfolio may invest in securities that
generate taxable income. Income exempt from federal tax may be subject to state
and local taxes.
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 SAI and are
included in the Fund's December 31, 1999 Annual Report to Shareholders. The
Annual Report and the Fund's financial statements, as well as the SAI, are
available at no cost from the Fund at the toll free number noted on the back
cover to this Prospectus.
11
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.08 $ 10.88 $ 10.58 $ 10.81 $ 9.82
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.64 0.62 0.65 0.67 0.72
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (0.81) 0.22 0.33 (0.20) 1.06
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS (0.17) 0.84 0.98 0.47 1.78
-------- -------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.64) (0.61) (0.68) (0.70) (0.79)
IN EXCESS OF NET INVESTMENT INCOME -- -- (0.00)+ (0.00)+ --
NET REALIZED GAIN -- (0.03) -- -- --
IN EXCESS OF NET REALIZED GAIN (0.03) -- -- -- --
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.67) (0.64) (0.68) (0.70) (0.79)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.24 $ 11.08 $ 10.88 $ 10.58 $ 10.81
======== ======== ======== ======== ========
TOTAL RETURN (1.56)% 7.93% 9.54% 4.61% 18.76%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $171,467 $212,718 $183,192 $130,733 $165,527
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 0.45% 0.45% 0.45% 0.45% 0.45%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 5.87% 5.63% 6.11% 6.30% 6.85%
PORTFOLIO TURNOVER RATE 97% 176% 163% 183% 172%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.01 $0.01 $0.02 $0.02 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.57% 0.58% 0.60% 0.60% 0.59%
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 5.75% 5.51% 5.97% 6.15% 6.71%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
-------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.10 $10.89 $10.58 $10.81
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.61 0.61 0.64 0.64
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (0.80) 0.22 0.33 (0.19)
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.19) 0.83 0.97 0.45
------ ------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.63) (0.59) (0.66) (0.68)
NET REALIZED GAIN -- (0.03) -- --
IN EXCESS OF NET REALIZED GAIN (0.03) -- -- --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.66) (0.62) (0.66) (0.68)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.25 $11.10 $10.89 $10.58
====== ====== ====== ======
TOTAL RETURN (1.76)% 7.85% 9.48% 4.35%
====== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $2,084 $3,649 $4,834 $1,462
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 0.60% 0.60% 0.60% 0.60%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 5.69% 5.50% 5.93% 6.15%**
PORTFOLIO TURNOVER RATE 97% 176% 163% 183%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.01 $0.02 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.72% 0.72% 0.74% 0.74%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.58% 5.38% 5.78% 6.01%**
- -----------------------------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+AMOUNT IS LESS THAN $0.01 PER SHARE.
12
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SELECTED PER SHARE DATA AND ----------------------------------------------------------------
RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.047 0.051 0.051 0.049 0.054
---------- ---------- ---------- ---------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.047) (0.051) (0.051) (0.049) (0.054)
---------- ---------- ---------- ---------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ========
TOTAL RETURN 4.80% 5.20% 5.20% 5.03% 5.51%
========== ========== ========== ========== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $2,931,316 $1,958,177 $1,506,210 $1,284,633 $836,693
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.50% 0.49% 0.49% 0.52% 0.51%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE
NET ASSETS 4.73% 5.07% 5.12% 4.92% 5.37%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.027 0.030 0.031 0.030 0.034
---------- -------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.027) (0.030) (0.031) (0.030) (0.034)
---------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ======== ======== ======== ========
TOTAL RETURN 2.77% 3.00% 3.17% 3.02% 3.44%
========== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $1,405,646 $990,579 $804,607 $721,410 $451,519
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.50% 0.50% 0.50% 0.53% 0.52%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 2.76% 2.96% 3.14% 2.98% 3.38%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
<TABLE>
<S> <C>
FIXED INCOME PORTFOLIO
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER MONEY MARKET PORTFOLIO
INSTITUTIONAL FUND, INC. MUNICIPAL MONEY MARKET
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.
------------------------------------------------------------------------------
Type of Registration: / / Incorporated / / Unincorporated Association
/ / Partnership / / Uniform Gift/Transfer to Minor
(ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / Trust -------------------- / / Other (SPECIFY) --------------------
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 SSN 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
($100,000 for Money Market and Municipal Money Market
Portfolios) and Class B shares minimum $100,000 for
the Fixed Income and Municipal Bond Portfolios.
Please indicate Portfolio, class and amount for
purchase of the following Portfolio(s):
<TABLE>
<C> <S> <C>
FIXED INCOME PORTFOLIO / / Class A Shares (065) $ ---------- / / Class B Shares (040) $ ----------
MONEY MARKET PORTFOLIO / / Class A Shares (060) $ ----------
MUNICIPAL MONEY MARKET PORTFOLIO / / Class A Shares (061) $ ----------
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 is registered
if such requests are believed to be authentic. ------------------------
The Fund and the Fund's Transfer Agent will employ NAME OF COMMERCIAL BANK (NOT SAVINGS BANK)
reasonable procedures to confirm that instructions ------------------------
communicated by telephone are genuine. These BANK ACCOUNT NUMBER
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 NAME(S) IN WHICH YOUR BANK ACCOUNT IS ESTABLISHED
telephone. In addition, all telephone transaction ------------------------
requests will be recorded and investors may be BANK'S STREET ADDRESS
required to provide additional telecopied written ------------------------
instructions of transaction requests. Neither the CITY STATE ZIP CODE
Fund nor the Transfer Agent will be responsible
for any loss, liability, cost or expense for
following instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
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 800-548-7786.
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 IRS.
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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the
Portfolios. The SAI 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 investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. To aid you in obtaining this
information, the Fund's Investment Company Act registration number is 811-05624.
[ICON] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
P.O. Box 2798
Boston, Massachusetts 02208-2798
FOR INFORMATION CALL 1-800-548-7786
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
PORTFOLIOS OF [LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
EMERGING MARKETS PORTFOLIO
THE EMERGING MARKETS PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF ISSUERS IN EMERGING MARKET
COUNTRIES.
EMERGING MARKETS DEBT PORTFOLIO
THE EMERGING MARKETS DEBT PORTFOLIO SEEKS HIGH TOTAL RETURN BY INVESTING
PRIMARILY IN FIXED INCOME SECURITIES OF GOVERNMENT AND GOVERNMENT-RELATED
ISSUERS AND, TO A LESSER EXTENT, OF CORPORATE ISSUERS IN EMERGING MARKET
COUNTRIES.
LATIN AMERICAN PORTFOLIO
THE LATIN AMERICAN PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF LATIN AMERICAN ISSUERS.
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 (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
EMERGING MARKETS PORTFOLIO 1
EMERGING MARKETS DEBT PORTFOLIO 2
LATIN AMERICAN PORTFOLIO 3
ADDITIONAL RISK FACTORS AND INFORMATION 4
FEES AND EXPENSES OF THE PORTFOLIOS 6
INVESTMENT ADVISER 7
MANAGEMENT FEES 7
PORTFOLIO MANAGERS 8
DISTRIBUTION OF PORTFOLIO SHARES 9
SHAREHOLDER INFORMATION 9
FINANCIAL HIGHLIGHTS 11
EMERGING MARKETS PORTFOLIO 12
EMERGING MARKETS DEBT PORTFOLIO 13
LATIN AMERICAN PORTFOLIO 14
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
- -------------------------------------------------------------------------------
THE EMERGING MARKETS PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF ISSUERS IN EMERGING MARKET
COUNTRIES.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maximize returns by investing in
growth-oriented equity securities in emerging markets. MSDW Investment
Management's investment approach combines top-down country allocation with
bottom-up stock selection. Investment selection criteria include attractive
growth characteristics, reasonable valuations and company managements with a
strong shareholder value orientation.
PROCESS
MSDW Investment Management's global strategists analyze the global economic
environment, particularly its impact on emerging markets and allocates the
Portfolio's assets among emerging markets based on relative economic, political
and social fundamentals, stock valuations and investor sentiment. MSDW
Investment Management invests within countries based on the work of country
specialists who conduct extensive fundamental analysis of companies within these
markets and seek to identify companies with strong earnings growth prospects. To
manage risk, MSDW Investment Management emphasizes thorough macroeconomic and
fundamental research.
RISK
Investing in the Emerging Markets Portfolio may be appropriate for you if you
are willing to accept the risks and uncertainties of investing in the equity
securities of issuers in emerging markets 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,
emerging markets equity securities, may underperform relative to other sectors.
THE RISK 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
SEPTEMBER 25, 1992
1993 85.91%
1994 -9.63%
1995 -12.77%
1996 12.19%
1997 -1.03%
1998 -25.42%
1999 101.78%
HIGH (QUARTER)
10/99 - 12/99
52.65%
LOW (QUARTER)
7/98 - 9/98
- -23.96%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B MSCI EMERGING
(COMMENCED (COMMENCED MARKETS FREE
OPERATIONS ON OPERATIONS ON INDEX**
SEPTEMBER 25, 1992) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PAST ONE YEAR 101.78% 101.26% 66.41% 66.41%
- -----------------------------------------------------------------------------------------------------------
PAST FIVE YEARS 7.84% N/A 2.00% N/A
- -----------------------------------------------------------------------------------------------------------
SINCE INCEPTION 13.45% 13.17% 9.49% 3.71%
</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 MSCI EMERGING MARKETS FREE INDEX IS A MARKET CAPITALIZATION WEIGHTED INDEX
COMPRISED OF COMPANIES THAT ARE REPRESENTATIVE OF THE MARKET STRUCTURE OF
DEVELOPING COUNTRIES IN LATIN AMERICA, ASIA, EASTERN EUROPE, THE MIDDLE EAST
AND AFRICA.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
EMERGING MARKETS DEBT PORTFOLIO
- -------------------------------------------------------------------------------
THE EMERGING MARKETS DEBT PORTFOLIO SEEKS HIGH TOTAL RETURN BY INVESTING
PRIMARILY IN FIXED INCOME SECURITIES OF GOVERNMENT AND GOVERNMENT-RELATED
ISSUERS AND, TO A LESSER EXTENT, OF CORPORATE ISSUERS IN EMERGING MARKET
COUNTRIES.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks high total return by investing in a portfolio
of emerging market debt that offers low correlation to many other asset classes.
Using macroeconomic and fundamental analysis, MSDW Investment Management seeks
to identify developing countries that are undervalued and have attractive or
improving fundamentals. After the country allocation is determined, the sector
and security selection is made within each country.
PROCESS
MSDW Investment Management's global allocation team analyzes the global economic
environment and its impact on emerging markets. MSDW Investment Management
focuses on investing in countries that show signs of positive fundamental
change. This analysis considers macroeconomic factors, such as GDP growth,
inflation, monetary policy, fiscal policy and interest rates and sociopolitical
factors, such as political risk, leadership, social stability and commitment to
reform. In selecting securities, MSDW Investment Management first examines yield
curves with respect to a country and then considers instrument-specific
criteria, including (i) spread duration; (ii) real interest rates; and
(iii) liquidity. The Portfolio's holdings may range in maturity from overnight
to 30 years or more and will not be subject to any minimum credit rating
standard. MSDW Investment Management may, when or if available, use certain
strategies, including the use of derivatives to protect the Portfolio from
overvalued currencies or to take advantage of undervalued currencies.
RISK
Investing in the Emerging Markets Debt Portfolio may be appropriate for you if
you are willing to accept the risks and uncertainties of investing in
lower-rated and unrated fixed income securities in emerging markets in the hope
of earning superior total return. Market prices of fixed income securities
respond to economic developments as well as to perceptions of the
creditworthiness of individual issuers, including governments. Generally, fixed
income securities decrease in value as interest rates rise and vice versa.
Investing in emerging markets intensifies risk, because lower quality fixed
income securities are more volatile in price. The Portfolio invests in many
fixed income securities that are rated below "investment grade" or are not
rated, but are of equivalent quality. These fixed income securities are often
referred to as "high yield securities" or "junk bonds." High yield securities
range from those for which the prospect for repayment of principal and interest
is predominantly speculative to those which are currently in default on
principal or interest payments. When the Portfolio invests in high yield
securities, it generally seeks to receive a correspondingly higher return on the
securities it holds to compensate it for the additional credit risk and market
risk it has assumed. Prices of longer term fixed income securities also are
generally more volatile, so the average maturity of the securities in the
Portfolio affects risk. At times the Portfolio's market sector, emerging markets
debt 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 OF THE COST OF REPLACING
THE BORROWED SECURITY. IF MSDW INVESTMENT MANAGEMENT INCORRECTLY PREDICTS THAT
THE PRICE OF A 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. THE PORTFOLIO MAY BORROW MONEY FOR
INVESTMENT PURPOSES. BORROWING FOR INVESTMENT PURPOSES IS A SPECULATIVE ACTIVITY
THAT CREATES LEVERAGE. LEVERAGE WILL MAGNIFY THE EFFECT OF INCREASES AND
DECREASES IN PRICES OF PORTFOLIO SECURITIES.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
FEBRUARY 1, 1994
1995 28.23%
1996 50.52%
1997 18.29%
1998 -35.95%
1999 29.22%
HIGH (QUARTER)
4/95 - 6/95
29.97%
LOW (QUARTER)
7/98 - 9/98
- -39.82%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
J.P. MORGAN
J.P. MORGAN EMERGING
EMERGING MARKETS
CLASS A CLASS B MARKETS BOND INDEX
(COMMENCED (COMMENCED BOND PLUS GLOBAL
OPERATIONS ON OPERATIONS ON INDEX (JPM EMBI GLOBAL)**
FEBRUARY 1, JANUARY 2, (JPM EMBI(+))*
1994) 1996) CLASS A CLASS B CLASS A CLASS B
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
PAST ONE YEAR 29.22% 28.01% 25.97% 25.97% 25.76% 25.76%
- --------------------------------------------------------------------------------------------------------------------------------
PAST FIVE YEARS 13.57% N/A 16.58% N/A 20.16% N/A
- --------------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION 8.53% 9.75% 9.95% 13.86% 10.14% 14.11%
</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 INDICES 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 INDICES DO NOT SHOW ACTUAL
INVESTMENT RETURNS OR REFLECT PAYMENT OF MANAGEMENT OR BROKERAGE FEES, WHICH
WOULD LOWER THE INDICES' PERFORMANCE. THE TABLE SEPARATELY COMPARES CLASS A AND
CLASS B SHARES TO THE INDICES SO THAT YOU CAN COMPARE PERFORMANCE FOR EACH CLASS
FROM ITS COMMENCEMENT DATE. THE INDICES THEMSELVES DO 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.
* JPM EMBI (+) IS A MARKET WEIGHTED INDEX COMPOSED OF ALL BRADY BONDS,
OUTSTANDING LOANS AND EUROBONDS, AS WELL AS U.S. DOLLAR LOCAL MARKET
INSTRUMENTS OF ARGENTINA, BRAZIL, BULGARIA, COLOMBIA, ECUADOR, MEXICO,
MOROCCO, NIGERIA, PANAMA, PERU, THE PHILIPPINES, POLAND, RUSSIA, SOUTH KOREA
AND VENEZUELA.
** THE JPM EMBI GLOBAL TRACKS TOTAL RETURNS FOR U.S. DOLLAR-DENOMINATED DEBT
INSTRUMENTS ISSUED BY EMERGING MARKETS SOVEREIGN AND QUASI-SOVEREIGN
ENTITIES: BRADY BONDS, LOANS, EUROBONDS, AND LOCAL MARKET INSTRUMENTS. THE
JPM EMBI GLOBAL INCLUDES COVERAGE OF 27 EMERGING MARKET COUNTRIES.
PREVIOUSLY, THE PORTFOLIO'S RETURNS HAD BEEN COMPARED ONLY TO THE JPM EMBI
(+). THE ADVISER BELIEVES THAT THE JPM EMBI GLOBAL HAS A MORE COMPREHENSIVE
COVERAGE OF GEOGRAPHIC REGIONS AND TYPES OF SECURITIES IN WHICH THE PORTFOLIO
MAY INVEST.
2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
LATIN AMERICAN PORTFOLIO
- -------------------------------------------------------------------------------
THE LATIN AMERICAN PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF LATIN AMERICAN ISSUERS.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maximize returns by investing in
growth-oriented securities in Latin American markets. MSDW Investment
Management's investment approach combines top-down country allocation with
bottom-up stock selection. Investment selection criteria include attractive
growth characteristics, reasonable valuations and managements that have strong
shareholder value orientation.
PROCESS
MSDW Investment Management allocates the Portfolio's assets among Latin American
countries based on relative economic, political and social fundamentals, stock
valuations and investor sentiment. MSDW Investment Management invests within
countries based on fundamental analysis of Latin American companies and seeks to
identify companies with strong earnings growth potential. The Portfolio may
concentrate in the Latin American telecommunications or financial services
industries because of the relatively small size of the overall Latin American
equity markets and the possibility that one or more Latin American markets may
become dominated by issuers engaged in these industries.
RISK
Investing in the Latin American Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in the equity
securities of issuers in Latin America in the hope of achieving 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,
equity securities of Latin American issuers, may underperform relative to other
sectors.
THE RISK 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 OF THE COST OF REPLACING
THE BORROWED SECURITY. IF MSDW INVESTMENT MANAGEMENT INCORRECTLY PREDICTS THAT
THE PRICE OF A 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
JANUARY 18, 1995
1996 48.77%
1997 41.28%
1998 -37.10%
1999 71.28%
HIGH (QUARTER)
10/99 - 12/99
40.10%
LOW (QUARTER)
7/98 - 9/98
- -31.43%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
CLASS A CLASS B MSCI EMERGING MSCI EMERGING
(COMMENCED (COMMENCED MARKETS GLOBAL MARKETS FREE
OPERATIONS ON OPERATIONS ON LATIN AMERICA LATIN AMERICA
JANUARY 18, JANUARY 2, INDEX* INDEX*
1995) 1996) CLASS A CLASS B CLASS A CLASS B
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
PAST ONE YEAR 71.28% 70.85% 65.45% 65.45% 58.89% 58.89%
- --------------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION 15.80% 21.20% 9.69% 13.85% 8.98% 12.83%
</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 INDICES 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 INDICES DO NOT SHOW ACTUAL
INVESTMENT RETURNS OR REFLECT PAYMENT OF MANAGEMENT OR BROKERAGE FEES, WHICH
WOULD LOWER THE INDICES' PERFORMANCE. THE TABLE SEPARATELY COMPARES CLASS A AND
CLASS B SHARES TO THE INDICES SO THAT YOU CAN COMPARE PERFORMANCE FOR EACH CLASS
FROM ITS COMMENCEMENT DATE. THE INDICES THEMSELVES DO 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 MSCI EMERGING MARKETS FREE LATIN AMERICA INDEX IS A BROAD BASED MARKET CAP
WEIGHTED COMPOSITE INDEX COVERING AT LEAST 60% OF MARKETS IN ARGENTINA, BRAZIL,
CHILE, COLOMBIA, MEXICO, PERU, AND VENEZUELA. THE INDEX TAKES INTO ACCOUNT
LOCAL MARKET RESTRICTIONS FOR SPECIFIC SECURITIES OR CLASSES OF SHARES THAT MAY
BE EXCLUDED FROM OR LIMITED FOR FOREIGN INVESTOR OWNERSHIP. THE MSCI EMERGING
MARKETS GLOBAL LATIN AMERICA INDEX INCLUDES THE SAME MARKETS, BUT DOES NOT TAKE
INTO ACCOUNT LOCAL MARKET RESTRICTIONS ON SHARE OWNERSHIP BY FOREIGNERS.
3
<PAGE>
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIOS. THE PORTFOLIOS' INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED
IN MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY
IS A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI 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 regions, countries, industries, companies or governments. 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 gains
superior to fixed income securities, although they have 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
Investing in foreign countries, particularly emerging markets, entails 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 occur separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. 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.
EMERGING MARKET RISKS
Emerging market countries are countries that major international financial
institutions, such as the World Bank, generally consider to be less economically
mature than developed nations, such as the United States or most nations in
Western Europe. Emerging market countries can include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand and most
countries located in Western Europe. Emerging market countries may be more
likely to experience political turmoil or rapid changes in economic conditions
than more developed countries, and the financial condition of issuers in
emerging market countries may be more precarious than in other countries. These
characteristics result in greater risk of price volatility in emerging market
countries, which may be heightened by currency fluctuations relative to the U.S.
dollar.
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 a Portfolio is in that position, it
could be forced to sell other securities that it wanted to retain.
4
<PAGE>
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 employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
INVESTMENT DISCRETION
In pursuing the Portfolios' investment objectives, MSDW Investment Management
has considerable leeway in deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolios' performance.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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 will cause a Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders. The Emerging
Markets Debt and Latin American Portfolios may engage in frequent trading of
securities to achieve their investment objectives.
5
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
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, which are described in the footnotes below,
and/or expense reimbursements from MSDW Investment Management.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS LATIN AMERICAN
PORTFOLIO DEBT PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
MANAGEMENT FEES
- -----------------------------------------------------------------------------------------------------
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 0.39% 0.65% 1.02%
- -----------------------------------------------------------------------------------------------------
CLASS B 0.38% 0.65% 1.00%
TOTAL ANNUAL FUND OPERATING EXPENSES
- -----------------------------------------------------------------------------------------------------
CLASS A 1.64% 1.40% 2.12%
- -----------------------------------------------------------------------------------------------------
CLASS B 1.88% 1.65% 2.35%
</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 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 CLASS A SHARES AND
2.00% FOR CLASS B SHARES OF THE EMERGING MARKETS AND EMERGING MARKETS DEBT
PORTFOLIOS AND 1.70% FOR CLASS A SHARES AND 1.95% FOR 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, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSES REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES, INCLUDING CERTAIN INVESTMENT RELATED EXPENSES,
INCURRED BY INVESTORS WERE 1.79% FOR CLASS A SHARES AND 2.05% FOR CLASS B SHARES
OF THE LATIN AMERICAN PORTFOLIO. EXCLUDING INVESTMENT RELATED EXPENSES, THE
OPERATING EXPENSES AFTER FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS WERE 1.70%
FOR CLASS A SHARES AND 1.95% FOR CLASS B SHARES OF THE LATIN AMERICAN PORTFOLIO.
TOTAL OPERATING EXPENSES FOR THE EMERGING MARKETS AND EMERGING MARKETS DEBT
PORTFOLIOS DID NOT EXCEED THE AMOUNTS SHOWN IN THE FIRST PARAGRAPH AND,
ACCORDINGLY, TOTAL OPERATING EXPENSES INCURRED BY INVESTORS IN THE PORTFOLIOS
WERE AS SHOWN IN THE TABLE ABOVE.
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.
6
<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
<S> <C> <C> <C> <C>
EMERGING MARKETS PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $167 $517 $892 $1,944
- ----------------------------------------------------------------------------------------------------
CLASS B $191 $591 $1,016 $2,201
EMERGING MARKETS DEBT PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $143 $443 $766 $1,680
- ----------------------------------------------------------------------------------------------------
CLASS B $168 $520 $897 $1,955
LATIN AMERICAN PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $215 $664 $1,139 $2,452
- ----------------------------------------------------------------------------------------------------
CLASS B $238 $733 $1,255 $2,686
</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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies, managed assets of approximately
$184.8 billion, including assets under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<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, 1999 1.25% 1.25% 0.75% 0.75% 0.77% 0.77%
(NET OF WAIVERS AND AS A PERCENTAGE OF AVERAGE NET
ASSETS)
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
THE FOLLOWING INDIVIDUALS HAVE PRIMARY DAY-TO-DAY PORTFOLIO MANAGEMENT
RESPONSIBILITY FOR THE PORTFOLIOS:
- ----------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
ROBERT L. MEYER AND ANDY SKOV
Robert L. Meyer, a Managing Director of MSDW Investment Management and Morgan
Stanley, joined MSDW Investment Management in 1989. Currently, he is head of and
a Portfolio Manager in the Emerging Markets Equity Group. Mr. Meyer was born in
Argentina and graduated from Yale University with a B.A. in Economics and
Political Science. He received a J.D. from Harvard Law School. In addition, Mr.
Meyer is a Chartered Financial Analyst. Andy Skov, a Managing Director of MSDW
Investment Management and Morgan Stanley, joined MSDW Investment Management in
1994. Currently, he is a Portfolio Manager in the Emerging Markets Equity Group.
Prior to joining MSDW Investment Management, he worked in the Latin America
group at Bankers Trust Company in corporate finance, research and sales; two of
those years he spent in Argentina. Mr. Skov graduated from the University of
California at Berkeley with a B.A. (PHI BETA KAPPA) in Political Science and
Economic Development. Mr. Meyer has assisted in managing the Portfolio's assets
since its inception and assumed primary responsibility for managing the
Portfolio's assets in September 1997. Mr. Skov has shared primary responsibility
for managing the Portfolio's assets since October 1998.
EMERGING MARKETS DEBT PORTFOLIO
STEPHEN F. ESSER AND ABIGAIL L. MCKENNA
Stephen F. Esser is a Managing Director of Morgan Stanley 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 focuses
primarily on the trading and management of emerging markets debt portfolios.
Prior to joining MSDW Investment Management in 1996, 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.
LATIN AMERICAN PORTFOLIO
ROBERT L. MEYER, ANDY SKOV AND MICHAEL PERL
Information about Robert L. Meyer and Andy Skov is included under the Emerging
Markets Portfolio above. Michael Perl is a Principal of MSDW Investment
Management and a Portfolio Manager in the Emerging Markets Equity Group. Prior
to joining MSDW Investment Management in 1998 as a Portfolio Manager, he worked
as a Latin American Portfolio Manager at Bankers Trust Australia from 1992 to
1998. Mr. Perl graduated from the University of New South Wales with a Bachelor
of Commerce (HONORS), majoring in Finance, Accounting and Taxation. Mr. Meyer
has had primary responsibility for managing the Portfolio's assets since its
inception. Mr. Skov has assisted Mr. Meyer in managing the Portfolio's assets
since its inception and has shared primary responsibility for managing the
Portfolio's assets since May 1997. Mr. Perl has shared primary responsibility
for managing the Portfolio's assets since November 1998.
8
<PAGE>
- --------------------------------------------------------------------------------
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 (the
"Plan") under the Investment Company Act of 1940. 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
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolios 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").
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. 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 NAV calculated at the
Pricing Time following receipt of your purchase order and payment.
9
<PAGE>
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 NAV 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.
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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
10
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of an annual dividend and to
distribute net capital gains, if any, at least annually.
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. A Portfolio may be able to
pass through to you a credit for foreign income taxes it pays. The Fund will
tell you annually how to treat dividends and distributions.
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 SAI and are
included in the Fund's December 31, 1999 Annual Report to Shareholders. The
Annual Report and the Fund's financial statements, as well as the SAI, are
available at no cost from the Fund at the toll free number noted on the back
cover to this Prospectus.
11
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.55 $ 12.97 $ 14.66 $ 13.14 $ 16.30
---------- -------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (0.03) 0.16 0.07 0.09 0.08
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 9.75 (3.46) (0.29) 1.51 (2.05)
---------- -------- ---------- ---------- --------
TOTAL FROM INVESTMENT OPERATIONS 9.72 (3.30) (0.22) 1.60 (1.97)
---------- -------- ---------- ---------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.12) (0.07) (0.08) (0.06)
IN EXCESS OF NET INVESTMENT INCOME -- -- (0.07) -- --
NET REALIZED GAIN -- -- (0.69) -- (1.13)
IN EXCESS OF NET REALIZED GAIN -- -- (0.64) -- --
---------- -------- ---------- ---------- --------
TOTAL DISTRIBUTIONS -- (0.12) (1.47) (0.08) (1.19)
---------- -------- ---------- ---------- --------
NET ASSET VALUE, END OF PERIOD $ 19.27 $ 9.55 $ 12.97 $ 14.66 $ 13.14
========== ======== ========== ========== ========
TOTAL RETURN 101.78% (25.42)% (1.03)% 12.19% (12.77)%
========== ======== ========== ========== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $1,544,893 $772,115 $1,501,386 $1,304,006 $876,591
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.64% 1.81% 1.75% 1.74% 1.72%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING FOREIGN TAX EXPENSE AND
INTEREST EXPENSE 1.57% 1.70% N/A N/A N/A
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (0.26)% 1.04% 0.40% 0.69% 0.60%
PORTFOLIO TURNOVER RATE 133% 98% 90% 55% 54%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
--------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.56 $12.98 $14.66 $ 13.25
------- ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (0.04) 0.10 0.02 0.04
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 9.72 (3.43) (0.28) 1.42
------- ------ ------ -------
TOTAL FROM INVESTMENT OPERATIONS 9.68 (3.33) (0.26) 1.46
------- ------ ------ -------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.09) (0.05) (0.05)
IN EXCESS OF NET INVESTMENT INCOME -- -- (0.04) --
NET REALIZED GAIN -- -- (0.69) --
IN EXCESS OF NET REALIZED GAIN -- -- (0.64) --
------- ------ ------ -------
TOTAL DISTRIBUTIONS -- (0.09) (1.42) (0.05)
------- ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 19.24 $ 9.56 $12.98 $ 14.66
======= ====== ====== =======
TOTAL RETURN 101.26% (25.65)% (1.31)% (11.04)%
======= ====== ====== =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $16,999 $7,199 $9,666 $14,213
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.88% 2.06% 2.00% 1.99%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
FOREIGN TAX EXPENSE AND INTEREST EXPENSE 1.81% 1.95% N/A N/A
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (0.51)% 0.80% 0.11% 0.33%**
PORTFOLIO TURNOVER RATE 133% 98% 90% 55%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
12
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
EMERGING MARKETS DEBT PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 2.61 $ 5.77 $ 7.54 $ 8.59 $ 8.59
------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.43 1.13 0.74 1.54 1.36
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 0.34 (3.19) 0.55 2.79 0.91
------- ------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.77 (2.06) 1.29 4.33 2.27
------- ------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.37) (1.08) (0.71) (1.17) (1.86)
IN EXCESS OF NET INVESTMENT INCOME (0.00)+ (0.02) -- (0.01) --
NET REALIZED GAIN -- -- (2.17) (4.20) (0.41)
IN EXCESS OF NET REALIZED GAIN -- -- (0.08) -- --
RETURN OF CAPITAL (0.01) -- (0.10) -- --
------- ------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.38) (1.10) (3.06) (5.38) (2.27)
------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 3.00 $ 2.61 $ 5.77 $ 7.54 $ 8.59
======= ======= ======== ======== ========
TOTAL RETURN 29.22% (35.95)% 18.29% 50.52% 28.23%
======= ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $52,654 $46,234 $142,382 $152,142 $181,878
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 2.38% 1.60% 2.70% 1.75%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.29% 1.34% N/A N/A N/A
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 13.12% 11.61% 8.06% 11.66% 14.70%
PORTFOLIO TURNOVER RATE 249% 457% 417% 560% 406%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996** TO
-------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 2.66 $ 5.77 $ 7.53 $ 8.68
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.28 1.13 0.69 1.01
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 0.46 (3.17) 0.59 3.20
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.74 (2.04) 1.28 4.21
------ ------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.05) (1.05) (0.69) (1.15)
IN EXCESS OF NET INVESTMENT INCOME -- (0.02) -- (0.01)
NET REALIZED GAIN -- -- (2.17) (4.20)
IN EXCESS OF NET REALIZED GAIN -- -- (0.08) --
RETURN OF CAPITAL (0.32) -- (0.10) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.37) (1.07) (3.04) (5.36)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 3.03 $ 2.66 $ 5.77 $ 7.53
====== ====== ====== ======
TOTAL RETURN 28.01% (35.37)% 18.05% 48.52%
====== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $ 860 $1,187 $2,281 $4,253
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% 2.62% 1.91% 2.81%*
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
INTEREST EXPENSE 1.55% 1.60% N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 12.85% 11.09% 7.87% 11.09%*
PORTFOLIO TURNOVER RATE 249% 457% 417% 560%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*ANNUALIZED
**THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+AMOUNT IS LESS THAN $0.01 PER SHARE.
13
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
LATIN AMERICAN PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
PERIOD FROM
JANUARY 18,
YEAR ENDED DECEMBER 31, 1995* TO
---------------------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998++ 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.74 $ 10.91 $ 11.32 $ 9.06 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.18 0.13 (0.01) 0.14 0.05
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 4.59 (4.16) 4.32 4.27 (0.92)
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.77 (4.03) 4.31 4.41 (0.87)
------- ------- ------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.19) (0.09) -- (0.13) (0.04)
NET REALIZED GAIN -- (0.05) (4.04) (2.02) --
IN EXCESS OF NET REALIZED GAIN -- -- (0.68) -- --
RETURN OF CAPITAL -- -- -- -- (0.03)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.19) (0.14) (4.72) (2.15) (0.07)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 11.32 $ 6.74 $ 10.91 $ 11.32 $ 9.06
======= ======= ======= ======= =======
TOTAL RETURN 71.28% (37.10)% 41.28% 48.77% (8.68)%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $13,809 $15,012 $73,196 $30,409 $15,376
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.79% 1.81% 1.89% 1.70% 1.70%**
RATIO OF EXPENSE TO AVERAGE NET ASSETS
EXCLUDING COUNTRY TAX AND INTEREST
EXPENSE 1.70% 1.64% 1.70% 1.70% 1.70%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 1.40% 1.40% (0.14)% 1.21% 1.62%**
PORTFOLIO TURNOVER RATE 124% 196% 286% 192% 137%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.04 N/A $0.01 $0.05 $0.09
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 2.12% N/A 1.96% 2.18% 3.13%**
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 1.07% N/A (0.21)% 0.75% (0.48)%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
--------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998++ 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.78 $ 10.80 $11.31 $ 9.44
------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.19 0.12 -- 0.09
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4.58 (4.09) 4.21 3.90
------ ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.77 (3.97) 4.21 3.99
------ ------- ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.19) -- -- (0.10)
NET REALIZED GAIN -- (0.05) (4.04) (2.02)
IN EXCESS OF NET REALIZED GAIN -- -- (0.68) --
------ ------- ------ ------
TOTAL DISTRIBUTIONS (0.19) (0.05) (4.72) (2.12)
------ ------- ------ ------
NET ASSET VALUE, END OF PERIOD $11.36 $ 6.78 $10.80 $11.31
====== ======= ====== ======
TOTAL RETURN 70.85% (36.86)% 40.37% 42.44%
====== ======= ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $1,387 $1,148 $6,709 $1,333
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 2.05% 2.01% 2.14% 1.95%**
RATIO OF EXPENSE TO AVERAGE NET ASSETS EXCLUDING COUNTRY
TAX AND INTEREST EXPENSE 1.95% 1.85% 1.95% 1.95%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 1.04% 1.24% (0.34)% 0.89%**
PORTFOLIO TURNOVER RATE 124% 196% 286% 192%
------------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.05 N/A $0.00+ $0.05
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 2.35% N/A 2.21% 2.43%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.75% N/A (0.41)% 0.42%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*COMMENCEMENT OF OPERATIONS
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+AMOUNT IS LESS THAN $0.01 PER SHARE
++PER SHARE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 1998 ARE BASED ON AVERAGE
SHARES OUTSTANDING.
14
<PAGE>
<TABLE>
<S> <C>
EMERGING MARKETS PORTFOLIO
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT
INSTITUTIONAL FUND, INC. PORTFOLIO
LATIN AMERICAN 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 SSN 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 and
Class B shares minimum $100,000 for each Portfolio.
Please indicate Portfolio, class and amount for
purchase of the following Portfolio(s):
<TABLE>
<C> <S> <C>
EMERGING MARKETS PORTFOLIO / / Class A Shares (071) $ ---------- / / Class B Shares (044) $ --------------------
EMERGING MARKETS DEBT / / Class A Shares (078) $ ---------- / / Class B Shares (049) $ --------------------
PORTFOLIO
LATIN AMERICAN PORTFOLIO / / Class A Shares (083) $ ---------- / / Class B Shares (087) $ --------------------
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 is registered ------------------------
if such requests are believed to be authentic. NAME OF COMMERCIAL BANK (NOT SAVINGS BANK)
The Fund and the Fund's Transfer Agent will employ ------------------------
reasonable procedures to confirm that instructions BANK ACCOUNT NUMBER
communicated by telephone are genuine. These ------------------------
procedures include requiring the investor to BANK ABA NUMBER
provide certain personal identification ------------------------
information at the time an account is opened and NAME(S) IN WHICH YOUR BANK ACCOUNT IS
prior to effecting each transaction requested by ESTABLISHED
telephone. In addition, all telephone transaction ------------------------
requests will be recorded and investors may be BANK'S STREET ADDRESS
required to provide additional telecopied written ------------------------
instructions of transaction requests. Neither the CITY STATE ZIP CODE
Fund nor the Transfer Agent will be responsible
for any loss, liability, cost or expense for
following instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
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 800-548-7786.
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 IRS.
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 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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the
Portfolios. The SAI 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 investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. 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
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
GLOBAL EQUITY PORTFOLIO
THE GLOBAL EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF ISSUERS THROUGHOUT THE WORLD, INCLUDING U.S.
ISSUERS.
INTERNATIONAL EQUITY PORTFOLIO
THE INTERNATIONAL EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF NON-U.S. ISSUERS.
INTERNATIONAL SMALL CAP PORTFOLIO
THE INTERNATIONAL SMALL CAP PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF SMALL NON-U.S. COMPANIES.
EUROPEAN EQUITY PORTFOLIO
THE EUROPEAN EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF EUROPEAN ISSUERS.
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"),
EXCEPT THAT THE INTERNATIONAL SMALL CAP PORTFOLIO OFFERS ONLY CLASS A SHARES.
THE SECURITIES AND EXCHANGE COMMISSION (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
GLOBAL EQUITY PORTFOLIO 1
INTERNATIONAL EQUITY PORTFOLIO 2
INTERNATIONAL SMALL CAP PORTFOLIO 3
EUROPEAN EQUITY PORTFOLIO 4
ADDITIONAL RISK FACTORS AND INFORMATION 5
FEES AND EXPENSES OF THE PORTFOLIOS 7
INVESTMENT ADVISER 8
MANAGEMENT FEES 8
PORTFOLIO MANAGERS 9
DISTRIBUTION OF PORTFOLIO SHARES 10
SHAREHOLDER INFORMATION 11
FINANCIAL HIGHLIGHTS 13
GLOBAL EQUITY PORTFOLIO 14
INTERNATIONAL EQUITY PORTFOLIO 15
INTERNATIONAL SMALL CAP PORTFOLIO 16
EUROPEAN EQUITY PORTFOLIO 17
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
THE GLOBAL EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF ISSUERS THROUGHOUT THE WORLD, INCLUDING U.S.
ISSUERS.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maintain a diversified portfolio of global
equity securities based on individual stock selection and emphasizes a bottom-up
approach to investing that seeks to identify securities of undervalued issuers.
PROCESS
MSDW Investment Management selects securities for investment from a universe of
eligible issuers consisting of approximately 4,500 companies throughout the
world. MSDW Investment Management expects to invest at least 20% of the
Portfolio's total assets in the common stocks of U.S. issuers. The investment
process is value driven and based on individual stock selection. In assessing
investment opportunities, MSDW Investment Management considers value criteria
with an emphasis on cash flow and the intrinsic value of company assets.
Securities which appear undervalued according to these criteria are then
subjected to in-depth fundamental analysis. MSDW Investment Management conducts
a thorough investigation of the issuer's balance sheet, cash flow and income
statement and assesses the company's business franchise, including product
competitiveness, market positioning and industry structure. Meetings with senior
company management are integral to the investment process.
RISK
Investing in the Global Equity Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in a portfolio of
equity securities of issuers throughout the world. 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, foreign and domestic equity securities, may
underperform relative to other sectors.
INVESTING IN FOREIGN COUNTRIES ENTAILS 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, THE 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 THE PORTFOLIO'S INVESTMENTS. THESE CHANGES MAY OCCUR
SEPARATELY FROM AND IN RESPONSE TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE
OF THE SECURITY IN THE ISSUER'S HOME COUNTRY. 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON JULY
15, 1992
1993 44.24%
1994 6.95%
1995 18.66%
1996 22.83%
1997 23.75%
1998 14.60%
1999 4.01%
HIGH (QUARTER)
10/95 - 12/95
17.94%
LOW (QUARTER)
7/98 - 9/98
- -12.74%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
CLASS A CLASS B
(COMMENCED (COMMENCED MSCI WORLD
OPERATIONS ON OPERATIONS ON INDEX*
JULY 15, 1992) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
PAST ONE YEAR 4.01% 3.75% 24.94% 24.94%
- ------------------------------------------------------------------------------------------------------
PAST FIVE YEARS 16.54% N/A 19.76% N/A
- ------------------------------------------------------------------------------------------------------
SINCE INCEPTION 17.02% 15.57% 16.52% 19.42%
</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 MSCI WORLD INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS AND INCLUDES
SECURITIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 22 DEVELOPED MARKET
COUNTRIES IN NORTH AMERICA, EUROPE, AND THE ASIA/PACIFIC REGION.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF NON-U.S. ISSUERS.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maintain a diversified portfolio of equity
securities of non-U.S. issuers based on individual stock selection. MSDW
Investment Management emphasizes a bottom-up approach to investing that seeks to
identify securities of undervalued issuers.
PROCESS
MSDW Investment Management selects issuers from a universe comprised of
approximately 2,600 companies in non-U.S. markets. The investment process is
value driven and based on individual stock selection. In assessing investment
opportunities, MSDW Investment Management considers value criteria with an
emphasis on cash flow and the intrinsic value of company assets. Securities
which appear undervalued according to these criteria are then subjected to in-
depth fundamental analysis. MSDW Investment Management conducts a thorough
investigation of the issuer's balance sheet, cash flow and income statement and
assesses the company's business franchise, including product competitiveness,
market positioning and industry structure. Meetings with senior company
management are integral to the investment process.
RISK
Investing in the International Equity Portfolio may be appropriate for you if
you are willing to accept the risks and uncertainties of investing in the equity
securities of non-U.S. issuers in the hope of earning superior returns and
diversifying your investment portfolio. 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, equity securities of foreign issuers, may
underperform relative to other sectors.
INVESTING IN FOREIGN COUNTRIES ENTAILS 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, THE 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 THE PORTFOLIO'S INVESTMENTS. THESE CHANGES MAY OCCUR
SEPARATELY FROM AND IN RESPONSE TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE
OF THE SECURITY IN THE ISSUER'S HOME COUNTRY. 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C> <C>
COMMENCED OPERATIONS ON
AUGUST 4, 1989
1990 -5.73%
1991 8.92%
1992 -2.92%
1993 46.50%
1994 12.39%
1995 11.77%
1996 19.64%
1997 13.91%
1998 18.30%
1999 16.91%
HIGH (QUARTER)
1/98 - 3/98
16.49%
LOW (QUARTER)
7/90 - 9/90
- -18.85%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
CLASS A CLASS B MSCI EUROPE,
(COMMENCED (COMMENCED AUSTRALASIA, FAR EAST
OPERATIONS ON OPERATIONS ON (EAFE) INDEX*
AUGUST 4, 1989) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
PAST ONE YEAR 16.91% 16.68% 26.96% 26.96%
- ----------------------------------------------------------------------------------------------------
PAST FIVE YEARS 16.07% N/A 12.83% N/A
- ----------------------------------------------------------------------------------------------------
PAST TEN YEARS 13.21% N/A 7.01% N/A
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION 13.21% 16.74% 7.35% 13.24%
</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 MSCI EAFE INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS IN EUROPE,
AUSTRALASIA AND THE FAR EAST.
2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP PORTFOLIO
- -------------------------------------------------------------------------------
THE INTERNATIONAL SMALL CAP PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF SMALL NON-U.S. COMPANIES.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maintain a diversified portfolio of equity
securities of small cap non-U.S. issuers based on individual stock selection.
MSDW Investment Management emphasizes a bottom-up approach to investing that
seeks to identify securities of undervalued issuers.
PROCESS
MSDW Investment Management selects issuers from a universe comprised of
approximately 5,000 small cap companies in non-U.S. markets, most with market
capitalizations of generally less than $2 billion. The investment process is
value driven and based on individual stock selection. In assessing investment
opportunities, MSDW Investment Management considers value criteria with an
emphasis on cash flow and the intrinsic value of company assets. Securities
which appear undervalued according to these criteria are then subjected to
in-depth fundamental analysis. MSDW Investment Management conducts a thorough
investigation of the issuer's balance sheet, cash flow and income statement and
assesses the company's business franchise, including product competitiveness,
market positioning and industry structure. Meetings with senior company
management are integral to the investment process.
RISK
Investing in the International Small Cap Portfolio may be appropriate for you if
you are willing to accept the risks and uncertainties of investing in the equity
securities of small cap non-U.S. issuers in the hope of earning superior returns
and diversifying your investment portfolio. 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, equity securities of smaller foreign issuers, may
underperform relative to other sectors.
THE RISK OF INVESTING IN EQUITY SECURITIES IS INTENSIFIED IN THE CASE OF THE
SMALL CAP COMPANIES IN WHICH THE PORTFOLIO INVESTS. MARKET PRICES FOR SUCH
COMPANIES' EQUITY SECURITIES TEND TO BE MORE VOLATILE THAN THOSE OF LARGER, MORE
ESTABLISHED COMPANIES. SMALL CAP COMPANIES MAY THEMSELVES BE MORE VULNERABLE TO
ECONOMIC OR COMPANY SPECIFIC PROBLEMS.
INVESTING IN FOREIGN COUNTRIES ENTAILS 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, THE 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 THE PORTFOLIO'S INVESTMENTS. THESE CHANGES MAY OCCUR
SEPARATELY FROM AND IN RESPONSE TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE
OF THE SECURITY IN THE ISSUER'S HOME COUNTRY. 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
DECEMBER 15, 1992
1993 45.34%
1994 5.25%
1995 2.60%
1996 16.82%
1997 -0.55%
1998 4.25%
1999 39.34%
HIGH (QUARTER)
1/93 - 3/93
17.46%
LOW (QUARTER)
7/98 - 9/98
- -18.68%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
CLASS A
(COMMENCED MSCI EAFE
OPERATIONS ON SMALL CAP
DECEMBER 15, 1992) INDEX*
<S> <C> <C>
- -----------------------------------------------------------------------------------
PAST ONE YEAR 39.34% 17.67%
- -----------------------------------------------------------------------------------
PAST FIVE YEARS 11.60% -1.76%
- -----------------------------------------------------------------------------------
SINCE INCEPTION 14.97% 4.46%
</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 MSCI EAFE SMALL CAP INDEX IS AN UNMANAGED, MARKET VALUE-WEIGHTED AVERAGE OF
THE PERFORMANCE OF OVER 900 SECURITIES OF COMPANIES LISTED ON THE STOCK
EXCHANGE OF COUNTRIES IN EUROPE, AUSTRALASIA AND THE FAR EAST.
3
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
EUROPEAN EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
THE EUROPEAN EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF EUROPEAN ISSUERS.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maintain a diversified portfolio of equity
securities of European issuers based on individual stock selection. MSDW
Investment Management emphasizes a bottom-up approach to investing that seeks to
identify securities of undervalued European issuers.
PROCESS
MSDW Investment Management selects issuers from a universe of approximately
2,000 European companies. The investment process is value driven and based on
individual stock selection. In assessing investment opportunities, MSDW
Investment Management considers value criteria with an emphasis on cash flow and
the intrinsic value of company assets. Securities which appear undervalued
according to these criteria are then subjected to in-depth fundamental analysis.
MSDW Investment Management conducts a thorough investigation of the issuer's
balance sheet, cash flow and income statement and assesses the company's
business franchise, including product competitiveness, market positioning and
industry structure. Meetings with senior company management are integral to the
investment process.
RISK
Investing in the European Equity Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in the equity
securities of European issuers in the hope of earning superior returns and
diversifying your investment portfolio. 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, equity securities of European issuers, may
underperform relative to other sectors.
INVESTING IN FOREIGN COUNTRIES ENTAILS 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, THE 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 THE PORTFOLIO'S INVESTMENTS. THESE CHANGES MAY OCCUR
SEPARATELY FROM AND IN RESPONSE TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE
OF THE SECURITY IN THE ISSUER'S HOME COUNTRY. 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C> <C>
COMMENCED OPERATIONS ON
APRIL 2, 1993
1994 10.88%
1995 11.85%
1996 22.29%
1997 17.88%
1998 8.09%
1999 9.60%
HIGH (QUARTER)
1/98 - 3/98
18.37%
LOW (QUARTER)
7/98 - 9/98
- -21.00%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
CLASS A CLASS B
(COMMENCED (COMMENCED MSCI EUROPE
OPERATIONS ON OPERATIONS ON INDEX*
APRIL 2, 1993) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
PAST ONE YEAR 9.60% 9.36% 15.89% 15.89%
- ------------------------------------------------------------------------------------------------------
PAST FIVE YEARS 13.80% N/A 22.12% N/A
- ------------------------------------------------------------------------------------------------------
SINCE INCEPTION 16.08% 13.79% 19.57% 22.08%
</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 MSCI EUROPE INDEX IS AN UNMANAGED MARKET VALUE WEIGHTED INDEX OF COMMON
STOCKS LISTED ON THE STOCK EXCHANGE OF COUNTRIES IN EUROPE.
4
<PAGE>
- --------------------------
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIOS. THE PORTFOLIOS' INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED
IN MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY
IS A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI 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 regions, countries, industries, companies or governments. 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 gains
superior to fixed income securities, although they have 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.
EMERGING MARKET RISKS
The Portfolios may invest in emerging market countries, which are countries that
major international financial institutions, such as the World Bank, generally
consider to be less economically mature than developed nations, such as the
United States or most nations in Western Europe. Emerging market countries can
include every nation in the world except the United States, Canada, Japan,
Australia, New Zealand, and most countries located in Western Europe. Emerging
market countries may be more likely to experience political turmoil or rapid
changes in economic conditions than more developed countries, and the financial
condition of issuers in emerging market countries may be more precarious than in
other countries. These characteristics result in greater risk of price
volatility in emerging market countries, which may be heightened by currency
fluctuations relative to the U.S. dollar.
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 a 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 employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
5
<PAGE>
INVESTMENT DISCRETION
In pursuing the Portfolios' investment objectives, MSDW Investment Management
has considerable leeway in deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolios' performance.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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 will cause a Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders.
6
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
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, with the exception of the International Small Cap Portfolio which
may charge a transaction fee of up to 0.50%, payable to the Portfolio, in
connection with each purchase and redemption. The transaction fee is intended to
allocate transaction costs associated with purchases and redemptions of shares
of the Portfolio to investors actually making such purchases and redemptions
rather than to the Portfolio's other shareholders. The fee represents MSDW
Investment Management's estimate of the cost of acquiring and disposing of
Portfolio securities. The Annual Fund Operating Expenses in the table below do
not reflect voluntary fee waivers, which are described in the footnotes below,
and/ or expense reimbursements from MSDW Investment Management.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL INTERNATIONAL EUROPEAN
EQUITY EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------------------------
CLASS A 0.80% 0.80% 0.95% 0.80%
- -------------------------------------------------------------------------------------------------
CLASS B 0.80% 0.80% N/A 0.80%
12b-1 FEE
- -------------------------------------------------------------------------------------------------
CLASS A NONE NONE NONE NONE
- -------------------------------------------------------------------------------------------------
CLASS B 0.25% 0.25% N/A 0.25%
OTHER EXPENSES
- -------------------------------------------------------------------------------------------------
CLASS A 0.26% 0.21% 0.25% 0.42%
- -------------------------------------------------------------------------------------------------
CLASS B 0.26% 0.21% N/A 0.43%
TOTAL ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------------------------------------
CLASS A 1.06% 1.01% 1.20% 1.22%
- -------------------------------------------------------------------------------------------------
CLASS B 1.31% 1.26% N/A 1.48%
</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 PORTFOLIOS SO THAT TOTAL ANNUAL OPERATING EXPENSES, EXCLUDING
CERTAIN INVESTMENT RELATED EXPENSES DESCRIBED BELOW, WILL NOT EXCEED 1.00% FOR
CLASS A SHARES AND 1.25% FOR CLASS B SHARES OF THE GLOBAL EQUITY, INTERNATIONAL
EQUITY AND EUROPEAN EQUITY PORTFOLIOS AND 1.15% FOR CLASS A SHARES OF THE
INTERNATIONAL SMALL CAP 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 WOULD EXCEED THE EXPENSE RATIOS SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSE REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES INCURRED BY INVESTORS WERE 1.00% FOR CLASS A SHARES AND
1.25% FOR CLASS B SHARES OF THE GLOBAL EQUITY AND INTERNATIONAL EQUITY
PORTFOLIOS AND 1.15% FOR CLASS A SHARES OF THE INTERNATIONAL SMALL CAP
PORTFOLIO. THE TOTAL OPERATING EXPENSES INCURRED BY INVESTORS, INCLUDING CERTAIN
INVESTMENT RELATED EXPENSES, WERE 1.09% FOR CLASS A SHARES AND 1.34% FOR
CLASS B SHARES OF THE EUROPEAN EQUITY PORTFOLIO. EXCLUDING INVESTMENT RELATED
EXPENSES, THE OPERATING EXPENSES AFTER FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS
WERE 1.00% FOR CLASS A SHARES AND 1.25% FOR CLASS B SHARES OF THE EUROPEAN
EQUITY PORTFOLIO.
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.
7
<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
<S> <C> <C> <C> <C>
GLOBAL EQUITY PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $108 $337 $585 $1,294
- ----------------------------------------------------------------------------------------------------
CLASS B $133 $415 $718 $1,579
INTERNATIONAL EQUITY PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $103 $322 $558 $1,236
- ----------------------------------------------------------------------------------------------------
CLASS B $128 $400 $692 $1,523
INTERNATIONAL SMALL CAP PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $326 $593 $880 $1,700
EUROPEAN EQUITY PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $124 $387 $670 $1,477
- ----------------------------------------------------------------------------------------------------
CLASS B $151 $468 $808 $1,768
</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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies (with MSDW Investment Management, the
"MSDW Investment Management Group"), managed assets of approximately $184.8
billion, including assets under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL INTERNATIONAL EUROPEAN
EQUITY EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <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
-------------------------------------------------------------------------------------
PAID IN FISCAL YEAR ENDED
DECEMBER 31, 1999 0.75% 0.75% 0.79% 0.79% 0.90% N/A 0.67% 0.67%
(NET OF WAIVERS AND AS A
PERCENTAGE OF AVERAGE NET ASSETS)
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
SUBJECT TO THE SUPERVISION OF MSDW INVESTMENT MANAGEMENT AND ITS INVESTMENT
MANAGEMENT COMMITTEE EACH PORTFOLIO IS MANAGED BY AN INVESTMENT TEAM COMPRISED
OF THE FOLLOWING INDIVIDUALS, EACH OF WHOM IS EMPLOYED BY A MEMBER OF THE MSDW
INVESTMENT MANAGEMENT GROUP:
- ----------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
FRANCES CAMPION, MANAGING DIRECTOR, RICHARD BOON, PRINCIPAL AND PAUL BOYNE,
PRINCIPAL
Frances Campion joined MSDW Investment Management Group in 1990 as a Global
Equity Fund Manager. Her responsibilities include day-to-day management of the
Global Equity product. Ms. Campion is a graduate of University College, Dublin.
Richard Boon joined MSDW Investment Management Group in 1995. In addition to
portfolio management, his responsibilities include security analysis on North
American equities. Prior to 1995, he spent seven years in investment banking
working on privatizations in both the U.K. and New Zealand. Mr. Boon is a
graduate of both Canterbury and Victoria Universities, New Zealand. Paul Boyne,
prior to joining MSDW Investment Management Group in 1993, was a Chartered
Accountant with Grant Thornton International in Dublin. Mr. Boyne is a graduate
of University College, Dublin.
INTERNATIONAL EQUITY PORTFOLIO
DOMINIC CALDECOTT, MANAGING DIRECTOR, PETER WRIGHT, MANAGING DIRECTOR, WILLIAM
LOCK, PRINCIPAL, KATE CORNISH-BOWDEN, PRINCIPAL AND WALTER RIDDELL, RESEARCH
ANALYST
Dominic Caldecott is the Chief Investment Officer of Morgan Stanley Dean Witter
Investment Management Limited. Prior to joining Morgan Stanley in 1986, he
worked with GT Management Group in Tokyo and Hong Kong, specializing in Pacific
Basin investment management. Mr. Caldecott is a graduate of New College, Oxford,
England. Peter Wright joined MSDW Investment Management Group in 1996 as a
Senior Portfolio Manager with the Core International Equity Program. From 1993
to 1996 he was an Investment Director and Portfolio Manager with the State of
Wisconsin Investment Board responsible for managing the agency's $2.5 billion
International Equity portfolio. Mr. Wright is a graduate of Victoria University
of Wellington, New Zealand. William Lock joined MSDW Investment Management Group
in 1994 as an Equity Analyst with principal responsibility for international
equity research and selection. Prior to 1994, he was a member of CS First
Boston's Corporate Finance Group and a Management Consultant with Arthur D.
Little. Mr. Lock graduated from Keble College, Oxford. Kate Cornish-Bowden
joined MSDW Investment Management Group in 1992, prior to which she was a
Research Analyst for M&G Investment Management where her primary
responsibilities were equity research and selection. Her responsibilities
include fundamental International Equity research and selection. Ms.
Cornish-Bowden graduated from Leicester University with an Economics degree and
holds an M.B.A. from the University of Nottingham. Walter Riddell joined MSDW
Investment Management Group in 1995 as a member of the International Team. Mr.
Riddell graduated from Oxford in 1995 with a History degree.
9
<PAGE>
INTERNATIONAL SMALL CAP PORTFOLIO
MARGARET NAYLOR, MANAGING DIRECTOR, WILLEM VINKE, PRINCIPAL, NATHALIE DEGANS,
PRINCIPAL AND ARTHUR POLLOCK
Margaret Naylor has overall responsibility for investment strategy and stock
selection for the International Small Cap program. Prior to joining MSDW
Investment Management Group in 1987, she spent three years at the Trade Policy
Research Centre, an independent research unit. Ms. Naylor is a graduate of the
University of York. Willem Vinke joined MSDW Investment Management Group in
1995. Prior to 1995, he worked for Morgan Stanley's Investment Banking and Fixed
Income Divisions. Mr. Vinke is a graduate of the University of Manchester and
the London School of Economics. Nathalie Degans joined MSDW Investment
Management Group in 1996. From 1993 to 1995 she worked in Morgan Stanley's
Corporate Treasury Division, and prior to that, she was with Banque Indosuez New
York from 1986 to 1992. Ms. Degans is a graduate of ISG, France and INSEAD,
France. Arthur Pollock joined MSDW Investment Management Group in 1999. Prior to
1999, he was a partner at DPM Partners from 1998 to 1999 working on Japanese
equity research. From 1996 to 1998 he was a portfolio manager at Metlife.
EUROPEAN EQUITY PORTFOLIO
MARGARET NAYLOR, MANAGING DIRECTOR, ALASTAIR ANDERSON, VICE PRESIDENT AND AMR
DIAB, VICE PRESIDENT
Information about Margaret Naylor is included under the International Small Cap
Portfolio above. Alastair Anderson joined MSDW Investment Management Group in
1994. Prior to 1994, he worked for Deloitte & Touche LLP. Mr. Anderson is a
commerce graduate of the University of Cape Town, South Africa. Amr Diab joined
MSDW Investment Management Group in 1997. From 1993 to 1997, he worked in Morgan
Stanley Dean Witter & Co.'s Investment Banking Division and strategic planning
team in New York. Prior to that time, he worked as a Business Development
Manager with Projects and Investment Consulting Co. from 1992 to 1993. Mr. Diab
is a graduate of the American University in Cairo, Egypt.
- -------------------------------------------------------------------------------
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 (the
"Plan") under the Investment Company Act of 1940. 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.
10
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
ABOUT NET ASSET VALUE
The net asset value ("NAV") per share of a class of shares of the Portfolio is
determined by dividing the total market value of the Portfolio's investments and
other assets attributable to 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
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolios 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").
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 Portfolios do not charge any sales loads or similar fees when you purchase
or redeem shares, with the exception of the International Small Cap Portfolio
which may charge up to a 0.50% transaction fee, payable to the Portfolio, in
connection with each purchase and redemption. The minimum initial investment
generally is $500,000 for Class A shares and $100,000 for Class B shares of each
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 NAV 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.
11
<PAGE>
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 NAV 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.
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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of an annual dividend and to
distribute net capital gains, if any, at least annually.
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.
12
<PAGE>
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. A Portfolio may be able to
pass through to you a credit for foreign income taxes it pays. The Fund will
tell you annually how to treat dividends and distributions.
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 SAI and are
included in the Fund's December 31, 1999 Annual Report to Shareholders. The
Annual Report and the Fund's financial statements, as well as the SAI, are
available at no cost from the Fund at the toll free number noted on the back
cover to this Prospectus.
13
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.74 $ 18.52 $ 16.24 $ 14.31 $ 13.40
-------- --------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.44 0.15 0.21 0.23 0.18
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 0.32 2.55 3.61 3.02 2.26
-------- --------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.76 2.70 3.82 3.25 2.44
-------- --------- -------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.38) (0.17) (0.40) (0.23) (0.22)
IN EXCESS OF NET INVESTMENT INCOME (0.06) -- -- -- --
NET REALIZED GAIN (2.74) (0.31) (1.14) (1.09) (1.31)
-------- --------- -------- ------- -------
TOTAL DISTRIBUTIONS (3.18) (0.48) (1.54) (1.32) (1.53)
-------- --------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 18.32 $ 20.74 $ 18.52 $ 16.24 $ 14.31
======== ========= ======== ======= =======
TOTAL RETURN 4.01% 14.60% 23.75% 22.83% 18.66%
======== ========= ======== ======= =======
RATIO AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $115,646 $ 228,748 $108,074 $80,297 $91,675
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.01% 1.00% 1.00% 1.00% 1.00%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 1.26% 0.96% 1.07% 1.38% 1.17%
PORTFOLIO TURNOVER RATE 41% 39% 30% 26% 28%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.02 $0.01 $0.02 $0.03 $0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.06% 1.07% 1.11% 1.15% 1.13%
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.20% 0.90% 0.96% 1.23% 1.04%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
---------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.63 $ 18.46 $16.21 $14.36
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.21 0.15 0.16 0.13
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 0.50 2.46 3.60 3.02
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.71 2.61 3.76 3.15
------- ------- ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.35) (0.13) (0.37) (0.21)
IN EXCESS OF NET INVESTMENT INCOME (0.05) -- -- --
NET REALIZED GAIN (2.74) (0.31) (1.14) (1.09)
------- ------- ------ ------
TOTAL DISTRIBUTIONS (3.14) (0.44) (1.51) (1.30)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 18.20 $ 20.63 $18.46 $16.21
======= ======= ====== ======
TOTAL RETURN 3.75% 14.15% 23.37% 22.04%
======= ======= ====== ======
RATIO AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $28,089 $13,123 $5,910 $3,928
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.26% 1.25% 1.25% 1.25%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 0.89% 0.68% 0.80% 1.29%**
PORTFOLIO TURNOVER RATE 41% 39% 30% 26%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.01 $0.02 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.31% 1.32% 1.36% 1.39%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.83% 0.62% 0.69% 1.15%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
14
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.25 $ 17.16 $ 16.95 $ 15.15 $ 15.34
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.24 0.27 0.30 0.25 0.16
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 2.80 2.86 2.01 2.71 1.55
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 3.04 3.13 2.31 2.96 1.71
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.18) (0.38) (0.48) (0.36) (0.06)
NET REALIZED GAIN (1.49) (1.66) (1.62) (0.80) (1.84)
---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (1.67) (2.04) (2.10) (1.16) (1.90)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 19.62 $ 18.25 $ 17.16 $ 16.95 $ 15.15
========== ========== ========== ========== ==========
TOTAL RETURN 16.91% 18.30% 13.91% 19.64% 11.77%
========== ========== ========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $4,630,035 $3,400,498 $2,822,900 $2,264,424 $1,598,530
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.00% 1.00% 1.00% 1.00% 1.00%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS (1) 1.28% 1.33% 1.49% 1.64% 1.38%
PORTFOLIO TURNOVER RATE 37% 33% 33% 18% 27%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.00+ $0.00+ $0.00+ $0.00 $0.003
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.01% 1.02% 1.02% 1.02% 1.03%
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 1.27% 1.32% 1.47% 1.61% 1.35%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
---------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.22 $ 17.13 $16.93 $15.24
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.19 0.24 0.23 0.23
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2.81 2.85 2.02 2.59
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.00 3.09 2.25 2.82
------- ------- ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.15) (0.34) (0.43) (0.33)
NET REALIZED GAIN (1.49) (1.66) (1.62) (0.80)
------- ------- ------ ------
TOTAL DISTRIBUTIONS (1.64) (2.00) (2.05) (1.13)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 19.58 $ 18.22 $17.13 $16.93
======= ======= ====== ======
TOTAL RETURN 16.68% 18.13% 13.57% 18.58%
======= ======= ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $41,374 $17,076 $3,074 $5,393
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.25% 1.25% 1.25% 1.25%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 0.93% 0.96% 1.21% 1.68%**
PORTFOLIO TURNOVER RATE 37% 33% 33% 18%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.00+ $0.00+ $0.00+ $0.00
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.26% 1.28% 1.27% 1.27%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.92% 0.95% 1.19% 1.66%**
- ------------------------------------------------------------------------------------------------------------
</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
- -------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.25 $ 15.61 $ 16.83 $ 14.94 $ 15.15
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.22 0.22 0.25 0.21 0.24
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 5.66 0.39 (0.42) 2.29* 0.15*
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 5.88 0.61 (0.17) 2.50 0.39
-------- -------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.27) (0.24) (0.31) (0.22) (0.23)
IN EXCESS OF NET INVESTMENT INCOME (0.02) -- (0.05) -- --
NET REALIZED GAIN (1.20) (0.79) (0.77) (0.39) (0.37)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (1.49) (1.03) (1.13) (0.61) (0.60)
-------- -------- -------- -------- --------
TRANSACTION FEES (0.03) 0.06 0.08 -- --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 19.67 $ 15.25 $ 15.61 $ 16.83 $ 14.94
======== ======== ======== ======== ========
TOTAL RETURN 39.34% 4.25% (0.55)% 16.82% 2.60%
======== ======== ======== ======== ========
RATIO AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $357,708 $252,642 $230,095 $234,743 $198,669
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.15% 1.15% 1.15% 1.15% 1.15%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 1.30% 1.23% 1.37% 1.29% 1.72%
PORTFOLIO TURNOVER RATE 48% 39% 31% 35% 24%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.01 $0.01 $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.20% 1.21% 1.22% 1.23% 1.24%
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 1.25% 1.18% 1.30% 1.20% 1.63%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*INCLUDES A 1% TRANSACTION FEE ON PURCHASES AND REDEMPTIONS OF CAPITAL SHARES.
16
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
EUROPEAN EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.75 $ 17.96 $ 16.70 $ 13.92 $ 13.94
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.29 0.43 0.39 0.24 0.14
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1.10 1.08 2.58 2.85 1.37
-------- -------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.39 1.51 2.97 3.09 1.51
-------- -------- -------- -------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.32) (0.42) (0.37) (0.25) (0.15)
IN EXCESS OF NET INVESTMENT INCOME (0.03) -- -- (0.02) --
NET REALIZED GAIN (1.70) (3.30) (1.34) (0.04) (1.38)
-------- -------- -------- -------- -------
TOTAL DISTRIBUTIONS (2.05) (3.72) (1.71) (0.31) (1.53)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 15.09 $ 15.75 $ 17.96 $ 16.70 $ 13.92
======== ======== ======== ======== =======
TOTAL RETURN 9.60% 8.09% 17.88% 22.29% 11.85%
======== ======== ======== ======== =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $105,030 $168,712 $242,868 $178,356 $69,583
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.09% 1.00% 1.00% 1.00% 1.00%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.00% N/A N/A N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 1.46% 1.47% 1.96% 1.83% 1.37%
PORTFOLIO TURNOVER RATE 74% 52% 43% 24% 13%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.03 $0.02 $0.02 $0.02 $0.03
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.22% 1.08% 1.09% 1.16% 1.25%
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 1.34% 1.40% 1.87% 1.67% 1.12%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
-------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $15.74 $17.94 $16.67 $14.05
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.12 0.33 0.28 0.18
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1.23 1.13 2.66 2.73
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.35 1.46 2.94 2.91
------ ------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.26) (0.36) (0.33) (0.23)
IN EXCESS OF NET INVESTMENT INCOME (0.02) -- -- (0.02)
NET REALIZED GAIN (1.70) (3.30) (1.34) (0.04)
------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.98) (3.66) (1.67) (0.29)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.11 $15.74 $17.94 $16.67
====== ====== ====== ======
TOTAL RETURN 9.36% 7.80% 17.73% 20.76%
====== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $2,196 $5,181 $4,654 $2,654
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.34% 1.25% 1.25% 1.25%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.25% N/A N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 1.30% 1.15% 1.55% 1.67%**
PORTFOLIO TURNOVER RATE 74% 52% 43% 24%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.02 $0.02 $0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.48% 1.34% 1.34% 1.40%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.16% 1.08% 1.46% 1.52%**
- -----------------------------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
17
<PAGE>
<TABLE>
<S> <C>
GLOBAL EQUITY PORTFOLIO
INTERNATIONAL EQUITY
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER PORTFOLIO
INSTITUTIONAL FUND, INC. INTERNATIONAL SMALL CAP
PORTFOLIO
EUROPEAN EQUITY 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 SSN 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 and
Class B shares minimum $100,000 for the Global Equity,
International Equity and European Equity Portfolios.
Please indicate Portfolio, class and amount for
purchase of the following Portfolio(s):
<TABLE>
<C> <S> <C>
GLOBAL EQUITY PORTFOLIO / / Class A Shares (070) $--------- / / Class B Shares (043) $ ------
INTERNATIONAL EQUITY PORTFOLIO / / Class A Shares (063) $--------- / / Class B Shares (038) $ ------
INTERNATIONAL SMALL CAP PORTFOLIO / / Class A Shares (073) $---------
EUROPEAN EQUITY PORTFOLIO / / Class A Shares (075) $--------- / / Class B Shares (047) $ ------
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 is registered --------
if such requests are believed to be authentic. NAME OF COMMERCIAL BANK (NOT SAVINGS
The Fund and the Fund's Transfer Agent will employ BANK)
reasonable procedures to confirm that instructions --------
communicated by telephone are genuine. These BANK ACCOUNT NUMBER
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 NAME(S) IN WHICH YOUR BANK ACCOUNT IS
telephone. In addition, all telephone transaction ESTABLISHED
requests will be recorded and investors may be --------
required to provide additional telecopied written BANK'S STREET ADDRESS
instructions of transaction requests. Neither the --------
Fund nor the Transfer Agent will be responsible CITY STATE ZIP CODE
for any loss, liability, cost or expense for
following instructions received 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 800-548-7786.
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 IRS.
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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the
Portfolios. The SAI 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 investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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 the Securities and Exchange Commission, Public
Reference Section, Washington, D.C. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. To aid you in obtaining this
information, the Fund's Investment Company Act registration number is 811-05624.
[ICON] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
P.O. Box 2798
Boston, Massachusetts 02208-2798
FOR INFORMATION CALL 1-800-548-7786
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
GLOBAL FIXED INCOME PORTFOLIO
THE GLOBAL FIXED INCOME PORTFOLIO SEEKS TO PRODUCE AN ATTRACTIVE REAL RATE OF
RETURN WHILE PRESERVING CAPITAL BY INVESTING PRIMARILY IN HIGH QUALITY FIXED
INCOME SECURITIES OF ISSUERS THROUGHOUT THE WORLD, INCLUDING U.S. ISSUERS.
HIGH YIELD PORTFOLIO
THE HIGH YIELD PORTFOLIO SEEKS TO MAXIMIZE TOTAL RETURN BY INVESTING PRIMARILY
IN A DIVERSIFIED PORTFOLIO OF HIGH YIELD FIXED INCOME SECURITIES THAT OFFER A
YIELD ABOVE THAT GENERALLY AVAILABLE ON DEBT SECURITIES IN THE FOUR HIGHEST
RATING CATEGORIES OF THE RECOGNIZED RATING SERVICES.
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 (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
GLOBAL FIXED INCOME PORTFOLIO 1
HIGH YIELD PORTFOLIO 2
ADDITIONAL RISK FACTORS AND INFORMATION 3
FEES AND EXPENSES OF THE PORTFOLIOS 5
INVESTMENT ADVISER 6
MANAGEMENT FEES 6
PORTFOLIO MANAGERS 7
DISTRIBUTION OF PORTFOLIO SHARES 8
SHAREHOLDER INFORMATION 8
FINANCIAL HIGHLIGHTS 10
GLOBAL FIXED INCOME PORTFOLIO 11
HIGH YIELD PORTFOLIO 12
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
GLOBAL FIXED INCOME PORTFOLIO
- -------------------------------------------------------------------------------
THE GLOBAL FIXED INCOME PORTFOLIO SEEKS TO PRODUCE AN ATTRACTIVE REAL RATE OF
RETURN WHILE PRESERVING CAPITAL BY INVESTING PRIMARILY IN HIGH QUALITY FIXED
INCOME SECURITIES OF ISSUERS THROUGHOUT THE WORLD, INCLUDING U.S. ISSUERS.
- ----------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to produce an attractive return by constructing
a portfolio of fixed income securities from throughout the world. MSDW
Investment Management manages interest rate, country, and currency exposures by
a strategic, value-based approach that favors securities with high real interest
rates and sizable incremental yield at longer maturities. MSDW Investment
Management seeks to preserve capital by investing in high quality (i.e., those
rated in the three highest rating categories or believed to be of equivalent
quality) fixed income securities.
PROCESS
MSDW Investment Management assesses real interest rates, inflationary trends and
yield curves in the global fixed income markets and combines this with a
separate currency analysis that focuses on relative interest rate differentials
and economic competitiveness. MSDW Investment Management then seeks to establish
overweight positions in markets that offer the most attractive yield curves and
the highest yields over and above future inflation. The Portfolio generally
invests in fixed income securities having intermediate maturities (remaining
maturities between 3 and 7 years) as a starting point, then shifts to longer
maturities where real yields are attractive and shorter maturities where they
are less attractive. The Portfolio generally emphasizes investment in securities
of U.S. and foreign governments and their agencies and instrumentalities, and
may invest in other fixed income securities rated in the three highest rating
categories of a nationally recognized statistical rating organization or that
MSDW Investment Management believes to be of equivalent quality.
RISK
Investing in the Global Fixed Income Portfolio may be appropriate for you if you
are willing to accept the risks and uncertainties of investing in fixed income
securities of U.S. and foreign issuers, many of which may be denominated in
foreign currencies, in the hope of earning an attractive rate of return. Market
prices of fixed income securities respond to economic developments, especially
changes in interest rates, as well as to perceptions of the creditworthiness of
individual issuers, including governments. Generally, fixed income securities
decrease in value as interest rates rise and vice versa. Prices of longer term
fixed income securities also are generally more volatile, so the average
maturity of the securities in the Portfolio affects risk. In addition, at times
the Portfolio's market sector, global fixed income securities, may underperform
relative to other sectors.
TO THE EXTENT THAT THE PORTFOLIO INVESTS IN FOREIGN COUNTRIES, PARTICULARLY
EMERGING MARKETS, 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, THE 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 THE PORTFOLIO'S INVESTMENTS. THESE CHANGES MAY OCCUR SEPARATELY FROM AND IN
RESPONSE TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE OF THE SECURITY IN THE
ISSUER'S HOME COUNTRY. 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. IN ADDITION,
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.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C> <C>
COMMENCED OPERATIONS ON MAY
1, 1991
1992 2.74%
1993 15.34%
1994 -6.08%
1995 19.32%
1996 6.44%
1997 1.50%
1998 13.84%
1999 -6.84%
HIGH (QUARTER)
7/98 - 9/98
8.07%
LOW (QUARTER)
1/98 - 3/98
- -3.92%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED J.P. MORGAN TRADED
OPERATIONS ON OPERATIONS ON GLOBAL BOND INDEX*
MAY 1, 1991) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
PAST ONE YEAR -6.84% -7.09% -5.08% -5.08%
- --------------------------------------------------------------------------------------------------
PAST FIVE YEARS 6.45% N/A 6.69% N/A
- --------------------------------------------------------------------------------------------------
SINCE INCEPTION 6.38% 3.22% 7.62% 3.76%
</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 J.P. MORGAN TRADED GLOBAL BOND INDEX IS AN UNMANAGED INDEX OF SECURITIES
AND INCLUDES AUSTRALIA, BELGIUM, CANADA, DENMARK, FINLAND, FRANCE, GERMANY,
IRELAND, ITALY, JAPAN, THE NETHERLANDS, NEW ZEALAND, PORTUGAL, SOUTH AFRICA,
SPAIN, SWEDEN, THE UNITED KINGDOM AND THE UNITED STATES.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
- -------------------------------------------------------------------------------
THE HIGH YIELD PORTFOLIO SEEKS TO MAXIMIZE TOTAL RETURN BY INVESTING PRIMARILY
IN A DIVERSIFIED PORTFOLIO OF HIGH YIELD FIXED INCOME SECURITIES THAT OFFER A
YIELD ABOVE THAT GENERALLY AVAILABLE ON DEBT SECURITIES IN THE FOUR HIGHEST
RATING CATEGORIES OF THE RECOGNIZED RATING SERVICES.
- ----------------------------------------------------------------------------
APPROACH
The Portfolio invests primarily in high yield securities (commonly referred to
as "junk bonds"). The Portfolio also may invest in other fixed income
securities, including U.S. Government securities, mortgage-backed securities,
and investment grade corporate bonds. The Portfolio may also invest in foreign
fixed income securities, including emerging market securities. MSDW Investment
Management will generally use derivatives in managing the Portfolio.
PROCESS
MSDW Investment Management uses equity and fixed income valuation techniques,
together with analyses of economic and industry trends, to determine the
Portfolio's overall structure, sector allocation and desired maturity. MSDW
Investment Management emphasizes securities of companies that have strong
industry positions and favorable outlooks for cash flow and asset values. MSDW
Investment Management conducts a credit analysis for each security considered
for investment to evaluate its attractiveness relative to the level of risk it
presents.
RISK
Investing in the High Yield Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in non-investment
grade fixed income securities of U.S. and foreign issuers in the hope of earning
a return that is superior to that available from investment grade fixed income
securities. Market prices of fixed income securities respond to economic
developments, especially changes in interest rates, as well as to perceptions of
the creditworthiness of individual issuers, including governments. Generally,
fixed income securities decrease in value as interest rates rise and vice versa.
The Portfolio invests in fixed income securities that are rated below
"investment grade" or are not rated, but are of equivalent quality. These fixed
income securities are often referred to as "high yield securities" or "junk
bonds." High yield securities range from those for which the prospect for
repayment of principal and interest is predominantly speculative to those which
are currently in default on principal or interest payments. When the Portfolio
invests in high yield securities, it generally seeks to receive a
correspondingly higher return on the securities it holds to compensate it for
the additional credit risk and market risk it has assumed, however, prices of
high yield securities generally are more volatile than prices of investment
grade fixed income securities. Prices of longer term fixed income securities
also are generally more volatile, so the average maturity of the securities in
the Portfolio affects risk. In addition, at times the Portfolio's market sector,
high yield securities, may underperform relative to other sectors.
TO THE EXTENT THAT THE PORTFOLIO INVESTS IN FOREIGN COUNTRIES, PARTICULARLY
EMERGING MARKETS, 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, THE 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 THE PORTFOLIO'S INVESTMENTS. THESE CHANGES MAY OCCUR SEPARATELY FROM AND IN
RESPONSE TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE OF THE SECURITY IN THE
ISSUER'S HOME COUNTRY. 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.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C> <C>
COMMENCED OPERATIONS ON
SEPTEMBER 28, 1992
1993 22.11%
1994 -4.18%
1995 23.35%
1996 15.01%
1997 15.87%
1998 3.03%
1999 7.77%
HIGH (QUARTER)
1/93 - 3/93
7.74%
LOW (QUARTER)
7/98 - 9/98
- -6.16%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A
(COMMENCED CLASS B
OPERATIONS ON (COMMENCED CS FIRST BOSTON
SEPTEMBER 28, OPERATIONS ON HIGH YIELD INDEX*
1992) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
PAST ONE YEAR 7.77% 7.44% 3.28% 3.28%
- ---------------------------------------------------------------------------------------------------
PAST FIVE YEARS 12.79% N/A 9.07% N/A
- ---------------------------------------------------------------------------------------------------
SINCE INCEPTION 11.18% 9.90% 8.82% 7.07%
</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 CS FIRST BOSTON HIGH YIELD INDEX IS AN UNMANAGED INDEX OF HIGH YIELD
CORPORATE BONDS.
2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIOS. THE PORTFOLIOS' INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED
IN MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY
IS A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI 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 regions, countries, industries, companies or governments. 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. Fixed income securities, regardless of credit quality,
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.
EMERGING MARKET RISKS
Emerging market countries are countries that major international financial
institutions, such as the World Bank, generally consider to be less economically
mature than developed nations, such as the United States or most nations in
Western Europe. Emerging market countries can include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand, and most
countries located in Western Europe. Emerging market countries may be more
likely to experience political turmoil or rapid changes in economic conditions
than more developed countries, and the financial condition of issuers in
emerging market countries may be more precarious than in other countries. These
characteristics result in greater risk of price volatility in emerging market
countries, which may be heightened by currency fluctuations relative to the U.S.
dollar.
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 a 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 employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
3
<PAGE>
INVESTMENT DISCRETION
In pursuing the Portfolio's investment objectives, MSDW Investment Management
has considerable leeway in deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolios' performance.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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 will cause a Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders. The Portfolios may
engage in frequent trading of securities to achieve their investment goals.
4
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
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, which are described in the footnotes below,
and/or expense reimbursements from MSDW Investment Management.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
GLOBAL HIGH
FIXED INCOME YIELD
PORTFOLIO PORTFOLIO
<S> <C> <C>
------------------------------
MANAGEMENT FEES
- --------------------------------------------------------------------------------------------
CLASS A 0.40% 0.375%
- --------------------------------------------------------------------------------------------
CLASS B 0.40% 0.375%
12b-1 FEE
- --------------------------------------------------------------------------------------------
CLASS A NONE NONE
- --------------------------------------------------------------------------------------------
CLASS B 0.15%+ 0.25%
OTHER EXPENSES
- --------------------------------------------------------------------------------------------
CLASS A 0.36% 0.22%
- --------------------------------------------------------------------------------------------
CLASS B 0.36% 0.23%
TOTAL ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------------------
CLASS A 0.76% 0.59%
- --------------------------------------------------------------------------------------------
CLASS B 0.91% 0.85%
</TABLE>
+THE ACTUAL 12b-1 FEE PAID BY THE PORTFOLIO FOR THE LAST FISCAL YEAR WAS 0.15%
BECAUSE MORGAN STANLEY HAS VOLUNTARILY AGREED TO WAIVE 0.10% OF THE 0.25%
DISTRIBUTION FEE IT IS ENTITLED TO RECEIVE.
*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 PORTFOLIOS SO THAT TOTAL ANNUAL OPERATING EXPENSES, EXCLUDING
CERTAIN INVESTMENT RELATED EXPENSES DESCRIBED BELOW, WILL NOT EXCEED 0.50% FOR
CLASS A SHARES AND 0.65% FOR CLASS B SHARES OF THE GLOBAL FIXED INCOME PORTFOLIO
AND 0.695% FOR CLASS A SHARES AND 0.945% FOR CLASS B SHARES OF THE HIGH YIELD
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 WOULD EXCEED THE EXPENSE RATIO SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSE REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES INCURRED BY INVESTORS WERE 0.50% FOR CLASS A SHARES AND
0.65% FOR CLASS B SHARES OF THE GLOBAL FIXED INCOME PORTFOLIO. TOTAL OPERATING
EXPENSES FOR THE HIGH YIELD PORTFOLIO DID NOT EXCEED THE AMOUNTS SHOWN IN THE
FIRST PARAGRAPH AND, ACCORDINGLY, TOTAL OPERATING EXPENSES INCURRED BY INVESTORS
WERE AS SHOWN IN THE TABLE ABOVE.
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.
5
<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
<S> <C> <C> <C> <C>
GLOBAL FIXED INCOME PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $78 $243 $422 $942
- ----------------------------------------------------------------------------------------------------
CLASS B $93 $290 $504 $1,120
HIGH YIELD PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $60 $189 $329 $738
- ----------------------------------------------------------------------------------------------------
CLASS B $87 $271 $471 $1,049
</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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies (with MSDW Investment Management, the
"MSDW Investment Management Group"), managed assets of approximately
$184.8 billion, including assets under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
GLOBAL HIGH
FIXED INCOME YIELD
PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
-----------------------------------
MANAGEMENT FEE PAID IN FISCAL YEAR CLASS A CLASS B CLASS A CLASS B
ENDED DECEMBER 31, 1999
-----------------------------------------
(NET OF WAIVERS AND AS A PERCENTAGE OF AVERAGE NET ASSETS) 0.14% 0.14% 0.35% 0.35%
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
SUBJECT TO THE SUPERVISION OF MSDW INVESTMENT MANAGEMENT AND ITS INVESTMENT
MANAGEMENT COMMITTEE, THE FOLLOWING INDIVIDUALS, EACH OF WHOM IS EMPLOYED BY A
MEMBER OF THE MSDW INVESTMENT MANAGEMENT GROUP, HAVE PRIMARY DAY-TO-DAY
PORTFOLIO MANAGEMENT RESPONSIBILITY FOR THE PORTFOLIOS:
- ----------------------------------------------------------------------------
GLOBAL FIXED INCOME PORTFOLIO
J. DAVID GERMANY, MANAGING DIRECTOR, MICHAEL B. KUSHMA, PRINCIPAL, PAUL F.
O'BRIEN, PRINCIPAL, CHRISTIAN G. ROTH, PRINCIPAL AND DAVID STANLEY, VICE
PRESIDENT
J. David Germany joined MSDW Investment Management Group in 1991. He joined
Morgan Stanley as a Senior Economist in 1987 and was promoted to Vice President
in 1989. Mr. Germany holds an A.B. degree (VALEDICTORIAN) from Princeton
University and a Ph.D. in Economics from the Massachusetts Institute of
Technology. Michael B. Kushma joined Morgan Stanley in 1987. He was a member of
Morgan Stanley's Global Fixed Income Strategy Group in the fixed income division
from 1987 to 1995, where he became the division's senior government bond
strategist. He joined MSDW Investment Management Group in 1995, where he took
responsibility for global fixed income bond strategy. Mr. Kushma received an
A.B. in Economics from Princeton University in 1979, a Masters in Economics from
the London School of Economics in 1981 and a Masters of Philosophy from Columbia
University in 1983. Paul F. O'Brien joined MSDW Investment Management Group in
1996. He was head of European Economics from 1993 through 1995 for JP Morgan and
a Principal Administrator from 1991 through 1992 for the Organization for
Economic Cooperation and Development. Mr. O'Brien attended the United States
Naval Academy and holds a B.S. degree from the Massachusetts Institute of
Technology and a Ph.D. in Economics from the University of Minnesota. Christian
G. Roth joined MSDW Investment Management Group in 1991. Prior to 1991, he
served as a Senior Associate in the Merchant Banking Group of Dean Witter
Capital Corporation. Mr. Roth received a B.S. from The Wharton School of the
University of Pennsylvania. David Stanley joined MSDW Investment Management
Group in 1994. Prior to joining MSDW Investment Management Group, he was with
Aetna Capital Management International, where he had sole responsibility for
managing all European and Global bond funds. Previously, he spent over five
years at Marine and General Mutual Life Assurance Society, where he managed
Sterling and Global bond funds. Mr. Stanley graduated from Manchester
University. Messrs. Germany, Kushma and O'Brien have shared primary
responsibility for managing the Portfolio's assets since September 1997. Messrs.
Roth and Stanley have shared primary responsibility for managing the Portfolio's
assets since July 1999 and January 2000, respectively.
HIGH YIELD PORTFOLIO
ROBERT E. ANGEVINE, PRINCIPAL, STEPHEN F. ESSER, MANAGING DIRECTOR, GORDON W.
LOERY, PRINCIPAL AND DEANNA L. LOUGHNANE, PRINCIPAL
Robert E. Angevine joined MSDW Investment Management Group in 1988. Prior to
1988 he spent over eight years at Prudential Insurance where he was responsible
for one of the largest open-end high yield mutual funds in the country. His
other experience includes international treasury operations at a major
pharmaceutical company and commercial banking. Mr. Angevine received a B.A. in
Economics from Lafayette College and an M.B.A. from Fairleigh Dickinson
University. He served two years as a Lieutenant in the U.S. Army. Stephen F.
Esser joined MSDW Investment Management Group in 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. Gordon W. Loery
joined Morgan Stanley in 1990 as a Fixed Income Analyst and joined MSDW
Investment Management Group in 1996. Mr. Loery received a B.A. in Economics from
Cornell University. Deanna L. Loughnane joined MSDW Investment Management Group
in 1997. She served as a Vice President and Senior Corporate Bond Analyst for
Putnam Investments from 1993 to 1997. Ms. Loughnane received a B.S. from The
University of Virginia's McIntire School of Commerce and an M.B.A from Harvard
University. Mr. Angevine has had primary responsibility for managing the
Portfolio's assets since its inception. Messrs. Esser and Loery and Ms.
Loughnane have shared primary responsibility for managing the Portfolio's assets
since April 1996, April 1999 and January 2000, respectively.
7
<PAGE>
- --------------------------------------------------------------------------------
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 (the
"Plan") under the Investment Company Act of 1940. 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
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolios 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").
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. 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 NAV calculated at the
Pricing Time following receipt of your purchase order and payment.
8
<PAGE>
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 NAV 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.
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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
9
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of a quarterly dividend and to
distribute net capital gains, if any, at least annually.
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. A Portfolio may be able to
pass through to you a credit for foreign income taxes it pays. The Fund will
tell you annually how to treat dividends and distributions.
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 SAI and are
included in the Fund's December 31, 1999 Annual Report to Shareholders. The
Annual Report and the Fund's financial statements, as well as the SAI, are
available at no cost from the Fund at the toll free number noted on the back
cover to this Prospectus.
10
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
GLOBAL FIXED INCOME PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999++ 1998++ 1997++ 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.51 $ 11.15 $ 11.30 $ 11.22 $ 10.29
-------- ------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.51 0.55 0.56 0.61 0.76
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (1.37) 0.98 (0.40) 0.08 1.15
-------- ------- ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS (0.86) 1.53 0.16 0.69 1.91
-------- ------- ------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.39) (0.17) (0.31) (0.61) (0.98)
IN EXCESS OF NET INVESTMENT INCOME (0.03) -- -- -- --
RETURN OF CAPITAL (0.01) -- -- -- --
-------- ------- ------- -------- --------
TOTAL DISTRIBUTIONS (0.43) (0.17) (0.31) (0.61) (0.98)
-------- ------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 11.22 $ 12.51 $ 11.15 $ 11.30 $ 11.22
======== ======= ======= ======== ========
TOTAL RETURN (6.84)% 13.84% 1.50% 6.44% 19.32%
======== ======= ======= ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $34,225 $45,884 $84,635 $112,888 $102,852
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 0.50% 0.50% 0.50% 0.50% 0.50%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 4.01% 4.76% 5.05% 5.50% 6.79%
PORTFOLIO TURNOVER RATE 102% 110% 116% 258% 207%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.03 $0.03 $0.02 $0.02 $0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.76% 0.81% 0.71% 0.72% 0.71%
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 3.75% 4.48% 4.84% 5.29% 6.58%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------
PERIOD FROM
YEAR ENDED JANUARY 2,
DECEMBER 31, 1996*** TO
-------------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999++ 1998++ 1997++ 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.48 $11.13 $11.29 $11.23
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.45 0.53 0.54 0.48
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1.32) 0.98 (0.40) 0.18
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.87) 1.51 0.14 0.66
------ ------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.39) (0.16) (0.30) (0.60)
IN EXCESS OF NET INVESTMENT INCOME (0.03) -- -- --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.42) (0.16) (0.30) (0.60)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.19 $12.48 $11.13 $11.29
====== ====== ====== ======
TOTAL RETURN (7.09)% 13.68% 1.29% 6.12%
====== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $322 $362 $366 $1,559
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 0.65% 0.65% 0.65% 0.65%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 3.86% 4.54% 4.88% 5.28%**
PORTFOLIO TURNOVER RATE 102% 110% 116% 258%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.03 $0.03 $0.02 $0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.91% 0.99% 0.86% 0.86%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 3.60% 4.26% 4.68% 5.08%**
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
++PER SHARE AMOUNTS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 ARE
BASED ON AVERAGE SHARES OUTSTANDING.
11
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.75 $ 11.58 $ 10.91 $ 10.46 $ 9.55
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.94 1.00 1.00 1.03 1.14
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (0.14) (0.66) 0.67 0.47 0.97
-------- -------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.80 0.34 1.67 1.50 2.11
-------- -------- -------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.95) (0.98) (1.00) (1.05) (1.20)
IN EXCESS OF NET INVESTMENT INCOME (0.01) (0.00)+ -- (0.00)+ --
NET REALIZED GAIN -- (0.14) -- -- --
IN EXCESS OF NET REALIZED GAIN -- (0.04) -- -- --
RETURN OF CAPITAL (0.01) (0.01) -- -- --
-------- -------- -------- ------- -------
TOTAL DISTRIBUTIONS (0.97) (1.17) (1.00) (1.05) (1.20)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.58 $ 10.75 $ 11.58 $ 10.91 $ 10.46
======== ======== ======== ======= =======
TOTAL RETURN 7.77% 3.03% 15.87% 15.01% 23.35%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $136,386 $128,237 $113,006 $95,663 $62,245
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 0.59% 0.67% 0.69% 0.75% 0.75%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 8.72% 8.70% 8.70% 9.78% 11.09%
PORTFOLIO TURNOVER RATE 58% 93% 111% 117% 90%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME N/A N/A N/A $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS N/A N/A N/A 0.82% 0.83%
NET INVESTMENT INCOME TO AVERAGE NET ASSETS N/A N/A N/A 9.71% 11.01%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
---------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.73 $ 11.56 $10.90 $10.49
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.92 0.90 0.97 0.98
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (0.15) (0.59) 0.65 0.45
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.77 0.31 1.62 1.43
------- ------- ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.93) (0.95) (0.96) (1.02)
IN EXCESS OF NET INVESTMENT INCOME (0.01) (0.00)+ -- --
REALIZED NET GAIN -- (0.14) -- --
IN EXCESS OF NET REALIZED GAIN -- (0.04) -- --
RETURN OF CAPITAL (0.01) (0.01) -- --
------- ------- ------ ------
TOTAL DISTRIBUTIONS (0.95) (1.14) (0.96) (1.02)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.55 $ 10.73 $11.56 $10.90
======= ======= ====== ======
TOTAL RETURN 7.44% 2.79% 15.48% 14.37%
======= ======= ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $48,457 $56,804 $7,213 $5,665
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 0.85% 0.95% 0.93% 1.00%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 8.49% 8.73% 8.48% 9.49%**
PORTFOLIO TURNOVER RATE 58% 93% 111% 117%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME N/A N/A N/A $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS N/A N/A N/A 1.05%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS N/A N/A N/A 9.44%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+AMOUNT IS LESS THAN $0.01 PER SHARE.
12
<PAGE>
<TABLE>
<S> <C>
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER GLOBAL FIXED INCOME PORTFOLIO
INSTITUTIONAL FUND, INC. HIGH YIELD 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.
-----------------------------------------------------
Type of Registration: / / Incorporated / /
Unincorporated Association / / Partnership
/ / Uniform Gift/Transfer to
Minor
(ONLY ONE CUSTODIAN AND
MINOR PERMITTED)
/ / Trust
-------------------------------- / / Other (SPECIFY)
--------------------------------
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 SSN 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 and
Class B shares minimum $100,000 for each Portfolio.
Please indicate Portfolio, class and amount for
purchase of the following Portfolio(s):
<TABLE>
<C> <S> <C>
GLOBAL FIXED INCOME PORTFOLIO / / Class A Shares (069) $--------- / / Class B Shares (042) $ ------
HIGH YIELD PORTFOLIO / / Class A Shares (072) $--------- / / Class B Shares (045) $ ------
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 is registered if such requests are --------
believed to be authentic. NAME OF COMMERCIAL BANK (NOT SAVINGS BANK)
The Fund and the Fund's Transfer Agent will employ --------
reasonable procedures to confirm that instructions BANK ACCOUNT NUMBER
communicated by telephone are genuine. These procedures --------
include requiring the investor to provide certain BANK ABA NUMBER
personal identification information at the time an --------
account is opened and prior to effecting each NAME(S) IN WHICH YOUR BANK ACCOUNT IS ESTABLISHED
transaction requested by telephone. In addition, all --------
telephone transaction requests will be recorded and BANK'S STREET ADDRESS
investors may be required to provide additional --------
telecopied written instructions of transaction CITY STATE ZIP CODE
requests. Neither the Fund nor the Transfer Agent will
be responsible for any loss, liability, cost or expense
for following instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
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 800-548-7786.
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 IRS.
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 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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the
Portfolios. The SAI 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 investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. To aid you in obtaining this
information, the Fund's Investment Company Act registration number is 811-05624.
[ICON] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
P.O. Box 2798
Boston, Massachusetts 02208-2798
FOR INFORMATION CALL 1-800-548-7786
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
A PORTFOLIO OF [LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
U.S. EQUITY PLUS PORTFOLIO
THE U.S. EQUITY PLUS PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF ISSUERS INCLUDED IN THE STANDARD & POOR'S 500
INDEX ("S&P 500").
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
U.S. EQUITY PLUS PORTFOLIO (THE "PORTFOLIO").
THE SECURITIES AND EXCHANGE COMMISSION (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
U.S. EQUITY PLUS PORTFOLIO 1
ADDITIONAL RISK FACTORS AND INFORMATION 2
FEES AND EXPENSES OF THE PORTFOLIO 4
INVESTMENT ADVISER 5
MANAGEMENT FEES 5
PORTFOLIO MANAGER 6
DISTRIBUTION OF PORTFOLIO SHARES 6
SHAREHOLDER INFORMATION 6
FINANCIAL HIGHLIGHTS 9
U.S. EQUITY PLUS PORTFOLIO 10
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
U.S. EQUITY PLUS PORTFOLIO
- -------------------------------------------------------------------------------
THE U.S. EQUITY PLUS PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF ISSUERS INCLUDED IN THE S&P 500.
APPROACH
MSDW Investment Management seeks to maintain an investment portfolio that
consistently exceeds the performance of the S&P 500 Index while maintaining
comparable price volatility. MSDW Investment Management's investment approach
combines an active and systematic security selection process with the
application of a rigorous risk control process.
PROCESS
MSDW Investment Management seeks to purchase equity securities of the most
attractive issuers in the S&P 500 based upon a disciplined, analytical
investment strategy that combines both quantitative and qualitative analysis.
MSDW Investment Management first considers historical stock prices, earnings,
cash flow, dividend yield information, consensus earnings and earnings growth
forecasts in order to identify and rank the attractiveness of all securities in
the investment universe. Following this quantitative analysis, MSDW Investment
Management purchases securities from the remaining pool of issuers based on
qualitative recommendations from Morgan Stanley & Co. Incorporated's ("Morgan
Stanley") team of research analysts. MSDW Investment Management also uses a
proprietary market conditions model to adapt Portfolio investments to changing
market environments.
RISK
Investing in the U.S. Equity Plus 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, equity securities of larger U.S. issuers, 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 JULY
31, 1997
1998 21.26%
1999 20.25%
HIGH (QUARTER)
10/98 - 12/98 20.33%
LOW (QUARTER)
7/98 - 9/98 -12.25%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED
OPERATIONS ON OPERATIONS ON S&P 500
JULY 31, 1997) JULY 31, 1997) INDEX*
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
PAST ONE YEAR 20.25% 19.99% 21.04%
- ----------------------------------------------------------------------------------------------
SINCE INCEPTION 18.75% 18.52% 21.26%
</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 INDEX IS COMPRISED OF THE STOCKS OF 500 LARGE-CAP U.S. COMPANIES
WITH MARKET CAPITALIZATION OF $1 BILLION OR MORE. THESE 500 COMPANIES REPRESENT
APPROXIMATELY 100 INDUSTRIES, CHOSEN MAINLY FOR MARKET SIZE, LIQUIDITY AND
INDUSTRY GROUP REPRESENTATION.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIO. THE PORTFOLIO'S INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED IN
MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY IS
A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI AND
OTHER REPORTS AND INFORMATION, SEE THE BACK COVER OF THIS PROSPECTUS.
- ----------------------------------------------------------------------------
PRICE VOLATILITY
The value of your investment in the 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 gains superior to fixed income securities,
although they have 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 the
Portfolio.
DERIVATIVES
The Portfolio 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 the Portfolio, and of derivatives relating to those
securities, may not be proportionate, (ii) there may not be a liquid market for
the 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, the Portfolio may enter into derivatives transactions only with
counterparties that meet certain requirements for credit quality and collateral.
Also, the 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.
The 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 the
Portfolio, if MSDW Investment Management is not successful in employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
INVESTMENT DISCRETION
In pursuing the Portfolio's investment objective, MSDW Investment Management has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolio's performance.
BANK INVESTORS
An investment in the Portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
2
<PAGE>
TEMPORARY DEFENSIVE
INVESTMENTS
When MSDW Investment Management believes that changes in economic, financial or
political conditions warrant, the 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 the Portfolio's performance and
the Portfolio may not achieve its investment objective.
PORTFOLIO TURNOVER
Consistent with its investment policies, the Portfolio will purchase and sell
securities without regard to the effect on portfolio turnover. Higher portfolio
turnover will cause the Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders. The Portfolio may
engage in frequent trading of securities to achieve its investment objectives.
3
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIO
- -------------------------------------------------------------------------------
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 Portfolio. The
Portfolio does 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, which are described in the footnotes below,
and/or expense reimbursements from MSDW Investment Management.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
U.S. EQUITY PLUS PORTFOLIO
<S> <C>
MANAGEMENT FEES
- --------------------------------------------------------------------------------
CLASS A 0.45%
- --------------------------------------------------------------------------------
CLASS B 0.45%
12b-1 FEE
- --------------------------------------------------------------------------------
CLASS A NONE
- --------------------------------------------------------------------------------
CLASS B 0.25%
OTHER EXPENSES
- --------------------------------------------------------------------------------
CLASS A 0.72%
- --------------------------------------------------------------------------------
CLASS B 0.72%
TOTAL ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
CLASS A 1.17%
- --------------------------------------------------------------------------------
CLASS B 1.42%
</TABLE>
*THE MANAGEMENT FEES FOR THE PORTFOLIO 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,
EXCLUDING CERTAIN INVESTMENT RELATED EXPENSES DESCRIBED BELOW, WILL NOT EXCEED
0.80% FOR CLASS A SHARES AND 1.05% FOR CLASS B SHARES.
IN DETERMINING THE ACTUAL AMOUNT OF VOLUNTARY MANAGEMENT FEE WAIVER AND/OR
EXPENSE REIMBURSEMENT FOR THE 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 PORTFOLIO'S TOTAL OPERATING EXPENSES AFTER VOLUNTARY FEE WAIVERS AND/OR
EXPENSE REIMBURSEMENTS WOULD EXCEED THE EXPENSE RATIO SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSE REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES INCURRED BY INVESTORS IN THE PORTFOLIO, INCLUDING
CERTAIN INVESTMENT RELATED EXPENSES, WERE 0.83% FOR CLASS A SHARES AND 1.08%
FOR CLASS B SHARES. EXCLUDING INVESTMENT RELATED EXPENSES, THE OPERATING
EXPENSES AFTER FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS WERE 0.80% FOR CLASS A
SHARES AND 1.05% FOR CLASS B SHARES.
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.
4
<PAGE>
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS HAVING SIMILAR
INVESTMENT OBJECTIVES.
- ----------------------------------------------------------------------------
The example assumes that you invest $10,000 in the 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 the 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
<S> <C> <C> <C> <C>
U.S. EQUITY PLUS PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $119 $372 $644 $1,420
- ----------------------------------------------------------------------------------------------------
CLASS B $145 $449 $776 $1,702
</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, the Fund's Distributor. 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, 1999, MSDW Investment
Management, together with its affiliated institutional asset management
companies, managed assets of approximately $184.8 billion, including assets
under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
the Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
U.S. EQUITY PLUS PORTFOLIO
----------------------------------
<S> <C> <C>
MANAGEMENT FEE PAID IN FISCAL YEAR CLASS A CLASS B
ENDED DECEMBER 31, 1999
----------------------------------
(NET OF WAIVERS AND AS A PERCENTAGE OF AVERAGE NET ASSETS) 0.11% 0.11%
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- -------------------------------------------------------------------------------
THE FOLLOWING INDIVIDUAL HAS PRIMARY DAY-TO-DAY PORTFOLIO MANAGEMENT
RESPONSIBILITY FOR THE PORTFOLIO:
- ----------------------------------------------------------------------------
NARAYAN RAMACHANDRAN
Narayan Ramachandran, a Managing Director of MSDW Investment Management and
Morgan Stanley, joined MSDW Investment Management in 1996. Currently, he is a
Portfolio Manager and head of the Structured Asset Management business at MSDW
Investment Management. Prior to joining MSDW Investment Management, from 1988 to
1996 he was with RogersCasey Associates, Inc. ("RogersCasey"), an investment
consulting and special assets advisory firm based in Darien, Connecticut. As
President of RogersCasey's investment advisory subsidiary (1995-1996), he was
responsible for leading the special assets advisory business with $2 billion in
assets under management. Prior to that, he was Managing Director of Research for
RogersCasey (1991-1994), with his research efforts focused on quantitative
investment models. Mr. Ramachandran holds a B.S. in Chemical Engineering from
the Indian Institute of Technology in Bombay and an M.B.A. from the University
of Michigan at Ann Arbor. He is also a Chartered Financial Analyst.
Mr. Ramachandran has had primary responsibility for managing the Portfolio's
assets since its inception.
- -------------------------------------------------------------------------------
DISTRIBUTION OF PORTFOLIO SHARES
- -------------------------------------------------------------------------------
Morgan Stanley is the exclusive Distributor of Class A shares and Class B shares
of the Portfolio. Morgan Stanley receives no compensation for distributing Class
A shares of the Portfolio. The Fund has adopted a Plan of Distribution with
respect to the Class B shares of the Portfolio pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the 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 the 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 Portfolio may
hold portfolio securities that are listed on foreign exchanges. These securities
may trade on weekends or other days when the Portfolio does 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 the Portfolio at the
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolio 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").
6
<PAGE>
HOW TO PURCHASE SHARES
You may purchase Class A shares and Class B shares of the 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. 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 NAV 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.
7
<PAGE>
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 NAV 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, the Portfolio may pay redemption proceeds by a
distribution-in-kind of readily marketable portfolio securities.
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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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 the Portfolio and raise its expenses.
Therefore, the Fund may, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
DIVIDENDS AND DISTRIBUTIONS
The Portfolio's policy is to distribute to shareholders substantially all of its
taxable net investment income in the form of an annual dividend and to
distribute net capital gains, if any, at least annually.
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.
8
<PAGE>
TAXES
The dividends and distributions you receive from the 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.
If you redeem shares of the 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
the 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 table is intended to help you understand the
financial performance of the Class A shares and Class B shares of the 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 table represent the rate that an investor would
have earned (or lost) on an investment in the 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 SAI and are included
in the Fund's December 31, 1999 Annual Report to Shareholders. The Annual Report
and the Fund's financial statements, as well as the SAI, are available at no
cost from the Fund at the toll free number noted on the back cover to this
Prospectus.
9
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
U.S. EQUITY PLUS PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------
PERIOD FROM
JULY 31,
YEAR ENDED DECEMBER 31, 1997* TO
------------------------------ DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999++ 1998++ 1997++
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.43 $ 10.31 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.11 0.09 0.06
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2.30 2.10 0.33
------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.41 2.19 0.39
------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.11) (0.05) (0.05)
IN EXCESS OF NET INVESTMENT INCOME -- -- (0.03)
NET REALIZED GAIN (2.34) -- --
IN EXCESS OF NET REALIZED GAIN (0.05) (0.02) --
------- ------- -------
TOTAL DISTRIBUTIONS (2.50) (0.07) (0.08)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.34 $ 12.43 $ 10.31
======= ======= =======
TOTAL RETURN 20.25% 21.26% 3.94%
======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $22,430 $66,640 $20,914
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 0.83% 0.80% 0.80%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
INTEREST EXPENSE 0.80% N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (1) 0.35% 0.87% 1.32%**
PORTFOLIO TURNOVER RATE 182% 228% 15%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING
THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.10 $0.03 $0.07
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.17% 1.05% 2.37%**
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS 0.00% 0.59% (0.25)%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------
PERIOD FROM
JULY 31,
YEAR ENDED DECEMBER 31, 1997* TO
------------------------------ DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999++ 1998++ 1997++
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.42 $10.31 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.03 0.06 0.02
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2.36 2.10 0.37
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.39 2.16 0.39
------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.08) (0.03) (0.05)
NET REALIZED GAIN (2.33) -- (0.03)
IN EXCESS OF NET REALIZED GAIN (0.07) (0.02) --
------ ------ ------
TOTAL DISTRIBUTIONS (2.48) (0.05) (0.08)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $12.33 $12.42 $10.31
====== ====== ======
TOTAL RETURN 19.99% 20.95% 3.93%
====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $1,533 $1,431 $ 102
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.08% 1.05% 1.05%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
INTEREST EXPENSE (2) 1.05% N/A N/A
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET
ASSETS (2) 0.15% 0.52% 0.48%**
PORTFOLIO TURNOVER RATE 182% 228% 15%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.08 $0.03 $0.00+
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.42% 1.34% 2.63%**
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (0.24)% 0.24% (0.32)%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*COMMENCEMENT OF OPERATIONS
**ANNUALIZED
+AMOUNT IS LESS THAN $0.01 PER SHARE.
++PER SHARE AMOUNTS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND PERIOD
ENDED DECEMBER 31, 1997 ARE BASED ON AVERAGE SHARES OUTSTANDING.
10
<PAGE>
<TABLE>
<S> <C>
A PORTFOLIO OF [ICON] MORGAN STANLEY DEAN WITTER
INSTITUTIONAL FUND, INC. U.S. EQUITY PLUS 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.
------------------------------------------------------------------------------
Type of Registration: / / Incorporated/ / Unincorporated Association/ /
Partnership
/ / Uniform Gift/Transfer to Minor
(ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / Trust -------------------- / / Other (SPECIFY) --------------------
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 SSN 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 the Portfolio and
Class B shares minimum $100,000 for the Portfolio.
Please indicate class and amount for purchase of the
following Portfolio:
<TABLE>
<C> <S> <C>
U.S. EQUITY PLUS PORTFOLIO / / Class A Shares (097) $ ---------- / / Class B Shares (098) $ ----------
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 is registered ------------------------
if such requests are believed to be authentic. NAME OF COMMERCIAL BANK (NOT SAVINGS
The Fund and the Fund's Transfer Agent will employ BANK)
reasonable procedures to confirm that instructions ------------------------
communicated by telephone are genuine. These BANK ACCOUNT NUMBER
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 NAME(S) IN WHICH YOUR BANK ACCOUNT IS
telephone. In addition, all telephone transaction ESTABLISHED
requests will be recorded and investors may be ------------------------
required to provide additional telecopied written BANK'S STREET ADDRESS
instructions of transaction requests. Neither the ------------------------
Fund nor the Transfer Agent will be responsible CITY STATE ZIP CODE
for any loss, liability, cost or expense for
following instructions received 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 800-548-7786.
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 IRS.
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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the Portfolio.
The SAI 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 the 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
the Portfolio's performance during that period.
For additional Fund information, including information regarding investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: public [email protected]. To aid you in obtaining this
information, the Fund's Investment Company Act registration number is 811-05624.
[ICON] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
P.O. Box 2798
Boston, Massachusetts 02208-2798
FOR INFORMATION CALL 1-800-548-7786
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
PORTFOLIOS OF [LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
EUROPEAN REAL ESTATE PORTFOLIO
THE EUROPEAN REAL ESTATE PORTFOLIO SEEKS TO PROVIDE CURRENT INCOME AND LONG-TERM
CAPITAL APPRECIATION BY INVESTING PRIMARILY IN EQUITY SECURITIES OF COMPANIES IN
THE EUROPEAN REAL ESTATE INDUSTRY.
ASIAN REAL ESTATE PORTFOLIO
THE ASIAN REAL ESTATE PORTFOLIO SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION
BY INVESTING PRIMARILY IN EQUITY SECURITIES OF COMPANIES IN THE ASIAN REAL
ESTATE INDUSTRY.
U.S. REAL ESTATE PORTFOLIO
THE U.S. REAL ESTATE PORTFOLIO SEEKS TO PROVIDE ABOVE AVERAGE CURRENT INCOME AND
LONG-TERM CAPITAL APPRECIATION BY INVESTING PRIMARILY IN EQUITY SECURITIES OF
COMPANIES IN THE U.S. REAL ESTATE INDUSTRY, INCLUDING REAL ESTATE INVESTMENT
TRUSTS ("REITS").
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 (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
EUROPEAN REAL ESTATE PORTFOLIO 1
ASIAN REAL ESTATE PORTFOLIO 2
U.S. REAL ESTATE PORTFOLIO 3
ADDITIONAL RISK FACTORS AND INFORMATION 4
FEES AND EXPENSES OF THE PORTFOLIOS 6
INVESTMENT ADVISER 7
MANAGEMENT FEES 7
PORTFOLIO MANAGERS 8
DISTRIBUTION OF PORTFOLIO SHARES 9
SHAREHOLDER INFORMATION 9
FINANCIAL HIGHLIGHTS 11
EUROPEAN REAL ESTATE PORTFOLIO 12
ASIAN REAL ESTATE PORTFOLIO 13
U.S. REAL ESTATE PORTFOLIO 14
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
EUROPEAN REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
THE EUROPEAN REAL ESTATE PORTFOLIO SEEKS TO PROVIDE CURRENT INCOME AND LONG-TERM
CAPITAL APPRECIATION BY INVESTING PRIMARILY IN EQUITY SECURITIES OF COMPANIES IN
THE EUROPEAN REAL ESTATE INDUSTRY.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks a combination of current income and capital
appreciation by constructing a portfolio of equity securities of European real
estate companies. MSDW Investment Management considers a company to be European
if its securities are traded on a recognized stock exchange in Europe or if it
is organized in a European country and operates primarily in Europe. The
Portfolio will invest primarily in companies located in Germany, France,
Switzerland, Belgium, Italy, Spain, Portugal, Finland, Sweden, Denmark, Norway,
Ireland and the United Kingdom but may also invest in the emerging markets of
Europe. MSDW Investment Management's approach emphasizes bottom-up stock
selection with a top-down country allocation overlay.
PROCESS
MSDW Investment Management's dedicated real estate team focuses on valuation,
including underlying asset values, values per square foot and property yields as
well as property portfolio composition, lease expiration, capital structure and
management. Before investing, MSDW Investment Management employees typically
visit with representatives of each company and selected properties. In seeking
an optimal matrix of country and property market exposure, MSDW Investment
Management considers broad demographic and macroeconomic factors as well as
criteria such as space demand, new construction and rental patterns.
RISK
Investing in the European Real Estate Portfolio may be appropriate for you if
you are willing to accept the risks and uncertainties of the European real
estate market in the hope of earning current income and long-term gain. 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). Investing in real estate companies entails the risks of
the real estate business generally, including sensitivity to economic and
business cycles, changing demographic patterns and government actions. In
addition, at times the Portfolio's market sector, European real estate
securities, may underperform relative to other sectors.
INVESTING IN FOREIGN COUNTRIES, PARTICULARLY EMERGING MARKETS, ENTAILS 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, THE
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 THE PORTFOLIO'S INVESTMENTS.
THESE CHANGES MAY OCCUR SEPARATELY FROM AND IN RESPONSE TO EVENTS THAT DO NOT
OTHERWISE AFFECT THE VALUE OF THE SECURITY IN THE ISSUER'S HOME COUNTRY. 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. IN ADDITION, 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.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
OCTOBER 1, 1997
1998 4.75%
1999 -2.36%
HIGH (QUARTER)
1/98 - 3/98
16.28%
LOW (QUARTER)
7/98 - 9/98
- -9.03%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B GPR GENERAL
(COMMENCED (COMMENCED REAL ESTATE
OPERATIONS ON OPERATIONS ON SECURITIES
OCTOBER 1, 1997) OCTOBER 1, 1997) INDEX-EUROPE*
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
PAST ONE YEAR -2.36% -2.61% 3.40%
- ------------------------------------------------------------------------------------
SINCE INCEPTION -1.14% -1.34% 1.33%
</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 GPR GENERAL REAL ESTATE SECURITIES INDEX-EUROPE IS A EUROPEAN MARKET
CAPITALIZATION WEIGHTED INDEX OF LISTED PROPERTY/REAL ESTATE SECURITIES
MEASURING TOTAL RETURN.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
ASIAN REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
THE ASIAN REAL ESTATE PORTFOLIO SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION
BY INVESTING PRIMARILY IN EQUITY SECURITIES OF COMPANIES IN THE ASIAN REAL
ESTATE INDUSTRY.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks capital appreciation by constructing a
portfolio of equity securities of Asian real estate companies. MSDW Investment
Management considers a company to be Asian if its securities are traded on a
recognized stock exchange in Asia or if it is organized in an Asian country and
operates primarily in Asia. The Portfolio will invest primarily in the more
established Asian markets, including Singapore, Malaysia, Hong Kong and
Thailand, but may also invest in other Asian emerging markets and in Japan,
Australia and New Zealand. MSDW Investment Management's approach emphasizes
bottom-up stock selection with a top-down country allocation overlay.
PROCESS
MSDW Investment Management's dedicated real estate team focuses on valuation,
including underlying asset values, values per square foot and property yields as
well as property portfolio composition, lease expiration, capital structure and
management. Before investing, MSDW Investment Management employees typically
visit with representatives of each company and selected properties. In seeking
an optimal matrix of country and property market exposure, MSDW Investment
Management considers broad demographic and macroeconomic factors as well as
criteria such as space demand, new construction and rental patterns.
RISK
Investing in the Asian Real Estate Portfolio may be appropriate for you if you
are willing to accept the risks and uncertainties of the Asian real estate
market in the hope of earning long-term gain. 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). Investing in real estate
companies entails the risks of the real estate business generally, including
sensitivity to economic and business cycles, changing demographic patterns and
government actions. In addition, at times the Portfolio's market sector, Asian
real estate securities, may underperform relative to other sectors.
INVESTING IN FOREIGN COUNTRIES, PARTICULARLY EMERGING MARKETS, ENTAILS 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, THE
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 THE PORTFOLIO'S INVESTMENTS.
THESE CHANGES MAY OCCUR SEPARATELY FROM AND IN RESPONSE TO EVENTS THAT DO NOT
OTHERWISE AFFECT THE VALUE OF THE SECURITY IN THE ISSUER'S HOME COUNTRY. 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. 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.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
OCTOBER 1, 1997
1998 -11.82%
1999 24.27%
HIGH (QUARTER)
10/98 - 12/98
50.92%
LOW (QUARTER)
4/98 - 6/98
- -30.06%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B GPR GENERAL
(COMMENCED (COMMENCED REAL ESTATE
OPERATIONS ON OPERATIONS ON SECURITIES
OCTOBER 1, 1997) OCTOBER 1, 1997) INDEX-FAR EAST*
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
PAST ONE YEAR 24.27% 23.88% 20.46%
- ----------------------------------------------------------------------------------
SINCE INCEPTION -5.64% -6.00% -13.86%
</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 GPR GENERAL REAL ESTATE SECURITIES INDEX-FAR EAST IS A MARKET
CAPITALIZATION WEIGHTED INDEX MEASURING TOTAL RETURN OF LISTED PROPERTY/REAL
ESTATE SECURITIES IN THE FAR EAST.
2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
U.S. REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
THE U.S. REAL ESTATE PORTFOLIO SEEKS TO PROVIDE ABOVE AVERAGE CURRENT INCOME AND
LONG-TERM CAPITAL APPRECIATION BY INVESTING PRIMARILY IN EQUITY SECURITIES OF
COMPANIES IN THE U.S. REAL ESTATE INDUSTRY, INCLUDING REAL ESTATE INVESTMENT
TRUSTS ("REITS").
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks a combination of current income and long-term
gain by constructing a portfolio of equity securities of companies that are in
the U.S. real estate business. The Portfolio focuses on REITs as well as real
estate operating companies and invests in a variety of property types and
regions. MSDW Investment Management's approach emphasizes bottom-up stock
selection with a top-down asset allocation overlay.
PROCESS
MSDW Investment Management actively manages the Portfolio using a combination of
top-down and bottom-up methodologies. The top-down asset allocation overlay is
determined by focusing on key regional criteria, which include demographic and
macroeconomic considerations (for example, population, employment, household
formation and income). MSDW Investment Management employs a value-driven
approach to bottom-up security selection which emphasizes underlying asset
values, values per square foot and property yields. In seeking an optimal matrix
of regional and property market exposure, MSDW Investment Management considers
broad demographic and macroeconomic factors as well as criteria such as space
demand, new construction and rental patterns.
RISK
Investing in the U.S. Real Estate Portfolio may be appropriate for you if you
are willing to accept the risks and uncertainties of the U.S. real estate market
in the hope of earning current income and long-term gain. 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). Investing in
real estate companies entails the risks of the real estate business generally,
including sensitivity to economic and business cycles, changing demographic
patterns and government actions. In addition, at times the Portfolio's market
sector, U.S. real estate securities, may underperform relative to other sectors.
INVESTING IN REITS EXPOSES INVESTORS TO THE RISKS OF OWNING REAL ESTATE
DIRECTLY, AS WELL AS TO RISKS THAT RELATE SPECIFICALLY TO THE WAY IN WHICH REITS
ARE ORGANIZED AND OPERATED. REITS GENERALLY INVEST DIRECTLY IN REAL ESTATE
(EQUITY REITS), IN MORTGAGES (MORTGAGE REITS) OR IN SOME COMBINATION OF THE TWO
(HYBRID REITS). THE PORTFOLIO WILL INVEST PRIMARILY IN EQUITY REITS. OPERATING
REITS REQUIRES SPECIALIZED MANAGEMENT SKILLS AND THE PORTFOLIO INDIRECTLY BEARS
REIT MANAGEMENT EXPENSES ALONG WITH THE DIRECT EXPENSES OF THE PORTFOLIO.
INDIVIDUAL REITS MAY OWN A LIMITED NUMBER OF PROPERTIES AND MAY CONCENTRATE IN A
PARTICULAR REGION OR PROPERTY TYPE. REITS ALSO MUST SATISFY SPECIFIC INTERNAL
REVENUE CODE REQUIREMENTS IN ORDER TO QUALIFY FOR THE TAX-FREE PASS THROUGH OF
INCOME. 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.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS
ON FEBRUARY 24, 1995
1996 39.56%
1997 27.62%
1998 -12.29%
1999 -1.48%
HIGH (QUARTER)
10/96 - 12/96
16.71%
LOW (QUARTER)
7/98 - 9/98
- -9.45%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
NATIONAL
ASSOCIATION OF
REAL ESTATE
CLASS A CLASS B INVESTMENT
(COMMENCED (COMMENCED TRUSTS (NAREIT)
OPERATIONS ON OPERATIONS ON EQUITY INDEX*
FEBRUARY 24, 1995) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
PAST ONE YEAR -1.48% -1.73% -4.62% -4.62%
- ---------------------------------------------------------------------------------------------------
SINCE INCEPTION 13.68% 10.89% 8.30% 6.38%
</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. 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 NAREIT EQUITY INDEX IS AN UNMANAGED MARKET WEIGHTED INDEX OF TAX QUALIFIED
REITS LISTED ON THE NEW YORK STOCK EXCHANGE, AMERICAN STOCK EXCHANGE AND THE
NASDAQ NATIONAL MARKET SYSTEM.
3
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIOS. THE PORTFOLIOS' INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED
IN MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY
IS A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI 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 regions, countries, companies or governments. 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 gains superior to fixed income
securities, although they have 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.
REAL ESTATE INVESTING
Each of the Portfolios invests in companies that are mainly in the real estate
business (that is, they either (i) derived at least 50% of their revenues or
profits from the ownership, construction, management, financing or sale of
residential, commercial or industrial real estate, or (ii) have at least 50% of
the fair market value of their assets invested in residential, commercial or
industrial real estate). As a result, these companies (and, therefore, the
Portfolios) will experience the risks of investing in real estate directly. Real
estate is a cyclical business, highly sensitive to general and local economic
developments and characterized by intense competition and periodic overbuilding.
Real estate income and values may also be greatly affected by demographic
trends, such as population shifts or changing tastes and values. Government
actions, such as tax increases, zoning law changes or environmental regulations,
may also have a major impact on real estate markets. Changing interest rates and
credit quality requirements will also affect the cash flow of real estate
companies and their ability to meet capital needs.
EMERGING MARKET RISKS
The European Real Estate and Asian Real Estate Portfolios may invest in emerging
market countries, which are countries that major international financial
institutions, such as the World Bank, generally consider to be less economically
mature than developed nations, such as the United States or most nations in
Western Europe. Emerging market countries can include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand, and most
countries located in Western Europe. Emerging market countries may be more
likely to experience political turmoil or rapid changes in economic conditions
than more developed countries, and the financial condition of issuers in
emerging market countries may be more precarious than in other countries. These
characteristics result in greater risk of price volatility in emerging market
countries, which may be heightened by currency fluctuations relative to the U.S.
dollar.
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
4
<PAGE>
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 a 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 employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
INVESTMENT DISCRETION
In pursuing the Portfolios' investment objectives, MSDW Investment Management
has considerable leeway in deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolios' performance.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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 will cause a Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders. A Portfolio may
engage in frequent trading of securities to achieve its investment objectives.
5
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
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, which are described in the footnotes below.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
EUROPEAN REAL ESTATE ASIAN REAL ESTATE U.S. REAL ESTATE
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
MANAGEMENT FEES
- ------------------------------------------------------------------------------------------------------
CLASS A 0.80% 0.80% 0.80%
- ------------------------------------------------------------------------------------------------------
CLASS B 0.80% 0.80% 0.80%
12b-1 Fee
- ------------------------------------------------------------------------------------------------------
CLASS A NONE NONE NONE
- ------------------------------------------------------------------------------------------------------
CLASS B 0.25% 0.25% 0.25%
OTHER EXPENSES
- ------------------------------------------------------------------------------------------------------
CLASS A 0.91% 2.39% 0.22%
- ------------------------------------------------------------------------------------------------------
CLASS B 0.91% 2.05% 0.22%
TOTAL ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------------------------------------------------
CLASS A 1.71% 3.19% 1.02%
- ------------------------------------------------------------------------------------------------------
CLASS B 1.96% 3.10% 1.27%
</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 PORTFOLIOS SO THAT ANNUAL OPERATING EXPENSES, EXCLUDING CERTAIN
INVESTMENT RELATED EXPENSES, AS DESCRIBED BELOW, WILL NOT EXCEED 1.00% FOR
CLASS A SHARES AND 1.25% FOR CLASS B SHARES.
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 WOULD EXCEED THE EXPENSE RATIOS SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY FEE WAIVER AND/ OR EXPENSE REIMBURSEMENT, THE TOTAL
OPERATING EXPENSES INCURRED BY INVESTORS WERE 1.00% FOR CLASS A SHARES AND 1.25%
FOR CLASS B SHARES OF THE U.S. REAL ESTATE PORTFOLIO. THE TOTAL OPERATING
EXPENSES INCURRED BY INVESTORS, INCLUDING CERTAIN INVESTMENT RELATED EXPENSES,
WERE 1.23% FOR CLASS A SHARES AND 1.47% FOR CLASS B SHARES OF THE EUROPEAN REAL
ESTATE PORTFOLIO AND 1.01% FOR CLASS A SHARES AND 1.25% FOR CLASS B SHARES OF
THE ASIAN REAL ESTATE PORTFOLIO. EXCLUDING INVESTMENT RELATED EXPENSES, THE
OPERATING EXPENSES AFTER FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS WERE 1.00%
FOR CLASS A SHARES AND 1.25% FOR CLASS B SHARES OF THE EUROPEAN REAL ESTATE AND
ASIAN REAL ESTATE PORTFOLIOS.
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.
6
<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
<S> <C> <C> <C> <C>
EUROPEAN REAL ESTATE PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $174 $539 $928 $2,019
- ----------------------------------------------------------------------------------------------------
CLASS B $199 $615 $1,057 $2,285
ASIAN REAL ESTATE PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $322 $983 $1,669 $3,494
- ----------------------------------------------------------------------------------------------------
CLASS B $313 $957 $1,625 $3,411
U.S. REAL ESTATE PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $104 $325 $563 $1,248
- ----------------------------------------------------------------------------------------------------
CLASS B $129 $403 $697 $1,534
</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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies (with MSDW Investment Management, the
"MSDW Investment Management Group"), managed assets of approximately
$184.8 billion, including assets under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
EUROPEAN ASIAN REAL U.S. REAL
REAL ESTATE ESTATE ESTATE
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------
MANAGEMENT FEE PAID IN FISCAL YEAR ENDED CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
---------------------------------------------------------------
DECEMBER 31, 1999 0.32% 0.32% 0.00% 0.00% 0.78% 0.78%
(NET OF WAIVERS AND AS A PERCENTAGE OF
AVERAGE NET ASSETS)
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
SUBJECT TO THE SUPERVISION OF MSDW INVESTMENT MANAGEMENT AND ITS INVESTMENT
MANAGEMENT COMMITTEE, THE FOLLOWING INDIVIDUALS, EACH OF WHOM IS EMPLOYED BY A
MEMBER OF THE MSDW INVESTMENT MANAGEMENT GROUP, HAVE PRIMARY DAY-TO-DAY
PORTFOLIO MANAGEMENT RESPONSIBILITY FOR THE PORTFOLIOS:
- ----------------------------------------------------------------------------
EUROPEAN REAL ESTATE PORTFOLIO
THEODORE R. BIGMAN, MANAGING DIRECTOR AND JAN WILLEM DE GEUS, VICE PRESIDENT
Theodore R. Bigman has primary responsibility for managing MSDW Investment
Management Group's global real estate securities business. Prior to joining MSDW
Investment Management Group in 1995, he was a Director at CS First Boston, where
he worked for eight years in the Real Estate Group. While at CS First Boston,
Mr. Bigman established and managed that firm's REIT effort, which included
primary responsibility for $2.5 billion of initial public offerings by REITs.
Mr. Bigman graduated from Brandeis University in 1983 with a B.A. in Economics
and received his M.B.A. from Harvard University in 1987. Jan Willem de Geus
joined MSDW Investment Management Group in 1997 to establish and manage the
European Real Estate Portfolio. During March through May 1999, he departed MSDW
Investment Management Group to act as a consultant in the real estate securities
business. Prior to 1997, he was employed at the Dutch Metalworkers Pensionfund
(MPMA), where he worked for four years in the international real estate
department. At the MPMA he was involved in the acquisition of direct real
estate, was responsible for selecting REIT managers in the United States and was
a portfolio manager of international real estate securities. Mr. de Geus
graduated from the University of Nijmegen in 1991 with a doctorate in city
planning with a specialization in real estate and received a masters degree in
real estate investment from the Pennsylvania State University in 1993. He is
currently in the final stage of finishing his RBS (the Dutch equivalent of an
American CFA). Mr. Bigman has shared primary responsibility for managing the
Portfolio's assets since January 1999. Mr. de Geus had primary responsibility
for managing the Portfolio's assets from its inception until his departure in
February 1999 and has shared primary responsibility for managing the Portfolio's
assets since his return in June 1999.
ASIAN REAL ESTATE PORTFOLIO
THEODORE R. BIGMAN, MANAGING DIRECTOR AND ANGELINE HO, PORTFOLIO MANAGER
Information about Theodore R. Bigman is included under the European Real Estate
Portfolio above. Angeline Ho joined MSDW Investment Management Group in 1997.
Prior to 1997 she was a senior research analyst at Schroder Securities from 1993
to 1995, and at SocGen-Crosby Securities from 1995 to 1997, where she was
primarily responsible for the coverage of listed real estate securities in
Singapore and Malaysia. Prior to 1991, she worked for Debenham Tewson
International where she was involved in property appraisal and consultancy. Ms.
Ho is a qualified property appraiser, and received a B.Sc. with honours in
Estate Management from the National University of Singapore and an M.B.A. in
Accountancy from the Nanyang Technological University. Mr. Bigman has shared
primary responsibility for managing the Portfolio's assets since June 1999. Ms.
Ho has shared primary responsibility for managing the Portfolio's assets since
January 2000.
U.S. REAL ESTATE PORTFOLIO
THEODORE R. BIGMAN, MANAGING DIRECTOR AND DOUGLAS A. FUNKE, VICE PRESIDENT
Information about Theodore R. Bigman is included under the European Real Estate
Portfolio above. Douglas A. Funke joined Morgan Stanley in 1993. Currently, he
is responsible for providing research and analytical support for MSDW Investment
Management Group's real estate securities investment business. Prior to joining
MSDW Investment Management Group in 1995, he was a member of Morgan Stanley's
Interest Rate and Foreign Exchange Risk Management Group, where he assisted in
the execution of more than $3 billion of structured financings and firm-related
risk management
8
<PAGE>
projects. Mr. Funke graduated from the University of Chicago in 1993 with a B.A.
in Economics and Political Science. He is a member of the National Association
of Real Estate Investment Trusts and the New York Society of Security Analysts.
Mr. Bigman has shared primary responsibility for managing the Portfolio's assets
since March 1995. Mr. Funke has shared primary responsibility for managing the
Portfolio's assets since January 1999.
- -------------------------------------------------------------------------------
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 (the
"Plan") under the Investment Company Act of 1940. 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
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolios 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").
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. 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.
9
<PAGE>
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 NAV calculated at the
Pricing Time following receipt of your purchase order and payment.
10
<PAGE>
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 NAV 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 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.
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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
11
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of quarterly dividends and to
distribute net capital gains, if any, at least annually.
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. A Portfolio may be able to
pass through to you a credit for foreign income taxes it pays. The Fund will
tell you annually how to treat dividends and distributions.
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 SAI and are
included in the Fund's December 31, 1999 Annual Report to Shareholders. The
Annual Report and the Fund's financial statements, as well as the SAI, are
available at no cost from the Fund at the toll free number noted on the back
cover to this Prospectus.
12
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
EUROPEAN REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------
PERIOD FROM
OCTOBER 1,
YEAR ENDED DECEMBER 31, 1997* TO
------------------------ DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.58 $ 9.52 $ 10.00
------ ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (1) (0.05) 0.12 0.05
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (0.17) 0.33 (0.52)
------ ------- -------
TOTAL FROM INVESTMENT OPERATIONS (0.22) 0.45 (0.47)
------ ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.18) (0.25) (0.01)
IN EXCESS OF NET INVESTMENT INCOME (0.02) (0.14) --
------ ------- -------
TOTAL DISTRIBUTIONS (0.20) (0.39) (0.01)
------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.16 $ 9.58 $ 9.52
====== ======= =======
TOTAL RETURN (2.36)% 4.75% (4.72)%
====== ======= =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $9,931 $33,422 $15,177
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.23% 1.03% 1.00%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING INTEREST
EXPENSE 1.00% 1.00% N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (1) 2.33% 1.33% 2.08%**
PORTFOLIO TURNOVER RATE 35% 119% 47%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.03 $0.05
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.71% 1.43% 3.05%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.85% 0.95% 0.03%**
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
PERIOD FROM
OCTOBER 1,
YEAR ENDED DECEMBER 31, 1997* TO
--------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.61 $ 9.52 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.19 0.11 0.02
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (0.43) 0.33 (0.50)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.24) 0.44 (0.48)
------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.16) (0.22) --
IN EXCESS OF NET INVESTMENT INCOME (0.02) (0.13) --
------ ------ ------
TOTAL DISTRIBUTIONS (0.18) (0.35) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.19 $ 9.61 $ 9.52
====== ====== ======
TOTAL RETURN (2.61)% 4.60% (4.76)%
====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $1,786 $2,531 $789
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.47% 1.28% 1.25%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING INTEREST
EXPENSE 1.25% 1.25% N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 2.35% 1.15% 1.51%**
PORTFOLIO TURNOVER RATE 35% 119% 47%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.04 $0.04 $0.03
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.96% 1.68% 3.12%**
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS 1.91% 0.77% (0.36)%**
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
*COMMENCEMENT OF OPERATIONS
**ANNUALIZED
12
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ASIAN REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
PERIOD FROM
OCTOBER 1,
YEAR ENDED DECEMBER 31, 1997* TO
------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.63 $ 7.94 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.11 0.26 0.11
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1.50 (1.24) (2.10)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.61 (0.98) (1.99)
------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.32) (0.33) (0.07)
IN EXCESS OF NET INVESTMENT INCOME (0.02) -- --
------ ------ ------
TOTAL DISTRIBUTIONS (0.34) (0.33) (0.07)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 7.90 $ 6.63 $ 7.94
====== ====== ======
TOTAL RETURN 24.27% (11.82)% (19.92)%
====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $2,912 $2,447 $2,385
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.01% 1.05% 1.08%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING INTEREST
EXPENSE 1.00% 1.00% 1.00%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (1) 1.64% 2.47% 5.21%**
PORTFOLIO TURNOVER RATE 98% 261% 38%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.15 $0.36 $0.25
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 3.19% 4.52% 12.95%**
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (0.54)% (1.00)% (6.66)%**
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------
PERIOD FROM
OCTOBER 1,
YEAR ENDED DECEMBER 31, 1997* TO
----------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.66 $ 8.03 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.13 0.12 --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1.46 (1.16) (1.97)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.59 (1.04) (1.97)
------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.30) (0.33) --
IN EXCESS OF NET INVESTMENT INCOME (0.02) -- --
------ ------ ------
TOTAL DISTRIBUTIONS (0.32) (0.33) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 7.93 $ 6.66 $ 8.03
====== ====== ======
TOTAL RETURN 23.88% (12.53)% (19.70)%
====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $1,372 $ 761 $ 0+
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.25% 1.38% 1.18%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING INTEREST
EXPENSE 1.25% 1.25% N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 1.39% 2.39% 4.24%**
PORTFOLIO TURNOVER RATE 98% 261% 38%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.17 $0.18 N/A
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 3.10% 5.03% N/A
NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (0.45)% (1.27)% N/A
- -------------------------------------------------------------------------------------------------------------
</TABLE>
*COMMENCEMENT OF OPERATIONS
**ANNUALIZED
+AMOUNT IS LESS THAN $500.
13
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
U.S. REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
PERIOD FROM
FEBRUARY 24,
YEAR ENDED DECEMBER 31, 1995* TO
-------------------------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.71 $ 15.38 $ 14.41 $ 11.42 $ 10.00
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.81 0.47 0.42 0.37 0.26
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (0.98) (2.32) 3.40 4.02 1.84
-------- -------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS (0.17) (1.85) 3.82 4.39 2.10
-------- -------- -------- -------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.66) (0.49) (0.43) (0.39) (0.24)
NET REALIZED GAIN -- (0.10) (2.16) (1.01) (0.44)
IN EXCESS OF NET REALIZED GAIN (0.04) (0.23) (0.26) -- --
-------- -------- -------- -------- -------
TOTAL DISTRIBUTIONS (0.70) (0.82) (2.85) (1.40) (0.68)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 11.84 $ 12.71 $ 15.38 $ 14.41 $ 11.42
======== ======== ======== ======== =======
TOTAL RETURN (1.48)% (12.29)% 27.62% 39.56% 21.07%
======== ======== ======== ======== =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $311,064 $259,589 $361,549 $210,368 $69,509
RATIO OF EXPENSES TO AVERAGE NET
ASSETS (1) 1.00% 1.00% 1.00% 1.00% 1.00%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS (1) 6.52% 3.33% 2.72% 3.08% 4.04%**
PORTFOLIO TURNOVER RATE 47% 117% 135% 171% 158%
------------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.00+ $0.00+ $0.01 $0.02 $0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.02% 1.04% 1.04% 1.14% 1.33%**
NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 6.51% 3.30% 2.68% 2.93% 3.71%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
----------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.67 $ 15.34 $ 14.39 $11.50
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.82 0.47 0.47 0.35
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1.02) (2.35) 3.29 3.92
------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS (0.20) (1.88) 3.76 4.27
------- ------- ------- ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.63) (0.46) (0.39) (0.37)
NET REALIZED GAIN -- (0.10) (2.16) (1.01)
IN EXCESS OF NET REALIZED GAIN (0.04) (0.23) (0.26) --
------- ------- ------- ------
TOTAL DISTRIBUTIONS (0.67) (0.79) (2.81) (1.38)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 11.80 $ 12.67 $ 15.34 $14.39
======= ======= ======= ======
TOTAL RETURN (1.73)% (12.52)% 27.21% 38.23%
======= ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $13,418 $13,523 $21,231 $8,734
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.25% 1.25% 1.25% 1.25%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 6.13% 3.23% 3.49% 2.91%**
PORTFOLIO TURNOVER RATE 47% 117% 135% 171%
------------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.00+ $0.01 $0.00+ $0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.27% 1.29% 1.28% 1.37%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.12% 3.20% 3.46% 2.79%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* COMMENCEMENT OF OPERATIONS
** ANNUALIZED
*** THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+ AMOUNT IS LESS THAN $0.01 PER SHARE.
14
<PAGE>
<TABLE>
<S> <C>
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER EUROPEAN REAL ESTATE
INSTITUTIONAL FUND, INC. PORTFOLIO
ASIAN REAL ESTATE PORTFOLIO
U.S. REAL ESTATE 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.
------------------------------------------------------------------------------
Type of Registration: / / Incorporated / / Unincorporated Association
/ / Partnership / / Uniform Gift/Transfer to Minor
(ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / Trust -------------------- / / Other (SPECIFY) --------------------
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 SSN 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 and
Class B shares minimum $100,000 for each Portfolio.
Please indicate Portfolio, class and amount for
purchase of the following Portfolio(s):
<TABLE>
<C> <S> <C>
EUROPEAN REAL ESTATE PORTFOLIO / / Class A Shares (001) $ ---------- / / Class B Shares (002) $ --------------------
ASIAN REAL ESTATE PORTFOLIO / / Class A Shares (051) $ ---------- / / Class B Shares (099) $ --------------------
U.S. REAL ESTATE PORTFOLIO / / Class A Shares (085) $ ---------- / / Class B Shares (089) $ --------------------
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 is registered
if such requests are believed to be authentic. ------------------------
The Fund and the Fund's Transfer Agent will employ NAME OF COMMERCIAL BANK (NOT SAVINGS BANK)
reasonable procedures to confirm that instructions ------------------------
communicated by telephone are genuine. These BANK ACCOUNT NUMBER
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 NAME(S) IN WHICH YOUR BANK ACCOUNT IS ESTABLISHED
telephone. In addition, all telephone transaction ------------------------
requests will be recorded and investors may be BANK'S STREET ADDRESS
required to provide additional telecopied written ------------------------
instructions of transaction requests. Neither the CITY STATE ZIP CODE
Fund nor the Transfer Agent will be responsible
for any loss, liability, cost or expense for
following instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
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 800-548-7786.
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 IRS.
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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the
Portfolios. The SAI 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 investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090; (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. 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
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
A PORTFOLIO OF [LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
INTERNATIONAL MAGNUM PORTFOLIO
THE INTERNATIONAL MAGNUM PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF NON-U.S. ISSUERS DOMICILED IN EAFE
COUNTRIES.
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
INTERNATIONAL MAGNUM PORTFOLIO (THE "PORTFOLIO").
THE SECURITIES AND EXCHANGE COMMISSION (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
INTERNATIONAL MAGNUM PORTFOLIO 1
ADDITIONAL RISK FACTORS AND INFORMATION 2
FEES AND EXPENSES OF THE PORTFOLIO 4
INVESTMENT ADVISER 5
MANAGEMENT FEE 5
PORTFOLIO MANAGER 6
DISTRIBUTION OF PORTFOLIO SHARES 6
SHAREHOLDER INFORMATION 6
FINANCIAL HIGHLIGHTS 9
INTERNATIONAL MAGNUM PORTFOLIO 10
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
INTERNATIONAL MAGNUM PORTFOLIO
- -------------------------------------------------------------------------------
THE INTERNATIONAL MAGNUM PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF NON-U.S. ISSUERS DOMICILED IN EAFE
COUNTRIES.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to achieve superior long-term returns by
creating a portfolio of attractively valued international equity securities. To
achieve this goal, MSDW Investment Management uses a combination of strategic
geographic asset allocation and fundamental stock selection.
PROCESS
The Portfolio is managed using a two-part process combining the expertise of
investment teams based in New York, London, Tokyo and Singapore. The New
York-based portfolio management team decides upon the appropriate allocation of
the Portfolio's assets among Europe, Japan and developed Asia, including
Australia and New Zealand. Regional allocation decisions are based on a variety
of factors, including relative valuations, earnings expectations, macroeconomic
factors, as well as input from the regional stock selection teams and from MSDW
Investment Management's Asset Allocation Group, which is made up of several of
MSDW Investment Management's most senior investment officers. Once allocations
to Europe, Asia and Japan have been determined, overseas investment teams in
London (for European stocks), Tokyo (for Japanese stocks) and Singapore (for
Asian stocks) decide which stocks to purchase for their respective geographic
regions. The regional portfolio management teams look for stocks that they
believe to be attractively valued. The regional specialists analyze each
company's finances, products and management, typically meeting with each
company's management before a stock is purchased for the Portfolio. The
Portfolio invests primarily in countries comprising the MSCI Europe,
Australasia, Far East (EAFE) Index (the "EAFE Index"). EAFE countries include
Japan, most nations in Western Europe, Australia, New Zealand, Hong Kong and
Singapore. However, the Portfolio also may invest up to 5% of its assets in
countries not included in the EAFE Index, including emerging market countries.
RISK
Investing in the International Magnum Portfolio may be appropriate for you if
you are willing to accept the risks and uncertainties of investing in the equity
securities of non-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 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,
foreign 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. MSDW INVESTMENT MANAGEMENT MAY INVEST IN CERTAIN
INSTRUMENTS, SUCH AS DERIVATIVES, AND MAY USE CERTAIN TECHNIQUES, SUCH AS
HEDGING, TO MANAGE 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. MSDW INVESTMENT
MANAGEMENT MAY USE DERIVATIVES FOR OTHER PURPOSES, SUCH AS GAINING EXPOSURE TO
FOREIGN MARKETS.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
MARCH 15, 1996
1997 6.58%
1998 7.33%
1999 24.87%
HIGH (QUARTER)
1/98 - 3/98
14.26%
LOW (QUARTER)
7/98 - 9/98
- -17.57%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED
OPERATIONS ON OPERATIONS ON MSCI EAFE
MARCH 15, 1996) MARCH 15, 1996) INDEX*
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PAST ONE YEAR 24.87% 24.58% 26.96%
- -------------------------------------------------------------------------------------------
SINCE INCEPTION 12.16% 11.87% 14.09%
</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 MSCI EAFE INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS IN EUROPE,
AUSTRALASIA AND THE FAR EAST.
1
<PAGE>
- --------------------------
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIO. THE PORTFOLIO'S INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED IN
MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY IS
A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI AND
OTHER REPORTS AND INFORMATION, SEE THE BACK COVER OF THIS PROSPECTUS.
- ----------------------------------------------------------------------------
PRICE VOLATILITY
The value of your investment in the 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 regions, countries, industries, companies or governments. 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 gains
superior to fixed income securities, although they have 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 the Portfolio.
FOREIGN INVESTING
Investing in foreign countries entails 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, the 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 the Portfolio's investments. These changes may occur
separately from and in response to events that do not otherwise affect the value
of the security in the issuer's home country. 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.
EMERGING MARKET RISKS
Emerging market countries are countries that major international financial
institutions, such as the World Bank, generally consider to be less economically
mature than developed nations, such as the United States or most nations in
Western Europe. Emerging market countries can include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand, and most
countries located in Western Europe. Emerging market countries may be more
likely to experience political turmoil or rapid changes in economic conditions
than more developed countries, and the financial condition of issuers in
emerging market countries may be more precarious than in other countries. These
characteristics result in greater risk of price volatility in emerging market
countries, which may be heightened by currency fluctuations relative to the U.S.
dollar.
DERIVATIVES
The Portfolio 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 the Portfolio, and of derivatives relating to those
securities, may not be proportionate, (ii) there may not be a liquid market for
the 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
2
<PAGE>
are subject to counterparty risk. To minimize this risk, the Portfolio may enter
into derivatives transactions only with counterparties that meet certain
requirements for credit quality and collateral. Also, the 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.
The 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 the
Portfolio, if MSDW Investment Management is not successful in employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
INVESTMENT DISCRETION
In pursuing the Portfolio's investment objectives, MSDW Investment Management
has considerable leeway in deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolio's performance.
BANK INVESTORS
An investment in the Portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
TEMPORARY DEFENSIVE
INVESTMENTS
When MSDW Investment Management believes that changes in economic, financial or
political conditions warrant, the 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 the Portfolio's performance and
the Portfolio may not achieve its investment objective.
PORTFOLIO TURNOVER
Consistent with its investment policies, the Portfolio will purchase and sell
securities without regard to the effect on portfolio turnover. Higher portfolio
turnover will cause the Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders.
3
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIO
- -------------------------------------------------------------------------------
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 Portfolio. The
Portfolio does 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, which are described in the footnotes below,
and/or expense reimbursements from MSDW Investment Management.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
INTERNATIONAL MAGNUM PORTFOLIO
<S> <C>
MANAGEMENT FEES
- -----------------------------------------------------------------------------
CLASS A 0.80%
- -----------------------------------------------------------------------------
CLASS B 0.80%
12b-1 FEE
- -----------------------------------------------------------------------------
CLASS A NONE
- -----------------------------------------------------------------------------
CLASS B 0.25%
OTHER EXPENSES
- -----------------------------------------------------------------------------
CLASS A 0.31%
- -----------------------------------------------------------------------------
CLASS B 0.30%
TOTAL ANNUAL FUND OPERATING EXPENSES
- -----------------------------------------------------------------------------
CLASS A 1.11%
- -----------------------------------------------------------------------------
CLASS B 1.35%
</TABLE>
*THE MANAGEMENT FEES FOR THE PORTFOLIO 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, EXCLUDING
CERTAIN INVESTMENT RELATED EXPENSES DESCRIBED BELOW, WILL NOT EXCEED 1.00% FOR
CLASS A SHARES AND 1.25% FOR CLASS B SHARES.
IN DETERMINING THE ACTUAL AMOUNT OF VOLUNTARY MANAGEMENT FEE WAIVER AND/OR
EXPENSE REIMBURSEMENT FOR THE 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 PORTFOLIO'S TOTAL OPERATING EXPENSES AFTER VOLUNTARY FEE WAIVERS AND/OR
EXPENSE REIMBURSEMENTS WOULD EXCEED THE EXPENSE RATIO SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSE REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES INCURRED BY INVESTORS IN THE PORTFOLIO, INCLUDING
CERTAIN INVESTMENT RELATED EXPENSES, WERE 1.01% FOR CLASS A SHARES AND 1.25% FOR
CLASS B SHARES. EXCLUDING INVESTMENT RELATED EXPENSES, THE OPERATING EXPENSES
AFTER FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS WERE 1.00% FOR CLASS A SHARES
AND 1.25% FOR CLASS B SHARES.
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.
4
<PAGE>
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS HAVING SIMILAR
INVESTMENT OBJECTIVES.
- ----------------------------------------------------------------------------
The example assumes that you invest $10,000 in the 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 the 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
<S> <C> <C> <C> <C>
INTERNATIONAL MAGNUM PORTFOLIO
- ---------------------------------------------------------------------------------------------------
CLASS A $113 $353 $612 $1,352
- ---------------------------------------------------------------------------------------------------
CLASS B $137 $428 $739 $1,624
</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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies, managed assets of approximately
$184.8 billion, including assets under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEE
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
the Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
INTERNATIONAL MAGNUM PORTFOLIO
<S> <C> <C>
MANAGEMENT FEE PAID IN FISCAL YEAR CLASS A CLASS B
ENDED DECEMBER 31, 1999
--------------------------------------------
(NET OF WAIVERS AND AS A PERCENTAGE OF AVERAGE NET
ASSETS) 0.70% 0.70%
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- -------------------------------------------------------------------------------
THE FOLLOWING INDIVIDUAL HAS PRIMARY DAY-TO-DAY PORTFOLIO MANAGEMENT
RESPONSIBILITY FOR THE PORTFOLIO:
- ----------------------------------------------------------------------------
FRANCINE J. BOVICH
Francine J. Bovich is a Managing Director of MSDW Investment Management and
Morgan Stanley. Prior to joining MSDW Investment Management in 1993, she was a
Principal and Executive Vice President of Westwood Management Corp., a
registered investment adviser. She began her investment career at Bankers Trust
Company. She was also a Managing Director of Citicorp Investment Management,
Inc., where she had responsibility for the Institutional Investment Management
Group. Ms. Bovich serves as the U.S. Representative to the United Nations
Investments Committee. Additionally, she serves as an Emeritus Trustee and Chair
of the Investment Sub-Committee for Connecticut College. She is a former board
member of the YWCA Retirement Fund. Ms. Bovich graduated from Connecticut
College with a B.A. in Economics and received her M.B.A. in Finance from New
York University. Ms. Bovich has had primary responsibility for managing the
Portfolio's assets since its inception.
- -------------------------------------------------------------------------------
DISTRIBUTION OF PORTFOLIO SHARES
- -------------------------------------------------------------------------------
Morgan Stanley is the exclusive Distributor of Class A shares and Class B shares
of the Portfolio. Morgan Stanley receives no compensation for distributing Class
A shares of the Portfolio. The Fund has adopted a Plan of Distribution with
respect to the Class B shares of the Portfolio pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the 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 the 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 Portfolio may
hold portfolio securities that are listed on foreign exchanges. These securities
may trade on weekends or other days when the Portfolio does 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 the Portfolio at the
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolio 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").
6
<PAGE>
HOW TO PURCHASE SHARES
You may purchase Class A shares and Class B shares of the 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. 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 NAV 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 NAV 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, the Portfolio may pay redemption proceeds by a
distribution-in-kind of readily marketable portfolio securities.
7
<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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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 the Portfolio and raise its expenses.
Therefore, the Fund may, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
DIVIDENDS AND DISTRIBUTIONS
The Portfolio's policy is to distribute to shareholders substantially all of its
taxable net investment income in the form of an annual dividend and to
distribute net capital gains, if any, at least annually.
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.
8
<PAGE>
TAXES
The dividends and distributions you receive from the 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 Portfolio may be able to
pass through to you a credit for foreign income taxes it pays. The Fund will
tell you annually how to treat dividends and distributions.
If you redeem shares of the 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
the 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 table is intended to help you understand the
financial performance of the Class A shares and Class B shares of the 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 table represent the rate that an investor would
have earned (or lost) on an investment in the 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 SAI and are included
in the Fund's December 31, 1999 Annual Report to Shareholders. The Annual Report
and the Fund's financial statements, as well as the SAI, are available at no
cost from the Fund at the toll free number noted on the back cover to this
Prospectus.
9
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
INTERNATIONAL MAGNUM PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------
PERIOD FROM
YEAR ENDED MARCH 15,
DECEMBER 31, 1996* TO
-------------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.57 $ 10.87 $ 10.66 $ 10.00
-------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.19 0.14 0.17 0.06
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 2.64 0.66 0.54 0.76
-------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.83 0.80 0.71 0.82
-------- -------- -------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.15) (0.10) (0.41) (0.13)
IN EXCESS OF NET INVESTMENT INCOME -- -- -- (0.02)
NET REALIZED GAIN (0.63) -- (0.09) (0.01)
-------- -------- -------- -------
TOTAL DISTRIBUTIONS (0.78) (0.10) (0.50) (0.16)
-------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 13.62 $ 11.57 $ 10.87 $ 10.66
======== ======== ======== =======
TOTAL RETURN 24.87% 7.33% 6.58% 8.25%
======== ======== ======== =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $188,586 $269,814 $159,096 $85,316
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.01% 1.00% 1.00% 1.00%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
COUNTRY TAX AND INTEREST EXPENSE 1.00% N/A N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 0.89% 1.34% 1.44% 0.99%**
PORTFOLIO TURNOVER RATE 59% 39% 41% 18%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE
PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.02 $0.01 $0.02 $0.03
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.11% 1.13% 1.19% 1.54%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.80% 1.24% 1.25% 0.44%**
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
PERIOD FROM
YEAR ENDED MARCH 15,
DECEMBER 31, 1996* TO
----------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.54 $ 10.84 $ 10.63 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.11 0.14 0.16 0.01
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2.68 0.64 0.52 0.78
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.79 0.78 0.68 0.79
------- ------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.12) (0.08) (0.38) (0.13)
IN EXCESS OF NET INVESTMENT INCOME -- -- -- (0.02)
NET REALIZED GAIN (0.63) -- (0.09) (0.01)
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.75) (0.08) (0.47) (0.16)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.58 $ 11.54 $ 10.84 $ 10.63
======= ======= ======= =======
TOTAL RETURN 24.58% 7.13% 6.33% 7.90%
======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $30,770 $26,151 $28,217 $23,173
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.25% 1.25% 1.25% 1.25%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING
COUNTRY TAX AND INTEREST EXPENSE 1.25% N/A N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (2) 0.87% 1.24% 1.19% 0.60%**
PORTFOLIO TURNOVER RATE 59% 39% 41% 18%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.01 $0.02 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.35% 1.37% 1.44% 1.69%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.54% 1.14% 1.00% 0.15%**
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*COMMENCEMENT OF OPERATIONS
**ANNUALIZED
10
<PAGE>
<TABLE>
<S> <C>
A PORTFOLIO OF [ICON] MORGAN STANLEY DEAN WITTER
INSTITUTIONAL FUND, INC. INTERNATIONAL MAGNUM
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.
------------------------------------------------------------------------------
Type of Registration: / / Incorporated/ / Unincorporated Association/ /
Partnership
/ / Uniform Gift/Transfer to Minor
(ONLY ONE CUSTODIAN AND MINOR PERMITTED)
/ / Trust ------ / / Other (SPECIFY) ------
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 SSN 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 the Portfolio and
Class B shares minimum $100,000 for the Portfolio.
Please indicate class and amount for purchase of the
following Portfolio:
<TABLE>
<C> <S> <C>
INTERNATIONAL MAGNUM PORTFOLIO / / Class A Shares (090) $--------- / / Class B Shares (033) $ ------
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 is registered if such requests are --------
believed to be authentic. NAME OF COMMERCIAL BANK (NOT SAVINGS BANK)
The Fund and the Fund's Transfer Agent will employ --------
reasonable procedures to confirm that instructions BANK ACCOUNT NUMBER
communicated by telephone are genuine. These procedures --------
include requiring the investor to provide certain BANK ABA NUMBER
personal identification information at the time an --------
account is opened and prior to effecting each NAME(S) IN WHICH YOUR BANK ACCOUNT IS ESTABLISHED
transaction requested by telephone. In addition, all --------
telephone transaction requests will be recorded and BANK'S STREET ADDRESS
investors may be required to provide additional --------
telecopied written instructions of transaction CITY STATE ZIP CODE
requests. Neither the Fund nor the Transfer Agent will
be responsible for any loss, liability, cost or expense
for following instructions received by telephone that
it reasonably believes to be genuine.
</TABLE>
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 800-548-7786.
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 IRS.
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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the Portfolio.
The SAI 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 the 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
the Portfolio's performance during that period.
For additional Fund information, including information regarding investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. To aid you in obtaining this
information, the Fund's Investment Company Act registration number is 811-05624.
[ICON] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
P.O. Box 2798
Boston, Massachusetts 02208-2798
FOR INFORMATION CALL 1-800-548-7786
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
PORTFOLIOS OF [LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
ASIAN EQUITY PORTFOLIO
THE ASIAN EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF ASIAN ISSUERS.
JAPANESE EQUITY PORTFOLIO
THE JAPANESE EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF JAPANESE ISSUERS.
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 (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
ASIAN EQUITY PORTFOLIO 1
JAPANESE EQUITY PORTFOLIO 2
ADDITIONAL RISK FACTORS AND INFORMATION 3
FEES AND EXPENSES OF THE PORTFOLIOS 5
INVESTMENT ADVISER 6
MANAGEMENT FEES 6
PORTFOLIO MANAGERS 7
DISTRIBUTION OF PORTFOLIO SHARES 8
SHAREHOLDER INFORMATION 8
FINANCIAL HIGHLIGHTS 10
ASIAN EQUITY PORTFOLIO 11
JAPANESE EQUITY PORTFOLIO 12
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
THE ASIAN EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF ASIAN ISSUERS.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to achieve long-term capital appreciation by
investing in a diversified portfolio of equity securities of issuers in Asian
countries, excluding Japan. MSDW Investment Management employs a disciplined,
value-oriented approach to security selection, focusing on larger companies with
strong management teams. MSDW Investment Management evaluates top-down country
risk factors and opportunities when determining position sizes and overall
exposure to individual markets.
PROCESS
MSDW Investment Management emphasizes its internal research of the leading
companies as the basis for stock selection. This research process encompasses
analysis of historical financial statements, identification of the potential for
future earnings and cash flows, valuation of key assets, discussions with
analysts to determine consensus expectations and an evaluation of the strength
and depth of management. Visits with management are central to this process.
Depending on the type of company, factors considered in selecting securities
include price to sales, price to earnings, price to cash flow, price to book
value and price to replacement value of assets. MSDW Investment Management
considers valuation on an absolute basis and relative to market average and
comparable companies in the region and emphasizes stocks where a catalyst can be
identified which will correct undervaluation. MSDW Investment Management
combines bottom-up stock evaluation with a thorough analysis of risk factors and
opportunities within individual Asian countries. The team evaluates
macroeconomic and political factors when determining overall exposures within
individual countries.
RISK
Investing in the Asian Equity Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in the equity
securities of issuers in emerging markets in the hope of earning superior
returns and diversifying your investment portfolio. 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, equity securities of Asian issuers, may underperform
relative to other sectors.
THE PORTFOLIO INVESTS PRIMARILY IN EMERGING MARKET COUNTRIES. EMERGING MARKET
COUNTRIES ARE COUNTRIES THAT MAJOR INTERNATIONAL FINANCIAL INSTITUTIONS, SUCH AS
THE WORLD BANK, GENERALLY CONSIDER TO BE LESS ECONOMICALLY MATURE THAN DEVELOPED
NATIONS, SUCH AS THE UNITED STATES OR MOST NATIONS IN WESTERN EUROPE. EMERGING
MARKET COUNTRIES CAN INCLUDE EVERY NATION IN THE WORLD EXCEPT THE UNITED STATES,
CANADA, JAPAN, AUSTRALIA, NEW ZEALAND, AND MOST COUNTRIES LOCATED IN WESTERN
EUROPE. EMERGING MARKET COUNTRIES MAY BE MORE LIKELY TO EXPERIENCE POLITICAL
TURMOIL OR RAPID CHANGES IN ECONOMIC CONDITIONS THAN MORE DEVELOPED COUNTRIES,
AND THE FINANCIAL CONDITION OF ISSUERS IN EMERGING MARKET COUNTRIES MAY BE MORE
PRECARIOUS THAN IN OTHER COUNTRIES. THESE CHARACTERISTICS RESULT IN GREATER RISK
OF PRICE VOLATILITY IN EMERGING MARKET COUNTRIES, WHICH MAY BE HEIGHTENED BY
CURRENCY FLUCTUATIONS RELATIVE TO THE U.S. DOLLAR.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON JULY
1, 1991
1992 26.42%
1993 105.71%
1994 -15.81%
1995 6.87%
1996 3.49%
1997 -48.29%
1998 -11.38%
1999 81.00%
HIGH (QUARTER)
10/93 - 12/93
49.56%
LOW (QUARTER)
10/97 - 12/97
- -37.43%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B MSCI ALL-COUNTRY
(COMMENCED (COMMENCED FAR EAST FREE
OPERATIONS ON OPERATIONS ON EX-JAPAN INDEX*
JULY 1, 1991) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
PAST ONE YEAR 81.00% 79.95% 59.40% 59.40%
- ----------------------------------------------------------------------------------------------
PAST FIVE YEARS -1.71% N/A 0.78% N/A
- ----------------------------------------------------------------------------------------------
SINCE INCEPTION 9.06% -4.15% 10.20% -1.21%
</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 MSCI ALL-COUNTRY FAR EAST FREE EX-JAPAN INDEX IS AN UNMANAGED INDEX OF
COMMON STOCKS AND INCLUDES CHINA, INDONESIA, HONG KONG, THE PHILIPPINES, KOREA,
SINGAPORE, TAIWAN AND THAILAND.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
JAPANESE EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
THE JAPANESE EQUITY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF JAPANESE ISSUERS.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to achieve long-term capital appreciation by
investing in a diversified portfolio of equity securities of Japanese issuers
that are undervalued relative to their intrinsic assets, cash flow and earnings
potential.
PROCESS
MSDW Investment Management conducts a quantitative screening of Japanese
companies, including both large-cap and small-cap issuers. The screening is
designed to identify undervalued issuers, based on price-to-book value,
price-to-cash flow and other value-oriented criteria. MSDW Investment Management
analysts conduct fundamental analysis on the 25% of companies that quantitative
screening indicate are most undervalued, with an emphasis on financial
structure, strategic value of assets, business franchise, product line and
management quality and focus. Company visits also are a normal part of the
investment process. MSDW Investment Management closely monitors companies that
are no longer among the 25% most undervalued and generally sells the securities
following a material fundamental disappointment in earnings or when they are no
longer among the one-third most undervalued securities.
RISK
Investing in the Japanese Equity Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in the equity
securities of issuers in Japan in the hope of achieving superior returns and
diversifying your investment portfolio. 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, equity securities of Japanese issuers, may
underperform relative to other sectors.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
APRIL 25, 1994
1995 -3.64%
1996 -1.40%
1997 -9.23%
1998 8.82%
1999 63.75%
HIGH (QUARTER)
4/97 - 6/97
25.58%
LOW (QUARTER)
10/97 - 12/97
- -20.29%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED
OPERATIONS ON OPERATIONS ON MSCI JAPAN INDEX*
APRIL 25, 1994) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
PAST ONE YEAR 63.75% 63.46% 61.53% 61.53%
- --------------------------------------------------------------------------------------------------
PAST FIVE YEARS 8.97% N/A 1.96% N/A
- --------------------------------------------------------------------------------------------------
SINCE INCEPTION 7.52% 12.01% 2.07% 2.48%
</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 MSCI JAPAN INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS.
2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIOS. THE PORTFOLIOS' INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED
IN MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY
IS A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI 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 regions, countries, industries, companies or governments. 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 gains
superior to fixed income securities, although they have 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 market volatility, there is a risk that you might
lose money by investing in a Portfolio.
FOREIGN INVESTING
Investing in foreign countries entails 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 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 occur separately from and in response
to events that do not otherwise affect the value of the security in the issuer's
home country. 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 a 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 employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
3
<PAGE>
INVESTMENT DISCRETION
In pursuing the Portfolios' investment objectives, MSDW Investment Management
has considerable leeway in deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolios' performance.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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 will cause a Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders. The Asian Equity
Portfolio may engage in frequent trading of securities to achieve its investment
objective.
4
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
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, which are described in the footnotes below,
and/or expense reimbursements from MSDW Investment Management.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
ASIAN EQUITY JAPANESE EQUITY
PORTFOLIO PORTFOLIO
<S> <C> <C>
MANAGEMENT FEES
- -----------------------------------------------------------------------
CLASS A 0.80% 0.80%
- -----------------------------------------------------------------------
CLASS B 0.80% 0.80%
12b-1 FEE
- -----------------------------------------------------------------------
CLASS A NONE NONE
- -----------------------------------------------------------------------
CLASS B 0.25% 0.25%
OTHER EXPENSES
- -----------------------------------------------------------------------
CLASS A 0.81% 0.34%
- -----------------------------------------------------------------------
CLASS B 0.82% 0.34%
TOTAL ANNUAL FUND OPERATING EXPENSES
- -----------------------------------------------------------------------
CLASS A 1.61% 1.14%
- -----------------------------------------------------------------------
CLASS B 1.87% 1.39%
</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 PORTFOLIOS SO THAT ANNUAL OPERATING EXPENSES, EXCLUDING CERTAIN
INVESTMENT RELATED EXPENSES, AS DESCRIBED BELOW, WILL NOT EXCEED 1.00% FOR CLASS
A SHARES AND 1.25% FOR CLASS B SHARES.
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
REIMBURSEMENTS WOULD EXCEED THE EXPENSE RATIOS SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY FEE WAIVER AND/ OR EXPENSE REIMBURSEMENT, THE TOTAL
OPERATING EXPENSES INCURRED BY INVESTORS, INCLUDING CERTAIN INVESTMENT RELATED
EXPENSES, WERE 1.07% FOR CLASS A SHARES AND 1.32% FOR CLASS B SHARES OF THE
ASIAN EQUITY PORTFOLIO AND 1.01% FOR CLASS A SHARES AND 1.26% FOR CLASS B SHARES
OF THE JAPANESE EQUITY PORTFOLIO. EXCLUDING INVESTMENT RELATED EXPENSES, THE
OPERATING EXPENSES AFTER FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS WERE 1.00%
FOR CLASS A SHARES AND 1.25% FOR CLASS B SHARES.
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.
5
<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
<S> <C> <C> <C> <C>
ASIAN EQUITY PORTFOLIO
- ------------------------------------------------------------------
CLASS A $164 $508 $876 $1,911
- ------------------------------------------------------------------
CLASS B $190 $588 $1,011 $2,190
JAPANESE EQUITY PORTFOLIO
- ------------------------------------------------------------------
CLASS A $116 $362 $628 $1,386
- ------------------------------------------------------------------
CLASS B $142 $440 $761 $1,669
</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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies (with MSDW Investment Management, the
"MSDW Investment Management Group"), managed assets of approximately
$184.8 billion, including assets under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
ASIAN JAPANESE
EQUITY EQUITY
PORTFOLIO PORTFOLIO
----------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEE PAID IN FISCAL
YEAR CLASS A CLASS B CLASS A CLASS B
ENDED DECEMBER 31, 1999
----------------------------------
(NET OF WAIVERS AND AS A
PERCENTAGE OF AVERAGE NET
ASSETS) 0.26% 0.26% 0.67% 0.67%
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
SUBJECT TO THE SUPERVISION OF MSDW INVESTMENT MANAGEMENT AND ITS INVESTMENT
MANAGEMENT COMMITTEE, THE FOLLOWING INDIVIDUALS, EACH OF WHOM IS EMPLOYED BY A
MEMBER OF THE MSDW INVESTMENT MANAGEMENT GROUP, HAVE PRIMARY DAY-TO-DAY
PORTFOLIO MANAGEMENT RESPONSIBILITY FOR THE PORTFOLIOS:
- ----------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO
ASHUTOSH SINHA, PRINCIPAL
Ashutosh Sinha joined MSDW Investment Management Group in 1995. Currently, he is
a member of the Group's Emerging Markets Equity Group, focusing primarily on
Asian Markets other than Japan. Prior to 1995, he spent two years at SBI Funds
Management Ltd., where he was an analyst for the India Magnum Fund. Previous to
that, he worked for three years as a consultant for Citicorp Overseas Software
Ltd. Mr. Sinha graduated from the Indian Institute of Technology, Kanpur, with a
degree in Electrical Engineering and received an M.B.A from the Indian Institute
of Management, Calcutta. Mr. Sinha has had primary responsibility for managing
the Portfolio's assets since August 1996.
JAPANESE EQUITY PORTFOLIO
JOHN R. ALKIRE, MANAGING DIRECTOR AND KUNIHIKO SUGIO, MANAGING DIRECTOR
John R. Alkire joined MSDW Investment Management Group in 1981 to initiate
foreign equity sales and trading to Pacific basin institutions and was appointed
President of Morgan Stanley Investment Advisory, Japan in October 1993. Prior to
1993, he specialized in Japanese warrants and cash equity sales and trading to
Japanese financial institutions in the Tokyo office. Mr. Alkire is a graduate of
the University of Victoria, Canada. Kunihiko Sugio joined MSDW Investment
Management Group in 1993. Currently, he manages dedicated Japanese equity
portfolios. Prior to 1993, he worked with Baring International Investment
Management, Tokyo, where he was a Director and fund manager. Mr. Sugio graduated
from Wakayama Kokuritsu University. Messrs. Alkire and Sugio have shared primary
responsibility for managing the Portfolio's assets since its inception in 1995.
7
<PAGE>
- --------------------------------------------------------------------------------
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 (the
"Plan") under the Investment Company Act of 1940. 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 the 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
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolios 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").
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. 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 NAV 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
8
<PAGE>
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 NAV 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.
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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
9
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of an annual dividend and to
distribute net capital gains, if any, at least annually.
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. A Portfolio may be able to
pass through to you a credit for foreign income taxes it pays. The Fund will
tell you annually how to treat dividends and distributions.
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 SAI and are
included in the Fund's December 31, 1999 Annual Report to Shareholders. The
Annual Report and the Fund's financial statements, as well as the SAI, are
available at no cost from the Fund at the toll free number noted on the back
cover to this Prospectus.
10
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.01 $ 9.43 $ 18.73 $ 19.48 $ 21.54
-------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.06 0.12 0.14 0.17 0.18
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 6.42 (1.24) (8.93) 0.50 1.11
-------- ------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 6.48 (1.12) (8.79) 0.67 1.29
-------- ------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.10) (0.30) (0.00)+ (0.15) (0.34)
IN EXCESS OF NET INVESTMENT INCOME -- -- -- (0.00)+ (0.00)+
NET REALIZED GAIN -- -- -- (1.27) (3.01)
IN EXCESS OF NET REALIZED GAIN -- -- (0.51) -- --
-------- ------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.10) (0.30) (0.51) (1.42) (3.35)
-------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 14.39 $ 8.01 $ 9.43 $ 18.73 $ 19.48
======== ======= ======== ======== ========
TOTAL RETURN 81.00% (11.38)% (48.29)% 3.49% 6.87%
======== ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $103,513 $51,334 $85,503 $363,498 $314,884
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.07% 1.19% 1.12% 1.00% 1.00%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.00% 1.00% 1.00% N/A N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (1) 0.58% 1.36% 0.47% 0.74% 0.97%
PORTFOLIO TURNOVER RATE 197% 151% 107% 69% 42%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.06 $0.05 $0.05 $0.05 $0.03
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.61% 1.79% 1.31% 1.25% 1.18%
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 0.04% 0.76% 0.29% 0.54% 0.79%
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
------------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.97 $ 9.40 $ 18.74 $ 19.55
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.05 0.07 0.03 0.11
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 6.34 (1.20) (8.86) 0.46
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 6.39 (1.13) (8.83) 0.57
------- ------- ------- -------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.08) (0.30) (0.00)+ (0.11)
IN EXCESS OF NET INVESTMENT INCOME -- -- -- --
NET REALIZED GAIN -- -- -- (1.27)
IN EXCESS OF NET REALIZED GAIN -- -- (0.51) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.08) (0.30) (0.51) (1.38)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 14.28 $ 7.97 $ 9.40 $ 18.74
======= ======= ======= =======
TOTAL RETURN 79.95% (11.53)% (48.48)% 2.92%
======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $ 2,828 $ 1,487 $ 1,468 $11,002
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.32% 1.47% 1.37% 1.25%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.25% 1.25% 1.25% N/A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (2) 0.33% 1.06% 0.18% 0.58%**
PORTFOLIO TURNOVER RATE 197% 151% 107% 69%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME $0.08 $0.04 $0.04 $0.04
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.87% 2.07% 1.56% 1.52%**
NET INVESTMENT INCOME (LOSS) TO AVERAGE
NET ASSETS (0.22)% 0.46% (0.01)% 0.37%**
- ---------------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+AMOUNT IS LESS THAN $0.01 PER SHARE.
11
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
JAPANESE EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999++ 1998 1997 1996++ 1995
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.18 $ 5.89 $ 7.96 $ 9.27 $ 9.83
------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (1) (0.02) 0.04 0.17 -- 0.04
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS+ 3.96 0.48 (0.94) (0.13) (0.40)
------- ------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 3.94 0.52 (0.77) (0.13) (0.36)
------- ------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.23) (1.30) (0.66) --
IN EXCESS OF NET INVESTMENT INCOME -- -- -- (0.52) (0.20)
------- ------- -------- -------- --------
TOTAL DISTRIBUTIONS -- (0.23) (1.30) (1.18) (0.20)
------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.12 $ 6.18 $ 5.89 $ 7.96 $ 9.27
======= ======= ======== ======== ========
TOTAL RETURN 63.75% 8.82% (9.23)% (1.40)% (3.64)%
======= ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $73,666 $57,755 $77,086 $152,229 $119,278
RATIO OF EXPENSES TO AVERAGE NET ASSETS (1) 1.01% 1.11% 1.06% 1.00% 1.00%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST EXPENSE 1.00% 1.00% 1.00% N/A N/A
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (1) (0.28)% 0.03% (0.21)% (0.04)% 0.15%
PORTFOLIO TURNOVER RATE 26% 66% 40% 38% 52%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME (LOSS) $0.01 $0.01 $0.01 $0.01 $0.06
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.14% 1.30% 1.14% 1.07% 1.20%
NET INVESTMENT LOSS TO AVERAGE NET
ASSETS (0.41)% (0.14)% (0.28)% (0.11)% (0.05)%
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996** TO
------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999++ 1998 1997 1996++
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.13 $ 5.87 $ 7.94 $ 9.25
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (2) 0.08 (0.09) 0.09 (0.02)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 3.81 0.58 (0.89) (0.14)
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.89 0.49 (0.80) (0.16)
------- ------- ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME -- (0.23) (1.27) (0.64)
IN EXCESS OF NET INVESTMENT INCOME -- -- -- (0.51)
------- ------- ------ ------
TOTAL DISTRIBUTIONS -- (0.23) (1.27) (1.15)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.02 $ 6.13 $ 5.87 $ 7.94
======= ======= ====== ======
TOTAL RETURN 63.46% 8.33% (9.64)% (1.67)%
======= ======= ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $ 3,538 $ 1,083 $1,703 $3,431
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.26% 1.36% 1.31% 1.25%*
RATIO OF EXPENSES TO AVERAGE NET ASSETS
EXCLUDING INTEREST
EXPENSE 1.25% 1.25% 1.25% N/A
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (2) (0.57)% (0.25)% (0.53)% (0.26)%*
PORTFOLIO TURNOVER RATE 26% 66% 40% 38%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT
INCOME (LOSS) $0.01 $0.02 $0.01 $0.01
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.39% 1.55% 1.38% 1.31%*
NET INVESTMENT LOSS TO AVERAGE NET
ASSETS (0.67)% (0.42)% (0.60)% (0.32)%*
- ---------------------------------------------------------------------------------------
</TABLE>
*ANNUALIZED
**THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
+THE AMOUNT SHOWN FOR THE YEAR ENDED DECEMBER 31, 1995 FOR A SHARE OUTSTANDING
THROUGHOUT THE YEAR DOES NOT AGREE WITH THE AMOUNT OF AGGREGATE NET GAINS ON
INVESTMENTS FOR THE YEAR BECAUSE OF THE TIMING OF SALES AND REPURCHASES OF THE
PORTFOLIO SHARES IN RELATION TO FLUCTUATING MARKET VALUE OF THE INVESTMENTS IN
THE PORTFOLIO.
++PER SHARE AMOUNTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1996 ARE BASED
ON AVERAGE SHARES OUTSTANDING.
12
<PAGE>
<TABLE>
<S> <C>
PORTFOLIOS OF [ICON] MORGAN STANLEY DEAN WITTER ASIAN EQUITY PORTFOLIO
INSTITUTIONAL FUND, INC. JAPANESE EQUITY 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>
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 SSN 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 and
Class B shares minimum $100,000 for each Portfolio.
Please indicate Portfolio, class and amount for
purchase of the following Portfolio(s):
<TABLE>
<C> <S> <C>
ASIAN EQUITY PORTFOLIO / / Class A Shares (057) $--------- / / Class B Shares (035) $ --------------------
JAPANESE EQUITY PORTFOLIO / / Class A Shares (080) $--------- / / Class B Shares (068) $ --------------------
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 is registered if such requests are ------------------------
believed to be authentic. NAME OF COMMERCIAL BANK (NOT SAVINGS BANK)
The Fund and the Fund's Transfer Agent will employ ------------------------
reasonable procedures to confirm that instructions BANK ACCOUNT NUMBER
communicated by telephone are genuine. These procedures ------------------------
include requiring the investor to provide certain BANK ABA NUMBER
personal identification information at the time an ------------------------
account is opened and prior to effecting each NAME(S) IN WHICH YOUR BANK ACCOUNT IS
transaction requested by telephone. In addition, all ESTABLISHED
telephone transaction requests will be recorded and ------------------------
investors may be required to provide additional BANK'S STREET ADDRESS
telecopied written instructions of transaction ------------------------
requests. Neither the Fund nor the Transfer Agent will CITY STATE ZIP CODE
be responsible for any loss, liability, cost or expense
for following instructions received 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 800-548-7786.
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 IRS.
The IRS does not require your consent to any provision
of this document other than the certifications
required to avoid backup withholding.
SIGN HERE -->
<PAGE>
---------------------------------------
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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the
Portfolios. The SAI 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 investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. 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
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
PORTFOLIOS OF [LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
CHINA GROWTH PORTFOLIO
THE CHINA GROWTH PORTFOLIO SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF ISSUERS IN THE PEOPLE'S REPUBLIC OF
CHINA, HONG KONG AND TAIWAN.
GOLD PORTFOLIO
THE GOLD PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING PRIMARILY
IN THE EQUITY SECURITIES OF FOREIGN AND DOMESTIC ISSUERS ENGAGED IN GOLD-RELATED
ACTIVITIES.
MICROCAP PORTFOLIO
THE MICROCAP PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN GROWTH ORIENTED EQUITY SECURITIES OF SMALL CORPORATIONS.
MORTGAGE-BACKED SECURITIES PORTFOLIO
THE MORTGAGE-BACKED SECURITIES PORTFOLIO SEEKS TO PRODUCE AS HIGH A LEVEL OF
CURRENT INCOME AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
PRIMARILY IN A VARIETY OF INVESTMENT GRADE MORTGAGE-BACKED SECURITIES.
MUNICIPAL BOND PORTFOLIO
THE MUNICIPAL BOND PORTFOLIO SEEKS TO PRODUCE A HIGH LEVEL OF CURRENT INCOME
CONSISTENT WITH PRESERVATION OF PRINCIPAL BY INVESTING PRIMARILY IN MUNICIPAL
OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM FEDERAL INCOME TAX.
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 CHINA GROWTH, MICROCAP AND MORTGAGE-BACKED SECURITES PORTFOLIOS CURRENTLY
ARE NOT BEING OFFERED. THE GOLD PORTFOLIO IS CURRENTLY CLOSED TO NEW INVESTORS
WITH THE EXCEPTION OF CERTAIN MORGAN STANLEY EMPLOYEES AND CUSTOMERS, CERTAIN
TAX-QUALIFIED RETIREMENT PLANS AND OTHER INVESTMENT COMPANIES ADVISED BY MSDW
INVESTMENT MANAGEMENT.
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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
CHINA GROWTH PORTFOLIO 1
GOLD PORTFOLIO 2
MICROCAP PORTFOLIO 3
MORTGAGE-BACKED SECURITIES PORTFOLIO 4
MUNICIPAL BOND PORTFOLIO 5
ADDITIONAL RISK FACTORS AND INFORMATION 6
FEES AND EXPENSES OF THE PORTFOLIOS 8
INVESTMENT ADVISER AND SUB-ADVISER 9
MANAGEMENT FEES 9
PORTFOLIO MANAGERS 10
DISTRIBUTION OF PORTFOLIO SHARES 11
SHAREHOLDER INFORMATION 11
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
CHINA GROWTH PORTFOLIO
- -------------------------------------------------------------------------------
THE CHINA GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF ISSUERS IN THE PEOPLE'S REPUBLIC OF CHINA,
HONG KONG AND TAIWAN.
APPROACH
MSDW Investment Management seeks to maximize long-term capital appreciation by
investing in the equity securities of issuers located in The People's Republic
of China, Hong Kong and Taiwan that exhibit strong or accelerating earnings
growth. In addition, the Portfolio may also invest in securities of issuers
located in other Asian countries, such as Singapore, Malaysia, the Philippines,
Indonesia, Korea, Vietnam and Thailand.
PROCESS
MSDW Investment Management relies on its research capabilities, analytical
resources and experience to identify well established companies with consistent
or rising earnings growth records and that present accelerating growth
prospects. MSDW Investment Management rigorously studies company developments,
including changes in strategy, management focus and results, and closely
monitors analysts' expectations to ascertain issuers that have the potential for
positive earnings surprises versus consensus expectations.
RISK
Investing in the China Growth Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in the equity
securities of issuers in China and other foreign countries 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,
equity securities of Chinese issuers, may underperform relative to other
sectors.
INVESTING IN FOREIGN COUNTRIES, PARTICULARLY EMERGING MARKETS,
ENTAILS 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, THE 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 THE
PORTFOLIO'S INVESTMENTS. THESE CHANGES MAY OCCUR SEPARATELY FROM AND
IN RESPONSE TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE OF THE
SECURITY IN THE ISSUER'S HOME COUNTRY. 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. 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.
A BAR CHART AND TABLE SHOWING THE PERFORMANCE OF THE PORTFOLIO IS NOT PROVIDED
BECAUSE, AS OF DECEMBER 31, 1999, THE CHINA GROWTH PORTFOLIO HAD NOT COMMENCED
OPERATIONS.
1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
GOLD PORTFOLIO
- -------------------------------------------------------------------------------
THE GOLD PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING PRIMARILY
IN EQUITY SECURITIES OF ISSUERS ENGAGED IN GOLD-RELATED ACTIVITIES.
APPROACH
MSDW Investment Management and Sun Valley Gold Company ("Sun Valley Gold") as
investment sub-adviser, seek to maximize long-term capital appreciation by
investing in domestic and foreign companies engaged in the exploration, mining,
fabrication, processing, distribution or trading of gold and, to a lesser
extent, other precious metals.
PROCESS
Sun Valley Gold employs a flexible investment program in an attempt to identify
securities of issuers engaged in gold-related activities that offer the
potential for capital appreciation. Sun Valley Gold evaluates various countries
and regions based on factors such as political stability and economic outlook.
Based on this evaluation, they select particular countries and issuers for
investment by the Portfolio. Because most of the world's gold production is
outside of the United States, the Portfolio frequently invests in securities of
foreign issuers, particularly those located in Canada, Australia and South
Africa.
RISK
Investing in the Gold Portfolio may be appropriate for you if you are willing to
accept the risks and uncertainties of investing in a portfolio of equity
securities of foreign and domestic issuers engaged in gold-related activities.
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). The Portfolio's concentration in investments in
gold-related issuers may expose it to risks unique to that industry. In
addition, at times the Portfolio's market sector, securities of gold-related
related issuers, may underperform relative to other sectors.
TO THE EXTENT THAT THE PORTFOLIO INVESTS IN SECURITIES OF FOREIGN ISSUERS, 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, THE 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 OCCUR SEPARATELY FROM AND IN RESPONSE
TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE OF THE SECURITY IN THE ISSUER'S
HOME COUNTRY. SUN VALLEY GOLD MAY INVEST IN CERTAIN INSTRUMENTS, SUCH AS
DERIVATIVES, AND MAY USE CERTAIN TECHNIQUES, SUCH AS HEDGING, TO MANAGE THESE
RISKS. HOWEVER, SUN VALLEY GOLD 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
FEBRUARY 1, 1994
1995 13.21%
1996 16.94%
1997 -55.64%
HIGH (QUARTER)
1/96-3/96
34.50%
LOW (QUARTER)
10/97-12/97
- -34.99%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B PHILADELPHIA
(COMMENCED (COMMENCED GOLD AND SILVER
OPERATIONS ON OPERATIONS ON INDEX*
FEBRUARY 1, 1994) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
PAST ONE YEAR % % % %
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION % % % %
</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 PHILADELPHIA GOLD AND SILVER INDEX IS AN UNMANAGED INDEX COMPRISED OF THE
LEADING COMPANIES INVOLVED IN THE MINING OF GOLD AND SILVER.
2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
MICROCAP PORTFOLIO
- -------------------------------------------------------------------------------
THE MICROCAP PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN GROWTH-ORIENTED EQUITY SECURITIES OF SMALL COMPANIES.
APPROACH
MSDW Investment Management seeks to maximize long-term capital appreciation by
investing in small, growth-oriented domestic and, to a limited extent, foreign
companies. The universe of eligible companies generally includes those with
annual gross revenues of $150 million or less or market capitalizations of $250
million or less.
PROCESS
MSDW Investment Management employs a flexible investment program in an attempt
to identify issuers early in their life cycle with the potential for long-term
growth. MSDW Investment Management uses its judgment and research capabilities
to assess economic, industry, market and company developments to identify
promising companies that are expected to benefit from new technology or new
products or services. In addition, MSDW Investment Management looks for special
developments, such as research discoveries, changes in customer demand,
rejuvenated management or basic changes in the economic environment.
RISK
Investing in the MicroCap Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in a portfolio of
equity securities of small issuers. 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).
THE RISK OF INVESTING IN EQUITY SECURITIES IS INTENSIFIED IN THE CASE
OF THE SMALL COMPANIES IN WHICH THE PORTFOLIO INVESTS. MARKET PRICES
FOR SUCH COMPANIES' EQUITY SECURITIES TEND TO BE MORE VOLATILE THAN
THOSE OF LARGER, MORE ESTABLISHED COMPANIES. SMALL COMPANIES MAY
THEMSELVES BE MORE VULNERABLE TO ECONOMIC OR COMPANY SPECIFIC
PROBLEMS. IN ADDITION, AT TIMES THE PORTFOLIO'S MARKET SECTOR, EQUITY
SECURITIES OF SMALLER ISSUERS, MAY UNDER PERFORM RELATIVE TO OTHER
SECTORS.
TO THE EXTENT THAT THE PORTFOLIO INVESTS IN SECURITIES OF FOREIGN
ISSUERS, 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, THE 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 THE
PORTFOLIO'S INVESTMENTS. THESE CHANGES MAY OCCUR SEPARATELY FROM AND
IN RESPONSE TO EVENTS THAT DO NOT OTHERWISE AFFECT THE VALUE OF THE
SECURITY IN THE ISSUER'S HOME COUNTRY. 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. 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.
A BAR CHART AND TABLE SHOWING THE PERFORMANCE OF THE PORTFOLIO IS NOT PROVIDED
BECAUSE, AS OF DECEMBER 31, 1999, THE MICROCAP PORTFOLIO HAD NOT COMMENCED
OPERATIONS.
3
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES PORTFOLIO
- -------------------------------------------------------------------------------
THE MORTGAGE-BACKED SECURITIES PORTFOLIO SEEKS TO PRODUCE AS HIGH A LEVEL OF
CURRENT INCOME AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
PRIMARILY IN A VARIETY OF INVESTMENT GRADE MORTGAGE-BACKED SECURITIES.
APPROACH
MSDW Investment Management seeks to preserve capital and produce an attractive
real rate of return by emphasizing investment in high quality (i.e., those rated
in the three highest rating categories or believed to be of equivalent quality)
short- and intermediate-term mortgage-backed securities. The investment process
is designed to achieve an attractive return through gradual shifts in portfolio
maturity.
PROCESS
MSDW Investment Management assesses current and projected market and economic
conditions and, based on its evaluation, sets an annual target rate of return
for the Portfolio. MSDW Investment Management manages the Portfolio primarily
using gradual shifts in maturities to achieve the target rate of return. Short-
and intermediate-term mortgage-backed securities form the core of the Portfolio.
The Portfolio may hold long-term securities (i.e., securities with maturities
over 10 years) when MSDW Investment Management believes that they will enhance
return without significantly increasing risk. Typically, the Portfolio expects
to invest at least 75% of its assets in mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or rated in
the highest rating category. However, the Portfolio may invest up to 15% in
mortgage-backed securities rated in the third highest rating category or, if
unrated, believed by MSDW Investment Management to be of equivalent quality.
RISK
Investing in the Mortgage-Backed Securities Portfolio may be appropriate for you
if you are willing to accept the risks and uncertainties of investing in fixed
income securities, and mortgage-backed securities in particular. Although most
of the Portfolio's investments are issued or guaranteed by the U.S. Government
or its instrumentalities or rated in the top three rating categories, or of
equivalent quality, market risks, particularly changes in interest rates, will
still affect the prices of fixed income securities. Moreover, mortgage-backed
securities are subject to prepayment risk. In addition, at times the Portfolio's
market sector, mortgage-backed securities, may underperform relative to other
sectors.
MORTGAGE-BACKED SECURITIES ARE FIXED-INCOME SECURITIES REPRESENTING AN INTEREST
IN A POOL OF UNDERLYING MORTGAGE LOANS. THEY ARE SENSITIVE TO CHANGES IN
INTEREST RATES, BUT MAY RESPOND TO THESE CHANGES DIFFERENTLY FROM OTHER FIXED
INCOME SECURITIES DUE TO THE POSSIBILITY OF PREPAYMENT OF THE UNDERLYING
MORTGAGE LOANS. AS A RESULT, IT MAY NOT BE POSSIBLE TO DETERMINE IN ADVANCE THE
ACTUAL MATURITY DATE OR AVERAGE LIFE OF A MORTGAGE-BACKED SECURITY. RISING
INTEREST RATES TEND TO DISCOURAGE REFINANCINGS, WITH THE RESULT THAT THE AVERAGE
LIFE AND VOLATILITY OF THE SECURITY WILL INCREASE AND ITS MARKET PRICE WILL
DECREASE. WHEN INTEREST RATES FALL, HOWEVER, MORTGAGE-BACKED SECURITIES MAY NOT
GAIN AS MUCH IN MARKET VALUE BECAUSE ADDITIONAL MORTGAGE PREPAYMENTS MUST BE
REINVESTED AT LOWER INTEREST RATES. PREPAYMENT RISK MAY MAKE IT DIFFICULT TO
CALCULATE THE AVERAGE MATURITY OF A PORTFOLIO OF MORTGAGE-BACKED SECURITIES AND,
THEREFORE, TO ASSESS THE VOLATILITY RISK OF THAT PORTFOLIO.
A BAR CHART AND TABLE SHOWING THE PERFORMANCE OF THE PORTFOLIO IS NOT PROVIDED
BECAUSE, AS OF DECEMBER 31, 1999, THE MORTGAGE-BACKED SECURITIES PORTFOLIO HAD
NOT COMMENCED OPERATIONS.
4
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO
- -------------------------------------------------------------------------------
THE MUNICIPAL BOND PORTFOLIO SEEKS TO PRODUCE A HIGH LEVEL OF CURRENT INCOME
CONSISTENT WITH PRESERVATION OF PRINCIPAL BY INVESTING PRIMARILY IN MUNICIPAL
OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM FEDERAL INCOME TAX.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to preserve capital and produce an attractive
real rate of return by emphasizing investment in investment grade (i.e., those
rated in the four highest rating categories or believed to be of equivalent
quality) intermediate- and long-term obligations that pay interest that is
exempt from federal income tax and in certain instances from state and local
taxes. The investment process is designed to capture value in the municipal
market through credit analysis, recognition of relative value and trade
execution.
PROCESS
MSDW Investment Management assesses the relative yields available on securities
of different maturities and its expectations of future changes in interest
rates. Based on evolving economic and credit market conditions, MSDW Investment
Management adjusts the Portfolio's average maturity, usually in a range between
7 and 10 years. Individual portfolio securities are municipal obligations issued
by various states, territories and possessions of the United States and the
District of Columbia, and their political subdivisions, agencies and
instrumentalities, with an emphasis on general obligation and essential purpose
revenue bonds. The Portfolio has a fundamental policy of investing, under normal
circumstances, at least 80% of its assets in municipal obligations rated
investment grade at the time of investment, or futures and options on futures
relating to these municipal obligations. The Portfolio will not invest more than
20% of its assets in municipal obligations that pay interest subject to the
alternative minimum tax. The Portfolio may invest up to 20% of its assets in
cash, cash equivalents, U.S. Government securities and investment grade
corporate fixed income securities. Typically, at least 65% of the Portfolio's
assets will be invested in municipal obligations having an initial maturity of
more than a year.
RISK
Investing in the Municipal Bond Portfolio may be appropriate for you if you are
willing to accept the risks and uncertainties of investing in municipal fixed
income securities. Although the Portfolio's investments in municipal obligations
are rated investment grade, or of equivalent quality, market risks, particularly
changes in interest rates, will still affect the prices of fixed income
securities. In addition, at times the Portfolio's market sector, municipal
bonds, may underperform relative to other sectors.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
JANUARY 18, 1995
1996 3.67%
1997 7.25%
1998 5.52%
1999 -1.79%
HIGH (QUARTER)
7/98 - 9/98
3.07%
LOW (QUARTER)
4/99 - 6/99
- -1.66%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B** LEHMAN 7-YEAR
(COMMENCED (COMMENCED MUNICIPAL
OPERATIONS ON OPERATIONS ON BOND INDEX*
JANUARY 18, 1995) JANUARY 2, 1996)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
PAST ONE YEAR -1.79% N/A -0.14%
- --------------------------------------------------------------------------------------------
SINCE INCEPTION 4.67% N/A 6.02%
</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 LEHMAN 7-YEAR MUNICIPAL BOND INDEX CONSISTS OF INVESTMENT GRADE BONDS WITH
MATURITIES BETWEEN 6-8 YEARS, RATED BAA OR BETTER. ALL BONDS HAVE BEEN TAKEN
FROM ISSUES OF AT LEAST $50 MILLION IN SIZE SOLD WITHIN THE LAST FIVE YEARS.
**NO PAST PERFORMANCE INFORMATION IS PROVIDED FOR CLASS B SHARES BECAUSE THERE
CURRENTLY ARE NO CLASS B SHAREHOLDERS.
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 regions, countries, industries or 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
have tended to be more volatile than fixed income securities 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.
FIXED INCOME SECURITIES
Investments in fixed income securities are subject to credit risk and market
risk. Credit risk is the possibility that an issuer may be unable to meet its
scheduled principal and interest payments. Market risk is the possibility that a
change in interest rates or the market's perception of an issuer's prospects may
adversely affect the value of a fixed income security. Generally, fixed income
securities decrease in value as interest rates rise and vice versa. Prices of
longer term securities also are generally more volatile, so the average maturity
of portfolio securities affects risk.
EMERGING MARKET RISKS
Emerging market countries are countries that major international financial
institutions, such as the World Bank, generally consider to be less economically
mature than developed nations, such as the United States or most nations in
Western Europe. Emerging market countries can include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand, and most
countries located in Western Europe. Emerging market countries may be more
likely to experience political turmoil or rapid changes in economic conditions
than more developed countries, and the financial condition of issuers in
emerging market countries may be more precarious than in other countries. These
characteristics result in greater risk of price volatility in emerging market
countries, which may be heightened by currency fluctuations relative to the U.S.
dollar.
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
6
<PAGE>
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 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.
INVESTMENT DISCRETION
In pursuing the Portfolios' investment objectives, MSDW Investment Management
has considerable leeway in deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decision will affect the
Portfolios' performance.
BANK INVESTORS
An investment in a Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
TEMPORARY DEFENSIVE
INVESTMENTS
When MSDW Investment Management or Sun Valley Gold 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 or Sun Valley Gold
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.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
MORTGAGE-
CHINA BACKED MUNICIPAL
GROWTH GOLD MICROCAP SECURITIES BOND
PORTFOLIO+ PORTFOLIO+ PORTFOLIO+ PORTFOLIO+ PORTFOLIO+
<S> <C> <C> <C> <C> <C>
MANAGEMENT FEES
- ---------------------------------------------------------------------------------------------------------------------
CLASS A 1.25% 1.00% 1.00% 0.35% 0.35%
- ---------------------------------------------------------------------------------------------------------------------
CLASS B 1.25% 1.00% 1.00% 0.35% 0.35%
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 0.77% 0.62% 0.57% 0.25% 0.46%
- ---------------------------------------------------------------------------------------------------------------------
CLASS B 0.77% 0.62% 0.57% 0.25% 0.46%
TOTAL ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------------------------------------------------------------------
CLASS A 2.02% 1.62% 1.57% 0.60% 0.81%
- ---------------------------------------------------------------------------------------------------------------------
CLASS B 2.27% 1.87% 1.82% 0.85% 1.06%
</TABLE>
+ ESTIMATED. AS OF THE DATE OF THIS PROSPECTUS, NONE OF THE PORTFOLIOS WERE
OPERATIONAL.
* 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 Portfolios so that total annual operating expenses,
excluding certain investment related expenses described below, will not exceed
1.75% for Class A shares and 2.00% for Class B shares of the China Growth
Portfolio; 1.25% for Class A shares and 1.50% for Class B shares of the Gold
Portfolio; 1.50% for Class A shares and 1.75% for Class B shares of the
MicroCap Portfolio; 0.60% for Class A shares and 0.85% for Class B shares of
the Mortgage-Backed Securities Portfolio; and 0.45% for Class A shares and
0.70% for Class B shares of the Municipal Bond Portfolio.
In determining the actual amount of voluntary management fee waiver and/or
expense reimbursement for a Portfolio, if any, MSDW Investment Management
excludes from annual operating expenses certain investment related expenses,
such as foreign country tax expense and interest expense on borrowing. If
these expenses were incurred, the Portfolios' total operating expenses after
voluntary fee waivers and/or expense reimbursements would exceed the expense
ratio shown above.
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
<S> <C> <C> <C> <C>
CHINA GROWTH PORTFOLIO
- ------------------------------------------------------------------
CLASS A $205 $634 $1,088 $2,348
- ------------------------------------------------------------------
CLASS B $230 $709 $1,215 $2,605
GOLD PORTFOLIO
- ------------------------------------------------------------------
CLASS A $165 $511 $881 $1,922
- ------------------------------------------------------------------
CLASS B $190 $588 $1,011 $2,190
MICROCAP PORTFOLIO
- ------------------------------------------------------------------
CLASS A $160 $496 $855 $1,867
- ------------------------------------------------------------------
CLASS B $185 $573 $985 $2,137
MORTGAGE-BACKED SECURITIES PORTFOLIO
- ------------------------------------------------------------------
CLASS A $61 $192 $335 $750
- ------------------------------------------------------------------
CLASS B $87 $271 $471 $1,049
MUNICIPAL BOND PORTFOLIO
- ------------------------------------------------------------------
CLASS A $83 $259 $450 $1,002
- ------------------------------------------------------------------
CLASS B $108 $337 N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND SUB-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.
Sun Valley Gold Company ("Sun Valley Gold"), located at 620 Sun Valley Road, Sun
Valley, Idaho 83340, serves as investment sub-adviser and manager for the Gold
Portfolio on a day-to-day basis. Sun Valley Gold selects, buys and sells
securities for the Gold Portfolio under the supervision of MSDW Investment
Management and the Board of Directors.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
each Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
MORTGAGE-
CHINA BACKED MUNICIPAL
GROWTH GOLD MICROCAP SECURITIES BOND
PORTFOLIO+ PORTFOLIO+ 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, 1999 0.90% 0.90% 0.65% 0.65% 1.05% 1.05% 0.20% 0.20% 0.00% N/A
(NET OF WAIVERS AND AS A PERCENTAGE
OF AVERAGE NET ASSETS)
</TABLE>
+ESTIMATED. AS OF THE DATE OF THIS PROSPECTUS, NONE OF THE PORTFOLIOS WERE
OPERATIONAL.
9
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
THE FOLLOWING INDIVIDUALS HAVE PRIMARY DAY-TO-DAY PORTFOLIO MANAGEMENT
RESPONSIBILITY FOR THE PORTFOLIOS:
- ----------------------------------------------------------------------------
CHINA GROWTH PORTFOLIO
[TO BE PROVIDED]
GOLD PORTFOLIO
[TO BE PROVIDED]
MICROCAP PORTFOLIO
[TO BE PROVIDED]
MORTGAGE-BACKED SECURITIES PORTFOLIO
[TO BE PROVIDED]
MUNICIPAL BOND PORTFOLIO
[TO BE PROVIDED]
10
<PAGE>
- --------------------------------------------------------------------------------
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 the 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").
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. 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.
11
<PAGE>
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, the Portfolio may pay redemption proceeds by a
distribution-in-kind of readily marketable portfolio securities.
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
Aggressive Equity Portfolio Active International Allocation Portfolio
Emerging Growth Portfolio Asian Real Estate Portfolio
Equity Growth Portfolio Asian Equity Portfolio
MicroCap Portfolio+ China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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.
12
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
It is the policy of each of the China Growth and MicroCap Portfolio's to
distribute to shareholders substantially all of its taxable net investment
income in the form of an annual dividend. The Gold Portfolio's policy is to
distribute to shareholders substantially all of its taxable net investment
income in the form of quarterly dividends. The Mortgage-Backed Securities
Portfolio's policy is to distribute to shareholders substantially all of its
taxable net investment income in the form of monthly dividends. Each Portfolio's
policy is to distribute to shareholders net capital gains, if any, at least
annually.
The Fund automatically reinvests all 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 rates. A Portfolio may be able to pass
through to you a credit for foreign income taxes it pays. The Fund will tell you
annually how to treat dividends and distributions.
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.
13
<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 Portfolio. 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, and quarterly reports. These reports contain additional information
about the 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 the 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
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS MAY 1, 2000
- -------------------------------------------------------------------------------
A PORTFOLIO OF [LOGO] MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
THE ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION BY INVESTING PRIMARILY, IN ACCORDANCE WITH COUNTRY AND SECTOR
WEIGHTINGS DETERMINED BY THE INVESTMENT ADVISER, IN EQUITY SECURITIES OF
NON-U.S. ISSUERS WHICH, IN THE AGGREGATE, REPLICATE BROAD MARKET INDICES.
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
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO (THE "PORTFOLIO").
THE SECURITIES AND EXCHANGE COMMISSION (THE "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 PAGE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SUMMARY
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO 1
ADDITIONAL RISK FACTORS AND INFORMATION 2
FEES AND EXPENSES OF THE PORTFOLIO 4
INVESTMENT ADVISER 5
MANAGEMENT FEES 5
PORTFOLIO MANAGERS 6
DISTRIBUTION OF PORTFOLIO SHARES 6
SHAREHOLDER INFORMATION 6
FINANCIAL HIGHLIGHTS 9
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO 10
ACCOUNT REGISTRATION FORM
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
- -------------------------------------------------------------------------------
THE ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION BY INVESTING PRIMARILY, IN ACCORDANCE WITH COUNTRY AND SECTOR
WEIGHTINGS DETERMINED BY MSDW INVESTMENT MANAGEMENT, IN EQUITY SECURITIES OF
NON-U.S. ISSUERS WHICH, IN THE AGGREGATE, REPLICATE BROAD MARKET INDICES.
- --------------------------------------------------------------------------------
APPROACH
MSDW Investment Management seeks to maintain a diversified portfolio of
international equity securities based on a top-down approach that emphasizes
country and sector selection and weighting rather than individual stock
selection. MSDW Investment Management capitalizes on the significance of country
and sector selection in international equity portfolio returns by over and
underweighting countries and/or sectors based on three factors: (i) valuation;
(ii) fundamental change; and (iii) market momentum/technicals.
PROCESS
MSDW Investment Management's Active International Allocation team analyzes both
the global economic environment and the economies of countries throughout the
world, focusing mainly on the industrialized countries comprising the MSCI
Europe, Australasia, Far East (EAFE) Index (the "EAFE Index"). EAFE countries
include Japan, most nations in Western Europe, Australia, New Zealand, Hong Kong
and Singapore. MSDW Investment Management views each country and sector as
unique investment opportunities and evaluates prospects for value, growth,
inflation, interest rates, corporate earnings, liquidity and risk
characteristics, investor sentiment and economic and currency outlook. MSDW
Investment Management - on an ongoing basis - establishes the proportion or
weighting for each country (e.g., overweight, underweight or neutral) relative
to the EAFE Index for investment by the Portfolio. MSDW Investment Management
may also choose to overweight or underweight particular sectors, such as
telecommunications or banking, within each country or region. MSDW Investment
Management invests the Portfolio's assets within each country and/or sector
based on its assigned weighting. Within each country, MSDW Investment Management
will try to match the performance of a broad local market index by investing in
"baskets" of common stocks and other equity securities. In most cases, the MSCI
Index for that country will be used as the benchmark index. The Portfolio may
invest in emerging market countries and, with regard to such investments, may
make global and regional allocations to emerging markets, as well as allocations
to specific emerging market countries.
RISK
Investing in the Active International Allocation Portfolio may be appropriate
for you if you are willing to accept the risks and uncertainties of investing in
the equity securities of issuers in foreign countries, including emerging market
countries, on a very diversified basis, in the hope of earning superior returns
and to diversify your portfolio. 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, foreign equity securities, may underperform relative
to other sectors.
MSDW INVESTMENT MANAGEMENT MAY INVEST IN CERTAIN INSTRUMENTS, SUCH A
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. MSDW INVESTMENT MANAGEMENT MAY USE
DERIVATIVES FOR OTHER PURPOSES, SUCH AS GAINING EXPOSURE TO FOREIGN MARKETS.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON
JANUARY 17, 1992
1993 30.72%
1994 -0.52%
1995 10.57%
1996 9.71%
1997 8.61%
1998 20.12%
1999 27.82%
HIGH (QUARTER)
10/99-12/99
18.68%
LOW (QUARTER)
7/98-9/98
- -11.55%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
CLASS A CLASS B
(COMMENCED (COMMENCED
OPERATIONS ON OPERATIONS ON MSCI EAFE INDEX*
JANUARY 17, 1992) JANUARY 2, 1996) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
PAST ONE YEAR 27.82% 26.63% 26.96% 26.96%
- ------------------------------------------------------------------------------------------------
PAST FIVE YEARS 15.15% N/A 12.83% N/A
- ------------------------------------------------------------------------------------------------
SINCE INCEPTION 12.33% 15.98% 11.66% 13.24%
</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 MSCI EAFE INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS IN EUROPE,
AUSTRALASIA AND THE FAR EAST.
1
<PAGE>
- --------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS AND INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT SUMMARY
THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATING TO THE
PORTFOLIO. THE PORTFOLIO'S INVESTMENT PRACTICES AND LIMITATIONS ARE DESCRIBED IN
MORE DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), WHICH LEGALLY IS
A PART OF THIS PROSPECTUS. FOR DETAILS ON HOW TO OBTAIN A COPY OF THE SAI AND
OTHER REPORTS AND INFORMATION, SEE THE BACK COVER OF THIS PROSPECTUS.
- ----------------------------------------------------------------------------
PRICE VOLATILITY
The value of your investment in the 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 regions, countries, industries, companies or governments. 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 gains
superior to fixed income securities, although they have 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 the Portfolio.
FOREIGN INVESTING
Investing in foreign countries, particularly emerging markets, entails 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, the
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 the Portfolio's investments.
These changes may occur separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. 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. MSDW Investment Management may use derivatives for other
purposes such as gaining exposure to foreign markets.
EMERGING MARKET RISKS
Emerging market countries are countries that major international financial
institutions, such as the World Bank, generally consider to be less economically
mature than developed nations, such as the United States or most nations in
Western Europe. Emerging market countries can include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand, and most
countries located in Western Europe. Emerging market countries may be more
likely to experience political turmoil or rapid changes in economic conditions
than more developed countries, and the financial condition of issuers in
emerging market countries may be more precarious than in other countries. These
characteristics result in greater risk of price volatility in emerging market
countries, which may be heightened by currency fluctuations relative to the U.S.
dollar.
DERIVATIVES
The Portfolio 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 the Portfolio, and of derivatives relating to those
securities, may not be proportionate, (ii) there may not be a liquid market for
the 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, the Portfolio may enter into derivatives transactions only with
counterparties that meet certain requirements for credit quality and collateral.
Also, the 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
2
<PAGE>
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.
The 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 the
Portfolio, if MSDW Investment Management is not successful in employing them,
the Portfolio's performance may be worse than if it did not make such
investments. See the SAI for more about the risks of different types of
derivatives.
INVESTMENT DISCRETION
In pursuing the Portfolio's investment objective, MSDW Investment Management has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis, and which trading strategies it uses. For example, MSDW
Investment Management may determine to use some permitted trading strategies
while not using others. The success or failure of such decisions will affect the
Portfolio's performance.
BANK INVESTORS
An investment in the Portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
TEMPORARY DEFENSIVE
INVESTMENTS
When MSDW Investment Management believes that changes in economic, financial or
political conditions warrant, the 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 the 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 will cause the Portfolio to incur additional transaction costs and may
result in taxable gains being passed through to shareholders.
3
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIO
- -------------------------------------------------------------------------------
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 Portfolio. The
Portfolio does 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, which are described in the footnotes below,
and/or expense reimbursements from MSDW Investment Management.
1999 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)*
<TABLE>
<CAPTION>
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<S> <C>
MANAGEMENT FEES
- ----------------------------------------------------------------------------------------------
CLASS A 0.65%
- ----------------------------------------------------------------------------------------------
CLASS B 0.65%
12b-1 FEE
- ----------------------------------------------------------------------------------------------
CLASS A NONE
- ----------------------------------------------------------------------------------------------
CLASS B 0.25%
OTHER EXPENSES
- ----------------------------------------------------------------------------------------------
CLASS A 0.27%
- ----------------------------------------------------------------------------------------------
CLASS B 0.27%
TOTAL ANNUAL FUND OPERATING EXPENSES
- ----------------------------------------------------------------------------------------------
CLASS A 0.92%
- ----------------------------------------------------------------------------------------------
CLASS B 1.17%
</TABLE>
*THE MANAGEMENT FEES FOR THE PORTFOLIO 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, EXCLUDING
CERTAIN INVESTMENT RELATED EXPENSES DESCRIBED BELOW, WILL NOT EXCEED 0.80% FOR
CLASS A SHARES AND 1.05% FOR CLASS B SHARES.
IN DETERMINING THE ACTUAL AMOUNT OF VOLUNTARY MANAGEMENT FEE WAIVER AND/OR
EXPENSE REIMBURSEMENT FOR THE 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 PORTFOLIO'S TOTAL OPERATING EXPENSES AFTER VOLUNTARY FEE WAIVERS AND/OR
EXPENSE REIMBURSEMENTS WOULD EXCEED THE EXPENSE RATIO SHOWN ABOVE.
FOR THE YEAR ENDED DECEMBER 31, 1999, AFTER GIVING EFFECT TO MSDW INVESTMENT
MANAGEMENT'S VOLUNTARY MANAGEMENT FEE WAIVER AND/OR EXPENSE REIMBURSEMENT, THE
TOTAL OPERATING EXPENSES INCURRED BY INVESTORS WERE 0.80% FOR CLASS A SHARES AND
1.05% FOR CLASS B SHARES.
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.
4
<PAGE>
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS HAVING SIMILAR
INVESTMENT OBJECTIVES.
- ----------------------------------------------------------------------------
The example assumes that you invest $10,000 in the 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 the 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
<S> <C> <C> <C> <C>
ACTIVE INTERNATIONAL
ALLOCATION PORTFOLIO
- ----------------------------------------------------------------------------------------------------
CLASS A $94 $293 $509 $1,131
- ----------------------------------------------------------------------------------------------------
CLASS B $119 $372 $644 $1,420
</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 & Co. Incorporated ("Morgan
Stanley"), the Fund's Distributor. 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, 1999, MSDW Investment Management, together with its affiliated
institutional asset management companies, managed assets of approximately
$184.8 billion, including assets under fiduciary advice.
- -------------------------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------------------------
For the year ended December 31, 1999, MSDW Investment Management received from
the Portfolio the management fee set forth in the table below:
<TABLE>
<CAPTION>
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
-------------------------------------------------------
<S> <C> <C>
MANAGEMENT FEE PAID IN FISCAL YEAR
ENDED DECEMBER 31, 1999 CLASS A CLASS B
-------------------------------------------------------
(NET OF WAIVERS AND AS A PERCENTAGE OF
AVERAGE NET ASSETS) 0.53% 0.53%
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
THE FOLLOWING INDIVIDUALS HAVE PRIMARY DAY-TO-DAY PORTFOLIO MANAGEMENT
RESPONSIBILITY FOR THE PORTFOLIO:
- ----------------------------------------------------------------------------
ANN D. THIVIERGE AND BARTON M. BIGGS
Ann D. Thivierge, a Managing Director of MSDW Investment Management and Morgan
Stanley, joined MSDW Investment Management in 1986. Ms. Thivierge holds a B.A.
in International Relations from James Madison College, Michigan State
University, and an M.B.A. in Finance from New York University. Barton M. Biggs,
Chairman and a Director of MSDW Investment Management and a Managing Director of
Morgan Stanley, joined Morgan Stanley in 1975. He is also a director and
chairman of various registered investment companies to which MSDW Investment
Management and certain of its affiliates provide investment advisory services.
Mr. Biggs holds a B.A. from Yale University and an M.B.A. from New York
University. Ms. Thivierge and Mr. Biggs have shared primary responsibility for
managing the Portfolio's assets since June 1995.
- -------------------------------------------------------------------------------
DISTRIBUTION OF PORTFOLIO SHARES
- -------------------------------------------------------------------------------
Morgan Stanley is the exclusive Distributor of Class A shares and Class B shares
of the Portfolio. Morgan Stanley receives no compensation for distributing Class
A shares of the Portfolio. The Fund has adopted a Plan of Distribution with
respect to the Class B shares of the Portfolio pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the 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 the 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 Portfolio may
hold portfolio securities that are listed on foreign exchanges. These securities
may trade on weekends or other days when the Portfolio does 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 the Portfolio at the
NAV next determined for the class after receipt of your order. The Fund
determines the NAV for the Portfolio 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").
6
<PAGE>
HOW TO PURCHASE SHARES
You may purchase Class A shares and Class B shares of the 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. 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 NAV 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 NAV 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, the Portfolio may pay redemption proceeds by a
distribution-in-kind of readily marketable portfolio securities.
7
<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
Equity Growth Portfolio Active International Allocation Portfolio
Focus Equity Portfolio Asian Real Estate Portfolio
MicroCap Portfolio+ Asian Equity Portfolio
Small Company Growth Portfolio China Growth Portfolio+
Technology Portfolio Emerging Markets Portfolio
U.S. Equity Plus Portfolio European Equity Portfolio
U.S. Real Estate Portfolio European Real Estate Portfolio
Value Equity Portfolio Global Equity Portfolio
FIXED INCOME Gold Portfolio+
Emerging Markets Debt Portfolio International Equity Portfolio*
Fixed Income Portfolio International Magnum Portfolio
Global Fixed Income Portfolio International Small Cap Portfolio
High Yield Portfolio Japanese Equity Portfolio
Mortgage-Backed Securities Portfolio+ Latin American 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 the Portfolio and raise its expenses.
Therefore, the Fund may, in its sole discretion, bar a shareholder who trades
excessively from making further exchanges or purchases.
DIVIDENDS AND DISTRIBUTIONS
The Portfolio's policy is to distribute to shareholders substantially all of its
taxable net investment income in the form of an annual dividend and to
distribute net capital gains, if any, at least annually.
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.
8
<PAGE>
TAXES
The dividends and distributions you receive from the 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 Portfolio may be able to
pass through to you a credit for foreign income taxes it pays. The Fund will
tell you annually how to treat dividends and distributions.
If you redeem shares of the 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
the 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 table is intended to help you understand the
financial performance of the Class A shares and Class B shares of the 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 table represent the rate that an investor would
have earned (or lost) on an investment in the 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 SAI and are included
in the Fund's December 31, 1999 Annual Report to Shareholders. The Annual Report
and the Fund's financial statements, as well as the SAI, are available at no
cost from the Fund at the toll free number noted on the back cover to this
Prospectus.
9
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999 1998++ 1997++ 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.90 $ 10.39 $ 11.44 $ 11.63 $ 11.65
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (1) 0.22 0.22 0.18 0.24 0.17
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 3.01 1.86 0.80 0.88 1.00
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 3.23 2.08 0.98 1.12 1.17
-------- -------- -------- -------- --------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.05) (0.30) (0.83) (0.81) (0.25)
IN EXCESS OF NET INVESTMENT INCOME (0.06) (0.04) (0.02) (0.02) (0.10)
NET REALIZED GAIN (0.76) (0.23) (1.18) (0.48) (0.84)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.87) (0.57) (2.03) (1.31) (1.19)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 14.26 $ 11.90 $ 10.39 $ 11.44 $ 11.63
======== ======== ======== ======== ========
TOTAL RETURN 27.82% 20.12% 8.61% 9.71% 10.57%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $583,607 $266,832 $138,667 $183,193 $170,663
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) 1.71% 1.91% 1.47% 1.22% 1.26%
PORTFOLIO TURNOVER RATE 53% 49% 49% 65% 72%
- -----------------
(1) EFFECT OF VOLUNTARY EXPENSE LIMITATION
DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.02 $0.03 $0.03 $0.05
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 0.92% 1.03% 1.10% 1.09% 1.18%
NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 1.59% 1.70% 1.18% 0.94% 0.88%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------
PERIOD FROM
JANUARY 2,
YEAR ENDED DECEMBER 31, 1996*** TO
------------------------------------- DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS 1999 1998++ 1997++ 1996
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.12 $10.48 $11.44 $11.66
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (2) 0.13 0.22 0.08 0.06
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 3.02 1.94 0.87 1.00
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.15 2.16 0.95 1.06
------ ------ ------ ------
DISTRIBUTIONS
NET INVESTMENT INCOME (0.05) (0.23) (0.71) (0.78)
IN EXCESS OF NET INVESTMENT INCOME (0.05) (0.06) (0.02) (0.02)
NET REALIZED GAIN (0.76) (0.23) (1.18) (0.48)
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.86) (0.52) (1.91) (1.28)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.41 $12.12 $10.48 $11.44
====== ====== ====== ======
TOTAL RETURN 26.63% 20.71% 8.35% 9.22%
====== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $9,959 $96 $14 $633
RATIO OF EXPENSES TO AVERAGE NET ASSETS (2) 1.05% 1.05% 1.05% 1.05%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS (2) 1.16% 1.80% 0.71% 1.09%**
PORTFOLIO TURNOVER RATE 53% 49% 49% 65%
- -----------------
(2) EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD:
PER SHARE BENEFIT TO NET INVESTMENT INCOME $0.01 $0.03 $0.03 $0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS 1.17% 1.27% 1.32% 1.33%**
NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.95% 1.58% 0.45% 0.82%**
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
**ANNUALIZED
***THE PORTFOLIO BEGAN OFFERING CLASS B SHARES ON JANUARY 2, 1996.
++PER SHARE AMOUNTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 ARE BASED ON
AVERAGE SHARES OUTSTANDING.
10
<PAGE>
A PORTFOLIO OF [ICON] MORGAN STANLEY DEAN WITTER ACTIVE INTERNATIONAL
INSTITUTIONAL FUND, INC. ALLOCATION PORTFOLIO
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.
-----------------------------------------------------
Type of Registration: / / Incorporated/ /
Unincorporated Association/ / Partnership
/ / Uniform Gift/Transfer to
Minor
(ONLY ONE CUSTODIAN AND
MINOR PERMITTED)
/ / Trust
--------------------------------------- / / Other
(SPECIFY)
---------------------------------------
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 SSN 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 the Portfolio and
Class B shares minimum $100,000 for the Portfolio.
Please indicate class and amount for purchase of the
following Portfolio:
ACTIVE INTERNATIONAL / / Class A Shares (056) $ -------------
ALLOCATION PORTFOLIO Total Initial Investment $ -------------
/ / Class B Shares (034) $ -------------
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 is registered if such requests are ----------------
believed to be authentic. NAME OF COMMERCIAL BANK (NOT SAVINGS BANK)
The Fund and the Fund's Transfer Agent will employ ----------------
reasonable procedures to confirm that instructions BANK ACCOUNT NUMBER
communicated by telephone are genuine. These procedures ----------------
include requiring the investor to provide certain BANK ABA NUMBER
personal identification information at the time an ----------------
account is opened and prior to effecting each NAME(S) IN WHICH YOUR BANK ACCOUNT IS
transaction requested by telephone. In addition, all ESTABLISHED
telephone transaction requests will be recorded and ----------------
investors may be required to provide additional BANK'S STREET ADDRESS
telecopied written instructions of transaction ----------------
requests. Neither the Fund nor the Transfer Agent will CITY STATE ZIP CODE
be responsible for any loss, liability, cost or expense
for following instructions received 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 800-548-7786.
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 IRS.
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 an SAI, dated May 1, 2000, which
contains additional, more detailed information about the Fund and the Portfolio.
The SAI 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 the 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
the Portfolio's performance during that period.
For additional Fund information, including information regarding investments
comprising the Fund's Portfolios, please call 1-800-548-7786.
You may obtain the SAI, and shareholder reports, when available, 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 SAI, and the annual and semi-annual
reports, may be obtained from the 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 on the operation of the
Public Reference Room, call 1-202-942-8090); (2) On-line: you may retrieve
information from the EDGAR Database on 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. 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the Commission at
the following address: [email protected]. 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
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
This statement of additional information is not a prospectus. It should be read
in conjunction with a prospectus for the applicable portfolio, which may be
obtained by calling the Morgan Stanley Dean Witter Institutional Fund, Inc. (the
"Fund") Services Group at 1-800-548-7786.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
INVESTMENT POLICIES AND STRATEGIES...... 2
INVESTMENT LIMITATIONS.................. 25
PURCHASE OF SHARES...................... 27
REDEMPTION OF SHARES.................... 29
ACCOUNT POLICIES AND FEATURES........... 30
MANAGEMENT OF THE FUND.................. 32
INVESTMENT ADVISORY AND OTHER
SERVICES.............................. 35
DISTRIBUTIONS OF SHARES................. 36
BROKERAGE PRACTICES..................... 38
GENERAL INFORMATION..................... 41
TAXES................................... 42
CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES............................ 46
PERFORMANCE INFORMATION................. 53
DESCRIPTION OF RATINGS.................. 57
</TABLE>
The Fund's audited financial statements for the fiscal year ended December 31,
1999, including notes thereto and the report of PricewaterhouseCoopers LLP, are
incorporated by reference herein from the Fund's Annual Report. A copy of the
Fund's Annual Report to Shareholders must accompany the delivery of this
Statement of Additional Information. The China Growth, Mortgage-Backed
Securities and MicroCap Portfolios had not commenced operations at December 31,
1999. You may obtain the Fund's most recent Annual Report by calling the Morgan
Stanley Dean Witter Institutional Fund, Inc. Services Group at 1-800-548-7786.
STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 2000.
- Prospectus for the European Real Estate Portfolio, Asian Real Estate
Portfolio and U.S. Real Estate Portfolio, dated May 1, 2000
- Prospectus for the Asian Equity Portfolio and Japanese Equity Portfolio,
dated May 1, 2000
- Prospectus for the Emerging Markets Portfolio, Emerging Markets Debt
Portfolio and Latin American Portfolio, dated May 1, 2000
- Prospectus for the Global Equity Portfolio, International Equity
Portfolio, International Small Cap Portfolio and European Equity
Portfolio, dated May 1, 2000
- Prospectus for the U.S. Equity Plus Portfolio, dated May 1, 2000
- Prospectus for the International Magnum Portfolio, dated May 1, 2000
- Prospectus for the Fixed Income Portfolio, Money Market Portfolio and
Municipal Money Market Portfolio, dated May 1, 2000
- Prospectus for the Equity Growth Portfolio, Focus Equity Portfolio
(formerly the Aggressive Equity Portfolio), Small Company Growth Portfolio
(formerly the Emerging Growth Portfolio), Value Equity Portfolio and
Technology Portfolio, dated May 1, 2000
- Prospectus for the Global Fixed Income Portfolio and High Yield Portfolio,
dated May 1, 2000
- Prospectus for the Active International Allocation Portfolio, dated May 1,
2000
- Prospectus for the China Growth Portfolio, Gold Portfolio, MicroCap
Portfolio, Mortgage-Backed Securities Portfolio and Municipal Bond
Portfolio dated May 1, 2000
1
<PAGE>
INVESTMENT POLICIES AND STRATEGIES
This Statement of Additional Information provides additional information about
the investment policies and operations of the Fund and its investment portfolios
(each a "Portfolio"). Morgan Stanley Dean Witter Investment Management Inc.
("MSDW Investment Management") acts as investment adviser to each Portfolio.
Under the supervision of MSDW Investment Management, Morgan Stanley Dean Witter
Advisors Inc. ("MSDW Advisors") acts as investment sub-adviser to the Money
Market and Municipal Money Market Portfolios and Sun Valley Gold Company ("Sun
Valley" and, together with MSDW Advisors, the "Sub-Advisers") acts as investment
sub-adviser to the Gold Portfolio. References to MSDW Investment Management,
when used in connection with its activities as investment adviser, include the
Sub-Advisers acting under its supervision.
The following table provides additional information about the Portfolios'
investment policies. Capitalized items used below are described in more detail
later in this section.
Fixed Income Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Investment Grade Fixed Income Securities and may
invest over 50% of its assets in Mortgage
Related Securities. The Portfolio may also
invest in Fixed Income Securities denominated in
foreign currencies.
Municipal Bond Portfolio Under normal circumstances, the Portfolio
invests at least 80% of its assets in Municipals
rated investment grade at the time of investment
or futures and options on futures relating to
these Municipals and 65% of its net assets in
Municipals having an initial maturity of more
than one year. The Portfolio may invest up to
20% of its net assets in Municipals that pay
interest subject to alternative minimum tax and
up to 20% in cash, cash equivalents, U.S.
Government securities and taxable investment
grade corporate Fixed Income Securities.
Money Market Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its assets in Money
Market Instruments with effective maturities of
397 days or less.
Municipal Money Market Under normal circumstances, the Portfolio
Portfolio invests at least 80% of its assets in Municipal
Money Market Instruments with effective
maturities of 397 days or less that pay interest
that is exempt from federal taxation.
Global Fixed Income Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in high
quality Fixed Income Securities of issuers
throughout the world, including U.S. issuers.
High Yield Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in High
Yield Securities (commonly referred to as "junk
bonds"). The Portfolio may also invest in other
Fixed Income Securities including Foreign Fixed
Income Securities and Emerging Market Country
Securities.
Equity Growth Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
growth oriented Equity Securities of large
capitalization U.S. and, to a limited extent,
foreign companies.
Focus Equity Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities U.S. and, to a limited extent,
foreign companies. 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.
Small Company Growth Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
growth oriented Equity Securities of small U.S.
issuers and, to a limited extent, foreign
issuers.
Value Equity Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of U.S. and, to a limited
extent, foreign issuers that MSDW Investment
Management believes to be undervalued relative
to the stock market in general at the time of
purchase.
Technology Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of companies that MSDW
Investment Management expects will benefit from
their involvement in technology and
technology-related industries.
European Real Estate Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of companies principally
engaged in the European real estate industry.
Asian Real Estate Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of companies principally
engaged in the Asian real estate industry.
2
<PAGE>
U.S. Real Estate Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of companies principally
engaged in the U.S. real estate industry,
including real estate investment trusts (REITs).
Active International Under normal circumstances, the Portfolio
Allocation Portfolio invests at least 65% of its total assets in
Equity Securities of non-U.S. issuers that, in
the aggregate, generally replicate broad market
indices. The Portfolio may invest in Emerging
Market Countries Securities.
Global Equity Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of issuers located throughout
the world, including issuers located in the
United States and in Emerging Market Countries.
Ordinarily, at least 20% of the Portfolio's
total assets will be invested in Equity
Securities of U.S. issuers.
International Equity Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of non-U.S. issuers.
International Small Cap Under normal circumstances, the Portfolio
Portfolio invests at least 65% of its total assets in
Equity Securities of non-U.S. issuers with
equity market capitalizations of less than $1
billion.
European Equity Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of European issuers.
International Magnum Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of non-U.S. issuers domiciled
in at least three different EAFE countries. The
Portfolio may invest up to 5% of its total
assets in the securities of issuers domiciled in
non-EAFE countries, including emerging market
countries.
Asian Equity Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of Asian issuers (excluding
Japanese issuers).
Japanese Equity Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
Equity Securities of Japanese issuers that MSDW
Investment Management believes are undervalued
relative to their intrinsic assets, cash flow
and earnings potential.
Emerging Markets Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
growth-oriented Equity Securities of issuers in
Emerging Market Countries.
Emerging Markets Debt Under normal circumstances, the Portfolio
Portfolio invests at least 65% of its total assets in
Fixed Income Securities of government and
government-related issuers and, to a lesser
extent, corporate issuers in Emerging Market
Countries.
Latin American Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its total assets in
growth-oriented Equity Securities of Latin
American issuers. In addition, the Portfolio
will invest between 25% and 50% of its assets in
securities of issuers engaged in the
telecommunications industry.
U.S. Equity Plus Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its assets in Equity
Securities of U.S. issuers included in the
Standard & Poor's 500 Index.
China Growth Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its assets in Equity
Securities of issuers in The People's Republic
of China, Hong Kong and Taiwan.
Gold Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its assets in Equity
Securities of U.S. and foreign companies engaged
in gold-related activities. The Portfolio
frequently invests in securities of foreign
issuers.
Microcap Portfolio Under normal circumstances, the Portfolio
invests at least 65% of its assets in growth
oriented Equity Securities of small
growth-oriented domestic and, to a limited
extent, foreign companies with potential for
long-term growth.
Mortgage-Backed Securities Under normal circumstances, the Portfolio
Portfolio invests at least 65% of its assets in Investment
Grade short and intermediate-term Mortgage-
Related Securities. The Portfolio may invest up
to 15% in Mortgage-Related Securities rated in
the third highest rating category or, if
unrated, believed by MSDW Investment Management
to be of equivalent quality.
3
<PAGE>
The following tables summarize the permissible strategies and investments for
each Portfolio. These tables should be used in conjunction with the investment
summaries for each Portfolio contained in the Prospectus in order to provide a
more complete description of such Portfolio's investment policies.
GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
ACTIVE
INTER-
NATIONAL ASIAN EUROPEAN
ALLO- ASIAN REAL CHINA EMERGING EUROPEAN REAL
CATION EQUITY ESTATE GROWTH MARKETS EQUITY ESTATE
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
EQUITY SECURITIES:
Common Stocks................................... X X X X X X X
Depositary Receipts............................. X X X X X X X
Preferred Stocks................................ X X X X X X X
Rights.......................................... X X X X X X X
Warrants........................................ X X X X X X X
Convertible Securities.......................... X X X X X X X
Limited Partnerships............................
Investment Company Securities................... X X X X X X X
Real Estate Investing........................... X X X X X X X
--REITS......................................... X X X X X X X
--Specialized Ownership Vehicles................ X X X X X X X
FIXED INCOME SECURITIES:
High Yield Securities........................... X
U.S. Government Securities...................... X X X X X * X
Agencies........................................ X X X X X * X
Corporates...................................... X X X X X * X
Money Market Instruments........................ X X X X X X X
Mortgage Related Securities.....................
--MBSs..........................................
--CMOs..........................................
--SMBSs.........................................
Repurchase Agreements........................... X X X X X X X
Municipals......................................
Asset-Backeds...................................
Loan Participations and Assignments............. X
Temporary Investments........................... X X X X X X X
Zero Coupons, Pay-In-Kind Securities or Deferred
Payment Securities............................. X X X X X X
Floaters........................................
Inverse Floaters................................
FOREIGN INVESTMENT:
Foreign Equity Securities....................... X X X X X X X
Foreign Government Fixed Income Securities...... X X X X X X
Foreign Corporate Fixed Income Securities....... X X X X X X
Emerging Market Country Securities.............. X X X X X X X
Russian Equity Securities....................... X
Foreign Currency Transactions................... X X X X X X X
Brady Bonds..................................... X X X X X X
Investment Funds................................ X X X X X X X
<CAPTION>
INTER-
INTER- INTER- NATIONAL
GLOBAL NATIONAL NATIONAL SMALL JAPANESE LATIN
EQUITY GOLD EQUITY MAGNUM CAP EQUITY AMERICAN
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
EQUITY SECURITIES:
Common Stocks................................... X X X X X X X
Depositary Receipts............................. X X X X X X X
Preferred Stocks................................ X X X X X X X
Rights.......................................... X X X X X X X
Warrants........................................ X X X X X X X
Convertible Securities.......................... X X X X X X X
Limited Partnerships............................
Investment Company Securities................... X X X X X X X
Real Estate Investing........................... X X X X X X
--REITS......................................... X X X X X X
--Specialized Ownership Vehicles................ X X X X X X
FIXED INCOME SECURITIES:
High Yield Securities........................... X
U.S. Government Securities...................... * X * X * X X
Agencies........................................ * X * X * X X
Corporates...................................... * X * X * X X
Money Market Instruments........................ X X X X X X X
Mortgage Related Securities.....................
--MBSs..........................................
--CMOs..........................................
--SMBSs.........................................
Repurchase Agreements........................... X X X X X X X
Municipals......................................
Asset-Backeds...................................
Loan Participations and Assignments............. X
Temporary Investments........................... X X X X X X X
Zero Coupons, Pay-In-Kind Securities or Deferred
Payment Securities............................. X X X X
Floaters........................................
Inverse Floaters................................
FOREIGN INVESTMENT:
Foreign Equity Securities....................... X X X X X X X
Foreign Government Fixed Income Securities...... X X X X
Foreign Corporate Fixed Income Securities....... X X X X
Emerging Market Country Securities.............. X X X X X X
Russian Equity Securities.......................
Foreign Currency Transactions................... X X X X X X X
Brady Bonds..................................... X X X X X X
Investment Funds................................ X X X X X X X
</TABLE>
4
<PAGE>
GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS (CONTINUED)
<TABLE>
<CAPTION>
ACTIVE
INTER-
NATIONAL ASIAN EUROPEAN
ALLO- ASIAN REAL CHINA EMERGING EUROPEAN REAL
CATION EQUITY ESTATE GROWTH MARKETS EQUITY ESTATE
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
OTHER SECURITIES AND INVESTMENT TECHNIQUES:
Loans of Portfolio Securities................... X X X X X X X
Non-Publicly Traded Securities, Private
Placements and Restricted Securities........... X X X X X X X
When-Issued and Delayed Delivery Securities..... X X X X X X X
Borrowing for Investment Purposes...............
Temporary Borrowing............................. X X X X X X X
Reverse Repurchase Agreements...................
Short Sales.....................................
Structured Investments.......................... X X X X X X X
DERIVATIVE PRODUCTS:
Foreign Currency Forward Contracts.............. X X X X X X X
Futures Contracts............................... X X X X X X X
Forward Contracts............................... X X X X X X X
Option Transactions............................. X X X X X X X
Swaps........................................... X X X X X X X
<CAPTION>
INTER-
INTER- INTER- NATIONAL
GLOBAL NATIONAL NATIONAL SMALL JAPANESE LATIN
EQUITY GOLD EQUITY MAGNUM CAP EQUITY AMERICAN
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------
OTHER SECURITIES AND INVESTMENT TECHNIQUES:
Loans of Portfolio Securities................... X X X X X X X
Non-Publicly Traded Securities, Private
Placements and Restricted Securities........... X X X X X X X
When-Issued and Delayed Delivery Securities..... X X X X X X X
Borrowing for Investment Purposes...............
Temporary Borrowing............................. X X X X X X X
Reverse Repurchase Agreements................... X
Short Sales..................................... X
Structured Investments.......................... X X X X X X X
DERIVATIVE PRODUCTS:
Foreign Currency Forward Contracts.............. X X X X X X X
Futures Contracts............................... X X X X X X X
Forward Contracts............................... X X X X X X X
Option Transactions............................. X X X X X X X
Swaps........................................... X X X X X X X
</TABLE>
- --------------
* This Portfolio may invest in certain U.S. Government Securities, Agencies and
Corporate Debt as described under Money Market Instruments and Temporary
Investments.
U.S. EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
SMALL
FOCUS COMPANY EQUITY
EQUITY GROWTH GROWTH MICROCAP TECHNOLOGY U.S. EQUITY PLUS
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
EQUITY SECURITIES:
Common Stocks.............................. X X X X X X
Depositary Receipts........................ X X X X X X
Preferred Stocks........................... X X X X X X
Rights..................................... X X X X X X
Warrants................................... X X X X X X
Convertible Securities..................... X X X X X X
Limited Partnerships.......................
Investment Company Securities.............. X X X X X X
Real Estate Investing...................... X X X X X
--REITS.................................... X X X X X
--Specialized Ownership Vehicles........... X X X X X
FIXED INCOME SECURITIES:
High Yield Securities...................... X
U.S. Government Securities................. X X X X X X
Agencies................................... X X X X X X
Corporates................................. X X X X X X
Money Market Instruments................... X X X X X X
<CAPTION>
U.S. REAL ESTATE VALUE EQUITY
<S> <C> <C>
------------------------------
EQUITY SECURITIES:
Common Stocks.............................. X X
Depositary Receipts........................ X X
Preferred Stocks........................... X X
Rights..................................... X X
Warrants................................... X X
Convertible Securities..................... X X
Limited Partnerships.......................
Investment Company Securities.............. X X
Real Estate Investing...................... X X
--REITS.................................... X X
--Specialized Ownership Vehicles........... X X
FIXED INCOME SECURITIES:
High Yield Securities......................
U.S. Government Securities................. X X
Agencies................................... X X
Corporates................................. X X
Money Market Instruments................... X X
</TABLE>
5
<PAGE>
U.S. EQUITY PORTFOLIOS (CONTINUED)
<TABLE>
<CAPTION>
SMALL U.S. U.S.
FOCUS COMPANY EQUITY EQUITY REAL
EQUITY GROWTH GROWTH MICROCAP TECHNOLOGY PLUS ESTATE
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
FIXED INCOME SECURITIES: (CONTINUED)
Mortgage Related Securities................
--MBSs.....................................
--CMOs.....................................
--SMBSs....................................
Repurchase Agreements...................... X X X X X X X
Municipals.................................
Asset-Backeds..............................
Loan Participations and Assignments........
Temporary Investments...................... X X X X X X X
Zero Coupons, Pay-In-Kind Securities or
Deferred Payment Securities............... X X X X X X X
Floaters...................................
Inverse Floaters...........................
FOREIGN INVESTMENT:
Foreign Equity Securities.................. X X X X X X X
Foreign Bonds.............................. X X
Emerging Market Country Securities......... X X
Russian Equity Securities..................
Foreign Currency Transactions.............. X X X X X X X
Brady Bonds................................
Investment Funds........................... X X X X X X X
OTHER SECURITIES AND INVESTMENT TECHNIQUES:
Loans of Portfolio Securities.............. X X X X X X X
Non-Publicly Traded Securities, Private
Placements and Restricted Securities...... X X X X X X X
When-Issued and Delayed Delivery
Securities................................ X X X X X X X
Borrowing for Investment Purposes.......... X
Temporary Borrowing........................ X X X X X X X
Reverse Repurchase Agreements.............. X X
Short Sales................................
Structured Investments..................... X X X X X X X
DERIVATIVE PRODUCTS:
Foreign Currency Forward Contracts......... X X X X X X X
Futures Contracts.......................... X X X X X X X
Forward Contracts.......................... X X X X X X X
Option Transactions........................ X X X X X X X
Swaps...................................... X X X X X X X
<CAPTION>
VALUE
EQUITY
<S> <C>
---------
FIXED INCOME SECURITIES: (CONTINUED)
Mortgage Related Securities................
--MBSs.....................................
--CMOs.....................................
--SMBSs....................................
Repurchase Agreements...................... X
Municipals.................................
Asset-Backeds..............................
Loan Participations and Assignments........
Temporary Investments...................... X
Zero Coupons, Pay-In-Kind Securities or
Deferred Payment Securities............... X
Floaters...................................
Inverse Floaters...........................
FOREIGN INVESTMENT:
Foreign Equity Securities.................. X
Foreign Bonds..............................
Emerging Market Country Securities.........
Russian Equity Securities..................
Foreign Currency Transactions.............. X
Brady Bonds................................
Investment Funds........................... X
OTHER SECURITIES AND INVESTMENT TECHNIQUES:
Loans of Portfolio Securities.............. X
Non-Publicly Traded Securities, Private
Placements and Restricted Securities...... X
When-Issued and Delayed Delivery
Securities................................ X
Borrowing for Investment Purposes..........
Temporary Borrowing........................ X
Reverse Repurchase Agreements..............
Short Sales................................
Structured Investments..................... X
DERIVATIVE PRODUCTS:
Foreign Currency Forward Contracts......... X
Futures Contracts.......................... X
Forward Contracts.......................... X
Option Transactions........................ X
Swaps...................................... X
</TABLE>
6
<PAGE>
FIXED INCOME AND MONEY MARKET PORTFOLIOS
<TABLE>
<CAPTION>
EMERGING GLOBAL MORTGAGE- MUNICIPAL
MARKETS FIXED FIXED HIGH BACKED MUNICIPAL MONEY MONEY
DEBT INCOME INCOME YIELD SECURITIES BOND MARKET MARKET
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
EQUITY SECURITIES:
Common Stocks......................... X
Depositary Receipts................... X
Preferred Stocks...................... X X X X
Rights................................ X X X X
Warrants.............................. X X X X
Convertible Securities................ X X X X
Limited Partnerships.................. X
Investment Company Securities......... X X X X X X X X
Real Estate Investing.................
--REITs............................... +
--Specialized Ownership Vehicles......
FIXED INCOME SECURITIES:
High Yield Securities................. X X
U.S. Government Securities............ X X X X X X X X
Agencies.............................. X X X X X X X X
Corporates............................ X X X X * X X *
Money Market Instruments.............. X X X X X X X X
Mortgage Related Securities........... X X X X X X X
--MBSs................................ X X X X X X
--CMOs................................ X X X X X
--SMBSs............................... X X X X
Repurchase Agreements................. X X X X X X X X
Municipals............................ X X X X X X X
Asset-Backeds......................... X X X X X
Loan Participations and Assignments... X X
Temporary Investments................. X X X X X X X X
Zero Coupons, Pay-In-Kind Securities
or Deferred Payment Securities....... X X X X X X X X
Floaters.............................. X X X X X X X X
Inverse Floaters...................... X X X X X X
FOREIGN INVESTMENT:
Foreign Equity Securities............. X X X X
Foreign Bonds......................... X X X X
Emerging Market Country Securities.... X X X
Russian Equity Securities.............
Foreign Currency Transactions......... X X X X
Brady Bonds........................... X X X
Investment Funds...................... X
</TABLE>
7
<PAGE>
FIXED INCOME AND MONEY MARKET PORTFOLIOS (CONTINUED)
<TABLE>
<CAPTION>
EMERGING GLOBAL MORTGAGE-
MARKETS FIXED FIXED HIGH BACKED MUNICIPAL MONEY
DEBT INCOME INCOME YIELD SECURITIES BOND MARKET
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
OTHER SECURITIES AND INVESTMENT TECHNIQUES:
Loans of Portfolio Securities.............. X X X X X X
Non-Publicly Traded Securities, Private
Placements and Restricted Securities...... X X X X X X X
When-Issued and Delayed Delivery
Securities................................ X X X X X X X
Borrowing for Investment Purposes.......... X
Temporary Borrowing........................ X X X X X X X
Reverse Repurchase Agreements.............. X X X
Short Sales................................ X
Structured Investments..................... X X X X X X X
DERIVATIVE PRODUCTS:
Foreign Currency Forward Contracts......... X X X X X X
Futures Contracts.......................... X X X X X X
Forward Contracts.......................... X X X X X X
Option Transactions........................ X X X X X X
Swaps...................................... X X X X X X
<CAPTION>
MUNICIPAL
MONEY
MARKET
<S> <C>
---------
OTHER SECURITIES AND INVESTMENT TECHNIQUES:
Loans of Portfolio Securities..............
Non-Publicly Traded Securities, Private
Placements and Restricted Securities...... X
When-Issued and Delayed Delivery
Securities................................ X
Borrowing for Investment Purposes..........
Temporary Borrowing........................ X
Reverse Repurchase Agreements..............
Short Sales................................
Structured Investments.....................
DERIVATIVE PRODUCTS:
Foreign Currency Forward Contracts.........
Futures Contracts..........................
Forward Contracts..........................
Option Transactions........................
Swaps......................................
</TABLE>
- --------------
* This Portfolio may invest in certain Corporate Debt as described under Money
Market Instruments and Temporary Investments.
+ The High Yield Portfolio may invest in certain fixed income securities issued
by REITs.
8
<PAGE>
EQUITY SECURITIES
Equity Securities generally represent an ownership interest in an issuer, or may
be convertible into or represent a right to acquire an ownership interest in an
issuer. While there are many types of Equity Securities, prices of all equity
securities will fluctuate. Economic, political and other events may affect the
prices of broad equity markets. For example, changes in inflation or consumer
demand may affect the prices of all Equity Securities in the United States.
Similar events also may affect the prices of particular equity securities. For
example, news about the success or failure of a new product may affect the price
of a particular issuer's Equity Securities.
COMMON STOCKS. Common Stocks represent an ownership interest in a corporation,
entitling the stockholder to voting rights and receipt of dividends paid based
on proportionate ownership.
DEPOSITARY RECEIPTS. Depositary Receipts represent an ownership interest in
securities of foreign companies (an "underlying issuer") that are deposited with
a depositary. Depositary Receipts are not necessarily denominated in the same
currency as the underlying securities. Depositary Receipts include American
Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and other
types of Depositary Receipts (which, together with ADRs and GDRs, are
hereinafter collectively referred to as "Depositary Receipts"). ADRs are
dollar-denominated Depositary Receipts typically issued by a U.S. financial
institution which evidence an ownership interest in a security or pool of
securities issued by a foreign issuer. ADRs are listed and traded in the United
States. GDRs and other types of Depositary Receipts are typically issued by
foreign banks or trust companies, although they also may be issued by U.S.
financial institutions, and evidence ownership interests in a security or pool
of securities issued by either a foreign or a U.S. corporation. Generally,
Depositary Receipts in registered form are designed for use in the U.S.
securities market and Depositary Receipts in bearer form are designed for use in
securities markets outside the United States.
Depositary Receipts may be "sponsored" or "unsponsored." Sponsored Depositary
Receipts are established jointly by a depositary and the underlying issuer,
whereas unsponsored Depositary Receipts may be established by a depositary
without participation by the underlying issuer. Holders of unsponsored
Depositary Receipts generally bear all the costs associated with establishing
unsponsored Depositary Receipts. In addition, the issuers of the securities
underlying unsponsored Depository Receipts are not obligated to disclose
material information in the United States and, therefore, there may be less
information available regarding such issuers and there may not be a correlation
between such information and the market value of the Depositary Receipts. For
purposes of a Portfolio's investment policies, the Portfolio's investments in
Depositary Receipts will be deemed to be an investment in the underlying
securities, except that ADRs may be deemed to be issued by a U.S. issuer.
PREFERRED STOCKS. Preferred Stocks are securities that evidence ownership in a
corporation and pay a fixed or variable stream of dividends. Preferred Stocks
have a preference over Common Stocks in the event of the liquidation of an
issuer and usually do not carry voting rights. Because Preferred Stocks pay a
fixed or variable stream of dividends they have many of the characteristics of a
Fixed Income Security and are, therefore, included in both the definition of
Equity Security and Fixed Income Security.
RIGHTS. Rights represent the right, but not the obligation, for a fixed period
of time to purchase additional shares of an issuer's Common Stock at the time of
a new issuance, usually at a price below the initial offering price of the
Common Stock and before the Common Stock is offered to the general public.
Rights are usually freely transferrable. The risk of investing in a Right is
that the Right may expire prior to the market value of the Common Stock
exceeding the price fixed by the Right.
WARRANTS. Warrants give holders the right, but not the obligation, to buy
Common Stock of an issuer at a given price, usually higher than the market price
at the time of issuance, during a specified period. Warrants are usually freely
transferrable. The risk of investing in a Warrant is that the Warrant may expire
prior to the market value of the Common Stock exceeding the price fixed by the
Warrant.
CONVERTIBLE SECURITIES. Convertible Securities are securities that may be
exchanged under certain circumstances for a fixed number of shares of Common
Stock or other Equity Securities. Convertible Securities generally represent a
feature of some other type of security, such as a Fixed Income Security or
Preferred Stock, so that, for example, a Convertible Fixed Income Security would
be a Fixed Income Security that is convertible into Common Stock. Convertible
Securities may be viewed as an investment in the current security or the
security into which the Convertible Securities may be exchanged and, therefore,
are included in both the definition of Equity Security and Fixed Income
Security.
LIMITED PARTNERSHIPS. A limited partnership interest entitles a Portfolio to
participate in the investment return of the partnership's assets as defined by
the agreement among the partners. As a limited partner, a Portfolio generally is
not permitted to participate in the management of the partnership. However,
unlike a general partner whose liability is not limited, a limited partner's
liability generally is limited to the amount of its commitment to the
partnership.
INVESTMENT COMPANY SECURITIES. Investment Company Securities are securities of
other open-end or closed-end investment companies. The Investment Company Act of
1940, as amended (the "1940 Act"), generally prohibits an investment company
from acquiring more than 3% of the outstanding voting shares of an investment
company and limits such investments to no more than 5% of the Portfolio's total
assets in any one investment company and no more than 10% in any combination of
investment companies. A Portfolio may invest in Investment Company Securities of
investment companies managed by MSDW Investment
9
<PAGE>
Management or its affiliates to the extent permitted under the 1940 Act or as
otherwise authorized by the Securities and Exchange Commission ("SEC"). To the
extent a Portfolio invests a portion of its assets in Investment Company
Securities, those assets will be subject to the risks of the purchased
investment company's portfolio securities. The Portfolio also will bear it's
proportionate share of the expenses of the purchased investment company in
addition to its own expenses.
REAL ESTATE INVESTING. Investments in securities of issuers engaged in the real
estate industry entail special risks and considerations. In particular,
securities of such issuers may be subject to risks associated with the direct
ownership of real estate. These risks include: the cyclical nature of real
estate values, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, demographic trends and variations in rental income, changes
in zoning laws, casualty or condemnation losses, environmental risks, regulatory
limitations on rents, changes in neighborhood values, changes in the appeal of
properties to tenants, increases in interest rates and other real estate capital
market influences. Generally, increases in interest rates will increase the
costs of obtaining financing, which could directly and indirectly decrease the
value of the Portfolios' investments.
REITS. Real Estate Investment Trusts ("REITs") pool investors' funds for
investment primarily in income producing real estate or real estate related
loans or interests. A REIT is not taxed on income distributed to its
shareholders or unitholders if it complies with regulatory requirements relating
to its organization, ownership, assets and income, and with a regulatory
requirement that it distribute to its shareholders or unitholders at least 95%
of its taxable income for each taxable year. Generally, REITs can be classified
as Equity REITs, Mortgage REITs or Hybrid REITs. Equity REITs invest the
majority of their assets directly in real property and derive their income
primarily from rents and capital gains from appreciation realized through
property sales. Equity REITs are further categorized according to the types of
real estate securities they own, e.g., apartment properties, retail shopping
centers, office and industrial properties, hotels, health-care facilities,
manufactured housing and mixed-property types. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITs combine the characteristics of
both Equity and Mortgage REITs.
A shareholder in any of the Portfolios, by investing in REITs indirectly through
the Portfolio, will bear not only his proportionate share of the expenses of the
Portfolio, but also, indirectly, the management expenses of underlying REITs.
REITs may be affected by changes in the value of their underlying properties and
by defaults by borrowers or tenants. Mortgage REITs may be affected by the
quality of the credit extended. Furthermore, REITs are dependent on specialized
management skills. Some REITs may have limited diversification and may be
subject to risks inherent in investments in a limited number of properties, in a
narrow geographic area, or in a single property type. REITs depend generally on
their ability to generate cash flow to make distributions to shareholders or
unitholders, and may be subject to defaults by borrowers and to
self-liquidations. In addition, the performance of a REIT may be affected by its
failure to qualify for tax-free pass-through of income, or its failure to
maintain exemption from registration under the 1940 Act.
SPECIALIZED OWNERSHIP VEHICLES. Specialized ownership vehicles pool investors'
funds for investment primarily in income-producing real estate or real estate
related loans or interests. Such specialized ownership vehicles in which the
Portfolios may invest include property unit trusts, REITs and other similar
specialized investment vehicles. Investments in such specialized ownership
vehicles may have favorable or unfavorable legal, regulatory or tax implications
for a Portfolio and, to the extent such vehicles are structured similarly to
investment funds, may cause the Portfolios' shareholders to indirectly bear
certain additional operating expenses.
FIXED INCOME SECURITIES
Fixed Income Securities generally represent an issuer's obligation to repay
money that it has borrowed together with interest on the amount borrowed. Fixed
Income Securities come in many varieties and may differ in the way that interest
is calculated, the amount and frequency of payments, the type of collateral, if
any, and some Fixed Income Securities may have other novel features such as
conversion rights. Prices of Fixed Income Securities fluctuate and, in
particular, are subject to credit risk and market risk. Credit risk is the
possibility that an issuer may be unable to meet scheduled interest and
principal payments. Market risk is the possibility that a change in interest
rates or the market's perception of the issuer's prospects may adversely affect
the value of a Fixed Income Security. Economic, political and other events also
may affect the prices of broad fixed income markets. Generally, the values of
Fixed Income Securities vary inversely with changes in interest rates. During
periods of falling interest rates, the values of outstanding Fixed Income
Securities generally rise and during periods of rising interest rates, the
values of such securities generally decline. Prepayments also will affect the
maturity and value of Fixed Income Securities. Prepayments generally rise in
response to a decline in interest rates as debtors take advantage of the
opportunity to refinance their obligations. When this happens, a Portfolio may
be forced to reinvest in lower yielding Fixed Income Securities.
The length of time to the final payment, or maturity, of a Fixed Income Security
also affects its price volatility. While securities with longer maturities tend
to produce higher yields, the prices of longer maturity securities are subject
to greater market fluctuation, especially as a result of changes in interest
rates. Traditionally, term to maturity has been used as a barometer of a Fixed
Income Security's sensitivity to interest rate changes. However, this measure
considers only the time until final payment and takes no account of the pattern
of payments prior to maturity. Duration is a more precise measure of the
expected life of a
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Fixed Income Security that combines consideration of yield, coupon, interest
payments, final maturity and call features and measures the expected life of a
Fixed Income Security on a present value basis. The duration of a Fixed Income
Security ordinarily is shorter than its maturity.
INVESTMENT GRADE SECURITIES. Investment Grade Securities are Fixed Income
Securities rated by one or more of the rating agencies in one of the four
highest rating categories at the time of purchase (e.g., AAA, AA, A or BBB by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch"), or Aaa, Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"))
or determined to be of equivalent quality by MSDW Investment Management.
Securities rated BBB or Baa represent the lowest of four levels of Investment
Grade Securities and are regarded as borderline between definitely sound
obligations and those in which the speculative element begins to predominate.
Ratings assigned to Fixed Income Securities represent only the opinion of the
rating agency assigning the rating and are not dispositive of the credit risk
associated with the purchase of a particular Fixed Income Security. Moreover,
market risk also will affect the prices of even the highest rated Fixed Income
Securities so that their prices may rise or fall even if the issuer's capacity
to repay its obligations remains unchanged.
HIGH YIELD SECURITIES. High Yield Securities are generally considered to
include Fixed Income Securities rated below the four highest rating categories
at the time of purchase (e.g., Ba through C by Moody's or BB through D by S&P)
and unrated securities considered by MSDW Investment Management to be of
equivalent quality. High Yield Securities are not considered investment grade
and are commonly referred to as junk bonds or high yield, high risk securities.
While High Yield Securities offer higher yields, they carry a high degree of
credit risk and are considered speculative by the major credit rating agencies.
High Yield Securities are often issued by smaller, less credit worthy issuers,
or by highly leveraged (indebted) issuers that are generally less able than more
established or less leveraged issuers to make scheduled payments of interest and
principal. In comparison to Investment Grade Securities, the price movement of
these securities is influenced less by changes in interest rates and more by the
financial and business position of the issuer. The values of High Yield
Securities are more volatile and may react with greater sensitivity to market
changes.
U.S. GOVERNMENT SECURITIES. U.S. Government Securities are Fixed Income
Securities that are backed by the full faith and credit of the U.S. Government
as to the payment of both principal and interest. U.S. Government Securities may
include securities issued by the U.S. Treasury and securities issued by federal
agencies and U.S. Government sponsored instrumentalities.
AGENCIES. Agencies are Fixed Income Securities which are not guaranteed by, or
backed by the full faith and credit of the U.S. Government, but which are
issued, sponsored or guaranteed by a federal agency or federally sponsored
agency such as the Student Loan Marketing Association, or any of several other
agencies.
CORPORATES. Corporates are Fixed Income Securities issued by private
businesses. Holders, as creditors, have a prior legal claim over holders of
Equity Securities of the issuer as to both income and assets for the principal
and interest due the holder.
MONEY MARKET INSTRUMENTS. Money Market Instruments are high quality short-term
Fixed Income Securities. Money Market Instruments may include obligations of
governments, government agencies, banks, corporations and special purpose
entities and Repurchase Agreements relating to these obligations. Certain Money
Market Instruments may be denominated in a foreign currency.
MORTGAGE RELATED SECURITIES. Mortgage related securities are securities that,
directly or indirectly, represent a participation in, or are secured by and
payable from, mortgage loans on real property. Mortgage related securities
include collateralized mortgage obligations and mortgage-backed securities
issued or guaranteed by agencies or instrumentalities of the U.S. Government or
by private sector entities.
MORTGAGE-BACKED SECURITIES. With mortgage-backed securities ("MBSs"), many
mortgagees' obligations to make monthly payments to their lending institution
are pooled together and passed through to investors. The pools are assembled by
various governmental, Government-related and private organizations. A Portfolio
may invest in securities issued or guaranteed by Government National Mortgage
Association ("GNMA" or "Ginnie Mae"), Federal Home Loan Mortgage Corporation
("FHLMC" or "Freddie Mac"), Fannie Mae, private issuers and other government
agencies. MBSs issued by non-agency issuers, whether or not such securities are
subject to guarantees, may entail greater risk, since private issuers may not be
able to meet their obligations under the policies. If there is no guarantee
provided by the issuer, a Portfolio will purchase only MBSs which at the time of
purchase are rated investment grade by one or more NRSROs or, if unrated, are
deemed by MSDW Investment Management to be of comparable quality.
MBSs are issued or guaranteed by private sector originators of or investors in
mortgage loans and structured similarly to governmental pass-through securities.
Because private pass-throughs typically lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality, however, they are
generally structured with one or more of the types of credit enhancement
described below. Fannie Mae and FHLMC obligations are not backed by the full
faith and credit of the U.S. Government as GNMA certificates are. FHLMC
securities are supported by its right to borrow from the U.S. Treasury. Each of
GNMA, Fannie Mae and FHLMC guarantees timely distributions of interest to
certificate holders. Each of GNMA and Fannie Mae also guarantees timely
distributions of scheduled principal. Although FHLMC has in the past guaranteed
only the ultimate
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collection of principal of the underlying mortgage loan, FHLMC now issues MBSs
("FHLMC Gold PCS") which also guarantee timely payment of monthly principal
reductions. Resolution Funding Corporation ("REFCORP") obligations are backed,
as to principal payments, by zero coupon U.S. Treasury bonds, and as to interest
payment, ultimately by the U.S. Treasury.
There are two methods of trading MBSs. A specified pool transaction is a trade
in which the pool number of the security to be delivered on the settlement date
is known at the time the trade is made. This is in contrast with the typical MBS
transaction, called a TBA (to be announced) transaction, in which the type of
MBS to be delivered is specified at the time of trade but the actual pool
numbers of the securities that will be delivered are not known at the time of
the trade. The pool numbers of the pools to be delivered at settlement are
announced shortly before settlement takes place. The terms of the TBA trade may
be made more specific if desired. Generally, agency pass-through MBSs are traded
on a TBA basis.
Like Fixed Income Securities in general, MBSs will generally decline in price
when interest rates rise. Rising interest rates also tend to discourage
refinancings of home mortgages, with the result that the average life of MBSs
held by a Portfolio may be lengthened. As average life extends, price volatility
generally increases. This extension of average life causes the market price of
the MBSs to decrease further when interest rates rise than if their average
lives were fixed. However, when interest rates fall, mortgages may not enjoy as
large a gain in market value due to prepayment risk because additional mortgage
prepayments must be reinvested at lower interest rates. Faster prepayment will
shorten the average life and slower prepayments will lengthen it. However, it is
possible to determine what the range of the average life movement could be and
to calculate the effect that it will have on the price of the MBS. In selecting
MBSs, MSDW Investment Management looks for those that offer a higher yield to
compensate for any variation in average maturity. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, a Portfolio
may fail to fully recoup its initial investment in these securities, even if the
security is in one of the highest rating categories. A Portfolio may invest,
without limit, in MBSs issued by private issuers when MSDW Investment Management
deems that the quality of the investment, the quality of the issuer, and market
conditions warrant such investments. The Portfolios will purchase securities
issued by private issuers which are rated investment grade at the time of
purchase by Moody's or S&P or be deemed by MSDW Investment Management to be of
comparable investment quality.
FANNIE MAE CERTIFICATES. Fannie Mae is a federally chartered and privately
owned corporation organized and existing under the Federal National Mortgage
Association Charter Act of 1938. The obligations of Fannie Mae are not backed by
the full faith and credit of the U.S. Government.
Each Fannie Mae certificate represents a pro rata interest in one or more pools
of mortgage loans insured by the Federal Housing Administration under the
Housing Act, or Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed
by the Department of Veteran Affairs under the Servicemen's Readjustment Act of
1944, as amended ("VA Loans") or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (i) fixed rate level payment mortgage loans; (ii) fixed rate
growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed rate and adjustable mortgage loans secured by
multi-family projects.
FREDDIE MAC CERTIFICATES. Freddie Mac is a corporate instrumentality of the
United States created pursuant to the Emergency Home Finance Act of 1970, as
amended (the "FHLMC Act"). The obligations of Freddie Mac are obligations solely
of Freddie Mac and are not backed by the full faith and credit of the U.S.
Government.
Freddie Mac certificates represent a pro rata interest in a group of mortgage
loans (a "Freddie Mac Certificate group") purchased by Freddie Mac. The mortgage
loans underlying the Freddie Mac Certificates consist of fixed rate or
adjustable rate mortgage loans with original terms to maturity of between ten
and thirty years, substantially all of which are secured by first liens on
one-to-four-family residential properties or multi-family projects. Each
mortgage loan must meet the applicable standards set forth in the FHLMC Act. A
Freddie Mac Certificate group may include whole loans, participation interests
in whole loans and undivided interests in whole loans and participations
comprising another Freddie Mac Certificate group.
GINNIE MAE CERTIFICATES. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and Urban
Development. The National Housing Act of 1934, as amended (the "Housing Act"),
authorizes Ginnie Mae to guarantee the timely payment of the principal and
interest on certificates that are based on and backed by a pool of FHA Loans, VA
Loans or by pools of other eligible mortgage loans. The Housing Act provides
that the full faith and credit of the U.S. Government is pledged to the payment
of all amounts that may be required to be paid under any guaranty. In order to
meet its obligations under such guaranty, Ginnie Mae is authorized to borrow
from the U.S. Treasury with no limitations as to amount.
Each Ginnie Mae certificate represents a pro rata interest in one or more of the
following types of mortgage loans: (i) fixed rate level payment mortgage loans;
(ii) fixed rate graduated payment mortgage loans; (iii) fixed rate growing
equity mortgage loans; (iv) fixed rate mortgage loans secured by manufactured
(mobile) homes; (v) mortgage loans on multi-family residential properties under
construction; (vi) mortgage loans on completed multi-family projects;
(vii) fixed rate mortgage loans as to which escrowed funds are used to reduce
the borrower's monthly payments during the early years of the mortgage loans
("buydown" mortgage loans); (viii) mortgage loans that provide for adjustments
in payments based on periodic changes in
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interest rates or in other payment terms of the mortgage loans; and
(ix) mortgage-backed serial notes. All of these mortgage loans will be FHA Loans
or VA loans and, except as otherwise specified above, will be fully-amortizing
loans secured by first liens on one- to-four-family housing units.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations
("CMOs") are debt obligations or multiclass pass-through certificates issued by
agencies or instrumentalities of the U.S. Government or by private originators
or investors in mortgage loans. They are backed by mortgage-backed securities
(discussed below) or whole loans (all such assets, the "Mortgage Assets") and
are evidenced by a series of bonds or certificates issued in multiple classes.
Each class of a CMO, often referred to as a "tranche," may be issued with a
specific fixed or floating coupon rate and has a stated maturity or final
scheduled distribution date. The principal and interest on the underlying
Mortgage Assets may be allocated among the several classes of a series of CMOs
in many ways. Interest is paid or accrues on CMOs on a monthly, quarterly or
semi-annual basis.
CMOs may be issued by agencies or instrumentalities of the U.S. Government, or
by private originators of, or investors in, mortgage loans, including savings
and loan associations, mortgage bankers, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. CMOs that are issued by private
sector entities and are backed by assets lacking a guarantee of an entity having
the credit status of a governmental agency or instrumentality are generally
structured with one or more types of credit enhancement as described below. An
issuer of CMOs may elect to be treated for federal income tax purposes as a Real
Estate Mortgage Investment Conduit (a "REMIC"). An issuer of CMOs issued after
1991 must elect to be treated as a REMIC or it will be taxable as a corporation
under rules regarding taxable mortgage pools.
The principal and interest on the Mortgage Assets may be allocated among the
several classes of a CMO in many ways. The general goal in allocating cash flows
on Mortgage Assets to the various classes of a CMO is to create certain tranches
on which the expected cash flows have a higher degree of predictability than do
the underlying Mortgage Assets. As a general matter, the more predictable the
cash flow is on a particular CMO tranche, the lower the anticipated yield on
that tranche at the time of issue will be relative to prevailing market yields
on Mortgage Assets. As part of the process of creating more predictable cash
flows on certain tranches of a CMO, one or more tranches generally must be
created that absorb most of the changes in the cash flows on the underlying
Mortgage Assets. The yields on these tranches are generally higher than
prevailing market yields on other mortgage related securities with similar
average lives. Principal prepayments on the underlying Mortgage Assets may cause
the CMOs to be retired substantially earlier than their stated maturities or
final scheduled distribution dates. Because of the uncertainty of the cash flows
on these tranches, the market prices and yields of these tranches are more
volatile. In addition, some inverse floating rate obligation CMOs exhibit
extreme sensitivity to changes in prepayments. As a result, the yield to
maturity of these CMOs is sensitive not only to changes in interest rates, but
also to changes in prepayment rates on the related underlying Mortgage Assets.
Included within the category of CMOs are PAC Bonds. PAC Bonds are a type of CMO
tranche or series designed to provide relatively predictable payments, provided
that, among other things, the actual prepayment experience on the underlying
Mortgage Assets falls within a predefined range. If the actual prepayment
experience on the underlying Mortgage Assets is faster or slower than the
predefined range or if deviations from other assumptions occur, payments on the
PAC Bond may be earlier or later than predicted and the yield may rise or fall.
The magnitude of the predefined range varies from one PAC Bond to another; a
narrower range increases the risk that prepayments on the PAC Bond will be
greater or smaller than predicted. Because of these features, PAC Bonds
generally are less subject to the risk of prepayment than are other types of
mortgage related securities.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped Mortgage-Backed Securities
("SMBSs") are multi-class mortgage securities issued by agencies or
instrumentalities of the U.S. Government and private originators of, or
investors in, mortgage loans. SMBSs are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of Mortgage Assets. In some cases, one class will receive all of the
interest ("interest-only" or "IO class"), while the other class will receive all
of the principal ("principal-only" or "PO class"). The yield to maturity on IO
classes and PO classes is extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying Mortgage Assets, and
significant changes in the rate of principal repayments will have a
corresponding effect on the SMBSs' yield to maturity.
CREDIT ENHANCEMENT. Mortgage related securities are often backed by a pool
of assets representing the obligations of a number of parties. To lessen the
effect of failure by obligors on underlying assets to make payments, these
securities may have various types of credit support. Credit support falls into
two primary categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection generally refers to the provision of advances, typically by
the entity administering the pool of assets, to ensure that the pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties (referred
to herein as "third party credit support"), through various means of structuring
the transaction or through a combination of such approaches.
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The ratings of mortgage related securities for which third party credit
enhancement provides liquidity protection or protection against losses from
default are generally dependent upon the continued creditworthiness of the
provider of the credit enhancement. The ratings of such securities could decline
in the event of deterioration in the creditworthiness of the credit enhancement
provider even in cases where the delinquency and loss experience on the
underlying pool of assets is better than expected.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal and
interest thereon, with defaults on the underlying assets being borne first by
the holders of the most subordinated class), creation of "reserve funds" (where
cash or investments, sometimes funded from a portion of the payments on the
underlying assets, are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed those required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each security is generally based on historical information with
respect to the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that which is anticipated could adversely
affect the return on an investment in such a security.
REPURCHASE AGREEMENTS. Repurchase Agreements are transactions in which a
Portfolio purchases a security or basket of securities and simultaneously
commits to resell that security or basket to the seller (a bank, broker or
dealer) at a mutually agreed upon date and price. The resale price reflects the
purchase price plus an agreed upon market rate of interest which is unrelated to
the coupon rate or date of maturity of the purchased security. Repurchase
Agreements may be viewed as a fully collateralized loan of money by the
Portfolio to the seller at a mutually agreed upon rate and price. The term of
these agreements is usually from overnight to one week, and never exceeds one
year. Repurchase Agreements with a term of over seven days are considered
illiquid.
In these transactions, the Portfolio receives as collateral securities that have
a market value at least equal to the purchase price (including accrued interest)
of the Repurchase Agreement, and this value is maintained during the term of the
agreement. These securities are held by the Portfolio's Custodian or an approved
third party for the benefit of the Portfolio until repurchased. Repurchase
Agreements permit a Portfolio to remain fully invested while retaining overnight
flexibility to pursue investments of a longer-term nature. If the seller
defaults and the collateral value declines, the Portfolio might incur a loss. If
bankruptcy proceedings are commenced with respect to the seller, the Portfolio's
realization upon the collateral may be delayed or limited.
Pursuant to an order issued by the SEC, the Portfolios may pool their daily
uninvested cash balances in order to invest in Repurchase Agreements on a joint
basis with other investment companies advised by MSDW Investment Management. By
entering into Repurchase Agreements on a joint basis, the Portfolios expect to
incur lower transaction costs and potentially obtain higher rates of interest on
such Repurchase Agreements. Each Portfolio's participation in the income from
jointly purchased Repurchase Agreements will be based on that Portfolio's
percentage share in the total Repurchase Agreement.
MUNICIPALS. Municipal securities ("Municipals") are debt obligations issued by
local, state and regional governments that provide interest income that is
exempt from federal income taxes and in certain instances, from state and local
taxes. Municipals include both municipal bonds (those securities with maturities
of five years or more) and municipal notes (those securities with maturities of
less than five years). Municipal bonds are issued for a wide variety of reasons:
to construct public facilities, such as airports, highways, bridges, schools,
hospitals, mass transportation, streets, water and sewer works; to obtain funds
for operating expenses; to refund outstanding municipal obligations; and to loan
funds to various public institutions and facilities. Certain industrial
development bonds are also considered municipal bonds if their interest is
exempt from federal income taxes. Industrial development bonds are issued by or
on behalf of public authorities to obtain funds for various privately-operated
manufacturing facilities, housing, sports arenas, convention centers, airports,
mass transportation systems and water, gas or sewer works. Industrial
development bonds are ordinarily dependent on the credit quality of a private
user, not the public issuer.
ASSET-BACKED SECURITIES. Asset-Backed Securities ("Asset-Backeds") are
securities collateralized by shorter-term loans such as automobile loans, home
equity loans, equipment or computer leases or credit card receivables. The
payments from the collateral are passed through to the security holder. The
collateral underlying Asset-Backeds tends to have prepayment rates that usually
do not vary with interest rates. In addition, the short-term nature of the loans
reduces the impact of any change in prepayment level. However, it is possible
that prepayments (on automobile loans and other collateral) will alter the cash
flow on Asset-Backeds and it is not possible to determine in advance the actual
final maturity date or average life. Faster prepayment will shorten the average
life and slower prepayment will lengthen it. However, it is possible to
determine what the range of that movement could be and to calculate the effect
that it will have on the price of the security. The maturity of Asset-Backeds
will be based on the expected average life of the instrument. In selecting these
securities, MSDW Investment Management will look for those securities that offer
a higher yield to compensate for any variation in average maturity.
PREFERRED STOCKS. Preferred Stocks are securities that evidence ownership in a
corporation and pay a fixed or variable stream of dividends. Preferred Stocks
have a preference over Common Stocks in the event of the liquidation of an
issuer and usually do not carry voting rights. Because Preferred Stocks
represent an ownership interest in the issuer they have many of the
characteristics of an Equity Security and are, therefore, included in both the
definition of Fixed Income Security and Equity Security.
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CONVERTIBLE SECURITIES. Convertible Securities are securities that may be
exchanged under certain circumstances for a fixed number of shares of Common
Stock or other Equity Securities. Convertible Securities generally represent a
feature of some other type of security, such as a Fixed Income Security or
Preferred Stock, so that, for example, a Convertible Fixed Income Security would
be a Fixed Income Security that is convertible into Common Stock. Prices of
Convertible Fixed Income Securities frequently are more volatile than
non-Convertible Fixed Income Securities. Convertible Securities may be viewed as
an investment in the current security or the security into which the Convertible
Security may be exchanged and, therefore, are included in both the definition of
Fixed Income Security or Equity Security.
LOAN PARTICIPATIONS AND ASSIGNMENTS. Loan Participations are interests in loans
or other direct debt instruments ("Loans") relating to amounts owed by a
corporate, governmental or other borrower to another party. Loans may represent
amounts owed to lenders or lending syndicates, to suppliers of goods or services
(trade claims or other receivables), or to other parties ("Lenders") and may be
fixed rate or floating rate. Loans also may be arranged through private
negotiations between an issuer of sovereign debt obligations and Lenders.
A Portfolio's investments in Loans are expected in most instances to be in the
form of a participation in Loans ("Participations") and assignments of all or a
portion of Loans ("Assignments") from third parties. In the case of a
Participation, a Portfolio will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In the event of an insolvency of the Lender selling a Participation, a
Portfolio may be treated as a general creditor of the Lender and may not benefit
from any set-off between the Lender and the borrower. Certain Participations may
be structured in a manner designed to avoid purchasers of Participations being
subject to the credit risk of the Lender with respect to the Participation. Even
under such a structure, in the event of a Lender's insolvency, the Lender's
servicing of the Participation may be delayed and the assignability of the
Participation may be impaired. A Portfolio will acquire Participations only if
the Lender interpositioned between a Portfolio and the borrower is determined by
MSDW Investment Management to be creditworthy.
When a Portfolio purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan. However, because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by a Portfolio as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender. Because there is no liquid market for such securities, it is
likely that such securities could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market may have an
adverse impact on the value of such securities and a Portfolio's ability to
dispose of particular Assignments or Participations when necessary to meet a
Portfolio's liquidity needs or in response to a specific economic event, such as
a deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for a Portfolio to assign a value to these securities for purposes of
valuing a Portfolio's securities and calculating its net asset value.
Loan Participations and Assignments involve a risk of loss in case of default or
insolvency of the borrower. In addition, they may offer less legal protection to
a Portfolio in the event of fraud or misrepresentation and may involve a risk of
insolvency of the Lender. Certain Loan Participations and Assignments may also
include standby financing commitments that obligate the investing Portfolio to
supply additional cash to the borrower on demand. Participations involving
emerging market country issuers may relate to Loans as to which there has been
or currently exists an event of default or other failure to make payment when
due, and may represent amounts owed to Lenders that are themselves subject to
political and economic risks, including the risk of currency devaluation,
expropriation, or failure. Such Loan Participations and Assignments present
additional risk of default or loss.
TEMPORARY INVESTMENTS. When MSDW Investment Management believes that changes in
economic, financial or political conditions make it advisable, each Portfolio
may invest up to 100% of its assets in cash and certain short- and medium-term
Fixed Income Securities for temporary defensive purposes. These Temporary
Investments may consist of obligations of the U.S. or foreign governments, their
agencies or instrumentalities; Money Market Instruments; and instruments issued
by international development agencies.
ZERO COUPONS, PAY-IN-KIND SECURITIES OR DEFERRED PAYMENT SECURITIES. Zero
Coupon, Pay-In-Kind and Deferred Payment Securities are all types of Fixed
Income Securities on which the holder does not receive periodic cash payments of
interest or principal. Generally, these securities are subject to greater price
volatility and lesser liquidity in the event of adverse market conditions than
comparably rated securities paying cash interest at regular intervals. Although
a Portfolio will not receive cash periodic coupon payments on these securities,
the Portfolio may be deemed to have received interest income, or "phantom
income" during the life of the obligation. The Portfolio may have to pay taxes
on this phantom income, although it has not received any cash payment.
ZERO COUPONS. Zero Coupons are fixed income securities that do not make
regular interest payments. Instead, Zero Coupons are sold at a discount from
their face value. The difference between a Zero Coupon's issue or purchase price
and its face value represents the imputed interest an investor will earn if the
obligation is held until maturity. Zero Coupons may offer investors the
opportunity to earn a higher yield than that available on ordinary
interest-paying obligations of similar credit quality and maturity.
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PAY-IN-KIND SECURITIES. Pay-In-Kind Securities are securities that have
interest payable by delivery of additional securities. Upon maturity, the holder
is entitled to receive the aggregate par value of the securities.
DEFERRED PAYMENT SECURITIES. Deferred Payment Securities are securities
that remain Zero Coupons until a predetermined date, at which time the stated
coupon rate becomes effective and interest becomes payable at regular intervals.
FLOATERS. Floaters are Fixed Income Securities with a rate of interest that
varies with changes in specified market rates or indices, such as the prime
rate, or at specified intervals. Certain Floaters may carry a demand feature
that permits the holder to tender them back to the issuer of the underlying
instrument, or to a third party, at par value prior to maturity. When the demand
feature of certain Floaters represents an obligation of a foreign entity, the
demand feature will be subject to certain risks discussed under "Foreign
Investment."
INVERSE FLOATERS. Inverse floating rate obligations ("Inverse Floaters") are
Fixed Income Securities that have coupon rates that vary inversely at a multiple
of a designated floating rate, such as LIBOR (London Inter-Bank Offered Rate).
Any rise in the reference rate of an Inverse Floater (as a consequence of an
increase in interest rates) causes a drop in the coupon rate while any drop in
the reference rate of an Inverse Floater causes an increase in the coupon rate.
Inverse Floaters may exhibit substantially greater price volatility than fixed
rate obligations having similar credit quality, redemption provisions and
maturity, and Inverse Floater CMOs exhibit greater price volatility than the
majority of other mortgage-related securities.
EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS. The Portfolios may invest in
Eurodollar and Yankee dollar obligations. Eurodollar bank obligations are
dollar-denominated certificates of deposit and time deposits issued outside the
U.S. capital markets by foreign branches of U.S. banks and by foreign banks.
Yankee dollar bank obligations are dollar-denominated obligations issued in the
U.S. capital markets by foreign banks. The Portfolios may consider Yankee dollar
obligations to be domestic securities for purposes of their investment policies.
Eurodollar and Yankee dollar obligations are subject to the same risks as
domestic issues but Eurodollar (and to a limited extent, Yankee dollar)
obligations are also subject to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in the form of
dollars, from flowing across its borders. Other risks include adverse political
and economic developments; the extent and quality of government regulations of
financial markets and institutions; the imposition of foreign withholding taxes;
and the expropriation or nationalization of foreign issuers.
FOREIGN INVESTMENT
Investing in foreign securities involves certain special considerations which
are not typically associated with investing in the Equity Securities or Fixed
Income Securities of U.S. issuers. Foreign issuers are not generally subject to
uniform accounting, auditing and financial reporting standards and may have
policies that are not comparable to those of domestic issuers. As a result,
there may be less information available about foreign issuers than about
domestic issuers. Securities of some foreign issuers are generally less liquid
and more volatile than securities of comparable domestic issuers. There is
generally less government supervision and regulation of stock exchanges, brokers
and listed issuers than in the United States. In addition, with respect to
certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, political and social instability, or diplomatic
developments which could affect U.S. investments in those countries. The costs
of investing in foreign countries frequently is higher than the costs of
investing in the United States. Although MSDW Investment Management endeavors to
achieve the most favorable execution costs in portfolio transactions, fixed
commissions on many foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges.
Investments in securities of foreign issuers generally are denominated in
foreign currencies. Accordingly, the value of a Portfolio's assets, as measured
in U.S. dollars may be affected favorably or unfavorably by changes in currency
exchange rates and in exchange control regulations. A Portfolio may incur costs
in connection with conversions between various currencies.
Certain foreign governments levy withholding or other taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. The Portfolios may be
able to claim a credit for U.S. tax purposes with respect to any such foreign
taxes.
MSDW Investment Management considers an issuer to be from a particular country
if (i) its principal securities trading market is in that country; (ii) alone or
on a consolidated basis it derives 50% or more of its annual revenue from either
goods produced, sales made or services performed in that country; or (iii) it is
organized under the laws of, or has a principal office in that country. By
applying these tests, it is possible that a particular company could be deemed
to be from more than one country.
FOREIGN EQUITY SECURITIES. Foreign Equity Securities are Equity Securities of
an issuer in a foreign country.
FOREIGN GOVERNMENT FIXED INCOME SECURITIES. Foreign Government Fixed Income
Securities are Fixed Income Securities issued by a foreign government or
government-related issuer in a foreign country.
FOREIGN CORPORATE FIXED INCOME SECURITIES. Foreign Corporate Fixed Income
Securities are Fixed Income Securities issued by a private issuer in a foreign
country.
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EMERGING MARKET COUNTRY SECURITIES. An emerging market country security is one
issued by a foreign government or private issuer that has one or more of the
following characteristics: (i) its principal securities trading market is in an
emerging market country, (ii) alone or on a consolidated basis it derives 50% or
more of its annual revenue from either goods produced, sales made or services
performed in emerging markets, or (iii) it is organized under the laws of, or
has a principal office in, an emerging market country.
Emerging market describes any country which is generally considered to be an
emerging or developing country by major organizations in the international
financial community, such as the International Bank for Reconstruction and
Development (more commonly known as the World Bank) and the International
Finance Corporation. Emerging markets can include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand and most nations
located in Western Europe.
The economies of individual emerging market countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments position. Further, the
economies of developing countries generally are heavily dependent upon
international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures. These economies also
have been, and may continue to be, adversely affected by economic conditions in
the countries with which they trade.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging market countries, and the extent of
foreign investment in certain fixed income securities and domestic companies may
be subject to limitation in other emerging market countries. Foreign ownership
limitations also may be imposed by the charters of individual companies in
emerging market countries to prevent, among other concerns, violation of foreign
investment limitations. Repatriation of investment income, capital and the
proceeds of sales by foreign investors may require governmental registration
and/or approval in some emerging countries. A Portfolio could be adversely
affected by delays in, or a refusal to grant, any required governmental
registration of approval for such repatriation. Any investment subject to such
repatriation controls will be considered illiquid if it appears reasonably
likely that this process will take more than seven days.
Investing in emerging market countries may entail purchasing securities issued
by or on behalf of entities that are insolvent, bankrupt, in default or
otherwise engaged in an attempt to reorganize or reschedule their obligations,
and in entities that have little or no proven credit rating or credit history.
In any such case, the issuer's poor or deteriorating financial condition may
increase the likelihood that the investing Portfolio will experience losses or
diminution in available gains due to bankruptcy, insolvency or fraud. Emerging
market countries also pose the risk of nationalization, expropriation or
confiscatory taxation, political changes, government regulation, social
instability or diplomatic developments (including war) that could affect
adversely the economies of such countries or the value of a Portfolio's
investments in those countries. In addition, it may be difficult to obtain and
enforce a judgment in a court outside the United States.
Portfolios that invest in emerging markets may also be exposed to an extra
degree of custodial and/or market risk, especially where the securities
purchased are not traded on an official exchange or where ownership records
regarding the securities are maintained by an unregulated entity (or even the
issuer itself).
RUSSIAN EQUITY SECURITIES. The registration, clearing and settlement of
securities transactions involving Russian issuers are subject to significant
risks not normally associated with securities transactions in the United States
and other more developed markets. Ownership of Equity Securities in Russian
companies is evidenced by entries in a company's share register (except where
shares are held through depositories that meet the requirements of the 1940 Act)
and the issuance of extracts from the register or, in certain limited cases, by
formal share certificates. However, Russian share registers are frequently
unreliable and a Portfolio could possibly lose its registration through
oversight, negligence or fraud. Moreover, Russia lacks a centralized registry to
record securities transactions and registrars located throughout Russia or the
companies themselves maintain share registers. Registrars are under no
obligation to provide extracts to potential purchasers in a timely manner or at
all and are not necessarily subject to effective state supervision. In addition,
while registrars are liable under law for losses resulting from their errors, it
may be difficult for a Portfolio to enforce any rights it may have against the
registrar or issuer of the securities in the event of loss of share
registration. Although Russian companies with more than 1,000 shareholders are
required by Russian law to employ an independent registrar, in practice, such
companies have not always followed this law. Because of this lack of
independence of registrars, management of a Russian company may be able to exert
considerable influence over who can purchase and sell the company's shares by
illegally instructing the registrar to refuse to record transactions on the
share register. Furthermore, these practices may prevent a Portfolio from
investing in the securities of certain Russian companies deemed suitable by the
Adviser and could cause a delay in the sale of Russian Securities by the
Portfolio if the company deems a purchaser unsuitable, which may expose the
Portfolio to potential loss on its investment.
In light of the risks described above, the Board Directors of the Fund has
approved certain procedures concerning the Fund's investments in Russian
Securities. Among these procedures is a requirement that a Portfolio will not
invest in the Equity Securities of a Russian company unless that issuer's
registrar has entered into a contract with the Fund's sub-custodian containing
certain protective conditions, including, among other things, the
sub-custodian's right to conduct regular share confirmations on behalf of the
Portfolio. This requirement will likely have the effect of precluding
investments in certain Russian companies that a Portfolio would otherwise make.
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FOREIGN CURRENCY TRANSACTIONS. The U.S. dollar value of the assets of the
Portfolios, to the extent they invest in securities denominated in foreign
currencies, may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the Portfolios may
incur costs in connection with conversions between various currencies. The
Portfolios may conduct their foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market. The Portfolios also may manage their foreign currency transactions by
entering into foreign currency forward contracts to purchase or sell foreign
currencies or by using other instruments and techniques described under
"Derivatives" below.
Under normal circumstances, consideration of the prospect for changes in the
values of currency will be incorporated into the long-term investment decisions
made with regard to overall diversification strategies. However, MSDW Investment
Management believes that it is important to have the flexibility to use such
derivative products when it determines that it is in the best interests of a
Portfolio. It may not be practicable to hedge foreign currency risk in all
markets, particularly emerging markets.
FOREIGN CURRENCY WARRANTS. Portfolios may invest in foreign currency
warrants, which entitle the holder to receive from the issuer an amount of cash
(generally, for warrants issued in the U.S., in U.S. dollars) which is
calculated pursuant to a predetermined formula and based on the exchange rate
between a specified foreign currency and the U.S. dollar as of the exercise date
of the warrant. Foreign currency warrants generally are exercisable upon their
issuance and expire as of a specified date and time.
Foreign currency warrants have been issued in connection with U.S.
dollar-denominated debt offerings by major corporate issuers in an attempt to
reduce the foreign currency exchange risk which, from the point of view of
prospective purchasers of the securities, is inherent in the international
fixed-income marketplace. Foreign currency warrants may attempt to reduce the
foreign exchange risk assumed by purchasers of a security by, for example,
providing for a supplemental payment in the event that the U.S. dollar
depreciates against the value of a major foreign currency such as the Japanese
Yen or German Deutschmark. The formula used to determine the amount payable upon
exercise of a foreign currency warrant may make the warrant worthless unless the
applicable foreign currency exchange rate moves in a particular direction (E.G.,
unless the U.S. dollar appreciates or depreciates against the particular foreign
currency to which the warrant is linked or indexed). Foreign currency warrants
are severable from the debt obligations with which they may be offered, and may
be listed on exchanges.
Foreign currency warrants may be exercisable only in certain minimum amounts,
and an investor wishing to exercise warrants who possesses less than the minimum
number required for exercise may be required either to sell the warrants or to
purchase additional warrants, thereby incurring additional transaction costs. In
the case of any exercise of warrants, there may be a delay between the time a
holder of warrants gives instructions to exercise and the time the exchange rate
relating to exercise is determined, during which time the exchange rate could
change significantly, thereby affecting both the market and cash settlement
values of the warrants being exercised. The expiration date of the warrants may
be accelerated if the warrants should be delisted from an exchange or if their
trading should be suspended permanently, which would result in the loss of any
remaining "time value" of the warrants (I.E., the difference between the current
market value and the exercise value of the warrants), and, in the case where the
warrants were "out-of-the-money," in a total loss of the purchase price of the
warrants.
Foreign currency warrants are generally unsecured obligations of their issuers
and are not standardized foreign currency options issued by the Options Clearing
Corporation ("OCC"). Unlike foreign currency options issued by the OCC, the
terms of foreign exchange warrants generally will not be amended in the event of
governmental or regulatory actions affecting exchange rates or in the event of
the imposition of other regulatory controls affecting the international currency
markets. The initial public offering price of foreign currency warrants is
generally considerably in excess of the price that a commercial user of foreign
currencies might pay in the interbank market for a comparable option involving
significantly larger amounts of foreign currencies. Foreign currency warrants
are subject to complex political or economic factors.
PRINCIPAL EXCHANGE RATE LINKED SECURITIES. Principal exchange rate linked
securities are debt obligations the principal on which is payable at maturity in
an amount that may vary based on the exchange rate between the U.S. dollar and a
particular foreign currency at or about that time. The return on "standard"
principal exchange rate linked securities is enhanced if the foreign currency to
which the security is linked appreciates against the U.S. dollar, and is
adversely affected by increases in the foreign exchange value of the
U.S. dollar; "reverse" principal exchange rate linked securities are like the
"standard" securities, except that their return is enhanced by increases in the
value of the U.S. dollar and adversely impacted by increases in the value of
foreign currency. Interest payments on the securities are generally made in
U.S. dollars at rates that reflect the degree of foreign currency risk assumed
or given up by the purchaser of the notes (I.E., at relatively higher interest
rates if the purchaser has assumed some foreign currency risk).
BRADY BONDS. Brady Bonds are Fixed Income Securities that are created through
the exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a plan introduced by
Nicholas F. Brady when he was the U.S. Secretary of the Treasury. They may be
collateralized or uncollateralized and issued in various currencies (although
most are U.S. dollar-denominated) and they are actively traded in the
over-the-counter secondary market. The Portfolios will invest in Brady Bonds
only if they are consistent with the Portfolio's quality specifications.
However, Brady Bonds should be viewed as speculative in light of the history of
defaults with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds.
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INVESTMENT FUNDS. Some emerging market countries have laws and regulations that
currently preclude direct investment or make it undesirable to invest directly
in the securities of their companies. However, indirect investment in the
securities of companies listed and traded on the stock exchanges in these
countries is permitted by certain emerging market countries through Investment
Funds that have been specifically authorized. A Portfolio may invest in these
Investment Funds subject to the provisions of the 1940 Act, as applicable, and
other applicable laws.
EUROPEAN CURRENCY TRANSITION. On January 1, 1999, the European Monetary Union
(EMU) implemented a new currency unit, the Euro, which is expected to reshape
financial markets, banking systems and monetary policies in Europe and other
parts of the world. Implementation of this plan will mean that financial
transactions and market information, including share quotations and company
accounts, in participating countries will be denominated in Euros. Monetary
policy for participating countries will be uniformly managed by a new central
bank, the European Central Bank (ECB).
The transition to the Euro may change the economic environment and behavior of
investors, particularly in European markets. For example, the process of
implementing the Euro may adversely affect financial markets world-wide and may
result in changes in the relative strength and value of the U.S. dollar or other
major currencies, as well as possible adverse tax consequences. The transition
to the Euro is likely to have a significant impact on fiscal and monetary policy
in the participating countries and may produce unpredictable effects on trade
and commerce generally. These resulting uncertainties could create increased
volatility in financial markets world-wide.
OTHER SECURITIES
LOANS OF PORTFOLIO SECURITIES. Each Portfolio may lend its investment
securities to qualified institutional investors that need to borrow securities
in order to complete certain transactions, such as covering short sales,
avoiding failures to deliver securities or completing arbitrage operations. By
lending its investment securities, a Portfolio attempts to increase its net
investment income through the receipt of interest on the loan. Any gain or loss
in the market price of the securities loaned that might occur during the term of
the loan would be for the account of the Portfolio. Each Portfolio may lend its
investment securities to qualified brokers, dealers, domestic and foreign banks
or other financial institutions, so long as the terms, structure and the
aggregate amount of such loans are not inconsistent with the 1940 Act or the
Rules and Regulations or interpretations of the SEC thereunder, which currently
require that (i) the borrower pledge and maintain with the Portfolio collateral
consisting of liquid, unencumbered assets having a value at all times not less
than 100% of the value of the securities loaned; (ii) the borrower add to such
collateral whenever the price of the securities loaned rises (i.e., the borrower
"marks to market" on a daily basis); (iii) the loan be made subject to
termination by the Portfolio at any time; and (iv) the Portfolio receive
reasonable interest on the loan (which may include the Portfolio investing any
cash collateral in interest bearing short-term investments), any distributions
on the loaned securities and any increase in their market value. There may be
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans will be made only to borrowers deemed by MSDW Investment Management to be
of good standing and when, in the judgment of MSDW Investment Management, the
consideration which can be earned currently from such securities loans justifies
the attendant risk. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Board of Directors.
At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such fees are set forth in a written contract and approved by the
investment company's Board of Directors. In addition, voting rights may pass
with the loaned securities, but if a material event will occur affecting an
investment on loan, the loan must be called and the securities voted.
NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED
SECURITIES. The Portfolios may invest in securities that are neither listed on
a stock exchange nor traded over-the-counter, including privately placed and
restricted securities. Such unlisted securities may involve a higher degree of
business and financial risk that can result in substantial losses. As a result
of the absence of a public trading market for these securities, they may be less
liquid than publicly traded securities. Although these securities may be resold
in privately negotiated transactions, the prices realized from these sales could
be less that those originally paid by the Portfolio or less than what may be
considered the fair value of such securities. Furthermore, companies whose
securities are not publicly traded may not be subject to the disclosure and
other investor protection requirements which might be applicable if their
securities were publicly traded. If such securities are required to be
registered under the securities laws of one or more jurisdictions before being
sold, the Portfolio may be required to bear the expenses of registration.
As a general matter, a Portfolio may not invest more than 15% (10% for the Money
Market and Municipal Money Market Portfolios) of its net assets in illiquid
securities, such as securities for which there is not a readily available
secondary market or securities that are restricted from sale to the public
without registration. However, certain Restricted Securities can be offered and
sold to qualified institutional buyers under Rule 144A under the Securities Act
of 1933 (the "1993 Act") ("Rule 144A Securities") and may be deemed to be liquid
under guidelines adopted by the Fund's Board of Directors. The Portfolios may
invest without limit in liquid Rule 144A Securities. Rule 144A Securities may
become illiquid if qualified institutional buyers are not interested in
acquiring the securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. When-Issued and Delayed Delivery
Securities are securities purchased with payment and delivery taking place in
the future in order to secure what is considered to be an advantageous yield or
price at the
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time of the transaction. Delivery of and payment for these securities may take
as long as a month or more after the date of the purchase commitment, but will
take place no more than 120 days after the trade date. The payment obligation
and the interest rates that will be received are each fixed at the time a
Portfolio enters into the commitment and no interest accrues to the Portfolio
until settlement. Thus, it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed. When a Portfolio agrees to purchase When-Issued
or Delayed Delivery Securities, it will earmark or segregate cash or liquid
securities in an amount equal to the Portfolio's commitment to purchase these
securities.
BORROWING FOR INVESTMENT PURPOSES. Borrowing for investment purposes creates
leverage which is a speculative characteristic. Portfolios authorized to borrow
will do so only when MSDW Investment Management believes that borrowing will
benefit the Portfolio after taking into account considerations such as the costs
of borrowing and the likely investment returns on securities purchased with
borrowed funds. Borrowing by a Portfolio will create the opportunity for
increased net income but, at the same time, will involve special risk
considerations. Leverage that results from borrowing will magnify declines as
well as increases in a Portfolio's net asset value per share and net yield. Each
Portfolio that engages in borrowing expects that all of its borrowing will be
made on a secured basis. The Portfolio will either segregate the assets securing
the borrowing for the benefit of the lenders or arrangements will be made with a
suitable sub-custodian. If assets used to secure the borrowing decrease in
value, a Portfolio may be required to pledge additional collateral to the lender
in the form of cash or securities to avoid liquidation of those assets.
TEMPORARY BORROWING. Each Portfolio is permitted to borrow from banks in an
amount up to 10% (33 1/3% for the High Yield Portfolio) of its total assets for
extraordinary or emergency purposes, except that the Emerging Markets Debt
Portfolio may borrow up to 33 1/3% of its total assets from banks and other
entities. For example, the Portfolios may borrow for temporary defensive
purposes or to meet shareholder redemptions when MSDW Investment Management
believes that it would not be in the best interests of a Portfolio to liquidate
portfolio holdings. A Portfolio will not purchase additional securities while
temporary borrowings exceed 5% of its total assets.
The Board of Directors of the Fund has approved procedures whereby the
Portfolios together with other investment companies advised by MSDW Investment
Management or its affiliates may enter into a joint line of credit arrangement
with a bank. Each Portfolio would be liable only for its own temporary
borrowings under the joint line of credit arrangements.
REVERSE REPURCHASE AGREEMENTS. Under a Reverse Repurchase Agreement, a
Portfolio sells a security and promises to repurchase that security at an agreed
upon future date and price. The price paid to repurchase the security reflects
interest accrued during the term of the agreement. The Portfolio will earmark
cash or liquid assets or establish a segregated account holding cash and other
liquid assets in an amount not less than the purchase obligations of the
agreement. Reverse Repurchase Agreements may be viewed as a speculative form of
borrowing called leveraging. A Portfolio may invest in Reverse Repurchase
Agreements if (i) interest earned from leveraging exceeds the interest expense
of the original reverse repurchase transaction and (ii) proceeds from the
transaction are not invested for longer than the term of the Reverse Repurchase
Agreement.
SHORT SALES. A short sale is a transaction in which the Portfolio sells
securities it owns or has the right to acquire at no added cost (i.e., "against
the box") or does not own (but has borrowed) in anticipation of a decline in the
market price of the securities. To deliver the securities to the buyer, the
Portfolio arranges through a broker to borrow the securities and, in so doing,
the Portfolio becomes obligated to replace the securities borrowed at their
market price at the time of replacement. When selling short, the Portfolio
intends to replace the securities at a lower price and therefore, profit from
the difference between the cost to replace the securities and the proceeds
received from the sale of the securities. When the Portfolio makes a short sale,
the proceeds it receives from the sale will be held on behalf of a broker until
the Portfolio replaces the borrowed securities. The Portfolio may have to pay a
premium to borrow the securities and must pay any dividends or interest payable
on the securities until they are replaced.
The Portfolio's obligation to replace the securities borrowed in connection with
a short sale will be secured by collateral deposited with the broker that
consists of cash or other liquid securities. In addition, the Portfolio will
earmark cash or liquid assets or place in a segregated account an amount of cash
or other liquid assets equal to the difference, if any, between (i) the market
value of the securities sold at the time they were sold short, and (ii) any cash
or other liquid securities deposited as collateral with the broker in connection
with the short sale. Short sales by the Portfolio involve certain risk and
special considerations. If MSDW Investment Management incorrectly predicts that
the price of the borrowed security will decline, the Portfolio will have to
replace the securities with securities with a greater value than the amount
received from the sale. As a result, losses from short sales differ from losses
that could be incurred from a purchase of a security, because losses from short
sales may be unlimited, whereas losses from purchases can equal only the total
amount invested.
STRUCTURED INVESTMENTS. Structured Investments are securities that are
convertible into, or the value of which is based upon the value of, other fixed
income or equity securities or indices upon certain terms and conditions. The
amount a Portfolio receives when it sells a Structured Investment or at maturity
of a Structured Investment is not fixed, but is based on the price of the
underlying security or index. Particular Structured Investments may be designed
so that they move in conjunction with or differently from their underlying
security or index in terms of price and volatility. It is impossible to predict
whether the underlying index or price of the underlying security will rise or
fall, but prices of the underlying indices and securities (and, therefore, the
prices of Structured Investments) will be influenced by the same types of
political and economic events that affect particular issuers of fixed income and
equity securities and capital markets generally. Structured Investments also may
trade
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differently from their underlying securities. Structured Investments generally
trade on the secondary market, which is fairly developed and liquid. However,
the market for such securities may be shallow compared to the market for the
underlying securities or the underlying index. Accordingly, periods of high
market volatility may affect the liquidity of Structured Investments, making
high volume trades possible only with discounting.
Structured Investments are a relatively new innovation and may be designed to
have various combinations of equity and fixed income characteristics. The
following sections describe four of the more common types of Structured
Investments. The Portfolios may invest in other Structured Investments,
including those that may be developed in the future, to the extent that the
Structured Investments are otherwise consistent with a Portfolio's investment
objective and policies.
PERCS. Preferred Equity Redemption Cumulative Stock ("PERCS") technically
is preferred stock with some characteristics of common stock. PERCS are
mandatorily convertible into common stock after a period of time, usually three
years, during which the investors' capital gains are capped, usually at 30%.
Commonly, PERCS may be redeemed by the issuer at any time or if the issuer's
common stock is trading at a specified price level or better. The redemption
price starts at the beginning of the PERCS duration period at a price that is
above the cap by the amount of the extra dividends the PERCS holder is entitled
to receive relative to the common stock over the duration of the PERCS and
declines to the cap price shortly before maturity of the PERCS. In exchange for
having the cap on capital gains and giving the issuer the option to redeem the
PERCS at any time or at the specified common stock price level, a Portfolio may
be compensated with a substantially higher dividend yield than that on the
underlying common stock. Investors that seek current income find PERCS
attractive because PERCS provide a high dividend income than that paid with
respect to a company's common stock.
ELKS. Equity-Linked Securities ("ELKS") differ from ordinary debt
securities, in that the principal amount received at maturity is not fixed but
is based on the price of the issuer's common stock. ELKS are debt securities
commonly issued in fully registered form for a term of three years under an
indenture trust. At maturity, the holder of ELKS will be entitled to receive a
principal amount equal to the lesser of a cap amount, commonly in the range of
30% to 55% greater than the current price of the issuer's common stock, or the
average closing price per share of the issuer's common stock, subject to
adjustment as a result of certain dilution events, for the 10 trading days
immediately prior to maturity. Unlike PERCS, ELKS are commonly not subject to
redemption prior to maturity. ELKS usually bear interest during the three-year
term at a substantially higher rate than the dividend yield on the underlying
common stock. In exchange for having the cap on the return that might have been
received as capital gains on the underlying common stock, a Portfolio may be
compensated with the higher yield, contingent on how well the underlying common
stock does. Investors that seek current income, find ELKS attractive because
ELKS provide a higher dividend income than that paid with respect to a company's
common stock. The return on ELKS depends on the creditworthiness of the issuer
of the securities, which may be the issuer of the underlying securities or a
third party investment banker or other lender. The creditworthiness of such
third party issuer of ELKS may, and often does, exceed the creditworthiness of
the issuer of the underlying securities. The advantage of using ELKS over
traditional equity and debt securities is that the former are income producing
vehicles that may provide a higher income than the dividend income on the
underlying equity securities while allowing some participation in the capital
appreciation of the underlying equity securities. Another advantage of using
ELKS is that they may be used for hedging to reduce the risk of investing in the
generally more volatile underlying equity securities.
LYONs. Liquid Yield Option Notes ("LYONs") differ from ordinary debt
securities, in that the amount received prior to maturity is not fixed but is
based on the price of the issuer's common stock. LYONs are zero-coupon notes
that sell at a large discount from face value. For an investment in LYONs, the
Portfolio will not receive any interest payments until the notes mature,
typically in 15 to 20 years, when the notes are redeemed at face, or par, value.
The yield on LYONs, typically, is lower-than-market rate for debt securities of
the same maturity, due in part to the fact that the LYONs are convertible into
common stock of the issuer at any time at the option of the holder of the LYONs.
Commonly, the LYONs are redeemable by the issuer at any time after an initial
period or if the issuer's common stock is trading at a specified price level or
better or, at the option of the holder, upon certain fixed dates. The redemption
price typically is the purchase price of the LYONs plus accrued original issue
discount to the date of redemption, which amounts to the lower-than-market
yield. A Portfolio will receive only the lower-than-market yield unless the
underlying common stock increases in value at a substantial rate. LYONs are
attractive to investors when it appears that they will increase in value due to
the rise in value of the underlying common stock.
STRUCTURED NOTES. Structured Notes are derivative securities for which the
amount of principal repayment and/or interest payments is based upon the
movement of one or more "factors." These factors include, but are not limited
to, currency exchange rates, interest rates (such as the prime lending rate and
LIBOR) and stock indices, such as the S&P 500. In some cases, the impact of the
movements of these factors may increase or decrease through the use of
multipliers or deflators. Structured Notes may be designed to have particular
quality and maturity characteristics and may vary from money market quality to
below investment grade. Depending on the factor used and the use of multipliers
or deflators, however, changes in interest rates and movement of the factor may
cause significant price fluctuations or may cause particular Structured Notes to
become illiquid. The Portfolios will use Structured Notes to tailor their
investments to the specific risks and returns the Adviser wishes to accept while
avoiding or reducing certain other risks.
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DERIVATIVES
The Portfolios are permitted to utilize various exchange-traded and
over-the-counter derivative instruments and derivative securities, both for
hedging and non-hedging purposes. Permitted derivative products include, but are
not limited to futures contracts ("futures"); forward contracts ("forwards");
options; swaps, caps, collars and floors; structured notes; and other derivative
products yet to be developed, so long as these new products are used in a manner
consistent with the objectives of the Portfolios. These derivative products may
be based on a wide variety of underlying rates, indices, instruments, securities
and other products, such as interest rates, foreign currencies, foreign and
domestic fixed income and equity securities, groups or "baskets" of securities
and securities indices (for each derivative product, the "underlying"). Each
Portfolio will limit its use of foreign currency forward contracts and other
derivative products for non-hedging purposes to 33 1/3% of its total assets,
measured by the aggregate notional amount of outstanding derivative products.
The term hedging, generally, means that a Portfolio is using a derivative
product as a way to reduce or limit risk. For example, a Portfolio may hedge in
order to limit the effects of a change in the value of a particular foreign
currency versus the U.S. dollar or a Portfolio could use a portion of its cash
to buy securities futures in order to hedge the risk of not being fully
invested. The Portfolios also may use certain complex hedging techniques. For
example, a Portfolio may use a type of hedge known as a cross hedge or a proxy
hedge, where the Portfolio hedges the risk associated with one underlying by
purchasing or selling a derivative product with an underlying that is different.
There is no limit on the use of foreign currency forward contracts or other
derivative products for hedging purposes.
The Portfolios may use derivative products under a number of different
circumstances to further their investment objectives. For example, a Portfolio
may purchase derivatives to gain exposure to a market or currency quickly in
response to changes in the Portfolio's investment strategy, upon the inflow of
investable cash or when the derivative provides greater liquidity than the
underlying market. A Portfolio may also use derivatives when it is restricted
from directly owning the "underlying" or when derivatives provide a pricing
advantage or lower transaction costs. The Portfolios also may purchase
combinations of derivatives in order to gain exposure to an investment in lieu
of actually purchasing such investment. Derivatives may also be used by a
Portfolio for hedging or risk management purposes and in other circumstances
when MSDW Investment Management believes it advantageous to do so consistent
with the Portfolio's investment objectives and policies. Except under
circumstances where a segregated account is not required under the 1940 Act or
the rules adopted thereunder, the Portfolio will earmark cash or liquid assets
or place them in a segregated account in an amount necessary to cover the
Portfolio's obligations under such derivative transactions.
The use of derivative products is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If MSDW Investment Management is incorrect in
forecasts of market values, interest rates, and currency exchange rates, the
investment performance of the Portfolios will be less favorable than it would
have been if these investment techniques had not been used.
Some of the derivative products in which the Portfolios may invest and some of
the risks related thereto are described in further detail below.
FOREIGN CURRENCY FORWARD CONTRACTS. A foreign currency forward contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for such trades. The Portfolios may enter into foreign currency forward
contracts in many circumstances. For example, when a Portfolio enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, or when a Portfolio anticipates the receipt in a foreign currency of
dividends or interest payments on a security which it holds, the Portfolio may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such dividend or interest payment, as the case may be. By entering
into a forward contract for a fixed amount of dollars, for the purchase or sale
of the amount of foreign currency involved in the underlying transactions, the
Portfolio will be able to protect itself against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payment is declared, and
the date on which such payments are made or received. For example, when any of
the Portfolios anticipates that the currency of a particular foreign country may
suffer a decline against the U.S. dollar, it may enter into a forward contract
for a fixed amount of dollars to sell the amount of foreign currency
approximating the value of some or all of such Portfolio's securities
denominated in such foreign currency. Similarly, when any of the Portfolios
anticipates that the U.S. dollar may suffer a decline against a foreign currency
it may enter into a foreign currency forward contract to buy that currency for a
fixed amount. However, it may not be practicable to hedge currency in all
markets, particularly emerging markets.
The precise matching of the forward contract amounts and the value of the
securities involved generally will not be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain.
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Under normal circumstances, consideration of the prospect for changes in the
values of currency will be incorporated into the long-term investment decisions
made with regard to overall diversification strategies. However, MSDW Investment
Management believes that it is important to have the flexibility to enter into
such forward contracts when it determines that it is in the best interests of a
Portfolio. Except under circumstances where a segregated account is not required
under the 1940 Act or the rules adopted thereunder, the Portfolio will earmark
cash or liquid assets or place them into a segregated account in an amount
necessary to cover the Portfolio's obligations under such foreign currency
forward contracts.
The Portfolios generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, a Portfolio may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for a Portfolio to purchase additional foreign currency on the
spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency that such Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction, such Portfolio will incur a gain or a loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between a Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, such Portfolio
will realize a gain to the extent that the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, such Portfolio would suffer a loss to the extent that
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
The Portfolios are not required to enter into such transactions with regard to
their foreign currency-denominated securities. It also should be realized that
this method of protecting the value of portfolio securities against a decline in
the value of a currency does not eliminate fluctuations in the underlying prices
of the securities. It simply establishes a rate of exchange which one can
achieve at some future point in time. Additionally, although such contracts tend
to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result should the value of such currency increase.
FUTURES CONTRACTS (FUTURES) AND FORWARD CONTRACTS (FORWARDS). The Portfolios
may purchase and sell futures contracts, including futures on securities
indices, baskets of securities, foreign currencies and interest rates of the
type generally known as financial futures. These are standardized contracts that
are bought and sold on organized exchanges. A futures contract obligates a party
to buy or sell a specific amount of the "underlying," such as a particular
foreign currency, on a specified future date at a specified price or to settle
the value in cash.
The Portfolios may also purchase and sell forward contracts, such as forward
rate agreements and other financial forward contracts. The Portfolios may also
use foreign currency forward contracts which are separately discussed under
"Foreign Currency Forward Contracts." These forward contracts are privately
negotiated and are bought and sold in the over-the-counter market. Like a
future, a forward contract obligates a party to buy or sell a specific amount of
the underlying on a specified future date at a specified price. The terms of the
forward contract are customized. Forward contracts, like other over-the-counter
contracts that are negotiated directly with an individual counterparty, subject
the Portfolio to the risk of counterparty default.
In some cases, the Portfolios may be able to use either futures contracts,
forward contracts or exchange-traded or over-the-counter options to accomplish
similar purposes. In all cases, the Portfolios will uses these products only as
permitted by applicable laws and regulations. Some of the ways in which the
Portfolios may use futures contracts, forward contracts and related options are
as follows:
The Portfolios may sell securities index futures contracts and/or options
thereon in anticipation of or during a market decline to attempt to offset the
decrease in market value of investments in its portfolio, or may purchase
securities index futures or options in order to gain market exposure. There
currently are limited securities index futures and options on such futures in
many countries, particularly emerging markets. The nature of the strategies
adopted by MSDW Investment Management, and the extent to which those strategies
are used, may depend on the development of such markets. The Portfolios may also
purchase and sell foreign currency futures to lock in rates or to adjust their
exposure to a particular currency.
The Portfolio may engage in transactions in interest rate futures and related
products. The value of these contracts rises and falls inversely with change in
interest rates. The Portfolios may engage in such transactions to hedge their
holdings of debt instruments against future changes in interest rates or for
other purposes.
Gains and losses on futures contracts, forward contracts and related options
depend on MSDW Investment Management's ability to predict correctly the
direction of movement of securities prices, interest rates and other economic
factors. Other risks associated with the use of these instruments include
(i) imperfect correlation between the changes in market value of investments
held by a Portfolio and the prices of derivative products relating to
investments purchased or sold by the Portfolio, and (ii) possible lack of a
liquid secondary market for a derivative product and the resulting inability to
close out a position. A
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Portfolio will seek to minimize the risk by only entering into transactions for
which there appears to be a liquid exchange or secondary market. In some
strategies, the risk of loss in trading on futures and related transactions can
be substantial, due both to the low margin deposits required and the extremely
high degree of leverage involved in pricing.
Under rules adopted by the Commodity Futures Trading Commission (the "CFTC"),
each Portfolio may, without registering with the CFTC as a Commodity Pool
Operator, enter into futures contracts and options thereon for both hedging and
non-hedging purposes, provided that not more than 5% of such Portfolio's total
assets at the time of entering the transaction are required as margin and option
premiums to secure obligations under such contracts relating to non-bona fide
hedging activities.
OPTIONS. The Portfolios may seek to increase their returns or may hedge their
portfolio investments through options transactions with respect to individual
securities, indices or baskets in which such Portfolios may invest; other
financial instruments; and foreign currency. Various options may be purchased
and sold on exchanges or over-the-counter markets.
Each Portfolio may purchase put and call options. Purchasing a put option gives
a Portfolio the right, but not the obligation, to sell the underlying (such as a
securities index or a particular foreign currency) at the exercise price either
on a specific date or during a specified exercise period. The purchaser pays a
premium to the seller (also known as the writer) of the option.
Each Portfolio also may write put and call options on investments held in its
portfolio, as well as foreign currency options. A Portfolio that has written an
option receives a premium that increases the Portfolio's return on the
underlying in the event the option expires unexercised or is closed out at a
profit. However, by writing a call option, a Portfolio will limit its
opportunity to profit from an increase in the market value of the underlying
above the exercise price of the option. By writing a put option, a Portfolio
will be exposed to the amount by which the price of the underlying is less than
the strike price.
By writing an option, a Portfolio incurs an obligation either to buy (in the
case of a put option) or sell (in the case of a call option) the underlying from
the purchaser of the option at the option's exercise price, upon exercise by the
purchaser. Pursuant to guidelines established by the Board of Directors, the
Portfolios may only write options that are "covered." A covered call option
means that until the expiration of the option, the Portfolio will either earmark
or segregate sufficient liquid assets to cover its obligations under the option
or will continue to own (i) the underlying; (ii) securities or instruments
convertible or exchangeable without the payment of any consideration into the
underlying; or (iii) a call option on the same underlying with a strike price no
higher than the price at which the underlying was sold pursuant to a short
option position. In the case of a put option, the Portfolio will either earmark
or segregate sufficient liquid assets to cover its obligations under the option
or will own another put option on the same underlying with an equal or higher
strike price.
There currently are limited options markets in many countries, particularly
emerging market countries, and the nature of the strategies adopted by MSDW
Investment Management and the extent to which those strategies are used will
depend on the development of these options markets. The primary risks associated
with the Portfolios' use of options as described include (i) imperfect
correlation between the change in market value of investments held, purchased or
sold by a Portfolio and the prices of options relating to such investments, and
(ii) possible lack of a liquid secondary market for an option.
SWAPS, CAPS, COLLARS AND FLOORS. Swaps are privately negotiated
over-the-counter derivative products in which two parties agree to exchange
payment streams calculated in relation to a rate, index, instrument or certain
securities and a particular "notional amount." As with many of the other
derivative products available to the Portfolios, the underlying may include an
interest rate (fixed or floating), a currency exchange rate, a commodity price
index, and a security, securities index or a combination thereof. A great deal
of flexibility is possible in the way the products may be structured, with the
effect being that the parties may have exchanged amounts equal to the return on
one rate, index or group of securities for another. For example, in a simple
fixed-to-floating interest rate swap, one party makes payments equivalent to a
fixed interest rate, and the other make payments equivalent to a specified
interest rate index. A Portfolio may engage in simple or more complex swap
transactions involving a wide variety of underlyings. The currency swaps that
the Portfolios may enter will generally involve an agreement to pay interest
streams in one currency based on a specified index in exchange for receiving
interest streams denominated in another currency. Such swaps may involve initial
and final exchanges that correspond to the agreed upon notional amount.
Caps, collars and floors are privately-negotiated option-based derivative
products. A Portfolio may use one or more of these products in addition to or in
lieu of a swap involving a similar rate or index. As in the case of a put or
call option, the buyer of a cap or floor pays a premium to the writer. In
exchange for that premium, the buyer receives the right to a payment equal to
the differential if the specified index or rate rises above (in the case of a
cap) or falls below (in the case of a floor) a pre-determined strike level. As
in the case of swaps, obligations under caps and floors are calculated based
upon an agreed notional amount, and like most swaps (other than foreign currency
swaps), the entire notional amount is not exchanged and thus is not at risk. A
collar is a combination product in which the same party, such as the Portfolio,
buys a cap from and sells a floor to the other party. As with put and call
options, the amount at risk is limited for the buyer, but, if the cap or floor
in not hedged or covered, may be unlimited for the seller. Under current market
practice, caps, collars and floors between the same two parties are generally
documented under the same "master agreement." In some cases, options and forward
agreements may also be governed by the same master agreement. In the event of a
default, amounts owed under all transactions entered into under, or covered by,
the same master agreement would be netted and only a single payment would be
made.
Swaps, caps, collars and floors are credit-intensive products. A Portfolio that
enters into a swap transaction bears the risk of default, i.e. nonpayment, by
the other party. The guidelines under which each Portfolio enters derivative
transactions, along with
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some features of the transactions themselves, are intended to reduce these risks
to the extent reasonably practicable, although they cannot eliminate the risks
entirely. Under guidelines established by the Board of Directors, a Portfolio
may enter into swaps only with parties that meet certain credit rating
guidelines. Consistent with current market practices, a Portfolio will generally
enter into swap transactions on a net basis, and all swap transactions with the
same party will be documented under a single master agreement to provide for net
payment upon default. In addition, a Portfolio's obligations under an agreement
will be accrued daily (offset against any amounts owing to the Portfolio) and
any accrued, but unpaid, net amounts owed to the other party to a master
agreement will be covered by the maintenance of a segregated account consisting
of cash or liquid securities.
Interest rate and total rate of return (fixed income or equity) swaps generally
do not involve the delivery of securities, other underlying assets, or
principal. In such case, if the other party to an interest rate or total rate of
return swap defaults, a Portfolio's risk of loss will consist of the payments
that a Portfolio is contractually entitled to receive from the other party. This
may not be true for currency swaps that require the delivery of the entire
notional amount of one designated currency in exchange for the other. If there
is a default by the other party, a Portfolio may have contractual remedies under
the agreements related to the transaction.
INVESTMENT LIMITATIONS
FUNDAMENTAL LIMITATIONS
Each current Portfolio has adopted the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (i) at least 67% of the voting securities of the Portfolio present at a
meeting if the holders of more than 50% of the outstanding voting securities of
the Portfolio are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Portfolio. Each Portfolio of the Fund will
not:
(1) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (except this shall not prevent the
Portfolio from purchasing or selling options or futures contracts or from
investing in securities or other instruments backed by physical commodities),
and except that the Gold Portfolio may invest in gold bullion in accordance with
its investment objectives and policies;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies that deal in real estate and may purchase and sell
securities that are secured by interests in real estate;
(3) lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or repurchase agreements;
(4) except with respect to the Global Fixed Income, Emerging Markets,
Emerging Markets Debt, China Growth, International Magnum, Latin American,
MicroCap, Focus Equity, European Real Estate, Asian Real Estate, Technology and
U.S. Real Estate Portfolios (i) purchase more than 10% of any class of the
outstanding voting securities of any issuer and (ii) purchase securities of an
issuer (except obligations of the U.S. Government and its agencies and
instrumentalities) if as a result, with respect to 75% of its total assets, more
than 5% of the Portfolio's total assets, at market value, would be invested in
the securities of such issuer;
(5) issue senior securities and will not borrow, except from banks and as a
temporary measure for extraordinary or emergency purposes and then, in no event,
in excess of 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings), except that each of the Emerging Markets
Debt and Latin American Portfolios may borrow from banks and other entities, and
the Technology Portfolio may borrow from banks, in an amount not in excess of
33 1/3% of its total assets (including the amount borrowed) less liabilities in
accordance with its investment objectives and policies;
(6) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the 1933 Act in
the disposition of restricted securities;
(7) acquire any securities of companies within one industry if, as a result
of such acquisition, more than 25% of the value of the Portfolio's total assets
would be invested in securities of companies within such industry; provided,
however, that there shall be no limitation on the purchase of obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, or (in
the case of the Money Market Portfolio or the Municipal Money Market Portfolio)
instruments issued by U.S. Banks, except that (i) the Latin American Portfolio
may invest more than 25% of its total assets in securities of companies involved
in the telecommunications industry or financial services industry; (ii) the Gold
Portfolio will invest more than 25% of its total assets in securities of
companies in the group of industries involved in gold-related or
precious-metals-related activities, as described in its prospectus, and may
invest more than 25% of its total assets in one or more of the industries that
are a part of such group of industries, as described in its prospectus; (iii)
each of the Asian Real Estate, European Real Estate and U.S. Real Estate
Portfolios will invest more than 25% of its total assets in the Asian, European
and U.S. real estate industries, respectively, as described in their
prospectuses; and (iv) the Technology Portfolio will invest more than 25% of its
assets in securities of companies in the technology or technology-related
industries; and
(8) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
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NON-FUNDAMENTAL LIMITATIONS
In addition, each current Portfolio of the Fund has adopted non-fundamental
investment limitations as stated below and in their respective Prospectuses.
Such limitations may be changed without shareholder approval. Each current
Portfolio of the Fund will not:
(1) purchase on margin or sell short, except (i) that the Emerging Markets
Debt and Latin American Portfolios may from time to time sell securities short
without limitation but consistent with applicable legal requirements as stated
in its Prospectus; (ii) that each Portfolio, except the Money Market and
Municipal Money Market Portfolios, may enter into option transactions and
futures contracts as described in its Prospectus; and (iii) as specified above
in fundamental investment limitation number (1) above;
(2) except for the High Yield Portfolio, purchase or retain securities of an
issuer if those officers and Directors of the Fund or its investment adviser
owning more than 1/2 of 1% of such securities together own more than 5% of such
securities;
(3) pledge, mortgage, or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value, except that the High Yield
Portfolio may pledge, mortgage or hypothecate a maximum of 50% of its assets,
not counting assets segregated to comply with coverage requirements under
Section 18(f) of the 1940 Act, and the SEC's rules, regulations, orders, and
interpretations thereunder;
(4) invest for the purpose of exercising control over management of any
company;
(5) except for the U.S. Real Estate, European Real Estate and Asian Real
Estate Portfolios, invest in real estate limited partnership interests, and the
U.S. Real Estate, European Real Estate and Asian Real Estate Portfolios may not
invest in such interests that are not publicly traded;
(6) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the limitations as
described in the respective Prospectuses) that are publicly distributed, except
that the High Yield Portfolio also may purchase such securities that are not
publicly distributed; (ii) by lending its portfolio securities to banks,
brokers, dealers and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the Rules and Regulations or interpretations
of the SEC thereunder; and (iii) the High Yield Portfolio may lend securities to
institutional investors in addition to entities described in (ii);
(7) borrow money, except from banks for extraordinary or emergency purposes,
and then only in amounts up to 10% of the value of the Portfolio's total assets,
or purchase securities while borrowings exceed 5% of its total assets, except
that (i) the Emerging Markets Debt Portfolio may borrow in accordance with
fundamental investment limitation number (5) above; and (ii) the High Yield
Portfolio may borrow up to 33 1/3% of its total assets in the aggregate,
including reverse repurchase agreements; and
The Fixed Income and Value Equity Portfolios will only issue shares for
securities or assets other than cash in a bona fide reorganization, statutory
merger, or in other acquisitions of portfolio securities (except for municipal
debt securities issued by state political subdivisions or their agencies or
instrumentalities) which (i) meet their respective investment objectives; and
(ii) are acquired for investment and not for resale.
Each of the Global Fixed Income, Emerging Markets, Emerging Markets Debt, China
Growth, Latin American, Focus Equity, European Real Estate, Asian Real Estate,
U.S. Real Estate and Technology Portfolios will diversify its holdings so that,
at the close of each quarter of its taxable year or within 30 days thereafter,
(i) at least 50% of the market value of the Portfolio's total assets is
represented by cash (including cash items and receivables), U.S. Government
securities, and other securities, with such other securities limited, in respect
of any one issuer, for purposes of this calculation to an amount not greater
than 5% of the value of the Portfolio's total assets and 10% of the outstanding
voting securities of such issuer; and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities). Prior to the close of each quarter (or within 30 days
thereafter), the Portfolio's holdings maybe less diversified and are not
required to satisfy any diversification test.
With respect to fundamental investment limitation number (7), each Portfolio
will determine industry concentration in accordance with the industry
classifications used by its benchmark index, except that (i) with respect to the
Money Market, Municipal Money Market and High Yield Portfolios, (a) financial
service companies will be classified according to the end users of their
services, for example, automobile finance, bank finance and diversified finance
will each be considered a separate industry and (b) asset-backed securities will
be classified according to the underlying assets securing such securities; and
(ii) with respect to the High Yield Portfolio, utility companies will be
classified according to their services, for example, electric, gas, gas
transmission, and telephone will be treated as separate industries.
In accordance with fundamental investment limitation number (7), the Latin
American Portfolio will only invest more than 25% of its total assets in
companies involved in the telecommunications industry or financial services
industry if the Board of Directors determines that the Latin American markets
are dominated by securities of issuers in such industries and that, in light of
the anticipated return, investment quality, availability and liquidity of the
issuers in such industries, the Portfolio's ability to achieve its investment
objective would, in light of the investment policies and limitations, be
materially adversely affected if the
26
<PAGE>
Portfolio was not able to invest greater than 25% of its total assets in such
industries. As stated in the Prospectus, the Board of Directors has made the
foregoing determination and, accordingly, the Latin American Portfolio will
invest between 25% and 50% of its assets in securities of issuers engaged in the
telecommunications industry.
The percentage limitations contained in these restrictions apply at the time of
purchase of securities. Future Portfolios of the Fund may adopt different
limitations.
PURCHASE OF SHARES
You may purchase shares of each Portfolio on any day the New York Stock Exchange
("NYSE") is open. Each Portfolio reserves the right in its sole discretion
(i) to suspend the offering of its shares; (ii) to reject purchase orders when
in the judgment of management such rejection is in the best interest of the
Fund; and (iii) to reduce or waive the minimum for initial and subsequent
investments for certain accounts such as employee benefit plans or under
circumstances where certain economies can be achieved in sales of a Portfolio's
shares. The International Equity Portfolio is currently closed to new investors
with the exception of certain Morgan Stanley & Co. Incorporated ("Morgan
Stanley") customers, employees of Morgan Stanley and its affiliates, certain
tax-qualified retirement plans and other investment companies advised by MSDW
Investment Management and its affiliates. The China Growth, Gold, MicroCap,
Mortgage-Backed Securities and Municipal Bond Portfolios currently are not
operational.
Shares of each Portfolio may be purchased at the net asset value per share next
determined after receipt by the Fund or its designee of a purchase order as
described under "Methods of Purchase" and "Investment through Financial
Intermediaries." The International Small Cap Portfolio may impose a transaction
fee of up to 0.50%. CLASS B SHARES OF THE MONEY MARKET PORTFOLIO ARE AVAILABLE
FOR PURCHASE ONLY THROUGH FINANCIAL INTERMEDIARIES (AS DISCUSSED BELOW) THAT
HAVE MADE ARRANGEMENTS WITH THE FUND. The net asset value per share of each
Portfolio is calculated on days that the NYSE is open for business. Net asset
value per share is determined (i) for each non-money market Portfolio, as of the
close of trading of the NYSE (normally 4:00 p.m. Eastern Time); (ii) for the
Money Market Portfolio, as of 12:00 noon Eastern Time; and (ii) for the
Municipal Money Market Portfolio, as of 11:00 a.m. Eastern Time (for each
Portfolio, the "Pricing Time").
MINIMUM INVESTMENT
The minimum initial investment is $500,000 for Class A shares and $100,000 for
Class B shares of each non-money market 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 initial investment is $100,000 for
Class A shares of each money market Portfolio. There is no minimum initial
investment for Class B shares of the Money Market Portfolio. These minimums may
be waived at MSDW Investment Management's discretion for certain types of
investors, including trust departments, brokers, dealers, agents, financial
planners, financial services firms, investment advisers or various retirement
and deferred compensation plans ("Financial Intermediaries"); certain accounts
managed by MSDW Investment Management and its affiliates ("Managed Accounts");
and certain employees and customers of Morgan Stanley and its affiliates. The
Fund's determination of an investor's eligibility to purchase shares of a given
class will take precedence over the investor's selection of a class.
METHODS OF PURCHASE
You may purchase shares directly from the Fund by Federal Funds wire, by bank
wire or by check; however, on days that the NYSE is open but the custodian bank
is closed, you may only purchase shares by check. Investors may also invest in
the Portfolios by purchasing shares through Financial Intermediaries that have
made arrangements with the Fund. Class B shares of the Money Market Portfolio
may only be purchased through Financial Intermediaries. Some Financial
Intermediaries may charge an additional service or transaction fee (see also
"Investment through Financial Intermediaries.") If a purchase is canceled due to
nonpayment or because your check does not clear, you will be responsible for any
loss the Fund or its agents incur. If you are already a shareholder, the Fund
may redeem shares from your account(s) to reimburse the Fund or its agents for
any loss. In addition, you may be prohibited or restricted from making future
investments in the Fund.
FEDERAL FUNDS WIRE. Purchases may be made by having your bank wire Federal
Funds to the Fund's bank account. Federal Funds purchase orders will be accepted
only on a day on which the Fund and The Chase Manhattan Bank ("Chase Bank") are
open for business. Your bank may charge a service fee for wiring Federal Funds.
In order to ensure proper handling of your purchase by Federal Funds wire,
please follow these steps.
27
<PAGE>
1. Place your order by telephoning the Fund at 1-800-548-7786. A Fund
representative will request certain purchase information and provide you
with a confirmation number.
2. Instruct your bank to wire the specified amount to the Fund's Wire
Concentration Bank Account as follows:
The Chase Manhattan Bank
One Manhattan Plaza
New York, NY 10081-1000
ABA# 021000021
DDA# 910-2-733293
Attn: Morgan Stanley Dean Witter Institutional Fund, Inc.
Ref: (Portfolio name, your account number, your account name)
Please call the Fund at 1-800-548-7786 prior to wiring funds.
3. Complete and sign an Account Registration Form and mail it to the
address shown thereon.
When a purchase order is received prior to the Pricing Time and Federal Funds
are received prior to the regular close of the Federal Funds Wire Control Center
("FFWCC") (normally 6:00 p.m. Eastern Time) the purchase will be executed at the
net asset value computed on the date of receipt. Purchases for which an order is
received after the Pricing Time or for which Federal Funds are received after
the regular close of the FFWCC will be executed at the net asset value next
determined. Certain institutional investors and financial institutions have
entered into an agreement with the Fund pursuant to which they may place orders
prior to the Pricing Time, but make payment in Federal Funds for those shares
the following business day.
BANK WIRE. A purchase of shares by bank wire must follow the same procedure as
for a Federal Funds wire, described above. However, depending on the time the
bank wire is sent and the bank handling the wire, money transferred by bank wire
may or may not be converted into Federal Funds prior to the close of the FFWCC.
Prior to conversion to Federal Funds and receipt by the Fund, an investor's
money will not be invested.
CHECK. An account may be opened by completing and signing an Account
Registration Form and mailing it, together with a check payable to "Morgan
Stanley Dean Witter Institutional Fund, Inc. -- [Portfolio name]" to:
Morgan Stanley Dean Witter Institutional Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
The Fund ordinarily is credited with Federal Funds within one business day of
deposit of a check. Thus, a purchase of shares by check ordinarily will be
credited to your account at the net asset value per share of each of the
Portfolios determined on the next business day after receipt. An investor's
money will not be invested prior to crediting of Federal Funds.
INVESTMENT THROUGH FINANCIAL INTERMEDIARIES. Certain Financial Intermediaries
have made arrangements with the Fund so that an investor may purchase or redeem
shares at the net asset value per share next determined after the Financial
Intermediary receives the share order. In other instances, the Fund has also
authorized such Financial Intermediaries to designate other intermediaries to
receive purchase and redemption orders on the Fund's behalf at the share price
next determined after such designees receive the share order. Under these
arrangements, the Fund will be deemed to have received a purchase or redemption
order when the Financial Intermediary or, if applicable, a Financial
Intermediary's authorized designee, receives the share order from an investor.
ADDITIONAL INVESTMENTS. You may purchase additional shares for your account at
any time by purchasing shares at net asset value by any of the methods described
above. The minimum additional investment generally is $1,000 per Portfolio,
except that there is no minimum for Class B shares of the Money Market
Portfolio. The minimum additional investment may be lower for certain accounts
described above under "Minimum Investment." For purchases directly from the
Fund, your account name, the Portfolio name and the class selected must be
specified in the letter or wire to assure proper crediting to your account.
INVOLUNTARY CONVERSION AND REDEMPTION OF NEW ACCOUNT SHARES
Class A and Class B shares of each non-money market Portfolio may be subject to
the involuntary conversion and redemption features described below. Shares of
the money market Portfolios are not subject to involuntary conversion or
redemption. The conversion and redemption features may be waived at MSDW
Investment Management's discretion for shares held in a Managed Account and
shares purchased through a Financial Intermediary. Accounts that were open prior
to January 2, 1996 are not subject to involuntary conversion or redemption. The
Fund reserves the right to modify or terminate the conversion or redemption
features of the shares at any time upon 60 days notice to shareholders.
CONVERSION FROM CLASS A TO CLASS B SHARES. If the value of an account
containing Class A shares of a non-money market Portfolio falls below $500,000
($250,000 for the Technology Portfolio), but remains at or above $100,000
($50,000 for the Technology Portfolio), because of shareholder redemption(s),
the Fund will notify the shareholder, and if the account value remains below
$500,000 ($250,000 for the Technology Portfolio), but remains at or above
$100,000 ($50,000 for the Technology Portfolio), for a continuous 60-day period,
the Class A shares in such account will convert to Class B shares and will be
subject to
28
<PAGE>
the distribution fee and other features applicable to Class B shares. The Fund
will not convert Class A shares to Class B shares based solely upon changes in
the market that reduce the net asset value of shares. Under current tax law,
conversion between share classes is not a taxable event to the shareholder.
CONVERSION FROM CLASS B TO CLASS A SHARES. If the value of an account
containing Class B shares of a non-money market Portfolio increases to $500,000
or more, ($250,000 for the Technology Portfolio), whether due to shareholder
purchases or market activity, the Class B shares will convert to Class A shares.
Class B shares purchased through a Financial Intermediary that has entered into
an arrangement with the Fund for the purchase of such shares may not be
converted. Under current tax law, such conversion is not a taxable event to the
shareholder. Class A shares converted from Class B shares are subject to the
same minimum account size requirements as are applicable to accounts containing
Class A shares described above.
INVOLUNTARY REDEMPTION OF SHARES. If the value of an account falls below
$100,000 ($50,000 for the Technology Portfolio), because of shareholder
redemption(s), the Fund will notify the shareholder, and if the account value
remains below $100,000 ($50,000 for the Technology Portfolio), for a continuous
60-day period, the shares in such account will be subject to redemption by the
Fund. The Fund will not redeem shares based solely upon changes in the market
that reduce the net asset value of shares. If redeemed, redemption proceeds will
be promptly paid to the shareholder.
REDEMPTION OF SHARES
The Fund normally makes payment for all shares redeemed within one business day
of receipt of the request, and in no event more than seven days after receipt of
a redemption request in good order. However, payments to investors redeeming
shares which were purchased by check will not be made until payment for the
purchase has been collected, which may take up to eight days after the date of
purchase. The Fund may suspend the right of redemption or postpone the date of
payment (i) during any period that the NYSE is closed, or trading on the NYSE is
restricted as determined by the SEC; (ii) during any period when an emergency
exists as defined by the rules of the SEC as a result of which it is not
practicable for a Portfolio to dispose of securities it owns, or fairly to
determine the value of its assets; and (iii) for such other periods as the SEC
may permit.
Class A shares of each Portfolio and Class B shares of each Portfolio, except
for the International Small Cap and Municipal Money Market Portfolios that do
not offer Class B shares, may be redeemed at any time and without charge at the
net asset value per share next determined after receipt by the Fund of a
redemption order as described under "Methods of Redemption," except that the
International Small Cap Portfolio may impose a transaction fee of up to 0.50%.
Redemption proceeds may be more or less than the purchase price of your shares
depending on, among other factors, the market value of the investment securities
held by a Portfolio.
METHODS OF REDEMPTION
You may redeem shares directly from the Fund by mail or by telephone. HOWEVER,
SHARES PURCHASED THROUGH A FINANCIAL INTERMEDIARY MUST BE REDEEMED THROUGH A
FINANCIAL INTERMEDIARY. Certain Financial Intermediaries may charge an
additional service or transaction fee.
BY MAIL. Each Portfolio will redeem shares upon receipt of a redemption request
in "good order." Redemption requests may be sent by regular mail to Morgan
Stanley Dean Witter Institutional Fund, Inc., P.O. Box 2798, Boston,
Massachusetts 02208-2798 or, by overnight courier, to Morgan Stanley Dean Witter
Institutional Fund, Inc., c/o Chase Global Funds Services Company, 73 Tremont
Street, Boston, Massachusetts 02108-3913.
"Good order" means that the request to redeem shares must include the following:
1. A letter of instruction or a stock assignment specifying the class and
number of shares or dollar amount to be redeemed, signed by all
registered owners of the shares in the exact names in which they are
registered;
2. Any required signature guarantees; and
3. Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and
profit-sharing plans and other organizations.
Redemption requests received in "good order" prior to the Pricing Time will be
executed at the net asset value computed on the date of receipt. Redemption
requests received after the Pricing Time will be executed at the next determined
net asset value. Shareholders who are uncertain of requirements for redemption
by mail should consult with a Fund representative.
BY TELEPHONE. If you have previously elected the Telephone Redemption Option on
the Account Registration Form, you can redeem Portfolio shares by calling the
Fund and requesting that the redemption proceeds be mailed to you or wired to
your bank. Please contact one of the Fund's representatives for further details.
To change the commercial bank or account designated to receive redemption
proceeds, send a written request to the Fund at the address above. Requests to
change the bank or account must be signed by each shareholder and each signature
must be guaranteed. The telephone redemption option may be difficult to
implement at times, particularly during volatile market conditions. If you
experience difficulty in making a telephone redemption, you may redeem shares by
mail as described above.
The Fund and the Transfer Agent will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include requiring the investor to provide certain personal identification
information at the time an account is opened and prior to effecting each
telephone transaction. In addition, all telephone transaction requests will be
29
<PAGE>
recorded and investors may be required to provide additional telecopied written
instructions regarding transactions requests. Neither the Fund nor the Transfer
Agent will be responsible for any loss, liability, cost or expense for following
instructions received by telephone that either of them reasonably believes to be
genuine.
REDEMPTION THROUGH FINANCIAL INTERMEDIARIES. Certain Financial Intermediaries
have made arrangements with the Fund to accept redemption request from
underlying beneficial owners. These redemptions may be processed in the same way
as purchases made through Financial Intermediaries, as described above.
FURTHER REDEMPTION INFORMATION
If the Board of Directors determines that it would be detrimental to the best
interests of the remaining shareholders of a Portfolio to make payment in cash,
the Fund may pay redemption proceeds in whole or in part by a
distribution-in-kind of readily marketable portfolio securities in accordance
with applicable SEC rules. Shareholders may incur brokerage charges on the sale
of securities received from a distribution-in-kind.
The Fund has made an election with the SEC pursuant to Rule 18f-1 under the 1940
Act to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1% of
the net assets of a Portfolio at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. Redemptions in excess of
the above limits may be paid in whole or in part in portfolio securities or in
cash, as the Board of Directors may deem advisable as being in the best
interests of the Fund. If redemptions are paid in portfolio securities, such
securities will be valued as set forth under "Valuation of Shares."
No charge is made by any Portfolio for redemptions, except for the transaction
fee of up to 0.50% that may be assessed upon redemption by the International
Small Cap Portfolio. Any redemption may be more or less than the shareholder's
cost depending on the market value of the securities held by the Portfolio.
To protect your account and the Fund from fraud, signature guarantees are
required for certain redemptions. Signature guarantees enable the Fund to verify
the identity of the person who has authorized a redemption from your account.
Signature guarantees are required in connection with: (i) all redemptions,
regardless of the amount involved, when the proceeds are to be paid to someone
other than the registered owner(s) and/or registered address; and (ii) share
transfer requests. An "eligible guarantor institution" may include a bank, a
trust company, a credit union or savings and loan association, a member firm of
a domestic stock exchange, or a foreign branch of any of the foregoing. Notaries
public are not acceptable guarantors. The signature guarantees must appear
either: (i) on the written request for redemption; (ii) on a separate instrument
for assignment ("stock power") which should specify the total number of shares
to be redeemed; or (iii) on all stock certificates tendered for redemption and,
if shares held by the Fund are also being redeemed, on the letter or stock
power.
ACCOUNT POLICIES AND FEATURES
EXCHANGE FEATURES
You may exchange shares of each Portfolio that you own for shares of any other
available Portfolio(s) of the Fund, subject to certain limitations. Any such
exchange will be based on the respective net asset values of the shares
involved. There is no sales commission or sales charge of any kind (although a
transaction fee of up to 0.50% may be charged on exchanges to and from the
International Small Cap Portfolio). You cannot exchange for shares of the
International Equity Portfolio because it is currently closed to new investors.
In addition, certain Portfolios are not operational or may be unavailable to
shareholders who purchased Portfolio shares through a Financial Intermediary.
Contact your Financial Intermediary to determine which Portfolios are available
for exchange.
Before you make an exchange, you should read the prospectus of the Portfolio(s)
in which you seek to invest. The class of shares you receive in exchange will be
determined in the same manner as any other purchase of shares, including minimum
initial investment and account size requirements, and will not be based on the
class of shares you surrender for the exchange. Exchange transactions are
treated as a redemption followed by a purchase. Therefore, an exchange will be
considered a taxable event for shareholders subject to tax. Exchange
transactions will be processed at the net asset value per share next determined
after receipt of the request.
Exchange requests may be made either by mail or telephone. Exchange requests by
mail should be sent to Morgan Stanley Dean Witter Institutional Fund, Inc.,
P.O. Box 2798, Boston, Massachusetts 02208-2798. Telephone exchanges will be
accepted only if the certificates for the shares to be exchanged are held by the
Fund for the account of the shareholder and the registration of the two accounts
will be identical. The telephone exchange privilege is automatic and made
available without shareholder election. Exchanges may be subject to limitations
as to amounts or frequency, and to other restrictions established by the Board
of Directors to assure that such exchanges do not disadvantage the Fund and its
shareholders. The exchange privilege may be modified or terminated by the Fund
at any time upon 60-days notice to shareholders.
TRANSFER OF SHARES
Shareholders may transfer Portfolio shares to another person by making a written
request to the Fund. The request should clearly identify the account and number
of shares to be transferred, and include the signature of all registered owners
and all stock certificates, if any, which are subject to the transfer. It may
not be possible to transfer shares purchased through a Financial Intermediary.
The signature on the letter of request, the stock certificate or any stock power
must be guaranteed in the same
30
<PAGE>
manner as described under "Redemption of Shares." As in the case of redemptions,
the written request must be received in good order before any transfer can be
made. Transferring shares may affect the eligibility of an account for a given
class of the Portfolio's shares and may result in involuntary conversion or
redemption of such shares.
VALUATION OF SHARES
The net asset value per share of a class of shares of each of the non-money
market Portfolios is determined by dividing the total market value of the
Portfolio's investments and other assets attributable to such class, less all
liabilities attributable to such class, by the total number of outstanding
shares of such class of the Portfolio. Net asset value is calculated separately
for each class of a Portfolio. Net asset value per share of the non-money market
Portfolios is determined as of the close of the NYSE (normally 4:00 p.m. Eastern
Time) on each day that the NYSE is open for business. The NYSE will be closed on
the following days: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Price information on listed securities is taken from the
exchange where the security is primarily traded. Portfolio securities generally
are valued at their market value. Securities listed on a U.S. securities
exchange for which market quotations are available generally are valued at the
last quoted sale price on the day the valuation is made. Securities listed on a
foreign exchange generally are valued at their closing price. Unlisted
securities and listed securities not traded on the valuation date and for which
market quotations are not readily available generally are valued at a price
within a range not exceeding the current asked price nor less than the current
bid price. The current bid and asked prices are determined based on the average
of the bid and asked prices quoted on such valuation date by reputable brokers.
Bonds and other fixed income securities are valued according to the broadest and
most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities, which is
accrued daily unless collection is in doubt. In addition, bonds and other fixed
income securities may be valued on the basis of prices provided by a pricing
service when such prices are believed to reflect the fair market value of such
securities. The prices provided by a pricing service are determined without
regard to bid or last sale prices, but take into account institutional-size
trading in similar groups of securities and any developments related to the
specific securities. Securities not priced in this manner are valued at the most
recently quoted bid price or, when securities exchange valuations are used, at
the latest quoted sale price on the day of valuation. If there is no such
reported sale, the latest quoted bid price will be used. Securities purchased
with remaining maturities of 60 days or less are valued at amortized cost, if it
approximates market value. In the event that amortized cost does not approximate
market value, market prices as determined above will be used.
The value of other assets and securities for which quotations are not readily
available (including certain restricted and unlisted securities) and those
securities for which it is inappropriate to determine prices in accordance with
the above-stated procedures are determined in good faith at fair value using
methods determined by the Board of Directors. For purposes of calculating net
asset value per share, all assets and liabilities initially expressed in foreign
currencies generally will be converted into U.S. dollars at the mean of the bid
and asked price of such currencies against the U.S. dollar as quoted by a major
bank.
Although the legal rights of Class A and Class B shares will be identical, the
different expenses borne by each class will result in different net asset values
and dividends for the class. Dividends will differ by approximately the amount
of the distribution expense accrual differential among the classes. The net
asset value of Class B shares will generally be lower than the net asset value
of Class A shares as a result of the distribution expense charged to Class B
shares.
The net asset value per share of each of the Money Market and Municipal Money
Market Portfolios is determined by subtracting the Portfolio's liabilities
(including accrued expenses and dividends payable) from the total value of the
Portfolio's investments and other assets and dividing the result by the total
number of outstanding shares of the Portfolio. The net asset value per share of
the Municipal Money Market Portfolio and the Money Market Portfolio are
determined as of 11:00 a.m. and 12:00 noon (Eastern Time), respectively, on the
days on which the NYSE is open. For purposes of calculating each money market
Portfolio's net asset value per share, securities are valued by the "amortized
cost" method of valuation, which does not take into account unrealized gains or
losses. This involves valuing an instrument at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which the value, as determined by the amortized cost, is higher or lower
than the price the Portfolio would receive if it sold the instrument.
31
<PAGE>
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors, manage the
day-to-day operations of the Fund. The Directors set broad policies for the Fund
and choose its officers. Two Directors and all of the officers of the Fund are
directors, officers or employees of MSDW Investment Management, Morgan Stanley
or Chase Global Funds Services Company ("Chase Global"). The other Directors
have no affiliation with MSDW Investment Management, Morgan Stanley or Chase
Global. Directors and officers of the Fund are also directors and officers of
some or all of the funds in the Fund Complex (defined below) or other investment
companies managed, administered, advised or distributed by MSDW Investment
Management or its affiliates. A list of the Directors and officers of the Fund
and a brief statement of their present positions and principal occupations
during the past five years is set forth below:
<TABLE>
<CAPTION>
NAME, ADDRESS AND DATE OF BIRTH POSITION WITH FUND PRINCIPAL; OCCUPATION DURING PAST FIVE YEARS
- --------------------------------------- ---------------------- --------------------------------------------
<S> <C> <C>
Barton M. Biggs* Chairman and Director Chairman, Director and Managing Director of Morgan
Morgan Stanley Dean Witter Investment Stanley Dean Witter Investment Management Inc.
Management Inc. and Morgan Stanley Dean Witter Investment
1221 Avenue of the Americas Management Limited; Managing Director of Morgan
New York, NY 10020 Stanley & Co. Incorporated; Member of the Yale
11/26/32 Development Board; and Chairman and Director of
various funds in the Fund Complex.**
John D. Barrett, II Director Chairman and Director of Barrett Associates, Inc.
Barrett Associates Inc. (investment counseling); Director of the
521 Fifth Avenue Ashforth Company (real estate); and Director of
New York, NY 10135 various funds in the Fund Complex.
8/21/35
Gerard E. Jones Director Partner, Richards & O'Neil LLP (law firm); and
Richards & O'Neil LLP Director of various funds in the Fund Complex.
43 Arch Street
Greenwich, CT 06830
1/23/37
Graham E. Jones Director Senior Vice President of BGK Properties; Trustee
330 Garfield Street of various investment companies managed by
Suite 200 Weiss, Peck & Greer; Trustee of various
Santa Fe, NM 87501 investment companies managed by Morgan Grenfell
1/31/33 Capital Management Incorporated; Trustee of
various investment companies managed by Sun
Capital Advisors, Inc.; and Director of various
funds in the Fund Complex. Formerly, Chief
Financial Officer of Practice Management
Systems, Inc.
John A. Levin Director Chairman and Chief Executive Officer of John A.
One Rockeffeller Plaza Levin & Co., Inc.; Director, President and Chief
New York, NY 10020 Executive Officer of Baker Fentress & Company;
8/20/38 and Director of various funds in the Fund
Complex.
Andrew McNally IV Director Director of Mercury Finance (consumer finance) and
333 North Michigan Avenue Zenith Electronics, Hubbell, Inc. (industrial
Suite 501 electronics) and Director of various funds in
Chicago, IL 60601 the Fund Complex. Formerly, Chairman and Chief
11/11/39 Executive Officer of Rand McNally & Company
(publishing).
William G. Morton, Jr. Director Chairman and Chief Executive Officer of Boston
100 Franklin Street Stock Exchange; Director of Tandy Corporation;
Boston, MA 02110 and Director of various funds in the Fund
3/13/37 Complex.
Samuel T. Reeves Director President, Pinnacle Trading L.L.C (investments)
8211 North Fresno Street and Director of various funds in the Fund
Fresno, CA 93720 Complex.
7/28/34
Fergus Reid Director Chairman and Chief Executive Officer of LumeLite
85 Charles Colman Blvd Plastics Corporation (injection molding);
Pawling, NY 12564 Trustee and Director of Vista Mutual Fund Group;
8/12/32 and Director of various funds in the Fund
Complex.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND DATE OF BIRTH POSITION WITH FUND PRINCIPAL; OCCUPATION DURING PAST FIVE YEARS
- --------------------------------------- ---------------------- --------------------------------------------
<S> <C> <C>
Frederick O. Robertshaw Director Of Counsel, Copple, Chamberlin and Boehm, P.C.
2025 North Third Street (law firm); and Director of various funds in the
Suite 300 Fund Complex. Formerly, of Counsel, Bryan, Cave
Phoenix, AZ 85004 LLP (law firm).
1/24/34
Harold J. Schaaff, Jr. President Managing Director of Morgan Stanley & Co.
Morgan Stanley Dean Witter Investment Incorporated and Morgan Stanley Dean Witter
Management Inc. Investment Management Inc.; and Director and
1221 Avenue of the Americas President of various funds in the Fund Complex.
New York, NY 10020 Previously General Counsel and Secretary of MSDW
6/10/60 Investment Management
Joseph P. Stadler Vice President Principal of Morgan Stanley & Co. Incorporated and
Morgan Stanley Dean Witter Investment Morgan Stanley Dean Witter Investment Management
Management Inc. Inc.; and Vice President of various funds in the
1221 Avenue of the Americas Fund Complex. Previously with Price Waterhouse
New York, NY 10020 LLP (now PricewaterhouseCoopers LLP).
6/7/54
Stefanie V. Chang Vice President Vice President of Morgan Stanley & Co.
Morgan Stanley Dean Witter Investment Incorporated and Morgan Stanley Dean Witter
Management Inc. Investment Management Inc.; and Vice President
1221 Avenue of the Americas of various funds in the Fund Complex. Previously
New York, NY 10020 practiced law with the New York law firm of
11/30/66 Rogers & Wells.
Mary E. Mullin Secretary Vice President of Morgan Stanley & Co.
Morgan Stanley Dean Witter Investment Incorporated and Morgan Stanley Dean Witter
Management Inc. Investment Management Inc.; and Secretary of
1221 Avenue of the Americas various funds in the Fund Complex. Previously
New York, NY 10020 practiced law with the New York law firms of
3/22/67 McDermott, Will & Emery and Skadden, Arps,
Slate, Meagher & Flom LLP.
Belinda A. Brady Treasurer Fund Administration Senior Manager, Chase Global
Chase Global Funds Funds Services Company; and Treasurer of various
Services Company funds in the Fund Complex. Previously was senior
73 Tremont Street auditor at Price Waterhouse LLP (now
Boston, MA 02108-3913 PricewaterhouseCoopers LLP).
1/23/68
Robin L. Conkey Assistant Treasurer Fund Administration Manager, Chase Global Funds
Chase Global Funds Services Company; and Assistant Treasurer of
Services Company various various funds in the Fund Complex.
73 Tremont Street Previously, was senior auditor at Price
Boston, MA 02108-3913 Waterhouse LLP (now PricewaterhouseCoopers LLP).
5/11/70
</TABLE>
- --------------
* Indicates each director that is an "interested person" within the meaning of
the 1940 Act.
** The Fund Complex currently includes Morgan Stanley Dean Witter Institutional
Fund, Inc.; The Universal Institutional Funds, Inc.; Morgan Stanley Dean
Witter Strategic Adviser Fund, Inc.; Morgan Stanley Dean Witter Africa
Investment Fund, Inc.; Morgan Stanley Dean Witter Asia-Pacific Fund, Inc.;
Morgan Stanley Dean Witter Eastern Europe Fund, Inc.; Morgan Stanley Dean
Witter Emerging Markets Fund, Inc.; Morgan Stanley Dean Witter Emerging
Markets Debt Fund, Inc.; Morgan Stanley Dean Witter Global Opportunity Bond
Fund, Inc.; Morgan Stanley Dean Witter High Yield Fund, Inc.; Morgan Stanley
Dean Witter India Investment Fund, Inc.; The Latin American Discovery Fund,
Inc.; The Malaysia Fund, Inc.; The Pakistan Investment Fund, Inc.; The Thai
Fund, Inc.; and The Turkish Investment Fund, Inc.
As of December 31, 1999, the Directors and officers of the Fund, as a group,
owned more than 1% of the outstanding common stocks of the following Portfolios
of the Fund: Asian Equity Portfolio (6.13%); Fixed Income Portfolio (2.17%);
Muncipal Money Market Portfolio (1.15%); and Value Equity Portfolio (1.82%).
COMPENSATION OF DIRECTORS AND OFFICERS
The Fund, together with the other funds in the Fund Complex for which a Director
serves as director, pays each of the Directors who is not an "interested person"
an annual aggregate fee of $75,000, plus reasonable out-of-pocket expenses for
service as a Director and for serving on the Board's Audit and/or
Nominating/Compensation Committees. Directors' fees will be allocated among the
Fund and the other funds in the Fund Complex for which the Directors serves as a
director in proportion to their respective average net assets. For the fiscal
year ended December 31, 1999, the Fund paid approximately $654,000 in Directors'
fees and expenses. Directors who are also officers or affiliated persons receive
no remuneration from the Fund for their services as Directors. The Fund's
officers and employees are paid by MSDW Investment Management or its agents.
33
<PAGE>
The following table shows aggregate compensation paid to each of the Fund's
Directors by the Fund and the Fund Complex, respectively, in the fiscal year
ended December 31, 1999. Prior to April 1, 2000 each Independent Director
received annual compensation of $65,000, plus reasonable out-of-pocket expenses
from the Fund Complex. Members of the Board's Audit Committee received an
additional $10,000 per year from the Fund Complex.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM FUND
COMPENSATION AND FUND COMPLEX
NAME OF PERSON, POSITION FROM FUND PAYABLE TO DIRECTORS
- ------------------------ ------------ --------------------
<S> <C> <C>
Barton M. Biggs,
Director and Chairman of the Board............... None None
Michael F. Klein,(1)
Director and President........................... None None
John D. Barrett, II(5)
Director......................................... 62,320 65,000
Gerard E. Jones,(6)
Director......................................... 62,320 72,100
Andrew McNally, IV(2)(6)
Director......................................... 71,908 75,000
Samuel T. Reeves,(2)(5)
Director......................................... 71,908 82,100
Fergus Reid,(2)(5)
Director......................................... 62,320 72,100
Frederick O. Robertshaw,(2)(6)
Director......................................... 71,908 75,000
Graham E. Jones,(3)(6)
Director......................................... N/A 75,750
John A. Levin,(3)(5)
Director......................................... N/A 72,100
William G. Morton, Jr.,(3)(6)
Director......................................... N/A 65,000
</TABLE>
- ------------------
(1) Mr. Klein resigned from the Board effective March 2, 2000.
(2) Messrs. McNally, Reeves, Reid and Robertshaw have elected, pursuant to the
deferred compensation plan, to defer all, or a portion, of their
compensation received from the Fund for the fiscal year ended December 31,
1999.
(3) Messrs. Jones, Levin and Morton were appointed to the Board on February 17,
2000 and therefore, did not receive compensation from the Fund for the
fiscal year ended December 31, 1999.
(4) Number of other investment companies in Fund Complex from whom Directors
received compensation: Mr. Barrett-2; Mr. Gerard E. Jones-3; Mr. Graham E.
Jones-12; Mr. Levin-12; Mr. McNally-2; Mr. Morton-12; Mr. Reeves-3; Mr.
Reid-3; Mr. Robertshaw-2.
(5) Member of Nominating/Compensation Committee of the Board of Directors of the
Fund.
(6) Member of the Audit Committee of the Board of Directors of the Fund.
The Fund maintains an unfunded Deferred Compensation Plan which allows each
independent Director to defer payment of all, or a portion, of the fees he or
she receives for attending meetings of the Board of Directors throughout the
year. Each eligible Director generally may elect to have the deferred amounts
credited with a return equal to either of the following: (i) a rate equal to the
prevailing rate for 90-day U.S. Treasury Bills, or (ii) a rate equal to the
total return on one or more portfolios of the Fund or other funds in the Fund
Complex selected by the Director. Distributions generally are in the form of
equal annual installments over a period of five years beginning on the first day
of the year following the year in which the Director's service terminates,
except that the Board of Directors, in its sole discretion, may accelerate or
extend such distribution schedule. The Fund intends that the Deferred
Compensation Plan shall be maintained at all times on an unfunded basis for
federal income tax purposes under the Internal Revenue Code of 1986, as amended
(the "Code"). The rights of an eligible Director and the beneficiaries to the
amounts held under the Deferred Compensation Plan are unsecured and such amounts
are subject to the claims of the creditors of the Fund.
CODE OF ETHICS
Pursuant to Rule 17j-1 under the 1940 Act, the Board of Directors has adopted a
Code of Ethics for the Fund and approved Codes of Ethics adopted by MSDW
Investment Management and Morgan Stanley (collectively the "Codes"). The Codes
are intended to ensure that the interests of shareholders and other clients are
placed ahead of any personal interest, that no undue personal benefit is
obtained from the person's employment activities and that actual and potential
conflicts of interest are avoided.
The Codes apply to the personal investing activities of Directors and officers
of the Fund, MSDW Investment Management and Morgan Stanley ("Access Persons").
Rule 17j-1 and the Codes are designed to prevent unlawful practices in
connection with the purchase or sale of securities by Access Persons. Under the
Codes, Access Persons are permitted to engage in personal securities
transactions, but are required to report their personal securities transactions
for monitoring purposes. In addition, certain Access Persons are required to
obtain approval before investing in initial public offerings or private
placements. The Codes are on file with the SEC, and are available to the Public.
34
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
MSDW Investment Management is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co. ("MSDW"). The principal offices of MSDW are located at 1585
Broadway, New York, NY 10036, and the principal offices of MSDW Investment
Management are located at 1221 Avenue of the Americas, New York, NY 10020. MSDW
Investment Management provides investment advice and portfolio management
services pursuant to an Investment Advisory Agreement and, subject to the
supervision of the Fund's Board of Directors, makes each of the Portfolio's
day-to-day investment decisions, arranges for the execution of portfolio
transactions and generally manages each of the Portfolio's investments. In
managing the Portfolio, MSDW Investment Management may use the services of
associated investment personnel employed by its affiliated institutional asset
management companies. Pursuant to the Investment Advisory Agreement, MSDW
Investment Management is entitled to receive from the Class A and Class B shares
of each Portfolio an annual management fee, payable quarterly, equal to the
percentage of average daily net assets set forth in the table below. MSDW
Investment Management has voluntarily agreed to a reduction in the fees payable
to it and to reimburse the Portfolios, if necessary, if such fees would cause
the total annual operating expenses of each Portfolio to exceed the percentage
of average daily net assets set forth in the table below. In determining the
actual amount of voluntary fee waiver and/or expense reimbursement for a
Portfolio, if any, MSDW Investment Management excludes from annual operating
expenses certain investment related expenses, such as foreign country tax
expense and interest expense on borrowing. MSDW Investment Management reserves
the right to terminate any of its fee waivers and/or expense reimbursements at
any time in its sole discretion.
The following table shows, for each of the Class A and Class B shares of each
Portfolio, (i) the contractual advisory fee as a percentage of average daily net
assets; (ii) the advisory fee paid for each of the past three fiscal years;
(iii) the total operating expenses after voluntary fee waivers (excluding
certain investment related expenses); and (iv) total operating expenses after
voluntary fee waivers for the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
ADVISORY FEE PAID
(AFTER VOLUNTARY FEE WAIVERS)
---------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
CONTRACTUAL DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
PORTFOLIO ADVISORY FEE (000) (000) (000)
- --------- ------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Emerging Markets Portfolio......... 1.25% $12,672* $16,181* $21,203*
Emerging Markets Debt Portfolio.... 0.75 492* 1,410* 1,623*
Latin American Portfolio........... 1.10 144 636* 718
Active International Allocation
Portfolio........................ 0.65 2,262 1,017 588
Asian Equity Portfolio............. 0.80 191 88 1,674
Asian Real Estate Portfolio........ 0.80 0 0 0
China Growth Portfolio............. 1.25 -- -- --
European Equity Portfolio.......... 0.80 872 2,015 1,696
European Real Estate Portfolio..... 0.80 63 178 0
Global Equity Portfolio............ 0.80 1,592 1,409 673
Gold Portfolio..................... 1.00 -- -- 150
International Equity Portfolio..... 0.80 32,217 25,948 21,159
International Magnum Portfolio..... 0.80 1,592 1,728 984
International Small Cap
Portfolio........................ 0.95 2,571 2,462 2,268
Japanese Equity Portfolio.......... 0.80 412 440 1,139
Focus Equity Portfolio............. 0.80 1,017 1,535 1,067
Small Company Growth Portfolio..... 1.00 388 616 558
Equity Growth Portfolio............ 0.60 6,007 4,635 2,961
MicroCap Portfolio................. 1.00 -- -- --
Technology Portfolio............... 1.00 320 135 0
U.S. Equity Plus Portfolio......... 0.45 31 85 0
U.S. Real Estate Portfolio......... 0.80 2,391 2,423 2,313
Value Equity Portfolio............. 0.50 192 342 415
Fixed Income Portfolio............. 0.35 466 473 294
Global Fixed Income Portfolio...... 0.40 45 77 182
High Yield Portfolio............... 0.375 698* 711* 489*
Mortgage-Backed Securities
Portfolio........................ 0.35 -- -- --
Municipal Bond Portfolio........... 0.35 0 51 67
Money Market Portfolio............. 0.30 6,153* 5,176* 4,066*
Municipal Money Market Portfolio... 0.30 3,349* 2,881* 2,213*
<CAPTION>
TOTAL OPERATING
TOTAL OPERATING EXPENSES AFTER
EXPENSES AFTER VOLUNTARY FEE
VOLUNTARY FEE WAIVERS FOR THE
WAIVERS FISCAL YEAR
(EXCLUDING ENDED
INVESTMENT DECEMBER 31,
RELATED EXPENSES) 1999
-------------------------- --------------------------
PORTFOLIO CLASS A CLASS B CLASS A CLASS B
- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Emerging Markets Portfolio......... 1.57% 1.81% 1.64% 1.88%
Emerging Markets Debt Portfolio.... 1.29 1.55 1.40 1.65
Latin American Portfolio........... 1.70 1.95 1.79 2.05
Active International Allocation
Portfolio........................ 0.80 1.05 0.80 1.05
Asian Equity Portfolio............. 1.00 1.25 1.07 1.32
Asian Real Estate Portfolio........ 1.00 1.25 1.01 1.25
China Growth Portfolio............. -- -- -- --
European Equity Portfolio.......... 1.00 1.25 1.09 1.34
European Real Estate Portfolio..... 1.00 1.25 1.23 1.47
Global Equity Portfolio............ 1.00 1.25 1.01 1.26
Gold Portfolio..................... -- -- -- --
International Equity Portfolio..... 1.00 1.25 1.00 1.25
International Magnum Portfolio..... 1.00 1.25 1.01 1.25
International Small Cap
Portfolio........................ 1.15 -- 1.15 --
Japanese Equity Portfolio.......... 1.00 1.25 1.01 1.26
Focus Equity Portfolio............. 1.00 1.25 1.01 1.26
Small Company Growth Portfolio..... 1.25 1.50 1.25 1.50
Equity Growth Portfolio............ 0.80 1.05 0.80 1.05
MicroCap Portfolio................. -- -- -- --
Technology Portfolio............... 1.25 1.50 1.26 1.51
U.S. Equity Plus Portfolio......... 0.80 1.00 0.83 1.08
U.S. Real Estate Portfolio......... 1.00 1.25 1.00 1.25
Value Equity Portfolio............. 0.70 0.95 0.73 0.98
Fixed Income Portfolio............. 0.45 0.60 0.45 0.60
Global Fixed Income Portfolio...... 0.50 0.65 0.50 0.65
High Yield Portfolio............... 0.59 0.85 0.59 0.85
Mortgage-Backed Securities
Portfolio........................ -- -- -- --
Municipal Bond Portfolio........... 0.45 -- 0.45 --
Money Market Portfolio............. 0.50 -- 0.50 --
Municipal Money Market Portfolio... 0.50 -- 0.50 --
</TABLE>
- ----------------
* No fee waivers were necessary for this portfolio because total operating
expenses did not exceed the expense limitation.
INVESTMENT SUB-ADVISERS
MSDW Advisors, with principal offices at Two World Trade Center, New York, New
York 10048, serves as the investment sub-adviser to the Money Market and
Municipal Money Market Portfolios pursuant to an investment sub-advisory
agreement with
35
<PAGE>
MSDW Investment Management. As compensation for managing the day-to-day
investments of the Money Market and Municipal Money Market Portfolios, MSDW
Investment Management pays MSDW Advisors 40% of the investment advisory fee that
MSDW Investment Management receives from each of those Portfolios (net of
applicable fee waivers).
Sun Valley, with principal offices at 620 Sun Valley Road, Sun Valley, Idaho,
serves as the investment sub-adviser of the Gold Portfolio, pursuant to a
sub-advisory agreement among the Fund, MSDW Investment Management and Sun Valley
(the "Sub-Advisory Agreement"). MSDW Investment Management and Sun Valley have
entered into an indemnification agreement under which, generally, Sun Valley has
agreed to indemnify MSDW Investment Management and the Fund for claims or losses
in connection with any failure by Sun Valley to comply with its obligations
under the Sub-Advisory Agreement or related agreements or any act or omission
that amounts to negligence, misfeasance or bad faith, and MSDW Investment
Management has agreed to indemnify Sun Valley for claims or losses in connection
with any failure by MSDW Investment Management to comply with its obligations
under the Sub-Advisory Agreement or related agreements. As compensation for
sub-advisory services for the fiscal years ended December 31, 1999,
December 31, 1998 and December 31, 1997, Sun Valley earned fees of approximately
$0, $172 and $106,000, respectively, and from such fees voluntarily waived fees
of $0, $172 and $46,000, respectively.
PRINCIPAL UNDERWRITER
Morgan Stanley serves as principal underwriter to the Fund. For information
relating to the services provided by Morgan Stanley see "Distribution of
Shares."
FUND ADMINISTRATION
MSDW Investment Management also provides administrative services to the Fund
pursuant to an Administration Agreement. The services provided under the
Administration Agreement are subject to the supervision of the officers and the
Board of Directors of the Fund and include day-to-day administration of matters
related to the corporate existence of the Fund, maintenance of records,
preparation of reports, supervision of the Fund's arrangements with its
custodian, and assistance in the preparation of the Fund's registration
statement under federal laws. The Administration Agreement also provides that
MSDW Investment Management, through its agents, will provide dividend disbursing
and transfer agent services to the Fund. For its services under the
Administration Agreement, the Fund pays MSDW Investment Management a monthly fee
which on an annual basis equals 0.15% of the average daily net assets of each
Portfolio.
SUB-ADMINISTRATOR. Under an agreement between MSDW Investment Management and
Chase Bank, Chase Global, a corporate affiliate of Chase Bank, provides certain
administrative services to the Fund. MSDW Investment Management supervises and
monitors the administrative services provided by Chase Global. Their services
are also subject to the supervision of the officers and Board of Directors of
the Fund. Chase Global provides operational and administrative services to
investment companies with approximately $164 billion in assets and having
approximately 391,442 shareholder accounts as of December 31, 1999. Chase
Global's business address is 73 Tremont Street, Boston, Massachusetts
02108-3913.
CUSTODIAN
Chase Bank, located at 73 Tremont Street, Boston, MA 02108-3913, acts as the
Fund's custodian.
DIVIDEND DISBURSING AND TRANSFER AGENT
Chase Global, 73 Tremont Street, Boston, MA 02108-3913, provides dividend
disbursing and transfer agency for the Fund pursuant to the Sub-Administration
Agreement.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, located at 1177 Avenue of the Americas, New York,
NY, serves as independent accountants for the Fund and audits the annual
financial statements of each Portfolio.
FUND COUNSEL
Morgan, Lewis & Bockius LLP, located at 1701 Market Street, Philadelphia, PA
19103, acts as the Fund's legal counsel.
YEAR 2000
The Fund and its service providers do not appear to have been adversely affected
by computer problems related to the transition to the year 2000. However, there
remains a risk that such problems could rise or be discovered in the future.
Year 2000 related problems also may adversely affect issuers whose securities
the Fund purchases, which could have an impact on the value of your investment.
DISTRIBUTION OF SHARES
Morgan Stanley, a wholly-owned subsidiary of MSDW, serves as the Fund's
exclusive distributor of Portfolio shares pursuant to a Distribution Agreement.
In addition, to promote the sale of Fund shares, the Fund has adopted a Plan of
Distribution with respect to the Class B shares of each Portfolio (except the
Municipal Money Market and International Small Cap Portfolios which do not offer
Class B shares) under Rule 12b-1 of the 1940 Act (each, a "Plan"). Under each
Plan, Morgan Stanley is entitled to receive as compensation from each Portfolio
a fee, which is accrued daily and paid quarterly, at an annual rate of 0.25% of
the average daily net assets of the Class B shares. Each Plan is designed to
compensate Morgan Stanley for its services
36
<PAGE>
in connection with distributing shares of all Portfolios. Morgan Stanley may
retain any portion of the fees it does not expend in meeting its obligations to
the Fund. Morgan Stanley may compensate financial intermediaries, plan
fiduciaries and administrators for providing distribution-related services,
including account maintenance services, to shareholders (including, where
applicable, underlying beneficial owners) of Class B shares.
The Plans for the Class B shares were most recently approved by the Fund's Board
of Directors, including those directors who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of a
Plan or in any agreements related thereto, on June 22, 1999.
The following table describes the 12b-1 fees paid by each Portfolio pursuant to
the Plan and the distribution-related expenses for each Portfolio for the fiscal
year ended December 31, 1999. To the extent that expenditures on
distribution-related activities exceed the fees paid by a Portfolio, the excess
amounts were paid by MSDW Investment Management or Morgan Stanley out of their
own resources.
<TABLE>
<CAPTION>
PRINTING
AND
TOTAL MAILING OF 12B-1 FEES
DISTRIBUTION PROSPECTUSES RETAINED BY
(12B-1) TO OTHER MORGAN STANLEY/
FEES THAN COMPENSATION (EXPENDITURES
PAID BY CURRENT SHAREHOLDER SUB- TO SALES IN EXCESS OF
PORTFOLIO SHAREHOLDERS SERVICING DISTRIBUTION PERSONNEL 12B-1 FEES)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------
Emerging Markets Portfolio............ $ 24,343 $ 46 $ 0 $ 3,670 $ 3,286 $ 17,341
Emerging Markets Debt Portfolio....... 2,342 0 0 0 472 1,870
Latin American Portfolio.............. 3,367 0 0 2 728 2,637
Active International Allocation
Portfolio........................... 7,166 13 0 5,838 527 788
Asian Equity Portfolio................ 4,769 31 0 0 1,285 3,453
Asian Real Estate Portfolio........... 2,522 0 0 0 888 1,634
European Equity Portfolio............. 8,399 58 0 0 3,075 5,266
European Real Estate Portfolio........ 5,154 0 0 0 1,970 3,184
Global Equity Portfolio............... 60,609 624 2,031 58,836 4,627 (5,509)
Gold Portfolio........................ 0 0 0 0 0 0
International Equity Portfolio........ 70,706 0 0 44,771 294 25,641
International Magnum Portfolio........ 64,287 227 1,198 62,643 6,892 (6,673)
Japanese Equity Portfolio............. 5,223 42 0 469 1,817 2,895
Focus Equity Portfolio................ 46,666 0 736 63 16,883 28,984
Small Company Growth Portfolio........ 10,152 0 0 8,740 584 828
Equity Growth Portfolio............... 405,992 359 6,632 417,061 6,399 (24,459)
Technology Portfolio.................. 5,986 0 0 6 1,800 4,180
U.S. Equity Plus Portfolio............ 3,473 0 0 2,325 130 1,018
U.S. Real Estate Portfolio............ 34,819 0 0 3,264 7,822 23,733
Value Equity Portfolio................ 2,357 0 0 0 495 1,862
Fixed Income Portfolio................ 4,040 40 340 0 1,163 2,497
Global Fixed Income Portfolio......... 501 26 0 0 16 459
High Yield Portfolio.................. 117,169 0 0 0 45,675 71,494
</TABLE>
37
<PAGE>
BROKERAGE PRACTICES
PORTFOLIO TRANSACTIONS
MSDW Investment Management, as each Portfolio's investment adviser, is
responsible for decisions to buy and sell securities for each Portfolio, for
broker-dealer selection and for negotiation of commission rates. Purchases and
sales of securities on a stock exchange are effected through brokers who charge
a commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased or sold directly from or to an issuer, no
commissions or discounts are paid.
On occassion, a Portfolio may purchase certain money market instruments directly
from an issuer without payment of a commission or concession. Money market
instruments are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on such
transactions are generally higher than negotiated commissions on domestic
transactions. There is also generally less government supervision and regulation
of foreign securities exchanges and brokers than in the United States.
MSDW Investment Management serves as investment adviser to a number of clients,
including other investment companies. MSDW Investment Management attempts to
equitably allocate purchase and sale transactions among the Portfolios of the
Fund and other client accounts. To that end, MSDW Investment Management
considers various factors, including respective investment objectives, relative
size of portfolio holdings of the same or comparable securities, availability of
cash for investment, size of investment commitments generally held and the
opinions of the persons responsible for managing the Portfolios of the Fund and
other client accounts.
MSDW Investment Management selects the brokers or dealers that will execute the
purchases and sales of investment securities for each Portfolio. MSDW Investment
Management seeks the best execution for all portfolio transactions. A Portfolio
may pay higher commission rates than the lowest available when MSDW Investment
Management believes it is reasonable to do so in light of the value of the
research, statistical, and pricing services provided by the broker effecting the
transaction. In seeking to determine the reasonableness of brokerage commissions
paid in any transaction, MSDW Investment Management relies upon its experience
and knowledge regarding commissions generally charged by various brokers and on
its judgement in evaluating the brokerage and research services received from
the broker effecting the transaction. MSDW Investment Management is unable to
ascertain the value of these services due to the subjective nature of their
determinations.
In cases where suitable price and execution are obtainable from more than one
broker or dealer, MSDW Investment Management may place portfolio transactions
with those who also furnish research and other services to the Fund and MSDW
Investment Management. Such services may include information as to the
availability of securities for purchase or sale, statistical or factual
information or opinions pertaining to investment, wire services, and appraisals
or evaluations of portfolio securities. MSDW Investment Management may use these
research services to service all of its accounts and may not use all of these
services in connection with providing investment advice to the Portfolios. While
the receipt of such information and services would generally reduce the amount
of research or services otherwise performed by MSDW Investment Management and
thus reduce its expenses, the value of such reduction is indeterminable and
therefore will not reduce the fees paid to MSDW Investment Management.
It is not the Fund's practice to direct brokerage or principal business on the
basis of sales of Portfolio shares which may be made through intermediary
brokers or dealers. However, MSDW Investment Management may, consistent with
NASD rules, place portfolio orders with qualified broker-dealers who recommend
the applicable Portfolio to their clients or who act as agents in the purchase
of shares of the Portfolio for their clients.
Subject to the overriding objective of obtaining the best execution of orders,
the Fund may use broker-dealer affiliates of MSDW Investment Management to
effect Portfolio brokerage transactions under procedures adopted by the Fund's
Board of Directors. Pursuant to these procedures, MSDW Investment Management
uses two broker-dealer affiliates, Morgan Stanley (including Morgan Stanley
International Limited) and Dean Witter Reynolds, Inc. ("DWR"), each of which is
wholly owned by MSDW for such transactions, the commission rates and other
remuneration paid to Morgan Stanley or DWR must be fair and reasonable in
comparison to those of other broker-dealers for comparable transactions
involving similar securities being purchased or sold during a comparable time
period. This standard would allow the affiliated broker or dealer to receive no
more than the remuneration which would be expected to be received by an
unaffiliated broker.
For the fiscal years ended December 31, 1997, 1998 and 1999, the Fund paid
brokerage commissions of approximately $25,893,432, $23,357,888 and $20,717,111,
respectively. For the fiscal years ended December 31, 1997, 1998 and 1999, the
Fund paid in the aggregate $1,060,894, $755,255 and $1,021,566, respectively, as
brokerage commissions to Morgan Stanley, an affiliated broker-dealer, which
represented 4.10%, 3.23% and 4.93% of the total amount of brokerage commissions
paid in each
38
<PAGE>
respective period. For the fiscal years ended December 31, 1997, 1998 and 1999,
the Fund paid in the aggregate $7,010, $0 and $0, respectively, as brokerage
commissions to DWR, an affiliated broker-dealer which represented 0.03%, 0% and
0% of the total amount of brokerage commissions paid in the period.
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS PAID DURING FISCAL YEAR ENDED DECEMBER 31, 1999
-------------------------------------------------------------------------------------------
COMMISSIONS PAID TO MORGAN STANLEY COMMISSIONS PAID TO DWR
-------------------------------------- --------------------------------------
PERCENT OF PERCENT OF
TOTAL PERCENT OF TOTAL PERCENT OF TOTAL
COMMISSIONS TOTAL TOTAL BROKERED TOTAL TOTAL BROKERED
PORTFOLIO PAID COMMISSIONS COMMISSIONS TRANSACTIONS COMMISSIONS COMMISSIONS TRANSACTIONS
- --------- ----------- ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging Markets.................... $8,082,739 $307,639 3.81% 3.43% $0 0% 0%
Emerging Markets Debt............... 0 0 0 0 0 0 0
Latin American...................... 133,838 1,192 0.89 1.75 0 0 0
Active International Allocation..... 472,261 2,982 0.63 1.42 0 0 0
Asian Equity........................ 954,117 165,631 17.36 16.60 0 0 0
Asian Real Estate................... 29,936 8,082 27.00 21.63 0 0 0
China Growth........................ -- -- -- -- -- -- --
European Equity..................... 547,509 15,863 2.90 8.06 0 0 0
European Real Estate................ 103,184 6,577 6.37 7.13 0 0 0
Global Equity....................... 363,210 24,249 6.68 10.25 0 0 0
Gold................................ -- -- -- -- -- -- --
International Equity................ 5,660,807 181,116 3.20 6.53 0 0 0
International Magnum................ 681,129 77,269 11.34 14.93 0 0 0
International Small Cap............. 727,604 6,581 0.90 1.13 0 0 0
Japanese Equity..................... 94,093 32,567 34.61 34.59 0 0 0
Focus Equity........................ 306,306 20,575 6.72 6.91 0 0 0
Small Company Growth................ 158,925 16,527 10.40 8.23 0 0 0
Equity Growth....................... 1,276,547 121,443 9.51 10.96 0 0 0
MicroCap............................ -- -- -- -- -- -- --
Technology.......................... 82,051 2,468 3.01 2.17 0 0 0
U.S. Equity Plus.................... 93,874 0 0 0 0 0 0
U.S. Real Estate.................... 851,550 0 0 0 0 0 0
Value Equity........................ 96,861 30,805 31.80 30.76 0 0 0
Fixed Income........................ 0 0 0 0 0 0 0
Global Fixed Income................. 5 0 0 100.00 0 0 0
High Yield.......................... 565 0 0 0 0 0 0
Mortgage-Backed Securities.......... -- -- -- -- -- -- --
Municipal Bond...................... 0 0 0 0 0 0 0
Money Market........................ 0 0 0 0 0 0 0
Municipal Money Market.............. 0 0 0 0 0 0 0
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
BROKERAGE COMMISSION PAID DURING FISCAL YEARS ENDED DECEMBER 31, 1998 AND 1997
-----------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1998 FISCAL YEAR ENDED DECEMBER 31, 1997
---------------------------------------- ----------------------------------------
PORTFOLIO TOTAL MORGAN STANLEY DWR TOTAL MORGAN STANLEY DWR
- --------- ----------- -------------- --------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Emerging Markets................... $7,405,604 $427,280 $ 0 $9,553,152 $508,656 $ 0
Emerging Markets Debt.............. 11,600 0 0 0 0 0
Latin American..................... 612,986 16,187 0 934,181 48,639 0
Active International Allocation.... 271,986 1,858 0 221,850 8 0
Asian Equity....................... 893,159 63,049 0 3,340,107 269,475 0
Asian Real Estate.................. 89,878 13,591 0 17,777 1,663 0
China Growth....................... -- -- -- -- -- --
European Equity.................... 701,142 23,472 0 428,978 893 0
European Real Estate............... 262,099 18,479 0 57,604 760 0
Global Equity...................... 428,439 33,841 0 146,658 7,724 0
Gold............................... -- -- -- 182,258 0 0
International Equity............... 4,447,250 36,072 0 4,108,858 34,331 0
International Magnum............... 505,962 39,045 0 478,263 3,816 0
International Small Cap............ 613,660 11,066 0 534,567 4,183 0
Japanese Equity.................... 345,321 71,315 0 687,376 133,968 0
Focus Equity....................... 1,412,028 0 0 914,888 0 0
Small Company Growth............... 646,865 0 0 237,105 0 0
Equity Growth...................... 2,460,784 0 0 1,911,995 108 1,988
MicroCap........................... -- -- -- -- -- --
Technology......................... 80,839 0 0 138,077 0 0
U.S. Equity Plus................... 125,983 0 0 7,886 18 0
U.S. Real Estate................... 1,677,239 0 0 1,886,276 46,652 5,022
Value Equity....................... 361,047 0 0 105,576 0 0
Fixed Income....................... 0 0 0 0 0 0
Global Fixed Income................ 4,017 0 0 0 0 0
High Yield......................... 0 0 0 0 0 0
Mortgage-Backed Securities......... -- -- -- -- -- --
Municipal Bond..................... 0 0 0 0 0 0
Money Market....................... 0 0 0 0 0 0
Municipal Money Market............. 0 0 0 0 0 0
</TABLE>
DIRECTED BROKERAGE. During the fiscal year ended December 31, 1999, the
Portfolios paid brokerage commissions to brokers because of research services
provided as follows:
<TABLE>
<CAPTION>
AGGREGATE DOLLAR
AMOUNT OF
BROKERAGE COMMISSIONS TRANSACTIONS FOR
DIRECTED IN CONNECTION WHICH SUCH
WITH RESEARCH SERVICES COMMISSIONS WERE
PROVIDED FOR PAID FOR FISCAL YEAR
FISCAL YEAR ENDED ENDED
PORTFOLIO DECEMBER 31, 1999 DECEMBER 31, 1999
- --------- ---------------------- --------------------
<S> <C> <C>
Emerging Markets Portfolio.............. $ 8,082,739 $2,256,971,055
Emerging Markets Debt Portfolio......... 0 0
Latin American Portfolio................ 133,838 46,790,770
Active International Allocation
Portfolio............................. 472,261 553,750,205
Asian Equity Portfolio.................. 954,117 265,190,629
Asian Real Estate Portfolio............. 29,936 7,272,994
China Growth Portfolio.................. N/A N/A
European Equity Portfolio............... 547,509 255,333,380
European Real Estate Portfolio.......... 103,184 42,118,725
Global Equity Portfolio................. 363,210 178,232,101
Gold Portfolio.......................... N/A N/A
International Equity Portfolio.......... 5,660,807 2,867,296,834
International Magnum Portfolio.......... 681,129 327,294,974
International Small Cap Portfolio....... 727,604 251,714,788
Japanese Equity Portfolio............... 94,093 47,075,457
Focus Equity Portfolio.................. 295,422 294,376,401
Small Company Growth Portfolio.......... 117,810 63,714,789
Equity Growth Portfolio................. 1,225,950 1,226,095,337
MicroCap Portfolio...................... N/A N/A
Technology Portfolio.................... 48,815 40,166,997
U.S. Equity Plus Portfolio.............. 93,874 137,936,317
U.S. Real Estate Portfolio.............. 844,237 335,582,148
Value Equity Portfolio.................. 96,861 78,221,277
Fixed Income Portfolio.................. 0 0
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE DOLLAR
AMOUNT OF
BROKERAGE COMMISSIONS TRANSACTIONS FOR
DIRECTED IN CONNECTION WHICH SUCH
WITH RESEARCH SERVICES COMMISSIONS WERE
PROVIDED FOR PAID FOR FISCAL YEAR
FISCAL YEAR ENDED ENDED
PORTFOLIO DECEMBER 31, 1999 DECEMBER 31, 1999
- --------- ---------------------- --------------------
<S> <C> <C>
Global Fixed Income Portfolio........... 5 796,912
High Yield Portfolio.................... 565 516,150
Mortgage-Backed Securities Portfolio.... N/A N/A
Municipal Bond Portfolio................ 0 0
Money Market Portfolio.................. 0 0
Municipal Money Market Portfolio........ 0 0
</TABLE>
REGULAR BROKER-DEALERS. The Fund's regular broker-dealers are (i) the ten
broker-dealers that received the greatest dollar amount of brokerage commissions
from the Fund; (ii) the ten broker-dealers that engaged as principal in the
largest dollar amount of portfolio transactions; and (iii) the ten
broker-dealers that sold the largest dollar amount of Portfolio shares. During
the fiscal year ended December 31, 1999, the following Portfolios purchased
securities issued by the Fund's regular broker-dealers:
<TABLE>
<CAPTION>
VALUE OF PORTFOLIO HOLDING
PORTFOLIO REGULAR BROKER-DEALER AS OF DECEMBER 31, 1999
- --------- -------------------------------------------------- --------------------------
<S> <C> <C>
International Equity Portfolio..... Manulife Financial $ 22,481
U.S. Equity Plus Portfolio......... Charles Schwab $ 23
Lehman Brothers, Inc. $ 136
Money Market Portfolio............. Goldman Sachs Group, Inc. $ 69,679
Merrill Lynch & Co. $ 69,488
</TABLE>
PORTFOLIO TURNOVER. The Portfolios generally do not invest for short-term
trading purposes, however, when circumstances warrant, each Portfolio may sell
investment securities without regard to the length of time they have been held.
Market conditions in a given year could result in a higher or lower portfolio
turnover rate than expected and the Portfolios will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with
their investment objectives and policies. Higher portfolio turnover (e.g., over
100%) necessarily will cause the Portfolios to pay correspondingly increased
brokerage and trading costs. In addition to transaction costs, higher portfolio
turnover may result in the realization of capital gains. As discussed under
"Taxes," to the extent net short-term capital gains are realized, any
distributions resulting from such gains are considered ordinary income for
federal income tax purposes.
GENERAL INFORMATION
FUND HISTORY
The Fund was incorporated pursuant to the laws of the State of Maryland on
June 16, 1988 under the name Morgan Stanley Institutional Fund, Inc. The Fund
filed a registration statement with the SEC registering itself as an open-end
management investment company offering diversified and non-diversified series
under the 1940 Act and its shares under the 1933 Act, as amended, and commenced
operations on November 15, 1988. Effective December 1, 1998, the Fund changed
its name to Morgan Stanley Dean Witter Institutional Fund, Inc.
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund's Amended and Restated Articles of Incorporation permit the Directors
to issue 40 billion shares of common stock, par value $.001 per share, from an
unlimited number of classes or series of shares. The Fund currently consists of
shares of thirty Portfolios. Each Portfolio offers Class A and Class B shares
except that the Municipal Money Market and International Small Cap Portfolios
offer only Class A shares.
The shares of each Portfolio of the Fund are fully paid and nonassessable, and
have no preference as to conversion, exchange, dividends, retirement or other
features. Portfolio shares have no pre-emptive rights. The shares of the Fund
have non-cumulative voting rights, which means that the holders of more than 50%
of the shares voting for the election of Directors can elect 100% of the
Directors if they choose to do so. Shareholders are entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in their name on the books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's net
investment income, if any. The Fund may also distribute any net realized capital
gains in the amount and at the times that will avoid both income (including
taxable gains) taxes on it and the imposition of the federal excise tax on
income and capital gains (see "Taxes"). However, the Fund may also choose to
retain net realized capital gains and pay taxes on such gains. The amounts of
any income dividends or capital gains distributions cannot be predicted.
41
<PAGE>
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net asset
value of that Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes for shareholders subject to tax as set
forth herein and in the applicable Prospectus.
As set forth in the Prospectuses, unless you elect otherwise in writing, all
dividends and capital gains distributions for a class of shares are
automatically reinvested in additional shares of the same class of the Portfolio
at net asset value (as of the business day following the record date). This
automatic reinvestment of dividends and distributions will remain in effect
until you notify the Fund in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions reinvested in shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected.
TAXES
The following is only a summary of certain additional federal income tax
considerations generally affecting the Fund, Portfolios and their shareholders
that are not described in the Prospectuses. No attempt is made to present a
detailed explanation of the federal, state or local tax treatment of the Fund,
Portfolios or shareholders, and the discussion here and in the Prospectuses is
not intended to be a substitute for careful tax planning.
The following general discussion of certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
Each Portfolio within the Fund is generally treated as a separate corporation
for federal income tax purposes. Thus, the provisions of the Code generally will
be applied to each Portfolio separately, rather than to the Fund as a whole.
REGULATED INVESTMENT COMPANY QUALIFICATION
Each Portfolio intends to qualify and elect to be treated for each taxable year
as a regulated investment company ("RIC") under Subchapter M of the Code. In
order to so qualify, each Portfolio must, among other things, (i) derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, and other income derived
with respect to its business of investing in such stock securities or
currencies, including, generally, certain gains from options, futures and
forward contracts; and (ii) diversify its holdings so that, at the end of each
fiscal quarter of the Portfolio's taxable year, (a) at least 50% of the market
value of the Portfolio's total assets is represented by cash and cash items,
U.S. Government securities, securities of other RICs, and other securities, with
such other securities limited, in respect to any one issuer, to an amount not
greater than 5% of the value of the Portfolio's total assets or 10% of the
outstanding voting securities of such issuer, and (b) not more than 25% of the
value of its total assets are invested in the securities (other than U.S.
Government securities or securities of other RICs) of any one issuer or two or
more issuers which the Portfolio controls and which are engaged in the same,
similar, or related trades or business. For purposes of the 90% of gross income
requirement described above, foreign currency gains which are not directly
related to a Portfolio's principal business of investing in stock or securities
(or options or futures with respect to stock or securities) may be excluded from
income that qualifies under the 90% requirement. For purposes of the
diversification requirement described above, the Portfolio will not be treated
as in violation of such requirement as a result of a discrepency between the
value of its various investments and the diversification percentages described
above, unless such discrepancy exists immediately following the acquisition of
any security or other property and is wholly or partly the result of such
acquisition. Moreover, even in the event of noncompliance with the
diversification requirement as of the end of any given quarter, the Portfolio is
permitted to cure the violation by eliminating the discrepancy causing such
noncompliance within a period of 30 days from the close of the relevant quarter.
In addition to the requirements described above, in order to qualify, a
Portfolio must distribute at least 90% of its net investment income (which
generally includes dividends, taxable interest, and the excess of net short-term
capital gains over net long-term capital losses less operating expenses) and at
least 90% of its net tax-exempt interest income, for each tax year, if any, to
its shareholders. If a Portfolio meets all of the RIC requirements, it will not
be subject to federal income tax on any of its net investment income or capital
gains that it distributes to shareholders.
If a Portfolio fails to qualify as a RIC for any taxable year, all of its net
income will be subject to tax at regular corporate rates (whether or not
distributed to shareholders), and its distributions (including capital gains
distributions) will be taxable as ordinary income dividends to its shareholders
to the extent of the Portfolio's current and accumulated earnings and profits,
and will be eligible for the corporate dividends-received deduction for
corporate shareholders.
GENERAL TAX TREATMENT OF QUALIFYING RICS AND SHAREHOLDERS
Each Portfolio intends to distribute substantially all of its net investment
income (including, for this purpose, net short-term capital gain) to
shareholders. Dividends from a Portfolio's net investment income are taxable to
shareholders as ordinary income, whether received in cash or in additional
shares. Such dividends paid by a Portfolio generally will only qualify for the
42
<PAGE>
dividends-received deduction for corporate shareholders to the extent of the
Portfolio's qualifying dividend income and to the extent designated by the
Portfolio. Each Portfolio will report annually to its shareholders the amount of
dividend income qualifying for such treatment.
Each Portfolio will decide whether to distribute or to retain all or part of any
net capital gains (the excess of net long-term capital gains over net short-term
capital losses) in any year for reinvestment. Distributions of net capital gain
are taxable to shareholders as a long-term capital gain regardless of how long
shareholders have held their shares. Each Portfolio will send reports annually
to shareholders regarding the federal income tax status of all distributions
made during the preceding year. If any such gains are retained, the Portfolio
will pay federal income tax thereon, and, if the Portfolio makes an election,
the shareholders will include such undistributed gains in their income, will
increase their tax basis in Portfolio shares by 65% of the amount included in
their income and will be able to claim their share of the tax paid by the
Portfolio as a refundable credit.
Dividends and other distributions declared by a Portfolio in October,
November or December of any year and payable to shareholders of record on a date
in such month will be deemed to have been paid by the Portfolio and received by
shareholders on December 31 of that year if the distributions are paid by the
Portfolio at any time during the following January.
A gain or loss realized by a shareholder on the sale, exchange or redemption of
shares of a Portfolio held as a capital asset will be capital gain or loss, and
such gain or loss will be long-term if the holding period for the shares exceeds
12 months and otherwise will be short-term. Any loss realized on a sale,
exchange or redemption of shares of a Portfolio will be disallowed to the extent
the shares disposed of are replaced within the 61-day period beginning 30 days
before and ending 30 days after the shares are disposed of. Any loss realized by
a shareholder on the disposition of shares held 6 months or less is treated as a
long-term capital loss to the extent of any distributions of net long-term
capital gains received by the shareholder with respect to such shares or any
inclusion of undistributed capital gain with respect to such shares.
The conversion of Class A shares to Class B shares will not be a taxable event
to the shareholder.
Each Portfolio will generally be subject to a nondeductible 4% federal excise
tax to the extent it fails to distribute by the end of any calendar year at
least 98% of its ordinary income for that year and 98% of its capital gain net
income (the excess of short- and long-term capital gains over short- and
long-term capital losses) for the one-year period ending on October 31 of that
year, plus certain other amounts. Each Portfolio intends to make sufficient
distributions or deemed distributions of its ordinary income and capital gain
net income (the excess of short-term and long-term capital gain over short-term
and long-term capital losses, including any available capital loss
carryforwards), prior to the end of each calendar year to avoid liability for
federal excise tax.
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
dividends, capital gains distributions and redemption proceeds paid to any
individual or certain other non-corporate shareholder (i) who has failed to
provide a correct taxpayer identification number (generally an individual's
social security number or non-individual's employer identification number) on
the Account Registration Form; (ii) who is subject to backup withholding by the
Internal Revenue Service; or (iii) who has not certified to the Fund that such
shareholder is not subject to backup withholding. This backup withholding is not
an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
As discussed above, in order for each Portfolio to continue to qualify for
federal income tax treatment as a RIC, at least 90% of its gross income for a
taxable year must be derived from certain qualifying income, including
dividends, interest, income derived from loans of securities, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
related income, including gains from options, futures and forward contracts,
derived with respect to its business of investing in stock, securities or
currencies. Any net gain realized from the closing out of futures contracts will
therefore generally be qualifying income for purposes of the 90% requirement.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY AND DERIVATIVES TRANSACTIONS
In general, gains from foreign currencies and from foreign currency options,
foreign currency futures and forward foreign exchange contracts relating to
investments in stock, securities or foreign currencies are currently considered
to be qualifying income for purposes of determining whether the Portfolio
qualifies as a RIC. It is unclear, however, who will be treated as the issuer of
certain foreign currency instruments or how foreign currency options, futures,
or forward foreign currency contracts will be valued for purposes of the
regulated investment company diversification requirements applicable to the
Portfolio. The Portfolio may request a private letter ruling from the Internal
Revenue Service on some or all of these issues.
Under Code Section 988, special rules are provided for certain transactions in a
foreign currency other than the taxpayer's functional currency (i.e., unless
certain special rules apply, currencies other than the U.S. dollar). In general,
foreign currency gains or losses from forward contracts, from futures contracts
that are not "regulated futures contracts", and from unlisted options will be
treated as ordinary income or loss under Code Section 988. Also, certain foreign
exchange gains or losses derived with respect to foreign fixed-income securities
are also subject to Section 988 treatment. In general, therefore, Code Section
988 gains or losses will increase or decrease the amount of the Portfolio's
investment company taxable income available to be distributed to shareholders as
ordinary income, rather than increasing or decreasing the amount of the
Portfolio's net capital gain.
A Portfolio's investment in options, swaps and related transactions, futures
contracts and forward contracts, options on futures contracts and stock indices
and certain other securities, including transactions involving actual or deemed
short sales or foreign exchange gains or losses are subject to many complex and
special tax rules. For example, over-the-counter options on debt
43
<PAGE>
securities and equity options, including options on stock and on narrow-based
stock indexes, will be subject to tax under Section 1234 of the Code, generally
producing a long-term or short-term capital gain or loss upon exercise, lapse or
closing out of the option or sale of the underlying stock or security. By
contrast, a Portfolio's treatment of certain other options, futures and forward
contracts entered into by a Portfolio is generally governed by Section 1256 of
the Code. These "Section 1256" positions generally include listed options on
debt securities, options on broad-based stock indexes, options on securities
indexes, options on futures contracts, regulated futures contracts and certain
foreign currency contracts and options thereon.
When a Portfolio holds options or futures contracts which substantially diminish
their risk of loss with respect to other positions (as might occur in some
hedging transactions), this combination of positions could be treated as a
"straddle" for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of Portfolio securities and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles (i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position) which may reduce or
eliminate the operation of these straddle rules.
A Section 1256 position held by a Portfolio will generally be marked-to-market
(i.e. treated as if it were sold for fair market value) on the last business day
of the Fund's fiscal year, and all gain or loss associated with fiscal year
transactions and mark-to-market positions at fiscal year end (except certain
currency gain or loss covered by Section 988 of the Code) will generally be
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. The effect of Section 1256 mark-to-market rules may be to accelerate
income or to convert what otherwise would have been long-term capital gains into
short-term capital gains or short-term capital losses into long-term capital
losses within a Portfolio. The acceleration of income on Section 1256 positions
may require a Portfolio to accrue taxable income without the corresponding
receipt of cash. In order to generate cash to satisfy the distribution
requirements of the Code, a Portfolio may be required to dispose of portfolio
securities that it otherwise would have continued to hold or to use cash flows
from other sources. Any or all of these rules may, therefore, affect the amount,
character and timing of income earned and, in turn, distributed to shareholders
by a Portfolio.
SPECIAL TAX CONSIDERATIONS RELATING TO MUNICIPAL BOND AND MUNICIPAL MONEY MARKET
PORTFOLIOS
Each of the Municipal Bond Portfolio and the Municipal Money Market Portfolio
will qualify to pay "exempt-interest dividends" to its shareholders, provided
that, at the close of each quarter of its taxable year, at least 50% of the
value of its total assets consist of obligations the interest on which is exempt
from federal income tax. Current federal tax law limits the types and volume of
bonds qualifying for federal income tax exemption of interest, which may have an
effect on the ability of these Portfolios to purchase sufficient amounts of
tax-exempt securities to satisfy this requirement. Any loss on the sale or
exchange of shares of the Municipal Bond Portfolio or the Municipal Money Market
Portfolio held for six months or less will be disallowed to the extent of any
exempt-interest dividends received by the selling shareholder with respect to
such shares.
In addition, for the Municipal Bond Portfolio and the Municipal Money Market
Portfolio, exempt-interest dividends are excludable from a shareholder's gross
income for regular Federal income tax purposes. Exempt-interest dividends may,
nevertheless, be subject to the alternative minimum tax imposed by Section 55 of
the Code (the "Alternative Minimum Tax"). The Alternative Minimum Tax is imposed
at the rate of up to 28% in the case of non-corporate taxpayers and at the rate
of 20% in the case of corporate taxpayers, to the extent it exceeds the
taxpayer's regular tax liability. The Alternative Minimum Tax may be affected by
the receipt of exempt-interest dividends in two circumstances. First,
exempt-interest dividends derived from certain "private activity bonds" issued
after August 7, 1986, will generally be an item of tax preference and therefore
potentially subject to the Alternative Minimum Tax. The Portfolios intend, when
possible, to avoid investing in private activity bonds. Second, in the case of
exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined in
Section 56(g) of the Code, in calculating the corporation's alternative minimum
taxable income for purposes of determining the Alternative Minimum Tax.
The percentage of income that constitutes exempt-interest dividends will be
determined for each year for the Municipal Bond Portfolio and the Municipal
Money Market Portfolio and will be applied uniformly to all dividends declared
with respect to the Portfolios during that year. This percentage may differ from
the actual percentage for any particular day.
Interest on indebtedness incurred or continued by shareholders to purchase or
carry shares of the Municipal Bond Portfolio or the Municipal Money Market
Portfolio will be limited for federal income tax purposes to the extent that any
portion of such Portfolio's distributions consist of exempt-interest dividends.
The deduction otherwise allowable to property and casualty insurance companies
for "losses incurred" will be reduced by an amount equal to a portion of
exempt-interest dividends received or accrued during any taxable year. Foreign
corporations engaged in a trade or business in the United States will be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. Up to 85% of the Social Security
benefits or railroad retirement benefits received by an individual during any
taxable year will be included in the gross income of such individual if the
individual's "modified adjusted gross income" (which includes exempt-interest
dividends) plus one-half of the Social Security benefits or railroad retirement
benefits received by such individual during that taxable year exceeds the base
amount described in Section 86 of the Code.
44
<PAGE>
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds or
private activity bonds should consult their tax advisors before purchasing
shares of the Municipal Bond Portfolio or the Municipal Money Market Portfolio.
"Substantial user" is defined generally for these purposes as including a
"non-exempt person" who regularly uses in trade or business a part of a facility
financed from the proceeds of such bonds.
Issuers of bonds purchased by the Municipal Bond Portfolio (or the beneficiary
of such bonds) may have made certain representations or covenants in connection
with the issuance of such bonds to satisfy certain requirements of the Code that
must be satisfied subsequent to the issuance of such bonds. Investors should be
aware that exempt-interest dividends derived from such bonds may become subject
to federal income taxation retroactively to the date thereof if such
representations are determined to have been inaccurate or if the issuer of such
bonds (or the beneficiary of such bonds) fails to comply with such covenants.
The state and local tax consequences of an investment in either the Municipal
Bond or Municipal Money Market Portfolios may differ from the federal
consequences described above and shareholders are urged to consult their tax
advisers with respect to such aspects.
SPECIAL TAX CONSIDERATIONS RELATING TO FOREIGN INVESTMENTS
Gains or losses attributable to foreign currency contracts, or to fluctuations
in exchange rates that occur between the time a Portfolio accrues interest or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Portfolio actually collects such receivables
or pays such liabilities are treated as ordinary income or ordinary loss to the
Portfolio. Similarly, gains or losses on disposition of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gain or loss to the Portfolio.
These gains or losses increase or decrease the amount of a Portfolio's net
investment income available to be distributed to its shareholders as ordinary
income.
It is expected that each Portfolio will be subject to foreign withholding taxes
with respect to its dividend and interest income from foreign countries, and a
Portfolio may be subject to foreign income taxes with respect to other income.
So long as more than 50% in value of a Portfolio's total assets at the close of
the taxable year consists of stock or securities of foreign corporations, the
Portfolio may elect to treat certain foreign income taxes imposed on it for U.S.
federal income tax purposes as paid directly by its shareholders. A Portfolio
will make such an election only if it deems it to be in the best interest of its
shareholders and will notify shareholders in writing each year if it makes an
election and of the amount of foreign income taxes, if any, to be treated as
paid by the shareholders. If a Portfolio makes the election, shareholders will
be required to include in income their proportionate share of the amount of
foreign income taxes treated as imposed on the Portfolio and will be entitled to
claim either a credit (subject to the limitations discussed below) or, if they
itemize deductions, a deduction, for their shares of the foreign income taxes in
computing their federal income tax liability.
Certain foreign governments levy withholding or other taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. Except in the case of
the Global Equity, European Equity, Japanese Equity, Asian Equity, Global Fixed
Income, International Fixed Income, International Magnum, International Small
Cap, Latin American, Active International Allocation, European Real Estate,
Asian Real Estate, Emerging Markets, Emerging Markets Debt, and China Growth
Portfolios, it is not expected that a Portfolio or its shareholders would be
able to claim a credit for U.S. tax purposes with respect to any such foreign
taxes. However, these foreign withholding taxes may not have a significant
impact on such Portfolios, considering that each Portfolio's investment
objective is to seek long-term capital appreciation and any dividend or interest
income should be considered incidental.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes will be subject to a number of complex limitations regarding the
availability and utilization of the credit. Because of these limitations,
shareholders may be unable to claim a credit for the full amount of their
proportionate shares of the foreign income taxes paid by a Portfolio.
Shareholders are urged to consult their tax advisors regarding the application
of these rules to their particular circumstances.
TAXES AND FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, a foreign trust or estate, a foreign corporation, or a foreign
partnership ("Foreign Shareholder") depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from a Portfolio is not effectively connected with a U.S. trade or
business carried on by a Foreign Shareholder, distributions of net investment
income plus the excess of net short-term capital gains over net long-term
capital losses will be subject to U.S. withholding tax at the rate of 30% (or
such lower treaty rate as may be applicable) upon the gross amount of the
dividend. Furthermore, Foreign Shareholders will generally be exempt from U.S.
federal income tax on gains realized on the sale of shares of a Portfolio,
distributions of net long-term capital gains, and amounts retained by the Fund
that are designated as undistributed capital gains.
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If the income from a Portfolio is effectively connected with a U.S. trade or
business carried on by a Foreign Shareholder, then distributions from the
Portfolio and any gains realized upon the sale of shares of the Portfolio, will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens
and residents or domestic corporations.
A Portfolio may be required to withhold U.S. federal income tax on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless the Foreign Shareholder complies with Internal Revenue Service
certification requirements.
The tax consequences to a Foreign Shareholder entitled to claim the benefits of
an applicable tax treaty may differ from those described here. Furthermore,
Foreign Shareholders are strongly urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in a
Portfolio, including the potential application of the provisions of the Foreign
Investment in Real Estate Property Tax Act of 1980, as amended.
STATE AND LOCAL TAX CONSIDERATIONS
Rules of U.S. state and local taxation of dividend and capital gains from
regulated investment companies often differ from the rules for U.S. federal
income taxation described above. Shareholders are urged to consult their tax
advisors as to the consequences of these and other U.S. state and local tax
rules regarding an investment in the Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
CONTROL PERSONS
The following shareholders may be deemed to control the following Portfolios
because they are record owners of 25% or more of the outstanding shares of that
Portfolio of the Fund as of April 14, 2000. For each control person, the
following table provides the name, address and percentage of outstanding shares
of such Portfolio owned.
SMALL COMPANY GROWTH PORTFOLIO: Fidelity Investments Institutional, Operations
Co. FIIOC as Benefit Plans, 100 Magellan Way KW1C, Covington, KY 41015, owned
42.07% of such Portfolio's total outstanding shares.
VALUE EQUITY PORTFOLIO: Morgan Stanley Asset Mgmt for the Account of Hubbell
Inc., Attn: John Larn, 22nd Floor, 1221 Avenue of the Americas, New York, NY
10020, owned 35.73% of such Portfolio's total outstanding shares.
GLOBAL FIXED INCOME PORTFOLIO: Northern Trust Company as Custodian FBO The Lund
Foundation, P.O. Box 92956, Chicago, IL 60675, owned 35.52% of such Portfolio's
total outstanding shares.
EUROPEAN REAL ESTATE PORTFOLIO: Trustees of Dartmouth College, One Rope Ferry
Road, Hanover, NH 03755, owned 34.20% of such Portfolio's total outstanding
shares.
INTERNATIONAL MAGNUM PORTFOLIO: Bankers Trust TTEE for Harris Corp. Retirement
Plan, 1025 W. Nasa Boulevard, Boston, MA 02110, owned 28.10% of such Portfolio's
outstanding shares.
GLOBAL EQUITY PORTFOLIO: Fidelity Investments Inst'l, Operations Co. FIIOC as
Benefit Plans, 100 Magellan Way KW1C, Covington, KY 41015, owned 34.93% of such
Portfolio's total outstanding shares.
EMERGING MARKETS PORTFOLIO: Morgan Stanley & Co. 401k Pension Plan, Cust. c/o
Northern Trust Co. Cust., 770 Broadway, New York, NY 10003 owned 51.33% of such
Portfolio's total outstanding shares.
ASIAN REAL ESTATE PORTFOLIO: Morgan Stanley Asset Management Inc., Attn: Elisa
Divito, 1221 Avenue of the Americas, New York, NY 10020, owned 64.32% of such
Portfolio's total outstanding shares.
ASIAN EQUITY PORTFOLIO: Morgan Stanley & Co. 401k Pension Plan, Cust c/o
Northern Trust Co. Cust, 770 Broadway, New York, NY 10003, owned 31.80% of such
Portfolio's total outstanding shares.
FIXED INCOME PORTFOLIO: Morgan Stanley & Co. 401k Pension Plan, Cust c/o
Northern Trust Co. Cust, 770 Broadway, New York, NY 10003, owned 31.23% of such
Portfolio's total outstanding shares.
FOCUS EQUITY PORTFOLIO: Morgan Stanley & Co. 401k Pension Plan, Cust c/o
Northern Trust Co. Cust, 770 Broadway, New York, NY 10003, owned 31.06% of such
Portfolio's total outstanding shares.
EQUITY PLUS PORTFOLIO: The Flinn Foundation, Northern Trust Co., Master Trust
Dept., 7th Fl., P.O. Box 92984, Chicago, IL 60675, owned 26.47% of such
Portfolio's total outstanding shares.
The Institute for Genomic Research, 9712 Medical Center Dr., Rockville, MD
20850, owned 27.85% of such Portfolio's total outstanding shares.
PRINCIPAL HOLDERS
The following shareholders are record owners of 5% or more of the outstanding
shares of any class of Portfolio shares as of April 14, 2000. For each principal
holder, the following table provides the name, address and percentage of
outstanding shares of such classes owned.
EUROPEAN REAL ESTATE PORTFOLIO: Trustees of Dartmouth College, One Rope Ferry
Road, Hanover, NH 03755, owned 41.76% of such Portfolio's total outstanding
Class A shares.
The C J Mack Foundation, 91 Sunset Ln, Rye, NY 10580, owned 12.30% of such
Portfolio's total outstanding Class A shares.
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Florence Lloyd Jones Barnett Charitabe, Remainder Unitrust, 6120 South Yale,
Suite 350, Tulsa, OK 74136, owned 8.78% of such Portfolio's total outstanding
Class A shares.
The Cathryn R Fortune Char, Remainder Unitrust Of 5/15/98, 5505 Lake Wa Blvd Ne
Unit 1D, Kirkland, WA 98033-7379, owned 17.86% of such Portfolio's total
outstanding Class B shares.
Harold M Mayer Family Trust, Dtd 7/16/74, Attn Barbara Pope, 115 S Lasalle St,
Suite 2285, Chicago, IL 60603-3801, owned 14.53% of such Portfolio's total
outstanding Class B shares.
Irene R Miller & Anoush Khoshkish, Apt 10e, 186 Riverside Dr, Manhattan,
NY 10024-1007, owned 11.75% of such Portfolio's total outstanding Class B
shares.
The 1991 Kidder Family Trust, FBO Kevin C Kidder, 900 Knollwood Drive, Santa
Barbara, CA 93108-1433, owned 7.96% of such Portfolio's total outstanding
Class B shares.
The 1991 Kidder Family Trust, FBO Karin E Kidder, 900 Knollwood Drive, Santa
Barbara, CA 93108-1433, owned 6.17% of such Portfolio's total outstanding
Class B shares.
Bernard M Madej and Elaine M Madej Jtwros, 10831 Oakland Drive, Orland Park,
IL 60462, owned 5.80% of such Portfolio's total outstanding Class B shares.
Ned McCarthy Trust, 3 Sugar Maple Ln, Hanover, NH 03755, owned 5.70% of such
Portfolio's total outstanding Class B shares.
Shimer And Fortune Chart Rem, Unitrust Of 2/6/98 John Shimer, 5505 Lk Wa
Blvd NE Unit 1D, Houghton, WA 98033-7376, owned 5.70% of such Portfolio's total
outstanding Class B shares.
John A Karoly 1989 Declaration Of Trust, 1420 N Lake Shore Dr, Chicago,
IL 60610, owned 5.60% of such Portfolio's total outstanding Class B shares.
Arthur H Bilger TTEE FBO The Bilger Foundation, 480 Bel Air Rd, Los Angeles,
CA 90077, owned 5.16% of such Portfolio's total outstanding Class B shares.
INTERNATIONAL MAGNUM PORTFOLIO: Fidelity Investments Inst'l Operations Co FIIOC
as Benefit Plans, 100 Magellan Way KW1C, Covington, KY 41015, owned 67.66% of
such Portfolio's total outstanding Class B shares.
Bankers Trust TTEE, Mailstop 3048, 1025 W Nasa Blvd, Boston, MA 02110, owned
32.28% of such Portfolio's total outstanding Class A shares.
Bankers Trust as Trustee, Mailstop 3048, 100 Plaza One Plz, Jersey City,
NJ 07311-3999, owned 15.16% of such Portfolio's total outstanding Class A
shares.
Norwest Bank Minnesota NA, FBO Lutheran Brotherhood, PO Box 1533, Minneapolis,
MN 55480, owned 12.04% of such Portfolio's total outstanding Class A shares.
Strafe & Co, FAO SKL Investment Group LLC, PO Box 160, Westerville, OH 43086,
owned 6.52% of such Portfolio's total outstanding Class A shares.
MAC & Co. A/C 10260102926, Mutual Fund Operations, PO L Box 3198, Pittsburgh,
PA 15230-3198, owned 5.04% of such Portfolio's total outstanding class A shares.
ACTIVE INTERNATIONAL PORTFOLIO: Resources Trust Co, Various IMS Customers, PO
Box 3865, Englewood, CO 80155-3865, owned 63.30% of such Portfolio's total
outstanding Class B shares.
The Trustees Of Columbia University, In The City Of New York, 475 Riverside Dr
Ste 400, New York, NY 10115, owned 12.59% of such Portfolio's total outstanding
Class A shares.
Puerto Rico Telephone Company, Attn Felipe Piazza, 1500 Roosevelt Ave, San Juan,
owned 9.70% of such Portfolio's total outstanding Class A shares.
Western Metal Industry, C/O Miller Anderson & Sherrerd, One Tower Bridge, West
Conshohocken, PA 19428, owned 6.84% of such Portfolio's total outstanding
Class A shares.
University Of Illinois Foundation, 1305 West Green St, Urbana, IL 61801, owned
5.06% of such Portfolio's total outstanding Class A shares.
ASIAN EQUITY PORTFOLIO: James L & Sarah M Barksdale, Ttees Jim & Sally
Barksdale, Equity Acct/Attn Walter Denny, 800 Woodlands Pky Ste 118, Ridgeland,
MS 39157-5216, owned 19.99% of such Portfolio's total outstanding Class B
shares.
Rosekrans Family Partnership, Ste 1940, 220 Montgomery St, San Francisco,
CA 94104, owned 11.06% of such Portfolio's total outstanding Class B shares.
W H OBrien, PO Box 9618, Amarillo, TX 79105-9618, owned 10.93% of such
Portfolio's total outstanding Class B shares.
The Pickwick Group Lp Intl, C/O Walter Denny, 800 Woodlands Pky, Ste 118,
Ridgeland, MS 39157-5215, owned 6.66% of such Portfolio's total outstanding
Class B shares.
John David Barksdale, C/O Walter Denny, 800 Woodlands Pky Ste 118, Ridgeland, MS
39157-5216, owned 6.66% of such Portfolio's total outstanding Class B shares.
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John Mobley -- Trading Acct, Stillhouse Canyon Office Park, 2801 W 35th St,
Austin, TX 78703, owned 5.97% of such Portfolio's total outstanding Class B
shares.
Berl Bernhard & Karen Bernhard, TTEE FBO The Berl Bernhard, 1693 Epping
Farms Ln, Annapolis, MD 21401, owned 5.57% of such Portfolio's total outstanding
Class B shares.
Morgan Stanley & Co 401k Pension Plan, Cust c/o Northern Trust Co Cust, 770
Broadway, New York, NY 10003, owned 32.63% of such Portfolio's total outstanding
Class A shares.
Association De Biefsaissance Et De, Retraite Des Pollciers De La Communaue, 480
Gilford Street, Suite 200, Montreal, owned 23.28% of such Portfolio's total
outstanding Class A shares.
Barton M Biggs, 390 Riversville Rd, Greenwich, CT 06830, owned 5.86% of such
Portfolio's total outstanding Class A shares.
EQUITY GROWTH PORTFOLIO: Bankers Trust Co as Custodian, for Marriott
International Inc, and Savings Plan and Trust, 100 Plaza One Attn Donna
Dekowski, Jersey City USA, NJ 07311-3999, owned 32.36% of such Portfolio's total
outstanding Class B shares.
Fidelity Investments Inst'l, Operations Co FIIOC As Benefit Plans, 100 Magellan
Way KW1C, Covington, KY 41015, owned 26.22% of such Portfolio's total
outstanding Class B shares.
Manufacturers Life Insurance Co USA, 250 Bloor Street East 7th Floor, Toronto,
Ontario M4W 1E5, owned 22.84% of such Portfolio's total outstanding Class B
shares.
FNB Nominee Co, C/O First Commonwealth Trust, 614 Philadelphia St, Indiana,
PA 15701, owned 6.02% of such Portfolio's total outstanding Class B shares.
Fidelity Investments Inst'l Operations Co FIIOC As Benefit Plans, 100 Magellan
Way Kw1c, Covington, KY 41015, owned 16.54% of such Portfolio's total
outstanding Class A shares.
Morgan Stanley & Co 401K Pension Plan, Cust c/o Northern Trust Co Cust, 770
Broadway, New York, NY 10003, owned 15.96% of such Portfolio's total outstanding
Class A shares.
Fidelity Management Trust Company as Trustee For GTE Master Mail Zone M3, 82
Devonshire St, Boston, MA 02109, owned 14.10% of such Portfolio's total
outstanding Class A shares.
The Northern Trust Co FBO Enron Savings Plan, PO Box 92956, Chicago, IL 60675,
owned 5.46% of such Portfolio's total outstanding Class A shares.
Fleet National Bank, Attn 0001396250, PO Box 92800, Rochester, NY 14692-8900,
owned 5.12% of such Portfolio's total outstanding Class A shares.
SMALL COMPANY GROWTH PORTFOLIO: Fidelity Investments Inst'l, Operations Co FIIOC
as Benefit Plans. 100 Magellan Way KW1C, Covington, KY 41015, owned 94.62% of
such Portfolio's total outstanding Class B shares.
Factory Mutual Insurance Company, Attn Michael D Bank, 225 Wyman Street PO Box
9198, Waltham, MA 02454-9198, owned 39.54% of such Portfolio's total outstanding
Class A shares.
Morgan Stanley Asset Mgmt For The Account Of Hubbell Inc, Attn John Lam 22nd
Floor, 1221 Avenue Of The Americas, New York, NY 10020, owned 9.89% of such
Portfolio's total outstanding Class A shares.
Iowa Municipal Fire & Police Public Benfit Plan, 2836 104 Street, Des Moines, IA
50322, owned 7.58% of such Portfolio's total outstanding Class A shares.
Commonwealth of Pennsylvania Public School Employees Retirement, 5 North 5th St,
Harrisburg, PA 17101, owned 5.71% of such Portfolio's total outstanding Class A
shares.
INTERNATIONAL EQUITY PORTFOLIO: Memphis Commerce Square, Trust Division,
c/o National Trust Bank of Commerce, One Commerce Square, Memphis, TN 38150,
owned 45.41% of such Portfolio's total outstanding Class B shares.
Memphis Commerce Square, Trust Division, C/O National Trust Bank Of Commerce,
One Commerce Square, Memphis, TN 38150, owned 22.95% of such Portfolio's total
outstanding Class B shares.
1st Source Bank TTEE, FBO Morris & Co, Attn John Seidl, P O Box 1602, South
Bend, IN 46634-1602, owned 12.60% of such Portfolio's total outstanding Class B
shares.
Vanguard Fiduciary Trust Company, FBO Ball Corp Plan 91324, The Vanguard Group,
PO BOX 2600 VM421, Valley Forge, PA 19482, owned 7.22% of such Portfolio's total
outstanding Class B shares.
VALUE EQUITY PORTFOLIO: Robbin L Dobson IRREV Family Trust, 1221 Avenue of The
Americas, New York, NY 10020, owned 29.34% of such Portfolio's total outstanding
Class B shares.
Everett R Dobson Irrev Fam Tr, Msdw Institutional Value Eqty, Attn Jon Klein,
1221 Avenue Of The Americas, New York, NY 10020-1001, owned 28.13% of such
Portfolio's total outstanding Class B shares.
George N Fugelsang & Susan P Fugelsang, 17 Calhoun Dr, Greenwich, CT 06831,
owned 20.56% of such Portfolio's total outstanding Class B shares.
Jeffrey L Caruso & Melissa M Weiksnar Trustees of Weiksnar-Caruso Nominee,
51 Robbins Dr, Carlisle, MA 01741, owned 5.96% of such Portfolio's total
outstanding Class B shares.
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Susan Afeman Howell, 352 Delgado Dr, Baton Rouge, LA 70808-4723, owned 5.06% of
such Portfolio's total outstanding Class B shares.
Morgan Stanley Asset Mgmt For The Account Of Hubbell Inc, Attn John Lam
22nd Floor, 1221 Avenue Of The Americas, New York, NY 10020, owned 36.27% of
such Portfolio's total outstanding Class A shares.
Frank R. Mori, 935 Park Ave. Apt. 16 A, Manhattan, NY 10028-0212, owned 5.21% of
such Portfolio's total outstanding class A shares.
FIXED INCOME PORTFOLIO: Carolyn S Young, 514 Chestertown St, Gaithersburgc,
MD 20878-5734, owned 19.11% of such Portfolio's total outstanding Class B
shares.
Burton D Cohen, 3912 Zenith Ave South, Minneapolis, MN 55410-1169, owned 18.71%
of such Portfolio's total outstanding Class B shares.
Mary Ann Young Brownsey Trust, Michael S Virgil Trustee Serritella PC, 330 N
Wabash Ave 22nd Floor, Chicago, IL 60611-3603, owned 15.33% of such Portfolio's
total outstanding Class B shares.
Laverne M Brownsey Trust UA DTD, 5-23-79 as Amended Gale's, Burke Warren Mackay
Serritella, 330 N Wabash Ave 22nd Floor, Chicago, IL 60611-3603, owned 12.22% of
such Portfolio's total outstanding Class B shares.
Joan H Giblichman IRA Chase Cust for Ms&Co, 3860 Mission Hills Rd S, Apt 209,
Northbrook, IL 60062, owned 6.56% of such Portfolio's total outstanding Class B
shares.
Daniel D Moseley, 2 Southbury Dr, Columbia, SC 29209, owned 5.22% of such
Portfolio's total outstanding Class B shares.
Morgan Stanley & Co 401K Pension Plan Cust C/O Northern Trust Co Cust,
770 Broadway, New York, NY 10003, owned 31.56% of such Portfolio's total
outstanding Class A shares.
Fleet National Bank, Attn 0001396250, PO Box 92800, Rochester, NY 14692-8900,
owned 10.80% of such Portfolio's total outstanding Class A shares.
Morgan Stanley Dean Witter Foundation, Attn Kathleen Toohill 27th Floor,
1221 Avenue Of The Americas, Manhattan, NY 10020-1001, owned 7.51% of such
Portfolio's total outstanding Class A shares.
Brooks School, Co Mr Frank Marino, N Andover, MA 01845, owned 5.52% of such
Portfolio's total outstanding Class A shares.
GLOBAL FIXED INCOME PORTFOLIO: David Brooks Gendron, 2 Montpelier Pl, London SW7
1HJ England, owned 71.18% of such Portfolio's total outstanding Class B shares.
George N Fugelsang & Susan P Fugelsang, 17 Calhoun Dr, Greenwich CT 06831, owned
20.76% of such Portfolio's total outstanding Class B shares.
Anthony F Rowland, Colette H Rowland Jt Wros, c/o Cambrian Management, 1114 Ave
of the Americas 2702, New York, NY 10036-7703, owned 8.06% of such Portfolio's
total outstanding Class B shares.
Northern Trust Company as Custodian FBO The Lund Foundation, P O Box 92956,
Chicago, IL 60675, owned 35.86% of such Portfolio's total outstanding Class A
shares.
National Bulk Carriers, Attn David Fey, 605 Third Ave, 33rd Floor, New York,
NY 10158, owned 13.73% of such Portfolio's total outstanding Class A shares.
National Bank Of Commerce Trustee, Fbo National Bank Of Commerce Pension, C/O
Nbc Trust Dept, One Commerce Square, Memphis, TN 38150, owned 11.95% of such
Portfolio's total outstanding Class A shares.
State Street Bank & Trust Co, Custodian For The Feinstein Family Fun M/S JQB7S,
ATTN Steve Pinto, N Quincy, MA 02171, owned 5.15% of such Portfolio's total
outstanding Class A shares.
GLOBAL EQUITY PORTFOLIO: Fidelity Investments Inst'l Operations Co FIIOC As
Benefit Plans, 100 Magellan Way KW1C, Covington, KY 41015, owned 80.82% of such
Portfolio's total outstanding Class B shares.
Balsa & Co, c/o Chase Manhattan Bank, P O Box 1768, New York, NY 10163-1768,
owned 16.09% of such Portfolio's total outstanding Class A shares.
Fleet National Bank, Attn 0001396250, Po Box 92800, Rochester, NY 14692-8900,
owned 8.76% of such Portfolio's total outstanding Class A shares.
CIBC Mellon Global Securities, Jayvee And Co, 2nd Floor, 320 Bay St, Toronto,
owned 8.29% of such Portfolio's total outstanding Class A shares.
Fidelity Investments Inst'l Operations Co FIIOC as Benefit Plans, 100 Magellan
Way KW1C, Covington, KY 41015, owned 6.81% of such Portfolio's total outstanding
Class A shares.
National Fincl Services, 200 Liberty St., New York, NY 10281, owned 12.01% of
such Portfolio's total outstanding class A shares.
EMERGING MARKETS PORTFOLIO: Fidelity Investments Inst'l Operations Co FIIOC As
Benefit Plans, 100 Magellan Way KW1C, Covington, KY 41015, owned 35.10% of such
Portfolio's total outstanding Class B shares.
Capinco, C/O Firstar Trust Company, Po Box 1787, Milwaukee, WI 53201-1787, owned
15.47% of such Portfolio's total outstanding Class B shares.
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Morgan Stanley & Co 401K Pension Plan, Cust c/o Northern Trust Co Cust, 770
Broadway, New York, NY 10003, owned 5.11% of such Portfolio's total outstanding
Class A shares.
HIGH YIELD PORTFOLIO: Universal Computer Consulting Holding Inc, 300 Delaware
Ave Ste 1704, Wilmington, DE 19801-1612, owned 37.57% of such Portfolio's total
outstanding Class B shares.
Blake Hogan And Shawn Hogan Jttic-High Yield A/C, 30 Farnham Park, Houston,
TX 77024-7501, owned 5.51% of such Portfolio's total outstanding Class B shares.
Morgan Stanley & Co 401K Pension Plan, Cust c/o Northern Trust Co Cust, 770
Broadway, New York, NY 10003, owned 28.65% of such Portfolio's total outstanding
Class A shares.
Morgan Stanley & Co Pension Fd, C/O Northern Trust Co Cust, 770 Broadway, New
York, NY 10003, owned 9.50% of such Portfolio's total outstanding Class A
shares.
EUROPEAN EQUITY PORTFOLIO: Wayne Gretzky Trustee Of The 650 North Sepulveda
Blvd, Los Angeles, CA 90049, owned 25.64% of such Portfolio's total outstanding
Class B shares.
The Pickwick Group LP Intl C/O Walter Denny, 800 Woodlands Pky, Ste 118,
Ridgeland, MS 39157-5215, owned 10.43% of such Portfolio's total outstanding
Class B shares.
Karen Zateslo Gray Cust For John David Gray Under Il Ugma Three First National
Plaza, 70 W Madison St Suite 2350, Chicago, IL 60603, owned 8.52% of such
Portfolio's total outstanding Class B shares.
Deborah Meredith, 1386 Pritchett Ct, Los Altos, CA 94024-5713, owned 8.06% of
such Portfolio's total outstanding Class B shares.
Christopher S Ruisi, 11 Colts Dr, Holmdel, NJ 07733, owned 7.20% of such
Portfolio's total outstanding Class B shares.
Dr Martin B Meyerson, Acct II International, 1601 Landfall Dr, Wilmington,
NC 28405-4255, owned 6.96% of such Portfolio's total outstanding Class B shares.
Steve Vesce & Carol A Vesce Jtwros Equity Account 8 Middle Hollow Rd, Lloyd
Harbor, NY 11743-1632, owned 6.59% of such Portfolio's total outstanding
Class B shares.
Sandra Titus McKinstry 7264 South Jasmine Ct, Englewood, CO 80112, owned 6.29%
of such Portfolio's total outstanding Class B shares.
Barbara Howe Spousal IRA Chase Custodian, 350 Ponca Place, Apt 29, Boulder,
CO 80303, owned 5.22% of such Portfolio's total outstanding Class B shares.
Liberty Northwest Insurance Corp, Attn John R Galbraith Exe, PO Box 4555,
Portland, OR 97208-4555, owned 6.66% of such Portfolio's total outstanding
Class A shares.
The Wortham Foundation Inc, 2727 Allen Pkwy 2000, Houston, TX 77019-2125, owned
5.89% of such Portfolio's total outstanding Class A shares.
EMERGING MARKETS DEBT PORTFOLIO: PACO, Box 513577, Los Angeles, CA 90051, owned
28.58% of such Portfolio's total outstanding Class B shares.
FFP Investments Ltd, STE 101, 1920 Nacogdoches, Alamo Heights, TX 78209-2241,
owned 12.96% of such Portfolio's total outstanding Class B shares.
Alice H Bartlett Trust A Paul D Bartlett Jr TTEE, 4800 Main St Ste 600, Kansas
City, MO 64112, owned 17.36% of such Portfolio's total outstanding Class B
shares.
Brenton D Anderson, 514 Silvermine Rd, New Canaan, CT 06840, owned 16.63% of
such Portfolio's total outstanding Class B shares.
Bartlett And Company, Grain Charitable Foundation, Ste 600, 4800 Main St, Kansas
City, MO 64112, owned 12.93% of such Portfolio's total outstanding Class B
shares.
Frances B Bernstein 1989 Trust, Douglas Lehman & David Botwinik, C/O Pavia &
Harcourt, 600 Madison Ave, New York, NY 10022, owned 7.37% of such Portfolio's
total outstanding Class B shares.
Morgan Stanley & Co 401k Pension Plan, Cust c/o Northern Trust Co Cust, 770
Broadway, New York, NY 10003, owned 14.73% of such Portfolio's total outstanding
Class A shares.
Charles Schwab & Co Inc, Attn Mutual Funds, 101 Montgomery Street, San
Francisco, CA 94104, owned 12.60% of such Portfolio's total outstanding Class A
shares.
Wellesley College, Attn Robert Bower, 139 Green Hall, Wellesley, MA 02481, owned
11.22% of such Portfolio's total outstanding Class A shares.
Commonwealth Of Pennsylvania, Public School Employees Retirement, 5 North 5th
St, Harrisburg, PA 17101, owned 7.75% of such Portfolio's total outstanding
Class A shares.
Janx Partners LP II, Attn John Naporano, Foot Of Hawkins Street, Newark,
NJ 07105, owned 7.34% of such Portfolio's total outstanding Class A shares.
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Morgan Stanley & Co Pension Fd, C/O Northern Trust Co Cust, 770 Broadway, New
York, NY 10003, owned 6.80% of such Portfolio's total outstanding Class A
shares.
ASIAN REAL ESTATE PORTFOLIO: Morgan Stanley Asset Management Inc, Attn Elisa
Divito, 1221 Avenue Of The Americas, New York, NY 10020, owned 85.24% of such
Portfolio's total outstanding Class A shares.
John Harris & Sharon Harris, 1998 Trust Dtd 10-1-98, 67 Marymont, Menlo Park,
CA 94027, owned 8.91% of such Portfolio's total outstanding Class A shares.
The Cathryn R Fortune Char, Remainder Unitrust Of 5/15/98, 5505 Lake WA Blvd NE
Unit 1D, Kirkland, WA 98033-7379, owned 38.03% of such Portfolio's total
outstanding Class B shares.
Shimer and Fortune Chart REM, Unitrust of 2/6/98 John Shimer, 5505 LK WA Blvd NE
Unit 1D, HOUGHTON, WA 98033-7376, owned 21.07% of such Portfolio's total
outstanding Class B shares.
Bernard M Madej And Elaine M Madej Jtwros, 10831 Oakland Drive, Orland Park,
IL 60462, owned 14.50% of such Portfolio's total outstanding Class B shares.
Ned McCarthy Trust, 3 Sugar Maple Ln, Hanover, NH 03755, owned 13.57% of such
Portfolio's total outstanding Class B shares.
KEVIN L Jackson, 3112 Grimes Ranch Road, Austin, TX 78732-2124, owned 12.83% of
such Portfolio's total outstanding Class B shares.
JAPANESE EQUITY PORTFOLIO: Resources Trust Co Various IMS Customers,
PO Box 3865, Englewood, CO 80155-3865, owned 32.92% of such Portfolio's total
outstanding Class B shares.
Barlett and Company Profit Sharing Plan and Trust, STE 600, 4800 Main St, Kansas
City, MO 64112, owned 10.34% of such Portfolio's total outstanding Class B
shares.
John David Barksdale, c/o Walter Denny, 800 Woodlands Pky, Ste 118, Ridgeland,
MS 39157-5216, owned 9.93% of such Portfolio's total outstanding Class B shares.
Robert J Weinstein M D & Lois Weinstein, Suite 2930, 875 N Michigan Ave,
Chicago, IL 60611-1803, owned 7.59% of such Portfolio's total outstanding
Class B shares.
Bank Morgan Stanley AG, Attn Thomas Genschwiler, Bahnhofstrasse 92, Zurich
Ch-8023 Switzerland, owned 5.62% of such Portfolio's total outstanding Class B
shares.
Donaldson Lufkin & Jenrette, Pershing Division, Po Box 2052, Jersey City,
NJ 07303, owned 6.14% of such Portfolio's total outstanding Class A shares.
Retired Staff Benefits Investment Accts, of The International Monetary Fund, 700
19th St NW, Washington, DC 20431, owned 6.13% of such Portfolio's total
outstanding Class A shares.
The Wortham Foundation Inc, 2727 Allen Pkwy 2000, Houston, TX 77019-2125, owned
5.60% of such Portfolio's total outstanding Class A shares.
INTERNATIONAL SMALL CAP PORTFOLIO: Charles Schwab & Co Inc, Attn Mutual Funds,
101 Montgomery Street, San Francisco, CA 94104, owned 9.67% of such Portfolio's
total outstanding Class A shares.
The Skillman Foundation, 600 Renaissance Center, Suite 1700, Attn Jean E
Gregory, Detroit, MI 48243, owned 7.97% of such Portfolio's total outstanding
Class A shares.
Carnegie Corp Of New York, Vice President & Chief Investment Offic, Attn Ellen
Shuman, 437 Madison Ave, New York, NY 10022, owned 7.28% of such Portfolio's
total outstanding Class A shares.
Trustees of Boston College, Attn Paul Haran Assoc Treasurer, St Thomas More Hall
310, Chestnut Hill, MA 02167-3819, owned 6.44% of such Portfolio's total
outstanding Class A shares.
General Mills Inc, One General Mills Blvd, Minneapolis, MN 55426, owned 5.67% of
such Portfolio's total outstanding Class A shares.
Cornell University, Morgan Stanley Asset Management, c/o Gail Reeke, 1221 Ave of
The Americas, New York, NY 10020, owned 5.23% of such Portfolio's total
outstanding Class A shares.
LATIN AMERICA PORTFOLIO: Batrus & Co, PO Box 9005, Church Street Station, New
York, NY 10008, owned 17.83% of such Portfolio's total outstanding Class A
shares.
Eastern Europe Fund, PO Box 852 9T, Georgetown, Cayman Islands, owned 10.79% of
such Portfolio's total outstanding Class A shares.
The Hostetter Foundation, The Pilot House, Lewis Wharf, Boston, MA 02110, owned
8.93% of such Portfolio's total outstanding Class A shares.
MHCH Ltd International, Discretionary Only Equity A/C, 301 Little John Ln,
Houston, TX 77024-5715, owned 8.92% of such Portfolio's total outstanding
Class A shares.
Nettie Sharp Washburn, Po Box 3779, Greenville, DE 19807, owned 6.96% of such
Portfolio's total outstanding Class A shares.
51
<PAGE>
Charles Schwab & Co Inc, Attn Mutual Funds, 101 Montgomery Street, San
Francisco, CA 94104, owned 6.92% of such Portfolio's total outstanding Class A
shares.
Michael E Hora Revocable Trust, C/O A T Kearney, 1350 North Lake Shore Dr Apt
1714, Chicago, IL 60610-5267, owned 23.05% of such Portfolio's total outstanding
Class B shares.
Fred Middleton, Capitol Ac, 545 El Cerrito Ave, Hillsborough, CA 94010-6821,
owned 20.25% of such Portfolio's total outstanding Class B shares.
Fleur Cates Netanyahu, 45 E 62nd St No 8A, New York, NY 10021-7428, owned 11.28%
of such Portfolio's total outstanding Class B shares.
BBJ Family Limited Partnership, BBJ Family Corp General Partner, 623 East Bailey
Rd, Naperville, IL 60565-2633, owned 10.13% of such Portfolio's total
outstanding Class B shares.
Gerald W Bodzy, Sue A Strauss, Po Box 980097, Houston, TX 77098-0097, owned
9.11% of such Portfolio's total outstanding Class B shares.
Nezar M Al-Saie, c/o Investcorp, PO Box 5340, Manama, Bahrain, owned 8.36% of
such Portfolio's total outstanding Class B shares.
Christopher S Ruisi, 11 Colts Dr, Holmdel, NJ 07733, owned 7.34% of such
Portfolio's total outstanding Class B shares.
Donald L Gustafson, MSTC Custodian, 3420 Norman Dr, Reno, NV 89899, owned 7.32%
of such Portfolio's total outstanding Class B shares.
FOCUS EQUITY PORTFOLIO: Morgan Stanley & Co 401K Pension Plan, Cust
c/o Northern Trust Co Cust, 770 Broadway, New York, NY 10003, owned 36.18% of
such Portfolio's total outstanding Class A shares.
US REAL ESTATE PORTFOLIO: Charles Schwab & Co Inc, Attn Mutual Funds,
101 Montgomery Street, San Francisco, CA 94104, owned 10.16% of such Portfolio's
total outstanding Class A shares.
Commonwealth of Pennsylvania, Public School Employees Retirement, 5 North
5th St, Harrisburg, PA 17101, owned 6.92% of such Portfolio's total outstanding
Class A shares.
Northwestern University, Attn Investment Dept 1-209 Crown, 633 Clark St,
Evanston, IL 60208-1122, owned 5.86% of such Portfolio's total outstanding
Class A shares.
Merrill Lynch Trust Co TTEE, FBO Qualified Retirement Plans, 265 Davidson Ave,
4th Flr, Somerset, NJ 08873, owned 32.29% of such Portfolio's total outstanding
Class B shares.
Putnam Fiduciary Trust Company TTEE, Ball Horticultural Co Inc, Profit Sharing
Retirement, 859 Willard St MSE 2C Attn Trading Serv, Quincy, MA 02269-9110,
owned 7.83% of such Portfolio's total outstanding Class B shares.
Mark A Mansour and Sharon A Mansour JTTIC -- US REIT FU, 2610 NE 40th Street,
Fort Lauderdale, FL 33308-5737, owned 7.05% of such Portfolio's total
outstanding Class B shares.
TECHNOLOGY PORTFOLIO: Bank Of New York AS Attn Ellie Whalen One Wall Street
12th Floor, Bank Of New York, NY 10286, owned 13.28% of such Portfolio's total
outstanding Class A shares.
Bruce W Bastian & McKay S Matthews TTEES FBO Bruce W, 51 West CTR755, Orem,
UT 84057, owned 11.63% of such Portfolio's total outstanding Class A shares.
Putnam Fiduciary Trust Co TTEE, FBO Viacom Investment Plan, 859 Willard St,
Attn Trading Services, Quincy, MA 02269-9110, owned 7.41% of such Portfolio's
total outstanding Class A shares.
Chesed Congregation Of America, One State Street Plaza, 29th Fl, New York,
NY 10004-1505, owned 5.40% of such Portfolio's total outstanding Class A shares.
John Wallace, 6314 Norway Road, Dallas, TX 75230, owned 9.21% of such
Portfolio's total outstanding Class B shares.
Donald L Gustafson, MSTC Custodian, 3420 Norman Dr, Reno, NV 89899, owned 8.48%
of such Portfolio's total outstanding Class B shares.
EQUITY PLUS PORTFOLIO: The Institute For Genomic Research, 9712 Medical Center
Dr, Rockville, MD 20850, owned 29.73% of such Portfolio's total outstanding
Class A shares.
The Flinn Foundation, Northern Trust Co, Master Trust Dept 7th Fl, Po
Box 92984, Chicago, IL 60675, owned 28.26% of such Portfolio's total outstanding
Class A shares.
Morgan Stanley Dean Witter Foundation, Attn Kathleen Toohill 27th Floor,
1221 Avenue of The Americas, Manhattan, NY 10020-1001, owned 23.72% of such
Portfolio's total outstanding Class A shares.
MAT Charitable Foundation, 476 Broadway, New York, NY 10013, owned 9.83% of such
Portfolio's total outstanding Class A shares.
Memphis Commerce Square, Trust Division, C/O National Trust Bank Of Commerce,
One Commerce Square, Memphis, TN 38150, owned 99.61% of such Portfolio's total
outstanding Class B shares.
52
<PAGE>
PERFORMANCE INFORMATION
The Fund may from time to time quote various performance figures to illustrate
the Portfolios' past performance.
Performance quotations by investment companies are subject to rules adopted by
the SEC, which require the use of standardized performance quotations. In the
case of total return, non-standardized performance quotations may be furnished
by the Fund but must be accompanied by certain standardized performance
information computed as required by the SEC. Current yield and average annual
compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the SEC. An
explanation of those and other methods used by the Fund to compute or express
performance follows.
TOTAL RETURN
From time to time each Portfolio, except the Money Market and Municipal Money
Market Portfolios, may advertise total return for each class of shares of the
Portfolio. Total return figures are based on historical earnings and are not
intended to indicate future performance. The average annual total return is
determined by finding the average annual compounded rates of return over 1-, 5-,
and 10-year periods (or over the life of the Portfolio) that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1-, 5-, and 10-year period (or over the life of the Portfolio) and the
deduction of all applicable Fund expenses on an annual basis.
The average annual compounded rates of return (unless otherwise noted) for the
Fund's Portfolios for the one year and five year periods ended December 31, 1999
and for the period from inception through December 31, 1999 are as follows:
<TABLE>
<CAPTION>
INCEPTION ONE AVERAGE ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL
NAME OF PORTFOLIO+ DATE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION
- ------------------ --------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Active International Allocation
Class A............................... 1/17/92 27.82% 15.15% N/A 12.33%
Class B............................... 1/02/96 26.63% N/A N/A 15.98%
Asian Equity
Class A............................... 7/01/91 81.00% -1.71% N/A 9.06%
Class B............................... 1/02/96 79.95% N/A N/A -4.15%
Asian Real Estate
Class A............................... 10/01/97 24.27% N/A N/A -5.64%
Class B............................... 10/01/97 23.88% N/A N/A -6.00%
Emerging Markets
Class A............................... 9/25/92 101.78% 7.84% N/A 13.45%
Class B............................... 1/02/96 101.26% N/A N/A 13.17%
Emerging Markets Debt
Class A............................... 2/01/94 29.22% 13.57% N/A 8.53%
Class B............................... 1/02/96 28.01% N/A N/A 9.75%
Equity Growth
Class A............................... 4/02/91 39.89% 32.93% N/A 21.28%
Class B............................... 1/02/96 39.61% N/A N/A 29.63%
European Equity
Class A............................... 4/02/93 9.60% 13.80% N/A 16.08%
Class B............................... 1/02/96 9.36% N/A N/A 13.79%
European Real Estate
Class A............................... 10/01/97 -2.36% N/A N/A -1.14%
Class B............................... 10/01/97 -2.61% N/A N/A -1.34%
Fixed Income
Class A............................... 5/15/91 -1.56% 7.65% N/A 7.24%
Class B............................... 1/02/96 -1.76% N/A N/A 4.89%
Focus Equity
Class A............................... 3/08/95 46.44% N/A N/A 36.58%
Class B............................... 1/02/96 46.13% N/A N/A 32.98%
Global Equity
Class A............................... 7/15/92 4.01% 16.54% N/A 17.02%
Class B............................... 1/02/96 3.75% N/A N/A 15.57%
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
INCEPTION ONE AVERAGE ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL
NAME OF PORTFOLIO+ DATE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION
- ------------------ --------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Global Fixed Income
Class A............................... 5/01/91 -6.84% 6.45% N/A 6.38%
Class B............................... 1/02/96 -7.09% N/A N/A 3.22%
High Yield
Class A............................... 9/28/92 7.77% 12.79% N/A 11.18%
Class B............................... 1/02/96 7.44% N/A N/A 9.90%
International Equity
Class A............................... 8/04/89 16.91% 16.07% 13.21% 13.21%
Class B............................... 1/02/96 16.68% N/A N/A 16.74%
International Magnum
Class A............................... 3/15/96 24.87% N/A N/A 12.16%
Class B............................... 3/15/96 24.58% N/A N/A 11.87%
International Small Cap
Class A............................... 12/15/92 39.34% 11.60% N/A 14.97%
Japanese Equity
Class A............................... 4/25/94 63.75% 8.97% N/A 7.52%
Class B............................... 1/02/96 63.46% N/A N/A 12.01%
Latin American
Class A............................... 1/18/95 71.28% N/A N/A 15.80%
Class B............................... 1/02/96 70.85% N/A N/A 21.20%
Money Market
Class A............................... 11/15/88 4.80% 5.15% 5.03% 5.37%
Class B............................... N/A N/A N/A N/A N/A
Municipal Bond
Class A............................... 1/18/95 -1.79% N/A N/A 4.67%
Class B*.............................. 1/02/96 N/A N/A N/A N/A
Municipal Money Market
Class A............................... 2/10/89 2.77% 3.08% 3.17% 3.40%
Class B............................... N/A N/A N/A N/A N/A
Small Company Growth
Class A............................... 11/01/89 96.45% 31.00% 19.43% 19.78%
Class B............................... 1/02/96 95.97% N/A N/A 30.09%
Technology
Class A............................... 9/16/96 160.62% N/A N/A 71.47%
Class B............................... 9/16/96 160.26% N/A N/A 71.13%
U.S. Equity Plus
Class A............................... 7/31/97 20.25% N/A N/A 18.75%
Class B............................... 7/31/97 19.99% N/A N/A 18.52%
U.S. Real Estate
Class A............................... 2/24/95 -1.48% N/A N/A 13.68%
Class B............................... 1/02/96 -1.73% N/A N/A 10.89%
Value Equity
Class A............................... 1/31/90 11.63% 20.22% N/A 13.93%
Class B............................... 1/02/96 11.22% N/A N/A 16.53%
</TABLE>
- ------------------
+ The China Growth, Mortgage-Backed Securities and MicroCap Portfolios had not
commenced operations as of December 31, 1999. The Gold Portfolio ceased
operations effective March 11, 1998 for Class A shares and May 6, 1998 for
Class B shares. The Municipal Bond Portfolio ceased operations effective
March 14, 2000.
* As of the date of this Statement of Additional Information, there were no
outstanding Class B shares of the Municipal Bond Portfolio.
These figures were calculated according to the following formula:
P(1+T)TO THE POWER OF n = ERV
where:
<TABLE>
<C> <C> <S>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of hypothetical $1,000 payment made
at the beginning of the 1-, 5-, or 10-year periods at the
end of the 1-, 5-, or 10-year periods (or fractional portion
thereof).
</TABLE>
CALCULATION OF YIELD FOR NON-MONEY MARKET PORTFOLIOS
From time to time certain of the Fund's Portfolios may advertise yield.
54
<PAGE>
Current yield reflects the income per share earned by a Portfolio's investments.
Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period.
The respective current yields for certain of the Fund's Portfolios for the
30-day period ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
PORTFOLIO NAME SHARES SHARES
- -------------- ------- -----------
<S> <C> <C>
Emerging Markets Debt................... 15.66% 15.36%
Fixed Income............................ 6.77% 6.62%
Global Fixed Income..................... 4.64% 4.48%
High Yield.............................. 10.58% 10.33%
Municipal Bond.......................... 4.97% --%
</TABLE>
These figures were obtained using the following formula:
<TABLE>
<S> <C> <C>
Yield = 2[(a - b + 1)TO THE POWER OF 6 - 1]
-------------------
cd
</TABLE>
CALCULATION OF YIELD FOR MONEY MARKET PORTFOLIOS
The current yield of the Money Market and Municipal Money Market Portfolios is
calculated daily on a base period return for a hypothetical account having a
beginning balance of one share for a particular period of time (generally 7
days). The return is determined by dividing the net change (exclusive of any
capital changes in such account) by its average net asset value for the period,
and then multiplying it by 365/7 to determine the annualized current yield. The
calculation of net change reflects the value of additional shares purchased with
the dividends by the Portfolio, including dividends on both the original share
and on such additional shares. The current yields of the Money Market and
Municipal Money Market Portfolios for the 7-day period ended December 31, 1999
were 5.33% and 3.84%, respectively. An effective yield, which reflects the
effects of compounding and represents an annualization of the current yield with
all dividends reinvested, may also be calculated for each Portfolio by dividing
the base period return by 7, adding 1 to the quotient, raising the sum to the
365th power, and subtracting 1 from the result. The effective yields of the
Money Market and Municipal Money Market Portfolios for the 7-day period ended
December 31, 1999 were 5.47% and 3.91%, respectively.
The yield of a Portfolio will fluctuate. The annualization of a week's dividend
is not a representation by the Portfolio as to what an investment in the
Portfolio will actually yield in the future. Actual yields will depend on such
variables as investment quality, average maturity, the type of instruments the
Portfolio invests in, changes in interest rates on instruments, changes in the
expenses of the Fund and other factors. Yields are one basis investors may use
to analyze the Portfolios of the Fund, and other investment vehicles; however,
yields of other investment vehicles may not be comparable because of the factors
set forth in the preceding sentence, differences in the time periods compared,
and differences in the methods used in valuing portfolio instruments, computing
net asset value and calculating yield.
TAXABLE EQUIVALENT YIELDS FOR THE MUNICIPAL BOND AND MUNICIPAL MONEY MARKET
PORTFOLIOS
It is easy to calculate your own taxable equivalent yield if you know your tax
bracket. The formula is:
<TABLE>
<S> <C> <C>
Tax Free Yield = Your Taxable Equivalent Yield
- -------------
1 - Your Tax Bracket
</TABLE>
For example, if you are in the 28% tax bracket and can earn a tax-free yield of
7.5%, the taxable equivalent yield would be 10.42%.
The table below indicates the advantages of investments in Municipal Bonds for
certain investors. Tax-exempt rates of interest payable on a Municipal Bond
(shown at the top of each column) are equivalent to the taxable yields set forth
opposite the respective income tax levels, based on income tax rates effective
for the tax year 1999 under the Internal Revenue Code. There can, of course, be
no guarantee that the Municipal Money Market Portfolio will achieve a specific
yield. Also, it is possible that some portion of the Portfolio's dividends may
be subject to Federal income taxes. A substantial portion, if not all, of such
dividends may be subject to state and local taxes.
TAXABLE EQUIVALENT YIELD TABLE
<TABLE>
<CAPTION>
SAMPLE LEVEL OF FEDERAL
TAXABLE INCOME INCOME TAXABLE EQUIVALENT RATES BASED ON TAX-EXEMPT YIELD OF:
- ------------------------------------ TAX -------------------------------------------------------------
JOINT RETURN SINGLE RETURN BRACKETS 3% 4% 5% 6% 7% 8% 9% 10% 11%
- ----------------- ----------------- --------- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-42,350 $0-25,350 15.0% 3.5% 4.7% 5.9% 7.1% 8.2% 9.4% 10.6% 11.8% 12.9%
42,350-102,300 25,350-61,400 28.0 4.2 5.6 6.9 8.3 9.7 11.1 12.5 13.9 15.3
102,300-155,950 61,400-128,100 31.0 4.3 5.8 7.2 8.7 10.1 11.6 13.0 14.5 15.9
155,950-278,450 128,100-278,450 36.0 4.7 6.3 7.8 9.4 10.9 12.5 14.1 15.6 17.2
over 278,450 over 278,450 39.6 5.0 6.6 8.3 9.9 11.6 13.2 14.9 16.6 18.2
</TABLE>
- ------------------
* Net amount subject to 1999 Federal Income Tax after deductions and exemptions,
not indexed for 1999 income tax rates.
55
<PAGE>
The taxable equivalent yield for the Municipal Money Market Portfolio for the
seven days ended December 31, 1999 assuming a Federal income tax rate of 39.6%
(maximum rate), was 6.36%. The taxable equivalent effective yield for the
Municipal Money Market for the seven days ended December 31, 1999, assuming the
same tax rate, was 6.47%.
GENERAL PERFORMANCE INFORMATION
Each Portfolio's performance will fluctuate, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time. Past
performance is not necessarily indicative of future return. Actual performance
will depend on such variables as portfolio quality, average portfolio maturity,
the type of portfolio instruments acquired, changes in interest rates, portfolio
expenses and other factors. Performance is one basis investors may use to
analyze a Portfolio as compared to other funds and other investment vehicles.
However, performance of other funds and other investment vehicles may not be
comparable because of the foregoing variables, and differences in the methods
used in valuing their portfolio instruments, computing net asset value and
determining performance.
From time to time, a Portfolio's performance may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, Morningstar, Inc. may be quoted in advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. Rankings that compare the performance of
funds to one another in appropriate categories over specific periods of time may
also be quoted in advertising.
Portfolio advertising may include data on historical returns of the capital
markets in the United States compiled or published by Ibbotson Associates of
Chicago, Illinois ("Ibbotson"), including returns on common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the Consumer Price Index), and combinations of various capital
markets. The performance of these capital markets is based on the returns of
different indices to which the performance of the Portfolios may also be
compared. The Portfolios may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
Portfolios. The Portfolios may also compare their performance to that of other
compilations or indices that may be developed and made available in the future.
The Portfolios may include in advertisements, charts, graphs or drawings which
illustrate the potential risks and rewards of investment in various investment
vehicles, including but not limited to, foreign securities, stocks, bonds,
treasury bills and shares of a Portfolio. In addition, advertisements may
include a discussion of certain attributes or benefits to be derived by an
investment in a Portfolio and/or other mutual funds, shareholder profiles and
hypothetical investor scenarios, timely information on financial management, tax
and retirement planning and various investment alternatives. Advertisements may
include lists of representative Morgan Stanley clients. The Portfolios may also
from time to time include discussions or illustrations of the effects of
compounding in advertisements. "Compounding" refers to the fact that, if
dividends or other distributions on a Portfolio investment are reinvested by
being paid in additional Portfolio shares, any future income or capital
appreciation of a Portfolio would increase the value, not only of the original
investment in the Portfolio, but also of the additional Portfolio shares
received through reinvestment.
The Portfolios may include in their advertisements, discussions or illustrations
of the potential investment goals of a prospective investor (including materials
that describe general principles of investing, such as asset allocation,
diversification, risk tolerance, goal setting, questionnaires designed to help
create a personal financial profile, worksheets used to project savings needs
based on assumed rates of inflation and hypothetical rates of return and action
plans offering investment alternatives), investment management techniques,
policies or investment suitability of a Portfolio (such as value investing,
market timing, dollar cost averaging, asset allocation, constant ratio transfer,
automatic account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments). Advertisements and sales materials
relating to a Portfolio may include information regarding the background and
experience of its portfolio managers; the resources, expertise and support made
available to the portfolio managers by Morgan Stanley; and the portfolio
manager's goals, strategies and investment techniques.
The Portfolios' advertisements may discuss economic and political conditions of
the United States and foreign countries, the relationship between sectors of the
U.S., a foreign, or the global economy and the U.S., a foreign, or the global
economy as a whole and the effects of inflation. The Portfolios' advertisements
may include discussions and illustrations of the growth potential of various
global markets including, but not limited to, Africa, Asia, Europe, Latin
America, North America, South America, Emerging Markets and individual
countries. These discussions may include the past performance of the various
markets or market sectors; forecasts of population, gross national product and
market performance; and the underlying data which supports such forecasts. From
time to time, advertisements, sales literature, communications to shareholders
or other materials may summarize the substance of information contained in the
Portfolios' shareholder reports (including the investment composition of a
Portfolio), as well as the views of Morgan Stanley as to current market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Portfolio.
The Portfolios may quote various measures of volatility and benchmark
correlation in advertising. The Portfolios may compare these measures to those
of other funds. Measures of volatility seek to compare the historical share
price fluctuations or total
56
<PAGE>
returns to those of a benchmark. Measures of benchmark correlation indicate how
valid a comparative benchmark may be. Measures of volatility and correlation may
be calculated using averages of historical data. A Portfolio may also advertise
its current interest rate sensitivity, duration, weighted average maturity or
similar maturity characteristics.
The Portfolios may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Portfolio at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when prices
are low. While such a strategy does not assure a profit or guard against loss in
a declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.
ADVISER'S USE OF COMPANIES COMPRISING THE S&P 500 INDEX
MSDW Investment Management uses the 500 companies included in the S&P 500 Index
as the universe of potential investments for the U.S. Equity Plus Portfolio. The
U.S. Equity Plus Portfolio is not sponsored, endorsed, sold or promoted by S&P,
a division of The McGraw-Hill Companies, Inc. S&P makes no representation or
warranty, express or implied, to investors in the U.S. Equity Plus Portfolio or
any member of the public regarding the advisability of investing in the U.S.
Equity Plus Portfolio or the ability of the S&P 500 Index to track general stock
market performance. S&P's only relationship to MSDW Investment Management is the
licensing of certain trademarks and trade names of S&P and of the S&P 500 Index
which is determined, composed and calculated by S&P without regard to MSDW
Investment Management or the U.S. Equity Plus Portfolio. S&P has no obligation
to take the needs of MSDW Investment Management or the investors in the U.S.
Equity Plus Portfolio into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for, does not participate
in and has no obligation or liability in connection with the management,
administration or marketing of the U.S. Equity Plus Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR COMPLETENESS OF THE S&P 500 INDEX OR
ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE PERFORMANCE OF THE ADVISER OR THE U.S. EQUITY PLUS PORTFOLIO, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS) ARISING OUT OF ANY USE OF THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
DESCRIPTION OF RATINGS
DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
EXCERPTS FROM MOODY'S DESCRIPTION OF BOND RATINGS: Aaa -- Bonds which are rated
Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt-edged." Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Aa -- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than Aaa securities. A -- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment some time in the future. Baa -- Bonds which are rated Baa are
considered as medium-grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba -- Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B -- Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Moody's applies numerical modifiers
1, 2 and 3 in each generic voting classification from Aa through B. The modifier
1 indicates that the security ranks at a higher end of the rating category;
modifier 2 indicates a mid-range rating; and the modifier 3 indicates that the
issue ranks at the lower end of the rating category. Caa -- Bonds which are
rated Caa are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Ca -- Bonds
which are rated Ca
57
<PAGE>
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. C -- Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
EXCERPTS FROM S&P'S DESCRIPTION OF BOND RATINGS: AAA -- Bonds rated AAA have
the highest rating assigned by Standard & Poor's to a debt obligation and
indicate an extremely strong capacity to pay principal and interest. AA -- Bonds
rated AA have a very strong capacity to pay interest and repay principal and
differ from the highest rated issues only to a small degree. A -- Bonds rated A
have a strong capacity to pay interest and repay principal although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than bonds in higher rated categories. BBB -- Bonds rated
BBB are regarded as having an adequate capacity to pay interest and repay
principal. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher rated categories. BB, B, CCC, CC -- Debt rated BB, B,
CCC, CC and C is regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. C -- The rating C may be used to cover a
situation where a bankruptcy petition has been filed or similar action has been
taken, but payments on this obligation are being continued. D -- Debt rated D is
in default, and payment of interest and/or repayment of principal is in arrears.
DESCRIPTION OF MOODY'S RATINGS OF STATE AND MUNICIPAL NOTES: Moody's ratings
for state and municipal notes and other short-term obligations are designated
Moody's Investment Grade ("MIG"). Symbols used are as follows: MIG-1 -- best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established broad-based access to the market for
refinancing, or both; MIG-2 -- high quality with margins of protection ample
although not so large as in the preceding group; MIG-3 -- favorable quality,
with all security elements accounted for but lacking the undeniable strength of
the preceding grades.
DESCRIPTION OF MOODY'S HIGHEST COMMERCIAL PAPER RATING: Prime-1 ("Pl") --
Judged to be of the best quality. Their short-term debt obligations carry the
smallest degree of investment risk.
EXCERPT FROM S&P'S RATING OF MUNICIPAL NOTE ISSUES: SP-l+ -- very strong
capacity to pay principal and interest; SP-2--strong capacity to pay principal
and interest.
DESCRIPTION OF S&P'S HIGHEST COMMERCIAL PAPER RATINGS: A-l+ -- this designation
indicates the degree of safety regarding timely payment is extremely strong. A-1
- -- this designation indicates the degree of safety regarding timely payment is
strong.
FINANCIAL STATEMENTS
The Fund's audited financial statements for the fiscal year ended December 31,
1999, including notes thereto and the report of PricewaterhouseCoopers LLP are
herein incorporated by reference from the Fund's Annual Report. A copy of the
Fund's Annual Report to Shareholders must accompany the delivery of this
Statement of Additional Information. The China Growth, Mortgage-Backed
Securities, MicroCap Portfolios had not commenced operations at December 31,
1999. On March 15, 2000 the shareholders of The Municipal Bond Portfolio
redeemed the outstanding shares as of that date and the Portfolio ceased
operations.
58
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a)(1) Registrant's Articles of Amendment and Restatement,
incorporated by reference to Exhibit 1(a) to Post-Effective
Amendment No. 26 to the Registrant's Registration Statement
on Form N-1A (Registration No. 33-23166), filed with the
Securities and Exchange Commission via EDGAR (Accession
No. 0000912057-95-008594) on October 13, 1995.
(a)(2) Registrant's Articles Supplementary to Registrant's Articles
of Amendment and Restatement (reclassifying shares),
incorporated by reference to Exhibit 1(b) to Post-Effective
Amendment No. 30 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-23166), filed with the
Securities and Exchange Commission via EDGAR (Accession No.
0000912057-96-010828) on May 24, 1996.
(a)(3) Registrant's Articles Supplementary to Registrant's Articles
of Amendment and Restatement (adding new Technology
Portfolio), incorporated by reference to Exhibit 1(c) to
Post-Effective Amendment No. 30 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-23166), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 0000912057-96-010828) on May 24, 1996.
(a)(4) Registrant's Articles Supplementary to Registrant's Articles
of Amendment and Restatement (adding U.S. Equity Plus
Portfolio), incorporated by reference to Exhibit 1(d) to
Post-Effective Amendment No. 38 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-23166), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 0001047469-98-008051)on February 27, 1998.
(a)(5) Registrant's Articles Supplementary to Registrant's Articles
of Amendment and Restatement (adding European Real Estate
and Asian Real Estate Portfolios), incorporated by reference
to Exhibit 1(e) to Post-Effective Amendment No. 38 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
00001047469-98-008051) on February 27, 1998.
(a)(6) Registrant's Articles Supplementary to Registrant's Articles
of Amendment and Restatement (adding Class B shares to the
Money Market Portfolio), incorporated by reference to
Exhibit 1(f) to Post-Effective Amendment No. 38 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
00001047469-98-008051) on February 27, 1998.
(a)(7) Articles of Amendment to Registrant's Articles of Amendment
and Restatement (Active Country Allocation Portfolio name
changed to Active International Portfolio), incorporated by
reference to Exhibit (a)(7) to Post-Effective Amendment No.
40 to the Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0001047469-99-002378) on January 27, 1999.
(a)(8) Articles of Amendment to Registrant's Articles of Amendment
and Restatement (Active International Portfolio name changed
to Active International Allocation Portfolio), incorporated
by reference to Exhibit (a)(8) to Post-Effective Amendment
No. 40 to the Registrant's Registration Statement on Form
N-1A
C-1
<PAGE>
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0001047469-99-002378) on January 27, 1999.
(a)(9) Articles of Amendment to Registrant's Articles of Amendment
and Restatement (changing corporate name to Morgan Stanley
Dean Witter Institutional Fund, Inc.), incorporated by
reference to Exhibit (a)(9) to Post-Effective Amendment No.
40 to the Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0001047469-99-002378) on January 27, 1999.
(a)(10) Articles of Amendment to Registrant's Articles of
Amendment and Restatement (Aggressive Equity Portfolio name
changed to Focus Equity Portfolio and Emerging Growth
Portfolio name changed to Small Company Growth Portfolio),
filed herewith.
(b) Amended and Restated By-Laws, incorporated by reference to
Exhibit 2 to Post-Effective Amendment No. 33 to Registrant's
Registration Statement on Form N-1A (Registration No.
33-23166), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 0000912057-97-007488) on
February 28, 1997.
(c)(1) Specimen Security with respect to Morgan Stanley
Institutional Fund, Inc. Class A shares incorporated by
reference to Exhibit 1(a) (Amended and Restated Articles of
Incorporation), as amended to date to Post-Effective
Amendment No. 26 to Registrant's Registration Statement
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0000912057-95-008594) on October 13, 1995 and Exhibit 2
(Amended and Restated By-Laws), as amended to date to
Post-Effective Amendment No. 33 to Registrant's Registration
Statement, filed with the Securities and Exchange Commission
via EDGAR (Accession No. 0000912057-97-007488) on
February 28, 1997.
(c)(2) Specimen Security with respect to Morgan Stanley
Institutional Fund, Inc. Class B shares incorporated by
reference to Exhibit 1(a) (Amended and Restated Articles of
Incorporation), as amended to date to Post-Effective
Amendment No. 26 to Registrant's Registration Statement
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0000912057-95-008594) on October 13, 1995 and Exhibit 2
(Amended and Restated By-Laws), as amended to date to
Post-Effective Amendment No. 33 to Registrant's Registration
Statement, filed with the Securities and Exchange Commission
via EDGAR (Accession No. 0000912057-97-007488) on
February 28, 1997.
(d)(1) Investment Advisory Agreement between Registrant and Morgan
Stanley Asset Management Inc., incorporated by reference to
Exhibit (d)(1) to Post-Effective Amendment No. 40 to the
Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0001047469-99-002378) on January 27, 1999.
(d)(2) Investment Sub-Advisory Agreement among Registrant, Morgan
Stanley Asset Management Inc. and Sun Valley Gold Company
(with respect to the Gold Portfolio) is incorporated by
reference to Exhibit 5(i) to Post-Effective Amendment No. 25
to Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0000912057-95-005830) on August 1, 1995.
C-2
<PAGE>
(d)(3) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the U.S. Equity Plus Portfolio), is incorporated by
reference to Exhibit 5(q) to Post-Effective Amendment No. 38
to Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0001047469-98-008051) on February 27, 1998.
(d)(4) Supplement to Investment Advisory Agreement between
Registrant and Morgan Stanley Asset Management Inc. (adding
the Asian and European Real Estate Portfolios), is
incorporated by reference to Exhibit 5(r) to Post-Effective
Amendment No. 38 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-23166), filed with the
Securities and Exchange Commission via EDGAR (Accession No.
0001047469-98-008051) on February 27, 1998.
(d)(5) Amendment to Investment Advisory Agreement between
Registrant and MSDW Investment Management (reducing the
annual advisory fee payable by the Emerging Markets Debt
Portfolio of the Fund from 1.00% to 0.75%), filed herewith.
(d)(6) Sub-Advisory Agreement between MSDW Investment Management
and Morgan Stanley Dean Witter Advisors Inc., filed
herewith.
(e)(1) Distribution Agreement between Registrant and Morgan Stanley
& Co. Incorporated., incorporated by reference to Exhibit
6(a) to Post-Effective Amendment No. 25 to Registrant's
Registration Statement on Form N-1A (Registration No.
33-23166), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 0000912057-95-005830) on August 1,
1995.
(e)(2) Supplement to Distribution Agreement between Registrant and
Morgan Stanley & Co. Incorporated, incorporated by reference
to Exhibit 6(b) to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0000912057-96-007390) on April 30, 1996.
(f) Not applicable.
(g)(1) Mutual Fund Domestic Custody Agreement between Registrant
and United States Trust Company, incorporated by reference
to Exhibit 8(a) to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0000912057-95-005830) August 1, 1995.
(g)(2) International Custody Agreement between Registrant and
Morgan Stanley Trust Company, incorporated by reference to
Exhibit 8(b) to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0000912057-95-005830) on August 1, 1995.
(g)(3) Amendment to International Custody Agreement between
Registrant and Morgan Stanley Trust Company, incorporated by
reference to Exhibit 8(c) to Post-Effective Amendment No. 30
to Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0000912057-96-010828) on May 24, 1996.
(g)(4) Amendment to International Custody Agreement between
Registrant and The Chase Manhattan Bank, filed herewith.
C-3
<PAGE>
(h)(1) Administration Agreement between Registrant and Morgan
Stanley Asset Management Inc., incorporated by reference to
Exhibit 9(a) to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
0000912057-95-005830) on August 1, 1995.
(h)(2) Administration Agreement between Registrant and United
States Trust Company, incorporated by reference to Exhibit
9(b) to Post-Effective Amendment No. 25 to Registrant's
Registration Statement on Form N-1A (Registration No.
33-23166), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 0000912057-95-005830) on August 1,
1995.
(i) Opinion of Counsel, filed herewith.
(j) Consent of Accountant, filed herewith.
(k) None.
(l) Purchase Agreement, incorporated by reference to Exhibit 13
to Post-Effective Amendment No. 25 to Registrant's
Registration Statement on Form N-1A (Registration No.
33-23166), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 0000912057-95-005830) on August 1,
1995.
(m)(1) Distribution Plan with respect to the Class B shares (the
"Class B Plan") of the Active Country Allocation Portfolio,
incorporated by reference to Exhibit 15 to Post-Effective
Amendment No. 33 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-23166), filed with Securities
and Exchange Commission via EDGAR (Accession No.
0000912057-97-007488) on February 28, 1997. The following
Class B Plans have been omitted because they are
substantially identical to the one incorporated by reference
herein. The omitted Class B Plans differ from the Class B
Plan incorporated by reference herein only with respect to
the portfolio to which the Class B Plan relates: Fixed
Income, Global Fixed Income, Municipal Bond, Mortgage-Backed
Securities, High Yield, Value Equity, Gold, Global Equity,
International Equity, Asian Equity, European Equity,
Japanese Equity, Latin American, Emerging Markets, Emerging
Markets Debt, China Growth, Equity Growth, Emerging Growth,
MicroCap, Aggressive Equity, U.S. Real Estate, International
Magnum, Technology, U.S. Equity Plus, European Real Estate,
Asian Real Estate and Money Market Portfolios.
(n) Financial Data Schedules, not applicable.
(o) 18f-3 Plan, incorporated by reference to Exhibit 19 to
Post-Effective Amendment No. 33 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-23166), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 0000912057-97-007488) on February 28, 1997.
(p) Code of Ethics, filed herewith
(q) Powers of Attorney, filed herewith.
C-4
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant
Provide a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant. For any person
controlled by another person, disclose the percentage of voting securities owned
by the immediately controlling person or other basis of that person's control.
For each company, also provide the state or other sovereign power under the laws
of which the company is organized.
None.
Item 25. Indemnification
State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified against any liability incurred in their
official capacity, other than insurance provided by any director, officer,
affiliated person, or underwriter for their own protection.
Reference is made to Article SEVENTH of the Registrant's Articles of
Incorporation. Insofar as indemnification for liability may be permitted to
trustees, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of the Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature in which the investment adviser and each director, officer or
partner of the investment adviser, is or has been, engaged within the last two
fiscal years for his or her own account or in the capacity of director, officer,
employee, partner or trustee. (Disclose the name and principal business address
of any company for which a person listed above serves in the capacity of
director, officer, employee, partner or trustee, and the nature of the
relationship.)
<TABLE>
<CAPTION>
NAME AND POSITION WITH
MSDW INVESTMENT POSITION WITH OTHER
MANAGEMENT INC. NAME OF OTHER COMPANY COMPANY
------------------------ --------------------- -------------------
<S> <C> <C>
Barton M. Biggs Morgan Stanley & Co. Managing Director
Chairman, Director Incorporated
and Managing
Director
Richard B. Worley Miller Anderson & Portfolio Manager and
President, Director, Sherrerd, LLP Executive Committee
Managing Director Member
and Member of
Executive Committee MAS Fund Distribution, Registered Representative
Inc.
Morgan Stanley & Co. Managing Director
Incorporated
C-5
<PAGE>
<CAPTION>
<S> <C> <C>
Harold J. Schaaff, Jr. Morgan Stanley & Co. Managing Director
General Counsel, Incorporated
Secretary and
Managing Director
Donald P. Ryan Morgan Stanley & Co. Principal
Compliance Officer Incorporated
and Principal
Alexander C. Frank Morgan Stanley & Co. Managing Director
Treasurer Incorporated
Marna C. Whittington Miller Anderson & Executive Committee
Chief Operating Sherrerd, LLP Member
Officer, Managing
Director and Member
of Executive
Committee
Peter D. Caldecott Morgan Stanley Dean Managing Director
Managing Director Witter Investment
and Member of Management Limited
Executive Committee
Thomas L. Bennett Morgan Stanley & Co. Managing Director
Member of Executive Incorporated
Committee and
Portfolio MAS Fund Distribution, Director
Manager Inc.
Miller Anderson & Portfolio Manager [and
Sherrerd, LLP Executive Committee
Member]
Alan E. Goldberg Morgan Stanley & Co. Managing Director
Member of Executive Incorporated
Committee
</TABLE>
In addition, MSDW Investment Management acts as investment adviser or
sub-adviser to the following registered investment companies: CIGNA Charter
Funds - Large Company Stock Growth Fund; Fifth Third Funds - International
Equity Fund; The Latin American Discovery Fund, Inc.; The Malaysia Fund, Inc.;
Morgan Stanley Dean Witter Africa Investment Fund, Inc.; Morgan Stanley Dean
Witter Asia-Pacific Fund, Inc.; Morgan Stanley Dean Witter
C-6
<PAGE>
Emerging Markets Debt Fund, Inc.; Morgan Stanley Dean Witter Emerging Markets
Fund, Inc.; Morgan Stanley Dean Witter Global Opportunity Bond Fund, Inc.;
Morgan Stanley Dean Witter High Yield Fund, Inc.; Morgan Stanley Dean Witter
Eastern Europe Fund, Inc.; Morgan Stanley Dean Witter India Investment Fund,
Inc.; certain portfolios of Morgan Stanley Dean Witter Universal Funds, Inc.;
Morgan Stanley Dean Witter Strategic Adviser Fund, Inc.; The Pakistan
Investment Fund, Inc.; The Thai Fund, Inc.; The Turkish Investment Fund,
Inc.; Aggressive Growth and Asset Allocation, Accounts of Principal Variable
Contracts Fund, Inc.; Principal Partners Aggressive Growth Fund, Inc.;
SunAmerica Series Trust - International Diversified Equities Portfolio;
SunAmerica Series Trust - Worldwide High Income Portfolio; Fortis Series
Fund, Inc. - Global Asset Allocation Series; Morgan Stanley Dean Witter
International Fund; Morgan Stanley Dean Witter International SmallCap Fund;
Morgan Stanley Dean Witter Pacific Growth Fund, Inc.; Morgan Stanley Dean
Witter Real Estate Fund; Morgan Stanley Dean Witter Variable Investment
Series - Pacific Growth Portfolio; Morgan Stanley Dean Witter Japan Fund,
Inc.; Morgan Stanley Dean Witter European Growth Fund Inc.; Morgan Stanley
Dean Witter Variable Investment Series - European Growth Portfolio; Morgan
Stanley Dean Witter Growth Fund; Morgan Stanley Dean Witter Select
Dimensions Investment Series -- The Growth Portfolio; Endeavor Money Market
Portfolio; Endeavor Series Trust - Endeavor Asset Allocation Portfolio; EQ
Advisors Trust - Morgan Stanley Emerging Markets Equity Portfolio; John
Hancock Variable Series Trust I - Emerging Markets Equity Portfolio; LSA
Variable Series Trust - MSAM Focused Equity Fund; Manufacturers Investment
Trust - Global Equity Trust; New England Zenith Fund - Morgan Stanley
International Magnum Equity Series; North American Funds -Global Equity Fund;
North American Funds - International Equity Fund; Pacific Select Fund - The
International Portfolio; Pacific Select Fund - Real Estate Investment Trust
("REIT") Portfolio; Phoenix Edge Series Fund - Morgan Stanley Focus Equity
Series; SEI Institutional International Trust - Emerging Markets Equity
Portfolio; Van Kampen World Portfolio Series Trust - Global Government
Securities Fund; Van Kampen Life Investment Trust - Global Equity Portfolio;
Van Kampen Life Investment Trust - Morgan Stanley Real Estate Securities
Portfolio; Van Kampen Global Managed Assets Fund; Van Kampen Real Estate
Securities Fund; certain portfolios of the Van Kampen Series Fund, Inc.
Describe any other business, profession, vocation or employment of a
substantial nature in which the investment sub-adviser, and each director,
officer or partner of the investment sub-adviser, is or has been, engaged within
the last two fiscal years, for his or her own account or in the capacity of
director, officer, employee, partner or trustee. (Disclose the name and
principal business address of any company for which a person listed above serves
in the capacity of director, officer, employee, partner or trustee, and the
nature of the relationship.)
During the last two fiscal years, no director or officer of Sun
Valley Gold Company or Morgan Stanley Dean Witter Advisors Inc., the
Registrant's investment sub-advisers, has engaged in any other business,
profession, vocation or employment of a substantial nature other than that of
the business of investment management and, through affiliates, investment
banking.
Item 27.
Principal Underwriters
(a) State the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing
securities of the Registrant also acts as a principal underwriter, depositor or
investment adviser.
Morgan Stanley & Co. Incorporated acts as distributor for Morgan
Stanley Dean Witter Institutional Fund, Inc., Morgan Stanley Dean
Witter Universal Funds, Inc. and Morgan Stanley Dean Witter Strategic
Adviser Fund, Inc., all registered open-end management investment
companies.
C-7
<PAGE>
(b) Provide the information with respect to each director, officer or
partner of each principal underwriter named in answer to item 20.
<TABLE>
<CAPTION>
POSITION AND
OFFICES WITH POSITION AND
NAME AND PRINCIPAL MORGAN STANLEY OFFICES WITH
BUSINESS ADDRESS* & CO. INCORPORATED REGISTRANT
------------------ ------------------ -------------
<S> <C> <C>
Barton M. Biggs Director Chairman and Director
Bruce D. Fiedorek Director and Vice Chairman
Mario Francescotti Director
Peter F. Karches Director, President and
Chief Operating Officer
John J. Mack Director
Robert A. Metzler Director
Stephan F. Newhouse Director and Vice Chairman
Ralph L. Pellecchio General Counsel and Secretary
Joseph R. Perella Director
Philip J. Purcell Director
John H. Schaefer Director
Robert G. Scott Director and Chief Financial
Officer
John S. Wadswoth, Jr. Director
Sir David Alan Walker Director
Alexander C. Frank Treasurer
-----------------------
Morgan Stanley & Co. Incorporated
*1585 Broadway
New York, NY 10036
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records
State the name and address of each person maintaining principal
possession of each account, book or other document required to be maintained by
section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and the rules under that
section.
C-8
<PAGE>
Chase Global Funds Services Company, Registrant's sub-transfer agent
and sub-dividend disbursing agent, P.O. Box 2798, Boston, Massachusetts,
02208-2798, maintains physical possession of each such account, book or other
document of the Fund.
In particular, with respect to the records required by Rule
31a-1(b)(1), Chase Global Funds Services Company maintains physical possession
of all journals containing itemized daily records of all purchases and sales of
securities, including sales and redemptions of Fund securities, and also
maintains physical possession all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash, and all other debts and
credits.
In addition, Morgan Stanley Dean Witter Investment Management Inc.,
Registrant's investment adviser and administrator, 1221 Avenue of the Americas,
New York, New York 10020, maintains possession of the Fund's corporate
organizational records, in addition to certain other records required by Rule
31a-1(b).
Item 29. Management Services
Provide a summary of the substantive provisions of any
management-related service contract not discussed in part A or part B,
disclosing the parties to the contract and the total amount paid and by whom,
for the fund's last three fiscal years.
Not applicable.
Item 30. Undertakings
In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons if the Fund intends to raise
its initial capital under section 14(a)(3)[15U.S.C. 80a-14(a)(3)].
Not applicable.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Amendment pursuant to Rule 485(b) under the 1933 Act and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of New York and State of New York on
April __, 2000.
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
By: /s/ Harold J. Schaaff, Jr.
--------------------------
Harold J. Schaaff, Jr.
President
Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ----------------------------- ---------
<S> <C> <C>
/s/ Harold J. Schaaff, Jr. President April 28, 2000
- ------------------------------- (Principal Executive
Harold J. Schaaff, Jr. Officer)
*/s/ Barton M. Biggs Director (Chairman) April 28, 2000
- -------------------------------
Barton M. Biggs
*/s/ Fergus Reid Director April 28, 2000
- -------------------------------
Fergus Reid
*/s/ Frederick O. Robertshaw Director April 28, 2000
- -------------------------------
Frederick O. Robertshaw
*/s/ Andrew McNally, IV Director April 28, 2000
- -------------------------------
Andrew McNally IV
*/s/ John D. Barrett, II Director April 28, 2000
- -------------------------------
John D. Barrett II
*/s/ Gerard E. Jones Director April 28, 2000
- -------------------------------
Gerard E. Jones
*/s/ Samuel T. Reeves Director April 28, 2000
- -------------------------------
Samuel T. Reeves
*/s/ Graham E. Jones Director April 28, 2000
- -------------------------------
Graham E. Jones
*/s/ John A. Levin Director April 28, 2000
- -------------------------------
John A. Levin
*/s/ William G. Morton, Jr. Director April 28, 2000
- -------------------------------
William G. Morton, Jr.
/s/ Belinda Anne Brady Treasurer April 28, 2000
- -------------------------------
Belinda Anne Brady
</TABLE>
*By: /s/ Harold J. Schaaff, Jr.
--------------------------
Harold J. Schaaff, Jr.
Attorney-In-Fact
<PAGE>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EDGAR
EXHIBIT
NUMBER DOCUMENT
------- ----------------------------------------------------------------------------------------------------------------
<S> <C>
(a)(1) Registrant's Articles of Amendment and Restatement, incorporated by reference to Exhibit 1(a) to Post-
Effective Amendment No. 26 to the Registrant's Registration Statement on Form N-1A (Registration No.
33-23166), filed with the Securities and Exchange Commission via EDGAR (Accession No. 0000912057-95-
008594) on October 13, 1995.
(a)(2) Registrant's Articles Supplementary to Registrant's Articles of Amendment and Restatement
(reclassifying shares), incorporated by reference to Exhibit 1(b) to Post-Effective Amendment No. 30
to Registrant's Registration Statement on Form N-1A (Registration No. 33-23166), filed with the
Securities and Exchange Commission via EDGAR (Accession No. 0000912057-96-010828) on May 24, 1996.
(a)(3) Registrant's Articles Supplementary to Registrant's Articles of Amendment and Restatement (adding new
Technology Portfolio), incorporated by reference to Exhibit 1(c) to Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A (Registration No. 33-23166), filed with the
Securities and Exchange Commission via EDGAR (Accession No. 0000912057-96-010828) on May 24, 1996.
(a)(4) Registrant's Articles Supplementary to Registrant's Articles of Amendment and Restatement (adding U.S.
Equity Plus Portfolio), incorporated by reference to Exhibit 1(d) to Post-Effective Amendment No. 38
to Registrant's Registration Statement on Form N-1A (Registration No. 33-23166), filed with the
Securities and Exchange Commission via EDGAR (Accession No. 0001047469-98-008051)on February 27, 1998.
(a)(5) Registrant's Articles Supplementary to Registrant's Articles of Amendment and Restatement (adding
European Real Estate and Asian Real Estate Portfolios), incorporated by reference to Exhibit 1(e) to
Post-Effective Amendment No. 38 to Registrant's Registration Statement on Form N-1A (Registration No.
33-23166), filed with the Securities and Exchange Commission via EDGAR (Accession No. 00001047469-98-
008051) on February 27, 1998.
(a)(6) Registrant's Articles Supplementary to Registrant's Articles of Amendment and Restatement (adding
Class B shares to the Money Market Portfolio), incorporated by reference to Exhibit 1(f) to Post-
Effective Amendment No. 38 to Registrant's Registration Statement on Form N-1A (Registration No. 33-
23166), filed with the Securities and Exchange Commission via EDGAR (Accession No. 00001047469-98-
008051) on February 27, 1998.
(a)(7) Articles of Amendment to Registrant's Articles of Amendment and Restatement (Active Country Allocation
Portfolio name changed to Active International Portfolio), incorporated by reference to Exhibit (a)(7)
to Post-Effective Amendment No. 40 to the Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and Exchange Commission via EDGAR (Accession
No. 0001047469-99-002378) on January 27, 1999.
(a)(8) Articles of Amendment to Registrant's Articles of Amendment and Restatement (Active International
Portfolio name changed to Active International Allocation Portfolio), incorporated by reference to
Exhibit (a)(8) to Post-Effective Amendment No. 40 to the Registrant's Registration Statement on Form
N-1A (Registration No. 33-23166), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 0001047469-99-002378) on January 27, 1999.
<PAGE>
<CAPTION>
<S> <C>
(a)(9) Articles of Amendment to Registrant's Articles of Amendment and Restatement (changing corporate name
to Morgan Stanley Dean Witter Institutional Fund, Inc.), incorporated by reference to Exhibit (a)(9)
to Post-Effective Amendment No. 40 to the Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and Exchange Commission via EDGAR (Accession
No. 0001047469-99-002378) on January 27, 1999.
EX-99. (a)(10) Articles of Amendment to Registrant's Articles of Amendment and Restatement (Aggressive Equity
Portfolio name changed to Focus Equity Portfolio and Emerging Growth Portfolio name changed to Small
Company Growth Portfolio), filed herewith.
(b) Amended and Restated By-Laws, incorporated by reference to Exhibit 2 to Post-Effective Amendment
No. 33 to Registrant's Registration Statement on Form N-1A (Registration No. 33-23166), filed with the
Securities and Exchange Commission via EDGAR (Accession No. 0000912057-97-007488) on February 28, 1997.
(c)(1) Specimen Security with respect to Morgan Stanley Institutional Fund, Inc. Class A shares incorporated
by reference to Exhibit 1(a) (Amended and Restated Articles of Incorporation), as amended to date to
Post-Effective Amendment No. 26 to Registrant's Registration Statement (Registration No. 33-23166),
filed with the Securities and Exchange Commission via EDGAR (Accession No. 0000912057-95-008594) on
October 13, 1995 and Exhibit 2 (Amended and Restated By-Laws), as amended to date to Post-Effective
Amendment No. 33 to Registrant's Registration Statement, filed with the Securities and Exchange
Commission via EDGAR (Accession No. 0000912057-97-007488) on February 28, 1997.
(c)(2) Specimen Security with respect to Morgan Stanley Institutional Fund, Inc. Class B shares incorporated
by reference to Exhibit 1(a) (Amended and Restated Articles of Incorporation), as amended to date to
Post-Effective Amendment No. 26 to Registrant's Registration Statement (Registration No. 33-23166),
filed with the Securities and Exchange Commission via EDGAR (Accession No. 0000912057-95-008594) on
October 13, 1995 and Exhibit 2 (Amended and Restated By-Laws), as amended to date to Post-Effective
Amendment No. 33 to Registrant's Registration Statement, filed with the Securities and Exchange
Commission via EDGAR (Accession No.0000912057-97-007488) on February 28, 1997.
(d)(1) Investment Advisory Agreement between Registrant and Morgan Stanley Asset Management Inc.,
incorporated by reference to Exhibit (d)(1) to Post-Effective Amendment No. 40 to the Registrant's
Registration Statement on Form N-1A (Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 0001047469-99-002378) on January 27, 1999.
(d)(2) Investment Sub-Advisory Agreement among Registrant, Morgan Stanley Asset Management Inc. and Sun
Valley Gold Company (with respect to the Gold Portfolio) is incorporated by reference to Exhibit 5(i)
to Post-Effective Amendment No. 25 to Registrant's Registration Statement on Form N-1A (Registration
No. 33-23166), filed with the Securities and Exchange Commission via EDGAR (Accession No. 0000912057-
95-005830) on August 1, 1995.
(d)(3) Supplement to Investment Advisory Agreement between Registrant and Morgan Stanley Asset Management
Inc. (adding the U.S. Equity Plus Portfolio), is incorporated by reference to Exhibit 5(q) to Post-
Effective Amendment No. 38 to Registrant's Registration Statement on Form N-1A (Registration No. 33-
23166), filed with the Securities and Exchange Commission via EDGAR (Accession No. 0001047469-98-
008051) on February 27, 1998.
<PAGE>
<CAPTION>
<S> <C>
(d)(4) Supplement to Investment Advisory Agreement between Registrant and Morgan Stanley Asset Management
Inc. (adding the Asian and European Real Estate Portfolios), is incorporated by reference to Exhibit
5(r) to Post-Effective Amendment No. 38 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and Exchange Commission on February 27, 1998.
EX-99. (d)(5) Amendment to Investment Advisory Agreement between Registrant and MSDW Investment Management (reducing
the annual advisory fee payable by the Emerging Markets Debt Portfolio of the Fund from 1.00% to
0.75%), filed herewith.
EX-99. (d)(6) Sub-Advisory Agreement between Registrant and Morgan Stanley Dean Witter Advisors Inc., filed herewith.
(e)(1) Distribution Agreement between Registrant and Morgan Stanley & Co. Incorporated., incorporated by
reference to Exhibit 6(a) to Post-Effective Amendment No. 25 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-23166), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 0000912057-95-005830) on August 1, 1995.
(e)(2) Supplement to Distribution Agreement between Registrant and Morgan Stanley & Co. Incorporated,
incorporated by reference to Exhibit 6(b) to Post-Effective Amendment No. 29 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 0000912057-96-007390) on April 30, 1996.
(f) Not applicable.
(g)(1) Mutual Fund Domestic Custody Agreement between Registrant and United States Trust Company,
incorporated by reference to Exhibit 8(a) to Post-Effective Amendment No. 25 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 0000912057-95-005830) August 1, 1995.
(g)(2) International Custody Agreement between Registrant and [Morgan Stanley Trust Company], incorporated by
reference to Exhibit 8(b) to Post-Effective Amendment No. 25 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-23166), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 0000912057-95-005830) on August 1, 1995.
(g)(3) Amendment to International Custody Agreement between Registrant and [Morgan Stanley Trust Company],
incorporated by reference to Exhibit 8(c) to Post-Effective Amendment No. 30 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 0000912057-96-010828) on May 24, 1996.
EX-99. (g)(4) Amendment to International Custody Agreement
between Registrant and The Chase Manhattan Bank, filed herewith.
(h)(1) Administration Agreement between Registrant and Morgan Stanley Asset Management Inc., incorporated by
reference to Exhibit 9(a) to Post-Effective Amendment No. 25 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-23166), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 0000912057-95-005830) on August 1, 1995.
<PAGE>
<CAPTION>
<S> <C>
(h)(2) Administration Agreement between Registrant and United States Trust Company, incorporated by reference
to Exhibit 9(b) to Post-Effective Amendment No. 25 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-23166), filed with the Securities and Exchange Commission via EDGAR (Accession
No. 0000912057-95-005830) on August 1, 1995.
EX-99. (i) Opinion of Counsel, filed herewith.
EX-99. (j) Consent of Accountant, filed herewith.
(k) None.
(l) Purchase Agreement, incorporated by reference to Exhibit 13 to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A (Registration No. 33-23166), filed with the
Securities and Exchange Commission via EDGAR (Accession No. 0000912057-95-005830) on August 1, 1995.
(m)(1) Distribution Plan with respect to the Class B shares (the "Class B Plan") of the Active Country
Allocation Portfolio, incorporated by reference to Exhibit 15 to Post-Effective Amendment No. 33 to
Registrant's Registration Statement on Form N-1A (Registration No. 33-23166), filed with Securities
and Exchange Commission via EDGAR (Accession No. 0000912057-97-007488) on February 28, 1997. The
following Class B Plans have been omitted because they are substantially identical to the one
incorporated by reference herein. The omitted Class B Plans differ from the Class B Plan incorporated
by reference herein only with respect to the portfolio to which the Class B Plan relates: Fixed
Income, Global Fixed Income, Municipal Bond, Mortgage-Backed Securities, High Yield, Value Equity,
Gold, Global Equity, International Equity, Asian Equity, European Equity, Japanese Equity, Latin
American, Emerging Markets, Emerging Markets Debt, China Growth, Equity Growth, Emerging Growth,
MicroCap, Aggressive Equity, U.S. Real Estate, International Magnum, Technology, U.S. Equity Plus,
European Real Estate, Asian Real Estate and Money Market Portfolios.
EX-27. (n) Financial Data Schedules, not applicable.
(o) 18f-3 Plan, incorporated by reference to Exhibit 19 to Post-Effective Amendment No. 33 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-23166), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 0000912057-97-007488) on February 28, 1997.
EX-99. (p) Code of Ethics, filed herewith
EX-99. (q) Powers of attorney, filed herewith
</TABLE>
<PAGE>
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC. (the
"Corporation"), a corporation organized under the laws of the State of Maryland,
having its principal place of business at 1221 Avenue of the Americas, New York,
New York 10020, does hereby certify to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: Pursuant to the authority contained in Section 2-605(a)(4) of
the Maryland General Corporation Law and under authority contained in Article
TENTH of the Articles of Incorporation of the Corporation, a majority of the
full Board of Directors by resolution passed September 15, 1999, have changed
the name of the class of stock designated the "Aggressive Equity Portfolio" to
the "Focus Equity Portfolio" and the class of stock designated the "Emerging
Growth Portfolio" to the "Small Company Growth Portfolio."
THIRD: Pursuant to the requirements of Section 2-607 of the Maryland
General Corporation Law, the Board of Directors has determined to file of record
these Articles of Amendment, which Amendment is limited to changes expressly
permitted by Section 2-605 of the Maryland General Corporation Law to be made
without action by the stockholders and which Amendment is solely for the purpose
of changing the name of four classes of stock of the Corporation.
FOURTH: Article FIFTH, Section 3 of the Articles of Incorporation of
the Corporation is hereby amended to read in its entirety as follows:
Pursuant to Section 2-105 of the Maryland General Corporation Law, the
Board of Directors of the Corporation shall have the power to designate one or
more classes of shares of Common Stock, to fix the number of shares in any such
class and to classify or reclassify any unissued shares with respect to such
class. Any such class (subject to any applicable rule, regulation or order of
the Securities and Exchange Commission or other applicable law or regulation)
shall have such preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, terms and conditions
of redemption and other characteristics as the Board may determine in the
absence of contrary determination set forth herein. The aforesaid power shall
include the power to create, by classifying or reclassifying unissued shares in
the aforesaid manner, one or more classes in addition to those initially
designated as named below. Subject to such aforesaid power, the Board of
Directors has
<PAGE>
designated thirty-two portfolios of the Corporation and for each has designated
two classes of shares of Common Stock except the Municipal Money Market and
International Small Cap Portfolios. The names of such classes and the number of
shares of Common Stock classified and allocated to these classes are as follows:
NUMBER OF SHARES
OF COMMON STOCK
NAME OF CLASS CLASSIFIED AND ALLOCATED
Money Market Portfolio - Class A..........................4,000,000,000 shares
Money Market Portfolio - Class B..........................2,000,000,000 shares
Municipal Money Market Portfolio - Class A................4,000,000,000 shares
Small Company Growth Portfolio - Class A....................500,000,000 shares
Small Company Growth Portfolio - Class B....................500,000,000 shares
International Equity Portfolio - Class A....................500,000,000 shares
International Equity Portfolio - Class B....................500,000,000 shares
Value Equity Portfolio - Class A............................500,000,000 shares
Value Equity Portfolio - Class B............................500,000,000 shares
Fixed Income Portfolio - Class A............................500,000,000 shares
Fixed Income Portfolio - Class B............................500,000,000 shares
Balanced Portfolio - Class A................................500,000,000 shares
Balanced Portfolio - Class B................................500,000,000 shares
Global Equity Portfolio - Class A...........................500,000,000 shares
Global Equity Portfolio - Class B...........................500,000,000 shares
Global Fixed Income Portfolio - Class A.....................500,000,000 shares
Global Fixed Income Portfolio - Class B.....................500,000,000 shares
European Equity Portfolio - Class A.........................500,000,000 shares
European Equity Portfolio - Class B.........................500,000,000 shares
Equity Growth Portfolio - Class A...........................500,000,000 shares
Equity Growth Portfolio - Class B...........................500,000,000 shares
Asian Equity Portfolio - Class A............................500,000,000 shares
Asian Equity Portfolio - Class B............................500,000,000 shares
Active International Allocation Portfolio - Class A.........500,000,000 shares
Active International Allocation Portfolio - Class B.........500,000,000 shares
International Small Cap Portfolio - Class A...............1,000,000,000 shares
High Yield Portfolio - Class A..............................500,000,000 shares
High Yield Portfolio - Class B..............................500,000,000 shares
Emerging Markets Portfolio - Class A........................500,000,000 shares
Emerging Markets Portfolio - Class B........................500,000,000 shares
Small Cap Value Equity Portfolio - Class A..................500,000,000 shares
Small Cap Value Equity Portfolio - Class B..................500,000,000 shares
Emerging Markets Debt Portfolio - Class A...................500,000,000 shares
Emerging Markets Debt Portfolio - Class B...................500,000,000 shares
Mortgage-Backed Securities Portfolio - Class A..............500,000,000 shares
Mortgage-Backed Securities Portfolio - Class B..............500,000,000 shares
<PAGE>
Municipal Bond Portfolio - Class A..........................500,000,000 shares
Municipal Bond Portfolio - Class B..........................500,000,000 shares
Japanese Equity Portfolio - Class A.........................500,000,000 shares
Japanese Equity Portfolio - Class B.........................500,000,000 shares
Gold Portfolio - Class A....................................500,000,000 shares
Gold Portfolio - Class B....................................500,000,000 shares
China Growth Portfolio - Class A............................500,000,000 shares
China Growth Portfolio - Class B............................500,000,000 shares
Latin American Portfolio - Class A..........................500,000,000 shares
Latin American Portfolio - Class B..........................500,000,000 shares
Focus Equity Portfolio - Class A............................500,000,000 shares
Focus Equity Portfolio - Class B............................500,000,000 shares
U.S. Real Estate Portfolio - Class A........................500,000,000 shares
U.S. Real Estate Portfolio - Class B........................500,000,000 shares
MicroCap Portfolio - Class A................................500,000,000 shares
MicroCap Portfolio - Class B................................500,000,000 shares
International Magnum Portfolio - Class A....................500,000,000 shares
International Magnum Portfolio - Class B....................500,000,000 shares
Technology Portfolio - Class A..............................500,000,000 shares
Technology Portfolio - Class B..............................500,000,000 shares
U.S. Equity Plus Portfolio - Class A........................500,000,000 shares
U.S. Equity Plus Portfolio - Class B........................500,000,000 shares
Asian Real Estate Portfolio - Class A.......................500,000,000 shares
Asian Real Estate Portfolio - Class B.......................500,000,000 shares
European Real Estate Portfolio - Class A....................500,000,000 shares
European Real Estate Portfolio - Class B....................500,000,000 shares
FIFTH: These Articles of Amendment shall be effective as of the time
the State Department of Assessments and Taxation of Maryland accepts these
Articles of Amendment of record.
<PAGE>
IN WITNESS WHEREOF, Morgan Stanley Dean Witter Institutional Fund, Inc.
has caused these Articles of Amendment to be signed in its corporate name and on
its behalf by its President and its corporate seal to be hereunto affixed and
attested by its Secretary as of the 24 day of September, 1999
MORGAN STANLEY DEAN WITTER
INSTITUTIONAL FUND, INC.
By: /s/ Michael F. Klein
--------------------
Michael F. Klein
President
[SEAL]
Attest:
/s/ Mary E. Mullin
- --------------------
Mary E. Mullin
Secretary
<PAGE>
THE UNDERSIGNED, President of Morgan Stanley Dean Witter
Institutional Fund, Inc., who executed on behalf of said corporation the
foregoing Articles of Amendment of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said corporation, the foregoing
Articles of Amendment to be the corporate act of said corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth herein with respect to the approval thereof are true
in all material respects, under the penalties of perjury.
/s/ Michael F. Klein
--------------------
Michael F. Klein
President
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
AMENDMENT TO MSDW INVESTMENT MANAGEMENT INVESTMENT ADVISORY AGREEMENT
EMERGING MARKETS DEBT PORTFOLIO
AMENDMENT (the "Amendment") TO INVESTMENT ADVISORY AGREEMENT dated as
of May 1, 1997 by and between Morgan Stanley Institutional Fund, Inc. (now known
as Morgan Stanley Dean Witter Institutional Fund, Inc.) (the "Fund") and Morgan
Stanley Asset Management Inc. (now known as Morgan Stanley Dean Witter
Investment Management Inc.) (the "Adviser") (the "Agreement").
RECITALS
WHEREAS, the Fund has executed and delivered the Agreement which sets
forth the rights and obligations of the parties with respect to the management
of the portfolios of the Fund set forth on Schedule A to such Agreement, as
amended and supplemented from time to time.
WHEREAS, the Fund has changed the management fee of the Emerging
Markets Debt Portfolio (the "Portfolio").
AGREEMENTS
Now, therefore, the parties agree as follows:
The compensation of the Adviser as set forth in Paragraph 3 of the
Agreement with respect to the Portfolio will be as set forth below:
<TABLE>
<CAPTION>
PORTFOLIO CONTRACTUAL RATE OF ADVISORY FEES
<S> <C>
Emerging Markets Debt Portfolio 0.75%
</TABLE>
This Amendment may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
The parties listed below have executed this Amendment as of the 12 day
of October, 1999
MORGAN STANLEY DEAN WITTER MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC. INSTITUTIONAL FUND, INC.
/s/ Harold J. Schaaff, Jr. /s/ Michael F. Klein
- ---------------------------- -----------------------
Name: Harold J. Schaaff, Jr. Name: Michael F. Klein
Title: Principal, General Counsel and Title: President
Secretary
<PAGE>
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 23rd day of April, 1999 by and between Morgan
Stanley Dean Witter Investment Management Inc., a Delaware corporation
(herein referred to as the "Investment Manager"), and Morgan Stanley Dean
Witter Advisors Inc., a Delaware corporation, (herein referred to as the
"Sub-Advisor").
WHEREAS, Morgan Stanley Dean Witter Institutional Fund, Inc. (herein
referred to as the "Fund") is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Investment Manager has entered into an Investment
Management Agreement with the Fund (the "Investment Management Agreement")
wherein the Investment Manager has agreed to provide investment management
services to the various portfolios of the Fund; and
WHEREAS, the Sub-Advisor is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of acting as
an investment adviser; and
WHEREAS, Investment Manager desires to retain the services of the
Sub-Advisor to render investment advisory services for the Money Market
Portfolio and the Municipal Money Market Portfolio of the Fund (each a
"Portfolio" and together the "Portfolios") in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Sub-Advisor desires to be retained by the Investment
Manager to perform services on said terms and conditions:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties hereto as herein set forth, the parties covenant
and agree as follows:
1. Subject to the supervision of the Fund, its officers and Directors,
and the Investment Manager, and in accordance with the investment objectives,
policies and restrictions set forth in the then-current Registration
Statement relating to the Fund, and such investment objectives, policies and
restrictions from time to time prescribed by the Directors of the Fund with
respect to the Portfolios and communicated by the Investment Manager to the
Sub-Advisor, the Sub-Advisor agrees to provide the Fund with investment
advisory services with respect to the Portfolios' investments to obtain and
evaluate such information and advice relating to the economy, securities
markets and securities as it deems necessary or useful to discharge its
duties hereunder; to continuously manage the assets of each Portfolio in a
manner consistent with the investment objective and policies of the applicable
Portfolio; to make decisions as to foreign currency matters and make
determinations as to forward foreign exchange contracts and options and
futures contracts in foreign currencies; shall determine the securities to be
purchased, sold or otherwise disposed of by the Fund and the timing of
1
<PAGE>
such purchases, sales and dispositions; to take such further action,
including the placing of purchase and sale orders on behalf of the
Portfolios, as it shall deem necessary or appropriate; to furnish to or
place at the disposal of the Fund and Investment Manager such of the
information, evaluations, analyses and opinions formulated or obtained by it
in the discharge of its duties as the Fund and the Investment Manager may,
from time to time, reasonably request. The Investment Manager and the
Sub-Advisor shall each make its officers and employees available to the other
from time to time at reasonable times to review investment policies of the
Portfolios and to consult with each other.
2. The Sub-Advisor shall, at its own expense, maintain such staff and
employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Sub-Advisor shall
be deemed to include persons employed or otherwise retained by the
Sub-Advisor to furnish statistical and other factual data, advice regarding
economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Investment Manager may desire. The Sub-Advisor shall maintain whatever
records as may be required to be maintained by it under the Act. All such
records so maintained shall be made available to the Fund, upon the request
of the Investment Manager or the Fund.
3. The Fund will, from time to time, furnish or otherwise make available
to the Sub-Advisor such financial reports, proxy statements and other
information relating to the business and affairs of the Portfolios as the
Sub-Advisor may reasonably require in order to discharge its duties and
obligations hereunder or to comply with any applicable law and regulations and
the investment objectives, policies and restrictions from time to time
prescribed by the Directors of the Fund.
4. The Sub-Advisor shall bear the cost of rendering the investment
advisory services to be performed by it under this Agreement, and shall, at
its own expense, pay the compensation of the officers and employees, if any,
of the Fund, employed by the Sub-Advisor, and such clerical help and
bookkeeping services as the Sub-Advisor shall reasonably require in
performing its duties hereunder.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund, including, without limitation: any fees paid to the Investment
Manager; fees pursuant to any plan of distribution that the Fund may adopt;
the charges and expenses of any registrar, any custodian, sub-custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any stock transfer or dividend agent or
agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to federal, state or other governmental agencies or
pursuant to any foreign laws; the cost and expense of engraving or printing
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund
and its shares with the Securities and Exchange Commission and various states
and other
2
<PAGE>
jurisdictions or pursuant to any foreign laws (including filing fees and
legal fees and disbursements of counsel); the cost and expense of printing
(including typesetting) and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders; fees and travel expenses of
Directors or members of any advisory board or committee who are not
employees of the Investment Manager or Sub-Advisor; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption whether in
shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund, the Investment Manager or the
Sub-Advisor, and of independent accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including but not limited to legal claims
and liabilities and litigation costs and any indemnification related
thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Sub-Advisor, the Investment Manager shall pay to the
Sub-Advisor monthly compensation equal to 40% of the fee that the Investment
Manager receives from each Portfolio pursuant to the Investment Management
Agreement. Any subsequent change in the Investment Management Agreement which
has the effect of raising or lowering the compensation of the Investment
Manager will have the concomitant effect of raising or lowering the fee
payable to the Sub-Advisor under this Agreement. In addition, if the
Investment Manager has undertaken in the Fund's Registration Statement as
filed under the Act (the "Registration Statement") or elsewhere to waive all
or part of its fee under the Investment Management Agreement, the
Sub-Advisor's fee payable under this Agreement will be proportionately
waived in whole or in part. The calculation of the fee payable to the
Sub-Advisor pursuant to this Agreement will be made, each month, at the time
designated for the monthly calculation of the fee payable to the Investment
Manager pursuant to the Investment Management Agreement. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for the part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fee as set forth above.
7. The Sub-Advisor will use its best efforts in the performance of
investment activities on behalf of the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Sub-Advisor shall not be liable to the Investment
Manager or the Fund or any of its investors for any error of judgment or
mistake of law or for any act or omission by the Sub-Advisor or for any
losses sustained by the Fund or its investors.
8. It is understood that any of the shareholders, Directors, officers and
employees of the Fund may be a shareholder, director, officer or employee of,
or be otherwise
3
<PAGE>
interested in, the Sub-Advisor, and in any person controlled by or under
common control with the Sub-Advisor, and that the Sub-Advisor and any person
controlled by or under common control with the Sub-Advisor may have an
interest in the Fund. It is also understood that the Sub-Advisor and any
affiliated persons thereof or any persons controlled by or under common
control with the Sub-Advisor have and may have advisory, management service
or other contracts with other organizations and persons, and may have other
interests and businesses, and further may purchase, sell or trade any
securities or commodities for their own accounts or for the account of others
for whom they may be acting.
9. This Agreement shall remain in effect with respect to each Portfolio
until March 31, 2001 and from year to year thereafter provided such
continuance is approved at least annually by the vote of holders of a
majority, as defined in the Act, of the outstanding voting securities of the
applicable Portfolio or by the Directors of the Fund, provided, that in
either event such continuance is also approved annually by the vote of a
majority of the Directors of the Fund who are not parties to this Agreement
or "interested persons" (as defined in the Act) of any such party, which vote
must be cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that (a) the Fund may, at any time and without
the payment of any penalty, terminate this Agreement with respect to either
Portfolio or both Portfolios upon thirty days' written notice to the
Investment Manager and the Sub-Advisor, either by majority vote of the
Directors of the Fund or by the vote of a majority of the outstanding voting
securities of the applicable Portfolio(s); (b) this Agreement shall
immediately terminate in the event of its assignment (within the meaning of
the Act) unless such automatic termination shall be prevented by an exemptive
order of the Securities and Exchange Commission; (c) this Agreement shall
immediately terminate in the event of the termination of the Investment
Management Agreement; (d) the Investment Manager may terminate this Agreement
with respect to either Portfolio or both Portfolios without payment of
penalty on thirty days' written notice to the Fund and the Sub-Advisor; and
(e) the Sub-Advisor may terminate this Agreement with respect to either
Portfolio or both Portfolios without the payment of penalty on thirty days'
written notice to the Fund and the Investment Manager. Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed
post-paid, to the other party at the principal office of such party.
10. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Portfolios to supply any omission, to
cure, correct or supplement any ambiguous, defective or inconsistent
provision hereof, or if they deem it necessary to conform this Agreement to
the requirements of applicable federal laws or regulations, but neither the
Fund, the Investment Manager nor the Sub-Advisor shall be liable for failing
to do so.
11. This Agreement shall be construed in accordance with the law of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
By: /s/ Harold J. Schaaff, Jr.
---------------------------------
Attest: /s/ Joseph C. Benedetti
-----------------------------
MORGAN STANLEY DEAN WITTER
ADVISORS INC.
By: /s/ Bkl
---------------------------------
Attest: /s/ LouAnne McInnis
-----------------------------
Accepted and agreed to as of
the day and year first above written:
MORGAN STANLEY DEAN WITTER
INSTITUTIONAL FUND, INC.
By: /s/ Michael F. Klein
---------------------------------
Attest: /s/ Stefanie V. Chang
-----------------------------
5
<PAGE>
AMENDMENT NO. 1
to Amendment to Custody Agreement between
The Chase Manhattan Bank and
Morgan Stanley Dean Witter Institutional Fund, Inc.
WHEREAS, Morgan Stanley Trust Company entered into a Custody Agreement
dated as of July 31, 1989, as amended by an Amendment to Custody Agreement
dated as of April 22, 1996 (the "Securities Lending Amendment, and,
collectively with the Custody Agreement, the "Agreement") with Morgan Stanley
Dean Witter Institutional Fund, Inc. (the "Client"); and
WHEREAS, the Agreement was assigned by Morgan Stanley Trust Company to
The Chase Manhattan Bank (the "Custodian") by letter of August 31, 1998; and
WHEREAS, the Client and the Custodian have agreed to enter into this
Amendment in order to authorize the Custodian to take certain additional
actions on behalf of the Client;
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
1. Terms used in the Agreement are used herein with their defined
meanings.
2. Sections 3 and 4 of the Securities Lending Amendment are hereby
deleted and a new provision with respect to the matters covered by such
Sections shall be considered part of the Agreement as follows:
"For each loan of Securities, the Custodian or a financial institution
with which Custodian shall have previously entered an agreement among itself,
such financial institution and a particular borrower providing for the
holding of collateral at such financial institution on behalf of Custodian's
lending customers (a "Triparty Institution") shall receive and hold all
collateral required by the applicable Securities Loan Agreement
("Collateral") in an account established solely for that purpose (the
"Collateral Account"), and the Custodian is hereby authorized and directed,
without obtaining any further approval from Client, to invest and reinvest
substantially all cash Collateral in accordance with the investment
guidelines annexed hereto. Except as contemplated by Custodian's fee
schedule with respect to Custodian's participation in negative earnings on
cash Collateral investments, such investments ("Authorized Investments") are
made for the account of, and at the sole risk of, Client. In that connection,
Client shall pay to
<PAGE>
Custodian on demand in cash an amount equal to any deficiency in the amount
of Collateral available for return to a borrower pursuant to the applicable
Securities Loan Agreement. Custodian is authorized to select brokers and
dealers for the execution of trades in connection with the investment of cash
Collateral, which broker or dealer may be an affiliate of Custodian provided
that a competitive execution price is obtained. Custodian shall credit, or
where applicable have a Triparty Institution credit, all Collateral,
Authorized Investments and proceeds to a Collateral Account and Custodian
shall mark its books and records to identify Clients' interest therein, it
being understood, however, that all monies credited to a Collateral Account
may for purposes of investment be commingled with cash collateral held for
other lenders of securities on whose behalf Custodian may act. Custodian may,
in its sole discretion, liquidate any Authorized Investment and credit the
net proceeds to a Collateral Account. Custodian shall accept substitutions of
Collateral in accordance with the applicable Securities Loan Agreement, and
shall credit, or where applicable shall have a triparty institution credit,
all such substitutions to a Collateral Account."
3. The following new Section is hereby made a part of the Agreement:
INDEMNIFICATION
(a) INDEMNIFICATION OF CLIENT IN RESPECT OF ALL INTEREST, DIVIDENDS AND
OTHER DISTRIBUTIONS MADE BY THE ISSUER ("DISTRIBUTIONS").
(i) NON-CASH DISTRIBUTIONS. If the borrower in respect of any loan of
Securities effected pursuant hereto and pursuant to the applicable Securities
Loan Agreement (a "Loan") fails to deliver any non-cash Distributions with
respect to Securities on Loan as and when requested to do so by Custodian,
(x) Custodian shall, with respect to Securities issued by an issuer that is
organized under the laws of the United States or any State thereof or that
are otherwise traded in the United States ("U.S. Securities"), at its option,
credit such non-cash Distribution or an amount equivalent thereto to Client's
account on the date it is due, or (y) with respect to Securities issued by an
issuer that is not organized under the laws of the United States ("Foreign
Securities"), for any non-cash Distributions for which the record date occurs
on or before the date of any event of default as described in the Securities
Loan Agreement (an "Event of Default"), Custodian shall, at its option,
either (i) purchase replacement securities (of an equal amount or the same
issue, class, type or series as the Distribution) on the principal market in
which such securities are traded or (ii) credit Client's account, with the
market value in U.S. dollars ("Dollars") of such Distributions on the due
date as determined by Custodian in good faith.
(ii) CASH DISTRIBUTIONS. Custodian shall credit Client's account on
payable date with the amount of all cash Distributions with respect to
Securities on Loan over their record date that Client would have received
under the Agreement had such Securities not been on Loan over record date;
provided, that with respect to Foreign Securities, Custodian's obligation to
credit Client's account shall extend only to record dates up to and
<PAGE>
including the date of any Event of Default (as defined in the applicable
Securities Loan Agreement). To the extent that cash Distributions are not
delivered to Custodian by borrower and Custodian has so credited Client's
account with such Distributions, Custodian shall be subrogated to Client's
rights against borrower as provided in paragraph (c) hereof. In connection
with the foregoing, Client shall promptly return any amount so credited upon
oral or written notification from Custodian: (a) that such amount has not
been paid by the issuer of the Securities or the paying agent therefor (as
applicable) in the ordinary course of business or (b) that such amount was
incorrectly credited. If Client does not promptly return any amount upon such
notification, Custodian shall be entitled, upon oral or written notification
to Client, to reverse such credit by debiting Client's account for the amount
previously credited.
(b) INDEMNIFICATION OF CLIENT IN RESPECT OF SECURITIES
(i) U.S. SECURITIES. If the borrower in respect of any Loan of U.S.
Securities effected pursuant hereto and pursuant to the applicable Securities
Loan Agreement fails to return any Securities on Loan to Custodian for the
Account when due thereunder, which is the date an Event of Default shall have
occurred under the applicable Securities Loan Agreement (the "Return Date"),
then Custodian shall, at its expense (subject to paragraph (d) hereof) deposit
replacement Securities of the same issue, type, class and series to the
Account, as soon as practicable. If Custodian is unable to obtain replacement
Securities, Custodian shall credit Client's account in Dollars with the
market value of such loaned Securities on the credit date (including, in the
case of debt Securities, accrued interest up to and including the credit
date).
(ii) FOREIGN SECURITIES. If the borrower in respect of any Loan of
Foreign Securities effected pursuant hereto and pursuant to the applicable
Securities Loan Agreement fails to return any Securities on Loan to Custodian
for the Account on the Return Date, Custodian will, at Custodian's sole
election and at its expense (subject to paragraphs (b)(iii) and (c) hereof),
as soon as practicable, either (x) deposit replacement Securities of the same
issue, type, class and series to the Account or (y) credit Client's Account,
in Dollars with the market value of the Collateral as determined as of the
Return Date (up to but not to exceed the market value of the Loaned
Securities as of the Return Date); provided, however, that if the market
value of the Collateral as of the Return Date is less than the market value
of the Loaned Securities as of the Return Date (other than as a consequence
of losses on Authorized Investments as provided in paragraph (b)(iii)
following), Custodian will credit Client's Account with such further amount
as shall account for the difference between the market value of the
Collateral and the market value of the Loaned Securities as of the Return
Date. For purposes of this Section, market value in the case of fixed income
Securities shall include accrued but unpaid interest. Market value shall be
determined by Custodian in accordance with the applicable Securities Loan
Agreement, including the computation of Dollar equivalents where Securities
on Loan and/or Collateral (and interest, dividends and other payments and
Distributions received by Chase in connection with such Securities on Loan
and/or Collateral) are denominated in a currency other than Dollars.
<PAGE>
(iii) In connection with (i) and (ii) above, if the market value of the
Cash Collateral at the time of default by the borrower on a credit date or a
Return Date is less than that which is required to purchase replacement
securities or to credit the Client's account with the market value in Dollars
of the Loaned Securities as a result of a decrease in the market value of
Authorized Investments, Custodian shall not be responsible for that decrease
and shall deposit replacement securities or credit Client's account, with the
market value of such Loaned Securities only to an amount net of the decrease
in market value of Authorized Investments. With respect to and to the extent
that a Loan is made against letter of credit Collateral, in the event of a
default by both the issuer of the letter of credit and the borrower,
Custodian shall not be responsible for any resulting decrease in the market
value of such letter of credit Collateral or have any obligation to either
contribute to or otherwise provide for any resulting Collateral deficiency.
(c) SUBROGATION. If Custodian makes a payment or a purchase pursuant to
Sections (a) or (b) hereof, Custodian shall, to the extent of such payment or
purchase, be subrogated to, and Client shall assign and be deemed to have
assigned to Custodian, all of its rights in, to and against the borrower (and
any guarantor thereof) in respect of such Loan, any Collateral pledged by the
borrower in respect of such Loan (including any Letters of Credit and the
issuers thereof), and all proceeds of such Collateral. In the event that
Client receives or is credited with any payment, benefit or value from or on
behalf of the borrower in respect of rights to which Custodian is subrogated
as provided herein, Client shall promptly remit or pay to Custodian the same
(or its Dollar equivalent).
In all other respects, all terms and provisions of the Agreement remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed and delivered by their respective authorized officers as
of the day and year first above written.
THE CHASE MANHATTAN BANK
By /s/ Gene Gemelli
Gene Gemelli, Vice President
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
216864 By /s/ Michael F. Klein
<PAGE>
CHASE GLOBAL SECURITIES LENDING
INVESTMENT GUIDELINES FOR
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
EFFECTIVE MAY 10, 1999
A. ACCOUNT OBJECTIVE
Pursuant to Amendment No.1 to Amendment to Custody Agreement between
The Chase Manhattan Bank ("Chase") and Morgan Stanley Dean Witter
Institutional Fund, Inc. (the "Fund") dated May 10, 1999, Chase has
undertaken to invest and reinvest cash collateral received in
connection with securities lending ("Collateral") in accordance with
the following investment guidelines.
This short term, fixed income account (the "Account"), established on
behalf of the Fund, is designed to maximize the yield on securities
lending cash collateral by investing in securities that satisfy these
guidelines, as applied at the time of purchase.
B. PERMISSIBLE INVESTMENTS
1. INSTRUMENTS
Chase on behalf of the Account is permitted to purchase only the
following securities:
Bankers' Acceptances
Domestic and Yankee Certificates of Deposit
Commercial Paper, including unregistered (so-called 4(2)) Commercial
Paper, but excluding Asset-backed commercial paper)
Corporate Bonds
Medium Term Notes
Repurchase Agreements, subject to the requirements of paragraph G
Time Deposits
U.S. Treasury Bills
U.S. Treasury Notes
U.S. Government Agency Discount Notes and Debentures, which shall
include securities issued or guaranteed as to principal and interest
by the United States Government, its agencies instrumentalities or
establishments
2. CERTAIN DERIVATIVES
Chase, on behalf of the Account, will not invest in any instrument
whose coupon rate will move in the opposite direction of the index to
which such instrument is tied. In addition,
<PAGE>
in the event that Chase, on behalf of the Account, invests in any
instrument whose coupon rate moves when the index to which such rate
is tied moves, Chase, on behalf of the Account, shall invest only in
those of such instruments whose movements in the coupon rate are
equivalent to movements in the index, with such index or indices being
limited to U.S. Treasury securities, US $ LIBOR, the U.S. Federal
Funds rate or U.S. Prime Rate.
3. CURRENCY
Only U.S. Dollar denominated securities will be permissible under
these guidelines.
4. LIMITATION ON FOREIGN ISSUERS
Subject to Sections B.4 and E, there are no limitations on securities
of foreign issuers.
C. PROHIBITED INVESTMENTS
Equity securities.
Floating rate securities with an interest rate cap, with the exception
of those U.S. Government Securities and Governmental Agencies which are
capped at a rate in excess of 20% to comply with state usury laws.
D. LIMITATIONS ON AMOUNTS INVESTED/CASH RESERVE; PERMITTED BORROWING
Chase, on behalf of the Account, will seek to be fully invested in
permissible securities as of the close of business on each day.
E. CONCENTRATION GUIDELINES
- - U.S. Treasury and U.S. Government Agency Securities = No Limit
- - Repurchase Agreements = 20% per counterparty (see Attachment 1 to
the guidelines) to the extent they are in
compliance with Section G.
- - All Other Permissible Investments = 3% of the account value at the
time of purchase, per issuer.
<PAGE>
F. MATURITY GUIDELINES
- - Time Deposits = Overnight Only. However, on occasion
where affected by legal holiday or with
the prior consent of MSDWIM, Chase, on
behalf of the Account, may purchase time
deposits with a maximum maturity not to
exceed 4 business days.
- - Term Repurchase Agreements = No Greater than 7 days
- - All other instruments must have a Final Maturity at the time of
purchase that does not exceed 397 days
Final Maturity, for purposes of these guidelines, means the earliest of
(i) the date noted on the face of the instrument as the date on which
the principal amount must be paid, (ii) in the case of an instrument
with an unconditional put or unconditional demand feature, the date on
which the principal amount of the instrument can be recovered by
demand, or (iii) in the case of a variable rate instrument, the
principal amount of which, in accordance with its terms, must
unconditionally be paid in 397 calendar days or less shall be deemed to
have a maturity equal to the earlier of the period remaining until the
next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand, (iv) in the case
of a variable rate instrument, the principal amount of which is
scheduled to be paid in more than 397 calendar days, that is subject to
a demand feature, shall be deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand, (v) a floating rate security, the principal
amount of which, in accordance with its terms, must unconditionally be
paid in 397 calendar days or less shall be deemed to have a maturity of
one day, (vi) a floating rate security, the principal amount of which
is scheduled to be paid in more than 397 calendar days, that is subject
to a demand feature, shall be deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through
demand.
- - A repurchase agreement shall be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur, or, where no date is
specified, but the agreement is subject to a demand, the notice period
applicable to a demand for the repurchase of the securities.
The maximum weighted average days to maturity, for all investments made
by Chase on behalf of the Account, may not exceed 90 days.
G. REPURCHASE AGREEMENTS (including term repurchase agreements, entered
into using custodians deemed appropriate by the Lender's Agent)
<PAGE>
PERMITTED COUNTERPARTIES
Repurchase agreements shall be entered into only with counterparties
approved by the Fund's Board of Directors, as such list shall be
amended from time to time.
PERMITTED COLLATERAL
The counterparty in a repurchase transaction shall post collateral
equal to 102% of the purchase price with collateral to consist of
bills, bonds or notes issued by the United States Treasury; other
securities guaranteed as to principal and interest by the Government of
the United States, its agencies, instrumentalities or establishments;
or mortgage-backed securities issued or guaranteed by agencies of the
Government of the United States and will be required to be marked to
market on a daily basis.
DIVERSIFICATION
A repurchase agreement, as described in this Section G, shall be deemed
to be an acquisition of the underlying securities, provided that the
obligation of the seller to repurchase the securities from the Fund is
fully collateralized.
H. QUALITY GUIDELINES
Except as otherwise provided with respect to repurchase agreement
collateral in paragraph G:
Specified rating categories at time of purchase:
SHORT TERM:
Either A-1 by S & P or P-1 by Moody's and one of the following and one
of the following; A-1 by S&P, P-1 by Moody's, F-1 by Fitch or D-1 by
Duff and Phelps.
DOWNGRADES
The Fund may not purchase securities based on an S&P, Moody's, Fitch,
or Duff rating where the rating organization has announced publicly
that it is examining the rating for a possible downgrade. This
limitation does not apply to securities rated A1+ by S&P.
In the event that a security held in the portfolio falls below the
minimum guideline as detailed in this paragraph H as a result of being
downgraded by S&P, Moody's, Fitch, or Duff, Chase will notify the
client and await instructions. In no event, however, will Chase be
liable for any consequences of the fallen rating, including retention
of the security in the absence of instructions from the client.
<PAGE>
I. TRANSACTION EXECUTION
When implementing these guidelines Chase will at all times seek the
best execution for purchases and sales of securities. Chase shall not
execute transactions on behalf of the Account with or through Chase,
Morgan Stanley & Co. Incorporated or Dean Witter Reynolds Co. acting as
agent or principal.
* * *
EACH CLIENT SHOULD ANALYZE THESE GUIDELINES CONTINUALLY TO DETERMINE THEIR
CONTINUED APPROPRIATENESS, RECOGNIZING THAT ALL INVESTMENTS BEAR RISKS AND THAT
THE RETURN OF PRINCIPAL IS NOT ASSURED.
MORGAN STANLEY DEAN WITTER THE CHASE MANHATTAN BANK
INSTITUTIONAL FUND, INC.
By: /s/ Michael Klein By: /s/ Gene Gemelli
----------------------- ------------------------
Print Name: Michael Klein Print Name: Gene Gemelli, Vice President
-------------- ----------------------------
DATE: May 10, 1999 DATE: May 12, 1999
------------ ------------
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
BY: /s/ Michael Klein
--------------------------
PRINT NAME: Michael Klein
------------------
DATE: May 10, 1999
------------------------
<PAGE>
1701 Market Street Morgan, Lewis
Philadelphia, PA 19103-2921 & Bockius LLP
215-963-5000 Counselors at Law
Fax: 215-963-5299
April 26, 2000
Morgan Stanley Dean Witter Institutional Fund, Inc.
1221 Avenue of the Americas
New York, NY 10020
Re: Opinion of Counsel regarding Post-Effective Amendment No. 43 to the
Registration Statement Filed on Form N-1A under the Securities Act of 1933
(File No. 33-23166).
--------------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Morgan Stanley Dean Witter Institutional Fund, Inc.,
a Maryland corporation (the "Fund"), in connection with the above-referenced
Registration Statement which relates to the Fund's shares of common stock, par
value $.001 per share (collectively, the "Shares"). This opinion is being
delivered to you in connection with the Fund's filing of Post-Effective
Amendment No. 43 to the Registration Statement (the "Amendment") to be filed
with the Securities and Exchange Commission pursuant to Rule 485(b) under the
Securities Act of 1933 (the "1933 Act"). With your permission, all assumptions
and statements of reliance herein have been made without any independent
investigation or verification on our part, except to the extent otherwise
expressly stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things, executed
copies of the following documents:
(a) a certificate of the State of Maryland to the existence and good
standing of the Fund dated April 13, 2000;
(b) the Articles of Incorporation of the Fund and all amendments and
supplements thereto (the "Articles of Incorporation");
(c) a certificate executed by Mary E. Mullin, the Secretary of the Fund,
certifying as to the Fund's Articles of Incorporation and Amended and
Restated By-Laws (the "By-Laws"), and certain resolutions adopted by
the Board of Directors of the Fund authorizing the issuance of the
Shares; and
<PAGE>
Morgan Stanley Dean Witter Strategic Adviser Fund, Inc.
April 26, 2000
Page 2
(d) a printer's proof of the Amendment.
In our capacity as counsel to the Fund, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Articles of
Incorporation and By-Laws, and for the consideration described in the
Registration Statement, will be legally issued, fully paid and nonassessable
under the laws of the State of Maryland.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Morgan, Lewis and Bockius LLP
Morgan, Lewis and Bockius LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated February 18, 2000, relating to the
financial statements and financial highlights which appears in the December
31, 1999 Annual Report to Shareholders of Morgan Stanley Dean Witter
Institutional Fund, Inc., which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Table of Contents", "Financial Highlights", "Independent
Accountants" and "Financial Statements" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
April 28, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "CLOSED-END FUNDS")
AND
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(THE "OPEN-END FUNDS", AND TOGETHER WITH THE CLOSED-END FUNDS, THE "FUNDS")
AND
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT")
AND
MILLER ANDERSON & SHERRERD, LLP
("MAS", AND TOGETHER WITH MSDW INVESTMENT MANAGEMENT, THE "INVESTMENT MANAGERS")
AND
MORGAN STANLEY & CO. INCORPORATED
("MS&CO.")
CODE OF ETHICS
1. PURPOSES
This Code of Ethics has been adopted by the Funds, the Investment Managers
and MS&Co., the principal underwriter of the Open-End Funds, in accordance with
Rule 17j-1 under the Investment Company Act of 1940, as amended (the "Act").
Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to purchases or sales of securities held or to be
acquired by investment companies, if effected by affiliated persons (as defined
under the Act) of such companies. Specifically, Rule 17j-1 provides that it is
unlawful for any affiliated person of or principal underwriter for a registered
investment company, or any affiliated person of an investment adviser of or
principal underwriter for a registered investment company, in connection with
the purchase or sale, directly or indirectly, by such person of a security held
or to be acquired by such registered investment company:
(a) To employ any device, scheme or artifice to defraud such registered
investment company;
1
<PAGE>
(b) To make to such registered investment company any untrue statement of
a material fact or omit to state to such registered investment company
a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading;
(c) To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any such registered
investment company; or
(d) To engage in any manipulative practice with respect to such registered
investment company.
While Rule 17j-1 is designed to protect only the interests of the Funds and
their stockholders, the Investment Managers apply the policies and procedures
described in this Code of Ethics to all employees of the Investment Managers to
protect the interests of their non-Fund clients as well (hereinafter, where
appropriate, non-Fund clients of the Investment Managers are referred to as
"Advisory Clients" and any reference to an Advisory Client(s) relates only to
the activities of employees of the Investment Managers).
The purpose of this Code of Ethics is to (i) ensure that Access Persons
conduct their personal securities transactions in a manner which does not (a)
create an actual or potential conflict of interest with the Funds' or an
Advisory Client's portfolio transactions, (b) place their personal interests
before the interest of the Funds and their stockholders or an Advisory Client or
(c) take unfair advantage of their relationship to the Funds or an Advisory
Client and (ii) provide policies and procedures consistent with the Act and Rule
17j-1 designed to give effect to the general prohibitions set forth in Rule
17j-l.
Among other things, the procedures set forth in this Code of Ethics require
that all (i) Access Persons review this Code of Ethics at least annually, (ii)
Access Persons, unless excepted by Sections 8. (d) or (e) of this Code of
Ethics, report transactions in Covered Securities, (iii) Access Persons refrain
from engaging in certain transactions, and (iv) employees of the Investment
Managers pre-clear with the Compliance Department or the trading desk at MAS any
transactions in Covered Securities.
2. DEFINITIONS
(a) "Access Person" means any director, officer or Advisory Person of
the Funds or of the Investment Managers, and any director or officer
of MS&Co., who, in the ordinary course of business, makes,
participates in or obtains information regarding the purchase or sale
of Covered Securities by the Funds.
(b) "Advisory Person" means any employee of the Funds, or of the
Investment Managers (or of any company in a control relationship to
the Funds or the Investment Managers), who, in connection with his or
her regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of Covered Securities by
the Funds or an Advisory Client, or whose functions relate to the
making of any recommendations with respect to such purchases or sales.
2
<PAGE>
(c) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions
of Section 16 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, except that the determination of
direct or indirect beneficial ownership shall apply to all securities
which an Access Person has or acquires.
(d) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act.
(e) "Compliance Department" means the MSDW Investment Management or MAS
Compliance Department.
(f) "Covered Security" means a security as defined in Section 2(a)(36) of
the Act, except that it does not include: (i) shares of registered
open-end investment companies, (ii) direct obligations of the
Government of the United States, and (iii) bankers' acceptances, bank
certificates of deposit, commercial paper, and high quality short-term
debt instruments, including repurchase agreements.
(g) "Disinterested Director" means a director of a Fund who is not an
"interested person" of such Fund within the meaning of Section 2(a)
(19) of the Act.
(h) "Purchase or sale (or sell)" with respect to a Covered Security means
any acquisition or disposition of a direct or indirect beneficial
interest in a Covered Security, including, INTER ALIA, the writing or
buying of an option to purchase or sell a Covered Security.
(i) "Security held or to be acquired" means (i) any Covered Security
which, within the most recent 15 days, is or has been held by a Fund
or an Advisory Client, or is being or has been considered by a Fund or
an Advisory Client or the Investment Managers for purchase by a Fund
or an Advisory Client; and (ii) any option to purchase or sell, and
any security convertible into or exchangeable for, a Covered Security
described in this paragraph.
3. PROHIBITED TRANSACTIONS
(a) No Access Person or employee of the Investment Managers shall purchase
or sell any Covered Security which to his or her actual knowledge at
the time of such purchase or sale:
(i) is being considered for purchase or sale by a Fund or an
Advisory Client; or
(ii) is being purchased or sold by a Fund or an Advisory Client.
3
<PAGE>
(b) No employee of the Investment Managers shall purchase or sell a
Covered Security while there is a pending "buy" or "sell" order in the
same or a related security for a Fund or an Advisory Client until that
order is executed or withdrawn.
(c) No Advisory Person shall purchase or sell a Covered Security within
seven calendar days before or after any portfolio(s) of the Funds over
which such Advisory Person exercises investment discretion or an
Advisory Client over which the Advisory Person exercises investment
discretion purchases or sells the same or a related Covered Security.
Any profits realized or unrealized by the Advisory Person on a
prohibited purchase or sale within the proscribed period shall be
disgorged to a charity.
(d) No employee of the Investment Managers shall profit from the purchase
and sale or sale and purchase of the same (or equivalent) Covered
Security within 60 calendar days. Any profits realized on such
purchase or sale shall be disgorged to a charity.
(e) No Access Person or employee of the Investment Managers shall purchase
any securities in an initial public offering.
(f) No employee of the Investment Managers shall purchase privately-placed
securities unless such purchase is pre-approved by the Compliance
Department. Any such person who has previously purchased
privately-placed securities must disclose such purchases to the
Compliance Department before such person participates in a Fund's or
an Advisory Client's subsequent consideration of an investment in the
securities of the same or a related issuer. Upon such disclosure, the
Compliance Department shall appoint another person with no personal
interest in the issuer, to conduct an independent review of such
Fund's or such Advisory Client's decision to purchase securities of
the same or a related issuer.
(g) No Access Person or employee of the Investment Managers shall
recommend the purchase or sale of any Covered Securities to a Fund or
to an Advisory Client without having disclosed to the Compliance
Department his or her interest, if any, in such Covered Securities or
the issuer thereof, including without limitation (i) his or her direct
or indirect beneficial ownership of any securities of such issuer,
(ii) any contemplated purchase or sale by such person of such
securities, (iii) any position with such issuer or its affiliates, and
(iv) any present or proposed business relationship between such issuer
or its affiliates, on the one hand, and such person or any party in
which such person has a significant interest, on the other; provided,
however, that in the event the interest of such person in such
securities or the issuer thereof is not material to his or her
personal net worth and any contemplated purchase or sale by such
person in such securities cannot reasonably be expected to have a
material adverse effect on any such purchase or sale by a Fund or an
Advisory Client or on the market for the securities generally, such
person shall not be required to disclose his or her interest in the
securities or the issuer thereof in connection with any such
recommendation.
4
<PAGE>
(h) No Access Person or employee of the Investment Managers shall reveal
to any other person (except in the normal course of his or her duties
on behalf of a Fund or an Advisory Client) any information regarding
the purchase or sale of any Covered Security by a Fund or an Advisory
Client or consideration of the purchase or sale by a Fund or an
Advisory Client of any such Covered Security.
4. PRE-CLEARANCE OF COVERED SECURITIES TRANSACTIONS AND PERMITTED BROKERAGE
ACCOUNTS
No employee of MSDW Investment Management shall purchase or sell
Covered Securities without prior written authorization from its Compliance
Department. No employee of MAS shall purchase or sell Covered Securities
without prior written authorization from the appropriate trading desk.
Pre-clearance of a purchase or sale shall be valid and in effect only for the
business day in which such pre-clearance is given; provided, however, that
the approval of an unexecuted purchase or sale is deemed to be revoked when
the employee becomes aware of facts or circumstances that would have resulted
in the denial of approval of the approved purchase or sale were such facts or
circumstances made known to the Compliance Department or MAS trading desk, as
appropriate, at the time the proposed purchase or sale was originally
presented for approval. The Investment Managers require all of their
employees to maintain their personal brokerage accounts at MS&Co. or a
broker/dealer affiliated with MS&Co. (hereinafter, a "Morgan Stanley
Account"). Outside personal brokerage accounts are permitted only under very
limited circumstances and only with express written approval by the
Compliance Department. The Compliance Department has implemented procedures
reasonably designed to monitor purchases and sales effected pursuant to the
aforementioned pre-clearance procedures.
5. EXEMPTED TRANSACTIONS
(a) The prohibitions of Section 3 and Section 4 of this Code of Ethics
shall not apply to:
(i) Purchases or sales effected in any account over which an Access
Person or an employee of the Investment Managers has no direct
or indirect influence or control;
(ii) Purchases or sales which are non-volitional;
(iii) Purchases which are part of an automatic dividend reinvestment
plan; or
(iv) Purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its securities and
sales of such rights so acquired, but only to the extent such
rights were acquired from such issuer.
(b) Notwithstanding the prohibitions of Sections 3. (a), (b) and (c) of
this Code of Ethics, the Compliance Department or MAS trading desk, as
appropriate, may approve a purchase or sale of a Covered Security by
employees of the Investment Managers which would appear to be in
contravention of the prohibitions in Sections 3. (a), (b) and (c) if
it is determined that (i) the facts
5
<PAGE>
and circumstances applicable at the time of such purchase or sale do
not conflict with the interests of a Fund or an Advisory Client, or
(ii) such purchase or sale is only remotely potentially harmful to a
Fund or an Advisory Client because it would be very unlikely to affect
a highly institutional market, or because it is clearly not related
economically to the securities to be purchased, sold or held by such
Fund or Advisory Client, and (iii) the spirit and intent of this Code
of Ethics is met.
6. RESTRICTIONS ON RECEIVING GIFTS
No employee of the Investment Managers shall receive any gift or other
consideration in merchandise, service or otherwise of more than DE MINIMIS value
from any person, firm, corporation, association or other entity that does
business with or on behalf of the Funds or an Advisory Client.
7. SERVICE AS A DIRECTOR
No employee of the Investment Managers shall serve on the board of
directors of a publicly-traded company without prior written authorization from
the Compliance Department. Approval will be based upon a determination that the
board service would not conflict with the interests of the Funds and their
stockholders or an Advisory Client.
8. REPORTING
(a) Unless excepted by Section 8. (d) and (e) of this Code of Ethics, each
Access Person must disclose all personal holdings in Covered
Securities to the Compliance Department for its review no later than
10 days after becoming an Access Person and annually thereafter. The
initial and annual holdings reports must contain the following
information:
(i) The title, number of shares and principal amount of each
Covered Security in which the Access Person has any direct
or indirect beneficial ownership;
(ii) The name of any broker, dealer or bank with or through whom the
Access Person maintained an account in which any securities
were held for the direct or indirect benefit of the Access
Person; and
(iii) The date the report was submitted to the Compliance Department
by the Access Person.
(b) Unless excepted by Section 8. (d) and (e) of this Code of Ethics, each
Access Person and each employee of the Investment Managers must report
to the Compliance Department for its review within 10 days of the end
of a calendar quarter the information described below with respect to
transactions in Covered Securities in which such person has, or by
reason of such transactions acquires any direct or indirect beneficial
interest:
6
<PAGE>
(i) The date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Covered Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(iii) The price of the Covered Security at which the purchase or
sale was effected;
(iv) The name of the broker, dealer or bank with or through which
the purchase or sale was effected; and
(v) The date the report was submitted to the Compliance Department
by such person.
(c) Unless excepted by Section 8. (d) and (e) of this Code of Ethics,
each Access Person and each employee of the Investment Managers must
report to the Compliance Department for its review within 10 days of
the end of a calendar quarter the information described below with
respect to any account established by such person in which any
securities were held during the quarter for the direct or indirect
benefit of such person:
(i) The name of the broker, dealer or bank with whom the account
was established;
(ii) The date the account was established; and
(iii) The date the report was submitted to the Compliance Department
by such person.
(d) An Access Person will not be required to make any reports described
in Sections 8. (a), (b) and (c) above for any account over which the
Access Person has no direct or indirect influence or control. An
Access Person or an employee of the Investment Managers will not be
required to make the annual holdings report under Section 8. (a) and
the quarterly transactions report under Section 8. (b) with respect
to purchases or sales effected for, and Covered Securities held in:
(i) a Morgan Stanley Account, (ii) an account in which the Covered
Securities were purchased pursuant to a dividend reinvestment plan,
(up to an amount equal to the cash value of a regularly declared
dividend, but not in excess of this amount), or (iii) an account for
which the Compliance Department receives duplicate trade
confirmations and quarterly statements.
(e) A Disinterested Director of a Fund, who would be required to make a
report solely by reason of being a Fund director, is not required to
make initial and annual holdings reports. Additionally, such
Disinterested Director need only make a quarterly transactions
report for a purchase or sale of Covered Securities if he or she, at
the time of that transaction, knew or, in the ordinary course of
fulfilling his or her official duties as a Disinterested Director of
a Fund, should have known
7
<PAGE>
that, during the 15-day period immediately preceding or following
the date of the Covered Securities transaction by him or her, such
Covered Security is or was purchased or sold by a Fund or was being
considered for purchase or sale by a Fund.
(f) The reports described in Sections 8. (a), (b) and (c) above may
contain a statement that the reports shall not be construed as an
admission by the person making such reports that he or she has any
direct or indirect beneficial ownership in the Covered Securities to
which the reports relate.
9. ANNUAL CERTIFICATIONS
All Access Persons and employees of the Investment Managers must certify
annually that they have read, understood and complied with the requirements of
this Code of Ethics and recognize that they are subject to this Code of Ethics
by signing the certification attached hereto as Exhibit A.
10. BOARD REVIEW
The management of the Funds and representatives or officers of the
Investment Managers and, with respect to the Open-End Funds, MS&Co., shall each
provide each Fund's Board of Directors, at least annually, with the following:
(a) a summary of existing procedures concerning personal investing and
any changes in the procedures made during the past year;
(b) a description of any issues arising under this Code of Ethics or
procedures since the last such report, including, but not limited
to, information about material violations of this Code of Ethics or
procedures and sanctions imposed in response to material violations;
(c) any recommended changes in the existing restrictions or procedures
based upon a Fund's or the Investment Managers' experience under
this Code of Ethics, evolving industry practices or developments in
applicable laws and regulations; and
(d) a certification (attached hereto as Exhibits B, C, D, and E, as
appropriate) that each has adopted procedures reasonably necessary
to prevent its Access Persons from violating this Code of Ethics.
11. SANCTIONS
Upon discovering a violation of this Code of Ethics, the Board of
Directors of such Fund or of the Investment Managers, as the case may be, may
impose such sanctions as it deems appropriate.
8
<PAGE>
12. RECORDKEEPING REQUIREMENTS
The management of the Funds and representatives or officers of the
Investment Managers and, with respect to the Open-End Funds, MS&Co., each shall
maintain, as appropriate, the following records for a period of five years, the
first two years in an easily accessible place, and shall make these records
available to the Securities and Exchange Commission or any representative of
such during an examination of the Funds or of the Investment Managers:
(a) a copy of this Code of Ethics or any other Code of Ethics which was
in effect at any time within the previous five years;
(b) a record of any violation of this Code of Ethics during the previous
five years, and of any action taken as a result of the violation;
(c) a copy of each report required by Section 8. of this Code of Ethics,
including any information provided in lieu of each such report;
(d) a record of all persons, currently or within the past five years,
who are or were subject to this Code of Ethics and who are or were
required to make reports under Section 8. of this Code of Ethics;
(e) a record of all persons, currently or within the past five years,
who are or were responsible for reviewing the reports required under
Section 8. of this Code of Ethics; and
(f) a record of any decision, and the reasons supporting the decision,
to approve the acquisition of securities described in Sections 3.
(e) and (f) of this Code of Ethics.
9
<PAGE>
EXHIBIT A
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "CLOSED-END FUNDS")
AND
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(THE "OPEN-END FUNDS", AND TOGETHER WITH THE CLOSED-END FUNDS, THE "FUNDS")
AND
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT")
AND
MORGAN STANLEY & CO., INCORPORATED
("MS&CO.")
CODE OF ETHICS
ANNUAL CERTIFICATION
I hereby certify that I have read and understand the Code of Ethics
(the "Code") which has been adopted by the Funds, MSDW Investment Management
and MS&Co. and recognize that it applies to me and agree to comply in all
respects with the policies and procedures described therein. Furthermore, I
hereby certify that I have complied with the requirements of the Code in
effect, as amended, for the year ended December 31, ____, and that all of my
reportable transactions in Covered Securities were executed and reflected
accurately in a Morgan Stanley Account (as defined in the Code) or that I
have attached a report that satisfies the annual holdings disclosure
requirement as described in Section 8. (a) of the Code.
Date:________________________,______ Name:______________________________
Signature:___________________________
<PAGE>
EXHIBIT B
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "FUNDS")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as
amended (the "1940 Act") and pursuant to the Code of Ethics for the Funds,
Morgan Stanley Dean Witter Investment Management, Inc. and Morgan Stanley &
Co., Incorporated (the "Code of Ethics"), each of the Funds hereby certifies
to such Fund's Board of Directors that such Fund has adopted procedures
reasonably necessary to prevent Access Persons (as defined in the Code of
Ethics) from violating the Code of Ethics.
Date:_________________ By:__________________________________
Name: Mary E. Mullin
Title: Secretary
<PAGE>
EXHIBIT E
MORGAN STANLEY & CO. INCORPORATED
("MS&CO.")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as
amended (the "1940 Act") and pursuant to the Code of Ethics for MS&Co., the
Open-End Funds (as defined in the Code of Ethics) and Morgan Stanley Dean
Witter Investment Management Inc. (the "Code of Ethics"), MS&Co. hereby
certifies to the Board of Directors of the Open-End Funds that MS&Co. has
adopted procedures reasonably necessary to prevent Access Persons (as defined
in the Code of Ethics) from violating the Code of Ethics.
Date:_________________ By:__________________________________
Name: Harold J. Schaaff, Jr.
Title: Managing Director
<PAGE>
EXHIBIT C
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, INC.
("MSDW INVESTMENT MANAGEMENT")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as
amended (the "1940 Act") and pursuant to the Code of Ethics for MSDW Investment
Management, the Funds (as defined in the Code of Ethics) and Morgan Stanley &
Co., Incorporated (the "Code of Ethics"), MSDW Investment Management hereby
certifies to the Board of Directors of the Funds that MSDW Investment Management
has adopted procedures reasonably necessary to prevent Access Persons (as
defined in the Code of Ethics) from violating the Code of Ethics.
Date:_________________ By:__________________________________
Name: Harold J. Schaaff, Jr.
Title: General Counsel
<PAGE>
EXHIBIT D
MILLER, ANDERSON & SHERRERD, LLP ("MAS")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as
amended (the "1940 Act") and pursuant to the Code of Ethics for MAS, the Funds
(as defined in the Code of Ethics) and Morgan Stanley & Co., Incorporated (the
"Code of Ethics"), MAS hereby certifies to the Board of Directors of the Funds
that MAS has adopted procedures reasonably necessary to prevent Access Persons
(as defined in the Code of Ethics) from violating the Code of Ethics.
Date:_________________ By:__________________________________
Name: Paul A. Frick
Title: Compliance Officer
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Frederick O. Robertshaw, whose signature appears below, does hereby
constitute and appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E.
Mullin his true and lawful attorneys and agents, each with power of substitution
or resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ Frederick O. Robertshaw
----------------------------------------
Frederick O. Robertshaw
Date: March 15, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Fergus Reid, whose signature appears below, does hereby constitute and
appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E. Mullin his true
and lawful attorneys and agents, each with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ Fergus Reid
----------------------------------------
Fergus Reid
Date: March 20, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Samuel T. Reeves, whose signature appears below, does hereby constitute
and appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E. Mullin his
true and lawful attorneys and agents, each with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ Samuel T. Reeves
----------------------------------------
Samuel T. Reeves
Date: March 17, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Andrew McNally, IV, whose signature appears below, does hereby
constitute and appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E.
Mullin his true and lawful attorneys and agents, each with power of substitution
or resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ Andrew McNally, IV
----------------------------------------
Andrew McNally, IV
Date: March 20, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
John Levin, whose signature appears below, does hereby constitute and
appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E. Mullin his true
and lawful attorneys and agents, each with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ John Levin
----------------------------------------
John Levin
Date: March 27, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Gerard E. Jones, whose signature appears below, does hereby constitute
and appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E. Mullin his
true and lawful attorneys and agents, each with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ Gerard E. Jones
----------------------------------------
Gerard E. Jones
Date: March 17, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER, INC.
(the "Funds")
POWER OF ATTORNEY
John D. Barrett, II, whose signature appears below, does hereby
constitute and appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E.
Mullin his true and lawful attorneys and agents, each with power of substitution
or resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ John D. Barrett, II
----------------------------------------
John D. Barrett, II
Date: March 20, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Barton M. Biggs, whose signature appears below, does hereby constitute
and appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E. Mullin his
true and lawful attorneys and agents, each with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as Chairman and a Director of each Fund such
Registration Statement and any and all such amendments filed with the Securities
and Exchange Commission under the 1933 Act and the 1940 Act, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorney and agents shall do or cause to be done by
virtue hereof.
/s/ Barton M. Biggs
----------------------------------------
Barton M. Biggs
Date: March 27, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
William Morton, whose signature appears below, does hereby constitute
and appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E. Mullin his
true and lawful attorneys and agents, each with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ William Morton
----------------------------------------
William Morton
Date: March 29, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Graham Jones, whose signature appears below, does hereby constitute and
appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E. Mullin his true
and lawful attorneys and agents, each with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a Director of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/ Graham Jones
----------------------------------------
Graham Jones
Date: March 24, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Belinda A. Brady, whose signature appears below, does hereby constitute
and appoint Harold J. Schaaff, Jr., Stefanie V. Chang Yu and Mary E. Mullin her
true and lawful attorneys and agents, each with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents may deem necessary or advisable or
which may be required to enable each of the above Funds to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with each Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all amendments thereto,
including within the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as Treasurer of each Fund such Registration
Statement and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agents shall do or cause to be done by virtue hereof.
/s/Belinda A. Brady
----------------------------------------
Belinda A. Brady
Date: March 27, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(the "Funds")
POWER OF ATTORNEY
Harold J. Schaaff, Jr., whose signature appears below, does hereby
constitute and appoint Stefanie V. Chang Yu and Mary E. Mullin his true and
lawful attorneys and agents, each with power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents may deem necessary or advisable or which may be
required to enable each of the above Funds to comply with the Securities Act of
1933, as amended (the "1933 Act") and the Investment Company Act of 1940, as
amended (the "1940 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with each
Fund's Registration Statement on Form N-1A pursuant to the 1933 Act and the 1940
Act, together with any and all amendments thereto, including within the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as President of each Fund such Registration Statement and any and
all such amendments filed with the Securities and Exchange Commission under the
1933 Act and the 1940 Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney and agents shall do or cause to be done by virtue hereof.
/s/ Harold J. Schaaff, Jr.
----------------------------------------
Harold J. Schaaff, Jr.
Date: April 4, 2000
