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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PCS CASH FUND, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PCS CASH FUND, INC.
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(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 PER EXCHANGE ACT RULES 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) OR
ITEM 22(a)(2) OF SCHEDULE 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Dated Filed:
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[PRELIMINARY COPY]
PCS MONEY MARKET
PORTFOLIO
PCS GOVERNMENT OBLIGATIONS
MONEY MARKET
PORTFOLIO
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IMPORTANT SHAREHOLDER INFORMATION
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THE DOCUMENT YOU HOLD IN YOUR HANDS CONTAINS YOUR PROXY STATEMENT AND PROXY
CARD. A PROXY CARD IS, IN ESSENCE, A BALLOT. WHEN YOU VOTE YOUR PROXY CARD, IT
TELLS US HOW TO VOTE ON YOUR BEHALF ON IMPORTANT ISSUES RELATING TO YOUR
PORTFOLIO. IF YOU SIMPLY SIGN THE PROXY CARD WITHOUT SPECIFYING A VOTE, YOUR
SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS. YOU WILL RECEIVE ONE PROXY CARD FOR EACH PORTFOLIO IN WHICH YOU OWN
SHARES.
WE URGE YOU TO SPEND A FEW MINUTES WITH THE PROXY STATEMENT, FILL OUT YOUR PROXY
CARD, AND RETURN IT TO US. VOTING YOUR PROXY, AND DOING SO PROMPTLY, ENSURES
THAT YOUR PORTFOLIO WILL NOT NEED TO CONDUCT ADDITIONAL MAILINGS. WHEN
SHAREHOLDERS DO NOT RETURN THEIR PROXIES IN SUFFICIENT NUMBERS, WE HAVE TO MAKE
FOLLOW-UP SOLICITATIONS, WHICH MAY COST YOUR PORTFOLIO MONEY.
PLEASE TAKE A FEW MOMENTS TO EXERCISE YOUR RIGHT TO VOTE. THANK YOU.
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PCS CASH FUND, INC.
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[PRELIMINARY COPY]
PCS CASH FUND, INC.
PCS MONEY MARKET PORTFOLIO
PCS GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
Dear Shareholder:
A Special Meeting of Shareholders of the PCS Money Market and PCS
Government Obligations Money Market Portfolios (each a "Portfolio" and,
together, the "Portfolios") of PCS Cash Fund, Inc. has been scheduled for
Friday, August 23, 1996. If you are a Shareholder of record as of the close of
business on July 17, 1996, you are entitled to vote at the meeting and for any
adjournment of the meeting.
While you are, of course, welcome to join us at the meeting, most
Shareholders cast their votes by filling out and signing the enclosed Proxy
Card(s). Whether or not you plan to attend the meeting, your vote is important.
Please mark, sign, and date the enclosed Proxy Card(s) and return it promptly in
the enclosed, postage-paid envelope so that the maximum number of shares may be
voted.
The attached Proxy Statement is designed to give you information
relating to the proposal upon which you will be asked to vote. The Board of
Directors is recommending that you approve a reorganization of the PCS Money
Market and PCS Government Obligations Portfolios under which the PCS Cash
Fund, Inc. would be combined with and into the Morgan Stanley Fund, Inc.
Shareholders of each Portfolio will vote separately and the reorganization
will be effectuated with respect to a Portfolio if Shareholders of that
Portfolio approve, regardless of whether Shareholders of the other Portfolio
approve. Assuming approval by Shareholders of both Portfolios, each holder
of shares of the PCS Money Market Portfolio will receive a number of shares
of the Morgan Stanley Money Market Portfolio equal to the number and value of
shares of the PCS Money Market Portfolio owned by such holder at the time of
the combination and each holder of shares of the PCS Government Obligations
Portfolio will receive a number of shares of the Morgan Stanley Government
Obligations Money Market Portfolio equal to the number and value of shares of
the PCS Government Obligations Money Market Portfolio owned by such holder at
the time of the combination. As further explained in the accompanying proxy
statement, the Board of Directors expects such a combination to result in
operational efficiencies and additional share distribution opportunities. We
encourage you to support the Directors' recommendation to approve the
proposal.
Your vote is important to us. Please do not hesitate to call 1-800-
___________ if you have any questions about the proposal under consideration.
Thank you for taking the time
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to consider this important proposal and for your investment in the Portfolios.
Sincerely,
Warren J. Olsen
President
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[PRELIMINARY COPY]
PCS CASH FUND, INC.
1221 AVENUE OF THE AMERICAS
22ND FLOOR
NEW YORK, NEW YORK 10020
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AUGUST 23, 1996
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of the PCS Money Market Portfolio and the PCS Government Obligations
Money Market Portfolio (each, a "PCS Portfolio" and together, the "PCS
Portfolios") of PCS Cash Fund, Inc. ("PCS") will be held at the offices of
Morgan Stanley Asset Management Inc., 1221 Avenue of the Americas, New York, New
York 10020, on Friday, August 23, 1996 at 10:00 a.m.
At the Meeting, Shareholders of each PCS Portfolio will be asked to
consider and act upon a proposed Agreement and Plan of Reorganization and
Liquidation pursuant to which each PCS Portfolio, that obtains shareholder
approval, will transfer all of its assets and liabilities to a portfolio of the
Morgan Stanley Fund, Inc. ("MSF") with an identical investment objective and
substantially similar investment policies and limitations (the Morgan Stanley
Money Market Fund and Morgan Stanley Government Obligations Money Market Fund,
respectively, (each, an "MSF Fund" and together, the "MSF Funds")) in exchange
for shares of the corresponding MSF Fund. The proposals, which are more fully
described in the attached Proxy Statement, are as follows:
PCS MONEY MARKET PORTFOLIO
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION BETWEEN
PCS CASH FUND, INC., ON BEHALF OF THE PCS MONEY MARKET PORTFOLIO, AND THE
MORGAN STANLEY FUND, INC., ON BEHALF OF THE MORGAN STANLEY MONEY MARKET
FUND.
PCS GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION BETWEEN
PCS CASH FUND, INC., ON BEHALF OF THE PCS GOVERNMENT OBLIGATIONS MONEY
MARKET PORTFOLIO, AND THE MORGAN STANLEY FUND, INC., ON BEHALF OF THE
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND.
Shareholders of each Portfolio will vote separately and the reorganization
will be effectuated with respect to a Portfolio if Shareholders of that
Portfolio approve, regardless of whether Shareholders of the other Portfolio
approve.
The persons named as proxies are authorized to vote on such other business
as may properly come before the Meeting in accordance with their own discretion.
<PAGE>
All Shareholders are cordially invited to attend the Meeting. However, if
you are unable to attend the Meeting, you are requested to mark, sign and date
the enclosed Proxy Card(s) and return it promptly in the enclosed, postage-paid
envelope so that the Meeting may be held and a maximum number of shares may be
voted.
Shareholders of record at the close of business on July 17, 1996 are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
VALERIE Y. LEWIS, SECRETARY
July 30, 1996
ii
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[PRELIMINARY COPY]
PCS CASH FUND, INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PCS Cash Fund, Inc. ("PCS") for use at the
Special Meeting of Shareholders to be held on Friday, August 23, 1996 at 10:00
a.m. at the offices of Morgan Stanley Asset Management Inc. ("MSAM"), 1221
Avenue of the Americas, New York, New York 10020, and at any adjourned session
thereof (such meeting and any adjournments thereof are hereinafter referred to
as the "Meeting"). Shareholders of the PCS Money Market and PCS Government
Obligations Money Market Portfolios (each, a "PCS Portfolio," and together, the
"PCS Portfolios") of PCS of record at the close of business on July 17, 1996
("Shareholders"), are entitled to vote at the Meeting. As of July 17, 1996, the
approximate number of shares of common stock, par value $.001 per share
("shares"), issued and outstanding for each of the PCS Portfolios is set forth
below:
SHARES OUTSTANDING AS
PCS PORTFOLIOS OF JULY 17, 1996
- - - -------------- ----------------
PCS Money Market ___________________
PCS Government Obligations Money Market ___________________
Each share is entitled to one vote and each fractional share is entitled to a
proportionate fractional vote on each matter as to which such shares are to be
voted at the Meeting.
The solicitation of proxies will be largely by mail, but may include,
without cost to PCS, telephonic, facsimile, telegraphic or oral communications
by regular employees of MSAM. Persons holding shares as nominees will, upon
request, be reimbursed for their reasonable expenses incurred in sending
soliciting materials to their principals. The cost of the solicitation will be
borne by PCS, including reimbursement to brokerage firms and others for expenses
in forwarding proxy solicitation material to beneficial owners. The Proxy
Card(s) and this Proxy Statement are being mailed to Shareholders on or about
July 30, 1996.
Shares represented by duly executed proxies will be voted in accordance
with the instructions given. Proxies may be revoked at any time before they are
exercised by a written revocation received by the President of PCS at 1221
Avenue of the Americas, New York, New York 10020, by properly executing a
later-dated proxy, or by attending the Meeting and voting in person.
<PAGE>
PROPOSALS
PCS MONEY MARKET PORTFOLIO
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION BETWEEN
PCS CASH FUND, INC., ON BEHALF OF THE PCS MONEY MARKET PORTFOLIO, AND THE
MORGAN STANLEY FUND, INC., ON BEHALF OF THE MORGAN STANLEY MONEY MARKET
FUND.
PCS GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION BETWEEN
PCS CASH FUND, INC., ON BEHALF OF THE PCS GOVERNMENT OBLIGATIONS MONEY
MARKET PORTFOLIO, AND THE MORGAN STANLEY FUND, INC., ON BEHALF OF THE
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND.
INTRODUCTION
The Meeting is being called in order to permit the Shareholders of the
PCS Money Market and PCS Government Obligations Money Market Portfolios of
PCS to vote on an Agreement and Plan of Reorganization and Liquidation of PCS
(the "Agreement"). Shareholders of each Portfolio will vote separately and
the Agreement will be executed with respect to a Portfolio if the
Shareholders of that Portfolio approve, regardless of whether Shareholders of
the other Portfolio approve. PCS will not be liquidated unless Shareholders
of both Portfolios approve the Agreement. Assuming approval of both PCS
Portfolios, each PCS Portfolio will transfer all of its assets and
liabilities to one of two "shell" portfolios of Morgan Stanley Fund, Inc.
("MSF") in exchange for shares of such portfolios, which are called the
Morgan Stanley Money Market Fund and Morgan Stanley Government Obligations
Money Market Fund (each, an "MSF Fund" and together, the "MSF Funds").
Specifically, the assets and liabilities of the PCS Money Market Portfolio
would be transferred to the Morgan Stanley Money Market Fund and the assets
and liabilities of the PCS Government Obligations Money Market Portfolio
would be transferred to the Morgan Stanley Government Obligations Money Market
Fund (the "Reorganization"). Once shares of an MSF Fund have been distributed
to Shareholders of the corresponding PCS Portfolio, such PCS Portfolio will be
liquidated. Once all PCS Shareholders have received MSF shares, PCS will be
liquidated. The Board of Directors anticipate that the exchange of assets of
such PCS Portfolio(s) for shares of such MSF Fund(s) will occur on
September 30, 1996. The Board of Directors of PCS is recommending that
Shareholders of the PCS Portfolios approve the Agreement. A copy of the
Agreement is attached to this Proxy Statement as Exhibit A. The description
of the Agreement in this Proxy Statement is qualified in its entirety by
reference to Exhibit A.
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DESCRIPTION OF THE AGREEMENT AND PLAN OF REORGANIZATION AND LIQUDATION
The Agreement by and between PCS, on behalf of each of the PCS Portfolios,
and MSF, on behalf of each of the MSF Funds, provides for (i) the transfer of
all or substantially all of the assets of the PCS Money Market Portfolio solely
in exchange for shares of common stock of the Morgan Stanley Money Market Fund
and the assumption by the Morgan Stanley Money Market Fund of all or
substantially all of the liabilities of the PCS Money Market Portfolio, followed
by the distribution on the closing date of the Morgan Stanley Money Market
Fund's shares to the holders of the PCS Money Market Portfolio's shares; and
(ii) the transfer of all or substantially all of the assets of the PCS
Government Obligations Money Market Portfolio solely in exchange for shares of
common stock of the Morgan Stanley Government Obligations Money Market Fund and
the assumption by the Morgan Stanley Government Obligations Money Market Fund of
all or substantially all of the liabilities of the PCS Government Obligations
Money Market Portfolio, followed by the distribution on the closing date of the
Morgan Stanley Government Obligations Money Market Fund's shares to the holders
of the PCS Government Obligations Money Market Portfolio's shares. On the
closing date for the Reorganization, anticipated to be September 30, 1996, each
PCS Portfolio that obtains shareholder approval of its proposal for the
Reorganization will assign, deliver, and otherwise transfer all of its assets
and assign all or substantially all of its liabilities to the corresponding MSF
Fund free and clear of all liens and encumbrances, and such MSF Fund will
acquire all the assets and will assume all such liabilities, in exchange for
shares of such MSF Fund. In addition, the Agreement provides that the net asset
value per share of each PCS Portfolio and of each corresponding MSF Fund will be
equal and the number of shares of each MSF Fund issued in exchange for shares of
the corresponding PCS Portfolio will equal the number of shares of such PCS
Portfolio issued and outstanding at the time of the Reorganization. Thereafter,
PCS will take all necessary and proper steps to effect the complete termination
of each PCS Portfolio involved in the Reorganization and, if both of the PCS
Portfolios have obtained shareholder approval for the Reorganization, the
complete termination of PCS, itself.
The Agreement also provides that MSF will receive, prior to the closing, an
opinion of counsel for PCS to the effect that: (i) PCS and the PCS Portfolios
are duly organized and validly existing under the laws of the State of Maryland;
(ii) PCS is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); (iii) the
Agreement, the Reorganization provided for therein and the execution of the
Agreement have been duly authorized and approved by all requisite action of PCS
and has been duly executed and delivered by PCS on behalf of PCS and the PCS
Portfolio(s) and is a valid and binding obligation of PCS and the PCS
Portfolio(s), subject to applicable bankruptcy, insolvency, fraudulent
conveyance, and similar laws or court decisions regarding enforcement of
creditors' rights generally; and (iv) to the best of counsel's knowledge after
reasonable inquiry, no consent, approval, order or other authorization of any
federal or state court or administrative or regulatory agency is required for
PCS to enter into the Agreement or carry out its terms on behalf of PCS and the
PCS Portfolio(s) that has not been obtained other than where
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the failure to obtain such consent, approval, order, or authorization would not
have a material adverse effect on the operations of PCS and the PCS
Portfolio(s).
In addition, PCS shall have received an opinion of counsel for MSF to the
effect that: (i) MSF and the MSF Funds are duly organized and validly existing
under the laws of the State of Maryland; (ii) MSF is an open-end management
investment company registered under the 1940 Act; (iii) the Agreement, the
Reorganization provided for therein and the execution of the Agreement have been
duly authorized and approved by all requisite corporate action of MSF and the
Agreement has been duly executed and delivered by MSF and is a valid and binding
obligation of MSF and the MSF Fund(s), subject to applicable bankruptcy,
insolvency, fraudulent conveyance and similar laws or court decisions regarding
enforcement of creditors' rights generally; (iv) to the best of counsel's
knowledge, after reasonable inquiry, no consent, approval, order or other
authorization of any federal or state court or administration or regulatory
agency is required for MSF to enter into the Agreement or carry out its terms on
behalf of MSF and the MSF Fund(s) that has not already been obtained, other than
where the failure to obtain any such consent, approval, order or authorization
would not a material adverse effect on the operations of MSF and the MSF
Fund(s); and (v) MSF shares to be issued in the Reorganization have been duly
authorized and upon issuance thereof in accordance with the Agreement, will be
validly issued, fully paid and nonassessable.
TAX CONSEQUENCES OF THE REORGANIZATION
At the time of the closing, PCS and MSF shall have received an opinion of
counsel substantially to the effect that for Federal income tax purposes: (1)
no gain or loss will be recognized by a PCS Portfolio upon the transfer of its
assets in exchange, solely for the corresponding MSF Fund's shares and the
assumption by such MSF Fund of such PCS Portfolio's stated liabilities; (2) no
gain or loss will be recognized by such MSF Fund on its receipt of such PCS
Portfolio's assets in exchange for such MSF Fund's shares and the assumption by
such MSF Fund of such PCS Portfolio's liabilities; (3) the basis of such PCS
Portfolio's assets in such MSF Fund's hands will be the same as the basis of
those assets in the PCS Portfolio's hands immediately before the conversion; (4)
such MSF Fund's holding period for the assets transferred to such MSF Fund by
such PCS Portfolio will include the holding period of those assets in such PCS
Portfolio's hands immediately before the conversion; (5) no gain or loss will be
recognized by such PCS Portfolio on the distribution of such MSF Fund's shares
to such PCS Portfolio's shareholders in exchange for their shares of such PCS
Portfolio; (6) no gain or loss will be recognized by a shareholder of such PCS
Portfolio as a result of such PCS Portfolio's distribution of MSF Fund's shares
to such PCS Portfolio's shareholder in exchange for such PCS Portfolio's
shareholders' shares of such PCS Portfolio; (7) the basis of such MSF Fund's
shares received by such PCS Portfolio's shareholders will be the same as the
adjusted basis of such PCS Portfolio's shareholders' shares of such PCS
Portfolio surrendered in exchange therefor; and (8) the holding period of such
MSF Fund's shares received by such PCS Portfolio's shareholders will include
such PCS Portfolio's shareholders' holding period for such PCS Portfolio's
shareholders' shares of such PCS Portfolio surrendered in exchange
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therefor, provided that such PCS Portfolio's shares were held as capital assets
on the date of the conversion.
The Reorganization is expected to qualify as a "reorganization" within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), with each of the Funds and the PCS Portfolios being "parties to the
reorganization" within the meaning of Section 368 of the Code. As a
consequence, the Reorganization will be tax-free for each of the MSF Funds, the
PCS Portfolios and their respective Shareholders.
COMPARISON OF PCS AND MSF
The following is a comparison of PCS and its PCS Portfolios with MSF and
its "shell" MSF Funds. Each of PCS and MSF is managed under the direction of
its Board of Directors. The same individuals comprise the PCS and MSF Boards of
Directors.
DESCRIPTION OF PCS AND THE PCS PORTFOLIOS
PCS was organized under Maryland law as a corporation pursuant to Articles
of Incorporation, dated January 4, 1989 and filed on January 5, 1989, as amended
or supplemented to date. PCS is an open-end management investment company
registered under the 1940 Act, and has authorized capital of 10,000,000,000
shares of common stock, par value $.001 per share, which includes 1,000,000,000
shares of the PCS Money Market Portfolio and 1,000,000,000 shares of the PCS
Government Obligations Money Market Portfolio. The PCS Tax-Free Money Market
Portfolio has not offered shares and has no shareholder, assets or liabilities.
The PCS Money Market Portfolio's investment objective is to provide as high
a level of current interest income as is consistent with maintaining liquidity
and stability of principal. It seeks to achieve such objective by investing in
a portfolio of high quality, U.S. dollar-denominated money market instruments.
In pursuing its investment objective, the PCS Money Market Portfolio invests in
a broad range of government, foreign and domestic bank obligations and
commercial obligations that may be available in the money markets. See
"Comparison of the Investment Objectives and Policies of the PCS Portfolios and
MSF Funds" below.
The PCS Government Obligations Money Market Portfolio's investment
objective is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal. It seeks to
achieve its objective by investing exclusively in short-term U.S. Treasury
bills, notes and other obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, and enters into repurchase agreements
relating to such obligations. See "Comparison of the Investment Objectives and
Policies of the PCS Portfolios and MSF Funds" below.
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MSAM serves as investment adviser to each PCS Portfolio pursuant to an
Investment Advisory Agreement dated July 3, 1989. MSAM conducts a worldwide
portfolio management business. It provides a broad range of portfolio management
services to customers in the United States and abroad and has provided
investment advisory services to investment companies since 1989. At March 31,
1996, the Adviser together with its affiliated asset management companies
managed investments totaling approximately $97.4 billion, including
approximately $81.5 billion under active management and $15.9 billion as named
fiduciary or fiduciary adviser. The PCS Portfolios' Advisory Agreement with
MSAM provides, in part, that MSAM makes investment decisions for the assets of
each PCS Portfolio and continuously reviews, supervises and administers each PCS
Portfolio's investment program, subject to the supervision of, and policies
established by, the Directors of PCS. For its services, MSAM is entitled to
receive from each PCS Portfolio a fee, which is calculated daily and payable
monthly, at an annual rate of .45% of the first $250 million of such PCS
Portfolio's average daily net assets, .40% of the next $250 million of such PCS
Portfolio's average daily net assets and .35% of the average daily net assets of
such PCS Portfolio in excess of $500 million.
Morgan Stanley & Co. Incorporated (the "Distributor") is the principal
underwriter of PCS. The Distributor, with its address at 1221 Avenue of the
Americas, New York, New York 10020, acts as distributor of the shares of each
of the PCS Portfolios pursuant to separate distribution contracts
(collectively, the "Distribution Contracts") with PCS on behalf of each of
the PCS Portfolios. The Distributor is entitled, under the Distribution
Contracts and the Rule 12b-1 plans of PCS, to a fee, calculated daily and
paid monthly, at an annual rate of .50% of each PCS Portfolio's average daily
net assets.
MSAM and the Distributor are voluntarily waiving a portion of their
respective fees. However, such fee waivers are voluntary and may be
terminated at any time. Currently, management fees and Rule 12b-1 fees are
.40% and .35%, respectively, for the PCS Money Market Portfolio and .43% and
.25%, respectively, for the PCS Government Obligations Money Market
Portfolio. Absent fee waivers, total annual operating expenses would be
1.18% for the PCS Money Market Portfolio and 1.22% for the PCS Government
Obligations Money Market Portfolio. With the fee waivers, total annual
operating expenses are .98% for the PCS Money Market Portfolio and .95% for
the PCS Government Obligations Money Market Portfolio.
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PFPC, Inc. ("PFPC"), 400 Bellevue Parkway, Wilmington, Delaware 19809,
serves as administrator, transfer agent and dividend disbursing agent for PCS,
and PNC Bank, N.A. ("PNC Bank"), 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103, is its custodian. Both PFPC and PNC Bank are, directly or
indirectly, wholly owned subsidiaries of PNC Financial Corp., a multi-bank
holding company.
DESCRIPTION OF MSF
MSF, with principal executive offices at 1221 Avenue of the Americas,
New York, New York 10020, was organized under Maryland law as a corporation
pursuant to Articles of Incorporation dated August 12, 1992, and filed on
August 14, 1992. MSF is an open-end management investment company registered
under the 1940 Act which has authorized capital consisting of 21,750,000,000
shares of common stock, par value $.001 per share, which includes 2,000,000,000
shares of the Morgan Stanley Money Market Fund and 2,000,000,000 shares of the
Morgan Stanley Government Obligations Money Market Fund.
The Morgan Stanley Money Market Fund's investment objective is to provide
as high a level of current interest income as is consistent with maintaining
liquidity and stability of principal. It seeks to achieve such objective by
investing in a portfolio of high quality, U.S. dollar-denominated money market
instruments. In pursuing its investment objective, the Morgan Stanley Money
Market Fund invests in a broad range of government, foreign and domestic bank
obligations and commercial obligations that may be available in the money
markets. This MSF
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Fund has the same investment objective as the PCS Money Market Portfolio. See
"Comparison of the Investment Objectives and Policies of the PCS Portfolios and
MSF Funds" below.
The Morgan Stanley Government Obligations Money Market Fund's investment
objective is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal. It seeks to
achieve its objective by investing exclusively in short-term U.S. Treasury
bills, notes and other obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, and enters into repurchase agreements
relating to such obligations. This MSF Fund has the same investment objective
as the PCS Government Obligations Money Market Portfolio. See "Comparison of
the Investment Objectives and Policies of the PCS Portfolios and MSF Funds"
below.
MSAM will serve as investment adviser to the MSF Funds and currently serves
as investment adviser to each of the other series of MSF. The Investment
Advisory Agreement between MSAM and MSF Fund is substantially identical to the
Investment Advisory Agreement that exists between MSAM and PCS, on behalf of the
PCS Portfolios. Significantly, both Investment Advisory Agreements provide for
the same fees, duties, and standards of care. For its services, MSAM is
entitled to receive from each Fund a fee, computed daily and payable monthly, at
an annual rate of .45% of the first $250 million of such Fund's average daily
net assets, .40% of the next $250 million of such Fund's average daily net
assets and .35% of the average daily net assets of such Fund in excess of $500
million. The Distributor is the principal underwriter of MSF and is entitled,
under the Distribution Agreement and the Rule 12b-1 plans for the MSF Funds, to
a fee, calculated daily and paid monthly, at an annual rate of .50% of each MSF
Fund's average daily net assets. MSAM and the Distributor will voluntarily
waive a portion of their respective fees. However, such fee waivers are
voluntary and may be terminated at any time. Currently, management fees and
Rule 12b-1 fees are .40% and .35%, respectively, for the Morgan Stanley Money
Market Fund and .43% and .25%, respectively, for the Morgan Stanley Government
Obligations Money Market Fund. Absent fee waivers, total annual operating
expenses would be 1.18% for the Morgan Stanley Money Market Fund and 1.22% for
the Morgan Stanley Government Obligations Money Market Fund. With the fee
waivers, total annual operating expenses would be .98% for the Morgan Stanley
Money Market fund and .95% for the Morgan Stanley Government Obligations
Money Market Fund.
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MSAM provides all series of MSF with administrative services pursuant to a
separate administration agreement (the "Administration Agreement"), which will
be applicable to the MSF Funds. The services provided under the Administration
Agreement are subject to the supervision of the officers and Board of Directors
of MSF and include day-to-day administration of matters related to the corporate
existence of MSF, maintenance of its records, preparation of reports,
supervision of MSF's arrangements with its custodian and assistance in the
preparation of MSF's registration statements under federal and state laws. The
Administration Agreement also provides that MSAM through its agents will provide
MSF dividend disbursing and transfer agent services. For its services under the
Administration Agreement, the MSF Funds will pay MSAM a monthly fee which on an
annual basis equals 0.25% of the average daily net assets of each MSF Fund.
Under an agreement between MSAM and The Chase Manhattan Bank, N.A.
("Chase"), Chase Global Funds Services Company ("CGFSC"), a subsidiary of Chase,
will provide certain administrative services to MSF. MSAM supervises and
monitors such administrative services provided by CGFSC. These services will
extend to the MSF Funds. The services provided under the administration
agreement are subject to the supervision of the Board of Directors of MSF. The
Board of Directors of MSF has approved the provision of services described above
9
<PAGE>
pursuant to the administration agreement as being in the best interests of MSF.
CGFSC's business address is 73 Tremont Street, Boston, Massachusetts 02108-3913.
The Distributor acts as distributor of the shares of each of the MSF Funds
pursuant to a distribution agreement (the "MSF Distribution Agreement") with MSF
on behalf of each of the MSF Funds and the other series of MSF. The services
to be provided by the Distributor under the MSF Distribution Agreement are
substantially similar to those it provides under the current PCS distribution
agreements.
The Board of Directors of MSF approved and adopted the MSF Distribution
Agreement and separate Plans of Distribution for each of the MSF Funds
(collectively, the "MSF Plans") pursuant to Rule 12b-1 under the 1940 Act. The
MSF Plans and the obligations and rights of the MSF Funds and the Distributor
thereunder are substantially similar to the Plans and related obligations and
rights thereunder as described above for the PCS Portfolios.
CGFSC also acts as dividend disbursing and transfer agent for MSF and will
act as dividend disbursing and transfer agent for the MSF Funds. If the
Reorganization is consummated, PFPC, will serve as sub-transfer agent for Morgan
Stanley Prime Resource Account shareholders. PNC Bank will serve as the MSF
Funds' custodian.
COMPARISON OF THE INVESTMENT OBJECTIVES AND POLICIES OF THE PCS PORTFOLIOS AND
MSF FUNDS
[Each MSF Fund has an investment objective and investment policies and
limitations that are substantially the same as the investment objective and
investment policies and limitations of the corresponding PCS Portfolio. Due to
changes in regulations applicable to all money market funds, the MSF Funds will
be subject to certain constraints not applicable to the PCS Portfolios.
However, these regulatory changes will have no actual impact because the PCS
Portfolios have been operated in a manner that could [generally] have complied
with the revised regulations. Another difference between the MSF Funds and the
PCS Portfolios is that the investment objectives of the MSF Funds are
fundamental. Accordingly, the objectives of the MSF Funds may be changed only
with shareholder approval. The objectives of the PCS Portfolios have remained
the same throughout their existence.]
CONSIDERATIONS OF THE DIRECTORS OF PCS
At a Meeting held on July 16, 1996, the Directors of PCS reviewed the
Agreement and determined that the Reorganization is in the best interests of the
PCS Portfolios and the Shareholders of the PCS Portfolios, and that the
interests of the PCS Portfolios' Shareholders will not be diluted as a result of
the Reorganization.
10
<PAGE>
In making this determination, the Directors carefully reviewed the terms
and provisions of the Agreement, the substantial similarity of the investment
objectives, policies and limitations of each PCS Portfolio and its corresponding
MSF Fund, the tax consequences of the Reorganization to the PCS Portfolios and
its Shareholders, and the expense ratios of the MSF Funds and the PCS
Portfolios. In addition, the Directors reviewed the services to be provided to
the MSF Funds, particularly the fact that MSAM and the Distributor will provide
the same advisory and share distribution services to the MSF Funds that they
provide to the PCS Portfolios. The Directors also considered the changes in
certain administrative services and the continuity of custody and certain
shareholder services.
The Directors concluded that after the Reorganization, (i) the MSF Funds
will experience operating efficiencies resulting from the consolidation of
administrative services with MSAM and CGFSC; and (ii) the distribution of shares
may be enhanced because of the additional distribution networks available as a
result of the Reorganization.
After careful review and evaluation, the Directors have determined to
recommend that the Shareholders of the PCS Portfolios approve the Agreement and
the Reorganization transaction. If this recommendation is not adopted by the
Shareholders of a PCS Portfolio or both PCS Portfolios, such PCS Portfolio or
both PCS Portfolios will continue to operate in the same manner as prior to the
proposed Reorganization. If this recommendation is adopted by one of the PCS
Portfolios and not the other, PCS will effect the Reorganization with respect to
the PCS Portfolio that adopts the recommendation and the other PCS Portfolio
will continue to operate in the same manner as prior to such partial
Reorganization. Approval of the Agreement and Reorganization with respect to
each PCS Portfolio requires the affirmative vote of a majority of the shares of
such PCS Portfolio and approval of the Agreement and Reorganization with respect
to both PCS Portfolios requires the affirmative vote of a majority of the shares
of the PCS Portfolios voting together.
THE DIRECTORS RECOMMEND THAT THE SHAREHOLDERS OF EACH OF THE PCS PORTFOLIOS
VOTE FOR THE PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION AND
LIQUIDATION.
GENERAL INFORMATION
5% SHAREHOLDERS. As of July 17, 1996, the following persons were the only
persons who were, to the knowledge of PCS, beneficial owners of 5% or more of
shares of the PCS Portfolios:
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<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF
PORTFOLIO OF BENEFICIAL OWNER NUMBER OF SHARES PORTFOLIO'S SHARES
- - - --------- ------------------- ---------------- ------------------
<S> <C> <C> <C>
PCS Money Market
Portfolio ----- ----
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF
PORTFOLIO OF BENEFICIAL OWNER NUMBER OF SHARES PORTFOLIO'S SHARES
- - - --------- ------------------- ---------------- ------------------
PCS Government Obligations
Money Market Portfolio ----- ----
</TABLE>
MSAM owns all of the outstanding shares of the PCS Tax-Free Portfolio.
PCS's Directors and officers beneficially own less than 1% of the shares of PCS.
ADJOURNMENT. In the event that sufficient votes in favor of the Proposal set
forth in the Notice of the Special Meeting are not received with respect to
either or both of the PCS Portfolios by the time scheduled for the Meeting, the
persons named as proxies may propose one or more adjournments of the Meeting for
a period or periods of not more than 60 days in the aggregate to permit further
solicitation of proxies with respect to the Proposal for such PCS Portfolio or
both PCS Portfolios. Any such adjournment will require the affirmative vote of
a majority of the votes cast on the question in person or by proxy at the
session of the meeting to be adjourned. The persons named as proxies will vote
in favor of such adjournment those proxies which they are entitled to vote in
favor of the Proposal. They will vote against any such adjournment those
proxies required to be voted against the Proposal. The costs of any such
additional solicitation and of any adjourned session will be borne by PCS.
REQUIRED VOTE. Approval of the Proposal with respect to a PCS Portfolio
requires the affirmative vote of a majority of the shares of such PCS Portfolio
and approval of the Proposal with respect to both PCS Portfolios requires the
affirmative vote of a majority of the shares of the PCS Portfolios voting
together.
Abstentions and "broker non-votes" will not be counted for or against any
Proposal to which it relates, but will be counted for purposes of determining
whether a quorum is present. Abstentions will be counted as votes present for
purposes of determining the number of voting securities present at the Meeting,
and will therefore have the effect of counting against the Proposal.
SHAREHOLDER PROPOSALS. PCS does not hold annual shareholder meetings.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a shareholder meeting subsequent to the Meeting, if any, should send their
written proposals to the Secretary of
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PCS, c/o Morgan Stanley Asset Management Inc., Legal Department, 1221 Avenue of
the Americas, New York, New York 10020.
REPORTS TO SHAREHOLDERS. PCS will furnish, without charge, a copy of the most
recent Annual Report to Shareholders of PCS and the most recent Semiannual
Report succeeding such Annual Report, if any, on request. Requests should be
directed to the Chase Global Funds Services Company at P.O. Box 2798, Boston,
Massachusetts 02208-2798, or by calling 1-800-282-4404.
OTHER MATTERS. The Directors know of no other business to be brought before
the Meeting. However, if any other matters properly come before the Meeting, it
is their intention that proxies which do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment of
the persons named in the enclosed form of proxy.
------------------------
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY.
13
<PAGE>
EXHIBIT A
FORM OF AGREEMENT AND PLAN
OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated
as of _______, 1996 (the "Agreement"), by and between PCS Cash
Fund, Inc. (the "PCS Fund"), a Maryland corporation, on behalf of
the PCS Money Market Portfolio and the PCS Government Obligations
Money Market Portfolio (each, an "Acquired Fund," and
collectively, the "Acquired Funds"), and Morgan Stanley Fund,
Inc. (the "MSF Fund") a Maryland corporation, on behalf of the
Morgan Stanley Money Market Fund and Morgan Stanley Government
Obligations Money Market Fund (each, an "Acquiring Fund," and
collectively, the "Acquiring Funds").
WHEREAS, the PCS Fund was organized under Maryland law as a
corporation under Articles of Incorporation dated January 4, 1989
and filed on January 5, 1989; the PCS Fund is an open-end
management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); the PCS Fund
has authorized capital consisting of 10,000,000,000 shares of
common stock, par value $.001 per share, including 1,000,000,000
shares of the PCS Money Market Portfolio and 1,000,000,000 shares
of the PCS Government Obligations Money Market Portfolio; the
Acquired Funds are duly organized and validly existing series of
the PCS Fund; and
WHEREAS, MSF Fund was organized under Maryland law as a
corporation under Articles of Incorporation dated August 12, 1992
and filed on August 14, 1992; the MSF Fund is an open-end
management investment company registered under the 1940 Act; the
MSF Fund has authorized capital consisting of 21,750,000,000
shares of common stock, par value $.001 per share, including
2,000,000,000 shares of the Morgan Stanley Money Market Fund and
2,000,000,000 shares of the Morgan Stanley Government Obligations
Money Market Fund; and the Acquiring Funds are duly organized and
validly existing series of the MSF Fund;
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto agree to effect (i) the
transfer of all of the assets of the PCS Money Market Portfolio
solely in exchange for (a) the assumption by the Morgan Stanley
Money Market Fund of all or substantially all of the liabilities
of the PCS Money Market Portfolio and (b) shares of common stock
of the Morgan Stanley Money Market Fund, followed by the
distribution, at the Effective Time (as defined in Section 9 of
this Agreement), of such shares of common stock of the Morgan
Stanley Money Market Fund to the holders of shares of common
stock of the PCS Money Market Portfolio on the terms and
conditions hereinafter set forth in liquidation of the PCS Money
Market Portfolio; and (ii) the transfer of all of the assets of
the PCS Government Obligations Money Market Portfolio solely in
exchange for (a) the assumption by the Morgan Stanley
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Government Obligations Money Market Fund of all or substantially
all of the liabilities of the PCS Government Obligations Money
Market Portfolio and (b) shares of common stock of the Morgan
Stanley Government Obligations Money Market Fund, followed by the
distribution, at the Effective Time (as defined in Section 9 of
this Agreement), of such shares of common stock of the Morgan
Stanley Government Obligations Money Market Fund to the holders
of shares of common stock of the PCS Government Obligations Money
Market Portfolio on the terms and conditions hereinafter set
forth in liquidation of the PCS Government Obligations Money
Market Portfolio. For convenience: (x) the PCS Money Market
Portfolio and the Morgan Stanley Money Market Fund are referred
to generically hereinafter as "corresponding" Acquired and
Acquiring Funds, as are the PCS Government Obligations Money
Market Portfolio and the Morgan Stanley Government Obligations
Money Market Fund; (y) the shares of common stock of the Morgan
Stanley Money Market Fund and the Morgan Stanley Government
Obligations Money Market Fund that are given in exchange for the
assets of the corresponding Acquired Funds are referred to
hereinafter as the "Acquiring Funds Shares;" and (z) the shares
of common stock of the PCS Money Market Portfolio and PCS
Government Obligations Money Market Portfolio that are held by
the holders of such shares at the Effective Time are referred to
hereinafter as the "Acquired Funds Shares." The parties hereto
covenant and agree as follows:
1. PLAN OF REORGANIZATION. At the Effective Time, each
Acquired Fund will assign, deliver and otherwise transfer all of
its assets and good and marketable title thereto, and assign all
or substantially all of its liabilities as are set forth in a
statement of assets and liabilities, to be prepared as of the
Effective Time (the "Statement of Assets and Liabilities") to the
corresponding Acquiring Fund free and clear of all liens,
encumbrances and adverse claims except as provided in this
Agreement, and each Acquiring Fund shall acquire all such assets,
and shall assume all such liabilities of the corresponding
Acquired Fund, in exchange for delivery to the corresponding
Acquired Fund by such Acquiring Fund of a number of its Acquiring
Funds Shares (both full and fractional) equivalent in number and
value to the Acquired Funds Shares of the corresponding Acquired
Fund outstanding immediately prior to the Effective Time. The
assets and stated liabilities of each Acquired Fund, as set forth
in the Statement of Assets and Liabilities attached hereto as
Exhibit A, shall be exclusively assigned to and assumed by the
corresponding Acquiring Fund. All debts, liabilities,
obligations and duties of each Acquired Fund, to the extent that
they exist at or after the Effective Time and are stated in the
Statement of Assets and Liabilities, shall after the Effective
Time attach to the corresponding Acquiring Fund and may be
enforced against the corresponding Acquiring Fund to the same
extent as if the same had been incurred by the corresponding
Acquiring Fund.
2. TRANSFER OF ASSETS. The assets of each Acquired Fund to be
acquired by the corresponding Acquiring Fund shall include,
without limitation, all cash, cash equivalents, securities,
receivables (including interest and dividends receivable) as set
forth in the Statement of Assets and Liabilities, as well as any
claims or rights of action or rights to
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<PAGE>
register shares under applicable securities laws, any books or
records of such Acquired Fund and other property owned by the
such Acquired Fund at the Effective Time.
3. LIQUIDATION AND DISSOLUTION OF THE ACQUIRED FUNDS. At the
Effective Time, the Acquired Funds will liquidate and the
Acquiring Funds Shares (both full and fractional) received by the
Acquired Funds will be distributed to the shareholders of record
of the Acquired Funds as of the Effective Time in exchange for
their respective Acquired Funds Shares and in complete
liquidation of the Acquired Funds. Each shareholder of the
Acquired Funds will receive a number of Acquiring Funds Shares
equal in number and value to the Acquired Funds Shares held by
that shareholder, and each Acquiring Funds and Acquired Funds
share will be of equivalent net asset value per share. Such
liquidation and distribution will be accompanied by the
establishment of an open account on the share records of the
Acquiring Funds in the name of each shareholder of record of the
Acquired Funds and representing the respective number of
Acquiring Funds Shares due such shareholder. As soon as
practicable after the Effective Time, but not later than October
31, 1996, the PCS Fund shall take all steps as shall be necessary
and proper to effect a complete termination of the Acquired Funds
and, if both Acquired Funds are terminated, PCS Fund shall
liquidate and dissolve.
4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING FUNDS. The
Acquiring Funds represent and warrant to the Acquired Funds as
follows:
(a) ORGANIZATION, EXISTENCE, ETC. MSF Fund is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland and has the
power to carry on its business as it is now being conducted.
(b) REGISTRATION AS INVESTMENT COMPANY. MSF Fund is
registered under the 1940 Act as an open-end management
investment company; such registration has not been revoked
or rescinded and is in full force and effect.
(c) FINANCIAL STATEMENTS. The unaudited financial
statements, if any, of MSF Fund relating to the Acquiring
Funds dated as of _____________, 1996 (the "Acquiring Funds
Financial Statements"), which will, if available, be
delivered to the Acquired Funds as of the Effective Time,
will fairly present the financial position of the Acquiring
Funds as of the date thereof.
(d) SHARES TO BE ISSUED UPON REORGANIZATION. The Acquiring
Funds Shares to be issued in connection with the
Reorganization have been duly authorized and upon
consummation of the Reorganization will be validly issued,
fully paid and nonassessable. [ Prior to ] the Effective
Time, there shall be no issued and outstanding Acquiring
Funds Shares or any other securities issued by the Acquiring
Funds.
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(e) AUTHORITY RELATIVE TO THIS AGREEMENT. MSF Fund, on
behalf of the Acquiring Funds, has the power to enter into
this Agreement and to carry out its obligations hereunder.
The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated
hereby, have been duly authorized by the MSF Fund Board of
Directors, and no other proceedings by the Acquiring Funds
are necessary to authorize its officers to effectuate this
Agreement and the transactions contemplated hereby. Each of
the Acquiring Funds is not a party to or obligated under any
charter, by-law, indenture or contract provision or any
other commitment or obligation, or subject to any order or
decree, which would be violated by its executing and
carrying out this Agreement.
(f) LIABILITIES. There are no liabilities of the Acquiring
Funds, whether or not determined or determinable, other than
liabilities disclosed or provided for in the Acquiring Funds
Financial Statements and liabilities incurred in the
ordinary course of business [ subsequent to ] the Effective
Time or otherwise previously disclosed to the Acquired
Funds, none of which has been materially adverse to the
business, assets or results of operations of the Acquiring
Funds.
(g) LITIGATION. Except as previously disclosed to the
Acquired Funds, there are no claims, actions, suits or
proceedings pending or, to the actual knowledge of the
Acquiring Funds, threatened which would materially adversely
affect any of the Acquiring Funds or its assets or business
or which would prevent or hinder in any material respect
consummation of the transactions contemplated hereby.
(h) CONTRACTS. Except for contracts and agreements
disclosed to the Acquired Funds, under which no default
exists, each of the Acquiring Funds is not a party to or
subject to any material contract, debt instrument, plan,
lease, franchise, license or permit of any kind or nature
whatsoever with respect to the Acquiring Funds.
(i) TAXES. As of the Effective Time, all Federal and other
tax returns and reports of the Acquiring Funds required by
law to have been filed shall have been filed, and all other
taxes shall have been paid so far as due, or provision shall
have been made for the payment thereof, and to the best of
the Acquiring Funds' knowledge, no such return is currently
under audit and no assessment has been asserted with respect
to any of such returns.
5. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED FUNDS. The
Acquired Funds represent and warrant to the Acquiring Funds as
follows:
(a) ORGANIZATION, EXISTENCE, ETC. The PCS Fund is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland and has the
power to carry on its business as it is now being conducted.
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(b) REGISTRATION AS INVESTMENT COMPANY. The PCS Fund is
registered under the 1940 Act as an open-end management
investment company; such registration has not been revoked
or rescinded and is in full force and effect.
(c) FINANCIAL STATEMENTS. The audited financial statements
of the PCS Fund relating to the Acquired Funds for the
fiscal year ended June 30, 1996 (the "Acquired Funds
Financial Statements"), as delivered to the Acquiring Funds,
fairly present the financial position of the Acquired Funds
as of the date thereof, and the results of its operations
and changes in its net assets for the periods indicated.
(d) MARKETABLE TITLE TO ASSETS. Each of the Acquired Funds
will have, at the Effective Time, good and marketable title
to, and full right, power and authority to sell, assign,
transfer and deliver, the assets to be transferred to the
Acquiring Funds. Upon delivery and payment for such assets,
each of the Acquiring Funds will have good and marketable
title to such assets without restriction on the transfer
thereof free and clear of all liens, encumbrances and
adverse claims.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. The PCS Fund, on
behalf of the Acquired Funds, has the power to enter into
this Agreement and to carry out its obligations hereunder.
The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated
hereby, have been duly authorized by the PCS Fund's Board of
Directors, and, except for approval by the shareholders of
the Acquired Funds, no other proceedings by the Acquired
Funds are necessary to authorize its officers to effectuate
this Agreement and the transactions contemplated hereby.
Each of the Acquired Funds is not a party to or obligated
under any charter, by-law, indenture or contract provision
or any other commitment or obligation, or subject to any
order or decree, which would be violated by its executing
and carrying out this Agreement.
(f) LIABILITIES. There are no liabilities of the Acquired
Funds, whether or not determined or determinable, other than
liabilities disclosed or provided for in the Acquired Funds
Financial Statements and liabilities incurred in the
ordinary course of business subsequent to June 30, 1996, or
otherwise previously disclosed to the Acquiring Funds, none
of which has been materially adverse to the business, assets
or results of operations of the Acquired Funds. The PCS
Fund's Registration Statement, which is on file with the
Securities and Exchange Commission, does not contain an
untrue statement of a material fact required to be stated
therein or necessary to make the statements therein not
misleading.
(g) LITIGATION. Except as previously disclosed to the
Acquiring Funds, there are no claims, actions, suits or
proceedings pending or, to the knowledge of the Acquired
Funds, threatened which would materially adversely affect
the Acquired Funds or its assets or business or which would
prevent or hinder in any material respect consummation of
the transactions contemplated hereby.
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(h) CONTRACTS. Except for contracts and agreements
disclosed to the Acquiring Funds, under which no default
exists, each of the Acquired Funds, at the Effective Time,
is not a party to or subject to any material contract, debt
instrument, plan, lease, franchise, license or permit of any
kind or nature whatsoever.
(i) TAXES. As of the Effective Time, all Federal and other
tax returns and reports of the Acquired Funds required by
law to have been filed shall have been filed, and all other
taxes shall have been paid so far as due, or provision shall
have been made for the payment thereof, and to the best of
the Acquired Funds' knowledge, no such return is currently
under audit and no assessment has been asserted with respect
to any of such returns.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS.
(a) All representations and warranties of the Acquired
Funds contained in this Agreement shall be true and correct
in all material respects as of the date hereof and, except
as they may be affected by the transactions contemplated by
this Agreement, as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time.
(b) The Acquiring Funds shall have received an opinion of
counsel for the Acquired Funds, dated as of the Effective
Time, addressed to and in form and substance satisfactory to
counsel for the Acquiring Funds, to the effect that (i) the
Acquired Funds are duly organized and validly existing
series of the PCS Fund under the laws of the State of
Maryland; (ii) the PCS Fund is an open-end management
investment company registered under the 1940 Act; (iii) this
Agreement and the Reorganization provided for herein and the
execution of this Agreement have been duly authorized and
approved by all requisite action of each of the Acquired
Funds and this Agreement has been duly executed and
delivered by the PCS Fund on behalf of the Acquired Funds
and is a valid and binding obligation of the Acquired Funds,
subject to applicable bankruptcy, insolvency, fraudulent
conveyance and similar laws or court decisions regarding
enforcement of creditors' rights generally; (iv) to the best
of counsel's knowledge after reasonable inquiry, no consent,
approval, order or other authorization of any Federal or
state court or administrative or regulatory agency is
required for each of the Acquired Funds to enter into this
Agreement or carry out its terms that has not been obtained
other than where the failure to obtain any such consent,
approval, order or authorization would not have a material
adverse effect on the operations of the Acquired Funds; and
(v) upon consummation of this Agreement, the Acquiring Funds
shall have acquired all of the Acquired Funds's assets
listed in the Statement of Assets and Liabilities, free and
clear of all liens encumbrances or adverse claims.
(c) The Acquired Funds shall have delivered to the
Acquiring Funds at the Effective Time the Acquired Funds'
Statement of Assets and Liabilities, prepared in accordance
with generally accepted accounting principles consistently
applied, together with a certificate of the Treasurer or
Assistant Treasurer of the Acquired Funds as to the
aggregate asset value of the Acquired Funds' portfolio
securities.
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUNDS.
(a) All representations and warranties of the Acquiring
Funds contained in this Agreement shall be true and correct
in all material respects as of the date hereof and, except
as they may be affected by the transactions contemplated by
this Agreement, as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time.
(b) The Acquired Funds shall have received an opinion of
counsel for the Acquiring Funds, dated as of the Effective
Time, addressed to and in form and substance satisfactory to
counsel for the Acquired Funds, to the effect that: (i) the
Acquiring Funds are duly organized and validly existing
series of MSF Fund under the laws of the State of Maryland;
(ii) MSF Fund is an open-end management investment company
registered under the 1940 Act; (iii) this Agreement and the
Reorganization provided for herein and the execution of this
Agreement have been duly authorized and approved by all
requisite corporate action of each of the Acquiring Funds
and this Agreement has been duly executed and delivered by
the Acquiring Funds and is a valid and binding obligation of
the Acquiring Funds, subject to applicable bankruptcy,
insolvency, fraudulent conveyance and similar laws or court
decisions regarding enforcement of creditors' rights
generally; (iv) to the best of counsel's knowledge, no
consent, approval, order or other authorization of any
Federal or state court or administrative or regulatory
agency is required for each of the Acquiring Funds to enter
into this Agreement or carry out its terms that has not
already been obtained, other than where the failure to
obtain any such consent, approval, order or authorization
would not have a material adverse effect on the operations
of the Acquiring Funds; and (v) the Acquiring Funds Shares
to be issued in the Reorganization have been duly authorized
and upon issuance thereof in accordance with this Agreement
will be validly issued, fully paid and nonassessable.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED
FUNDS AND THE ACQUIRING FUNDS. The obligations of the
Acquired Funds and the Acquiring Funds to effectuate this
Agreement shall be subject to the satisfaction of each of
the following conditions:
(a) Such authority from the Securities and Exchange
Commission (the "SEC") and state securities commissions as
may be necessary to permit the parties to carry out the
transactions contemplated by this Agreement shall have been
received.
(b) With respect to the Acquired Funds, the PCS Fund will
call a meeting of shareholders to consider and act upon this
Agreement and to take all other actions reasonably necessary
to obtain the approval by shareholders of each of the
Acquired Funds of this Agreement and the transactions
contemplated herein, including the Reorganization and the
termination of the Acquired Funds if the Reorganization is
consummated. The PCS Fund has prepared or will prepare the
notice of meeting, form of proxy and proxy statement
(collectively, "Proxy Materials") to be used in connection
with such meeting; provided that the Acquiring Funds has
furnished or will furnish a current, effective Prospectus
relating to the Acquiring Funds Shares for incorporation
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within and/or distribution with the Proxy Materials, and
with such other information relating to the Acquiring Funds
as is reasonably necessary for the preparation of the Proxy
Materials.
(c) The Registration Statement on Form N-1A of the
Acquiring Funds shall be effective under the Securities Act
of 1933, as amended (the "1933 Act"), and, to the best
knowledge of the Acquiring Funds, no investigation or
proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
(d) The shares of the Acquiring Funds shall have been duly
qualified for offering to the public in all states of the
United States, the Commonwealth of Puerto Rico and the
District of Columbia (except where such qualifications are
not required) so as to permit the transfer contemplated by
this Agreement to be consummated.
(e) The Acquired Funds and the Acquiring Funds shall have
received on or before the Effective Time an opinion of
counsel satisfactory to the Acquired Funds and the Acquiring
Funds substantially to the effect that for Federal income
tax purposes:
(1) No gain or loss will be recognized to the
Acquired Funds upon the transfer of its assets in
exchange solely for the Acquiring Funds Shares and
the assumption by the Acquiring Funds of the
corresponding Acquired Fund's stated liabilities;
(2) No gain or loss will be recognized to the
Acquiring Funds on its receipt of the Acquired
Funds' assets in exchange for the Acquiring Funds
Shares and the assumption by the Acquiring Funds
of the corresponding Acquired Fund's liabilities;
(3) The basis of an Acquired Fund's assets in the
corresponding Acquiring Fund's hands will be the
same as the basis of those assets in the Acquired
Fund's hands immediately before the conversion;
(4) The Acquiring Funds' holding period for the
assets transferred to the Acquiring Funds by the
Acquired Funds will include the holding period of
those assets in the corresponding Acquired Fund's
hands immediately before the conversion;
(5) No gain or loss will be recognized to the
Acquired Funds on the distribution of the
Acquiring Funds Shares to the Acquired Funds'
shareholders in exchange for their Acquired Funds
Shares;
(6) No gain or loss will be recognized to the
Acquired Funds' shareholders as a result of the
Acquired Funds' distribution of Acquiring Funds
Shares to the Acquired Funds' shareholders in
exchange for the Acquired Funds' shareholders'
Acquired Funds Shares;
A-8
<PAGE>
(7) The basis of the Acquiring Funds Shares
received by the Acquired Funds' shareholders will
be the same as the adjusted basis of that Acquired
Funds' shareholders' Acquired Funds Shares
surrendered in exchange therefor; and
(8) The holding period of the Acquiring Funds
Shares received by the Acquired Funds'
shareholders will include the Acquired Funds'
shareholders' holding period for the Acquired
Funds' shareholders' Acquired Funds Shares
surrendered in exchange therefor, provided that
said Acquired Funds Shares were held as capital
assets on the date of the conversion.
(f) A vote approving this Agreement and the Reorganization
contemplated hereby shall have been adopted by at least a
majority of the outstanding shares of each of the Acquired
Funds entitled to vote at an annual or special meeting;
provided that, if a majority of the shares of only one
Acquired Fund approve the Agreement and the Reorganization,
the parties may execute the Agreement and effect the
Reorganization solely with respect to such Acquired Fund.
(g) The Board of Directors of MSF Fund, at a meeting duly
called for such purpose, shall have authorized the issuance
by each of the Acquiring Funds of Acquiring Funds Shares at
the Effective Time in exchange for the assets of the
Acquired Funds pursuant to the terms and provisions of this
Agreement.
9. EFFECTIVE TIME OF THE REORGANIZATION. The exchange of the
Acquired Funds's assets for Acquiring Funds Shares shall be
effective as of close of business on September 30, 1996, or at
such other time and date as fixed by the mutual consent of the
parties (the "Effective Time").
10. TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated and abandoned without
penalty by resolution of the Board of Directors of the PCS Fund,
at any time prior to the Effective Time, if circumstances should
develop that, in the opinion of the Board, make proceeding with
the Agreement inadvisable.
11. AMENDMENT. This Agreement may be amended, modified or
supplemented in such manner as may be mutually agreed upon in
writing by the parties; PROVIDED, that following the
shareholders' meeting called on behalf of the Acquired Funds
pursuant to Section 8 of this Agreement, no such amendment may
have the effect of changing the provisions for determining the
number or value of Acquiring Funds Shares to be paid to the
Acquired Funds' shareholders under this Agreement to the
detriment of the Acquired Funds, shareholders without their
further approval.
12. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Maryland.
A-9
<PAGE>
13. NOTICES. Any notice, report, statement or demand required
or permitted by any provision of this Agreement shall be in
writing and shall be given by prepaid telegraph, telecopy,
certified mail, internet or overnight express courier addressed
as follows:
if to the Acquiring Funds:
Mr. Warren J. Olsen
Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
with a copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
if to the Acquired Funds:
Mr. Warren J. Olsen
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
with a copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
14. FEES AND EXPENSES.
(a) Each of the Acquiring Funds and the Acquired Funds
represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
(b) Except as otherwise provided for herein, all expenses
of the transactions contemplated by this Agreement incurred
by each of the Acquired Funds and the Acquiring Funds will
be borne by the PCS Fund. Such expenses include, without
limitation, (i) expenses incurred in connection with the
entering into and the carrying out of the provisions of this
Agreement; (ii) expenses associated with the preparation and
filing of the Proxy Statement under the Securities Exchange
Act of 1934, as amended; (iii) registration or qualification
fees and expenses of preparing and filing
A-10
<PAGE>
such forms as are necessary under applicable state
securities laws to qualify the Acquiring Funds Shares to be
issued in connection herewith in each state in which the
Acquired Funds' shareholders are resident as of the date of
the mailing of the Proxy Statement to such shareholders;
(iv) postage; (v) printing; (vi) accounting fees; (vii)
legal fees; and (viii) solicitation costs of the
transaction. Each of the Acquiring Funds shall pay its own
Federal and state registration fees.
15. HEADINGS, COUNTERPARTS, ASSIGNMENT.
(a) The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not
effect in any way the meaning or interpretation of this
Agreement.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
successors and assigns, but no assignment or transfer hereof
or of any rights or obligations hereunder shall be made by
any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be
construed to confer upon or give any person, firm or
corporation other than the parties hereto and their
respective successors and assigns any rights or remedies
under or by reason of this Agreement.
16. ENTIRE AGREEMENT. Each of the Acquiring Funds and the
Acquired Funds agree that neither party has made any
representation, warranty or covenant not set forth herein and
that this Agreement constitutes the entire agreement between the
parties. The representations, warranties and covenants contained
herein or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the
transactions contemplated hereunder.
17. FURTHER ASSURANCES. Each of the Acquiring Funds and the
Acquired Funds shall take such further action as may be necessary
or desirable and proper to consummate the transactions
contemplated hereby.
18. BINDING NATURE OF AGREEMENT. As provided in each
corporation's Articles of Incorporation, as amended and
supplemented to date, on file with the State Department of
Assessments and Taxation of the State of Maryland, this Agreement
was executed by the undersigned officers of MSF Fund and the PCS
Fund, on behalf of each of the Acquiring Funds and the Acquired
Funds, respectively, as officers and not individually, and the
obligations of this Agreement are not binding upon the
undersigned officers individually, but
A-11
<PAGE>
are binding only upon the assets and property of each
corporation. Moreover, no series of a corporation shall be
liable for the obligations of any other series of that
corporation.
Attest: PCS CASH FUND, INC.
on behalf of its series, the
PCS Money Market Portfolio, the PCS
Tax-Free Money Market Portfolio and
the PCS Government Obligations
Money Market Portfolio
________________________ By______________________________
Name: Name:
Title: Title:
Attest: MORGAN STANLEY FUND, INC. on behalf
of its series, the Morgan Stanley
Money Market Fund, the Morgan
Stanley Tax-Free Money Market Fund
and the Morgan Stanley Government
Obligations Money Market Fund
________________________ By______________________________
Name: Name:
Title: Title:
A-12
<PAGE>
[APPENDIX TO PROXY STATEMENT]
PCS CASH FUND, INC.
PCS GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
PRELIMINARY PROXY FOR SPECIAL MEETING OF SHAREHOLDERS, AUGUST 23, 1996
The undersigned Shareholder(s) of the PCS Government Obligations Money
Market Portfolio (the "Portfolio") of PCS Cash Fund, Inc. ("PCS") hereby
appoint(s) Warren J. Olsen, Michael F. Klein and Valerie Y. Lewis and each of
them (with full power of substitution), the proxy or proxies of the undersigned
to attend the Special Meeting of Shareholders of the Portfolio to be held on
August 23, 1996, and any adjournments thereof, to vote all of the shares of the
Portfolio that the signer would be entitled to vote if personally present at the
Special Meeting of Shareholders on the following Proposal and on any other
matters brought before the Meeting, all as set forth in the Notice of Special
Meeting of Shareholders and Proxy Statement of the Board of Directors. Said
proxies are directed to vote or refrain from voting pursuant to the Proxy
Statement as checked below upon the following matters:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PCS
AND WILL BE VOTED "FOR" THE PROPOSAL UNLESS OTHERWISE INDICATED.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
Proposal: Approval of the Agreement and Plan of Reorganization and Liquidation
between PCS Cash Fund, Inc., on behalf of the PCS Government
Obligations Money Market Portfolio, and the Morgan Stanley Fund, Inc.,
on behalf of the Morgan Stanley Government Obligations Money Market
Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In accordance with their own discretion, the proxies are authorized to
vote on such other business as may properly come before the Meeting.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY
IS RETURNED, SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS FOR THE PROPOSAL.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT WITH THIS PROXY OF A COPY OF THE
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT OF THE BOARD
OF DIRECTORS.
Please date, sign and return promptly.
Dated: _______________________________, 1996
YOUR SIGNATURE(S) ON THIS PROXY SHOULD BE EXACTLY AS YOUR NAME OR
NAMES APPEAR ON THIS PROXY. IF THE SHARES ARE HELD JOINTLY, EACH HOLDER SHOULD
SIGN. IF SIGNING IS BY ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE PRINT YOUR FULL TITLE BELOW YOUR SIGNATURE.
_____________________________________________
Signature
_____________________________________________
Signature
<PAGE>
[APPENDIX TO PROXY STATEMENT]
PCS CASH FUND, INC.
PCS MONEY MARKET PORTFOLIO
PRELIMINARY PROXY FOR SPECIAL MEETING OF SHAREHOLDERS, AUGUST 23, 1996
The undersigned Shareholder(s) of the PCS Money Market Portfolio (the
"Portfolio") of PCS Cash Fund, Inc. ("PCS") hereby appoint(s) Warren J. Olsen,
Michael F. Klein and Valerie Y. Lewis and each of them (with full power of
substitution), the proxy or proxies of the undersigned to attend the Special
Meeting of Shareholders of the Portfolio to be held on August 23, 1996, and any
adjournments thereof, to vote all of the shares of the Portfolio that the signer
would be entitled to vote if personally present at the Special Meeting of
Shareholders on the following Proposal and on any other matters brought before
the Meeting, all as set forth in the Notice of Special Meeting of Shareholders
and Proxy Statement of the Board of Directors. Said proxies are directed to
vote or refrain from voting pursuant to the Proxy Statement as checked below
upon the following matters:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PCS
AND WILL BE VOTED "FOR" THE PROPOSAL UNLESS OTHERWISE INDICATED.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
Proposal: Approval of an Agreement and Plan of Reorganization and Liquidation
between PCS Cash Fund, Inc., on behalf of the PCS Money Market
Portfolio, and the Morgan Stanley Fund, Inc., on behalf of the Morgan
Stanley Money Market Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In accordance with their own discretion, the proxies are authorized to
vote on such other business as may properly come before the Meeting.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY
IS RETURNED, SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS FOR THE PROPOSAL.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT WITH THIS PROXY OF A COPY OF THE
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT OF THE BOARD
OF DIRECTORS.
Please date, sign and return promptly.
Dated: _______________________________, 1996
YOUR SIGNATURE(S) ON THIS PROXY SHOULD BE EXACTLY AS YOUR NAME OR NAMES APPEAR
ON THIS PROXY. IF THE SHARES ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN. IF
SIGNING IS BY ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
PRINT YOUR FULL TITLE BELOW YOUR SIGNATURE.
_____________________________________________
Signature
______________________________________________
Signature
