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SUPPLEMENT DATED MARCH 7, 1996
TO THE PROSPECTUS DATED JANUARY 2, 1996
MORGAN STANLEY FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS
02208-2798
The prospectus dated January 2, 1996 (the "Prospectus") of the Morgan
Stanley Fund, Inc. (the "Fund") is hereby amended and supplemented, effective
March 7, 1996, as follows:
1. Although the total operating expenses of each class of shares of the
investment funds of the Fund have not changed, the following amendments have
been made to the "Annual Fund Operating Expenses" table appearing on pages 4 and
5 of the Prospectus under the "FUND EXPENSES" section. Each entry under the
"12b-1 Fee" category for the Class B and Class C shares of each investment fund
appearing in the table is changed from 0.75% to 1.00% to reflect a shareholder
services fee of 0.25% applicable to both such classes. Accordingly, footnote (6)
has been added to the "Class B" and "Class C" line under "12b-1 Fees" as
follows:
(6) Of the 12b-1 fees for the Class B shares and the Class C shares, 0.75%
represents a distribution fee and 0.25% represents a shareholder
services fee.
In addition, each entry under the "Other Expenses" category for the Class B
and Class C shares of each investment fund is decreased by 0.25%.
2. The following section is added to page 35 of the Prospectus after the
section entitled "Investment Objectives and Policies -- Aggressive Equity Fund":
PERFORMANCE INFORMATION FOR THE AGGRESSIVE EQUITY FUND
The Aggressive Equity Fund has identical investment objectives and
policies and substantially similar investment restrictions as those of the
Aggressive Equity Portfolio (the "Portfolio") of Morgan Stanley
Institutional Fund, Inc., an investment portfolio currently managed by the
Adviser. Set forth below is representative performance data which an
investor may find relevant in considering whether to invest in the
Aggressive Equity Fund. The performance data is not necessarily indicative
of the future performance of the Aggressive Equity Fund. Although the
Adviser expects that the Aggressive Equity Fund initially will be somewhat
smaller in asset size to the Portfolio, it anticipates that the Aggressive
Equity Fund will be comparable in asset size to the Portfolio before the end
of the Aggressive Equity Fund's first full year of operation and will
continue to grow in size thereafter. (Investment in the Portfolio is subject
to considerably larger minimum investments and account sizes, with certain
exceptions.)
The Portfolio incurred expenses during the periods shown that are
different from the estimated advisory, administrative and other fees to
which the Aggressive Equity Fund will be subject. Accordingly, the following
performance information has been adjusted by applying the anticipated total
expense ratios for the Aggressive Equity Fund rather than the total expense
ratios experienced by the Portfolio. The data set forth below under the
heading "Return With Sales Charge" is adjusted, (i) with respect to the
Class A shares, to take into account a 4.75% sales charge applicable to
purchases of Class A shares of the Aggressive Equity Fund, (ii) with respect
to Class B shares, to take into account a 5.00% contingent deferred sales
charge that is imposed if Class B shares are redeemed within one year of
their purchase and (iii) with respect to the Class C shares, to take into
account a 1.00% contingent deferred sales charge that is imposed if Class C
shares are redeemed within one year of their
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purchase. The data set forth below under the heading "Return Without Sales
Charge" is not adjusted to take into account such sales charges. See
"Performance Information" below and in the Statement of Additional
Information.
TOTAL RETURN FOR THE AGGRESSIVE EQUITY PORTFOLIO
FROM INCEPTION ON 3/18/95 THROUGH 12/31/95
(ADJUSTED TO REFLECT ESTIMATED AGGRESSIVE EQUITY FUND EXPENSES)
<TABLE>
<CAPTION>
RETURN WITH SINCE
SALES CHARGE INCEPTION
- ----------------------------------------------------------- -----------
<S> <C>
Class A (of 4.75%)......................................... 36.00%
Class B (of 5.00%)......................................... 35.75%
Class C (of 1.00%)......................................... 39.75%
<CAPTION>
RETURN WITHOUT
SALES CHARGE
- -----------------------------------------------------------
<S> <C>
Class A.................................................... 40.75%
Class B.................................................... 40.00%
Class C.................................................... 40.00%
</TABLE>
The past performance of the Portfolio is no guarantee of the future
performance of the Investment Fund.
3. The following sections are added to the Prospectus in light of
investment in Russian equity securities by the Emerging Markets Fund. The
following paragraph is added to the cover page of the Prospectus after the first
bold-face paragraph:
THE MORGAN STANLEY EMERGING MARKETS FUND MAY INVEST IN EQUITY SECURITIES
OF RUSSIAN COMPANIES. RUSSIA'S SYSTEM OF SHARE REGISTRATION AND CUSTODY
INVOLVES CERTAIN RISKS OF LOSS THAT ARE NOT NORMALLY ASSOCIATED WITH
INVESTMENTS IN OTHER SECURITIES MARKETS. SEE "ADDITIONAL INVESTMENT
INFORMATION -- RUSSIAN SECURITIES TRANSACTIONS."
The following is added to page 19 of the Prospectus at the end of the
section entitled "Prospectus Summary -- Risk Factors":
The Emerging Markets Fund may invest in equity securities of Russian
companies. The registration, clearing and settlement of securities
transactions in Russia are subject to significant risks not normally
associated with securities transactions in the United States and other more
developed markets. See "Additional Investment Information -- Russian
Securities Transactions."
The following section is added to page 53 of the Prospectus after the
section entitled "Additional Investment Information -- Reverse Repurchase
Agreements":
RUSSIAN SECURITIES TRANSACTIONS. The Emerging Markets Fund may invest
in equity securities of Russian companies. The registration, clearing and
settlement of securities transactions in Russia are subject to significant
risks not normally associated with securities transactions in the United
States and other more developed markets. Ownership of shares in Russian
companies is evidenced by entries in a company's share register (except
where shares are held through depositories that meet the requirements of the
1940 Act) and the issuance of extracts from the register or, in certain
limited cases, by formal share certificates. However, Russian share
registers are frequently unreliable and the Investment Fund could possibly
lose its registration through oversight, negligence or fraud. Moreover,
Russia lacks a centralized registry to record securities transactions and
registrars located throughout Russia or the companies themselves maintain
share registers. Registrars are under no obligation to
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provide extracts to potential purchasers in a timely manner or at all and
are not necessarily subject to effective state supervision. In addition,
while registrars are liable under law for losses resulting from their
errors, it may be difficult for the Investment Fund to enforce any rights it
may have against the registrar or issuer of the securities in the event of
loss of share registration. Although Russian companies with more than 1,000
shareholders are required by law to employ an independent company to
maintain share registers, in practice, such companies have not always
followed this law. Because of this lack of independence of registrars,
management of a Russian company may be able to exert considerable influence
over who can purchase and sell the company's shares by illegally instructing
the registrar to refuse to record transactions on the share register.
Furthermore, these practices may prevent the Investment Fund from investing
in the securities of certain Russian companies deemed suitable by the
Adviser and could cause a delay in the sale of Russian securities by the
Investment Fund if the company deems a purchaser unsuitable, which may
expose the Investment Fund to potential loss on its investment.
In light of the risks described above, the Board of Directors of the
Investment Fund has approved certain procedures concerning the Investment
Fund's investments in Russian securities. Among these procedures is a
requirement that the Investment Fund will not invest in the securities of a
Russian company unless that issuer's registrar has entered into a contract
with the Investment Fund's sub-custodian containing certain protective
conditions including, among other things, the sub-custodian's right to
conduct regular share confirmations on behalf of the Investment Fund. This
requirement will likely have the effect of precluding investments in certain
Russian companies that the Investment Fund would otherwise make.
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