MORGAN STANLEY FUND INC, 497, 1997-07-21

MORGAN STANLEY FUND INC
497, 1997-07-21

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<PAGE>
SUPPLEMENT DATED JULY 21, 1997
TO THE PROSPECTUS DATED JANUARY 2, 1997
PREVIOUSLY SUPPLEMENTED ON JULY 1, 1997

MORGAN STANLEY MONEY MARKET FUND
MORGAN STANLEY TAX-FREE MONEY MARKET FUND
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND

PORTFOLIOS OF THE

MORGAN STANLEY FUND, INC. (THE "COMPANY")
P.O. BOX 418256
KANSAS CITY, MISSOURI
64141
-------------

The Prospectus, as previously supplemented, is being further amended and
supplemented to reflect changes approved at the Company's shareholder meeting of
July 2, 1997. As a result of this meeting, the Company's new investment adviser
and administrator is Van Kampen American Capital Investment Advisory Corp. and
the Company's previous adviser, Morgan Stanley Asset Management Inc., is now one
of the Company's sub-advisers. The Prospectus is amended and supplemented as
follows:
--------------

The third sentence of the first paragraph on page 1 of the Prospectus is
deleted and replaced with the following:

The Company is designed to make available to retail investors the
expertise of Van Kampen American Capital Investment Advisory Corp., the
adviser (the "Adviser") and administrator (the "Administrator") and its
affiliates, Morgan Stanley Asset Management Inc., a sub-adviser (a "Sub-
Adviser") and Miller Anderson & Sherrerd, LLP, a sub-adviser (a
"Sub-Adviser") to the Funds.
--------------

Under the heading "PROSPECTUS SUMMARY," the first paragraph under the
sub-heading "THE COMPANY" is deleted and replaced with the following:

The Company currently consists of twenty-two Funds which are
designed to offer investors with Van Kampen American Capital Investment
Advisory Corp. ("VK Advisory" or the "Adviser") providing services as
adviser and administrator and its affiliates, Morgan Stanley Asset
Management Inc. ("MSAM" or a "Sub-Adviser") and Miller, Andersen &
Sherrerd, LLP ("MAS" or a "Sub-Adviser") providing services as
sub-advisers and Van Kampen American Capital Distributors, Inc. ("VKAC
Distributors" or the "Distributor") providing services as Distributor.
MAS serves as the Sub-Adviser for the Mid Cap Growth and Value Funds,
which are described in a separate prospectus. MSAM serves as the
Sub-Adviser for all of the other Funds listed below. Each Fund has its
own investment objective and policies designed to meet its specific
goals. For ease of reference the words "Morgan Stanley," which begin the
name of each Fund, are not included in the Funds named below. The
investment objective of each Fund described in this Prospectus is as
follows:
--------------
<PAGE>
Under the heading "INVESTMENT MANAGEMENT," the first paragaph is deleted and
replaced with the following:

Van Kampen American Capital Investment Advisory Corp., ("VK
Advisory," the "Adviser" and the "Administrator"), acts as investment
adviser to each of the Funds. Morgan Stanley Asset Management Inc.
("MSAM," or a "Sub-Adviser") acts as an investment sub-adviser to each
of the Funds, except the Mid Cap Growth and Value Funds. Miller Anderson
& Sherrerd, LLP ("MAS," or a "Sub-Adviser") acts as an investment
sub-adviser to each of the Mid Cap Growth and Value Funds.

On May 31, 1997, Morgan Stanley Group, Inc. and Dean Witter,
Discover & Co. merged to form Morgan Stanley, Dean Witter, Discover &
Co. Prior thereto, Morgan Stanley Group Inc. was the parent of the
Adviser, the Sub-Advisers and the Distributor. The Adviser, Sub-Advisers
and Distributor are now subsidiaries of Morgan Stanley, Dean Witter,
Discover & Co.
--------------

Throughout the section entitled "INVESTMENT OBJECTIVES AND POLICIES" all
references to the "Adviser" are deleted and replaced with the term
"Sub-Adviser."
--------------

Throughout the section entitled "ADDITIONAL INVESTMENT INFORMATION," all
references to the "Adviser" are deleted and replaced with the term
"Sub-Adviser."
--------------

Under the heading "MANAGEMENT OF THE COMPANY," the section entitled
"INVESTMENT ADVISER" is deleted and replaced with the following:

INVESTMENT ADVISER. Van Kampen American Capital Investment Advisory
Corp. ("VK Advisory," or the "Adviser") is the investment adviser and
administrator of the Funds. The Adviser provides investment advice and
portfolio management services pursuant to an advisory agreement (the
"Advisory Agreement") and subject to the supervision of the Company's
Board of Directors, makes the Funds' investment decisions, arranges for
the execution of portfolio transactions and generally manages the Funds'
investments. The Advisory Agreement also provides that VK Advisory may
appoint sub-advisers to perform these portfolio management
responsibilities. See "Investment Sub-Adviser" below. The Adviser is
entitled to receive an aggregate advisory fee computed daily and paid
monthly at the following annual rates for each Fund:

<TABLE>
<CAPTION>
ASSETS ABOVE
ASSETS UP TO $250 MILLION UP ASSETS EXCEEDING
$250 MILLION TO $500 MILLION $500 MILLION
------------- --------------- -----------------
<S> <C> <C> <C>
Money Market Fund....................................... 0.45% 0.40% 0.35%
Tax-Free Money Market Fund.............................. 0.45% 0.40% 0.35%
Government Obligations Money Market Fund................ 0.45% 0.40% 0.35%
</TABLE>

The Adviser has agreed to a reduction in the fees payable to it and
to reimburse expenses to the applicable Fund, if necessary, if such fees
or expenses would cause total annual operating expenses of the Fund to
exceed the maximums set forth in "Fund Expenses."

The Adviser is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("Van Kampen American Capital"). Van Kampen American
Capital is a diversified asset management company with

2
<PAGE>
more than two million retail investor accounts, extensive capabilities
for managing institutional portfolios, and more than $57 billion under
management or supervision. Van Kampen American Capital's more than 40
open-end and 38 closed-end funds and more than 2,500 unit investment
trust are professionally distributed by leading financial advisers
nationwide. The Distributor of the Company and the sponsor of the funds
mentioned above, is also a wholly-owned subsidiary of Van Kampen
American Capital.

Van Kampen American Capital is a wholly-owned subsidiary of VK/AC
Holding, Inc. VK/AC Holding, Inc. is a wholly-owned subsidiary of MSAM
Holdings II, Inc. which, in turn, is a wholly-owned subsidiary of Morgan
Stanley Dean Witter, Discover & Co. The Adviser's principal office is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

On May 31, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover
& Co. merged to form Morgan Stanley, Dean Witter, Discover & Co. Prior
thereto, Morgan Stanley Group Inc. was the parent of the Adviser,
Sub-Advisers and Distributor. The Adviser, Sub-Advisers and Distributor
are now subsidiaries of Morgan Stanley, Dean Witter, Discover & Co.

Morgan Stanley, Dean Witter, Discover & Co. and various of its
directly or indirectly owned subsidiaries, including Morgan Stanley &
Co. Incorporated, a registered broker-dealer and investment adviser, and
Morgan Stanley International are engaged in a wide range of financial
services. Their principal businesses include securities underwriting,
distribution and trading; merger, acquisition, restructuring and other
corporate finance advisory activities; merchant banking, stock brokerage
and research services; asset management; trading of futures, option,
foreign exchange commodities and swaps (including foreign exchange,
commodities, indices and interest rates); real estate advice, financing
and investing; and global custody, securities clearance services and
securities lending; and credit services.

INVESTMENT SUB-ADVISER. Morgan Stanley Asset Management Inc.
("MSAM," or the "Sub-Adviser") is the investment sub-adviser of the
Funds. The Sub-Adviser provides investment advice and portfolio
management services pursuant to an investment sub-advisory agreement
(the "Investment Advisory Agreement") and, subject to the supervision of
the Adviser and the Company's Board of Directors, makes the Funds'
investment decisions, arranges for the execution of portfolio
transactions and generally manages the Funds' investments.

The Sub-Adviser is entitled to receive sub-advisory fees computed
daily and paid quarterly at the following rates for the Funds. If the
average daily net assets of a Fund during the monthly period are less
than or equal to $500 million, VK Advisory shall pay MSAM one-half of
the total investment advisory fee payable to VK Advisory by the Fund
(after application of any fee waivers in effect) for such monthly
period. If a Fund's average daily net assets for the monthly period are
greater than $500 million, VK Advisory shall pay MSAM a fee for such
monthly period equal to the greater of (a) one-half of what the total
investment advisory fee payable to VK Advisory by the Fund (after
application of any fee waivers in effect) for such monthly period would
have been had the Fund's average daily net assets during such period
been equal to $500 million, or (b) forty-five percent of the total
investment advisory fee payable to VK Advisory by the Fund (after
application of any fee waivers in effect) for such monthly period.

3
<PAGE>
MSAM, 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 May 31, 1997, MSAM had approximately
$75.1 billion in assets under management as an investment adviser or as
a Named Fiduciary or Fiduciary Adviser. See "Management of the Company
-- Investment Advisory and Administrative Agreements" in the Statement
of Additional Information.
--------------

Under the heading "PURCHASE OF SHARES," the second sentence of the second
paragraph is deleted and replaced with the following:

The minimum initial investment is $250,000, except that the minimum
initial investment amount for individual retirement accounts ("IRAs") is
$250,000 effective August 4, 1997.
--------------

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE

4
<PAGE>
SUPPLEMENT DATED JULY 21, 1997
TO THE PROSPECTUS DATED JANUARY 2, 1997
AS SUPPLEMENTED THROUGH JUNE 19, 1997
PREVIOUSLY SUPPLEMENTED ON JULY 1, 1997

MORGAN STANLEY EMERGING MARKETS DEBT FUND
MORGAN STANLEY GLOBAL FIXED INCOME FUND
MORGAN STANLEY HIGH YIELD FUND
MORGAN STANLEY WORLDWIDE HIGH INCOME FUND

PORTFOLIOS OF THE

MORGAN STANLEY FUND, INC. (THE "COMPANY")
P.O. BOX 418256
KANSAS CITY, MISSOURI
64141
-------------

--------------

The third sentence of the first paragraph on page 1 of the Prospectus is
deleted and replaced with the following:

The Company is designed to make available to retail investors the
expertise of Van Kampen American Capital Investment Advisory Corp., the
adviser (the "Adviser") and administrator (the "Administrator") and its
affiliates, Morgan Stanley Asset Management Inc., a sub-adviser ("MSAM"
or a "Sub-Adviser") and Miller Anderson & Sherrerd, LLP, a sub-adviser
(a "Sub-Adviser") to the Funds.

--------------

On page 6, the last sentence on the page is deleted and replaced with the
following:

For the fiscal periods ended June 30, 1994, June 30, 1995 and June
30, 1996, the Fund's prior investment adviser, MSAM, waived fees and/or
reimbursed expenses totaling approximately $150,000, $121,000 and
$112,000, respectively, for the Global Fixed Income Fund.

On page 7, the last sentence on the page is deleted and replaced with the
following:

For the fiscal period ended June 30, 1996, the Fund's prior
investment adviser, MSAM, waived advisory fees and/or reimbursed
expenses totaling approximately $38,000 for the High Yield Fund.

On page 8, the last sentence on the page is deleted and replaced with the
following:

For the fiscal periods ended June 30, 1994, June 30, 1995 and June
30, 1996, the Fund's prior investment adviser, MSAM, waived fees and/or
reimbursed expenses totaling approximately $39,000, $88,000 and $97,000,
respectively, for the Worldwide High Income Fund.

--------------
<PAGE>
Under the heading "PROSPECTUS SUMMARY," the first paragraph under the
sub-heading "THE COMPANY" on page 9 is deleted and replaced with the following:

--------------

Under the heading "INVESTMENT MANAGEMENT" on page 11, the first paragaph is
deleted and replaced with the following:

--------------

Under the heading "RISK FACTORS," the first full sentence on page 12 is
deleted and replaced with the following:

The Emerging Markets Debt, Global Fixed Income and Worldwide High
Income Funds are non-diversified portfolios which may invest a greater
portion of their assets in the securities of a smaller number of issuers
and, as a result, will be subject to a greater risk resulting from such
concentration of its portfolio securities.

--------------

Throughout the section entitled "INVESTMENT OBJECTIVES AND POLICIES" all
references to the "Adviser" are deleted and replaced with the term
"Sub-Adviser."

--------------

Throughout the section entitled "ADDITIONAL INVESTMENT INFORMATION," all
references to the "Adviser" are deleted and replaced with the term
"Sub-Adviser."

--------------

2
<PAGE>
The paragraph under the section entitled "INVESTMENT LIMITATIONS" on page 30
is deleted and replaced with the following:

The High Yield Fund is a diversified investment company under the
1940 Act, and is subject to the following limitations: (a) the Fund may
not invest more than 5% of its total assets in the securities of any one
issuer, except obligations of the U.S. Government, its agencies and
instrumentalities, and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer. The Emerging Markets
Debt, Global Fixed Income and Worldwide High Income Funds are non-
diversified investment companies under the 1940 Act, which means that
each such Fund 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 Emerging Markets Debt, Global Fixed Income and Worldwide High
Income Funds may invest a greater proportion of their total assets in
the securities of a smaller number of issuers and, as a result, will be
subject to greater risk resulting from such concentration of its
portfolio securities. The Emerging Markets Debt, Global Fixed Income and
Worldwide High Income Funds, however, intend to comply with the
diversification requirements imposed by the Internal Revenue Code of
1986, as amended, for qualification as a regulated investment company.

--------------

Under the heading "MANAGEMENT OF THE COMPANY," the section entitled
"INVESTMENT ADVISER" on pages 30-31 is deleted and replaced with the following:

<TABLE>
<S> <C>
Emerging Markets Debt Fund.................................................. 1.25%
Global Fixed Income Fund.................................................... 0.75%
High Yield Fund............................................................. 0.75%
Worldwide High Income Fund.................................................. 0.75%
</TABLE>

3
<PAGE>
are professionally distributed by leading financial advisers nationwide.
The Distributor of the Company and the sponsor of the funds mentioned
above, is also a wholly-owned subsidiary of Van Kampen American Capital.

4
<PAGE>
billion in assets under management as an investment adviser or as a
Named Fiduciary or Fiduciary Adviser. See "Management of the Company --
Investment Advisory and Administrative Agreements" in the Statement of
Additional Information.

--------------

Under the sub-heading "PORTFOLIO MANAGERS" on pages 31-33, all reference to
the "Adviser" are deleted and replaced with "Sub-Adviser."

--------------

Under the sub-heading "ADMINISTRATOR" on page 33, the first sentence of the
first paragraph is deleted and replaced with the following:

VK Advisory (the "Administrator") also provides the Company with
services pursuant to an administration agreement (the "Administration
Agreement").

--------------

Under the heading "'PURCHASE OF SHARES", the fourth paragraph under the
sub-heading "QUANTITY DISCOUNTS" on page 38 is deleted and replaced with the
following:

Until August 4, 1997, the phrase "Participating Funds," as used
herein, refers to all Funds of Morgan Stanley Fund, Inc. On August 4,
1997, "Participating Funds" will refer to certain open-end investment
companies advised by the Adviser or Van Kampen American Capital Asset
Management Inc. and distributed by the Distributor as determined from
time to time by the Company's Board of Directors.

--------------

As of August 4, 1997, item #7 under the sub-heading "NAV PURCHASE OPTIONS"
on pages 39-41, will be deleted and the remaining items will be renumbered
accordingly.

--------------

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE

5
<PAGE>
SUPPLEMENT DATED JULY 21, 1997
TO THE PROSPECTUS DATED JANUARY 2, 1997
PREVIOUSLY SUPPLEMENTED ON JULY 1, 1997

MORGAN STANLEY ASIAN GROWTH FUND
MORGAN STANLEY EMERGING MARKETS FUND
MORGAN STANLEY GLOBAL EQUITY FUND
MORGAN STANLEY GLOBAL EQUITY ALLOCATION FUND
MORGAN STANLEY INTERNATIONAL MAGNUM FUND
MORGAN STANLEY JAPANESE EQUITY FUND
MORGAN STANLEY LATIN AMERICAN FUND
PORTFOLIOS OF THE

MORGAN STANLEY FUND, INC. (THE "COMPANY")
P.O. BOX 418256
KANSAS CITY, MISSOURI
64141
-------------

The third sentence of the first paragraph on page 1 of the Prospectus is
deleted and replaced with the following:

The Company is designed to make available to retail investors the
expertise of Van Kampen American Capital Investment Advisory Corp., the
adviser (the "Adviser") and administrator (the "Administrator") and its
affiliates, Morgan Stanley Asset Management Inc., a sub-adviser ("MSAM"
or a "Sub-Adviser") and Miller Anderson & Sherrerd, LLP, a sub-adviser
(a "Sub-Adviser") to the Funds.
--------------

On page 6, the last sentence on the page is deleted and replaced with the
following:

For the fiscal periods ended June 30, 1994, June 30, 1995 and June
30, 1996, the Fund's prior investment adviser, MSAM, waived fees and/or
reimbursed expenses totaling approximately $464,000, $0 and $0,
respectively, for the Asian Growth Fund.

On page 7, the last sentence on the page is deleted and replaced with the
following:

For the fiscal periods ended June 30, 1995 and June 30, 1996, the
Fund's prior investment adviser, MSAM, waived advisory fees and/or
reimbursed expenses totaling approximately $197,000 and $335,000,
respectively, for the Emerging Markets Fund.

On page 8, the last sentence on the page is deleted and replaced with the
following:
<PAGE>
For the fiscal periods ended June 30, 1994, June 30, 1995 and June
30, 1996, the Fund's prior investment adviser, MSAM, waived fees and/or
reimbursed expenses totaling approximately $353,000, $247,000 and
$371,000, respectively, for the Global Equity Allocation Fund.

On page 10, the last sentence on the page is deleted and replaced with the
following:

For the fiscal periods ended June 30, 1995 and June 30, 1996, the
Fund's prior investment adviser, MSAM waived advisory fees and/or
reimbursed expenses totaling approximately $165,000 and $206,000,
respectively, for the Latin American Fund.
--------------

Under the heading "PROSPECTUS SUMMARY," the first paragraph under
the sub-heading "THE COMPANY" on page 11 is deleted and replaced with
the following:

Under the heading "INVESTMENT MANAGEMENT" on page 13, the first paragaph is
deleted and replaced with the following:

Throughout the section entitled "INVESTMENT OBJECTIVES AND POLICIES" all
references to the "Adviser" are deleted and replaced with the term
"Sub-Adviser."
--------------

Throughout the section entitled "ADDITIONAL INVESTMENT INFORMATION," all
references to the "Adviser" are deleted and replaced with the term
"Sub-Adviser."
--------------

2
<PAGE>
Under the heading "MANAGEMENT OF THE COMPANY" on page 37, the section
entitled "Investment Adviser" is deleted and replaced with the following:

<TABLE>
<S> <C>
Asian Growth Fund........................................................... 1.00%
Emerging Markets Fund....................................................... 1.25%
Global Equity Fund.......................................................... 1.00%
Global Equity Allocation Fund............................................... 1.00%
International Magnum Fund................................................... 0.80%
Japanese Equity Fund........................................................ 1.00%
Latin American Fund......................................................... 1.25%
</TABLE>

The Adviser is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("Van Kampen American Capital"). Van Kampen American
Capital is a diversified asset management company with more than two
million retail investor accounts, extensive capabilities for managing
institutional portfolios, and more than $57 billion under management or
supervision. Van Kampen American Capital's more than 40 open-end and 38
closed-end funds and more than 2,500 unit investment trust are
professionally distributed by leading financial advisers nationwide. The
Distributor of the Company and the sponsor of the funds mentioned above,
is also a wholly-owned subsidiary of Van Kampen American Capital.

3
<PAGE>
Morgan Stanley, Dean Witter, Discover & Co. and various of its
directly or indirectly owned subsidiaries, including Morgan Stanley &
Co. Incorporated, a registered broker-dealer and investment adviser, and
Morgan Stanley International are engaged in a wide range of financial
services. Their principal businesses include securities underwriting,
distribution and trading; merger, acquisition, restructuring and other
corporate finance advisory activities; merchant banking, stock brokerage
and research services; asset management; trading of futures, option,
foreign exchange commodities and swaps (including foreign exchange,
commodities, indices and interest rates); real estate advice, financing
and investing; and global custody, securities clearance services and
securities lending; and credit services.

INVESTMENT SUB-ADVISER. Morgan Stanley Asset Management Inc.
("MSAM," or a "Sub-Adviser") is the investment sub-adviser of the Funds.
The Sub-Adviser provides investment advice and portfolio management
services pursuant to an investment sub-advisory agreement (the
"Investment Advisory Agreement") and, subject to the supervision of the
Adviser and the Company's Board of Directors, makes the Funds'
investment decisions, arranges for the execution of portfolio
transactions and generally manages the Funds' investments.

MSAM, 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 May 31, 1997, MSAM had approximately
$75.1 billion in assets under management as an investment adviser or as
a Named Fiduciary or Fiduciary Adviser. See "Management of the Company
-- Investment Advisory and Administrative Agreements" in the Statement
of Additional Information.
--------------

Under the heading "PORTFOLIO MANAGERS" on pages 37-39, all references to the
term "Adviser" are deleted and replaced with "Sub-Adviser."
--------------

Under the heading "PURCHASE OF SHARES," the fourth paragraph under the
sub-heading "QUANTITY DISCOUNTS" on pages 45-46 is deleted and replaced with the
following:

Until August 4, 1997, the phrase "Participating Funds," as used
herein, refers to all Funds of Morgan Stanley Fund, Inc. On August 4,
1997, "Participating Funds" will refer to certain open-end

4
<PAGE>
investment companies advised by the Adviser or Van Kampen American
Capital Asset Management Inc. and distributed by the Distributor as
determined from time to time by the Company's Board of Directors.
--------------

As of August 4, 1997, item #7 under the sub-heading "NAV PURCHASE OPTIONS"
on pages 47-48, will be deleted and the remaining items will be renumbered
accordingly.
--------------

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE

5
<PAGE>
SUPPLEMENT DATED JULY 21, 1997
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 2, 1997
PREVIOUSLY SUPPLEMENTED ON JULY 1, 1997

MORGAN STANLEY FUND, INC. (THE "COMPANY")
P.O. BOX 418256
KANSAS CITY, MISSOURI
64141
-------------

At a Special Meeting of Shareholders of the Company held on July 2, 1997,
Shareholders approved changes to the investment advisory structure of the
Company, approved a non-diversification policy for the Worldwide High Income
Fund and elected a new Board of Directors. At the new Board of Directors' first
Board meeting, they elected new officers to the Company. Therefore, the
Statement of Additional Information ("SAI"), as previously amended and
supplemented, is being further amended and supplemented to: (i) add disclosure
regarding the Company's new investment adviser, Van Kampen American Capital
Investment Advisory Corp.; (ii) revise disclosure regarding Morgan Stanley Asset
Management Inc. and Miller Anderson & Sherrerd, LLP, now sub-advisers to the
Company; (iii) reflect the change of the Wideworld High Income Fund's status to
a non-diversified portfolio; and (iv) reflect changes in the Board of Directors
and officers of the Company. The SAI is amended and supplemented as follows:

--------------

The introductory paragraph on the cover of the SAI is deleted and replaced
with the following:

Morgan Stanley Fund, Inc. (the "Company") is an open-end management
investment company. The Company currently consists of twenty-two
diversified and non-diversified investment portfolios designed to offer
a range of investment choices (each, a "Fund" and collectively, the
"Funds"). The Company is designed to make available to retail investors
the expertise of (i) Van Kampen American Capital Investment Advisory
Corp. ("VK Advisory"), the adviser (the "Adviser") and administrator
(the "Administrator") to the Funds, (ii) Morgan Stanley Asset Management
Inc. ("MSAM"), a sub-adviser (a "Sub-Adviser") to the Funds, other than
the Mid Cap Growth and Value Funds and (iii) Miller, Andersen &
Sherrerd, LLP ("MAS"), a sub-adviser (a "Sub-Adviser") to the Mid Cap
Growth and Value Funds. This Statement of Additional Information ("SAI")
addresses information of the Company applicable to the Funds.

--------------

On page 21, the Category I Funds' non-fundamental investment limitation no.
(17) is amended to reflect that the Wideworld High Income Fund is excepted from
such diversification limitation.

--------------

On page 22, the paragraph following the Category I Funds' non-fundamental
policy No. 4 regarding diversification for status as a registered investment
company purposes is amended to include the Worldwide High Income Fund.

--------------
<PAGE>
The section entitled "MANAGEMENT OF THE COMPANY -- OFFICERS AND DIRECTORS,"
is deleted and replaced with the following:

The Company's Officers, under the supervision of the Board of
Directors, manage the day-to-day operations of the Company. The
Directors set broad policies for the Company and choose its Officers.
Two Directors and all of the Officers of the Company are directors,
officers or employees of the Adviser or its affiliates. The other
Directors have no affiliation with the Adviser, Distributor or
administrative services providers or their affiliates. The Directors are
also Trustees of other open-end funds advised by VK Advisory or Van
Kampen American Capital Asset Management, Inc. ("Asset Management")
(collectively with the Company, the "Fund Complex") and Mr. Whalen is
also Trustee of closed-end funds that are similarly managed. Officers of
the Company are also officers of funds in the Fund Complex and some or
all of the other investment companies managed, administered, advised or
distributed by VK Advisory or its affiliates. A list of the Directors
and Officers of the Company and a brief statement of their present
positions and principal occupations during the past five years is set
forth below. Messrs. Hegel, McDonnell, Nyberg, Wood, Sullivan, Dalmaso,
Martin, Wetherell and Hill are located at One Parkview Plaza, Oakbrook
Terrace, IL 60181. The Company's officers other than Messrs. McDonnell,
Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin, Wetherell, Hill and
Stadler and Ms. Haigney are located at 2800 Post Oak Blvd., Houston, TX
77056.

<TABLE>
<CAPTION>
NAME, ADDRESS AND
DATE OF BIRTH POSITION WITH COMPANY PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------------- --------------------------- ---------------------------------------------------
<S> <C> <C>
J. Miles Branagan Director Private investor, Co-founder, and prior to August
1632 Morning Mountain Road 1996, Chairman, Chief Executive Officer and
Raleigh, NC 27614 President, MDT Corporation (now known as
Date of Birth: 07/14/32 Getinge/Castle, Inc. a subsidiary of Getinge
Industrier AB), a company which develops,
manufactures, markets and services medical and
scientific equipment. Trustee of each of the funds
in the Fund Complex.

Richard M. DeMartini Director President and Chief Operating Officer, Dean Witter
Dean Witter Capital Capital, a division of Morgan Stanley, Dean Witter,
Two World Trade Center Discover & Co. ("MSDWD"). Member of the MSDWD
New York, NY 10048 Management Committee. Director of the InterCapital
Date of Birth: 10/12/52 Funds. Trustee of the TCW/DW Funds. Former Chairman
of the Board of the NASDAQ Stock Market, Inc.
Former Vice Chairman of the Board of the National
Association of Securities Dealers, Inc.
</TABLE>

2
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
DATE OF BIRTH POSITION WITH COMPANY PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------------- --------------------------- ---------------------------------------------------
<S> <C> <C>
Linda Hutton Heagy Director Co-Managing Partner of Heidrick & Struggles, an
Sears Tower executive search firm. Prior to 1997, Partner, Paul
233 South Wacker Drive Ray Berndtson, Inc. an executive recruiting and
Suite 7000 management consulting firm. Formerly, Executive
Chicago, IL 60606 Vice President of ABN AMRO, N.A., a Dutch bank
Date of Birth: 06/03/48 holding company. Prior to 1992, Executive Vice
President of La Salle National Bank. Trustee on The
University of Chicago Hospitals Board, The
International House Board and the Women's Board of
the University of Chicago. Trustee of each of the
funds in the Fund Complex.

R. Craig Kennedy Director President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis
Washington, D.C. 20036 Trading Group Inc. Prior to 1992, President and
Date of Birth: 02/29/52 Chief Executive Officer. Director and Member of the
Investment Committee of the Joyce Foundation, a
private foundation. Trustee of each of the funds in
the Fund Complex.

Jack E. Nelson Director President, Nelson Investment Planning Services,
423 Country Club Drive Inc., a financial planning company and registered
Winter Park, FL 32789 investment adviser. President, Nelson Investment
Date of Birth: 02/13/36 Brokerage Services Inc., a member of the National
Association of Securities Dealers, Inc. ("NASD")
and Securities Investors Protection Corp. ("SIPC").
Trustee of each of the funds in the Fund Complex.
</TABLE>

3
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
DATE OF BIRTH POSITION WITH COMPANY PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------------- --------------------------- ---------------------------------------------------
<S> <C> <C>
Don G. Powell Director Chairman, President, Chief Executive Officer and a
2800 Post Oak Blvd. Director of Van Kampen American Capital, Inc.
Houston, TX 77056 ("VKAC"). Chairman, Chief Executive Officer and a
Date of Birth: 10/19/39 Director of the Adviser, Asset Management and the
Distributor. Chairman and a Director of ACCESS
Investors Services, Inc. ("ACCESS"). Director or
officer of certain other subsidiaries of VKAC.
Chairman of the Board of Governors and the
Executive Committee of the Investment Company
Institute. Prior to November, 1996, President,
Chief Executive Officer and a Director of VK/AC
Holding, Inc. ("VKAC Holding"). President, Chief
Executive Officer and a Trustee/Director of certain
investment companies advised by Asset Management
and prior to July 1996, President, Chief Executive
Officer and a Trustee of the funds in the Fund
Complex and closed-end investment companies advised
by VK Advisory.

Jerome L. Robinson Director President, Robinson Technical Products Corporation,
115 River Road a manufacturer and processor of welding alloys,
Edgewater, NJ 07020 supplies and equipment. Director, Pacesetter
Date of Birth: 10/10/22 Software, a software programming company
specializing in white collar productivity.
Director, Panasia Bank. Trustee of each of the
funds in the Fund Complex.
</TABLE>

4
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
DATE OF BIRTH POSITION WITH COMPANY PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------------- --------------------------- ---------------------------------------------------
<S> <C> <C>
Phillip Rooney Director Vice Chairman and Director of The Servicemaster
One Service Master Way Company, a business and consumer services company,
Downers Grove, IL 60515 since May 1997. Private investor, Director,
Date of Birth: 07/08/44 Illinois Tool Works, Inc., a manufacturing company.
Director, Urban Shopping Centers Inc., a retail
mall management company; Director, Stone Container
Corp., a paper manufacturing company. Trustee,
University of Notre Dame. Formerly, President and
Chief Executive Officer, Waste Management, Inc., an
environmental services company, and prior to that
President and Chief Operating Officer, Waste
Management, Inc. Trustee of each of the funds in
the Fund Complex.

Fernando Sisto Director Professor Emeritus and prior to 1995, Dean of the
155 Hickory Lane Graduate School, Stevens Institute of Technology.
Closter, NJ 07624 Director, Dynalysis of Princeton, a firm engaged in
Date of Birth: 08/02/24 engineering research. Trustee of each of the funds
in the Fund Complex.

Wayne W. Whalen Director and Chairman of Partner in the law firm of Skadden, Arps, Slate,
333 West Wacker Drive the Board Meagher & Flom (Illinois), legal counsel to the
Chicago, IL 60606 funds in the Fund Complex, open-end funds advised
Date of Birth: 08/22/39 by Van Kampen American Capital Management, Inc. and
closed-end funds advised by the Adviser. Trustee of
each of the funds in the Fund Complex, open-end
funds advised by Van Kampen Capital Management,
Inc. and closed-end funds advised by the Adviser.

Dennis J. McDonnell President President and Director of VKAC. President, Chief
Date of Birth: 05/20/42 Operating Officer and a Director of the Adviser and
American Capital. Director or officer of certain
other subsidiaries of VKAC. Prior to November 1996,
Executive Vice President and a Director of VKAC
Holding. President and Trustee of each of the funds
in the Fund Complex. President, Chairman of the
Board and Trustee of other investment companies
advised by the Adviser, Asset Management or their
affiliates.
</TABLE>

5
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
DATE OF BIRTH POSITION WITH COMPANY PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------------- --------------------------- ---------------------------------------------------
<S> <C> <C>
Ronald A. Nyberg Vice President and Executive Vice President, General Counsel and
Date of Birth: 07/29/53 Secretary Secretary of VKAC. Executive Vice President,
General Counsel, Assistant Secretary and a Director
of the Adviser, Asset Management and the
Distributor. Executive Vice President, General
Counsel and Assistant Secretary of ACCESS. Director
or officer of certain other subsidiaries of VKAC.
Director of ICI Mutual Insurance Co., a provider of
insurance to members of the Investment Company
Institute. Prior to November 1996, Executive Vice
President, General Counsel and Secretary of VKAC
Holding. Vice President and Secretary of each of
the funds in the Fund Complex and certain other
investment companies advised by the Adviser, Asset
Management or their affiliates.

Peter W. Hegel Vice President Executive Vice President of the Adviser. Director
Date of Birth: 06/25/56 of Asset Management. Officer of certain other
subsidiaries of VKAC. Vice President of each of the
funds in the Fund Complex and certain other
investment companies advised by the Adviser, Asset
Management or their affiliates.

Alan T. Sachtleben Vice President Executive Vice President of the Adviser and Asset
Date of Birth: 04/20/42 Management. Director of Asset Management, Director
or officer of certain other subsidiaries of VKAC.
Vice President of each of the funds in the Fund
Complex and certain other investment companies
advised by the Adviser, Asset Management or their
affiliates.

Joseph P. Stadler Vice President Vice President of Morgan Stanley Asset Management
1221 Avenue of the Americas Inc.; Officer of various investment companies
New York, NY 10020 managed by Morgan Stanley Asset Management Inc.
Date of Birth: 06/07/54 Previously with Price Waterhouse LLP (accounting).
</TABLE>

6
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
DATE OF BIRTH POSITION WITH COMPANY PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------------- --------------------------- ---------------------------------------------------
<S> <C> <C>
Paul R. Wolkenberg Vice President Executive Vice President of VKAC, Asset Management
Date of Birth: 11/10/44 and the Distributor. President, Chief Executive
Officer and a Director of ACCESS. Director or
officer of certain other subsidiaries of VKAC. Vice
President of each of the funds in the Fund Complex
and certain other investment companies advised by
the Adviser, Asset Management or their affiliates.

Edward C. Wood, III Vice President and Chief Senior Vice President of the Adviser and Asset
Date of Birth: 01/11/56 Financial Officer Management. Vice President and Chief Financial
Officer of each of the funds in the Fund Complex
and certain other investment companies advised by
the Adviser, Asset Management or their affiliates.

Curtis W. Morell Vice President and Chief Senior Vice President of the Adviser and Asset
Date of Birth: 08/04/46 Accounting Officer Management. Vice President and Chief Accounting
Officer of each of the funds in the Fund Complex
and certain other investment companies advised by
the Adviser, Asset Management or their affiliates.

John L. Sullivan Treasurer First Vice President of the Adviser and Asset
Date of Birth: 08/20/55 Management. Treasurer of each of the funds in the
Fund Complex and certain other investment companies
advised by the Adviser, Asset Management or their
affiliates.

Tanya M. Loden Controller Vice President of the Adviser and Asset Management.
Date of Birth: 11/19/59 Controller of each of the funds in the Fund Complex
and other investment companies advised by the
Adviser, Asset Management or the affiliates.

Nicholas Dalmaso Assistant Secretary Vice President and Senior Attorney of VKAC, Vice
Date of Birth: 03/01/65 President and Assistant Secretary of the Adviser,
Asset Management and the Distributor. Officer of
certain other subsidiaries of VKAC. Assistant
Secretary of each of the funds in the Fund Complex
and other investment companies advised by the
Adviser, Asset Management or the affiliates.
</TABLE>

7
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
DATE OF BIRTH POSITION WITH COMPANY PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------------- --------------------------- ---------------------------------------------------
<S> <C> <C>
Huey P. Falgout, Jr. Assistant Secretary Assistant Vice President and Senior Attorney of
Date of Birth: 11/15/63 VKAC, Assistant Vice President and Assistant
Secretary of the Adviser, Asset Management, the
Distributor and ACCESS. Officer of certain other
subsidiaries of VKAC, Assistant Secretary of each
of the funds in the Fund Complex and other
investment companies advised by the Adviser, Asset
Management or the affiliates.

Scott E. Martin Assistant Secretary Senior Vice President, Deputy General Counsel and
Date of Birth: 08/20/56 Assistant Secretary of VKAC, Senior Vice President,
Deputy General Counsel and Secretary of the
Adviser, Asset Management, the Distributor and
ACCESS. Officer of certain other subsidiaries of
VKAC. Prior to November 1996, Senior Vice
President, Deputy General Counsel and Assistant
Secretary of VKAC Holding. Assistant Secretary of
each of the funds in the Fund Complex and other
investment companies advised by the Adviser, Asset
Management or the affiliates.

Weston B. Wetherell Assistant Secretary Vice President, Associate General Counsel and
Date of Birth: 06/15/56 Assistant Secretary of VKAC, the Adviser, Asset
Management and the Distributor. Officer of certain
other subsidiaries of VKAC. Assistant Secretary of
each of the funds in the Fund Complex and other
investment companies advised by the Adviser, Asset
Management or the affiliates.

Joanna Haigney Assistant Treasurer Assistant Vice President, Senior Manager of Fund
73 Tremont Street Administration and Compliance Services, Chase
Boston, MA 02108 Global Funds Services Company; Officer of various
Date of Birth: 10/10/66 investment companies managed by Morgan Stanley
Asset Management Inc. Previously with Coopers &
Lybrand LLP.

Steven M. Hill Assistant Treasurer Assistant Vice President of the Adviser and Asset
Date of Birth: 10/16/64 Management. Assistant Treasurer of each of the
funds in the Fund Complex and other investment,
companies advised by the Adviser, Asset Management
or the affiliates.
</TABLE>

8
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
DATE OF BIRTH POSITION WITH COMPANY PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------------- --------------------------- ---------------------------------------------------
<S> <C> <C>
M. Robert Sullivan Assistant Controller Assistant Vice President of the Adviser and Asset
Date of Birth: 03/30/33 Management. Assistant Controller of each of the
funds in the Fund Complex and other investment
companies advised by the Adviser, Asset Management
or the affiliates.
</TABLE>

- --------------

* Such Directors are "interested persons" (within the meaning of Section
2(a)(19) of the 1940 Act). Mr. McDonnell is an interested person of the
Adviser, Asset Management and the Company by reason of his positions with VKAC
and its affiliates.

--------------

The section entitled "MANAGEMENT OF THE COMPANY -- REMUNERATION OF DIRECTORS
AND OFFICERS," on page 28 of the SAI is deleted and replaced with the following:

Each of the Directors is a trustee of each of the other funds in the
Fund Complex. As of June 30, 1997, there were 71 funds in the Fund
Complex. Each director/trustee who is not an affiliated person of VKAC,
the Adviser, Asset Management, the Distributor, ACCESS or Morgan Stanley
(each a "Non-Affiliated Trustee") is compensated by an annual retainer
and meeting fees for services to the funds in the Fund Complex. Each
fund in the Fund Complex provides a deferred compensation plan to its
Non-Affiliated Trustees that allows director/trustees to defer receipt
of their compensation and earn a return on such deferred amounts based
upon the return of the common shares of the funds in the Fund Complex as
more fully described below. Each fund in the Fund Complex also provides
a retirement plan to its Non-Affiliated Trustees that provides
Non-Affiliated Trustees with compensation after retirement, provided
that certain eligibility requirements are met as more fully described
below.

The compensation of each Non-Affiliated Trustee from each fund in
the Fund Complex advised by VK Advisory (each a "VK Fund" and
collectively the "VK Funds") includes an annual retainer in an amount
equal to $2,500 per calendar year, due in four quarterly installments on
the first business day of each calendar quarter. Each Non-Affiliated
Trustee receives a per meeting fee from each VK Fund in the amount of
$125 per regular quarterly meeting attended by the Non-Affiliated
Trustee, due on the date of such meeting, plus reasonable expenses
incurred by the Non-Affiliated Trustee in connection with his or her
services as a director/trustee, provided that no compensation will paid
in connection with certain telephonic special meetings.

The compensation of each Non-Affiliated Trustee from the funds in
the Fund Complex advised by Asset Management (each an "AC Fund" or
collectively the "AC Funds") includes an annual retainer in an amount
equal to $35,000 per calendar year, due in four quarterly installments
on the first business day of each calendar quarter. The AC Funds pay
each Non-Affiliated Trustee a per meeting fee in the amount of $2,000
per regular quarterly meeting attended by the Non-Affiliated Trustee,
due on the date of such meeting, plus reasonable expenses incurred by
the Non-Affiliated Trustee in connection with his or her services as a
director/trustee. Payment of the annual retainer and the regular meeting
fee is allocated among of all the AC Funds (i) 50% on the basis of the
relative net assets of each AC Fund to the aggregate net assets of all
the AC Funds and (ii) 50% equally to each AC Fund, in each case as of
the last business day of the preceding calendar quarter. Each AC Fund
which is the subject of a special meeting of the director/trustees
generally pays each Non-Affiliated Trustee a per meeting fee in the
amount of $125 per special meeting attended by the Non-Affiliated
Trustee, due on the date of

9
<PAGE>
such meeting, plus reasonable expenses incurred by the Non-Affiliated
Trustee in connection with his on her services as a director/trustee,
provided that no compensation will be paid in connection with certain
telephonic special meetings.

The trustees approved an aggregate compensation cap with respect to
funds in the Fund Complex of $84,000 per Non-Affiliated Trustee per year
(excluding any retirement benefits) for the period July 22, 1995 through
December 31, 1996, subject to the net assets and the number of funds in
the Fund Complex as of July 21, 1995 and certain other exceptions. For
the calendar year ended December 31, 1996, certain trustees received
aggregate compensation from the funds in the Fund Complex over $84,000
due to compensation received but not subject to the cap, including
compensation from new funds added to the Fund Complex after July 22,
1995 and certain special meetings in 1996. In addition, each of VK
Advisory or Asset Management, as the case may be, agreed to reimburse
each fund in the Fund Complex through December 31, 1996 for any increase
in the aggregate trustee's compensation over the aggregate compensation
paid by such fund in its 1994 fiscal year, provided that if a fund did
not exist for the entire 1994 fiscal year appropriate adjustments will
be made.

Each Non-Affiliated Trustee generally can elect to defer receipt of
all or a portion of the compensation earned by such Non-Affiliated
Trustee until retirement. Amounts deferred are retained by the Company
and earn a rate of return determined by reference to the return on the
common shares of such Fund or other funds in the Fund Complex as
selected by the respective Non-Affiliated Trustee, with the same
economic effect as if such Non-Affiliated Trustee had invested in one or
more funds in the Fund Complex. To the extent permitted by the 1940 Act,
the Company may invest to securities of those selected by the
Non-Affiliated Trustees in order to match the deferred compensation
obligation. The deferred compensation plan is not funded and obligations
thereunder represent general unsecured claims against the general assets
of the Company.

Each fund in the Fund Complex has adopted a retirement plan. Under
the Company's retirement plan, a Non-Affiliated Trustee who is receiving
director/trustee's compensation from the Company prior to such
Non-Affiliated Trustee's retirement, has at least 10 years of service
(including years of service prior to adoption of the retirement plan)
and retires at or after attaining the age of 60, is eligible to receive
a retirement benefit equal to $2,500 per year for each of the ten years
following such director/trustee's retirement from the Company. Trustees
retiring prior to the age of 60 or with fewer than 10 years but more
than 5 years of service may receive reduced retirement benefits from the
Company. The retirement plan contains a Fund Complex retirement benefit
cap of $60,000 per year. Asset Management has reimbursed each AC Fund
for the expenses related to the retirement plan through December 31,
1996.

Prior to the election of the current Directors on July 2, 1997,
Messrs. Barton M. Biggs, John D. Barrett, II, Gerard E. Jones, Warren J.
Olsen, Andrew McNally, IV, Samuel T. Reeves, Fergus Reid, Frederick O.
Robertshaw and Frederick B. Whittemore (the "Prior Directors") served as
directors to the Company. Until July 2, 1997, the Company was part of an
open-end fund complex, which also consisted of Morgan Stanley
Institutional Fund, Inc. and Morgan Stanley Universal Funds, Inc.

For the fiscal period ended June 30, 1996, the Company paid
approximately $77,000 in Directors' fees and expenses. Prior Directors
who were also officers or affiliated persons receive no remuneration for
their services as directors. The Company's officers and employees were
paid by the MSAM or MAS or their agents. As of September 30, 1996, to
Company management's knowledge, the Prior Directors and officers of the
Company, as a group, owned less than 1% of the outstanding common stock
of each

10
<PAGE>
Fund of the Company. The following table shows aggregate compensation
paid to each of the Company's Prior Directors by the Company and the
fund complex, respectively, for the fiscal year from July 1, 1995 to
June 30, 1996.

COMPENSATION TABLE
PRIOR DIRECTORS

<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL FROM REGISTRANT
FROM AS PART OF FUND BENEFITS UPON AND FUND COMPLEX
NAME OF PERSON, POSITION REGISTRANT EXPENSES RETIREMENT PAID TO DIRECTORS
- ----------------------------------------- -------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Barton M. Biggs*
Director and Chairman of the Board....... $ 0 $0 $0 $ 0

John D. Barrett, II,*
Director................................. $ 65,000 $0 $0 $ 65,000

Gerard E. Jones,*
Director................................. $ 65,000 $0 $0 $ 72,100

Warren J. Olsen,*
Director and President................... $ 0 $0 $0 $ 0

Andrew McNally, IV,*
Director................................. $ 55,000+ $0 $0 $ 55,000

Samuel T. Reeves,*
Director................................. $ 55,000+ $0 $0 $ 55,000

Fergus Reid,*
Director................................. $ 65,000+ $0 $0 $ 72,100

Frederick O. Robertshaw,**
Director................................. $ 55,000+ $0 $0 $ 55,000

Frederick B. Whittemore,**
Director
(Chairman of the Board until
June 28, 1995)........................... $ 0 $0 $0 $ 13,750
</TABLE>

- --------------

* Elected (Director) as of June 28, 1995.

** Reelected as of June 28, 1995.

+ The total amount of deferred compensation for Frederick O. Robertshaw, Samuel
T. Reeves, Fergus Reid, Andrew McNally, IV, and Frederick B. Whittemore was
$0, $32,500, $27,500, $27,500 and $3,000, respectively.

--------------

11
<PAGE>
The heading "INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENTS" on page 28
and the discussion thereunder, are deleted and replaced with the following:

INVESTMENT ADVISORY, INVESTMENT SUB-ADVISORY AND ADMINISTRATIVE AGREEMENTS

VK Advisory is a wholly-owned subsidiary of Morgan Stanley, Dean
Witter, Discover & Co. ("MSDWD"). The principal offices of MSDWD are
located at 1585 Broadway, 40th floor, New York, NY 10036. VK Advisory is
a registered investment adviser under the Investment Advisers Act of
1940, as amended, and has its offices at One Parkview Plaza, Oakbrook
Terrace, IL 60181 and 2800 Post Oak Boulevard, Houston, TX 77056.

Pursuant to the advisory agreement between the Adviser and the
Company, VK Advisory provides investment services to the Funds.
Additionally, pursuant to the administration agreement (the
"Administration Agreement") between the Adviser and the Company, VK
Advisory (the "Administrator") provides administrative services to the
Funds. For its services under the Administration Agreement, the Company
pays the Administrator a monthly fee which on an annual basis equals
0.25% of the average daily net assets of each Non-Money Market Fund and
0.10% of the first $200 million of each Money Market Fund's average
daily net assets, 0.75% of the next $200 million of average daily net
assets, .05% of the next $200 million of average daily net assets, and
.03% on average daily net assets over $600 million. VK Advisory did not
serve as Adviser to the Funds or Administrator to the Company and
received no compensation from the Company prior to the end of the fiscal
year ended June 30, 1996.

MSAM is a wholly-owned subsidiary of MSDWD and pursuant to an
investment sub-advisory agreement between MSAM and the Adviser. MSAM
provides sub-advisory services to each of the Company's Funds, other
than the Mid Cap Growth and Value Funds. The principal offices of the
MSAM are located at 1221 Avenue of the Americas, New York, NY 10020. As
compensation for advisory services to the Company for the fiscal years
ended June 30, 1994, June 30, 1995 and June 30, 1996, MSAM, the prior
adviser, earned fees of approximately $2,322,000 (and voluntarily waived
a portion of such fees equal to approximately $1,026,000), $4,571,000
(and voluntarily waived a portion of such fees equal to approximately
$868,000), $7,177,000 (and voluntarily waived a portion of such fees
equal to approximately $1,328,000) respectively. Further, for the fiscal
years ended June 30, 1994, June 30, 1995 and June 30, 1996, MSAM, as
adviser for the PCS Money Market Portfolio (the "Predecessor Money
Market Portfolio") the predecessor to the Money Market Fund received
$686,138, $611,754 and $759,398, respectively (net of voluntary fee
waivers of $109,879, $87,105 and $153,797 respectively) and as adviser
for the PCS Government Obligations Money Market Portfolio (the
"Predecessor Government Obligations Money Market Portfolio") the
predecessor to the Government Obligations Money Market Fund received
$412,757, $897,867 and $395,312 respectively (net of voluntary fee
waivers of $25,448, $0 and $45,251, respectively). For the fiscal years
ended June 30, 1994, June 30, 1995 and June 30, 1996, the Company paid
administrative fees to MSAM, the prior administrator to the Funds, of
approximately $852,000, $1,154,000 and $1,801,654 respectively. For the
fiscal years ended June 30, 1994, June 30, 1995 and June 30, 1996, PFPC
Inc., which served as administrator to the Predecessor Money Market
Portfolio and Predecessor Government Obligations Money Market Portfolio
(the "Predecessor Portfolios"), was paid aggregate administrative fees
of $283,085, $346,829 and $273,252 respectively.

12
<PAGE>
MAS is an indirect wholly-owned subsidiary of MSDWD with its
principal offices located at One Tower Bridge, West Conshohocken, PA
19428. Pursuant to an investment sub-advisory agreement between MAS and
the Adviser, MAS provides sub-advisory services to each of the Mid Cap
Growth and Value Funds. MAS provides investment services to employee
benefit plans, endowment funds, foundations, and other institutional
investors and has served as investment adviser to the MAS Funds, a
registered open-end investment company, since 1984. At September 30,
1996, MAS managed investments totaling approximately $37.5 billion. MAS
did not serve as an adviser, sub-adviser or administrator to the Funds
and received no compensation from the Company prior to the end of the
fiscal year ended June 30, 1996.

Under sub-administration agreements between the Administrator and
The Chase Manhattan Bank ("Chase," successor in interest to United
States Trust Company of New York), Chase Global Funds Services Company
("CGFSC," formerly Mutual Funds Service Company, a corporate affiliate
of Chase) provides certain administrative services to the Company. CGFSC
provides operational and administrative services to investment companies
with approximately $64.3 billion in assets and having approximately
212,568 shareholder accounts as of June 30, 1996. CGFSC's business
address is 73 Tremont Street, Boston, MA 02108-3913.

--------------

The first sentence under the heading "PORTFOLIO TRANSACTIONS" on page 33 is
deleted and replaced with the following:

The Investment Advisory Agreement and Investment Sub-Advisory
Agreements authorize each of the Adviser and the Sub-Advisers
(collectively, the "Adviser") to select the brokers or dealers that will
execute the purchases and sales of investment securities for the Funds
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 Funds.

--------------

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE