<PAGE>
As filed with the Securities and Exchange Commission on October 4, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
File No. 33-51294
File No. 811-7140
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 10 /X/
and
REGISTRATION STATEMENT UNDER THE / /
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 12
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MORGAN STANLEY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of Principal Executive Office)
Registrant's Telephone Number (800) 548-7786
Harold J. Schaaff, Esquire
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas, New York, New York 10020
(Name and Address of Agent for Service)
--------------
COPIES TO:
Warren J. Olsen, Esquire Richard W. Grant, Esquire
Morgan Stanley Asset Management Inc. Morgan, Lewis & Bockius LLP
1221 Avenue of the Americas 2000 One Logan Square
New York, NY 10020 Philadelphia, PA 19103
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It is proposed that this filing be effective
(check appropriate box)
/ / immediately upon filing pursuant to Paragraph (b)
/ / on ____________________ pursuant to Paragraph (b)
/X/ 75 days after filing pursuant to Paragraph (a)
/ / on (date) pursuant to Paragraph (a) of rule 485
/ / 60 days after filing pursuant to Paragraph (a)
- --------------------------------------------------------------------------------
REGISTRANT HAS PREVIOUSLY ELECTED TO AND HEREBY CONTINUES ITS ELECTION TO
REGISTER AN INDEFINITE NUMBER OF SHARES OF ITS COMMON STOCK, PAR VALUE
$.001 PER SHARE, PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF
1940. REGISTRANT FILED ITS RULE 24f-2 NOTICE FOR ITS FISCAL YEAR ENDED
JUNE 30, 1995 ON AUGUST 23, 1995.
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<PAGE>
MORGAN STANLEY FUND, INC.
CROSS REFERENCE SHEET
PART A - INFORMATION REQUIRED IN A PROSPECTUS
Form N-1A Location in Prospectus for Morgan Stanley Global Equity,
Item Number Morgan Stanley Global Fixed Income, Morgan Stanley Asian Growth,
- ----------- Morgan Stanley Emerging Markets, Morgan Stanley Latin American,
Morgan Stanley European Equity, Morgan Stanley American Value,
Morgan Stanley Worldwide High Income, Morgan Stanley Growth and
Income and Morgan Stanley Money Market Fund
----------------------------------------------------------------
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses; Prospectus Summary
Item 3. Condensed Financial Information -- Financial Highlights;
Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objectives and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Management of the Fund; Portfolio
Transactions; General Information
Item 5A. Management's Discussion of Fund Performance -- * (See
June 30, 1995 Annual Report to Shareholders)
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Distributions; Taxes; General Information
Item 7. Purchase of Securities Being Offered -- Cover Page;
Prospectus Summary; Management of the Fund; Purchase of Shares;
Valuation of Shares
Item 8. Redemption or Repurchase -- Redemption of Shares; Shareholder
Services
Item 9. Pending Legal Proceedings -- *
Form N-1A
Item Number Location in Prospectus for Morgan Stanley Aggressive Equity Fund
- ----------- ----------------------------------------------------------------
Item 1. Cover Page -- Cover Page
Item 2. Synopsis -- Fund Expenses; Prospectus Summary
Item 3. Condensed Financial Information -- Performance Information
Item 4. General Description of Registrant -- Prospectus Summary;
Investment Objectives and Policies; Additional Investment
Information; Investment Limitations; General Information
Item 5. Management of the Fund -- Management of the Fund; Portfolio
Transactions; General Information
Item 5A. Management's Discussion of Fund Performance -- *
Item 6. Capital Stock and Other Securities -- Purchase of Shares;
Redemption of Shares; Shareholder Services; Valuation of Shares;
Dividends and Distributions; Taxes; General Information
Item 7. Purchase of Securities Being Offered -- Cover Page; Prospectus
Summary; Management of the Fund; Purchase of Shares; Valuation
of Shares
Item 8. Redemption or Repurchase -- Redemption of Shares; Shareholder
Services
Item 9. Pending Legal Proceedings -- *
* Omitted since the answer is negative or the Item is not applicable.
i
<PAGE>
PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
- ------ -------------------------------------------------------------
Form N-1A Location in Statement of Additional Information for
Item Number Morgan Stanley Global Equity, Morgan Stanley Global Fixed
- ----------- Income, Morgan Stanley Asian Gorwth, Morgan Stanley Emerging
Markets, Morgan Stanley Latin American, Morgan Stanley European
Equity, Morgan Stanley American Value, Morgan Stanley Worldwide
High Income, Morgan Stanley Growth and Income and Morgan
Stanley Money Market Fund
----------------------------------------------------------------
Item 10. Cover Page -- Cover Page
Item 11. Table of Contents -- Cover Page
Item 12. General Information and History --
Item 13. Investment Objectives and Policies -- Investment Objectives
and Policies; Investment Limitations; Determining Maturities of
Certain Instruments; Description of Securities and Ratings
Item 14. Management of the Fund -- Management of the Fund
Item 15. Control Persons and Principal Holders of Securities --
Management of the Fund; General Information
Item 16. Investment Advisory and Other Services -- Management of the
Fund; General Information
Item 17. Brokerage Allocation and Other Practices -- Portfolio
Transactions
Item 18. Capital Stock and Other Securities -- General Information
Item 19. Purchase, Redemption and Pricing of Securities Being
Offered -- Purchase of Shares; Redemption of Shares; Shareholder
Services; Net Asset Value; General Information
Item 20. Tax Status -- Investment Objectives and Policies; Federal
Income Tax; Federal Tax Treatment of Forward Currency Contracts
and Exchange Rate Changes; Taxes and Foreign Shareholders;
General Information
Item 21. Underwriters -- Management of the Fund
Item 22. Calculation of Performance Data -- Performance Information
Item 23. Financial Statements -- Financial Statements
Form N-1A Location in Statement of Additional Information for Morgan
Item Number Stanley Aggressive Equity Fund
- ----------- ----------------------------------------------------------
Item 10. Cover Page -- Cover Page
Item 11. Table of Contents -- Cover Page
Item 12. General Information and History --
Item 13. Investment Objectives and Policies -- Investment Objectives and
Policies; Investment Limitations; Determining Maturities of
Certain Instruments; Description of Securities and Ratings
Item 14. Management of the Fund -- Management of the Fund
Item 15. Control Persons and Principal Holders of Securities --
Management of the Fund; General Information
Item 16. Investment Advisory and Other Services -- Management of the
Fund; General Information
Item 17. Brokerage Allocation and Other Practices -- Portfolio
Transactions
Item 18. Capital Stock and Other Securities -- General Information
Item 19. Purchase, Redemption and Pricing of Securities Being Offered --
Purchase of Shares; Redemption of Shares; Shareholder Services;
Net Asset Value; General Information
Item 20. Tax Status -- Investment Objectives and Policies; Federal Income
Tax; Federal Tax Treatment of Forward Currency Contracts and
Exchange Rate Changes; Taxes and Foreign Shareholders; General
Information
Item 21. Underwriters -- Management of the Fund
Item 22. Calculation of Performance Data -- Performance Information
Item 23. Financial Statements -- Financial Statements
PART C - OTHER INFORMATION
- ------ -----------------
Part C contains the information required by the Items of the Form
N-1A under such Items as set forth in the Form N-1A.
ii
<PAGE>
The Prospectus for the Morgan Stanley Global Equity Allocation, Morgan Stanley
Global Fixed Income, Morgan Stanley Asian Growth, Morgan Stanley Emerging
Markets, Morgan Stanley Latin American, Morgan Stanley European Equity, Morgan
Stanley American Value, Morgan Stanley Worldwide High Income, Morgan Stanley
Growth and Income and Morgan Stanley Money Market Funds, included as part of
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A of
Morgan Stanley Fund, Inc. (File No. 33-51294) filed with the Securities and
Exchange Commission on April 4, 1995 and in final form under Rule 497(e) on
August 1, 1995, is hereby incorporated by reference as if set forth in full
herein.
<PAGE>
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P R O S P E C T U S
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MORGAN STANLEY [AGGRESSIVE EQUITY] FUND
PORTFOLIO OF THE
MORGAN STANLEY FUND, INC.
P.O. BOX 2798, BOSTON, MASSACHUSETTS 02208-2798
FOR INFORMATION CALL 1-800-282-4404
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Morgan Stanley Fund, Inc. (the "Fund") is an open-end management
investment company, or mutual fund, which offers redeemable shares of the
Morgan Stanley Aggressive Equity Fund (the "Aggressive Equity Fund") and
other series of diversified and nondiversified investment portfolios (each,
an "Investment Fund"). The Fund offers the shares of its Investment Funds,
except the Money Market Fund, in three classes (Class A, Class B and Class C)
designed to provide investors a choice of three ways to pay distribution
costs. The Fund is designed to make available to retail investors the
expertise of Morgan Stanley Asset Management Inc., the Investment Adviser and
Administrator. Shares are available through Morgan Stanley & Co. Incorporated
("Morgan Stanley"), the Distributor, and investment dealers, banks and
financial services firms that provide distribution, administrative or
shareholder services ("Participating Dealers"). The Fund currently consists
of eleven Investment Funds, ten of which offer the following range of
investment choices:
GLOBAL AND INTERNATIONAL EQUITY FUNDS:
Morgan Stanley Global Equity Allocation Fund (the "Global Equity Allocation
Fund")
Morgan Stanley Asian Growth Fund (the "Asian Growth Fund")
Morgan Stanley Emerging Markets Fund (the "Emerging Markets Fund")
Morgan Stanley Latin American Fund (the "Latin American Fund")
Morgan Stanley European Equity Fund (the "European Equity Fund")
Morgan Stanley Growth and Income Fund (the "Growth and Income Fund")
UNITED STATES EQUITY FUND:
Morgan Stanley Aggressive Equity Fund (the "Aggressive Equity Fund")
Morgan Stanley American Value Fund (the "American Value Fund")
<PAGE>
GLOBAL FIXED INCOME FUNDS:
Morgan Stanley Global Fixed Income Fund (the "Global Fixed Income Fund")
Morgan Stanley Worldwide High Income Fund (the "Worldwide High Income
Fund")
The eleventh Investment Fund, the Morgan Stanley Money Market Fund (the
"Money Market Fund") is not currently offering shares.
The Aggressive Equity Fund invests in emerging markets securities, which
are subject to special risks. See "Foreign Investment Risk Factors."
INVESTORS SHOULD NOTE THAT THE AGGRESSIVE EQUITY FUND MAY INVEST UP TO
15% OF ITS NET ASSETS IN ILLIQUID ASSETS, INCLUDING RESTRICTED SECURITIES
(OTHER THAN RULE 144A SECURITIES THAT ARE DETERMINED TO BE LIQUID). SEE
"ADDITIONAL INVESTMENT INFORMATION --NON-PUBLICLY TRADED SECURITIES, PRIVATE
PLACEMENTS AND RESTRICTED SECURITIES." INVESTMENTS IN RESTRICTED SECURITIES
IN EXCESS OF 5% OF THE AGGRESSIVE EQUITY FUND'S TOTAL ASSETS MAY BE
CONSIDERED A SPECULATIVE ACTIVITY, MAY INVOLVE GREATER RISK AND MAY INCREASE
THE AGGRESSIVE EQUITY FUND'S EXPENSES.
This Prospectus is designed to set forth concisely the information about
the Aggressive Equity Fund that a prospective investor should know before
investing and it should be retained for future reference. Additional
information about the Aggressive Equity Fund is contained in a "Statement of
Additional Information," dated December ___, 1995, which is incorporated
herein by reference. The Statement of Additional Information is available
upon request and without charge by writing or calling the Fund at the address
and telephone number set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS DECEMBER __, 1995.
2
<PAGE>
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of
the Aggressive Equity Fund may incur:
AGGRESSIVE
EQUITY
SHAREHOLDER TRANSACTION EXPENSES FUND
-------------------------------- ----
Maximum Sales Load Imposed on Purchases
Class A . . . . . . . . . . . . . . . . . . . . . 4.75%(1)
Class B . . . . . . . . . . . . . . . . . . . . . None
Class C . . . . . . . . . . . . . . . . . . . . . None
Maximum Sales Load Imposed on Reinvested Dividends
Class A . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . None
Class C . . . . . . . . . . . . . . . . . . . . . None
Deferred Sales Load
For Purchases up to $999,999
Class A . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . 5.00%(2)
Class C . . . . . . . . . . . . . . . . . . . . . 1.00%(3)
For Purchases of $1,000,000 or more
Class A . . . . . . . . . . . . . . . . . . . . . 1.00%(1)
Class B . . . . . . . . . . . . . . . . . . . . . 5.00%(2)
Class C . . . . . . . . . . . . . . . . . . . . . 1.00%(3)
Redemption Fees (4) . . . . . . . . . . . . . . . . .
Class A . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . None
Class C . . . . . . . . . . . . . . . . . . . . . None
Exchange Fees
Class A . . . . . . . . . . . . . . . . . . . . . None
Class B . . . . . . . . . . . . . . . . . . . . . None
Class C . . . . . . . . . . . . . . . . . . . . . None
_______
(1) Percentage shown is the maximum sales load. Certain large purchases may be
subject to a reduced sales load. Purchases of Class A shares of the
Aggressive Equity Fund which, when combined with the net asset value of the
purchaser's existing investment in Class A shares of the Aggressive Equity
Fund, aggregate $1 million or more are not subject to a sales load (an
"initial sales charge"). A contingent deferred sales charge ("CDSC") of
1.00% will be imposed, however, on shares from any such purchase that are
redeemed within one year following such purchase. Any such CDSC will be
paid to the Distributor. Certain other purchases are not subject to an
initial sales charge. See "Purchase of Shares."
(2) Percentage shown is the maximum CDSC. Purchases of Class B shares of the
Aggressive Equity Fund are subject to a maximum CDSC of 5.00% which
decreases in steps to 0% after six years. See "Purchase of Class B
Shares." Any such CDSC will be paid to the Distributor.
(3) Purchases of Class C shares of the Aggressive Equity Fund are subject to a
CDSC of 1.00% for redemptions made within one year of purchase. Any such
CDSC will be paid to the Distributor.
(4) A charge of $8.00 may be imposed on redemptions by wire which is not an
expense of the Aggressive Equity Fund.
3
<PAGE>
ANNUAL FUND OPERATING EXPENSES
------------------------------
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE AGGRESSIVE
REIMBURSEMENT AND/OR FEE WAIVER) EQUITY FUND
Investment Advisory Fee and Administrative and Shareholder
Account Costs (5)
Class A. . . . . . . . . . . . . . . . . . . . . 1.05%
Class B. . . . . . . . . . . . . . . . . . . . . 1.05%
Class C. . . . . . . . . . . . . . . . . . . . . 1.05%
12b-1 Fees
Class A. . . . . . . . . . . . . . . . . . . . . 0.25%
Class B. . . . . . . . . . . . . . . . . . . . . 1.00%
Class C. . . . . . . . . . . . . . . . . . . . . 1.00%
Custody Fees.
Class A. . . . . . . . . . . . . . . . . . . . . 0.05%
Class B. . . . . . . . . . . . . . . . . . . . . 0.05%
Class C. . . . . . . . . . . . . . . . . . . . . 0.05%
Other Expenses.
Class A. . . . . . . . . . . . . . . . . . . . . 0.10%
Class B. . . . . . . . . . . . . . . . . . . . . 0.10%
Class C. . . . . . . . . . . . . . . . . . . . . 0.10%
Total Operating Expenses (6)
Class A. . . . . . . . . . . . . . . . . . . . . 1.50%
Class B. . . . . . . . . . . . . . . . . . . . . 2.25%
Class C. . . . . . . . . . . . . . . . . . . . . 2.25%
_______
(5) The Adviser has agreed to waive its advisory fees and/or to reimburse
expenses of the Aggressive Equity Fund, if necessary, if such fees would
cause the total annual operating expenses of the Aggressive Equity Fund as
a percentage of average daily net assets, to exceed the percentages set
forth in the table above. Absent the fee waivers, investment advisory fee
of the Aggressive Equity Fund is 0.90%.
(6) If such advisory fees were not waived and/or expenses reimbursed, the total
operating expenses of the Aggressive Equity Fund would be estimated to be a
percentage of their respective average daily net assets as follows:
CLASS A CLASS B CLASS C
------- ------- -------
Aggressive Equity Fund . . . . . . . . 1.55% 2.30% 2.30%
------------------------------
------------------------------
These reductions are effective as of the inception of the Aggressive Equity
Fund. As a result of these reductions, the Investment Advisory Fee stated above
is lower than contractual fees stated under "Management of the Fund." The
Adviser reserves the right to terminate any of its fee waivers at any time in
its sole discretion. For further information on Fund expenses, see "Management
of the Fund."
The purpose of the above table is to assist the investor in understanding
the various expenses that an investor in the Aggressive Equity Fund will bear
directly or indirectly. The Class A, Class B and Class C expenses and fees for
the Aggressive Equity Fund are based on estimates. For purposes of calculating
the estimated expenses and fees set forth above, the table assumes that the
Fund's average daily net assets will be [$50,000,000.] "Other Expenses"
include, among others, Directors' fees and expenses, amortization of
organizational costs, filing fees, professional fees, and the costs for reports
to shareholders. Due to the continuous nature of Rule 12b-1 fees, long-term
shareholders may pay more than the equivalent of the maximum front-end sales
charges otherwise permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
4
<PAGE>
The following example illustrates the expenses that you would pay on a
$1,000 investment, assuming a 5% annual rate of return and redemption at the
end of each time period as indicated, in (i) Class A shares of the Aggressive
Equity Fund, including the maximum 4.75% sales charge, (ii) Class B shares of
the Aggressive Equity Fund, which has a CDSC, but no initial sales charge and
(iii) Class C shares of the Aggressive Equity Fund, which has a CDSC, but no
initial sales charge. (If it is assumed there are no redemptions, the expenses
are the same.)
AGGRESSIVE
EQUITY FUND
-----------
Class A shares
1 Year . . . . . . . . . . . . . . . . . . . . . $62(1)
3 Years. . . . . . . . . . . . . . . . . . . . . 93
5 Years. . . . . . . . . . . . . . . . . . . . . *
10 Years . . . . . . . . . . . . . . . . . . . . *
Class B shares
(Assuming complete redemption at end of period)
1 Year . . . . . . . . . . . . . . . . . . . . . 74
3 Years. . . . . . . . . . . . . . . . . . . . . 103
5 Years. . . . . . . . . . . . . . . . . . . . . *
10 Years . . . . . . . . . . . . . . . . . . . . *
(Assuming no redemption). . . . . . . . . . . . . . .
1 Year . . . . . . . . . . . . . . . . . . . . . 23
3 Years. . . . . . . . . . . . . . . . . . . . . 70
5 Years. . . . . . . . . . . . . . . . . . . . . *
10 Years . . . . . . . . . . . . . . . . . . . . *
Class C shares
(Whether or not complete redemption occurs at end
of period)
1 Year . . . . . . . . . . . . . . . . . . . . . 23(2)
3 Years. . . . . . . . . . . . . . . . . . . . . 70
5 Years. . . . . . . . . . . . . . . . . . . . . *
10 Years . . . . . . . . . . . . . . . . . . . . *
_______
* Because the Aggressive Equity Fund has just become operational as of the
date of this Prospectus, the Aggressive Equity Fund has not projected
expenses beyond the three-year period shown.
(1) Reduced sales charges apply to purchases of $100,000 or more of the Class
A shares of the Aggressive Equity Fund. See "Purchase of Shares." For
Class A shares of the Aggressive Equity Fund, generally purchases of
$1 million or more may be accomplished at net asset value without an
initial sales charge, but may be subject to a 1.00% CDSC if liquidated
within one year of purchase.
(2) If Class C shares of the Aggressive Equity Fund are redeemed within one
year of purchase, the expense figures in the first year increase to $33.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. The Adviser in its discretion may terminate voluntary fee waivers and/or
reimbursements at any time. Absent the waiver of fees or reimbursement of
expenses, the amounts in the example above would be greater.
5
<PAGE>
PROSPECTUS SUMMARY
THE FUND
The Fund currently consists of eleven Investment Funds, offering investors a
range of investment choices with Morgan Stanley providing services as Adviser,
Administrator and Distributor. Each Investment Fund has its own investment
objective and policies designed to meet its specific goals. This Prospectus
pertains to the Class A, Class B and Class C shares of the Aggressive Equity
Fund. A separate Prospectus pertains to the Class A, Class B and Class C shares
of the following Investment Funds (the Money Market Fund has only one class of
shares, which are not currently being offered):
- The GLOBAL EQUITY ALLOCATION FUND seeks long-term capital appreciation by
investing in common stocks of U.S. and non-U.S. issuers in accordance with
country weightings determined by the Adviser and with stock selection within
each country designed to replicate a broad market index.
- The GLOBAL FIXED INCOME FUND seeks to produce an attractive real rate of
return while preserving capital by investing in fixed income securities of
issuers throughout the world, including U.S. issuers.
- The ASIAN GROWTH FUND seeks long-term capital appreciation by investing
primarily in the common stocks of Asian issuers, excluding Japan.
- The EMERGING MARKETS FUND seeks long-term capital appreciation by investing
primarily in common stocks of emerging country issuers.
- The LATIN AMERICAN FUND seeks long-term capital appreciation by investing
primarily in equity securities of Latin American issuers and investing in debt
securities issued or guaranteed by Latin American governments or governmental
entities.
- The EUROPEAN EQUITY FUND seeks long-term capital appreciation by investing
primarily in the common stocks of European issuers.
- The AMERICAN VALUE FUND seeks high long-term total return by investing in
undervalued common stocks of small- to medium-sized corporations.
- The WORLDWIDE HIGH INCOME FUND seeks high current income consistent with
relative stability of principal and, secondarily, capital appreciation, by
investing primarily in a portfolio of high yielding fixed income securities of
issuers throughout the world.
- The GROWTH AND INCOME FUND seeks capital appreciation and current income by
investing primarily in equity and equity-linked securities.
- The MONEY MARKET FUND seeks to maximize current income and preserve capital
while maintaining high levels of liquidity through investing in high quality
money market instruments with remaining maturities of 397 days or less.
INVESTMENT MANAGEMENT
6
<PAGE>
Morgan Stanley Asset Management Inc. (the "Adviser" and the "Administrator"),
a wholly-owned subsidiary of Morgan Stanley Group Inc., which, together with its
affiliated asset management companies, had approximately $___ billion in assets
under management as an investment manager or as a fiduciary adviser at
September ___, 1995 acts as investment adviser to the Fund and each of its
Investment Funds. See "Management of the Fund -- Investment Adviser" and "--
Administrator."
HOW TO INVEST
Class A shares of the Aggressive Equity Fund are offered at net asset value
plus an initial sales charge of up to 4.75% in graduated percentages based on
the investor's aggregate investments in the Aggressive Equity Fund. Class B and
Class C shares of the Aggressive Equity Fund are offered at net asset value.
Class B shares are subject to a contingent deferred sales charge ("CDSC") for
redemptions within six years and are subject to higher annual
distribution-related expenses than the Class A shares. Class C shares are
subject to a CDSC for redemptions within one year and are subject to higher
annual distribution-related expenses than the Class A shares. Share purchases
may be made through Morgan Stanley, through Participating Dealers or by sending
payments directly to the Transfer Agent on behalf of the Fund. The minimum
initial investment is $1,000 for the Aggressive Equity Fund, except that the
minimum initial investment amount for individual retirement accounts ("IRAs") is
$250. The minimum for subsequent investments is $100, except that the minimum
for subsequent investments for IRAs is $50, and there is no minimum for
automatic reinvestment of dividends and distributions. See "Purchase of
Shares."
HOW TO REDEEM
Shares of the Aggressive Equity Fund may be redeemed at any time at the net
asset value per share of the Aggressive Equity Fund next determined after
receipt of the redemption request. The redemption price may be more or less than
the purchase price. A Class A shareholder of the Aggressive Equity Fund who did
not pay an initial sales charge due to the size of the purchase and redeems
shares within one year of purchase will be subject to a CDSC of 1.00% on the
lesser of the current market value of the shares redeemed or the total cost of
such shares. Certain Class B shares that are redeemed within six years of
purchase are subject to a maximum CDSC of 5.00% which decreases in steps to 0%
after six years. Certain Class C shares that are redeemed within one year of
purchase are subject to a CDSC of 1.00%. The CDSC in each case is applicable to
the lesser of the current market value of the shares redeemed or the total cost
of such shares. In determining whether either of such CDSCs is payable, and, if
so, the amount of the charge, it is assumed that shares not subject to such
charge are the first redeemed followed by other shares held for the longest
period of time. If a shareholder reduces his/her total investment in shares of
the Aggressive Equity Fund to less than $1,000, the entire investment may be
subject to involuntary redemption. See "Redemption of Shares."
RISK FACTORS
The investment policies of the Aggressive Equity Fund entail certain risks
and considerations of which an investor should be aware. The Aggressive
Equity Fund may invest in small- to medium-sized companies and in securities
of foreign issuers, which are subject to certain risks not typically
associated with domestic securities. See "Investment Objective and Policies"
and "Additional Investment Information." In addition, the Aggressive Equity
Fund may invest in repurchase agreements, lend its fund securities and may
purchase securities on a when-issued basis. The Aggressive Equity Fund may
invest in covered call options and may also invest in stock options, stock
futures contracts and options on stock futures contracts, and may invest in
forward foreign currency exchange contracts to hedge currency risk associated
with investment in non-U.S. Dollar-denominated securities. The Aggressive
Equity Fund may invest in convertible debentures and specialty equity-linked
securities, such as PERCS, ELKS or LYONs, of U.S., and to a limited extent,
foreign issuers, which may involve risks in addition to those associated with
equity securities. The Aggressive Equity Fund is a non-diversified fund
under the Investment Company Act of 1940, as amended (the "1940 Act") and
therefore may invest a greater proportion of its assets in the securities of
a smaller number of issuers and may, as a result, be subject to greater risk
with respect to its portfolio securities. See "Investment Limitations" and
"Additional Investment Information." Each of these investment strategies
involves specific risks which are described
7
<PAGE>
under "Investment Objective and Policies" and "Additional Investment
Information" herein and under "Investment Objective and Policies" in the
Statement of Additional Information.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Aggressive Equity Fund is described below,
together with the policies the Aggressive Equity Fund employs in its efforts to
achieve this objective. The Aggressive Equity Fund's investment objective is a
fundamental policy which may not be changed by the Aggressive Equity Fund
without the approval of a majority of the Aggressive Equity Fund's outstanding
voting securities. There is no assurance that the Aggressive Equity Fund will
attain its objective. The investment policies described below are not
fundamental policies and may be changed without shareholder approval.
The Aggressive Equity Fund's investment objective is to provide capital
appreciation by investing primarily in a non-diversified portfolio of
corporate equity and equity-linked securities. With respect to the Aggressive
Equity Fund, equity and equity-linked securities include common and preferred
stock, convertible securities, rights and warrants to purchase common stocks,
options, futures, and specialty securities, such as ELKS, LYONs and PERCS of
U.S., and to a limited extent, as described below, foreign issuers. As a
non-diversified portfolio, the Aggressive Equity Fund can be more heavily
weighted in fewer stocks than a diversified portfolio. See "Additional
Investment Information." Under normal circumstances, the Fund will invest at
least 65% of the value of its total assets in equity and equity-linked
securities.
The Adviser employs a flexible and eclectic investment process in pursuit of
the Aggressive Equity Fund's investment objective. In selecting securities for
the Aggressive Equity Fund, the Adviser concentrates on a universe of rapidly
growing, high quality companies and lower, but accelerating, earnings growth
situations. The Adviser's universe of potential investments generally comprises
companies with market capitalizations of $500 million or more but smaller market
capitalization securities may be purchased from time to time. The Aggressive
Equity Fund is not restricted to investments in specific market sectors. The
Adviser uses its research capabilities, analytical resources and judgment to
assess economic, industry and market trends, as well as individual company
developments, to select promising investments for the Aggressive Equity Fund.
The Adviser concentrates on companies with strong, communicative managements and
clearly defined strategies for growth. In addition, the Adviser rigorously
assesses company developments, including changes in strategic direction,
management focus and current and likely future earnings results. Valuation is
important to the Adviser and is viewed in the context of prospects for
sustainable earnings growth and the potential for positive earnings surprises
vis-a-vis consensus expectations. The Aggressive Equity Fund is free to invest
in any equity or equity-linked security that, in the Adviser's judgment,
provides above average potential for capital appreciation.
The Aggressive Equity Fund may from time to time and consistent with
applicable legal requirements sell securities short that it owns (i.e., "against
the box") or borrows. See "Additional Investment Information."
In selecting investments for the Aggressive Equity Fund, the Adviser
emphasizes individual security selection. Overweighted sector positions and
issuer positions may result from the investment process. See "Investment
Limitations." The Aggressive Equity Fund has a long-term investment
perspective; however, the Adviser may take advantage of short-term opportunities
that are consistent with the Aggressive Equity Fund's objective by selling
recently purchased securities which have increased in value.
The Aggressive Equity Fund may invest in equity and equity-linked securities
of domestic and foreign corporations. However, the Aggressive Equity Fund does
not expect to invest more than 25% of its total assets at the time of purchase
in securities of foreign companies. The Aggressive Equity Fund may invest in
securities of foreign issuers directly or in the form of American Depositary
Receipts ("ADRs"). Investors should recognize that investing in foreign
companies involves certain special considerations which are not typically
associated with investing in U.S. companies. See "Additional Investment
Information" herein and "Investment Objective and Policies -- Forward Foreign
Currency Exchange Contracts" in the Statement of Additional Information.
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Any remaining assets may be invested in securities or obligations, including
derivative securities, that are set forth in "Additional Investment Information"
below.
ADDITIONAL INVESTMENT INFORMATION
BORROWING AND OTHER FORMS OF LEVERAGE
The Aggressive Equity Fund is authorized to borrow money from banks and
other entities in an amount equal to up to 33 1/3% of its total assets
(including the amount borrowed), less all liabilities and indebtedness other
than the borrowing, and may use the proceeds of the borrowing for investment
purposes or to pay dividends. Borrowing creates leverage which is a
speculative characteristic. Although the Aggressive Equity Fund is authorized
to borrow, it will do so only when the Adviser believes that borrowing will
benefit the Aggressive Equity Fund after taking into account considerations
such as the costs of borrowing and the likely investment returns on
securities purchased with borrowed monies. Borrowing by the Aggressive Equity
Fund will create the opportunity for increased net income but, at the same
time, will involve special risk considerations. Leveraging resulting from
borrowing will magnify declines as well as increases in the Aggressive Equity
Fund's net asset value per share and net yield.
The Aggressive Equity Fund expects that all of its borrowing will be made
on a secured basis. The Aggressive Equity Fund's Custodian 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, the Aggressive Equity Fund may be
required to pledge additional collateral to the lender in the form of cash or
securities to avoid liquidation of those assets.
The Aggressive Equity Fund may also enter into reverse repurchase
agreements. See "Additional Investment Information -- Reverse Repurchase
Agreements" below.
CONVERTIBLE SECURITIES, WARRANTS AND EQUITY-LINKED SECURITIES
The Aggressive Equity Fund may invest in convertible securities, preferred
stock, warrants or other securities exchangeable under certain circumstances
for shares of common stock. Convertible securities are any debt securities
or preferred stock which may be converted into common stock or which carry
the right to purchase common stock. Convertible securities entitle the holder
to exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of
time and to receive interest or dividends until the holder elects to exercise
the conversion privilege. Warrants are instruments giving holders the right,
but not the obligation, to buy shares of a company at a given price during a
specified period.
The Aggressive Equity Fund may invest in PERCS, ELKS or LYONs, which are
equity-linked securities that are convertible into or based upon the value of
equity securities upon certain terms and conditions. The amount received by an
investor at maturity of such securities is not fixed but is based on the price
of the underlying common stock. It is impossible to predict whether the price
of the underlying common stock will rise or fall. Trading prices of the
underlying common stock will be influenced by the issuer's operational results,
by complex, interrelated political, economic, financial or other factors
affecting the capital markets, the stock exchanges on which the underlying
common stock is traded and the market segment of which the issuer is a part. In
addition, it is not possible to predict how equity-linked securities will trade
in the secondary market, which is fairly developed and liquid. The market for
such securities may be shallow, however, and high volume trades may be possible
only with discounting. In addition to the foregoing risks, the return on such
securities 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
equity-linked securities may, and often does, exceed the creditworthiness of the
issuer of the underlying securities. The advantage of using equity-linked
securities 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
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underlying equity securities. Another advantage of using equity-linked
securities is that they may be used for hedging to reduce the risk of investing
in the generally more volatile underlying equity securities.
The following are three examples of equity-linked securities. The Aggressive
Equity Fund may invest in the securities described below or other similar
equity-linked securities.
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, the Aggressive Equity Fund may be compensated with a
substantially higher dividend yield than that on the underlying common stock.
Investors, such as the Aggressive Equity Fund, that seek current income, find
PERCS attractive because a PERCS provides a higher 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, the Aggressive Equity Fund may be compensated with the higher
yield, contingent on how well the underlying common stock does. Investors,
such as the Aggressive Equity Fund, 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.
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 Aggressive Equity Fund 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. The Aggressive
Equity Fund 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, like the Aggressive Equity Fund, when it appears
that they will increase in value due to the rise in value of the underlying
common stock.
DEPOSITARY RECEIPTS
The Aggressive Equity Fund may on occasion invest in American Depositary
Receipts ("ADRs"). ADRs are securities, typically issued by a U.S. financial
institution (a "depository"), that evidence ownership interests in a security or
a pool of securities issued by a foreign issuer (the "underlying issuer") and
deposited with the depository. ADRs include American Depositary Shares and New
York Shares and may be "sponsored" or "unsponsored." Sponsored ADRs are
established jointly by a depositary and the underlying issuer, whereas
unsponsored ADRs may be
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established by a depositary without participation by the underlying issuer.
GDRs, EDRs and other types of Depositary Receipts are typically issued by
foreign depositaries, although they may also be issued by U.S. depositaries, and
evidence ownership interests in a security or pool of securities issued by
either a foreign or a U.S. corporation.
Holders of unsponsored Depositary Receipts generally bear all the costs
associated with establishing the unsponsored Depositary Receipt. The
depository of an unsponsored Depositary Receipt is under no obligation to
distribute shareholder communications received from the underlying issuer or
to pass through to the holders of the unsponsored Depositary Receipt voting
rights with respect to the deposited securities or pool of securities.
Depositary Receipts are not necessarily denominated in the same currency as
the underlying securities to which they may be connected. 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. The Aggressive Equity Fund
may invest in sponsored and unsponsored Depositary Receipts. For purposes of
the Aggressive Equity Fund's investment policies, the Aggressive Equity
Fund's investments in Depositary Receipts will be deemed to be investments in
the underlying securities.
DERIVATIVES
The Aggressive Equity Fund may invest in derivatives, which are financial
products for instruments that derive their value from the value of an underlying
asset, reference rate or index. The following may be considered derivatives:
forward foreign currency exchange contracts, options (e.g., puts and calls),
futures contracts, options on futures contracts, convertible securities,
warrants, equity-linked securities, structured securities, when-issued and
delayed delivery securities and depositary receipts. See elsewhere in this
"Additional Investment Information" section for descriptions of these various
instruments, and see "Investment Objective and Policies" for more information
regarding any investment policies or limitations applicable to their use.
FOREIGN CURRENCY HEDGING TRANSACTIONS
The Aggressive Equity Fund may enter into forward foreign currency exchange
contracts ("forward contracts"). Forward contracts provide for the purchase
or sale of an amount of a specified foreign currency at a future date.
Purposes for which such contracts may be used include protecting against a
decline in a foreign currency against the U.S. Dollar between the trade date
and settlement date when the Aggressive Equity Fund purchases or sells
securities, locking in the U.S. Dollar value of dividends declared on
securities held by the Aggressive Equity Fund and generally protecting the
U.S. Dollar value of securities held by the Aggressive Equity Fund against
exchange rate fluctuations. Such contracts may also be used as a protective
measure against the effects of fluctuating rates of currency exchange and
exchange control regulations. While such forward contracts may limit losses
to the Aggressive Equity Fund as a result of exchange rate fluctuations, they
will also limit any exchange rate gains that might otherwise have been
realized. Such forward contracts are derivative securities, in which the
Aggressive Equity Fund may invest for hedging purposes.
The Aggressive Equity Fund may also enter into foreign currency futures
contracts. A foreign currency futures contract is a standardized contract for
the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are traded on regulated exchanges.
Parties to a futures contract must make initial "margin" deposits to secure
performance of the contract, which generally range from 2% to 5% of the
contract price. There also are requirements to make "variation" margin
deposits as the value of the futures contract fluctuates. The Aggressive
Equity Fund may not enter into foreign currency futures contracts if the
aggregate amount of initial margin deposits on the Aggressive Equity Fund's
futures positions, including stock index futures contracts (which are
discussed below), would exceed 5% of the value of the Aggresive Equity Fund's
total assets. The Aggressive Equity Fund also will be required to segregate
assets to cover its futures contracts obligations.
At the maturity of a forward or futures contract, the Aggressive Equity Fund
may either accept or make delivery of the currency specified in the contract or,
prior to maturity, enter into a closing purchase transaction involving the
purchase or sale of an offsetting contract. Closing purchase transactions with
respect to forward contracts are usually
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effected with the currency trader who is a party to the original forward
contract. Closing purchase transactions with respect to futures contracts are
effected on an exchange. The Aggressive Equity Fund will only enter into such
a forward or futures contract if it is expected that there will be a liquid
market in which to close out such contract. There can, however, be no
assurance that such a liquid market will exist in which to close a forward or
futures contract, in which case the Aggressive Equity Fund may suffer a loss.
The Aggressive Equity Fund may attempt to accomplish objectives similar to
those described above with respect to forward and futures contracts for
currency by means of purchasing put or call options on foreign currencies on
exchanges. A put option gives the Aggressive Equity Fund the right to sell a
currency at the exercise price until the expiration of the option. A call
option gives the Aggressive Equity Fund the right to purchase a currency at
the exercise price until the expiration of the option.
The Aggressive Equity Fund's Custodian will place cash, U.S. government
securities, or liquid high-grade debt securities into a segregated account of
the Aggressive Equity Fund in an amount equal to the value of the Aggressive
Equity Fund's total assets committed to the consummation of forward foreign
currency exchange contracts. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will be at
least equal to the amount of the Aggressive Equity Fund's commitments with
respect to such contracts. See "Investment Objective and Policies -- Forward
Foreign Currency Exchange Contracts" in the Statement of Additional
Information.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
In order to remain fully invested, and to reduce transaction costs, the
Aggressive Equity Fund may utilize appropriate securities index futures
contracts and options on securities index futures contracts to a limited
extent. Because transaction costs associated with futures and options may be
lower than the costs of investing in securities directly, it is expected that
the use of index futures and options to facilitate cash flows may reduce the
Aggressive Equity Fund's overall transaction costs. The Aggressive Equity Fund
may sell indexed financial futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of
securities in its portfolio that might otherwise result. When the Aggressive
Equity Fund is not fully invested and the Adviser anticipates a significant
market advance, it may purchase stock index futures in order to gain rapid
market exposure that may in part or entirely offset increases in the cost of
securities that it intends to purchase. In a substantial majority of these
transactions, the Aggressive Equity Fund will purchase such securities upon
termination of the futures position but, under unusual market conditions, a
futures position may be terminated without the corresponding purchase of
securities. The Aggressive Equity Fund will engage in futures and options
transactions only for hedging purposes.
The Aggressive Equity Fund will engage only in transactions in securities
index futures contracts, interest rate futures contracts and options thereon
which are traded on a recognized securities or futures exchange. There currently
are limited securities index futures, interest rate futures and options on such
futures markets in many countries, particularly emerging countries such as Latin
American countries, and the nature of the strategies adopted by the Adviser, and
the extent to which those strategies are used, will depend on the development of
such markets.
The Aggressive Equity Fund may enter into futures contracts and options
thereon provided that not more than 5% of its total assets at the time of
entering the transaction is required as deposit to secure obligations under
such contracts, and provided further that not more than 20% of the Aggressive
Equity Fund's total assets in the aggregate is invested in futures contracts
and options transactions.
The primary risks associated with the use of futures and options are (i)
imperfect correlation between the change in market value of the stocks held
by the Aggressive Equity Fund and the prices of futures and options relating
to the stocks purchased or sold by the Aggressive Equity Fund, and (ii)
possible lack of a liquid secondary market for a futures contract and the
resulting inability to close a futures position which could have an adverse
impact on the Aggressive Equity ability to hedge. The risk of loss in trading
on futures contracts in some strategies can be substantial, due both to the
low margin deposits required and the extremely high degree of leverage
involved in futures pricing. Gains and losses
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on futures and options depend on the Adviser's ability to predict correctly
the direction of stock prices, interest rates, and other economic factors. In
the opinion of the [Adviser], the risk that the Aggressive Equity Fund will
be unable to close out a futures position or options contract will be
minimized by only entering into futures contracts or options transactions for
which there appears to be a liquid secondary market. For more detailed
information about futures transactions see "Investment Objective and
Policies" in the Statement of Additional Information.
INVESTMENT COMPANIES
Some emerging market countries have laws and regulations that currently
preclude direct foreign investment in the securities of their companies.
However, indirect foreign investment in the securities of companies listed
and traded on the stock exchanges in these countries is permitted by certain
emerging market countries through investment companies which have been
specifically authorized. The Aggressive Equity Fund may invest in these
investment companies, subject to the provisions of the 1940 Act and other
applicable laws. If the Aggressive Equity Fund invests in such investment
companies, the Agressive Equity Fund's shareholders will bear not only their
proportionate share of the expenses of the Aggressive Equity Fund (including
operating expenses and the fees of the Adviser), but also will indirectly
bear similar expenses of the underlying investment companies.
Certain of the investment companies referred to in the preceding paragraph
are advised by the Adviser. The Aggressive Equity Fund may, to the extent
permitted under the 1940 Act and other applicable law, invest in these
investment companies. If the Aggressive Equity Fund does elect to make an
investment in such an investment company, it will only purchase the securities
of such investment company in the secondary market.
LOANS OF PORTFOLIO SECURITIES
The Aggressive Equity Fund may lend its securities to brokers, dealers,
domestic and foreign banks or other financial institutions for the purpose of
increasing its net investment income. These loans must be secured
continuously by cash or equivalent collateral or by a letter of credit at
least equal to the market value of the securities loaned plus accrued
interest. The Aggressive Equity Fund will not enter into securities loan
transactions exceeding in the aggregate 33 1/3% of the market value of the
Aggressive Equity Fund's total assets. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in collateral
should the borrower of the portfolio securities fail financially. For more
detailed information about securities lending, see "Investment Objective and
Policies" in the Statement of Additional Information.
LOAN PARTICIPATIONS AND ASSIGNMENTS
The Aggressive Equity Fund may invest in fixed and floating rate loans
("Loans") arranged through private negotiations between an issuer of
sovereign or corporate debt obligations and one or more financial
institutions ("Lenders"). The Aggressive Equity Fund's investments in Loans
are expected in most instances to be in the form of participation in Loans
("Participation") and assignments of all or a portion of Loans
("Assignments") from third parties. In the case of a Participation, the
Aggressive Equity Fund 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 the insolvency of the Lender selling a
Participation, the Aggressive Equity Fund may be treated as a general
creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Aggressive Equity Fund will acquire a
Participation only if the Lender interpositioned between the Aggressive
Equity Fund and the borrower is determined by the Adviser to be creditworthy.
When the Aggressive Equity Fund purchases Assignments from Lenders it will
acquire direct rights against the borrower on the Loan. Because Assignments
are arranged through private negotiations between potential assignees and
potential assignors, however, the rights and obligations acquired by the
Aggressive Equity Fund 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, the Aggressive Equity Fund anticipates
that such securities could be sold only to a limited number of institutional
investors. The lack of a liquid secondary market may have an adverse impact
on the value of such securities and the Aggressive Equity Fund's ability to
dispose of particular Assignments or Participation when necessary to meet the
Aggressive Equity Fund's
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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 Participation also may make it more
difficult for the Aggressive Equity Fund to assign a value to these
securities for purposes of valuing the Aggressive Equity Fund's portfolio and
calculating its net asset value.
MONEY MARKET INSTRUMENTS
The Aggressive Equity Fund is permitted to invest in money market
instruments, although the Aggressive Equity Fund intends to stay invested in
securities satisfying its primary investment objective to the extent
practical. The Aggressive Equity Fund may make money market investments
pending other investment or settlement for liquidity or in adverse market
conditions. The money market investments permitted for the Aggressive Equity
Fund include obligations of the U.S. Government and its agencies and
instrumentalities, obligations of foreign sovereignties, other debt
securities; commercial paper including bank obligations; certificates of
deposit (including Eurodollar certificates of deposit); and repurchase
agreements. For more detailed information about these money market
investments, see "Description of Securities and Ratings" in the Statement of
Additional Information.
NON-DIVERSIFICATION
The Aggressive Equity Fund is a non-diversified portfolio, which means that
it is not limited by the 1940 Act in the proportion of its assets that may be
invested in the obligations of a single issuer. Thus, the Aggressive Equity
Fund may invest a greater proportion of its assets in the securities of a
smaller number of issuers and, as a result, will be subject to greater risk
with respect to its portfolio securities. The Aggressive Equity Fund,
however, intends to comply with the diversification requirements imposed by
the Internal Revenue Code for qualification as a regulated investment
company. See "Taxes" and "Investment Restrictions."
NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED SECURITIES
The Aggressive Equity Fund may invest in securities that are neither listed
on a stock exchange nor traded over the counter. Such unlisted equity
securities may involve a higher degree of business and financial risk that
can result in substantial losses. As a result of the absence of a public
trading market for these securities, they may be less liquid than publicly
traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized from these sales could be less
than those originally paid by the Aggressive Equity Fund or less than what
may be considered the fair value of such securities. Further, companies whose
securities are not publicly traded may not be subject to the disclosure and
other investor protection requirements which might be applicable if their
securities were publicly traded. If such securities are required to be
registered under the securities laws of one or more jurisdictions before
being resold, the Aggressive Equity Fund may be required to bear the expenses
of registration. As a general matter, the Aggressive Equity Fund may not
invest more than 15% of its net assets in illiquid securities, including
securities for which there is no readily available secondary market.
Securities that are not registered under the Securities Act of 1933, as
amended, but that can be offered and sold to qualified institutional buyers
under Rule 144A under that Act will not be included within the foregoing 15%
restriction if the securities are determined to be liquid. The Board of
Directors has adopted guidelines and delegated to the Adviser, subject to the
supervision of the Board of Directors, the daily function of determining and
monitoring the liquidity of Rule 144A securities. Rule 144A securities may
become illiquid if qualified institutional buyers are not interested in
acquiring the securities.
OPTIONS TRANSACTIONS
The Aggressive Equity Fund may seek to increase its return or may hedge all
or a portion of its portfolio investments through options with respect to
securities in which it may invest. The Aggressive Equity Fund will engage
only in transactions in options which are traded on a recognized securities
or futures exchange. There currently are limited options markets in many
countries, particularly emerging countries such as Latin American countries,
and the nature of the strategies adopted by the Adviser and the extent to
which those strategies are used will depend on the development of such option
markets.
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The Aggressive Equity Fund may write (i.e., sell) covered call options
which give the purchaser the right to buy the underlying security covered by
the option from the Aggressive Equity Fund at the stated exercise price. A
"covered" call option means that so long as the Aggressive Equity Fund is
obligated as the writer of the option, it will own (i) the underlying
securities subject to the option, or (ii) securities convertible or
exchangeable without the payment of any consideration into the securities
subject to the option. As a matter of operating policy, the value of the
underlying securities on which options will be written at any one time will
not exceed 5% of the total assets of the Aggressive Equity Fund. In addition,
as a matter of operating policy, the Aggressive Equity Fund will neither
purchase or write put options on securities nor purchase call options on
securities (except in connection with closing purchase transactions).
The Aggressive Equity Fund will receive a premium from writing call
options, which increases the Aggressive Equity Fund's return on the
underlying security in the event the option expires unexercised or is closed
out at a profit. By writing a call, the Aggressive Equity Fund will limit its
opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Aggressive
Equity Fund's obligation as writer of the option continues. Thus, in some
periods the Aggressive Equity Fund will receive less total return and in
other periods greater total return from writing covered call options than it
would have received from its underlying securities had it not written call
options.
The Aggressive Equity Fund may also write (i.e., sell) covered put options.
By selling a covered put option, the Aggressive Equity Fund incurs an
obligation to buy the security underlying the option from the purchaser of
the put at the option's exercise price at any time during the option period,
at the purchaser's election (certain options written by the Aggressive Equity
Fund will be exercisable by the purchaser only on a specific date).
Generally, a put option is "covered" if the Aggressive Equity Fund maintains
cash, U.S. Government securities or other high grade debt obligations equal
to the exercise price of the option or if the Aggressive Equity Fund holds a
put option on the same underlying security with a similar or higher exercise
price. The Aggressive Equity Fund may sell put options to receive the
premiums paid by purchasers and to close out a long put option position. In
addition, when the Adviser wishes to purchase a security at a price lower
than its current market price, the Aggressive Equity Fund may write a covered
put at an exercise price reflecting the lower purchase price sought.
The Aggressive Equity Fund may also purchase put or call options on
individual securities or baskets of securities. When the Aggressive Equity
Fund purchases a call option it acquires the right to buy a designated
security at a designated price (the "exercise price"), and when the
Aggressive Equity Fund purchases a put option it acquires the right to sell a
designated security at the exercise price, in each case on or before a
specified date (the "termination date"), usually not more than nine months
from the date the option is issued. The Aggressive Equity Fund may purchase
call options to close out a covered call position or to protect against an
increase in the price of a security it anticipates purchasing. The Aggressive
Equity Fund may purchase put options on securities which it holds in its
portfolio to protect itself against a decline in the value of the security.
If the value of the underlying security were to fall below the exercise price
of the put purchased in an amount greater than the premium paid for the
option, the Aggressive Equity Fund would incur no additional loss. The
Aggressive Equity Fund may also purchase put options to close out written put
positions in a manner similar to call option closing purchase transactions.
There are no other limits on the Aggressive Equity Fund's ability to purchase
call and put options.
The primary risks associated with the use of options are (i) imperfect
correlation between the change in market value of the securities held by the
Aggressive Equity Fund and the prices of options relating to the securities
purchased or sold by the Aggressive Equity Fund; and (ii) possible lack of a
liquid secondary market for an option. In the opinion of the Adviser, the
risk that the Aggressive Equity Fund will be unable to close out an options
contract will be minimized by only entering into options transactions for
which there appears to be a liquid secondary market.
REPURCHASE AGREEMENTS
The Aggressive Equity Fund may enter into repurchase agreements with
brokers, dealers or banks that meet the credit guidelines of the Fund's Board
of Directors. In a repurchase agreement, the Aggressive Equity Fund buys a
security from a seller that has agreed to repurchase it at a mutually agreed
upon date and price, reflecting the interest rate
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effective for the term of the agreement. The term of these agreements is
usually from overnight to one week, and never exceeds one year. A repurchase
agreement may be viewed as a fully collateralized loan of money by the
Aggressive Equity Fund to the seller. The Aggressive Equity Fund always
receives securities as collateral with a market value at least equal to the
purchase price, including accrued interest, and this value is maintained
during the term of the agreement. If the seller defaults and the collateral
value declines, the Aggressive Equity Fund might incur a loss. If bankruptcy
proceedings are commenced with respect to the seller, the Aggressive Equity
Fund's realization upon the collateral may be delayed or limited. The
aggregate of certain repurchase agreements and certain other investments is
limited as set forth under "Investment Limitations."
REVERSE REPURCHASE AGREEMENTS
The Aggressive Equity Fund may enter into reverse repurchase agreements
with brokers, dealers, domestic and foreign banks or other financial
institutions that have been determined by the Adviser to be creditworthy. In
a reverse repurchase agreement, the Aggressive Equity Fund sells a security
and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Aggressive Equity Fund. The
Aggressive Equity Fund's investment of the proceeds of a reverse repurchase
agreement is the speculative factor known as leverage. The Aggressive Equity
Fund will enter into a reverse repurchase agreement only if the interest
income from investment of the proceeds is expected to be greater than the
interest expense of the transaction, and the proceeds are invested for a
period no longer than the term of the agreement. The Aggressive Equity Fund
will maintain with the Custodian a separate account with a segregated
portfolio of cash, U.S. Government securities or other liquid high grade debt
obligations in an amount at least equal to its purchase obligations under
these agreements (including accrued interest). If interest rates rise during
a reverse repurchase agreement, it may adversely affect the Aggressive Equity
Fund's ability to maintain a stable net asset value. In the event that the
buyer of securities under a reverse repurchase agreement files for bankruptcy
or becomes insolvent, the buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the Aggressive Equity
Fund's repurchase obligation, and the Aggressive Equity Fund's use of
proceeds of the agreement may effectively be restricted pending such
decision. The aggregate of these agreements is limited as set forth under
"Investment Limitations." Reverse repurchase agreements are considered to be
borrowings and are subject to the percentage limitations on borrowings set
forth in "Investment Limitations."
SHORT SALES
The Aggressive Equity Fund may from time to time sell securities short
without limitation, although initially it does not intend to sell securities
short. A short sale is a transaction in which the Aggressive Equity Fund
would sell securities it does not own (but has borrowed) in anticipation of a
decline in the market price of the securities. When the Aggressive Equity
Fund makes a short sale, the proceeds it receives from the sale will be held
on behalf of a broker until the Aggressive Equity Fund replaces the borrowed
securities. To deliver the securities to the buyer, the Aggressive Equity
Fund will need to arrange through a broker to borrow the securities and, in
so doing, the Aggressive Equity Fund will become obligated to replace the
securities borrowed at their market price at the time of replacement,
whatever that price may be. The Aggressive Equity Fund 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 Aggressive Equity Fund's obligation to replace the securities borrowed
in connection with a short sale will be secured by collateral deposited with
the broker that consists of cash, U.S. Government securities or other liquid,
high grade debt obligations. In addition, the Aggressive Equity Fund will
place in a segregated account with its Custodian an amount of cash, U.S.
Government securities or other liquid, high grade debt obligations equal to
the difference, if any, between (1) the market value of the securities sold
at the time they were sold short and (2) any cash, U.S. Government securities
or other liquid, high grade debt obligations deposited as collateral with the
broker in connection with the short sale (not including the proceeds of the
short sale). Short sales by the Aggressive Equity Fund involve certain risks
and special considerations. Possible losses from short sales differ from
losses that could be incurred from a purchase of a security, because losses
from short sales may be unlimited, whereas losses from purchases can equal
only the total amount invested. The Aggressive Equity Fund will incur a loss
as a result of the short sale if the price of the
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security increases between the date of the short sale and the date on which
the Aggressive Equity Fund replaces the borrowed security. The Aggressive
Equity Fund will realize a gain if the security declines in price between
those dates in an amount greater than any premium paid in connection with the
short sale. This result is the opposite of what would result from a cash
purchase of a long position in a security. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any
premium, dividends or interest the Fund may be required to pay in connection
with a short sale.
STRUCTURED INVESTMENTS
The Aggressive Equity Fund may invest a portion of its assets in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments (such as commercial bank loans or Brady
Bonds) and the issuance by that entity of one or more classes of securities
("Structured Securities") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Securities to create securities
with different investment characteristics, such as varying maturities,
payment priorities and interest rate provisions, and the extent of the
payments made with respect to Structured Securities is dependent on the
extent of the cash flow on the underlying instruments. Because Structured
Securities of the type in which the Aggressive Equity Fund anticipates it
will invest typically involve no credit enhancement, their credit risk
generally will be equivalent to that of the underlying instruments. The
Aggressive Equity Fund is permitted to invest in a class of Structured
Securities that is either subordinated or unsubordinated to the right of
payment of another class. Subordinated Structured Securities typically have
higher yields and present greater risks than unsubordinated Structured
Securities. Structured Securities are typically sold in private placement
transactions, and there currently is no active trading market for Structured
Securities.
TEMPORARY INVESTMENTS
During periods in which the Adviser believes changes in economic, financial
or political conditions make it advisable, for temporary defensive purposes
the Aggressive Equity Fund may reduce its holdings in equity and other
securities and may invest in certain short-term (less than twelve months to
maturity) and medium-term (not greater than five years to maturity) debt
securities or may hold cash. The short-term and medium-term debt securities
in which the Aggressive Equity Fund may invest consist of (a) obligations of
the United States or emerging country governments, their respective agencies
or instrumentalities; (b) bank deposits and bank obligations (including
certificates of deposit, time deposits and bankers' acceptances) of United
States or emerging country banks denominated in any currency; (c) floating
rate securities and other instruments denominated in any currency issued by
international development agencies; (d) finance company and corporate
commercial paper and other short-term corporate debt obligations of United
States and emerging country corporations meeting the Aggressive Equity Fund's
credit quality standards; and (e) repurchase agreements with banks and
broker-dealers with respect to such securities. See "Additional Investment
Information -- Repurchase Agreements." For temporary defensive purposes, the
Aggressive Equity Fund intends to invest only in short-term and medium-term
debt securities that the Adviser believes to be of high quality, i.e.,
subject to relatively low risk of loss of interest or principal (there is
currently no rating system for debt securities in most emerging countries).
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Aggressive Equity Fund may purchase securities on a when-issued or
delayed delivery basis. In such transactions, instruments are bought with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous yield or price at the time of the
transaction. Delivery of and payment for these securities may take as long as
a month or more after the date of the purchase commitment, but will take
place no more than 120 days after the trade date. The Aggressive Equity Fund
will maintain with the Custodian a separate account with a segregated
portfolio of cash, U.S. Government securities or other liquid high grade debt
obligations in an amount at least equal to these commitments. The payment
obligation and the interest rates that will be received are each fixed at the
time the Aggressive Equity Fund enters into the commitment, and no interest
accrues to the Aggressive Equity Fund
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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.
RISK FACTORS RELATING TO FOREIGN INVESTMENT
The Aggressive Equity Fund may invest in securities of foreign issuers.
Investment in securities of foreign issuers, especially in securities of
issuers in emerging countries, and in foreign branches of domestic banks
involves somewhat different investment risks from those affecting securities
of U.S. issuers. There may be limited publicly available information with
respect to foreign issuers, and foreign issuers are not generally subject to
uniform accounting, auditing, and financial and other reporting standards and
requirements comparable to those applicable to domestic companies. Therefore,
disclosure of certain material information may not be made and less
information may be available to investors investing in foreign countries than
in the United States. There may also be less government supervision and
regulation of foreign securities exchanges, brokers and listed companies than
in the United States. Many foreign securities markets have substantially less
volume than U.S. national securities exchanges, and securities of some
foreign issuers are less liquid and subject to greater price volatility than
securities of comparable domestic issuers. Brokerage commissions and other
transaction costs on foreign securities exchanges are generally higher than
in the United States. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes, which may decrease the net
return on foreign investments as compared to dividends and interest paid to
the Aggressive Equity Fund by domestic companies. See "Taxes." Additional
risks include future adverse political and economic developments, the
possibility that a foreign jurisdiction might impose or change withholding
taxes on income payable with respect to foreign securities, possible seizure,
nationalization or expropriation of the foreign issuer or foreign deposits,
and the possible adoption of foreign governmental restrictions such as
exchange controls. Emerging countries may have less stable political
environments than more developed countries. Also, it may be more difficult to
obtain a judgment in a court outside the United States.
Investments in securities of foreign issuers are frequently denominated in
foreign currencies, and the Aggressive Equity Fund may also temporarily hold
uninvested reserves in bank deposits in foreign currencies. Therefore, the
value of the Aggressive Equity Fund's assets measured in U.S. Dollars may be
affected favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. The Aggressive Equity Fund will also incur
certain costs in connection with conversions between various currencies.
RISK FACTORS RELATING TO INVESTING IN LOWER RATED AND UNRATED DEBT SECURITIES
The Aggressive Equity Fund may invest in lower rated or unrated debt
securities, commonly referred to as "junk bonds." In addition, the emerging
country debt securities in which the Aggressive Equity Fund may invest are
subject to risk and will not be required to meet a minimum rating standard
and may not be rated. Fixed income securities are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations
(credit risk) and may also be subject to price volatility due to such factors
as interest rate sensitivity, market perception of the creditworthiness of
the issuer and general market liquidity (market risk). Lower rated or unrated
securities are more likely to react to developments affecting market and
credit risk than are more highly rated securities, which react primarily to
movements in the general level of interest rates. The market values of
fixed-income securities tend to vary inversely with the level of interest
rates. Yields and market values of lower rated and unrated debt securities
will fluctuate over time, reflecting not only changing interest rates but the
market's perception of credit quality and the outlook for economic growth.
When economic conditions appear to be deteriorating, medium to lower rated
securities may decline in value due to heightened concern over credit
quality, regardless of prevailing interest rates. Fluctuations in the value
of the Aggressive Equity Fund's investments will be reflected in the
Aggressive Equity Fund's net asset value per share. The Adviser considers
both credit risk and market risk in making investment decisions for the
Aggressive Equity Fund. Investors should carefully consider the relative risks
of investing in lower rated and unrated debt securities and understand that
such securities are not generally meant for short-term investing.
The U.S. corporate lower rated and unrated debt securities market is
relatively new and its recent growth paralleled a long period of economic
expansion and an increase in merger, acquisition and leveraged buyout activity.
Adverse
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economic developments may disrupt the market for U.S. corporate lower rated and
unrated debt securities and for emerging country debt securities. Such
disruptions may severely affect the ability of issuers, especially highly
leveraged issuers, to service their debt obligations or to repay their
obligations upon maturity. In addition, the secondary market for lower rated and
unrated debt securities, which is concentrated in relatively few market makers,
may not be as liquid as the secondary market for more highly rated securities.
As a result, the Adviser could find it more difficult to sell these securities
or may be able to sell the securities only at prices lower than if such
securities were widely traded. In addition, there may be limited trading markets
for debt securities of issuers located in emerging countries. Prices realized
upon the sale of such lower rated or unrated securities, under these
circumstances, may be less than the prices used in calculating the Aggressive
Equity Fund's net asset value.
Prices for lower rated and unrated debt securities may be affected by
legislative and regulatory developments. These laws could adversely affect the
Aggressive Equity Fund's net asset value and investment practices, the secondary
market for lower rated and unrated debt securities, the financial condition of
issuers of such securities and the value of outstanding lower rated and unrated
debt securities. For example, U.S. federal legislation requiring the divestiture
by federally insured savings and loan associations of their investments in lower
rated and unrated debt securities and limiting the deductibility of interest by
certain corporate issuers of lower rated and unrated debt securities adversely
affected the market in recent years.
Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligations for redemption, the Aggressive
Equity Fund may have to replace the security with a lower yielding security,
resulting in a decreased return for investors. If the Aggressive Equity Fund
experiences unexpected net redemptions, it may be forced to sell its higher
rated securities, resulting in a decline in the overall credit quality of the
Aggressive Equity Fund's investment portfolio and increasing the exposure of the
Aggressive Equity Fund to the risks of lower rated and unrated debt securities.
INVESTMENT LIMITATIONS
The Aggressive Equity Fund is a non-diversified investment company under the
1940 Act, which means that it is not limited by the 1940 Act in the proportion
of its total assets that may be invested in the obligations of a single issuer.
Thus, the Aggressive Equity Fund may invest a greater proportion of its total
assets in the securities of a smaller number of issuers and, as a result, will
be subject to greater risk with respect to its portfolio securities. The
Aggressive Equity Fund, however, intends to comply with the diversification
requirements imposed by the Internal Revenue Code of 1986, as amended, for
qualification as a regulated investment company. See "Taxes."
The Aggressive Equity Fund also operates under certain investment
restrictions that are deemed fundamental policies and may be changed by the
Aggressive Equity Fund only with the approval of the holders of a majority of
the Aggressive Equity Fund's outstanding shares. In addition to other
restrictions listed in the Statement of Additional Information, the
Aggressive Equity Fund may not (i) enter into repurchase agreements with more
than seven days to maturity if, as a result, more than 15% of the market
value of the Aggressive Equity Fund's total assets would be invested in these
agreements and other investments for which market quotations are not readily
available or which are otherwise illiquid; (ii) borrow, or mortgage, pledge or
hypothecate its assets to secure such borrowings, in amounts exceeding 33
1/3% of its total assets (including the amount borrowed), less all
liabilities and indebtedness other than the borrowing, and the Aggressive
Equity Fund may enter into reverse repurchase agreements in accordance with
its investment objective and policies; (iii) invest in fixed time deposits
with a duration of over seven calendar days; (iv) invest in fixed time deposits
with a duration of from two business days to seven calendar days if more than
15% of the Aggressive Equity Fund's total assets would be invested in these
deposits; or (v) invest more than 25% of the Aggressive Equity Fund's total
assets in securities of companies in any one industry.
MANAGEMENT OF THE FUND
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INVESTMENT ADVISER. Morgan Stanley Asset Management Inc. (the "Adviser") is
the Investment Adviser and Administrator of the Fund and each of its
Investment Funds, including the Aggressive Equity Fund. The Adviser provides
investment advice and portfolio management services pursuant to an Investment
Advisory Agreement and, subject to the supervision of the Fund's Board of
Directors, makes each of the Investment Fund's investment decisions, arranges
for the execution of portfolio transactions and generally manages each of the
Investment Fund's investments. The advisory fee paid to the Adviser quarterly
by the Aggressive Equity Fund, as an annual percentage of average daily net
assets, is 0.90%. The investment advisory fee of the Aggressive Equity Fund,
which involves international investments, is higher than those of most
investment companies but comparable to those of investment companies with
similar objectives.
The Adviser, with principal offices at 1221 Avenue of the Americas, New
York, NY 10020, conducts a worldwide portfolio management business. It provides
a broad range of portfolio management services to customers in the United States
and abroad. At September 30, 1995, the Adviser, together with its affiliated
asset management companies managed investments totaling approximately
$____ billion, including approximately $____ billion under active management and
$____ billion as Named Fiduciary or Fiduciary Adviser. See "Management of the
Fund -- Investment Advisory and Administrative Agreements" in the Statement of
Additional Information.
Each class of the Aggressive Equity Fund has adopted separate Plans of
Distribution pursuant to Rule 12b-1 under the 1940 Act (each, a "Plan").
Under the applicable Plan, which is described in more detail under
"Distributor" below, the Distributor is entitled to receive from the
Aggressive Equity Fund, with respect to the Class A shares, payments of 0.25%
of such class's annual average net assets and, with respect to the Class B
and Class C shares, payments of 0.75% of each such class's annual average net
assets. Each Plan recognizes that, in addition to such payments, the Adviser
may use its advisory fees or other resources to pay expenses associated with
activities which might be construed to be financing the sale of the
Aggressive Equity Fund's shares. Each Plan provides that the Adviser may make
payments from these sources to third parties, such as consultants that
provide assistance in the distribution effort (in addition to selling shares
and providing shareholder services). As part of such distribution fees for
the Class A shares of the Aggressive Equity Fund, up to 0.25% of the net
assets of such class will be used to compensate the Distributor for
shareholder services provided. In addition to such distribution fees for the
Class B shares and Class C shares, the Rule 12b-1 plan of each class of the
Aggressive Equity Fund authorizes the payment of 0.25% of the net assets of
each such class to compensate the Distributor for shareholder services
provided.
PORTFOLIO MANAGER -- KURT A. FEUERMAN. Kurt Feuerman is a Managing
Director of the Adviser and has had primary management responsibility for the
Aggressive Equity Fund since its inception. Prior to joining the Adviser in July
1993, he spent over three years in Morgan Stanley's Research Department where he
was responsible for restaurant, gaming and emerging growth stocks. Before
joining Morgan Stanley, Mr. Feuerman was a Managing Director at Drexel Burnham
Lambert, where he had been an equity analyst since 1984. From 1982 to 1984,
Mr. Feuerman was at the Bank of New York, following the auto and auto parts
industries. Mr. Feuerman earned a B.A. degree from McGill University, an M.A.
from Syracuse University, and an M.B.A. from Columbia University.
ADMINISTRATOR. The Adviser also provides the Fund with administrative services
pursuant to a separate Administration Agreement. The services provided under the
Administration Agreement are subject to the supervision of the officers and
Board of Directors of the Fund and include day-to-day administration of matters
related to the corporate existence of the Fund, maintenance of its records,
preparation of reports, supervision of the Fund's arrangements with its
custodian and assistance in the preparation of the Fund's registration
statements under federal and state laws. The Administration Agreement also
provides that the Adviser through its agents will provide the Fund dividend
disbursing and transfer agent services. For its services under the
Administration Agreement, the Fund pays the Adviser a monthly fee which on an
annual basis equals 0.25% of the average daily net assets of each Investment
Fund.
In a merger completed on September 1, 1995, the Chase Manhattan Bank,
N.A. ("Chase" or the "Transfer Agent") succeeded to all of the rights and
obligations under the U.S. Trust Administration Agreement between the Adviser
and the United States Trust Company of New York ("U.S. Trust"), pursuant to
which U.S. Trust had agreed to
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provide certain administrative services to the Fund. Pursuant to a
delegation clause in the U.S. Trust Administration Agreement, U.S. Trust
delegated its administration responsibilities to Chase Global Funds Services
Company, formerly Mutual Funds Service Company, which after the merger with
Chase is a subsidiary of Chase and will continue to provide certain
administrative services to the Fund. The Adviser supervises and monitors such
administrative services provided by CGFSC. The services provided under the
Administration Agreement and the U.S. Trust Administration Agreement are also
subject to the supervision of the Board of Directors of the Fund. The Board of
Directors of the Fund has approved the provision of services described above
pursuant to the Administration Agreement and the U.S. Trust Administration
Agreement as being in the best interests of the Fund. CGFSC's business address
is 73 Tremont Street, Boston, Massachusetts 02108-3913. For additional
information on the Administration Agreement and the U.S. Trust Administration
Agreement, see "Management of the Fund" in the Statement of Additional
Information.
DIRECTORS AND OFFICERS. Pursuant to the Fund's Articles of Incorporation, the
Board of Directors decides upon matters of general policy and review the actions
of the Fund's Adviser, administrators and Distributor. The Officers of the Fund
conduct and supervise its daily business operations.
DISTRIBUTOR. Morgan Stanley serves as the Distributor of the shares of the
Fund. Under its Distribution Agreement with the Fund, Morgan Stanley sells
shares of the Fund upon the terms and at the current offering price described in
this Prospectus. Morgan Stanley is not obligated to sell any specific number of
shares of the Fund.
The Fund currently offers only the classes of shares offered by this
Prospectus. The Fund may in the future offer one or more classes of shares of
the Aggressive Equity Fund that may have different CDSCs or initial sales
charges or other distribution charges or a combination thereof than the classes
currently offered.
The Board of Directors of the Fund has approved and adopted the
Distribution Agreement for the Fund pursuant to Rule 12b-1 under the 1940 Act.
Under the Plan, the Distributor is entitled to receive from the Aggressive
Equity Fund a distribution fee, which is accrued daily and paid quarterly, of
0.25% for the Class A shares of the Aggressive Equity Fund and 0.75% of the
Class B shares and Class C shares of the Aggressive Equity Fund, on an
annualized basis of the average daily net assets of the Aggressive Equity Fund
or classes. The Distributor expects to reallocate most of its fee to investment
dealers, banks or financial services firms that provide distribution,
administrative or shareholder services ("Participating Dealer"). The actual
amount of such compensation is agreed upon by the Fund's Board of Directors and
by the Distributor. The Distributor may, in its discretion, voluntarily waive
from time to time all or any portion of its distribution fee and the Distributor
is free to make additional payments out of its own assets to promote the sale of
Fund shares. Class B shares and Class C shares are also subject to a service fee
at an annual rate of 0.25% on an annualized basis of the average daily net
assets of such class of shares of the Aggressive Equity Fund.
In addition to the distribution and shareholder servicing fees described
above, Morgan Stanley also receives a sales charge of up to 4.75% of the
sales price of Class A shares of the Aggressive Equity Fund. Morgan Stanley
may reallow up to the full applicable sales charge, as shown in the table in
"Purchase of Shares" below, to certain Participating Dealers during periods
and for transactions specified in "Purchase of Shares" and such reallowances
may be based upon attainment of minimum sales levels. During periods when 90%
or more of the sales charge is reallowed, certain Participating Dealers may
be deemed to be underwriters as that term is defined in the Securities Act of
1933, as amended. Morgan Stanley may receive a CDSC of up to 1.00% of the
sales price of the Class A shares and Class C shares of the Aggressive Equity
Fund, as described below under "Purchase of Shares." Morgan Stanley may also
receive a CDSC of up to 5.00% of the sales price of shares of the Class B
shares of the Aggressive Equity Fund, as described below under "Purchase of
Shares." In addition to the sales charges described above, Morgan Stanley
may from time to time and from its own resources pay or allow additional
discounts or promotional incentives, in the form of cash or other
compensation, to Participating Dealers. In some instances, such discounts or
other incentives may be offered only to certain Participating Dealers that
sell or are expected to sell during specified time periods certain minimum
amounts of shares of the Fund, or other funds underwritten by Morgan Stanley.
In some instances, these incentives may be offered only to certain
Participating Dealers that have sold or may sell significant amounts of
shares. In addition, Morgan Stanley pays ongoing trail commissions to
Participating Dealers. At the option of the
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Participating Dealer, such bonuses or other incentives may take the form of
payment for travel expenses, including lodging incurred in connection with trips
taken by persons associated with the Participating Dealer and members of their
families to places within or outside of the United States. The Distributor or
Participating Dealers and their investment representatives may receive different
levels of compensation depending on which class of shares they sell.
The Plans obligate the Aggressive Equity Fund to accrue and pay to the
Distributor the fee agreed to under its Distribution Agreement. The Plans do not
obligate the Aggressive Equity Fund to reimburse Morgan Stanley for the actual
expenses Morgan Stanley may incur in fulfilling its obligations under the Plan.
Thus, under each Plan, even if Morgan Stanley's actual expenses exceed the fee
payable to it thereunder at any given time, the Aggressive Equity Fund will not
be obligated to pay more than that fee. If Morgan Stanley's actual expenses are
less than the fee it receives, Morgan Stanley will retain the full amount of the
fee.
Each Plan of Distribution for a class of Fund shares, under the terms of
Rule 12b-1, will remain in effect only if approved at least annually by the
Fund's Board of Directors, including those directors who are not "interested
persons" of the Fund as that term is defined in the 1940 Act and who have no
direct or indirect financial interest in the operation of a Plan or in any
agreements related thereto ("12b-1 Directors"). Each Plan may be terminated at
any time by a vote of a majority of the 12b-1 Directors or by a vote of a
majority of the outstanding voting securities of the applicable class of the
Aggressive Equity Fund. The fee set forth above will be paid by the Aggressive
Equity Fund or class thereof to Morgan Stanley unless and until a Plan is
terminated or not renewed. The Fund intends to operate each Plan in accordance
with its terms and the NASD Rules concerning sales charges.
PAYMENTS TO FINANCIAL INSTITUTIONS. The Adviser or its affiliates may
compensate certain financial institutions for the continued investment of their
customers' assets in the Portfolios of the Fund pursuant to the advice of such
financial institutions. These payments will be made directly by the Adviser or
its affiliates from their assets, and will not be made from the assets of the
Fund or by the assessment of a sales charge on shares. Such financial
institutions may also perform certain shareholder or recordkeeping services that
would otherwise be performed by CGFSC. The Adviser may elect to enter into a
contract to pay the financial institutions for such services.
EXPENSES. The Aggressive Equity Fund is responsible for payment of certain
other fees and expenses (including professional fees, custodial fees and
printing and mailing costs) specified in the Administration and Distribution
Agreements.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Aggressive Equity Fund and directs the Adviser to use its
best efforts to obtain the best available price and most favorable execution
with respect to all transactions for the Aggressive Equity Fund. The Fund has
authorized the Adviser to pay higher commissions in recognition of brokerage
services which, in the opinion of the Adviser, are necessary for the achievement
of better execution, provided the Adviser believes this to be in the best
interest of the Fund.
Shares of the Aggressive Equity Fund are marketed through Participating
Dealers and the Fund may allocate brokerage or principal business on the basis
of sales of shares of the Aggressive Equity Fund which may be made through such
firms. The Adviser may place portfolio orders with qualified broker-dealers who
recommend the Aggressive Equity Fund or who act as agents in the purchase of
shares of the Aggressive Equity Fund for their clients.
In purchasing and selling securities for the Aggressive Equity Fund, it is
the Fund's policy to seek to obtain quality execution at the most favorable
prices, through responsible broker-dealers. In selecting broker-dealers to
execute the securities transactions for the Aggressive Equity Fund,
consideration will be given to such factors as the price of the security, the
rate of the commission, the size and difficulty of the order, the reliability,
integrity, financial condition, general execution and operational capabilities
of competing broker-dealers, and the brokerage and
22
<PAGE>
research services which they provide to the Fund. Some securities considered
for investment by the Aggressive Equity Fund may also be appropriate for other
clients served by the Adviser. If purchase or sale of securities consistent
with the investment policies of the Aggressive Equity Fund and one or more of
such other clients served by the Adviser is considered at or about the same
time, transactions in such securities will be allocated among the Aggressive
Equity Fund and other clients in a manner deemed fair and reasonable by the
Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Fund's Board
of Directors.
Subject to the overriding objective of obtaining the best possible
execution of orders, the Adviser may allocate a portion of the Fund's portfolio
brokerage transactions to Morgan Stanley or broker affiliates of Morgan Stanley.
In order for Morgan Stanley or its affiliates to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration received
by Morgan Stanley or such affiliates must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time. Furthermore, the
Board of Directors of the Fund, including a majority of the Directors who are
not "interested persons" of the Fund as defined in the 1940 Act, have adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to Morgan Stanley or such affiliates are consistent
with the foregoing standard.
Portfolio securities will not be purchased from, or through, or sold to or
through, the Adviser or Morgan Stanley or any "affiliated persons," as defined
in the 1940 Act, of Morgan Stanley when such entities are acting as principals,
except to the extent permitted by law.
Although the primary objective of the Aggressive Equity Fund is not to
invest for short-term trading, the Aggressive Equity Fund will seek to take
advantage of trading opportunities as they arise to the extent they are
consistent with the Aggressive Equity Fund's objective. Accordingly,
investment securities may be sold from time to time without regard to the
length of time they have been held. The Aggressive Equity Fund anticipates
that its annual portfolio turnover rate will exceed 100% under normal
circumstances. Market conditions could result in portfolio activity at a
greater or lesser rate than anticipated. High portfolio turnover involves
correspondingly greater transaction costs which will be borne directly by the
Aggressive Equity Fund. In addition, high portfolio turnover may result in
more capital gains which would be taxable to the shareholders of the
Aggressive Equity Fund.
PURCHASE OF SHARES
Shares of the Aggressive Equity Fund may be purchased through Participating
Dealers or directly from the Fund. Class A shares of the Aggressive Equity Fund
may be purchased at the net asset value per share plus the applicable sales
charge, if any, next determined after receipt of the purchase order by the Fund.
Class B shares and Class C shares of the Aggressive Equity Fund may be purchased
at the net asset value per share next determined after receipt of the purchase
order by the Fund. Participating Dealers are responsible for forwarding orders
they receive to the Fund by the applicable times described below on the same day
as their receipt of the orders to permit purchase of shares as described above
and the failure to do so will result in the investors being unable to obtain
that day's net asset value. See "Valuation of Shares."
The Class A, Class B and Class C alternatives permit an investor to choose
the method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the combination of sales charge, distribution fee
and CDSC on Class A shares is more favorable than the combination of
distribution/service fees and CDSC on Class B shares or Class C shares. In some
cases, investors planning to purchase $100,000 or more of Fund shares may pay
lower aggregate charges and expenses by purchasing Class A shares. (See "Fee
Table.")
OFFERING PRICE OF CLASS A SHARES
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<PAGE>
Class A shares of the Aggressive Equity Fund may be purchased at the net
asset value per share plus a sales charge (the "Offering Price") which is a
percentage of the Offering Price that decreases as the amount of the purchase
increases as shown below:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER RETENTION
CLASS A SHARES PERCENTAGE OF OFFERING PERCENTAGE OF NET AMOUNT AS PERCENTAGE OF
AMOUNT OF PURCHASE + PRICE INVESTED OFFERING PRICE**
-------------------- ----- -------- ----------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.99% 4.25%
$100,000 - $249,999 3.50% 3.63% 3.00%
$250,000 - $499,999 2.50% 2.56% 2.00%
$500,000 - $999,999 2.00% 2.04% 1.50%
$1,000,000 and over None* None** *++
_______
<FN>
* Purchases of $1 million or more may be subject to a redemption fee. (See
below.) Morgan Stanley may make payments to Participating Dealers in
amounts up to 1.00% of the Offering Price.
** The Distributor may, in its discretion, permit Participating Dealers to
retain the full amount of the sales charge in connection with certain
sales.
+ The amount of purchase includes net asset value of the purchase plus the
sales charge.
++ Commission is payable by Morgan Stanley as discussed below.
</TABLE>
Morgan Stanley may in its discretion compensate Participating Dealers in
connection with the sale of Class A shares of the Aggressive Equity Fund in an
aggregate amount of $1 million or more up to the following amounts: 1.00% of the
net asset value of shares sold on amounts up to $3 million, .50% on the next
$2 million and .25% on amounts over $5 million. For purposes of determining the
appropriate commission percentage to be applied to a particular sale under the
foregoing schedule, Morgan Stanley will consider the cumulative amount invested
by the purchaser in Class A shares of the Aggressive Equity Fund.
REDUCTION OR WAIVER OF SALES CHARGES. A shareholder who purchases additional
Class A shares of an Investment Fund may obtain reduced sales charges through a
right of accumulation of current purchases of Class A shares of an Investment
Fund with concurrent purchases of Class A shares of the other Investment Fund
and with existing Class A share investments in all Investment Funds. The
applicable sales charge will be determined based on the total of (a) the
shareholder's current purchases of Class A shares of Investment Funds plus
(b) an amount equal to the greater of the then current net asset value, or the
total purchase price of the investor's prior purchases of all Class A shares of
Investment Funds held by the shareholder. To obtain the reduced sales charge
through a right of accumulation, the shareholder must provide Morgan Stanley at
the time of purchase, either directly or through a Participating Dealer or
shareholder servicing agent, as applicable, with sufficient information to
verify that the shareholder has such a right. The Fund may amend or terminate
this right of accumulation at any time as to subsequent purchases.
For purposes of reduced sales charges based on amount of purchase, the term
"purchase" refers to purchases made at one time by any "purchaser," which
includes an individual; a group composed of an individual and his or her spouse
and children under the age of 21; a trustee or other fiduciary of a single trust
estate or single fiduciary account; an organization exempt from federal income
tax under Section 501(c)(3) or (13) of the Internal Revenue Code of 1986, as
amended (the "Code"); a pension, profit-sharing or other employee benefit plan,
whether or not qualified under Section 401 of the Code; or other organized group
of persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount. In
order to qualify for a lower sales charge on purchases of the Class A shares,
all orders from an organized group will have to be placed through a single
Participating Dealer and identified as originating from a qualifying purchaser.
24
<PAGE>
An investor may also obtain reduced sales charges shown above on
purchases of the Class A shares by executing a written letter of intent which
states the investor's intention to invest not less than $100,000 within a
13-month period in Class A shares of the Aggressive Equity Fund ("Letter").
Each purchase of Class A shares of the Aggressive Equity Fund under a Letter
will be made at the Offering Price applicable at the time of such purchase to
single purchases of the full amount indicated on the Letter. (See Terms and
Conditions included in the form of Letter in the New Account Application
attached to this Prospectus.) An investor who wishes to enter into a Letter
in connection with an investment in Class A shares of the Aggressive Equity
Fund should use the form in the New Account Application attached to this
Prospectus. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the
first purchase following execution of the Letter must be at least 5% of the
amount of the intended purchase, and that 5% of the amount of the intended
purchase normally will be held in escrow in the form of shares pending
completion of the intended purchase. If the total investments under the
Letter are less than the intended amount and thereby qualify only for a
higher sales charge than actually paid, the appropriate number of escrowed
Class A shares will be redeemed and the proceeds used toward satisfaction of
the obligation to pay the increased sales charge. A shareholder may include
the value of all Class A shares of the Aggressive Equity Fund held of record
as of the initial purchase date under the Letter as an "accumulation credit"
toward the completion of the terms of the Letter, but no price adjustment
will be made on such shares.
Class A shares of the Aggressive Equity Fund may be purchased at net asset
value without a sales charge by employee benefit plans, retirement plans and
deferred compensation plans and trusts used to fund such plans, including, but
not limited to, those defined in Section 401(a), 403(b) or 457 of the Code and
"rabbi trusts." Morgan Stanley will not compensate Participating Dealers at the
time of purchase for sales made to such plans and trusts.
As disclosed above, no sales charge will be payable at the time of purchase
of Class A shares on investments of $1 million or more. However, a CDSC will be
imposed on such investments in the event of a redemption of such Class A shares
of the Aggressive Equity Fund within 12 months following the purchase, at the
rate of 1.00% of the lesser of the current market value of the shares redeemed
or the total cost of such shares. In determining whether a CDSC is payable, and,
if so, the amount of the fee or charge, it is assumed that shares not subject to
such fee or charge are the first redeemed, followed by other shares held for the
longest period of time. The Fund may also sell Class A shares of the Aggressive
Equity Fund at net asset value (without a sales charge) to Directors of the
Fund, directors and employees of Morgan Stanley, Participating Dealers, their
respective affiliates and their immediate families and employees of agents of
the Fund. In addition, Class A shares may be sold without a sales charge when
purchased (i) through bank trust departments; (ii) for investors whose account
is managed by certain investment advisers registered under the Investment
Advisers Act of 1940, as amended; (iii) for investors through certain
broker/dealers and other financial services firms that have entered into certain
agreements with the Fund which may include a requirement that such shares be
sold for the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker/dealer or other firm;
(iv) with redemption proceeds from other investment companies on which the
investor had paid a front-end or contingent deferred sales charge; or
(v) through a broker that maintains an omnibus account with the Fund and such
purchases are made by the following: (1) investment advisers or financial
planners who place trades for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee for their services,
(2) clients of such investment advisers or financial planners who place trades
for their own accounts if the accounts are linked to the master account of such
investment adviser or financial planner on the books and records of the broker
or agent, or (3) retirement and deferred compensation plans and trusts used to
fund such plans, including, but not limited to, those defined in Section 401(a),
403(b) or 457 of the Code and "rabbi trusts." Investors who purchase or redeem
shares through a trust department, broker, dealer, agent, financial planner,
financial services firm, or investment adviser may be charged an additional
service or transaction fee by that institution.
PURCHASE OF CLASS B SHARES
Class B shares of the Aggressive Equity Fund may be purchased at net asset
value without an initial sales charge. However, a CDSC will be imposed on
certain Class B shares redeemed within six years of purchase. The
25
<PAGE>
charge is assessed on an amount equal to the lesser of the then-current market
value of the Class B shares redeemed or the total cost of such shares.
Accordingly, the CDSC will not be applied to dollar amounts representing an
increase in the net asset values above the initial purchase price of the shares
being redeemed. In addition, no charge is assessed on redemptions of Class B
shares derived from reinvestment of dividends or capital gains distributions.
In determining whether the CDSC is applicable to a redemption, the
calculation is made in the manner that results in the lowest possible rate.
Therefore, it is assumed that the redemption is first of any Class B shares in
the shareholder's account that represent reinvested dividends and/or
distributions, and/or of Class B shares held longer than six years after
purchase, and next of Class B shares held the longest during the initial six-
year period after purchase. The amount of the contingent deferred sales charge,
if any, will vary depending on the number of years from the time of purchase of
Class B shares until the redemption of such shares (the "holding period"). The
following table sets forth the rates of the CDSC.
CONTINGENT DEFERRED SALES CHARGE
SALES CHARGE AS
PERCENTAGE OF THE DOLLAR
YEAR SINCE PURCHASE AMOUNT
PAYMENT WAS MADE SUBJECT TO CHARGE
---------------- -----------------
First. . . . . . . . . . . . . . . . . . . 5.0%
Second . . . . . . . . . . . . . . . . . . 4.0%
Third. . . . . . . . . . . . . . . . . . . 3.0%
Fourth . . . . . . . . . . . . . . . . . . 3.0%
Fifth. . . . . . . . . . . . . . . . . . . 2.0%
Sixth. . . . . . . . . . . . . . . . . . . 1.0%
Thereafter . . . . . . . . . . . . . . . . None*
_______
* As described more fully below, Class B shares automatically convert to
Class A shares after the seventh year following purchase.
Proceeds from the CDSC are paid to Morgan Stanley and are used by Morgan
Stanley to defray the expenses of Morgan Stanley related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares. Morgan Stanley will make payments to the Participating Dealers
that handle the purchases of such shares at the rate of 4.00% of the purchase
price of such shares at the time of purchase and expects to reallocate a portion
of its distribution fee, with respect to such shares, under the Rule 12b-1 Plan
for such class of shares, as described under "Management of the Fund --
Distributor" above. The combination of the CDSC and the distribution services
fee facilitates the ability of the Fund to sell the Class B shares without a
sales charge being deducted at the time of purchase.
WAIVER OF CDSC. The CDSC will be waived on the redemption of Class B shares
(i) following the death or initial determination of disability (as defined in
the Code) of a shareholder; (ii) to the extent that the redemption represents a
minimum required distribution from an individual retirement account or other
retirement plan to a shareholder who has attained the age of 70 1/2; or (iii) to
the extent that shares redeemed have been withdrawn from a Systematic Withdrawal
Plan, up to a maximum amount of 12% per year from a shareholder account based on
the value of the account at the time the Plan is established, provided, however
that all dividends and distributions are reinvested in Class B Shares. The
waiver with respect to (i) above is only applicable in cases where the
shareholder account is registered (a) in the name of an individual person,
(b) as a joint tenancy with rights of survivorship, (c) as community property or
(d) in the name of a minor child under the Uniform Gifts or Uniform Transfers to
Minors Act. A shareholder, or his or her representative, must notify the Fund's
Transfer Agent prior to the time of redemption if such
26
<PAGE>
circumstances exist and the shareholder is eligible for this waiver. The
shareholder is responsible for providing sufficient documentation to the
Transfer Agent to verify the existence of such circumstances. For information
on the imposition and waiver of the CDSC, contact the Transfer Agent at
1-800-282-4404.
AUTOMATIC CONVERSION TO CLASS A SHARES. After the seventh year following
purchase, Class B shares will automatically convert to Class A shares and will
no longer be subject to the higher distribution and service fees. Such
conversion will be on the basis of the relative net asset values of the two
classes, without the imposition of any sales load, fee or other charge. Under
current tax law, the conversion is not a taxable event to the shareholder.
Class B shares may also be purchased through an Automatic Investment Plan
as described below.
PURCHASE OF CLASS C SHARES
Class C shares of the Aggressive Equity Fund may be purchased at the net
asset value per share and such shares are subject to a CDSC at the rate of 1.00%
of the lesser of the current market value of the shares redeemed or the total
cost of such shares for shares that are redeemed within one year of purchase.
Morgan Stanley will make payments to the Participating Dealers that handle the
purchases of such shares at the rate of 1.00% of the purchase price of such
shares at the time of purchase and expects to reallocate most of its
distribution fee, with respect to such shares, under the Rule 12b-1 Plan for
such class of shares, as described under "Management of the Fund -- Distributor"
above. In determining whether a CDSC is payable, and, if so, the amount of the
fee or charge, it is assumed that shares not subject to such fee or charge are
the first redeemed, followed by other shares held for the longest period of
time.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
No initial sales charge or CDSC will be payable on the shares of the
Aggressive Equity Fund or class thereof purchased through the automatic
reinvestment of dividends and distributions on shares of the Aggressive Equity
Fund.
REINVESTMENT PRIVILEGE OF EACH CLASS
A shareholder who has redeemed Class A shares of the Aggressive Equity Fund
may reinvest up to the full amount redeemed (less any CDSC, if applicable) at
net asset value at the time of the reinvestment in Class A shares of the
Aggressive Equity Fund without payment of a sales charge. A shareholder who has
redeemed Class B shares of the Aggressive Equity Fund and paid a CDSC upon such
redemption may reinvest up to the full amount received upon redemption in Class
A shares at net asset value with no initial sales charge. A shareholder who has
redeemed Class C shares of the Aggressive Equity Fund and paid a CDSC upon such
redemption may reinvest up to the full amount received upon redemption in Class
C shares at net asset value and not be subject to a CDSC. Purchases through the
reinvestment privilege are subject to the minimum applicable investment
requirements. The reinvestment privilege as to any specific Class A, Class B or
Class C shares must be effected within 180 days of the redemption. The Transfer
Agent must receive from the shareholder or the shareholder's Participating
Dealer both a written request for reinvestment and a check or wire which does
not exceed the redemption proceeds. The written request must state that the
reinvestment is made pursuant to this reinvestment privilege. If a loss is
realized on the redemption of Class A shares, the reinvestment may be subject to
the "wash sale" rules if made within 30 days of the redemption, resulting in a
postponement of the recognition of such loss for federal income tax purposes.
The reinvestment privilege may be terminated or modified at any time.
RETIREMENT PLANS
Qualified retirement plans, IRAs, banks, bank trust departments and
registered investment advisory companies, acting in a fiduciary or advisory
capacity for individual, institutional or trust accounts, may purchase Class A
shares of the Aggressive Equity Fund at net asset value (without a sales charge)
provided that the initial order for such purchases is in an amount of $1 million
or more or is part of a series of orders covered by a Letter to invest
27
<PAGE>
$1 million or more in Class A shares of the Aggressive Equity Fund. Certain
employee benefit plans, retirement plans and deferred compensation plans and
trusts used to fund such plans may purchase Class A shares of the Aggressive
Equity Fund at net asset value without imposition of a sales charge. See
"Offering Price of Class A Shares."
Morgan Stanley provides retirement plan services and documents and can
establish investor accounts in IRAs trusteed by Chase. This includes Simplified
Employee Pension Plan ("SEP") IRA accounts and prototype documents. Brochures
describing such plans and materials for establishing them are available from
Morgan Stanley upon request. The brochures for plans trusteed by Chase describe
the current fees payable to Chase for its services as trustee. Investors should
consult with their own tax advisers before establishing a retirement plan.
INITIAL PURCHASES DIRECTLY FROM THE FUND
1) BY CHECK. An account may be opened by completing and signing a New Account
Application and mailing it, together with a check ($1,000 minimum for the
Aggressive Equity Fund, except for IRAs, for which the initial minimum is
$250) made payable to "Morgan Stanley Fund, Inc. -- Aggressive Equity
Fund," to:
Morgan Stanley Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
Payment will be accepted only by check payable in U.S. Dollars, unless
prior approval for payment by other currencies is given by the Fund. The
class(es) to be purchased should be designated on the New Account
Application. For purchases by check, the Fund is ordinarily credited with
Federal Funds within one business day. Thus your purchase of shares by
check is ordinarily credited to your account at the net asset value per
share of the Aggressive Equity Fund determined on the next day from
receipt.
2) BY FEDERAL FUNDS WIRE. Purchases may be made by having your bank wire
Federal Funds to the Fund's bank account ($1,000 minimum for the Aggressive
Equity Fund, except for IRAs, for which the initial minimum is $250). To
help ensure prompt receipt of your Federal Funds Wire, it is important that
you follow these steps:
A. Telephone the Fund (toll free: 1-800-282-4404) and provide your name,
address, telephone number, Social Security or Tax Identification
Number, the class(es) selected, the amount being wired, and by which
bank. The Fund will then provide you with a bank wire control number.
(Investors with existing accounts must also notify the Fund prior to
wiring funds.)
B. Instruct your bank to wire the specified amount to the Fund's Wire
Concentration Bank Account (be sure to have your bank include the name
of the Aggressive Equity Fund and the bank wire control number
assigned to you):
Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA# 021000021
DDA# 910-2-732907
Attn: Morgan Stanley Fund, Inc.
Ref: (Investment name(s), your account number, your account name)
Please call the Fund at 1-800-282-4404 prior to wiring funds.
C. Complete and sign the New Account Application and mail it to the
address shown thereon.
28
<PAGE>
Purchase orders for shares of the Aggressive Equity Fund which are
received prior to the regular close of the NYSE (currently 4:00 p.m.
Eastern Time) will be executed at the price computed on the date of receipt
as long as the Transfer Agent receives payment by check or in Federal Funds
prior to the regular close of the NYSE on such day.
Federal Funds purchase orders will be accepted only on a day on which
the Fund and Chase (the "Custodian Bank") are open for business. Your bank
may charge a service fee for wiring funds.
3) BY BANK WIRE. The same procedure outlined under "By Federal Funds Wire"
above must be followed in purchasing shares by bank wire. However, money
transferred by bank wire may or may not be converted into Federal Funds the
same day, depending on the time the money is received and the bank handling
the wire. The timing of effectiveness of purchase of shares and receipt of
dividends is subject to the same timing considerations as described above
with respect to purchase by Federal Funds wire and depends on when payment
in Federal Funds is received. Your bank may charge a service fee for wiring
funds.
ADDITIONAL INVESTMENTS
You may add to your account at any time (minimum additional investment
$100, except for IRAs, for which the minimum additional investment is $50, and
automatic reinvestment of dividends and capital gains distributions, for which
there is no minimum and no sales charge) by purchasing shares through your
Participating Dealer, by mailing a check to the Fund (payable to "Morgan Stanley
Fund, Inc. -- Aggressive Equity Fund") at the above address or by wiring monies
to the Custodian Bank as outlined above. It is very important that your account
number or wire control number be specified in the letter or wire to better
assure proper crediting to your account. In order to ensure that your wire
orders are invested promptly, you are requested to notify one of the Fund's
representatives (toll-free 1-800-282-4404) prior to the wire.
AUTOMATIC INVESTMENT PLAN
After establishing an account with the Fund, investors may purchase shares
of the Fund through an Automatic Investment Plan, under which an amount
specified by the shareholder equal to at least the applicable minimum for an
investment amount on a monthly basis will be sent to the Transfer Agent from the
investor's bank for investment in the Fund. Investors who are participants in
the Fund's Systematic Withdrawal Plan should not at the same time participate in
the Automatic Investment Plan. Investors interested in the Automatic Investment
Plan or seeking further information should contact a Participating Dealer or
fund representative. Shares to be held in broker street name may not be
purchased through the Automatic Investment Plan.
OTHER PURCHASE INFORMATION
The purchase price for the Class A shares of the Aggressive Equity Fund is
based upon the net asset value per share plus the applicable sales charge, if
any, next determined after the order is received by the Fund and for the Class B
shares and Class C shares of the Aggressive Equity Fund is based on the net
asset value per share next determined after the order is received by the Fund.
Participating Dealers are responsible for forwarding orders they receive to the
Fund by the applicable times described below on the same day as their receipt of
the orders to permit purchase of shares as described above and the failure to do
so will result in the investors being unable to obtain that day's net asset
value. See "Valuation of Shares." An order received prior to the regular close
of the NYSE, which is currently 4:00 p.m. (Eastern Time), will be executed at
the price computed on the date of receipt as long as the Transfer Agent receives
payment by check or in Federal Funds prior to the regular close of the NYSE on
such day. An order received after the regular close of the NYSE will be executed
at the price computed on the next day the NYSE is open as long as the Transfer
Agent receives payment by check or in Federal Funds prior to the regular close
of the NYSE on such
29
<PAGE>
day. If you purchase shares of the Aggressive Equity Fund directly, you must
make payment by check or Federal Funds to effect your purchase of the shares and
obtain the price for the shares as described above. Purchasing shares of the
Aggressive Equity Fund is different from placing a trade for securities at a
given price and having a certain number of days in which to make settlement or
payment for the securities.
In the interest of economy and convenience and because of the operating
procedures of the Fund, certificates representing shares of the Aggressive
Equity Fund will normally not be issued. Such certificates will be made
available to investors, however, upon written request to the Fund. All shares
purchased are confirmed to you and credited to your account on the Fund's books
maintained by the Adviser or its agents. You will have the same rights and
ownership with respect to such shares as if certificates had been issued.
To ensure that checks are collected by the Fund, withdrawals of investments
made by check are not presently permitted until the Fund's depositary bank has
made fully available for withdrawal the check amount used to purchase Fund
shares, which generally will be within 15 days. As a condition of this offering,
if a purchase is cancelled due to nonpayment or because your check does not
clear, you will be responsible for any loss the Fund and/or its agents incur. If
you are already a shareholder, the Fund may redeem shares from your account(s)
to reimburse the Fund and/or its agents for any loss. In addition, you may be
prohibited or restricted from making future purchases in the Fund.
Investors who purchase Class A shares of an Aggressive Equity Fund
directly rather than through a Participating Dealer will pay the public
offering price including the sales charge, and the sales charge will be
payable, as described under "Purchase of Shares -- Offering Price" above, to
Morgan Stanley unless a Participating Dealer is designated on the account
application. Investors may also invest in the Aggressive Equity Fund by
purchasing shares through Participating Dealers.
REDEMPTION OF SHARES
You may withdraw all or any portion of the amount in your account by
redeeming shares at any time. Please note that purchases made by check are not
permitted to be redeemed until the Fund's depository bank has made fully
available for withdrawal the check amount used to purchase Fund shares, which
generally will be within 15 days. The Fund will redeem shares of the Aggressive
Equity Fund at its next determined net asset value. A CDSC of 1.00% will be
imposed on certain Class A shares of the Aggressive Equity Fund that were
purchased without payment of the initial sales charge due to the size of the
purchase and are redeemed within one year of purchase. A maximum CDSC of 5.00%
which decreases in steps to 0% after six years, will be imposed on certain Class
B shares of the Aggressive Equity Fund that are redeemed within six years of
purchase. A CDSC of 1.00% will be imposed on certain Class C shares of the
Aggressive Equity Fund that are redeemed within one year of purchase. See
"Purchase of Shares." The CDSC will be imposed on the lesser of the current
market value or the total cost of the shares being redeemed. In determining
whether either of such CDSCs is payable, and, if so, the amount of the charge,
it is assumed that shares not subject to such charge are the first redeemed
followed by other shares held for the longest period of time. On days that both
the NYSE and the Custodian Bank are open for business, the net asset value per
share of the Aggressive Equity Fund is determined at the regular close of
trading of the NYSE (currently 4:00 p.m. Eastern Time). Shares of the
Aggressive Equity Fund may be redeemed by mail or telephone. Any redemption may
be more or less than the purchase price of your shares depending on the market
value of the investment securities held by the Aggressive Equity Fund at the
time of purchase and of redemption, among other factors.
The CDSC may be waived on redemptions of shares in connection with certain
post-retirement withdrawals from IRA or other retirement plans or following the
death or disability (as defined in the Internal Revenue Code of 1986, as
amended) of a shareholder of the Fund.
Redemption of shares held in broker street name may not be accomplished by
mail or telephone as described below. Shares held in broker street name may be
redeemed only by contacting your Participating Dealer.
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BY MAIL
The Aggressive Equity Fund will redeem its shares at the net asset value
next determined after your request is received, if your request is received in
"good order" by the Transfer Agent. If applicable, a CDSC will be deducted. Your
request should be addressed to Mutual Funds Service Company, P.O. Box 2798,
Boston, Massachusetts 02208-2798, except that deliveries by overnight courier
should be addressed to Morgan Stanley Fund, Inc. c/o Mutual Funds Service
Company, 73 Tremont Street, Boston, Massachusetts 02108.
"Good order" means that the request to redeem shares must include the
following documentation:
(a) A letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered owners of the
shares in the exact names in which they are registered;
(b) Any required signature guarantees (see "Further Redemption
Information" below); and
(c) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit-sharing
plans and other organizations.
Shareholders who are uncertain of requirements for redemption should
consult with their Participating Dealers or with a Fund representative.
BY TELEPHONE
Unless you have elected on the New Account Application or on a separate
form supplied by the Transfer Agent not to utilize the telephone redemption and
exchange privileges, you or your Participating Dealer can request a redemption
of your shares by calling the Fund and requesting the redemption proceeds be
mailed to you or wired to your bank. Please contact one of the Fund's
representatives for further details. In times of drastic market conditions, the
telephone redemption option may be difficult to implement. If you experience
difficulty in making a telephone redemption, your request may be made by mail or
overnight courier, and it will be implemented at the net asset value next
determined after it is received minus the CDSC, if any. The Fund and the Fund's
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 transaction requested by
telephone. In addition, all telephone transaction requests will be recorded and
investors may be required to provide additional telecopied written instructions
of such transaction requests. The Fund or the Transfer Agent may be responsible
for losses, liabilities, costs or expenses for acting upon telephone
transactions if procedures are not followed to confirm that such transactions
are genuine.
For shares that are held in broker street name, you cannot request
redemption by telephone or by mail; such shares may be redeemed only by
contacting your Participating Dealer. The Fund may impose a fee of $8.00 on a
wire redemption of shares of the Fund that will be deducted from the redemption
proceeds.
To change the name of the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent at the
address above. Requests to change the bank or account must be signed by each
shareholder and each signature must be guaranteed.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder of $5,000 or more of the Fund's shares at the Offering Price
(net asset value plus the sales charge, if any) may provide for the payment from
the owner's account of any requested dollar amount to be paid to the owner or a
designated payee monthly, quarterly, semiannually or annually. The minimum
periodic payment is $100. Shares are redeemed so that the payee will receive
payment on approximately the first of the month. Any income and capital gain
dividends will be automatically reinvested at net asset value on the
reinvestment date. A
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sufficient number of full and fractional shares will be redeemed to make the
designated payment. Depending upon the size of the payments requested and
fluctuations in the net asset value of the shares redeemed, redemptions for the
purpose of making such payments may result in a gain or loss for tax purposes
and may reduce or even exhaust the shareholder's Fund account. To protect
shareholders and the Fund, if the Systematic Withdrawal Plan is not established
when an account is opened, a signature guarantee is required to establish a
Systematic Withdrawal Plan subsequently if withdrawal payments are directed to
an address other than the address of record, or if a change of address request
has been submitted in the last 30 days. See "Redemption of Shares" in the
Statement of Additional Information.
The purchase of Class A shares of the Aggressive Equity Fund while
participating in a systematic withdrawal plan ordinarily will be disadvantageous
to the investor because the investor will be paying a sales charge on the
purchase of shares at the same time that the investor is redeeming shares upon
which a sales charge may already have been paid. The purchase of certain Class B
shares or Class C shares of the Aggressive Equity Fund while participating in
the Systematic Withdrawal Plan may be disadvantageous because the new shares
will be subject to up to a 5.00% CDSC for up to six years after purchase, or a
1.00% CDSC for the first year after purchase, respectively. Therefore, the Fund
will not knowingly permit additional investments of less than $2,000 in the
Aggressive Equity Fund if the investor is at the same time making systematic
withdrawals. The right is reserved to amend the Systematic Withdrawal Plan on
thirty days' notice. The plan may be terminated at any time by the investor or
the Fund.
The CDSC on Class B shares is waived for withdrawals under the Systematic
Withdrawal Plan of a maximum of 1% per month, 3% per quarter, 6% semiannually or
12% annually, of a shareholder's investment in, and any dividends or
distributions on, Class B shares of a Fund at the time the Systematic Withdrawal
Plan commences, provided that the shareholder elects to have all dividends and
distributions on the shareholder's Class B shares automatically reinvested in
additional Class B shares. Under this CDSC waiver policy, amounts withdrawn
each month will be paid by redeeming first Class B shares not subject to a CDSC
because the shares were purchased by the reinvestment of dividends or capital
gains distributions, the CDSC period has elapsed or some other waiver of the
CDSC applies. If no Class B shares not subject to the CDSC are available, or not
enough such shares are available, Class B shares having a CDSC will be redeemed
next, beginning with such shares held for the longest period of time (having the
lowest CDSC payable upon redemption) and continuing with shares held the next
longest period of time until shares held the shortest period of time are
redeemed. Under this policy, the least amount of CDSC will be waived by
withdrawals under the Systematic Withdrawal Plan.
See "Purchase of Shares" for a description of the circumstances under which
a CDSC on Class A shares, Class B shares and Class C shares, respectively, may
be assessed on redemptions of such shares made through the Systematic Withdrawal
Plan as described above.
FURTHER REDEMPTION INFORMATION
The Fund will pay for shares redeemed through broker-dealers using
electronic purchase and redemption systems within seven days after receipt of a
redemption request through such system. In other situations, the Fund normally
will make payment for all shares redeemed under this procedure within one
business day of receipt of the request, but in no event will payment be made
more than seven days after receipt of a redemption request in good order.
Payment for redeemed shares will be sent to the shareholder within seven days
after receipt of the request in proper form, except that the Fund may delay the
mailing of the redemption check, or a portion thereof, until the Fund's
depository bank has made fully available for withdrawal the check amount used to
purchase Fund shares, which generally will be within 15 days. The Fund may
suspend the right of redemption or postpone the date at times when the NYSE is
closed, or under any emergency circumstances as determined by the SEC.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Aggressive Equity Fund to
make payment wholly or partly in cash, the Fund may pay the redemption proceeds
in whole or in part by a distribution-in-kind of readily marketable securities
held by the
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Aggressive Equity Fund in lieu of cash in conformity with applicable rules of
the SEC. Shareholders may incur brokerage charges upon the sale of portfolio
securities so received in payment of redemptions.
Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to redeem shares in any account invested in the
Aggressive Equity Fund having a value of less than $1,000. The Fund, however,
will not redeem shares based solely upon market reductions in net asset
value. If at any time your total investment does not equal or exceed the
stated minimum value, you may be notified of this fact and you will be
allowed at least 60 days to make an additional investment before the
redemption is processed.
To protect your account, the Fund and its agents from fraud, signature
guarantees are required for certain redemptions to verify the identity of the
person who has authorized a redemption from your account. Please contact the
Transfer Agent for further information. See "Redemption of Shares" in the
Statement of Additional Information.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
You may exchange shares that you own in the Aggressive Equity Fund for
shares of the same class of another Investment Fund. Shares of the Aggressive
Equity Fund may be exchanged by mail or telephone, except that no shares may be
exchanged by telephone if you have elected on the New Account Application or on
a separate form supplied by the Transfer Agent not to accept the telephone
redemption and exchange privilege. Before you make an exchange, you should read
the Prospectus of the new Investment Fund in which you seek to invest. Because
an exchange transaction is treated as a redemption followed by a purchase, an
exchange would be considered a taxable event for shareholders subject to tax.
The exchange privilege is only available with respect to Investment Funds that
are registered for sale in a shareholder's state of residence. The exchange
privilege may be modified or terminated by the Fund at any time upon 60 days'
notice to shareholders.
No CDSC, if one is otherwise applicable, will be assessed at the time of
the exchange if the shareholder exchanges from one class of the Aggressive
Equity Fund into the same class of another Investment Fund. For purposes of
determining whether a shareholder's redemption will be subject to a CDSC, the
shareholder's holding period of shares acquired through an exchange will be
related back to the time the shareholder initially purchased the Fund shares
that were exchanged so long as the shares are held in the same class of the
Aggressive Equity Fund. As an example, Class A share purchases of $1,000,000
or more, purchased at net asset value, will not be assessed the 1.00% CDSC if
exchanged into Class A shares of another Investment Fund during the first
year after purchase. Class B shares of the Aggressive Equity Fund will not
be assessed the Class B CDSC if exchanged into Class B shares of another
Investment Fund during the first six years after purchase. Class C shares of
the Aggressive Equity Fund will not be subject to a CDSC for the first year
if exchanged into Class C shares of another Investment Fund. If the initial
shares of the Aggressive Equity Fund purchased by the investor were not
subject to any sales load or CDSC on such shares, then no sales load or CDSC
for shares of the same class will be imposed on any subsequent exchanges
involving such shares. No initial sales charge will be assessed, however,
and any applicable CDSC will not be imposed when shares of the Aggressive
Equity Fund are exchanged for shares of an Investment Fund where the purchase
of shares of the Aggressive Equity Fund through the exchange is of any of the
types that benefit from a waiver of such initial sales charge or CDSC.
CLASS A SHARES. As described above and as permitted pursuant to any rule,
regulation or order promulgated by the SEC, shareholders of the Aggressive
Equity Fund may tender their Class A shares of any Investment Fund for exchange
into the number of Class A shares of another Investment Fund (including
fractions thereof) which have a value equal to the total redemption proceeds of
shares tendered divided by the net asset value per share next determined after
such order is received. Class A shares purchased pursuant to such exchange will
not be assessed the initial sales charges described above or any other charge at
purchase.
CLASS B SHARES. As described above and as permitted pursuant to any rule,
regulation or order promulgated by the SEC, shareholders of the Aggressive
Equity Fund may tender their Class B shares of any Investment Fund for
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exchange into the number of Class B shares of another Investment Fund (including
fractions thereof) which have a value equal to the total redemption proceeds of
shares tendered divided by the net asset value per share next determined after
such order is received. Class B shares redeemed pursuant to such exchange will
not be assessed the CDSC described above or any other charge at purchase.
CLASS C SHARES. As described above and as permitted pursuant to any rule,
regulation or order promulgated by the SEC, shareholders of the Aggressive
Equity Fund may tender their Class C shares of any Investment Fund for exchange
into the number of Class C shares of another Investment Fund (including
fractions thereof) which have a value equal to the total redemption proceeds of
shares tendered divided by the net asset value per share next determined after
such order is received. Class C shares redeemed pursuant to such exchange will
not be assessed the CDSC described above or any other charge at purchase.
Morgan Stanley will tender the shares offered for exchange for redemption
by the Fund and will use the proceeds to purchase shares of the designated
Investment Fund on the shareholder's behalf. Under normal circumstances, Morgan
Stanley will use the proceeds from shares redeemed on any day to purchase shares
on the same Business Day.
Exchanges may also 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.
Exchange of Fund shares held in broker street name may not be accomplished
by mail or telephone as described below. Shares held in broker street name may
be exchanged only by contacting your Participating Dealer.
BY MAIL
In order to exchange shares by mail, you should include in the exchange
request the name and account number of your current Investment Fund, the name of
the Investment Fund and class of such Fund, if applicable, from which and into
which you intend to exchange shares, and the signatures of all registered
account holders. Send the exchange request to the Transfer Agent, P.O. Box 2798,
Boston, Massachusetts 02208-2798.
BY TELEPHONE
When exchanging shares by telephone, have ready the name and your
account number of the current Investment Fund, the name of the Investment
Fund and class of such Fund, if applicable, from which and into which you
intend to exchange shares, your Social Security number or Tax I.D. number,
and your account address. Requests for telephone exchanges received prior to
4:00 p.m. (Eastern Time) are processed at the close of business that same day
based on the net asset value of the applicable Investment Funds at such time.
Requests received after 4:00 p.m. (Eastern Time) are processed the next
Business Day based on the net asset value determined at the close of business
on such day. For shares that are held in broker street name, you cannot
request exchange by telephone or by mail; such shares may be exchanged only
by contacting your Participating Dealer. For additional information regarding
responsibility for the authenticity of telephoned instructions, see
"Redemption of Shares -- By Telephone" above.
TRANSFER OF REGISTRATION
You may transfer the registration of any of your Fund shares to another
person by writing to the Transfer Agent, P.O. Box 2798, Boston, Massachusetts
02208-2798. As in the case of redemptions, the written request must be received
in "good order" before any transfer can be made. Shares held in broker street
name may be transferred only by contacting your Participating Dealer.
VALUATION OF SHARES
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The net asset value per share of the Aggressive Equity Fund is
determined by dividing the total fair market value of the Aggressive Equity
Fund's investments and other assets, less all liabilities, by the total
number of outstanding shares of the Aggressive Equity Fund. Net asset value
is calculated separately for each class of the Aggressive Equity Fund. Net
asset value per share of the Aggressive Equity Fund is determined as of the
regular close of the NYSE on each day that the NYSE is open for business.
Securities listed on a United States securities exchange for which market
quotations are available are valued at the last quoted sale price on the day
the valuation is made. Price information on listed securities is taken from
the exchange where the security is primarily traded. Securities listed on a
foreign exchange are valued at their closing price. Unlisted securities and
listed securities not traded on the valuation date for which market
quotations are not readily available 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 either based on the average bid
and asked prices quoted on such valuation date by two reputable brokers or as
provided by a reliable pricing service.
Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market. Net asset value includes interest on fixed income
securities, which is accrued daily. In addition, bonds and other fixed income
securities may be valued on the 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
recent quoted bid price, or, when stock 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. Debt 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.
For the purpose of calculating the Aggressive Equity Fund'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
value, as determined by amortized cost, is higher or lower than the price the
Aggressive Equity Fund would receive if it sold the instrument.
The value of other assets and securities for which no quotations are
readily available (including restricted and unlisted foreign securities) and
those securities for which it is inappropriate to determine prices in accordance
with the above 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 will be converted into U.S. Dollars at the mean of the bid price and
asked price of such currencies against the U.S. Dollar as quoted by a major
bank.
Although the legal rights of Class A, Class B and Class C shares will be
identical, the different expenses borne by each class will result in different
net asset values and dividends. Dividends will differ by approximately the
amount of the distribution expense accrual differential among the classes. The
respective net asset values of Class B shares and Class C shares will generally
be lower than the net asset value of Class A shares as a result of the larger
distribution fee charged to Class B and Class C shares.
PERFORMANCE INFORMATION
The Fund may from time to time advertise total return of the Aggressive
Equity Fund. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" shows what an
investment in the Aggressive Equity Fund would have earned over a specified
period of time (such as one, five or ten years) assuming that all
distributions and dividends by the Aggressive Equity Fund were reinvested on
the reinvestment dates during the period. Total return does not take into
account any federal or state income taxes that
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may be payable upon redemption by shareholders subject to tax. The Fund may
also include comparative performance information in advertising or marketing the
Aggressive Equity Fund's shares. Such performance information may include data
from Lipper Analytical Services, Inc. and Morgan Stanley Capital International.
From time to time the Aggressive Equity Fund may advertise "yield". Yield
figures are based on historical performance and are not intended to indicate
future performance. The "yield" of the Aggressive Equity Fund refers to the
income generated by an investment in the Aggressive Equity Fund over a 30-day
period. The 30-day yield is further described under "Performance Information"
in the Statement of Additional Information. The Fund may also use comparative
performance information from time to time in marketing Fund shares, including
data from Lipper Analytical Services, Inc. and/or Donoghue's Money Fund Report.
The respective performance figures for Class B shares and Class C shares of
the Fund will generally be lower than those for Class A shares of the Fund
because of the larger distribution fee charged to Class B shares and Class C
shares.
DIVIDENDS AND DISTRIBUTIONS
Shareholders will automatically be credited with all dividends and
distributions in additional shares at net asset value, without payment of any
initial sales charge for Class A shares of the Aggressive Equity Fund, except
that, upon written notice to the Fund or by checking off the appropriate box in
the Distribution Option Section on the New Account Application, a shareholder
may elect to receive dividends and/or distributions in cash. Shares received
through reinvestment of dividends and/or distributions will not be subject to
any CDSC upon their redemption.
The Aggressive Equity Fund expects to distribute substantially all of
its net investment income in the form of quarterly dividends. Net realized
gains, if any, will be distributed annually. Confirmations of the purchase
of shares of the Aggressive Equity Fund through the automatic reinvestment of
income dividends and capital gains distributions will be provided, pursuant
to Rule 10b-10(b) under the Securities Exchange Act of 1934, as amended, on
the next quarterly client statement following such purchase of shares.
Consequently, confirmations of such purchases will not be provided at the
time of completion of such purchases, as might otherwise be required by Rule
10b-10.
Any undistributed net investment income and undistributed realized gains
increase the Aggressive Equity Fund's net assets for the purpose of
calculating net asset value per share. On the "ex-dividend" or
"ex-distribution" date, the net asset value per share excludes the dividend
or distribution (i.e., is reduced by the per share amount of the dividend or
distribution). Dividends and distributions paid shortly after the purchase of
shares by an investor, although in effect a return of capital, are taxable to
shareholders subject to tax.
Because of the higher distribution fee, potentially higher shareholder
servicing fee, and any other expenses that may be attributable to the Class B
shares and Class C shares of the Aggressive Equity Fund, the net income
attributable to and the dividends payable on Class B shares and Class C shares
of the Aggressive Equity Fund will be lower than the net income attributable to
and the dividends payable on Class A shares of the Aggressive Equity Fund. As a
result, the net asset value per share of the classes of the Aggressive Equity
Fund will differ at times. Expenses of a Fund allocated to a particular class
of shares of the Aggressive Equity Fund will be borne on a pro rata basis by
each outstanding share of that class.
TAXES
TAX STATUS OF THE AGGRESSIVE EQUITY FUND
The following summary of certain Federal income tax consequences is
based on current tax laws and regulations, which may be changed by
legislative, judicial, or administrative action.
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No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Aggressive Equity Fund or its
shareholders. Accordingly, shareholders are urged to consult their tax advisors
regarding specific questions as to federal, state and local income taxes.
The Aggressive Equity Fund is generally treated as a separate entity for
federal income tax purposes, and thus the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), generally will be applied to the
Aggressive Equity Fund separately, rather than to the Fund as a whole.
The Aggressive Equity Fund intends to qualify for the special tax treatment
afforded "regulated investment companies" ("RICs") under Subchapter M of the
Code so that it will be relieved of federal income tax on that part of its net
investment income and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) which is distributed to its shareholders.
TAX STATUS OF DISTRIBUTIONS
The Aggressive Equity Fund distributes substantially all of its net
investment income (including, for this purpose, net short-term capital gain, to
its shareholders. Dividends paid by the Aggressive Equity Fund from its net
investment income will be taxable to the shareholders of the Aggressive Equity
Fund as ordinary income, whether received in cash or in additional shares, if
the shareholder is subject to tax. Such dividends paid by the Aggressive Equity
Fund generally will not qualify for the dividends-received deduction to
corporations.
Distributions of net capital gains (i.e., net long-term capital gains in
excess of net short-term capital losses and any available capital loss
carryforward) are taxable to shareholders subject to tax as long-term capital
gains, regardless of how long the shareholder has held the Aggressive Equity
Fund's shares. Capital gains distributions are not eligible for the corporate
dividends-received deduction. The Aggressive Equity Fund will make annual
reports to shareholders of the federal income tax status of all distributions.
Shareholders may also be subject to state and local taxes on distributions
from the Fund. Shareholders are advised to consult their own tax advisers with
respect to tax consequences to them of an investment in the Fund.
Dividends declared in October, November and December by the Aggressive
Equity Fund payable as of a record date in such month and paid at any time
during January of the following year are treated as having been paid by the
Aggressive Equity Fund and received by the shareholders on December 31 of the
year declared.
The Aggressive Equity Fund intends to make sufficient distributions prior
to the end of each calendar year to avoid liability for federal excise taxes.
A sale, exchange or redemption of shares held as a capital asset will be
capital gain or loss and such gain or loss will be a taxable event to the
shareholder.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS AND SHAREHOLDERS SHOULD CONSULT THEIR
OWN TAX ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT
IN THE AGGRESSIVE EQUITY FUND.
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
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The Fund was organized as a Maryland corporation on August 14, 1992. The
Amended Articles of Incorporation currently permit the Fund to issue 7.75
billion shares of common stock, par value $.001 per share. Pursuant to the
Fund's By-Laws, the Board of Directors may increase the number of shares the
Fund is authorized to issue without the approval of the shareholders of the
Fund. The Board of Directors has the power to designate one or more classes
of shares of common stock and to classify and reclassify any unissued shares
with respect to such classes. (The current Class C shares of the Investment
Funds other than the Aggressive Equity Fund were named Class B shares until
May 1, 1995 when such shares were renamed Class C shares and thereafter new
Class B shares were created).
The shares of the Aggressive Equity Fund, when issued, will be fully paid,
nonassessable, fully transferable and redeemable at the option of the holder.
The shares have no preference as to conversion, exchange, dividends, retirement
or other features and have no preemptive rights. The shares of the Aggressive
Equity 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. Under Maryland law, the Fund is not
required to hold an annual meeting of its shareholders unless required to do so
under the 1940 Act. A Director may be removed by shareholders at a special
meeting called upon written request of shareholders owning at least 10% of the
outstanding shares of the Fund. Any person or organization owning 25% or more of
the outstanding shares of an Investment Fund may be presumed to "control" (as
that term is defined in the 1940 Act) that Investment Fund. As of
_________________, 1995, ______________________ [Morgan Stanley Group, Inc.,
1221 Avenue of the Americas, New York, New York 10020], was presumed to
"control" the Aggressive Equity Fund based solely on its ownership of 25% or
more of the outstanding voting shares of the Fund.
REPORTS TO SHAREHOLDERS
The Fund will send to its shareholders annual and semiannual reports; the
financial statements appearing in annual reports are audited by independent
accountants.
In addition, the Fund or the Transfer Agent will send to each shareholder
having an account directly with the Fund a quarterly statement showing
transactions in the account, the total number of shares owned, and any dividends
or distributions paid. In addition, when a transaction occurs in a shareholder's
account, the Fund or the Transfer Agent will send the shareholder a confirmation
statement showing the same information.
CUSTODIAN
As of September 1, 1995, domestic securities and cash are held by Chase,
which replaced U.S. Trust as the Fund's domestic custodian. Chase is not an
affiliate of the Adviser or Distributor. Morgan Stanley Trust Company,
Brooklyn, New York ("Morgan Stanley Trust"), acts as the Fund's custodian for
foreign assets held outside the United States and employs subcustodians who
were approved by the Directors of the Fund in accordance with regulations of
the SEC for the purpose of providing custodial services for such assets.
Morgan Stanley Trust may also hold certain domestic assets for the Fund.
Morgan Stanley Trust is an affiliate of the Adviser and the Distributor. For
more information on the custodians, see "General Information -- Custody
Arrangements" in the Statement of Additional Information.
DIVIDEND DISBURSING AND TRANSFER AGENT
Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108-3913, acts as Dividend Disbursing and Transfer Agent for
the Fund.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, NY 10036,
serves as independent accountants for the Fund and audits its annual
financial statements.
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APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier 3
indicates that the issue ranks at the lower end of the rating category.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and 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 contact over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
39
<PAGE>
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's to
a debt obligation and indicate an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C -- The rating C is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
MORGAN STANLEY FUND, INC.
P.O. Box 2798, Boston, MA 02208-2798 (800-282-4404) NEW ACCOUNT
APPLICATION
ACCOUNT REGISTRATION
- Individual - Joint Tenants - Trust - Gift/Transfer to Minor - Other_____
NOTE: Joint tenant registration will be as "joint tenants with right of
survivorship" and not as "tenants in common" unless specified. Trust
registrations should specify name of the trust, trustee(s), beneficiary(ies),
and date of trust instrument. Registration for Uniform Gifts/Transfers to
Minors should be in the name of one custodian and one minor and include the
state under which the custodianship is created (using the minor's Social
Security Number ("SSN")). For an Individual Retirement Account ("IRA") a
different application is required. Please call Chase Global Funds Services
Company ("CGFSC") at 800-282-4404 or your investment dealer to obtain the IRA
application.
Name(s) (PLEASE PRINT) Social Security Number(s) or Taxpayer
Identification Number(s) ("TIN(s)")
Name Telephone Number
Address
- U.S. Citizen - Other (specify
citizenship)
City/State/Zip
CONSOLIDATED MAILINGS: If you or your family members own multiple accounts in
the Morgan Stanley Fund, Inc., you can prevent duplicate mailings to your
address by completing this section.
40
<PAGE>
ACCOUNT NUMBER(S) NAME(S) IN WHICH ACCOUNT IS REGISTERED
FUND SELECTION
The minimum initial and subsequent investment is $1,000 and $100, respectively,
except for IRAs, for which the minimum amounts are $250 and $50, respectively.
Attach a check payable to MORGAN STANLEY FUND, INC.--AGGRESSIVE EQUITY FUND.
Morgan Stanley Class A (____) $ Class B (____) $ Class C(____) $
Aggressive
Equity Fund
Total Initial Investment: $
NOTE: IF INVESTING BY WIRE, YOU MUST OBTAIN A BANK WIRE CONTROL NUMBER. TO DO
SO, PLEASE CALL 800-282-4404.
A. By Mail: Enclosed is a check in the amount of $__ payable to Morgan Stanley
Fund, Inc.
B. By Wire: A bank wire in the amount of $__ has been sent to Morgan Stanley
Fund, Inc. from __ __
Name of Bank Wire Control Number
CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares of the same class unless
appropriate boxes below are checked:
All Dividends are to be - reinvested - paid in cash
All Capital Gains are to be - reinvested - paid in cash
41
<PAGE>
ACCOUNT PRIVILEGES
TELEPHONE EXCHANGE AND REDEMPTION
You will automatically have telephone exchange and redemption privileges for
yourself and your investment dealer and appoint CGFSC to act as your agent to
act upon instructions received by telephone in order to effect such privileges
unless you mark one or more of the boxes below:
No, I/we do not want:
- telephone exchange privileges - telephone redemption privileges
for myself/ourselves or my/our investment dealer.
I/We further acknowledge that it is my/our responsibility to read the Prospectus
of any Fund into which I/we exchange.
Morgan Stanley Fund, Inc. will mail redemption proceeds to the name and address
in which my/our fund account is registered unless I check the following box
and complete the information at right. -
AUTHORITY TO TRANSMIT REDEMPTION PROCEEDS TO PRE-DESIGNATED ACCOUNT.
I/We hereby authorize CGFSC to act upon instructions received by telephone to
withdraw $1,000 or more from my/our account in Morgan Stanley Fund, Inc. and
wire the amount withdrawn to the following commercial bank account. I/We
understand that CGFSC charges an $8.00 fee for each wire redemption, which will
be deducted from the proceeds of the redemption.
Title on Bank Account
Name of Bank
Bank A.B.A. Number Account Number
City/State/Zip
ATTACH A VOIDED CHECK HERE
A corporation or partnership must also submit a "Corporate Resolution" or
"Certificate of Partnership" indicating the names and titles of officers
authorized to act on its behalf.
The Fund and the Fund's 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 transaction requested by telephone. In addition, all telephone
transaction requests will be recorded and investors may be required to provide
additional telecopying written instructions of transaction requests. Neither
the Fund nor the Transfer Agent will be responsible for any loss, liability,
cost or expenses for following instructions received by telephone that it
reasonably believes to be genuine.
RIGHTS OF ACCUMULATION (optional)
Fund shareholders together with members of their families, may be entitled to
reduced sales charges with respect to their purchases of Class A shares of Funds
of Morgan Stanley Fund, Inc. sold with an initial sales load ("Investment
Fund"). You may also receive a reduced sales charge by completing the Letter of
Intent as set forth below as provided in the Prospectus of the Morgan Stanley
Fund, Inc. (the "Prospectus"). See the Prospectus for details.
To qualify, you must complete this section, listing all of your accounts
including those in your spouse's name, joint accounts and accounts held for your
minor children. If you need more space, please attach a separate sheet.
I/We qualify for the Rights of Accumulation initial sales charge discount
described in the Prospectus and Statement of Additional Information of Morgan
Stanley Fund, Inc.
- - I/We own Class A shares of more than one Non-Money Fund of Morgan Stanley
Fund, Inc.
- - The registration of some of my/our Class A shares differs from that shown
on this application. Listed below are the account number(s) and full
registration(s) in each case.
42
<PAGE>
LIST OF OTHER ACCOUNTS
ACCOUNT NUMBER(S) NAME(S) IN WHICH ACCOUNT IS REGISTERED
43
<PAGE>
LETTER OF INTENT (optional)
I/we agree to the Letter of Intent Conditions on the last page of this
application.
I/we intend to invest, within a 13-month period beginning on the date hereof
(initial purchase date) in Class A shares of the Aggressive Equity Fund
purchased hereunder and the other Investment Fund, an aggregate amount which,
together with the value of Class A shares of any of the Investment Funds then
owned by me/us, will equal or exceed the amount indicated below:
- $100,000 - $250,000 - $500,000 - $1,000,000
SYSTEMATIC WITHDRAWAL PLAN (optional) - Yes - No Not Available for IRAs
Available to shareholders with account balances of $5,000 or more.
I/We hereby authorize CGFSC to redeem the necessary number of shares from my/our
Morgan Stanley Fund, Inc. Account on the designated dates in order to make the
following periodic payments:
- Monthly - Quarterly - Semiannually - Annually
(This request for participation in the Systematic Withdrawal Plan must be
received by the 18th day of the month in which you wish withdrawals to begin.
Redemptions of shares to make the payments elected above will occur on the 25th
day of the month prior to payment, or if such day is not a business day, then
the next preceding business day.)
Withdrawal ($100 minimum) from:
Fund Name Amount of Or %*
Each Check
Class : Code : $ %
Class : Code : $ %
Class : Code : $ %
Please make check payable to:
(to be completed only if redemption proceeds to be paid to other than account
holder of record or mailed to address other than address of record)
Recipient
Street Address
City, State, Zip Code
*With the systematic withdrawal plan, a maximum of 12% per year may be withdrawn
from Class B accounts without being subject to a CDSC.
AUTOMATIC INVESTMENT PLAN (optional)
I/We hereby authorize CGFSC to debit my/our personal checking account on the
designated dates in order to purchase shares in the Funds indicated below at the
applicable public offering price determined on that day.
- Monthly on the 5th day - Monthly on the 20th day
Amount of each debit (minimum $100) to be invested as follows:
Fund Name
Class : Code : $
Class : Code : $
Class : Code : $
44
<PAGE>
NOTE: A completed Bank Authorization Form (see below) and a voided personal
check MUST accompany this Automatic Investment Plan application.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AUTOMATIC INVESTMENT PLAN--BANK AUTHORIZATION
Bank Name Bank Address Bank Account Number
I/We authorize you, the above named bank, to debit my/our account for amounts
drawn by Mutual Funds Service Company, acting as my/our agent for the purchase
of Shares of Morgan Stanley Fund, Inc. I/We agree that your rights in respect to
each withdrawal shall be the same as if it were a check drawn upon you and
signed by me/us. This authority shall remain in effect until revoked in writing
and received by you. I/We agree that you shall incur no liability when honoring
debits, except a loss due to payments drawn against insufficient funds. I/We
further agree that you will incur no liability to me if you dishonor any such
withdrawal. This will be so even though such dishonor results in the
cancellation of that purchase.
Account Holder's Name Joint Account Holder's Name
X X
Signature Date Signature Date
45
<PAGE>
Agreements and Signatures
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:
- - 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 I/we have not been notified by the Internal
Revenue Service ("IRS") that I/we are subject to backup withholding, or the
IRS has notified me/us that I am/we are no longer subject to backup
withholding. (NOTE: IF ANY OR ALL OF CLAUSE (2) IS NOT TRUE, STRIKE OUT
THAT PART BEFORE SIGNING.)
- - 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
CGFSC within 60 days of the date of this application or if I/we fail to
furnish my/our correct SSN or TIN, I/we may be subject to a penalty and a
31% backup withholding on distributions and redemption proceeds. (Please
provide either number on IRS Form W-9.) You may request such form by
calling CGFSC at 800-282-4404.
I/We represent that I am/we are of legal age and capacity to purchase shares of
the Morgan Stanley Fund, Inc. I/We understand that unless otherwise indicated in
this application, my/our investment dealer and I/we will automatically receive
telephone exchange and redemption privileges and that Morgan Stanley Fund, Inc.
and MFSC and their directors, officers and employees will not be liable for any
loss, liability, cost or expense incurred for acting upon instructions believed
to be authentic and in accordance with the procedures set forth in the
Prospectus. I/We have received, read and carefully reviewed a copy of the Fund's
current Prospectus and agree to its terms and by signing below I/we acknowledge
that neither the Fund nor the Distributor is a bank and that Fund shares are not
backed or guaranteed by any bank or insured by the FDIC.
X Date
Owner Signature
X Date
Owner Signature
Sign exactly as name(s) of registered owner(s) appear(s) above (including legal
title if signing for a corporation, trust custodial account, etc.)
NOTE: THE FOLLOWING SECTION SHOULD BE COMPLETED ONLY IF YOU ARE INVESTING IN
THE MORGAN STANLEY FUND, INC. THROUGH A PARTICIPATING DEALER (AN
INVESTMENT DEALER).
FOR USE BY AUTHORIZED AGENT (PARTICIPATING DEALER) ONLY
We hereby submit this application for the purchase of shares in accordance with
the terms of our selling agreement with Morgan Stanley & Co. Incorporated and
with the Prospectus and Statement of Additional Information of the Fund. We
agree to notify CGFSC of any purchases made under the Letter of Intent or Rights
of Accumulation.
Investment Dealer's Name Representative's Name
Branch Number Representative's Telephone Number
Branch Address
46
<PAGE>
City/State/Zip Code
Branch Telephone Number Investment Dealer's Authorized Signature
47
<PAGE>
___________________ ___________________
___________________ ___________________
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER BY THE FUND OR THE DISTRIBUTOR TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
___________
TABLE OF CONTENTS
PAGE
------
Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 8
Additional Investment Information. . . . . . . . . . . . . . . . . . . . 9
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 19
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 19
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 22
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Valuation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . 35
Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . . . 36
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
New Account Application
MORGAN STANLEY
AGGRESSIVE EQUITY FUND
48
<PAGE>
MORGAN STANLEY
AGGRESSIVE EQUITY FUND
PORTFOLIO OF THE
MORGAN STANLEY
FUND, INC.
COMMON STOCK
($.001 PAR VALUE)
_
PROSPECTUS
_
INVESTMENT ADVISER
MORGAN STANLEY
ASSET MANAGEMENT INC.
DISTRIBUTOR
MORGAN STANLEY & CO.
INCORPORATED
___________________ ___________________
___________________ ___________________
49
<PAGE>
(This page has been left blank intentionally.)
50
<PAGE>
The Statement of Additional Information for the Morgan Stanley Global Equity
Allocation, Morgan Stanley Global Fixed Income, Morgan Stanley Asian Growth,
Morgan Stanley Emerging Markets, Morgan Stanley Latin American, Morgan Stanley
European Equity, Morgan Stanley American Value, Morgan Stanley Worldwide High
Income, Morgan Stanley Growth and Income and Morgan Stanley Money Market Funds,
included as part of Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A of Morgan Stanley Fund, Inc. (File No. 33-51294) filed
with the Securities and Exchange Commission on April 4, 1995 and in final form
under Rule 497(e) on August 3, 1995, is hereby incorporated by reference as if
set forth in full herein.
<PAGE>
MORGAN STANLEY FUND,INC.
STATEMENT OF ADDITIONAL INFORMATION
Morgan Stanley Fund, Inc. (the "Fund") is an open-end management investment
company with diversified and non-diversified series ("Investment Funds"). The
Fund currently consists of [eleven] Investment Funds offering a broad range of
investment choices. The Fund is designed to provide clients with attractive
alternatives for meeting their investment needs. This Statement of Additional
Information ("SAI") addresses information of the Fund applicable to the Class A
shares, Class B shares and Class C shares of the Morgan Stanley Aggressive
Equity Fund (the "Aggressive Equity Fund").
This Statement is not a prospectus but should be read in conjunction with
the prospectus of the Aggressive Equity Fund (the "Prospectus"). To obtain the
Prospectus, [and the prospectus and SAI for any of the Fund's Investment Funds,]
please call the Morgan Stanley Fund, Inc. Services Group:
1-800-282-4404
TABLE OF CONTENTS
PAGE
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . 2
Federal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Federal Tax Treatment of Forward Currency Contracts and Exchange
Rate Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Taxes and Foreign Shareholders . . . . . . . . . . . . . . . . . . . . . . . .10
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Determining Maturities of Certain Instruments. . . . . . . . . . . . . . . . .13
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Description of Securities and Ratings. . . . . . . . . . . . . . . . . . . . .27
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Statement of Additional Information dated December __, 1995, relating to the
Prospectus dated December __, 1995 for Morgan Stanley Aggressive Equity Fund.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objective and policies
set forth in the Fund's Prospectus with respect to the Morgan Stanley Aggressive
Equity Fund.
EQUITY-LINKED SECURITIES
The amount received by an investor at maturity of such securities is not
fixed but is based on the price of the underlying common stock. It is
impossible to predict whether the price of the underlying common stock will rise
or fall. Trading prices of the underlying common stock will be influenced by
the issuer's operational results, by complex, interrelated political, economic,
financial or other factors affecting the capital markets, the stock exchanges on
which the underlying common stock is traded and the market segment of which the
issuer is a part. It is not possible to predict how equity-linked securities
will trade in the secondary market or whether such market will be liquid or
illiquid. The following are three examples of equity-linked securities. The
Aggressive Equity Fund may invest in the securities described below or other
similar equity-linked securities.
There are certain risks of loss of principal in connection with investing
in equity-linked securities, as described in the following examples of certain
equity-linked securities. Preferred Equity Redemption Cumulative Stock ("PERCS")
as described in "Additional Investment Information" in the Prospectus will
convert into common stock within three years no matter at what price the common
stock trades. If the common stock is trading at a price that is at or below the
cap, the Aggressive Equity Fund receives one share of common stock for each
PERCS share. If the common stock is trading at a price that is above the cap,
the Aggressive Equity Fund receives less than one share, with the conversion
ratio adjusted so that the market value of the common stock received by the
Aggressive Equity Fund equals the cap. Accordingly, the Aggressive Equity Fund
is subject to the risk that if the price of the common stock is below the cap
price at the maturity of the PERCS, the Aggressive Equity Fund will lose the
amount of the difference between the price of the common stock and the cap.
Such a loss could substantially reduce the Aggressive Equity Fund's initial
investment in the PERCS and any dividends that were paid on the PERCS. PERCS
also present risks based on payment expectations. If a PERCS issuer redeems the
PERCS, the Aggressive Equity Fund may have to replace the PERCS with a lower
yielding security, resulting in a decreased return for investors.
The principal amount that Equity-Linked Securities ("ELKS") holders receive
at maturity, as described in "Additional Investment Information" in the
Prospectus, is based on the price of underlying common stock. If the common
stock is trading at a price that is at or below the cap, the Aggressive Equity
Fund receives for each ELKS share an amount equal to the average price of the
common stock. If the common stock is trading at a price that is above the cap,
the Aggressive Equity Fund receives the cap amount. Accordingly, the Aggressive
Equity Fund is subject to the risk that if the price of the common stock is
below the cap price at the maturity of the ELKS, the Aggressive Equity Fund will
lose the amount of the difference between the price of the common stock and the
cap. Such a loss could substantially reduce the Aggressive Equity Fund's initial
investment in the ELKS and any dividends that were paid on the ELKS. An
additional risk is that the issuer may "reopen" the issue of ELKS and issue
additional ELKS at a later time or issue additional debt securities or other
securities with terms similar to those of the ELKS, and such issuances may
affect the trading value of the ELKS.
The principal amount that Liquid Yield Option Notes ("LYONs") holders
receive for LYONs, other than the lower-than-marked yield at maturity, as
described in "Additional Investment Information" in the Prospectus, is based on
the price of underlying common stock. If the common stock is trading at a price
that is at or below the purchase price of the LYONs plus accrued original issue
discount, the Aggressive Equity Fund receives only the lower-than-market yield,
assuming the LYONs are not in default. If the common stock is trading at a price
that is above the purchased price of the LYONs plus accrued original issue
discount, the Aggressive Equity Fund will receive an amount above the
lower-than-market yield on the LYONs, based on how well the underlying common
stock does. LYONs also present risks based on payment expectations. If a LYONs
issuer redeems the LYONs, the Aggressive Equity Fund may have to replace the
LYONs with a lower yielding security, resulting in a decreased return for
investors.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the Aggressive Equity Fund may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and the Aggressive Equity Fund may incur
costs
2
<PAGE>
in connection with conversions between various currencies. The Aggressive Equity
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward contracts to purchase or sell foreign
currencies. A forward foreign currency exchange contract (a "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 Aggressive Equity Fund may enter into forward contracts in several
circumstances. When the Aggressive Equity Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Aggressive Equity Fund anticipates the receipt in a foreign currency of
dividends or interest payments on a security which it holds, the Aggressive
Equity Fund 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 Aggressive Equity Fund 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.
Additionally, when the Aggressive Equity Fund anticipates that the currency
of a particular foreign country may suffer a substantial decline against the
U.S. dollar, it may enter into a forward contract for a fixed amount of dollars,
to sell the amount of foreign currency approximating the value of some or all of
the Aggressive Equity Fund's securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. The Aggressive Equity Fund
will not enter into such forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate the Aggressive
Equity Fund to deliver an amount of foreign currency in excess of the value of
the Aggressive Equity Fund securities or other assets denominated in that
currency.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the management of the
Fund believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the performance
of the Aggressive Equity Fund will thereby be served. Except in circumstances
where segregated accounts are not required by the 1940 Act and the rules adopted
thereunder, the Fund's Custodian will place cash, U.S. Government securities, or
liquid, high-grade debt securities into a segregated account of the Aggressive
Equity Fund in an amount equal to the value of the Aggressive Equity Fund's
total assets committed to the consummation of forward contracts. If the value
of the securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will be at least equal to the amount of the Aggressive Equity
Fund's commitments with respect to such contracts.
The Aggressive Equity Fund generally will not enter into a forward contract
with a term of greater than one year. At the maturity of a forward contract, the
Aggressive Equity Fund 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 the Aggressive Equity Fund 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
the Aggressive Equity Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency.
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If the Aggressive Equity Fund retains the portfolio security and engages in
an offsetting transaction, the Aggressive Equity Fund 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 the
Aggressive Equity Fund 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, the Aggressive Equity Fund 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 Aggressive Equity Fund 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 Aggressive Equity Fund is not required to enter into such transactions
with regard to its 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
The Aggressive Equity Fund may enter into securities index futures
contracts and options on securities index futures contracts to a limited extent.
In addition, the Aggressive Equity Fund may enter into foreign currency futures
contracts and options thereon. Futures contracts provide for the future sale by
one party and purchase by another party of a specified amount of a specific
security or a specific currency at a specified future time and at a specified
price. Futures contracts, which are standardized as to maturity date and
underlying financial instrument, index or currency, traded in the United States
are traded on national futures exchanges. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"), a U.S. government agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities or currencies, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold" or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract is bought
or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold for prices that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of an
additional "variation" margin will be required. Conversely, a change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Aggressive
Equity Fund expects to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the underlying securities with futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from market
fluctuations. The Aggressive Equity Fund intends to use futures contracts only
for hedging purposes.
Regulations of the CFTC applicable to the Aggressive Equity Fund require
that all futures transactions constitute bona fide hedging transactions or
transactions for other purposes so long as the aggregate initial margin and
premiums
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required for such transaction will not exceed 5% of the liquidation value of the
Aggressive Equity Fund's portfolio, after taking into account unrealized profits
and unrealized losses on any such contracts it has entered into. The Aggressive
Equity Fund will only sell futures contracts to protect securities owned against
declines in price or purchase contracts to protect against an increase in the
price of securities intended for purchase. As evidence of this hedging interest,
the Aggressive Equity Fund expects that approximately 75% of its respective
futures contracts will be "completed"; that is, equivalent amounts of related
securities will have been purchased or are being purchased by the Aggressive
Equity Fund upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Aggressive Equity Fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While the Aggressive Equity Fund will incur commission
expenses in both opening and closing out futures positions, these costs are
lower than transaction costs incurred in the purchase and sale of the underlying
securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS. The Aggressive Equity Fund will
not enter into futures contract transactions to the extent that, immediately
thereafter, the sum of its initial margin deposits on open contracts exceeds 5%
of the market value of its total assets. In addition, the Aggressive Equity Fund
will not enter into futures contracts to the extent that its outstanding
obligations to purchase securities under futures contracts and options would
exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the Aggressive Equity Fund would continue to be required to make
daily cash payments to maintain its required margin. In such situations, if the
Aggressive Equity Fund has insufficient cash, it may have to sell portfolio
securities to meet its daily margin requirement at a time when it may be
disadvantageous to do so. In addition, the Aggressive Equity Fund may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the Aggressive Equity Fund's ability to effectively hedge.
The Aggressive Equity Fund will minimize the risk that it will be unable to
close out a futures contract by only entering into futures for which there
appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if, at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the Aggressive
Equity Fund engages in futures strategies only for hedging purposes, the Adviser
does not believe that the Aggressive Equity Fund is subject to the risks of loss
frequently associated with futures transactions. The Aggressive Equity Fund
would presumably have sustained comparable losses if, instead of the futures
contract, the Aggressive Equity Fund had invested in the underlying security or
currency and sold it after the decline.
Utilization of futures transactions by the Aggressive Equity Fund does
involve the risk of imperfect or no correlation where the securities underlying
futures contracts have different maturities than the portfolio securities or
currencies being hedged. It is also possible that the Aggressive Equity Fund
could both lose money on futures contracts and also experience a decline in
value of its portfolio securities. There is also the risk of loss by the
Aggressive Equity Fund of margin deposits in the event of bankruptcy of a broker
with whom the Aggressive Equity Fund has an open position in a futures contract
or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in
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a particular type of contract, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses, because
the limit may prevent the liquidation of unfavorable positions. Futures contract
prices have occasionally moved to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to substantial losses.
GLOBAL INVESTING
Global investment diversification can lower the risk that occurs from
fluctuations in any one market. Global stock and bond markets often do not
parallel the performance of each other which means that, over time, diversifying
investments across several countries can help reduce portfolio volatility while
increasing returns.
U.S. stock and bond markets now comprise less than half of the total
securities available worldwide and investors who limit their investments to the
U.S. ignore over 80% of the world's blue chip companies. Participating in global
markets helps the astute investor take advantage of opportunities worldwide.
Over the past 10 years, through 1994, the U.S. ranked in the top five performing
stock markets only two times according to Morgan Stanley Capital International.
LOAN PARTICIPATIONS AND ASSIGNMENTS
The Aggressive Equity Fund may invest in fixed and floating rate loans
("Loans") arranged through private negotiations between an issuer of sovereign
debt obligations and one or more financial institutions ("Lenders"). The
Aggressive Equity Fund's investments in Loans are expected in most instances to
be in the form of participations in Loans ("Participations") and assignments of
all or a portion of Loans ("Assignments") from third parties. The Aggressive
Equity Fund 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 the insolvency of the Lender selling a Participation, the Aggressive
Equity Fund 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 the
Participation being subject to the credit risk of the Lender with respect to the
Participation, but even under such a structure, in the event of the Lender's
insolvency, the Lender's servicing of the Participation may be delayed and the
assignability of the Participation impaired. The Aggressive Equity Fund will
acquire a Participation only if the Lender interpositioned between the
Aggressive Equity Fund and the borrower is determined by the Adviser to be
creditworthy.
When the Aggressive Equity Fund purchases Assignments from Lenders it will
acquire direct rights against the borrower on the Loan. Because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Aggressive Equity
Fund 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, the Aggressive Equity Fund anticipates that such securities
could be sold only to a limited number of institutional investors. The lack of a
liquid secondary market may have an adverse impact on the value of such
securities and the Aggressive Equity Fund's ability to dispose of particular
Assignments or Participation when necessary to meet the Aggressive Equity Fund'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 Participation also may make it more
difficult for the Aggressive Equity Fund to assign a value to these securities
for purposes of valuing the Aggressive Equity Fund's portfolio and calculating
its net asset value.
OPTIONS TRANSACTIONS
The Aggressive Equity Fund may write (i.e., sell) covered call options
which give the purchaser the right to buy the underlying security covered by the
option from the Aggressive Equity Fund at the stated exercise price. A "covered"
call option means that so long as the Aggressive Equity Fund is obligated as the
writer of the option, it will own (i) the underlying securities subject to the
option, or (ii) securities convertible or exchangeable without the payment of
any consideration into the securities subject to the option. As a matter of
operating policy, the value of the underlying securities on which options will
be written at any one time will not exceed 5% of the total assets of the
Aggressive Equity Fund. In addition, as a matter of operating policy, the
Aggressive Equity Fund will neither purchase or write put options on securities
nor purchase call options on securities (except in connection with closing
purchase transactions).
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The Aggressive Equity Fund will receive a premium from writing call
options, which increases the Aggressive Equity Fund's return on the underlying
security in the event the option expires unexercised or is closed out at a
profit. By writing a call, the Aggressive Equity Fund will limit its opportunity
to profit from an increase in the market value of the underlying security above
the exercise price of the option for as long as the Aggressive Equity Fund's
obligation as writer of the option continues. Thus, in some periods the
Aggressive Equity Fund will receive less total return and in other periods
greater total return from writing covered call options than it would have
received from its underlying securities had it not written call options.
PORTFOLIO TURNOVER
It is anticipated that the annual portfolio turnover rate for the
Aggressive Equity Fund will not exceed 100%, although in any particular year,
market conditions could result in portfolio activity at a greater or lesser rate
than anticipated. The portfolio turnover rate for a year is the lesser of the
value of the purchases or sales for the year divided by the average monthly
market value of the Aggressive Equity Fund for the year, excluding U.S.
Government securities and securities with maturities of one year or less. The
portfolio turnover rate for a year is calculated by dividing the lesser of sales
or the average monthly value of the Aggressive Equity Fund's portfolio purchases
of portfolio securities during that year by securities, excluding money market
instruments. The rate of portfolio turnover will not be a limiting factor when
the Aggressive Equity Fund deems it appropriate to purchase or sell securities
for the portfolio. However, the U.S. federal tax requirement that the Aggressive
Equity Fund derive less than 30% of its gross income from the sale or
disposition of securities held less than three months may limit the Aggressive
Equity Fund's ability to dispose of its securities. See "Federal Income Tax."
SECURITIES LENDING
The Aggressive Equity Fund may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, the Aggressive Equity Fund 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 Aggressive Equity Fund. The Aggressive
Equity Fund may lend its investment securities to qualified brokers, dealers,
domestic and foreign banks or other financial institutions, so long as the
terms, structure and the aggregate amount of such loans are not inconsistent
with the Investment Company Act of 1940, as amended (the "1940 Act"), or the
Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the borrower
pledge and maintain with the Aggressive Equity Fund collateral consisting of
cash, an irrevocable letter of credit issued by a domestic U.S. bank, or
securities issued or guaranteed by the U.S. Government having a value at all
times not less than 100% of the value of the securities loaned, including
accrued interest, (b) the borrower add to such collateral whenever the price of
the securities loaned rises (i.e., the borrower "marks to the market" on a daily
basis), (c) the loan be made subject to termination by the Aggressive Equity
Fund at any time, and (d) the Aggressive Equity Fund receives reasonable
interest on the loan (which may include the Aggressive Equity Fund investing any
cash collateral in interest bearing short-term investments), any distributions
on the loaned securities and any increase in their market value. There may be
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans will only be made to borrowers deemed by Morgan Stanley Asset Management
Inc. (the "Adviser" or "MSAM") to be of good standing and when, in the judgment
of the Adviser, 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 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 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.
FEDERAL INCOME TAX
The following is only a summary of certain additional federal tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's prospectus. No attempt is made to present a detailed
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explanation of the federal, state or local tax treatment of the Fund or its
shareholders, and the discussion here and in the Fund's prospectus is not
intended as a substitute for careful tax planning.
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. Legislation and 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 Investment Fund, within the Fund is generally treated as a separate
corporation for federal income tax purposes, and thus the provisions of the Code
generally will be applied to each Investment Fund separately, rather than to the
Fund as a whole. The Aggressive Equity Fund 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 qualify for the special tax treatment afforded to RICs under
Subchapter M of the Code, the Aggressive Equity Fund must, among other things,
(a) derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies, and certain other
related income, including, generally, gains from options, futures and forward
contracts (the "90% Gross Income Test"); (b) derive less than 30% of its gross
income each taxable year from the sale or other disposition of (i) stocks or
securities, (ii) options, futures or forward contracts (other than options,
futures or forward contracts on foreign currencies) and (iii) foreign currencies
(or options, futures or forward contracts on foreign currencies), but only if
not directly related to the Aggressive Equity Fund's principal business of
investing in stocks or securities (or options and futures with respect to stocks
or securities) held less than three months (the "Short-Short Gain Test"), and
(c) diversify its holdings so that, at the end of each fiscal quarter of the
Fund's taxable year, (i) at least 50% of the market value of the Aggressive
Equity Fund's total assets is represented by cash, United States Government
securities, securities of other RICs, and other securities and cash items, with
such other securities limited, in respect of any one issuer, to an amount not
greater than 5% of the value of the Aggressive Equity Fund's total assets or 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its total assets is invested in the securities of any one issuer
or two or more issuers which the Fund controls and which are engaged in the
same, similar, or related trades or businesses (other than U.S. Government
securities or the securities of other RICs). For purposes of the 90% gross
income requirement described above, foreign currency gains may be excluded by
regulation from income that qualifies under the 90% requirement.
In addition to the requirements described above, in order to qualify as a
RIC, the Aggressive Equity Fund must distribute at least 90% of its net
investment income (which generally includes dividends, taxable interest, and net
short-term capital gains less operating expenses) to shareholders. If the
Aggressive Equity Fund 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 the Aggressive Equity Fund fails to qualify as a RIC for any taxable
year, it will be taxable at regular corporate rates. In such case,
distributions (including capital gain distributions) will be taxable as
ordinary dividends to the extent of the Aggressive Equity Fund's current and
accumulated earnings and profits and such distributions generally will be
eligible for the corporate dividends received deductions.
The Aggressive Equity Fund will decide whether to distribute or to retain
all or part of any net capital gains (the excess of net long-term capital gains
over net short-term capital losses) in any year for reinvestment. If any such
gains are retained, the Aggressive Equity Fund will pay federal income tax
thereon, and, if the Aggressive Equity Fund makes an election, the shareholders
will include such undistributed gains in their income and shareholders subject
to tax will be able to claim their share of the tax paid by the Aggressive
Equity Fund as a credit against their federal income tax liability.
A gain or loss realized by a shareholder on the sale or exchange of shares
of the Aggressive Equity Fund held as a capital asset will be capital gain or
loss, and such gain or loss will be long-term if the holding period for the
shares exceeds one year, and otherwise will be short-term. Any loss realized on
a sale or exchange 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 Aggressive Equity Fund 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 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.
The Aggressive Equity Fund is required by federal law to withhold 31% of
reportable payments (which may include dividends, capital gains distributions,
and redemptions) paid to shareholders who have not certified on the Account
Registration Form or on a separate form supplied by the Aggressive Equity Fund,
that the Social Security or Taxpayer
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Identification Number provided is correct and that the shareholder is exempt
from backup withholding or is not currently subject to backup withholding.
FOREIGN INCOME TAX
It is expected that the Aggressive Equity Fund will be subject to foreign
withholding taxes with respect to its dividend and interest income from foreign
countries, and the Aggressive Equity Fund may be subject to foreign income or
other taxes with respect to other income. So long as more than 50% in value of
the Aggressive Equity Fund's total assets at the close of the taxable year
consists of stock or securities of foreign corporations, the Aggressive Equity
Fund may elect to treat certain foreign income taxes imposed on it under U.S.
federal income tax law as paid directly by its shareholders. The Aggressive
Equity Fund 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 the Aggressive Equity Fund makes the
election, shareholders will be required to include in income their proportionate
shares of the amount of foreign income taxes treated as imposed on the
Aggressive Equity Fund 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. (No deductions will be allowed in computing alternative minimum tax
liability.)
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes will be subject to a number of complex limitations regarding the
availability and utilization of the credit. Because of these limitations,
shareholders may be unable to claim a credit for the full amount of their
proportionate shares of the foreign income taxes paid by the Aggressive Equity
Fund. Shareholders are urged to consult their tax advisors regarding the
application of these rules to their particular circumstances.
The foregoing is only a general description of the treatment of foreign
income taxes under the U.S. federal income tax laws. Because the availability of
a credit or deduction depends on the particular circumstances of each
shareholder, shareholders are advised to consult their own tax advisers.
FEDERAL TAX TREATMENT OF FORWARD
CURRENCY CONTRACTS AND EXCHANGE RATE CHANGES
Except for certain hedging transactions, the Aggressive Equity Fund is
required for federal income tax purposes to recognize as gain or loss for each
taxable year its net unrealized gains and losses on certain forward currency and
futures contracts as of the end of each taxable year, as well as those actually
realized during the year. In most cases, any such gain or loss recognized with
respect to a regulated futures contract is considered to be 60% long-term
capital gain or loss and 40% short-term capital gain or loss, without regard to
the holding period of the contract. Gain or loss attributable to a foreign
currency forward contract is treated as 100% ordinary income. Furthermore,
forward currency futures contracts which are intended to hedge against a change
in the value of securities held by the Aggressive Equity Fund may affect the
holding period of such securities and, consequently, the nature of the gain or
loss on such securities upon disposition.
Any net gain realized from the closing out of futures contracts will
generally be qualifying income for purposes of the 90% Gross Income test. In
order to satisfy the Short-Short Gain test, however, the Aggressive Equity Fund
will have to avoid realizing gains on futures contracts and certain forward
contracts held less than three months and may be required to defer the closing
out of futures contracts beyond the time when it would otherwise be advantageous
to do so. It is anticipated that unrealized gains of such contracts that have
been open for less than three months as of the end of the Aggressive Equity
Fund's taxable year and which are treated as recognized for tax purposes at the
end of the taxable year will not be considered gains on securities held less
than three months for purposes of the Short-Short Gain test.
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Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates that occur between the time the Aggressive Equity
Fund accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Aggressive Equity
Fund actually collects such receivables or pays such liabilities are treated as
ordinary income or ordinary loss. 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.
These gains or losses increase or decrease the amount of the Aggressive Equity
Fund's net investment income, if any, available to be distributed to its
shareholders as ordinary income.
TAXES AND FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, a foreign trust or estate, foreign corporation, or foreign
partnership ("Foreign Shareholder") depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by a Foreign Shareholder, distributions of ordinary
income will be subject to U.S. withholding tax at the rate of 30% (or lower
treaty rate) upon the gross amount of the dividend. Furthermore, Foreign
Shareholders will generally be exempt from United States federal income tax on
gains realized on the sale of shares of the Fund, distributions of net long-term
capital gains, and amounts retained by the Fund which are designated as
undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a Foreign Shareholder, then distributions of net
investment income and net long-term capital gains, and any gains realized upon
the sale of shares of the Fund, will be subject to U.S. federal income tax at
the rates applicable to United States citizens and residents or domestic
corporations.
The Fund 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 the Fund.
PURCHASE OF SHARES
For Class A shares of the Aggressive Equity Fund, the purchase price of
shares is based upon the net asset value per share plus the applicable sales
charge, if any, next determined after the purchase order is received. Class B
shares and Class C shares of the Aggressive Equity Fund may be purchased at the
net asset value per share next determined after the purchase order is received.
For all classes of the Aggressive Equity Fund an order received prior to the
regular close of the New York Stock Exchange (the "NYSE") will be executed at
the price computed on the date of receipt; and an order received after the
regular close of the NYSE will be executed at the price computed on the next day
the NYSE is open. The purchase price of shares of the Aggressive Equity Fund is
based on such price as further described in the Prospectus under "Purchase of
Shares." Class A shares of the Aggressive Equity Fund purchased without an
initial sales charge that are redeemed within one year of purchase are subject
to a 1.00% contingent deferred sales charge ("CDSC"), certain Class B shares of
the Aggressive Equity Fund that are redeemed within six years of purchase are
subject to a CDSC of up to 5.00% and certain Class C shares of the Aggressive
Equity Fund that are redeemed within one year of purchase are subject to a 1.00%
CDSC, as described in the Prospectus under "Purchase of Shares." The initial
sales charge and CDSC are not applicable to shares of any class of the
Aggressive Equity Fund purchased through the automatic reinvestment of dividends
or distributions paid by the Aggressive Equity Fund. Shares of the Fund may be
purchased on any day the NYSE is open. The NYSE is closed on the following days:
New Year's Day; Presidents' Day; Good Friday; Memorial Day; Independence Day;
Labor Day; Thanksgiving Day; and Christmas Day.
The Aggressive Equity Fund reserves the right in its sole discretion (i) to
suspend the offering of its shares, (ii) to reject purchase orders when in the
judgment of management such rejection is in the best interest of the Fund, and
(iii) to reduce or waive the minimum for initial and subsequent investments for
certain fiduciary accounts such as
10
<PAGE>
employee benefit plans or under circumstances where certain economies can be
achieved in sales of the Aggressive Equity Fund's shares.
REDEMPTION OF SHARES
The Aggressive Equity Fund may suspend redemption privileges or postpone
the date of payment (i) during any period that the NYSE is closed, or trading on
the NYSE is restricted as determined by the 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 reasonably practicable for the Aggressive Equity Fund to dispose of
securities owned by it, or fairly to determine the value of its assets, and
(iii) for such other periods as the SEC may permit.
Any redemption may be more or less than the shareholder's cost depending
on, among other factors, the market value of the securities held by the
Aggressive Equity Fund. Class A shares of the Aggressive Equity Fund purchased
without an initial sales charge due to the size of the purchase that are
redeemed within one year of purchase are subject to a 1.00% CDSC, certain Class
B shares of the Aggressive Equity Fund that are redeemed within six years of
purchase are subject to a CDSC of up to 5.00% that decreases to 0% after six
years, and certain Class C shares of the Aggressive Equity Fund that are
redeemed within one year of purchase are subject to a 1.00% CDSC as described in
the Prospectus under "Purchase of Shares." Such initial sales charge and CDSC
are not applicable to shares of any class of the Aggressive Equity Fund
purchased through the automatic reinvestment of dividends or distributions paid
by the Aggressive Equity Fund.
To protect your account and the Fund from fraud, signature guarantees are
required for certain redemptions. Signature guarantees enable the Fund to verify
the identity of the person who has authorized a redemption from your account.
Signature guarantees are required in connection with: (1) all redemptions,
regardless of the amount involved, when the proceeds are to be paid to someone
other than the registered owner(s) and/or registered address; and (2) share
transfer requests.
Eligible signature guarantor institutions generally include banks,
broker-dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations, provided
that the institution is a member of the Securities Transfer Agents Medallion
Program or another recognized signature guarantee program. Notaries public are
not acceptable guarantors.
The signature guarantees must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
Redemption of shares held in broker street name may not be accomplished by
mail or telephone as described above. Shares held in broker street name may be
redeemed only by contacting the investment dealer, bank or financial services
firm ("Participating Dealer") that handles your account.
INVESTMENT LIMITATIONS
The Aggressive Equity Fund has adopted the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) at least 67% of the voting securities of the Aggressive Equity Fund
present at a meeting if the holders of more than 50% of the outstanding voting
securities of the Aggressive Equity Fund are present or represented by proxy, or
(2) more than 50% of the outstanding voting securities of the Aggressive Equity
Fund. The Aggressive Equity Fund will not:
(1) invest in commodities, except that the Aggressive Equity Fund may
invest in futures contracts and options to the extent that not more than 5% of
its total assets are required as deposits to secure obligations under futures
contracts and not more than 20% of its total assets are invested in futures
contracts and options at any time;
(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which deal in real
estate and may purchase and sell securities which are secured by interests in
real estate;
11
<PAGE>
(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the limitation
described in (11) below) which are publicly distributed, and (ii) by lending its
portfolio securities to banks, brokers, dealers and other financial institutions
so long as such loans are not inconsistent with the 1940 Act or the Rules and
Regulations or interpretations of the SEC thereunder;
(4) purchase on margin or sell short except as specified above in (1) and
except that the Aggressive Equity Fund may enter into short sales in accordance
with its investment objectives and policies;
(5) 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;
(6) borrow in amounts greater than 33 1/3% of the its total assets
(including the amount borrowed), less all liabilities and indebtedness other
than the borrowing; and the Aggressive Equity Fund may enter into reverse
repurchase agreements in accordance with its investment objective and
policies;
(7) pledge, mortgage or hypothecate its assets to secure borrowings in
amounts greater than 33 1/3% of its assets (including the amount borrowed);
(8) underwrite the securities of other issuers;
(9) invest more than an aggregate of 15% of the net assets of the
Aggressive Equity Fund, determined at the time of investment, in illiquid
assets, including repurchase agreements having maturities of more than seven
days; provided, however, that the Aggressive Equity Fund shall not invest more
than 10% of its total assets in securities subject to legal or contractual
restrictions on resale;
(10) invest for the purpose of exercising control over management of any
company;
(11) invest its assets in securities of any investment company, except by
purchase in the open market involving only customary brokers' commissions or in
connection with mergers, acquisitions of assets or consolidations and except as
may otherwise be permitted by the 1940 Act;
(12) invest more than 5% of its total assets in securities of companies
which have (with predecessors) a record of less than three years' continuous
operation;
(13) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of its 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;
(14) write or acquire options or interests in oil, gas or other mineral
exploration or development programs or leases; or
(15) issue senior securities.
The Aggressive Equity Fund will diversify its holdings so that, at the
close of each quarter of its taxable year, (i) at least 50% of the market value
of its 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 its 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);
In addition, the Fund has adopted the following limitations which are not
fundamental policies and may be changed without shareholder approval:
12
<PAGE>
(1) the Aggressive Equity Fund will not purchase puts, calls, straddles,
spreads and any combination thereof if by reason thereof the value of its
aggregate investment in such derivative securities will exceed 5% of its
total assets except that the Aggressive Equity Fund may purchase puts and calls
on foreign currencies and may write covered call options in accordance with its
investment objective and policies;
(2) the Aggressive Equity Fund may not purchase warrants if, by reason of
such purchase, more than 5% of the value of the Aggressive Equity Fund's net
assets would be invested in warrants valued at the lower of cost or market.
Included in this amount, but not to exceed 2% of the value of the Aggressive
Equity Fund's net assets may be warrants that are not listed on a recognized
stock exchange; and
(3) the Aggressive Equity Fund will not invest in oil, gas or other
mineral leases; and
The percentage limitations contained in these restrictions apply at the
time of purchase of securities. Future Investment Funds may adopt different
limitations.
DETERMINING MATURITIES OF CERTAIN INSTRUMENTS
Generally, the maturity of a portfolio instrument shall be deemed to be the
period remaining until the date noted on the face of the instrument as the date
on which the principal amount must be paid, or in the case of an instrument
called for redemption, the date on which the redemption payment must be made.
However, instruments having variable or floating interest rates or demand
features may be deemed to have remaining maturities as follows: (1) a Government
Obligation with a variable rate of interest readjusted no less frequently than
annually may be deemed to have a maturity equal to the period remaining until
the next readjustment of the interest rate; (b) an instrument with a variable
rate of interest, the principal amount of which is scheduled on the face of the
instrument to be paid in one year or less, may be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate;
(c) an instrument with a variable rate of interest that is subject to a demand
feature may be deemed to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand; (d) an
instrument with a floating rate of interest that is subject to a demand feature
may be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand; and (e) a repurchase agreement
may be deemed to have a maturity equal to the period remaining until the date on
which the repurchase of the underlying securities is scheduled to occur, or
where no date is specified, but the agreement is subject to demand, the notice
period applicable to a demand for the repurchase of the securities.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and choose its officers. Three Directors and all of the officers of
the Fund are directors, officers or employees of the Fund's adviser, distributor
or administrative services provider. The other Directors have no affiliation
with the Fund's adviser, distributor or administrative services provider. The
Directors are also directors of other open-end funds advised by Morgan Stanley
Asset Management Inc. (collectively with the Fund, the "Open-end Fund Complex").
Officers of the Fund are also officers of some or all of the other
investment companies managed, administered, advised or distributed by Morgan
Stanley Asset Management Inc. 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 5 years is set forth below:
13
<PAGE>
Principal Occupation During
Name and Address Position with Fund Past Five Years
- ---------------- ------------------ ---------------------------
Barton M. Biggs* Chairman and Chairman and Director of
1221 Avenue of the Director Morgan Stanley Asset
Americas Management Inc. and Morgan
New York, NY 10020 Stanley Asset Management
Limited; Managing Director
of Morgan Stanley & Co.,
Inc.; Director of Morgan
Stanley Group Inc.; Member
of International Advisory
Counsel of the Thailand
Fund; Chairman and Director
of The Brazilian Investment
Fund, Inc., The Latin
American Discovery Fund,
Inc., The Malaysia Fund,
Inc., Morgan Stanley Africa
Investment Fund, Inc.,
Morgan Stanley Asia-Pacific
Fund, Inc., Morgan Stanley
Emerging Markets Debt Fund,
Inc., Morgan Stanley
Emerging Markets Fund,
Inc., Morgan Stanley Fund
Inc., Morgan Stanley Global
Opportunity Bond Fund,
Inc., Morgan Stanley High
Yield Fund, Inc., Morgan
Stanley India Investment
Fund, Inc., Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
Warren J. Olsen* Director and Principal of Morgan Stanley
1221 Avenue of the President & Co., Inc.; Vice President
Americas of Morgan Stanley Asset
New York, NY 10020 Management Inc.; President
and Director of The
Brazilian Investment Fund,
Inc., The Latin American
Discovery Fund, Inc., The
Malaysia Fund, Inc., Morgan
Stanley Africa Investment
Fund, Inc., Morgan Stanley
Asia-Pacific Fund, Inc.,
Morgan Stanley Emerging
Markets Debt Fund, Inc.,
Morgan Stanley Emerging
Markets Fund, Inc., Morgan
Stanley Fund, Inc., Morgan
Stanley Global Opportunity
Bond Fund, Inc., Morgan
Stanley High Yield Fund,
Inc., Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc., and The Turkish
Investment Fund, Inc.
John D. Barrett, II Director Chairman and Director of
521 Fifth Avenue Barrett Associates, Inc.
New York, NY 10135 (Investment counseling);
Director of the Ashforth
Company (real estate);
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
14
<PAGE>
Principal Occupation During
Name and Address Position with Fund Past Five Years
- ---------------- ------------------ ---------------------------
Gerard E. Jones Director Partner in Richards &
43 Arch Street O'Neil L.L.P. (law firm);
Greenwich, CT 06830 Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
Andrew McNally IV Director Chairman and Chief
8255 North Central Executive Officer of Rand
Park Avenue McNally (Publication);
Skokie, IL 60076 Director of Allendale
Insurance Co., Mercury
Finance (consumer finance);
Zenith Electronics,
Hubbell, Inc. (industrial
electronics); Director of
the Morgan Stanley Fund,
Inc., Morgan Stanley
Institutional Fund, Inc.
and PCS Cash Fund, Inc.;
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
Samuel T. Reeves Director Chairman of the Board and
8211 North CEO, Pinacle L.L.C.
Fresno Street (investment firm);
Fresno, CA 93720 Director, Pacific Gas and
Electric and PG&E
Enterprises (utilities);
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
Fergus Reid Director Chairman and Chief
85 Charles Colman Blvd. Executive Officer of
Pawling, NY 12564 LumeLite Corporation
(injection molding firm);
Trustee and Director of
Vista Mutual Fund Group;
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
Frederick O. Robertshaw Director Of Counsel, Bryan, Cave
2800 North Central Avenue (law firm); Previously
Phoenix, AZ 85004 associated with Copple,
Chamberlin & Boehm, P.C.
and Rake, Copple, Downey &
Black, P.C. (law firms);
Director of the Morgan
Stanley Fund, Inc., Morgan
Stanley Institutional Fund,
Inc. and PCS Cash Fund,
Inc.
15
<PAGE>
Principal Occupation During
Name and Address Position with Fund Past Five Years
- ---------------- ------------------ ---------------------------
Frederick B. Whittemore* Director Advisory Director of Morgan
1251 Avenue of the Stanley & Co., Inc.; Vice-
Americas, 30th Flr. Chairman and Director of
New York, NY 10020 The Brazilian Investment
Fund, Inc., The Latin
American Discovery Fund,
Inc., The Malaysia Fund,
Inc., Morgan Stanley Africa
Investment Fund, Inc.,
Morgan Stanley Asia-Pacific
Fund, Inc., Morgan Stanley
Emerging Markets Debt Fund,
Inc., Morgan Stanley
Emerging Markets Fund,
Inc., Morgan Stanley Fund,
Inc., Morgan Stanley Global
Opportunity Bond Fund,
Inc., Morgan Stanley High
Yield Fund, Inc., Morgan
Stanley India Investment
Fund, Inc., Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
James W. Grisham* Vice President Principal of Morgan Stanley
1221 Avenue of the & Co., Inc.; Vice President
Americas of Morgan Stanley Asset
New York, NY 10020 Management Inc.; Vice
President of The Brazilian
Investment Fund, Inc., The
Latin American Discovery
Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley
Africa Investment Fund,
Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan
Stanley Emerging Markets
Debt Fund, Inc., Morgan
Stanley Emerging Markets
Fund, Inc., Morgan Stanley
Fund, Inc., Morgan Stanley
Global Opportunity Bond
Fund, Inc., Morgan Stanley
High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
16
<PAGE>
Principal Occupation During
Name and Address Position with Fund Past Five Years
- ---------------- ------------------ ---------------------------
Harold J. Schaaff, Jr.* Vice President Principal of Morgan Stanley
1221 Avenue of the & Co.; General Counsel and
Americas Secretary of Morgan Stanley
New York, NY 10020 Asset Management Inc.; Vice
President of The Brazilian
Investment Fund, Inc., The
Latin American Discovery
Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley
Africa Investment Fund,
Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan
Stanley Emerging Markets
Debt Fund, Inc., Morgan
Stanley Emerging Markets
Fund, Inc., Morgan Stanley
Fund, Inc., Morgan Stanley
Global Opportunity Bond
Fund, Inc., Morgan Stanley
High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
Joseph P. Stadler* Vice President Vice President of Morgan
1221 Avenue of the Stanley Asset Management
Americas Inc.; Previously with Price
New York, NY 10020 Waterhouse (accounting);
Vice President of The
Brazilian Investment Fund,
Inc., The Latin American
Discovery Fund, Inc., The
Malaysia Fund, Inc., Morgan
Stanley Africa Investment
Fund, Inc., Morgan Stanley
Asia-Pacific Fund, Inc.,
Morgan Stanley Emerging
Markets Debt Fund, Inc.,
Morgan Stanley Emerging
Markets Fund, Inc., Morgan
Stanley Fund, Inc., Morgan
Stanley Global Opportunity
Bond Fund, Inc., Morgan
Stanley High Yield Fund,
Inc., Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
17
<PAGE>
Principal Occupation During
Name and Address Position with Fund Past Five Years
- ---------------- ------------------ ---------------------------
Valerie Y. Lewis* Secretary Vice President of Morgan
1221 Avenue of the Stanley Asset Management
Americas Inc.; Previously with
New York, NY 10020 Citicorp (banking);
Secretary of The Brazilian
Investment Fund, Inc., The
Latin American Discovery
Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley
Africa Investment Fund,
Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan
Stanley Emerging Markets
Debt Fund, Inc., Morgan
Stanley Emerging Markets
Fund, Inc., Morgan Stanley
Fund, Inc., Morgan Stanley
Global Opportunity Bond
Fund, Inc., Morgan Stanley
High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The PCS Cash
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
Karl O. Hartmann Assistant Secretary Senior Vice President,
73 Tremont Street Secretary and General
Boston, MA 02108-3913 Counsel of Chase Global Funds
Services Company; Senior
Vice President, Secretary
and General Counsel,
Leland, O'Brien, Rubinstein
Associates, Inc. (an
investment adviser) from
November 1990 to November
1991.
James R. Rooney Treasurer Assistant Vice President,
73 Tremont Street Chase Global Funds Services
Boston, MA 02108-3913 Company; Manager of Fund
Administration; Officer of
various investment
companies managed by Morgan
Stanley Asset Management
Inc.; Previously with
Scudder, Stevens & Clark,
Inc. (Investment);
Treasurer of The Brazilian
Investment Fund, Inc., The
Latin American Discovery
Fund, Inc., The Malaysia
Fund, Inc., Morgan Stanley
Africa Investment Fund,
Inc., Morgan Stanley Asia-
Pacific Fund, Inc., Morgan
Stanley Emerging Markets
Debt Fund, Inc., Morgan
Stanley Emerging Markets
Fund, Inc., Morgan Stanley
Fund, Inc., Morgan Stanley
Global Opportunity Bond
Fund, Inc., Morgan Stanley
High Yield Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
18
<PAGE>
Principal Occupation During
Name and Address Position with Fund Past Five Years
- ---------------- ------------------ ---------------------------
Joanna Haigney Assistant Treasurer Supervisor of Fund
Administration and
Compliance, Chase Global Funds
Services Company; Previously
with Coopers & Lybrand
L.L.P.; Assistant Treasurer
of The Brazilian Investment
Fund, Inc., The Latin
American Discovery Fund,
Inc., The Malaysia Fund,
Inc., Morgan Stanley Africa
Investment Fund, Inc.,
Morgan Stanley Asia-Pacific
Fund, Inc., Morgan Stanley
Emerging Markets Debt Fund,
Inc., Morgan Stanley
Emerging Markets Fund,
Inc., Morgan Stanley Fund,
Inc., Morgan Stanley Global
Opportunity Bond Fund,
Inc., Morgan Stanley High
Yield Fund, Inc., Morgan
Stanley India Investment
Fund, Inc., Morgan Stanley
Institutional Fund, Inc.,
The Pakistan Investment
Fund, Inc., The Thai Fund,
Inc. and The Turkish
Investment Fund, Inc.
- ----------
* "Interested Person" within the meaning of the 1940 Act.
REMUNERATION OF DIRECTORS AND OFFICERS
Effective June 28,1995, the Open-end Fund Complex will pay each of the nine
Directors who is not an "interested person" an annual aggregate fee of $55,000,
plus out-of-pocket expenses. The Open-end Fund Complex will pay each of the
members of the Fund's Audit Committee, which consists of the Fund's Directors
who are not "interested persons," an additional annual aggregate fee of $10,000
for serving on such a committee. The allocation of such fees will be among the
three funds in the Open-end Fund Complex in direct proportion to their
respective average net assets. For the fiscal period ended June 30, 1995, the
Fund paid approximately $77,367 in Directors' fees and expenses. Directors who
are also officers or affiliated persons receive no remuneration for their
services as Directors. The Fund's officers and employees are paid by the Adviser
or its agents. As of June 30, 1995, to Fund management's knowledge, the
Directors and officers of the Fund, as a group, owned less than 1% of the
outstanding common stock of each Investment Fund of the Fund. The following
table shows aggregate compensation paid to each of the Fund's Directors by the
Fund and the Fund Complex, respectively, for the fiscal year from July 1, 1994
to June 30, 1995.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Total
Person, Compensation Retirement Annual Compensation
Position From Benefits Accrued Benefits From Registrant
Registrant as Part of Upon and Fund Complex
Fund Expenses Retirement Paid to Directors
- ------------------------------------------------------------------------------------------------
Frederick B. Whittemore,* $ 7,500 $0 $0 $69,904
Director and Chairman of
the Board
John E. Eckleberry,** 7,500 0 0 7,500
Director
Gerard E. Jones,* 8,700 0 0 93,977
Director
19
<PAGE>
Warren J. Olsen,* 0 0 0 0
Director and President
Frederick O. Robertshaw,* 7,500 0 0 32,002
Director
- -------------------------------------------------------------------------------------------------
<FN>
* As of June 28, 1995, the following persons were elected Directors of the
Fund: Barton M. Biggs, John D. Barrett II, Gerard E. Jones, Andrew McNally
IV, Warren J. Olsen, Samuel T. Reeves, Fergus Reid, Frederick O. Robertshaw
and Frederick B. Whittemore.
** Resigned effective June 28, 1995.
</TABLE>
INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENTS
The Adviser is a wholly-owned subsidiary of Morgan Stanley Group Inc.
("Group"). The principal offices of the Group are located at 1221 Avenue of the
Americas, New York, NY 10020.
The Group, a renowned global financial services firm, is distinguished by
quality, service and a commitment to excellence. Tracing its roots to the
founding of the U.S. securities industry, the Group remains a leader in the
field. The Group's premier list of clients includes some of the largest
multinational corporations and institutions, governments, nation-states, royal
households and very high-net-worth individuals.
The Group with its subsidiaries ("Morgan Stanley") maintains a major global
presence with offices in Chicago, Frankfurt, Hong Kong, London, Los Angeles,
Luxembourg, Melbourne, Milan, New York, Paris, San Francisco, Seoul, Singapore,
Taipei, Tokyo, Toronto and Zurich. With over 9,800 employees, approximately 35%
of which are located outside the U.S., and members of the portfolio management
teams which are native to the countries in which they are investing, Morgan
Stanley is in an exceptional position to interpret the forces that will impact
the world's capital markets today, over the next decade and beyond.
The investment management division of Morgan Stanley was formed in 1975
under the leadership of Barton Biggs and incorporated as a wholly-owned
subsidiary of the Group in 1981. MSAM was formed to offer investment management
and fiduciary services to institutions and high-net-worth individuals. MSAM
offers its clients the same superior service and high standards of integrity
that have been the hallmark of Morgan Stanley since its founding in 1935.
As one of the world's premier global investment managers affiliated with
one of the leading global financial services firms and with offices in the
United States, Europe and Asia, MSAM brings a truly global perspective to the
investment of its clients' assets. This global perspective, coupled with Morgan
Stanley's long-standing tradition of integrity and prudence, puts MSAM in a
unique position to offer investment management services. As compensation for
advisory services for the fiscal year ended June 30, 1995, the Adviser earned
fees of approximately $4,571,040 and voluntarily waived a portion of such fees
equal to approximately $867,999.
Pursuant to the Administration Agreement between the Adviser and the Fund,
the Adviser provides administrative services. For its services under the
Administration Agreement, the Fund pays the Adviser a monthly fee which on an
annual basis equals 0.25% of the average daily net assets of each Investment
Fund. For the fiscal year ended June 30, 1995, the Fund paid administrative fees
to MSAM of approximately $1,153,656.
Under the Agreement between the Adviser and The Chase Manhattan Bank, N.A.
("Chase"), successor in interest to United States Trust Company of New York,
Chase Global Funds Services Company ("CGFSC"), formerly Mutual Funds Service
Company, a Chase subsidiary, provides certain administrative services to the
Fund. CGFSC provides operational and administrative services to investment
companies with approximately $___ billion in assets and having approximately
_____________ shareholder accounts as of September 30, 1995. CGFSC's
business address is 73 Tremont Street, Boston, Massachusetts 02108-3913.
20
<PAGE>
DISTRIBUTION OF FUND SHARES
Morgan Stanley & Co. Incorporated (the "Distributor"), a wholly-owned
subsidiary of Group, serves as the Distributor of the Fund's shares pursuant to
a Distribution Agreement for the Fund and a Plan of Distribution for each class
of the Aggressive Equity Fund pursuant to Rule 12b-1 under the 1940 Act (each, a
"Plan" and collectively, the "Plans"). Under each Plan the Distributor is
entitled to receive from the Aggressive Equity Fund a distribution fee, which
is accrued daily and paid quarterly, of up to 0.25% for the Class A shares of
the Aggressive Equity Fund, and up to 0.75% of the Class B shares and Class C
shares of the Aggressive Equity Fund, on an annualized basis, of the average
daily net assets of such classes. The Distributor expects to allocate most of
its fee to investment dealers, banks or financial service firms that provide
distribution, administrative or shareholder services ("Participating Dealer").
The actual amount of such compensation is agreed upon by the Fund's Board of
Directors and by the Distributor. The Distributor may, in its discretion,
voluntarily waive from time to time all or any portion of its distribution fee
and the Distributor is free to make additional payments out of its own assets to
promote the sale of Fund shares.
The Plans obligate the Aggressive Equity Fund to accrue and pay to the
Distributor the fee agreed to under its Distribution Agreement. The Plans do not
obligate the Aggressive Equity Fund to reimburse the Distributor for the actual
expenses the Distributor may incur in fulfilling its obligations under the Plan.
Thus, under each Plan, even if the Distributor's actual expenses exceed the fee
payable to it thereunder at any given time, the Aggressive Equity Fund will not
be obligated to pay more than that fee. If the Distributor's actual expenses are
less than the fee it receives, the Distributor will retain the full amount of
the fee. [The Plans for the Class A shares and the Class C shares were most
recently approved by the Fund's Board of Directors, including those directors
who are not "interested persons" of the Fund as that term is defined in the 1940
Act and who have no direct or indirect financial interest in the operation of a
Plan or in any agreements related thereto, on September 20, 1995. The Plan for
the Class B shares was most recently approved by the Fund's Board of Directors,
including those directors who are not "interested persons" of the Fund as that
term is defined in the 1940 Act and who have no direct or indirect financial
interest in the operation of a Plan or in any agreements related thereto, on
September 20, 1995.]
The distributor has not received any compensation for providing
distribution services to the Aggressive Equity Fund.
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CODE OF ETHICS
The Board of Directors of the Fund has adopted a Code of Ethics under Rule
17j-1 of the 1940 Act which incorporates the Code of Ethics of the Adviser
(together, the "Codes"). The Codes significantly restrict the personal
investing activities of all employees of the Adviser and, as described below,
impose additional, more onerous, restrictions on the Fund's investment
personnel.
The Codes require that all employees of the Adviser preclear any personal
securities investment (with limited exceptions, such as government securities).
The preclearance requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the proposed investment.
The substantive restrictions applicable to all employees of the Adviser include
a ban on acquiring any securities in a "hot" initial public offering and a
prohibition from profiting on short-term trading in securities. In addition, no
employee may purchase or sell any security that at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any fund advised by the Adviser.
Furthermore, the Codes provide for trading "blackout periods" that prohibit
trading by investment personnel of the Fund within periods of trading by the
Fund in the same (or equivalent) security.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The names and addresses of the holders of 5% or more of the outstanding
shares of any class of the Fund as of September 30, 1995 and the percentage of
outstanding shares of such classes owned beneficially or of record by such
shareholders as of such date are, to Fund management's knowledge, as follows:
GLOBAL EQUITY ALLOCATION FUND: FTC & Co., Attn: Datalynx #162, P.O. Box
173736, Denver, CO 80217-3736, owned 6% of the total outstanding Class A shares
of such Investment Fund.
GLOBAL FIXED INCOME FUND: Morgan Stanley Group, Inc. (the "Group"), 1221
Avenue of the Americas, New York, NY 10020, owned 49% of the total outstanding
Class C shares of such Investment Fund.
EMERGING MARKETS FUND: FTC & Co., Attn: Datalynx #118, P.O. Box 173736,
Denver, CO 80217-3736, owned 16% of the total outstanding Class A shares of
such Investment Fund; Crestar Bank Trust Department, Sheltering Arms Foundation,
a/c #10091700, P.O. Box 26246, Richmond, VA 23260, owned 7% of the total
outstanding Class A shares of such Investment Fund; and Advest, Inc. ("Advest"),
280 Trumbull Street, Hartford, CT 06103, owned 6% of the total outstanding
Class A shares of such Investment Fund.
LATIN AMERICAN FUND: The Group owned 18% of the total outstanding Class C
shares of such Investment Fund; and Prudential Securities FBO J.P. Barger, 600
W. Cummings Park, Suite 3500, Woburn, MA 01801-6349, owned 13% of the total
outstanding Class C shares of such Investment Fund.
AMERICAN VALUE FUND: The Group owned 26% of the total outstanding Class A
shares and 39% of the total outstanding Class C shares of such Investment Fund;
and Smith Barney Inc., a/c/ #00122517815, 388 Greenwich Street, New York, NY
10013, owned 5% of the total outstanding Class A shares and a/c #00122517779
owned 5% of the total outstanding Class A shares of such Investment Fund.
WORLDWIDE HIGH INCOME FUND: The Group owned 33% of the total outstanding
Class A shares of such Investment Fund; Advest, 280 Trumbull Street, Hartford,
CT 06103, owned 6% of the total outstanding Class A shares
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of such Investment Fund; and Prudential Securities FBO John P. Dobson, 140
Christie Hill Road, Darien, CT 06820-3016, owned 5% of the total outstanding
Class A shares of such Investment Fund.
The Group may be deemed a "controlling person" of the Fund by virtue of its
power to control the voting or disposition of the shares it owns. As a result of
its ownership position, the Group may be able to control the outcome of matters
voted on by shareholders of the Funds.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Aggressive Equity Fund and directs the Adviser to use its
best efforts to obtain the best available price and most favorable execution
with respect to all transactions for the Aggressive Equity Fund. The Fund has
authorized the Adviser to pay higher commissions in recognition of brokerage
services which, in the opinion of the Adviser, are necessary for the achievement
of better execution, provided the Adviser believes this to be in the best
interest of the Fund.
In purchasing and selling securities for the Aggressive Equity Fund, it is
the Fund's policy to seek to obtain quality execution at the most favorable
prices, through responsible broker-dealers. In selecting broker-dealers to
execute the securities transactions for the Aggressive Equity Fund,
consideration will be given to such factors as the price of the security, the
rate of the commission, the size and difficulty of the order, the reliability,
integrity, financial condition, general execution and operational capabilities
of competing broker-dealers, and the brokerage and research services which they
provide to the Fund. Some securities considered for investment by the Aggressive
Equity Fund may also be appropriate for other clients served by the Adviser. If
purchase or sale of securities consistent with the investment policies of the
Aggressive Equity Fund and one or more of these other clients served by the
Adviser is considered at or about the same time, transactions in such securities
will be allocated among the Aggressive Equity Fund and clients in a manner
deemed fair and reasonable by the Adviser. Although there is no specified
formula for allocating such transactions, the various allocation methods used by
the Adviser, and the results of such allocations, are subject to periodic review
by the Fund's Directors.
Subject to the overriding objective of obtaining the best possible
execution of orders, the Adviser may allocate a portion of the Fund's portfolio
brokerage transactions to Morgan Stanley or broker affiliates of Morgan Stanley.
In order for Morgan Stanley or its affiliates to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration received
by Morgan Stanley or such affiliates must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time. Furthermore, the
Directors of the Fund, including a majority of the Directors who are not
"interested persons," have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to Morgan Stanley
or such affiliates are consistent with the foregoing standard. For the three
fiscal years ended June 30, 1993, June 30, 1994 and June 30, 1995, the Fund paid
brokerage commissions of approximately $36,558, $2,060,894 and $2,697,893,
respectively. During the same period, the Fund paid brokerage commissions of
approximately $2,497, $618,000 and $115,622, respectively, to the Distributor,
an affiliated broker-dealer. For the fiscal year ended June 30, 1995 commissions
paid to the Distributor represented approximately 7% of the total amount of
brokerage commissions paid in such period and which were paid on transactions
that represented .03% of the aggregate dollar amount of transactions that
incurred commissions paid by the Fund during such period.
Aggressive Equity Fund securities will not be purchased from, or through,
or sold to or through, the Adviser or Morgan Stanley or any "affiliated
persons," as defined in the 1940 Act, of Morgan Stanley when such entities are
acting as principals, except to the extent permitted by law.
PERFORMANCE INFORMATION
The Fund may from time to time quote various performance figures to
illustrate the Aggressive Equity Fund's 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
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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 the Aggressive Equity Fund may advertise total return.
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 Aggressive Equity Fund) 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 Aggressive Equity Fund)
and the deduction of all applicable Fund expenses on an annual basis.
Total return figures are calculated according to the following formula:
P(1 + T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of hypothetical $1,000 payment made
at the beginning of the 1-, 5-, or 10-year periods at the
end of the 1-, 5-, or 10-year periods (or fractional portion
thereof).
COMPARISONS
To help investors better evaluate how an investment in the Aggressive Equity
Fund might satisfy their investment objective, advertisements regarding the Fund
may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages - an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities company stocks and 20 transportation stocks. Comparisons of
performance assume reinvestment of dividends.
(c) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation and finance
company stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index or its component indices - represents the
return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.
(e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income
Fund Performance Analysis - measures total return and average current yield for
the mutual fund industry. Ranks individual mutual fund performance over
specified time periods, assuming reinvestment of all distributions, exclusive of
any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index - an arithmetic,
market value-weighted average of the performance of over 900 securities on the
stock exchanges of countries in Europe, Australia and the Far East.
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(g) Goldman Sachs 100 Convertible Bond Index - currently includes 67
bonds and 33 preferred. The original list of names was generated by screening
for convertible issues of $100 million or greater in market capitalization. The
index is priced monthly.
(h) Salomon Brothers GNMA Index - includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Government
National Association.
(i) Salomon Brothers High Grade Corporate Bond Index - consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues with
maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond - is a market-weighted
index that contains approximately 4700 individually priced investment grade
corporate bonds rated BBB or better, United States Treasury/agency issues and
mortgage pass-through securities.
(k) Salomon Brothers World Bond Index - measures the total return
performance of high-quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10 currencies:
Australian Dollars Netherlands Guilder
Canadian Dollars Swiss Francs
European Currency Units UK Pounds Sterling
French Francs U.S. Dollars
Japanese Yen German Deutsche Marks
(l) J.P. Morgan Traded Global Bond Index - is an unmanaged index of
government bond issues and includes Australia, Belgium, Canada, Denmark, France,
Germany, Italy, Japan, The Netherlands, Spain, Sweden, United Kingdom and United
States gross of withholding tax.
(m) Lehman LONG-TERM Treasury Bond - is composed of all bonds covered by
the Lehman Treasury Bond Index with maturities of 10 years or greater.
(n) Lehman Aggregate Bond Index - is an unmanaged index made up of the
Government/Corporate Index, the Mortgage-Backed Securities Index and the Asset-
Backed Securities Index.
(o) NASDAQ Industrial Index - is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only and does
not include income.
(p) Composite Indices - 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 36% Standard & Poor's 500 Stock Index and 65% Salomon
Brothers High Grade Bond Index; and 65% Standard & Poor's 500 Stock Index and
35% Salomon Brothers High Grade Bond Index.
(q) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk, total return and
average rate of return (average annual compounded growth rate) over specified
time periods for the mutual fund industry.
(r) Mutual Fund Source Book, published by Morningstar, Inc. - analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Investor's Daily, Lipper Analytical Services, Inc.,
Morningstar, Inc., New York Times, Personal Investor, Wall Street Journal and
Weisenberger Investment Companies Service - publications that rate fund
performance over specified time periods.
(t) Consumer Price Index (or cost of Living Index), published by the
United States Bureau of Labor Statistics - a statistical measure of change, over
time, in the price of goods and services in major expenditure groups.
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(u) Stocks, Bonds, Bills and Inflation, published by Hobson Associates -
historical measure of yield, price and total return for common and small company
stock, long-term government bonds, Treasury bills and inflation.
(v) Savings and Loan Historical Interest Rates - as published in the
United States Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill Lynch, Pierce,
Fenner & Smith, Lehman Brothers Inc. and Bloomberg L.P.
(x) The MSCI Combined Far East Free ex-Japan Index, a
market-capitalization weighted index comprising stocks in Hong Kong, Indonesia,
Korea, Malaysia, Philippines, Singapore and Thailand. Korea is included in the
MSCI Combined Far East Free ex Japan Index at 20% of its market capitalization.
(y) First Boston High Yield Index - generally includes over 180 issues
with an average maturity range of seven to ten years with a minimum
capitalization of $100 million. All issues are individually trader-priced
monthly.
(z) Russell 2500 Small Company Index - is comprised of the bottom 500
stocks in the Russell 1000 Index which represents the universe of stocks from
which most active money managers typically select; and all the stocks in the
Russell 2000 Index. The largest security in the index has a market
capitalization of approximately $1.3 billion.
(aa) Morgan Stanley Capital International World Index - An arithmetic,
market value-weighted average of the performance of over 1,470 securities listed
on the stock exchanges of countries in Europe, Australia, the Far East, Canada
and the United States.
(bb) Morgan Stanley Capital International Emerging Markets Global Latin
American Index - An unmanaged, arithmetic market value weighted average of the
performance of over 196 securities on the stock exchanges of Argentina, Brazil,
Chile, Colombia, Mexico, Peru and Venezuela. (Assumes reinvestment of
dividends).
(cc) IFC Global Total Return Composite Index - An unmanaged index of
common stocks and includes 18 developing countries in Latin America, East and
South Asia, Europe, the Middle East and Africa (net of dividends reinvested).
(dd) EMBI+ - Expanding on the EMBI, which includes only Bradys, the
EMBI+ includes a broader group of Brady Bonds, loans, Eurobonds and U.S. Dollar
local markets instruments. A more comprehensive benchmark than EMBI, the EMBI+
covers 49 instruments from 14 countries. At $98 billion, its market cap is
nearly 50% higher than the EMBI's. The EMBI+ is not, however, intended to
replace the EMBI but rather to complement it. The EMBI continues to represent
the most liquid, most easily traded segment of the market, while the EMBI+
represents the broader market, including more of the assets that investors
typically hold in their portfolios. Both of these indices are published daily.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Aggressive Equity Fund, that the averages are generally unmanaged, and that the
items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its performance. In addition, there can be
no assurance that the Fund will continue this performance as compared to such
other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund's Articles of Incorporation permit the Directors to issue
13,375,000,000 shares of common stock, par value $.001 per share, from an
unlimited number of Investment Funds. Currently the Fund is authorized to offer
shares of [eleven] Investment Funds, [ten] of which have Class A and Class B
shares.
The shares of the Aggressive Equity Fund are fully paid and non-
assessable, and have no preference as to conversion, exchange, dividends,
retirement or other features. The shares of the Aggressive Equity Fund have no
pre-emptive rights. The shares of the Fund have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do so. A
shareholder is entitled to one vote for each full share owned (and a fractional
vote for each fractional share owned), then standing in his name on the books of
the Fund.
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Aggressive
Equity Fund's net investment income, if any. The Aggressive Equity Fund may
choose to make sufficient distributions of net capital gains to avoid
liability for federal excise tax. The Aggressive Equity Fund will not be
subject to federal income tax on capital gains or ordinary income distributed
to shareholders so long as it qualifies as a RIC (see discussion under
"Dividends and Distributions" and
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<PAGE>
"Taxes" in the Prospectus). 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 distributions cannot be predicted.
Any dividend or distribution paid shortly after an investor purchases
shares of the Aggressive Equity Fund will reduce the per share net asset
value of that Aggressive Equity Fund 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 to shareholders
subject to taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise
in writing, all dividends and distributions of the Aggressive Equity Fund are
automatically reinvested in additional shares of that Aggressive Equity Fund
at net asset value as of the business day following the record date. This
reinvestment policy will remain in effect until the shareholder notifies the
Transfer Agent in writing at least three days prior to a record date that the
shareholder has elected either the Income Option (income dividends in cash
and distributions in additional shares at net asset value) or the Cash Option
(both income dividends and distributions in cash). No initial sales charge or
CDSC is imposed on shares of the Aggressive Equity Fund that are purchased
through the automatic reinvestment of dividends and distributions of the
Aggressive Equity Fund.
The Aggressive Equity Fund generally will be treated as a separate
corporation (and hence as a separate "regulated investment company") for
federal tax purposes. Any net capital gains of the Aggressive Equity Fund,
whether or not distributed to investors, cannot be offset against net capital
losses of any other Investment Fund.
CUSTODY ARRANGEMENTS
Chase serves as the Fund's domestic custodian. Chase is not affiliated
with Morgan Stanley & Co. Incorporated. Morgan Stanley Trust Company,
Brooklyn, NY, acts as the Fund's custodian for foreign assets held outside
the United States and employs subcustodians who were approved by the
Directors of the Fund in accordance with Rule 17f-5 adopted by the SEC under
the 1940 Act. Morgan Stanley Trust Company is an affiliate of Morgan Stanley
& Co. Incorporated. In the selection of foreign subcustodians, the Directors
consider a number of factors, including, but not limited to, the reliability
and financial stability of the institution, the ability of the institution to
provide efficiently the custodial services required for the Fund, and the
reputation of the institution in the particular country or region.
DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
EXCERPTS FROM MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") DESCRIPTION OF
BOND RATINGS: Aaa - Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Aa -
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. Moody's
applies numerical modifiers 1, 2 and 3 in the Aa and A rating categories. The
modifier 1 indicates that the security ranks at a higher end of the rating
category, modifier 2 indicates a mid-range rating and the modifier 3 indicates
that the issue ranks at the lower end of the rating category.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Ba - Bonds which are rated Ba
are judged to have speculative elements;
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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 contact
over any long period of time may be small. Caa - Bonds which are rated Caa are
of poor standing. Such issues may be in default or there may be present elements
of danger with respect to principal or interest. Ca - Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. C - Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
EXCERPTS FROM STANDARD & POOR'S CORPORATION ("S&P") DESCRIPTION OF BOND
RATINGS: AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation and indicate an extremely strong capacity to pay
principal and interest. AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only to a
small degree. A - Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories. BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than for debt in higher rated
categories. BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. C - The rating C is reserved for income bonds on which no interest
is being paid. D - Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears.
DESCRIPTION OF MOODY'S RATINGS OF STATE AND MUNICIPAL NOTES: Moody's
ratings for state and municipal notes and other short-term obligations are
designated Moody's Investment Grade ("MIG"). Symbols used are as follows: MIG-1
- - best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established broad-based access to the market for
refinancing, or both; MIG-2 - high quality with margins of protection ample
although not so large as in the preceding group.
DESCRIPTION OF MOODY'S HIGHEST COMMERCIAL PAPER RATING: Prime-1 ("P1") -
Judged to be of the best quality. Their short-term debt obligations carry the
smallest degree of investment risk.
EXCERPT FROM S&P'S RATING OF MUNICIPAL NOTE ISSUES: S-1+ - very strong
capacity to pay principal and interest; SP-1 - strong capacity to pay principal
and interest.
DESCRIPTION OF S&P'S HIGHEST COMMERCIAL PAPER RATINGS: A-1+ - this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 - this designation indicates the degree of safety regarding
timely payment is very strong.
WITH RESPECT TO RATINGS BY IBCA LTD., the designation A1 by IBCA, Ltd.
indicates that the obligation is supported by a very strong capacity for timely
repayment. Those obligations rated A1+ are supported by the highest capacity for
timely repayment. Obligations rated A2 are supported by a strong capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
II. DESCRIPTION OF UNITED STATES GOVERNMENT SECURITIES
The term "United States Government securities" refers to a variety of
securities which are issued or guaranteed by the United States Government, and
by various instrumentalities which have been established or sponsored by the
United States Government.
United States Treasury securities are backed by the "full faith and credit"
of the United States. Securities issued or guaranteed by federal agencies and
United States Government sponsored instrumentalities may or may not be backed by
the full faith and credit of the United States. In the case of securities not
backed by the full faith and
28
<PAGE>
credit of the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
and may not be able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies which
are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Associates, are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service debt.
Debt from certain other agencies and instrumentalities, including the Federal
Home Loan Bank and Federal National Mortgage Association, are not guaranteed by
the United States, but those institutions are protected by the discretionary
authority for the United States Treasury to purchase certain amounts of their
securities to assist the institution in meeting its debt obligations. Finally,
other agencies and instrumentalities, such as the Farm Credit System and the
Federal Home Loan Mortgage Corporation, are federally chartered institutions
under Government supervision, but their debt securities are backed only by the
creditworthiness of those institutions, not the United States Government.
Some of the United States Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
An instrumentality of the United States Government is a Government agency
organized under federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Immediate
Credit Banks, and the Federal National Mortgage Association.
III. FOREIGN INVESTMENTS
The Aggressive Equity Fund may invest in securities of foreign issuers.
Investors should recognize that investing in such foreign securities involves
certain special considerations which are not typically associated with
investing in United States issuers. For a description of the effect on the
Aggressive Equity Fund of currency exchange rate fluctuations, see
"Investment Objectives and Policies -Forward Foreign Currency Exchange
Contracts" above. As foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards and may have policies
that are not comparable to those of domestic issuers, there may be less
information available about certain foreign companies than about domestic
issuers. Securities of some foreign issuers are generally less liquid and
more volatile than securities of comparable domestic issuers. There is
generally less government supervision and regulation of stock exchanges,
brokers and listed issuers than in the United States. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect United States investments in those
countries. Foreign securities not listed on a recognized domestic or foreign
exchange are regarded as not readily marketable and therefore such
investments will be limited to 15% of the Aggressive Equity Fund's net asset
value at the time of purchase.
Although the Aggressive Equity Fund will endeavor to achieve the most
favorable execution costs in their portfolio transactions, fixed commissions
on many foreign stock exchanges are generally higher than negotiated
commissions on United States exchanges.
Certain foreign governments levy withholding or other taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. It is not expected that
the Aggressive Equity Fund 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 the Aggressive
Equity Fund because its investment objective is to seek long-term capital
appreciation and any dividend or interest income should be considered
incidental.
FINANCIAL STATEMENTS
There are no financial statements for the Aggressive Equity Fund because
the Aggressive Equity Fund has just become operational as of the date of this
SAI.
29
<PAGE>
PART C
Morgan Stanley Fund, Inc.
Other Information
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
The registrant's audited financial highlights for the Morgan Stanley
Global Equity Allocation Fund, Morgan Stanley Global Fixed Income Fund,
Morgan Stanley Asian Growth Fund, Morgan Stanley American Value Fund and
Morgan Stanley Worldwide High Income Fund, respectively, for the fiscal
year ended June 30, 1994 and registrant's unaudited financial highlights
for such funds and the Morgan Stanley Emerging Markets Fund and Morgan
Stanley Latin American Fund for the periods ended December 31, 1994 are
included in the prospectus ("August 1995 prospectus") of the foregoing
funds which was filed as part of Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (File No. 33-51294) on
April 4, 1995 and in final form under Rule 497(e) via EDGAR on August 1,
1995 and which is incorporated herein by reference.
The registrant's audited financial statements for the Morgan Stanley
Global Equity Allocation Fund, Morgan Stanley Global Fixed Income Fund,
Morgan Stanley Asian Growth Fund, Morgan Stanley American Value Fund and
Morgan Stanley Worldwide High Income Fund, respectively, for the fiscal
year ended June 30, 1994, including Price Waterhouse LLP's report thereon,
and registrant's unaudited financial statements for such funds and the
Morgan Stanley Emerging Markets Fund and Morgan Stanley Latin American
Fund for the periods ended December 31, 1994 are included in the Statement
of Additional Information ("August 1995 SAI") for the foregoing funds
which was filed with the August 1995 Prospectus and which is incorporated
herein by reference. Included in the August 1995 SAI were the Report of
Independent Accountants relating only to the June 30, 1994 audited
financials and financial statements as follows:
1. Statement of Assets and Liabilities
2. Statement of Operations
3. Statement of Changes in Net Assets
4. Financial Highlights
5. Notes to Financial Statements
As of June 30, 1994, the Morgan Stanley Emerging Markets Fund, Morgan
Stanley European Equity Fund, Morgan Stanley Latin American Fund and Morgan
Stanley Growth and Income Fund had not yet commenced operations and the
Morgan Stanley Money Market Fund has ceased operations. Accordingly, no
audited financial highlights or statements were filed for such funds.
As of December 31, 1994 the Morgan Stanley European Equity Fund and the
Morgan Stanley Growth and Income Fund had not yet commenced operations.
Accordingly, no unaudited financial highlights or statements were filed
for such funds.
The Morgan Stanley Aggressive Equity Fund is not yet operational and
therefore the separate prospectus and SAI for such fund, which are filed
herewith, do not include financial highlights or statements.
(B) EXHIBITS
1 Amended and Restated Articles of Incorporation, filed herewith.
2 Amended and Restated By-laws, filed herewith.
3 Not applicable.
4 Registrant's Forms of Specimen Securities were previously filed and
are incorporated herein by reference.
5 (a) Investment Advisory Agreement between Registrant and Morgan
Stanley Asset Management Inc. with respect to the Morgan Stanley
Money Market Fund, the Morgan Stanley Global Fixed Income Fund
and the Morgan Stanley Global Equity Allocation Fund, filed
herewith.
(b) Amended Schedule A and Supplement to Investment Advisory
Agreement between Registrant and Morgan Stanley Asset Management
Inc. (adding Registrant's Asian Growth Fund and Small Cap Value
Equity Fund (currently the American Value Fund)), filed herewith.
(c) Supplement to Investment Advisory Agreement between the
Registrant and Morgan Stanley Asset Management Inc. (adding
Registrant's Worldwide High Income Fund), filed herewith.
(d) Supplement to Investment Advisory Agreement between the
Registrant and Morgan Stanley Asset Management Inc. (adding
Registrant's Growth and Income Fund, European Equity Fund, Latin
American Fund and Emerging Markets Fund), filed herewith.
(e) Supplement to Investment Advisory Agreement between the
Registrant and Morgan Stanley Asset Management Inc. (adding
Registrant's Aggressive Equity Fund), filed herewith.
6 Form of Distribution Agreement between Registrant and Morgan Stanley &
Co. Incorporated is incorporated herein by reference to Pre-Effective
Amendment No. 2 to Registrant's
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Registration Statement on Form N-1A (File No. 33-51294) filed with the
Securities and Exchange Commission on November 25, 1992.
7 Not applicable.
8 (a) Form of Registrant's Custodian Agreement is incorporated herein
by reference to Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A (File No. 33-51294) filed
with the Securities and Exchange Commission on November 25, 1992.
(b) Registrant's Global Custody Agreement is incorporated herein by
reference to Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A (File No. 33-51294) filed
with the Securities and Exchange Commission on November 25, 1992.
9 (a) Form of Administration Agreement between Registrant and Morgan
Stanley Asset Management Inc. is incorporated herein by reference
to Pre-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A (File No. 33-51294) filed with the
Securities and Exchange Commission on November 25, 1992.
(b) United States Trust Administration Agreement is incorporated
herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No. 33-
51294) filed with the Securities and Exchange Commission on
November 25, 1992.
(c) Form of Amended Schedule A and Amended Administration Agreement
between Registrant and Morgan Stanley Asset Management Inc. with
respect to the Morgan Stanley Asian Growth Fund and Morgan
Stanley Small Cap Value Equity Fund (currently the Morgan Stanley
American Value Fund) is incorporated herein by reference to Post-
Effective Amendment No. 1 to Registrant's Registration Statement
on Form N-1A (File No. 33-51294) filed with the Securities and
Exchange Commission on March 18, 1993.
10 Opinion of Counsel is incorporated herein by reference to Pre-
Effective Amendment No. 3 to Registrant's Registration Statement on
Form N-1A (File No. 33-51294) filed with the Securities and Exchange
Commission on December 30, 1992.
11 Consent of Independent Accountants, filed herewith.
12 Not applicable.
13 Form of Purchase Agreement is incorporated herein by reference to Pre-
Effective Amendment No. 3 to Registrant's Registration Statement on
Form N-1A (File No. 33-51294) filed with the Securities and Exchange
Commission on December 30, 1992.
14 Not applicable.
15 (a) Form of Plan of Distribution Pursuant to Rule 12b-1 for shares of
the Morgan Stanley Money Market Fund is incorporated herein by
reference to Registrant's Registration
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<PAGE>
Statement on Form N-1A (File No. 33-51294) filed with the
Securities and Exchange Commission on August 25, 1992.
(b) Plan of Distribution Pursuant to Rule 12b-1 for Class A Shares
(the "Class A Plan") of the Morgan Stanley Aggressive Equity
Fund, filed herewith. The following Class A Plans have been
omitted because they are substantially identical to the one filed
herewith. The omitted Class A Plans differ from the Class A Plan
filed herewith only in references to the Investment Fund to which
the Class A Plan relates: Morgan Stanley Global Fixed Income
Fund, Morgan Stanley Asian Growth Fund, Morgan Stanley Small Cap
Value Equity Fund (currently the Morgan Stanley American Value
Fund), Morgan Stanley Worldwide High Income Fund, Morgan Stanley
Emerging Markets Fund, Morgan Stanley Latin American Fund, Morgan
Stanley European Equity Fund, Morgan Stanley Global Equity
Allocation Fund, and Morgan Stanley Growth and Income Fund.
(c) Form of Plan of Distribution Pursuant to Rule 12b-1 for Class B
Shares (the "Class B Plan") of the Morgan Stanley Aggressive
Equity Fund is filed herewith. The following Class B Plans have
been omitted because they are substantially identical to the one
filed herewith. The omitted Class B Plans differ from the Class
B Plan filed herewith only in references to the Investment Fund
to which the Plan relates: Morgan Stanley Global Fixed Income
Fund, Morgan Stanley Asian Growth Fund, Morgan Stanley Small Cap
Value Equity Fund (currently the Morgan Stanley American Value
Fund), Morgan Stanley Worldwide High Income Fund, Morgan Stanley
Emerging Markets Fund, Morgan Stanley Latin American Fund, Morgan
Stanley European Equity Fund, Morgan Stanley Global Equity
Allocation Fund, and Morgan Stanley Growth and Income Fund.
(d) Plan of Distribution Pursuant to Rule 12b-1 for Class B Shares
(now known as Class C Shares) and referred to as the "Class C
Plan" of the Morgan Stanley Aggressive Equity Fund, filed
herewith. The following Class C Plans have been omitted because
they are substantially identical to the one filed herewith. The
omitted Class C Plans differ from the Class C Plan filed herewith
only in references to the Investment Fund to which the Plan
relates: Morgan Stanley Global Fixed Income Fund, Morgan Stanley
Asian Growth Fund, Morgan Stanley Small Cap Value Equity Fund
(currently the Morgan Stanley American Value Fund), Morgan
Stanley Worldwide High Income Fund, Morgan Stanley Emerging
Markets Fund, Morgan Stanley Latin American Fund, Morgan Stanley
European Equity Fund, Morgan Stanley Global Equity Allocation
Fund, and Morgan Stanley Growth and Income Fund.
16 Schedule of Computation of Performance Information is incorporated
herein by reference to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (File No. 33-51294) filed with the
Securities and Exchange Commission on March 18, 1993.
19 Registrant's Form of Rule 18f-3 Multiple Class Plan, filed herewith.
24 Powers of Attorney, filed herewith.
27 No financial data schedules are filed herewith because there are
no financial statements.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
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No person is controlled by or under common control with the
Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following information is given as of June 30, 1995.
Number of
Title of Class Record Holders
-------------- --------------
Morgan Stanley Global Equity Allocation Fund-Class A . 3,198
Morgan Stanley Global Equity Allocation Fund-Class B . 63
Morgan Stanley Global Equity Allocation Fund-Class C . 343
Morgan Stanley Global Fixed Income Fund-Class A. . . . 340
Morgan Stanley Global Fixed Income Fund-Class B. . . . 7
Morgan Stanley Global Fixed Income Fund-Class C. . . . 189
Morgan Stanley Asian Growth Fund-Class A . . . . . . . 16,629
Morgan Stanley Asian Growth Fund-Class B . . . . . . . 217
Morgan Stanley Asian Growth Fund-Class C . . . . . . . 12,120
Morgan Stanley Emerging Markets Fund-Class A . . . . . 2,212
Morgan Stanley Emerging Markets Fund-Class B . . . . . 85
Morgan Stanley Emerging Markets Fund-Class C . . . . . 2,230
Morgan Stanley Latin American Fund-Class A . . . . . . 807
Morgan Stanley Latin American Fund-Class B . . . . . . 6
Morgan Stanley Latin American Fund-Class C . . . . . . 435
Morgan Stanley European Equity Fund-Class A. . . . . . 0
Morgan Stanley European Equity Fund-Class B. . . . . . 0
Morgan Stanley European Equity Fund-Class C. . . . . . 0
Morgan Stanley American Value Fund-Class A . . . . . . 1,153
Morgan Stanley American Value Fund-Class B . . . . . . 48
Morgan Stanley American Value Fund-Class C . . . . . . 942
Morgan Stanley Worldwide High Income Fund-Class A. . . 806
Morgan Stanley Worldwide High Income Fund-Class B. . . 165
Morgan Stanley Worldwide High Income Fund-Class C. . . 660
Morgan Stanley Money Market Fund . . . . . . . . . . . 0
ITEM 27. INDEMNIFICATION
Reference is made to Article SEVEN of the Registrant's Articles of
Incorporation. Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
directors, 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 (the "Commission") such
indemnification is against public policy as expressed in the 1933 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 director, 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 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the caption "Management of the Fund--Investment
Adviser" in the Prospectus constituting Part A of this Registration Statement
and "Management of the Fund" in Part B of this Registration Statement.
Listed below are the officers and Directors of Morgan Stanley Asset
Management Inc. ("MSAM"). The information as to any other business, profession,
vocation, or employment of a substantial
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<PAGE>
nature engaged in by the Chairman, President and Directors during the past two
fiscal years, is incorporated by reference to Schedules A and D of Form ADV
filed by MSAM pursuant to the Advisers Act (SEC File No. 801-15757).
Barton M. Biggs, Chairman and Director
Peter A. Nadosy, President, Director and Managing Director
James M. Allwin, Chief Operating Officer and Managing Director
F. Dominic Caldecott, Managing Director (MSAM) - UK
A. Macdonald Caputo, Managing Director
Ean Wah Chin, Managing Director (MSAM) - Singapore
Garry B. Crowder, Managing Director
Michael A. Crowe, Managing Director
Madhav Dhar, Vice President and Managing Director
Kurt A. Feuerman, Managing Director
Gordon S. Gray, Vice President, Managing Director and Director
Gary D. Latainer, Managing Director
Dennis G. Sherva, Vice President, Managing Director and Director
Richard G. Woolworth, Jr., Vice President and Managing Director
Richard B. Fisher, Director
Donald H. McAllister, Director
Robert E. Angevine, Vice President and Principal
Gerald P. Barth, Vice President and Principal
S. Nicoll Benjamin, Jr., Vice President
Josephine M. Glass, Vice President
Richard S. Brody, Vice President
Terence P. Carmichael, Vice President and Principal
Ean Wah Chin, Vice President
Mary T. Coughlin, Vice President
Eileen F. Cresham, Vice President and Principal
Garry B. Crowder
Michael A. Crowe, Vice President
Pierre J. deVegh
Abigail J. Feder, Vice President
Robert P. Follert, Vice President
George W. Gardner, Vice President
Geoffrey C. Getman, Vice President
James W. Grisham, Vice President and Principal
Perry E. Hall, II, Vice President and Principal
Bruce S. Ives, Vice President and Principal
Paul J. Jackson, Vice President
Margaret A. Kinsley, Vice President and Principal
John D. Knox, Vice President
Christopher A. H. Lewis, Vice President
Marianne J. Lippmann, Vice President and Principal
Gary J. Mangino, Vice President and Principal
Winslow M. Marston, Vice President
Walter Maynard, Jr., Vice President and Principal
Amr M. Nosseir, Vice President
Warren J. Olsen, Vice President and Principal
Anthony J. Pesce, Vice President
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<PAGE>
Christopher G. Petrow, Vice President and Principal
Robin H. Prince, Vice President
Gail H. Reeke, Vice President and Principal
Thomas A. Rorro, Vice President
Bruce R. Sandberg, Vice President and Principal
Vinod R. Sethi, Vice President and Principal
Steven C. Sexauer, Vice President and Principal
Kim I. Spellman, Vice President
Joseph P. Stadler, Vice President
Kenneth E. Tanaka, Vice President
Susan I. Tuomi, Vice President
Philip W. Warner, Vice President and Principal
Philip W. Winters, Vice President and Principal
Alford E. Zick, Jr., Vice President and Principal
Marshall T. Bassett, Vice President
Jeffrey G. Boudy, Vice President
L. Kenneth Brooks, Vice President
Andrew C. Brown, Vice President (MSAM) - UK
Frances Campion, Vice President (MSAM) - UK
Carl Kuo-Wei Chien, Vice President (MSAM) - Hong Kong
Lori A. Cohane, Vice President
James Colmenares, Vice President
Kate Cornish-Bowden, Vice President (MSAM) - UK
Bertrand Le PanDe Ligny, Vice President (MSAM) - UK
Christine H. du Bois, Vice President
Raye L. Dube, Vice President
Maureen A. Grover, Vice President
Kenneth R. Holley, Vice President
Nan B. Levy, Vice President
Valerie Y. Lewis, Vice President
Gordon W. Loery, Vice President
Yvonne Longley, Vice President (MSAM) - UK
Jeffrey Margolis, Vice President
Paula J. Morgan, Vice President (MSAM) - UK
Clare K. Mutone, Vice President
Martin O. Pearce, Vice President (MSAM) - UK
Alexander A. Pena, Vice President
David J. Polansky, Vice President
Denise Saber, Vice President (MSAM) - UK
Michael James Smith, Vice President (MSAM) - UK
Christian K. Stadlinger, Vice President
Catherine Steinhardt, Vice President
Kunihiko Sugio, Vice President (MSAM) - Tokyo
Joseph Y.S. Tern, Vice President (MSAM) - Singapore
Ann D. Thivierge, Vice President
Richard Boon Hwee Toh, Vice President (MSAM) - Singapore
K.N. Vaidyanathan, Vice President (MSAM) - Bombay
Kevin V. Wasp, Vice President
Warren Ackerman, III, Principal
John R. Alkire, Principal (MSAM) - Tokyo
Francine J. Bovich, Principal
Stuart J.M. Breslow, Principal
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<PAGE>
Arthur Certosimo, Principal
James K.K. Cheno, Principal (MSAM) - Singapore
Stephen C. Cordy, Principal
Jacqueline A. Day, Principal (MSAM) - UK
Paul B. Ghaffari, Principal
Marianne Laing Hay, Principal (MSAM) - UK
Kathryn Jonas Kasanoff, Principal
Debra A.F. Kushma, Principal
M. Paul Martin, Principal
Robert L. Meyer, Principal
Margaret P. Naylor, Principal (MSAM) - UK
Russell C. Platt, Principal
Christine T. Reilly, Principal
Robert A. Sargent, Principal (MSAM) - UK
Harold J. Schaaff, Jr., Secretary, Principal and General Counsel
Kiat Seng Seah, Principal (MSAM) - Singapore
Robert M. Smith, Principal
Charles B. Hintz, Treasurer
Madeline Diaz, Assistant Secretary
Madeline D. Barkhorn, Assistant Secretary
Charlene R. Herzer, Assistant Secretary
In addition, MSAM acts as investment adviser to the following
registered investment companies: American Advantage International Equity Fund;
The Brazilian Investment Fund, Inc.; The Enterprise Group of Funds, Inc. - Tax-
Exempt Income Portfolio; Fortis Series Fund, Inc. - Global Asset Allocation
Series; Fountain Square International Equity Fund; General American Capital
Company; The Latin American Discovery Fund, Inc.; certain portfolios of The
Legends Fund, Inc.; The Malaysia Fund, Inc.; Morgan Stanley Africa Investment
Fund, Inc.; Morgan Stanley Asia-Pacific Fund, Inc.; Morgan Stanley Emerging
Markets Debt Fund, Inc.; Morgan Stanley Emerging Markets Fund, Inc.; Morgan
Stanley European Emerging Markets Fund, Inc.; all funds of the Morgan Stanley
Fund, Inc.; Morgan Stanley Global Opportunity Bond Fund, Inc.; The Morgan
Stanley High Yield Fund, Inc.; Morgan Stanley India Investment Fund, Inc.;
Morgan Stanley Institutional Fund, Inc.; The Pakistan Investment Fund, Inc.; PCS
Cash Fund, Inc.; Principal Aggressive Growth Fund, Inc.; Principal Asset
Allocation Fund, Inc.; certain portfolios of Sun America Series Trust; SEI
Institutional Managed Trust - Balanced Portfolio; The Thai Fund, Inc. and The
Turkish Investment Fund, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS
Morgan Stanley & Co. Incorporated ("MS&Co.") is distributor for
Morgan Stanley Institutional Fund, Inc., Morgan Stanley Fund, Inc., and PCS Cash
Fund, Inc. The information required by this Item 29 with respect to each
Director and officer of MS&Co. is incorporated by reference to Schedule A of
Form BD filed by MS&Co. pursuant to the Securities and Exchange Act of 1934 (SEC
File No. 8-15869).
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a)
under the Investment Company Act of 1940, as amended, and the rules promulgated
thereunder are maintained in the physical possession of the Registrant;
Registrant's Transfer Agent and Sub-Administrator, Mutual Funds Service Company,
73 Tremont Street, P.O. Box 2798, Boston, Massachusetts 02208-2798; and the
Registrant's custodian banks, including sub-custodians.
ITEM 31. MANAGEMENT SERVICES
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Morgan Stanley Asset Management Inc. ("MSAM") has entered into a
U.S. Trust Administration Agreement with The Chase Manhattan Bank,
N.A. ("Chase"), successor in interest to United States Trust Company of New
York (which is incorporated herein by reference to Exhibit No. 9(b) to Pre-
Effective Amendment No. 2 to Registrant's Registration Statement) pursuant to
which Chase will provide the following services to the Registrant: (i) managing,
administering and conducting the general business activities of the Registrant,
other than those which are contracted to third parties; (ii) providing personnel
and facilities to perform the foregoing; (iii) accounting services, including
the preparation of statements and reports; (iv) transfer agent services,
including processing correspondence from shareholders, recording transfers,
issuing stock certificates and handling checks; (v) handling dividends and
distributions, including disbursing, withholding and tax reporting; and (vi)
providing office facilities, statistical and research data, office supplies and
assisting the Registrant to comply with regulatory developments.
ITEM 32. UNDERTAKINGS
1. Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified,
for the Morgan Stanley European Equity Fund, Morgan Stanley Growth and Income
Fund and Morgan Stanley Aggressive Equity Fund, within four to six months of
their effective date or the commencement of operations of each such Investment
Fund, whichever is later.
2. Registrant hereby undertakes that whenever a Shareholder or
Shareholders who meet the requirements of Section 16(c) of the 1940 Act inform
the Board of Directors of his or their desire to communicate with other
Shareholders of the Fund, the Directors will inform such Shareholder(s) as to
the approximate number of Shareholders of record and the approximate costs of
mailing or afford said Shareholders access to a list of Shareholders.
3. Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's annual report to
shareholders, upon request and without charge.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(a) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and State
of New York, on October 2, 1995.
MORGAN STANLEY FUND, INC.
By: /s/ Warren J. Olsen
--------------------
Warren J. Olsen
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Warren J. Olsen Director, President October 2, 1995
- ------------------------- ---------------
Warren J. Olsen (Principal Executive Date
Officer)
*/s/ Barton M. Biggs Director (Chairman) October 2, 1995
- ------------------------- ---------------
Barton M. Biggs Date
*/s/ Fergus Reid Director October 2, 1995
- ------------------------- ---------------
Fergus Reid Date
*/s/ Frederick O. Robertshaw Director October 2, 1995
- ---------------------------- ---------------
Frederick O. Robertshaw Date
*/s/ Andrew McNally IV Director October 2, 1995
- -------------------------- ---------------
Andrew McNally IV Date
*/s/ John D. Barrett II Director October 2, 1995
- ------------------------- ---------------
John D. Barrett II Date
*/s/ Gerard E. Jones Director October 2, 1995
- ------------------------- ---------------
Gerard E. Jones Date
*/s/ Samuel T. Reeves Director October 2, 1995
- ------------------------- ---------------
Samuel T. Reeves Date
*/s/ Frederick B. Whittemore Director October 2, 1995
- ---------------------------- ---------------
Frederick B. Whittemore Date
*/s/ James R. Rooney Treasurer October 2, 1995
- ------------------------- ---------------
James R. Rooney (Principal Date
Accounting
Officer)
*By: /s/ Warren J. Olsen
----------------------
Warren J. Olsen
Attorney-In-Fact
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
1 Amended and Restated Articles of Incorporation, filed herewith.
2 Amended and Restated By-laws, filed herewith.
3 Not applicable.
4 Registrant's Forms of Specimen Securities were previously filed
and are incorporated herein by reference.
5 (a) Investment Advisory Agreement between Registrant and Morgan
Stanley Asset Management Inc. with respect to the Morgan
Stanley Money Market Fund, the Morgan Stanley Global Fixed
Income Fund and the Morgan Stanley Global Equity Allocation
Fund, filed herewith.
(b) Amended Schedule A and Supplement to Investment Advisory
Agreement between Registrant and Morgan Stanley Asset
Management Inc. (adding Registrant's Asian Growth Fund and
Small Cap Value Equity Fund (currently the American Value
Fund)), filed herewith.
(c) Supplement to Investment Advisory Agreement between the
Registrant and Morgan Stanley Asset Management Inc. (adding
Registrant's Worldwide High Income Fund), filed herewith.
(d) Supplement to Investment Advisory Agreement between the
Registrant and Morgan Stanley Asset Management Inc. (adding
Registrant's Growth and Income Fund, European Equity Fund,
Latin American Fund and Emerging Markets Fund), filed
herewith.
(e) Supplement to Investment Advisory Agreement between the
Registrant and Morgan Stanley Asset Management Inc. (adding
Registrant's Agressive Equity Fund), filed herewith.
6 Form of Distribution Agreement between Registrant and Morgan
Stanley & Co. Incorporated is incorporated herein by reference to
Pre-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A (File No. 33-51294) filed with the
Securities and Exchange Commission on November 25, 1992.
7 Not applicable.
8 (a) Form of Registrant's Custodian Agreement is incorporated
herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No.
33-51294) filed with the Securities and Exchange Commission
on November 25, 1992.
(b) Registrant's Global Custody Agreement is incorporated herein
by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No.
33-51294) filed with the Securities and Exchange Commission
on November 25, 1992.
9 (a) Form of Administration Agreement between Registrant and
Morgan Stanley Asset Management Inc. is incorporated herein
by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File
No. 33-51294) filed with the Securities and Exchange
Commission on November 25, 1992.
<PAGE>
(b) United States Trust Administration Agreement is incorporated
herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No.
33-51294) filed with the Securities and Exchange Commission
on November 25, 1992.
(c) Form of Amended Schedule A and Amended Administration
Agreement between Registrant and Morgan Stanley Asset
Management Inc. with respect to the Morgan Stanley Asian
Growth Fund and Morgan Stanley Small Cap Value Equity Fund
(currently the Morgan Stanley American Value Fund) is
incorporated herein by reference to Post-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 33-51294) filed with the Securities and Exchange
Commission on March 18, 1993.
10 Opinion of Counsel is incorporated herein by reference to Pre-
Effective Amendment No. 3 to Registrant's Registration Statement
on Form N-1A (File No. 33-51294) filed with the Securities and
Exchange Commission on December 30, 1992.
11 Consent of Independent Accountants, filed herewith.
12 Not applicable.
13 Form of Purchase Agreement is incorporated herein by reference to
Pre-Effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A (File No. 33-51294) filed with the
Securities and Exchange Commission on December 30, 1992.
14 Not applicable.
15 (a) Form of Plan of Distribution Pursuant to Rule 12b-1 for
shares of the Morgan Stanley Money Market Fund is
incorporated herein by reference to Registrant's
Registration Statement on Form N-1A (File No. 33-51294)
filed with the Securities and Exchange Commission on August
25, 1992.
(b) Plan of Distribution Pursuant to Rule 12b-1 for Class A
Shares (the "Class A Plan") of the Morgan Stanley Aggressive
Equity Fund, filed herewith. The following Class A Plans
have been omitted because they are substantially identical
to the one filed herewith. The omitted Class A Plans differ
from the Class A Plan filed herewith only in references to
the Investment Fund to which the Class A Plan relates:
Morgan Stanley Global Fixed Income Fund, Morgan Stanley
Asian Growth Fund, Morgan Stanley Small Cap Value Equity
Fund (currently the Morgan Stanley American Value Fund),
Morgan Stanley Worldwide High Income Fund, Morgan Stanley
Emerging Markets Fund, Morgan Stanley Latin American Fund,
Morgan Stanley European Equity Fund, Morgan Stanley Global
Equity Allocation Fund, and Morgan Stanley Growth and Income
Fund.
(c) Form of Plan of Distribution Pursuant to Rule 12b-1 for
Class B Shares (the "Class B Plan") of the Morgan Stanley
Aggressive Equity Fund is filed herewith. The following
Class B Plans have been omitted because they are
substantially identical to the one filed herewith. The
omitted Class B Plans differ from the Class B Plan filed
herewith only in references to the Investment Fund to which
the Plan relates: Morgan Stanley Global Fixed Income Fund,
Morgan Stanley Asian Growth Fund, Morgan Stanley Small Cap
Value Equity Fund (currently the Morgan Stanley American
Value Fund), Morgan Stanley Worldwide High Income Fund,
Morgan Stanley Emerging Markets Fund, Morgan Stanley Latin
American Fund, Morgan Stanley European Equity Fund, Morgan
Stanley Global Equity Allocation Fund, and Morgan Stanley
Growth and Income Fund.
(d) Plan of Distribution Pursuant to Rule 12b-1 for Class B
Shares (now known as Class C Shares) and referred to as the
"Class C Plan" of the Morgan Stanley Aggressive Equity Fund,
filed herewith. The following Class C Plans have been
omitted because they are
<PAGE>
substantially identical to the one filed herewith. The
omitted Class C Plans differ from the Class C Plan filed
herewith only in references to the Investment Fund to which
the Plan relates: Morgan Stanley Global Fixed Income Fund,
Morgan Stanley Asian Growth Fund, Morgan Stanley Small Cap
Value Equity Fund (currently the Morgan Stanley American
Value Fund), Morgan Stanley Worldwide High Income Fund,
Morgan Stanley Emerging Markets Fund, Morgan Stanley Latin
American Fund, Morgan Stanley European Equity Fund, Morgan
Stanley Global Equity Allocation Fund, and Morgan Stanley
Growth and Income Fund.
16 Schedule of Computation of Performance Information is
incorporated herein by reference to Post-Effective Amendment No.
1 to Registrant's Registration Statement on Form N-1A (File No.
33-51294) filed with the Securities and Exchange Commission on
March 18, 1993.
19 Registrant's Form of Rule 18f-3 Multiple Class Plan, filed
herewith.
24 Powers of Attorney, filed herewith.
27 No financial data schedules are filed herewith because there are
no financial statements.
<PAGE>
ARTICLES OF AMENDMENT AND RESTATEMENT
MORGAN STANLEY FUND, INC.
Morgan Stanley Fund, Inc., a Maryland corporation having its principal
office in Baltimore, Maryland and having its resident agent located in
Baltimore, Maryland (herein after called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation that:
FIRST: The Corporation desires to amend and restate its Charter as currently
in effect. The amendment and restatement of the Charter of the Corporation was
approved by a majority of the entire Board of Directors of the Corporation at a
meeting duly convened and held on September 20, 1995. The amendment is limited
(i) to changes expressly permitted by Section 2-605 of Maryland General
Corporation Law to be made without action by the stockholders, and (ii),
pursuant to Section 2-105 of the Maryland General Corporation Law, to an
increase in the aggregate number of shares of stock or the number of shares of
stock of any class that the Corporation has authority to issue. The Corporation
is registered as an open-end company under the Investment Company Act of 1940,
as amended. The provisions set forth in the Articles of Amendment and
Restatement are all the provisions of the Charter currently in effect, except
for the limited amendments as stated above.
SECOND: Prior to this amendment to the Charter which increases the number of
shares of authorized stock as set forth in Article Fifth thereof, the
Corporation was authorized to issue eleven billion one hundred twenty-five
million (11,125,000,000) shares of common stock with a par value of one-tenth of
one cent ($.001) per share, having an aggregate par value of eleven million one
hundred twenty-five thousand dollars ($11,125,000) and classified into ten
portfolios each having three classes of shares, except the Morgan Stanley Money
Market Fund which has only a single class of shares, and allocated as follows:
NUMBER OF SHARES OF
COMMON STOCK
NAME OF CLASS CLASSIFIED AND ALLOCATED
- ------------- ------------------------
Morgan Stanley Money Market Fund 1,000,000,000 shares
Morgan Stanley Global Equity
Allocation Fund - Class A 375,000,000 shares
Morgan Stanley Global Equity
Allocation Fund - Class B 375,000,000 shares
Morgan Stanley Global Equity
Allocation Fund - Class C 375,000,000 shares
Morgan Stanley Global Fixed Income
Fund - Class A 375,000,000 shares
Morgan Stanley Global Fixed Income
Fund - Class B 375,000,000 shares
<PAGE>
Morgan Stanley Global Fixed Income
Fund - Class C 375,000,000 shares
Morgan Stanley Asian Growth Fund
- Class A 375,000,000 shares
Morgan Stanley Asian Growth Fund
- Class B 375,000,000 shares
Morgan Stanley Asian Growth Fund
- Class C 375,000,000 shares
Morgan Stanley American Value Fund
- Class A 375,000,000 shares
Morgan Stanley American Value Fund
- Class B 375,000,000 shares
Morgan Stanley American Value Fund
- Class C 375,000,000 shares
Morgan Stanley Worldwide High Income Fund
- Class A 375,000,000 shares
Morgan Stanley Worldwide High Income Fund
- Class B 375,000,000 shares
Morgan Stanley Worldwide High Income Fund
- Class C 375,000,000 shares
Morgan Stanley Emerging Markets Fund
- Class A 375,000,000 shares
Morgan Stanley Emerging Markets Fund
- Class B 375,000,000 shares
Morgan Stanley Emerging Markets Fund
- Class C 375,000,000 shares
Morgan Stanley Latin American Fund
- Class A 375,000,000 shares
Morgan Stanley Latin American Fund
- Class B 375,000,000 shares
Morgan Stanley Latin American Fund
- Class C 375,000,000 shares
Morgan Stanley European Equity Fund
- Class A 375,000,000 shares
Morgan Stanley European Equity Fund
- Class B 375,000,000 shares
Morgan Stanley European Equity Fund
- Class C 375,000,000 shares
Morgan Stanley Growth and Income Fund
- Class A 375,000,000 shares
Morgan Stanley Growth and Income Fund
- Class B 375,000,000 shares
Morgan Stanley Growth and Income Fund
- Class C 375,000,000 shares
THIRD: The information required by subsection (b)(2)(i) of Section 2-607 of
the Maryland General Corporation Law was not changed by this amendment to the
Charter.
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<PAGE>
FOURTH: The Charter of the Corporation is hereby amended and restated in full
as follows: by striking out Articles First through Thirteenth and inserting in
lieu thereof the following:
FIRST: I, THE UNDERSIGNED, Harold J. Schaaff, whose post office
address is 1221 Avenue of the Americas, New York, New York, 10020, being at
least twenty-one years of age, do under and by virtue of the General Laws of the
State of Maryland authorizing the formation of corporations, associate myself as
incorporator with the intention of forming a corporation (hereinafter called the
"Corporation").
SECOND: The name of the Corporation is Morgan Stanley Fund, Inc.
THIRD: The purpose for which the Corporation is formed is to act as
an open-end management investment company under the federal Investment Company
Act of 1940 as then in effect and the rules and regulations from time to time
promulgated and effective thereunder (referred to herein collectively as the
"Investment Company Act of 1940") and to exercise and enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations by the General
Laws of the State of Maryland now or hereafter in force.
FOURTH: The post office address of the principal office of the
Corporation in this State is 100 Light Street, Baltimore, Maryland 21202. The
name of the resident agent in this State is CSC-Lawyers Incorporating Service
Company, James E. Baker, Esquire, who resides in this State, and the post office
address of the resident agent is 100 Light Street, 6th Floor, Baltimore,
Maryland 21202.
FIFTH: 1. The total number of shares of stock which the Corporation
shall have the authority to issue is thirteen billion three hundred seventy-five
million (13,375,000,000) shares of stock, with a par value of one-tenth of one
cent ($.001) per share to be known and designated as Common Stock, such shares
of Common Stock having an aggregate par value of thirteen million three hundred
seventy-five thousand dollars ($13,375,000). The Board of Directors shall have
power and authority to increase or decrease, from time to time, the aggregate
number of shares of stock, or any class of stock, which the Corporation shall
have the authority to issue.
2. Subject to the provisions of these Articles of Amendment and
Restatement, the Board of Directors shall have the power to issue shares of
Common Stock of the Corporation from time to time, at prices not less than the
net asset value or par value thereof, whichever is greater, for such
consideration as may be fixed from time to time pursuant to the direction of the
Board of Directors. All stock shall be issued on a non-assessable basis.
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<PAGE>
3. 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 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 designated
twelve portfolios of the Corporation and for each of which has designated three
classes of shares of Common Stock of the Corporation, except for the Morgan
Stanley Money Market Fund, for which the Board of Directors has designated only
a single class of shares of Common Stock of the Corporation. 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
- ------------- ------------------------
Morgan Stanley Money Market Fund 1,000,000,000 shares
Morgan Stanley Global Equity
Allocation Fund - Class A 375,000,000 shares
Morgan Stanley Global Equity
Allocation Fund - Class B 375,000,000 shares
Morgan Stanley Global Equity
Allocation Fund - Class C 375,000,000 shares
Morgan Stanley Global Fixed Income
Fund - Class A 375,000,000 shares
Morgan Stanley Global Fixed Income
Fund - Class B 375,000,000 shares
Morgan Stanley Global Fixed Income
Fund - Class C 375,000,000 shares
Morgan Stanley Asian Growth Fund
- Class A 375,000,000 shares
Morgan Stanley Asian Growth Fund
- Class B 375,000,000 shares
Morgan Stanley Asian Growth Fund
- Class C 375,000,000 shares
Morgan Stanley American Value Fund
- Class A 375,000,000 shares
Morgan Stanley American Value Fund
- Class B 375,000,000 shares
-4-
<PAGE>
Morgan Stanley American Value Fund
- Class C 375,000,000 shares
Morgan Stanley Worldwide High Income Fund
- Class A 375,000,000 shares
Morgan Stanley Worldwide High Income Fund
- Class B 375,000,000 shares
Morgan Stanley Worldwide High Income Fund
- Class C 375,000,000 shares
Morgan Stanley Emerging Markets Fund
- Class A 375,000,000 shares
Morgan Stanley Emerging Markets Fund
- Class B 375,000,000 shares
Morgan Stanley Emerging Markets Fund
- Class C 375,000,000 shares
Morgan Stanley Latin American Fund
- Class A 375,000,000 shares
Morgan Stanley Latin American Fund
- Class B 375,000,000 shares
Morgan Stanley Latin American Fund
- Class C 375,000,000 shares
Morgan Stanley European Equity Fund
- Class A 375,000,000 shares
Morgan Stanley European Equity Fund
- Class B 375,000,000 shares
Morgan Stanley European Equity Fund
- Class C 375,000,000 shares
Morgan Stanley Growth and Income Fund
- Class A 375,000,000 shares
Morgan Stanley Growth and Income Fund
- Class B 375,000,000 shares
Morgan Stanley Growth and Income Fund
- Class C 375,000,000 shares
Morgan Stanley International Magnum Fund
- Class A 375,000,000 shares
Morgan Stanley International Magnum Fund
- Class B 375,000,000 shares
Morgan Stanley International Magnum Fund
- Class C 375,000,000 shares
Morgan Stanley Aggressive Equity Fund
- Class A 375,000,000 shares
Morgan Stanley Aggressive Equity Fund
- Class B 375,000,000 shares
Morgan Stanley Aggressive Equity Fund
- Class C 375,000,000 shares
4. Each share of a class shall have equal rights with each other
share of that class with respect to the assets of the Corporation pertaining to
that class. The dividends payable to the holders of any class (subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or any other applicable law or regulation) shall be determined by the Board and
need not be individually declared, but may be declared and paid in accordance
with a formula adopted by the
-5-
<PAGE>
Board. Whether or not the amount of dividend or distribution so declared can be
calculated at the time of such declaration.
5. The holder of each share of stock of the Corporation shall be
entitled to one vote for each full share and a fractional vote for each
fractional share of stock, irrespective of the class, then outstanding in his or
her name in the books of the Corporation. On any matter submitted to a vote of
stockholders, all shares of the Corporation then issued and outstanding and
entitled to vote, irrespective of the class, shall be voted in the aggregate and
not by class except (1) when otherwise expressly provided by the Maryland
General Corporation Law, or (2) when required by the Investment Company Act of
1940, as amended, shares shall be voted by individual class and (3) when the
matter does not affect any interest of a particular class, then only
stockholders of such other class or classes whose interests may be affected
shall be entitled to vote hereon. Holders of shares of stock of the Corporation
shall not be entitled to cumulative voting in the election of Directors or on
any other matter.
6. All consideration received by the Corporation for the issue or
sale of stock of each class, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived form any reinvestment of
such proceeds in whatever form the same may be, shall belong to the class of
shares of stock with respect to which such assets, payments or funds were
received by the Corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the Corporation.
Such assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof and any assets
derived from any reinvestment of such proceeds in whatever form the same may be,
and herein referred to as "assets belonging to" such class.
7. The Board of Directors may from time to time declare and pay
dividends or distributions, in stock property or in cash, on any or all classes
of stock and to the stockholders of record as of such date as the Board of
Directors may determine, provided such dividends or distributions on shares of
any class of stock shall be paid only out of earnings, surplus, or other
lawfully available assets belonging to such class. Subject to the foregoing
proviso, the amount of any dividends or distributions and the payment thereof
shall be wholly in the discretion of the Board of Directors.
8. In the event of the liquidation or dissolution of the
Corporation, stockholders of each class shall be entitled to receive, as a
class, out of the assets of the Corporation available for distribution to
stockholders, but other than general assets, the assets belonging to such class
and the assets
-6-
<PAGE>
so distributable to the stockholders of any class shall be distributed among
such stockholders in proportion to the number of shares of such class held by
them and recorded on the books of the Corporation. In the event that there are
any general assets not belonging to any particular class of stock and available
for distribution, such distribution shall be made to the holders of stock of all
classes in proportion to the net asset value of the respective class determined
as hereinafter provided.
9. The assets belonging to any class of stock shall be charged with
the liabilities in respect to such class and shall also be charged with its
share of the general liabilities of the Corporation, in proportion to the net
asset value of the respective class determined as hereinafter provided. The
determination of the Board of Directors shall be conclusive as to the amount of
liabilities, including accrued expenses and reserves, as to the allocation of
the same as to a given class, and as to whether the same or general assets of
the Corporation are allocable to one or more classes.
10. The Board of Directors may provide for a holder of any class of
stock of the Corporation, who surrenders his certificate in good form for
transfer to the Corporation or, if the shares in question are not represented by
certificates, who delivers to the Corporation a written request in good order
signed by the shareholder to convert the shares in question on such basis as the
Board may provide, into shares of stock of any other class of the Corporation.
The net asset value per share of a class of the Corporation's Common
Stock shall be determined in accordance with the Investment Company Act of 1940,
as amended, and with generally accepted accounting principles.
11. Subject to subsection 12 below, the net asset value per share of
the Corporation's Common Stock shall be determined by adding the value of all
securities, cash and other assets of the Corporation pertaining to that class
subtracting the liabilities applicable to that class, allocating any general
assets and general liabilities to that class and dividing the net result by the
number of shares of that class outstanding. Subject to subsection 12 below, the
value of the securities, cash and other assets, and the amount and nature of
liabilities, and the allocation thereof to any particular class, shall be
determined pursuant to procedures or methods prescribed by or approved by the
Board of Directors in its sole discretion and shall be so determined at the time
or times prescribed or approved by the Board of Directors in its sole
discretion.
12. The net asset value per share of the Corporation's Common Stock
for the purpose of issue, redemptions or repurchase of a share, shall be
determined in accordance with the Investment
-7-
<PAGE>
Company Act of 1940 and any other applicable federal securities law or rule or
regulation.
13. All shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the stockholder, in the sense used in
the General Corporation Law of the State of Maryland. Each holder of a share,
upon request to the Corporation accompanied by surrender of the appropriate
stock certificate or certificates in proper form for transfer, shall be entitled
to require the Corporation to redeem all or any part of the shares standing in
the name of such holder on the books of the Corporation at a redemption price
per share equal to the net asset value per share determined in accordance with
this Article.
14. Notwithstanding subsection 13 above, (or any other provision of
these Articles of Amendment and Restatement), the Board of Directors of the
Corporation may suspend the right of the holders of shares to require the
Corporation to redeem such shares (or may suspend any voluntary purchase of such
shares pursuant to the provisions of these Articles of Amendment and
Restatement) during any national financial emergency.
"For the purpose of these Articles of Amendment and Restatement, a
'national financial emergency' is defined as the whole or any part of any period
(i) during which the New York Stock Exchange is closed other than customary
weekend and holiday closing, (ii) during which trading on the New York Stock
Exchange is restricted, (iii) during which an emergency exists as a result of
which disposal by the Corporation of securities owned by such class is not
reasonably practicable or it is not reasonably practicable for the Corporation
fairly to determine the value of the net assets of such class, or (iv) during
any other period when the Securities and Exchange Commission (or any succeeding
governmental authority) may for the protection of security holders of the
Corporation by order permit suspension of the right of redemption or
postponement of the date of payment on redemption, provided that applicable
rules and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) shall govern as to whether the conditions
under which (a) trading shall be deemed to be restricted, and (b) an emergency
shall be deemed to exist.
15. The Board of Directors may by resolution from time to time
authorize the repurchase by the Corporation, either directly or through an
agent, of shares upon such terms and conditions and for such consideration as
the Board of Directors shall deem advisable, out of funds legally available
therefor, at prices per share not in excess of the net asset value per share
determined in accordance with this Article and to take all other steps deemed
necessary or advisable in connection therewith.
16. Except as otherwise permitted by the Investment Company Act of
1940, payment of the redemption or repurchase of
-8-
<PAGE>
shares surrendered to the Corporation for redemption pursuant to the provisions
of subsection 12 or 18 of this Article or for repurchase by the Corporation
pursuant to the provisions of subsection 15 of this Article shall be made by the
Corporation within seven days after surrender of such shares to the Corporation
for such purpose. Any such payment may be made in whole or in part in portfolio
securities or in cash, as the Board of Directors shall deem advisable, and no
stockholder shall have the right, other than as determined by the Board of
Directors, to have his shares redeemed or repurchased in portfolio securities.
17. In the absence of any specifications as to the purposes for which
shares are redeemed or repurchased by the Corporation, all shares so redeemed or
repurchased shall be deemed to be acquired for retirement in the sense
contemplated by the General Corporation Law of the State of Maryland. Shares
retired by redemption or repurchase shall thereafter have the status of
authorized but unissued shares.
18. All shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the Corporation. The Board of
Directors may by resolution from time to time authorize the Corporation to
require the redemption of all or any part of any outstanding shares, without the
vote or consent of stockholders (including through the establishment of uniform
standards with respect to the minimum net asset value of a stockholder account)
upon the sending of written notice thereof to each stockholder any of whose
shares are so redeemed and upon such terms and conditions as the Board of
Directors shall deem advisable, out of funds legally available therefore, at net
asset value per share determined in accordance with the provisions of this
Article and to take all other steps deemed necessary or advisable in connection
therewith. The Board of Directors may authorize the closing of those accounts
not meeting the specified minimum standards of net asset value by redeeming all
of the shares in such accounts.
19. The holders of shares of Common Stock or other securities of the
Corporation shall have no preemptive rights to subscribe to new or additional
shares of its Common Stock or other securities.
SIXTH: The number of directors of the Corporation shall be three
provided, however, that the number of Directors may be increased or decreased in
accordance with the By-laws so long as the number is never less than three. The
names of the directors who shall act until the next annual meeting or until
their successors are duly chosen and qualify are: John D. Barrett II, Barton M.
Biggs, Gerard E. Jones, Andrew McNally IV, Warren J. Olsen, Samuel T. Reeves,
Fergus Reid, Frederick O. Robertshaw and Frederick B. Whittemore.
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<PAGE>
SEVENTH: 1. A director or officer of the Corporation shall not be
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director or officer, except to the extent such exemption
from liability or limitation thereof is not permitted by laws (including the
Investment Company Act of 1940) as currently in effect or as the same may
hereafter be amended.
No amendment, modification or repeal of this Section 1 shall adversely
affect any right to protection of a director or officer that exists at the time
of such amendment, modification or repeal.
2. The Corporation shall indemnify to the fullest extent permitted by
law (including the Investment Company Act of 1940) as currently in effect or as
the same may hereafter be amended, any person made or threatened to be made a
party to any action, suit or proceeding, whether criminal, civil, administrative
or investigative, by reason of the fact that such person or such person's
testator or intestate is or was a director or officer of the Corporation or
serves or served at the request of the Corporation any other enterprise as a
director or officer. To the fullest extent permitted by law (including the
Investment Company Act of 1940) as currently in effect or as the same may
hereafter be amended, expenses incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the Corporation
promptly upon receipt by it of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not entitled
to be indemnified by the Corporation. The rights provided to any person in this
Section 2 shall be enforceable against the Corporation by such person who shall
be presumed to have relied upon it in serving or continuing to serve as a
director or officer as provided above. No amendment of this Section 2 shall
impair the rights of any person arising at any time with respect to events
occurring prior to such amendment. For purposes of this Section 2, the term
"Corporation" shall include any predecessor of the Corporation and any
constituent corporation (including any constituent) absorbed by the Corporation
in a consolidation merger; the term "other enterprise" shall include any
corporation, partnership, joint venture, trust or employee benefit plan; service
"at the request of the Corporation" shall include service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be indemnifiable
expenses; and action by a person with respect to any employee benefit plan which
such person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation. The provisions
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<PAGE>
of this Section 2 shall be in addition to the other provisions of this Article
SEVENTH.
3. Nothing in this Article protects or purports to protect, any
director or officer against any liability to the Corporation or its security
holders to which he or she would otherwise be subject by reason of willful
malfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
4. Each section or portion thereof of this Article shall be deemed
severable from the remainder, and the invalidly of any such section or portion
shall not affect the validity of the remainder of this Article.
EIGHTH: The Board of Directors shall have the management and control
of the property, business and affairs of the Corporation and is hereby vested
with all the powers possessed by the Corporation itself so far as is not
inconsistent with law or these Articles of Amendment and Restatement. In
furtherance and without limitation of the foregoing provisions, it is expressly
declared that, subject to these Articles of Amendment and Restatement, the Board
of Directors shall have power:
1. To make, alter, amend or repeal from time to time the By-laws of
the Corporation except as such power may otherwise be limited in the By-laws.
2. To authorize the repurchase of shares in the open market or
otherwise, at prices not in excess of the net asset value of such shares
determined in accordance with Article FIFTH hereof, provided the Corporation has
assets legally available for such purpose, and to pay for such shares in cash,
securities or other assets then held or owned by the Corporation.
3. To fix an offering price for the shares of any class which shall
yield to the Corporation not less than the par value thereof, at which price the
shares of the Common Stock of the Corporation shall be offered for sale, and to
determine from time to time thereafter the offering price which shall yield to
the Corporation not less than the par value thereof from sales to the shares of
its Common Stock.
4. From time to time to determine whether and to what extent and at
what times and places and under what conditions and regulations the books and
accounts of the Corporation, or any of them other than the stock ledger, shall
be open to the inspection of the stockholders, and no stockholder shall have any
right to inspect any account or book or document of the Corporation, except as
conferred by law or authorized by resolution of the Board of Directors or of the
stockholders.
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<PAGE>
5. In addition to the powers and authorities granted herein and by
statute expressly conferred upon it, the Board of Directors is authorized to
exercise all such powers and do all acts and things as may be exercised or done
by the Corporation, subject, nevertheless, to the provisions of Maryland laws,
of these Articles of Amendment and Restatement, and of the By-Laws of the
Corporation.
NINTH: The books of the Corporation may be kept (subject to any
provisions contained in applicable statutes) outside the State of Maryland at
such place or places as may be designed from time to time by the Board of
Directors or in the By-Laws of the Corporation. Election of directors need not
be by ballot unless the By-Laws of the Corporation shall so provide.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in these Articles of Amendment and Restatement,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ELEVENTH: Section 3 (a) The presence in person or by proxy of the
holders of record of one-third of the shares issued and outstanding and entitled
to vote thereat shall constitute a quorum for the transaction of any business at
all meetings of the stockholders except as otherwise provided by law or in these
Articles of Amendment and Restatement.
(b) On any given matter, the presence in any meeting, in person or by
proxy, of holders of record of less than one-third of the shares issued and
outstanding and entitled to vote thereat shall not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if there shall be present thereat, in person or by proxy, holders of
record of the number of shares required for action in respect of such other
matter or matters.
Notwithstanding any provision of Maryland law requiring more than a
majority vote of the Common Stock, or any class thereof, in connection with any
corporation action (including, but not limited to, the amendment of these
Articles of Amendment and Restatement), unless otherwise provided in these
Article of Incorporation the Corporation may take or authorize such action upon
the favorable vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote thereon.
TWELFTH: All persons who shall acquire shares in the Corporation
shall acquire the same subject to the provisions of these Articles of Amendment
and Restatement.
THIRTEENTH: The Corporation reserves the right from time to time to
amend, alter, or repeal any of the provisions of these Articles of Amendment and
Restatement (including any
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amendment that changes the terms of any of the outstanding shares by
classification, reclassification or otherwise), and any contract rights, as
expressly set forth in these Articles of Amendment and Restatement, of any
outstanding shares, and to add or insert any other provisions that may, under
the statutes of the State of Maryland at the time in force, be lawfully
contained in articles of incorporation, and all rights at any time conferred
upon the stockholders of the Corporation by these Articles of Amendment and
Restatement are subject to the provisions of this Article THIRTEENTH.
The term "Articles of Amendment and Restatement" as used herein and in
the By-laws of the Corporation shall be deemed to mean these Articles of
Amendment and Restatement as from time to time amended and restated.
FIFTH: The Charter of the Corporation is amended and restated by these Articles
of Amendment and Restatement.
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IN WITNESS WHEREOF, these Articles of Amendment and Restatement have been
executed on behalf of MORGAN STANLEY FUND, INC. by its officers. Its President
acknowledges the same to be the act of the Corporation and states that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to approval are true in all material respects under
penalties of perjury.
MORGAN STANLEY FUND, INC.
By /s/ Warren J. Olsen
----------------------------
Warren J. Olsen
President
Attest:
By /s/ Valerie Y. Lewis
---------------------------
Valerie Y. Lewis
Secretary
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CERTIFICATE
The undersigned, President of MORGAN STANLEY FUND, INC., who executed on
behalf of said corporation the foregoing Articles of Amendment and Restatement
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said corporation, the foregoing Articles of Amendment and
Restatement 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 therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/ Warren J. Olsen
--------------------------
Warren J. Olsen
Dated: October 2, 1995
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AMENDED AND RESTATED BY-LAWS OF
MORGAN STANLEY FUND, INC.
(As Amended March 7, 1995)
ARTICLE I
Fiscal Year and Offices
Section 1. FISCAL YEAR. Unless otherwise provided by resolution of the Board
of Directors the fiscal year of the Corporation shall begin on July 1 and end on
the last day of June.
Section 2. REGISTERED OFFICE. The registered office of the Corporation in
Maryland shall be located at 100 Light Street, Baltimore, Maryland 21202, and
the name and address of its Resident Agent is CSC-Lawyers Incorporating Service
Company, James E. Baker, Esq., 100 Light St., 6th Fl., Baltimore, Maryland,
21202.
Section 3. OTHER OFFICES. The Corporation shall also have a place of
business in New York, New York, and the Corporation shall have the power to open
additional offices for the conduct of its business, either within or outside the
States of Maryland, New York and Massachusetts, at such places as the Board of
Directors may from time to time designate.
ARTICLE II
Meetings of Stockholders
Section 1. PLACE OF MEETING. Meetings of the Stockholders for the election
of Directors shall be held in such place as the Board of Directors may by
resolution establish. In the absence of any specific resolution, Annual
Meetings of Stockholders shall be held at the corporation's principal office in
New York, New York. Meetings of Stockholders for any other purpose may be held
at such place and time as shall be fixed by resolution of the Board of Directors
and stated in the notice of the Meeting, or in a duly executed waiver of notice
thereof.
Section 2. ANNUAL MEETINGS. An annual meeting of the shareholders of the
Corporation shall not be required to be held in any year in which shareholders
are not required to elect directors under the Investment Company Act of 1940, as
amended (the "1940 Act") even if the Corporation is holding a meeting of the
shareholders for a purpose other than the election of directors. If the
Corporation is required by the 1940 Act to hold a meeting to elect directors,
the meeting shall be designated as the Annual Meeting of shareholders for that
year and shall be held within 120 days after the occurrence of an event
requiring the election of directors. The Board of Directors may, in its
discretion, hold a meeting to be designated as the Annual Meeting of
shareholders on a date within the month of April in any year where an election
of directors by shareholders is not required under the 1940 Act. The date of an
Annual Meeting shall be set by appropriate resolution of the Board of Directors,
and shareholders shall vote on the election of directors and transact any other
business as may properly be brought before the Annual Meeting.
Section 3. SPECIAL MEETINGS. Special Meetings of the Stockholders may be
called at any time by the Chairman of the Board or the President, or by a
majority of the Board of Directors, and shall be called by the Chairman of the
Board, President or Secretary upon written request of the holders of shares
entitled to cast not less than ten percent of all the votes entitled to be cast
at such meeting provided that (a) such request shall state the purposes of such
meeting and the matters proposed to be acted on, and (b) the Stockholders
requesting such meeting shall have paid to the Corporation the reasonably
estimated cost of preparing and mailing the notice thereof, which the Secretary
shall determine and specify to such
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Stockholders. No Special Meeting need be called to consider any matter which is
substantially the same as a matter voted on at any meeting of the Stockholders
held during the preceding twelve months.
Section 4. NOTICE. Not less than ten nor more than ninety days before the
date of every Annual or Special Stockholders' Meeting, the Secretary shall cause
to be mailed to each Stockholder entitled to vote at such meeting at his (her)
address (as it appears on the records of the Corporation at the time of mailing)
written notice stating the time and place of the meeting and, in the case of a
Special Meeting of Stockholders shall be limited to the purposes stated in the
notice. Notice of any Stockholders' meeting need not be given to any
Stockholder who shall sign a written waiver of such notice whether before or
after the time of such meeting, or to any Stockholder who shall attend such
meeting in person or by proxy. Notice of adjournment of a Stockholders' meeting
to another time or place need not be given, if such time and place are announced
at the meeting.
Section 5. RECORD DATE FOR MEETINGS. The Board of Directors may fix in
advance a date not more than ninety days, nor less than ten days, prior to the
date of any Annual or Special Meeting of the Stockholders as a record date for
the determination of the Stockholders entitled to receive notice of, and to vote
at any meeting and any adjournment thereof; and in such case such Stockholders
and only such Stockholders as shall be Stockholders of record on the date so
fixed shall be entitled to receive notice of and to vote at such meeting and any
adjournment thereof, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 6. QUORUM. At any meeting of Stockholders, the presence in person or
by proxy of the holders of a majority of all the votes entitled to be cast at
the meeting shall constitute a quorum for the transaction of business at the
meeting, except that where any provision of law or the Articles of Incorporation
require that the holders of any class of shares shall vote as a class, then a
majority of the aggregate number of shares of that class at the time outstanding
shall be necessary to constitute a quorum for the transaction of such business.
If, however, such quorum shall not be present or represented at any meeting of
the Stockholders, any officer entitled to preside at, or act as Secretary of,
such meeting, shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 7. VOTING. Each Stockholder shall have one vote for each full share
and a fractional vote for each fractional share of stock having voting power
held by such Stockholder on the record date set pursuant to Section 5 on each
matter submitted to a vote at a meeting of Stockholders. Such vote may be made
in person or by proxy. If no record date has been fixed for the determination of
Stockholders, the record date for the determination of Stockholders entitled to
notice of or to vote at a meeting of Stockholders shall be at the close of
business (i) on the day on which notice of the meeting is mailed or (ii) on the
day 30 days before the meeting, whichever is the closer date to the meeting. At
all meetings of the Stockholders, a quorum being present, all matters shall be
decided by majority vote of the shares of stock entitled to vote held by
Stockholders present in person or by proxy, unless the question is one which by
express provision of the laws of the State of Maryland, the Investment Company
Act of 1940, as from time to time amended, or the Articles of Incorporation, a
different vote is required, in which case such express provision shall control
the decision of such question. At all meetings of Stockholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting.
Section 8. VOTING - PROXIES. The right to vote by proxy shall exist only if
the instrument authorizing such proxy to act shall have been executed in writing
by the Stockholder himself or by his attorney thereunto duly authorized in
writing. No proxy shall be voted on after eleven months from its date unless it
provides for a longer period. Each proxy shall be in writing subscribed by the
Stockholder or his duly authorized attorney
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and shall be dated, but need not be sealed, witnessed or acknowledged. Proxies
shall be delivered to the Secretary of the Corporation or person acting as
Secretary of the meeting before being voted. A proxy with respect to stock held
in the name of two or more persons shall be valid if executed by one of them
unless at or prior to exercise of such proxy the Corporation received a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Stockholder shall be deemed valid unless
challenged at or prior to its exercise.
Section 9. INSPECTORS. At any election of Directors, the Board of Directors
prior thereto may, or, if they have not so acted, the Chairman of the meeting
may appoint one or more inspectors of election who shall first subscribe an oath
of affirmation to execute faithfully the duties of inspectors at such election
with strict impartiality and according to the best of their ability, and shall
after the election make a certificate of the result of the vote taken. No
candidate for the office of Director shall be appointed such inspector.
Section 10. STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be the duty of
the Secretary or Assistant Secretary of the Corporation to cause an original or
duplicate stock ledger to be maintained at the office of the Corporation's
transfer agent. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection. Any one or more persons, each of whom has been a Stockholder of
record of the Corporation for more than six months next preceding such request,
who owns or own in the aggregate 5% or more of the outstanding capital stock of
the Corporation, may submit a written request to any officer of the Corporation.
Within 20 days after such a request, there shall be prepared and filed at the
Corporation's principal office a list containing the names and addresses of all
Stockholders of the Corporation and the number of shares of each class held by
each Stockholder, certified as correct by an officer of the Corporation, by its
stock transfer agent, or by its registrar.
Section 11. ACTION WITHOUT MEETING. Any action to be taken by Stockholders
may be taken without a meeting if all Stockholders entitled to vote on the
matter consent to the action in writing, and the written consents are filed with
the records of the meetings of Stockholders. Such consent shall be treated for
all purposes as a vote at a meeting.
ARTICLE III
Directors
Section 1. GENERAL POWERS. The business of the Corporation shall be under
the direction of its Board of Directors, which may exercise all powers of the
Corporation, except such as are by statute, or the Articles of Incorporation, or
by these By-Laws conferred upon or reserved to the Stockholders. All acts done
by any meeting of the Directors or by any person acting as a Director, so long
as his successor shall not have been duly elected or appointed, shall,
notwithstanding that it be afterwards discovered that there was some defect in
the election of the Directors or of such person acting as aforesaid or that they
or any of them were disqualified, be as valid as if the Directors or such other
person, as the case may be, had been duly elected and were or was qualified to
be Directors or a Director of the Corporation.
Section 2. NUMBER AND TERM OF OFFICE. The number of Directors that shall
constitute the whole Board shall be determined from time to time by the Board of
Directors, but shall not be fewer than three, nor more than fifteen. Each
Director elected shall hold office until the earlier of the following: (i) his
successor is elected and qualified; (ii) his death; (iii) he shall have
resigned; (iv) December 31 of the year in which he shall have reached seventy-
three years of age; or (v) he shall have been removed as hereinafter provided in
these By-Laws or as otherwise provided by Statute or the Articles of
Incorporation. Directors need not be Stockholders.
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Section 3. ELECTION. Initially the Directors shall be those persons named as
such in the Articles of Incorporation. The Directors shall be elected by the
vote of a majority of the shares present in person or by proxy at the Annual
Meeting of the Stockholders, except that any vacancy in the Board of Directors
may be filled by a majority vote of the Board of Directors, although less than a
quorum, if immediately after filling any such vacancy at least two-thirds of the
directors then holding office shall have been elected to such office by the
shareholders. A newly created directorship may be filled only by a vote of the
entire Board of Directors. However, if at any time less than a majority of the
Directors then holding office were elected by Stockholders, a Stockholders
Meeting shall be called as soon as possible, and in any event within sixty days,
for the purpose of electing an entire new Board of Directors.
Section 4. REMOVAL OF DIRECTORS. At any Stockholders Meeting, provided a
quorum is present, any Director may be removed (either with or without cause) by
the vote of the holders of a majority of the shares present or represented at
the meeting, and at the same meeting a duly qualified person may be elected in
his stead by a majority of the votes validly cast.
Section 5. PLACE OF MEETING. Meetings of the Board of Directors, regular or
special, may be held at any place in or out of the State of Maryland as the
Board may from time to time determine.
Section 6. QUORUM. At all meetings of the Board of Directors a majority of
the entire Board of Directors shall constitute a quorum for the transaction of
business and the action of a majority of the Directors present at any meeting at
which a quorum is present shall be the action of the Board of Directors unless
the concurrence of a greater proportion is required for such action by the laws
of Maryland, the Investment Company Act of 1940, these By-Laws or the Articles
of Incorporation. If a quorum shall not be present at any meeting of Directors,
the Directors present thereat may by a majority vote adjourn the meeting from
time to time without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7. REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at such time and place as shall from time to time be
determined by the Board of Directors provided that notice of any change in the
time or place of such meetings shall be sent promptly to each Director not
present at the meeting at which such change was made in the manner provided for
notice of special meetings. Members of the Board of Directors or any committee
designated thereby may participate in a meeting of such Board or committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time, and participation by such means shall constitute presence in person at a
meeting.
Section 8. SPECIAL MEETINGS. Special Meetings of the Board of Directors may
be called by the Chairman of the Board or the President on one day's notice to
each Director; Special Meetings shall be called by the Chairman of the Board,
President or Secretary in like manner and on like notice on the written request
of two Directors.
Section 9. INFORMAL ACTIONS. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent to such action is signed in one or more
counterparts by all members of the Board or of such committee, as the case may
be, and such written consent is filed with the minutes of proceedings of the
Board or committee.
Section 10. COMMITTEES. The Board of Directors may by resolution passed by a
majority of the entire Board appoint from among its members an Executive
Committee and other committees composed of two or more Directors, and may
delegate to such committees, in the intervals between meetings of the Board of
Directors, any or all of the powers of the Board of Directors in the management
of the business and affairs
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of the Corporation, except the powers to declare dividends or distributions on
stock, to issue stock or to recommend to Stockholders any action requiring
Stockholder approval.
Section 11. ACTION OF COMMITTEES. In the absence of an appropriate
resolution of the Board of Directors each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable, provided that the quorum shall not be less than two
Directors. The committees shall keep minutes of their proceedings and shall
report the same to the Board of Directors at the meeting next succeeding, and
any action by the committee shall be subject to revision and alteration by the
Board of Directors, provided that no rights of third persons shall be affected
by any such revision or alteration. In the absence of any member of such
committee the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member, amend the By-Law, or approve any merger or
share exchange which does not require stockholder approval.
Section 12. COMPENSATION. Any Director, whether or not he is a salaried
officer or employee of the Corporation, may be compensated for his services as
Director or as a member of a committee of Directors, or as Chairman of the Board
or chairman of a committee by fixed periodic payments or by fees for attendance
at meetings or by both, and in addition may be reimbursed for transportation and
other expenses, all in such manner and amounts as the Board of Directors may
from time to time determine.
ARTICLE IV
Notices
Section 1. FORM. Notices to Stockholders shall be in writing and delivered
personally or mailed to the Stockholders at their addresses appearing on the
books of the Corporation. Notices to Directors shall be oral or by telephone or
telegram or in writing delivered personally or mailed to the Directors at their
addresses appearing on the books of the Corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
Directors need not state the purpose of a Regular or Special Meeting.
Section 2. WAIVER. Whenever any notice of the time, place or purpose of any
meeting of Stockholders, Directors or a committee is required to be given under
the provisions of Maryland law or under the provisions of the Articles of
Incorporation or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of Stockholders in person or by proxy, or at the meeting of
Directors of committee in person, shall be deemed equivalent to the giving of
such notice to such persons.
ARTICLE V
Officers
Section 1. EXECUTIVE OFFICERS. The officers of the Corporation shall be
chosen by the Board of Directors and shall include a President, who shall be a
Director, a Secretary and a Treasurer. The Board of Directors may, from time to
time, elect or appoint a Controller, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The Board of Directors, at its
discretion, may also appoint a Director as Chairman of the Board who shall
perform and execute such executive and administrative duties and powers as the
Board of Directors shall from time to time prescribe. The same person may hold
two or more offices, except that no person shall be both President and Secretary
and no officer shall execute, acknowledge or verify any
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instrument in more than one capacity, if such instrument is required by law, the
Articles of Incorporation or these By-Laws to be executed, acknowledged or
verified by two or more officers.
Section 2. ELECTION. The Board of Directors shall choose a President, a
Secretary and a Treasurer at its first meeting and thereafter at the next
meeting following a Stockholders' Meeting at which Directors were elected.
Section 3. OTHER OFFICERS. The Board of Directors from time to time may
appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise powers and perform such
duties as shall be determined from time to time by the Board. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 4. COMPENSATION. The salaries or other compensation of all officers
and agents of the Corporation shall be fixed by the Board of Directors, except
that the Board of Directors may delegate to any person or group of persons the
power to fix the salary or other compensation of any subordinate officers or
agents appointed pursuant to Section 3 of this Article V.
Section 5. TENURE. The officers of the Corporation shall serve for one year
and until their successors are chosen and qualify. Any officer or agent may be
removed by the affirmative vote of a majority of the Board of Directors
whenever, in its judgment, the best interests of the corporation will be served
thereby. In addition, any officer or agent appointed pursuant to Section 3 may
be removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by the Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise shall be filled by the Board of Directors, unless pursuant to Section
3 the power of appointment has been conferred by the Board of Directors on any
other officer.
Section 6. PRESIDENT. The President, unless the Chairman has been so
designated, shall be the Chief Executive Officer of the Corporation; he (she)
shall preside at all meetings of the Stockholders and Directors, and shall see
that all orders and resolutions of the Board are carried into effect. The
President, unless the Chairman has been so designated, shall also be the chief
administrative officer of the Corporation and shall perform such other duties
and have such other powers as the Board of Directors may from time to time
prescribe.
Section 7. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall be
chosen, shall preside at all meetings of the Board of Directors and
Stockholders, and shall perform and execute such executive duties and
administrative powers as the Board of Directors shall from time to time
prescribe.
Section 8. VICE-PRESIDENT. The Vice-Presidents, in order of their seniority,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties as the
Board of Directors or the Chief Executive Officer may from time to time
prescribe.
Section 9. SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the Stockholders and record all the proceedings
thereof and shall perform like duties for any Committee when required. He (she)
shall give, or cause to be given, notice of meetings of the Stockholders and of
the Board of Directors, shall have charge of the records of the Corporation,
including the stock books, and shall perform such other duties as may be
prescribed by the Board of Directors or Chief Executive Officer, under whose
supervision he (she) shall be. He (she) shall keep in safe custody the seal of
the Corporation and, when authorized by the Board of Directors, shall affix and
attest the same to any instrument requiring it. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his (her) signature.
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Section 10. ASSISTANT SECRETARIES. The Assistant Secretaries in order of
their seniority, shall, in the absence or disability of the Secretary, perform
the duties and exercise the powers of the Secretary and shall perform such other
duties as the Board of Directors shall prescribe.
Section 11. TREASURER. The Treasurer, unless another officer has been so
designated, shall be the Chief Financial Officer and the principal accounting
officer of the Corporation. He (she) shall have general charge of the finances
and books of account of the Corporation. Except as otherwise provided by the
Board of Directors, he (she) shall have general supervision of the funds and
property of the Corporation and of the performance by the custodian of its
duties with respect thereto. He (she) shall render to the Board of Directors,
whenever directed by the Board, an account of the financial condition of the
Corporation and of all his (her) transactions as Treasurer; and as soon as
possible after the close of each financial year he (she) shall make and submit
to the Board of Directors a like report for such financial year. He (she) shall
cause to be prepared annually a full and correct statement of the affairs of the
Corporation, including a balance sheet and a financial statement of operations
for the preceding fiscal year, which shall be submitted at the Annual Meeting of
Stockholders and filed within twenty days thereafter at the principal office of
the Corporation in the State of Maryland. He (she) shall perform all the acts
incidental to the office of Treasurer, subject to the control of the Board of
Directors.
Section 12. CONTROLLER. The Controller shall be under the direct supervision
of the Chief Financial Officer of the Corporation. He (she) shall maintain
adequate records of all assets, liabilities and transactions of the Corporation,
establish and maintain internal accounting control and, in cooperation with the
independent public accountants selected by the Board of Directors shall
supervise internal auditing. He (she) shall have such further powers and duties
as may be conferred upon him (her) from time to time by the President or the
Board of Directors.
Section 13. ASSISTANT TREASURERS. The Assistant Treasurers, in the order of
their seniority, shall, in the absence or disability of the Treasurer, perform
the duties and exercise the powers of the Treasurer and shall perform such other
duties as the Board of Directors may from time to time prescribe.
Section 14. SURETY BONDS. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the federal Investment Company Act of 1940, as amended, and the
rules and regulations of the Securities and Exchange Commission) to the
Corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his (her)
duties of the Corporation, including responsibility for negligence and for the
accounting of any Corporation's property, funds or securities that may come into
his (her) hands.
ARTICLE VI
Investment Restrictions
Section 1. TRADING IN SECURITIES. Neither the investment adviser or any
officer or director thereof, nor any officer or director of the Corporation
shall take a long or short position in the securities issued by the Corporation,
except as permitted by applicable laws and regulations; PROVIDED, that the
foregoing shall not prevent the purchase from the Corporation of shares issued
by it by the officers or directors of the Corporation or of the investment
adviser or by the investment adviser at the price available to the public at the
moment of such purchase.
In any case where an officer or director of the Corporation or of the
investment adviser or a member of an advisory or portfolio committee of the
Corporation is also an officer or director of another corporation
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and the purchase or sale of shares issued by that other corporation is under
consideration, the officer or director or committee member concerned will
abstain from participating in any decision made on behalf of the Corporation to
purchase or sell any securities issued by the other corporation.
Section 2. LOANS TO AFFILIATES. The Corporation shall not lend assets of the
Corporation to any officer or director of the Corporation, or to any partner,
officer, director or stockholder of, or person who has a material, financial
interest in, the investment adviser of the Corporation, or the distributor of
the Corporation, or to the investment adviser of the Corporation or to the
distributor of the corporation.
Section 3. CONFLICT OF INTEREST TRANSACTIONS. The Corporation shall not
permit any officer or director, or any officer or director of the investment
adviser or distributor of the Corporation to deal for or on behalf of the
Corporation with himself as principal or agent, or with any partnership,
association or corporation in which he has a material, financial interest;
provided that the foregoing provisions shall not prevent (a) officers or
directors of the Corporation from buying, holding or selling shares in the
Corporation, or from being partners, officers or directors of or otherwise
financially interested in the investment adviser, sponsor, manager or
distributor of the Corporation; (b) purchases or sales of securities or other
property by the Corporation from or to an affiliated person or to the investment
adviser or distributor of the Corporation if such transaction is exempt from the
applicable provisions of the Investment Company Act of 1940; (c) purchases of
investments owned by the Corporation through a security dealer who is, or one or
more of whose partners, stockholders, officers or director is, an officer or
director of the Corporation, if such transactions are handled in the capacity of
brokers only and commissions charged do not exceed customary brokerage charges
for such services; (d) employment of legal counsel, registrar, transfer agent,
dividend disbursing agent or custodian who is, or has a partner, stockholder,
officer or director, who is an officer or director of the Corporation, if only
customary fees are charged for services to the Corporation; (e) sharing
statistical, research, legal and management expenses with a firm of which an
officer or directors of the Corporation is an officer or director or otherwise
financially interested; (f) purchase for the portfolio of the Corporation of
securities issued by an issuer having an officer, director or securities holder
who is an officer or director of the Corporation or of any investment adviser of
the Corporation, unless the retention of such securities in the portfolio of the
Corporation would be a violation of these By-Laws or the Articles of
Incorporation of the Corporation.
ARTICLE VII
Stock
Section 1. CERTIFICATES. Each Stockholder shall be entitled to a certificate
or certificates in form approved by the Board of Directors which shall certify
the class and the number of shares owned by him in the Corporation. Each
certificate shall be signed by the President or a Vice-President and counter-
signed by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer.
Section 2. SIGNATURE. Where a certificate is signed (1) by a transfer agent
or an assistant transfer agent or (2) by a transfer clerk acting on behalf of
the Corporation and a registrar, the signature of any such President, Vice-
President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may
be a facsimile. In case any officer who has signed any certificate ceases to be
an officer of the Corporation before the certificate is issued, the certificate
may nevertheless be issued by the Corporation with the same effect as if the
officer had not ceased to be such officer as of the date of its issue.
Section 3. RECORDING AND TRANSFER WITHOUT CERTIFICATES. Notwithstanding the
foregoing provisions of this Article VII, the Corporation shall have full power
to participate in any program approved by the Board of
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<PAGE>
Directors providing for the recording and transfer of ownership of shares of the
Corporation's stock by electronic or other means without the issuance of
certificates.
Section 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been stolen,
lost or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to have been stolen, lost or destroyed, or
upon other satisfactory evidence of such theft, loss or destruction. When
authorizing such issuance of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such stolen, lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and to give the Corporation a bond with sufficient surety,
to the Corporation to indemnify it against any loss or claim that may be made by
reason of the issuance of a new certificate.
Section 5. TRANSFER OF CAPITAL STOCK. Transfers of shares of the stock of
the Corporation shall be made on the books of the Corporation by the holder of
record thereof (in person or by his attorney thereunto duly authorized by a
power of attorney duly executed in writing and filed with the Secretary of the
Corporation) (i) if a certificate or certificates have been issued, upon the
surrender of the certificate or certificates, properly endorsed or accompanied
by proper instruments of transfer, representing such shares, or (ii) as
otherwise prescribed by the Board of Directors. Every certificate exchanged,
surrendered for redemption or otherwise returned to the Corporation shall be
marked "Canceled" with the date of cancellation.
Section 6. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such shares or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the General Laws of the State of Maryland.
Section 7. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may, from
time to time, appoint or remove transfer agents and/or registrars of transfers
of shares of stock of the Corporation, and it may appoint the same person as
both transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the
same person shall be both transfer agent and registrar, only one
countersignature by such person shall be required.
Section 8. STOCK LEDGER. The Corporation shall maintain an original stock
ledger containing the names and addresses of all Stockholders and the number and
class of shares held by each Stockholder. Such stock ledger may be in written
form or any other form capable of being converted into written form within a
reasonable time for visual inspection.
ARTICLE VIII
General Provisions
Section 1. RIGHTS IN SECURITIES. The Board of Directors, on behalf of the
Corporation, shall have the authority to exercise all of the rights of the
Corporation as owner of any securities which might be exercised by any
individual owning such securities in his own right; including, but not limited
to, the rights to vote by proxy for any and all purposes, to consent to the
reorganization, merger or consolidation of any issuer or to consent to the sale,
lease or mortgage of all or substantially all of the property and assets of any
issuer; and
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<PAGE>
to exchange any of the shares of stock of any issuer for the shares of stock
issued therefor upon any such reorganization, merger, consolidation, sale lease
or mortgage. The Board of Directors shall have the right to authorize any
officer of the investment adviser to execute proxies and the right to delegate
the authority granted by this Section 1 to any officer of the corporation.
Section 2. CUSTODIANSHIP. (a) The Corporation shall place and at all times
maintain in the custody of a custodian (including any sub-custodian for the
custodian) all funds, securities and similar investments owned by the
Corporation. Subject to the approval of the Board of Directors the custodian
may enter into arrangements with securities depositories, as long as such
arrangements comply with the provisions of the Investment Company Act of 1940
and the rules and regulations promulgated thereunder. The custodian (and any
sub-custodian) shall be a bank having no less than $2,000,000 aggregate capital,
surplus and undivided profits and shall be appointed from time to time by the
Board of Directors, which shall fix its remuneration.
(b) Upon termination of a custodian agreement or inability of the custodian to
continue to serve, the Board of Directors shall promptly appoint a successor
custodian. But in the event that no successor custodian can be found who has
the required qualifications and is willing to serve, the Board of Directors
shall call as promptly as possible a Special Meeting of the Stockholders to
determine whether the Corporation shall function without a custodian or shall be
liquidated. If so directed by vote of the holders of a majority of the
outstanding shares of stock of the Corporation, the custodian shall deliver and
pay over all property of the Corporation held by it as specified in such vote.
(c) The following provisions shall apply to the employment of a custodian and
to any contract entered into with the custodian so employed:
The Board of Directors shall cause to be delivered to the custodian all
securities owned by the Corporation or to which it may become entitled, and
shall order the same to be delivered by the custodian only in completion of a
sale, exchange, transfer, pledge, or other disposition thereof, all as the
Board of Directors may generally or from time to time require or approve or to
a successor custodian; and the Board of Directors shall cause all funds owned
by the Corporation or to which it may become entitled to be paid to the
custodian, and shall order the same disbursed only for investment against
delivery of the securities acquired, or in payment of expenses, including
management compensation, and liabilities of the Corporation, including
distributions to shareholders or proper payments to borrowers of securities
representing partial return of collateral, or to a successor custodian.
Section 3. REPORTS. Not less often than semi-annually, the Corporation shall
transmit to the Stockholders a report of the operations of the Corporation,
based at least annually upon an audit by independent public accountants, which
report shall clearly set forth, in addition to the information customarily
furnished in a balance sheet and profit and loss statement, a statement of all
amounts paid to security dealers, legal counsel, transfer agent, disbursing
agent, registrar or custodian or trustee, where such payments are made to a
firm, corporation, bank or trust company, having a partner, officer or director
who is also an officer or director of the Corporation. A copy, or copies, of
all reports submitted to the Stockholders of the Corporation shall also be sent,
as required, to the regulatory agencies of the United States and of the states
in which the securities of the Corporation are registered and sold.
Section 4. SEAL. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Maryland". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
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<PAGE>
Section 5. EXECUTION OF INSTRUMENTS. All deeds, documents, transfers,
contracts, agreements and other instruments requiring execution by the
Corporation shall be signed by the Chairman or the President or a Vice President
and by the Treasurer or Secretary or an Assistant Treasurer or an Assistant
Secretary, or as the Board of Directors may otherwise, from time to time,
authorize. Any such authorization may be general or confined to specific
instances. Except as otherwise authorized by the Board of Directors, all
requisitions or orders for the assignment of securities standing in the name of
the custodian or its nominee, or for the execution of powers to transfer the
same, shall be signed in the name of the Corporation by the Chairman or the
President or a Vice President and by the Secretary, Treasurer or an Assistant
Treasurer.
ARTICLE IX
Amendments
The By-Laws of the Corporation may be altered, amended or repealed either by
the affirmative vote of a majority of the stock issued and outstanding and
entitled to vote in respect thereof and represented in person or by proxy at any
annual or special meeting of the Stockholders, or by the Board of Directors at
any regular or special meeting of the Board of Directors.
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<PAGE>
INVESTMENT ADVISORY AGREEMENT
of the Morgan Stanley Fund, Inc.
AGREEMENT made this 17th day of November, 1992 by and between Morgan
Stanley Fund, Inc., a Maryland corporation (the "Fund") and Morgan Stanley Asset
Management Inc., a Delaware corporation (the "Adviser").
1. DUTIES OF ADVISER. The Fund hereby appoints the Adviser to act as
investment adviser to the investment funds (the "Investment Funds") of the Fund
as set forth on Schedule A attached hereto and such other Investment Funds as
may be offered by the Fund, for the period and on such terms as set forth in
this Agreement. The Fund employs the Adviser to manage the investment and
reinvestment of the assets of the Investment Funds, to continuously review,
supervise and administer the investment program of each of the Investment Funds,
to determine in its discretion the securities to be purchased or sold and the
portion of each Investment Fund's assets to be held uninvested, to provide the
Fund with records concerning the Adviser's activities which the Fund is required
to maintain, and to render regular reports to the Fund's officers and Board of
Directors concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the officers and the Board of Directors of the Fund, and in
compliance with the objectives, policies and limitations set forth in the Fund's
prospectus and applicable laws and regulations. The Adviser accepts such
employment and agrees to render the services and to provide, at its own expense,
the office space, furnishings and equipment and the personnel required by it to
perform the services on the terms and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the brokers
or dealers that will execute the purchases and sales of securities for each of
the Investment Funds and is directed to use its best efforts to obtain the best
available price and most favorable execution, except as prescribed herein.
Unless and until otherwise directed by the Board of Directors of the Fund, the
Adviser is authorized to effect individual securities transactions at commission
rates in excess of the minimum commission rates available, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage or research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund. The execution of
such transactions shall not be deemed to present an unlawful act or breach of
any duty created by this Agreement or otherwise. The Adviser will promptly
communicate to the officers and Directors of the Fund such information relating
to portfolio transactions as they may reasonably request.
<PAGE>
3. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in Section 1 of this Agreement, the Fund shall pay to the
Adviser, at the end of each of the Fund's fiscal quarters, an advisory fee
calculated by applying a quarterly rate, based on the annual percentage rates as
set forth in Schedule A attached hereto with respect to the average daily net
assets of each of the Investment Funds for the quarter.
In the event of termination of this Agreement, the fees provided in this
Section shall be computed on the basis of the period ending on the last business
day on which this Agreement is in effect subject to a pro rata adjustment based
on the number of days elapsed in the current fiscal quarter as a percentage of
the total number of days in such quarter.
4. OTHER SERVICES. At the request of the Fund, the Adviser in its
discretion may make available to the Fund office facilities, equipment,
personnel and other services. Such office facilities, equipment, personnel and
services shall be provided for or rendered by the Adviser and billed to the Fund
at the Adviser's cost.
5. REPORTS. The Fund and the Adviser agree to furnish to each other
current prospectuses, proxy statements, reports to shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs as each may reasonably request.
6. STATUS OF ADVISER. The services of the Adviser to the Fund are not to
be deemed exclusive, and the Adviser shall be free to render similar services to
others.
7. LIABILITY OF ADVISER. In the absence of (i) willful misfeasance, bad
faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard of the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the Investment Company Act of 1940 ("1940
Act")), the Adviser shall not be subject to any liability whatsoever to the
Fund, or to any shareholder of the Fund, for any error of judgment, mistake of
law or any other act or omission in the course of, or connected with, rendering
services hereunder including, without limitation, for any losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security on behalf of any of the Investment Funds.
-2-
<PAGE>
8. PERMISSIBLE INTERESTS. Subject to and in accordance with the Amended
Articles of Incorporation of the Fund and the Certificate of Incorporation of
the Adviser, Directors, officers, agents and shareholders of the Fund are or may
be interested in the Adviser (or any successor thereof) as Directors, officers,
agents, shareholders or otherwise; Directors, officers, agents and shareholders
of the Adviser are or may be interested in the Fund as Directors, officers,
shareholders or otherwise; and the Adviser (or any successor) is or may be
interested in the Fund as a shareholder or otherwise; and the effect of any such
interrelationships shall be governed by said Amended Articles of Incorporation,
Certificate of Incorporation and the provisions of the 1940 Act.
9. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall continue until the earlier of November 16, 1994 or the
date of the first annual or special meeting of the shareholders of the Fund and,
if approved by a majority of the outstanding voting securities of the respective
Investment Funds, thereafter shall continue for periods of one year so long as
such continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board of Directors of the Fund who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of each of the Investment Funds; provided,
however, that if the holders of any Investment Fund fail to approve the
Agreement as provided herein, the Adviser may continue to serve in such capacity
in the manner and to the extent permitted by the 1940 Act and rules thereunder.
This Agreement may be terminated with respect to any of the Investment Funds at
any time, without the payment of any penalty, by vote of a majority of the
entire Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Investment Fund on 60 days' written notice
to the Adviser. This Agreement may be terminated by the Adviser at any time,
without the payment of any penalty, upon 90 days' written notice to the Fund.
This Agreement will automatically and immediately terminate in the event of its
assignment, provided that an assignment to a corporate successor to all or
substantially all of the Adviser's business or to a wholly-owned subsidiary of
such corporate successor which does not result in a change of actual control of
the Adviser's business shall not be deemed to be an assignment for the purposes
of this Agreement. Any notice under this Agreement shall be given in writing,
addressed and delivered or mailed postpaid, to the other party at any office of
such party and shall be deemed given when received by the addressee.
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<PAGE>
As used in this Section 9, the terms "assignment", "interested persons",
and "a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act.
10. AMENDMENT OF AGREEMENT. This Agreement may be amended by mutual
consent, but the consent of the Fund must be approved (a) by vote of a majority
of those members of the Board of Directors of the Fund who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of each of the Investment Funds.
11. USE OF NAME. The Fund agrees that if this Agreement is terminated and
the Adviser shall no longer be the adviser to the Fund, the Fund will, within a
reasonable period of time, change its name to delete reference to "Morgan
Stanley."
12. SEVERABILITY. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
13. APPLICABLE LAW. This Agreement shall be construed in accordance with
the laws of the State of New York, provided, however, that nothing herein shall
be construed as being inconsistent with the 1940 Act.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first written above.
MORGAN STANLEY ASSET MORGAN STANLEY FUND, INC.
MANAGEMENT INC.
By: /s/ Warren J. Olsen By:/s/ Warren J. Olsen
----------------------- -----------------------
Name: Warren J. Olsen Name: Warren J. Olsen
Title: Vice President Title: President
-4-
<PAGE>
AMENDED
SCHEDULE A
ANNUAL
INVESTMENT FUND PERCENTAGE RATE
--------------- ---------------
Morgan Stanley Global Equity Allocation Fund 1.00%
Morgan Stanley Global Fixed Income Fund 0.75%
Morgan Stanley Asian Growth Fund 1.00%
Morgan Stanley Money Market Fund 0.35%
Morgan Stanley American Value Fund 0.85%
Morgan Stanley Worldwide High Income Fund 0.75%
Morgan Stanley Growth and Income Fund ____%
Morgan Stanley European Equity Fund 1.00%
Morgan Stanley Latin American Fund 1.25%
Morgan Stanley Emerging Markets Fund 1.25%
<PAGE>
MORGAN STANLEY FUND, INC.
SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
Supplement to Investment Advisory Agreement (the "Agreement") dated as of
November 17th, 1992 between Morgan Stanley Fund, Inc. (the "Fund"), and Morgan
Stanley Asset Management Inc. ("MSAM" or the "Adviser").
RECITALS
The Fund has executed and delivered the Agreement, dated as of November
17th, 1992, between the Fund and the Adviser. The Agreement sets forth the
rights and obligations of the parties with respect to the management of the
Investment Funds of the Fund. The Fund has created two additional investment
funds: the Morgan Stanley Small Cap Value Equity Fund and Morgan Stanley Asian
Equity Fund (the "Additional Funds");
AGREEMENTS
NOW, therefore, the parties agree as follows:
The percentage rate in Paragraph 3 of the Agreement will be as set forth in
the Amended Schedule A attached hereto with respect to the Investment Funds of
the Fund.
This agreement 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 Agreement as of the 18th day of
March, 1993.
MORGAN STANLEY ASSET
MANAGEMENT INC.
By:/s/ Warren J. Olsen
----------------------
Name: Warren J. Olsen
Title: Vice President
MORGAN STANLEY FUND, INC.
By:/s/ Warren J. Olsen
----------------------
Name: Warren J. Olsen
Title: President
<PAGE>
AMENDED SCHEDULE A
ANNUAL
INVESTMENT FUND PERCENTAGE RATE
--------------- ---------------
Morgan Stanley Global Equity Allocation Fund 1.00%
Morgan Stanley Global Fixed Income Fund 0.75%
Morgan Stanley Money Market Fund 0.35%
Morgan Stanley Small Cap Value Equity Fund 0.85%
Morgan Stanley Asian Equity Fund 1.00%
<PAGE>
MORGAN STANLEY FUND, INC.
SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
Worldwide High Income Fund
Supplement to Investment Advisory Agreement (the "Agreement") dated as of
February 2, 1994 between Morgan Stanley Fund, Inc. (the "Fund"), and Morgan
Stanley Asset Management Inc. ("MSAM" or the "Adviser").
RECITALS
The Fund has executed and delivered the Agreement, dated as of November __,
1992, between the Fund and the Adviser. The Agreement sets forth the rights and
obligations of the parties with respect to the management of the Investment
Funds of the Fund. The Fund has created one additional investment fund: the
Morgan Stanley Worldwide High Income Fund (the "Additional Fund").
AGREEMENTS
NOW, therefore, the parties agree as follows:
Schedule A to the Agreement is hereby amended to include the following
information:
Annual
Investment Fund Percentage Rate
--------------- ---------------
Worldwide High Income Fund 0.75%
This Supplement 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 Supplement as of the 2nd day of
February, 1994.
MORGAN STANLEY ASSET
MANAGEMENT INC.
By:/s/ Peter A. Nadosy
-----------------------
Name: Peter A. Nadosy
Title: President
MORGAN STANLEY FUND, INC.
By:/s/ Warren J. Olsen
-----------------------
Name: Warren J. Olsen
Title: President
<PAGE>
MORGAN STANLEY FUND, INC.
SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
Morgan Stanley Growth and Income Fund
Morgan Stanley European Equity Fund
Morgan Stanley Latin American Fund
Morgan Stanley Emerging Markets Fund
Supplement to Investment Advisory Agreement (the "Agreement") dated as of
April 18, 1994 between Morgan Stanley Fund, Inc. (the "Fund"), and Morgan
Stanley Asset Management Inc. ("MSAM" or the "Adviser").
RECITALS
The Fund has executed and delivered the Agreement, dated as of November 17,
1992, between the Fund and the Adviser. The Agreement sets forth the rights and
obligations of the parties with respect to the management of the Investment
Funds of the Fund. The Fund has created four additional investment funds:
Morgan Stanley Growth and Income Fund, Morgan Stanley European Equity Fund,
Morgan Stanley Latin American Fund and Morgan Stanley Emerging Markets Fund (the
"Additional Funds").
AGREEMENTS
NOW, therefore, the parties agree as follows:
Schedule A to the Agreement is hereby amended to include the following
information:
Annual
Investment Fund Percentage Rate
--------------- ---------------
Growth and Income Fund 1.00%
European Equity Fund 1.00%
Latin American Fund 1.25%
Emerging Markets Fund 1.25%
This Supplement 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 Supplement as of the 18th day
of April, 1994.
MORGAN STANLEY ASSET
MANAGEMENT INC.
By:/s/ Peter A. Nadosy
-----------------------
Name: Peter A. Nadosy
Title: President
MORGAN STANLEY FUND, INC.
By:/s/ Warren J. Olsen
-----------------------
Name: Warren J. Olsen
Title: President
<PAGE>
MORGAN STANLEY FUND, INC.
FORM OF
SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
Morgan Stanley Aggressive Equity Fund
Supplement to Investment Advisory Agreement (the "Agreement") dated as of
_____________, 1995 between Morgan Stanley Fund, Inc. (the "Fund"), and Morgan
Stanley Asset Management Inc. ("MSAM" or the "Adviser").
RECITALS
The Fund has executed and delivered the Agreement, dated as of November 17,
1992, between the Fund and the Adviser. The Agreement sets forth the rights and
obligations of the parties with respect to the management of the Investment
Funds of the Fund. The Fund has created one additional investment fund: Morgan
Stanley Aggressive Equity Fund (the "Additional Fund").
AGREEMENTS
NOW, therefore, the parties agree as follows:
Schedule A to the Agreement is hereby amended to include the following
information:
Annual
Investment Fund Percentage Rate
--------------- ---------------
Aggressive Equity Fund
This Supplement 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 Supplement as of the ___th day
of _____________, 1995.
MORGAN STANLEY ASSET
MANAGEMENT INC.
By:___________________
Name:
Title:
MORGAN STANLEY FUND, INC.
By:____________________
Name:
Title:
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting part of this Post-Effective
Amendment No. 10 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated August 19, 1994, relating to the financial
statements and financial highlights of the Morgan Stanley Fund, Inc. (the
"Fund") appearing in the June 30, 1994 Annual Report to Shareholders of the
Fund, which is also incorporated by reference into this Registration
Statement. We also consent to the reference to us under the heading
"Independent Accountants" in the Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 29, 1995
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
MORGAN STANLEY FUND, INC.
FOR THE MORGAN STANLEY AGGRESSIVE EQUITY FUND CLASS A
WHEREAS, Morgan Stanley Fund, Inc. (the "Fund") intends to engage 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 Fund desires to adopt a Plan of Distribution pursuant to Rule
12b-1 under the Act with respect to shares of its common stock, par value $.001
per share, that are classified and allocated to its Morgan Stanley Aggressive
Equity Fund Class A (the "Shares") and the Board of Directors has determined
that there is a reasonable likelihood that adoption of this Plan of Distribution
will benefit the Fund and its stockholders; and
WHEREAS, the Fund intends to employ Morgan Stanley & Co. Incorporated (the
"Distributor") as distributor of the Shares; and
WHEREAS, the Fund and the Distributor have entered into a Distribution
Agreement with the Fund for Shares, pursuant to which the Fund will employ the
Distributor as distributor for the continuous offering of Shares;
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby agrees
to the terms of, this Plan of Distribution (the "Plan") in accordance with Rule
12b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the
Shares, compensation for distribution of the Shares at the annual rate not to
exceed 0.25% of the average daily net assets of the Morgan Stanley Aggressive
Equity Fund Class A. The amount of such compensation shall be agreed upon by
the Board of Directors of the Fund and by the Distributor and shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board of Directors and the Distributor shall mutually agree.
2. The amount set forth in Paragraph 1 of this Plan shall be paid for the
Distributor's services as distributor of the Shares. Such amount may be spent
by the Distributor on any
<PAGE>
activities or expenses primarily intended to result in the sale of Shares,
including, but not limited to: compensation to and expenses, including overhead
and telephone expenses, of employees of the Distributor who engage in or support
distribution of the Shares; printing of prospectuses and reports for other than
existing stockholders; preparation, printing and distribution of sales
literature and advertising materials; and compensation to broker/dealers who
sell Shares. The Distributor may negotiate with any such broker/dealer the
services to be provided by the broker/dealer to stockholders in connection with
the sale of Shares, and all or any portion of the compensation paid to the
Distributor under Paragraph 1 of this Plan may be reallocated by the Distributor
to broker/dealers who sell Shares.
3. This Plan shall not take effect until it has been approved by a vote
of at least a majority (as defined in the Act) of the outstanding Shares.
4. In addition to the approval required by Paragraph 3 above, this Plan
shall not take effect until it has been approved, together with any related
agreements, by votes of a majority of both (a) the Board of Directors of the
Fund and (b) those Directors of the Fund who are not "interested persons" of the
Fund (as defined in the Act) and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan and such related agreements.
5. This Plan shall continue in effect for a term of one year.
Thereafter, this Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in Paragraph 4.
6. The Distributor shall provide to the Board of Directors of the Fund
and the Board of Directors shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and the purposes for which such
expenditures were made, including commissions, advertising, printing, interest,
carrying charges and allocated overhead expenses.
7. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by a vote of a majority of the outstanding Shares.
8. This Plan may not be amended to increase materially the amount of
compensation provided for in Paragraph 1 hereof unless such amendment is
approved in the manner provided for initial approval in Paragraph 3 hereof, and
no material amendment to the Plan of any kind, including an amendment which
would increase
2
<PAGE>
materially the amount of such compensation, shall be made unless approved in the
manner provided for approval and annual renewal in Paragraph 4 hereof.
9. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the then current Directors who are not
interested persons (as defined in the Act) of the Fund.
10. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 6 hereof for a period of not less
than six years from the date of this Plan, such agreements or such reports, as
the case may be, the first two years in an easily accessible place.
3
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
MORGAN STANLEY FUND, INC.
FOR THE MORGAN STANLEY AGGRESSIVE EQUITY FUND CLASS B
WHEREAS, Morgan Stanley Fund, Inc. (the "Fund") intends to engage 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 Fund desires to adopt a Plan of Distribution pursuant to Rule
12b-1 under the Act (the "Plan") with respect to shares of its common stock, par
value $.001 per share, that are classified and allocated (the "Shares") to its
Morgan Stanley Aggressive Equity Fund Class B (the "Class") and the Board of
Directors has determined that there is a reasonable likelihood that adoption of
the Plan will benefit the Fund and its stockholders; and
WHEREAS, the Fund intends to employ Morgan Stanley & Co. Incorporated (the
"Distributor") as distributor of the Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate
Distribution Agreement with the Fund for Shares, pursuant to which the Fund will
employ the Distributor as distributor for the continuous offering of Shares;
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby agrees
to the terms of, the Plan with respect to the Class in accordance with Rule 12b-
1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the
Shares, compensation for distribution of the Shares at the annual rate not to
exceed 0.75% of the average daily net assets of the Class. The amount of such
compensation shall be agreed upon by the Board of Directors of the Fund and by
the Distributor and shall be calculated and accrued daily and paid monthly or at
such other intervals as the Board of Directors and the Distributor shall
mutually agree.
2. The amount set forth in Paragraph 1 of this Plan shall be paid for the
Distributor's services as distributor of the Shares. Such amount may be spent
by the Distributor on any activities or expenses primarily intended to result in
the sale
<PAGE>
of Shares, including, but not limited to: compensation to and expenses,
including overhead and telephone expenses, of employees of the Distributor who
engage in or support distribution of the Shares; printing of prospectuses and
reports for other than existing stockholders; preparation, printing and
distribution of sales literature and advertising materials; and compensation to
broker/dealers who sell Shares. The Distributor may negotiate with any such
broker/dealer the services to be provided by the broker/dealer to stockholders
in connection with the sale of Shares, and all or any portion of the
compensation paid to the Distributor under Paragraph 1 of this Plan may be
reallocated by the Distributor to broker/dealers who sell Shares.
3. (a) Stockholder Services Annual Fee. The Fund is authorized to pay
the Distributor an annual fee that is calculated daily and paid monthly for the
stockholder services provided to stockholders of the Class described in
paragraph (b) of this Section, at the annual rate of 0.25% of the average daily
net assets of the Class.
(b) Stockholder Services. In addition to the distribution services
set forth in Paragraph 2 above, the Distributor will provide stockholder
services to accounts of the Class, including, but not limited to, the following:
telephone service to stockholders, including the acceptance of telephone
inquiries and transaction requests; acceptance and processing of written
correspondence, new account applications and subsequent purchases by check;
mailing of confirmations, statements and tax forms directly to stockholders; and
acceptance of payment for trades by check, Federal Reserve wire or Automated
Clearing House payment. In addition, the Distributor shall perform or supervise
the performance by others of other stockholder services in connection with the
operations of the Class, as agreed from time to time.
4. This Plan shall not take effect until it has been approved by a vote
of at least a majority (as defined in the Act) of the outstanding Shares.
5. In addition to the approval required by Paragraph 4 above, this Plan
shall not take effect until it has been approved, together with any related
agreements, by votes of a majority of both (a) the Board of Directors of the
Fund and (b) those Directors of the Fund who are not "interested persons" of the
Fund (as defined in the Act) and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan and such related agreements.
2
<PAGE>
6. This Plan shall be adopted for the Class effective on the date the
Class commences operation. This Plan shall continue in effect for one year from
the date of its adoption and thereafter, the Plan shall continue in effect for
so long as such continuance is specifically approved at least annually in the
manner provided for approval of this Plan in Paragraph 5.
7. The Distributor shall provide to the Board of Directors of the Fund
and the Board of Directors shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and the purposes for which such
expenditures were made, including commissions, advertising, printing, interest,
carrying charges and allocated overhead expenses.
8. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by a vote of a majority of the outstanding Shares.
9. This Plan may not be amended to increase materially the amount of
compensation provided for in Paragraph 1 hereof unless such amendment is
approved in the manner provided for initial approval in Paragraph 4 hereof, and
no material amendment to the Plan of any kind, including an amendment which
would increase materially the amount of such compensation, shall be made unless
approved in the manner provided for approval and annual renewal in Paragraphs 5
and 6 hereof.
10. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the then current Directors who are not
interested persons (as defined in the Act) of the Fund.
11. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 7 hereof for a period of not less
than six years from the date of this Plan, such agreements or such reports, as
the case may be, the first two years in an easily accessible place.
3
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
MORGAN STANLEY FUND, INC.
FOR THE MORGAN STANLEY AGGRESSIVE EQUITY FUND CLASS C
WHEREAS, Morgan Stanley Fund, Inc. (the "Fund") intends to engage 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 Fund desires to adopt a Plan of Distribution pursuant to Rule
12b-1 under the Act (the "Plan") with respect to shares of its common stock, par
value $.001 per share, that are classified and allocated (the "Shares") to its
Morgan Stanley Aggressive Equity Fund Class C (the "Class") and the Board of
Directors has determined that there is a reasonable likelihood that adoption of
the Plan will benefit the Fund and its stockholders; and
WHEREAS, the Fund intends to employ Morgan Stanley & Co. Incorporated (the
"Distributor") as distributor of the Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate
Distribution Agreement with the Fund for Shares, pursuant to which the Fund will
employ the Distributor as distributor for the continuous offering of Shares;
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby agrees
to the terms of, the Plan with respect to the Class in accordance with Rule 12b-
1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the
Shares, compensation for distribution of the Shares at the annual rate not to
exceed 0.75% of the average daily net assets of the Class. The amount of such
compensation shall be agreed upon by the Board of Directors of the Fund and by
the Distributor and shall be calculated and accrued daily and paid monthly or at
such other intervals as the Board of Directors and the Distributor shall
mutually agree.
2. The amount set forth in Paragraph 1 of this Plan shall be paid for the
Distributor's services as distributor of the Shares. Such amount may be spent
by the Distributor on any activities or expenses primarily intended to result in
the sale
<PAGE>
of Shares, including, but not limited to: compensation to and expenses,
including overhead and telephone expenses, of employees of the Distributor who
engage in or support distribution of the Shares; printing of prospectuses and
reports for other than existing stockholders; preparation, printing and
distribution of sales literature and advertising materials; and compensation to
broker/dealers who sell Shares. The Distributor may negotiate with any such
broker/dealer the services to be provided by the broker/dealer to stockholders
in connection with the sale of Shares, and all or any portion of the
compensation paid to the Distributor under Paragraph 1 of this Plan may be
reallocated by the Distributor to broker/dealers who sell Shares.
3. (a) Stockholder Services Annual Fee. The Fund is authorized to pay
the Distributor an annual fee that is calculated daily and paid monthly for the
stockholder services provided to stockholders of the Class described in
paragraph (b) of this Section, at the annual rate of 0.25% of the average daily
net assets of the Class.
(b) Stockholder Services. In addition to the distribution services
set forth in Paragraph 2 above, the Distributor will provide stockholder
services to accounts of the Class, including, but not limited to, the following:
telephone service to stockholders, including the acceptance of telephone
inquiries and transaction requests; acceptance and processing of written
correspondence, new account applications and subsequent purchases by check;
mailing of confirmations, statements and tax forms directly to stockholders; and
acceptance of payment for trades by check, Federal Reserve wire or Automated
Clearing House payment. In addition, the Distributor shall perform or supervise
the performance by others of other stockholder services in connection with the
operations of the Class, as agreed from time to time.
4. This Plan shall not take effect until it has been approved by a vote
of at least a majority (as defined in the Act) of the outstanding Shares.
5. In addition to the approval required by Paragraph 4 above, this Plan
shall not take effect until it has been approved, together with any related
agreements, by votes of a majority of both (a) the Board of Directors of the
Fund and (b) those Directors of the Fund who are not "interested persons" of the
Fund (as defined in the Act) and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan and such related agreements.
2
<PAGE>
6. This Plan shall be adopted for the Class effective on the date the
Class commences operation. This Plan shall continue in effect for one year from
the date of its adoption and thereafter, the Plan shall continue in effect for
so long as such continuance is specifically approved at least annually in the
manner provided for approval of this Plan in Paragraph 5.
7. The Distributor shall provide to the Board of Directors of the Fund
and the Board of Directors shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and the purposes for which such
expenditures were made, including commissions, advertising, printing, interest,
carrying charges and allocated overhead expenses.
8. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by a vote of a majority of the outstanding Shares.
9. This Plan may not be amended to increase materially the amount of
compensation provided for in Paragraph 1 hereof unless such amendment is
approved in the manner provided for initial approval in Paragraph 4 hereof, and
no material amendment to the Plan of any kind, including an amendment which
would increase materially the amount of such compensation, shall be made unless
approved in the manner provided for approval and annual renewal in Paragraphs 5
and 6 hereof.
10. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the then current Directors who are not
interested persons (as defined in the Act) of the Fund.
11. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 7 hereof for a period of not less
than six years from the date of this Plan, such agreements or such reports, as
the case may be, the first two years in an easily accessible place.
3
<PAGE>
MORGAN STANLEY FUND, INC.
RULE 18f-3 MULTIPLE CLASS PLAN
FOR
CLASSES A, B AND C
June 28, 1995
I. INTRODUCTION.
A. AUTHORITY. Pursuant to Rule 18f-3 (that became effective on April 1,
1995) under the Investment Company Act of 1940, as amended (the "1940 Act"),
this Rule 18f-3 Multiple Class Plan (the "Plan") has been adopted by the Board
of Directors (the "Board") of the Morgan Stanley Fund, Inc. (the "Fund"),
including a majority of the Directors of the Fund who are not "interested
persons" of the Fund as defined in the 1940 Act (the "Independent Directors").
B. HISTORY. Pursuant to an exemptive order dated December 29, 1992,
obtained by, and applicable to, the Fund (Inv. Co. Act Release No. IC-19189)
(the "Order"), the Fund created a multiple class distribution arrangement for
two classes of shares of the common stock of each of the investment series funds
(each, a "Series") of the Fund, except the Morgan Stanley Money Market Fund (the
"Money Fund"), which has only one class. The multiple class distribution
arrangement was effective from the commencement of operations of the Fund in
January 1993. The initial two classes of each Series except the Money Fund (the
"Non-Money Funds") were named the Class A Shares and Class B Shares. Effective
on May 1, 1995, the Fund renamed its Class B Shares as Class C Shares and
created a third class of shares of each of the Non-Money Funds, named the Class
B Shares. Effective on June 28, 1995 and with respect to the commencement of
the offering of the new Class B shares, and the continued offering of the Class
A and Class C shares, the Fund elected to rely on Rule 18f-3 rather than the
Order, as permitted by Rule 18f-3, subject to certain conditions.
C. ADOPTION OF PLAN; AMENDMENT OF PLAN; AND PERIODIC REVIEW. Pursuant to
Rule 18f-3, the Fund is required to create a written plan specifying all of the
differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
<PAGE>
covered by the Plan. Before any material amendment of the Plan, the Fund is
required to obtain a finding by a majority of the Board, and a majority of the
Independent Directors, that the Plan as proposed to be amended, including the
expense allocations, is in the best interests of each class individually and the
Fund as a whole.
II. ATTRIBUTES OF SHARE CLASSES
A. The rights of each existing class of the Fund are not being changed
hereby, and shall be as set forth in the resolutions and related materials of
the Board adopted pursuant to the Order and adopted with respect to the classes
of the Fund to date, as set forth in Exhibit A hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series must represent an
equal pro rata interest in the Series and must have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class must have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares must separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan") for such class (and any other costs relating to obtaining
shareholder approval of the Rule 12b-1 Plan for such class, or an amendment of
such plan) and must separately bear any expenses associated with any non-Rule
12b-1 Plan service payments ("service fees") that are made under any servicing
agreement entered into with respect to that class; (iii) holders of the shares
of the class shall have exclusive voting rights regarding the Rule 12b-1 Plan
relating to such class (e.g., the adoption, amendment or termination of a Rule
12b-1 Plan), regarding the servicing agreements relating to such class and
regarding any matter submitted to shareholders in which the interests of that
class differ from the interests of any other class; (iv) each new class of
shares may bear, consistent with rulings and other published statements of
position by the Internal Revenue Service, the expenses of the Fund's operation
that are directly attributable to such class ("Class Expenses")(1); and (v) each
class may have conversion features
- --------------------------------
(1) Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of
2
<PAGE>
unique to such class, permitting conversion of shares of such class to shares of
another class, subject to the requirements set forth in Rule 18f-3.
C. Classes of Shares of the Fund
(1) MORGAN STANLEY MONEY MARKET FUND SHARES. The Money Fund has a
class of shares that are not designated as any class ("Money Fund Shares").
SALES LOADS. Money Fund Shares are offered at net asset value
without any sales charge assessed at time of purchase ("front-end
sales charge").
12b-1 FEES. Money Fund Shares are subject to a distribution fee
equal to .25% of the average daily net assets of the Money Fund
Shares. The distribution fee is paid for distribution-related
services to broker-dealers that have entered into dealer agreements
with the Fund's Distributor ("Authorized Dealers") and that have
effected sales of Money Fund Shares.
EXCHANGE PRIVILEGES AND CONVERSION FEATURES. The Money Fund
Shares are not exchangeable for any Class A, Class B or Class C Shares
of the other Series. Money Fund Shares have no conversion features.
(2) CLASS A SHARES. Each of the Non-Money Funds has a class of
shares designated as its "Class A Shares."
SALES LOADS. Class A Shares are offered with a maximum front-end
sales charge of 4.75% of the offering price of the shares. The sales
charge is reduced at four break points and purchases of $1 million or
more are not subject to the front-end sales charge. However, a CDSC
of 1.00% will be imposed in the event of redemption within 12 months
following purchase on sales at net asset value (i.e., purchases of $1
million or more). This CDSC arrangement applies in lieu of the front-
end sales charge on purchases of $1 million or more.
- --------------------------------
administrative personnel and services as required to support the shareholders of
a specific class, (vi) directors' fees or expenses incurred as a result of
issues relating solely to a class of shares, (vii) account expenses relating
solely to a class of shares, (viii) auditors' fees, litigation expenses, and
legal fees and expenses relating solely to a class of shares, and (ix) expenses
incurred in connection with shareholder meetings as a result of issues relating
solely to a class of shares.
3
<PAGE>
The Distributor receives the sales charges and either retains
such amounts (on shares sold through its investment representatives)
or reallows all or a substantial part of such charges to Authorized
Dealers that have effected sales of Class A Shares. The Distributor
may make payments to Authorized Dealers in amounts up to 1.00% of the
offering price in connection with purchases where no front-end sales
charge is imposed because the purchase was in an amount of $1 million
or more.
Class A Shares purchased through the reinvestment of dividends
and other distributions paid in respect of Class A Shares will also be
Class A Shares, although such shares will not be subject to the front-
end sales charge or 1.00% CDSC. However, such shares will be subject
to the .25% distribution fee.
12b-1 FEES. Class A Shares are subject to a distribution fee
equal to .25% of the average daily net assets of Class A Shares. The
distribution fee is paid for distribution-related services to
Authorized Dealers that have effected sales of Class A Shares.
EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class A Shares of
each Series are exchangeable only for Class A Shares of the other
Series. Class A Shares have no conversion feature.
(3) CLASS B SHARES. Each of the Non-Money Funds has a class of
shares designated as its "Class B Shares."
SALES LOADS. Class B Shares are offered without the imposition
of a front-end sales charge, but are subject to a maximum contingent
deferred sales charge ("CDSC") of 5% for redemptions in the first year
after purchase; the CDSC is reduced by one percent per year after the
first, second, fourth, fifth and sixth years after purchase,
decreasing to 0% after the sixth year. The CDSC is assessed as
described in each Fund's prospectus and statement of additional
information ("SAI"). No CDSC is imposed at the time of exchanges of
Class B Shares to purchase Class B Shares of another Fund. The CDSC
may be waived in certain instances as described in each Fund's
prospectus and SAI.
12b-1 FEES AND SERVICE FEES. Class B Shares are subject to a
distribution fee of .75%, and a shareholder service fee of .25%, of
the average daily net assets of the Class B Shares of the Series. The
shareholder service fee is used to compensate the Distributor and
other Authorized Dealers for services
4
<PAGE>
provided and expenses incurred in maintaining shareholder accounts,
responding to shareholder inquiries and providing information on
shareholder investments.
Shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class B Shares will also be Class B
Shares, although such shares will not be subject to the CDSC.
However, such shares will be subject to the .75% distribution fee and
the .25% service fee.
EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class B Shares of
each Series are exchangeable only for Class B Shares of other Series.
Class B Shares automatically convert after the end of seven years to
Class A Shares. The conversion feature is fully disclosed in each
Fund's prospectus and SAI.
(4) CLASS C SHARES. Each of the Non-Money Funds has a class of
shares designated as its "Class C Shares."
SALES LOADS. Class C Shares are offered at net asset value
without any front-end sales charge, but are subject to a 1.00% CDSC on
redemptions of such Class C Shares for a period of one year. The CDSC
may be waived in certain instances as set forth in the Fund's
prospectus.
12b-1 FEES AND SERVICE FEES. Class C Shares are subject to a
distribution fee of .75%, and a shareholder service fee of .25%, of
the average daily net assets of the Class C Shares of the Series. The
shareholder service fee is used to compensate the Distributor and
other Authorized Dealers for services provided and expenses incurred
maintaining shareholder accounts, responding to shareholder inquiries
and providing information on shareholder investments.
Shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class C Shares will also be Class C
Shares, although such shares will not be subject to the CDSC.
However, such shares will be subject to the .75% distribution fee and
the .25% service fee.
EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class C Shares of
each Series are exchangeable only for Class C Shares of other Series.
Class C Shares have no conversion feature.
5
<PAGE>
III. EXPENSE ALLOCATIONS
Expenses of each class created after the date hereof must be allocated
as follows: (i) distribution and shareholder servicing payments associated with
any Rule 12b-1 Plan or servicing agreement relating to each respective class of
shares (including any costs relating to implementing such plans or any amendment
thereto) will be borne exclusively by that class; (ii) any incremental transfer
agency fees relating to a particular class will be borne exclusively by that
class; and (iii) Class Expenses relating to a particular class will be borne
exclusively by that class.
The methodology and procedures for calculating the net asset value and
dividends and distributions of the various classes of shares of the Fund and the
proper allocation of income and expenses among the various classes of shares of
the Fund are required to comply with the Fund's internal control structure
pursuant to applicable auditing standards, including Statement on Auditing
Standards No. 55, and to be reviewed as part of the independent accountants'
review of such internal control structure. The independent accountants' report
on the Fund's system of internal controls required by Form N-SAR, Item 77B, is
not required to refer expressly to the procedures for calculating the classes'
net asset values.
6
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
Warren J. Olsen, whose signature appears below, does hereby constitute
and appoint Harold J. Schaaff, his true and lawful attorney and agent, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorney and agent may deem
necessary or advisable or which may be required to enable Morgan Stanley Fund,
Inc. (the "Fund") 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 the 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 foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a President and a director
of the 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 agent shall do or cause to
be done by virtue hereof.
/s/Warren J. Olsen
------------------
Warren J. Olsen
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
Fergus Reid, whose signature appears below, does hereby constitute and
appoint Warren J. Olsen and Harold J. Schaaff, his true and lawful attorneys and
agents, 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 Morgan
Stanley Fund, Inc. (the "Fund") 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 the 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 foregoing, the power and
authority to sign in the name and on behalf of the undersigned as a director of
the 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 attorneys and agents shall do or cause
to be done by virtue hereof.
/s/Fergus Reid
--------------
Fergus Reid
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
Frederick O. Robertshaw, whose signature appears below, does hereby
constitute and appoint Warren J. Olsen and Harold J. Schaaff, his true and
lawful attorneys and agents, 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 Morgan Stanley Fund, Inc. (the "Fund") 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 the
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 foregoing, the
power and authority to sign in the name and on behalf of the undersigned as a
director of the 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 attorneys and agents
shall do or cause to be done by virtue hereof.
/s/Frederick O. Robertshaw
--------------------------
Frederick O. Robertshaw
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
Andrew McNally IV, whose signature appears below, does hereby
constitute and appoint Warren J. Olsen and Harold J. Schaaff, his true and
lawful attorneys and agents, 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 Morgan Stanley Fund, Inc. (the "Fund") 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 the
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 foregoing, the
power and authority to sign in the name and on behalf of the undersigned as a
director of the 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 attorneys and agents
shall do or cause to be done by virtue hereof.
/s/Andrew McNally IV
--------------------
Andrew McNally IV
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
John D. Barrett II, whose signature appears below, does hereby
constitute and appoint Warren J. Olsen and Harold J. Schaaff, his true and
lawful attorneys and agents, 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 Morgan Stanley Fund, Inc. (the "Fund") 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 the
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 foregoing, the
power and authority to sign in the name and on behalf of the undersigned as a
director of the 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 attorneys and agents
shall do or cause to be done by virtue hereof.
/s/John D. Barrett II
----------------------
John D. Barrett II
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
Gerard E. Jones, whose signature appears below, does hereby constitute
and appoint Warren J. Olsen and Harold J. Schaaff, his true and lawful attorneys
and agents, 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 Morgan
Stanley Fund, Inc. (the "Fund") 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 the 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 foregoing, the power and
authority to sign in the name and on behalf of the undersigned as a director of
the 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 attorneys and agents shall do or cause
to be done by virtue hereof.
/s/Gerard E. Jones
------------------
Gerard E. Jones
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
Samuel T. Reeves, whose signature appears below, does hereby
constitute and appoint Warren J. Olsen and Harold J. Schaaff, his true and
lawful attorneys and agents, 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 Morgan Stanley Fund, Inc. (the "Fund") 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 the
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 foregoing, the
power and authority to sign in the name and on behalf of the undersigned as a
director of the 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 attorneys and agents
shall do or cause to be done by virtue hereof.
/s/Samuel T. Reeves
-------------------
Samuel T. Reeves
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
Frederick B. Whittemore, whose signature appears below, does hereby
constitute and appoint Warren J. Olsen and Harold J. Schaaff, his true and
lawful attorneys and agents, 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 Morgan Stanley Fund, Inc. (the "Fund") 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 the
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 foregoing, the
power and authority to sign in the name and on behalf of the undersigned as a
director of the 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 attorneys and agents
shall do or cause to be done by virtue hereof.
/s/Frederick B. Whittemore
--------------------------
Frederick B. Whittemore
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
James R. Rooney, whose signature appears below, does hereby constitute
and appoint Warren J. Olsen and Harold J. Schaaff, his true and lawful attorneys
and agents, 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 Morgan
Stanley Fund, Inc. (the "Fund") 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 the 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 foregoing, the power and
authority to sign in the name and on behalf of the undersigned as Treasurer
(Principal Accounting Officer) of the 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
attorneys and agents shall do or cause to be done by virtue hereof.
/s/James R. Rooney
------------------
James R. Rooney
Date: October 2, 1995
---------------------
<PAGE>
MORGAN STANLEY FUND, INC.
POWER OF ATTORNEY
Barton M. Biggs, whose signature appears below, does hereby constitute
and appoint Warren J. Olsen and Harold J. Schaaff, his true and lawful attorneys
and agents, 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 Morgan
Stanley Fund, Inc. (the "Fund") 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 the 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 foregoing, the power and
authority to sign in the name and on behalf of the undersigned as a director of
the 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 attorneys and agents shall do or cause
to be done by virtue hereof.
/s/Barton M. Biggs
------------------
Barton M. Biggs
Date: October 2, 1995
---------------------
