<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. )
Filed by the Registrant [X]
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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
March 27, 1997
Dear Shareholders:
The enclosed proxy statement relates to a special meeting of the
shareholders of Morgan Stanley Fund, Inc. (the "Company"). On February 4, 1997,
Morgan Stanley Group Inc., the parent corporation of the Company's investment
advisers, entered into an Agreement and Plan of Merger with Dean Witter,
Discover & Co. Pursuant to the merger agreement, each of your Company's
investment advisers, Morgan Stanley Asset Management Inc. ("MSAM") and Miller
Anderson & Sherrerd, LLP ("MAS") will become a subsidiary of the merged company,
which will be named Morgan Stanley, Dean Witter, Discover & Co. MSAM and MAS
will continue to provide the Company with investment advisory and management
services following the merger. The primary purpose of the special meeting is to
permit the Company's shareholders to consider new investment advisory agreements
to take effect following the merger. The new investment advisory agreements
between the Company and its investment advisers will be identical to the
Company's applicable current investment advisory agreements, except for the
dates of execution, effectiveness and initial terms.
The attached proxy statement seeks shareholder approval on this item.
Although we encourage you to read carefully the full proxy statement, we have
created a brief question-and-answer section for your convenience.
Your vote is important and your participation
in the governance of your Company does make a difference.
The proposal has been unanimously approved by the Board of Directors
of the Company, who recommend you vote "FOR" the proposal. 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,
Warren J. Olsen
President
1
<PAGE> 3
INFORMATION ABOUT YOUR PROXY STATEMENT
Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. The direct parent company of Morgan Stanley Asset Management Inc.
("MSAM") and the indirect parent of Miller Anderson & Sherrerd, LLP
("MAS"), your investment advisers, is merging with another company
and, as a result, your consent is being sought on:
- approval of a new investment advisory agreement with MSAM;
and/or
- approval of a new investment advisory agreement with MAS.
Please refer to the proxy statement for a detailed explanation of the
proposed items.
Q. HOW WILL THIS AFFECT MY ACCOUNT?
A. You can expect the same management expertise and shareholder service
you are currently receiving. The new investment advisory agreements
between your Company and its investment advisers will be identical to
the Company's current investment advisory agreements, except for the
dates of execution, effectiveness and initial terms.
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 save on
the costs of any further solicitations for a shareholder vote. We
encourage all shareholders to participate in the governance of their
Company.
Q. HOW DO THE BOARD OF DIRECTORS SUGGEST THAT I VOTE?
A. After careful consideration, the Board of Directors of your Company
unanimously recommends that you vote "FOR" each item proposed on the
enclosed proxy card(s).
Q. WHO IS PAYING FOR EXPENSES RELATED TO THE SHAREHOLDER MEETING?
A. The Company's investment advisers or their affiliates will pay for
all costs of solicitation. The Company will not pay for the
expenses relating to the approval.
Q. WHERE DO I MAIL MY PROXY CARD?
A. You may use the enclosed postage-paid envelope or mail your proxy
card(s) to:
Morgan Stanley Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798.
Q. WHO DO I CALL IF I HAVE QUESTIONS?
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<PAGE> 4
A. We will be happy to answer your questions about the proxy
solicitation. Please call us at [Telephone Number] between [7:00 a.m.
and 7:00 p.m.] [Eastern time], Monday through Friday.
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<PAGE> 5
Morgan Stanley Fund, Inc.
P.O. Box 2798
Boston, Massachusetts 02208-2798
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
MAY 1, 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. on May 1, 1997, at _:__ _.m. (New York time), in Conference
Room __, at 1221 Avenue of the Americas, __th Floor, New York, NY 10020, for
the following purposes:
1. To approve or disapprove a new investment advisory agreement
with Morgan Stanley Asset Management Inc.;
2. To approve or disapprove a new investment advisory agreement
with Miller Anderson & Sherrerd, LLP; and
3. To transact such other business as may properly come before
the Meeting or any adjournments thereof.
Only Shareholders of investment portfolios (the "Funds") advised by
Morgan Stanley Asset Management Inc. are entitled to vote on Proposal 1 (with
each appropriate Fund voting separately). Likewise, only Shareholders of the
Funds advised by Miller Anderson & Sherrerd, LLP are entitled to vote on
Proposal 2 (with each appropriate Fund voting separately). 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 solicitation for each account you
have with the Company and a separate proxy card for each Fund in which such
accounts have an investment.)
Shareholders of record at the close of business on March 21, 1997 are
entitled to notice of and to vote at this Meeting or any adjournment thereof.
By Order of the Board of Directors
Valerie Y. Lewis, Secretary
March 27, 1997
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<PAGE> 6
PROXY STATEMENT
MORGAN STANLEY FUND, INC.
P.O. BOX 2798
BOSTON, MASSACHUSETTS 02208-2798
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 1, 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 __, __th Floor, 1221 Avenue of
the Americas, New York, NY 10020 on Thursday, May 1, 1997 at _:__ _.m. (New
York time). The approximate mailing date of this proxy statement and
accompanying form of proxy is March 27, 1997.
The primary purpose of the Meeting is to permit the Company's
shareholders to consider New Advisory Agreements (defined below) to take effect
following the consummation of 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" or an "Adviser") and the indirect parent of Miller Anderson &
Sherrerd, LLP ("MAS" or an "Adviser"), the Company's investment advisers.
Pursuant to the Merger Agreement, MSAM will become a direct subsidiary and MAS
will become an indirect subsidiary of the merged company, which will be called
Morgan Stanley, Dean Witter, Discover & Co. The Company's New Advisory
Agreements are identical to the Company's Current Advisory Agreements (defined
below), except for the dates of execution, effectiveness and initial terms.
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
[ADDRESS] OR BY CALLING (800) [NUMBER].
Participating in the Meeting are holders of shares of capital stock,
par value $.001 per share (collectively, the "Shares"), of the Company.
The Board has fixed the close of business on March 21, 1997, as the
record date (the "Record Date") for the determination of holders of Shares of
the Company entitled to vote at the Meeting.
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<PAGE> 7
Shareholders of the Company on the Record Date of investment portfolios
("Funds") advised by MSAM (the "MSAM Advised Funds") will be entitled to one
vote per Share with respect to Proposal Number 1 submitted to the Shareholders
of the Company for each Share of the Company of such Funds then held.
Likewise, Shareholders of the Company on the Record Date of the Funds advised
by MAS (the "MAS Advised Funds") will be entitled to one vote per Share with
respect to Proposal Number 2 submitted to the Shareholders of the Company for
each Share of the Company of such Funds then held. Shareholders of each Fund
will vote separately with respect to the relevant proposal.
At the close of business on March 21, 1997, there were issued and
outstanding the following number of Shares of the Funds (for ease of reference
the words "Morgan Stanley," which begin the name of each Fund, have not been
included in the Funds named herein):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FUND ISSUED AND OUTSTANDING SHARES AS OF MARCH __ 1997
---- -------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Emerging Markets Debt Fund N/A
- -------------------------------------------------------------------------------------------------------------
Global Fixed Income Fund
- -------------------------------------------------------------------------------------------------------------
High Yield Fund
- -------------------------------------------------------------------------------------------------------------
Worldwide High Income Fund
- -------------------------------------------------------------------------------------------------------------
Asian Growth Fund
- -------------------------------------------------------------------------------------------------------------
Emerging Markets Fund
- -------------------------------------------------------------------------------------------------------------
European Equity Fund* N/A
- -------------------------------------------------------------------------------------------------------------
Global Equity Allocation Fund
- -------------------------------------------------------------------------------------------------------------
Global Equity Fund
- -------------------------------------------------------------------------------------------------------------
International Magnum Fund
- -------------------------------------------------------------------------------------------------------------
Japanese Equity Fund* N/A
- -------------------------------------------------------------------------------------------------------------
Latin American Fund
- -------------------------------------------------------------------------------------------------------------
Aggressive Equity Fund
- -------------------------------------------------------------------------------------------------------------
American Value Fund
- -------------------------------------------------------------------------------------------------------------
Equity Growth Fund N/A
- -------------------------------------------------------------------------------------------------------------
Growth and Income Fund* N/A
- -------------------------------------------------------------------------------------------------------------
U.S. Real Estate Fund
- -------------------------------------------------------------------------------------------------------------
Government Obligations Money Market Fund
- -------------------------------------------------------------------------------------------------------------
Money Market Fund
- -------------------------------------------------------------------------------------------------------------
Tax-Free Money Market Fund* N/A
</TABLE>
6
<PAGE> 8
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund** N/A
- -------------------------------------------------------------------------------------------------------------
Value Fund** N/A
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* The Growth and Income, Japanese Equity, European Equity and Tax-Free Money
Market Funds have not commenced operations and, therefore, are currently not
being offered.
** The Mid Cap Growth Fund and the Value Fund are referred to herein as the
"MAS Advised Funds," and the remaining Funds are referred to herein as the
"MSAM Advised Funds."
VOTING
To become effective with respect to a particular MSAM Advised Fund,
the New MSAM Advisory Agreement (defined below) must be approved by a vote of
a majority of the outstanding voting securities of that MSAM Advised Fund.
Likewise, to become effective with respect to a particular MAS Advised Fund,
the New MAS Advisory Agreement (defined below) must be approved by a vote of a
majority of the outstanding voting securities of that MAS Advised Fund. A
"vote of majority of the outstanding voting securities" 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 in person or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Fund entitled to vote thereon.
Shareholders of each MSAM Advised Fund are entitled to vote with
respect to Proposal Number 1 and Shareholders of each MAS Advised Fund are
entitled to vote with respect to Proposal Number 2. Proposal Number 1 will be
approved with respect to an MSAM Advised Fund if approved by the Shareholders
of that MSAM Advised Fund, regardless of whether the other Shareholders of any
other Funds approve the proposal. Likewise, Proposal Number 2 will be approved
with respect to an MAS Advised Fund if approved by the Shareholders of that MAS
Advised Fund, regardless of whether the other Shareholders of any other Funds
approve the proposal.
The Board recommends that you cast your vote.
- FOR approval of the New Advisory Agreement with MSAM; and/or
- FOR approval of the New Advisory Agreement with MAS.
All properly executed proxies received prior to the Meeting will be
voted at the Meeting in accordance with the instructions marked thereon.
Proxies received prior to the Meeting on which no vote is indicated will be
voted "for" the proposal as to which it is entitled to vote. Abstentions 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. Abstentions and broker non-votes will be counted as
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<PAGE> 9
votes present for purposes of determining a "majority of the outstanding voting
securities" present at the Meeting and will therefore have the effect of
counting against any 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 PROPOSALS: APPROVAL OF NEW ADVISORY AGREEMENTS
THE ADVISERS
MORGAN STANLEY ASSET MANAGEMENT INC. (MSAM)
MSAM acts as an investment adviser for the Company with respect to the
following Funds:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
FUND
----
- -------------------------------------------------------------------------------------------------
<S> <C>
Emerging Markets Debt Fund Japanese Equity Fund
- -------------------------------------------------------------------------------------------------
Global Fixed Income Fund Latin American Fund
- -------------------------------------------------------------------------------------------------
High Yield Fund Aggressive Equity Fund
- -------------------------------------------------------------------------------------------------
Worldwide High Income Fund American Value Fund
- -------------------------------------------------------------------------------------------------
Asian Growth Fund Equity Growth Fund
- -------------------------------------------------------------------------------------------------
Emerging Markets Fund Growth and Income Fund
- -------------------------------------------------------------------------------------------------
European Equity Fund U.S. Real Estate Fund
- -------------------------------------------------------------------------------------------------
Global Equity Allocation Fund Government Obligations Money Market Fund
- -------------------------------------------------------------------------------------------------
Global Equity Fund Money Market Fund
- -------------------------------------------------------------------------------------------------
International Magnum Fund Tax-Free Money Market Fund
- -------------------------------------------------------------------------------------------------
</TABLE>
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 [date], MSAM together with its affiliated asset management
companies (other than MAS) managed investments totaling approximately __
billion. The address of MSAM is 1221 Avenue of the Americas, New York,
NY 10020.
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<PAGE> 10
Set forth below is the name, address and principal occupation of the
principal executive officer and each director of MSAM:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Name and Address Principal Occupation
- ---------------- --------------------
- -------------------------------------------------------------------------------------------------
<S> <C>
Barton M. Biggs Chairman and Managing Director, MSAM; Managing
1221 Avenue of Americas Director of Morgan Stanley & Co. Incorporated;
New York, New York 10020 Chairman of Morgan Stanley Asset Management
Limited
- -------------------------------------------------------------------------------------------------
James M. Allwin President, Director and Managing Director,
1221 Avenue of Americas MSAM; Managing Director of Morgan Stanley &
New York, New York 10020 Co. Incorporated; President of Morgan Stanley
Realty, Inc.
- -------------------------------------------------------------------------------------------------
Peter A. Nadosky Vice Chariman, Director and Managing Director,
1221 Avenue of Americas MSAM; Managing Director of Morgan Stanley &
New York, New York 10020 Co. Incorporated; Director of Morgan Stanley
Asset Management Limited
- -------------------------------------------------------------------------------------------------
Gordon S. Gray Director and Managing Director, MSAM; Managing
1221 Avenue of Americas Director of Morgan Stanley & Co. Incorporated
New York, New York 10020
- -------------------------------------------------------------------------------------------------
Dennis G. Sherva Director and Managing Director, MSAM; Managing
1221 Avenue of Americas Director of Morgan Stanley & Co. Incorporated
New York, New York 10020
- ------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 11
MILLER ANDERSON & SHERRERD, LLP (MAS)
MAS acts as an investment adviser for the Company with respect to the
Mid Cap Growth Fund and the Value Fund.
MAS, a Pennsylvania limited liability partnership founded in 1969, has
its principal offices at One Tower Bridge, West Conshohocken, Pennsylvania
19428. MAS provides investment services to employee benefit plans, endowment
funds, foundations and other institutional investors and has served as
investment adviser to several open-end investment companies since 1984. At
[date], MAS managed investments totaling approximately ___ billion.
Set forth below is the name, address and principal occupation of the
principal executive officers of MAS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Name and Address Principal Occupation
---------------- --------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Thomas L. Bennett Principal executive officer and portfolio manager; Managing Director,
One Tower Bridge, West Conshohocken, Morgan Stanley & Co. Incorporated
Pennsylvania 19428
- ------------------------------------------------------------------------------------------------------------------------------
Gary G. Schlarbaum Principal executive officer and portfolio manager; Managing Director,
One Tower Bridge, West Conshohocken, Morgan Stanley & Co. Incorporated
Pennsylvania 19428
- ------------------------------------------------------------------------------------------------------------------------------
Marna C. Whittington Principal executive officer; Managing Director,
One Tower Bridge, West Conshohocken, Morgan Stanley & Co. Incorporated
Pennsylvania 19428
- ------------------------------------------------------------------------------------------------------------------------------
Richard B. Worley Principal executive officer and portfolio manager; Managing Director,
One Tower Bridge, West Conshohocken, Morgan Stanley & Co. Incorporated
Pennsylvania 19428
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MS Group acquired MAS in January, 1996. As part of that acquisition,
the then-partners of MAS, including each of the above-mentioned principal
executive officers, sold their partnership interests in MAS to Morgan Stanley
Asset Management Holdings Inc. [, a direct/indirect wholly-owned subsidiary of
MS Group] for cash and securities of MS Group.
INFORMATION CONCERNING MORGAN STANLEY GROUP INC.
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
International provide a wide range of financial services on a global basis. MS
Group's principal businesses include securities underwriting, distribution and
trading;
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<PAGE> 12
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 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 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
Pursuant to the Merger Agreement, MS Group will be merged (the
"Merger") with and into Dean Witter Discover and the surviving corporation will
be named Morgan Stanley, Dean Witter, Discover & Co. Following the Merger,
MSAM will be a direct subsidiary and MAS will be an indirect subsidiary of
Morgan Stanley, Dean Witter, Discover & Co.
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. 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.
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<PAGE> 13
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.
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.
Neither MSAM nor MAS anticipate any reduction in the quality of
services now provided to the Company and neither expects that the Merger will
result in any material changes in the business of MSAM or MAS, respectively, or
in the manner in which they render services to the Company. Nor does either
MSAM or MAS anticipate that the Merger or any ancillary transactions will have
any adverse effect on its ability to fulfill its obligations under the
applicable New Advisory Agreement (as defined below) with the Company or to
operate its business in a manner consistent with past business practice.
THE ADVISORY AGREEMENTS
In anticipation of the Merger, a majority of the Directors of the
Company, including a majority of the Directors who are not (i) parties to
either New Advisory Agreement (defined below) or (ii) interested persons of any
such party, approved a new investment advisory agreement between the Company
and MSAM (the "New MSAM Advisory Agreement") and a new advisory agreement
between the Company and MAS (the "New MAS Advisory Agreement" and, together
with the New MSAM Advisory Agreement, the "New Advisory Agreements"). The form
of the New MSAM Advisory Agreement is identical to the Current MSAM Advisory
Agreement (defined below) and the form of the New MAS Advisory Agreement is
identical to the Current MAS Advisory Agreement (defined below), except in each
case for the dates of execution, effectiveness and initial term. The holders
of a majority of the outstanding voting securities (within the meaning of the
1940 Act) of the Funds are being asked to approve the appropriate New Advisory
Agreement. See "The New Advisory Agreements" below.
The following summary of the Current Advisory Agreements and the New
Advisory Agreements set forth herein is qualified by reference to Annexes A and
B.
THE CURRENT ADVISORY AGREEMENTS.
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<PAGE> 14
MORGAN STANLEY ASSET MANAGEMENT INC.
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 MSAM Advisory
Agreement"). In particular, at a Board of Directors Meeting held on July 16,
1996, the Directors, including a majority of the Directors of the Company each
of whom was not an "interested person" 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 MSAM Advisory
Agreement. Similarly, at a Board of Directors Meeting held on December 12,
1997, 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 MSAM 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 for continuance, for the year beginning April 14, 1997, the
Current MSAM Advisory Agreement.
The Current MSAM 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 objectives and policies of each MSAM Advised Fund, will manage the
investment and reinvestment of the assets of each MSAM Advised Fund. In this
regard, it is the responsibility of MSAM to make investment decisions for each
MSAM Advised Fund and to place each such Fund's purchase and sale orders for
investment securities. The
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<PAGE> 15
Current MSAM Advisory Agreement states that MSAM will provide adequate office
space, facilities and personnel to perform its advisory services for the
Company.
The Current MSAM 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 MSAM 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 of a majority of the outstanding voting securities of
the Fund on 60 days' written notice to MSAM. The Current MSAM 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 MSAM
Advisory Agreement automatically terminates in the event of its assignment.
The Current MSAM 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 Shareholders of the Company, for
any error or judgment, mistake of law or any other act or omission in
connection with rendering services under the respective agreements, including
for 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 following table sets forth: (i) the compensation that MSAM is
entitled to receive under the Current MSAM Advisory Agreement as a percentage
of average daily net assets; (ii) MSAM's advisory fees after expense
reimbursement or fee waiver; (iii) the aggregate fees the Company 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 approved the Current MSAM
Advisory Agreement.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISORY FEES-- FISCAL YEAR
--------------------------------------
ADVISORY FEE (AFTER ENDED JUNE 30, 1996
------------------- -------------------
CONTRACTUAL EXPENSE REIMBURSEMENT
----------- ---------------------
ADVISORY FEE OR FEE WAIVER) NET FEES PAID AMOUNT WAIVED (000) DATE OF SHAREHOLDER
------------ -------------- ------------- ------------------- -------------------
FUND (000) APPROVAL
---- ----- --------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Emerging Markets Debt 1.25% 1.25% N/A N/A
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Global Fixed Income 0.75 0.04 10 112 January 4, 1993
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield Fund 0.75 0.42 0 13 May 1, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide High Income 0.75 0.61 430 97 February 2, 1994
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Asian Growth Fund 1.00 1.00 3762 0
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund 1.25 1.25 727 355
- ------------------------------------------------------------------------------------------------------------------------------------
European Equity Fund 1.00 1.00 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Global Equity 1.00 1.00 677 371 January 4, 1993
Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund 1.00 1.00 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
International Magnum 1.00 1.00 N/A N/A June 29, 1995
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Japanese Equity Fund (1) 1.00 1.00 N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Latin American Fund 1.25 1.25 13 206
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Equity Fund 0.90 0.50 0 31 December 29, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
American Value Fund 0.85 0.54 230 134 October 18, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund 0.70 0.68 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and Income 0.75 N/A N/A N/A
Fund (1)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Real Estate Fund 1.00 0.70 0 9 May 1, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Government Obligations 0.41 0.45 759 (3) 154 (3)
Money Market Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund 0.36 0.45 395 (3) 45 (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Free Money Market 0.14 0.45 N/A N/A N/A
Fund (1)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Growth and Income, Japanese Equity, European Equity and Tax-Free Money
Market Funds are currently not being offered.
(2) [The investment advisory fees represent fees paid for the fiscal period
(beginning on the Fund's commencement of operations) ended June 30, 1996.
The ____ Fund fcommenced operations on ___________.]
(3) 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 the fees (and MSAM waived fees) in the amounts indicated
in the foregoing chart with respect to the predecessor portfolios.
The net assets of the MSAM Advised Funds as of [Date], as well as
other investment companies advised by the Adviser, and other investment
companies for which the Adviser acts as subadviser, the rates of compensation
to the Adviser, the aggregate amount of advisory fees paid by the Company to
the Adviser and the aggregate amount of any other material payments by the
Company to MSAM are set forth at Annex C hereto.
MILLER ANDERSON & SHERRERD, LLP
The Current Advisory Agreement with MAS (the "Current MAS Advisory
Agreement"), dated as of [date], was approved by consent of the sole
shareholder on [date]. The Board, including a majority of the Independent
Directors, approved the Current MAS Advisory Agreement with respect to each of
the Mid Cap Growth and Value Funds at a Board of Directors Meeting held
December 12, 1997.
The Current MAS Advisory Agreement provides that MAS, 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
objectives and policies of each MAS Advised Fund, will manage the investment
and reinvestment of the assets of each MAS Advised Fund. In this regard,
14
<PAGE> 16
it is the responsibility of MAS to make investment decisions for each MAS
Advised Fund and to place each such Fund's purchase and sale orders for
investment securities. The Current MAS Advisory Agreement states that MAS will
provide adequate office space, facilities and personnel to perform its advisory
services for the Company.
The Current MAS Advisory Agreement has an initial term of two years
from ___________, 1996, and thereafter will continue in effect 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 MAS 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 of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to MAS. The Current MAS Advisory Agreement may be terminated by MAS at
any time, without the payment of any penalty, upon 90 days' written notice to
the Company. The Current MAS Advisory Agreement automatically terminates in
the event of its assignment.
The Current MAS Advisory Agreement provides that, in the absence of
(i) willful misfeasance, bad faith or gross negligence on the part of MAS in
the performance of its obligations and duties, (ii) reckless disregard by MAS
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, MAS
shall not be liable to the Company, or to any Shareholders of the Company, for
any error or judgment, mistake of law or any other act or omission in
connection with rendering services under the respective 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.
Under the Current MAS Advisory Agreement the Company pays MAS as
compensation for the services rendered annual fees equal to percentages listed
below of the respective Fund's average daily net assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
ADVISORY FEE (AFTER EXPENSE
---------------------------
FUND CONTRACTUAL ADVISORY FEE REIMBURSEMENT OR FEE WAIVER)
- ---- ------------------------ ----------------------------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mid Cap Growth Fund 0.75% 0.67%
- -----------------------------------------------------------------------------------------------------------
Value Fund 0.70 0.64
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The Mid Cap Growth and Value Funds had not commenced operations in the
fiscal year ended June 30, 1996 and, therefore, MAS received no compensation
from the Company prior to the end of the fiscal year ended June 30, 1996.
15
<PAGE> 17
The net assets of the MAS Advised Funds as of [Date], as well as other
investment companies advised by the Adviser, and other investment companies for
which the Adviser acts as subadviser, the rates of compensation to the Adviser,
the aggregate amount of advisory fees paid by the Company to the Adviser and
the aggregate amount of any other material payments by the Company to the
Adviser are set forth at Annex D hereto.
THE NEW ADVISORY AGREEMENTS. The Board approved the proposed New MSAM
Advisory Agreement between the Company and MSAM and the proposed New MAS
Advisory Agreement between the Company and MAS on March 13, 1997, the forms of
which are attached as Annex A and Annex B, respectively. The form of the
proposed New MSAM Advisory Agreement is identical to the Current MSAM Advisory
Agreement, except for the dates of execution, effectiveness and initial terms.
Likewise, the form of the proposed New MAS Advisory Agreement is identical to
the Current MAS Advisory Agreement, except for the dates of execution,
effectiveness and initial terms.
The investment advisory fee as a percentage of net assets payable by
each Fund will be the same under each New Advisory Agreement as under the
applicable Current Advisory Agreement. If the investment advisory fee under
each of the New Advisory Agreements had been in effect for the Company's most
recently completed fiscal year, advisory fees paid to MSAM and MAS by the
Company would have been identical to those paid under the applicable Current
Advisory Agreement.
The Board held a meeting on March 13, 1997, at which meeting the
Directors, including the Independent Directors, unanimously approved each New
Advisory Agreement for the Company and recommended the agreements for approval
by the Shareholders of the MSAM Advised Funds and the MAS Advised Funds, as
appropriate. Each New Advisory Agreement would take effect upon the later to
occur of (i) the obtaining of Shareholders approval or (ii) the closing of the
Merger. Each New Advisory Agreement will continue in effect for an initial two
year term and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.
In evaluating each New Advisory Agreement, the Board took into account
that the Company's Current Advisory Agreements and the New Advisory Agreements,
including their terms relating to the services to be provided thereunder by the
respective Adviser and the fees and expenses payable by the Company, are
identical, except for the dates of execution, effectiveness and initial terms.
The Board also considered other possible benefits to MSAM, MAS 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
its 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 each of MSAM and MAS
and upon the ability of each Adviser to provide advisory services to the
Company. The Board considered the skills and
16
<PAGE> 18
capabilities of MSAM and MAS. In this regard, the Board was informed of the
resources of Morgan Stanley, Dean Witter, Discover & Co. to be made available
to each of MSAM and MAS.
The Board also considered the effect on the Company of MSAM and MAS
each becoming an affiliated person 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, management of MSAM and management of MAS each 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 MSAM Advised Funds nor
the MAS Advised Funds, respectively.
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 MSAM Advisory
Agreement; (ii) approved the New MAS Advisory Agreement; (iii) voted to
recommend the approval of the New MSAM Advisory Agreement to the Shareholders
of the MSAM Advised Funds; and (iv) voted to recommend the approval of the New
MAS Advisory Agreement to the Shareholders of the MAS Advised Funds.
In the event that Shareholders of any MSAM Advised Fund or any MAS
Advised Fund do not approve the New MSAM Advisory Agreement or the New MAS
Advisory Agreement, the applicable Current Advisory Agreement will remain in
effect and the Board will take such action as it deems in the best interest of
the Company and its Shareholders, which may include proposing that Shareholders
approve an agreement in lieu of such New Advisory Agreement. If the Merger is
not consummated, each Adviser would continue to serve as investment adviser of
the Company pursuant to the terms of its respective Current Advisory Agreement.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
NEW ADVISORY AGREEMENTS.
ADDITIONAL INFORMATION
17
<PAGE> 19
DIRECTORS AND OFFICERS OF THE COMPANY
Information is set forth below about the Company's current Directors
and principal executive officers, including their name, position with the
Company, relationship to MSAM or MAS, and, in the case of Directors, the number
of shares of each Fund beneficially owned.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
NAME AND POSITION WITH THE AFFILIATION WITH MSAM OR FUND SHARES BENEFICIALLY OWNED AS OF OUTSTANDING FUND
COMPANY MAS MARCH 1, 1997 SHARES
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Barton M. Biggs Chairman and Director of
Chairman and Director MSAM
- --------------------------------------------------------------------------------------------------------------------------------
Warren J. Olsen Principal of MSAM
Director and President
- --------------------------------------------------------------------------------------------------------------------------------
John D. Barrett, II N/A
Director
- --------------------------------------------------------------------------------------------------------------------------------
Gerard E. Jones N/A
Director
- --------------------------------------------------------------------------------------------------------------------------------
Andrew McNally IV N/A
Director
- --------------------------------------------------------------------------------------------------------------------------------
Samuel T. Reeves N/A
Director
- --------------------------------------------------------------------------------------------------------------------------------
Fergus Reid N/A
Director
- --------------------------------------------------------------------------------------------------------------------------------
Frederick O. Robertshaw N/A
Director
- --------------------------------------------------------------------------------------------------------------------------------
Frederick B. Whittemore N/A
Director
- --------------------------------------------------------------------------------------------------------------------------------
James W. Grisham Principal of MSAM N/A N/A
Vice President
- --------------------------------------------------------------------------------------------------------------------------------
Michael F. Klein Principal of MSAM N/A N/A
Vice President
- --------------------------------------------------------------------------------------------------------------------------------
Harold J. Schaaff, Jr. Principal General Counsel N/A N/A
Vice President and Secretary of MSAM
- --------------------------------------------------------------------------------------------------------------------------------
Joseph P. Stadler Vice President of MSAM N/A N/A
Vice President
- --------------------------------------------------------------------------------------------------------------------------------
Valerie Y. Lewis Vice President of MSAM N/A N/A
Secretary
- --------------------------------------------------------------------------------------------------------------------------------
Lorraine Truten Principal of Morgan Stanley & N/A N/A
Vice President Co. Incorporated, Head of
Mutual Fund Services of MAS
- --------------------------------------------------------------------------------------------------------------------------------
Douglas W. Kuglar Vice President of Morgan N/A N/A
Vice President Stanley & Co. Incorporated,
Head of Mutual Fund
Administration of MAS
- --------------------------------------------------------------------------------------------------------------------------------
Karl O. Hartman N/A N/A N/A
Assistant Secretary
- --------------------------------------------------------------------------------------------------------------------------------
James R. Rooney N/A N/A N/A
Treasurer
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 20
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Joanna Haigney N/A
Assistant Treasurer
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
BENEFICIAL OWNERS
To the knowledge of Fund Management, as of March 21, 1997, the
following were beneficial owners of 5% or more of the outstanding Shares of the
Funds:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
AMOUNT OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP TOTAL SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRANSACTIONS/AGREEMENTS WITH AFFILIATES
ADMINISTRATOR
Pursuant to Administration Agreements between each of the Advisers and
the Company, MSAM and MAS (each, an "Administrator") provide administrative
services to the MSAM Advised Funds and the MAS Advised Funds, respectively.
For their services under separate administration agreements with the Company
(the "Administration Agreements"), the Company pays the Administrators a
monthly fee which on an annual basis equals 0.25% of the average 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,
.075% of the next $200 million of average daily net assets, .05% of the next
$200 million of average daily net assets, and .03% on average daily net assets
over $600 million. For the fiscal year ended June 30, 1996, the Company paid
administration fees to MSAM of approximately $1,801,654 and paid PFPC, Inc.,
which served as 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), aggregate
administration fees of $273,252. MAS did not serve as an administrator 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, MSAM
and MAS will continue to provide administrative services to the MSAM Advised
Funds and the MAS Advised Funds, respectively.
CUSTODIAN
Morgan Stanley Trust Company ("MSTC"), Brooklyn, New York, acts as the
Company's custodian for foreign assets held outside the United States and
employs subcustodians who were approved by the Directors of the Company in
accordance with the regulations of the SEC 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>
Custodian Fees
Fund (000)
---- -----
<S> <C>
Global Equity Allocation Fund $217
Global Fixed Income Fund 20
Asian Growth Fund 631
American Value Fund 20
Worldwide High Income Fund 58
Latin American Fund 120
Emerging Markets Fund 359
Aggressive Equity Fund 7
U.S. Real Estate Fund 1
High Yield Fund 1
</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.
19
<PAGE> 21
DISTRIBUTOR
On October 31, 1996, MS Group purchased the parent company of Van
Kampen American Capital, Inc., which is in turn the parent company of Van
Kampen American Capital Distributors, Inc. ("VKAC Distributors"). VKAC
Distributors serves as the distributor of the Shares of the Company. Van
Kampen American Capital, Inc. is the fourth largest non-proprietary mutual fund
provider in the United States with approximately $[__] billion in assets under
management or supervision as of [date].
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 Non-Money 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 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 Dealer"). 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 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 of a Fund.
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:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended June 30, 1996 (000)
Fund ------------------------------------------------------------------------
Class A Class B Class C
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity Allocation Fund-Class $126 $47 $496
- ---------------------------------------------------------------------------------------------------------------------
Global Fixed Income Fund-Class 26 3 56
- ---------------------------------------------------------------------------------------------------------------------
Asian Growth Fund 516 194 1,505
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund 131 35 309
- ---------------------------------------------------------------------------------------------------------------------
Latin American Fund 28 6 55
- ---------------------------------------------------------------------------------------------------------------------
American Value Fund 57 14 187
- ---------------------------------------------------------------------------------------------------------------------
Worldwide High Income Fund 90 112 231
- ---------------------------------------------------------------------------------------------------------------------
Aggressive Equity Fund 4 10 10
- ---------------------------------------------------------------------------------------------------------------------
High Yield Fund 2 5 5
- ---------------------------------------------------------------------------------------------------------------------
U.S. Real Estate Fund 1 3 3
- ---------------------------------------------------------------------------------------------------------------------
International Magnum N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Japanese Equity Fund** N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Growth and Income Fund** N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
European Equity Fund** N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Money Market Fund**++ N/A -- --
- ---------------------------------------------------------------------------------------------------------------------
Government Obligations Money Market N/A -- --
Fund**++
- ---------------------------------------------------------------------------------------------------------------------
Tax-Free Money Market Fund** N/A -- --
- ---------------------------------------------------------------------------------------------------------------------
Equity Growth Fund N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Equity Growth Fund N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Global Equity Fund N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Fund N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Value Fund N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
** Not operational as of June 30,1996.
+ The Class B shares listed above were created on May 1, 1995. The
original Class B shares were renamed Class C shares, as listed above,
on May 1, 1995. The current Class B shares commenced operations on
August 1, 1995.
++ 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 Predecessor Money Market Portfolio in the
amount of $843,776 and from the Predecessor 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.
21
<PAGE> 23
DIVIDEND DISBURSING AND TRANSFER AGENT
ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned subsidiary
of Van Kampen American Capital, Inc. 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.
PORTFOLIO TRANSACTIONS
Each Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of investment securities for the Funds and to
use its best efforts to obtain the best available price and most favorable
execution with respect to all transactions for the Funds. The Company has
authorized each Adviser to pay higher commissions in recognition of brokerage
and research services which, in the opinion of the particular Adviser, are
necessary for the achievement of better execution, provided that the Adviser
believes this to be in the best interest of the Company.
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 that 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 that 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 Advisers, and the results of such allocations,
are subject to periodic review by the Company's Directors.
Subject to the overriding objective of obtaining the best execution of
orders, each 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., an affiliated broker-dealer.
For the fiscal year ended June 30, 1996, commissions paid to the 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
22
<PAGE> 24
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, an Adviser or Morgan Stanley & Co. or, subsequent to the Merger, DWR
or any "affiliated persons," as defined in the 1940 Act, of Morgan Stanley and
DWR when such entities are acting as principals, except to the extent permitted
by law.
EXPENSES
MSAM, MAS or their 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 Advisers, ACCESS or by [First Data
Corporation], a solicitation firm located in [ ] that has been engaged
to assist in proxy solicitation at an estimated cost of approximately [ ].
SUBMISSION OF SHAREHOLDER PROPOSALS
The Company does not hold annual shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a
shareholder meeting subsequent to the Meeting, if any, should send their
written proposals to the Secretary of 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
Proposals of 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 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 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.
23
<PAGE> 25
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 Shareholders during
regular business hours for ten days prior to the date of the Meeting.
Failure of a quorum to be present at the Meeting for the Company may
necessitate adjournment and may necessitate additional proxy solicitations.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN
AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
[Date]
Valerie Y. Lewis, Secretary
24
<PAGE> 26
ANNEX A
FORM OF NEW MSAM INVESTMENT ADVISORY AGREEMENT
[Insert a form of the Company's investment advisory agreement with MSAM]
25
<PAGE> 27
ANNEX B
FORM OF NEW MAS INVESTMENT ADVISORY AGREEMENT
[Insert a form of the Company's investment advisory agreement with MAS]
26
<PAGE> 28
ANNEX C
MORGAN STANLEY ASSET MANAGEMENT INC.
The following table indicates the size of each investment company
advised or subadvised by Morgan Stanley Asset Management Inc., the advisory fee
rate, the amount of advisory fees or subadvisory fees paid to MSAM for the last
fiscal year, and the amount of other material fees paid to such persons for
such fiscal year. Average net assets are calculated on a daily basis for
registered open-end investment companies and on a weekly basis for registered
closed-end investment companies.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Amount of
Asset Aggregate Other Material
Management Amount of Payments to
Fee as Adviser/ Adviser/
Net Assets on Percent of Subadviser's Subadviser for
[Date] Average Net Fee for Last the Last Fiscal
Name (In Millions) Assets Fiscal Year Year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
[Insert
Appropriate
Information]
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 29
ANNEX D
MILLER ANDERSON & SHERRERD, LLP
The following table indicates the size of each investment company
advised or subadvised by Miller Anderson & Sherrerd, LLP, the advisory fee rate,
the amount of advisory fees or subadvisory fees paid to MAS for the last fiscal
year, and the amount of other material fees paid to such persons for such fiscal
year. Average net assets are calculated on a daily basis for registered
open-end investment companies and on a weekly basis for registered closed-end
investment companies.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Amount of
Other
Asset Aggregate Material
Management Amount of Payments to
Fee as Adviser/ Adviser/
Net Assets on Percent of Subadviser's Subadviser for
[Date] Average Net Fee for Last the Last Fiscal
Name (In Millions) Assets Fiscal Year Year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
[Insert
Appropriate
Information]
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 30
[Sample card to be used for each of the following Funds: Morgan Stanley Money
Market Fund, Morgan Stanley Tax-Free Money Market Fund, Morgan Stanley
Government Obligations Money Market Fund, Morgan Stanley Emerging Markets Debt
Fund, Morgan Stanley Global Fixed Income Fund, Morgan Stanley High Yield Fund,
Morgan Stanley Worldwide High Income Fund, Morgan Stanley Aggressive Equity
Fund, Morgan Stanley American Value Fund, Morgan Stanley Equity Growth Fund,
Morgan Stanley U.S. Real Estate Fund, Morgan Stanley Asian Growth Fund, Morgan
Stanley Emerging Markets Fund, Morgan Stanley Global Equity Allocation Fund,
Morgan Stanley International Magnum Fund, Morgan Stanley Japanese Equity Fund
and Morgan Stanley Latin American Fund.]
MORGAN STANLEY FUND, INC.
PRELIMINARY PROXY FOR SPECIAL MEETING OF SHAREHOLDERS, MAY 1, 1997
The undersigned Shareholder(s) of the Morgan Stanley [NAME OF FUND]
Fund (the "Fund") of Morgan Stanley Fund, Inc. (the "Company") hereby
appoint(s) Warren J. Olsen, Harold J. Schaaff, Jr., Michael F. Klein and
Valerie Y. Lewis and each of them (with full power of substitution), the proxy
or proxies of the undersigned to attend the Special Meeting of Shareholders of
the Fund to be held on May 1, 1997, and any adjournments thereof, to vote all
of the shares of the Fund that the signer would be entitled to vote if
personally present at the Special Meeting of Shareholders on the following
Proposal and on any other matters brought before the Meeting, all as set forth
in the Notice of Special Meeting of Shareholders and Proxy Statement of the
Board of Directors. Said proxies are directed to vote or refrain from voting
pursuant to the Proxy Statement as checked below upon the following matters:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
AND WILL BE VOTED "FOR" THE PROPOSAL UNLESS OTHERWISE INDICATED.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
Proposal: Approval of the investment advisory agreement by and between
Morgan Stanley Fund, Inc. and Morgan Stanley Asset Management Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In accordance with their own discretion, the proxies are authorized to vote
on such other business as may properly come before the Meeting.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY
IS RETURNED, SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS
OF THE BOARD OF DIRECTORS FOR THE PROPOSAL.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT WITH THIS PROXY OF A COPY OF THE
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT OF THE BOARD
OF DIRECTORS.
Please date, sign and return promptly.
Dated: , 1997
-------------------------------
YOUR SIGNATURE(S) ON THIS PROXY SHOULD BE EXACTLY AS YOUR NAME OR NAMES APPEAR
ON THIS PROXY. IF THE SHARES ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN. IF
SIGNING IS BY ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
PRINT YOUR FULL TITLE BELOW YOUR SIGNATURE.
29
<PAGE> 31
- -----------------------------
Signature
- -----------------------------
Signature
30
<PAGE> 32
[Sample card to be used for each of the following Funds: Morgan Stanley Mid Cap
Growth Fund and Morgan Stanley Value Fund.]
MORGAN STANLEY FUND, INC.
PRELIMINARY PROXY FOR SPECIAL MEETING OF SHAREHOLDERS, MAY 1, 1997
The undersigned Shareholder(s) of the Morgan Stanley [NAME OF FUND]
Fund (the "Fund") of Morgan Stanley Fund, Inc. (the "Company") hereby
appoint(s) Warren J. Olsen, Harold J. Schaaff, Jr., Michael F. Klein and
Valerie Y. Lewis and each of them (with full power of substitution), the proxy
or proxies of the undersigned to attend the Special Meeting of Shareholders of
the Fund to be held on May 1, 1997, and any adjournments thereof, to vote all
of the shares of the Fund that the signer would be entitled to vote if
personally present at the Special Meeting of Shareholders on the following
Proposal and on any other matters brought before the Meeting, all as set forth
in the Notice of Special Meeting of Shareholders and Proxy Statement of the
Board of Directors. Said proxies are directed to vote or refrain from voting
pursuant to the Proxy Statement as checked below upon the following matters:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY AND
WILL BE VOTED "FOR" THE PROPOSAL UNLESS OTHERWISE INDICATED.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
Proposal: Approval of the investment advisory agreement by and between
Morgan Stanley Fund, Inc. and Miller Anderson & Sherrerd, LLP.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In accordance with their own discretion, the proxies are authorized to vote
on such other business as may properly come before the Meeting.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY
IS RETURNED, SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS
OF THE BOARD OF DIRECTORS FOR THE PROPOSAL.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT WITH THIS PROXY OF A COPY OF THE
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT OF THE BOARD
OF DIRECTORS.
Please date, sign and return promptly.
Dated: , 1997
-------------------------------
YOUR SIGNATURE(S) ON THIS PROXY SHOULD BE EXACTLY AS YOUR NAME OR NAMES APPEAR
ON THIS PROXY. IF THE SHARES ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN. IF
SIGNING IS BY ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
PRINT YOUR FULL TITLE BELOW YOUR SIGNATURE.
- ----------------------------------------
Signature
- ----------------------------------------
Signature
31
