<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 1999
REGISTRATION NOS.: 333-06935
811-7683
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 6 [X]
----------------
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
DAVID M. BUTOWSKY, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
immediately upon filing pursuant to paragraph (b)
-----
on (date) pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a)
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X on September 27, 1999 pursuant to paragraph (a) of rule 485.
-----
----------------
AMENDING THE PROSPECTUS
================================================================================
<PAGE>
PROSPECTUS - SEPTEMBER 27, 1999
Morgan Stanley Dean Witter
---------------------------------------------------------------------
SPECIAL VALUE FUND
A MUTUAL FUND THAT SEEKS LONG-TERM CAPITAL APPRECIATION
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
CONTENTS
The Fund Investment Objective................................1
Principal Investment Strategies.....................1
Principal Risks.....................................1
Past Performance....................................2
Fees and Expenses...................................3
Additional Investment Strategy Information..........4
Additional Risk Information.........................5
Fund Management.....................................7
Shareholder Information Pricing Fund Shares.................................8
How to Buy Shares...................................8
How to Exchange Shares..............................9
How to Sell Shares.................................11
Distributions......................................13
Tax Consequences...................................13
Share Class Arrangements...........................14
Financial Highlights ...................................................21
Our Family of Funds .................................... Inside Back Cover
This Prospectus contains important information about
the Fund. Please read it carefully and keep it for
future reference.
<PAGE>
THE FUND
[GRAPHIC OMITTED]
INVESTMENT OBJECTIVE
- ---------------------------------
Morgan Stanley Dean Witter Special Value Fund seeks long-term capital
appreciation.
[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------
(side bar)
CAPITAL APPRECIATION
An investment objective having the goal of selecting securities with the
potential to rise in price rather than pay out income.
(end side bar)
The Fund will normally invest at least 65% of its total assets in common stocks
of small companies that the Fund's "Investment Manager," Morgan Stanley Dean
Witter Advisors Inc., believes are undervalued relative to the marketplace or
similar companies. Companies within a capitalization range of $100 million to $1
billion are considered small companies. In deciding which securities to buy,
hold or sell, the Investment Manager will pursue a value oriented approach that
seeks to identify securities whose market value is less than their intrinsic
value. The Investment Manager will focus on securities with market-to-book
ratios and price-earnings ratios that are lower than those of the general market
averages or similar companies. The Investment Manager also may consider a
company's dividend yield, growth in sales, balance sheet, management
capabilities, earnings and cash flow, as well as other factors.
As part of the value-oriented approach, the Investment Manager may also seek to
identify companies with growth opportunities that are not fairly valued in the
marketplace. These growth opportunities may include valuable franchises or
other intangibles, ownership of trademarks or trade names, control of
distribution networks, ownership of undervalued real estate, and other factors
that would identify the company as a potential takeover target or turnaround
candidate. In addition, the Investment Manager may select securities because it
believes there is some potential catalyst to cause a stock's price to rise. A
catalyst might include increased investor attention, asset sales, corporate
reorganizations, a cyclical turnaround of a depressed business or industry, a
new product/innovation, significant changes in management, or regulatory
shifts.
In addition, the Fund may invest in common stocks of medium-sized and large
companies, convertible and non-convertible fixed-income securities, and foreign
securities (including depository receipts).
Common stock is a share ownership or equity interest in a corporation. It may
or may not pay dividends, as some companies reinvest all of their profits back
into their businesses, while others pay out some of their profits to
shareholders as dividends. A depository receipt is generally issued by a bank
or financial institution and represents an ownership interest in the common
stock or other equity securities of a foreign company.
In pursuing the Fund's investment objective, the Investment Manager has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis -- and which trading strategies it uses. For example, the
Investment Manager in its discretion may determine to use some permitted
trading strategies while not using others.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
- ----------------------------
There is no assurance that the Fund will achieve its investment objective. The
Fund's share price will fluctuate with changes in the market value of the
Fund's portfolio securities. When you sell Fund shares, they may be worth less
than what you paid for them and, accordingly, you can lose money investing in
this Fund.
1
<PAGE>
A principal risk of investing in the Fund is associated with its investments in
common stocks. In general, stock values fluctuate in response to activities
specific to the company as well as general market, economic and political
conditions. These prices can fluctuate widely.
Investing in securities of small companies may involve greater risk than is
customarily associated with investing in more established companies. Often,
small companies and the industries in which they are focused are still
evolving, and they are more sensitive to changing market conditions than larger
companies in more established industries. Small companies often have limited
product lines, financial resources and less experienced management. As a
consequence, their securities may be more volatile and have returns that vary,
sometimes significantly, from the overall stock market. Securities of small
companies also may be less liquid than established companies.
OTHER RISKS. The performance of the Fund also will depend on whether the
Investment Manager is successful in pursuing the Fund's investment strategy.
The Fund is also subject to other risks from its permissible investments
including the risks associated with the common stocks of medium-sized and large
companies, convertible and non-convertible fixed-income securities, and foreign
securities.
Shares of the Fund are not bank deposits and are not guaranteed or insured by
the FDIC or any other government agency.
[GRAPHIC OMITTED]
PAST PERFORMANCE
- -----------------------------
The bar chart and table below provide some indication of the risks of investing
in the Fund. The Fund's past performance does not indicate how the Fund will
perform in the future.
(side bar)
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's Class B shares has varied
from year to year over the past 2 calendar years.
(end side bar)
ANNUAL TOTAL RETURNS -- CALENDAR YEARS
1997 0
'98 0
The bar chart reflects the performance of Class B shares; the performance of
the other Classes will differ because the Classes have different ongoing fees.
The performance information in the bar chart does not reflect the deduction of
sales charges; if these amounts were reflected, returns would be less than
shown. Year-to-date total return as of June 30, 1999 was %.
During the periods shown in the bar chart, the highest return for a calendar
quarter was % (quarter ended ) and the lowest return for a calendar
quarter was % (quarter ended ).
2
<PAGE>
(side bar)
AVERAGE ANNUAL TOTAL RETURNS
This table compares the Fund's average annual returns with those of a broad
measure of market performance over time as well as with an index of funds with
similar investment objectives. The Fund's returns include the maximum
applicable sales charge for each Class and assume you sold your shares at the
end of each period.
(end side bar)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
- --------------------------------------------------------------------------------
LIFE OF THE FUND
PAST 1 YEAR (SINCE OCTOBER 29, 1996)
<S> <C> <C>
- --------------------------------------------------------------------------------
Class A(1) % --
- --------------------------------------------------------------------------------
Class B % %
- --------------------------------------------------------------------------------
Class C(1) % --
- --------------------------------------------------------------------------------
Class D(1) % --
- --------------------------------------------------------------------------------
S&P 500 Index(2) % %
- --------------------------------------------------------------------------------
Lipper Small Cap Funds Index(3) % %
- --------------------------------------------------------------------------------
</TABLE>
1 Classes A, C and D commenced operations on July 28, 1997.
2 The Standard & Poor's (Registered Trademark) 500 Stock Price Index is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The performance of the Index
does not include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
3 The Lipper Small Cap Funds Index is an equally-weighted performance index of
the largest qualifying funds (based on net assets) in the small cap funds
objective. The index, which is adjusted for capital gains distributions and
income dividends, is unmanaged and should not be considered an investment.
There are currently [30] funds represented in this index.
[GRAPHIC OMITTED]
FEES AND EXPENSES
- ------------------------------
The table below briefly describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund offers four Classes of shares:
Classes A, B, C and D. Each Class has a different combination of fees, expenses
and other features. The Fund does not charge account or exchange fees. See the
"Share Class Arrangements" section for further fee and expense information.
(side bar)
SHAREHOLDER FEES
These fees are paid directly from your investment.
ANNUAL FUND OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended July 31, 1999.
(end side bar)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.25%(1) None None None
- --------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or net asset value at redemption) None(2) 5.00%(3) 1.00%(4) None
- --------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------------------------------------
Management fee % % % %
- --------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25% 1.00% 1.00% None
- --------------------------------------------------------------------------------------------------------------
Other expenses % % % %
- --------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses % % % %
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of purchase
are subject to a CDSC of 1.00% that will be imposed if you sell your shares
within one year after purchase, except for certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
4 Only applicable if you sell your shares within one year after purchase.
3
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, the tables below show your
costs at the end of each period based on these assumptions depending upon
whether or not you sell your shares at the end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------- --------------------------------------------
CLASS A $ $ $ $ $ $ $ $
- --------------------------------------------------------- --------------------------------------------
CLASS B $ $ $ $ $ $ $ $
- --------------------------------------------------------- --------------------------------------------
CLASS C $ $ $ $ $ $ $ $
- --------------------------------------------------------- --------------------------------------------
CLASS D $ $ $ $ $ $ $ $
- --------------------------------------------------------- --------------------------------------------
</TABLE>
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers.
[GRAPHIC OMITTED]
ADDITIONAL INVESTMENT STRATEGY INFORMATION
- -------------------------------------------------------
This section provides additional information relating to the Fund's principal
strategies.
OTHER COMMON STOCKS AND FIXED-INCOME SECURITIES. The Fund may invest up to 35%
of its total assets in common stocks of medium-sized and large companies,
convertible securities, and fixed-income securities. The fixed-income
securities in which the Fund may invest include U.S. government securities and
corporate debt securities.
JUNK BONDS. The Fund may invest up to 20% of its assets in convertible
securities rated below investment grade or, if unrated, of comparable quality
as determined by the Investment Manager. In addition, the Fund may invest up to
5% of its assets in fixed-income securities rated below investment grade or, if
unrated, of comparable quality as determined by the Investment Manager.
Securities below investment grade are commonly known as "junk bonds."
FOREIGN SECURITIES. The Fund may invest in foreign securities (including
depository receipts) that are listed in the U.S. on a national securities
exchange.
DEFENSIVE INVESTING. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets in cash or money market instruments in a defensive posture
when the Investment Manager believes it is advisable to do so. Although taking
a defensive posture is designed to protect the Fund from an anticipated market
downturn, it could have the effect of reducing the benefit from any upswing in
the market. When the Fund takes a defensive position, it may not achieve its
investment objective.
PORTFOLIO TURNOVER. The Fund may engage in active and frequent trading of
portfolio securities to achieve its principal investment strategies. The
portfolio turnover rate is not expected to exceed 150% annually under normal
circumstances. A high turnover
4
<PAGE>
rate, such as 150%, will increase Fund brokerage costs. It also may increase
the Fund's capital gains, which are passed along to Fund shareholders as
distributions. This, in turn may increase your tax liability as a Fund
shareholder. See the sections on "Distributions" and "Tax Consequences."
The percentage limitations relating to the composition of the Fund's portfolio
apply at the time the Fund acquires an investment and refer to the Fund's net
assets unless otherwise noted. Subsequent percentage changes that result from
market fluctuations will not require the Fund to sell any portfolio security.
The Fund may change its principal investment strategies without shareholder
approval; however, you would be notified of any changes.
[GRAPHIC OMITTED]
ADDITIONAL RISK INFORMATION
- ----------------------------------------
This section provides additional information relating to the principal risks of
investing in the Fund.
FIXED-INCOME SECURITIES. Principal risks of investing in the Fund are also
associated with its fixed-income securities. All fixed-income securities are
subject to two types of risk: credit risk and interest rate risk.
Credit risk refers to the possibility that the issuer of a security will be
unable to make interest payments and/or repay the principal on its debt. While
the Fund invests in investment grade securities, certain of these securities
have speculative characteristics.
Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When
the general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up.
CONVERTIBLE SECURITIES. The Fund's investments in convertible securities
subject the Fund to the risks associated with both fixed-income securities and
common stocks. To the extent that a convertible security's investment value is
greater than its conversion value, its price will likely increase when interest
rates fall and decrease when interest rates rise, as with a fixed-income
security. If the conversion value exceeds the investment value, the price of
the convertible security will tend to fluctuate directly with the price of the
underlying equity security.
JUNK BONDS. Any "junk bond" investments of the Fund pose significant risks. The
prices of these securities are likely to be more sensitive to adverse economic
changes or individual corporate developments than higher rated securites.
During an economic downturn or substantial period of rising interest rates,
junk bond issuers and, in particular, highly leveraged issuers may experience
financial stress that would adversely affect their ability to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. In the event of a default, the Fund
may incur additional expenses to seek recovery. In addition, periods of
economic uncertainty and change probably would result in an increased
volatility of market prices of junk bond securities and a corresponding
volatility in the Fund's net asset value.
5
<PAGE>
FOREIGN SECURITIES. The Fund's investments in foreign securities (including
depository receipts) involve risks that are in addition to the risks associated
with domestic securities. One additional risk is currency risk. While the price
of Fund shares is quoted in U.S. dollars, the Fund generally converts U.S.
dollars to a foreign market's local currency to purchase a security in that
market. If the value of that local currency falls relative to the U.S. dollar,
the U.S. dollar value of the foreign security will decrease. This is true even
if the foreign security's local price remains unchanged.
Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation, exchange
control regulation, limitations on the use or transfer of Fund assets and any
effects of foreign social, economic or political instability. Foreign
companies, in general, are not subject to the regulatory requirements of U.S.
companies and, as such, there may be less publicly available information about
these companies. Moreover, foreign accounting, auditing and financial reporting
standards generally are different from those applicable to U.S. companies.
Finally, in the event of a default of any foreign debt obligations, it may be
more difficult for the Fund to obtain or enforce a judgment against the issuers
of the securities.
YEAR 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of the Investment Manager, the Fund's
other service providers and the markets and corporate and governmental issuers
in which the Fund invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the Fund, the Investment Manager and
its affiliates are working hard to avoid any problems and to obtain assurances
from their service providers that they are taking similar steps.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues.
Corporate and governmental data processing errors also may result in production
problems for individual companies and overall economic uncertainties. Earnings
of individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
6
<PAGE>
[GRAPHIC OMITTED]
FUND MANAGEMENT
- ----------------------------
(side bar)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc.,
its wholly-owned subsidiary, has more than $ billion in assets under
management or administration as of August 31, 1999.
(end side bar)
The Fund has retained the Investment Manager -- Morgan Stanley Dean Witter
Advisors Inc. -- to provide administrative services, manage its business affairs
and invest its assets, including the placing of orders for the purchase and sale
of portfolio securities. The Investment Manager is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services. Its main business office is
located at Two World Trade Center, New York, NY 10048.
The Fund's portfolio is managed within the Investment Manager's Growth Group.
Jenny Beth Jones, Senior Vice President of the Investment Manager, has been the
Fund's primary portfolio manager of the Fund since its inception in October
1996; she has been assisted by John S. Roscoe, Vice President of the Investment
Manager, since April 1998. Prior to joining the Investment Manager in August
1996, Ms. Jones was a portfolio manager with Oppenheimer Capital. Prior to
joining the Investment Manager in December 1997, Mr. Roscoe was an equity
analyst with Rockefeller & Co., Inc.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for
Fund expenses assumed by the Investment Manager. The fee is based on the Fund's
average daily net assets. For the fiscal year ended July 31, 1999 the Fund
accrued total compensation to the Investment Manager amounting to % of the
Fund's average daily net assets.
7
<PAGE>
SHAREHOLDER INFORMATION
[GRAPHIC OMITTED]
PRICING FUND SHARES
- --------------------------------
The price of Fund shares (excluding sales charges), called "net asset value,"
is based on the value of the Fund's portfolio securities. While the assets of
each Class are invested in a single portfolio of securities, the net asset
value of each Class will differ because the Classes have different ongoing
distribution fees.
The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time, on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.
The value of the Fund's portfolio securities is based on the securities' market
price when available. When a market price is not readily available, including
circumstances under which the Investment Manager determines that a security's
market price is not accurate, a portfolio security is valued at its fair value,
as determined under procedures established by the Fund's Board of Trustees. In
these cases, the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price.
An exception to the Fund's general policy of using market prices concerns its
short-term debt portfolio securities. Debt securities with remaining maturities
of sixty days or less at the time of purchase are valued at amortized cost.
However, if the cost does not reflect the securities' market value, these
securities will be valued at their fair value.
[GRAPHIC OMITTED]
HOW TO BUY SHARES
- ------------------------------
(side bar)
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (800) THE-DEAN for the telephone number of
the Morgan Stanley Dean Witter office nearest you. You may also access our
office locator on our Internet site at: www.deanwitter.com/funds
(end side bar)
You may open a new account to buy Fund shares or buy additional Fund shares for
an existing account by contacting your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest in the Fund. You
may also purchase shares directly by calling the Fund's transfer agent and
requesting an application.
Because every investor has different immediate financial needs and long-term
investment goals, the Fund offers investors four Classes of shares: Classes A,
B, C and D. Class D shares are only offered to a limited group of investors.
Each Class of shares offers a distinct structure of sales charges, distribution
and service fees, and other features that are designed to address a variety of
needs. Your Financial Advisor or other authorized financial representative can
help you decide which Class may be most appropriate for you. When purchasing
Fund shares, you must specify which Class of shares you wish to purchase.
When you buy Fund shares, the shares are purchased at the next share price
calculated (less any applicable front-end sales charge for Class A shares)
after we receive your purchase order. Your payment is due on the third business
day after you place your purchase order. We reserve the right to reject any
order for the purchase of Fund Shares.
8
<PAGE>
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
- ---------------------------------------------------------------------------------------------------------
MINIMUM INVESTMENT
-----------------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Regular Accounts $5,000 $100
- ---------------------------------------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $5,000 $100
Education IRAs $500 $100
- ---------------------------------------------------------------------------------------------------------
EasyInvest(SM) (Automatically from your
checking or savings account or
Money Market Fund) $500* $500*
- ---------------------------------------------------------------------------------------------------------
* Provided your schedule of investments totals $5,000 in twelve months.
</TABLE>
(side bar)
EASYINVEST(SM)
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
(end side bar)
There is no minimum investment amount if you purchase Fund shares through: (1)
the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.
INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER INVESTORS/CLASS D
SHARES. To be eligible to purchase Class D shares, you must qualify under one
of the investor categories specified in the "Share Class Arrangements" section
of this Prospectus.
SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to buying
additional Fund shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor, you may send a check directly to the
Fund. To buy additional shares in this manner:
o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification
number, the Class of shares you wish to purchase and the investment amount
(which would include any applicable front-end sales charge). The letter must
be signed by the account owner(s).
o Make out a check for the total amount payable to: Morgan Stanley Dean Witter
Special Value Fund.
o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O. Box
1040, Jersey City, NJ 07303.
[GRAPHIC OMITTED]
HOW TO EXCHANGE SHARES
- -----------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of the Fund
for the same Class of any other continuously offered Multi-Class Fund, or for
shares of a No-Load Fund, a Money Market Fund, North American Government Income
Trust or Short-Term U.S. Treasury Trust, without the imposition of an exchange
fee. See the inside back cover of this Prospectus for each Morgan Stanley Dean
Witter Fund's designation as a Multi-Class Fund, No- Load Fund or Money Market
Fund. If a Morgan Stanley Dean Witter Fund is not listed, consult the inside
back cover of that fund's Prospectus for its designation. For purposes of
exchanges, shares of FSC Funds (subject to a front-end sales charge) are
treated as Class A shares of a Multi-Class Fund.
9
<PAGE>
Exchanges may be made after shares of the Fund acquired by purchase have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment. The current Prospectus for each
Fund describes its investment objective(s), policies and investment minimums,
and should be read before investment.
EXCHANGE PROCEDURES. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent -- Morgan Stanley Dean Witter Trust FSB --
and then write the transfer agent or call (800) 869-NEWS to place an exchange
order. You can obtain an exchange privilege authorization form by contacting
your Financial Advisor or other authorized financial representative or by
calling (800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money Market Fund)
is made on the basis of the next calculated net asset values of the Funds
involved after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next calculated net
asset value and the Money Market Fund's shares are purchased at their net asset
value on the following business day.
The Fund may terminate or revise the exchange privilege upon required notice.
The check writing privilege is not available for Money Market Fund shares you
acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley Dean
Witter Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number. Telephone
instructions also may be recorded.
Telephone instructions will be accepted if received by the Fund's transfer
agent between 9:00 a.m. and 4:00 p.m. Eastern time, on any day the New York
Stock Exchange is open for business. During periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Fund in
the past.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the exchange of such shares.
TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the Fund for shares
of another Morgan Stanley Dean Witter Fund there are important tax
considerations. For tax purposes, the exchange out of the Fund is considered a
sale of Fund shares -- and the exchange into the other Fund is considered a
purchase. As a result, you may realize a capital gain or loss.
10
<PAGE>
You should review the "Tax Consequences" section and consult your own tax
professional about the tax consequences of an exchange.
FREQUENT EXCHANGES. A pattern of frequent exchanges may result in the Fund
limiting or prohibiting, at its discretion, additional purchases and/or
exchanges. The Fund will notify you in advance of limiting your exchange
privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements" section of
this Prospectus for a further discussion of how applicable contingent deferred
sales charges (CDSCs) are calculated for shares of one Morgan Stanley Dean
Witter Fund that are exchanged for shares of another.
For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.
[GRAPHIC OMITTED]
HOW TO SELL SHARES
- -------------------------------
You can sell some or all of your Fund shares at any time. If you sell Class A,
Class B or Class C shares, your net sale proceeds are reduced by the amount of
any applicable CDSC. Your shares will be sold at the next price calculated
after we receive your order to sell as described below.
<TABLE>
<S> <C>
OPTIONS PROCEDURES
- --------------------------------------------------------------------------------------------------------
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial
Financial Advisor Advisor or other authorized financial representative.
-----------------------------------------------------------------------------------
[GRAPHIC OMITTED] Payment will be sent to the address to which the account is registered or
deposited in your brokerage account.
- --------------------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction" that includes:
o your account number;
[GRAPHIC OMITTED] o the dollar amount or the number of shares you wish to sell;
o the Class of shares you wish to sell; and
o the signature of each owner as it appears on the account.
-----------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s) or
that payment be sent to any address other than the address of the registered
owner(s) or pre-designated bank account, you will need a signature guarantee.
You can obtain a signature guarantee from an eligible guarantor acceptable to
Morgan Stanley Dean Witter Trust FSB. (You should contact Morgan Stanley
Dean Witter Trust FSB at (800) 869-NEWS for a determination as to whether a
particular institution is an eligible guarantor.) A notary public cannot provide a
signature guarantee. Additional documentation may be required for shares held
by a corporation, partnership, trustee or executor.
-----------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box 983, Jersey
City, NJ 07303. If you hold share certificates, you must return the certificates,
along with the letter and any required additional documentation.
-----------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is
registered, or otherwise according to your instructions.
- --------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
OPTIONS PROCEDURES
- ------------------ ----------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of Funds has
Withdrawal Plan a total market value of at least $10,000, you may elect to withdraw amounts of
$25 or more, or in any whole percentage of a Fund's balance (provided the
[GRAPHIC OMITTED] amount is at least $25), on a monthly, quarterly, semi-annual or annual basis,
from any Fund with a balance of at least $1,000. Each time you add a Fund to the
plan, you must meet the plan requirements.
----------------------------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC may be
waived under certain circumstances. See the Class B waiver categories listed in
the "Share Class Arrangements" section of this Prospectus.
----------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley
Dean Witter Financial Advisor or call (800) 869-NEWS. You may terminate or
suspend your plan at any time. Please remember that withdrawals from the plan
are sales of shares, not Fund "distributions," and ultimately may exhaust your
account balance. The Fund may terminate or revise the plan at any time.
- ------------------ ----------------------------------------------------------------------------------
</TABLE>
PAYMENT FOR SOLD SHARES. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.
Payment may be postponed or the right to sell your shares suspended under
unusual circumstances. If you request to sell shares that were recently
purchased by check, payment of the sale proceeds may be delayed for the minimum
time needed to verify that the check has been honored (not more than fifteen
days from the time we receive the check).
TAX CONSIDERATIONS. Normally, your sale of Fund shares is subject to federal
and state income tax. You should review the "Tax Consequences" section of this
Prospectus and consult your own tax professional about the tax consequences of
a sale.
REINSTATEMENT PRIVILEGE. If you sell Fund shares and have not previously
exercised the reinstatement privilege, you may, within 35 days after the date
of sale, invest any portion of the proceeds in the same Class of Fund shares at
their net asset value and receive a pro rata credit for any CDSC paid in
connection with the sale.
INVOLUNTARY SALES. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through EasyInvestSM, if after
12 months the shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that
will increase the value of your account to at least the required amount before
the sale is processed. No CDSC will be imposed on any involuntary sale.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the sale of such securities.
12
<PAGE>
[GRAPHIC OMITTED]
DISTRIBUTIONS
- --------------------------
(side bar)
TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another Morgan Stanley Dean Witter Fund
that you own. Contact your Morgan Stanley Dean Witter Financial Advisor for
further information about this service.
(end side bar)
The Fund passes substantially all of its earnings from income and capital gains
along to its investors as "distributions." The Fund earns income from stocks and
interest from fixed-income investments. These amounts are passed along to Fund
shareholders as "income dividend distributions." The Fund realizes capital gains
whenever it sells securities for a higher price than it paid for them. These
amounts may be passed along as "capital gain distributions."
The Fund declares income dividends separately for each Class. Distributions
paid on Class A and Class D shares usually will be higher than for Class B and
Class C because distribution fees that Class B and Class C pay are higher.
Normally, income dividends are distributed to shareholders annually. Capital
gains, if any, are distributed in December. The Fund, however, may retain and
reinvest any long-term capital gains. The Fund may at times make payments from
sources other than income or capital gains that represent a return of a portion
of your investment.
Distributions are reinvested automatically in additional shares of the same
Class and automatically credited to your account, unless you request in writing
that all distributions be paid in cash. If you elect the cash option, the Fund
will mail a check to you no later than seven business days after the
distribution is declared. No interest will accrue on uncashed checks. If you
wish to change how your distributions are paid, your request should be received
by the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at least
five business days prior to the record date of the distributions.
[GRAPHIC OMITTED]
TAX CONSEQUENCES
- -----------------------------
As with any investment, you should consider how your Fund investment will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred retirement
account, such as a 401(k) plan or IRA, you need to be aware of the possible tax
consequences when:
o The Fund makes distributions; and
o You sell Fund shares, including an exchange to another Morgan Stanley Dean
Witter Fund.
TAXES ON DISTRIBUTIONS. Your distributions are normally subject to federal and
state income tax when they are paid, whether you take them in cash or reinvest
them in Fund shares. A distribution also may be subject to local income tax.
Any income dividend distributions and any short-term capital gain distributions
are taxable to you as ordinary income. Any long-term capital gain distributions
are taxable as long-term capital gains, no matter how long you have owned
shares in the Fund.
Every January, you will be sent a statement (IRS Form 1099-DIV) showing the
taxable distributions paid to you in the previous year. The statement provides
full information on your dividends and capital gains for tax purposes.
13
<PAGE>
TAXES ON SALES. Your sale of Fund shares normally is subject to federal and
state income tax and may result in a taxable gain or loss to you. A sale also
may be subject to local income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean Witter Fund is treated for tax purposes like a sale
of your original shares and a purchase of your new shares. Thus, the exchange
may, like a sale, result in a taxable gain or loss to you and will give you a
new tax basis for your new shares.
When you open your Fund account, you should provide your social security or tax
identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax
of 31% on taxable distributions and redemption proceeds. Any withheld amount
would be sent to the IRS as an advance tax payment.
[GRAPHIC OMITTED]
SHARE CLASS ARRANGEMENTS
- -------------------------------------
The Fund offers several Classes of shares having different distribution
arrangements designed to provide you with different purchase options according
to your investment needs. Your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative can help you decide which Class may
be appropriate for you.
The general public is offered three Classes: Class A shares, Class B shares and
Class C shares, which differ principally in terms of sales charges and ongoing
expenses. A fourth Class, Class D shares, is offered only to a limited category
of investors. Shares that you acquire through reinvested distributions will not
be subject to any front-end sales charge or CDSC -- contingent deferred sales
charge. Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide for the
distribution financing of shares of that Class.
The chart below compares the sales charge and maximum annual 12b-1 fee
applicable to each Class:
<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1 FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
A Maximum 5.25% initial sales charge reduced for purchase of
$25,000 or more; shares sold without an initial sales charge are
generally subject to a 1.0% CDSC during the first year 0.25%
- ---------------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to 0%
after six years 1.0%
- ---------------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.0%
- ---------------------------------------------------------------------------------------------------
D None None
- ---------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
CLASS A SHARES Class A shares are sold at net asset value plus an initial sales
charge of up to 5.25%. The initial sales charge is reduced for purchases of
$25,000 or more according to the schedule below. Investments of $1 million or
more are not subject to an initial sales charge, but are generally subject to a
contingent deferred sales charge, or CDSC, of 1.0% on sales made within one year
after the last day of the month of purchase. The CDSC will be assessed in the
same manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of the
average daily net assets of the Class.
The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:
(side bar)
FRONT-END SALES CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges -- the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
(end side bar)
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
PERCENTAGE OF APPROXIMATE PERCENTAGE
------------------------------------------------------
AMOUNT OF SINGLE TRANSACTION PUBLIC OFFERING PRICE OF NET AMOUNT INVESTED
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.25% 5.54%
- -------------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
- -------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
- -------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
- -------------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
- -------------------------------------------------------------------------------------------
$1 million and over 0 0
- -------------------------------------------------------------------------------------------
</TABLE>
The reduced sales charge schedule is applicable to purchases of Class A shares
in a single transaction by:
o A single account (including an individual, trust or fiduciary account).
o Family member accounts (limited to husband, wife and children under the age
of 21).
o Pension, profit sharing or other employee benefit plans of companies and
their affiliates.
o Tax-exempt organizations.
o Groups organized for a purpose other than to buy mutual fund shares.
COMBINED PURCHASE PRIVILEGE. You also will have the benefit of reduced sales
charges by combining purchases of Class A shares of the Fund in a single
transaction with purchases of Class A shares of other Multi-Class Funds and
shares of FSC Funds.
RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales charges
if the cumulative net asset value of Class A shares of the Fund purchased in a
single transaction, together with shares of other Funds you currently own which
were previously purchased at a price including a front-end sales charge
(including shares acquired through reinvestment of distributions), amounts to
$25,000 or more. Also, if you have a cumulative net asset value of all your
Class A and Class D shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase Class D shares of
any Fund subject to the Fund's minimum initial investment requirement.
15
<PAGE>
You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative (or Morgan Stanley Dean Witter Trust FSB if
you purchase directly through the Fund), at the time a purchase order is
placed, that the purchase qualifies for the reduced charge under the Right of
Accumulation. Similar notification must be made in writing when an order is
placed by mail. The reduced sales charge will not be granted if: (i)
notification is not furnished at the time of the order; or (ii) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund shares or
the Fund's transfer agent does not confirm your represented holdings.
LETTER OF INTENT. The schedule of reduced sales charges for larger purchases
also will be available to you if you enter into a written "letter of intent." A
letter of intent provides for the purchase of Class A shares of the Fund or
other Multi-Class Funds or shares of FSC Funds within a thirteen-month period.
The initial purchase under a letter of intent must be at least 5% of the stated
investment goal. To determine the applicable sales charge reduction, you may
also include: (1) the cost of shares of other Morgan Stanley Dean Witter Funds
which were previously purchased at a price including a front-end sales charge
during the 90-day period prior to the distributor receiving the letter of
intent, and (2) the cost of shares of other Funds you currently own acquired in
exchange for shares of Funds purchased during that period at a price including
a front-end sales charge. You can obtain a letter of intent by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve the stated
investment goal within the thirteen-month period, you are required to pay the
difference between the sales charges otherwise applicable and sales charges
actually paid, which may be deducted from your investment.
OTHER SALES CHARGE WAIVERS. In addition to investments of $1 million or more,
your purchase of Class A shares is not subject to a front-end sales charge (or
a CDSC upon sale) if your account qualifies under one of the following
categories:
o A trust for which Morgan Stanley Dean Witter Trust FSB provides discretionary
trustee services.
o Persons participating in a fee-based investment program (subject to all of
its terms and conditions, including mandatory sale or transfer restrictions
on termination) approved by the Fund's distributor pursuant to which they
pay an asset-based fee for investment advisory, administrative and/or
brokerage services.
o Employer-sponsored employee benefit plans, whether or not qualified under the
Internal Revenue Code, for which Morgan Stanley Dean Witter Trust FSB serves
as trustee or Dean Witter Reynolds' Retirement Plan Services serves as
recordkeeper under a written Recordkeeping Services Agreement ("MSDW
Eligible Plans") which have at least 200 eligible employees.
o An MSDW Eligible Plan whose Class B shares have converted to Class A shares,
regardless of the plan's asset size or number of eligible employees.
o A client of a Morgan Stanley Dean Witter Financial Advisor who joined us from
another investment firm within six months prior to the date of purchase of
Fund shares, and you used the proceeds from the sale of shares of a
proprietary mutual
16
<PAGE>
fund of that Financial Advisor's previous firm that imposed either a front-end
or deferred sales charge to purchase Class A shares, provided that: (1) you
sold the shares not more than 60 days prior to the purchase of Fund shares,
and (2) the sale proceeds were maintained in the interim in cash or a money
market fund.
o Current or retired Directors/Trustees of the Morgan Stanley Dean Witter
Funds, such persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.
o Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries, such persons' spouses and children
under the age of 21, and trust accounts for which any of such persons is a
beneficiary.
CLASS B SHARES Class B shares are offered at net asset value with no initial
sales charge but are subject to a contingent deferred sales charge, or CDSC, as
set forth in the table below. For the purpose of calculating the CDSC, shares
are deemed to have been purchased on the last day of the month during which they
were purchased.
(side bar)
CONTINGENT DEFERRED SALES CHARGE OR CDSC
A fee you pay when you sell shares of certain Morgan Stanley Dean Witter Funds
purchased without an initial sales charge. This fee declines the longer you hold
your shares as set forth in the table.
(end side bar)
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE CDSC AS A PERCENTAGE OF AMOUNT REDEEMED
- --------------------------------------------------------------------------------
<S> <C>
First 5.0%
- --------------------------------------------------------------------------------
Second 4.0%
- --------------------------------------------------------------------------------
Third 3.0%
- --------------------------------------------------------------------------------
Fourth 2.0%
- --------------------------------------------------------------------------------
Fifth 2.0%
- --------------------------------------------------------------------------------
Sixth 1.0%
- --------------------------------------------------------------------------------
Seventh and thereafter None
- --------------------------------------------------------------------------------
</TABLE>
Each time you place an order to sell or exchange shares, shares with no CDSC
will be sold or exchanged first, then shares with the lowest CDSC will be sold
or exchanged next. For any shares subject to a CDSC, the CDSC will be assessed
on an amount equal to the lesser of the current market value or the cost of the
shares being sold.
CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the case of:
o Sales of shares held at the time you die or become disabled (within the
definition in Section 72(m)(7) of the Internal Revenue Code which relates to
the ability to engage in gainful employment), if the shares are: (i)
registered either in your name (not a trust) or in the names of you and your
spouse as joint tenants with right of survivorship; or (ii) held in a
qualified corporate or self-employed retirement plan, IRA or 403(b)
Custodial Account, provided in either case that the sale is requested within
one year of your death or initial determination of disability.
o Sales in connection with the following retirement plan "distributions": (i)
lump-sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or, in the case of a "key employee" of
a "top heavy" plan, following attainment of age 59 1/2); (ii) distributions
from an IRA or 403(b) Custodial Account following attainment of age 59 1/2;
or (iii) a tax-free return of an excess IRA contribution (a "distribution"
does not include a direct transfer of IRA, 403(b) Custodial Account or
retirement plan assets to a successor custodian or trustee).
17
<PAGE>
o Sales of shares held for you as a participant in an MSDW Eligible Plan.
o Sales of shares in connection with the Systematic Withdrawal Plan of up to
12% annually of the value of each Fund from which plan sales are made. The
percentage is determined on the date you establish the Systematic Withdrawal
Plan and based on the next calculated share price. You may have this CDSC
waiver applied in amounts up to 1% per month, 3% per quarter, 6%
semi-annually or 12% annually. Shares with no CDSC will be sold first,
followed by those with the lowest CDSC. As such, the waiver benefit will be
reduced by the amount of your shares that are not subject to a CDSC. If you
suspend your participation in the plan, you may later resume plan payments
without requiring a new determination of the account value for the 12% CDSC
waiver.
o Sales of shares that (i) certain unit investment trusts purchased (on which a
sales charge has been paid) or (ii) are attributable to reinvested
distributions from, or the proceeds of, certain unit investment trusts.
All waivers will be granted only following the Fund's distributor receiving
confirmation of your entitlement. If you believe you are eligible for a CDSC
waiver, please contact your Financial Advisor or call (800) 869-NEWS.
DISTRIBUTION FEE. Class B shares are subject to an annual distribution (12b-1)
fee of 1.0% of the average daily net assets of Class B.
CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales charge. The
ten year period runs from the last day of the month in which the shares were
purchased, or in the case of Class B shares acquired through an exchange, from
the last day of the month in which the original Class B shares were purchased;
the shares will convert to Class A shares based on their relative net asset
values in the month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically reinvested
distributions will convert to Class A shares on the same basis. (Class B shares
held before May 1, 1997, however, will convert to Class A shares in May 2007.)
In the case of Class B shares held in an MSDW Eligible Plan, the plan is
treated as a single investor and all Class B shares will convert to Class A
shares on the conversion date of the Class B shares of a Morgan Stanley Dean
Witter Fund purchased by that plan.
Currently, the Class B share conversion is not a taxable event; the conversion
feature may be cancelled if it is deemed a taxable event in the future by the
Internal Revenue Service.
If you exchange your Class B shares for shares of a Money Market Fund, a
No-Load Fund, North American Government Income Trust or Short-Term U.S.
Treasury Trust, the holding period for conversion is frozen as of the last day
of the month of the exchange and resumes on the last day of the month you
exchange back into Class B shares.
EXCHANGING SHARES SUBJECT TO A CDSC. There are special considerations when you
exchange Fund shares that are subject to a CDSC. When determining the length of
time you held the shares and the corresponding CDSC rate, any period (starting
at the
18
<PAGE>
end of the month) during which you held shares of a fund that does not charge a
CDSC will not be counted. Thus, in effect the "holding period" for purposes of
calculating the CDSC is frozen upon exchanging into a fund that does not charge
a CDSC.
For example, if you held Class B shares of the Fund in a regular account for
one year, exchanged to Class B of another Morgan Stanley Dean Witter
Multi-Class Fund for another year, then sold your shares, a CDSC rate of 4%
would be imposed on the shares based on a two year holding period -- one year
for each Fund. However, if you had exchanged the shares of the Fund for a Money
Market Fund (which does not charge a CDSC) instead of the Multi-Class Fund,
then sold your shares, a CDSC rate of 5% would be imposed on the shares based
on a one year holding period. The one year in the Money Market Fund would not
be counted. Nevertheless, if shares subject to a CDSC are exchanged for a Fund
that does not charge a CDSC, you will receive a credit when you sell the shares
equal to the distribution (12b-1) fees, if any, you paid on those shares while
in that Fund up to the amount of any applicable CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley Dean
Witter Fund subject to a higher CDSC rate will be subject to the higher rate,
even if the shares are re-exchanged into a Fund with a lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no initial sales
charge but are subject to a CDSC of 1.0% on sales made within one year after the
last day of the month of purchase. The CDSC will be assessed in the same manner
and with the same CDSC waivers as with Class B shares.
DISTRIBUTION FEE. Class C shares are subject to an annual distribution (12b-1)
fee of up to 1.0% of the average daily net assets of that Class. The Class C
shares' distribution fee may cause that Class to have higher expenses and pay
lower dividends than Class A or Class D shares. Unlike Class B shares, Class C
shares have no conversion feature and, accordingly, an investor that purchases
Class C shares may be subject to distribution (12b-1) fees applicable to Class
C shares for an indefinite period.
CLASS D SHARES Class D shares are offered without any sales charge on purchases
or sales and without any distribution (12b-1) fee. Class D shares are offered
only to investors meeting an initial investment minimum of $5 million ($25
million for MSDW Eligible Plans) and the following investor categories:
o Investors participating in the Investment Manager's mutual fund asset
allocation program (subject to all of its terms and conditions, including
mandatory sale or transfer restrictions on termination) pursuant to which
they pay an asset-based fee.
o Persons participating in a fee-based investment program (subject to all of
its terms and conditions, including mandatory sale or transfer restrictions
on termination) approved by the Fund's distributor pursuant to which they
pay an asset-based fee for investment advisory, administrative and/or
brokerage services.
o Employee benefit plans maintained by Morgan Stanley Dean Witter & Co. or any
of its subsidiaries for the benefit of certain employees of Morgan Stanley
Dean Witter & Co. and its subsidiaries.
o Certain unit investment trusts sponsored by Dean Witter Reynolds.
19
<PAGE>
o Certain other open-end investment companies whose shares are distributed by
the Fund's distributor.
o Investors who were shareholders of the Dean Witter Retirement Series on
September 11, 1998 for additional purchases for their former Dean Witter
Retirement Series accounts.
MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million ($25 million for
MSDW Eligible Plans) initial investment to qualify to purchase Class D shares
you may combine: (1) purchases in a single transaction of Class D shares of the
Fund and other Morgan Stanley Dean Witter Multi-Class Funds and/or (2) previous
purchases of Class A and Class D shares of Multi-Class Funds and shares of FSC
Funds you currently own, along with shares of Morgan Stanley Dean Witter Funds
you currently own that you acquired in exchange for those shares.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash
payment representing an income dividend or capital gain and you reinvest that
amount in the applicable Class of shares by returning the check within 30 days
of the payment date, the purchased shares would not be subject to an initial
sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12b-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company Act of
1940 with respect to the distribution of Class A, Class B and Class C shares.
The Plan allows the Fund to pay distribution fees for the sale and distribution
of these shares. It also allows the Fund to pay for services to shareholders of
Class A, Class B and Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase the cost
of your investment in these Classes and may cost you more than paying other
types of sales charges.
20
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the life of the Fund. Certain information reflects
financial results for a single Fund share throughout each year. The total
returns in the table represent the rate an investor would have earned or lost
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by , independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 29,
1996*
THROUGH
FOR THE YEAR ENDED JULY 31, 1999 1998 JULY 31, 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS B SHARES
- ---------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period $ $ $
- ---------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss
Net realized and unrealized gain (loss)
Total income (loss) from investment operations ----- ----- -----
- ---------------------------------------------------------------------------------------
Less dividends and distributions:
In excess of net investment income
From net realized gain
Total dividends and distributions ----- ----- -----
- ---------------------------------------------------------------------------------------
Net asset value, end of period
- ---------------------------------------------------------------------------------------
TOTAL RETURN+
- ---------------------------------------------------------------------------------------
RATIOS TO AVERATE NET ASSETS:
- ---------------------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------------------
Net investment loss
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------
Net assets, end of period, in thousands
- ---------------------------------------------------------------------------------------
Portfolio turnover rate
- ---------------------------------------------------------------------------------------
* Commencement of operations.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 29,
1996*
THROUGH
FOR THE YEAR ENDED JULY 31, 1999 1998 JULY 31, 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
- ---------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period
- ---------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss
Net realized and unrealized gain
Total income from investment operations ----- ----- -----
- ---------------------------------------------------------------------------------------
Less distributions from
Net realized gain
Net asset value, end of period ----- ----- -----
- ---------------------------------------------------------------------------------------
TOTAL RETURN
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------------------
Net investment loss
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------
Net assets, end of period, in thousands
- ---------------------------------------------------------------------------------------
Portfolio turnover rate
- ---------------------------------------------------------------------------------------
CLASS C SHARES
- ---------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period
- ---------------------------------------------------------------------------------------
Income (loss) from Investment operations:
Net investment loss
Net realized and unrealized gain
Total income from investment operations ----- ----- -----
- ---------------------------------------------------------------------------------------
Less distributions from
Net realized gain
Net asset value, end of period ----- ----- -----
- ---------------------------------------------------------------------------------------
TOTAL RETURN+
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------------------
Net investment loss
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------
Net assets, end of period, in thousands
- ---------------------------------------------------------------------------------------
Portfolio turnover rate
- ---------------------------------------------------------------------------------------
* The date shares were first issued.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 29,
1996*
THROUGH
FOR THE YEAR ENDED JULY 31, 1999 1998 JULY 31, 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS D SHARES
- ---------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period
- ---------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss
Net realized and unrealized gain
Total income from investment operations
- ---------------------------------------------------------------------------------------
Less distributions from
Net realized gain
Net asset value, end of period
- ---------------------------------------------------------------------------------------
TOTAL RETURN+
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------------------
Net investment loss
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------
Net assets, end of period, in thousands
- ---------------------------------------------------------------------------------------
Portfolio turnover rate
- ---------------------------------------------------------------------------------------
* The date shares were first issued.
</TABLE>
23
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds
offers investors a wide range of investment choices.
Come on in and meet the family!
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GROWTH FUNDS GROWTH FUNDS Health Sciences Trust
Aggressive Equity Fund Information Fund
American Opportunities Fund Natural Resource Development Securities
Capital Growth Securities Precious Metals and Minerals Trust
Developing Growth Securities GLOBAL/INTERNATIONAL FUNDS
Equity Fund Competitive Edge Fund - "Best Ideas" Portfolio
Growth Fund European Growth Fund
Market Leader Trust Fund of Funds - International Portfolio
Mid-Cap Equity Trust International Fund
Small Cap Growth Fund International SmallCap Fund
Special Value Fund Japan Fund
Value Fund Latin American Growth Fund
THEME FUNDS Pacific Growth Fund
Financial Services Trust
- ----------------------------------------------------------------------------------------------------------------------
GROWTH & INCOME FUNDS Balanced Growth Fund Strategist Fund
Balanced Income Fund Total Return Trust
Convertible Securities Trust Value/Added Market Series/Equity Portfolio
Dividend Growth Securities THEME FUNDS
Fund of Funds - Domestic Portfolio Global Utilities Fund
Income Builder Fund Real Estate Fund
Mid-Cap Dividend Growth Securities Utilities Fund
S&P 500 Index Fund GLOBAL FUNDS
S&P 500 Select Fund Global Dividend Growth Securities
- ----------------------------------------------------------------------------------------------------------------------
INCOME FUNDS GOVERNMENT INCOME FUNDS GLOBAL INCOME FUNDS
Federal Securities Trust North American Government Income Trust
Short-Term U.S. Treasury Trust World Wide Income Trust
U.S. Government Securities Trust TAX-FREE INCOME FUNDS
DIVERSIFIED INCOME FUNDS California Tax-Free Income Fund
Diversified Income Trust Hawaii Municipal Trust(FSC)
CORPORATE INCOME FUNDS Limited Term Municipal Trust(NL)
High Yield Securities Multi-State Municipal Series Trust(FSC)
Intermediate Income Securities New York Tax-Free Income Fund
Short-Term Bond Fund(NL) Tax-Exempt Securities Trust
- ----------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Liquid Asset Fund(MM) California Tax-Free Daily Income Trust(MM)
U.S. Government Money Market Trust(MM) New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
</TABLE>
There may be Funds created after this Prospectus was published. Please consult
the inside back cover of a new Fund's prospectus for its designations, e.g.,
Multi-Class Fund or Money Market Fund.
Each listed Morgan Stanley Dean Witter Fund except for North American
Government Income Trust and Short-Term U.S. Treasury Trust is a Multi-Class
Fund, which is a mutual fund offering multiple Classes of shares. The other
types of Funds are: NL -- No-Load (Mutual) Fund; MM -- Money Market Fund; FSC
- -- A mutual fund sold with a front-end sales charge and a distribution (12b-1)
fee.
<PAGE>
MORGAN STANLEY DEAN WITTER
SPECIAL VALUE FUND
Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
The Fund's Statement of Additional Information also provides additional
information about the Fund. The Statement of Additional Information is
incorporated herein by reference (legally is part of this Prospectus). For a
free copy of any of these documents, to request other information about the
Fund, or to make shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
WWW.DEANWITTER.COM/FUNDS
Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, upon payment of
a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, DC 20549-6009.
(side bar)
TICKER SYMBOLS:
Class A: SVFAX
- ---------------------------
Class B: SVFBX
- ---------------------------
Class C: SVFCX
- ---------------------------
Class D: SVFDX
- ---------------------------
(end side bar)
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7683)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY DEAN WITTER
SPECIAL VALUE FUND
SEPTEMBER 27, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated September 27, 1999) for the Morgan Stanley Dean Witter
Special Value Fund may be obtained without charge from the Fund at its address
or telephone number listed below or from Dean Witter Reynolds at any of its
branch offices.
Morgan Stanley Dean Witter Special Value Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
I. Fund History ......................................................... 4
II. Description of the Fund and Its Investments and Risks ................ 4
A. Classification ................................................. 4
B. Investment Strategies and Risks ................................ 4
C. Fund Policies/Investment Restrictions .......................... 9
III. Management of the Fund ............................................... 11
A. Board of Trustees .............................................. 11
B. Management Information ......................................... 11
C. Compensation ................................................... 15
IV. Control Persons and Principal Holders of Securities .................. 17
V. Investment Management and Other Services ............................. 17
A. Investment Manager ............................................. 17
B. Principal Underwriter .......................................... 18
C. Services Provided by the Investment Manager and Fund Expenses
Paid by Third Parties ....................................... 18
D. Dealer Reallowances ............................................ 19
E. Rule 12b-1 Plan ................................................ 19
F. Other Service Providers ........................................ 23
VI. Brokerage Allocation and Other Practices ............................. 23
A. Brokerage Transactions ......................................... 23
B. Commissions .................................................... 24
C. Brokerage Selection ............................................ 24
D. Directed Brokerage ............................................. 25
E. Regular Broker-Dealers ......................................... 25
VII. Capital Stock and Other Securities ................................... 25
VIII. Purchase, Redemption and Pricing of Shares ........................... 26
A. Purchase/Redemption of Shares .................................. 26
B. Offering Price ................................................. 27
IX. Taxation of the Fund and Shareholders ................................ 27
X. Underwriters ......................................................... 29
XI. Calculation of Performance Data ...................................... 29
XII. Financial Statements ................................................. 31
</TABLE>
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
The terms defined in this glossary are frequently used in this Statement
of Additional Information (other terms used occasionally are defined in the
text of the document).
"Custodian" -- The Bank of New York.
"Dean Witter Reynolds" -- Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"Distributor" -- Morgan Stanley Dean Witter Distributors Inc., a
wholly-owned broker-dealer subsidiary of MSDW.
"Financial Advisors" -- Morgan Stanley Dean Witter authorized financial
services representatives.
"Fund" -- Morgan Stanley Dean Witter Special Value Fund, a registered
open-end investment company.
"Investment Manager" -- Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.
"Independent Trustees" -- Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.
"Morgan Stanley & Co." -- Morgan Stanley & Co. Incorporated, a
wholly-owned broker-dealer subsidiary of MSDW.
"Morgan Stanley Dean Witter Funds" -- Registered investment companies (i)
for which the Investment Manager serves as the investment advisor and (ii) that
hold themselves out to investors as related companies for investment and
investor services.
"MSDW" -- Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.
"MSDW Services Company" -- Morgan Stanley Dean Witter Services Company
Inc., a wholly-owned fund services subsidiary of the Investment Manager.
"Transfer Agent" -- Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.
"Trustees" -- The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on June 21, 1996, with the name Dean Witter Special Value
Fund. Effective June 22, 1998, the Fund's name was changed to Morgan Stanley
Dean Witter Special Value Fund.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end, diversified management investment company whose
investment objective is to seek long-term capital appreciation.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information," and "Additional Risk Information."
STOCK INDEX FUTURES CONTRACTS. The Fund may invest in stock index futures
contracts. Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account. An index futures contract sale creates an obligation by the
Fund, as seller, to deliver cash at a specified future time. An index futures
contract purchase would create an obligation by the Fund, as purchaser, to take
delivery of cash at a specified future time.
The Fund will purchase or sell stock index futures contracts for the
purpose of hedging its equity portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that the
prices of stock held by the Fund may fall, the Fund may sell a stock index
futures contract. Conversely, if the Investment Manager wishes to hedge against
anticipated price rises in those stocks which the Fund intends to purchase, the
Fund may purchase stock index futures contracts. In addition, stock index
futures contracts will be bought or sold in order to close out a short or long
position in a corresponding futures contract.
A futures contract sale is closed out by effecting a futures contract
purchase for the same aggregate amount of the specific type of security and the
same delivery date. If the sale price exceeds the offsetting purchase price,
the seller would be paid the difference and would realize a gain. If the
offsetting purchase price exceeds the sale price, the seller would pay the
difference and would realize a loss. Similarly, a futures contract purchase is
closed out by effecting a futures contract sale for the same aggregate amount
of the specific type of security and the same delivery date. If the offsetting
sale price exceeds the purchase price, the purchaser would realize a gain,
whereas if the purchase price exceeds the offsetting sale price, the purchaser
would realize a loss. There is no assurance that the Fund will be able to enter
into a closing transaction.
Margin. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities
or other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of those
required by the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper termination
of the futures contract. The margin deposits made are marked to market daily
and the Fund may be required to make subsequent deposits of cash or U.S.
Government securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.
4
<PAGE>
Limitations on Futures Contracts. The Fund may enter into futures
contracts provided that not more than 5% of its total assets, after taking into
account unrealized gains and unrealized losses on such contracts it has entered
into. However, there is no overall limitation on the percentage of the Fund's
net assets which may be subject to a hedge position.
Risks of Transactions in Futures Contracts. The prices of indexes subject
to futures contracts (and thereby the futures contract prices) may correlate
imperfectly with the behavior of the cash prices of the Fund's portfolio
securities. Also, prices of futures contracts may not move in tandem with the
changes in prevailing interest rates and market movements against which the
Fund seeks a hedge. A correlation may also be distorted (a) temporarily, by
short-term traders' seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds; (b) by investors in
futures contracts electing to close out their contracts through offsetting
transactions rather than meet margin deposit requirements; (c) by investors in
futures contracts opting to make or take delivery of underlying securities
rather than engage in closing transactions, thereby reducing liquidity of the
futures market; and (d) temporarily, by speculators who view the deposit
requirements in the futures markets as less onerous than margin requirements in
the cash market. Due to the possibility of price distortion in the futures
market and because of the possible imperfect correlation between movements in
the prices of securities and movements in the prices of futures contracts, a
correct forecast of interest rate and/or market movement trends by the
Investment Manager may still not result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for
futures contracts in which the Fund may invest. In the event a liquid market
does not exist, it may not be possible to close out a futures position and, in
the event of adverse price movements, the Fund would continue to be required to
make daily cash payments of variation margin. The absence of a liquid market in
futures contracts might cause the Fund to make or take delivery of the
underlying securities at a time when it may be disadvantageous to do so.
Exchanges also limit the amount by which the price of a futures contract
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased. In the event of adverse price movements, the
Fund would continue to be required to make daily cash payments of variation
margin on open futures positions. In these situations, if the Fund has
insufficient cash, it may have to sell portfolio securities to meet daily
variation margin requirements at a time when it may be disadvantageous to do
so. The inability to close out options and futures positions could also have an
adverse impact on the Fund's ability to effectively hedge its portfolio.
If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in a
segregated account maintained on the books of the Fund, cash, U.S. government
securities or other liquid portfolio securities equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the option.
Such a position may also be covered by owning the securities underlying the
futures contract (in the case of a stock index futures contract a portfolio of
securities substantially replicating the relevant index), or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S. government
securities or other liquid portfolio securities equal to the purchase price of
the contract or the exercise price of the put option (less the amount of
initial or variation margin on deposit) in a segregated account maintained on
the books of the Fund. Alternatively, the Fund could cover its long position by
purchasing a put option on the same futures contract with an exercise price as
high or higher than the price of the contract held by the Fund.
MONEY MARKET SECURITIES. The Fund may invest in various money market
securities for cash management purposes or when assuming a temporary defensive
position, which among others may include commercial paper, bank acceptances,
bank obligations, corporate debt securities, certificates of deposit, U.S.
Government securities, obligations of savings institutions and repurchase
agreements. Such securities are limited to:
5
<PAGE>
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the FDIC), limited to $100,000 principal amount per certificate and to 10%
or less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate; and
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grade by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by a company
having an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and
Repurchase Agreements. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides
that the Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to
the account to maintain full collateralization. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although
this date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are
not subject to any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager subject to procedures established by the Trustees. In addition, as
described above, the value of the collateral underlying the repurchase
agreement will be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling financial institution, the Fund will seek to liquidate
such collateral. However, the exercising of the Fund's right to liquidate such
collateral could involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase were less
than the repurchase price, the Fund could suffer a loss.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to brokers, dealers and other financial institutions, provided that the loans
are callable at any time by the Fund, and are at all times secured by cash or
cash equivalents, which are maintained in a segregated account pursuant to
applicable regulations and that are equal to at least 100% of the market value,
determined daily, of the
6
<PAGE>
loaned securities. The advantage of these loans is that the Fund continues to
receive the income on the loaned securities while at the same time earning
interest on the cash amounts deposited as collateral, which will be invested in
short-term obligations. The Fund will not lend more than 25% of the value of
its total assets.
As with any extensions of credit, there are risks of delay in recovery
and, in some cases, even loss of rights in the collateral should the borrower
of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Fund's management to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price during
the loan period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned securities,
to be delivered within one day after notice, to permit the exercise of the
rights if the matters involved would have a material effect on the Fund's
investment in the loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time the Fund may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment
basis. When these transactions are negotiated, the price is fixed at the time
of the commitment, but delivery and payment can take place a month or more
after the date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the
settlement date, if it is deemed advisable. The securities so purchased or sold
are subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date.
At the time the Fund makes the commitment to purchase or sell securities
on a when-issued, delayed delivery or forward commitment basis, it will record
the transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase
securities on a when-issued, delayed delivery or forward commitment basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Investment Manager determines that issuance of the security is probable. At
that time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At that time, the
Fund will also establish a segregated account on the Fund's books in which it
will maintain cash or cash equivalents or other liquid portfolio securities
equal in value to recognized commitments for such securities.
An increase in the percentage of the Fund's assets committed to the
purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Fund may also sell securities on a
"when, as and if issued" basis provided that the issuance of the security will
result automatically from the exchange or conversion of a security owned by the
Fund at the time of sale.
PRIVATE PLACEMENTS. The Fund may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for resale
pursuant to Rule 144A under the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are
7
<PAGE>
generally referred to as private placements or restricted securities.
Limitations on the resale of these securities may have an adverse effect on
their marketability, and may prevent the Fund from disposing of them promptly
at reasonable prices. The Fund may have to bear the expense of registering the
securities for resale and the risk of substantial delays in effecting the
registration.
Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Investment Manager, pursuant to
procedures adopted by the Trustees, will make a determination as to the
liquidity of each restricted security purchased by the Fund. If a restricted
security is determined to be "liquid," the security will not be included within
the category "illiquid securities," which may not exceed 15% of the Fund's net
assets. However, investing in Rule 144A securities could have the effect of
increasing the level of Fund illiquidity to the extent the Fund, at a
particular point in time, may be unable to find qualified institutional buyers
interested in purchasing such securities.
WARRANTS AND SUBSCRIPTION RIGHTS. The Fund may acquire warrants and/or
rights which are attached to other securities. A warrant is, in effect, an
option to purchase equity securities at a specific price, generally valid for a
specific period of time, and has no voting rights, pays no dividends and has no
rights with respect to the corporation issuing it.
A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the
common stock. A subscription right is freely transferable.
INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments primarily
in commercial real estate properties. Investment in real estate investment
trusts may be the most practical available means for the Fund to invest in the
real estate industry (the Fund is prohibited from investing in real estate
directly). As a shareholder in a real estate investment trust, the Fund would
bear its ratable share of the real estate investment trust's expenses,
including its advisory and administration fees. At the same time the Fund would
continue to pay its own investment management fees and other expenses, as a
result of which the Fund and its shareholders in effect will be absorbing
duplicate levels of fees with respect to investments in real estate investment
trusts.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.
ENHANCED AND SYNTHETIC CONVERTIBLES. The Fund may invest up to 25% of its
total assets in "enhanced" convertible securities. Enhanced convertible
securities offer holders the opportunity to obtain higher current income than
would be available from a traditional equity security issued by the same
company, in return for reduced participation or a cap on appreciation in the
underlying common stock of the issuer which the holder can realize. In
addition, in many cases, enhanced convertible securities are convertible into
the underlying common stock of the issuer automatically at maturity, unlike
traditional convertible securities which are convertible only at the option of
the security holder. Enhanced convertible securities may be more volatile than
traditional convertible securities due to the mandatory conversion feature.
8
<PAGE>
The Fund also may invest up to 10% in "synthetic" convertible securities.
Unlike traditional convertible securities whose conversion values are based on
the common stock of the issuer of the convertible security, "synthetic"
convertible securities are preferred stocks or debt obligations of an issuer
which are combined with an equity component whose conversion value is based on
the value of the common stock of a different issuer or a particular benchmark
(which may include a foreign issuer or basket of foreign stocks, or a company
whose stock is not yet publicly traded). In many cases, "synthetic" convertible
securities are not convertible prior to maturity, at which time the value of
the security is paid in cash by the issuer.
"Synthetic" convertible securities may be less liquid than traditional
convertible securities and their price changes may be more volatile. Reduced
liquidity may have an adverse impact on the Fund's ability to sell particular
synthetic securities promptly at favorable prices and may also make it more
difficult for the Fund to obtain market quotations based on actual trades, for
purposes of valuing the Fund's portfolio securities.
The Fund may invest without limitation in "exchangeable" convertible bonds
and convertible preferred stock which are issued by one company, but
convertible into the common stock of a different publicly traded company. These
securities generally have liquidity trading and risk characteristics similar to
traditional convertible securities.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000
and expect that their systems will be adapted before that date, but there can
be no assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues.
Corporate and governmental data processing errors also may result in production
problems for individual companies and overall economic uncertainties. Earnings
of individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act
of 1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund. The Investment Company Act defines a majority as the lesser of (a) 67% or
more of the shares present at a meeting of shareholders, if the holders of 50%
of the outstanding shares of the Fund are present or represented by proxy; or
(b) more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions: (i) all percentage limitations apply immediately after
a purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund will:
1. Seek long-term capital appreciation.
9
<PAGE>
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities
of one issuer (other than obligations issued or guaranteed by the United
States government, its agencies or instrumentalities), except that the
Fund may invest all or substantially all of its assets in another
registered investment company having the same investment objective and
policies and substantially the same investment restrictions (a
"Qualifying Portfolio").
2. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States government, its
agencies or instrumentalities.
3. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than 3
years of continuous operation. This restriction shall not apply to any
investment in a Qualifying Portfolio or any obligation of the United
States government, its agencies or instrumentalities.
4. Purchase more than 10% of all outstanding voting securities of any
issuer, except that the Fund may invest all or substantially all of its
assets in a Qualifying Portfolio.
5. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.
6. Purchase or sell commodities or commodities contracts, except that the
Fund may purchase or sell financial or index futures contracts and
related options thereon.
7. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Fund may invest
in the securities of companies which operate, invest in, or sponsor
these programs.
8. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
This restriction does not apply to an investment by the Fund in a
Qualifying Portfolio.
9. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% (taken at the lower of
cost or current value) of its total assets (not including the amount
borrowed).
10. Pledge its assets or assign or otherwise encumber them, except to
secure permitted borrowings.
11. Issue senior securities as defined in the Investment Company Act,
except insofar as the Fund may be deemed to have issued a senior
security by reason of (a) entering into any repurchase agreement; (b)
purchasing or selling any futures contracts or options; (c) borrowing
money; (d) purchasing any securities on a when-issued or delayed
delivery basis; or (e) lending portfolio securities.
12. Make loans of money or securities, except: (a) by the purchase of debt
obligations; (b) by investment in repurchase agreements; or (c) by
lending its portfolio securities.
13. Make short sales of securities.
14. Purchase securities on margin, except for short-term loans as are
necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the
purchase of a security on margin.
15. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act in disposing of a
portfolio security.
16. Invest for the purpose of exercising control or management of any
other issuer.
10
<PAGE>
17. Invest in securities of any issuer if in the exercise of reasonable
diligence, the Fund has determined that any officer or trustee/director
of the Fund or of the Investment Manager owns more than 1/2 of 1% of the
outstanding securities of such issuer, and such officers and
trustees/directors who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such issuer.
In addition, the Fund, as a non-fundamental policy, will not invest more
than 5% of the value of its net assets in warrants, including not more than 2%
of such assets in warrants not listed on the New York or American Stock
Exchange. However, the acquisition of warrants attached to other securities is
not subject to this restriction.
III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided
to the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's
own interest or the interest of another person or organization. A Trustee
satisfies his or her duty of care by acting in good faith with the care of an
ordinarily prudent person and in a manner the Trustee reasonably believes to be
in the best interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any
of its affiliated persons and do not own any stock or other securities issued
by the Investment Manager's parent company, MSDW. These are the
"non-interested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with the Investment Manager. All of the
Trustees also serve as Trustees of "Discover Brokerage Index Series," a mutual
fund for which the Investment Manager is the investment advisor.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the 90 Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series, are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------
<S> <C>
Michael Bozic (58) ........................ Vice Chairman of Kmart Corporation (since
Trustee December, 1998); Director or Trustee of the Morgan
c/o Kmart Corporation Stanley Dean Witter Funds and Discover Brokerage
3100 West Big Beaver Road Index Series; formerly Chairman and Chief
Troy, Michigan Executive Officer of Levitz Furniture Corporation
(November, 1995-November, 1998) and President
and Chief Executive Officer of Hills Department
Stores (May, 1991-July, 1995); formerly variously
Chairman, Chief Executive Officer, President and
Chief Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.;
Director of Eaglemark Financial Services, Inc. and
Weirton Steel Corporation.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- --------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (66) .............. Chairman, Director or Trustee and Chief Executive
Chairman of the Board, Officer of the Morgan Stanley Dean Witter Funds
Chief Executive Officer and Trustee and Discover Brokerage Index Series; formerly
Two World Trade Center Chairman, Chief Executive Officer and Director of
New York, New York the Investment Manager, the Distributor and MSDW
Services Company; Executive Vice President and
Director of Dean Witter Reynolds; Chairman and
Director of the Transfer Agent; formerly Director
and/or officer of various MSDW subsidiaries (until
June 1998).
Edwin J. Garn (66) ........................ Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds and Discover Brokerage Index Series;
c/o Huntsman Corporation formerly United States Senator (R-Utah)
500 Huntsman Way (1974-1992) and Chairman, Senate Banking
Salt Lake City, Utah Committee (1980-1986); formerly Mayor of Salt
Lake City, Utah (1971-1974); formerly Astronaut,
Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Corporation (chemical
company); Director of Franklin Covey (time
management systems), BMW Bank of North
America, Inc. (industrial loan corporation), United
Space Alliance (joint venture between Lockheed
Martin and the Boeing Company) and Nuskin Asia
Pacific (multilevel marketing); member of the board
of various civic and charitable organizations.
Wayne E. Hedien (65) ...................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds and Discover Brokerage Index
c/o Mayer, Brown & Platt Series; Director of The PMI Group, Inc. (private
Counsel to the Independent Trustees mortgage insurance); Trustee and Vice Chairman of
1675 Broadway The Field Museum of Natural History; formerly
New York, New York associated with the Allstate Companies (1966-1994),
most recently as Chairman of The Allstate Corporation
(March, 1993-December, 1994) and Chairman and
Chief Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July, 1989-December,
1994); director of various other business and
charitable organizations.
Dr. Manuel H. Johnson (50) ................ Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds and Discover Brokerage
Index Series; Director of Greenwich Capital
Markets, Inc. (broker-dealer) and NVR, Inc. (home
construction); Chairman and Trustee of the
Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System
(1986-1990) and Assistant Secretary of the U.S.
Treasury.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ------------------------------------------------------
<S> <C>
Michael E. Nugent (63) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds and Discover Brokerage
New York, New York Index Series; formerly Vice President, Bankers Trust
Company and BT Capital Corporation (1984-1988);
director of various business organizations.
Philip J. Purcell* (56) ................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Trustee of Discover
Brokerage Index Series; Director and/or officer of
various MSDW subsidiaries.
John L. Schroeder (66) .................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds and Discover Brokerage Index
Counsel to the Independent Trustees Series; Director of Citizens Utilities Company
1675 Broadway (telecommunications, gas, electric and water
New York, New York utilities company); formerly Executive Vice
President and Chief Investment Officer of the
Home Insurance Company (August, 1991-
September, 1995).
Mitchell M. Merin (45) .................... President and Chief Operating Officer of Asset
President Management of MSDW (since December, 1998);
Two World Trade Center President and Director (since April, 1997) and
New York, New York Chief Executive Officer (since June, 1998) of the
Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and
Director of the Distributor (since June, 1998);
Chairman and Chief Executive Officer (since June,
1998) and Director (since January, 1998) of the
Transfer Agent; Director of various MSDW
subsidiaries; President of the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series
(since May, 1999); previously Chief Strategic Officer
of the Investment Manager and MSDW Services
Company and Executive Vice President of the
Distributor (April, 1997-June, 1998), Vice President
of the Morgan Stanely Dean Witter Funds and
Discover Brokerage Index Series (May, 1997-April,
1999), and Executive Vice President of Dean
Witter, Discover & Co.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ----------------------------------------------------
<S> <C>
Barry Fink (44) ........................... Senior Vice President (since March, 1997) and
Vice President, Secretary Secretary and General Counsel (since February,
and General Counsel 1997) and Director (since July, 1998) of the
Two World Trade Center Investment Manager and MSDW Services
New York, New York Company; Senior Vice President (since March,
1997) and Assistant Secretary and Assistant
General Counsel (since February, 1997) of the
Distributor; Assistant Secretary of Dean Witter
Reynolds (since August, 1996); Vice President,
Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds (since February, 1997);
Vice President, Secretary and General Counsel of
Discover Brokerage Index Series; previously First
Vice President (June, 1993-February, 1997), Vice
President and Assistant Secretary and Assistant
General Counsel of the Investment Manager and
MSDW Services Company and Assistant Secretary
of the Morgan Stanley Dean Witter Funds.
Jenny Beth Jones (41) ..................... Senior Vice President of the Investment Manager
Vice President (since August, 1996); formerly Senior Vice
Two World Trade Center President and Manager of the Small Cap
New York, New York Department of Oppenheimer Capital.
Thomas F. Caloia (53) ..................... First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds and Discover Brokerage
Index Series.
</TABLE>
- ----------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer
Agent, and Peter Hermann, Vice President of the Investment Manager, are Vice
Presidents of the Fund. John S. Roscoe, Vice President of the Investment
Manager, is an Assistant Vice President of the Fund.
In addition, Frank Bruttomesso, Marilyn K. Cranney, Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, First Vice Presidents and Assistant General
Counsels of the Investment Manager and MSDW Services Company, Todd Lebo, Vice
President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, and Natasha Kassian, a Staff Attorney with the Investment
Manager, are Assistant Secretaries of the Fund.
INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their
time. All of the independent directors/trustees serve as members of the Audit
Committee. In addition, three of the directors/trustees, including two
independent directors/trustees, serve as members of the Derivatives Committee
and the Insurance Committee.
14
<PAGE>
The independent directors/trustees are charged with recommending to the
full board approval of management, advisory and administration contracts, Rule
12b-1 plans and distribution and underwriting agreements; continually reviewing
Fund performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
independent directors/trustees are required to select and nominate individuals
to fill any independent director/trustee vacancy on the board of any Fund that
has a Rule 12b-1 plan of distribution. Most of the Morgan Stanley Dean Witter
Funds have a Rule 12b-1 plan.
The Audit Committee is charged with recommending to the full board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
board.
The board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.
Finally, the board of each Fund has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS/TRUSTEES
FOR ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees
and the Funds' management believe that having the same independent
directors/trustees for each of the Morgan Stanley Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as independent directors/trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals
serve as independent directors/trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility
of separate groups of independent directors/trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund boards enhances the ability of each Fund to obtain,
at modest cost to each separate Fund, the services of independent
directors/trustees, of the caliber, experience and business acumen of the
individuals who serve as independent directors/trustees of the Morgan Stanley
Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or
a Committee meeting, or a meeting of the Independent Trustees and/or more than
one Committee meeting, take place on a single day, the Trustees are paid a
single meeting fee by the Fund. The Fund also reimburses such Trustees for
travel and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Trustees and officers of the Fund who are or have been
employed by the Investment Manager or an affiliated company receive no
compensation or expense reimbursement from the Fund for their services as
Trustee.
15
<PAGE>
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended July 31, 1999.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------- --------------
<S> <C>
Michael Bozic ................. $
Edwin J. Garn .................
Wayne E. Hedien ...............
Dr. Manuel H. Johnson .........
Michael E. Nugent .............
John L. Schroeder .............
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 90 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1998. No compensation was paid to the Fund's Independent Trustees by
Discover Brokerage Index Series for the calendar year ended December 31, 1998.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES TO 90
MORGAN STANLEY
DEAN WITTER
NAME OF INDEPENDENT TRUSTEE FUNDS
- ------------------------------- -------------------
<S> <C>
Michael Bozic ................. $120,150
Edwin J. Garn ................. 132,450
Wayne E. Hedien ............... 132,350
Dr. Manuel H. Johnson ......... 155,681
Michael E. Nugent ............. 159,731
John L. Schroeder ............. 160,731
</TABLE>
As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, not including the Fund, have adopted a
retirement program under which an independent director/trustee who retires
after serving for at least five years (or such lesser period as may be
determined by the Board) as an independent director/trustee of any Morgan
Stanley Dean Witter Fund that has adopted the retirement program (each such
Fund referred to as an "Adopting Fund" and each such director/trustee referred
to as an "Eligible Trustee") is entitled to retirement payments upon reaching
the eligible retirement age (normally, after attaining age 72). Annual payments
are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation
plus 0.5036667% of such Eligible Compensation for each full month of service as
an Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 60.44% after ten years of service. The foregoing percentages
may be changed by the Board.(1) "Eligible Compensation" is one-fifth of the
total compensation earned by such Eligible Trustee for service to the Adopting
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are accrued as expenses on
the books of the Adopting Funds. Such benefits are not secured or funded by the
Adopting Funds.
- ----------
(1) An Eligible Trustee may elect alternative payments of his or her
retirement benefits based upon the combined life expectancy of the
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. In addition, the Eligible Trustee may elect that
the surviving spouse's periodic payment of benefits will be equal to a
lower percentage of the periodic amount when both spouses were alive. The
amount estimated to be payable under this method, through the remainder
of the later of the lives of the Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit.
16
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the year ended December 31, 1998, and the estimated
retirement benefits for the Independent Trustees, to commence upon their
retirement, from the 55 Morgan Stanley Dean Witter Funds as of December 31,
1998.
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS ESTIMATED
------------------------------- RETIREMENT ANNUAL
ESTIMATED BENEFITS BENEFITS
CREDITED ACCRUED AS UPON
YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- ------------------------------- --------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
Michael Bozic ................. 10 60.44% $22,377 $52,250
Edwin J. Garn ................. 10 60.44 35,225 52,250
Wayne E. Hedien ............... 9 51.37 41,979 44,413
Dr. Manuel H. Johnson ......... 10 60.44 14,047 52,250
Michael E. Nugent ............. 10 60.44 25,336 52,250
John L. Schroeder ............. 8 50.37 45,117 44,343
</TABLE>
- ----------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
The following owned 5% or more [to come].
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1% of the Fund's shares of
beneficial interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------
A. INVESTMENT MANAGER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New
York, New York 10048. The Investment Manager is a wholly-owned subsidiary of
MSDW, a Delaware corporation. MSDW is a preeminent global financial services
firm that maintains leading market positions in each of its three primary
businesses: securities, asset management and credit services.
Pursuant to an Investment Management Agreement (the "Management
Agreement") with the Investment Manager, the Fund has retained the Investment
Manager to provide administrative services and manage the investment of the
Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Fund pays the Investment Manager monthly compensation
calculated daily at the following annual rates: 0.75% of the Fund's average net
assets not exceeding $500 million and 0.725% of the Fund's average net assets
exceeding $500 million. The management fee is allocated among the Classes pro
rata based on the net assets of the Fund attributable to each Class. For the
period October 29, 1996 (commencement of operations) through July 31, 1997 and
for the fiscal years ended July 31, 1998 and 1999, the Investment Manager
accrued total compensation under the Management Agreement in the amounts of
$1,295,177, $2,761,954 and $ , respectively.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has
17
<PAGE>
entered into a selected dealer agreement with Dean Witter Reynolds, which
through its own sales organization sells shares of the Fund. In addition, the
Distributor may enter into similar agreements with other selected
broker-dealers. The Distributor, a Delaware corporation, is a wholly-owned
subsidiary of MSDW.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. These expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
Financial Advisors. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears the
costs of initial typesetting, printing and distribution of prospectuses and
supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws and
pays filing fees in accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND FUND EXPENSES PAID BY THIRD
PARTIES
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, the office space,
facilities, equipment, clerical help, bookkeeping and certain legal services as
the Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be filed
with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in the
opinion of the Investment Manager, necessary or desirable). In addition, the
Investment Manager pays the salaries of all personnel, including officers of
the Fund, who are employees of the Investment Manager. The Investment Manager
also bears the cost of telephone service, heat, light, power and other
utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses will be allocated among the four Classes of shares pro rata based on
the net assets of the Fund attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1; charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the
Fund and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager;
all expenses incident to any dividend, withdrawal or redemption options;
charges and expenses of any outside service used for pricing of the Fund's
shares; fees and expenses of legal counsel, including counsel to the Trustees
who are not interested persons of the Fund or of the Investment Manager (not
including compensation or expenses of attorneys who are employees of the
Investment Manager); fees and expenses of the Fund's independent accountants;
18
<PAGE>
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Trustees)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's operation.
The 12b-1 fees relating to a particular Class will be allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees) may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Trustees.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is
defined in the Securities Act.
E. RULE 12B-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act (the "Plan") pursuant to which each Class, other
than Class D, pays the Distributor compensation accrued daily and payable
monthly at the following annual rates: 0.25%, 1.0% and 1.0% of the average
daily net assets of Class A, Class B and Class C, respectively.
The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the last three fiscal
years ended July 31, in approximate amounts as provided in the table below (the
Distributor did not retain any of these amounts).
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Class A .......... FSCs:(1) $ FSCs: $176,211 FSCs: $ 0(2)
CDSCs: $ CDSCs: $ 0 CDSCs: $ 0(2)
Class B .......... CDSCs: $ CDSCs: $768,105 CDSCs: $342,000
Class C .......... CDSCs: $ CDSCs: $ 2,492 CDSCs: $ 0(2)
</TABLE>
- ----------
(1) FSCs apply to Class A only.
(2) This Class commenced operations on July 28, 1997.
The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.
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<PAGE>
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. For the fiscal year ended July
31, 1999, Class B shares of the Fund accrued amounts payable to the Distributor
under the Plan of $ . This amount is equal to 1.00% of the average
daily net assets of Class B. For the fiscal year ended July 31, 1999, Class A
and Class C shares of the Fund accrued payments under the Plan amounting to
$ and $ , respectively, which amounts are equal to 0.25% and 1.00% of
the average daily net assets of Class A and Class C, respectively, for the
fiscal year.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.
With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer-sponsored employee
benefit plans, whether or not qualified under the Internal Revenue Code, for
which the Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement ("MSDW Eligible Plans"), the Investment Manager compensates
Financial Advisors by paying them, from its own funds, a gross sales credit of
1.0% of the amount sold.
With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.
With respect to Class D shares other than shares held by participants in
the Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds's Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year
and a chargeback of 50% of the amount paid if the Class D shares are redeemed
in the second year after purchase. The Investment Manager also compensates Dean
Witter Reynolds's Financial Advisors by paying them, from its own funds, an
annual residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund
asset allocation program).
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds's
Fund-associated distribution-related expenses, including sales compensation,
and overhead and other branch office distribution-related expenses including
(a) the expenses of operating Dean Witter Reynolds's branch offices in
connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other expenses relating to branch
promotion of Fund sales.
20
<PAGE>
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Fund and, in the case of Class B shares, opportunity costs, such
as the gross sales credit and an assumed interest charge thereon ("carrying
charge"). In the Distributor's reporting of the distribution expenses to the
Fund, in the case of Class B shares, such assumed interest (computed at the
"broker's call rate") has been calculated on the gross credit as it is reduced
by amounts received by the Distributor under the Plan and any contingent
deferred sales charges received by the Distributor upon redemption of shares of
the Fund. No other interest charge is included as a distribution expense in the
Distributor's calculation of its distribution costs for this purpose. The
broker's call rate is the interest rate charged to securities brokers on loans
secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C
will be reimbursable under the Plan. With respect to Class A, in the case of
all expenses other than expenses representing the service fee, and, with
respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including, a majority of
the Independent Trustees. Expenses representing the service fee (for Class A)
or a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives (for Class C) may be reimbursed without
prior determination. In the event that the Distributor proposes that monies
shall be reimbursed for other than such expenses, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund, together
with a report explaining the purposes and anticipated benefits of incurring
such expenses. The Trustees will determine which particular expenses, and the
portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended July 31, 1999 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $ on behalf of Class B since the inception of the Plan. It is
estimated that this amount was spent in approximately the following ways: (i)
% ($ ) -- advertising and promotional expenses; (ii) % ($ ) --
printing of prospectuses for distribution to other than current shareholders;
and (iii) % ($ ) -- other expenses, including the gross sales credit and
the carrying charge, of which % ($ ) represents carrying charges, %
($ ) represents commission credits to Dean Witter Reynolds branch offices
and other selected broker-dealers for payments of commissions to Financial
Advisors and other authorized financial representatives, and % ($ )
represents overhead and other branch office distribution-related expenses. The
amounts accrued by Class A and a portion of the amounts accrued by Class C
under the Plan during the fiscal year ended July 31, 1999 were service fees.
The remainder of the amounts accrued by Class C were for expenses which relate
to compensation of sales personnel and associated overhead expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which
21
<PAGE>
arise from it having advanced monies without having received the amount of any
sales charges imposed at the time of sale of the Fund's Class B shares, totaled
$ as of July 31, 1999 (the end of the Fund's fiscal year), which was equal
to % of the net assets of Class B on such date. Because there is no
requirement under the Plan that the Distributor be reimbursed for all
distribution expenses with respect to Class B shares or any requirement that
the Plan be continued from year to year, this excess amount does not constitute
a liability of the Fund. Although there is no legal obligation for the Fund to
pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of CDSCs paid by investors upon redemption of shares, if
for any reason the Plan is terminated, the Trustees will consider at that time
the manner in which to treat such expenses. Any cumulative expenses incurred,
but not yet recovered through distribution fees or CDSCs, may or may not be
recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales commission credited to Morgan Stanley Dean Witter Financial
Advisors and other authorized financial representatives at the time of sale may
be reimbursed in the subsequent calendar year. The Distributor has advised the
Fund that unreimbursed expenses representing a gross sales commission credited
to Morgan Stanley Dean Witter Financial Advisors and other authorized financial
representatives at the time of sale totaled $ in the case of Class C at
December 31, 1998 (the end of the calendar year), which amount was equal to %
of the net assets of Class C on such date, and that there were no such expenses
that may be reimbursed in the subsequent year in the case of Class A on such
date. No interest or other financing charges will be incurred on any Class A or
Class C distribution expenses incurred by the Distributor under the Plan or on
any unreimbursed expenses due to the Distributor pursuant to the Plan.
No interested person of the Fund nor any Independent Trustee has any
direct financial interest in the operation of the Plan except to the extent
that the Distributor, the Investment Manager, Dean Witter Reynolds, MSDW
Services Company or certain of their employees may be deemed to have such an
interest as a result of benefits derived from the successful operation of the
Plan or as a result of receiving a portion of the amounts expended thereunder
by the Fund.
On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan, including that: (a) the Plan is essential in order to
give Fund investors a choice of alternatives for payment of distribution and
service charges and to enable the Fund to continue to grow and avoid a pattern
of net redemptions which, in turn, are essential for effective investment
management; and (b) without the compensation to individual brokers and the
reimbursement of distribution and account maintenance expenses of Dean Witter
Reynolds's branch offices made possible by the 12b-1 fees, Dean Witter Reynolds
could not establish and maintain an effective system for distribution,
servicing of Fund shareholders and maintenance of shareholder accounts; and (3)
what services had been provided and were continuing to be provided under the
Plan to the Fund and its shareholders. Based upon their review, the Trustees,
including each of the Independent Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority
22
<PAGE>
of the Independent Trustees or by a vote of a majority of the outstanding
voting securities of the Fund (as defined in the Investment Company Act) on not
more than thirty days' written notice to any other party to the Plan. So long
as the Plan is in effect, the election and nomination of Independent Trustees
shall be committed to the discretion of the Independent Trustees.
F. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various
investment plans. The principal business address of the Transfer Agent is
Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 110 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
, serves as the independent
accountants of the Fund. The independent accountants are responsible for
auditing the annual financial statements of the Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses
and reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these
services, the Transfer Agent receives a per shareholder account fee from the
Fund and is reimbursed for its out-of-pocket expenses in connection with such
services.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. The Fund also expects that securities will be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession
or discount. Futures transactions will usually be effected through a broker and
a commission will be charged. On occasion, the Fund may also purchase certain
money market instruments directly from an issuer, in which case no commissions
or discounts are paid.
For the period October 29, 1996 (commencement of operations) through July
31, 1997, and for the fiscal years ended July 31, 1998 and 1999, the Fund paid
a total of $635,153, $1,686,749 and $ , respectively, in brokerage
commissions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal
transactions in certain money market instruments with Dean Witter Reynolds. The
Fund will limit its transactions with Dean Witter Reynolds to
23
<PAGE>
U.S. Government and government agency securities, bank money instruments (i.e.,
certificates of deposit and bankers' acceptances) and commercial paper. The
transactions will be effected with Dean Witter Reynolds only when the price
available from Dean Witter Reynolds is better than that available from other
dealers.
During the fiscal years ended July 31, 1997, 1998 and 1999, the Fund did
not effect any principal transactions with Dean Witter Reynolds.
Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds,
Morgan Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on an exchange during a comparable period of time. This standard would
allow the affiliated broker or dealer to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Trustees, including the
Independent Trustees, have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to an affiliated
broker or dealer are consistent with the foregoing standard. The Fund does not
reduce the management fee it pays to the Investment Manager by any amount of
the brokerage commissions it may pay to an affiliated broker or dealer.
During the period October 29, 1996 (commencement of operations) through
July 31, 1997 and for the fiscal years ended July 31, 1998 and 1999, the Fund
paid a total of $51,805, $109,942 and $ , respectively, in brokerage
commissions to Dean Witter Reynolds. During the fiscal year ended July 31,
1999, the brokerage commissions paid to Dean Witter Reynolds represented
approximately % of the total brokerage commissions paid by the Fund during
the year and were paid on account of transactions having an aggregate dollar
value equal to approximately % of the aggregate dollar value of all
portfolio transactions of the Fund during the year for which commissions were
paid.
During the period June 1, 1997 through July 31, 1997 and during the fiscal
years ended July 31, 1998 and 1999, the Fund paid a total of $0, $48,620 and
$ , respectively, in brokerage commissions to Morgan Stanley & Co., which
broker-dealer became an affiliate of the Investment Manager on May 31, 1997
upon consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group Inc. During the fiscal year ended July 31, 1999, the brokerage
commissions paid to Morgan Stanley & Co. represented approximately % of the
total brokerage commissions paid by the Fund for this period and were paid on
account of transactions having an aggregate dollar value equal to approximately
% of the aggregate dollar value of all portfolio transactions of the Fund
during the year for which commissions were paid.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid
in all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. These
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.
24
<PAGE>
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed commissions
on such transactions are generally higher than negotiated commissions on
domestic transactions. There is also generally less government supervision and
regulation of foreign securities exchanges and brokers than in the United
States.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment Manager
believes provide the most favorable prices and are capable of providing
efficient executions. If the Investment Manager believes the prices and
executions are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the Fund or the Investment
Manager. The services may include, but are not limited to, any one or more of
the following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio securities. The
information and services received by the Investment Manager from brokers and
dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain
initial and secondary public offerings, the Investment Manager may utilize a
pro rata allocation process based on the size of the Morgan Stanley Dean Witter
Funds involved and the number of shares available from the public offering.
D. DIRECTED BROKERAGE
During the fiscal year ended July 31, 1999, the Fund paid $ in
brokerage commissions in connection with transactions in the aggregate amount
of $ to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended July 31, 1999, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or ten
dealers which executed transactions for or with the Fund in the largest dollar
amounts during the period. At July 31, 1999, the Fund did not own any
securities issued by any such issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of beneficial interest of
the Fund are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class
B and Class C bear expenses related to the distribution of their respective
shares.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios) and additional Classes
of shares within any series. The Trustees have not presently authorized any
such additional series or Classes of shares other than as set forth in the
Prospectus.
25
<PAGE>
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by action of
the Trustees. In addition, under certain circumstances, the shareholders may
call a meeting to remove Trustees and the Fund is required to provide
assistance in communicating with shareholders about such a meeting. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect
any Trustees.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
All of the Trustees have been elected by the shareholders of the Fund,
most recently at a Special Meeting of Shareholders held on May 21, 1997. The
Trustees themselves have the power to alter the number and the terms of office
of the Trustees (as provided for in the Declaration of Trust), and they may at
any time lengthen or shorten their own terms or make their terms of unlimited
duration and appoint their own successors, provided that always at least a
majority of the Trustees has been elected by the shareholders of the Fund.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any
other Morgan Stanley Dean Witter Fund and the general administration of the
exchange privilege. No commission or discounts will be paid to the Distributor
or any authorized broker-dealer for any transaction pursuant to the exchange
privilege.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Fund shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior to
the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.
26
<PAGE>
B. OFFERING PRICE
The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Investment Management and Other Services -- E. Rule 12b-1 Plan." The price of
Fund shares, called "net asset value," is based on the value of the Fund's
portfolio securities. Net asset value per share of each Class is calculated by
dividing the value of the portion of the Fund's securities and other assets
attributable to that Class, less the liabilities attributable to that Class, by
the number of shares of that Class outstanding. The assets of each Class of
shares are invested in a single portfolio. The net asset value of each Class,
however, will differ because the Classes have different ongoing fees.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange, prior to
the time when assets are valued; if there were no sales that day, the security
is valued at the latest bid price (in cases where a security is traded on more
than one exchange, the security is valued on the exchange designated as the
primary market pursuant to procedures adopted by the Trustees); and (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest bid price. When market quotations
are not readily available, including circumstances under which it is determined
by the Investment Manager that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Fund's Trustees. For valuation purposes, quotations of
foreign portfolio securities, other assets and liabilities and forward
contracts stated in foreign currency are translated into U.S. dollar
equivalents at the prevailing market rates prior to the close of the New York
Stock Exchange.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.
Futures are valued at the latest sale price on the commodities exchange on
which they trade unless the Trustees determine such price does not reflect
their market value, in which case they will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the
Fund are not generally a consideration for shareholders such as tax exempt
entities and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding
specific questions as to federal, state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
27
<PAGE>
The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.
Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than one year. Gains or losses on the sale of securities with a tax holding
period of one year or less will be short-term gains or losses.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.
Under certain tax rules, the Fund may be required to accrue a portion of
any discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year.
To the extent that the Fund invests in such securities, it would be required to
pay out such accrued discount as an income distribution in each year in order
to avoid taxation at the Fund level. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have
to pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends
and distributions, to the extent that they are derived from net investment
income or short-term capital gains, are taxable to the shareholder as ordinary
income regardless of whether the shareholder receives such payments in
additional shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. The Taxpayer Relief Act of 1997
reduced the maximum tax on long-term capital gains applicable to individuals
from 28% to 20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Subject to certain exceptions, a corporate shareholder may be eligible for
a 70% dividends received deduction to the extent that the Fund earns and
distributes qualifying dividends from its investments. Distributions of net
capital gains by the Fund will not be eligible for the dividends received
deduction.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.
After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, and the portion taxable as
long-term capital gains.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment
company will have the effect of reducing the
28
<PAGE>
net asset value of the shareholder's stock in that company by the exact amount
of the dividend or capital gains distribution. Furthermore, such dividends and
capital gains distributions are subject to federal income taxes. If the net
asset value of the shares should be reduced below a shareholder's cost as a
result of the payment of dividends or the distribution of realized long-term
capital gains, such payment or distribution would be in part a return of the
shareholder's investment but nonetheless would be taxable to the shareholder.
Therefore, an investor should consider the tax implications of purchasing Fund
shares immediately prior to a distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains
or losses and those held for more than one year generally result in long-term
gain or loss. Any loss realized by shareholders upon a redemption of shares
within six months of the date of their purchase will be treated as a long-term
capital loss to the extent of any distributions of net long-term capital gains
with respect to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured
by the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the
tax basis of their shares. Under certain circumstances a shareholder may
compute and use an average cost basis in determining the gain or loss on the
sale or redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain
obligations under the Distribution Agreement concerning the distribution of the
shares. These obligations and the compensation the Distributor receives are
described above in the sections titled "Principal Underwriter" and "Rule 12b-1
Plans."
XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time, the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period from the date of
commencement of operations, if shorter than any of the foregoing. The ending
redeemable value is reduced by any contingent deferred sales charge ("CDSC") at
the end of the one, five, ten year or other period. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment (which in the case of Class A shares is reduced by the Class A
initial sales charge), taking a root of the quotient (where the root is
equivalent to the number of years in the period) and subtracting 1 from the
result. Based on this calculation, the average annual total returns for Class B
for the one year period
29
<PAGE>
ended July 31, 1999 and for the period October 29, 1996 (commencement of
operations) through July 31, 1999 were % and %, respectively. The average
annual total returns of Class A for the fiscal year ended July 31, 1999 and for
the period July 28, 1997 (inception of the Class) through July 31, 1999 were
% and %, respectively. The average annual total returns of Class C for
the fiscal year ended July 31, 1999 and for the period July 28, 1997 through
July 31, 1999 were % and %, respectively. The average annual total
returns of Class D for the fiscal year ended July 31, 1999 and for the period
July 28, 1997 through July 31, 1999 were % and %, respectively.
In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction
of the CDSC for each of Class B and Class C which, if reflected, would reduce
the performance quoted. For example, the average annual total return of the
Fund may be calculated in the manner described above, but without deduction for
any applicable sales charge. Based on this calculation, the average annual
total returns of Class B for the one year period ended July 31, 1999 and for
the period October 29, 1996 (commencement of operations) through July 31, 1999
were % and %, respectively. The average annual total returns of Class A
for the fiscal year ended July 31, 1999 and for the period July 28, 1997
(inception of the Class) through July 31, 1999 were % and %,
respectively. The average annual total returns of Class C for the fiscal year
ended July 31, 1999 and for the period July 28, 1997 through July 31, 1999 were
% and %, respectively. The average annual total returns of Class D for
the fiscal year ended July 31, 1999 and for the period July 28, 1997 through
July 31, 1999 were % and %, respectively.
In addition, the Fund may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate which
will result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on this calculation, the total returns
of Class B for the one year period ended July 31, 1999 and for the period
October 29, 1996 (commencement of operations) through July 31, 1999 were %
and %, respectively. The total returns of Class A for the fiscal year ended
July 31, 1999 and for the period July 28, 1997 (inception of the Class) through
July 31, 1999 were % and %, respectively. The total returns of Class C
for the fiscal year ended July 31, 1999 and for the period July 28, 1997
through July 31, 1999 were % and %, respectively. The total returns of
Class D for the fiscal year ended July 31, 1999 and for the period July 28,
1997 through July 31, 1999 were % and %, respectively.
30
<PAGE>
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1
to the Fund's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and multiplying
by $9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as
the case may be. Investments of $10,000, $50,000 and $100,000 in each Class at
inception of the Class would have grown to the following amounts at July 31,
1999:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ---------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Class A ......... 07/28/97 $ $ $
Class B ......... 10/29/96
Class C ......... 07/28/97
Class D ......... 07/28/97
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
July 31, 1999 included in this Statement of Additional Information and
incorporated by reference in the Prospectus have been so included and
incorporated in reliance on the report of , independent accountants,
given on the authority of said firm as experts in auditing and accounting.
* * * * *
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from
the SEC.
31
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
PART C OTHER INFORMATION
Item 23. Exhibits
1(a). Declaration of Trust of the Registrant, dated June 21, 1996, is
incorporated by reference to Exhibit 1(a) to the Registration
Statement on Form N-1A, filed on June 27, 1996.
1(b). Instrument Establishing and Designating Additional Classes is
incorporated by reference to Exhibit 1 of Post-Effective Amendment No.
2 to the Registration Statement on Form N-1A, filed on July 22, 1997.
1(c). Amendment to the Declaration of Trust of the Registrant, dated June
22, 1998, is incorporated by reference to Exhibit 1 of Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed on
September 29, 1998.
2. Amended and Restated By-Laws of the Registrant, dated May 1, 1999,
filed herein.
3. Not applicable.
4. Amended Investment Management Agreement dated May 1, 1999 between the
Registrant and Morgan Stanley Dean Witter Advisors Inc., filed herein.
5(a). Amended Distribution Agreement between the Registrant and Morgan
Stanley Dean Witter Distributors Inc., dated June 22, 1998, is
incorporated by reference to Exhibit 6 of Post-Effective Amendment No.
4 to the Registration Statement on Form N-1A, filed on September 29,
1998.
5(b). Selected Dealer Agreement between Dean Witter Distributors Inc. and
Dean Witter Reynolds Inc. is incorporated by reference to Exhibit 5(b)
of Post-Effective Amendment No. 4 to the Registration Statement on
Form N-1A, filed on September 29, 1998.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and National Financial Services Corporation, dated
October 17, 1998, filed herein.
6. Not applicable.
<PAGE>
7. Custody Agreement between the Registrant and The Bank of New York is
incorporated by reference to Exhibit 8(a) of Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A, filed on August 21,
1996.
8(a). Amended and Restated Transfer Agency and Services Agreement between
the Registrant and Morgan Stanley Dean Witter Trust FSB, dated June
22, 1998, is incorporated by reference to Exhibit 8 of Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed on
September 29, 1998.
8(b). Amended Services Agreement, dated June 22, 1998 between Morgan Stanley
Dean Witter Advisors Inc. and Morgan Stanley Dean Witter Services
Company Inc., filed herein.
9(a). Opinion of Sheldon Curtis, Esq., dated August 19, 1996, is
incorporated by reference to Exhibit 10(a) of Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A, filed on August 21,
1996.
9(b). Opinion of Lane, Altman & Owens LLP, dated August 16, 1996, is
incorporated by reference to Exhibit 10(b) of Post-Effective Amendment
No. 1 to the Registration Statement on Form N-1A, filed on August 21,
1996.
10. Not applicable.
11. Not applicable.
12. Not applicable.
13. Amended Plan of Distribution pursuant to Rule 12b-1, dated July 28,
1997 between the Registrant and Morgan Stanley Dean Witter
Distributors Inc., is incorporated by reference to Exhibit 15 of
Post-Effective Amendment No. 2 to the Registration Statement on Form
N-1A, filed on July 22, 1997.
14. Multiple Class Plan pursuant to Rule 18f-3 between the Registrant and
Dean Witter Distributors Inc., dated July 28, 1997, is incorporated by
reference to Exhibit (Other) of Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A, filed on July 22, 1997.
Other. Powers of Attorney of Trustees is incorporated by reference to Exhibit
(Other) of Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A, filed on August 21, 1996 and of Post-Effective Amendment
No. 3 filed on September 29, 1997.
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the Fund.
None
Item 25. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust
and paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such trustee,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company Act
of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such Act
remains in effect.
Registrant, in conjunction with the Investment Manager,
Registrant's Trustees, and other registered investment management companies
managed by the Investment Manager, maintains insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of Registrant, or who is or
was serving at the request of Registrant as a trustee, director, officer,
employee or agent of another trust or corporation, against any liability
asserted against
<PAGE>
him and incurred by him or arising out of his position. However, in no event
will Registrant maintain insurance to indemnify any such person for any act for
which Registrant itself is not permitted to indemnify him.
Item 26. Business and Other Connections of Investment Advisor
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment advisor. The following information is given regarding
officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
- -------------------------------
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
Open-end Investment Companies
- -----------------------------
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
<PAGE>
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Real Estate Fund
(48) Morgan Stanley Dean Witter S&P 500 Index Fund
(49) Morgan Stanley Dean Witter S&P 500 Select Fund
(50) Morgan Stanley Dean Witter Select Dimensions Investment Series
(51) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(52) Morgan Stanley Dean Witter Short-Term Bond Fund
(53) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(54) Morgan Stanley Dean Witter Small Cap Growth Fund
(55) Morgan Stanley Dean Witter Special Value Fund
(56) Morgan Stanley Dean Witter Strategist Fund
(57) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(58) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(59) Morgan Stanley Dean Witter Total Return Trust
(60) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(61) Morgan Stanley Dean Witter U.S. Government Securities Trust
<PAGE>
(62) Morgan Stanley Dean Witter Utilities Fund
(63) Morgan Stanley Dean Witter Value-Added Market Series
(64) Morgan Stanley Dean Witter Value Fund
(65) Morgan Stanley Dean Witter Variable Investment Series
(66) Morgan Stanley Dean Witter World Wide Income Trust
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and
Director Director of Morgan Stanley Dean Witter
Distributors Inc. ("MSDW Distributors") and Morgan
Stanley Dean Witter Trust FSB ("MSDW Trust");
President, Chief Executive Officer and Director of
Morgan Stanley Dean Witter Services Company Inc.
("MSDW Services"); President of the Morgan Stanley
Dean Witter Funds and Discover Brokerage Index
Series; Executive Vice President and Director of
Dean Witter Reynolds Inc. ("DWR"); Director of
various MSDW subsidiaries.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds and Discover Brokerage Index Series;
and Chief Investment Director of MSDW Trust.
Officer
Ronald E. Robison President MSDW Trust; Executive Vice President,
Executive Vice President, Chief Administrative Officer and Director of
Chief Administrative MSDW Services; Vice President of the Morgan
Officer and Director Stanley Dean Witter Fundsand Discover Brokerage
Index Series.
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant
Counsel and Director Secretary and Assistant General Counsel of MSDW
Distributors; Vice President, Secretary and
General Counsel of the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series.
Peter M. Avelar Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Douglas Brown
Senior Vice President
Rosalie Clough
Senior Vice President
and Director of Marketing
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW
Trust; Vice President of the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean
Senior Vice President, Witter Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative
Officer - Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds and Discover Brokerage Index Series.
Kevin Hurley Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Jenny Beth Jones Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of Sector
Rotation
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Jonathan R. Page Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Money Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the Growth
Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
James Solloway
Senior Vice President
Paul D. Vance Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the Growth
and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication
James F. Willison Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Frank Bruttomesso First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter Funds
and Discover Brokerage Index Series.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and
Treasurer Accounting Officer of the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series.
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Thomas Chronert
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of MSDW Services;
and Assistant Secretary Assistant Secretary of MSDW Distributors, the
Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
Michael Interrante First Vice President and Controller of MSDW
First Vice President Services; Assistant Treasurer of MSDW
and Controller Distributors; First Vice President and Treasurer
of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Lou Anne D. McInnis First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter Funds
and Discover Brokerage Index Series.
Carsten Otto First Vice President and Assistant Secretary of
First Vice President MSDW Services; Assistant Secretary of MSDW
and Assistant Secretary Distributors, the Morgan Stanley Dean Witter Funds
and Discover Brokerage Index Series.
Ruth Rossi First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter Funds
and DiscoverBrokerage Index Series.
James P. Wallin
First Vice President
Robert Abreu
Vice President
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Armon Bar-Tur Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Raymond Basile
Vice President
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Dale Boettcher
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Aaron Clark
Vice President
William Connerly
Vice President
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
David Dineen
Vice President
Sheila Finnerty Vice President of Morgan Stanley Dean Witter Prime
Vice President Income Trust
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Trey Hancock
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Peter Hermann Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
David T. Hoffman
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Doug Ketterer
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter Funds
and Discover Brokerage Index Series.
Gerard J. Lian Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.
Albert McGarity
Vice President
Teresa McRoberts Vice President of Morgan Stanley Dean Witter
Vice President S&P 500 Select Fund.
Mark Mitchell
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
David Myers Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter
Vice President Federal Securities Trust.
Peter J. Seeley Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Robert Stearns
Vice President
Naomi Stein
Vice President
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Michael Strayhorn
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean
Vice President Witter Funds
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Robert Vanden Assem
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
John Wong
Vice President
The principal address of MSDW Advisors, MSDW Services, MSDW
Distributors, DWR, the Morgan Stanley Dean Witter Funds and Discover Brokerage
Index Series is Two World Trade Center, New York, New York 10048. The principal
address of MSDW is 1585 Broadway, New York, New York 10036. The principal
address of MSDW Trust is 2 Harborside Financial Center, Jersey City, New Jersey
07311.
Item 27. Principal Underwriters
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
<PAGE>
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Prime Income Trust
(48) Morgan Stanley Dean Witter Real Estate Fund
(49) Morgan Stanley Dean Witter S&P 500 Index Fund
(50) Morgan Stanley Dean Witter S&P 500 Select Fund
(51) Morgan Stanley Dean Witter Short-Term Bond Fund
(52) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(53) Morgan Stanley Dean Witter Small Cap Growth Fund
(54) Morgan Stanley Dean Witter Special Value Fund
(55) Morgan Stanley Dean Witter Strategist Fund
(56) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(57) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(58) Morgan Stanley Dean Witter Total Return Trust
(59) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(60) Morgan Stanley Dean Witter U.S. Government Securities Trust
(61) Morgan Stanley Dean Witter Utilities Fund
(62) Morgan Stanley Dean Witter Value-Added Market Series
<PAGE>
(63) Morgan Stanley Dean Witter Value Fund
(64) Morgan Stanley Dean Witter Variable Investment Series
(65) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
Fredrick K. Kubler Senior Vice President, Assistant Secretary and Chief
Compliance Officer.
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 29. Management Services
Registrant is not a party to any such management-related service contract.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 27th day of July, 1999.
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
By /s/Barry Fink
----------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer Chief Executive Officer,
Trustee and Chairman
By /s/Charles A. Fiumefreddo 07/27/99
-------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/Thomas F. Caloia 07/27/99
-------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/Barry Fink 07/27/99
-------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By /s/David M. Butowsky 07/27/99
-------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
EXHIBIT INDEX
2. Amended and Restated By-Laws of the Registrant, dated May 1, 1999.
4. Amended Investment Management Agreement dated May 1, 1999, between the
Registrant and Morgan Stanley Dean Witter Advisors Inc.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors and National Financial Services Corporation, dated October
17, 1998.
8(b). Amended Services Agreement, dated June 22, 1998, between Morgan Stanley
Dean Witter Advisors Inc. and Morgan Stanley Dean Witter Services
Company Inc.
<PAGE>
BY-LAWS
OF
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
AMENDED AND RESTATED AS OF MAY 1, 1999
ARTICLE I
DEFINITIONS
The terms "Commission," "Declaration," "Distributor," "Investment
Adviser," "Majority Shareholder Vote," "1940 Act," "Shareholder," "Shares,"
"Transfer Agent," "Trust," "Trust Property" and "Trustees" have the respective
meanings given them in the Declaration of Trust of Morgan Stanley Dean Witter
Special Value Fund dated June 21, 1996, as amended from time to time.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or the
business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the provisions
of Section 16(a) of the 1940 Act, for that purpose. Meetings of Shareholders
shall also be called by the Secretary upon the written request of the holders
of Shares entitled to vote as otherwise required by Section 16(c) of the 1940
Act and to the extent required by the corporate or business statute of any
state in which the Shares of the Trust are sold, as made applicable to the
Trust by the provisions of Section 2.3 of the Declaration. Such request shall
state the purpose or purposes of such meeting and the matters proposed to be
acted on thereat. Except to the extent otherwise required by Section 16(c) of
the 1940 Act, as made applicable to the Trust by the provisions of Section 2.3
of the Declaration, the Secretary shall inform such Shareholders of the
reasonable estimated cost of preparing and mailing such notice of the meeting,
and upon payment to the Trust of such costs, the Secretary shall give notice
stating the purpose or purposes of the meeting to all entitled to vote at such
meeting. No meeting need be called upon the request of the holders of Shares
entitled to cast less than a majority of all votes entitled to be cast at such
meeting, to consider any matter which is substantially the same as a matter
voted upon at any meeting of Shareholders held during the preceding twelve
months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety
(90) days before such meeting to each Shareholder entitled to vote at such
meeting. Such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the Shareholder at his address as it
appears on the records of the Trust.
<PAGE>
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders, the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
be requisite and shall constitute a quorum for the transaction of business. In
the absence of a quorum, the Shareholders present or represented by proxy and
entitled to vote thereat shall have the power to adjourn the meeting from time
to time. The Shareholders present in person or represented by proxy at any
meeting and entitled to vote thereat also shall have the power to adjourn the
meeting from time to time if the vote required to approve or reject any
proposal described in the original notice of such meeting is not obtained (with
proxies being voted for or against adjournment consistent with the votes for
and against the proposal for which the required vote has not been obtained).
The affirmative vote of the holders of a majority of the Shares then present in
person or represented by proxy shall be required to adjourn any meeting. Any
adjourned meeting may be reconvened without further notice or change in record
date. At any reconvened meeting at which a quorum shall be present, any
business may be transacted that might have been transacted at the meeting as
originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders,
each holder of record of Shares entitled to vote thereat shall be entitled to
one vote in person or by proxy for each Share of beneficial interest of the
Trust and for the fractional portion of one vote for each fractional Share
entitled to vote so registered in his or her name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. Without limiting the manner in which a
Shareholder may authorize another person or persons to act for such Shareholder
as proxy pursuant hereto, the following shall constitute a valid means by which
a Shareholder may grant such authority:
(i) A Shareholder may execute a writing authorizing another person or
persons to act for such Shareholder as proxy. Execution may be accomplished
by the Shareholder or such Shareholder's authorized officer, director,
employee, attorney-in-fact or another agent signing such writing or causing
such person's signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile or telecopy signature. No
written evidence of authority of a Shareholder's authorized officer,
director, employee, attorney-in-fact or other agent shall be required; and
(ii) A Shareholder may authorize another person or persons to act for such
Shareholder as proxy by transmitting or authorizing the transmission of a
telegram or cablegram or by other means of telephonic, electronic or
computer transmission to the person who will be the holder of the proxy or
to a proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram or cablegram or
other means of telephonic, electronic or computer transmission must either
set forth or be submitted with information from which it can be determined
that the telegram, cablegram or other transmission was authorized by the
Shareholder.
No proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. At all meetings of Shareholders, unless the voting is
conducted by inspectors, all questions relating to the qualification of voters
and the validity of proxies and the acceptance or rejection of votes shall be
decided by the chairman of the meeting. In determining whether a telegram,
cablegram or other electronic transmission is valid, the chairman or inspector,
as the case may be, shall specify the information upon which he or she relied.
Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or Officers of the Trust. Proxy
solicitations may be made in writing or by using telephonic or other electronic
solicitation procedures that include appropriate methods of verifying the
identity of the Shareholder and confirming any instructions given thereby.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any
2
<PAGE>
Shareholder or his proxy shall, appoint Inspectors of Election of the meeting.
In case any person appointed as Inspector fails to appear or fails or refuses
to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all
votes or consents, determine the results, and do such other acts as may be
proper to conduct the election or vote with fairness to all Shareholders. On
request of the chairman of the meeting, or of any Shareholder or his proxy, the
Inspectors of Election shall make a report in writing of any challenge or
question or matter determined by them and shall execute a certificate of any
facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Business Corporation Law of
the Commonwealth of Massachusetts.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
SECTION 3.10 Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the Chairman and shall be
called by the Chairman or the Secretary upon the written request of any two (2)
Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Trustee at his address as it appears on the records of the Trust. Subject
to the provisions of the 1940 Act, notice or waiver of notice need not specify
the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such committee,
as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act of
the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By- Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall have been obtained.
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SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of the Trustees may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all of the Trustees entitled to
vote upon the action and such written consent is filed with the minutes of
proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of said
persons shall receive for services rendered as a Trustee of the Trust such
compensation as may be fixed by the Trustees. Nothing herein contained shall be
construed to preclude any Trustee from serving the Trust in any other capacity
and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all checks,
notes, drafts and other obligations for the payment of money by the Trust shall
be signed, and all transfer of securities standing in the name of the Trust
shall be executed, by the Chairman, the President, any Vice President or the
Treasurer or by any one or more officers or agents of the Trust as shall be
designated for that purpose by vote of the Trustees; notwithstanding the above,
nothing in this Section 4.7 shall be deemed to preclude the electronic
authorization, by designated persons, of the Trust's Custodian (as described
herein in Section 9.1) to transfer assets of the Trust, as provided for herein
in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Trustee, officer, employee, or agent of the Trust. The
indemnification shall be against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by him in connection with the action, suit, or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust to obtain a judgment or decree in its favor
by reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Trust; except that no indemnification shall be made in respect of any
claim, issue, or matter as to which the person has been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Trust,
except to the extent that the court in which the action or suit was brought, or
a court of equity in the county in which the Trust has its principal office,
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the person is fairly and reasonably
entitled to indemnity for those expenses which the court shall deem proper,
provided such Trustee, officer, employee or agent is not adjudged to be liable
by reason of his willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
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(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940 ("disabling
conduct"). A person shall be deemed not liable by reason of disabling
conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition thereof
if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
(3) either, (i) such person provides a security for his undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available facts,
that there is reason to believe that such person ultimately will be
found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding the office, and shall continue as to a person who has ceased to
be a Trustee, officer, employee, or agent and inure to the benefit of the
heirs, executors and administrators of such person; provided that no
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person may satisfy any right of indemnity or reimbursement granted herein or to
which he may be otherwise entitled except out of the property of the Trust, and
no Shareholder shall be personally liable with respect to any claim for
indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust purchase
insurance to indemnify any officer or Trustee against liability for any act for
which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the Trustees
of the Trust and may delegate to such committees, in the intervals between
meetings of the Trustees, any or all of the powers of the Trustees in the
management of the business and affairs of the Trust. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute,
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acknowledge or verify any instrument in more than one capacity. The executive
officers of the Trust shall be elected annually by the Trustees and each
executive officer so elected shall hold office until his or her successor is
elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the Chairman the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his or her successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. Powers and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws or, to the extent not so provided, as may be prescribed by the
Trustees; provided that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless such third
party has knowledge thereof.
SECTION 6.6. The Chairman. The Chairman shall be the chief executive
officer of the Trust, shall preside at all meetings of the Shareholders and of
the Trustees, shall have general and active management of the business of the
Trust, shall see that all orders and resolutions of the Trustees are carried
into effect and, in connection therewith, shall be authorized to delegate to
the President or to one or more Vice Presidents such of his or her powers and
duties at such times and in such manner as he or she may deem advisable, shall
be a signatory on all Annual and Semi-Annual Reports as may be sent to
Shareholders, and shall perform such other duties as the Trustees may from time
to time prescribe.
SECTION 6.7. The President. The President shall perform such duties as the
Trustees and the Chairman may from time to time prescribe and shall, in the
absence or disability of the Chairman, exercise the powers and perform the
duties of the Chairman. The President shall be authorized to delegate to one or
more Vice Presidents such of his or her powers and duties at such times and in
such manner as he or she may deem advisable.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there shall be more than one, the Vice
Presidents in such order as may be determined from time to time by the Trustees
or the Chairman, shall, in the absence or disability of the President, exercise
the powers and perform the duties of the President, and shall perform such
other duties as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there shall be more than one, the Assistant Vice Presidents in such
order as may be determined from time to time by the Trustees or the Chairman,
shall perform such duties and have such powers as may be assigned them from
time to time by the Trustees or the Chairman.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He or she shall give, or cause to be given, notice of
all meetings of the Shareholders and special meetings of the Trustees, and
shall perform such other duties and have such powers as the Trustees or the
Chairman may from time to time prescribe. He or she shall keep in safe custody
the seal of the Trust and affix or cause the same to be affixed to any
instrument requiring it, and, when so affixed, it shall be attested by his or
her signature or by the signature of an Assistant Secretary.
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SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there shall be more than one, the Assistant Secretaries in such order as may be
determined from time to time by the Trustees or the Chairman, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such duties and have such other
powers as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He or she shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books belonging to the
Trust, and he or she shall render to the Trustees and the Chairman, whenever
any of them require it, an account of his or her transactions as Treasurer and
of the financial condition of the Trust, and he or she shall perform such other
duties as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in such order as may be
determined from time to time by the Trustees or the Chairman, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary from
the computation thereof on the records of the Trust, the Trustees shall have
power, in their discretion, to distribute as income dividends and as capital
gain distributions, respectively, amounts sufficient to enable the Trust to
avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holders' name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of the
Trust by the Chairman, the President, or a Vice President, and countersigned by
the Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option, determine
not to issue a certificate or certificates to evidence Shares owned of record
by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Trust, such certificate or certificates shall,
nevertheless, be adopted by the Trust and be issued and
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delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall appear therein
had not ceased to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of
the lost, stolen or destroyed certificate, or his legal representative, to give
to the Trust and to such Registrar, Transfer Agent and/or Transfer Clerk as may
be authorized or required to countersign such new certificate or certificates,
a bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be
against them or any of them on account of or in connection with the alleged
loss, theft or destruction of any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at all times employ a
bank or trust company having capital, surplus and undivided profits of at least
five million dollars ($5,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as
may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon between
the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these By-
Laws, a waiver thereof in writing, signed by the person or persons entitled to
such notice and filed with the records of the meeting, whether before or after
the holding thereof, or actual attendance at the meeting of Shareholders,
Trustees or committee, as the case may be, in person, shall be deemed
equivalent to the giving of such notice to such person.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii) receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. The record date, in
any case, shall not be more than one hundred eighty (180) days, and in the case
of a meeting of Shareholders not less than ten (10) days, prior to the date on
which such meeting is to be held or the date on which such other particular
action requiring determination of Shareholders is to be taken, as the case may
be. In the case of a meeting of Shareholders, the meeting date set forth in the
notice to Shareholders accompanying the proxy statement shall be the date used
for purposes of calculating the 180 day or 10 day period, and any adjourned
meeting may be reconvened without a change in record date. In lieu of fixing a
record date, the Trustees may provide that the transfer books shall be closed
for a stated period but not to exceed, in any case, twenty (20) days. If the
transfer books are closed for the purpose of determining Shareholders entitled
to notice of a vote at a meeting of Shareholders, such books shall be closed
for at least ten (10) days immediately preceding the meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from time
to time provide. The seal of the Trust may be affixed to any document, and the
seal and its attestation may be lithographed, engraved or otherwise printed on
any document with the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement between
the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided,
however, that no By-Law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to law, the Declaration,
or these By-Laws, a vote of the Shareholders. The Trustees shall in no event
adopt By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
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ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Morgan Stanley Dean Witter Special
Value Fund, dated June 21, 1996, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name Morgan Stanley Dean Witter Special Value
Fund refers to the Trustees under the Declaration collectively as Trustees, but
not as individuals or personally; and no Trustee, Shareholder, officer,
employee or agent of Morgan Stanley Dean Witter Special Value Fund shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise, in
connection with the affairs of said Morgan Stanley Dean Witter Special Value
Fund, but the Trust Estate only shall be liable.
11
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997, and amended as of April
30, 1998 and May 1, 1999, by and between Morgan Stanley Dean Witter Special
Value Fund, an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts (hereinafter called the "Fund"), and Morgan
Stanley Dean Witter Advisors Inc., a Delaware corporation (hereinafter called
the "Investment Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and engages in the business of
acting as investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Trustees, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously
manage the assets of the Fund in a manner consistent with the investment
objectives and policies of the Fund; shall determine the securities and
commodities to be purchased, sold or otherwise disposed of by the Fund and the
timing of such purchases, sales and dispositions; and shall take such further
action, including the placing of purchase and sale orders on behalf of the
Fund, as the Investment Manager shall deem necessary or appropriate. The
Investment Manager shall also furnish to or place at the disposal of the Fund
such of the information, evaluations, analyses and opinions formulated or
obtained by the Investment Manager in the discharge of its duties as the Fund
may, from time to time, reasonably request.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Manager shall be deemed to
include persons employed or otherwise retained by the Investment Manager to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Manager may
desire. The Investment Manager shall, as agent for the Fund, maintain the
Fund's records and books of account (other than those maintained by the Fund's
transfer agent, registrar, custodian and other agencies). All such books and
records so maintained shall be the property of the Fund and, upon request
therefor, the Investment Manager shall surrender to the Fund such of the books
and records so requested.
3. The Fund will, from time to time, furnish or otherwise make available
to the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
<PAGE>
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and
employees, if any, of the Fund who are also directors, officers or employees of
the Investment Manager, and provide such office space, facilities and equipment
and such clerical help and bookkeeping services as the Fund shall reasonably
require in the conduct of its business. The Investment Manager shall also bear
the cost of telephone service, heat, light, power and other utilities provided
to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund, including without limitation: fees pursuant to any plan of
distribution that the Fund may adopt; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities or commodities and other
property, and any stock transfer or dividend agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with portfolio
transactions to which the Fund is a party; all taxes, including securities or
commodities issuance and transfer taxes, and fees payable by the Fund to
federal, state or other governmental agencies; the cost and expense of
engraving or printing certificates representing shares of the Fund; all costs
and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees
and legal fees and disbursements of counsel); the cost and expense of printing,
including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; all expenses incident to the payment of
any dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel to the
Trustees of the Fund who are not interested persons (as defined in the Act) of
the Fund or the Investment Manager, and of independent accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Trustees) of the Fund which
inure to its benefit; extraordinary expenses (including but not limited to
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation
unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the
Investment Manager monthly compensation determined by applying the following
annual rates to the Fund's daily net assets: 0.75% of daily net assets up to
$500 million; and 0.725% of daily net assets over $500 million. Except as
hereinafter set forth, compensation under this Agreement shall be calculated
and accrued daily and the amounts of the daily accruals shall be paid monthly.
Such calculations shall be made by applying 1/365ths of the annual rates to the
Fund's net assets each day determined as of the close of business on that day
or the last previous business day. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day
of a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as
set forth above.
Subject to the provisions of paragraph 7 hereof, payment of the Investment
Manager's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated by paragraph 7
hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from time
to time, the Investment Manager shall reduce its management fee to the extent
of such excess and, if required, pursuant to any such laws or regulations, will
reimburse the Fund for annual operating expenses in excess of any expense
limitation that may be applicable; provided, however, there shall be excluded
from such expenses the
2
<PAGE>
amount of any interest, taxes, brokerage commissions, distribution fees and
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto) paid
or payable by the Fund. Such reduction, if any, shall be computed and accrued
daily, shall be settled on a monthly basis, and shall be based upon the expense
limitation applicable to the Fund as at the end of the last business day of the
month. Should two or more such expense limitations be applicable as at the end
of the last business day of the month, that expense limitation which results in
the largest reduction in the Investment Manager's fee shall be applicable.
For purposes of this provision, should any applicable expense limitation
be based upon the gross income of the Fund, such gross income shall include,
but not be limited to, interest on debt securities in the Fund's portfolio
accrued to and including the last day of the Fund's fiscal year, and dividends
declared on equity securities in the Fund's portfolio, the record dates for
which fall on or prior to the last day of such fiscal year, but shall not
include gains from the sale of securities.
8. The Investment Manager will use its best efforts in the supervision and
management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund
or any of its investors for any error of judgment or mistake of law or for any
act or omission by the Investment Manager or for any losses sustained by the
Fund or its investors.
9. Nothing contained in this Agreement shall prevent the Investment
Manager or any affiliated person of the Investment Manager from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way bind or restrict the Investment Manager or any such
affiliated person from buying, selling or trading any securities or commodities
for their own accounts or for the account of others for whom they may be
acting. Nothing in this Agreement shall limit or restrict the right of any
Trustee, officer or employee of the Investment Manager to engage in any other
business or to devote his or her time and attention in part to the management
or other aspects of any other business whether of a similar or dissimilar
nature.
10. This Agreement shall remain in effect until April 30, 2000 and from
year to year thereafter provided such continuance is approved at least annually
by the vote of holders of a majority, as defined in the Investment Company Act
of 1940, as amended (the "Act"), of the outstanding voting securities of the
Fund or by the Trustees of the Fund; provided that in either event such
continuance is also approved annually by the vote of a majority of the Trustees
of the Fund who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that (a) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon thirty days' written notice to the Investment
Manager, either by majority vote of the Trustees of the Fund or by the vote of
a majority of the outstanding voting securities of the Fund; (b) this Agreement
shall immediately terminate in the event of its assignment (to the extent
required by the Act and the rules thereunder) unless such automatic
terminations shall be prevented by an exemptive order of the Securities and
Exchange Commission; and (c) the Investment Manager may terminate this
Agreement without payment of penalty on thirty days' written notice to the
Fund. Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed post-paid, to the other party at the principal office of
such party.
11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund
nor the Investment Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
13. The Investment Manager and the Fund each agree that the name "Morgan
Stanley Dean Witter," which comprises a component of the Fund's name, is a
property right of Morgan Stanley Dean Witter
3
<PAGE>
& Co. ("MSDW"), the parent of the Investment Manager. The Fund agrees and
consents that (i) it will only use the name "Morgan Stanley Dean Witter" as a
component of its name and for no other purpose, (ii) it will not purport to
grant to any third party the right to use the name "Morgan Stanley Dean Witter"
for any purpose, (iii) MSDW, or any corporate affiliate of MSDW, may use or
grant to others the right to use the name "Morgan Stanley Dean Witter," or any
combination or abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company, (iv) at the request of MSDW or any corporate
affiliate of MSDW, the Fund will take such action as may be required to provide
its consent to the use of the name "Morgan Stanley Dean Witter," or any
combination or abbreviation thereof, by MSDW or any corporate affiliate of
MSDW, or by any person to whom MSDW or a corporate affiliate of MSDW shall have
granted the right to such use, and (v) upon the termination of any investment
advisory agreement into which a corporate affiliate of MSDW and the Fund may
enter, or upon termination of affiliation of the Investment Manager with its
parent, the Fund shall, upon request of MSDW or any corporate affiliate of
MSDW, cease to use the name "Morgan Stanley Dean Witter" as a component of its
name, and shall not use the name, or any combination or abbreviation thereof,
as a part of its name or for any other commercial purpose, and shall cause its
officers, trustees and shareholders to take any and all actions which MSDW or
any corporate affiliate of MSDW may request to effect the foregoing and to
reconvey to MSDW any and all rights to such name.
14. The Declaration of Trust establishing Morgan Stanley Dean Witter
Special Value Fund, dated June 21, 1996, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Morgan
Stanley Dean Witter Special Value Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Morgan Stanley Dean
Witter Special Value Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise, in connection with the affairs of said Morgan Stanley
Dean Witter Special Value Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on May 1, 1999 in New York, New York.
MORGAN STANLEY DEAN WITTER
SPECIAL VALUE FUND
By:
-----------------------------------
Attest:
- ---------------------------------
MORGAN STANLEY DEAN WITTER ADVISORS INC.
By:
-----------------------------------
Attest:
- ----------------------------------
4
<PAGE>
MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
OMNIBUS SELECTED DEALER AGREEMENT INC.
Dear Sir or Madam:
We, Morgan Stanley Dean Witter Distributors Inc. (the "Distributor")
have a distribution agreement (the "Distribution Agreement") with each of the
open-end investment companies listed in Schedule A attached hereto (each, a
"Fund"), pursuant to which we act as the Distributor for the sale of each Fund's
shares of common stock or beneficial interest, as the case may be, (the
"Shares"). Under the Distribution Agreement, we have the right to distribute
Shares for resale.
Each Fund is an open-end management investment company registered under
the Investment Company Act of 1940, as amended, and the Shares being offered to
the public are registered under the Securities Act of 1933, as amended (the
"Securities Act"). You have received a copy of the Distribution Agreements
between us and each Fund and reference is made herein to certain provisions of
such Distribution Agreements. The terms used herein, including "Prospectus" and
"Registration Statement" of each Fund and "Selected Dealer" shall have the same
meaning in this Agreement as in the Distribution Agreements. As principal, we
offer to sell Shares to your customers upon the following terms and conditions:
1. In all sales of Shares to the public you shall act on behalf of
customers which for purposes of this Agreement are limited to customers for
which Nations Banc Investments, Inc. is the Introducing Broker, and in no
transaction shall you have any authority to act as agent for a Fund, for us or
for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the public offering price applicable to each order, as set forth in the
applicable current Prospectus. The procedure relating to the handling of orders
shall be subject to written instructions which we or the applicable Fund shall
forward from time to time to you. All orders are subject to acceptance or
rejection by us or a Fund in the sole discretion of either. The Distributor of
the Fund will promptly notify you in writing of any such rejection.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable public offering price
and subject to the terms hereof and of the applicable Distribution Agreement and
Prospectus. In connection herewith, you agree to abide by the terms of the
applicable Distribution Agreement and Prospectus to the extent required
hereunder. Furthermore, you agree that (i) you will sell any of the Shares only
under circumstances that will result in compliance with all applicable Federal
and state securities laws; (ii) you will not furnish or cause to be furnished to
any person any information relating to the Shares which is inconsistent in any
respect with the information contained in the applicable Prospectus (as then
amended or supplemented) or cause any advertisements to be published by radio or
television or in any newspaper or posted in any public place or use any sales
promotional material without our consent and the consent of the applicable Fund;
and (iii) you will endeavor to obtain proxies from purchasers of Shares. You
also agree that you will be liable to Distributor for payment of the purchase
price for Shares purchased by customers and that you shall make payment for such
shares when due.
4. We will compensate you for sales of shares of the Funds and personal
services to Fund shareholders by paying you a sales charge and/or other
commission (which may be in the form of a gross sales credit and/or an annual
residual commission) and/or a service fee, each as separately agreed by you and
us with respect to each Fund.
5. If any Shares sold to your customers under the terms of this
Agreement are repurchased by us for the account of a Fund or are tendered for
redemption within seven business days after the date of the confirmation of the
original purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any commission received by you with respect to such Shares.
6. No person is authorized to make any representations concerning the
Shares or the Funds except those contained in the current applicable Prospectus
and in such printed information subsequently issued by us or a Fund as
information supplemental to such Prospectus. In selling Shares, you shall rely
solely on the representations contained in the applicable Prospectus and
supplemental information mentioned above. Any printed information which we
furnish you other than the Prospectus and the Funds' periodic reports and
<PAGE>
proxy solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall have no
liability or responsibility to you in these respects unless expressly assumed in
connection therewith.
7. You are hereby authorized (i) to place orders directly with a Fund or
its agent for shares of the Fund to be sold by us subject to the applicable
terms and conditions governing the placement of orders for the purchase of Fund
Shares, as set forth in the Distribution Agreement, and (ii) to tender Shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in the Distribution Agreement. We will provide you with
copies of any updates to the Distribution Agreement.
8. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement with respect to one or more Funds upon fifteen
days prior written notice to the other party.
9. I. You shall indemnify and hold us harmless from and against any and
all losses, costs, (including reasonable attorney's fees) claims, damages and
liabilities which arise as a result of action taken pursuant to instructions
from you, or on your behalf to: (a)(i) place orders for Shares of a Fund with
the Fund's transfer agent or direct the transfer agent to receive instructions
for the order of Shares, and (ii) accept monies or direct that the transfer
agent accept monies as payment for the order of such Shares, all as contemplated
by and in accordance with Section 3 of the applicable Distribution Agreement;
(b)(i) place orders for the redemption of Shares of a Fund with the Fund's
transfer agent or direct the transfer agent to receive instruction for the
redemption of such Shares and (ii) to pay redemption proceeds or to direct that
the transfer agent pay redemption proceeds in connection with orders for the
redemption of Shares, all as contemplated by and in accordance with Section 4 of
the applicable Distribution Agreement; Distributor agrees to indemnify and hold
harmless you and your affiliates, officers, directors, control persons and
employees from and against any and all losses, costs (including reasonable
attorney's fees), claims, damages and liabilities which arise as a result of
Distributor's failure to fulfill its obligations hereunder and from any alleged
inaccuracy, omission or misrepresentation contained in any prospectus or any
advertising, or sales literature prepared by Distributor or the Fund provided,
however, that in no case, (i) is this indemnity in favor of you or us and any of
other party's such controlling persons to be deemed to protect us or any such
controlling persons against any liability to which we or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of our duties or by reason of reckless
disregard of our obligations and duties under this Agreement or the applicable
Distribution Agreement; or (ii) are you to be liable under the indemnity
agreement contained in this paragraph with respect to any claim made against us
or any such controlling persons, unless we or any such controlling persons, as
the case may be, shall have notified you in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon us or such controlling persons (or
after we or such controlling persons shall have received notice of such service
on any designated agent), notwithstanding the failure to notify you of any such
claim shall not relieve you from any liability which you may have to the person
against whom such action is brought otherwise than on account of the indemnity
agreement contained in this paragraph.
II. You will be entitled to participate at your own expense in the
defense, or, if you so elect, to assume the defense, of any suit brought to
enforce any such liability, but if you elect to assume the defense, such defense
shall be conducted by counsel chosen by you and reasonably satisfactory to us or
such controlling person or persons, defendant or defendants in the suit. In the
event you elect to assume the defense of any such suit and retain such counsel,
we or such controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them,
but, in case you do not elect to assume the defense of any such suit, you will
reimburse us or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
Each party shall promptly notify the other party to this Agreement of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Shares pursuant to
this Agreement.
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<PAGE>
III. If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless the Distributor, as provided above
in respect of any losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to herein, then you shall contribute to the amount
paid or payable by us as a result of such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by you on the one hand and us on the
other from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law, then you
shall contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative benefits but
also your relative fault on the one hand and our relative fault on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. You and we agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by us
as a result of the losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by us in connection with investigating or
defending any such claim. Notwithstanding the provisions of this subsection
(III), you shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares distributed by you to the
public were offered to the public exceeds the amount of any damages which you
have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
IV. Notwithstanding the provisions of subsections (I), (II) and (III),
we shall indemnify, defend and hold harmless you and your officers, directors,
employees, affiliates, agents, successors and assigns from and against any and
all claims and all related losses, expenses, damages, cost and liabilities
including reasonable attorneys' fees and expenses incurred in investigation or
defense, arising out of or related to any breach of any representation, warranty
or covenant by us contained in Section 15 of this Agreement.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Shares. Neither party shall be under any liability to the other
party except for lack of good faith and for obligations expressly assumed
herein. Nothing contained in this paragraph is intended to operate as, and the
provisions of this paragraph shall not in any way whatsoever constitute, a
waiver by you of compliance with any provision of the Securities Act, or of the
rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. Each party represents that it is a member in good standing of the
National Association of Securities Dealers, Inc. and, with respect to any sales
in the United States, each party hereby agrees to abide by the Rules of Fair
Practice of such Association relating to the performance of the obligations
hereunder.
13. We will inform you in writing as to the states in which we believe
the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. Notwithstanding any other provision of this Agreement to the
contrary, we represent and warrant that the names and addresses of your
customers (or customers of your affiliates) which have or which may come to our
attention in connection with this Agreement are confidential and are your
exclusive property and shall not be utilized by us except in connection with the
functions performed by us in connection with this Agreement. Notwithstanding the
foregoing, should a customer request, that we or an organization affiliated with
us, provide services to such customer, we or such affiliated organization shall
in no way violate this representation and warranty, nor be considered in breach
of this Agreement.
15. We represent, warrant, and covenant to you that the marketing
materials, any communications distributed to the public and training materials
designed by us or our agents relating to the product sold under this Agreement
are true and accurate and do not omit to state a fact necessary to make the
3
<PAGE>
information contained therein not misleading and comply with applicable federal
and state laws. We further represent, warrant, and covenant to you that the
performance by us of our obligations under this Agreement in no way constitutes
an infringement on or other violation of copyright, trade secret, trademark,
proprietary information or non-disclosure rights of any other party.
16. We shall maintain a contingency disaster recovery plan, and, in the
event you are so required by any regulatory or governmental agency, we shall
make such plan available to you for inspection at your office upon reasonable
advance notice by you. Each party agrees that it will at all times conduct its
activities under this Agreement in an equitable, legal and professional manner.
17. We understand that the performance of your and our obligations under
this Agreement is subject to examination during business hours by your
authorized representatives and auditors and by federal and state regulatory
agencies, and we agree that upon being given reasonable notice and proper
identification we shall submit or furnish at a reasonable time and place to any
such representative or regulatory agency reports, information, or other data
relating to this Agreement as may reasonably be required or requested by you. We
shall maintain and make available to you upon reasonable notice all material,
data, files, and records relating to this Agreement for a period of not less
than three years after the termination of this Agreement.
18. The sales, advertising and promotional materials designed by either
party or its agents relating to products sold under this Agreement shall comply
with applicable federal and state laws. Each party agrees that the sales,
advertising and promotional materials shall be made available to the other party
prior to distribution to your employees or customers.
19. Any controversy or claim between or among the parties hereto arising
out of or relating to this Agreement, including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in accordance
with the rules of the National Association of Securities Dealers, Inc. Judgment
upon any arbitration award may be entered in any court having jurisdiction. Any
party to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which this
Agreement applies in any court having jurisdiction over such action.
20. All notices or other communications under this Agreement shall be in
writing and given as follows:
If to us: Morgan Stanley Dean Witter Distributors Inc.
Attn: Barry Fink,
Two World Trade Center
New York, NY 10048
If to you: National Financial
Services Corporation
Attn: Robert Masabug
4201 Congress Street, Suite 245
Boston, MA
or such other address as the parties may hereafter specify in writing. Each such
notice to any party shall be either hand-delivered or transmitted, postage
prepaid, by registered or certified United States mail with return receipt
requested, and shall be deemed effective only upon receipt.
4
<PAGE>
21. This Agreement shall become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
By
---------------------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
Morgan Stanley Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: National Financial Services Corp.
----------------------------------
By:
----------------------------------
Address: 200 Liberty Street
----------------------------------
New York, New York
----------------------------------
Date: October 17, 1998
---------------------------------------
5
<PAGE>
SCHEDULE A
Dean Witter Global Asset Allocation Fund
Morgan Stanley Dean Witter American Value Fund
Morgan Stanley Dean Witter Balanced Growth Fund
Morgan Stanley Dean Witter Balanced Income Fund
Morgan Stanley Dean Witter California Tax-Free Income Fund
Morgan Stanley Dean Witter Capital Appreciation Fund
Morgan Stanley Dean Witter Capital Growth Securities
Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas" Portfolio
Morgan Stanley Dean Witter Convertible Securities Trust
Morgan Stanley Dean Witter Developing Growth Securities Trust
Morgan Stanley Dean Witter Diversified Income Trust
Morgan Stanley Dean Witter Dividend Growth Securities Inc.
Morgan Stanley Dean Witter Equity Fund
Morgan Stanley Dean Witter European Growth Fund Inc.
Morgan Stanley Dean Witter Federal Securities Trust
Morgan Stanley Dean Witter Financial Services Trust
Morgan Stanley Dean Witter Fund of Funds
Morgan Stanley Dean Witter Global Dividend Growth Securities
Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
Morgan Stanley Dean Witter Global Utilities Fund
Morgan Stanley Dean Witter Growth Fund
Morgan Stanley Dean Witter Hawaii Municipal Trust
Morgan Stanley Dean Witter Health Sciences Trust
Morgan Stanley Dean Witter High Yield Securities Inc.
Morgan Stanley Dean Witter Income Builder Fund
Morgan Stanley Dean Witter Information Fund
Morgan Stanley Dean Witter Intermediate Income Securities Inc.
Morgan Stanley Dean Witter International SmallCap Fund
Morgan Stanley Dean Witter Japan Fund
Morgan Stanley Dean Witter Limited Term Municipal Trust
Morgan Stanley Dean Witter Market Leader Trust
Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
Morgan Stanley Dean Witter Mid-Cap Growth Fund
Morgan Stanley Dean Witter Multi-State Municipal Series Trust
Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
Morgan Stanley Dean Witter New York Tax-Free Income Fund
Morgan Stanley Dean Witter Pacific Growth Fund Inc.
Morgan Stanley Dean Witter Precious Metals and Minerals Trust
Morgan Stanley Dean Witter S&P 500 Index Fund
Morgan Stanley Dean Witter S&P 500 Select Fund
Morgan Stanley Dean Witter Short-Term Bond Fund
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
Morgan Stanley Dean Witter Special Value Fund
Morgan Stanley Dean Witter Strategist Fund
Morgan Stanley Dean Witter Tax-Exempt Securities Trust
Morgan Stanley Dean Witter U.S. Government Securities Trust
Morgan Stanley Dean Witter Utilities Fund
Morgan Stanley Dean Witter Value-Added Market Series
Morgan Stanley Dean Witter Value Fund
Morgan Stanley Dean Witter World Wide Income Trust
A-1
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995, and amended as of June
22, 1998, by and between Morgan Stanley Dean Witter Advisors Inc., a Delaware
corporation (herein referred to as "MSDW Advisors"), and Morgan Stanley Dean
Witter Services Company Inc., a Delaware corporation (herein referred to as
"MSDW Services").
WHEREAS, MSDW Advisors has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which MSDW Advisors is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, MSDW Advisors desires to retain MSDW Services to perform the
administrative services as described below; and
WHEREAS, MSDW Services desires to be retained by MSDW Advisors to perform
such administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. MSDW Services agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, MSDW
Services shall (i) administer the Fund's business affairs and supervise the
overall day-to-day operations of the Fund (other than rendering investment
advice); (ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts and
other records required under the Investment Company Act of 1940, as amended
(the "Act"), the notification to the Fund and MSDW Advisors of available funds
for investment, the reconciliation of account information and balances among
the Fund's custodian, transfer agent and dividend disbursing agent and MSDW
Advisors, and the calculation of the net asset value of the Fund's shares;
(iii) provide the Fund with the services of persons competent to perform such
supervisory, administrative and clerical functions as are necessary to provide
effective operation of the Fund; (iv) oversee the performance of administrative
and professional services rendered to the Fund by others, including its
custodian, transfer agent and dividend disbursing agent, as well as accounting,
auditing and other services; (v) provide the Fund with adequate general office
space and facilities; (vi) assist in the preparation and the printing of the
periodic updating of the Fund's registration statement and prospectus (and, in
the case of an open-end Fund, the statement of additional information), tax
returns, proxy statements, and reports to its shareholders and the Securities
and Exchange Commission; and (vii) monitor the compliance of the Fund's
investment policies and restrictions.
In the event that MSDW Advisors enters into an Investment Management
Agreement with another investment company, and wishes to retain MSDW Services
to perform administrative services hereunder, it shall notify MSDW Services in
writing. If MSDW Services is willing to render such services, it shall notify
MSDW Advisors in writing, whereupon such other Fund shall become a Fund as
defined herein.
2. MSDW Services shall, at its own expense, maintain such staff and employ
or retain such personnel and consult with such other persons as it shall from
time to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of MSDW Services shall be deemed to include
officers of MSDW Services and persons employed or otherwise retained by MSDW
Services (including officers and employees of MSDW Advisors, with the consent
of MSDW Advisors) to furnish services, statistical and other factual data,
information with respect to technical and scientific developments, and such
other information, advice and assistance as MSDW Services may desire. MSDW
Services shall maintain each Fund's records and books of account (other than
those maintained by the Fund's transfer agent, registrar, custodian and other
agencies). All such books and records so maintained shall be the property of
the Fund and, upon request therefor, MSDW Services shall surrender to MSDW
Advisors or to the Fund such of the books and records so requested.
1
<PAGE>
3. MSDW Advisors will, from time to time, furnish or otherwise make
available to MSDW Services such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as MSDW Services
may reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation
or request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by MSDW Services, MSDW Advisors shall pay to MSDW Services
monthly compensation calculated daily (in the case of an open-end Fund) or
weekly (in the case of a closed-end Fund) by applying the annual rate or rates
set forth on Schedule B to the net assets of each Fund. Except as hereinafter
set forth, (i) in the case of an open-end Fund, compensation under this
Agreement shall be calculated by applying 1/365th of the annual rate or rates
to the Fund's or the Series' daily net assets determined as of the close of
business on that day or the last previous business day and (ii) in the case of
a closed-end Fund, compensation under this Agreement shall be calculated by
applying the annual rate or rates to the Fund's average weekly net assets
determined as of the close of the last business day of each week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth on Schedule B. Subject to the
provisions of paragraph 5 hereof, payment of MSDW Services' compensation for
the preceding month shall be made as promptly as possible after completion of
the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to MSDW Advisors pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof
imposed by state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, or, in the case of InterCapital
Income Securities Inc. or Morgan Stanley Dean Witter Variable Investment Series
or any Series thereof, the expense limitation specified in the Fund's
Investment Management Agreement, the fee payable hereunder shall be reduced on
a pro rata basis in the same proportion as the fee payable by the Fund under
the Investment Management Agreement is reduced.
6. MSDW Services shall bear the cost of rendering the administrative
services to be performed by it under this Agreement, and shall, at its own
expense, pay the compensation of the officers and employees, if any, of the
Fund employed by MSDW Services, and such clerical help and bookkeeping services
as MSDW Services shall reasonably require in performing its duties hereunder.
7. MSDW Services will use its best efforts in the performance of
administrative activitives on behalf of each Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, MSDW Services shall not be liable to the Fund or any of
its investors for any error of judgment or mistake of law or for any act or
omission by MSDW Services or for any losses sustained by the Fund or its
investors. It is understood that, subject to the terms and conditions of the
Investment Management Agreement between each Fund and MSDW Advisors, MSDW
Advisors shall retain ultimate responsibility for all services to be performed
hereunder by MSDW Services. MSDW Services shall indemnify MSDW Advisors and
hold it harmless from any liability that MSDW Advisors may incur arising out of
any act or failure to act by MSDW Services in carrying out its responsibilities
hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, MSDW Services, and in any person
controlling, controlled by or under common control with MSDW Services, and that
MSDW Services and any person controlling, controlled by or under common control
with MSDW Services may have an interest in the Fund. It is also understood that
MSDW Services and any affiliated persons thereof or any persons controlling,
controlled by or under common control with MSDW Services have and may have
advisory, management, administration service or other contracts with other
organizations and persons, and may have other interests and businesses, and
further may purchase, sell or trade any securities or commodities for their own
accounts or for the account of others for whom they may be acting.
2
<PAGE>
9. This Agreement shall continue until April 30, 1999, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party
within 30 days of the expiration of the then-existing period. Notwithstanding
the foregoing, this Agreement may be terminated at any time, by either party on
30 days' written notice delivered to the other party. In the event that the
Investment Management Agreement between any Fund and MSDW Advisors is
terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.
MORGAN STANLEY DEAN WITTER ADVISORS
INC.
By:
-----------------------------------
Attest:
- -----------------------------------
MORGAN STANLEY DEAN WITTER SERVICES
COMPANY INC.
By:
-----------------------------------
Attest:
- -----------------------------------
3
<PAGE>
SCHEDULE A
MORGAN STANLEY DEAN WITTER FUNDS
AS AMENDED AS OF JUNE 28, 1999
<TABLE>
<S> <C>
OPEN-END FUNDS
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Morgan Stanley Dean Witter Aggressive Equity Fund
6. Morgan Stanley Dean Witter American Opportunities Fund
7. Morgan Stanley Dean Witter Balanced Growth Fund
8. Morgan Stanley Dean Witter Balanced Income Fund
9. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
10. Morgan Stanley Dean Witter California Tax-Free Income Fund
11. Morgan Stanley Dean Witter Capital Growth Securities
12. Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas" Portfolio
13. Morgan Stanley Dean Witter Convertible Securities Trust
14. Morgan Stanley Dean Witter Developing Growth Securities Trust
15. Morgan Stanley Dean Witter Diversified Income Trust
16. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
17. Morgan Stanley Dean Witter Equity Fund
18. Morgan Stanley Dean Witter European Growth Fund Inc.
19. Morgan Stanley Dean Witter Federal Securities Trust
20. Morgan Stanley Dean Witter Financial Services Trust
21. Morgan Stanley Dean Witter Fund of Funds
(i) Domestic Portfolio
(ii) International Portfolio
22. Morgan Stanley Dean Witter Global Dividend Growth Securities
23. Morgan Stanley Dean Witter Global Utilities Fund
24. Morgan Stanley Dean Witter Growth Fund
25. Morgan Stanley Dean Witter Hawaii Municipal Trust
26. Morgan Stanley Dean Witter Health Sciences Trust
27. Morgan Stanley Dean Witter High Yield Securities Inc.
28. Morgan Stanley Dean Witter Income Builder Fund
29. Morgan Stanley Dean Witter Information Fund
30. Morgan Stanley Dean Witter Intermediate Income Securities
31. Morgan Stanley Dean Witter International Fund
32. Morgan Stanley Dean Witter International SmallCap Fund
33. Morgan Stanley Dean Witter Japan Fund
34. Morgan Stanley Dean Witter Latin American Growth Fund
35. Morgan Stanley Dean Witter Limited Term Municipal Trust
36. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
37. Morgan Stanley Dean Witter Managers Focus Fund
38. Morgan Stanley Dean Witter Market Leader Trust
39. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
40. Morgan Stanley Dean Witter Mid-Cap Equity Trust
41. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
42. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
43. Morgan Stanley Dean Witter New York Municipal Money Market Trust
44. Morgan Stanley Dean Witter New York Tax-Free Income Fund
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
45. Morgan Stanley Dean Witter North American Government Income Trust
46. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
47. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
48. Morgan Stanley Dean Witter Real Estate Fund
49. Morgan Stanley Dean Witter Select Dimensions Investment Series
(i) American Opportunities Portfolio
(ii) Balanced Growth Portfolio
(iii) Developing Growth Portfolio
(iv) Diversified Income Portfolio
(v) Dividend Growth Portfolio
(vi) Emerging Markets Portfolio
(vii) Global Equity Portfolio
(viii) Growth Portfolio
(ix) Mid-Cap Growth Portfolio
(x) Money Market Portfolio
(xi) North American Government Securities Portfolio
(xii) Utilities Portfolio
(xiii) Value-Added Market Portfolio
50. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
51. Morgan Stanley Dean Witter Short-Term Bond Fund
52. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
53. Morgan Stanley Dean Witter Small Cap Growth Fund
54. Morgan Stanley Dean Witter Special Value Fund
55. Morgan Stanley Dean Witter Strategist Fund
56. Morgan Stanley Dean Witter S&P 500 Index Fund
57. Morgan Stanley Dean Witter S&P 500 Select Fund
58. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
59. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
60. Morgan Stanley Dean Witter Total Return Trust
61. Morgan Stanley Dean Witter U.S. Government Securities Trust
62. Morgan Stanley Dean Witter U.S. Government Money Market Trust
63. Morgan Stanley Dean Witter Utilities Fund
64. Morgan Stanley Dean Witter Value Fund
65. Morgan Stanley Dean Witter Value-Added Market Series
66. Morgan Stanley Dean Witter Variable Investment Series
(i) Aggressive Equity Portfolio
(ii) Capital Growth Portfolio
(iii) Competitive Edge "Best Ideas" Portfolio
(iv) Dividend Growth Portfolio
(v) Equity Portfolio
(vi) European Growth Portfolio
(vii) Global Dividend Growth Portfolio
(viii) High Yield Portfolio
(ix) Income Builder Portfolio
(x) Money Market Portfolio
(xi) Quality Income Plus Portfolio
(xii) Pacific Growth Portfolio
(xiii) S&P 500 Index Portfolio
(xiv) Short-Term Bond Portfolio
(xv) Strategist Portfolio
(xvi) Utilities Portfolio
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
67. Morgan Stanley Dean Witter World Wide Income Trust
68. Morgan Stanley Dean Witter Worldwide High Income Fund
CLOSED-END FUNDS
69. Morgan Stanley Dean Witter High Income Advantage Trust
70. Morgan Stanley Dean Witter High Income Advantage Trust II
71. Morgan Stanley Dean Witter High Income Advantage Trust III
72. Morgan Stanley Dean Witter Income Securities Inc.
73. Morgan Stanley Dean Witter Government Income Trust
74. Morgan Stanley Dean Witter Insured Municipal Bond Trust
75. Morgan Stanley Dean Witter Insured Municipal Trust
76. Morgan Stanley Dean Witter Insured Municipal Income Trust
77. Morgan Stanley Dean Witter California Insured Municipal Income Trust
78. Morgan Stanley Dean Witter Insured Municipal Securities
79. Morgan Stanley Dean Witter Insured California Municipal Securities
80. Morgan Stanley Dean Witter Quality Municipal Investment Trust
81. Morgan Stanley Dean Witter Quality Municipal Income Trust
82. Morgan Stanley Dean Witter Quality Municipal Securities
83. Morgan Stanley Dean Witter California Quality Municipal Securities
84. Morgan Stanley Dean Witter New York Quality Municipal Securities
</TABLE>
A-3
<PAGE>
SCHEDULE B
MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF JUNE 28, 1999
Monthly compensation calculated daily by applying the following annual
rates to a fund's daily net assets:
FIXED INCOME FUNDS
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.060% of the daily net assets.
Balanced Income Fund
Morgan Stanley Dean Witter 0.055% of the portion of the daily net assets not exceeding
California Tax-Free Income Fund $500 million; 0.0525% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.050%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.0475% of the portion of the
daily net assets exceeding $1 billion but not exceeding $1.25
billion; and 0.045% of the portion of the daily net assets
exceeding $1.25 billion.
Morgan Stanley Dean Witter 0.060% of the portion of the daily net assets not exceeding
Convertible Securities Trust $750 million; 0.055% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.050% of
the portion of the daily net assets of the exceeding $1 billion
but not exceeding $1.5 billion; 0.0475% of the portion of the
daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.045% of the portion of the daily net assets exceeding
$2 billion but not exceeding $3 billion; and 0.0425% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter 0.040% of the daily net assets.
Diversified Income Trust
Morgan Stanley Dean Witter 0.055% of the portion of the daily net assets not exceeding $1
Federal Securities Trust billion; 0.0525% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.050% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2 billion; 0.0475% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.045% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $5 billion; 0.0425% of the portion of the daily
net assets exceeding $5 billion but not exceeding $7.5 billion;
0.040% of the portion of the daily net assets exceeding $7.5
billion but not exceeding $10 billion; 0.0375% of the portion of
the daily net assets exceeding $10 billion but not exceeding
$12.5 billion; and 0.035% of the portion of the daily net assets
exceeding $12.5 billion.
Morgan Stanley Dean Witter 0.035% of the daily net assets.
Hawaii Municipal Trust
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
High Yield Securities Inc. $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $2 billion;
0.0325% of the portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and 0.030% of the portion
of daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter 0.060% of the portion of the daily net assets not exceeding
Intermediate Income Securities $500 million; 0.050% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.040%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; and 0.030% of the portion of the
daily net assets exceeding $1 billion.
Morgan Stanley Dean Witter 0.050% of the daily net assets.
Limited Term Municipal Trust
Morgan Stanley Dean Witter 0.035% of the daily net assets.
Multi-State Municipal Series Trust
(10 Series)
Morgan Stanley Dean Witter 0.055% of the portion of the daily net assets not exceeding
New York Tax-Free Income Fund $500 million; and 0.0525% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter North 0.039% of the portion of the daily net assets not exceeding
American Government Income $3 billion; and 0.036% of the portion of the daily net assets
Trust exceeding $3 billion.
Morgan Stanley Dean Witter Select
Dimensions Investment Series--
Diversified Income Portfolio 0.040% of the daily net assets.
North American Government 0.039% of the daily net assets.
Securities Portfolio
Morgan Stanley Dean Witter Select 0.050% of the daily net assets.
Municipal Reinvestment Fund
Morgan Stanley Dean Witter 0.070% of the daily net assets.
Short-Term Bond Fund
Morgan Stanley Dean Witter 0.035% of the daily net assets.
Short-Term U.S. Treasury Trust
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Tax-Exempt Securities Trust $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; and 0.035% of the portion of the
daily net assets exceeding $1 billion but not exceeding $1.25
billion; .0325% of the portion of the daily net assets exceeding
$1.25 billion.
</TABLE>
B-2
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding $1
U.S. Government Securities Trust billion; 0.0475% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.045% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2 billion; 0.0425% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.040% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $5 billion; 0.0375% of the portion of the daily
net assets exceeding $5 billion but not exceeding $7.5 billion;
0.035% of the portion of the daily net assets exceeding $7.5
billion but not exceeding $10 billion; 0.0325% of the portion of
the daily net assets exceeding $10 billion but not exceeding
$12.5 billion; and 0.030% of the portion of the daily net assets
exceeding $12.5 billion.
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Variable Investment Series-- $500 million; and 0.0425% of the daily net assets exceeding
High Yield Portfolio $500 million.
Quality Income Plus Portfolio 0.050% of the portion of the daily the net assets up to
$500 million; and 0.045% of the portion of the daily net assets
exceeds $500 million.
Short-Term Bond Portfolio 0.045% of the daily net assets.
Morgan Stanley Dean Witter 0.075% of the portion of the daily net assets up to $250 million;
World Wide Income Trust 0.060% of the portion of the daily net assets exceeding
$250 million but not exceeding $500 million; 0.050% of the
portion of the daily net assets of the exceeding $500 million
but not exceeding $750 million; 0.040% of the portion of the
daily net assets exceeding $750 million but not exceeding $1
billion; and 0.030% of the portion of the daily net assets
exceeding $1 billion.
Morgan Stanley Dean Witter 0.060% of the daily net assets.
Worldwide High Income Fund
EQUITY FUNDS
Morgan Stanley Dean Witter 0.075% of the daily net assets.
Aggressive Equity Fund
Morgan Stanley Dean Witter 0.0625% of the portion of the daily net assets not exceeding
American Opportunities Fund $250 million; 0.050% of the portion of the daily net assets
exceeding $250 million but not exceeding $2.25 billion; 0.0475%
of the portion of the daily net assets exceeding $2.25 billion
but not exceeding $3.5 billion; 0.0450% of the portion of the
daily net assets exceeding $3.5 billion but not exceeding $4.5
billion; and 0.0425% of the portion of the daily net assets
exceeding $4.5 billion.
Morgan Stanley Dean Witter 0.060% of the portion of the daily net assets not exceeding
Balanced Growth Fund $500 million; and 0.0575% of the portion of the daily net assets
exceeding $500 million.
</TABLE>
B-3
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.065% of the portion of the daily net assets not exceeding
Capital Growth Securities $500 million; 0.055% of the portion exceeding $500 million but
not exceeding $1 billion; 0.050% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion; and
0.0475% of the portion of the daily net assets exceeding $1.5
billion.
Morgan Stanley Dean Witter 0.065% of the portion of the daily net assets not exceeding $1.5
Competitive Edge Fund, billion; and 0.0625% of the portion of the daily net assets
"Best Ideas" Portfolio exceeding $1.5 billion.
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Developing Growth Securities $500 million; and 0.0475% of the portion of the daily net assets
Trust exceeding $500 million.
Morgan Stanley Dean Witter 0.0625% of the portion of the daily net assets not exceeding
Dividend Growth Securities Inc. $250 million; 0.050% of the portion of the daily net assets
exceeding $250 million but not exceeding $1 billion; 0.0475% of
the portion of the daily net assets exceeding $1 billion but not
exceeding $2 billion; 0.045% of the portion of the daily net
assets exceeding $2 billion but not exceeding $3 billion;
0.0425% of the portion of the daily net assets exceeding $3
billion but not exceeding $4 billion; 0.040% of the portion of
the daily net assets exceeding $4 billion but not exceeding $5
billion; 0.0375% of the portion of the daily net assets exceeding
$5 billion but not exceeding $6 billion; 0.035% of the portion of
the daily net assets exceeding $6 billion but not exceeding $8
billion; 0.0325% of the portion of the daily net assets exceeding
$8 billion but not exceeding $10 billion; 0.030% of the portion
of the daily net assets exceeding $10 billion but not exceeding
$15 billion; and 0.0275% of the portion of the daily net assets
exceeding $15 billion.
Morgan Stanley Dean Witter 0.051% of the daily net assets.
Equity Fund
Morgan Stanley Dean Witter 0.057% of the portion of the daily net assets not exceeding
European Growth Fund Inc. $500 million; 0.054% of the portion of the daily net assets
exceeding $500 million but not exceeding $2 billion; and
0.051% of the portion of the daily net assets exceeding $2
billion.
Morgan Stanley Dean Witter 0.075% of the portion of the daily net assets not exceeding
Financial Services Trust $500 million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter
Fund of Funds--
Domestic Portfolio None
International Portfolio None
</TABLE>
B-4
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Global 0.075% of the portion of the daily net assets not exceeding $1
Dividend Growth Securities billion; 0.0725% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.070% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2.5 billion; 0.0675% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3.5 billion; 0.0650%
of the portion of the daily net assets exceeding $3.5 billion but
not exceeding $4.5 billion; and 0.0625% of the portion of the
daily net assets exceeding $4.5 billion.
Morgan Stanley Dean Witter 0.065% of the portion of the daily net assets not exceeding
Global Utilities Fund $500 million; 0.0625% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; and
0.060% of the portion of the daily net assets exceeding $1
billion.
Morgan Stanley Dean Witter 0.048% of the portion of daily net assets not exceeding
Growth Fund $750 million; 0.045% of the portion of daily net assets
exceeding $750 million but not exceeding $1.5 billion; and
0.042% of the portion of daily net assets exceeding $1.5 billion.
Morgan Stanley Dean Witter 0.10% of the portion of daily net assets not exceeding
Health Sciences Trust $500 million; and 0.095% of the portion of daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.075% of the portion of the net assets not exceeding
Income Builder Fund $500 million; and 0.0725% of the portion of daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.075% of the portion of the daily net assets not exceeding
Information Fund $500 million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.060% of the daily net assets.
International Fund
Morgan Stanley Dean Witter 0.069% of the daily net assets.
International SmallCap Fund
Morgan Stanley Dean Witter 0.057% of the daily net assets.
Japan Fund
Morgan Stanley Dean Witter Latin 0.075% of the portion of the daily net assets not exceeding
American Growth Fund $500 million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.0625% of the daily net assets.
Managers Focus Fund
Morgan Stanley Dean Witter 0.075% of the daily net assets.
Market Leader Trust
Morgan Stanley Dean Witter 0.075 of the daily net assets.
Mid-Cap Dividend Growth
Securities
Morgan Stanley Dean Witter 0.035% of the portion of the daily net assets not exceeding
Mid-Cap Equity Trust $500 million; and 0.0325% of the portion of the daily net assets
exceeding $500 million.
</TABLE>
B-5
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.0625% of the portion of the daily net assets not exceeding
Natural Resource Development $250 million and 0.050% of the portion of the daily net assets
Securities Inc. exceeding $250 million.
Morgan Stanley Dean Witter 0.057% of the portion of the daily net assets not exceeding $1
Pacific Growth Fund Inc. billion; 0.054% of the portion of the daily net assets exceeding
$1 billion but not exceeding $2 billion; and 0.051% of the
portion of the daily net assets exceeding $2 billion.
Morgan Stanley Dean Witter 0.080% of the daily net assets.
Precious Metals and
Minerals Trust
Morgan Stanley Dean Witter 0.060% of the daily net assets.
Real Estate Fund
Morgan Stanley Dean Witter Select
Dimensions Investment Series--
American Opportunities Portfolio 0.0625% of the portion of the daily net assets not exceeding
$500 million; and 0.060% of the portion of the daily net assets
exceeding $500 million.
Balanced Growth Portfolio 0.065% of the daily net assets.
Developing Growth Portfolio 0.050% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding
$500 million; 0.050% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; and
0.0475% of the portion of the daily net assets exceeding $1
billion.
Emerging Markets Portfolio 0.075% of the daily net assets.
Global Equity Portfolio 0.10% of the daily net assets.
Growth Portfolio 0.048% of the daily net assets.
Mid-Cap Growth Portfolio 0.075% of the daily net assets
Utilities Portfolio 0.065% of the daily net assets.
Value-Added Market Portfolio 0.050% of the daily net assets.
Morgan Stanley Dean Witter Small 0.060% of the daily net assets.
Cap Growth Fund
Morgan Stanley Dean Witter 0.075% of the portion of the daily net assets not exceeding
Special Value Fund $500 million; and 0.0725% of the portion of daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.060% of the portion of the daily net assets not exceeding
Strategist Fund $500 million; 0.055% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.050% of
the portion of the daily net assets exceeding $1 billion but not
exceeding $1.5 billion; 0.0475% of the portion of the daily net
assets exceeding $1.5 billion but not exceeding $2.0 billion; and
0.045% of the portion of the daily net assets exceeding $2.0
billion.
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.040% of the portion of the daily net assets not exceeding $1.5
S&P 500 Index Fund billion; 0.0375% of the portion of daily net assets exceeding
$1.5 billion but not exceeding $3 billion; and 0.035% of the
portion of daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter 0.060% of the daily net assets.
S&P 500 Select Fund
Morgan Stanley Dean Witter Total 0.045% of the daily net assets.
Return Trust
Morgan Stanley Dean Witter 0.065% of the portion of the daily net assets not exceeding
Utilities Fund $500 million; 0.055% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.0525% of
the portion of the daily net assets exceeding $1 billion but not
exceeding $1.5 billion; 0.050% of the portion of the daily net
assets exceeding $1.5 billion but not exceeding $2.5 billion;
0.0475% of the portion of the daily net assets exceeding $2.5
billion but not exceeding $3.5 billion; 0.045% of the portion of
the daily net assets exceeding $3.5 but not exceeding $5 billion;
and 0.0425% of the daily net assets exceeding $5 billion.
Morgan Stanley Dean Witter 0.060% of the daily net assets.
Value Fund
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Value-Added Market Series $500 million; 0.45% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.0425% of
the portion of the daily net assets exceeding $1.0 billion but
not exceeding $2.0 billion; and 0.040% of the portion of the
daily net assets exceeding $2 billion.
Morgan Stanley Dean Witter
Variable Investment Series--
Aggressive Equity Portfolio 0.075% of the daily net assets.
Capital Growth Portfolio 0.065% of the daily net assets.
Competitive Edge "Best Ideas" 0.065% of the daily net assets.
Portfolio
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding
$500 million; 0.050% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.0475% of
the portion of the daily net assets exceeding $1.0 billion but
not exceeding $2.0 billion; 0.045% of the portion of the daily
net assets exceeding $2 billion but not exceeding $3 billion; and
0.0425% of the portion of the daily net assets exceeding $3
billion.
Equity Portfolio 0.050% of the portion of the daily net assets not exceeding $1
billion; and 0.0475% of the portion of the daily net assets
exceeding $1 billion.
European Growth Portfolio 0.057% of the portion of the daily net assets not exceeding
$500 million; and 0.054% of the portion of the daily net assets
exceeding $500 million.
</TABLE>
B-7
<PAGE>
<TABLE>
<S> <C>
Global Dividend Growth Portfolio 0.075% of the portion of the daily net assets not exceeding $1
billion; and 0.0725% of the portion of daily net assets
exceeding $1 billion.
Income Builder Portfolio 0.075% of the daily net assets.
Pacific Growth Portfolio 0.057% of the daily net assets.
S&P 500 Index Portfolio 0.040% of the daily net assets.
Strategist Portfolio 0.050% of the portion of the daily net assets not exceeding $1.5
billion; and 0.0475% of the portion of the daily net assets
exceeding $1.5 billion.
Utilities Portfolio 0.065% of the portion of the daily net assets not exceeding
$500 million; 0.055% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; and
0.0525% of the portion of the daily net assets exceeding $1
billion.
MONEY MARKET FUNDS
Active Assets Trusts:
(1) Active Assets Tax-Free Trust 0.050% of the portion of the daily net assets not exceeding
(2) Active Assets California $500 million; 0.0425% of the portion of the daily net assets
Tax-Free Trust exceeding $500 million but not exceeding $750 million; 0.0375%
(3) Active Assets Government of the portion of the daily net assets exceeding $750 million
Securities Trust but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
(4) Active Assets Money Trust 0.050% of the portion of the daily net assets not exceeding
$500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; 0.025% of the portion
of the daily net assets exceeding $3 billion but not exceeding
$15 billion; 0.0249% of the portion of the daily net assets
exceeding $15 billion but not exceeding $17.5 billion; and
0.0248% of the portion of the daily net assets exceeding $17.5
billion.
</TABLE>
B-8
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
California Tax-Free Daily $500 million; 0.0425% of the portion of the daily net assets
Income Trust exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter Liquid 0.050% of the portion of the daily net assets not exceeding
Asset Fund Inc. $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.35 billion;
0.0325% of the portion of the daily net assets exceeding $1.35
billion but not exceeding $1.75 billion; 0.030% of the portion of
the daily net assets exceeding $1.75 billion but not exceeding
$2.15 billion; 0.0275% of the portion of the daily net assets
exceeding $2.15 billion but not exceeding $2.5 billion; 0.025%
of the portion of the daily net assets exceeding $2.5 billion but
not exceeding $15 billion; 0.0249% of the portion of the daily
net assets exceeding $15 billion but not exceeding $17.5 billion;
and 0.0248% of the portion of the daily net assets exceeding
$17.5 billion.
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
New York Municipal Money $500 million; 0.0425% of the portion of the daily net assets
Market Trust exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter Select 0.050% of the daily net assets.
Dimensions Investment Series--
Money Market Portfolio
</TABLE>
B-9
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Tax-Free Daily Income Trust $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter U.S. 0.050% of the portion of the daily net assets not exceeding
Government Money Market Trust $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Variable Investment Series-- $500 million; 0.0425% of the portion of the daily net assets
Money Market Portfolio exceeding $500 million but not exceeding $750 million; and
0.0375% of the portion of the daily net assets exceeding
$750 million.
</TABLE>
Monthly compensation calculated weekly by applying the following annual
rates to a fund's weekly net assets:
CLOSED-END FUNDS
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.060% of the average weekly net assets.
Government Income Trust
Morgan Stanley Dean Witter 0.075% of the portion of the average weekly net assets not
High Income Advantage Trust exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of average weekly net assets exceeding
$750 million and not exceeding $1 billion; and 0.030% of the
portion of average weekly net assets exceeding $1 billion.
</TABLE>
B-10
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.075% of the portion of the average weekly net assets not
High Income Advantage Trust II exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of average weekly net assets exceeding
$750 million and not exceeding $1 billion; and 0.030% of the
portion of average weekly net assets exceeding $1 billion.
Morgan Stanley Dean Witter 0.075% of the portion of the average weekly net assets not
High Income Advantage Trust III exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of the average weekly net assets
exceeding $750 million and not exceeding $1 billion; and
0.030% of the portion of average weekly net assets exceeding
$1 billion.
Morgan Stanley Dean Witter 0.050% of the average weekly net assets.
Income Securities Inc.
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
Insured Municipal Bond Trust
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
Insured Municipal Trust
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
Insured Municipal Income Trust
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
California Insured Municipal
Income Trust
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
Quality Municipal Investment
Trust
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
New York Quality Municipal
Securities
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
Quality Municipal Income Trust
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
Quality Municipal Securities
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
California Quality Municipal
Securities
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
Insured Municipal Securities
Morgan Stanley Dean Witter 0.035% of the average weekly net assets.
Insured California Municipal
Securities
</TABLE>
B-11
