MORGAN STANLEY FUND INC, 497, 1998-04-20

MORGAN STANLEY FUND INC
497, 1998-04-20

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<PAGE> 1
- APRIL 1998 -

IMPORTANT NOTICE

TO VAN KAMPEN AMERICAN CAPITAL
GLOBAL EQUITY
FUND SHAREHOLDERS

QUESTIONS
& ANSWERS

- --------------------------------------------------------------------------------
Although we recommend that you read the complete Prospectus/Proxy
Statement, for your convenience, we have provided a brief overview of the issues
to be voted on.
- --------------------------------------------------------------------------------
Q WHY IS A SHAREHOLDER MEETING BEING HELD?

A You are being asked to vote on a reorganization (the "Reorganization") of
Van Kampen American Capital Global Equity Fund (the "VKAC Global Equity Fund")
into Morgan Stanley Global Equity Allocation Fund (the "MS Global Equity
Allocation Fund"), a fund that pursues a similar investment objective.

Q WHY IS THE REORGANIZATION BEING RECOMMENDED?

A After several transactions in 1996 and 1997, Van Kampen American Capital,
Inc. ("VKAC") has become an indirect wholly-owned subsidiary of Morgan Stanley
Dean Witter & Co. VKAC through its subsidiaries acts as the adviser, distributor
and shareholder servicing agent of the Van Kampen American Capital-sponsored
family of retail funds. VKAC has recently also assumed similar roles for the
Morgan Stanley-sponsored family of retail funds. The purpose of the proposed
Reorganization is to permit the shareholders to (i) achieve certain economies of
scale from the combined fund's larger net asset size upon consummation of the
reorganization and the potentially lower operating expenses associated
therewith, (ii) eliminate the duplication of services and expenses that
currently exists as a result of the separate operations of the funds and (iii)
obtain potentially greater portfolio diversity and potentially lower portfolio
transaction costs.

Q HOW WILL THE REORGANIZATION AFFECT ME?

A Assuming shareholders of the VKAC Global Equity Fund approve the
Reorganization, the assets and liabilities of the VKAC Global Equity Fund will
be combined with those of the MS Global Equity Allocation Fund, and you will
become a shareholder of the MS Global Equity Allocation Fund. You will receive
shares of the MS Global Equity Allocation Fund equal in value (at the time of
issuance) to your shares of the VKAC Global Equity Fund.

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Q WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER SIMILAR FEE IN
CONNECTION WITH THE REORGANIZATION?

A You will pay no sales loads or commissions in connection with the
Reorganization. If the Reorganization is completed, the costs associated with
the proposed Reorganization, including the costs associated with the shareholder
meeting, generally will be borne by the VKAC Global Equity Fund. As more fully
discussed in the combined Prospectus/Proxy Statement, the holding period with
respect to the contingent deferred sales charge applicable to Class B shares or
Class C shares of the MS Global Equity Allocation Fund acquired in the
Reorganization will be measured from the earlier of the time (i) the holder
purchased such Class B shares or Class C shares from the VKAC Global Equity Fund
or (ii) the holder purchased Class B shares or Class C shares of any other Van
Kampen American Capital or Morgan Stanley fund and subsequently exchanged them
for shares of the VKAC Global Equity Fund.

Q HOW DO ADVISORY AND OTHER OPERATING FEES PAID BY THE MSGLOBAL EQUITY
ALLOCATION FUND COMPARE TO THOSE PAYABLE BY THE VKAC GLOBAL EQUITY FUND?

A The VKAC Global Equity Fund is advised by Van Kampen American Capital Asset
Management, Inc. ("Asset Management"), a subsidiary of VKAC. The MS Global
Equity Allocation Fund is advised by Van Kampen American Capital Investment
Advisory Corp. ("Advisory Corp."), also a subsidiary of VKAC. Each fund is
subadvised by Morgan Stanley Asset Management, Inc. ("MSAM" or the
"Subadviser"), an indirect, wholly owned subsidiary of Morgan Stanley Dean
Witter & Co. Management of the funds anticipates that, as a result of the
Reorganization, shareholders of the VKAC Global Equity Fund would be subject to
lower total operating expenses as a percentage of net assets.

Q WHAT WILL I HAVE TO DO TO OPEN AN ACCOUNT IN THE MSGLOBAL EQUITY
ALLOCATION FUND? WHAT HAPPENS TO MY ACCOUNT IF THE REORGANIZATION IS
APPROVED?

A If the Reorganization is approved, your interest in shares of the VKAC
Global Equity Fund automatically will be converted into shares of the MS Global
Equity Allocation Fund, and we will send you written confirmation that this
change has taken place. You will receive the same class of shares of the
MS Global Equity Allocation Fund equal in value to your class of shares of the
VKAC Global Equity Fund. No certificates for MS Global Equity Allocation Fund
shares will be issued in connection with the Reorganization, although such
certificates will be available upon request. If you currently hold certificates
representing your shares of the VKAC Global Equity Fund, it is not necessary to
return such certificates; however, shareholders may want to present such
certificates to receive certificates of the MS Global Equity Allocation Fund (to
simplify proof of and to preserve the tax basis of separate lots of shares).

<PAGE> 3

Q WILL I HAVE TO PAY ANY FEDERAL TAXES AS A RESULT OF THE REORGANIZATION?

A The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended.
If the Reorganization so qualifies, in general, a shareholder of the VKAC Global
Equity Fund will recognize no gain or loss upon the receipt solely of the shares
of the MS Global Equity Allocation Fund in connection with the Reorganization.
Additionally, the VKAC Global Equity Fund would not recognize any gain or loss
as a result of the transfer of all of its assets and liabilities solely in
exchange for the shares of the MS Global Equity Allocation Fund or as a
result of its liquidation.

Q WHAT IF I REDEEM OR EXCHANGE MY SHARES OF THE VKAC GLOBAL EQUITY FUND
BEFORE THE REORGANIZATION TAKES PLACE?

A If you choose to redeem or exchange your shares of the VKAC Global Equity
Fund before the Reorganization takes place, the redemption or exchange will be
treated as a normal redemption or exchange of shares and generally will be a
taxable transaction.

Q WHERE DO I CALL FOR FURTHER INFORMATION?

A Please call Investor Services at 1-800-341-2911 (Telecommunications Device
for the Deaf users may call 1-800-772-8889) weekdays from 7:00 a.m. to 7:00 p.m.
Central time.

<PAGE> 4

ABOUT THE PROXY CARD

Please vote on each issue using blue or black ink to mark an X in one of the
boxes provided on the proxy card.

APPROVAL OF REORGANIZATION -- mark "For," "Against" or "Abstain"

Sign, date and return the proxy card in the enclosed postage-paid envelope. All
registered owners of an account, as shown in the address, must sign the card.
When signing as attorney, trustee, executor, administrator, custodian, guardian
or corporate officer, please indicate your full title.

PROXY

VAN KAMPEN AMERICAN CAPITAL GLOBAL EQUITY FUND
SPECIAL MEETING OF SHAREHOLDERS

SAMPLE

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

1. FOR [ ] AGAINST [ ] ABSTAIN [ ] THE PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION XXXXXXXXX.

<PAGE> 5

VAN KAMPEN AMERICAN CAPITAL
GLOBAL EQUITY FUND
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
(800) 421-5666

NOTICE OF SPECIAL MEETING
MAY 14, 1998

A Special Meeting of shareholders of Van Kampen American Capital Global Equity
Fund (the "VKAC Global Equity Fund") will be held at the offices of Van Kampen
American Capital, Inc., One Parkview Plaza, Oakbrook Terrace, Illinois 60181, on
Thursday, May 14, 1998 at 1:00 p.m. (the "Special Meeting"), for the following
purposes:

(1) To approve an Agreement and Plan of Reorganization pursuant to which the
VKAC Global Equity Fund would (i) transfer all of its assets to the Morgan
Stanley Global Equity Allocation Fund (the "MS Global Equity Allocation Fund")
in exchange solely for Class A, B and C shares of common stock of the MS
Global Equity Allocation Fund and the MS Global Equity Allocation Fund's
assumption of the liabilities of the VKAC Global Equity Fund, (ii) distribute
such shares of the MS Global Equity Allocation Fund to the holders of shares
of the VKAC Global Equity Fund and (iii) be dissolved.

(2) To transact such other business as may properly come before the Special
Meeting.

Shareholders of record as of the close of business on March 27, 1998 are
entitled to vote at the Special Meeting or any adjournment thereof.

For the Board of Trustees,

Ronald A. Nyberg
Secretary

April 14, 1998

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

PLEASE VOTE PROMPTLY BY SIGNING AND
RETURNING THE ENCLOSED PROXY.
---------------------
<PAGE> 6

PROSPECTUS/PROXY STATEMENT

MORGAN STANLEY GLOBAL EQUITY ALLOCATION FUND

RELATING TO THE ACQUISITION OF ASSETS AND LIABILITIES OF

VAN KAMPEN AMERICAN CAPITAL

GLOBAL EQUITY FUND

This Prospectus/Proxy Statement is being furnished to shareholders of Van
Kampen American Capital Global Equity Fund (the "VKAC Global Equity Fund") and
relates to the special meeting of shareholders of the VKAC Global Equity Fund to
be held at the offices of Van Kampen American Capital, Inc., One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 on Thursday, May 14, 1998 at 1:00 p.m. and at
any and all adjournments thereof (the "Special Meeting"). Shareholders of record
as of the close of business on March 27, 1998 are entitled to vote at the
Special Meeting or any adjournment thereof. The purpose of the Special Meeting
is to approve or disapprove the proposed reorganization of the VKAC Global
Equity Fund (the "Reorganization") into the Morgan Stanley Global Equity
Allocation Fund (the "MS Global Equity Allocation Fund"). The Reorganization
would result in shareholders of the VKAC Global Equity Fund in effect exchanging
their Class A, B and C shares of the VKAC Global Equity Fund for corresponding
Class A, B and C shares of the MS Global Equity Allocation Fund. The purpose of
the Reorganization is to permit the shareholders to (i) achieve certain
economies of scale from the combined fund's larger net asset size upon
consummation of the Reorganization and the potentially lower operating expenses
associated therewith, (ii) eliminate the duplication of services and expenses
that currently exists as a result of the separate operations of the funds and
(iii) obtain greater portfolio diversity and potentially lower portfolio
transaction costs.

The MS Global Equity Allocation Fund is a series of the Morgan Stanley Fund,
Inc., an open-end management investment company organized as a Maryland
corporation (the "Morgan Stanley Fund"). The VKAC Global Equity Fund is a series
of Van Kampen American Capital World Portfolio Series Trust, an open-end
management investment company organized as a Delaware business trust (the "World
Portfolio Trust"). The investment objective of the MS Global Equity Allocation
Fund is to seek long-term capital appreciation by investing in equity securities
of U.S. and non-U.S. issuers in accordance with country weightings determined by
the subadviser and with stock selection within each country designed to
replicate a broad market index which investment objective is similar to, but not
identical to, the investment objective of the VKAC Global Equity Fund. The
investment objective of the VKAC Global Equity Fund is to seek to provide
long-term growth of capital by investing in a diversified portfolio of equity
securities of companies located in any nation, including the United States.
There can be no assurance that either fund will achieve its investment
objective. The address, principal executive office and telephone number of the
MS Global Equity Allocation Fund and the VKAC Global Equity Fund is One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, (630) 684-6000 or (800) 421-5666. The
enclosed proxy and this Prospectus/Proxy Statement are first being sent to VKAC
Global Equity Fund shareholders on or about April 14, 1998.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
<PAGE> 7

This Prospectus/Proxy Statement sets forth concisely the information
shareholders of the VKAC Global Equity Fund should know before voting on the
Reorganization (in effect, investing in Class A, B or C shares of the MS Global
Equity Allocation Fund) and constitutes an offering of Class A, B and C shares
of common stock, par value $0.001 per share, of the MS Global Equity Allocation
Fund only. Please read it carefully and retain it for future reference. A
Statement of Additional Information dated April 14, 1998, relating to this
Prospectus/Proxy Statement (the "Reorganization SAI") has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference. A Prospectus (the "MS Fund Prospectus") and Statement of Additional
Information containing additional information about the MS Global Equity
Allocation Fund, each dated October 28, 1997 (and as currently supplemented),
have been filed with the SEC and are incorporated herein by reference. A copy of
the MS Fund Prospectus accompanies this Prospectus/Proxy Statement. A Prospectus
(the "VKAC Fund Prospectus") and Statement of Additional Information containing
additional information about the VKAC Global Equity Fund, each dated September
28, 1997 (and as currently supplemented), have been filed with the SEC and are
incorporated herein by reference. Copies of the foregoing may be obtained
without charge by calling or writing the MS Global Equity Allocation Fund or the
VKAC Global Equity Fund at the telephone number or address shown above. If you
wish to request the Reorganization SAI, please ask for the "Reorganization SAI."
IN ADDITION, EACH OF THE MS GLOBAL EQUITY ALLOCATION FUND AND THE VKAC GLOBAL
EQUITY FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT AND ANY SUBSEQUENT SEMI-ANNUAL REPORT TO A SHAREHOLDER UPON REQUEST. ANY
SUCH REQUEST SHOULD BE DIRECTED TO VAN KAMPEN AMERICAN CAPITAL BY CALLING (800)
421-5666 OR BY WRITING THE RESPECTIVE FUND AT THE ADDRESS SHOWN ABOVE.
---------------------

No person has been authorized to give any information or make any
representation not contained in this Prospectus/Proxy Statement and, if so given
or made, such information or representation must not be relied upon as having
been authorized. This Prospectus/Proxy Statement does not constitute an offer to
sell or a solicitation of an offer to buy any securities in any jurisdiction in
which, or to any person to whom, it is unlawful to make such offer or
solicitation.
---------------------

The Morgan Stanley Fund on behalf of the MS Global Equity Allocation Fund and
the World Portfolio Trust on behalf of the VKAC Global Equity Fund are subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended, and the Investment Company Act of 1940, as amended (the "1940 Act"),
and in accordance therewith file reports and other information with the SEC.
Such reports, other information and proxy statements filed by the Morgan Stanley
Fund on behalf of the MS Global Equity Allocation Fund and by the World
Portfolio Trust on behalf of the VKAC Global Equity Fund can be inspected and
copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its Regional Office at 500 West
Madison Street, Chicago, Illinois. Copies of such material can also be obtained
from the SEC's Public Reference Branch, Office of Consumer Affairs and
Information Services, Washington, D.C. 20549, at prescribed rates. In addition,
the SEC maintains a Web site (http://www.sec.gov) that contains reports, other
information and proxy statements filed by the Morgan Stanley Fund on behalf of
the MS Global Equity Allocation Fund and by the World Portfolio Trust on behalf
of the VKAC Global Equity Fund, such information is filed electronically with
the SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval
system (EDGAR).

The date of this Prospectus/Proxy Statement is April 14, 1998.

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<PAGE> 8

THE PROPOSED REORGANIZATION

A. SUMMARY

The following is a summary of, and is qualified by reference to, the more
complete information contained in this Prospectus/Proxy Statement and the
information attached hereto or incorporated herein by reference. As discussed
more fully below and elsewhere in this Prospectus/Proxy Statement, the Board of
Trustees of the World Portfolio Trust (the "Board of Trustees") believes the
proposed Reorganization (as defined herein) is in the best interests of
shareholders of the VKAC Global Equity Fund. As a result of the Reorganization,
shareholders of the VKAC Global Equity Fund would acquire an interest in the MS
Global Equity Allocation Fund

Shareholders should read the entire Prospectus/Proxy Statement carefully
together with (i) the VKAC Fund Prospectus incorporated herein by reference and
(ii) the MS Fund Prospectus incorporated herein by reference and accompanying
this Prospectus/Proxy Statement. This Prospectus/Proxy Statement constitutes an
offering of Class A, B and C shares of the MS Global Equity Allocation Fund
only.

THE REORGANIZATION

This Prospectus/Proxy Statement is being furnished to shareholders of the VKAC
Global Equity Fund in connection with the proposed combination of the VKAC
Global Equity Fund with and into the MS Global Equity Allocation Fund pursuant
to the terms and conditions of the Agreement and Plan of Reorganization between
the VKAC Global Equity Fund and the MS Global Equity Allocation Fund (the
"Agreement"). The Agreement provides that the VKAC Global Equity Fund would (i)
transfer all of its assets to the MS Global Equity Allocation Fund in exchange
solely for Class A, B and C shares of common stock of the MS Global Equity
Allocation Fund and the MS Global Equity Allocation Fund's assumption of the
liabilities of the VKAC Global Equity Fund, (ii) dissolve pursuant to a plan of
liquidation and dissolution to be adopted by the Board of Trustees promptly
following the Closing (as defined herein) and (iii) as part of such dissolution,
distribute to each shareholder of the VKAC Global Equity Fund shares of the
respective class of shares of the MS Global Equity Allocation Fund equal in
value to their existing shares of the VKAC Global Equity Fund (collectively, the
"Reorganization").

The Board of Trustees has determined that the Reorganization is in the best
interests of shareholders of each class of shares of the VKAC Global Equity Fund
and that the interests of such shareholders will not be diluted as a result of
the Reorganization. Similarly, the Board of Directors of the Morgan Stanley Fund
(the "Board of Directors") has determined that the Reorganization is in the best
interests of the MS Global Equity Allocation Fund and that the interests of each

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<PAGE> 9

class of shares of existing shareholders of the MS Global Equity Allocation Fund
will not be diluted as a result of the Reorganization. The Board of Trustees
unanimously approved the Reorganization and the Agreement on October 24, 1997.
The Board of Directors unanimously approved the Reorganization and the Agreement
on October 24, 1997.

The VKAC Global Equity Fund, as the primary beneficiary of the Reorganization,
generally will bear the costs of soliciting approval of the Reorganization by
its shareholders and related costs of the Reorganization in the event the
Reorganization is completed, including expenses incurred by the MS Global Equity
Allocation Fund. Payment of such expenses will reduce the amount of Class A, B
or C shares of the MS Global Equity Allocation Fund received by shareholders of
the VKAC Global Equity Fund on a pro rata basis. If the Reorganization is not
completed, VKAC (defined below) will bear all of the costs associated with the
Reorganization. See "THE PROPOSED REORGANIZATION -- Expenses" below.

The Board of Trustees is asking shareholders of the VKAC Global Equity Fund to
approve the Reorganization at the Special Meeting to be held on Thursday, May
14, 1998. If shareholders of the VKAC Global Equity Fund approve the
Reorganization, it is expected that the Closing will be after the close of
business on May 22, 1998, but it may be at a different time as described herein.
Approval of the Reorganization by the VKAC Global Equity Allocation Fund
shareholders will constitute ratification of the MS Global Equity Fund's
investment objective, policies and restrictions, distribution agreement and
advisory agreement and amendment of any investment restrictions of the VKAC
Global Equity Fund that may otherwise prohibit the Reorganization. See "THE
PROPOSED REORGANIZATION -- Ratification of Investment Objectives, Investment
Policies and Investment Restrictions of the MS Global Equity Allocation Fund".

THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THE REORGANIZATION.
APPROVAL OF THE REORGANIZATION REQUIRES THE FAVORABLE VOTE OF THE HOLDERS OF A
MAJORITY OF THE OUTSTANDING SHARES ENTITLED TO VOTE. SEE "VOTING INFORMATION AND
REQUIREMENTS" BELOW.

REASONS FOR THE PROPOSED REORGANIZATION

After several transactions in 1996 and 1997, Van Kampen American Capital, Inc.
("VKAC") has become an indirect wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co. VKAC through its subsidiaries acts as the adviser, distributor and
shareholder servicing agent of the Van Kampen American Capital-sponsored family
of retail funds. VKAC has recently also assumed similar roles for the Morgan
Stanley-sponsored family of retail funds. The Board of Trustees believes that
the proposed Reorganization would be in the best interests of the shareholders
of the VKAC Global Equity Fund because it would permit the shareholders to (i)
achieve certain economics of scale from the combined fund's larger net asset
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<PAGE> 10

size upon consummation of the Reorganization and the potentially lower operating
expenses associated therewith, (ii) eliminate the duplication of services and
expenses that currently exists as a result of the separate operations of the
funds and (iii) obtain greater portfolio diversity and potentially lower
portfolio transaction costs.

In determining whether to recommend approval of the Reorganization to
shareholders of the VKAC Global Equity Fund, the Board of Trustees considered a
number of factors, including, but not limited to: (i) the capabilities and
resources of the funds' advisers, the funds' subadviser and other service
providers in the areas of marketing, investment and shareholder services; (ii)
the expenses and advisory fees applicable to the VKAC Global Equity Fund and the
MS Global Equity Allocation Fund before the Reorganization and the estimated
expense ratios of the MS Global Equity Allocation Fund after the Reorganization;
(iii) the comparative investment performance of the VKAC Global Equity Fund and
the MS Global Equity Allocation Fund; (iv) the terms and conditions of the
Agreement and whether the Reorganization would result in dilution of VKAC Global
Equity Fund or MS Global Equity Allocation Fund shareholder interests; (v) the
advantages of eliminating duplication of effort in marketing funds having
similar investment objectives in addition to the economies of scale potentially
realized through the combination of the two funds; (vi) the compatibility of the
funds' investment objectives, policies and practices; (vii) the compatibility of
the funds' service features available to shareholders, including the retention
of applicable holding periods and exchange privileges; (viii) the costs
estimated to be incurred by the respective funds as a result of the
Reorganization; and (ix) the anticipated tax consequences of the Reorganization.

In this regard, the Board of Trustees reviewed information provided by Van
Kampen American Capital Investment Advisory Corp. ("Advisory Corp."), the
investment adviser of the MS Global Equity Allocation Fund, Van Kampen American
Capital Asset Management, Inc. ("Asset Management"), the investment adviser of
the VKAC Global Equity Fund, and VKAC, the parent corporation of Advisory Corp.
and Asset Management, relating to the anticipated impact to the shareholders of
the VKAC Global Equity Fund as a result of the Reorganization. The Board
considered the probability that the elimination of duplicative operations and
the increase in asset levels of the combined fund after the Reorganization would
result in the following potential benefits for shareholders of the VKAC Global
Equity Fund, although there can, of course, be no assurances in this regard:

(1) Achievement of Economies of Scale and Reduced Per Share Expenses.
Combining the net assets of the VKAC Global Equity Fund with the assets of
the MS Global Equity Allocation Fund should lead to reduced total
operating expenses for shareholders of the VKAC Global Equity Fund, on a
per share basis, by allowing fixed and relatively fixed costs, such as

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<PAGE> 11

accounting, legal and printing expenses, to be spread over a larger asset
base. Any reductions in expenses on a per share basis should, in turn,
have a favorable effect on the relative total return to shareholders of
the VKAC Global Equity Fund. Management anticipates that the
Reorganization should also lead to certain economies affecting the total
operating expenses of the MS Global Equity Allocation Fund.

(2) Elimination of Separate Operations. Consolidating the VKAC Global Equity
Fund and the MS Global Equity Allocation Fund should eliminate the
duplication of services and expenses that currently exists as a result of
their separate operations. Consolidating the separate operations of the
VKAC Global Equity Fund with those of the MS Global Equity Allocation Fund
should promote more efficient operations on a more cost-effective basis.

(3) Benefits to the Portfolio Management Process. The larger net asset size
of the MS Global Equity Allocation Fund upon consummation of the
Reorganization should generally permit it to purchase larger individual
portfolio investments that may result in reduced transaction costs or more
favorable pricing and provide the opportunity for greater portfolio
diversity.

Based upon these and other factors, the Board of Trustees unanimously determined
that the Reorganization is in the best interests of the shareholders of the VKAC
Global Equity Fund.

COMPARISON OF THE MS GLOBAL EQUITY ALLOCATION FUND AND THE VKAC GLOBAL EQUITY
FUND

GENERAL. The MS Global Equity Allocation Fund and the VKAC Global Equity Fund
have similar investment objectives of seeking long-term capital appreciation.
Both funds seek to achieve their investment objective by investing in U.S. and
non-U.S. equity securities. Both funds use Morgan Stanley Asset Management, Inc.
as subadviser ("MSAM" or the "Subadviser") to employ a top-down investment
strategy that emphasizes country selection and weighting first and then
individual stock selection within each country trying to replicate a broad
market index for such country. The MS Global Equity Allocation Fund and VKAC
Global Equity Fund do have differences with respect to certain investment
practices as discussed in more detail below.

INVESTMENT OBJECTIVES AND POLICIES. The investment objective of the MS Global
Equity Allocation Fund as provided in the MS Fund Prospectus is to provide long-
term capital appreciation by investing in equity securities of U.S. and non-U.S.
issuers in accordance with country weightings determined by the Subadviser and
with stock selection within each country designed to replicate a broad market
index. The investment objective of the VKAC Global Equity Fund as provided in
the
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VKAC Fund Prospectus is to provide long-term growth of capital by investing in
an internationally diversified portfolio of equity securities of companies
located in any nation, including the United States. As a matter of investment
policy, the VKAC Global Equity Fund also invests in accordance with country
weightings determined by the Subadviser and with stock selection within each
country designed to replicate a broad market index.

Each fund seeks to achieve its investment objective by investing in an
internationally diversified portfolio of equity securities. Under normal market
conditions, at least 65% of each fund's total assets are invested in the equity
securities of companies located in at least three countries, including the
United States, as determined by the respective Fund's adviser or the Subadviser
(collectively referred to herein as the "Adviser"). Each fund describes equity
securities to include common stocks, preferred stocks and warrants. The MS
Global Equity Allocation Fund description of equity securities also includes
convertible securities and allows for investment in convertible debt securities
that are rated investment grade (rated in one of the four highest rating
categories by a nationally recognized statistical rating organization) or, if
unrated, determined to be of comparable quality by the Adviser.

Each fund's Adviser determines country allocations for its fund on an ongoing
basis within policy ranges dictated by each country's market capitalization and
liquidity. Each fund invests in the United States and other industrialized
countries throughout the world that comprise the Morgan Stanley Capital
International World Index, which currently includes Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Italy, Japan, the
Netherlands, New Zealand, Norway, Singapore/Malaysia, Spain, Sweden,
Switzerland, the United Kingdom and the United States. In addition, each fund
may invest a portion of its assets in emerging country equity securities. The
funds each currently intend to invest in some or all of the following countries:
Argentina, Indonesia, Portugal, South Africa, Brazil, Malaysia, Philippines,
Thailand, India, Mexico, South Korea and Turkey.

By analyzing a variety of macroeconomic and political factors, the Adviser
develops fundamental projections on interest rates, currencies, corporate
profits and economic growth for each country. These country projections are then
used to determine what the Adviser believes to be a fair value for the stock
market of each country. Discrepancies between actual value and fair value, as
determined by the Adviser, provide an expected return for each stock market. The
expected return is adjusted by currency return expectations derived from the
Subadviser's purchasing-power parity exchange rate model to arrive at an
expected total return in U.S. Dollars. The final country allocation decision for
each fund is then reached by considering the expected total return in light of
various country specific considerations such as market size, volatility,
liquidity and country risk.

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<PAGE> 13

Within a particular country, investments are made through the purchase of
equity securities which, in the aggregate, replicate a broad market index, which
in most cases will be the Morgan Stanley Capital International ("MSCI") Index
for the particular country. The MSCI Indices measure the performance of stock
markets worldwide. The various MSCI Indices are based on the share prices of
companies listed on the local stock exchange of the specified country or
countries within a specified region. The combined market capitalization of
companies in these indices represent approximately 60 percent of the aggregate
market value of the covered stock exchanges. Companies included in the MSCI
country index replicate the industry composition of the local market and are a
representative sampling of large, medium and small companies, subject to
liquidity. Non-domiciled companies traded on the local exchange and companies
with restricted float due to dominant shareholders or cross-ownership are
avoided. The Adviser may overweight or underweight an industry segment of a
particular index if it concludes this would be advantageous to the respective
funds.

Each fund may engage in forward foreign currency exchange contracts, options,
futures and options on futures. Each fund may enter into repurchase agreements.
For temporary defensive purposes, each fund may invest a portion or all of its
assets in cash, money market instruments and short-term debt instruments and,
with respect to the MS Global Equity Allocation Fund only, medium-term debt
instruments.

Each fund may invest a limited portion of its net assets in restricted
securities and illiquid securities; the VKAC Global Equity Fund limit on
illiquid and restricted securities is 10% of such Fund's net assets whereas the
MS Global Equity Allocation Fund limit on illiquid securities is 15% of such
Fund's net assets and the MS Global Equity Allocation Fund limit on restricted
securities is 10% of such Fund's net assets. Each fund allows for a limited
amount of lending of its portfolio securities; the VKAC Global Equity Fund limit
is 15% of such Fund's total assets whereas the MS Global Equity Allocation Fund
limit is at 33 1/3% of such Fund's total assets. Each fund allows for a limited
amount of borrowing; the VKAC Global Equity Fund limit is 33 1/3% of such Fund's
total assets for temporary borrowing to facilitate payment of redemption
requests whereas the MS Global Equity Allocation Fund limit is 10% of such
Fund's total assets for emergency or extraordinary purposes. The VKAC Global
Equity Fund allows for short sales against the box whereas the MS Global Equity
Allocation Fund does not allow for short sales transactions. The VKAC Global
Equity Fund may purchase foreign securities in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other securities
representing underlying shares of foreign companies. The MS Global Equity
Allocation Fund allows for investment in zero coupon debt securities, payment in
kind securities, deferred payment securities, certain other derivative
transactions such as structured notes, caps, and floors and

8
<PAGE> 14

for investment of up to 15% of the Fund's net assets in when-issued or delayed
delivery transactions. See "Risk Factors."

INVESTMENT ADVISERS AND SUBADVISER. The MS Global Equity Allocation Fund is
advised by Advisory Corp., which is a wholly-owned subsidiary of VKAC. The VKAC
Global Equity Fund is advised by the Asset Management, which is also a
wholly-owned subsidiary of VKAC. VKAC is a diversified asset management company
with more than two million retail investor accounts, extensive capabilities for
managing institutional portfolios, and more than $60 billion under management or
supervision. Van Kampen American Capital's more than 50 open-end and 38
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. VKAC is an indirect
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"). The
principal office of Advisory Corp. and Asset Management is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181.

Morgan Stanley Asset Management Inc. ("MSAM" or the "Subadviser") is the
investment subadviser of each fund. MSAM is an indirect wholly-owned subsidiary
of MSDW. MSAM, with principal offices at 1221 Avenue of the Americas, New York,
NY 10020, conducts a worldwide portfolio management business. It provides a
broad range of portfolio management services to customers in the United States
and abroad.

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

ADVISORY AND OTHER FEES. The contractual advisory fees of the MS Global Equity
Allocation Fund and the VKAC Global Equity Fund are the same. Each fund is
obligated to pay its respective adviser a monthly fee based on its average daily
net assets at the annual rate of 1.00%. While the VKAC Global Equity Fund
currently pays Asset Management at such rate, the MS Global Equity Allocation
Fund currently pays Advisory Corp. at an effective rate less then 1.00% because
of voluntary fee waivers and/or expense reimbursements by Advisory Corp.
described in more detail below. Each of Asset Management and Advisory Corp.
retains the right from time to time to charge all or a portion of its management
fee or to reimburse the respective fund for all or a portion of its other
expenses.

9
<PAGE> 15

Subadvisory fees are paid to MSAM by the respective funds' adviser. The
subadvisory fees of the MS Global Equity Allocation Fund are as follows: if the
average daily net assets during the monthly period are less than or equal to
$500 million, then Advisory Corp. shall pay MSAM one-half of the total
investment advisory fee payable to Advisory Corp. by such fund (after
application of any fee waivers in effect) for such monthly period; and if the
average daily net assets during the monthly period are greater than $500
million, then Advisory Corp. shall pay MSAM a fee for such monthly period equal
to the greater of (a) one-half of what the total investment advisory fee payable
to Advisory Corp. by such fund (after application of any fee waivers in effect)
for such monthly period would have been had such fund's average daily net assets
during such period been equal to $500 million, or (b) forty-five percent of the
total investment advisory fee payable to Advisory Corp. by such fund (after
application of any fee waivers in effect) for such monthly period. The
subadvisory fees of the VKAC Global Equity Fund are 50% of the compensation
received by Asset Management.

The total operating expenses (after fee waivers) of the MS Global Equity
Allocation Fund for the six month period ended December 31, 1997 (on an
annualized basis) were 1.70%, 2.45% and 2.45% of the average daily net assets
attributable to Class A, B and C shares, respectively. Advisory Corp. has agreed
to waive a portion of the advisory fees and/or reimburse a portion of the
expenses of the MS Global Equity Fund if the Fund's total operating expenses
would exceed the amounts set forth in the preceding sentence. Advisory Corp. in
its discretion may terminate the voluntary fee waivers and/or reimbursements at
any time. In addition, the combined fund's larger net asset size may make the
current waiver/reimbursement unnecessary. See the "Expense Comparison Table"
below. Had no fee waiver been in effect, the total operating expenses during
such period would have been 1.81%, 2.56% and 2.56% of the average daily net
assets attributable to Class A, B and C shares, respectively.

The total operating expenses for the VKAC Global Equity Fund for the six month
period ended November 30, 1997 (on an annualized basis) were 2.02%, 2.78% and
2.79% of the average daily net assets attributable to Class A, B and C shares,
respectively. There were no fee waivers or expense reimbursements in effect with
respect to the VKAC Global Equity Fund during such period.

Both the MS Global Equity Allocation Fund and the VKAC Global Equity Fund have
adopted substantially identical distribution plans (the "Distribution Plans")
pursuant to Rule 12b-1 under the 1940 Act and have adopted substantially
identical service agreements or plans (the "Service Plans"). Both the MS Global
Equity Allocation Fund and the VKAC Global Equity Fund can pay up to 0.75% of
their respective average daily net assets attributable to Class B and C shares
for reimbursement of certain distribution-related expenses. In addition, both
the MS Global Equity Allocation Fund and the VKAC Global Equity Fund can pay up
to

10
<PAGE> 16

0.25% of the respective average daily net assets attributable to Class A, B and
C shares for the provision of ongoing services to shareholders. The distributor
of both the VKAC Global Equity Fund's shares and the MS Global Equity Allocation
Fund's shares is Van Kampen American Capital Distributors, Inc. ("VKAC
Distributors"). For a complete description of these arrangements with respect to
the MS Global Equity Allocation Fund, see the section of the MS Fund Prospectus
entitled "Management of the Company -- Distributor." For a complete description
of these arrangements with respect to the VKAC Global Equity Fund, see the
section of the VKAC Fund Prospectus entitled "The Distribution and Service
Plans."

11
<PAGE> 17

EXPENSE COMPARISON TABLE

The table below sets forth (i) the fees and expenses paid by the MS Global
Equity Allocation Fund for the six months ended December 31, 1997 (on an
annualized basis) and the VKAC Global Equity Fund for the six months ended
November 30, 1997 (on an annualized basis) and (ii) pro forma expenses for the
combined fund.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------------------------------------- ------------------------------------------
MS GLOBAL EQUITY VKAC GLOBAL MS GLOBAL EQUITY VKAC GLOBAL
ALLOCATION FUND EQUITY FUND PRO FORMA ALLOCATION FUND EQUITY FUND PRO FORMA
---------------- ----------- --------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchase of a Share (as a
percentage of Offering Price)...... 5.75%(1) 5.75% 5.75%(1) None None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the
original purchase price or
redemption proceeds)............... None None None 5.00%(2) 5.00%(2) 5.00%(2)
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management Fees..................... 0.89%(4) 1.00% 1.00% 0.89%(4) 1.00% 1.00%
Rule 12b-1 Fees..................... 0.25% 0.25% 0.25% 1.00%(5) 1.00%(5) 1.00%(5)
Other Expenses...................... 0.56% 0.77% 0.44% 0.56% 0.78% 0.44%
Total Fund Operating Expenses....... 1.70%(4) 2.02% 1.69% 2.45%(4) 2.78% 2.44%
Expense Example of Total Operating
Expenses Assuming Redemption at the
End of the Period(6)
One Year........................... $ 74 $ 77 $ 74 $ 75 $ 78 $ 75
Three Years........................ 108 117 108 106 116 106
Five Years......................... 144 160 144 146 162 145
Ten Years.......................... 247 279 246 260 293 259
Expense Example of Total Operating
Expenses Assuming No Redemption at
the End of the Period(6)
One Year........................... $ 74 $ 77 $ 74 $ 25 $ 28 $ 25
Three Years........................ 108 117 108 76 86 76
Five Years......................... 144 160 144 131 147 130
Ten Years.......................... 247 279 246 260 293 259

<CAPTION>
CLASS C SHARES
------------------------------------------
MS GLOBAL EQUITY VKAC GLOBAL
ALLOCATION FUND EQUITY FUND PRO FORMA
---------------- ----------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchase of a Share (as a
percentage of Offering Price)...... None None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the
original purchase price or
redemption proceeds)............... 1.00%(3) 1.00%(3) 1.00%(3)
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management Fees..................... 0.89%(4) 1.00% 1.00%
Rule 12b-1 Fees..................... 1.00%(5) 1.00%(5) 1.00%(5)
Other Expenses...................... 0.56% 0.79% 0.44%
Total Fund Operating Expenses....... 2.45%(4) 2.79% 2.44%
Expense Example of Total Operating
Expenses Assuming Redemption at the
End of the Period(6)
One Year........................... $ 35 $ 38 $ 35
Three Years........................ 76 87 76
Five Years......................... 131 147 130
Ten Years.......................... 279 312 278
Expense Example of Total Operating
Expenses Assuming No Redemption at
the End of the Period(6)
One Year........................... $ 25 $ 28 $ 25
Three Years........................ 76 87 76
Five Years......................... 131 147 130
Ten Years.......................... 279 312 278
</TABLE>

(See notes on the following page)

12
<PAGE> 18

Notes to Expense Comparison Table
(1) Class A shares of the MS Global Equity Allocation Fund received pursuant to
the Reorganization will not be subject to a sales charge upon purchase.

(2) Class B Shares of the MS Global Equity Allocation Fund and VKAC Global
Equity Fund are subject to a contingent deferred sales charge equal to
5.00% of the lesser of the then current net asset value or the original
purchase price on Class B Shares redeemed during the first year after
purchase, which charge is reduced to zero after a five year period as
follows: Year 1 -- 5.00%; Year 2 -- 4.00%; Year 3 -- 3.00%; Year
4 -- 2.50%; Year 5 -- 1.50%; Year 6 -- 0.00%.

(3) Class C shares of the MS Global Equity Allocation Fund and VKAC Global
Equity Fund are subject to a contingent deferred sales charge equal to
1.00% of the lesser of the then current net asset value or the original
purchase price on Class C shares redeemed during the first year after
purchase, which charge is reduced to zero thereafter.

(4) After fee waiver. In the absence of fee waiver, "Management Fees" for the
MS Global Equity Allocation Fund would have been 1.00% with respect to
Class A, B and C shares and "Total Fund Operating Expenses" for the MS
Global Equity Allocation Fund would have been 1.81%, 2.56% and 2.56% with
respect to Class A, B and C shares, respectively.

(5) Individual long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales charges permitted as a fund-level expense by
NASD Rules.

(6) Expense examples reflect what an investor would pay on a $1,000 investment,
assuming a 5% annual return with either redemption or no redemption at the
end of each time period as noted in the above table. The Pro Forma column
reflects expenses estimated to be paid on new shares purchased from the
combined fund subsequent to the Reorganization. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESSER THAN THOSE SHOWN.

13
<PAGE> 19

DISTRIBUTION, PURCHASE, VALUATION, REDEMPTION AND EXCHANGE OF SHARES. Both the
MS Global Equity Allocation Fund and the VKAC Global Equity Fund offer three
classes of shares. The Class A shares of both the MS Global Equity Allocation
Fund and the VKAC Global Equity Fund are subject to an initial sales charge of
up to 5.75%. The initial sales charge applicable to Class A shares of the MS
Global Equity Allocation Fund will be waived for Class A shares acquired in the
Reorganization. Any subsequent purchases of Class A shares of the MS Global
Equity Allocation Fund after the Reorganization will be subject to an initial
sales charge of up to 5.75%, excluding Class A shares purchased through the
dividend reinvestment plan. Purchases of Class A shares of the MS Global Equity
Allocation Fund or the VKAC Global Equity Fund in amounts of $1,000,000 or more
are not subject to an initial sales charge, but a contingent deferred sales
charge of 1.00% may be imposed on certain redemptions made within the first year
after purchase.

The Class B shares of both the MS Global Equity Allocation Fund and the VKAC
Global Equity Fund do not incur a sales charge when they are purchased, but
generally are subject to a contingent deferred sales charge of 5.00% if redeemed
within the first year after purchase, which charge is reduced to zero after a
five year period.

The Class C shares of both the MS Global Equity Allocation Fund and the VKAC
Global Equity Fund do not incur a sales charge when purchased, but are subject
to a contingent deferred sales charge of 1.00% if redeemed within the first year
after purchase.

No contingent deferred sales charge will be imposed on Class B shares or Class
C shares of the VKAC Global Equity Fund in connection with the Reorganization.
The holding period and conversation schedule for Class B shares or Class C
shares of the MS Global Equity Allocation Fund received in connection with the
Reorganization will be measured from the earlier time (i) the holder purchased
such shares from the VKAC Global Equity Fund or (ii) the holder purchased such
shares from any other Van Kampen American Capital Fund or Morgan Stanley Fund
advised by Advisory Corp. or Asset Management and distributed by VKAC
Distributors and subsequently exchanged them for shares of the VKAC Global
Equity Fund.

Shares of the MS Global Equity Allocation Fund or the VKAC Global Equity Fund
may be purchased by check, by electronic transfer, by bank wire and by exchange
from certain other open-end mutual funds advised by Advisory Corp. or Asset
Management and distributed by VKAC Distributors. For a complete description
regarding purchase of shares and exchange of shares of the MS Global Equity
Allocation Fund, see the sections of the MS Fund Prospectus entitled "Purchase
of Shares" and "Shareholder Services--Exchange Privilege." For a complete
description regarding purchase of shares and exchange of shares of the

14
<PAGE> 20

VKAC Global Equity Fund, see the sections of the VKAC Fund Prospectus entitled
"Purchase of Shares" and "Shareholder Services--Exchange Privilege".

Shares of the MS Global Equity Allocation Fund and the VKAC Global Equity Fund
properly presented for redemption may be redeemed or exchanged at the next
determined net asset value per share (subject to any applicable deferred sales
charge). Shares of either the MS Global Equity Allocation Fund or the VKAC
Global Equity Fund may be redeemed or exchanged by mail or by special redemption
privileges (telephone exchange, telephone redemption, by check or electronic
transfer). If a shareholder of either fund attempts to redeem shares within a
short time after they have been purchased by check, the respective fund may
delay payment of the redemption proceeds until such fund can verify that payment
for the purchase of the shares has been (or will be) received, usually a period
of up to 15 days.

No further purchases of the shares of the VKAC Global Equity Fund may be made
after the date on which the shareholders of the VKAC Global Equity Fund approve
the Reorganization, and the stock transfer books of the VKAC Global Equity Fund
will be permanently closed as of the date of Closing. Only redemption requests
and transfer instructions received in proper form by the close of business on
the day prior to the date of Closing will be fulfilled by the VKAC Global Equity
Fund. Redemption requests or transfer instructions received by the VKAC Global
Equity Fund after that date will be treated by the VKAC Global Equity Fund as
requests for the redemption or instructions for transfer of the shares of the MS
Global Equity Allocation Fund credited to the accounts of the shareholders of
the VKAC Global Equity Fund. Redemption requests or transfer instructions
received by the VKAC Global Equity Fund after the close of business on the day
prior to the date of Closing will be forwarded to the MS Global Equity
Allocation Fund. For a complete description of the redemption arrangements for
the MS Global Equity Allocation Fund, see the section of the MS Fund Prospectus
entitled "Redemption of Shares," and, for the VKAC Global Equity Fund, see the
section of the VKAC Fund Prospectus entitled "Redemption of Shares."

15
<PAGE> 21

CAPITALIZATION. The following table sets forth the capitalization of the MS
Global Equity Allocation Fund and the VKAC Global Equity Fund as of December 31,
1997, and the pro forma capitalization of the combined fund as if the
Reorganization had occurred on that date. These numbers may differ at the time
of Closing.

CAPITALIZATION TABLE AS OF DECEMBER 31, 1997

<TABLE>
<CAPTION>
MS GLOBAL EQUITY VKAC GLOBAL
ALLOCATION FUND EQUITY FUND PRO FORMA(1)
---------------- ----------- ------------
<S> <C> <C> <C>
NET ASSETS (IN THOUSANDS)
Class A shares............. $ 74,593 $154,939 $229,407
Class B shares............. 58,639 135,321 193,847
Class C shares............. 80,036 14,433 94,457
----------- --------- -----------
Total............... $213,268 $304,693 $517,711
=========== ========= ===========
NET ASSET VALUE PER SHARE
Class A shares............. $ 14.34 $ 14.35 $ 14.34
Class B shares............. 13.93 13.76 13.93
Class C shares............. 14.07 13.91 14.07
SHARES OUTSTANDING (IN
THOUSANDS)
Class A shares............. 5,202 10,796 15,998
Class B shares............. 4,209 9,832 13,915
Class C shares............. 5,688 1,037 6,713
----------- --------- -----------
Total............... 15,099 21,665 36,626
=========== ========= ===========
SHARES AUTHORIZED
Class A shares............. 375,000,000 Unlimited 375,000,000
Class B shares............. 375,000,000 Unlimited 375,000,000
Class C shares............. 375,000,000 Unlimited 375,000,000
</TABLE>

- ---------------
(1) The pro forma net assets and net asset value per share reflect the payment
of the reorganization expenses of approximately $250,000 by the VKAC Global
Equity Fund. The pro forma shares outstanding reflect the issuance of
approximately 10,796,000 Class A shares, 9,706,000 Class B shares and
1,025,000 Class C shares by the MS Global Equity Allocation Fund in exchange
for the assets and liabilities of the VKAC Global Equity Fund.

PERFORMANCE INFORMATION. The average annual total returns for MS Global Equity
Allocation Fund for the one-year and three-year periods ended December 31, 1997
and for the period beginning January 4, 1993 (the date Class A shares of the MS
Global Equity Allocation Fund were first offered for sale to the public) through
December 31, 1997 were 9.73%, 14.07% and 12.83% with respect to its Class A
shares; for the one-year period ended December 31, 1997 and for the period
beginning August 21, 1995 (the date Class B shares of the MS Global Equity
Allocation Fund were first offered for sale to the public) through December 31,
1997 were 10.49%, and 14.11% with respect to its Class B shares; and for the
one-year and three-year periods ended December 31, 1997 and for the period

16
<PAGE> 22

beginning January 4, 1993 (the date Class C shares of the MS Global Equity
Allocation were first offered to the public) through December 31, 1997 were
14.60%, 15.50% and 13.33% with respect to its Class C shares.

The average annual total returns for the VKAC Global Equity Fund for the
one-year, three-year and five-year periods ended December 31, 1997 and for the
period beginning August 5, 1991 (the date Class A shares of the VKAC Global
Equity Fund were first offered for sale to the public) through December 31, 1997
were 9.10%, 14.36%, 12.12% and 10.79% with respect to its Class A shares; for
the one-year, three-year and five-year periods ended December 31, 1997 and for
the period beginning November 15, 1991 (the date Class B shares of the VKAC
Global Equity Fund were first offered for sale to the public) through December
31, 1997 were 9.93%, 15.01%, 12.41% and 10.37% with respect to its Class B
shares; and for the one-year and three-year periods ended December 31, 1997 and
for the period beginning June 21, 1993 (the date Class C shares of the VKAC
Global Equity Fund were first offered for sale to the public) through December
31, 1997 were 13.99%, 15.76% and 12.47% with respect to its Class C shares.

The foregoing total returns include the effect of the maximum sales charge
applicable to sales of shares of both the MS Global Equity Allocation Fund and
the VKAC Global Equity Fund. The foregoing total returns also assume
reinvestment of all dividends and distributions. The total returns are not
necessarily indicative of future results. The performance of an investment
company is the result of conditions in the securities markets, portfolio
management and operating expenses. Although information such as that shown above
is useful in reviewing a fund's performance and in providing some basis for
comparison with other investment alternatives, it should not be used for
comparison with other investments using different reinvestment assumptions or
time periods. In the absence of fee waivers for the MS Global Equity Allocation
Fund, the MS Global Equity Allocation Fund's total returns would have been
reduced.

Management's discussion of the MS Global Equity Allocation Fund's and VKAC
Global Equity Fund's performance as of each funds' last fiscal year end are
attached hereto as Exhibit A.

OTHER SERVICE PROVIDERS. The transfer agent for each fund is ACCESS Investor
Services, Inc., a wholly-owned subsidiary of VKAC. The independent accountants
for each fund is Price Waterhouse LLP. The MS Global Equity Allocation Fund
obtains certain administrative services from Chase Global Funds Services
Company, a corporate affiliate of The Chase Manhattan Bank ("Chase"). The VKAC
Global Equity Fund obtains certain accounting and legal services from Advisory
Corp. and VKAC, respectively. The custodians for the MS Global Equity Allocation
Fund are Chase for domestic securities and cash and Morgan Stanley Trust
Company, an affiliate of the Adviser, for foreign assets. The custodian for the
VKAC Global Equity Fund is State Street Bank and Trust Company.

17
<PAGE> 23

GOVERNING LAWS. The MS Global Equity Allocation Fund is a series of the Morgan
Stanley Fund, an open-end management investment company organized as a Maryland
corporation. The VKAC Global Equity Fund is a series of the World Portfolio
Trust, an open-end management investment company organized as a Delaware
business trust. While Maryland corporate law contains many provisions
specifically applicable to management investment companies and Delaware business
trust law is specifically drafted to accommodate some of the unique corporate
governance needs of management investment companies, certain statutory
differences do exist and the funds' organizational document contain certain
differences summarized below. Each fund is subject to federal securities laws,
including the 1940 Act and the rules and regulations promulgated by SEC
thereunder, and applicable state securities laws.

Consistent with Delaware law, the World Portfolio Trust has authorized the
issuance of an unlimited number of shares for the VKAC Global Equity Fund.
Consistent with Maryland law, the Morgan Stanley Fund has authorized a specific
number of shares available for the MS Global Equity Allocation Fund, however,
the Morgan Stanley Fund organizational documents provide directors with the
authority to increase or decrease the authorized number of shares, from time to
time, as they consider necessary. Both the World Portfolio Trust and the Morgan
Stanley Fund allow the trustees/directors to create one or more separate
investment portfolios and to establish a separate series of shares for each
portfolio and to further subdivide the shares of a series into one or more
classes.

In general, the rights associated with common shares of beneficial interest of
the World Portfolio Trust are similar to the rights associated with shares of
common stock of the Morgan Stanley Fund. An area of potential difference is
that, although shareholders of a Delaware business trust generally are not
personally liable for obligations of the trust under Delaware law (the Delaware
business trust law provides that shareholders of a Delaware business trust
should be entitled to the same limitation of liability as shareholders of
private, for profit corporations), similar statutory or other authority limiting
business trust shareholder liability does not apply in many other states, and a
shareholder subject to proceedings in courts in other states, which may not
apply Delaware law, may be subject to liability. To guard against this risk, the
World Portfolio Trust organizational documents (i) contain an express disclaimer
of shareholder liability for acts or obligations of the trust and require notice
of such disclaimer in each agreement, obligation or instrument entered into by
the trust and (ii) provide for shareholder indemnification out of the series or
fund property if any shareholder is held personally liable for the obligations
of the trust. Management of the VKAC Global Equity Fund believes the risk of
liability to a World Portfolio Trust shareholder beyond his or her investment is
remote.

Shareholders of a Maryland corporation currently have no personal liability
for the corporation's acts or obligations, except that a shareholder may be
liable to the extent that: (1) the dividends a shareholder receives exceed the
amount which

18
<PAGE> 24

properly could have been paid under Maryland law, (2) the consideration paid to
a shareholder by the Maryland corporation for stock was paid in violation of
Maryland law or (3) a shareholder otherwise receives any distribution, payment
or release which exceeds the amount which a shareholder could properly receive
under Maryland law.

Neither fund is required, and neither fund anticipates, holdings annual
meetings of its shareholders. Both funds do have certain mechanics whereby
shareholders can call a special meeting of the respective fund. Shareholders
generally have the right to approve investment advisory agreements, elect
trustees/directors, change fundamental investment policies, ratify the selection
of independent auditors and vote on other matters required by law or deemed
desirable by trustees/directors.

The business of the World Portfolio Trust is supervised by nine trustees,
whereas the business of the Morgan Stanley Fund is supervised by the same nine
persons plus one additional person as director. The responsibilities, powers and
fiduciary duties of trustees under Delaware law are substantially the same as
those for directors under Maryland law. For the World Portfolio Trust and the
Morgan Stanley Fund, trustee/director vacancies may be filled by approval of a
majority of the trustees/directors then in office subject to provisions of the
1940 Act. Trustees/Directors terms are until the later of the election of such
person's successor or resignation or removal. Each of the funds has
substantially the same mandatory retirement age provisions for
trustees/directors. Trustees of the World Portfolio Trust may be removed with or
without cause by vote of 2/3's of the shares then outstanding or by vote of
2/3's of the number of trustees prior to such removal. Trustees of the Morgan
Stanley Fund may be removed with or without cause by vote of a majority of the
shares present or in person at a meeting.

The foregoing is only a summary of certain differences between the VKAC Global
Equity Fund under Delaware law and the MS Global Equity Allocation Fund under
Maryland law. It is not intended to be a complete list of differences and
shareholders should refer to the provisions of each fund's applicable
organizational documents for a more thorough comparison. Such documents are
filed are part of each fund's registration statements with the SEC and
shareholders may obtain copies of such documents as described on page 2 of this
prospectus/proxy statement.

B. RISK FACTORS

SIMILARITY OF RISKS

The investment objectives of the MS Global Equity Allocation Fund and the VKAC
Global Equity Fund are similar. The investment policies of the MS Global Equity
Allocation Fund and the VKAC Global Equity Fund are similar insofar as they each
invest, under normal market conditions, at least 65% of their respective net
assets in equity securities of issuers in at least three different countries.
Each of the Funds invests in securities of foreign issuers. Investment in
securities of foreign issuers, especially in securities of issuers in emerging
countries, involves somewhat

19
<PAGE> 25

different investment risks from those affecting securities of U.S. issuers.
There may be limited publicly available information with respect to foreign
issuers, and foreign issuers are not generally subject to uniform accounting,
auditing, and financial and other reporting standards and requirements
comparable to those applicable to domestic companies. Therefore disclosure of
certain material information may not be made and less information may be
available to investors investing in foreign countries than in the United States.
There may also be less government supervision and regulation of foreign
securities exchanges, brokers and listed companies than in the United States.
Many foreign securities markets have substantially less volume than U.S.
national securities exchanges, and securities of some foreign issuers are less
liquid and subject to greater price volatility than securities of comparable
domestic issuers. Brokerage commissions and other transaction costs on foreign
securities exchanges are generally higher than in the United States. Dividends
and interest paid by foreign issuers may be subject to withholding and other
foreign taxes, which may decrease the net return on foreign investments as
compared to dividends and interest paid to the funds by domestic companies.
Additional risks include future adverse political and income payable with
respect to foreign securities, possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits, and the possible
adoption of foreign governmental restrictions such as exchange controls. Also,
it may be more difficult to obtain a judgment in a court outside the United
States. Emerging countries may have less stable political environments than more
developed countries.

Each of the MS Global Equity Allocation Fund and the VKAC Global Equity Fund
also engages in certain common investment practices such as the purchase and
sale of forward foreign currency exchange contracts, options, futures, options
on futures, engaging in repurchase agreements, limited investing in restricted
securities and illiquid securities, limited ability to loan portfolio
securities, and limited ability to borrow.

To the extent that the investment objectives and investment policies and
practices of the MS Global Equity Allocation Fund and the VKAC Global Equity
Fund are similar, the risks associated with an investment in the funds are
similar.

Investment in either of the MS Global Equity Allocation Fund or the VKAC
Global Equity Fund may not be appropriate for all investors. Neither fund is
intended to be a complete investment program, and investors should consider
their long-term investment goals and financial needs when making an investment
decision with respect to the funds. An investment in either fund is intended to
be a long-term investment and should not be used as a trading vehicle.

DIFFERENCES IN RISKS

The MS Global Equity Allocation Fund and the VKAC Global Equity Fund engage in
some dissimilar investment practices. To the extent that the investment
20
<PAGE> 26

practices differ, the risks associated with an investment in the MS Global
Equity Allocation Fund are different from the risks associated with an
investment in the VKAC Global Equity Fund. For a complete description of the
respective fund's investment practices and associated risks, investors are
encouraged to read carefully the sections of the MS Fund Prospectus entitled
"Investment Objective and Policies," "Additional Investment Information" and
"Investment Limitations" and the sections of the VKAC Fund Prospectus entitled
"Investment Objective and Policies" and "Investment Practices."

STRUCTURED NOTES, SWAPS, CAPS, FLOORS, COLLARS, WHEN-ISSUED, DELAYED DELIVERY,
PORTFOLIO SECURITIES LENDING, ZERO COUPON DEBT, PAYMENT IN KIND DEBT AND
DEFERRED PAYMENT DEBT. The MS Global Equity Allocation Fund may enter into
investment transactions involving structured notes, swaps, caps, floors,
collars, when-issued securities, delayed delivery securities, lending of
portfolio securities, zero coupon debt, payment in kind debt and deferred
payment debt. The VKAC Global Equity Fund does not engage or engages to a lesser
degree in such transactions. Each of these transactions involve risks unique to
such transactions. For a complete description of such transactions and the
associated risks, see the appropriate subsections in the MS Global Equity
Allocation Fund Prospectus under the heading entitled "Additional Investment
Information."

C. THE PROPOSED REORGANIZATION

The material features of the Agreement are summarized below. This summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Agreement attached as
Appendix A to the Reorganization SAI, a copy of which may be obtained without
charge by calling the MS Global Equity Allocation Fund or the VKAC Global Equity
Fund at (800) 421-5666 and asking for the "Reorganization SAI".

TERMS OF THE AGREEMENT

Pursuant to the Agreement, the MS Global Equity Allocation Fund series of the
Morgan Stanley Fund would acquire all of the assets and the liabilities of the
VKAC Global Equity Fund series of the World Portfolio Trust on the date of the
Closing in consideration for Class A, B and C shares of the MS Global Equity
Allocation Fund.

Subject to the VKAC Global Equity Fund's shareholders approving of the
Reorganization, the closing (the "Closing") will occur within 15 business days
after the later of the receipt of all necessary regulatory approvals and the
final adjournment of the Special Meeting or such later date as soon as
practicable thereafter as the MS Global Equity Allocation Fund and the VKAC
Global Equity Fund may mutually agree.

21
<PAGE> 27

On the date of Closing, the VKAC Global Equity Fund will transfer to the MS
Global Equity Allocation Fund all of the assets and liabilities of the VKAC
Global Equity Fund. The MS Global Equity Allocation Fund will in turn transfer
to the VKAC Global Equity Fund a number of its Class A, B and C shares equal in
value to the value of the net assets of the VKAC Global Equity Fund transferred
to the MS Global Equity Allocation Fund as of the date of Closing, as determined
in accordance with the valuation method described in the MS Global Equity
Allocation Fund's then current prospectus. In order to minimize any potential
for undesirable federal income and excise tax consequences in connection with
the Reorganization, the MS Global Equity Allocation Fund and the VKAC Global
Equity Fund may distribute on or before the Closing all or substantially all of
their respective undistributed net investment income (including net capital
gains) as of such date.

The VKAC Global Equity Fund expects to distribute the Class A, B and C shares
of the MS Global Equity Allocation Fund to the shareholders of the VKAC Global
Equity Fund promptly after the Closing and then dissolve pursuant to a plan of
dissolution adopted by the Board of Trustees.

The MS Global Equity Allocation Fund and the VKAC Global Equity Fund have made
certain standard representations and warranties to each other regarding their
respective capitalizations, status and conduct of business.

Unless waived in accordance with the Agreement, the obligations of the parties
to the Agreement are conditioned upon, among other things:

1. the approval of the Reorganization by the VKAC Global Equity Fund's
shareholders;

2. the absence of any rule, regulation, order, injunction or proceeding
preventing or seeking to prevent the consummation of the transactions
contemplated by the Agreement;

3. the receipt of all necessary approvals, registrations and exemptions
under federal and state laws;

4. the truth in all material respects as of the Closing of the
representations and warranties of the parties and performance and
compliance in all material respects with the parties' agreements,
obligations and covenants required by the Agreement;

5. the effectiveness under applicable law of the registration statement of
the MS Global Equity Allocation Fund of which this Prospectus/Proxy
Statement forms a part and the absence of any stop orders under the
Securities Act of 1933, as amended, pertaining thereto; and

6. the receipt of opinions of counsel relating to, among other things, the
tax free nature of the Reorganization.

The Agreement may be terminated or amended by the mutual consent of the
parties either before or after approval thereof by the shareholders of the VKAC

22
<PAGE> 28

Global Equity Fund, provided that no such amendment after such approval shall be
made if it would have a material adverse affect on the interests of VKAC Global
Equity Fund shareholders. The Agreement also may be terminated by the non-
breaching party if there has been a material misrepresentation, material breach
of any representation or warranty, material breach of contract or failure of any
condition to Closing.

The Board of Trustees recommends that you vote to approve the Reorganization,
as it believes the Reorganization is in the best interests of the VKAC Global
Equity Fund's shareholders and that the interests of the VKAC Global Equity
Fund's existing shareholders will not be diluted as a result of consummation of
the proposed Reorganization.

DESCRIPTION OF SECURITIES TO BE ISSUED

SHARES OF COMMON STOCK. Shares of common stock of the MS Global Equity
Allocation Fund being offered hereby are represented by transferable Class A, B
and C shares, par value $0.001 per share. The Amended and Restated Certificate
of Incorporation of the Morgan Stanley Fund permits the directors, as they deem
necessary or desirable, to create one or more separate investment portfolios and
to issue a separate series of shares for each portfolio and, subject to
compliance with the 1940 Act, to further sub-divide the shares of a series into
one or more classes of shares for such portfolio.

VOTING RIGHTS OF SHAREHOLDERS. Holders of common shares of the MS Global
Equity Fund are entitled to one vote per share on matters as to which they are
entitled to vote; however, separate votes generally are taken by each series on
matters affecting an individual series.

The MS Global Equity Allocation Fund operates as an investment portfolio of
the Morgan Stanley Fund, an open-end management investment company registered
with the SEC under the 1940 Act. The VKAC Global Equity Fund operates as a
series of the World Portfolio Trust, also an open-end management investment
company registered with the SEC under the 1940 Act. Therefore, in addition to
the specific voting rights described above, shareholders of the MS Global Equity
Allocation Fund, as well as shareholders of the VKAC Global Equity Fund, are
entitled, under current law, to vote with respect to certain other matters,
including changes in fundamental investment policies and restrictions and the
ratification of the selection of independent auditors. Moreover, under the 1940
Act, shareholders owning not less than 10% of the outstanding shares of the VKAC
Global Equity Fund or MS Global Equity Allocation Fund may request that the
respective board of trustees/directors call a shareholders' meeting for the
purpose of voting upon the removal of trustee(s).

23
<PAGE> 29

CONTINUATION OF SHAREHOLDER ACCOUNTS AND PLANS; SHARE CERTIFICATES

If the Reorganization is approved, the MS Global Equity Allocation Fund will
establish an account for each VKAC Global Equity Fund shareholder containing the
appropriate number of shares of the MS Global Equity Allocation Fund. The
shareholder services and shareholder programs of the MS Global Equity Allocation
Fund and the VKAC Global Equity Fund are substantially identical. Shareholders
of the VKAC Global Equity Fund who are accumulating VKAC Global Equity Fund
shares under the dividend reinvestment plan, or who are receiving payment under
the systematic withdrawal plan with respect to VKAC Global Equity Fund shares,
will retain the same rights and privileges after the Reorganization in
connection with the MS Global Equity Allocation Fund Class A, B or C shares
received in the Reorganization through substantially identical plans maintained
by the MS Global Equity Allocation Fund. Van Kampen American Capital Trust
Company will continue to serve as custodian for the assets of VKAC Global Equity
Fund shareholders held in IRA accounts after the Reorganization. Such IRA
investors will be sent appropriate documentation to confirm Van Kampen American
Capital Trust Company's custodianship.

It will not be necessary for shareholders of the VKAC Global Equity Fund to
whom certificates have been issued to surrender their certificates. Upon
dissolution of the VKAC Global Equity Fund, such certificates will become null
and void. However, VKAC Global Equity Fund shareholders holding such
certificates may want to present such certificates to receive certificates of
the MS Global Equity Allocation Fund (to simplify substantiation of and to
preserve the tax basis of separate lots of shares).

FEDERAL INCOME TAX CONSEQUENCES

The following is a general discussion of the material federal income tax
consequences of the Reorganization to shareholders of the VKAC Global Equity
Fund and shareholders of the MS Global Equity Allocation Fund. The discussion
set forth below is for general information only and may not apply to a holder
subject to special treatment under the Internal Revenue Code of 1986, as amended
(the "Code"), such as a holder that is a bank, an insurance company, a dealer in
securities, a tax-exempt organization or that acquired its Class A, B and C
shares of the VKAC Global Equity Fund pursuant to the exercise of employee stock
options or otherwise as compensation. It is based upon the Code, legislative
history, Treasury regulations, judicial authorities, published positions of the
Internal Revenue Service (the "Service") and other relevant authorities, all as
in effect on the date hereof and all of which are subject to change or different
interpretations (possibly on a retroactive basis). This summary is limited to
shareholders who hold their VKAC Global Equity Fund shares as capital assets. No
advance rulings have been or will be sought from the Service regarding any
matter discussed in this

24
<PAGE> 30

Prospectus/Proxy Statement. Accordingly, no assurances can be given that the
Service could not successfully challenge the intended federal income tax
treatment described below. Shareholders should consult their own tax advisers to
determine the specific federal income tax consequences of all transactions
relating to the Reorganization, as well as the effects of state, local and
foreign tax laws and possible changes to the tax laws.

The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Code. It is a condition to closing that the
World Portfolio Trust on behalf of the VKAC Global Equity Fund receives an
opinion from Skadden, Arps, Slate, Meagher & Flom (Illinois) ("Skadden Arps")
substantially to the effect that for federal income tax purposes:

1. The acquisition by the MS Global Equity Allocation Fund of the assets of
the VKAC Global Equity Fund in exchange solely for Class A, B and C
shares of the MS Global Equity Allocation Fund and the assumption by the
MS Global Equity Allocation Fund of the liabilities of the VKAC Global
Equity Fund will qualify as a tax-free reorganization within the meaning
of Section 368(a)(1) of the Code.

2. No gain or loss will be recognized by the VKAC Global Equity Fund or the
MS Global Equity Allocation Fund upon the transfer to the MS Global
Equity Allocation Fund of the assets of the VKAC Global Equity Fund in
exchange solely for the Class A, B and C shares of the MS Global Equity
Allocation Fund and the assumption by the MS Global Equity Allocation
Fund of the liabilities of the VKAC Global Equity Fund.

3. The MS Global Equity Allocation Fund's basis in the VKAC Global Equity
Fund assets received in the Reorganization will, in each instance, equal
the basis of such assets in the hands of the VKAC Global Equity Fund
immediately prior to the transfer, and the MS Global Equity Allocation
Fund's holding period of such assets will, in each instance, include the
period during which the assets were held by the VKAC Global Equity Fund.

4. No gain or loss will be recognized by the shareholders of the VKAC Global
Equity Fund upon the exchange of their shares of the VKAC Global Equity
Fund for the Class A, B or C shares of the MS Global Equity Allocation
Fund.

5. The aggregate tax basis in the Class A, B and C shares of the MS Global
Equity Allocation Fund received by the shareholders of the VKAC Global
Equity Fund will be the same as the aggregate tax basis of the shares of
the VKAC Global Equity Fund surrendered in exchange therefor. See
"Continuation of Shareholder Accounts and Plans; Share Certificates"
above.

6. The holding period of the Class A, B and C shares of the MS Global Equity
Allocation Fund received by the shareholders of the VKAC Global Equity
25
<PAGE> 31

Fund will include the holding period of the shares of the VKAC Global
Equity Fund surrendered in exchange therefor if such surrendered shares
of the VKAC Global Equity Fund are held as capital assets by such
shareholder.

In rendering its opinion, Skadden Arps may rely upon certain representations
of the management of the MS Global Equity Allocation Fund and the VKAC Global
Equity Fund and assume that the Reorganization will be consummated as described
in the Agreement and that redemptions of shares of the VKAC Global Equity Fund
occurring prior to the Closing will consist solely of redemptions in the
ordinary course of business.

The MS Global Equity Allocation Fund intends to be taxed under the rules
applicable to regulated investment companies as defined in Section 851 of the
Code, which are the same rules currently applicable to the VKAC Global Equity
Fund and its shareholders.

EXPENSES

The expenses of the Reorganization, including expenses incurred by the MS
Global Equity Allocation Fund, generally will be borne by the VKAC Global Equity
Fund in the event the Reorganization is completed. Management of the funds
believes that shareholders of the VKAC Global Equity Fund are the primary
beneficiaries of benefits derived from the Reorganization. Management of the
VKAC Global Equity Fund and MS Global Equity Allocation Fund estimates total
Reorganization expenses at approximately $250,000. In addition, if the
Reorganization is completed, VKAC will reimburse the VKAC Global Equity Fund for
the cost of terminating its trustee retirement plan estimated to be
approximately $35,000. In the event the Reorganization is not completed, VKAC
will bear the costs associated with the Reorganization. The Board of Trustees
and Board of Directors have reviewed and approved the foregoing arrangements
regarding payment of expenses and other charges relating to the Reorganization.

As noted above, shareholders of the VKAC Global Equity Fund may redeem their
shares or exchange their shares for shares of certain other open-end mutual
funds advised by Advisory Corp. or Asset Management and distributed by VKAC
Distributors at any time prior to the closing of the Reorganization. See
"Distribution, Purchase, Valuation, Redemption and Exchange of Shares" above.
Redemptions and exchanges of shares generally are taxable transactions, unless
your account is not subject to taxation, such as an individual retirement
account or other tax-qualified retirement plan. Shareholders should consult with
their own tax advisers regarding potential transactions.

26
<PAGE> 32

RATIFICATION OF INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND INVESTMENT
RESTRICTIONS OF THE MS GLOBAL EQUITY ALLOCATION FUND

Approval of the Reorganization will constitute the ratification by VKAC Global
Equity Fund shareholders of the investment objective, investment policies and
investment restrictions, distribution plan and advisory agreement of the MS
Global Equity Allocation Fund. Approval of the Reorganization will constitute
approval of amendments to any of the fundamental investment restrictions of the
VKAC Global Equity Fund that might otherwise be interpreted as impeding the
Reorganization, but solely for the purpose of and to the extent necessary for,
consummation of the Reorganization.

LEGAL MATTERS

Certain legal matters concerning the federal income tax consequences of the
Reorganization and issuance of Class A, B and C shares of the MS Global Equity
Allocation Fund will be passed on by Skadden Arps, 333 West Wacker Drive,
Chicago, Illinois 60606, which serves as counsel to the MS Global Equity
Allocation Fund and the VKAC Global Equity Fund. Wayne W. Whalen, a partner of
Skadden Arps, is a Trustee of the World Portfolio Trust and a Director of the
Morgan Stanley Fund.

D. RECOMMENDATION OF THE BOARD

The Board of Trustees has unanimously approved the Agreement and has
determined that participation in the Reorganization is in the best interests of
shareholders of each class of shares of the VKAC Global Equity Fund. THE BOARD
OF TRUSTEES RECOMMENDS VOTING "FOR" THE PROPOSED REORGANIZATION.

OTHER INFORMATION

A. SHAREHOLDERS OF THE MS GLOBAL EQUITY ALLOCATION FUND
AND THE VKAC GLOBAL EQUITY FUND

At the close of business on April 7, 1998, there were 5,189,824 Class A
shares, 4,483,389 Class B shares and 5,544,418 Class C shares, respectively, of
the MS Global Equity Allocation Fund. As of such date, the trustees and officers
of the MS Global Equity Allocation Fund as a group own less than 1% of the
shares of the MS Global Equity Allocation Fund. As of such date, no person was
known by the MS Global Equity Allocation Fund to own beneficially or of record
as much as 5% of the Class A, Class B or Class C shares.

At the close of business on March 27, 1998, the record date with respect to
the Special Meeting, there were 10,673,953 Class A shares, 9,664,151 Class B
shares and 1,059,498 Class C shares, respectively, of the VKAC Global Equity
Fund. As
27
<PAGE> 33

of such date, the trustees and officers of the VKAC Global Equity Fund as a
group own less than 1% of the outstanding shares of the VKAC Global Equity Fund.
As of such date, no person was known by the VKAC Global Equity Fund to own
beneficially or of record as much as 5% of the Class A, Class B or Class C
shares, except that Van Kampen American Capital Trust Company, 2800 Post Oak
Blvd., Houston, TX 77056, which acts as custodian for employee benefit plans and
independent retirement accounts, was the recordholder of 2,605,810 Class A
shares, 2,835,749 Class B shares and 189,040 Class C shares, representing 24.4%,
29.3% and 17.8% of the VKAC Global Equity Fund's Class A shares, Class B shares
and Class C shares, respectively.

B. SHAREHOLDER PROPOSALS

As a general matter, the MS Global Equity Allocation Fund does not intend to
hold future regular annual or special meetings of its shareholders unless
required by the 1940 Act. In the event the Reorganization is not consummated,
the VKAC Global Equity Fund does not intend to hold future regular annual or
special meetings of its shareholders unless required by the 1940 Act. Any
shareholder who wishes to submit proposals for consideration at a meeting of
shareholders of the MS Global Equity Allocation Fund or the VKAC Global Equity
Fund should send such proposal to the respective fund at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181. To be considered for presentation at a
shareholders' meeting, rules promulgated by the SEC require that, among other
things, a shareholder's proposal must be received at the offices of the fund a
reasonable time before a solicitation is made. Timely submission of a proposal
does not necessarily mean that such proposal will be included.

VOTING INFORMATION AND REQUIREMENTS

Holders of shares of the VKAC Global Equity Fund are entitled to one vote per
share on matters as to which they are entitled to vote. The VKAC Global Equity
Fund does not utilize cumulative voting.

Each valid proxy given by a shareholder of the VKAC Global Equity Fund will be
voted by the persons named in the proxy in accordance with the instructions
marked thereon and as the persons named in the proxy may determine on such other
business as may come before the Special Meeting on which shareholders are
entitled to vote. If no designation is made, the proxy will be voted by the
persons named in the proxy as recommended by the Board "FOR" approval of the
Reorganization. Abstentions and broker non-votes do not count as votes "FOR" a
proposal and are treated as votes "AGAINST". 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 Special Meeting. Abstentions and broker
non-votes will be deemed present for quorum purposes.
28
<PAGE> 34

Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the VKAC Global Equity Fund a written notice of revocation,
by delivering a duly executed proxy bearing a later date, or by attending the
Special Meeting and voting in person. The giving of a proxy will not affect your
right to vote in person if you attend the Special Meeting and wish to do so.

It is not anticipated that any action will be asked of the shareholders of the
VKAC Global Equity Fund other than as indicated above, but if other matters are
properly brought before the Special Meeting, it is intended that the persons
named in the proxy will vote in accordance with their judgment.

APPROVAL OF THE REORGANIZATION WILL REQUIRE THE FAVORABLE VOTE OF THE HOLDERS
OF A MAJORITY OF THE OUTSTANDING SHARES OF THE VKAC GLOBAL EQUITY FUND ENTITLED
TO VOTE.

In the event that sufficient votes in favor of a proposal are not received by
the scheduled time of the Special Meeting, the persons named in the proxy may
propose and vote in favor of one or more adjournments of the Special Meeting to
permit further solicitation of proxies. If sufficient shares were present to
constitute a quorum, but insufficient votes had been cast in favor of a proposal
to approve it, proxies would be voted in favor of adjournment only if the Board
determined that adjournment and additional solicitation was reasonable and in
the best interest of the shareholders of the VKAC Global Equity Fund, taking
into account the nature of the proposal, the percentage of the votes actually
cast, the percentage of negative votes, the nature of any further solicitation
that might be made and the information provided to shareholders about the
reasons for additional solicitation. Any such adjournment will require the
affirmative vote of the holders of a majority of the outstanding shares voted at
the session of the Special Meeting to be adjourned.

Proxies of shareholders of the VKAC Global Equity Fund are solicited by the
Board. In order to obtain the necessary quorum at the Special Meeting,
additional solicitation may be made by mail, telephone, telegraph or personal
interview by representatives of Asset Management or VKAC, or by dealers or their
representatives. In addition, such solicitation servicing may also be provided
by First Data Investor Services Group, a solicitation firm located in Boston,
Massachusetts, at a cost estimated to be approximately $75,000, plus reasonable
expenses.

April 14, 1998

PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY.

YOUR VOTE IS IMPORTANT AND YOUR PARTICIPATION
IN THE AFFAIRS OF YOUR FUND DOES MAKE A DIFFERENCE.

29
<PAGE> 35

EXHIBIT A

MANAGEMENT'S DISCUSSION OF
MS GLOBAL EQUITY ALLOCATION FUND AND VKAC GLOBAL EQUITY FUND PERFORMANCE

Management's Discussion of the MS Global Equity Allocation Fund's Performance
as of the Annual Report dated June 30, 1997.

LETTER TO SHAREHOLDERS

MORGAN STANLEY
GLOBAL EQUITY ALLOCATION FUND
INVESTMENT OVERVIEW
(UNAUDITED)

COMPOSITION OF NET ASSETS (AT JUNE 30, 1997)
[PIE GRAPH]
<TABLE>
<S> <C>
AUSTRALIA 1.2
CANADA 4.5
FRANCE 4.3
GERMANY 5.3
HONG KONG 2.0
ITALY 2.8
JAPAN 16.1
KOREA 0.7
NETHERLANDS 1.5
SINGAPORE 1.8
SPAIN 3.0
SWEDEN 1.9
SWITZERLAND 2.1
UNITED KINGDOM 7.3
UNITED STATES 43.1
OTHER 2.4
</TABLE>

A-1
<PAGE> 36

<TABLE>
<CAPTION>
TOTAL RETURNS**
-------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 14.88% 20.61% 14.38% 15.90%
- -------------------------------------------------------------------------
Class B+ Shares 14.64% 19.64% 17.99% 19.77%
- -------------------------------------------------------------------------
Class C Shares 18.69% 19.69% 15.04% 15.04%
- -------------------------------------------------------------------------
MSCI World Index:
Class A & C Shares N/A 22.27% N/A 17.15%
Class B Shares N/A 22.27% N/A 18.29%
- -------------------------------------------------------------------------
</TABLE>

* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.

** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.

+ Class B shares have been offered since August 1, 1995.

The Morgan Stanley Capital International (MSCI) World Index is an unmanaged
index which includes securities listed on the stock exchanges of the U.S.,
Europe, Canada, Australia, New Zealand and the Far East and assumes dividends
are reinvested net of withholding tax.

A-2
<PAGE> 37

COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE GRAPH]
<TABLE>
<CAPTION>
GLOBAL EQUITY GLOBAL EQUITY
ALLOCATION ALLOCATION
MEASUREMENT PERIOD FUND - CLASS FUND - CLASS MSCI WORLD
(FISCAL YEAR COVERED) A C INDEX
<S> <C> <C> <C>
1/4/93 9525 10000 10000
6/30/93 10563 10939 11515
6/30/94 11516 11972 12696
6/30/95 12286 12671 14050
6/30/96 15311 15667 16640
6/30/97 18467 18752 20346
</TABLE>

TOP FIVE HOLDINGS

<TABLE>
<CAPTION>
PERCENT OF
ISSUER COUNTRY NET ASSETS
- -------------------------------------------------------------------------
<S> <C> <C>
General Electric Co. United States 1.7%
- -------------------------------------------------------------------------
Coca-Cola Co. United States 1.6%
- -------------------------------------------------------------------------
Microsoft Corp. United States 1.3%
- -------------------------------------------------------------------------
Morgan Stanley Asia-Pacific Fund, Inc. United States 1.2%
- -------------------------------------------------------------------------
Merck & Co., Inc. United States 1.2%
- -------------------------------------------------------------------------
</TABLE>

TOP FIVE SECTORS

<TABLE>
<CAPTION>
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ------------------------------------------------------------------------
<S> <C> <C>
Consumer Goods $40,454 21.3%
- ------------------------------------------------------------------------
Finance 37,011 19.4%
- ------------------------------------------------------------------------
Services 32,912 17.3%
- ------------------------------------------------------------------------
Capital Equipment 28,015 14.8%
- ------------------------------------------------------------------------
Energy 18,745 9.9%
- ------------------------------------------------------------------------
</TABLE>

In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.

Past performance is not predictive of future performance.

A-3
<PAGE> 38

The Global Equity Allocation Fund invests in global equity markets, with
emphasis placed upon country rather than stock selection. This approach reflects
an investment philosophy that a diversified selection of securities representing
exposure to each country that we find attractive is, we believe, an effective
way to maximize the return and reduce the risk associated with global investing.

For the year ended June 30, 1997, the Fund had a total return exclusive of
sales charge of 20.61% for the Class A shares, 19.64% for the Class B shares and
19.69% for the Class C shares, and a total return with sales charge of 14.88%
for the Class A shares, 14.64% for the Class B shares and 18.69% for the Class C
shares, as compared to a total return of 22.27% for the Morgan Stanley Capital
International (MSCI) World Index (the "Index"). For the period from inception
through June 30, 1997, the average annual total return for the Fund exclusive of
sales charge was 15.90% for the Class A shares, 19.77% for the Class B shares,
and 15.04% for the Class C shares and 14.38% for the Class A shares, 17.99% for
the Class B shares, and 15.04% for the Class C shares with sales charge, as
compared to 17.15% for the Index since inception of the Class A and C shares and
18.29% for the Index since inception of the Class B shares.

Driven by liquidity and lower interest rates, global equity markets continued
their inexorable climb during the last year. Our neutral weighting in Japan hurt
portfolio returns, but was somewhat offset by the tilt out of the banking sector
and by the currency hedge against the yen. Within Europe, underweights to the
high flying, very fully valued Dutch and Swiss markets were offset by an
overweight to Spain and some tactical shifts in France and the U.K. During the
year we reduced the U.K. slightly before the election, and increased Italy
1%-2%. THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI WORLD INDEX AND ARE FOR INFORMATIONAL PURPOSES ONLY AND
SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE PERFORMANCE.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.

In June, we removed the underweight to Japanese banks as they rallied and
investors began to differentiate between high and low quality banks.
Importantly, Japanese real estate has bottomed and the possibility of further
loan securitization and international partnerships is high. From inception to
deletion of the bank tilt (8/23/96-6/26/97), banks returned -10.3%; Japan with
banks returned 2.8%, and Japan ex-banks returned 6.1% for a difference of 335
basis points.

A-4
<PAGE> 39

In Asia, our tactical maneuvering in Hong Kong added to returns as we
increased the allocation going into the July 1 handover to China. Our zero
weight in Malaysia added significantly to returns as the market fell
precipitously. Singapore, where we were overweight, disappointed with flat
returns, and New Zealand, an underperformer for most of the year, rallied 13.5%
on the back of interest rate reductions. We have no allocation to New Zealand
due to heavy exposure to NZ Telecom and pulp and paper, and we are benchmark
neutral in Australia. In early July we sold our small positions in Thailand and
Korea which had rallied 35% and 24% respectively, and took the opportunity to
exit these markets while both were cheap. Slow export growth and indications
that economic structural issues will take some time to be worked out diluted our
earlier enthusiasm for these markets.

Our slight underweight in North America was detrimental to overall returns.
The favorable economic environment of moderate growth, falling interest rates
and strong corporate earnings provided much of the momentum for the U.S. market.

During the year, currency hedging added to returns. We reduced the yen hedge
to zero at $/Y127, reinstated it at $/Y113 for a time and then reduced it back
to zero at $/Y113 by June 1997. Unlike the yen, continental European currencies
declined steadily against the dollar, falling by about 5%. In June, we removed
the Deutsche mark and Swiss franc hedges entirely and reduced currency hedges
against the French franc, Dutch guilder, and Spanish peseta. European currencies
should continue to weaken, but the Deutsche mark and the Swiss franc are subject
to periodic EMU related strength. Other European currencies have weakened
substantially and are beginning to gain support from economic recoveries. We
believe the yen is stuck in a trading range: bound by its trade surplus on one
side and low interest rates and weak economic fundamentals on the other.

INVESTMENT OUTLOOK:

Overall, the markets performed exceptionally well over the year, and we are
increasingly uneasy about valuation levels and the rate of change. With few
exceptions, European markets, appear to be in a demand-driven blow-off. Current
valuations leave no room for short term setbacks -- such as earnings
disappointments or further intransigence on pension and tax reform in Germany,
Italy, Spain and France. Since June 30, we have selectively been raising cash to
between 7% and 10%. Most of the monies have been shaved off of European weights
(the Netherlands, France, and the U.K.), and we have pulled back on Asian
markets such as Hong Kong and Singapore. We added a few percentage points to
Italy, a market which has underperformed, is undervalued, and should benefit
from lower short-term interest rates. The U.K. underweight is due to the impact
of sterling strength on profits, continued 1997 earnings downgrades and the
belief that short rates need to rise further.

A-5
<PAGE> 40

U.S.

In spite of the U.S. market's upward trend and a very good economic and
corporate backdrop, we remain cautious. Valuations are extended on all measures
and we believe the market's earnings growth expectations of 15% for the next 5
years are unrealistic. Global competition is fierce and foreign competitors have
the advantage of potential cost cutting and much weaker currencies than 6-12
months ago. We remain underweight in the U.S. as the probability of a market
setback increases. We believe that inflationary risk is low, while the converse
of a deflationary slowdown remains.

JAPAN

While it appears that the Japanese economy has withstood the effects of the
April 1 consumption tax hike, it has done so with the aid of the lagged effect
of a weak yen, loose monetary policy, and increased foreign demand. The June
Tankan survey showed that small and medium sized companies -- which employ 75%
of Japanese workers -- are still depressed. Japanese domestic demand needs to
improve in order for the market to broaden beyond the current focus on a few,
over-owned, high-growth exporters. Signs of personal income growth and improved
investment spending are positive. Continued government fiscal consolidation will
not be helpful, but a less splintered LDP may adopt bolder structural reforms.

EUROPE

In Europe, markets have been focused on economic growth and the likelihood
that neither France nor Germany will achieve the 3% deficit-to-GDP ratio for
Economic and Monetary Union (EMU). The much awaited budget of the new
Socialist-led French government alleviated many fears, as corporate taxes were
raised in an attempt to keep the country on course to join EMU. While German
political squabbling about strict adherence to the 3% level continues, we agree
with the consensus that EMU will go forward, but with a larger number of
countries and a weaker Euro. EMU, though not without its risks, should be very
positive for Europe. Productive capital allowed to flow freely across borders
without currency risk will increase competition for investment and jobs, lower
taxes on capital and improve wage and labor flexibility. We have already seen
evidence of corporate consolidation and government de-regulation in preparation,
and we believe the trend will continue.

ASIA

Asian news has been dominated by the devaluation of the Thai baht and its
contagion to the Philippines, Indonesia, Malaysia, Singapore and most recently
Hong Kong. While parallels to Mexico in 1994 are inevitable, they have limited
validity. Compared to Latin America, Asian average growth rates are much faster
A-6
<PAGE> 41

(4.5% versus 7.0%) and levels of indebtedness much lower (99% versus 203%).
Property price levels and current account deficits need to come down, but deep
recessions should not be necessary to maintain stability.

Though disruptive, softening the Asian currency peg to the U.S. dollar is a
long-term policy positive and an indication of financial market maturity. We
have gone to an underweight in the region because of reduced investor flows, the
competitive squeeze on profits, and the high Asian correlation with the U.S. in
market pullbacks. However, many Asian markets, like Malaysia and Singapore are
back at 1990 valuation levels. At a later date, underowned, more competitive,
and ignored -- they will be poised to outperform.

Barton M. Biggs
Portfolio Manager

Madhav Dhar
Portfolio Manager

Francine J. Bovich
Portfolio Manager

Ann D. Thivierge
Portfolio Manager

July 1997

A-7
<PAGE> 42

Management's Discussion of the VKAC Global Equity Fund's Performance as of the
Annual Report dated May 31, 1997.

LETTER TO SHAREHOLDERS

June 24, 1997

Dear Shareholder,

As you know, VK/AC Holding, Inc., the parent company of Van Kampen American
Capital, Inc., was acquired by Morgan Stanley Group Inc., a world leader in
asset management. More recently, on February 5, 1997, Morgan Stanley Group Inc.
and Dean Witter, Discover & Co. agreed to merge. The merger was completed on May
31, 1997, creating the combined company of Morgan Stanley, Dean Witter, Discover
& Co. Additionally, we are very pleased to announce that Philip N. Duff,
formerly of Morgan Stanley, has joined Van Kampen American Capital as president
and chief executive officer. I will continue as chairman.

Additionally, on April 1, 1997, Morgan Stanley Asset Management became
subadvisor for the Van Kampen American Capital Global Equity Fund. Unlike the
previous subadvisory agreement, which divided responsibility for domestic and
foreign portfolio management, Morgan Stanley Asset Management has assumed
complete responsibility for your Fund's holdings. As explained in your proxy
statement, we believe that the new advisory relationship is another positive
result of our acquisition by Morgan Stanley. We are confident that your
partnership with Morgan Stanley will continue to work to the benefit of our fund
shareholders.

MARKET REVIEW

Bolstered by generally solid economic growth and continued low inflation, most
global equity markets posted gains over the fiscal year. The Morgan Stanley
Capital International World Index climbed 14.6 percent in dollar terms, with
more than half of the increase coming since the beginning of the year.

Among developed markets, U.S. stocks gained 20.38 percent over the 12 months
ended May 31, 1997, based on the Wilshire 5000 Index. Equity prices in the
United States were supported by nearly perfect economic conditions.
First-quarter gross domestic product, the nation's total output of goods and
services, increased by a robust 5.6 percent annualized rate, the largest
quarterly gain in nine years. Despite rapid growth, inflation remained benign,
with consumer prices up just 2.5 percent over the 12 months through April.
Meanwhile, unemployment fell below 4.9 percent and consumer confidence soared to
its highest level in 27 years. Signs that the tight labor market was putting
upward pressure on wages led the Federal Reserve Board to raise interest rates
by one-quarter point in March.

A-8
<PAGE> 43

European equity markets also were strong, with the Morgan Stanley Europe Index
climbing 22.7 percent over the fiscal year. We believe that three factors
contributed to the strong performance of European stocks. First, most of Europe
is in the relatively early stage of an economic expansion. Second, downsizing in
many European companies -- while not as extensive as in the United States -- has
improved profitability. Finally, the progress towards European Monetary Union
(EMU) functioned as a brake on excessive spending as governments struggled to
reduce inflation and budget deficits to levels acceptable for EMU inclusion.

In the Pacific Basin, most equity markets continued to show the effects of a
regional slowdown in export growth. Hardest hit were South Korea and Thailand,
where political jitters and concerns about economic competitiveness caused sharp
sell-offs in stock prices. Excluding Japan, the Morgan Stanley Far East Index
fell 2.4 percent over the 12-month reporting period. Strong rallies in Hong Kong
and Taiwan signaled investor confidence that Chinese officials would allow Hong
Kong's free-market economy to operate without interference after political
control reverts to China in July.

Japan continued to struggle with an ailing financial system and excess
production capacity. Despite a weakened yen, which aided the country's export
sector, Japanese stocks fell nearly 16 percent over the fiscal year. Although
profitability has soared among larger firms, the benefits of Japan's export-led
recovery generally have not passed through to the country's smaller and
mid-sized companies. In an effort to jump-start its economy, the Bank of Japan
kept monetary policy extremely loose, with real short-term interest rates
falling to near zero.

ECONOMIC OUTLOOK

We expect economic growth to accelerate modestly worldwide, leading to mild
increases in global inflation and interest rates. Faster growth in consumer
spending should help corporate profits remain strong, providing a solid
underpinning for the relatively high price-to-earnings ratios currently found in
most global equity markets.

In Europe, we believe that progress towards monetary union will continue,
although the election of leftist political groups in France increases the
possibility that EMU will be delayed. As economic growth in Europe accelerates,
interest rates and inflation in core European countries could rise modestly. The
major beneficiaries of EMU will likely be Italy and Spain, where tighter fiscal
and monetary policies could ultimately put those economies on a path to stronger
growth with less inflation.

We expect many Pacific Basin countries to resume increasingly rapid growth
rates after the region's mild slowdown. Japanese stocks should benefit from a
gradually recovering economy, although the yen has likely bottomed against the

A-9
<PAGE> 44

U.S. dollar. We also anticipate that fiscal and monetary policy will be
tightened in Japan, exerting a mild drag on corporate profitability.

Closer to home, we expect the U.S. economy to grow at a moderate pace with
relatively low inflation. The benefits of corporate downsizing will likely
diminish in coming years, leading to somewhat slower rates of profit growth and
less spectacular year-over-year earnings comparisons. While we remain optimistic
about the long-term outlook for U.S. stocks, we are concerned that the recent
extraordinary pace of earnings growth may have created unrealistic expectations
among some investors.

Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.

Sincerely,

<TABLE>
<S> <C>
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
</TABLE>

PERFORMANCE RESULTS FOR THE PERIOD ENDED MAY 31, 1997
VAN KAMPEN AMERICAN CAPITAL GLOBAL EQUITY FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
-------- -------- --------
<S> <C> <C> <C>
Total Returns
One-year total return based on
NAV(1)............................ 17.67% 16.83% 16.82%
One-year total return(2)............ 10.93% 11.83% 15.82%
Five-year average annual total
return(2)......................... 10.21% 10.45% N/A
Life-of-Fund average annual total
return(2)......................... 11.09% 10.75% 13.31%
Commencement Date................... 08/05/91 11/15/91 06/21/93
</TABLE>

- ---------------
N/A = Not Applicable

(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or
contingent deferred sales charge for early withdrawal (5% for B shares and
1% for C shares).

(2) Standardized total return. Assumes reinvestment of all distributions for the
periods and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).

See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth more
or less than their original cost.

Market forecasts provided in this report may not necessarily come to pass.

A-10
<PAGE> 45

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL GLOBAL EQUITY FUND

TOP FIVE HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF AS OF
MAY 31, 1997 NOVEMBER 30, 1996
<S> <C> <C> <C>
General Electric Co. ........ 1.9% ................... N/A
Coca Cola Co. ............... 1.7% ................... N/A
Exxon Corp. ................. 1.4% ................... N/A
Korea Fund, Inc. ............ 1.4% ................... N/A
Microsoft Corp. ............. 1.3% ................... 0.6
</TABLE>

N/A=Not Applicable

ASSET ALLOCATION AS A PERCENTAGE OF TOTAL INVESTMENTS

<TABLE>
<CAPTION>
AS OF MAY 31, 1997 AS OF NOVEMBER 30, 1996
<S> <C> <C> <C>
Stocks..................... 96.2% Stocks..................... 91.6%
Repurchase Agreements...... 3.8% Repurchase Agreements...... 7.8%
Convertibles............... 0.6%
</TABLE>

TOP TEN COUNTRIES AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF MAY 31, 1997 AS OF NOVEMBER 30, 1996
<S> <C> <C> <C>
United States.............. 47.0% United States.............. 32.9%
Japan...................... 12.8% Japan...................... 11.0%
United Kingdom............. 8.3% United Kingdom............. 8.3%
France..................... 5.4% France..................... 5.5%
Germany.................... 4.7% Germany.................... 4.8%
Canada..................... 4.4% Switzerland................ 4.6%
Singapore.................. 3.2% Netherlands................ 4.0%
Switzerland................ 3.1% Hong Kong.................. 3.7%
Spain...................... 2.2% Sweden..................... 2.8%
Hong Kong.................. 2.2% Italy...................... 2.7%
</TABLE>

A-11
<PAGE> 46

PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:

- Illustrate the general market environment in which your investments
are being managed

- Reflect the impact of favorable market trends or difficult market
conditions

- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over
the period measured

For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Morgan Stanley Capital
International World (MSCI) Index + Dividends over time. As a broad-based,
unmanaged statistical composite, this index does not reflect any commissions or
fees which would be incurred by an investor purchasing the securities it
represents. Similarly, its performance does not reflect any sales charges or
other costs which would be applicable to an actively managed portfolio, such as
that of the Fund.

A-12
<PAGE> 47

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT

Van Kampen American Capital Global Equity Fund vs. Morgan Stanley Capital
International World (MSCI) Index + Dividends (August 31, 1991 through May 31,
1997)

[CHART]

The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (5.75% for A shares).

While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.

A-13
<PAGE> 48

PORTFOLIO MANAGEMENT REVIEW

VAN KAMPEN AMERICAN CAPITAL GLOBAL EQUITY FUND

The following is an interview with the management team of the Van Kampen
American Capital Global Equity Fund. Through March 31, 1997, the Fund was co-
managed by portfolio managers Jeff D. New, Van Kampen American Capital (U.S.
holdings), portfolio manager Peter Kysel, John Govett & Co. Limited
(international holdings), and Alan T. Sachtleban, Van Kampen American Capital,
chief investment officer for equity investments. As of April 1, 1997, the Fund
is managed by portfolio managers Barton M. Biggs, Madhav Dhar, Francine J.
Bovich, and Ann D. Thivierge, Morgan Stanley Asset Management Inc.

Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND
OPERATED DURING THE 12-MONTH PERIOD ENDED MAY 31, 1997?

A During the period, there were several prevailing trends in the global
marketplace:

- - Interest rates fell across Europe as countries worked to meet inflation and
budget deficit criteria required for inclusion into the European Monetary
Union (EMU), scheduled for January 1, 1999. The tight fiscal policies allowed
long-term interest rates to decline, especially in peripheral European
countries whose bond yields had previously included a larger inflation risk
factor. Lower interest rates, in turn provided a healthy environment for
equity prices. The following table displays changes in 10-year government bond
yields over the fiscal year:

<TABLE>
<CAPTION>
PERCENTAGE
MAY 31, 1997 MAY 31, 1996 CHANGE
<S> <C> <C> <C>
Italy................ 7.33% ............ 9.67% ............ -24.2%
Spain................ 6.68% ............ 9.25% ............ -27.8%
Germany.............. 5.93% ............ 6.51% ............ -8.9%
France............... 5.81% ............ 6.49% ............ -10.5%
Belgium.............. 6.01% ............ 6.72% ............ -10.6%
Netherlands.......... 5.78% ............ 6.39% ............ -9.5%
</TABLE>

- - Many Pacific Rim economies experienced a mild slowdown in growth rates,
primarily because of weak demand and pricing for electronic exports. Also,
Thailand and South Korea struggled with the loss of economic competitiveness
to lower-wage nations such as China, Vietnam, and Indonesia. Thailand's
massive trade deficit created fears that its currency would be devalued.

- - Economic growth in the United States surged in the first quarter, leading to
concerns that the Federal Reserve Board would raise interest rates
aggressively to head off possible inflation. Continued robust growth in
corporate profits

A-14
<PAGE> 49

supported higher U.S. equity prices despite a mild increase in short- and long-
term interest rates over the fiscal year.

- - Japan's economy continued to recover at a moderate pace, held up in large part
by exports (due to the weak Yen) and very loose monetary conditions.

Q
WHAT SIGNIFICANT INVESTMENT TECHNIQUES AND STRATEGIES WERE USED TO PURSUE
THE FUND'S INVESTMENT OBJECTIVES?
A
As a result of our top-down analysis of global markets, we took the
following approach to regional allocations at the end of the fiscal year,
relative to the Morgan Stanley Capital International (MSCI) World Index:

- - A neutral position in Europe, with a slight overweighting in Germany and Spain

- - A mild overweighting in developed Asia, especially in Singapore and Hong Kong

- - A moderate underweighting in both the United States and Japan

HOW HAS THE FUND PERFORMED DURING THE REPORTING PERIOD?
A
We are pleased to report that the Fund achieved a 12-month total return
of 17.67 percent(1) (Class A shares at net asset value). This compares
favorably to the Morgan Stanley Capital International World Index, which
produced a total return of 8.87 percent during the same period. Please keep in
mind that the index is an unmanaged index used as a benchmark for general global
equity funds. It does not reflect any commissions or fees that would be paid by
an investor purchasing the securities it represents. Please refer to the chart
on page three for additional Fund performance results.

WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A
We expect the rate of global economic activity to accelerate, with only a
moderate pick-up in inflation from current levels. We also anticipate
that consumer spending will increase, especially in Europe and Japan,
giving corporations some relief from the intense pricing pressures of recent
years. Overall, the pattern of moderate but accelerating growth with only mild
increases in inflation and interest rates will create a favorable backdrop for
global equity prices. In Europe, we anticipate that progress towards monetary
union will continue, although the election of leftist-leaning political groups
in France increases the risk of delay in implementation. We also believe that
growth in the Pacific Basin should rebound from its current cyclically depressed
level. In the United States, we find stock prices to be generously valued, in
part because of extreme optimism over the future growth
A-15
<PAGE> 50

rate of corporate profits. Accordingly, we prefer to take a defensive approach
to the domestic equity market.

<TABLE>
<S> <C>
/s/ BARTON M. BIGGS /s/ MADHAV DHAR

Barton M. Biggs Madhav Dhar
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Morgan Stanley Asset Management
Inc. Inc.

/s/ FRANCINE J. BOVICH /s/ ANN D. THIVIERGE

Francine J. Bovich Ann D. Thivierge
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Morgan Stanley Asset Management
Inc. Inc.
</TABLE>

A-16
<PAGE> 51

FUND SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666.

DEALERS--FOR INFORMATION
WITH RESPECT TO THE
REORGANIZATION CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666.

FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 772-8889.

FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 421-5684.
MORGAN STANLEY GLOBAL
EQUITY ALLOCATION FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181

Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, IL 60181

Investment Subadviser
MORGAN STANLEY ASSET
MANAGEMENT, INC.
1221 Avenue of the Americas
New York, New York 10020

Distributor
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181

Transfer Agent
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, MO 64141-9256

Administrator and Domestic Custodian
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108-3913

Foreign Custodian
Morgan Stanley Trust Company
Brooklyn, NY

Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

Independent Accountants
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
<PAGE> 52

PROSPECTUS/PROXY STATEMENT

MORGAN STANLEY GLOBAL EQUITY ALLOCATION FUND
RELATING TO THE ACQUISITION OF ASSETS AND LIABILITIES OF

VAN KAMPEN AMERICAN CAPITAL
GLOBAL EQUITY FUND

APRIL 14, 1998
------------------------------------------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
THE PROPOSED REORGANIZATION......................................... 3
A. SUMMARY..................................................... 3
The Reorganization........................................ 3
Reasons for the Proposed Reorganization................... 4
Comparison of the MS Global Equity Allocation Fund and the
VKAC Global Equity Fund................................. 6
B. RISK FACTORS................................................ 19
Similarity of Risks....................................... 19
Differences in Risks...................................... 20
C. THE PROPOSED REORGANIZATION................................. 21
Terms of the Agreement.................................... 21
Description of Securities to be Issued.................... 23
Continuation of Shareholder Accounts and Plans; Share
Certificates.............................................. 24
Federal Income Tax Consequences........................... 24
Expenses.................................................. 26
Ratification of Investment Objective, Investment Policies
and Investment Restrictions of the MS Global Equity
Allocation Fund......................................... 27
Legal Matters............................................. 27
D. RECOMMENDATION OF THE BOARD................................. 27
OTHER INFORMATION................................................... 27
A. SHAREHOLDERS OF THE MS GLOBAL EQUITY ALLOCATION FUND AND THE
VKAC GLOBAL EQUITY FUND................................... 27
B. SHAREHOLDER PROPOSALS....................................... 28
VOTING INFORMATION AND REQUIREMENTS................................. 28
EXHIBIT A: MANAGEMENT'S DISCUSSION OF MS GLOBAL EQUITY ALLOCATION
FUND AND VKAC GLOBAL EQUITY FUND PERFORMANCE...................... A-1
</TABLE>

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-- A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH --

VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------------