MORGAN STANLEY FUND INC, PRES14A, 1997-05-28

MORGAN STANLEY FUND INC
PRES14A, 1997-05-28

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<PAGE> 1

SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)

Filed by the Registrant [ ]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))

[ ] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MORGAN STANLEY FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

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

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

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[ ] Fee paid previously with preliminary materials.

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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
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(1) Amount previously paid:

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<PAGE> 2

MORGAN STANLEY FUND, INC.
P.O. BOX 41826
KANSAS CITY, MISSOURI 64141

May 29, 1997

Dear Shareholder:

The enclosed proxy statement relates to a special meeting of the
shareholders of Morgan Stanley Fund, Inc. (the "Company"). The shareholders of
the investment portfolios of the Company (each a "Fund" and together, the
"Funds") are being asked to consider four proposals. The first three proposals
(the "Merger-Related Proposals") stem from transactions involving Morgan Stanley
Group Inc. ("MS Group"). The fourth proposal ("Proposal 4") is solely for the
consideration of the shareholders of the Worldwide High Income Fund.

MS Group is the parent corporation of the Company's investment adviser,
Morgan Stanley Asset Management Inc. ("MSAM") and also Van Kampen American
Capital Inc. ("Van Kampen"). Van Kampen is, in turn, the parent corporation of
the Company's distributor, transfer agent and the proposed investment adviser,
Van Kampen American Capital Investment Advisory Corp. ("VK Advisory"). In
February, 1997, MS Group entered into an Agreement and Plan of Merger with Dean
Witter, Discover & Co. ("Dean Witter Discover"). Pursuant to the merger
agreement, both MSAM and Van Kampen will become subsidiaries of the merged
company, which will be named Morgan Stanley, Dean Witter, Discover & Co. In
order to most effectively benefit from the combined resources of Morgan Stanley,
Dean Witter, Discover & Co., it is being proposed that the Company restructure
its Board and investment advisory arrangements.

The following proposals are being submitted for shareholder approval:

1: To consider and act upon a proposal to elect a new Board of Directors
(voted on by the shareholders of the Company as a whole);

2: To approve or disapprove a new investment advisory agreement with Van
Kampen American Capital Investment Advisory Corp. (voted on by
shareholders of each Fund of the Company separately); and

3: To approve or disapprove a new investment sub-advisory agreement with
Morgan Stanley Asset Management Inc. (voted on by shareholders of each
Fund of the Company separately).

4: To consider and act upon a proposal to eliminate the Worldwide High
Income Fund's fundamental policy regarding diversification and to
reclassify the Fund as "non-diversified" (voted on by shareholders of
the Worldwide High Income Fund only).
<PAGE> 3

The majority of the Director nominees have substantial familiarity and
experience as directors of mutual funds advised, administered and distributed by
subsidiaries of Van Kampen. If the Merger-Related Proposals are approved, VK
Advisory would serve as the Company's investment adviser and MSAM would serve as
sub-adviser to the Funds that it currently advises. Under the proposed
investment sub-advisory agreement, the personnel of MSAM will continue to
provide the same portfolio management services to the Company that they
currently provide under the current investment advisory agreement between MSAM
and the Company.

The new advisory agreement with VK Advisory is substantially similar to the
Company's current investment advisory agreement and the fees paid for investment
advisory services will not change as a result of the restructuring. Each of the
Merger-Related Proposals is contingent on the consummation of the merger of Dean
Witter Discover and MS Group. Moreover, the Proposals relating to approval of
the new investment advisory and sub-advisory agreements are contingent on each
other. That is, the agreements will be effective with respect to a Fund only if
both are approved by shareholders of that Fund.

Proposal 4 is unrelated to the merger and is submitted solely for the
consideration of the shareholders of the Worldwide High Income Fund. The
Worldwide High Income Fund is currently classified as a "diversified" Fund and,
as a matter of fundamental policy, may not purchase securities of an issuer
(except obligations of the U.S. Government and its instrumentalities) if as a
result, with respect to 75% of its total assets, more than 5% of the Fund's
total assets, at market value, would be invested in the securities of such
issuer. The elimination of the fundamental policy and the reclassification of
the Worldwide High Income Fund as "non-diversified" will provide MSAM with
greater investment flexibility in managing the Fund's portfolio and is not
expected to affect the Fund's investment performance, the securities or
instruments in which the Fund may invest or materially increase risk to the
Fund. This Proposal is unrelated to the merger and is, therefore, not contingent
upon its completion.

The attached proxy statement seeks shareholder approval on each matter as
to which such shares are to be voted at the Meeting.

The Board of Directors of the Company has approved unanimously the
proposals and recommend that you vote "FOR" each proposal on which you are
entitled to vote. YOUR IMMEDIATE RESPONSE WILL ELIMINATE THE NEED FOR ANY
ADDITIONAL SOLICITATIONS. We look forward to your participation, and we thank
you for your continued confidence in Morgan Stanley Fund, Inc.

PLEASE SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.

Sincerely,
[Signature]

Warren J. Olsen
President
<PAGE> 4

INFORMATION ABOUT YOUR PROXY STATEMENT

Q. WHY AM I RECEIVING THIS PROXY STATEMENT?

A. The parent company of the investment adviser is merging with another
company. As a result of this merger, it is being proposed that the
Company restructure its Board and investment advisory arrangements. In
this regard, your consent is being sought on:

- approval of a new Board of Directors;

- approval of a new investment advisory agreement; and

- approval of a new investment sub-advisory agreement.

Also at this time, it is believed that the reclassification of the
Worldwide High Income Fund as a "non-diversified" Fund will allow greater
investment flexibility without materially increasing risk. Therefore, the
consent of the shareholders of the Worldwide High Income Fund is also
being sought on:

- approval of the elimination of the Worldwide High Income Fund's
fundamental policy regarding diversification and its
reclassification as a "non-diversified" Fund.

Q. HOW WILL THIS AFFECT MY ACCOUNT?

A. You can expect the same management expertise and shareholder service that
you are currently receiving. The nominees for the Board have extensive
experience in the management of mutual funds designed for the individual
investor and the new investment advisory agreement will be substantially
similar to the Company's current investment advisory agreement. The
Funds' current investment adviser will, as sub-adviser, continue to
provide portfolio management services for the Funds. The new investment
advisory arrangements will not increase the fees paid by the Funds.

For shareholders of the Worldwide High Income Fund, the elimination of
the fundamental policy and the reclassification of the Fund as "non-
diversified" will provide MSAM with greater investment flexibility in
managing the Fund's portfolio and is not expected to affect the Fund's
investment performance, the securities or instruments in which the Fund
may invest or materially increase its risk.

Q. WHY DO I NEED TO VOTE?

A. Your vote is needed to ensure that the proposals can be acted upon. Your
immediate response on the enclosed proxy card will help prevent the need
for any further solicitations for a shareholder vote. We
<PAGE> 5

encourage all shareholders to participate in the governance of the
Company.

Q. HOW DOES THE BOARD OF DIRECTORS SUGGEST THAT I VOTE?

A. After careful consideration, the Board of Directors of the Company
unanimously recommends that you vote "FOR" each item proposed on the
enclosed proxy card.

Q. WHO IS PAYING FOR EXPENSES RELATED TO THE SHAREHOLDER MEETING?

A. VK Advisory or its affiliates will pay for expenses relating to the
shareholder meeting. The Company will not pay any expenses relating to
the shareholder meeting.

Q. WHERE DO I MAIL MY PROXY CARD?

A. You may use the enclosed postage-paid envelope or mail your proxy card
to:
Proxy Tabulator
P.O. Box 9113
Hingham, MA 02043-9888

Q. WHOM DO I CALL IF I HAVE QUESTIONS?

A. We will be happy to answer your questions about the proxy solicitation.
Please call us at (800) 341-2911 between 8:00 a.m. and 8:00 p.m. Eastern
Time, Monday through Friday.
<PAGE> 6

MORGAN STANLEY FUND, INC.
P.O. BOX 41826
KANSAS CITY, MISSOURI 64141

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

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

JULY 2, 1997

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

A Special Meeting of Shareholders (the "Meeting") of Morgan Stanley Fund,
Inc. (the "Company") will be held at the offices of Morgan Stanley Asset
Management Inc., in Conference Room 3, 22nd floor, 1221 Avenue of the Americas,
New York, New York 10020, on Wednesday, July 2, 1997, at 9:30 a.m. (New York
time) for the following purposes:

1. To consider and act upon a proposal to elect a Board of Directors
(voted on by the shareholders of the Company as a whole);

2. To approve or disapprove a new investment advisory agreement with Van
Kampen American Capital Investment Advisory Corp. (voted on separately
by shareholders of each of the Company's investment portfolios that
have commenced operations (each a "Fund"));

3. To approve or disapprove a new investment sub-advisory agreement with
Morgan Stanley Asset Management Inc. (voted on separately by
shareholders of each Fund);

4. To consider and act upon a proposal to eliminate the Worldwide High
Income Fund's fundamental policy regarding diversification and to
reclassify the Fund as "non-diversified" (voted on by the shareholders
of the Worldwide High Income Fund only); and

5. To transact such other business as may properly come before the Meeting
or any adjournments thereof.

Shareholders of record at the close of business on April 22, 1997 are
entitled to notice of and to vote at the Meeting or any adjournment thereof. The
enclosed proxy card(s) will enable you to vote with respect to the Fund(s) in
which you are a shareholder. You will receive a separate proxy card for each
account you have with the Company and for each Fund in which such accounts have
an investment.

By Order of the Board of Directors

Valerie Y. Lewis, Secretary

May 29, 1997
<PAGE> 7

MORGAN STANLEY FUND, INC.

P.O. BOX 41826

KANSAS CITY, MISSOURI 64141
------------------

PROXY STATEMENT
------------------

SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD

JULY 2, 1997

This proxy statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Morgan Stanley Fund, Inc. (the
"Company") of proxies to be voted at a Special Meeting of shareholders and all
adjournments thereof (the "Meeting"), to be held at the offices of Morgan
Stanley Asset Management Inc., Conference Room 3, 22nd Floor, 1221 Avenue of the
Americas, New York, NY 10020 on Wednesday, July 2, 1997 at 9:30 a.m. (New York
time). The approximate mailing date of this proxy statement and accompanying
form of proxy is May 29, 1997.

The primary purpose of the Meeting is to permit the Company's shareholders
to take action on the following proposals (each a "Proposal" and, collectively,
the "Proposals"):

Proposal 1: To elect a new Board of Directors.

Proposal 2: To approve a new investment advisory agreement with Van Kampen
American Capital Investment Advisory Corp. (the "New Advisory
Agreement").

Proposal 3: To approve a new investment sub-advisory agreement with Morgan
Stanley Asset Management Inc. (the "New Sub-Advisory
Agreement").

Proposal 4: To eliminate the Worldwide High Income Fund's fundamental
policy regarding diversification and to reclassify the Fund as
"non-diversified."

Proposals 1, 2 and 3 (each a "Merger-Related Proposal" and together, the
"Merger-Related Proposals") are submitted in connection with the transactions
contemplated by an Agreement and Plan of Merger, dated as of February 4, 1997
(the "Merger Agreement"), between Dean Witter, Discover & Co. ("Dean Witter
Discover") and Morgan Stanley Group Inc. ("MS Group"), the direct parent of
Morgan Stanley Asset Management Inc. ("MSAM"), a current investment adviser to
the Company. MS Group is also the indirect parent of Miller Anderson & Sherrerd,
LLP ("MAS"), a current investment adviser to the Company and Van Kampen American
Capital Investment Advisory Corp. ("VK Advisory"), the proposed new investment
adviser to the
<PAGE> 8

Company. Because the investment portfolios for which MAS has been selected to
act as investment adviser have not yet commenced operations, shareholder
approval of new sub-advisory agreements with respect to MAS is not currently
being sought. Appropriate shareholder approval will be obtained prior to each
such investment portfolio's commencement of operations. Pursuant to the Merger
Agreement, MSAM will become a direct subsidiary and VK Advisory and MAS indirect
subsidiaries of the merged company, which will be called Morgan Stanley, Dean
Witter, Discover & Co.

The Merger-Related Proposals are contingent upon the consummation of the
transactions contemplated by the Merger Agreement. Moreover, the New Advisory
and New Sub-Advisory Agreements will be effective with respect to an investment
portfolio with shares outstanding (a "Fund") only if both agreements are
approved by shareholders of that Fund. That is, even if shareholders approve a
Merger-Related Proposal in the manner described herein, such Proposal will take
effect only if (i) the merger between Dean Witter Discover and MS Group is
consummated; (ii) VK Advisory will act as investment adviser to a Fund only if
that Fund's shareholders also elect MSAM as the Fund's investment sub-adviser
and (iii) MSAM will act as investment sub-adviser to a Fund only if that Fund's
shareholders also elect VK Advisory as the Fund's investment adviser.

Proposal 4, which is submitted for the approval of the shareholders of the
Worldwide High Income Fund only, is unrelated to the merger of MS Group and Dean
Witter Discover and is not contingent upon the completion of the merger.

THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT (AND THE SUCCEEDING SEMI-ANNUAL REPORT) TO SHAREHOLDERS OF THE COMPANY ON
REQUEST. REQUESTS SHOULD BE DIRECTED TO THE COMPANY AT ONE PARKVIEW PLAZA,
OAKBROOK TERRACE, IL 60181 OR BY CALLING (800) 341-2911.

VOTING

Holders of shares of outstanding common stock, par value $.001 per share
(collectively, the "Shares"), of the Company are entitled to participate in the
Meeting. Shareholders of the Company will vote on Proposal 1 together;
shareholders of each Fund will vote separately with respect to each of Proposal
2 and Proposal 3; and only shareholders of the Worldwide High Income Fund will
vote on Proposal 4. With respect to Proposal 1, a Director nominee (a "Nominee")
will be elected to the Board if he or she receives a vote of a majority of the
Shares represented at the Meeting at which a majority of the shareholders
entitled to vote is present. There is no cumulative voting. With respect to
Proposals 2, 3 and 4, a "vote of majority of the outstanding voting securities"
of the particular Fund is required, which is defined under the Investment
Company Act of 1940, as amended (the "1940 Act") as the lesser of (i) 67% or
more of the voting securities of the Fund entitled to vote thereon present in
person or by proxy at the Meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund entitled to vote thereon are present

2
<PAGE> 9

in person or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of the Fund entitled to vote thereon. The following table
summarizes these voting requirements:

<TABLE>
<CAPTION>
SHAREHOLDERS
ENTITLED TO VOTE VOTE REQUIRED FOR APPROVAL*
---------------- ------------------------------
<C> <S> <C>
PROPOSAL 1 Shareholders of Each Nominee must be elected
(Election of Directors) all Funds of the by a majority of the Shares
Company vote represented at the Meeting,
together for provided a majority of the
each Nominee. Shares entitled to vote are
represented at the Meeting.

PROPOSAL 2 Shareholders of The Advisory Agreement must be
(Approval of Advisory each Fund vote approved by the lesser of (i)
Agreement) separately. 67% or more of the Shares
represented at the Meeting if
50% or more of the Shares are
represented at the Meeting or
(ii) more than 50% of the
Shares of each Fund.

PROPOSAL 3 Shareholders of The Sub-Advisory Agreement
(Approval of Sub- each Fund vote must be approved by the lesser
Advisory Agreement) separately. of (i) 67% or more of the
Shares represented at the
Meeting if 50% or more of the
Shares are represented at the
Meeting or (ii) more than 50%
of the Shares of each Fund.

PROPOSAL 4 Only The elimination of the
(Eliminate fundamental shareholders of fundamental limitation and the
policy regarding Worldwide High reclassification must be
diversification and Income Fund approved by the lesser of (i)
reclassify as vote. 67% or more of the Shares of
"non-diversified") the Worldwide High Income Fund
represented at the Meeting if
50% or more of the Shares are
represented at the Meeting or
(ii) more than 50% of the
Shares of the Fund.
</TABLE>

- ---------------
*The Merger-Related Proposals are contingent on the consummation of the
transactions contemplated by the Merger Agreement. Moreover, the New Advisory
and New Sub-Advisory Agreements will be effective with respect to a Fund only
if both agreements are approved by shareholders of that Fund. Proposal 4 is not
contingent upon the Merger or upon the approval of any Merger-Related Proposal.

The Board has fixed the close of business on April 22, 1997 as the record
date (the "Record Date") for the determination of holders of Shares of the
Company entitled to vote at the Meeting. Shareholders of the Company (or, as the
case may be, a Fund) on the Record Date will be entitled to one vote per Share
for each Share then held and a fractional vote for each fractional Share held
with respect to each Proposal submitted to the shareholders of the Company. At
the close of business on the Record Date there were issued and outstanding
467,695,415.706 Shares of the Company consisting of the following

3
<PAGE> 10

number of Shares of the Funds of the Company listed below (for ease of reference
the words "Morgan Stanley," which begin the name of each Fund, have not been
included):

<TABLE>
<CAPTION>
ISSUED AND
OUTSTANDING
SHARES AS OF
FUNDS* THE RECORD DATE
- --------------------------------------------------- ----------------
<S> <C>
Aggressive Equity Fund............................. 2,749,961.493
American Value Fund................................ 3,600,039.182
Asian Growth Fund.................................. 22,490,379.648
Emerging Markets Fund.............................. 14,296,425.077
Global Equity Allocation Fund...................... 11,134,926.099
Global Fixed Income Fund........................... 1,114,803.575
Government Obligations Money Market Fund........... 135,925,946.240
High Yield Fund.................................... 1,360,820.368
International Magnum Fund.......................... 2,366,304.442
Latin American Fund................................ 4,374,275.529
Money Market Fund.................................. 255,389,470.980
U.S. Real Estate Fund.............................. 1,329,960.437
Worldwide High Income Fund......................... 11,563,102.636
</TABLE>

- ---------------
*The Emerging Markets Debt, Equity Growth, European Equity, Global Equity,
Growth and Income, Japanese Equity, Mid Cap Growth, Tax-Free Money Market and
Value Funds have not commenced operations and are currently not being offered.
Accordingly, votes are not being solicited with respect to these investment
portfolios.

The Board recommends that you cast your vote:

- FOR each Nominee for the Board of Directors;

- FOR approval of the New Advisory Agreement with VK Advisory;

- FOR approval of the New Sub-Advisory Agreement with MSAM; and

- FOR approval of the elimination of the Worldwide High Income Fund's
fundamental policy regarding diversification and the reclassification of
the Worldwide High Income Fund as a "non-diversified" Fund.

All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon. Properly
executed proxies received prior to the Meeting on which no vote is indicated
will be voted "FOR" each Proposal as to which it is entitled to vote. With
respect to Proposal 1, votes may be cast in favor of Nominees or withheld. Votes
that are withheld and proxies signed and returned by brokers without voting on a
Proposal ("broker non-votes") will not be counted for or against the Proposal,
but will be counted as votes present for purposes of determining whether a
quorum is present. With respect to Proposals 2, 3 and 4, abstentions and broker
non-votes will be counted as votes present for purposes of determin-

4
<PAGE> 11

ing a "majority of the outstanding voting securities" present at the Meeting and
will therefore have the effect of counting against the Proposal to which they
relate. A majority of the outstanding Shares entitled to vote on a Proposal must
be present in person or by proxy to have a quorum to conduct business at the
Meeting.

Shareholders who execute proxies may revoke them at any time before they
are voted by filing with the Company a written notice of revocation, by
delivering a duly executed proxy bearing a later date or by attending the
Meeting and voting in person.

THE MERGER-RELATED PROPOSALS

BACKGROUND

The Merger-Related Proposals, if approved, are intended to give the Company
the benefit of the combined resources of MS Group, Dean Witter Discover and Van
Kampen American Capital, Inc. ("Van Kampen"). In particular, approval of the
Merger-Related Proposals would make available to the Company significant
additional experience in the management and distribution of mutual funds for
individual and other non-institutional investors ("retail investors").

MS Group acquired VK/AC Holdings, Inc. and, as a result, Van Kampen on
October 31, 1996. Van Kampen, through its subsidiaries, has extensive experience
in mutual fund management, distribution and shareholder servicing. VK Advisory,
the proposed new investment adviser for the Company, managed mutual funds with
assets of $43 billion as of March 27, 1997. On December 12, 1996, the Company's
Board of Directors appointed Van Kampen American Capital Distributors, Inc. as
distributor of all classes of the Company's shares and appointed ACCESS Investor
Services, Inc. (also a Van Kampen affiliate) as the transfer agent of the
Company's shares with the exception of Prime Resource Account Holders of the
Money Market and Government Obligations Money Market Funds (the "Money Market
Funds").

On February 5, 1997, MS Group and Dean Witter Discover announced that they
had entered into the Merger Agreement pursuant to which MS Group will be merged
with and into Dean Witter Discover (the "Merger"). The resulting corporation
will be called Morgan Stanley, Dean Witter, Discover & Co.

INFORMATION CONCERNING MORGAN STANLEY GROUP INC. (MS GROUP)

MS Group and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co."), a
registered broker-dealer and investment adviser, and Morgan Stanley Capital
International Incorporated provide a wide range of financial services on a
global basis. MS Group's principal businesses include securities underwriting,
distri-

5
<PAGE> 12

bution and trading; merger, acquisition, restructuring, real estate, project
finance and other corporate finance advisory activities; merchant banking and
other principal investment activities; stock brokerage and research services;
asset management; the trading of foreign exchange and commodities as well as
derivatives on a broad range of asset categories, rates and indices; real estate
advice, financing and investing; and global custody, securities clearance
services and securities lending.

INFORMATION CONCERNING DEAN WITTER, DISCOVER & CO. (DEAN WITTER DISCOVER)

Dean Witter Discover is a diversified financial services company offering a
broad range of nationally marketed credit and investment products with a primary
focus on individual customers. Dean Witter Discover has two principal lines of
business: credit services and securities. Its credit services business consists
primarily of the issuance, marketing and servicing of general purpose credit
cards and the provision of transaction processing services, private-label credit
card services and real estate secured loans. It is the largest single issuer of
general purpose credit cards in the United States as measured by number of
accounts and cardmembers and the third largest originator and servicer of credit
card receivables, as measured by managed loans. Dean Witter Discover's
securities business is conducted primarily through its wholly-owned
subsidiaries, Dean Witter Reynolds Inc. ("DWR") and Dean Witter Intercapital
Inc. ("Intercapital"). DWR is a full-service securities firm offering a wide
variety of securities products to serve the investment needs of individual
clients through over 9,100 professional account executives located in 371 branch
offices. DWR is among the largest NYSE members and is a member of other major
securities, futures and options exchanges. Intercapital is a registered
investment adviser that, along with its subsidiaries, services investment
companies, individual accounts and institutional portfolios.

THE MERGER

Under the terms of the Merger Agreement, each of MS Group's common shares
will be converted into the right to receive 1.65 shares of Morgan Stanley, Dean
Witter, Discover & Co. common stock and each issued and outstanding share of
Dean Witter Discover common stock will remain outstanding and will thereafter
represent one share of Morgan Stanley, Dean Witter, Discover & Co. common stock.
The total estimated value of the foregoing transaction is approximately $21
billion. Following the Merger, MS Group's former shareholders will own
approximately 45% and Dean Witter Discover's former shareholders will own
approximately 55% of the outstanding shares of common stock of Morgan Stanley,
Dean Witter, Discover & Co.

The Merger is expected to be consummated in mid-1997 and is subject to
certain closing conditions, including certain regulatory approvals and the
approval of shareholders of both MS Group and Dean Witter Discover.

6
<PAGE> 13

The Board of Directors of Morgan Stanley, Dean Witter, Discover & Co. will
initially consist of fourteen members, two of whom will be MS Group insiders and
two of whom will be Dean Witter Discover insiders. The remaining ten directors
will be independent directors, with MS Group and Dean Witter Discover each
nominating five of the ten. The Chairman and Chief Executive Officer of Morgan
Stanley, Dean Witter, Discover & Co. will be the current Chairman and Chief
Executive Officer of Dean Witter Discover, Phillip Purcell. The President and
Chief Operating Officer of Morgan Stanley, Dean Witter, Discover & Co. will be
the current President of MS Group, John Mack.

At meetings held on April 2, 1997 and May , 1997, the Board of Directors
of the Company unanimously approved the Merger-Related Proposals described
below. They also approved a proposal for VK Advisory to assume the
administrative responsibilities of MSAM and MAS under their respective
administration agreements with the Company, subject to the contingency of the
consummation of the Merger discussed above.

PROPOSAL 1: ELECTION OF DIRECTORS

At the Meeting, it is proposed that ten Directors will be elected to hold
office until their successors are duly elected and qualified. The persons named
in the accompanying proxy intend, in the absence of contrary instructions, to
vote all proxies on behalf of the shareholders for the election of the following
Nominees: J. Miles Branagan, Richard M. DeMartini, Linda Hutton Heagy, R. Craig
Kennedy, Jack E. Nelson, Don G. Powell, Jerome L. Robinson, Phillip Rooney,
Fernando Sisto and Wayne W. Whalen. The Nominees have not previously been
elected by the shareholders and have not previously served on the Board. Each of
the current members of the Board has announced his intention to resign from the
Board effective upon the election of the Nominees.

Each of the Nominees has consented to being named in this proxy statement
and to serve as a Director if elected. The Company knows of no reason why any
Nominee would be unable or unwilling to serve if elected. Should any of the
Nominees become unable or unwilling to accept nomination or election, the
persons named in the proxy will exercise their voting power to vote for such
person or persons as the management of the Company may recommend. Directors will
be elected by a majority of shareholders of the Company entitled to vote that
are present in person or by proxy at the Meeting.

INFORMATION REGARDING NOMINEES

The following table provides information regarding each Nominee. It
includes his or her name, position with the Company, age, principal occupations
or employment during the past five years, number of Shares of the Funds
beneficially owned and the percentage of shares of the Funds beneficially owned
as of March 1, 1997. In addition, the table shows, for each Nominee,
directorships with other companies that file reports periodically with the

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<PAGE> 14

Securities and Exchange Commission and the number of directorships with the
registered investment companies to which VK Advisory or an affiliated person of
VK Advisory provides investment advisory services (the "VKAC Fund Complex"). As
of March 1, 1997 the Nominees as a group beneficially owned less than 1% of the
Shares of each Fund of the Company.

<TABLE>
<CAPTION>
SHARES OF THE
FUNDS
BUSINESS EXPERIENCE BENEFICIALLY
NAME AND POSITION DURING THE PAST FIVE YEARS, OWNED AS OF
WITH THE COMPANY AGE INCLUDING ALL DIRECTORSHIPS MARCH 1, 1997 PERCENTAGE
- ------------------- --- ----------------------------- ------------- ----------
<S> <C> <C> <C> <C>
J. Miles Branagan 64 Co-Founder and retired None **
Nominee Chairman, Chief Executive
Officer and President, MDT
Corporation (now
Getinge/Castle, Inc.)
(medical and scientific
equipment). Trustee of
funds in the VKAC Fund
Complex.
Richard M. 44 President and Chief Operating None **
DeMartini* Officer, Dean Witter Capital;
Nominee Executive Vice President,
Dean Witter, Discover & Co.
Formerly, Vice Chairman,
National Association of
Securities Dealers, Inc.;
Chairman, Nasdaq, Inc. (stock
market). Director of Dean
Witter Reynolds, the Manager
Intercapital Distributors and
Dean Witter Trust Company;
Director, National Healthcare
Resources, Inc.
Linda Hutton 47 Partner, Ray & Berndtson None **
Heagy (executive recruiting and
Nominee management consulting firm).
Formerly, Executive Vice
President of ABN AMRO, N.A.
(bank holding company).
Trustee of the University of
Chicago Hospitals Board and
the Women's Board of the
University of Chicago.
Trustee of funds
in the VKAC Fund Complex.
R. Craig Kennedy 45 President and Director, None **
Nominee German Marshall Fund of the
United States (Philanthropy).
Formerly, Advisor, Dennis
Trading Group Inc.
(investment); Trustee of
funds in the VKAC Fund
Complex.
Jack E. Nelson 61 President, Nelson Investment None **
Nominee Planning Services, Inc.
(financial planning and
registered investment
adviser); President, Nelson
Invest Brokerage Services,
Inc. (broker). Trustee of
funds in the VKAC Fund
Complex.
</TABLE>

8
<PAGE> 15

<TABLE>
<CAPTION>
SHARES OF THE
FUNDS
BUSINESS EXPERIENCE BENEFICIALLY
NAME AND POSITION DURING THE PAST FIVE YEARS, OWNED AS OF
WITH THE COMPANY AGE INCLUDING ALL DIRECTORSHIPS MARCH 1, 1997 PERCENTAGE
- ------------------- --- ----------------------------- ------------- ----------
<S> <C> <C> <C> <C>
Don G. Powell* President, Chief Executive None **
Nominee Officer and Director, Van
Kampen American Capital Inc.;
Chairman, Chief Executive
Officer and Director of Van
Kampen American Capital
Distributors, Inc., VK
Advisory, Van Kampen American
Capital Asset Management,
Inc., Van Kampen American
Capital Management, Inc. and
Van Kampen American Capital
Advisors, Inc. Chairman,
President and a Director of
Van Kampen American Capital
Exchange Corporation,
American Capital Contractual
Services, Inc., and American
Capital Services, Inc.
Chairman and a Director of
ACCESS Investor Services,
Inc. and Van Kampen American
Capital Trust Company.
Chairman of the Board of
Governors and the Executive
Committee of the Investment
Company Institute. Trustee of
funds in the VKAC Fund
Complex.
Jerome L. Robinson 74 President, Robinson Technical None **
Nominee Products Corporation (welding
alloys, supplies and
equipment). Director,
Pacesetter Software;
Director, Panasia Bank.
Trustee of funds in the
VKAC Fund Complex.
Phillip Rooney Private Investor. Formerly, None **
Nominee President and Chief Executive
Officer, WMX Technologies
Inc. (environmental
services); President and
Chief Operating Officer, WMX
Technologies Inc. Director,
Illinois Tool Works
(manufacturing); Director,
Service Master (business and
consumer services); Director,
Urban Shopping Centers
(retail mall management);
Director, Stone Container
(paper manufacturing).
</TABLE>

9
<PAGE> 16

- ---------------
* If elected, would be an "interested person" within the meaning of the 1940
Act. In addition, Mr. Powell is a current shareholder of MS Group and Mr.
DeMartini is a current shareholder of Dean Witter Discover.

** As of March 1, 1997, the Nominees as a group beneficially owned less than 1%
of the Shares of each Fund of the Company.

BOARD APPROVAL OF THE ELECTION OF NOMINEES

At a meeting held April 2, 1997, the Board decided to recommend that
shareholders vote for each of the Nominees, except Mr. Powell who was not a
Nominee at that time. The Board decided to recommend that shareholders vote for
Mr. Powell at a meeting held on May 21, 1997. In considering the nomination of
Messrs. J. Miles Branagan, Richard M. DeMartini, R. Craig Kennedy, Jack E.
Nelson, Don G. Powell, Jerome L. Robinson, Phillip Rooney, Fernando Sisto and
Wayne W. Whalen and Ms. Linda Hutton Heagy for election as Directors of the
Company, the Directors considered the Nominees' experience and qualifications.
In particular, the Board considered that the majority of the Nominees have
substantial familiarity and experience as trustees of mutual funds advised,
administered and distributed by subsidiaries of Van Kampen. The Board believed
this experience would be germane in light of the determination to recommend that
VK Advisory become the Company's investment adviser and administrator and in
light of the fact that Van Kampen affiliates had already assumed responsibility
for distribution and most transfer agency activities. The Board also considered
that the experience of each of the remaining Nominees includes either experience
as a director of a large retail mutual fund complex or as a director of a number
of large publicly-held companies. At a meeting held May 21, 1997, the Board
waived certain retirement provisions to permit Mr. Robinson to serve as a
Director and conditionally determined the "disinterested" status of Mr. Nelson.

10
<PAGE> 17

COMPENSATION OF CURRENT DIRECTORS

The aggregate compensation paid by the Company to each of the Company's
current Directors serving during the fiscal year ended June 30, 1996 and the
aggregate compensation paid to each Director during calendar year 1996 by the
registered investment companies which (i) hold themselves out to investors as
related companies for purposes of investment and investment services or (ii) to
which MSAM or MAS or an affiliated person of MSAM or MAS provides investment
advisory services (collectively, the "Fund Complex") is set forth in the
following compensation table. The Nominees, if elected, may establish different
compensation and/or retirement plans from the Company and the VKAC Fund Complex.

COMPENSATION TABLE

<TABLE>
<CAPTION>
PENSION OR NUMBER OF
RETIREMENT TOTAL COMPENSATION INVESTMENT COMPANIES
AGGREGATE BENEFITS ACCRUED FROM THE COMPANY IN FUND COMPLEX
NAME AND COMPENSATION AS PART OF AND FUND COMPLEX FOR WHICH
POSITION FROM THE COMPANY FUND EXPENSES PAID TO DIRECTORS DIRECTOR SERVES++
- ------------ ---------------- ---------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Barton M. $ 0 $ 0 $ 0 4
Biggs,
Chairman
and
Director
Warren J. $ 0 $ 0 $ 0 4
Olsen,
Director
and
President
John D. $ 5,879 $ 0 $ 65,000 4
Barrett,
II,
Director
Gerard E. $ 5,879 $ 0 $ 72,100 4
Jones,
Director
Andrew $ 4,974+ $ 0 $ 55,000 4
McNally
IV,
Director
Samuel T. $ 4,974+ $ 0 $ 55,000 4
Reeves,
Director
Fergus Reid, $ 5,879+ $ 0 $ 72,000 4
Director
Frederick O. $ 4,974+ $ 0 $ 72,100 4
Robertshaw,
Director
Frederick B. $ 0+ $ 0 $ 0 4
Whittemore,
Director
</TABLE>

- ---------------
+ The total amount of deferred compensation for Frederick O. Robertshaw, Samuel
T. Reeves, Fergus Reid, Andrew McNally IV and Frederick B. Whittemore was $0,
$2,637, $3,117, $2,637 and $0, respectively. Mr. Whittemore retired from the
Board of Directors effective March 14, 1997.

++ Although the Fund Complex includes Morgan Stanley Universal Funds Inc.
("Universal"), as of June 30, 1996, the Directors had not received
compensation for their services on the Board of Directors of Universal. In
addition, although the Fund Complex includes PCS Cash Fund, Inc. ("PCS"), PCS
ceased operations on September 26, 1996.

11
<PAGE> 18

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

There were four meetings of the Board of Directors held during the fiscal
year ended June 30, 1996. In such fiscal year, all Directors, except Messrs.
Biggs and Whittemore, attended at least 75% of the meetings of the Board of
Directors held during their respective terms.

The Board of Directors has an Audit Committee. The Audit Committee makes
recommendations to the full Board of Directors with respect to the engagement of
independent accountants and reviews, with the independent accountants, the
results of the audit engagement and matters having a material effect on the
Company's financial operations. The members of the Audit Committee during the
fiscal year ended June 30, 1996 were Messrs. Jones (Chairman), Barrett and Reid,
each of whom is not an "interested person" within the meaning of the 1940 Act.
The Audit Committee met two times during the fiscal year ended June 30, 1996.
During such fiscal year, all members attended both meetings of the Audit
Committee.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION
OF EACH NOMINEE.

THE NEW ADVISORY AND SUB-ADVISORY AGREEMENTS.

INTRODUCTION

At meetings held on April 2, 1997 and May 21, 1997, the Directors of the
Company unanimously voted in favor of a management recommendation that VK
Advisory become the investment adviser for all of the Funds and called the
present Meeting for the purpose of, among others, requesting that shareholders
approve the New Advisory Agreement with VK Advisory and the New Sub-Advisory
Agreement with MSAM. At the same Board meeting, the Directors unanimously
authorized the assignment of the Company's administration agreements with,
respectively, MSAM and MAS to VK Advisory. The Board also approved the selection
of MSAM and MAS as sub-advisers to the Company and approved the New Sub-Advisory
Agreement with MSAM and a form of sub-advisory agreement with MAS. (The
investment portfolios for which MAS would be the sub-adviser have not yet become
operational.) Under the New Sub-Advisory Agreement, MSAM would continue to
manage the assets of the Funds for which it now acts as investment adviser.

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. (VK ADVISORY)

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, Illinois and 2800 Post Oak Boulevard, Houston, Texas 77056.
Prior to 1988, VK Advisory provided investment advisory services under the name
"American Portfolio Advisory Services Inc." On December 31, 1987,

12
<PAGE> 19

VK Advisory changed its name to Van Kampen Merritt Investment Advisory Corp. In
January 1995, VK Advisory adopted its current name.

Set forth below is the name, address and principal occupation of the
principal executive officer and each director of VK Advisory:

DIRECTORS AND OFFICERS OF VK ADVISORY

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ------------------------------------------------------------------------------------
<S> <C>
Don G. Powell See "Information Regarding Nominees."
2800 Post Oak Blvd.
Houston, TX 77056
Dennis J. McDonnell President, Chief Operating Officer and a Director of VK
Parkview Plaza Advisory, VKAC Asset Management, Inc., Van Kampen
Oakbrook Terrace, IL 60181 American Capital Advisors, Inc. and Van Kampen American
Capital Management, Inc. Executive Vice President and a
Director of Van Kampen American Capital Inc. Director of
MCM Group, Inc., McCarthy, Crisanti & Maffei, Inc., MCM
(Europe) Limited and MCM Asia Pacific Company, Limited.
Trustee of Funds in the VKAC Fund Complex. Prior
to November 1996, Executive Vice President and a
Director of VK/AC Holding, Inc.
Ronald A. Nyberg Executive Vice President, General Counsel and Secretary
One Parkview Plaza of Van Kampen American Capital Inc. Executive Vice
Oakbrook Terrace, IL 60181 President, General Counsel, Assistant Secretary and a
Director of Van Kampen American Capital Distributors,
Inc., VK Advisory, VKAC Asset Management, Van Kampen
American Capital Management, Inc., Van Kampen American
Capital Trust Company, Van Kampen American Capital
Record Keeping Services, Inc. and Van Kampen American
Capital Insurance Agency of Illinois, Inc. Executive
Vice President, General Counsel and Assistant Secretary
of Van Kampen American Capital Advisors, Inc., American
Capital Contractual Services, Inc., Van Kampen American
Capital Exchange Corporation, ACCESS Investor Services,
Inc. and Van Kampen American Capital Services, Inc.
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 VK/AC
Holding, Inc.
William R. Rybak Executive Vice President and Chief Financial Officer of
One Parkview Plaza Van Kampen American Capital Inc.; Executive Vice
Oakbrook Terrace, IL 60181 President and Chief Financial Officer of VK/AC Holding,
Inc. through October 1996. Executive Vice President,
Chief Financial Officer and a Director of Van Kampen
American Capital Distributors, Inc., VK Advisory, VKAC
Asset Management, Van Kampen American Capital
Management, Inc., Van Kampen American Capital Record
Keeping Services, Inc. and Van Kampen American Capital
Insurance Agency of Illinois, Inc. Executive Vice
President and Chief Financial Officer of Van Kampen
American Capital Advisors, Inc., Van Kampen American
Capital Exchange Corporation, Van Kampen American
Capital Trust Company, ACCESS Investor Services, Inc.,
and American Capital Contractual Services, Inc.
Executive Vice President, Chief Financial Officer and
Treasurer of American Capital Shareholders Corporation
and Van Kampen American Capital Services, Inc. [Director
of Alliance Bancorp (savings and loan holding company)
and, prior to [ ] 1997, Chairman of the Board of
Hinsdale Financial Corp. (savings and loan holding
company)].
Peter W. Hegel Executive Vice President of VK Advisory, VKAC Asset
One Parkview Plaza Management, Van Kampen American Capital Advisors, Inc.
Oakbrook Terrace, IL 60181 and Van Kampen American Capital Management, Inc.
Alan T. Sachtleben Executive Vice President of VK Advisory and Van Kampen
2800 Post Oak Blvd. American Capital Management, Inc., VKAC Asset Management
Houston, TX 77056 and Van Kampen American Capital Advisors, Inc.
</TABLE>

13
<PAGE> 20

MORGAN STANLEY ASSET MANAGEMENT INC. (MSAM)

MSAM, located at 1221 Avenue of the Americas, New York, New York 10020,
acts as investment adviser for each of the Funds that the Company currently
offers.

MSAM currently is a wholly-owned subsidiary of MS Group and provides a
broad range of portfolio management services to customers in the United States
and abroad. At March 31, 1997, MSAM, together with its affiliated asset
management companies, other than Miller, Anderson & Sherrerd, LLP ("MAS") and
Van Kampen and its subsidiaries (including VK Advisory), managed investments
totaling approximately $75.6 billion.

Set forth below is the name and principal occupation of the principal
executive officer and each director of MSAM. The address for each is 1221 Avenue
of the Americas, New York, New York 10020:

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ------------------------------------- ------------------------------
<S> <C>
Barton M. Biggs, Chairman of the Chairman and Managing
Board of Directors Director, MSAM; Managing
Director of Morgan Stanley &
Co. Incorporated; Chairman
of Morgan Stanley Asset
Management Limited; Director
of VK/AC Holdings, Inc.
Peter A. Nadosy, Vice-Chairman of the Vice Chairman, Director and
Board of Directors Managing Director, MSAM;
Managing Director of Morgan
Stanley & Co. Incorporated;
Director of Morgan Stanley
Asset Management Limited
James M. Allwin, Director and President, Director and
President Managing Director, MSAM;
Managing Director of Morgan
Stanley & Co. Incorporated;
President of Morgan Stanley
Realty Inc.; Director of
VK/AC Holdings, Inc.
Gordon S. Gray, Director Director and Managing
Director, MSAM; Managing
Director of Morgan Stanley &
Co. Incorporated
Dennis G. Sherva, Director Director and Managing
Director, MSAM; Managing
Director of Morgan Stanley &
Co. Incorporated
</TABLE>

14
<PAGE> 21

THE ADVISORY AGREEMENTS

A majority of the Directors of the Company, including a majority of the
Directors who are not (i) parties to the New Advisory Agreement or the New
Sub-Advisory Agreement (together, the "New Agreements") or (ii) interested
persons of any such party, approved the New Agreements at an in-person meeting
called for the purpose of voting on such approval. The holders of a majority of
the outstanding voting securities (within the meaning of the 1940 Act) of each
Fund are being asked to approve the New Agreements. The summary of the New
Advisory Agreement set forth herein is qualified by reference to Annex A and the
summary of the New Sub-Advisory Agreement is qualified by reference to Annex B.

THE CURRENT ADVISORY AGREEMENT. Since the beginning of the Company's last
fiscal year, the Board has taken several actions with respect to the current
advisory agreement dated November 17, 1992 between the Company and MSAM (the
"Current Advisory Agreement"). In particular, at a Board of Directors Meeting
held on July 16, 1996, the Directors, including a majority of the Directors who
are not "interested persons" as such term is defined under the 1940 Act (the
"Independent Directors"), approved the addition of the Money Market, Tax-Free
Money Market and Government Obligations Money Market Funds as additional
investment portfolios subject to the Current Advisory Agreement. Similarly, at a
Board of Directors Meeting held on December 12, 1996, the Board, including a
majority of the Independent Directors, approved the addition of the Global
Equity, Emerging Markets Debt and Equity Growth Funds as additional investment
portfolios subject to the Current Advisory Agreement. Most recently, at the
Annual Board of Directors meeting held February 13, 1997, the Directors,
including a majority of the Independent Directors, approved the Current Advisory
Agreement for continuance for the year beginning April 14, 1997.

The Current Advisory Agreement provides that MSAM, as an investment adviser
to the Company, in return for its fee, and subject to the control and
supervision of the Board and in conformance with the stated investment objective
and policies of each Fund, will manage the investment and reinvestment of the
assets of each Fund. In this regard, it is the responsibility of MSAM to make
investment decisions for each Fund and to place each such Fund's purchase and
sale orders for investment securities. The Current Advisory Agreement states
that MSAM will provide adequate office space, facilities and personnel to
perform its advisory services for the Company.

The Current Advisory Agreement provides that it shall continue for
successive annual periods with respect to a Fund, provided that such
continuation is approved at least annually by the Company's Independent
Directors or by vote of the holders of a majority of the Fund's outstanding
voting securities, as well as by a majority of the Company's Directors. The
Current Advisory Agreement may be terminated by any Fund at any time, without
the payment of any penalty, by vote of a majority of the Directors of the
Company or by vote

15
<PAGE> 22

of a majority of the outstanding voting securities of the Fund on 60 days'
written notice to MSAM. The Current Advisory Agreement may be terminated by MSAM
at any time, without the payment of any penalty, upon 90 days' written notice to
the Company. The Current Advisory Agreement automatically terminates in the
event of its assignment.

The Current Advisory Agreement provides that, in the absence of (i) willful
misfeasance, bad faith or gross negligence on the part of MSAM in the
performance of its obligations and duties, (ii) reckless disregard by MSAM of
its obligations and duties, or (iii) a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services, MSAM shall not be
liable to the Company, or to any shareholder of the Company, for any error of
judgment, mistake of law or any other act or omission in connection with
rendering services under the agreement, including any losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security on behalf of any Fund of the Company. The Current Advisory Agreement
also states that any limitation of liability does not apply to statutory
liability pursuant to Section 36(b) of the 1940 Act.

The following table sets forth: (i) the compensation that MSAM is entitled
to receive under the Current Advisory Agreement as a percentage of average daily
net assets; (ii) MSAM's advisory fees after expense reimbursement or fee waiver
as a percentage of average daily net assets; (iii) the aggregate fees each Fund
paid to MSAM during the Company's last fiscal year under the Current Advisory
Agreement; (iv) the advisory fees MSAM waived during the Company's last fiscal
year; and (v) the date shareholders of each of the Funds last effectively
approved the Current Advisory Agreement.

16
<PAGE> 23

<TABLE>
<CAPTION>
INVESTMENT ADVISORY
FEES--FISCAL
ADVISORY FEE YEAR ENDED
(AFTER JUNE 30, 1996
EXPENSE ----------------------- DATE OF
CONTRACTUAL REIMBURSEMENT NET FEES LAST EFFECTIVE
ADVISORY OR FEE PAID AMOUNT WAIVED SHAREHOLDER
FUND FEE WAIVER) (000) (000) APPROVAL
- ----------------- ----------- ------------- -------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Government 0.45 on 0.41 759 (2) 154(2) September 27, 1996
Obligations assets up
Money(2)(3) to $250
Market Fund million
0.40 on
assets
above $250
million up
to $500
million
0.35 on
assets
exceeding
$500
million
High Yield 0.75 0.42 0 13 May 1, 1996
Fund(1)
International 0.80 0.80 N/A N/A June 29, 1995
Magnum Fund(3)
Latin American 1.25 0.07 13 206 July 6, 1994
Fund
Money Market 0.45 on 0.36 395 (2) 45(2) September 27, 1996
Fund(2)(3) assets up
to $250
million
0.40 on
assets
above $250
million up
to $500
million
0.35 on
assets
exceeding
$500
million
U.S. Real Estate 1.00 0.70 0 9 May 1, 1996
Fund(1)
Worldwide High 0.75 0.61 430 97 February 2, 1994
Income Fund
</TABLE>

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

(1) The investment advisory fees represent fees paid for the fiscal period
(beginning on the Fund's commencement of operations) ended June 30, 1996.
The Aggressive Equity, U.S. Real Estate and High Yield Funds commenced
operations on January 2, 1996, May 1, 1996 and May 1, 1996, respectively.

(2) MSAM acted as investment adviser to the predecessor portfolios of the
Government Obligations Money Market Fund (the PCS Government Obligations
Money Market Fund) and the Money Market Fund (the PCS Money Market Fund).
PCS Cash Fund, Inc. paid MSAM advisory fees (and MSAM waived fees) in the
amounts indicated in the foregoing chart with respect to the predecessor
portfolios.

(3) The International Magnum, Government Obligations Money Market and Money
Market Funds had not yet commenced operations on June 30, 1996.

17
<PAGE> 24

The name, net assets as of December 31, 1996, contractual advisory fee and
advisory fee after fee waivers or expense reimbursement of all registered
investment companies advised by MSAM, including the Funds, are set forth at
Annex C hereto. Annex D hereto contains similar information with respect to
registered investment companies for which VK Advisory serves as investment
adviser.

PROPOSAL 2: APPROVAL OF A NEW INVESTMENT ADVISORY
AGREEMENT

The Board approved the proposed New Advisory Agreement between the Company
and VK Advisory at meetings held on April 2, 1997 and on May 21, 1997. The form
of the New Advisory Agreement is attached hereto as Annex A.

The New Advisory Agreement provides that VK Advisory will supply investment
research and portfolio management, including the selection of securities for
each Fund to purchase, hold or sell and the selection of brokers through which
that Fund's portfolio transactions are executed. However, the New Advisory
Agreement also provides that VK Advisory may appoint a sub-adviser selected and
approved in the manner provided for in the 1940 Act to perform these portfolio
management responsibilities. See "Proposal 3." The New Advisory Agreement
further provides for VK Advisory to administer the business affairs of each
Fund, furnish offices, necessary facilities and equipment, provide certain
administrative services and permit its officers and employees to serve without
compensation as directors and officers of the Company if duly elected to such
positions. The New Advisory Agreement acknowledges that (i) the chief executive
officer, president, chief financial officer and secretary of VK Advisory; and
(ii) each director, officer and employee of VK Advisory or any of its affiliates
who serves as an officer of the Company, in their current capacities, are viewed
as essential personnel and, for a period of one year, will not be replaced by VK
Advisory or any of its affiliates without first informing the Board of Directors
in a timely manner. This latter provision is not in the Current Advisory
Agreement.

The New Advisory Agreement provides that VK Advisory shall not be liable
for any error of judgment or law, or for any loss suffered by a particular Fund
in connection with the matters to which the New Advisory Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of VK Advisory in the performance of its obligations and duties, or
by reason of its reckless disregard of its obligations and duties under the New
Advisory Agreement. The Current Advisory Agreement contains similar provisions
but it also does not limit MSAM's liability for losses resulting from a breach
of fiduciary duty with respect to receipt of compensation for services. The
Current Advisory Agreement also states that any limitation of liability does not
apply to statutory liability pursuant to Section 36(b) of the 1940 Act.

18
<PAGE> 25

The investment advisory fee as a percentage of net assets payable by each
Fund will be the same under the New Advisory Agreement as under the Current
Advisory Agreement. If the investment advisory fee under the New Advisory
Agreement had been in effect for the Company's most recently completed fiscal
year, advisory fees paid to VK Advisory by the Company would have been identical
to those paid under the Current Advisory Agreement.

The New Advisory Agreement provides that VK Advisory's activities are
subject to the review and supervision of the Board of Directors, to which VK
Advisory will render periodic reports with respect to each Fund's investment
activities. The New Advisory Agreement provides that it must be approved and may
be continued from year to year, after an initial two-year term, in the manner
provided for in the 1940 Act. The New Advisory Agreement may be terminated by
either party, at any time, without penalty, upon 60 days' written notice, and
automatically terminates in the event of its assignment. The Current Advisory
Agreement requires MSAM to give 90 days' notice of termination.

At its April 2, 1997 meeting and, with respect to additional sub-advisory
matters, its May 21, 1997 meeting, the Board of Directors considered written and
oral information provided to it concerning the experience and qualifications of
VK Advisory. The materials and presentations included: (1) information on the
number, size, investment objectives and performance of mutual funds advised by
VK Advisory; (2) historical information about VK Advisory and its affiliates;
(3) background information on senior employees of VK Advisory (and in this
regard, the Board met with Don G. Powell, the Chairman and Chief Executive
Officer of VK Advisory and Nominee); (4) information on services to be provided
by VK Advisory as investment adviser and administrator; (5) information
regarding the post-Merger relationships among MS Group and its affiliates,
including VK Advisory, and Dean Witter Discover and its affiliates, particularly
as they affect the strategy for sales and services to retail investors and the
possibility of benefits to be derived by shareholders, particularly with respect
to the quality of services and the possibility of reduction in expenses due to
efficiencies and future growth and the possibility of making shares of the
Company exchangeable for shares of other Van Kampen funds; (6) the fact that the
contractual advisory fee rates would remain the same and that those fees would
continue to be waived to the extent necessary to maintain total operating
expenses for each Fund at their current levels; (7) information relating to
sub-advisory fees, taking into account, among other things, the fact that these
fees reflect a business judgment among affiliated entities as to how to share
revenues; and (8) the terms of the New Advisory Agreement, particularly the fact
that the terms of the New Advisory Agreement are substantially similar to those
of the Current Advisory Agreement in all material respects and are in compliance
with applicable legal requirements. The Board also considered that MSAM, as
sub-adviser, would continue to provide portfolio management to the Funds using
the same portfolio managers and other personnel currently managing the Funds and
that, under the New Advisory Agreement, VK Advisory

19
<PAGE> 26

could terminate MSAM as sub-adviser only with the approval of a majority of the
Directors who are not "interested persons" of any party to the New Advisory
Agreement.

The Board also considered possible benefits to VK Advisory and Morgan
Stanley, Dean Witter, Discover & Co. that may result from the Merger, including
the continued use of Morgan Stanley & Co. and Dean Witter Discover brokers and
their affiliates, to the extent permitted by law, for brokerage services.

The Board also considered the terms of the Merger Agreement and the
possible effects of the Merger upon the organization of VK Advisory and upon the
ability of VK Advisory to provide advisory services to the Company. In this
regard, the Board was informed of the resources of Morgan Stanley, Dean Witter,
Discover & Co. to be made available to VK Advisory.

The Board also considered the effect on the Company of VK Advisory and MSAM
becoming affiliated persons of Morgan Stanley, Dean Witter, Discover & Co.
Following the Merger, the 1940 Act will prohibit or impose certain conditions on
the ability of the Company to engage in certain transactions with Morgan
Stanley, Dean Witter, Discover & Co. and its affiliates. For example, absent
exemptive relief, the Company will be prohibited from purchasing securities from
Morgan Stanley & Co. and DWR in transactions in which Morgan Stanley & Co. and
DWR acts as a principal. Currently, the Company is prohibited from making such
purchases in only those transactions in which Morgan Stanley & Co. or an
affiliate acts as principal. The Company will also have to satisfy certain
conditions in order to engage in securities transactions in which Morgan Stanley
& Co. or DWR is acting as an underwriter. The Company is already required to
satisfy such conditions when engaging in transactions in which Morgan Stanley &
Co. or an affiliate is acting as an underwriter. In this connection, the
management of VK Advisory and MSAM represented to the Board that they do not
believe these prohibitions or conditions will have a material effect on the
management or performance of the Funds.

After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Directors, including the
Independent Directors, unanimously: (i) approved the New Advisory Agreement; and
(ii) voted to recommend the approval of the New Advisory Agreement to the
shareholders of the Funds.

In the event that shareholders of any Fund do not approve both the New
Advisory Agreement and the New Sub-Advisory Agreement (Proposal 3), the Current
Advisory Agreement will remain in effect with respect to the appropriate Fund(s)
and the Board will take such action as it deems in the best interest of the
affected Fund(s) and shareholders, which may include proposing that shareholders
approve another agreement in lieu of the New Advisory Agreement. If the Merger
is not consummated, MSAM will continue to serve as investment adviser of each

20
<PAGE> 27

Fund pursuant to the terms of the Current Advisory Agreement whether or not the
Merger-Related Proposals are approved by shareholders.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE NEW ADVISORY AGREEMENT.

PROPOSAL 3: APPROVAL OF A NEW INVESTMENT
SUB-ADVISORY AGREEMENT

At its April 2, 1997 and May 21, 1997 meetings, the Board approved a
proposed New Sub-Advisory Agreement between VK Advisory and MSAM, the form of
which is attached hereto as Annex B. At the meetings the Directors, including
the Independent Directors, unanimously approved the New Sub-Advisory Agreement
and recommended the agreement for approval by the shareholders of the Funds.

The New Sub-Advisory Agreement provides that, subject to the overall
policies, control, direction and review of the Company's Directors and VK
Advisory, MSAM shall manage the investment and reinvestment of the assets of
each of the Funds, continuously review, supervise and administer the investment
program of each of the Funds, determine in its discretion the securities to be
purchased or sold and the portion of each Fund's assets to be held uninvested,
to provide the Company with records concerning MSAM's activities which the
Company is required to maintain, and to render regular reports to the Company's
officers and Board of Directors concerning MSAM's discharge of the foregoing
responsibilities.

The New Sub-Advisory Agreement provides that MSAM shall not be liable to
the Funds or any shareholder of the Funds to any degree greater than VK
Advisory.

The New Sub-Advisory Agreement provides that VK Advisory shall pay MSAM a
monthly fee for its services to the Funds as investment sub-adviser calculated
as follows: If 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 advisory fee payable to VK Advisory by the Fund
(after application of any fee waivers in effect) for such 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 (45%) 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. Because the investment sub-advisory fee will be
paid to MSAM by VK Advisory had the proposed investment advisory/investment
sub-advisory fee structure been in effect for the Company's most recently
completed fiscal year, advisory fees paid to VK

21
<PAGE> 28

Advisory by the Company would have been identical to those paid under the
Current Advisory Agreement.

The New Sub-Advisory Agreement provides that it must be approved and may be
continued from year to year, after an initial two-year term, in the manner
provided for in the 1940 Act. The New Sub-Advisory Agreement may be terminated
by either party, at any time, without penalty, upon 60 days' written notice, and
automatically terminates in the event of its assignment.

In evaluating the New Sub-Advisory Agreement, the Board took into account
that the terms relating to the portfolio management services to be provided
under the Company's Current Advisory Agreement and the New Sub-Advisory
Agreement are substantially similar. The Board also considered possible benefits
to MSAM and Morgan Stanley, Dean Witter, Discover & Co. that may result from the
Merger including the continued use of Morgan Stanley & Co. and Dean Witter
Discover brokers and their affiliates, to the extent permitted by law, for
brokerage services.

The Board also considered the terms of the Merger Agreement and the
possible effects of the Merger upon the organization of MSAM and upon the
ability of MSAM to provide sub-advisory services to the Company. The Board
considered the skills and capabilities of MSAM, taking note of the information
they had considered in approving the continuation of the Current Advisory
Agreement on February 13, 1997. In this regard, the Board was informed of the
resources of Morgan Stanley, Dean Witter, Discover & Co. to be made available to
VK Advisory and MSAM.

The Board also considered the effect on the Company of VK Advisory and MSAM
becoming affiliated persons of Morgan Stanley, Dean Witter, Discover & Co.
Following the Merger, the 1940 Act will prohibit or impose certain conditions on
the ability of the Company to engage in certain transactions with Morgan
Stanley, Dean Witter, Discover & Co. and its affiliates. For example, absent
exemptive relief, the Company will be prohibited from purchasing securities from
Morgan Stanley & Co. and DWR in transactions in which Morgan Stanley & Co. and
DWR acts as a principal. Currently the Company is prohibited from making such
purchases in only those transactions in which Morgan Stanley & Co. or an
affiliate acts as principal. The Company will also have to satisfy certain
conditions in order to engage in securities transactions in which Morgan Stanley
& Co. or DWR is acting as an underwriter. The Company is already required to
satisfy such conditions when engaging in transactions in which Morgan Stanley &
Co. or an affiliate is acting as an underwriter. In this connection, the
management of MSAM represented to the Board that they do not believe these
prohibitions or conditions will have a material effect on the management or
performance of the Funds.

22
<PAGE> 29

Agreement; and (ii) voted to recommend the approval of the New Sub-Advisory
Agreement to the shareholders of the Funds.

In the event that shareholders of any Fund(s) do not approve both the New
Advisory Agreement (Proposal 2) and the New Sub-Advisory Agreement, the Current
Advisory Agreement will remain in effect with respect to the appropriate Fund(s)
and the Board will take such action as it deems in the best interest of the
affected Fund(s) and shareholders, which may include proposing that shareholders
approve another agreement in lieu of the New Advisory Agreement. If the Merger
is not consummated, MSAM will continue to serve as investment adviser of each
Fund pursuant to the terms of the Current Advisory Agreement whether or not the
Merger-Related Proposals are approved by shareholders of that Fund.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE NEW SUB-ADVISORY AGREEMENT.

PROPOSAL 4: ELIMINATION OF FUNDAMENTAL POLICY
REGARDING DIVERSIFICATION AND RECLASSIFICATION OF THE
WORLDWIDE HIGH INCOME FUND AS A "NON-DIVERSIFIED" FUND
(SHAREHOLDERS OF THE WORLDWIDE HIGH INCOME FUND ONLY)

Section 5 of the 1940 Act generally requires that each Fund of the Company
be classified as either "diversified" or "non-diversified." Under Section 13 of
the 1940 Act, a Fund may not change its classification from diversified to
non-diversified without the approval of the holders of a majority of its
outstanding shares.

The Worldwide High Income Fund currently is classified as "diversified,"
and is presently subject to a fundamental investment limitation prohibiting:

The purchase of securities of an issuer (except obligations of the U.S.
Government and its instrumentalities) if as a result, with respect to 75%
of its total assets, more than 5% of the Fund's total assets, at market
value, would be invested in the securities of such issuer.

After consideration, the Company's Board of Directors has determined that
circumstances may arise when it may be advantageous for the Fund to have a
larger position in a single issuer or in a group of issuers than is permitted
for diversified investment companies. The reclassification of the Fund as "non-
diversified" will provide VK Advisory and/or MSAM with greater investment
flexibility in managing the Fund's portfolio. In particular, becoming a non-
diversified Fund will enable the Fund to invest more efficiently in the debt
obligations of foreign governments, of which there may be a limited number of
issuers meeting the Fund's investment criteria. As a result, however, the Fund
may invest a greater proportion of its total assets in the securities of a
smaller number of issuers and, therefore, will be subject to greater risk with
respect to

23
<PAGE> 30

the securities of individual issuers. The Board of Directors believes that the
benefits accruing to the Fund as a consequence of the Fund's conversion to a
non-diversified portfolio will outweigh any increase in investment risk. On May
21, 1997, the Board of Directors, therefore, unanimously approved the
elimination of the Fund's fundamental policy regarding diversification, a change
in the classification of the Fund from a diversified to a non-diversified Fund
and recommended that the proposal to reclassify the Fund as a non-diversified
portfolio be submitted to the Fund's shareholders for approval.

If Proposal 4 is approved, the Fund will be exempt from the diversification
requirement of the 1940 Act. Once the Fund is reclassified as "non-diversified,"
the fundamental investment limitation will be eliminated and a non-fundamental
policy regarding non-diversification will replace it. A non-fundamental
investment limitation may be changed by a majority vote of the Board of
Directors and does not require shareholder approval. If Proposal 4 is not
approved by the shareholders of the Fund, the Fund's current limitation will
remain unchanged as a fundamental limitation.

If shareholders approve the elimination of the forgoing fundamental
limitation and reclassification of the Fund as a non-diversified Fund under the
1940 Act, the Fund would still be required to meet certain diversification
requirements in order to qualify as a regulated investment company for federal
income tax purposes. To so qualify, the Fund must diversify its holdings so
that, at the close of each quarter of its taxable year, (a) at least 50% of the
value of its total assets is represented by cash, cash items, securities issued
by the U.S. Government, its agencies and instrumentalities, the securities of
other regulated investment companies, and other securities limited generally
with respect to any one issuer to an amount not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the value of its total assets is invested
in the securities of any issuer (other than securities issued by the U.S.
Government, its agencies or instrumentalities or the securities of other
regulated investment companies), or in two or more issuers that the Fund
controls and that are engaged in the same or similar trades or businesses.

For purposes of the federal income tax test, the identification of the
issuer of any such security depends on the terms and conditions of the
obligation. If the assets and revenues of any agency, authority,
instrumentality, or other political subdivision are separate from those of the
government creating the subdivision, and the obligation is backed only by the
assets and revenues of the subdivision, such subdivision will be regarded as the
sole issuer. Similarly, in the case of a non-governmental user, such as an
industrial corporation or a privately owned or operated hospital, if the
security is backed only by the assets and revenues of the non-governmental user
then such non-governmental user will be deemed to be the sole issuer. If in
either case the creating government or other entity guarantees an obligation,
and the value of all securities issued or guaranteed by the guarantor and owned
by the Fund exceeds 10% of the value

24
<PAGE> 31

of the Fund's total assets, the guarantee will be regarded as a separate
security and treated as an issue of such government or entity.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE ELIMINATION OF THE WORLDWIDE HIGH INCOME FUND'S FUNDAMENTAL POLICY REGARDING
DIVERSIFICATION AND THE RECLASSIFICATION OF THE WORLDWIDE HIGH INCOME FUND AS A
"NON-DIVERSIFIED" FUND.

ADDITIONAL INFORMATION

CURRENT DIRECTORS AND OFFICERS OF THE COMPANY

Information is set forth below about the Company's current Directors and
principal executive officers, including their name, principal occupation,
relationship to VK Advisory and MSAM, if any, and, in the case of Directors, the
number of shares of each Fund beneficially owned. As of March 1, 1997, the
current Directors and Officers of the Company as a group beneficially owned less
than 1% of each Fund. It is the intention of the Nominees, if elected, to
replace certain of the Company's officers with individuals familiar with Van
Kampen's mutual fund organization.

<TABLE>
<CAPTION>
PERCENTAGE
FUND SHARES OF OUT-
BENEFICIALLY STANDING
NAME AND POSITION OWNED AS OF FUND
WITH THE COMPANY PRINCIPAL OCCUPATION MARCH 1, 1997 SHARES
- ------------------------ ------------------------------ ----------------- ----------
<S> <C> <C> <C>
Barton M. Biggs* Chairman, Director and None ***
Chairman and Director Managing Director of Morgan
Stanley Asset Management Inc.
and Morgan Stanley Asset
Management Limited; Managing
Director of Morgan Stanley &
Co. Incorporated; Director of
Morgan Stanley Group Inc.;
Director of VK/AC Holdings,
Inc.; Director of the Rand
McNally Company; Member of the
Yale Development Board;
Chairman and Director of 16
U.S. registered investment
companies managed by Morgan
Stanley Asset Management Inc.
Warren J. Olsen* Principal of Morgan Stanley & None ***
Director and President Co. Incorporated and of Morgan
Stanley Asset Management Inc.;
President and Director of 16
U.S. registered investment
companies managed by Morgan
Stanley Asset Management Inc.
</TABLE>

25
<PAGE> 32

John D. Barrett, II Chairman and Director of None ***
Director Barrett Associates, Inc.
(investment counseling);
Director of the Ashforth
Company (real estate);
Director of Morgan Stanley
Institutional Fund, Inc. and
Morgan Stanley Universal
Funds, Inc.

Gerard E. Jones Partner in Richards & O'Neil None ***
Director LLP (law firm); Director of
Morgan Stanley Institutional
Fund, Inc. and Morgan Stanley
Universal Funds, Inc.

Andrew McNally IV Chairman and Chief Executive None ***
Director Officer of Rand McNally
Company (publishing); Director
of Allendale Insurance Co.,
Mercury Finance (consumer
finance); Zenith Electronics,
Hubbell, Inc. (industrial
electronics); Director of
Morgan Stanley Institutional
Fund, Inc. and Morgan Stanley
Universal Funds, Inc.

Samuel T. Reeves Chairman of the Board and CEO, - Emerging ***
Director Pinacle L.L.C. (investments); Markets Fund:
Director, Pacific Gas and 374 shares
Electric and PG&E Enterprises - Money Market
(utilities); Director of Fund: 1,444
Morgan Stanley Institutional shares
Fund, Inc. and Morgan Stanley
Universal Funds, Inc.

Fergus Reid Chairman and Chief Executive None ***
Director Officer of LumeLite
Corporation (injection
molding); Trustee and Director
of Vista Mutual Fund Group;
Director of Morgan Stanley
Institutional Fund, Inc. and
Morgan Stanley Universal
Funds, Inc.

Frederick O. Robertshaw Of Counsel, Copple Chamberlin - American Value ***
Director & Boehm, P.C.; Formerly, Of Fund: 110
Counsel, Bryan, Cave LLP (law shares**
firms); Director of Morgan - Asian Growth
Stanley Institutional Fund, Fund: 96 shares
Inc. and Morgan Stanley 46 shares**
Universal Funds, Inc. - Global Equity
Allocation
Fund: 238
shares 88
shares**
- Global Fixed
Income Fund:
138 shares
- Worldwide High
Income Fund:
150 shares**
</TABLE>

26
<PAGE> 33

James W. Grisham Principal of Morgan Stanley & N/A ***
Vice President Co., Incorporated and of
Morgan Stanley Asset
Management Inc.; Vice
President of 16 U.S.
registered investment
companies managed by Morgan
Stanley Asset Management Inc.

Michael F. Klein Principal of Morgan Stanley & N/A ***
Vice President Co. Incorporated and of Morgan
Stanley Asset Management Inc.;
Officer of various investment
companies managed by Morgan
Stanley Asset Management Inc.
Previously practiced law with
the New York law firm of
Rogers & Wells.

Douglas W. Kugler Treasurer, MAS Funds; Manager N/A ***
Vice President of Mutual Fund Administration,
Miller Anderson & Sherrerd,
LLP; Vice President of Morgan
Stanley Asset Management Inc.;
formerly Assistant Vice
President, Provident Financial
Processing Corporation.

Harold J. Schaaff, Jr. Principal of Morgan Stanley & N/A ***
Vice President Co. Incorporated and of Morgan
Stanley Asset Management Inc.;
General Counsel and Secretary
of Morgan Stanley Asset
Management Inc.; Vice
President of 16 U.S.
registered investment
companies managed by Morgan
Stanley Asset Management Inc.

Joseph P. Stadler Vice President of Morgan N/A ***
Vice President Stanley & Co. Incorporated and
Morgan Stanley Asset
Management Inc.; Previously
with Price Waterhouse LLP
(accounting); Vice President
of 16 U.S. registered
investment companies managed
by Morgan Stanley Asset
Management Inc.

Lorraine Truten Vice President, MAS Funds; N/A ***
Vice President Head of Mutual Fund
Administration, Miller
Anderson & Sherrerd, LLP;
Principal of Morgan Stanley
Asset Management Inc.;
President, MAS Fund
Distribution, Inc.

Valerie Y. Lewis Vice President of Morgan N/A ***
Secretary Stanley & Co. Incorporated and
Morgan Stanley Asset
Management Inc.; Previously
with Citicorp (banking);
Secretary of 16 U.S.
registered investment
companies managed by Morgan
Stanley Asset Management Inc.
</TABLE>

27
<PAGE> 34

Karl O. Hartmann Senior Vice President, N/A ***
Assistant Secretary Secretary and General Counsel
of Chase Global Funds Services
Company; Previously, Leland,
O'Brien, Rubinstein
Associates, Inc.
(investments).

James R. Rooney Vice President, Director of N/A ***
Treasurer Fund Administration Compliance
Services, Chase Global Funds
Services Company; Previously
with Scudder, Stevens & Clark,
Inc. (investments) and Ernst &
Young LLP (accounting).

Joanna Haigney Manager of Fund Administration N/A ***
Assistant Treasurer and Compliance Services, Chase
Global Funds Services Company;
Previously with Coopers &
Lybrand LLP.
</TABLE>

- ---------------
* "Interested person" within the meaning of the 1940 Act.

** Indicates shared voting or investing power.

*** As of March 1, 1997, the current Directors and Officers of the Company as a
group beneficially owned less than 1% of each Fund.

BENEFICIAL OWNERS

To the knowledge of the Company's management, as of April 21, 1997, the
following were beneficial owners of 5% or more of the outstanding Shares of the
Funds:

[Insert 5% Shareholders]

TRANSACTIONS/AGREEMENTS WITH AFFILIATES

ADMINISTRATOR

On April 2, 1997, the Board of Directors of the Company approved a proposal
for VK Advisory to assume the responsibilities of MSAM and MAS under their
respective administration agreements with the Company, subject to the
consummation of the Merger and approval of the Merger-Related Proposals. If
shareholder approval for each of the Merger-Related Proposals is obtained, VK
Advisory will provide administrative services to the Company pursuant to
administration agreements with the Company, which will be assigned from MSAM and
MAS, respectively, to VK Advisory. The Board of Directors consented to the
assignment at its April 2, 1997 meeting.

For its services under the current administration agreement with MSAM, the
Company pays MSAM, and if the agreement is assigned, will pay VK Advisory, a
monthly fee which on an annual basis equals 0.25% of the average

28
<PAGE> 35

daily net assets of the respective Funds, other than the money market funds, and
0.10% of the first $200 million of each money market fund's average daily net
assets, 0.075% of the next $200 million of average daily net assets, 0.05% of
the next $200 million of average daily net assets, and 0.03% on average daily
net assets over $600 million. For the fiscal year ended June 30, 1996, MSAM
served as the administrator to the Company and PFPC, Inc. served as the
administrator to the predecessor portfolios of the Government Obligations Money
Market Fund (the PCS Government Obligations Money Market Fund) and the Money
Market Fund (the PCS Money Market Fund). The Company paid administration fees to
MSAM of approximately $1,801,654 and PFPC, Inc. received aggregate
administration fees of $273,252 for their respective administrative services.
The investment portfolios for which MAS serves as administrator are not yet
operational and MAS has received no compensation from the Company for
administrative services.

If the Merger-Related Proposals are not approved, MSAM and MAS will
continue to provide administrative services to the respective investment
portfolios which they advise.

CUSTODIAN

The Chase Manhattan Bank, located at 770 Broadway, New York, NY 10003, is
the Fund's custodian for domestic and certain foreign assets. Morgan Stanley
Trust Company ("MSTC"), located at 1 Pierrepont Plaza, Brooklyn, NY 11201, acts
as the Company's custodian for foreign assets held outside the United States and
employs sub-custodians who were approved by the Board of Directors of the
Company in accordance with the Securities and Exchange Commission (the "SEC")
regulations for the purpose of providing custodial services for such assets. As
compensation for providing custodial services for the fiscal year ended June 30,
1996, MSTC received fees from the Funds as indicated in the following table:

<TABLE>
<CAPTION>
FUND CUSTODIAN FEES
-------------------------------------- --------------
<S> <C>
Global Equity Allocation Fund......... $217,000
Global Fixed Income Fund.............. 20,000
Asian Growth Fund..................... 631,000
American Value Fund................... 20,000
Worldwide High Income Fund............ 58,000
Latin American Fund................... 120,000
Emerging Markets Fund................. 359,000
Aggressive Equity Fund................ 7,000
U.S. Real Estate Fund................. 1,000
High Yield Fund....................... 1,000
</TABLE>

Whether or not a particular Proposal is approved, MSTC will continue to act
as the Company's custodian for foreign assets held outside the United States.

29
<PAGE> 36

DISTRIBUTOR

Van Kampen is the parent company of Van Kampen American Capital
Distributors, Inc. ("VKAC Distributors"). VKAC Distributors serves as the
distributor of the Shares of the Company.

Prior to December 31, 1996, Morgan Stanley & Co., served as the distributor
of the Company's shares pursuant to a distribution agreement with the Company
and a Plan of Distribution for the Money Market Funds and each class of the
other Funds (the "non-Money Market Funds") pursuant to Rule 12b-1 under the 1940
Act (each, a "Plan" and collectively, the "Plans"). Subsequent to January 1,
1997, VKAC Distributors, Inc. replaced Morgan Stanley & Co. as distributor of
the Company's shares pursuant to a distribution agreement with the Company and
the Plans. Under each Plan the Company's distributor is entitled to receive from
the Funds a distribution fee, which is accrued daily and paid quarterly, of up
to 0.50% for each of the Money Market Funds and up to 0.75% of the Class B
shares and Class C shares of each of the non-Money Market Funds, on an
annualized basis, of the average daily net assets of such Fund or classes. With
respect to Class B shares, VKAC Distributors expects to utilize substantially
all of its fee to reimburse itself for commissions paid to investment dealers,
banks or financial services firms that provide distribution, administrative or
shareholder services ("Participating Dealers"). With respect to Class C shares,
VKAC Distributors expects to allocate most of its fee to Participating Dealers.
The actual amount of such compensation is agreed upon by the Company's Board of
Directors and by VKAC Distributors. VKAC Distributors may, in its discretion,
voluntarily waive from time to time all or any portion of its distribution fee
and VKAC Distributors is free to make additional payments out of its own assets
to promote the sale of Fund shares. Class A shares, Class B shares and Class C
shares of each Fund are 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.

VKAC Distributors did not serve as the distributor and received no
compensation from the Company prior to the end of the fiscal year ended June 30,
1996. As compensation for providing distribution services to the Company for the
fiscal year ended June 30, 1996, Morgan Stanley & Co. received aggregate fees of
approximately $4,267,000 which were attributable approximately as follows:

30
<PAGE> 37

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30, 1996
----------------------------------
FUND CLASS A CLASS B CLASS C
- ---------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Global Equity Allocation Fund..... $126,000 $ 47,000 $ 496,000
Global Fixed Income Fund.......... 26,000 3,000 56,000
Asian Growth Fund................. 516,000 194,000 1,505,000
Emerging Markets Fund............. 131,000 35,000 309,000
Latin American Fund............... 28,000 6,000 55,000
American Value Fund............... 57,000 14,000 187,000
Worldwide High Income Fund........ 90,000 112,000 231,000
Aggressive Equity Fund............ 4,000 10,000 10,000
High Yield Fund................... 2,000 5,000 5,000
U.S. Real Estate Fund............. 1,000 3,000 3,000
Money Market Fund+................ N/A -- --
Government Obligations Money
Market Fund+.................... N/A -- --
</TABLE>

- ---------------
+ Not operational as of June 30, 1996. As compensation for providing
distribution services to the predecessor portfolios for the fiscal year ended
June 30, 1996, Morgan Stanley & Co. received fees from the PCS Money Market
Portfolio in the amount of $843,776 and from the PCS Government Obligations
Money Market Portfolio in the amount of $439,236.

Whether or not a particular Proposal is approved, VKAC Distributors will
continue to provide distribution services to the Funds.

DIVIDEND DISBURSING AND TRANSFER AGENT

ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned subsidiary of Van
Kampen, acts as the dividend disbursing and transfer agent for shareholders of
each of the Funds, other than for the Prime Resource Account Holders of the
Money Market Funds. ACCESS performs book keeping, data processing and
administration services related to the maintenance of shareholder accounts.
ACCESS did not serve as the dividend disbursing and transfer agent and received
no compensation from the Company prior to the end of the fiscal year ended June
30, 1996.

Whether or not a particular Proposal is approved, ACCESS will continue to
provide dividend disbursing and transfer agent services to the Funds.

INDEPENDENT ACCOUNTANTS

A majority of the Company's Board of Directors who are not "interested
persons" of the Company have selected Price Waterhouse LLP as the independent
accountants of the Company for the fiscal year ending June 30, 1997. A
representative of Price Waterhouse LLP will be available during the Meeting, if
needed, to make a statement if desired and to respond to appropriate questions
from shareholders.

31
<PAGE> 38

PORTFOLIO TRANSACTIONS

The investment adviser or investment sub-adviser as the case may be
(collectively the "Adviser") is directed to use its best efforts to obtain for
the Funds the most favorable price and execution available. Subject to prior
authorization of appropriate policies and procedures by the Directors, the
Adviser may, to the extent authorized by law, cause the Funds to pay a broker or
dealer who provides brokerage and research services an amount of commission for
effecting the Company's investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, in recognition of the brokerage and research services provided by
the broker or dealer.

In purchasing and selling securities for the Funds, it is the Company'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 Funds, 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. Some securities
considered for investment by a Fund may also be appropriate for other clients
served by the Fund's Adviser. If purchase or sale of securities consistent with
the investment policies of a Fund and one or more of these other clients served
by the Fund's Adviser is considered at or about the same time, transactions in
such securities will be allocated among the 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 Company's Board of Directors.

Subject to the overriding objective of obtaining the best execution of
orders, the Adviser may allocate a portion of the Company's portfolio brokerage
transactions to Morgan Stanley & Co. or broker affiliates of Morgan Stanley &
Co. and, subsequent to the Merger, to DWR or broker affiliates of DWR, in each
case under procedures adopted by the Board of Directors. For the fiscal year
ended June 30, 1996, the Company paid brokerage commissions of approximately
$180,458 to Morgan Stanley & Co. For the fiscal year ended June 30, 1996,
commissions paid to Morgan Stanley & Co. represented approximately 6% of the
total amount of brokerage commissions paid in such period and which were paid on
transactions that represented 2% of the aggregate dollar amount of transactions
that incurred commissions paid by the Company during such period.

Fund securities will not be purchased from, or through, or sold to or
through, the Adviser or Morgan Stanley & Co. or, subsequent to the Merger, DWR
or any "affiliated persons," as defined in the 1940 Act, of Morgan Stanley

32
<PAGE> 39

and DWR when such entities are acting as principals, except to the extent
permitted by law.

EXPENSES

VK Advisory or its affiliates will bear the expense of preparing, printing
and mailing the enclosed form of proxy, the accompanying Notice and this Proxy
Statement.

In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made by mail, telephone, telegraph or personal interview by
representatives of the Company, the Adviser, ACCESS, dealers or their
representatives or by First Data Investor Services Group, a solicitation firm
located in Boston, Massachusetts that has been engaged to assist in proxy
solicitation at an estimated cost of approximately $55,000.

SUBMISSION OF SHAREHOLDER PROPOSALS

The Company is incorporated under the laws of the State of Maryland. Under
Maryland General Corporation Law, a corporation registered under the 1940 Act is
not required to hold an annual meeting of shareholders in any year in which the
election of Directors is not required to be acted upon under the 1940 Act. The
Company has availed itself of this provision and achieves cost savings by
eliminating printing costs, mailing charges and other expenses involved in
routine annual shareholder meetings.

Even with the elimination of routine annual meetings, the Board may call
special meetings of shareholders for action by shareholder vote as may be
required by the 1940 Act, or required or permitted by the Articles of
Incorporation and By-Laws of the Company. In compliance with the 1940 Act,
shareholder meetings will be held to elect Directors under certain
circumstances. The Company may also hold shareholder meetings for other
purposes, including to approve changes in investment policy, a new investment
advisory agreement or other matters requiring shareholder action under the 1940
Act. In addition, Maryland General Corporation Law provides for the calling of a
special meeting by the written request of shareholders holding at least 25% of
the Shares entitled to vote at the meeting. Shareholders wishing to submit
proposals for inclusion in a proxy statement for a shareholder meeting
subsequent to the Meeting, if any, should send their written proposals to the
Secretary of Morgan Stanley Fund, Inc., c/o Morgan Stanley Asset Management
Inc., Legal Department, 1221 Avenue of the Americas, New York, New York 10020.

GENERAL

The Company knows of no business other than that mentioned in the Notice
that will be presented for consideration at the Meeting. If any other matters
are properly presented, it is the intention of the persons named on the

33
<PAGE> 40

enclosed proxy to vote proxies in accordance with their best judgment. In the
event a quorum is present at the Meeting but sufficient votes to approve a
Proposal are not received, the persons named as proxies may propose one or more
adjournments of the Meeting with respect to that Proposal to permit further
solicitation of proxies, provided they determine that such an adjournment and
additional solicitation is reasonable and in the interest of shareholders based
on a consideration of all relevant factors, including the nature of the relevant
Proposal, the percentage of affirmative votes then cast, the percentage of
negative votes then cast, the nature of the proposed solicitation activities and
the nature of the reasons for such further solicitation.

A list of shareholders of the Company entitled to be present and vote at
the Meeting will be available at the offices of the Company, 1221 Avenue of the
Americas, New York, NY 10020 for inspection by any shareholder during regular
business hours for ten days prior to the date of the Meeting.

Failure of a quorum to be present at the Meeting may necessitate
adjournment and may necessitate additional proxy solicitations.

IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN,
DATE AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.

VALERIE Y. LEWIS
Secretary
May 29, 1997

34
<PAGE> 41

ANNEX A

FORM OF NEW ADVISORY AGREEMENT

MORGAN STANLEY FUND, INC.

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT, dated as of , 1997 (the
"Agreement"), by and between MORGAN STANLEY FUND, INC., a Maryland corporation
(the "Company"), on behalf of each of its investment portfolios identified at
Schedule A (the "Funds") and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY
CORP. (the "Adviser"), a Delaware corporation.

1. (a) RETENTION OF ADVISER BY THE COMPANY. Subject to the terms and
conditions set forth herein, the Company hereby employs the Adviser to act as
the investment adviser for and to manage the investment and reinvestment of the
assets of the Funds in accordance with each Fund's investment objective,
policies and limitations, and to administer its affairs to the extent requested
by, and subject to the review and supervision of, the Board of Directors of the
Company for the period and upon the terms herein set forth. The investment of
funds shall be subject to all applicable restrictions of applicable law and of
the Articles of Incorporation and By-Laws of the Company, and resolutions of the
Board of Directors of the Company as may from time to time be in force and
delivered or made available to the Adviser. The Adviser may appoint a sub-
adviser for one or more Funds to perform any or all services provided for in
this Agreement, provided that such sub-adviser is appointed pursuant to a
written agreement between the Adviser and the sub-adviser and such agreement is
approved by a majority of the Company's Directors who are not "interested
persons" of the Company, the Adviser, or the sub-adviser as defined in the
Investment Company Act of 1940, as amended, (the "1940 Act") and by a majority
of the outstanding voting securities of each appropriate Fund in accordance with
the 1940 Act. The Adviser shall be solely responsible for paying any such
sub-adviser for its services.

(b) ADVISER'S ACCEPTANCE OF EMPLOYMENT. The Adviser accepts such
employment and agrees during such period to render such services, to supply
investment research and portfolio management (including without limitation the
selection of securities for the Funds to purchase, hold or sell and the
selection of brokers through whom the Funds' portfolio transactions are
executed, in accordance with the policies adopted by the Company's Board of
Directors), to administer the business affairs of the Company, to furnish
offices and necessary facilities and equipment to the Company, to provide
administrative services for the Company, to render periodic reports to the Board
of Directors of the Company, and to permit any of its officers or employees to

35
<PAGE> 42

serve without compensation as Directors or officers of the Company if selected
to such positions.

(c) ESSENTIAL PERSONNEL. For a period of one year commencing on the
effective date of this agreement, the Adviser and the Company agree that the
retention of (i) the chief executive officer, president, chief financial officer
and secretary of the Adviser, (ii) each director, officer and employee of the
Adviser or any of its Affiliates (as defined in the 1940 Act) who serves as an
officer of the Company (each person referred to in (i) or (ii) hereinafter being
referred to as an "Essential Person"), in his or her current capacities, is in
the best interest of the Company and the Company's shareholders. In connection
with the Adviser's acceptance of employment hereunder, the Adviser hereby agrees
and covenants for itself and on behalf of its Affiliates that neither the
Adviser nor any of its Affiliates shall make any material or significant
personnel changes or replace or seek to replace any Essential Person or cause to
be replaced any Essential Person, in each case without first informing the Board
of Directors of the Company in a timely manner. In addition, neither the Adviser
nor any Affiliate of the Adviser shall change or seek to change or cause to be
changed, in any material respect, the duties and responsibilities of any
Essential Person, in each case without first informing the Board of Directors of
the Company in a timely manner.

(d) INDEPENDENT CONTRACTOR. The Adviser shall be deemed to be an
independent contractor under this Agreement and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the
Company in any way or otherwise be deemed as agent of the Company.

(e) NON-EXCLUSIVE AGREEMENT. The services of the Adviser to the Company
and the Funds under this Agreement are not to be deemed exclusive, and the
Adviser shall be free to render similar services or other services to others so
long as its services hereunder are not impaired thereby.

2. (a) FEE. For the services and facilities described in Section 1, the
Company will accrue daily and pay to the Adviser at the end of each calendar
month an investment management fee computed based on a fee rate (expressed as a
percentage per annum), applied to the average daily net assets of each Fund as
set forth at Schedule A.

(b) DETERMINATION OF NET ASSET VALUE. The net asset value of the Funds
shall be calculated as of 12:00 noon (Eastern time) for each Fund that is a
money market fund and as of 4:00 p.m. (Eastern time) for the non-money market
funds on each day the Exchange is open for trading or such other time or times
as the Directors may determine in accordance with the provisions of applicable
law and the Articles of Incorporation and By-Laws of the Company, and
resolutions of the Board of Directors of the Company as from time to time in
force. For the purposes of the foregoing computations, on each such day when net
asset value is not calculated, the net asset value of a share a Fund

36
<PAGE> 43

shall be deemed to be the net asset value of such share as of the close of
business of the last day on which such calculation was made.

(c) PRORATION. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Adviser's fee on the basis of the number of days that the Agreement is in effect
during such month and year, respectively.

3. EXPENSES. In addition to the fee of the Adviser, the Company shall
assume and pay any expenses for services rendered by a custodian for the
safekeeping of the Company's securities or other property, for keeping its books
of account, for any other charges of the custodian and for calculating the net
asset value of the Funds as provided above. The Adviser shall not be required to
pay, and the Company shall assume and pay, the charges and expenses of its
operations, including compensation of the Directors (other than those who are
interested persons of the Adviser and other than those who are interested
persons of the Company's distributor but not of the Adviser, if the distributor
has agreed to pay such compensation), charges and expenses of independent
accountants, of legal counsel and of any transfer or dividend disbursing agent,
costs of acquiring and disposing of portfolio securities, interest (if any) on
obligations incurred by the Company, costs of share certificates, membership
dues in the Investment Company Institute or any similar organization, costs of
reports and notices to shareholders, costs of registering shares of the Company
under the federal securities laws, miscellaneous expenses and all taxes and fees
to federal, state or other governmental agencies on account of the registration
of securities issued by the Company, filing of corporate documents or otherwise.
The Company shall not pay or incur any obligation for any management or
administrative expenses for which the Company intends to seek reimbursement from
the Adviser without first obtaining the written approval of the Adviser. The
Adviser shall arrange, if desired by the Company, for officers or employees of
the Adviser to serve, without compensation from the Company, as directors,
officers or agents of the Company if duly elected or appointed to such positions
and subject to their individual consent and to any limitations imposed by the
law.

4. INTERESTED PERSONS. Subject to applicable statutes and regulations, it
is understood that directors, officers, shareholders and agents of the Company
are or may be interested in the Adviser as directors, officers, shareholders,
agents or otherwise and that the directors, officers, shareholders and agents of
the Adviser may be interested in the Company as directors, officers,
shareholders, agents or otherwise.

5. LIABILITY. The Adviser shall not be liable for any error of judgment
or of law, or for any loss suffered by the Company in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.

37
<PAGE> 44

6. (a) TERM. This Agreement shall become effective on the date hereof and
shall remain in full force until , 199 unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter, but only for so long as such continuance is specifically approved at
least annually, in the manner required by the 1940 Act.

(b) TERMINATION. This Agreement shall automatically terminate in the event
of its assignment. This Agreement may be terminated at any time without the
payment of any penalty by the Company or by the Adviser on sixty (60) days'
written notice to the other party. The Company may effect termination of this
Agreement with respect to a Fund by action of the Board of Directors or by vote
of a majority of the outstanding shares of common stock of the appropriate Fund,
accompanied by appropriate notice. This Agreement may be terminated at any time
without the payment of any penalty and without advance notice by the Board of
Directors or by vote of a majority of the outstanding shares of the Company (or
with respect to a Fund, by a majority of the outstanding shares of that Fund) in
the event that it shall have been established by a court of competent
jurisdiction that the Adviser or any officer or director of the Adviser has
taken any action which results in a breach of the covenants of the Adviser set
forth herein.

(c) PAYMENT UPON TERMINATION. Termination of this Agreement shall not
affect the right of the Adviser to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.

7. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
thereby be affected.

8. NOTICES. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.

10. GOVERNING LAW. All questions concerning the validity, meaning and
effect of this Agreement shall be determined in accordance with the laws
(without giving effect to the conflict-of-law principles thereof) of the State
of Delaware applicable to contracts made and to be performed in that state.

11. NAME. In connection with its employment hereunder, the Adviser hereby
agrees and covenants not to change its name without the prior consent of the
Board of Directors

12. MISCELLANEOUS PROVISIONS. The execution of this Agreement has been
authorized by the Company's Directors and by each Fund's shareholders. This
Agreement is executed on behalf of the Company or the Directors of the Company
as Directors and not individually and the obligations of this Agreement are not
binding upon any of the Directors, officers or shareholders of the Company
individually but are binding only upon the assets and property of the Company.
The Articles of Incorporation of the Company is on file with the Department of
Assessments and Taxation of the State of Maryland. No Fund shall be liable under
this Agreement for the obligations of any other Fund.

38
<PAGE> 45

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.

MORGAN STANLEY FUND, INC.

By:

------------------------------------------------
Name:

------------------------------------------------
Title:

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

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
By:

------------------------------------------------
Name:

------------------------------------------------
Title:

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

39
<PAGE> 46

SCHEDULE A

<TABLE>
<CAPTION>
FUND* ANNUAL PERCENTAGE RATE
- ----------------------------- ----------------------
<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
Asian Growth Fund 1.00
Emerging Markets Fund 1.25
European Equity Fund 1.00
Global Equity Allocation Fund 1.00
Global Equity Fund 1.00
International Magnum Fund 0.80
Japanese Equity Fund 1.00
Latin American Fund 1.25
Aggressive Equity Fund 0.90
American Value Fund 0.85
Equity Growth Fund 0.70
Growth and Income Fund 1.00
Mid Cap Growth Fund 0.75
Value Fund 0.70
U.S. Real Estate Fund 1.00
Government Obligations Money
Market Fund 0.45 on assets up to $250 million;
0.40 on assets above $250 million up
to $500 million; and
0.35 on assets exceeding $500
million
Money Market Fund 0.45 on assets up to $250 million;
0.40 on assets above $250 million up
to $500 million; and
0.35 on assets exceeding $500
million
Tax-Free Money Market Fund 0.45 on assets up to $250 million;
0.40 on assets above $250 million up
to $500 million; and
0.35 on assets exceeding $500
million
</TABLE>

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

* For ease of reference the words "Morgan Stanley," which begin the name of each
Fund have been omitted.

40
<PAGE> 47

ANNEX B

FORM OF NEW SUB-ADVISORY AGREEMENT

INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
AND
MORGAN STANLEY ASSET MANAGEMENT INC.

THIS AGREEMENT is made as of this day of , 1997 by and
between MORGAN STANLEY ASSET MANAGEMENT INC. ("MSAM"), a Delaware corporation,
and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. ("VKAC") a Delaware
corporation.

WHEREAS, VKAC acts as Investment Adviser to Morgan Stanley Fund, Inc. (the
"Company") and each of its series identified at Schedule A (the "Funds"); and

WHEREAS, MSAM has available a staff of experienced investment personnel and
facilities for providing investment sub-advisory services to the Funds; and

WHEREAS, MSAM is an investment adviser registered under the Investment
Advisers Act of 1940, as amended, and is willing to provide VKAC with investment
advisory services on the terms and conditions hereinafter set forth; and

WHEREAS, VKAC and MSAM (jointly referred to as "the Advisers") desire to
enter into an agreement for MSAM to provide sub-advisory services to the Company
and to VKAC with respect to the investment of the assets of each of the Funds.

NOW THEREFORE it is mutually agreed:

1. INVESTMENT SUB-ADVISORY SERVICES.

(a) Investment Advice

i. Effective on , 1997, and subject to the overall
policies, control, direction and review of the Company's Directors and
VKAC, MSAM shall manage the investment and reinvestment of the assets of
each of the Funds, continuously review, supervise and administer the
investment program of each of the Funds, determine in its discretion the
securities to be purchased or sold and the portion of each Fund's assets to
be held uninvested, to provide the Company with records concerning MSAM's
activities which the Company is required to maintain, and to render regular
reports to the Company's officers and Board of Directors concerning MSAM's
discharge of the foregoing responsibilities.

41
<PAGE> 48

ii. Unless otherwise instructed by VKAC or the Directors, and subject
to the provisions of this Agreement and to any guidelines or limitations
specified from time to time by VKAC or by the Directors, MSAM shall
determine the securities to be purchased and sold by the Funds and shall
place orders for the purchase, sale or exchange of securities for the
Funds' accounts with brokers or dealers and to that end MSAM is authorized
by the Directors to give instructions to the Custodian and any
Sub-Custodian of the Company as to deliveries of such securities, transfers
of currencies and payments of cash for the accounts of the Funds.

iii. In performing these services, MSAM shall adhere to each Fund's
respective investment objective, policies and limitations as contained in
its Prospectus or Statement of Additional Information, and the Company's
Articles of Incorporation and By-Laws and shall comply with all statutory
and regulatory restrictions, limitations and requirements applicable to the
activity of the Company.

iv. Unless otherwise instructed by VKAC or the Directors, and subject
to the provisions of this Agreement and to any guidelines or limitations
specified from time to time by VKAC or by the Directors, MSAM shall have
executed and performed on behalf of and at the expense of the respective
Funds:

(1) Purchases, sales, exchanges, conversions, and placement or
orders for execution, and

(2) Reporting of all transactions to VKAC and to other entities as
directed by VKAC or by the Directors.

v. MSAM shall provide the Directors at least quarterly, in advance of
the regular meetings of the Directors, a report of its activities hereunder
on behalf of the Company and the Funds and MSAM's proposed strategy for the
next quarter, all in such form and detail as requested by the Directors.
MSAM shall also make an investment officer available to attend such
meetings of the Directors as the Directors may reasonably request.

(b) Restriction of MSAM's Powers

i. In carrying out its duties hereunder, MSAM shall comply with all
reasonable instructions of the Company or VKAC in connection therewith.
Such instructions may be given by letter, telex, telefax or telephone
confirmed by telex, by the Directors or by any other person authorized by a
resolution of the Directors provided a certified copy of such resolution
has been supplied to MSAM.

ii. All securities, cash and other assets of the Funds shall be placed
and maintained in the care of a member bank of the Federal Reserve System
of the United States approved by the Directors as custodian and one or more
"Eligible Foreign Custodians" (as defined in Rule 17f-5 under

42
<PAGE> 49

the Investment Company Act of 1940, as amended (the "1940 Act")) approved
by the Directors as sub-custodians.

iii. Persons authorized by resolution of the Directors shall have the
right to inspect and copy contracts, notes, vouchers, and copies of entries
in books or electronic recording media relating to the Company's
transactions at the registered office of MSAM at any time during normal
business hours. Such records, in relation to each transaction effected by
MSAM on behalf of the Company shall be maintained by MSAM for a period of
seven years from the date of such transaction.

In performing the services described above, MSAM shall use its best efforts
to obtain for the Funds the most favorable price and execution available.
Subject to prior authorization of appropriate policies and procedures by the
Directors, MSAM may, to the extent authorized by law, cause the Funds to pay a
broker or dealer who provides brokerage and research services an amount of
commission for effecting the Funds' investment transactions in excess of the
amount of commission another broker or dealer would have charged for effecting
such transactions, in recognition of the brokerage and research services
provided by the broker or dealer. To the extent authorized by law, MSAM shall
not be deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of such action.

(d) Custodian

MSAM shall not act as Custodian for the securities or any other assets of
the Company. All such assets shall be held by the Custodian or Sub-Custodian
appointed by the Directors.

2. DUTIES OF VKAC.

(a) Provision of Information

VKAC shall advise MSAM from time to time with respect to each Fund of its
investment objective and policies and of any changes or modifications thereto,
as well as any specific investment limitations by sending to MSAM a copy of each
registration statement relating to the Company as filed with the Securities and
Exchange Commission. As requested by MSAM, VKAC shall furnish such information
to MSAM as to holdings, purchases, and sales of the securities under its
management as will reasonably enable MSAM to furnish its investment advice under
this Agreement.

(b) Compensation to MSAM

The fee for the services provided under this Agreement will be determined
as follows:

i. An amount for each month (or such other valuation period as may be
mutually agreed upon) equivalent, on an annual basis, to [ %] of the

43
<PAGE> 50

compensation actually received by VKAC pursuant to the investment advisory
fee schedule set forth in the Investment Advisory Agreement between the
Company and VKAC taking into account any waiver or return to the Funds of
any or all of such advisory fee by VKAC (with any such return of fees to be
treated as if not actually received). The value of the assets of each Fund
shall be computed as of the close of business on the last day of each
valuation period of the Funds, using the average of all the daily
determinations of the net value of the assets of the Funds.

ii. The foregoing fee shall be paid in cash by VKAC to MSAM within
five (5) business days after the last day of the valuation period.

3. MISCELLANEOUS.

(a) Activities of MSAM

The services of MSAM as sub-adviser to VKAC under this Agreement are not to
be deemed exclusive, MSAM and its affiliates being free to render services to
others. It is understood that shareholders, directors, officers and employees of
MSAM may become interested in the Company or VKAC as shareholders, directors,
officers, partners or otherwise.

(b) Services to Other Clients

VKAC acknowledges that MSAM may have investment responsibilities, or render
investment advice to, or perform other investment advisory services for, other
individuals or entities, ("Clients"). Subject to the provisions of this
paragraph, VKAC agrees that MSAM may give advice or exercise investment
responsibility and take such other action with respect to such Clients which may
differ from advice given or the timing or nature of action taken with respect to
the Company, provided that MSAM acts in good faith, and provided, further, that
it is MSAM policy to allocate, within its reasonable discretion, investment
opportunities to the Funds over a period of time on a fair and equitable basis
relative to the Clients, taking into account the investment objectives and
policies of the Funds and any specific investment limitations applicable
thereto. VKAC acknowledges that one or more of the Clients may at any time hold,
acquire, increase, decrease, dispose of or otherwise deal with positions in
investments in which the Funds may have an interest from time to time, whether
in transactions which may involve the Funds or otherwise MSAM shall have no
obligation to acquire for any Fund a position in any investment which any Client
may acquire, and VKAC shall have no first refusal, coinvestment or other rights
in respect of any such investment, either for the Funds or otherwise.

It is understood and agreed that in furnishing the investment advice and
other services as herein provided, MSAM shall use its best professional judgment
to recommend actions which will provide favorable results for the

44
<PAGE> 51

Funds. MSAM shall not be liable to the Company or to any shareholder of the
Company to any greater degree than VKAC.

(d) Duration of Agreement

i. This Agreement, unless terminated pursuant to paragraph (ii), (iii)
or (iv) below, shall continue in effect through , 199 , and
thereafter shall continue in effect from year to year, provided that its
continued applicability is specifically approved at least annually by the
Directors or by a vote of the holders of a majority of the outstanding
shares of the appropriate Fund(s). In addition, such continuation shall be
approved by vote of a majority of the Directors 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. As used in this
paragraph, the term "interested person" shall have the same meaning as set
forth in the 1940 Act.

ii. This Agreement may be terminated by sixty (60) days' written
notice by either VKAC or MSAM to the other party, provided that VKAC's
termination of this Agreement shall be approved by vote of a majority of
the Directors who are not parties to this Agreement or interested persons
of any such party. The Agreement may also be terminated at any time,
without the payment of any penalty, by one or more Funds (by vote of the
Directors or, by the vote of a majority of the outstanding voting
securities of such Fund(s)), on sixty (60) days' written notice to both
VKAC and MSAM. This Agreement shall automatically terminate in the event of
the termination of the investment advisory agreement between VKAC and the
Company.

iii. This Agreement shall terminate in the event of its assignment.
The term "assignment" for this purpose shall have the same meaning set
forth in Section 2(a)(4) of the 1940 Act.

iv. This Agreement shall terminate forthwith by notice in writing on
the happening of any of the following events:

(i) If VKAC or MSAM shall go into liquidation (except a voluntary
liquidation for the purpose of and followed by a bona fide
reconstruction or amalgamation upon terms previously approved in writing
by the party not in liquidation) or if a receiver or receiver and
manager of any of the assets of any of them is appointed; or

(ii) If either of the parties hereto shall commit any breach of the
provisions hereof and shall not have remedied such breach within 30 days
after the service of notice by the party not in breach on the other
requiring the same to be remedied.

v. Termination shall be without prejudice to the completion of any
transactions which MSAM shall have committed to on behalf of the Funds
prior to the time of termination. MSAM shall not effect and the Company

45
<PAGE> 52

shall not be entitled to instruct MSAM to effect any further transactions
on behalf of the Funds subsequent to the time termination takes effect.

vi. On the termination of this Agreement and completion of all matters
referred to in the foregoing paragraph (v) MSAM shall deliver or cause to
be delivered to the Company copies of all documents, records and books of
the Company required to be maintained pursuant to Rules 31a-1 or 31a-2 of
the 1940 Act which are in MSAM's possession, power or control and which are
valid and in force at the date of termination.

(e) Notices

Any notice, request, instruction, or other document to be given under this
Agreement by any party hereto to the other parties shall be in writing and
delivered personally or sent by mail or telecopy (with a hard copy to follow):

If to MSAM to:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Attention: Warren J. Olsen

with a copy to:

Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Attention: Harold J. Schaaff, Esquire

If to VKAC, to:

Van Kampen American Capital Investment Advisory Corp.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Dennis J. McDonnell

with a copy to:

Van Kampen American Capital Investment Advisory Corp.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Ronald A. Nyberg, Esquire

or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be presumed to have
been duly given to the party to which it is addressed, on the date three (3)
days after mailing, and in the case of delivery by telecopy, on the date the
hard copy is received.

46
<PAGE> 53

(f) Choice of Law

This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of the United
States and the State of New York, without regard to the conflicts of laws
principles thereof.

IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.

<TABLE>
<S> <C>
VAN KAMPEN AMERICAN CAPITAL MORGAN STANLEY ASSET
INVESTMENT ADVISORY CORP. MANAGEMENT INC.

By: By:
- ------------------------------ ---------------------------------

Name: Name:
- ------------------------------ ------------------------------

Its: Its:
- ------------------------------ ---------------------------------
</TABLE>

47
<PAGE> 54

SCHEDULE A

<TABLE>
<CAPTION>
FUND* ANNUAL PERCENTAGE RATE
- ---------------------------------------- ------------------------
<S> <C>
Emerging Markets Debt Fund
Global Fixed Income Fund
High Yield Fund
Worldwide High Income Fund
Asian Growth Fund
Emerging Markets Fund
European Equity Fund
Global Equity Allocation Fund
Global Equity Fund
International Magnum Fund
Japanese Equity Fund
Latin American Fund
Aggressive Equity Fund
American Value Fund
Equity Growth Fund
Growth and Income Fund
U.S. Real Estate Fund
Government Obligations Money Market Fund
Money Market Fund
Tax-Free Money Market Fund
</TABLE>

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

* For ease of reference, the words "Morgan Stanley," which begin the name of
each Fund have been omitted.

48
<PAGE> 55

ANNEX C

The following tables indicate the name, net assets as of December 31, 1996,
contractual advisory fee and net advisory fee after fee waivers or expense
reimbursements for the last fiscal year for the Funds, as well as other
registered investment companies advised by MSAM. Except with respect to the U.S.
Registered Closed-End Funds, MSAM has voluntarily agreed to a reduction in the
fees payable to it and to reimburse each investment portfolio, if necessary, if
payment of advisory fees would cause the total annual operating expenses of each
investment portfolio to exceed certain maximums.

MORGAN STANLEY FUND, INC.

<TABLE>
<CAPTION>
NET ADVISORY
CONTRACTUAL FEES
RATE OF AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS
FUND 12/31/96 FEES(2) OR FEE WAIVERS
- ----------------------------------- ------------ ----------- --------------
<S> <C> <C> <C>
Aggressive Equity Fund............. $ 19,194,919 0.90% 0.50%
American Value Fund................ 481,199,603 0.85% 0.54%
Asian Growth Fund.................. 423,229,234 1.00% 1.00%
Emerging Markets Fund.............. 128,640,271 1.25% 0.84%
Emerging Markets Debt Fund(1)...... N/A 1.25% N/A
Equity Growth Fund (1)............. N/A 0.70% N/A
European Equity Fund (1)........... N/A 1.00% N/A
Global Equity Fund (1)............. N/A 1.00% N/A
Global Equity Allocation Fund...... 156,402,540 1.00% 0.64%
Global Fixed Income Fund........... 10,452,774 0.75% 0.04%
Government Obligations Money....... 116,815,884 0.45%(3) 0.41%
Market Fund...................... 0.40%(4)
0.35%(5)
Growth and Income Fund (1)......... N/A 1.00% N/A
High Yield Fund.................... 14,794,857 0.75% 0.42%
International Magnum Fund.......... 16,490,305 0.80% 0.80%
Japanese Equity Fund (1)........... N/A 1.00% N/A
Latin American Fund................ 28,891,074 1.25% 0.07%
Mid Cap Growth Fund (1)............ N/A 0.75% N/A
Money Market Fund.................. 254,854,113 0.45%(3) 0.36%
0.40%(4)
0.35%(5)
Tax-Free Money Market Fund (1)..... N/A 0.45%(3) N/A
0.40%(4)
0.35%(5)
U.S. Real Estate Fund.............. 14,131,988 1.00% 0.70%
Value Fund (1)..................... N/A 0.70% N/A
Worldwide High Income Fund......... 144,780,814 0.75% 0.61%
</TABLE>

- ------------------------------
(1) Fund had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets.
(3) As a percentage of first $250 million.
(4) As a percentage of next $250 million.
(5) As a percentage of excess over $500 million.

49
<PAGE> 56

MORGAN STANLEY INSTITUTIONAL FUND, INC.

<TABLE>
<CAPTION>
NET ADVISORY
CONTRACTUAL FEES
RATE OF AFTER EXPENSE
ASSETS AS OF ADVISORY REIMBURSEMENTS
PORTFOLIO 12/31/96 FEES(2) OR FEE WAIVERS
- ---------------------------------- -------------- ----------- --------------
<S> <C> <C> <C>
Active Country Allocation
Portfolio....................... $ 183,866,164 0.65% 0.36%
Aggressive Equity Portfolio....... 77,289,407 0.80% 0.56%
Asian Equity Portfolio............ 374,522,755 0.80% 0.55%
Balanced Portfolio................ 8,189,270 0.50% 0.00%
China Growth Portfolio (1)........ N/A 1.25% N/A
Emerging Growth Portfolio......... 66,789,901 1.00% 0.95%
Emerging Markets Portfolio........ 1,321,363,055 1.25% 1.25%
Emerging Markets Debt Portfolio... 156,419,732 1.00% 1.00%
Equity Growth Portfolio........... 66,789,901 0.60% 0.36%
European Equity Portfolio......... 181,009,746 0.80% 0.64%
Fixed Income Portfolio............ 132,194,980 0.35% 0.20%
Global Equity Portfolio........... 84,224,959 0.80% 0.65%
Global Fixed Income Portfolio..... 114,446,527 0.40% 0.18%
Gold Portfolio.................... 29,180,247 1.00% 0.52%
High Yield Portfolio.............. 101,321,211 0.50% 0.43%
International Equity Portfolio.... 2,269,491,236 0.80% 0.78%
International Magnum Portfolio.... 108,463,901 0.80% 0.26%
International Small Cap
Portfolio....................... 234,743,343 0.95% 0.87%
Japanese Equity Portfolio......... 155,659,538 0.80% 0.73%
Latin American Portfolio.......... 31,740,977 1.10% 0.62%
MicroCap Portfolio (1)............ N/A 1.00% N/A
Money Market Portfolio............ 1,284,371,173 0.30% 0.30%
Mortgage-Backed Securities
Portfolio (1)................... N/A 0.35% N/A
Municipal Bond Portfolio.......... 40,295,907 0.35% 0.07%
Municipal Money Market
Portfolio....................... 721,240,884 0.30% 0.30%
Small Cap Value Equity
Portfolio....................... 25,659,189 0.85% 0.53%
Technology Portfolio.............. 5,077,462 1.00% 0.00%
U.S. Real Estate Portfolio........ 219,140,369 0.80% 0.66%
Value Equity Portfolio............ 108,683,175 0.50% 0.42%
</TABLE>

- ------------------------------
(1) Investment portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets.

50
<PAGE> 57

MORGAN STANLEY UNIVERSAL FUNDS, INC.

<TABLE>
<CAPTION>
NET ADVISORY
CONTRACTUAL FEES AFTER
ASSETS AS RATE OF EXPENSE
OF ADVISORY REIMBURSEMENTS
PORTFOLIO 12/31/96 FEES(2) OR FEE WAIVERS
- ---------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Asian Equity Portfolio(1)... N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Emerging Market Debt
Portfolio(1).............. N/A 0.75%(3) N/A
0.70%(4)
0.65%(5)
Emerging Markets Equity
Portfolio................. $11,786,569 1.25%(3) 0.31%
1.20%(4)
1.15%(5)
Global Equity
Portfolio(1).............. N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Growth Portfolio(1)......... N/A 0.55%(3) N/A
0.50%(4)
0.45%(5)
International Magnum
Portfolio(1).............. N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
Money Market Portfolio(1)... N/A 0.30%(3) N/A
0.25%(4)
0.20%(5)
U.S. Real Estate
Portfolio................. N/A 0.80%(3) N/A
0.75%(4)
0.70%(5)
</TABLE>

- ------------------------------
(1) Portfolio had not commenced operations as of December 31, 1996.
(2) As a percentage of average daily net assets.
(3) As a percentage of first $500 million.
(4) As a percentage of next $500 million.
(5) As a percentage of excess over $1 billion.

51
<PAGE> 58

U.S. REGISTERED CLOSED-END FUNDS*

<TABLE>
<CAPTION>
CONTRACTUAL
RATE OF
ASSETS AS OF ADVISORY
COMPANY 12/31/96 FEES(1)
- ----------------------------------------- ------------ -----------
<S> <C> <C>
Morgan Stanley Africa Investment Fund,
Inc.................................... $260,522,375 1.20%
Morgan Stanley Asia-Pacific Fund, Inc.... 856,422,087 1.00%
Morgan Stanley Emerging Markets Fund,
Inc.................................... 358,394,428 1.25%
Morgan Stanley Emerging Markets Debt
Fund, Inc.............................. 372,677,758 1.00%
Morgan Stanley Global Opportunity Fund,
Inc.................................... 61,590,818 1.00%
Morgan Stanley India Investment Fund,
Inc.................................... 314,423,032 1.10%
Morgan Stanley Russia & New Europe Fund,
Inc.................................... 103,944,599 1.60%
The Brazilian Investment Fund, Inc....... 48,856,226 0.90%(2)
0.70%(3)
0.50%(4)
The Latin America Discovery Fund, Inc.... 171,586,180 1.15%
The Malaysia Fund, Inc................... 187,762,289 0.90%(2)
0.70%(3)
0.50%(4)
The Morgan Stanley High Yield Fund,
Inc.................................... 126,330,034 0.70%
The Pakistan Investment Fund, Inc........ 55,399,039 1.00%
The Thai Fund, Inc....................... 204,208,935 0.90%(2)
0.70%(3)
0.50%(4)
The Turkish Investment Fund, Inc......... 36,937,008 0.95%(2)
0.75%(3)
0.55%(4)
</TABLE>

- ------------------------------
* No voluntary fee waivers are in effect with regard to any U.S. Registered
Closed-End Fund.
(1) As a percentage of average weekly net assets.
(2) As a percentage of first $50 million.
(3) As a percentage of next $50 million.
(4) As a percentage of excess over $100 million.

52
<PAGE> 59

ANNEX D

The following tables indicate the name, net assets as of December 31, 1996,
contractual advisory fee and net advisory fee after fee waivers or expense
reimbursements for the last fiscal year for other registered investment
companies advised by VK Advisory. VK Advisory has voluntarily agreed to a
reduction in the fees payable to it and to reimburse certain investment
portfolios, if necessary, if payment of advisory fees would cause the total
annual operating expenses of these investment portfolios to exceed certain
maximums.

VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS

<TABLE>
<CAPTION>
NET ADVISORY
FEES AFTER
ASSETS AS OF EXPENSE
12/31/96 CONTRACTUAL RATE OF REIMBURSEMENTS
FUND (IN MILLIONS) ADVISORY FEES OR FEE WAIVERS
- ---------------------------------- ------------- ------------------------ --------------
<S> <C> <C> <C>
VKAC Aggressive Growth "A"........ $ 83.2 First $500 Million N/A
0.750%
VKAC Aggressive Growth "B"........ 76.6 Next $500 Million 0.700% N/A
VKAC Aggressive Growth "C"........ 8.2 Over $1 Billion 0.650% N/A
VKAC Harbor "A"................... 373.1 First $350 Million 0.538%
0.550%
VKAC Harbor "B"................... 78.9 Next $350 Million 0.500% 0.538%
VKAC Harbor "C"................... 3.6 Next $350 Million 0.450% 0.538%
Over $1.05 Billion
0.400%
VKAC Equity Income "A"............ 471.8 First $150 Million 0.409%
0.500%
VKAC Equity Income "B"............ 633.0 Next $100 Million 0.450% 0.409%
VKAC Equity Income "C"............ 55.1 Next $100 Million 0.400% 0.409%
Over $350 Million 0.350%
VKAC Prospector "A"............... 0.1 First $500 Million N/A
0.500%
VKAC Prospector "B"............... 0.1 Next $500 Million 0.650% N/A
VKAC Prospector "C"............... 0.1 Over $1 Billion 0.600% N/A
VKAC Global Managed Assets "A".... 8.5 1.00% 0.116%(a)
VKAC Global Managed Assets "B".... 9.9 0.116%(a)
VKAC Global Managed Assets "C".... 1.7 0.117%(a)
VKAC Global Equity "A"............ 124.1 1.00% 0.993%(a)
VKAC Global Equity "B"............ 106.7 1.000%
VKAC Global Equity "C"............ 11.1 1.000%
VKAC Great American Companies
"A"............................. 0.1 First $500 Million N/A
0.700%
VKAC Great American Next $500 Million 0.650%
Companies "B"................... 0.1 Over $1 Billion 0.600% N/A
VKAC Great American Companies
"C"............................. 0.1 N/A
VKAC Enterprise "A"............... 1,280.7 First $1 Billion 0.500% 0.496%
VKAC Enterprise "B"............... 308.0 Next $1 Billion 0.450% 0.496%
VKAC Enterprise "C"............... 30.9 Next $1 Billion 0.400% 0.496%
Over $3 Billion 0.350%
VKAC Exchange..................... 61.6 0.500% 0.500%
</TABLE>

53
<PAGE> 60

<TABLE>
<CAPTION>
NET ADVISORY
FEES AFTER
ASSETS AS OF EXPENSE
12/31/96 CONTRACTUAL RATE OF REIMBURSEMENTS
FUND (IN MILLIONS) ADVISORY FEES OR FEE WAIVERS
- ---------------------------------- ------------- ------------------------ --------------
<S> <C> <C> <C>
VKAC Growth "A"................... $ 1.1 First $500 Million N/A
0.750%
VKAC Growth "B"................... 0.1 Next $500 Million 0.700% N/A
VKAC Growth "C"................... 0.1 Over $1 Billion 0.650% N/A
VKAC Pace "A"..................... 2,671.0 First $1 Billion 0.500% 0.459%(a)
VKAC Pace "B"..................... 75.2 Next $1 Billion 0.450% 0.459%(a)
VKAC Pace "C"..................... 3.6 Next $1 Billion 0.400% 0.459%(a)
Over $3 Billion 0.350%
VKAC Value "A".................... 0.1 First $500 Million N/A
0.750%
VKAC Value "B".................... 0.1 Next $500 Million 0.700% N/A
VKAC Value "C".................... 0.1 Over $1 Billion 0.650% N/A
VKAC Comstock "A"................. 1,241.5 First $1 Billion 0.500% 0.498%
VKAC Comstock "B"................. 75.7 Next $1 Billion 0.450% 0.498%
VKAC Comstock "C"................. 5.8 Next $1 Billion 0.450% 0.498%
Over $3 Billion 0.350%
VKAC Growth & Income "A".......... 579.8 First $150 Million 0.462%
0.500%
VKAC Growth & Income "B".......... 212.7 Next $100 Million 0.450% 0.462%
VKAC Growth & Income "C".......... 22.8 Next $100 Million 0.400% 0.462%
Over $350 Million 0.350%
VKAC Emerging Growth "A".......... 1,623.7 First $350 Million 0.480%(a)
0.575%
VKAC Emerging Growth "B".......... 917.8 Next $350 Million 0.525% 0.480%(a)
VKAC Emerging Growth "C".......... 103.6 Next $350 Million 0.475% 0.480%(a)
Over $1.05 Billion
0.425%
VKAC Real Estate Securities "A"... 23.1 1.00% 0.511%(a)
VKAC Real Estate Securities "B"... 26.3 0.511%(a)
VKAC Real Estate Securities "C"... 7.5 0.511%(a)
VKAC Utility "A".................. 54.8 First $500 Million 0.638%(a)
0.650%
VKAC Utility "B".................. 88.4 Next $500 Million 0.600% 0.638%(a)
VKAC Utility "C".................. 5.0 Over $1 Billion 0.550% 0.638%(a)
VKAC Reserve "A".................. 374.9 First $150 Million 0.436%(a)
0.500%
VKAC Reserve "B".................. 40.6 Next $100 Million 0.450% 0.436%(a)
VKAC Reserve "C".................. 5.6 Next $100 Million 0.400% 0.439%(a)
Over $350 Million 0.350%
VKAC Tax Free Money............... 35.8 First $500 Million -0.177%(a)
0.500%
Next $500 Million 0.475%
Next $500 Million 0.425%
Over $1.5 Billion 0.375%
VKAC California Insured Tax Free
"A"............................. 142.0 First $100 Million 0.322%(a)
0.500%
Next $150 Million 0.450%
VKAC California Insured
Tax Free "B".................... 28.5 Next $250 Million 0.425% 0.322%(a)
VKAC California Insured Over $500 Million 0.400%
Tax Free "C".................... 2.2 0.322%(a)
</TABLE>

54
<PAGE> 61

VKAC Florida Insured
Tax Free "B".................... 18.6 -0.797%(a)
VKAC Florida Insured
Tax Free "C".................... 0.6 -0.797%(a)
VKAC Municipal Income "A"......... 802.4 First $500 Million 0.463%(a)
0.500%
VKAC Municipal Income "B"......... 210.5 Over $500 Million 0.450% 0.463%(a)
VKAC Municipal Income "C"......... 12.9 0.463%(a)
VKAC High Yield Municipal "A"..... 611.3 First $300 Million 0.556%(a)
0.600%
VKAC High Yield Municipal "B"..... 324.6 Next $300 Million 0.550% 0.556%(a)
VKAC High Yield Municipal "C"..... 49.8 Over $600 Million 0.500% 0.556%(a)
VKAC Tax Free High Income "A"..... 669.9 First $500 Million 0.480%(a)
0.500%
Over $500 Million 0.450%
VKAC Tax Free High Income "B"..... 173.6 0.480%(a)

VKAC Tax Free High Income "C"..... 18.8 0.480%(a)
VKAC Insured Tax Free
Income "A"...................... 1,294.2 First $500 Million 0.457%(a)
0.525%
Next $500 Million 0.500%

VKAC Insured Tax Free
Income "B"...................... 71.5 Next $500 Million 0.475% 0.457%(a)
Over 1.5 Billion 0.450%

VKAC Insured Tax Free
Income "C"...................... 4.9 0.457%(a)
VKAC Intermediate Term Municipal
Income "A"...................... 12.4 First $500 Million -0.110%(a)
0.500%
Over $500 Million 0.450%

VKAC Intermediate Term Municipal
Income "B"...................... 16.4 -0.110%(a)
VKAC Intermediate Term Municipal
Income "C"...................... 5.6 -0.110%(a)
VKAC New Jersey Tax Free Income
"A"............................. 7.6 First $500 Million -1.583%(a)
0.600%
Over $500 Million 0.500%

VKAC New Jersey Tax Free Income
"B"............................. 9.0 -1.583%(a)
VKAC New Jersey Tax Free Income
"C"............................. 0.7 -1.583%(a)
VKAC New York Tax Free Income
"A"............................. 7.7 First $500 Million -1.253%(a)
0.600%
Over $500 Million 0.500%
VKAC New York Tax Free
Income "B"...................... 10.1 -1.253%(a)
VKAC New York Tax Free Income
"C"............................. 0.3 -1.253%(a)
VKAC Pennsylvania Tax Free Income
"A"............................. 226.9 First $500 Million 0.455%(a)
0.600%
Over $500 Million 0.500%

VKAC Pennsylvania Tax Free
Income "B"...................... 48.3 0.455%(a)
VKAC Pennsylvania Tax Free Income
"C"............................. 3.4 0.455%(a)
</TABLE>

55
<PAGE> 62

<TABLE>
<CAPTION>
NET ADVISORY
FEES AFTER
ASSETS AS OF EXPENSE
12/31/96 CONTRACTUAL RATE OF REIMBURSEMENTS
FUND (IN MILLIONS) ADVISORY FEES OR FEE WAIVERS
- ---------------------------------- ------------- ------------------------ --------------
<S> <C> <C> <C>
VKAC Corporate Bond "A"........... $ 167.3 First $150 Million 0.485%(a)
0.500%
VKAC Corporate Bond "B"........... 29.1 Next $100 Million 0.450% 0.485%(a)
VKAC Corporate Bond "C"........... 6.1 Next $100 Million 0.400% 0.485%(a)
Over $350 Million 0.350
VKAC Government Securities "A".... 2,175.4 First $1 Billion 0.540% 0.516%
VKAC Government Securities "B".... 244.1 Next $1 Billion 0.515% 0.516%
VKAC Government Securities "C".... 23.3 Next $1 Billion 0.490% 0.516%
Next $1 Billion 0.440%
Next $1 Billion 0.390%
Next $1 Billion 0.340%
Next $1 Billion 0.290%
Over $7 Billion 0.240%
VKAC Global Government Securities
"A"............................. 32.1 0.750% 0.738%(a)
VKAC Global Government Securities
"B"............................. 86.5 0.750%
VKAC Global Government Securities
"C"............................. 7.7 0.750%
VKAC High Income Corporate
Bond "A"........................ 437.4 First $150 Million 0.555%
0.625%
Next $150 Million 0.500%
VKAC High Income Corporate
Bond "B"........................ 132.9 Over $300 Million 0.500% 0.555%
VKAC High Income Corporate Bond
"C"............................. 19.5 0.555%
VKAC High Yield "A"............... 280.8 First $500 Million 0.750%(b)
0.750%
VKAC High Yield "B"............... 118.7 Over $500 Million 0.650% 0.750%(b)
VKAC High Yield "C"............... 7.2 0.750%(b)
VKAC U.S. Government Trust for
Income "A"...................... 44.3 0.600% 0.600%
VKAC U.S. Government Trust for
Income "B"...................... 143.8 0.600%
VKAC U.S. Government Trust for
Income "C"...................... 17.0 0.600%
VKAC Strategic Income "A"......... 38.7 First $500 Million 0.933%(c)
0.750%
VKAC Strategic Income "B"......... 71.0 Next $500 Million 0.700% 0.933%(c)
VKAC Strategic Income "C"......... 3.5 Over $1 Billion 0.650% 0.933%(c)
VKAC Limited Maturity Government
"A"............................. 41.1 First $1 Billion 0.500% 0.457%(a)
Next $1 Billion 0.475%

VKAC Limited Maturity
Government "B".................. 22.5 Next $1 Billion 0.450% 0.457%(a)
Next $1 Billion 0.400%
VKAC Limited Maturity
Government "C".................. 4.6 Over $4 Billion 0.350% 0.457%(a)
VKAC Short-Term Global Income
"A"............................. 45.2 0.550% 0.522%(a)
VKAC Short-Term Global Income
"B"............................. 65.5 0.522%(a)
VKAC Short-Term Global Income
"C"............................. 0.2 0.522%(a)
</TABLE>

56
<PAGE> 63

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

(a) Management fee reduced due to voluntary waivers or expense limitation.
(b) Management fee has subsequently been reduced due to voluntary waivers or
expense limitation.
(c) Management fee based upon managed assets as fund was leveraged. Fee also has
been reduced due to voluntary waivers or expense limitations.

57
<PAGE> 64

VAN KAMPEN AMERICAN CAPITAL CLOSED-END FUNDS

<TABLE>
<CAPTION>
NET ADVISORY
ASSETS FEES AFTER
AS OF EXPENSE
12/31/96 CONTRACTUAL RATE OF REIMBURSEMENTS
FUND (IN MILLIONS) ADVISORY FEES OR FEE WAIVERS
- ------------------------ ------------- ------------------------ --------------
<S> <C> <C> <C>
VKAC Bond............... $ 230.8 First $150 Million 0.482%
0.500%
Next $100 Million 0.450%
Next $100 Million 0.400%
Over $350 Million 0.350%

VKAC California
Municipal Trust....... 33.5 0.600% 0.600%

VKAC California Quality
Municipal Trust....... 160.5 0.700% 0.700%

VKAC California Value
Municipal Income
Trust................. 91.7 0.650% 0.650%

VKAC Trust for
Investment Grade
California
Municipals............ 76.3 0.650% 0.650%

VKAC Convertible
Securities............ 79.0 First $150 Million 0.502%
0.500%
Next $100 Million 0.450%
Next $100 Million 0.400%
Over $350 Million 0.350%

VKAC Florida Municipal
Opportunity Trust..... 23.9 0.650% 0.650%

VKAC Florida Quality
Municipal Trust....... 108.7 0.700% 0.700%

VKAC Trust for
Investment Grade
Florida Municipals.... 71.7 0.650% 0.650%

VKAC Income Trust....... 121.2 0.650% 0.650%

VKAC Advantage Municipal
Income Trust II....... 111.1 0.650% 0.650%

VKAC Advantage Municipal
Income Trust.......... 301.2 0.650% 0.650%

VKAC Investment Grade
Municipal Trust....... 50.7 0.600% 0.600%

VKAC Municipal Income
Trust................. 281.3 0.600% 0.600%

VKAC Municipal
Opportunity Trust
II.................... 163.5 0.650% 0.650%

VKAC Municipal
Opportunity Trust..... 249.3 0.650% 0.650%

VKAC Municipal Trust.... 590.0 0.700% 0.700%

VKAC Select Sector
Municipal Trust....... 61.0 0.700% 0.700%

</TABLE>

58
<PAGE> 65

<TABLE>
<CAPTION>
NET ADVISORY
ASSETS FEES AFTER
AS OF EXPENSE
12/31/96 CONTRACTUAL RATE OF REIMBURSEMENTS
FUND (IN MILLIONS) ADVISORY FEES OR FEE WAIVERS
- ------------------------ ------- ----- -----
<S> <C> <C> <C>
VKAC Strategic Sector
Municipal Trust....... $ 148.9 0.650% 0.650%
VKAC Trust for
Investment Grade
Municipals............ 450.8 0.650% 0.650%

VKAC Value Municipal
Income Trust.......... 344.6 0.650% 0.650%

VKAC Intermediate Term
High Income Trust..... 87.8 0.750% 0.750%

VKAC Limited Term High
Income Trust.......... 67.4 0.750% 0.750%

VKAC Prime Rate Income
Trust................. 5,507.3 First $4.0 Billion 0.950%
0.950%
Next $3.5 Billion 0.900%
Next $2.5 Billion 0.875%
Over $10 Billion 0.850%

VKAC Massachusetts Value
Municipal Income
Trust................. 38.9 0.650% 0.650%

VKAC Trust for Insured
Municipals............ 159.9 0.600% 0.600%

VKAC New Jersey Value
Municipal Trust....... 36.2 0.650% 0.650%

VKAC Trust for
Investment Grade New
Jersey Municipals..... 66.8 0.650% 0.650%

VKAC New York Quality
Municipal Trust....... 93.7 0.700% 0.700%

VKAC New York Value
Municipal Income
Trust................. 62.5 0.650% 0.650%

VKAC Trust for
Investment Grade New
York Municipals....... 103.6 0.650% 0.650%

VKAC Ohio Quality
Municipal Trust....... 71.8 0.700% 0.700%

VKAC Ohio Value
Municipal Income
Trust................. 24.5 0.650% 0.650%

VKAC Advantage
Pennsylvania Municipal
Income Trust.......... 73.2 0.650% 0.650%

VKAC Pennsylvania
Quality Municipal
Trust................. 136.8 0.708% 0.700%

</TABLE>

59
<PAGE> 66

<TABLE>
<CAPTION>
NET ADVISORY
ASSETS FEES AFTER
AS OF EXPENSE
12/31/96 CONTRACTUAL RATE OF REIMBURSEMENTS
FUND (IN MILLIONS) ADVISORY FEES OR FEE WAIVERS
- ------------------------ ------------- ------------------------ --------------
<S> <C> <C> <C>
VKAC Pennsylvania Value
Municipal Income
Trust................. $ 66.8 0.650% 0.650%
VKAC Trust for
Investment Grade
Pennsylvania
Municipals............ 126.3 0.650%
0.650%
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