<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1998
REGISTRATION NOS.: 333-15813
811-7915
===============================================================================
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. 3 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 4 [X]
----------------
MORGAN STANLEY DEAN WITTER
MARKET LEADER TRUST
(FORMERLY NAMED DEAN WITTER MARKET LEADER TRUST)
(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.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
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)
_X_ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ---- -------
PART A PROSPECTUS
- ------ ----------
<S> <C>
1. ......... Cover Page
2. ......... Summary of Fund Expenses; Prospectus Summary
3. ......... Financial Highlights; Performance Information
4. ......... Investment Objective and Policies; Risk
Considerations and Investment Practices; The
Fund and Its Management; Cover Page;
Investment Restrictions; Prospectus Summary
5. ......... The Fund and Its Management; Back Cover;
Investment Objective and Policies
6. ......... Dividends, Distributions and Taxes; Additional
Information
7. ......... Purchase of Fund Shares; Shareholder Services;
Redemptions and Repurchases
8. ......... Purchase of Fund Shares; Redemptions and
Repurchases; Shareholder Services
9. ......... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
- ------ -----------------------------------
10. ......... Cover Page
11. ......... Table of Contents
12. ......... The Fund and Its Management
13. ......... Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and Brokerage
14. ......... The Fund and Its Management; Trustees and
Officers
15. ......... Trustees and Officers
16. ......... The Fund and Its Management; Purchase of Fund
Shares; Custodian and Transfer Agent;
Independent Accountants
17. ......... Portfolio Transactions and Brokerage
18. ......... Description of Shares
19. ......... The Distributor; Purchase of Fund Shares;
Redemptions and Repurchasers; Statement of
Assets of Liabilities; Shareholder Services
20. ......... Dividends, Distributions and Taxes
21. ......... The Distributor
22. ......... Performance Information
23. ......... Experts; Financial Statements
</TABLE>
PART C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
OCTOBER 28, 1998
Morgan Stanley Dean Witter Market Leader Trust (the
"Fund") is an open-end, diversified management investment company whose
investment objective is long-term growth of capital. The Fund seeks to meet its
investment objective by investing primarily in equity securities issued by
companies that are established leaders in their respective fields in growing
industries in domestic and foreign markets. (See "Risk Considerations and
Investment Practices.")
The Fund offers four classes of shares (each, a
"Class"), each with a different combination of sales charges, ongoing fees and
other features. The different distribution arrangements permit an investor to
choose the method of purchasing shares that the investor believes is most
beneficial given the amount of the purchase, the length of time the investor
expects to hold the shares and other relevant circumstances. (See "Purchase of
Fund Shares--Alternative Purchase Arrangements.")
This Prospectus sets forth concisely the information
you should know before investing in the Fund. It should be read and retained
for future reference. Additional information about the Fund is contained in the
Statement of Additional Information, dated October 28, 1998, which has been
filed with the Securities and Exchange Commission, and which is available at no
charge upon request of the Fund at the address or telephone numbers listed on
this page. The Statement of Additional Information is incorporated herein by
reference.
MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.,
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary / 2
Summary of Fund Expenses / 5
Financial Highlights / 7
The Fund and its Management / 10
Investment Objective and Policies / 10
Risk Considerations and Investment Practices / 12
Investment Restrictions / 20
Purchase of Fund Shares / 20
Shareholder Services / 31
Redemptions and Repurchases / 35
Dividends, Distributions and Taxes / 36
Performance Information / 36
Additional Information / 37
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OFTHIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Morgan Stanley Dean Witter
Market Leader Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust,
Fund and is an open-end, diversified management investment company. The Fund invests
primarily in equity securities issued by companies that are established leaders in their
respective fields in growing industries in domestic and foreign markets.
- ---------------------------------------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page 37). The Fund offers four
Classes of shares, each with a different combination of sales charges, ongoing fees and
other features (see pages 20-30).
- ---------------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened
Purchase through EasyInvestSM). Class D shares are only available to persons investing $5 million
($25 million for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million) investment
for Class D shares, and subject to the $1,000 minimum initial investment for each Class
of the Fund, an investor's existing holdings of Class A shares and shares of funds for
which Morgan Stanley Dean Witter Advisors Inc. serves as investment manager
("Morgan Stanley Dean Witter Funds") that are sold with a front-end sales charge, and
concurrent investments in Class D shares of the Fund and other Morgan Stanley Dean
Witter Funds that are multiple class funds, will be aggregated. The minimum subsequent
investment is $100 (see page 20).
- ---------------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is long-term growth of capital.
Objective
- ---------------------------------------------------------------------------------------------------------------
Investment Morgan Stanley Dean Witter Advisors Inc., the Investment Manager of the Fund, and its
Manager wholly-owned subsidiary, Morgan Stanley Dean Witter Services Company Inc., serve in
various investment management, advisory, management and administrative capacities to
100 investment companies and other portfolios with net assets under management of
approximately $113.7 billion at September 30, 1998 (see page 10).
- ---------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.75% of the
Fee Fund's average daily net assets (see page 10).
- ---------------------------------------------------------------------------------------------------------------
Distributor and Morgan Stanley Dean Witter Distributors Inc. is the Distributor of the Fund's shares. The
Distribution Fund has adopted a distribution plan pursuant to Rule 12b-1 under the Investment
Fee Company Act (the "12b-1 Plan") with respect to the distribution fees paid by the Class A,
Class B and Class C shares of the Fund to the Distributor. The entire 12b-1 fee payable
by Class A and a portion of the 12b-1 fee payable by each of Class B and Class C equal
to 0.25% of the average daily net assets of the Class are currently each characterized as
a service fee within the meaning of the National Association of Securities Dealers, Inc.
guidelines. The remaining portion of the 12b-1 fee, if any, is characterized as an
asset-based sales charge (see pages 20 and 29).
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase
Arrangements o Class A shares are offered with a front-end sales charge, starting at 5.25% and
reduced for larger purchases. Investments of $1 million or more (and investments by
certain other limited categories of investors) are not subject to any sales charge at the
time of purchase but a contingent deferred sales charge ("CDSC") of 1.0% may be
imposed on redemptions within one year of purchase. The Fund is authorized to
reimburse the Distributor for specific expenses incurred in promoting the distribution of
the Fund's Class A shares and servicing shareholder accounts pursuant to the Fund's
12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at an
annual rate of 0.25% of average daily net assets of the Class (see pages 20, 24 and 29).
o Class B shares are offered without a front-end sales charge, but will in most cases be
subject to a CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after
purchase. The CDSC will be imposed on any redemption of shares if after such
redemption the aggregate current value of a Class B account with the Fund falls below
the aggregate amount of the investor's purchase payments made during the six years
preceding the redemption. A different CDSC schedule applies to investments by certain
qualified plans. Class B shares are also subject to a 12b-1 fee assessed at the annual
rate of 1.0% of average daily net assets of Class B. All shares of the Fund held prior to
July 28, 1997 have been designated Class B shares. Shares held before May 1, 1997
will convert to Class A shares in May, 2007. In all other instances, Class B shares
convert to Class A shares approximately ten years after the date of the original purchase
(see pages 20, 26 and 29).
o Class C shares are offered without a front-end sales charge, but will in most cases be
subject to a CDSC of 1.0% if redeemed within one year after purchase. The Fund is
authorized to reimburse the Distributor for specific expenses incurred in promoting the
distribution of the Fund's Class C shares and servicing shareholder accounts pursuant to
the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to
payments at an annual rate of 1.0% of average daily net assets of the Class (see pages
20, 28 and 29).
o Class D shares are offered only to investors meeting an initial investment minimum of
$5 million ($25 million for certain qualified plans) and to certain other limited categories of
investors. Class D shares are offered without a front-end sales charge or CDSC and are
not subject to any 12b-1 fee (see pages 20 and 29).
- ---------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income and distributions from net capital gains, if any, are
Capital Gains paid at least annually. The Fund may, however, determine to retain all or part of any net
Distributions long-term capital gains in any year for reinvestment. Dividends and capital gains
distributions paid on shares of a Class are automatically reinvested in additional shares
of the same Class at net asset value unless the shareholder elects to receive cash.
Shares acquired by dividend and distribution reinvestment will not be subject to any sales
charge or CDSC (see pages 31 and 36).
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC
on Class A, Class B or Class C shares. An account may be involuntarily redeemed if the
total value of the account is less than $100 or, if the account was opened through
EasyInvestSM, if after twelve months the shareholder has invested less than $1,000 in the
account (see page 35).
- ---------------------------------------------------------------------------------------------------------------
Risk The net asset value of the Fund's shares will fluctuate with changes in market value of
Considerations portfolio securities. An investment in the Fund should be considered a long-term holding
and subject to all the risks associated with investing in equity securities of companies in
growing industries in domestic and foreign markets. The market value of the Fund's
portfolio securities and, therefore, the Fund's net asset value per share, will increase or
decrease due to a variety of economic, market or political factors which cannot be
predicted. It should be recognized that foreign securities and markets in which the Fund
may invest pose different and greater risks than those customarily associated with
domestic securities and their markets. The Fund may invest in lower-rated convertible
and non-convertible fixed-income securities, may enter into repurchase agreements, may
purchase securities on a when-issued, delayed delivery or forward commitment basis,
may purchase securities on a "when, as and if issued" basis, may lend its portfolio
securities and may utilize certain investment techniques including transactions involving
stock index futures which may be considered speculative in nature and may involve
greater risks than those customarily assumed by other investment companies which do
not invest in such instruments. An investment in shares of the Fund should not be
considered a complete investment program and is not appropriate for all investors.
Investors should carefully consider their ability to assume these risks and the risks
outlined under the heading "Risk Considerations and Investment Practices" (pages
12-19) before making an investment in the Fund.
- ---------------------------------------------------------------------------------------------------------------
Shareholder Automatic Investment of Dividends and Distributions; Investment of Distributions
Services Received in Cash; Systematic Withdrawal Plan; Exchange Privilege; EasyInvestSM;
Tax-Sheltered Retirement Plans (see pages 31-34).
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
4
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table below are for the
fiscal year ended August 31, 1998.
<TABLE>
<CAPTION>
Class A Class B Class C Class D
--------------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price) ......................... 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments ......... None None None None
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or redemption
proceeds) ............................................. None(2) 5.00%(3) 1.00%(4) None
Redemption Fees ........................................ None None None None
Exchange Fee ........................................... None None None None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management Fees (5) .................................... 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (6) (7) ..................................... 0.25% 1.00% 1.00% None
Other Expenses (5) ..................................... 0.31% 0.31% 0.31% 0.31%
Total Fund Operating Expenses .......................... 1.31% 2.06% 2.06% 1.06%
</TABLE>
- ----------
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(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 on
redemptions made within one year after purchase, except for certain
specific circumstances (see "Purchase of Fund Shares--Initial Sales
Charge Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) Management fees and other expenses are based on the Fund's actual
aggregate expenses.
(6) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1 fee
payable by Class A and a portion of the 12b-1 fee payable by each of
Class B and Class C equal to 0.25% of the average daily net assets of the
Class are currently each characterized as a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines and are payments made for personal service and/or maintenance
of shareholder accounts. The remainder of the 12b-1 fee, if any, is an
asset-based sales charge, and is a distribution fee paid to the
Distributor to compensate it for the services provided and the expenses
borne by the Distributor and others in the distribution of the Fund's
shares (see "Purchase of Fund Shares--Plan of Distribution").
(7) Upon conversion of Class B shares to Class A shares, such shares will be
subject to the lower 12b-1 fee applicable to Class A shares. No sales
charge is imposed at the time of conversion of Class B shares to Class A
shares. Class C shares do not have a conversion feature and, therefore,
are subject to an ongoing 1.00% distribution fee (see "Purchase of Fund
Shares--Alternative Purchase Arrangements").
5
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Examples 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
Class A ..................................................... $65 $92 $120 $201
Class B ..................................................... $71 $94 $131 $239
Class C ..................................................... $31 $64 $111 $239
Class D ..................................................... $11 $34 $ 58 $129
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A ..................................................... $65 $92 $120 $201
Class B ..................................................... $21 $64 $111 $239
Class C ..................................................... $21 $64 $111 $239
Class D ..................................................... $11 $34 $ 58 $129
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of Distribution"
and "Redemptions and Repurchases."
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 NASD.
6
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout the period have been audited by PricewaterhouseCoopers
LLP, independent accountants. The financial highlights should be read in
conjunction with the financial statements, the notes thereto and the
unqualified report of independent accountants, which are contained in the
Statement of Additional Information. Further information about the performance
of the Fund is contained in the Fund's Annual Report to Shareholders, which may
be obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
For the period
For the year April 28, 1997*
ended through
August 31, 1998++ August 31, 1997**
------------------- ----------------------
<S> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $ 10.81 $10.00
-------- --------
Net investment income (loss) .................... (0.09) 0.04
Net realized and unrealized gain (loss) ......... (0.95) 0.77
-------- --------
Total from investment operations ................ (1.04) 0.81
-------- --------
Less dividends and distributions from:
Net investment income .......................... (0.03) --
Net realized gain .............................. (0.06) --
-------- --------
Total dividends and distributions ............... (0.09) --
-------- --------
Net asset value, end of period .................. $ 9.68 $10.81
======== ========
TOTAL INVESTMENT RETURN+ ........................ (9.65)% 8.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 2.06 %(4) 2.34%(2)(3)
Net investment income (loss) .................... (0.81)%(4) 1.21%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $116,693 $107,298
Portfolio turnover rate ......................... 68 % 22%(1)
</TABLE>
- ----------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived
by the Investment Manager, the annualized expense and net investment
income ratios would have been 2.47% and 1.08%, respectively.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
7
<PAGE>
FINANCIAL HIGHLIGHTS--Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
For the year July 28, 1997*
ended through
August 31, 1998++ August 31, 1997
------------------- ------------------
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $ 10.82 $ 10.90
------- -------
Net investment income (loss) .................... (0.01) 0.01
Net realized and unrealized loss ................ (0.96) (0.09)
------- -------
Total from investment operations ................ (0.97) (0.08)
------- -------
Less dividends and distributions from:
Net investment income .......................... (0.06) --
Net realized gain .............................. (0.06) --
------- -------
Total dividends and distributions ............... (0.12) --
------- -------
Net asset value, end of period .................. $ 9.73 $ 10.82
======= =======
TOTAL INVESTMENT RETURN+ ........................ (8.98)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.31 %(3) 1.89 %(2)
Net investment income (loss) .................... (0.06)%(3) 1.30 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $ 319 $ 288
Portfolio turnover rate ......................... 68 % 22 %(1)
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $ 10.81 $ 10.90
-------- --------
Net investment income (loss) .................... (0.10) 0.01
Net realized and unrealized loss ................ (0.94) (0.10)
-------- --------
Total from investment operations ................ (1.04) (0.09)
-------- --------
Less dividends and distributions from:
Net investment income .......................... (0.04) --
Net realized gain .............................. (0.06) --
-------- --------
Total dividends and distributions ............... (0.10) --
-------- --------
Net asset value, end of period .................. $ 9.67 $ 10.81
======== ========
TOTAL INVESTMENT RETURN+ ........................ (9.63)% (0.83)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 2.06 %(3) 2.54 %(2)
Net investment income (loss) .................... (0.81)%(3) 0.61 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $ 937 $ 313
Portfolio turnover rate ......................... 68 % 22 %(1)
</TABLE>
- ----------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
8
<PAGE>
FINANCIAL HIGHLIGHTS--Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
For the year July 28, 1997*
ended through
August 31, 1998++ August 31, 1997
------------------- ------------------
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $ 10.82 $ 10.90
------- -------
Net investment income ........................... -- 0.02
Net realized and unrealized loss ................ (0.95) (0.10)
------- -------
Total from investment operations ................ (0.95) (0.08)
------- -------
Less dividends and distributions from:
Net investment income .......................... (0.07) --
Net realized gain .............................. (0.06) --
------- -------
Total dividends and distributions ............... (0.13) --
------- -------
Net asset value, end of period .................. $ 9.74 $ 10.82
======= =======
TOTAL INVESTMENT RETURN+ ........................ (8.81)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.06 %(3) 1.43 %(2)
Net investment income ........................... 0.19 %(3) 1.81 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $2,459 $10
Portfolio turnover rate ......................... 68 % 22 %(1)
</TABLE>
- ----------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
9
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter Market Leader Trust (formerly named Dean
Witter Market Leader Trust) (the "Fund") is an open-end, diversified management
investment company. The Fund is a trust of the type commonly known as a
"Massachusetts business trust" and was organized under the laws of The
Commonwealth of Massachusetts on November 4, 1996.
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors" or the
"Investment Manager"), whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. 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. The Investment Manager, which was incorporated in July, 1992 under
the name Dean Witter InterCapital Inc., changed its name to Morgan Stanley Dean
Witter Advisors Inc. on June 22, 1998.
MSDW Advisors and its wholly-owned subsidiary, Morgan Stanley Dean
Witter Services Company Inc. ("MSDW Services"), serve in various investment
management, advisory, management and administrative capacities to 100
investment companies, 28 of which are listed on the New York Stock Exchange,
with combined assets of approximately $109.6 billion at September 30, 1998. The
Investment Manager also manages portfolios of pension plans, other institutions
and individuals which aggregated approximately $4.1 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. MSDW Advisors has retained MSDW Services to perform the
aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by the
Investment Manager to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the
Fund and for expenses of the Fund incurred by the Investment Manager, the Fund
pays the Investment Manager monthly compensation calculated daily by applying
the annual rate of 0.75% to the Fund's net assets. For the fiscal year ended
August 31, 1998, the Fund accrued total compensation to the Investment Manager
amounting to 0.75% of the Fund's average daily net assets and the total
expenses of each Class amounted to 1.31%, 2.06%, 2.06% and 1.06% of the average
daily net assets of Class A, Class B, Class C and Class D, respectively.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is long-term growth of capital. The
objective is a fundamental policy of the Fund and may not be changed without a
vote of a majority of the outstanding voting securities of the Fund. There is
no assurance that the objective will be achieved. The following policies may be
changed by the Board of Trustees without shareholder approval.
The Fund seeks to achieve its objective by investing, under normal
circumstances, at least 65% of its total assets in equity securities of
companies that, in the opinion of the Investment Manager, are established
leaders in their respective fields in growing industries in domestic and
foreign markets. The equity securities in which the Fund may invest in include
common stocks, preferred stocks and debt or preferred stocks convertible into
or exchangeable for common stocks. These companies generally will possess
well-recognized proprietary skills or products, will have equity market
capitalizations in ex-
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cess of $1 billion and will be listed on a United States stock exchange
(including U.S. dollar-denominated securities such as American Depository
Receipts ("ADRs")). Generally these companies will be considered "leaders," in
the view of the Investment Manager, if they are nationally-known and have
established a strong reputation for quality management, products and services
in the United States and/or globally.
In addition to equity securities of market leader companies, up to 35%
of the Fund's total assets may be invested in equity securities or debt
securities convertible into or exchangeable for equity securities of other
companies, in non-convertible debt securities, including U.S. Government
securities and money market instruments, and in rights and warrants. (For a
discussion of the risks of investing in each of these securities, see "Risk
Considerations and Investment Practices" below.)
The Investment Manager intends to use both "top down" and "bottom-up"
approaches. The "top down" approach seeks to identify growing industries in
domestic and foreign markets. Within these industries, the Investment Manager
will apply a "bottom-up" fundamental analysis to identify the most attractive
securities to purchase, giving particular attention to companies with the
following attributes: recognized product and service leadership within its
industry, strong financial position (strong financial fundamentals) relative to
its peers, strong history of earnings growth or momentum often exceeding
consensus analyst expectations, evidence of corporate management's attention to
equity structure (evidenced by, among other things, stock buy-backs, the extent
to which management exercises stock options or otherwise acquires shares of the
company and sound financing decisions) as well as other attributes which the
Investment Manager believes are indicators of sustainable long-term growth.
Fixed-income securities in which the Fund may invest include corporate
notes and bonds and obligations issued or guaranteed by the United States
Government, its agencies and instrumentalities. The non-governmental debt
securities in which the Fund will invest will include: (a) corporate debt
securities, including bonds, notes and commercial paper, rated in the four
highest categories by a nationally recognized statistical rating organization
("NRSRO") including Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Corporation ("S&P"), Duff and Phelps, Inc. and Fitch Investors Service,
Inc., or, if unrated, of comparable quality as determined by the Investment
Manager; and (b) bank obligations, including CDs, banker's acceptances and time
deposits, issued by banks with a long-term CD rating in one of the four highest
categories by a NRSRO. Investments in securities rated within the four highest
rating categories by a NRSRO are considered "investment grade." However, such
securities rated within the fourth highest rating category by a NRSRO have
speculative characteristics and, therefore, changes in economic conditions or
other circumstances are more likely to weaken the capacity of their issuers to
make principal and interest payments than would be the case with investments in
securities with higher credit ratings. Where a fixed-income security is not
rated by a NRSRO, the Investment Manager will make a determination of its
creditworthiness and may deem it to be investment grade. If a fixed-income
non-convertible security held by the Fund is subsequently downgraded by a
rating agency below investment grade, the Fund will sell such securities as
soon as practicable without undue market or tax consequences to the Fund. See
the Appendix to the Statement of Additional Information for a discussion of
ratings of fixed-income securities.
The U.S. Government securities in which the Fund may invest include
securities which are direct obligations of the United States Government, such
as United States treasury bills, notes and bonds (including zero coupon bonds),
and which are backed by the full faith and credit of the United States;
securities which are backed by the full faith and credit of the United States
but which are obligations of a United States agency or instrumentality (e.g.,
obligations of the Government National Mortgage Association); securities issued
by a United
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<PAGE>
States agency or instrumentality which has the right to borrow, to meet its
obligations, from an existing line of credit with the United States Treasury
(e.g., obligations of the Federal National Mortgage Association); and
securities issued by a United States agency or instrumentality which is backed
by the credit of the issuing agency or instrumentality (e.g., obligations of
the Federal Farm Credit System).
Money market instruments in which the Fund may invest include securities
issued or guaranteed by the U.S. Government, its agencies and instrumentalities
(Treasury bills, notes and bonds, including zero coupon securities); bank
obligations; Eurodollar certificates of deposit; obligations of savings
institutions; fully insured certificates of deposit; and commercial paper rated
within the four highest grades by Moody's or S&P 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. Such securities may be used to invest uncommitted cash balances.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the Fund's
securities holdings. During such periods, the Fund may adopt a temporary
"defensive" posture in which up to 100% of its total assets is invested in
money market instruments or cash.
Convertible Securities. The Fund may invest in convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail less
risk than the corporation's common stock. The value of a convertible security
is a function of its "investment value" (its value as if it did not have a
conversion privilege), and its "conversion value" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege).
Up to 20% of the Fund's assets in convertible fixed-income securities
can be rated below investment grade or, if unrated, of comparable quality as
determined by the Investment Manager. Securities rated below investment grade
are the equivalent of high yield, high risk bonds (commonly known as "junk
bonds"). The Fund will not invest in convertible fixed-income securities that
are in default in payment of principal or interest. In the event that the
Fund's investments in convertible securities rated below investment grade,
including downgraded convertible securities, constitute more than 20% of the
Fund's total assets, the Fund will seek immediately to sell sufficient
securities to reduce the total to below the applicable percentage. See "Risk
Considerations and Investment Practices" below for a discussion of the risks of
investing in lower-rated and unrated fixed-income securities and the Appendix
to the Statement of Additional Information for a description of fixed income
security ratings.
The Fund may also purchase and sell futures contracts on stock indexes,
may invest in repurchase agreements, private placements, zero coupon securities
and real estate investment trusts, may purchase securities on a when-issued,
delayed delivery or forward commitment basis, may purchase securities on a
"when, as and if issued" basis, and may lend its portfolio securities, as
discussed under "Risk Considerations and Investment Practices" below.
RISK CONSIDERATIONS AND
INVESTMENT PRACTICES
The net asset value of the Fund's shares will fluctuate with changes in
the market value of the Fund's portfolio securities. The market value of the
Fund's portfolio securities will increase or decrease due to a variety of
economic, market or political factors which cannot be predicted.
Foreign Securities. The Fund may invest in foreign securities; provided,
however, that not more than 10% of the Fund's total assets may be invested in
foreign securities which are not listed on a United States stock exchange.
Foreign securities investments may be affected by changes in currency rates or
exchange control regulations, changes in governmental administration or
economic or monetary
12
<PAGE>
policy (in the United States and abroad) or changed circumstances in dealings
between nations. Fluctuations in the relative rates of exchange between
different currencies will affect the value of the Fund's investments
denominated in foreign currency. Changes in foreign currency exchange rates
relative to the U.S. dollar will affect the U.S. dollar value of the Fund's
assets denominated in that currency and thereby impact upon the Fund's total
return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade. The foreign currency transactions
of the Fund will be conducted on a spot basis or through forward foreign
currency exchange contracts (described below). The Fund will incur certain
costs in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign markets
may occasion delays in settlements of the Fund's trades effected in such
markets. As such, the inability to dispose of portfolio securities due to
settlement delays could result in losses to the Fund due to subsequent declines
in value of such securities and the inability of the Fund to make intended
security purchases due to settlement problems could result in a failure of the
Fund to make potentially advantageous investments.
Many European countries are about to adopt a single European currency,
the euro ("'the Euro Conversion"). The consequences of the Euro Conversion for
foreign exchange rates, interest rates and the value of European securities
eligible for purchase by the Fund are presently unclear. Such consequences may
adversely affect the value and/or increase the volatility of securities held by
the Fund.
Lower Rated or Unrated Convertible Securities. To the extent that a
convertible security's investment value is greater than its conversion value,
its price will be primarily a reflection of such investment value and its price
will be likely to increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security (the credit standing of the issuer
and other factors may also have an effect on the convertible security's value).
If the conversion value exceeds the investment value, the price of the
convertible security will rise above its investment value and, in addition, may
sell at some premium over its conversion value. (This premium represents the
price investors are willing to pay for the privilege of purchasing a
fixed-income security with a possibility of capital appreciation due to the
conversion privilege). At such times the price of the convertible security will
tend to fluctuate directly with the price of the underlying equity security.
A portion of the convertible securities in which the Fund may invest
will generally be rated below investment grade. Securities below investment
grade are the equivalent of high yield, high risk bonds,
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<PAGE>
commonly known as "junk bonds." Investment grade is generally considered to be
debt securities rated BBB or higher by Standard & Poor's Corporation ("S&P") or
Baa or higher by Moody's Investors Service, Inc. ("Moody's"). Fixed-income
securities rated Baa by Moody's or BBB by Standard & Poor's have speculative
characteristics greater than those of more highly rated securities, while
fixed-income securities rated Ba or BB or lower by Moody's and Standard &
Poor's, respectively, are considered to be speculative investments. The Fund
will not invest in convertible securities that are rated lower than B by S&P or
Moody's or, if not rated, determined to be of comparable quality by the
Investment Manager. The Fund will not invest in debt securities that are in
default in payment of principal or interest. The ratings of fixed-income
securities by Moody's and Standard & Poor's are a generally accepted barometer
of credit risk. However, as the creditworthiness of issuers of lower-rated
fixed-income securities is more problematic than that of issuers of higher-rated
fixed-income securities, the achievement of the Fund's investment objective
will be more dependent upon the Investment Manager's own credit analysis than
would be the case with a mutual fund investing primarily in higher quality
bonds. The Investment Manager will utilize a security's credit rating as simply
one indication of an issuer's creditworthiness and will principally rely upon
its own analysis of any security currently held by the Fund or potentially
purchasable by the Fund for its portfolio. See the Appendix to the Statement of
Additional Information for a discussion of ratings of fixed-income securities.
Because of the special nature of the Fund's permitted investments in
lower rated or unrated convertible securities, the Investment Manager must take
account of certain special considerations in assessing the risks associated
with such investments. The prices of lower rated or unrated securities have
been found to be less sensitive to changes in prevailing interest rates than
higher rated investments, but are likely to be more sensitive to adverse
economic changes or individual corporate developments. During an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect their
ability to service their principal and interest payment obligations, to meet
their projected business goals or to obtain additional financing. If the issuer
of a fixed-income security owned by the Fund defaults, the Fund may incur
additional expenses to seek recovery. In addition, periods of economic
uncertainty and change can be expected to result in an increased volatility of
market prices of lower rated or unrated securities and a corresponding
volatility in the net asset value of a share of the Fund.
Forward Foreign Currency Exchange Contracts. The fund may enter into
forward foreign currency exchange contracts ("forward contracts") in connection
with its foreign securities investments.
A forward contract involves an obligation to purchase or sell a currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase (by the Fund or
the counterparty) and the foreign currency in which the security is denominated
during the period between the date on which the security is purchased or sold
and the date on which payment is made or received.
At other times, when, for example, the Fund's Investment Manager
believes that a particular for-
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<PAGE>
eign currency may suffer a substantial decline against the U.S. dollar or some
other foreign currency, the Fund may enter into a forward contract to sell, for
a fixed amount of dollars or other currency, the amount of foreign currency
approximating the value of some or all of the Fund's securities holdings (or
securities which the Fund has purchased for its portfolio) denominated in such
foreign currency. Under identical circumstances, the Fund may enter into a
forward contract to sell, for a fixed amount of U.S. dollars or other currency,
an amount of foreign currency other than the currency in which the securities
to be hedged are denominated approximating the value of some or all of the
portfolio securities to be hedged. This method of hedging, called "cross-
hedging," will be selected by the Investment Manager when it is determined that
the foreign currency in which the portfolio securities are denominated has
insufficient liquidity or is trading at a discount as compared with some other
foreign currency with which it tends to move in tandem.
In addition, when the Fund's Investment Manager anticipates purchasing
securities at some time in the future, and wishes to lock in the current
exchange rate of the currency in which those securities are denominated against
the U.S. dollar or some other foreign currency, the Fund may enter into a
forward contract to purchase an amount of currency equal to some or all of the
value of the anticipated purchase, for a fixed amount of U.S. dollars or other
currency. The Fund may, however, close out the forward contract without
purchasing the security which was the subject of the "anticipatory" hedge.
In all of the above circumstances, if the currency in which the Fund
securities holdings (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be
possible, since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.
The Fund is not required to enter into such transactions with regard to its
foreign currency-denominated securities and will not do so unless deemed
appropriate by the Investment Manager. The Fund generally will not enter into a
forward contract with a term of greater than one year, although it may enter
into forward contracts for periods of up to five years. The Fund may be limited
in its ability to enter into hedging transactions involving forward contracts
by the Internal Revenue Code requirements relating to qualifications as a
regulated investment company (see "Dividends, Distributions and Taxes").
Corporate Notes and Bonds. Values and yield of corporate bonds will
fluctuate with changes in prevailing interest rates and other factors.
Generally, as prevailing interest rates rise, the value of corporate notes and
bonds held by the Fund will fall. Securities with longer maturities generally
tend to produce higher yields and are subject to greater market fluctuation as
a result of changes in interest rates than debt securities with shorter
maturities. The Fund is not limited as to the maturities of the debt securities
in which it may invest.
Stock Index Futures Transactions. The Fund may purchase and sell futures
contracts on stock indexes such as the Standard & Poor's 500 Composite Stock
Price Index, the New York Stock Exchange Composite Index and the Russell 2000
Index. 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. 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.
The Fund may purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against
15
<PAGE>
changes in their prices. Purchase of a futures contract by the Fund may serve
as a temporary substitute for the purchase of individual stocks which may then
be purchased in an orderly fashion. The Fund will not enter into futures
contracts on stock indexes for speculative purposes. The Fund may not enter
into futures contracts if immediately thereafter the amount committed to
initial margin exceeds 5% of the value of the Fund's total assets. However,
there is no overall limitation on the percentage of the Fund's assets which may
be subject to a hedge position, and therefore as much as 100% of the Fund's
assets may be subject to such futures contracts. The Fund may close out its
position as a buyer or seller of a futures contract only if a liquid secondary
market exists for futures contracts of that series. There is no assurance that
such a market will exist. Also, exchanges may limit the amount by which the
price of many futures contracts 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.
Futures contracts may be considered speculative in nature and may
involve greater risks than those customarily assumed by other investment
companies which do not invest in such instruments. One such risk is that the
Investment Manager could be incorrect in its expectations as to the direction
or extent of various interest rate or price movements or the time span within
which the movements take place. Another risk which will arise in employing
futures contracts to protect against the price volatility of portfolio
securities is that 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. This risk may
particularly apply, given the nature of the Fund's investments in securities of
smaller companies rather than larger companies. See the Statement of Additional
Information for a further discussion of risks.
The extent to which the Fund may enter into transactions involving
futures contracts may be limited by the Internal Revenue Code's requirements
for qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Taxes."
Investment in Other Investment Vehicles. Under the Investment Company
Act of 1940, as amended (the "Act"), the Fund generally may invest up to 10% of
its total assets in the aggregate in shares of other investment companies and
up to 5% of its total assets in any one investment company, as long as that
investment does not represent more than 3% of the voting stock of the acquired
investment company at the time such shares are purchased. Notwithstanding the
foregoing, 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 as the Fund. (See
"Additional Information--Master/Feeder Conversion.") Investment in other
investment companies or vehicles may be the sole or most practical means by
which the Fund can participate in certain foreign markets. Such investment may
involve the payment of substantial premiums above the value of such issuers'
portfolio securities, and is subject to limitations under the Act and market
availability. In addition, special tax considerations may apply. The Fund does
not intend to invest in such vehicles or funds unless, in the judgment of the
Investment Manager, the potential benefits of such investment justify the
payment of any applicable premium or sales charge. As a shareholder in an
investment company, the Fund would bear its ratable share of that investment
company's expenses, including its advisory and administration fees. At the same
time the Fund would continue to pay its own management fees and other expenses,
as a result of which the Fund and its shareholders in effect will be absorbing
duplicate levels of advisory fees with respect to investments in such other
investment companies.
Rights and Warrants. The Fund may acquire rights and/or warrants which
are attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, op-
16
<PAGE>
tions to purchase equity securities at a specific price, generally valid for a
specific period of time, and have no voting rights, pay no dividends and have
no rights with respect to the corporation issuing them.
Repurchase Agreements. The Fund may enter into repurchase agreements,
which may be viewed as a type of secured lending by the Fund, and which
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
at a specified price and at a fixed time in the future, usually not more than
seven days from the date of purchase. While repurchase agreements involve
certain risks not associated with direct investments in debt securities,
including the risks of default or bankruptcy of the selling financial
institution, 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 and maintaining
adequate collateralization.
Depository Receipts. The Fund may invest in securities of foreign
issuers in the form of ADRs, including ADRs sponsored by persons other than the
underlying issuers ("unsponsored ADRs"), European Depository Receipts ("EDRs"),
Global Depository Receipts ("GDRs") or other similar securities convertible
into securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying securities. Generally, issuers
of the stock of unsponsored ADRs are not obligated to distribute material
information in the United States and, therefore, there may not be a correlation
between such information and the market value of such ADRs. EDRs are issued by
a European bank and GDRs are issued by a foreign bank or trust company and both
evidence ownership of the underlying foreign security. Generally, ADRs, in
registered form, are designated for use in the United States securities
markets, EDRs, in bearer form, are designated for use in European securities
markets and GDRs, in bearer form, are designated for use in European and other
foreign securities markets.
When-Issued and Delayed Delivery Securities and Forward
Commitments. From time to time, in the ordinary course of business, 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 such
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 the
commitment. 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. See the Statement of
Additional Information for additional risk disclosure.
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, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. 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. See the
Statement of Additional Information for additional risk disclosure.
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
17
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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.
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. Real estate investment trusts are not diversified and are subject to
the risk of financing projects. They are also subject to heavy cash flow
dependency, defaults by borrowers or tenants, self-liquidation, and the
possibility of failing to qualify for tax-free status under the Internal
Revenue Code and failing to maintain exemption from the Act.
Private Placements and Restricted Securities. The Fund may invest up to
5% of its total assets in securities which are subject to restrictions on
resale because they have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or which are otherwise restricted.
(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 generally referred to as private placements or restricted
securities. Limitations on the resale of such 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 such securities for resale and the risk of substantial delays in
effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, 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," such security will
not be included within the category "illiquid securities," which under current
policy 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.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at any
time by the Fund (subject to certain notice provisions described in the
Statement of Additional Information), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account pursuant
to applicable regulations and that are equal to at least the market value,
determined daily, of the loaned securities. As with any extensions of credit,
there
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<PAGE>
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,
loans of portfolio securities will only be made to firms deemed by the
Investment Manager to be creditworthy and when the income which can be earned
from such loans justifies the attendant risks.
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. In
addition, corporate and governmental data processing errors 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.
For additional risk disclosure, please refer to the "Investment
Objective and Policies" section of the Prospectus and to the "Investment
Practices and Policies" section of the Statement of Additional Information.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and, as such, may be
changed without shareholder approval.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by the Investment Manager with
a view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean Witter
Reynolds Inc., Morgan Stanley & Co. Incorporated and other broker-dealers that
are affiliates of MSDW Advisors, and others regarding economic developments and
interest rate trends, and the Investment Manager's own analysis of factors it
deems relevant. The assets of the Fund are managed within MSDW Advisor's Growth
Group, which manages thirty-one equity funds and fund portfolios with
approximately $10.9 billion in assets as of September 30, 1998. Guy G.
Rutherfurd, Jr., Senior Vice President of MSDW Advisors and a member of MSDW
Advisor's Growth Group since February, 1997, is the primary portfolio manager
of the Fund and has been assisted by Aaron Clark, an Assistant Vice President
of MSDW Advisors, since October 28, 1998. Prior to joining MSDW Advisors, Mr.
Rutherfurd was Executive Vice President and Chief Investment Officer of Nomura
Asset Management (U.S.A.) Inc. Prior to joining MSDW Advisors in April 1997,
Mr. Clark was an independent analyst (December 1996--April 1997) and junior
bank stock analyst (January 1995-December 1996) with Gerard Klauer Mattison &
Co. and prior thereto was a research analyst with Prudential Securities Inc.
from October 1993--December 1994.
Although the Fund does not intend to engage in short-term trading of
portfolio securities as a means of achieving its investment objective, it may
sell portfolio securities without regard to the length of
19
<PAGE>
time they have been held whenever such sale will in the Investment Manager's
opinion strengthen the Fund's position and contribute to its investment
objective. Pursuant to an order of the Securities and Exchange Commission, the
Fund may effect principal transactions in certain money market instruments with
Dean Witter Reynolds Inc. In addition, the Fund may incur brokerage commissions
on transactions conducted through Dean Witter Reynolds Inc., Morgan Stanley &
Co. Incorporated and other brokers and dealers that are affiliates of MSDW
Advisors. It is not anticipated that the portfolio trading will result in the
Fund's portfolio turnover rate exceeding 100% in any one year. The Fund will
incur brokerage costs commensurate with its portfolio turnover rate. See
"Dividends, Distributions and Taxes" for a discussion of the tax implications
of the Fund's trading policy.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions
which have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. For purposes
of the following limitations: (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 may not:
1. As to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any 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 as
the Fund (a "Qualifying Portfolio").
2. As to 75% of its total assets, purchase more than 10% of all
outstanding voting securities or any class of securities of any one issuer,
except that the Fund may invest all or substantially all of its assets in a
Qualifying Portfolio.
3. 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 or its agencies or
instrumentalities.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and
Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors" or the
"Distributor"), an affiliate of the Investment Manager, shares of the Fund are
distributed by the Distributor and offered by Dean Witter Reynolds Inc.
("DWR"), a selected dealer and subsidiary of Morgan Stanley Dean Witter & Co.,
and other dealers who have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). It is anticipated that DWR will
undergo a change of corporate name which is expected to incorporate the brand
name of "Morgan Stanley Dean Witter," pending approval of various regulatory
authorities. The principal executive office of the Distributor is located at
Two World Trade Center, New York, New York 10048.
20
<PAGE>
The Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales charge
are subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified plans are
subject to a CDSC scaled down from 2.0% to 1.0% if redeemed within three years
after purchase.) Class C shares are sold without an initial sales charge but
are subject to a CDSC of 1.0% on most redemptions made within one year after
purchase. Class D shares are sold without an initial sales charge or CDSC and
are available only to investors meeting an initial investment minimum of $5
million ($25 million for certain qualified plans), and to certain other limited
categories of investors. At the discretion of the Board of Trustees of the
Fund, Class A shares may be sold to categories of investors in addition to
those set forth in this prospectus at net asset value without a front-end sales
charge, and Class D shares may be sold to certain other categories of
investors, in each case as may be described in the then current prospectus of
the Fund. See "Alternative Purchase Arrangements--Selecting a Particular Class"
for a discussion of factors to consider in selecting which Class of shares to
purchase.
The minimum initial purchase is $1,000 for each Class of shares,
although Class D shares are only available to persons investing $5 million ($25
million for certain qualified plans), or more and to certain other limited
categories of investors. For the purpose of meeting the minimum $5 million (or
$25 million) initial investment for Class D shares, and subject to the $1,000
minimum initial investment for each Class of the Fund, an investor's existing
holdings of Class A shares of the Fund and other Morgan Stanley Dean Witter
Funds that are multiple class funds ("Morgan Stanley Dean Witter Multi-Class
Funds") and shares of Morgan Stanley Dean Witter Funds sold with a front-end
sales charge ("FSC Funds") and concurrent investments in Class D shares of the
Fund and other Morgan Stanley Dean Witter Multi-Class Funds will be aggregated.
Subsequent purchases of $100 or more may be made by sending a check, payable to
Morgan Stanley Dean Witter Market Leader Trust, directly to Morgan Stanley Dean
Witter Trust FSB (the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040,
Jersey City, NJ 07303 or by contacting a Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative. When purchasing shares
of the Fund, investors must specify whether the purchase is for Class A, Class
B, Class C or Class D shares. If no Class is specified, the Transfer Agent will
not process the transaction until the proper Class is identified. The minimum
initial purchase in the case of investments through EasyInvestSM, an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. The minimum initial purchase in the case of an
"Education IRA" is $500, if the Distributor has reason to believe that
additional investments will increase the investment in the account to $1,000
within three years. In the case of investments pursuant to (i) Systematic
Payroll Deduction Plans (including Individual Retirement Plans), (ii) the MSDW
Advisors mutual fund asset allocation program and (iii) fee-based programs
approved by the Distributor, pursuant to which participants pay an asset based
fee for services in the nature of investment advisory, administrative and/or
brokerage services, the Fund, in its discretion, may accept investments without
regard to any minimum amounts which would otherwise be required, provided, in
the case of Systematic Payroll Deduction Plans, that the Distributor has reason
to believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares purchased
will not be issued unless a request is made by the shareholder in writing to
the Transfer Agent.
21
<PAGE>
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since DWR
and other Selected Broker-Dealers forward investors' funds on settlement date,
they will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. Sales personnel of a Selected Broker-Dealer are compensated for
selling shares of the Fund by the Distributor or any of its affiliates and/or
the Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to
provide them with the flexibility of selecting an investment best suited to
their needs. The general public is offered three Classes of shares: Class A
shares, Class B shares and Class C shares, which differ principally in terms of
sales charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors (see
"No Load Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents
an identical interest in the investment portfolio of the Fund except that Class
A, Class B and Class C shares bear the expenses of the ongoing shareholder
service fees, Class B and Class C shares bear the expenses of the ongoing
distribution fees and Class A, Class B and Class C shares which are redeemed
subject to a CDSC bear the expense of the additional incremental distribution
costs resulting from the CDSC applicable to shares of those Classes. The
ongoing distribution fees that are imposed on Class A, Class B and Class C
shares will be imposed directly against those Classes and not against all
assets of the Fund and, accordingly, such charges against one Class will not
affect the net asset value of any other Class or have any impact on investors
choosing another sales charge option. See "Plan of Distribution" and
"Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
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
certain purchases. Investments of $1 million or more (and investments by
certain other limited categories of investors) are not subject to any sales
charges at the time of purchase but are subject to a CDSC of 1.0% on
redemptions made within one year after purchase, except for certain specific
circumstances. Class A shares are also subject to a 12b-1 fee of up to 0.25% of
the average daily net assets of the Class. See "Initial Sales Charge
Alternative--Class A Shares."
Class B Shares. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 1.0% of
the average daily net assets of Class B. The Class B shares' distribution fee
will cause that Class to have higher expenses and pay lower dividends than
Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares
22
<PAGE>
of the Fund, based on the relative net asset values of the shares of the two
Classes on the conversion date. In addition, a certain portion of Class B
shares that have been acquired through the reinvestment of dividends and
distributions will be converted at that time. See "Contingent Deferred Sales
Charge Alternative--Class B Shares."
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 redemptions made
within one year after purchase. This CDSC may be waived for certain
redemptions. They are subject to an annual 12b-1 fee of up to 1.0% of the
average daily net assets of the Class C shares. 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. See "Level Load Alternative--Class C
Shares."
Class D Shares. Class D shares are available only to limited categories
of investors (see "No Load Alternative--Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
Selecting a Particular Class. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an
investor depends on the amount and intended length of his or her investment.
Investors who prefer an initial sales charge alternative may elect to purchase
Class A shares. Investors qualifying for significantly reduced or, in the case
of purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to an
ongoing 12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A
shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a front-end
sales charge and they are uncertain as to the length of time they intend to
hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all Morgan
Stanley Dean Witter Multi-Class Funds, shares of FSC Funds and shares of Morgan
Stanley Dean Witter Funds for which such shares have been exchanged will be
included together with the current investment amount.
Sales personnel may receive different compensation for selling each
Class of shares. Investors should understand that the purpose of a CDSC is the
same as that of the initial sales charge in that the sales charges applicable
to each Class provide for the financing of the distribution of shares of that
Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
23
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
- ---------------------------------------------------------------------
<S> <C> <C> <C>
A Maximum 5.25% 0.25% No
initial sales charge
reduced for
purchases of
$25,000 and over;
shares sold without
an initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
- ---------------------------------------------------------------------
B Maximum 5.0% 1.0% B shares convert
CDSC during the first to A shares
year decreasing automatically
to 0 after six years after
approximately
ten years
- ---------------------------------------------------------------------
C 1.0% CDSC during 1.0% No
first year
- ---------------------------------------------------------------------
D None None No
- ---------------------------------------------------------------------
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge.
In some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets
of the Class.
The offering price of Class A shares will be the net asset value per
share next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE 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>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow
up to the full applicable sales charge as shown in the above schedule 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 of 1933.
The above schedule of sales charges is applicable to purchases in a
single transaction by, among others: (a) an individual; (b) an individual, his
or her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified under
Section 401 of the Internal Revenue Code; (e) tax-exempt organi-
24
<PAGE>
zations enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code;
(f) employee benefit plans qualified under Section 401 of the Internal Revenue
Code of a single employer or of employers who are "affiliated persons" of each
other within the meaning of Section 2(a)(3)(c) of the Act; and for investments
in Individual Retirement Accounts of employees of a single employer through
Systematic Payroll Deduction plans; or (g) any other organized group of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount.
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other Morgan Stanley Dean Witter Multi-Class Funds and shares of FSC
Funds. The sales charge payable on the purchase of the Class A shares of the
Fund, the Class A shares of the other Morgan Stanley Dean Witter Multi-Class
Funds and the shares of the FSC Funds will be at their respective rates
applicable to the total amount of the combined concurrent purchases of such
shares.
Right of Accumulation. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Morgan Stanley Dean Witter Funds
previously purchased at a price including a front-end sales charge (including
shares of the Fund and other Morgan Stanley Dean Witter Funds acquired in
exchange for those shares, and including in each case shares acquired through
reinvestment of dividends and distributions), which are held at the time of
such transaction, amounts to $25,000 or more. If such investor has a cumulative
net asset value of shares of FSC Funds and Class A and Class D shares that,
together with the current investment amount, is equal to at least $5 million
($25 million for certain qualified plans), such investor is eligible to
purchase Class D shares subject to the $1,000 minimum initial investment
requirement of that Class of the Fund. See "No Load Alternative--Class D
Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or
the shareholder 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 by the dealer or shareholder when such an
order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Selected Broker-Dealer or the Transfer Agent fails to
confirm the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from DWR or other Selected Broker-Dealers. The cost of Class A
shares of the Fund or 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 date of receipt by the Distributor of the Letter
of Intent, or of Class A shares of the Fund or shares of other Morgan Stanley
Dean Witter Funds acquired in exchange for shares of such funds purchased
during such period at a price including a front-end sales charge, which are
still owned by the shareholder, may also be included in determining the
applicable reduction.
Additional Net Asset Value Purchase Options. In addition to investments
of $1 million or more, Class A shares also may be purchased at net asset value
by the following:
(1) trusts for which MSDW Trust (which is an affiliate of the Investment
Manager) provides discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which
25
<PAGE>
such persons pay an asset based fee for services in the nature of investment
advisory, administrative and/or brokerage services (such investments are
subject to all of the terms and conditions of such programs, which may include
termination fees, mandatory redemption upon termination and such other
circumstances as specified in the programs' agreements, and restrictions on
transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section
401(a) of the Internal Revenue Code ("Qualified Retirement Plans") with at
least 200 eligible employees and for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;
(4) Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible employees;
(5) investors who are clients of a Morgan Stanley Dean Witter Financial
Advisor who joined Morgan Stanley Dean Witter from another investment firm
within six months prior to the date of purchase of Fund shares by such
investors, if the shares are being purchased with the proceeds from a
redemption of shares of an open-end proprietary mutual fund of the Financial
Advisor's previous firm which imposed either a front-end or deferred sales
charge, provided such purchase was made within sixty days after the redemption
and the proceeds of the redemption had been maintained in the interim in cash
or a money market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares,
contact DWR or another Selected Broker-Dealer or consult the Statement of
Additional Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--
CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain Qualified Retirement
Plans, three years) preceding the redemption. In addition, Class B shares are
subject to an annual 12b-1 fee of 1.0% of the average daily net assets of Class
B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any CDSC upon
redemption. Shares redeemed earlier than six years after purchase may, however,
be subject to a CDSC which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE 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>
26
<PAGE>
In the case of Class B shares of the Fund purchased on or after July 28,
1997 by Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject
to any CDSC upon redemption. However, shares redeemed earlier than three years
after purchase may be subject to a CDSC (calculated as described in the
paragraph above), the percentage of which will depend on how long the shares
have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------------- ---------------------
<S> <C>
First ......................... 2.0%
Second ........................ 2.0%
Third ......................... 1.0%
Fourth and thereafter ......... None
</TABLE>
CDSC Waivers. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption; and (iii) the current
net asset value of shares purchased through reinvestment of dividends or
distributions and/or shares acquired in exchange for shares of FSC Funds or of
other Morgan Stanley Dean Witter Funds acquired in exchange for such shares.
Moreover, in determining whether a CDSC is applicable it will be assumed that
amounts described in (i), (ii) and (iii) above (in that order) are redeemed
first.
In addition, the CDSC, if otherwise applicable, will be waived in the
case of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination
of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) 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);
(B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA;
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by the
Investment Manager or its subsidiary, MSDW Services, as self-directed
investment alternatives and for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement ("Eligible Plan"), provided that either: (A)
the plan continues to be an Eligible Plan after the redemption; or (B) the
redemption is in connection with the complete termination of the plan involving
the distribution of all plan assets to participants; and
(4) certain redemptions pursuant to the Fund's Systematic Withdrawal
Plan (see "Shareholder Services--Systematic Withdrawal Plan").
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to engage
in gainful employment. With reference to (2) above, the term "distribution"
does not encompass a direct transfer of IRA, 403(b) Custodial Account or
retirement plan assets to a successor custodian or trustee. All waivers will be
granted only following receipt by the Distributor of confirmation of the
shareholder's entitlement.
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<PAGE>
Conversion to Class A Shares. All shares of the Fund held prior to July
28, 1997 have been designated Class B shares. Shares held before May 1, 1997
will convert to Class A shares in May, 2007. In all other instances Class B
shares will convert automatically to Class A shares, based on the relative net
asset values of the shares of the two Classes on the conversion date, which
will be approximately ten (10) years after the date of the original purchase.
The ten year period is calculated 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 or a series of exchanges, from the last day of the month in which the
original Class B shares were purchased, provided that shares originally
purchased before May 1, 1997 will convert to Class A shares in May, 2007. The
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends and distributions owned by the shareholder
as the total number of his or her Class B shares converting at the time bears
to the total number of outstanding Class B shares purchased and owned by the
shareholder. In the case of Class B shares held by a Qualified Retirement Plan
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement, 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 first shares of a Morgan Stanley
Dean Witter Multi-Class Fund purchased by that plan. In the case of Class B
shares previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in the
Exchange Fund (calculated from the last day of the month in which the Exchange
Fund shares were acquired) is excluded from the holding period for conversion.
If those shares are subsequently re-exchanged for Class B shares of a Morgan
Stanley Dean Witter Multi-Class Fund, the holding period resumes on the last
day of the month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares,
such certificates must be delivered to the Transfer Agent at least one week
prior to the date for conversion. Class B shares evidenced by share
certificates that are not received by the Transfer Agent at least one week
prior to any conversion date will be converted into Class A shares on the next
scheduled conversion date after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received
on conversion will have a holding period that includes the holding period of
the converted Class B shares. The conversion feature may be suspended if the
ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of
that section shall mean one year in the case of Class C shares. Class C shares
are subject to an annual 12b-1 fee of up to 1.0% of the average daily net
assets of the Class. Unlike Class B shares, Class C shares have no conversion
feature and, accordingly, an investor that purchases Class C shares will be
subject to 12b-1 fees appli-
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cable to Class C shares for an indefinite period subject to annual approval by
the Fund's Board of Trustees and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors:
(i) investors participating in the MSDW Advisors mutual fund asset allocation
program pursuant to which such persons pay an asset based fee; (ii) persons
participating in a fee-based program approved by the Distributor, pursuant to
which such persons pay an asset based fee for services in the nature of
investment advisory, administrative and/or brokerage services (subject to all
of the terms and conditions of such programs referred to in (i) and (ii) above,
which may include termination fees, mandatory redemption upon termination and
such other circumstances as specified in the programs' agreements, and
restrictions on transferability of Fund shares); (iii) 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; (iv) certain Unit Investment Trusts sponsored by DWR; (v) certain
other open-end investment companies whose shares are distributed by the
Distributor; (vi) investors who were shareholders of Dean Witter Retirement
Series on September 11, 1998 (with respect to additional purchases for their
former Dean Witter Retirement Series accounts); and (vii) other categories of
investors, at the discretion of the Board, as disclosed in the then current
prospectus of the Fund. Investors who require a $5 million (or $25 million)
minimum initial investment to qualify to purchase Class D shares may satisfy
that requirement by investing that amount in a single transaction in Class D
shares of the Fund and other Morgan Stanley Dean Witter Multi-Class Funds,
subject to the $1,000 minimum initial investment required for that Class of the
Fund. In addition, for the purpose of meeting the $5 million (or $25 million)
minimum investment amount, holdings of Class A shares in all Morgan Stanley
Dean Witter Multi-Class Funds, shares of FSC Funds and shares of Morgan Stanley
Dean Witter Funds for which such shares have been exchanged will be included
together with the current investment amount. If a shareholder redeems Class A
shares and purchases Class D shares, such redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act with respect to the distribution of Class A, Class B and Class C shares
of the Fund. In the case of Class A and Class C shares, the Plan provides that
the Fund will reimburse the Distributor and others for the expenses of certain
activities and services incurred by them specifically on behalf of those
shares. Reimbursements for these expenses will be made in monthly payments by
the Fund to the Distributor, which will in no event exceed amounts equal to
payments at the annual rates of 0.25% and 1.0% of the average daily net assets
of Class A and Class C, respectively. In the case of Class B shares, the Plan
provides that the Fund will pay the Distributor a fee, which is accrued daily
and paid monthly, at the annual rate of 1.0% of the average daily net assets of
Class B. The fee is treated by the Fund as an expense in the year it is
accrued. In the case of Class A shares, the entire amount of the fee currently
represents a service fee within the meaning of the NASD guidelines. In the case
of Class B and Class C shares, a portion of the fee payable pursuant to the
Plan, equal to 0.25% of the average daily net assets of each of these Classes,
is currently characterized as a service fee. A service fee is a payment made
for personal service and/or the maintenance of shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class
C shares are paid to the Distributor for services provided and the expenses
29
<PAGE>
borne by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of Morgan Stanley Dean
Witter Financial Advisors and others who engage in or support distribution of
shares or who service shareholder accounts, including overhead and telephone
expenses; printing and distribution of prospectuses and reports used in
connection with the offering of the Fund's shares to other than current
shareholders; and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan in the case of Class B shares to compensate DWR and other
Selected Broker-Dealers for their opportunity costs in advancing such amounts,
which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
For the fiscal year ended August 31, 1998, Class B shares of the Fund
accrued payments under the Plan amounting to $1,378,923, which amount is equal
to 1.00% of the average daily net assets of Class B for the fiscal year. These
payments were calculated pursuant to clauses (i)(a) and (ii) of the
compensation formula under the Plan. For the fiscal year ended August 31, 1998,
Class A and Class C shares of the Fund accrued payments under the Plan
amounting to $1,019 and $9,052 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.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i)
the payments made by the Fund pursuant to the Plan, and (ii) the proceeds of
CDSCs paid by investors upon the redemption of Class B 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 such excess amounts, including the carrying charge described above,
totalled $6,051,552 at August 31, 1998, which was equal to 5.19% 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 or any
requirement that the Plan be continued from year to year, such 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 Selected Broker-Dealer 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 Selected
Broker-Dealer representatives at the time of sale totalled $6,541 in the case
of Class C at December 31, 1997, which was equal to 0.75% of the net assets of
Class C on such date, and that there were no such expenses which 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.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at
4:00 p.m., New York time,
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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), by taking
the net assets of the Fund, dividing by the number of shares outstanding and
adjusting to the nearest cent. The assets belonging to the Class A, Class B,
Class C and Class D shares will be invested together in a single portfolio. The
net asset value of each Class, however, will be determined separately by
subtracting each Class's accrued expenses and liabilities. The net asset value
per share will not be determined on Good Friday and on such other federal and
non-federal holidays as are observed by the New York Stock Exchange.
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 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); (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest bid price; (3) 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 (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and maturity
or an appropriate matrix utilizing similar factors); (4) the value of
short-term debt securities which mature at a date less than sixty days
subsequent to valuation date will be determined on an amortized cost or
amortized value basis; and (5) the value of other assets will be determined in
good faith at fair value under procedures established by and under the general
supervision of the Fund's Trustees. Dividends receivable are accrued as of the
ex-dividend date. Interest income is accrued daily. Certain securities in the
Fund's portfolio may be valued by an outside pricing service approved by the
Fund's Trustees.
SHAREHOLDER SERVICES
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Automatic Investment of Dividends and Distributions. All income
dividends and capital gains distributions are automatically paid in full and
fractional shares of the applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end Morgan Stanley Dean Witter Fund),
unless the shareholder requests that they be paid in cash. Shares so acquired
are acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Redemptions and Repurchases").
Investment of Dividends or Distributions Received in Cash. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution in shares of the applicable Class at
the net asset value next determined after receipt by the Transfer Agent, by
returning the check or the proceeds to the Transfer Agent within thirty days
after the payment date. Shares so acquired are acquired at net asset value and
are not subject to the imposition of a front-end sales charge or a CDSC (see
"Redemptions and Repurchases").
EasyInvestSM. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Morgan Stanley Dean Witter money market fund, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for investment
in shares of the Fund (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").
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Systematic Withdrawal Plan. A systematic withdrawal plan (the
"Withdrawal Plan") is available for shareholders whose shares of Morgan Stanley
Dean Witter Funds have an aggregate value of $10,000 or more. Shares of any
Fund from which redemptions will be made pursuant to the Plan must have a value
of $1,000 or more (referred to as a "SWP Fund"). The required share values are
determined on the date the shareholder establishes the Withdrawal Plan. The
Withdrawal Plan provides for monthly, quarterly, semi-annual or annual payments
in any amount not less than $25, or in any whole percentage of the value of the
SWP Funds' shares, on an annualized basis. Any applicable CDSC will be imposed
on shares redeemed under the Withdrawal Plan (see "Purchase of Fund Shares"),
except that the CDSC, if any, will be waived on redemptions under the
Withdrawal Plan of up to 12% annually of the value of each SWP Fund account,
based on the share values next determined after the shareholder establishes the
Withdrawal Plan. Redemptions for which this CDSC waiver policy applies may be
in amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12%
annually. Under this CDSC waiver policy, amounts withdrawn each period will be
paid by first redeeming shares not subject to a CDSC because the shares were
purchased by the reinvestment of dividends or capital gains distributions, the
CDSC period has elapsed or some other waiver of the CDSC applies. If shares
subject to a CDSC must be redeemed, shares held for the longest period of time
will be redeemed first and continuing with shares held the next longest period
of time until shares held the shortest period of time are redeemed. Any
shareholder participating in the Withdrawal Plan will have sufficient shares
redeemed from his or her account so that the proceeds (net of any applicable
CDSC) to the shareholder will be the designated monthly, quarterly, semi-annual
or annual amount.
A shareholder may suspend or terminate participation in the Withdrawal
Plan at any time. A shareholder who has suspended participation may resume
payments under the Withdrawal Plan, without requiring a new determination of
the account value for the 12% CDSC waiver. The Withdrawal Plan may be
terminated or revised at any time by the Fund.
Prior to adding an additional SWP Fund to an existing Withdrawal Plan,
the required $10,000/ $1,000 share values must be met, to be calculated on the
date the shareholder adds the additional SWP Fund. However, the addition of a
new SWP Fund will not change the account value for the 12% CDSC waiver for the
SWP Funds already participating in the Withdrawal Plan.
Withdrawal Plan payments should not be considered dividends, yields or
income. If periodic Withdrawal Plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Each withdrawal constitutes a
redemption of shares and any gain or loss realized must be recognized for
federal income tax purposes.
Shareholders should contact their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative or the Transfer Agent
for further information about any of the above services.
Tax-Sheltered Retirement Plans. Retirement plans are available for use
by corporations, the self-employed, Individual Retirement Accounts and
Custodial Accounts under Section 403(b)(7) of the Internal Revenue Code.
Adoption of such plans should be on advice of legal counsel or tax advisor.
For further information regarding plan administration, custodial fees
and other details, investors should contact their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative or the
Transfer Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of
any other Morgan Stanley Dean Witter Multi-Class Fund without the imposition of
any exchange fee. Shares may also be exchanged for shares of the following
funds: Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust, Morgan
Stanley Dean Witter Limited Term Municipal Trust, Morgan Stanley Dean Witter
Short-Term Bond Fund and five Morgan Stanley Dean Witter Funds which are money
market funds (the "Exchange Funds"). Class A shares may also be
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<PAGE>
exchanged for shares of Morgan Stanley Dean Witter Multi-State Municipal Series
Trust and Morgan Stanley Dean Witter Hawaii Municipal Trust, which are Morgan
Stanley Dean Witter Funds sold with a front-end sales charge ("FSC Funds").
Class B shares may also be exchanged for shares of Morgan Stanley Dean Witter
Global Short-Term Income Fund Inc. ("Global Short-Term"), which is a Morgan
Stanley Dean Witter Fund offered with a CDSC. Exchanges may be made after the
shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another Morgan Stanley Dean Witter Multi-Class Fund, any
FSC Fund, Global Short-Term or any Exchange Fund that is not a money market
fund is on the basis of the next calculated net asset value per share of each
fund after the exchange order is received. When exchanging into a money market
fund from the Fund, shares of the Fund are redeemed out of the Fund at their
next calculated net asset value and the proceeds of the redemption are used to
purchase shares of the money market fund at their net asset value determined
the following business day. Subsequent exchanges between any of the money
market funds and any of the Morgan Stanley Dean Witter Multi-Class Funds, FSC
Funds or Global Short-Term or any Exchange Fund that is not a money market fund
can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If
those shares are subsequently re-exchanged for shares of a Morgan Stanley Dean
Witter Multi-Class Fund or shares of Global Short-Term, the holding period
previously frozen when the first exchange was made resumes on the last day of
the month in which shares of a Morgan Stanley Dean Witter Multi-Class Fund or
shares of Global Short-Term are reacquired. Thus, the CDSC is based upon the
time (calculated as described above) the shareholder was invested in shares of
a Morgan Stanley Dean Witter Multi-Class Fund or in shares of Global Short-Term
(see "Purchase of Fund Shares"). In the case of exchanges of Class A shares
which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in shares of a FSC
Fund. In the case of shares exchanged into an Exchange Fund on or after April
23, 1990, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount equal
to the Exchange Fund 12b-1 distribution fees incurred on or after that date
which are attributable to those shares. (Exchange Fund 12b-1 distribution fees
are described in the prospectuses for those funds.) Class B shares of the Fund
acquired in exchange for shares of Global Short-Term or Class B shares of
another Morgan Stanley Dean Witter Multi-Class Fund having a different CDSC
schedule than that of this Fund will be subject to the higher CDSC schedule,
even if such shares are subsequently re-exchanged for shares of the fund with
the lower CDSC schedule.
Additional Information Regarding Exchanges. Purchases and exchanges
should be made for investment purposes only. A pattern of frequent exchanges
may be deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional purchases
and/or exchanges from the investor. Although the Fund does not have any
specific definition of what constitutes a pattern of frequent exchanges, and
will consider all relevant factors in determining whether a particular
situation is abusive and contrary to the best interests of the Fund and its
other shareholders, investors should be aware that the Fund and each of the
other Morgan Stanley Dean Witter Funds may in their discretion limit or
otherwise restrict the number of times this Exchange Privilege may be exercised
by any investor. Any such restric-
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<PAGE>
tion will be made by the Fund on a prospective basis only, upon notice to the
shareholder not later than ten days following such shareholder's most recent
exchange. Also, the Exchange Privilege may be terminated or revised at any time
by the Fund and/or any of such Morgan Stanley Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies. Shareholders maintaining margin accounts with
DWR or another Selected Broker-Dealer are referred to their Morgan Stanley Dean
Witter Financial Advisor or other Selected Broker-Dealer representative
regarding restrictions on exchange of shares of the Fund pledged in the margin
account.
The current prospectus for each fund describes its investment
objective(s) and policies, and shareholders should obtain a copy and read it
carefully before investing. Exchanges are subject to the minimum investment
requirement of each Class of shares and any other conditions imposed by each
fund. In the case of a shareholder holding a share certificate or certificates,
no exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares on which the shareholder has realized a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above
Morgan Stanley Dean Witter Funds (for which the Exchange Privilege is
available) pursuant to this Exchange Privilege by contacting their Morgan
Stanley Dean Witter Financial Advisor or other Selected Broker-Dealer
representative (no Exchange Privilege Authorization Form is required). Other
shareholders (and those who are clients of DWR or another Selected
Broker-Dealer but who wish to make exchanges directly by writing or telephoning
the Transfer Agent) must complete and forward to the Transfer Agent an Exchange
Privilege Authorization Form, copies of which may be obtained from the Transfer
Agent, to initiate an exchange. If the Authorization Form is used, exchanges
may be made in writing or by contacting the Transfer Agent at (800) 869-NEWS
(toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR or
other Selected Broker-Dealer account number (if any). Telephone instructions
may also be recorded. If such procedures are not employed, the Fund may be
liable for any losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative,
if appropriate, or make a written exchange request. Shareholders are advised
that 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 experience of the other Morgan Stanley Dean Witter Funds in
the past.
For further information regarding the Exchange Privilege, shareholders
should contact their Morgan Stanley Dean Witter Financial Advisor or other
Selected Broker-Dealer representative or the Transfer Agent.
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<PAGE>
REDEMPTIONS AND REPURCHASES
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Redemption. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of
any applicable CDSC in the case of Class A, Class B, or Class C shares (see
"Purchase of Fund Shares"). If shares are held in a shareholder's account
without a share certificate, a written request for redemption to the Fund's
Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If
certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption, along with
any additional documentation required by the Transfer Agent.
Repurchase. DWR and other Selected Broker-Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate may
also be repurchased by DWR and other Selected Broker-Dealers upon the
telephonic or telegraphic request of the shareholder. The repurchase price is
the net asset value per share next determined (see "Purchase of Fund Shares")
after such repurchase order is received by DWR or other Selected Broker-Dealer,
reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed upon repurchase by the
Fund or, the Distributor. The offer by DWR and other Selected Broker-Dealers to
repurchase shares may be suspended without notice by them at any time. In that
event, shareholders may redeem their shares through the Fund's Transfer Agent
as set forth above under "Redemption."
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances, e.g., when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum
time needed to verify that the check used for investment has been honored (not
more than fifteen days from the time of receipt of the check by the Transfer
Agent). Shareholders maintaining margin accounts with DWR or another Selected
Dealer are referred to their Morgan Stanley Dean Witter Financial Advisor or
other Selected Broker-Dealer representative regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase
in shares of the Fund in the same Class from which such shares were redeemed or
repurchased, at the net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent and
receive a pro rata credit for any CDSC paid in connection with such redemption
or repurchase.
Involuntary Redemption. The Fund reserves the right to redeem, upon
sixty days' notice and at net asset value, the shares of any shareholder (other
than shares held in an Individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Board of Trustees or, in the case of an account opened through
EasyInvestSM, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares is less than the applicable amount and allow the shareholder to
make an additional investment in an amount which will increase the value of the
account to at least the applicable amount before the redemption is processed.
No CDSC will be imposed on any involuntary redemption.
35
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends separately for
each Class of shares and intends to distribute substantially all of the Fund's
net investment income and net realized short-term and long-term capital gains,
if there are any, at least once each year. The Fund may, however, determine
either to distribute or to retain all or part of any net long-term capital
gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends be paid in cash. Shares
acquired by dividend and distribution reinvestments will not be subject to any
front-end sales charge or CDSC. Class B shares acquired through dividend and
distribution reinvestments will become eligible for conversion to Class A
shares on a pro rata basis. Distributions paid on Class A and Class D shares
will be higher than for Class B and Class C shares because distribution fees
paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the Internal
Revenue Code, it is not expected that the Fund will be required to pay any
federal income tax. Shareholders who are required to pay taxes on their income
will normally have to pay federal income taxes, and any state and local income
taxes, on the dividends and 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 dividend income regardless of whether the shareholder receives such
distributions in additional shares or in cash. Any dividends declared in the
last quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed, for tax purposes, to have been received by the
shareholder in the prior year.
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. Capital gains distributions are not
eligible for the dividends received deduction.
The Fund may at times make payments from sources other than income or
net capital gains. Payments from such sources will, in effect, represent a
return of a portion of each shareholder's investment. All, or a portion, of
such payments will not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes. Shareholders will also be notified of their proportionate share of
long-term capital gains distributions that are eligible for a reduced rate of
tax under the Taxpayer Relief Act of 1997. To avoid being subject to a 31%
federal backup withholding tax on taxable dividends, capital gains
distributions and the proceeds of redemptions and repurchases, shareholders'
taxpayer identification numbers must be furnished and certified as to their
accuracy.
Shareholders should consult their tax advisors as to the applicability
of the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
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 total return of
36
<PAGE>
the Fund is based on historical earnings and is not intended to indicate future
performance. The "average annual total return" of the Fund refers to a figure
reflecting the average annualized percentage increase (or decrease) in the
value of an initial investment in a Class of the Fund of $1,000 over periods of
one, five and ten years, or over the life of the Fund, if less than any of the
foregoing. Total return and average annual total return reflect all income
earned by the Fund, any appreciation or depreciation of the Fund's assets and
all expenses incurred by the applicable Class and all sales charges which will
be incurred by shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, 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. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. 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. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc. and the S&P 500 Index).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Voting Rights. 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, as discussed herein, Class
A, Class B and Class C bear the expenses related to the distribution of their
respective shares.
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 Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
Shareholders.
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.
Code of Ethics. Directors, officers and employees of MSDW Advisors, MSDW
Services and MSDW Distributors are subject to a strict Code of Ethics adopted
by those companies. The Code of Ethics is intended to ensure that the interests
of shareholders and other clients are placed ahead of any personal interest,
that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by
employees of the companies be subject to an ad-
37
<PAGE>
vance clearance process to monitor that no Morgan Stanley Dean Witter Fund is
engaged at the same time in a purchase or sale of the same security. The Code
of Ethics bans the purchase of securities in an initial public offering, and
also prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account within
thirty days before or after any transaction in any Morgan Stanley Dean Witter
Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
Master/Feeder Conversion. The Fund reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to the Fund.
Shareholder Inquiries. All inquiries regarding the Fund should be
directed to the Fund at the telephone numbers or address set forth on the front
cover of this Prospectus.
38
<PAGE>
Morgan Stanley Dean Witter
Market Leader Trust
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary
and General Counsel
Guy G. Rutherfurd, Jr.
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
MORGAN STANLEY
DEAN WITTER
MARKET LEADER TRUST
PROSPECTUS -- OCTOBER 28, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY DEAN WITTER
MARKET LEADER TRUST
October 28, 1998
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter Market Leader Trust (the "Fund") is an
open-end, diversified management investment company whose investment objective
is long-term capital appreciation. The Fund seeks to meet its investment
objective by investing primarily in equity securities issued by companies that
are established leaders in their respective fields in growing industries in
domestic and foreign markets. (See "Investment Practices and Policies.")
A Prospectus for the Fund dated October 28, 1998, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at its address or telephone numbers listed below
or from the Fund's Distributor, Morgan Stanley Dean Witter Distributors Inc.,
or from Dean Witter Reynolds Inc, at any of its branch offices. This Statement
of Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the Prospectus.
Morgan Stanley Dean Witter Market Leader Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management .................. 3
Trustees and Officers ........................ 7
Investment Practices and Policies ............ 13
Investment Restrictions ...................... 19
Portfolio Transactions and Brokerage ......... 20
The Distributor .............................. 22
Purchase of Fund Shares ...................... 27
Shareholder Services ......................... 30
Redemptions and Repurchases .................. 34
Dividends, Distributions and Taxes ........... 36
Performance Information ...................... 37
Shares of the Fund ........................... 39
Custodian and Transfer Agent ................. 39
Independent Accountants ...................... 39
Reports to Shareholders ...................... 40
Legal Counsel ................................ 40
Experts ...................................... 40
Registration Statement ....................... 40
Financial Statements ......................... 41
Report of Independent Accountants ............ 55
Appendix ..................................... 56
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on November 4, 1996 under the name Dean Witter Market Leader
Trust. On June 22, 1998, the Trustees of the Fund adopted an Amendment to the
Declaration of Trust of the Fund changing the name to Morgan Stanley Dean
Witter Market Leader Trust.
THE INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager" or
"MSDW Advisors"), a Delaware corporation, whose address is Two World Trade
Center, New York, New York 10048, is the Fund's Investment Manager. MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW"), a Delaware corporation. The daily management of the Fund and research
relating to the Fund's portfolio are conducted by or under the direction of
officers of the Fund and of the Investment Manager, subject to review by the
Fund's Board of Trustees. Information as to these Trustees and officers is
contained under the caption "Trustees and Officers."
MSDW Advisors is the investment manager or investment advisor of the
following investment companies, which are collectively referred to as the
"Morgan Stanley Dean Witter Funds":
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 American Value Fund
6 Morgan Stanley Dean Witter Balanced Growth Fund
7 Morgan Stanley Dean Witter Balanced Income Fund
8 Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
9 Morgan Stanley Dean Witter California Tax-Free Income Fund
10 Morgan Stanley Dean Witter Capital Appreciation 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
22 Morgan Stanley Dean Witter Global Dividend Growth Securities
23 Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
24 Morgan Stanley Dean Witter Global Utilities Fund
25 Morgan Stanley Dean Witter Growth Fund
26 Morgan Stanley Dean Witter Hawaii Municipal Trust
27 Morgan Stanley Dean Witter Health Sciences Trust
28 Morgan Stanley Dean Witter High Yield Securities Inc.
29 Morgan Stanley Dean Witter Income Builder Fund
30 Morgan Stanley Dean Witter Information Fund
3
<PAGE>
31 Morgan Stanley Dean Witter Intermediate Income Securities
32 Morgan Stanley Dean Witter International SmallCap Fund
33 Morgan Stanley Dean Witter Japan Fund
34 Morgan Stanley Dean Witter Limited Term Municipal Trust
35 Morgan Stanley Dean Witter Liquid Asset Fund Inc.
36 Morgan Stanley Dean Witter Market Leader Trust
37 Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
38 Morgan Stanley Dean Witter Mid-Cap Growth Fund
39 Morgan Stanley Dean Witter Multi-State Municipal Series Trust
40 Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
41 Morgan Stanley Dean Witter New York Municipal Money Market Trust
42 Morgan Stanley Dean Witter New York Tax-Free Income Fund
43 Morgan Stanley Dean Witter Pacific Growth Fund Inc.
44 Morgan Stanley Dean Witter Precious Metals and Minerals Trust
45 Morgan Stanley Dean Witter Select Dimensions Investment Series
46 Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
47 Morgan Stanley Dean Witter Short-Term Bond Fund
48 Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
49 Morgan Stanley Dean Witter Special Value Fund
50 Morgan Stanley Dean Witter S&P 500 Index Fund
51 Morgan Stanley Dean Witter S&P 500 Select Fund
52 Morgan Stanley Dean Witter Strategist Fund
53 Morgan Stanley Dean Witter Tax-Exempt Securities Trust
54 Morgan Stanley Dean Witter Tax-Free Daily Income Trust
55 Morgan Stanley Dean Witter U.S. Government Money Market Trust
56 Morgan Stanley Dean Witter U.S. Government Securities Trust
57 Morgan Stanley Dean Witter Utilities Fund
58 Morgan Stanley Dean Witter Value-Added Market Series
59 Morgan Stanley Dean Witter Value Fund
60 Morgan Stanley Dean Witter Variable Investment Series
61 Morgan Stanley Dean Witter World Wide Income Trust
CLOSED-END FUNDS
1 InterCapital California Insured Municipal Income Trust
2 InterCapital California Quality Municipal Securities
3 Dean Witter Government Income Trust
4 High Income Advantage Trust
5 High Income Advantage Trust II
6 High Income Advantage Trust III
7 InterCapital Income Securities Inc.
8 InterCapital Insured California Municipal Securities
9 InterCapital Insured Municipal Bond Trust
10 InterCapital Insured Municipal Income Trust
11 InterCapital Insured Municipal Securities
12 InterCapital Insured Municipal Trust
13 Municipal Income Opportunities Trust
14 Municipal Income Opportunities Trust II
15 Municipal Income Opportunities Trust III
16 Municipal Income Trust
17 Municipal Income Trust II
18 Municipal Income Trust III
4
<PAGE>
19 Municipal Premium Income Trust
20 InterCapital New York Quality Municipal Securities
21 Morgan Stanley Dean Witter Prime Income Trust
22 InterCapital Quality Municipal Income Trust
23 InterCapital Quality Municipal Investment Trust
24 InterCapital Quality Municipal Securities
In addition, Morgan Stanley Dean Witter Services Company Inc. ("MSDW
Services"), a wholly-owned subsidiary of MSDW Advisors, serves as manager for
the following investment companies for which TCW Funds Management, Inc. is the
investment advisor (the "TCW/DW Funds"):
OPEN-END FUNDS
1 TCW/DW Emerging Markets Opportunities Trust
2 TCW/DW Global Telecom Trust
3 TCW/DW Income and Growth Fund
4 TCW/DW Latin American Growth Fund
5 TCW/DW Mid-Cap Equity Trust
6 TCW/DW North American Government Income Trust
7 TCW/DW Small Cap Growth Fund
8 TCW/DW Total Return Trust
CLOSED-END FUNDS
1 TCW/DW Term Trust 2000
2 TCW/DW Term Trust 2002
3 TCW/DW Term Trust 2003
MSDW Advisors also serves as: (i) administrator of The BlackRock Strategic
Term Trust Inc., a closed-end investment company; (ii) sub-administrator of
Templeton Global Governments Income Trust, a closed-end investment company; and
(iii) investment advisor of Offshore Dividend Growth Fund and Offshore Money
Market Fund, mutual funds established under the laws of the Cayman Islands and
available only to investors who are participants in the International Active
Assets Account program and are neither citizens nor residents of the United
States.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage 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 such 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 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, such office space,
facilities, equipment, clerical help and bookkeeping and certain legal services
as the Fund may reasonably require in the conduct of its business, including
the preparation of prospectuses, statements of additional information, 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. The
Investment Manager has retained MSDW Services to provide its administrative
services under the Agreement.
Expenses not expressly assumed by the Investment Manager under the
Agreement or by Morgan Stanley Dean Witter Distributors Inc., the Distributor
of the Fund's shares ("MSDW Distributors" or "the Distributor") will be paid by
the Fund. These expenses will be allocated among the four classes of shares of
the Fund (each, a "Class") pro rata based on the net assets of the Fund
attributable to each Class,
5
<PAGE>
except as described below. Such expenses include, but are not limited to:
expenses of the Plan of Distribution pursuant to Rule 12b-1 (the "12b-1 fee")
(see "The Distributor"); charges and expenses of any registrar; custodian,
stock transfer and dividend disbursing agent; brokerage commissions; taxes;
engraving and printing of 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 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 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) and independent
accountants; 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.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the annual
rate of 0.75% to the Fund's daily net assets. During the period April 28, 1997
(commencement of operations) through August 31, 1997, the Fund accrued total
compensation to the Manager under the Management Agreement in the amount of
$199,615. During this period, a portion of the fee payable under the Management
Agreement ($34,359) was waived by the Manager pursuant to an undertaking
described below. For the fiscal year ended August 31, 1998 the Fund accrued to
the Investment Manager total compensation in the amount of $1,054,688. The
management fee is allocated among the Classes pro rata based on the net assets
of the Fund attributable to each Class.
MSDW Advisors had undertaken to assume all operating expenses (except for
the Plan of Distribution and brokerage fees) and to waive the compensation
provided for in its Management Agreement until such time as the Fund had $50
million of net assets or until October 28, 1997, whichever occurred first. The
Fund attained $50 million of net assets on May 13, 1997.
The 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 Agreement in no way restricts the Investment
Manager from acting as investment manager or advisor to others.
The Investment Manager paid the organizational expenses of the Fund
incurred prior to the offering of the Fund's shares. The Fund has agreed to
bear and reimburse the Investment Manager for such expenses, which totaled
approximately $62,000. The organizational expenses of the Fund have been
deferred by the Fund and are being amortized on the straight line method over a
period not to exceed five years from the date of commencement of the Fund's
operations.
The Agreement was initially approved by the Trustees on February 21, 1997
and by MSDW Advisors, as the then sole shareholder, on February 21, 1997. The
Agreement is substantially identical to a prior investment management agreement
which was approved by the Trustees on December 3, 1996 and by MSDW Advisors as
the then sole shareholder on December 3, 1996. The Agreement took effect on May
31, 1997 upon the consummation of the merger of Dean Witter, Discover & Co.
with
6
<PAGE>
Morgan Stanley Group Inc. The Agreement may be terminated at any time, without
penalty, on thirty days' notice by the Trustees of the Fund, by the holders of
a majority of the outstanding shares of the Fund, as defined in the Investment
Company Act of 1940, as amended (the "Act"), or by the Investment Manager. The
Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Agreement has an initial term ending April 30, 1999
and will continue from year to year thereafter, provided continuance of the
Agreement is approved at least annually by the vote of the holders of a
majority of the outstanding shares of the Fund, as defined in the Act, or by
the Trustees of the Fund; provided that in either event such continuance is
approved annually by the vote of a majority of the Trustees of the Fund who are
not parties to the Agreement or "interested persons" (as defined in the Act) of
any such party (the "Independent Trustees"), which vote must be cast in person
at a meeting called for the purpose of voting on such approval.
The following owned 5% or more of the outstanding shares of Class A on
October 12, 1998: Gregory J. Vanlerberghe ITOD Mike Gilleran, 593 Blairmoor
Court, Grosse Pte Woods, MI 48236-1240--20.62%; Dean Witter Reynolds, custodian
for Charles A. Fiumefreddo, IRA Rollover dated 7/2/98, 589 Avenue E. Bayonne,
NJ 07002-4833--11.4%; Dean Witter Reynolds, custodian for Nancy M. Boydston,
IRA Rollover dated 9/12/96, 2935 N Shannon, Bethany, OK 73008-4854--9.51%;
Alison Whitelaw, 300 W. Hill St. Apt. 413, Chicago, IL 60610-7501--5.46%. The
following owned 5% or more of the outstanding shares of Class C on October 12,
1998: Shawn S. Schabel & Lori L. Schabel JTWROS, 3300 NW 20th St., Oklahoma
City, OK, 73107-3006--10.31%. The following owned 25% or more of the
outstanding shares of Class D on October 12, 1998: Hare & Co., c/o. The Bank of
New York, PO Box 11203, New York, NY 10286-1203--94.63%.
The Fund has acknowledged that the name "Morgan Stanley Dean Witter" is a
property right of MSDW. The Fund has agreed that MSDW, or any corporate
affiliate of MSDW, may use or, at any time, permit others to use, the name
"Morgan Stanley Dean Witter." The Fund has also agreed that in the event the
Agreement is terminated, or if the affiliation between MSDW Advisors and its
parent company is terminated, the Fund will eliminate the name "Morgan Stanley
Dean Witter" from its name if MSDW, or any corporate affiliate of MSDW, shall
so request.
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
MSDW Advisors, and with the 85 Morgan Stanley Dean Witter Funds and the 11
TCW/DW Funds are shown below:
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------
<S> <C>
Michael Bozic (57) ........................ Chairman and Chief Executive Officer of Levitz
Trustee Furniture Corporation (since November, 1995);
c/o Levitz Furniture Corporation Director or Trustee of the Morgan Stanley Dean
7887 N. Federal Highway Witter Funds; formerly President and Chief
Boca Raton, Florida 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>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (65) .............. Chairman, Director or Trustee, President and Chief
Chairman, President, Executive Officer of the Morgan Stanley Dean
Chief Executive Officer and Trustee Witter Funds; Chairman, Chief Executive Officer
Two World Trade Center and Trustee of the TCW/DW Funds; formerly
New York, New York Chairman, Chief Executive Officer and Director of
MSDW Advisors, MSDW Distributors and MSDW
Services, Executive Vice President and Director of
Dean Witter Reynolds Inc. ("DWR"), Chairman
and Director of Morgan Stanley Dean Witter Trust
FSB ("MSDW Trust"), and 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; formerly United States Senator
c/o Huntsman Corporation (R-Utah) (1974-1992) and Chairman, Senate
500 Huntsman Way Banking Committee (1980-1986); formerly Mayor
Salt Lake City, Utah of Salt Lake City, Utah (1972-1974); formerly
Astronaut, Space Shuttle Discovery (April 12-19,
1985); Vice Chairman, Huntsman Corporation;
Director of Franklin Covey (time management
systems), John Alden Financial Corporation (health
insurance); 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.
John R. Haire (73) ........................ Chairman of the Audit Committee and Director or
Trustee Trustee of the Morgan Stanley Dean Witter Funds;
Two World Trade Center Chairman of the Audit Committee and Trustee of
New York, New York the TCW/DW Funds; formerly Chairman of the
Independent Directors or Trustees of the Morgan
Stanley Dean Witter Funds and the TCW/DW
Funds (until June, 1998); formerly President,
Council for Aid to Education (1978-1989), Chairman
and Chief Executive Officer of Anchor Corporation,
an investment adviser (1964-1978).
Wayne E. Hedien (64) ...................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Director of The PMI Group,
c/o Gordon Altman Butowsky Inc. (private mortgage insurance); Trustee and
Weitzen Shalov & Wein Vice Chairman of The Field Museum of Natural
Counsel to the Independent Trustees History; formerly associated with the Allstate
114 West 47th Street Companies (1966-1994), most recently as
New York, New York 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.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (49) ................ 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; Director or Trustee of the
Washington, D.C. Morgan Stanley Dean Witter Funds; Trustee of the
TCW/DW Funds; Director of NASDAQ (since June,
1995); Director of Greenwich Capital Markets, Inc.
(broker-dealer) and NVR, Inc. (home construction);
Chairman and Trustee of the Financial Accounting
Foundation (oversight organization for 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 (1982-1986).
Michael E. Nugent (62) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Director or Trustee of the
c/o Triumph Capital, L.P. Morgan Stanley Dean Witter Funds; Trustee of the
237 Park Avenue TCW/DW Funds; formerly Vice President, Bankers
New York, New York Trust Company and BT Capital Corporation
(1984-1988); director of various business
organizations.
Philip J. Purcell* (55) ................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, DWR and Novus
1585 Broadway Credit Services Inc.; Director of MSDW Distributors;
New York, New York Director or Trustee of the Morgan Stanley Dean
Witter Funds; Director and/or officer of various
MSDW subsidiaries.
John L. Schroeder (68) .................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Director of Citizens Utilities
c/o Gordon Altman Butowsky Company; formerly Executive Vice President and
Weitzen Shalov & Wein Chief Investment Officer of the Home Insurance
Counsel to the Independent Trustees Company (August, 1991-September, 1995).
114 West 47th Street
New York, New York
Barry Fink (43) ........................... 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 MSDW
Two World Trade Center Advisors and MSDW Services; Senior Vice
New York, New York President (since March, 1997) and Assistant
Secretary and Assistant General Counsel (since
February, 1997) of MSDW Distributors; Assistant
Secretary of DWR (since August, 1996); Vice
President, Secretary and General Counsel of the
Morgan Stanley Dean Witter Funds and the
TCW/DW Funds (since February, 1997); previously
First Vice President (June, 1993-February, 1997),
Vice President and Assistant Secretary and
Assistant General Counsel of MSDW Advisors and
MSDW Services and Assistant Secretary of the
Morgan Stanley Dean Witter Funds and the
TCW/DW Funds.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------
<S> <C>
Guy G. Rutherfurd, Jr. (58) ............... Senior Vice President of MSDW Advisors (since
Vice President February, 1997); formerly Executive Vice President
Two World Trade Center and Chief Investment Officer of Nomura Asset
New York, New York Management (U.S.A.) Inc.
Aaron Clark (30) .......................... Assistant Vice President of MSDW Advisors (since
Assistant Vice President April, 1997): formerly independent analyst
Two World Trade Center (December, 1996-April, 1997) and junior bank stock
New York, New York analyst (January, 1995-December, 1996) with
Gerard Klauer Mattison & Co. and prior thereto a
research analyst with Prudential Securities Inc.
(October, 1993-December 1994).
Thomas F. Caloia (52) ..................... First Vice President and Assistant Treasurer of
Treasurer MSDW Advisors and MSDW Services; Treasurer
Two World Trade Center of the Morgan Stanley Dean Witter Funds and the
New York, New York TCW/DW Funds.
</TABLE>
- ----------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Mitchell M. Merin, President, Chief Executive Officer and
Director of MSDW Advisors and MSDW Services, Chairman and Director of MSDW
Distributors and MSDW Trust, Executive Vice President and Director of DWR, and
Director of various MSDW subsidiaries, Robert M. Scanlan, President, Chief
Operating Officer and Director of MSDW Advisors and MSDW Services, Executive
Vice President of MSDW Distributors and MSDW Trust and Director of MSDW Trust,
Ronald E. Robison, Executive Vice President and Chief Administrative Officer of
MSDW Advisors and MSDW Services, Robert S. Giambrone, Senior Vice President of
MSDW Advisors, MSDW Services, MSDW Distributors and MSDW Trust and Director of
MSDW Trust and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of MSDW Advisors and Director of MSDW Trust and Paul D.
Vance, Peter Hermann, Mark Bavoso and Ira N. Ross, Senior Vice Presidents of
MSDW Advisors, are Vice Presidents of the Fund. Marilyn K. Cranney and Carsten
Otto, First Vice Presidents and Assistant General Counsels of MSDW Advisors and
MSDW Services, Frank Bruttomesso, LouAnne D. McInnis and Ruth Rossi, Vice
Presidents and Assistant General Counsels of MSDW Advisors and MSDW Services,
and Todd Lebo, a staff attorney with MSDW Advisors, are Assistant Secretaries
of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Morgan Stanley
Dean Witter Funds, and are referred to in this section as Trustees. As of the
date of this Statement of Additional Information, there are a total of 85
Morgan Stanley Dean Witter Funds, comprised of 121 portfolios. As of September
30, 1998, the Morgan Stanley Dean Witter Funds had total net assets of
approximately $105.3 billion and more than six million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with MSDW Advisors or any of its affiliated persons and do not own
any stock or other securities issued by MSDW Advisors' parent company, MSDW.
These are the "disinterested" or "independent" Trustees. Four of the seven
independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Morgan Stanley Dean Witter Funds seek as
Independent 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. Indeed, by serving on the Funds' Boards, certain Trustees who would
otherwise be qualified and in demand to serve on bank boards would be
prohibited by law from doing so.
10
<PAGE>
All of the Independent Trustees serve as members of the Audit Committee.
Three of them also serve as members of the Derivatives Committee. In addition,
three of the Trustees, including two Independent Trustees, serve as members of
the Insurance Committee. During the calendar year ended December 31, 1997, the
Audit Committee, the Derivatives Committee and the Independent Trustees held a
combined total of seventeen meetings.
The Independent 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 Trustees are required to select and nominate individuals to fill
any Independent 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 such a
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 such services; and 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.
The Board of each Fund has formed 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 TRUSTEES FOR ALL MORGAN
STANLEY DEAN WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent 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 Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent 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 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 Trustees of the caliber, experience
and business acumen of the individuals who serve as Independent Trustees of the
Morgan Stanley Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
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). 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. Mr. Haire currently serves as Chairman of the Audit Committee. Prior
to June 1, 1998, Mr. Haire also served as Chairman of the Independent Trustees,
for which services the Fund paid him an additional annual fee of $1,200.
11
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended August 31, 1998.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------- --------------
<S> <C>
Michael Bozic ................. $1,650
Edwin J. Garn ................. 1,700
John R. Haire ................. 3,250
Wayne E. Hedien ............... 1,732
Dr. Manuel H. Johnson ......... 1,650
Michael E. Nugent ............. 1,700
John L. Schroeder ............. 1,700
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1997 for services
to the 84 Morgan Stanley Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at
December 31, 1997. Mr. Haire serves as Chairman of the Audit Committee of each
Morgan Stanley Dean Witter Fund and each TCW/DW Fund and, prior to June 1,
1998, also served as Chairman of the Independent Directors or Trustees of those
Funds. With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW
Funds are included solely because of a limited exchange privilege between those
Funds and five Morgan Stanley Dean Witter Money Market Funds. Mr. Hedien's term
as Director or Trustee of each Morgan Stanley Dean Witter Fund commenced on
September 1, 1997.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
INDEPENDENT FOR SERVICE AS TOTAL CASH
FOR SERVICE DIRECTORS/ CHAIRMAN OF COMPENSATION
AS DIRECTOR OR FOR SERVICE AS TRUSTEES AND INDEPENDENT FOR SERVICES TO
TRUSTEE AND TRUSTEE AND AUDIT TRUSTEES 84 MORGAN STANLEY
COMMITTEE MEMBER COMMITTEE MEMBER COMMITTEES OF 84 AND AUDIT DEAN WITTER
NAME OF OF 84 MORGAN STANLEY OF 14 TCW/DW MORGAN STANLEY COMMITTEES OF 14 FUNDS AND 14
INDEPENDENT TRUSTEE DEAN WITTER FUNDS FUNDS DEAN WITTER FUNDS TCW/DW FUNDS TCW/DW FUNDS
- --------------------------- ---------------------- ------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ............. $133,602 -- -- -- $133,602
Edwin J. Garn ............. 149,702 -- -- -- 149,702
John R. Haire ............. 149,702 $73,725 $157,463 $25,350 406,240
Wayne E. Hedien ........... 39,010 -- -- -- 39,010
Dr. Manuel H. Johnson 145,702 71,125 -- -- 216,827
Michael E. Nugent ......... 149,702 73,725 -- -- 223,427
John L. Schroeder ......... 149,702 73,725 -- -- 223,427
</TABLE>
As of the date of this Statement of Additional Information, 57 of the
Morgan Stanley Dean Witter Funds, not including the Fund, have adopted a
retirement program under which an Independent 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 or 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 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 29.41% of his or her Eligible Compensation
plus 0.4901667% 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 58.82% 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 not secured or funded by
the Adopting Funds.
- --------------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement.
The amount estimated to be payable under this method, through the
remainder of the later of the lives of such Eligible Trustee and spouse,
will be the actuarial equivalent of the Regular Benefit. In addition, the
Eligible Trustee may elect that the surviving spouse's periodic payment
of benefits will be equal to either 50% or 100% of the previous periodic
amount, an election that, respectively, increases or decreases the
previous periodic amount so that the resulting payments will be the
actuarial equivalent of the Regular Benefit.
12
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 57 Morgan Stanley Dean Witter Funds (not
including the Fund) for the year ended December 31, 1997, and the estimated
retirement benefits for the Fund's Independent Trustees, to commence upon their
retirement, from the 57 Morgan Stanley Dean Witter Funds as of December 31,
1997.
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
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 58.82% $ 20,499 $55,026
Edwin J. Garn ................. 10 58.82 30,878 55,026
John R. Haire ................. 10 58.82 (19,823)(3) 132,002
Wayne E. Hedien ............... 9 50.00 0 46,772
Dr. Manuel H. Johnson ......... 10 58.82 12,832 55,026
Michael E. Nugent ............. 10 58.82 22,546 55,026
John L. Schroeder ............. 8 49.02 39,350 46,123
</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.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until May 1, 1999.
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 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
FOREIGN SECURITIES
As stated in the Prospectus, the Fund may invest in securities issued by
foreign issuers. Investors should carefully consider the risks of investing in
securities of foreign issuers and securities denominated in non-U.S.
currencies. Fluctuations in the relative rates of exchange between the
currencies of different nations will affect the value of the Fund's
investments. Changes in foreign currency exchange rates relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which currencies trade.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American
13
<PAGE>
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition,
differences in clearance and settlement procedures on foreign markets may
occasion delays in settlements of Fund trades effected in such markets.
Inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases
due to settlement problems could result in a failure of the Fund to make
potentially advantageous investments.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As discussed in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large, commercial and investment banks) and
their customers. Such forward contracts will only be entered into with United
States banks and their foreign branches or foreign banks whose assets total $1
billion or more. A forward contract generally has no deposit requirement, and
no commissions are charged at any stage for trades.
When management of the Fund believes that a particular foreign currency
may suffer a substantial movement against the U.S. dollar, it may enter into a
forward contract to purchase or sell, for a fixed amount of dollars or other
currency, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. The
Fund will not enter into such forward contracts or maintain a net exposure to
such contracts where the consummation of the contracts would obligate the Fund
to deliver an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the longer term investment decisions made with regard to
overall diversification strategies. However, the management of the Fund
believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the Fund will
be served. The Fund's custodian bank will place cash, U.S. Government
securities or other appropriate liquid portfolio securities in a segregated
account of the Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of forward contracts entered into under the
circumstances set forth above. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will equal the
amount of the Fund's commitments with respect to such contracts.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign securities denominated in a foreign currency against adverse exchange
rate moves vis-a-vis the U.S. dollar, at the maturity of the forward contract
for delivery by the Fund of a foreign currency, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency (however, the ability of the Fund to terminate a contract is
contingent upon the willingness of the currency trader with whom the contract
has been entered into to permit an offsetting transaction). It is impossible to
forecast the market value of portfolio securities at the expiration of the
contract. Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell the security
and make delivery of the foreign currency. Conversely, it may be necessary to
sell on the spot market some of the foreign currency received upon the sale of
the portfolio securities if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
14
<PAGE>
If the Fund retains the portfolio securities and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell an amount of the relevant foreign currency equal to
some or all of the principal value of the security.
At times when the Fund has written a call option on a security or the
currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a
greater extent than the value of the premium received for the option. The Fund
will maintain with its Custodian at all times, cash, U.S. Government
securities, or other appropriate liquid portfolio securities in a segregated
account equal in value to all forward contract obligations and option contract
obligations entered into in hedge situations such as this.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. It will, however, do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the spread between the prices at which they are buying and selling various
currencies. Thus a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
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 ("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 maintained in a
segregated account and 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 such date
is deemed by the Fund to be the maturity date of a repurchase agreement, the
maturities of the collateral 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 Board of Trustees of the Fund.
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
15
<PAGE>
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. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days of any
such investment, which together with any other illiquid assets held by the
Fund, amounts to more than 15% of its net assets.
STOCK INDEX FUTURES CONTRACTS
As discussed in the Prospectus, 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 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 equity
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.
The Fund is required to maintain margin deposits with the Fund's
Custodian, in a segregated account in the name of the broker through which it
effects index futures contracts. Currently, the initial margin requirements
range from 3% to 10% of the contract amount for index futures. In addition, due
to current industry practice, daily variations in gains and losses on open
contracts are required to be reflected in cash in the form of variation margin
payments. The Fund may be required to make additional margin payments during
the term of the contract.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or a gain.
Currently, index futures contracts can be purchased or sold with respect
to, among others, the Standard & Poor's 500 Stock Price Index, the Russell 2000
Index, the Standard & Poor's 100 Stock Price Index on the Chicago Mercantile
Exchange, the New York Stock Exchange Composite Index on the New York Futures
Exchange, the Major Market Index on the American Stock Exchange, the Moody's
Investment-Grade Corporate Bond Index on the Chicago Board of Trade and the
Value Line Stock Index on the Kansas City Board of Trade.
Limitations on Futures Contracts. The Fund may not enter into futures
contracts if, immediately thereafter, the amount committed to initial margin
exceeds 5% of the value of the Fund's 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 assets
which may be subject to a hedge position. In addition, in accordance with the
regulations of the Commodity Futures Trading Commission ("CFTC") under which
the Fund is exempted from registration as a commodity pool
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operator, the Fund may only enter into futures contracts in accordance with the
limitation described above. If the CFTC changes its regulations so that the
Fund would be permitted more latitude to enter into futures contracts for
purposes other than hedging the Fund's investments without CFTC registration,
the Fund may engage in such transactions for those purposes. Except as
described above, there are no other limitations on the use of futures by the
Fund.
Risks of Transactions in Futures Contracts. The successful use of futures
contracts depends on the ability of the Investment Manager to accurately
predict market and interest rate movements. As stated in the Prospectus, the
Fund may sell a futures contract to protect against the decline in the value of
securities held by the Fund. However, it is possible that the futures market
may advance and the value of securities held in the portfolio of the Fund may
decline. If this occurred, the Fund would lose money on the futures contract
and also experience a decline in value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio will tend to move in the same
direction as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Fund may determine not to invest in the securities as
planned and will realize a loss on the futures contract that is not offset by a
reduction in the price of the securities.
In addition, if the Fund holds a long position in a futures contract, it
will hold cash, U.S. Government securities or other liquid portfolio securities
equal to the purchase price of the contract (less the amount of initial or
variation margin on deposit) in a segregated account maintained for the Fund by
its Custodian. If the Fund maintains a short position in a futures contract, it
will cover this position by holding, in a segregated account maintained at its
Custodian, 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.
Such a position may also be covered by owning a portfolio of securities
substantially replicating the relevant index.
Exchanges may limit the amount by which the price of futures contracts 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 be required to make daily cash payments of variation margin on open
futures positions. In such 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 futures positions could also have an adverse impact on the Fund's
ability to effectively hedge its portfolio.
The extent to which the Fund may enter into transactions involving futures
contracts may be limited by the Internal Revenue Code's requirements for
qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Taxes" in the Prospectus.
While the futures contracts to be engaged in by the Fund for the purpose
of hedging the Fund's portfolio securities are not speculative in nature, there
are risks inherent in the use of such instruments. One such risk which may
arise in employing futures contracts to protect against the price volitility of
portfolio securities is that 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. 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
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of interest
rate trends may still not result in a successful hedging transaction.
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<PAGE>
As stated in the Prospectus, 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. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Fund from closing out a contract
which may result in reduced gain or increased loss to the Fund.
The Investment Manager has substantial experience in the use of the
investment techniques described above under the heading "Stock Index Futures
Contracts," which techniques require skills different from those needed to
select the portfolio securities underlying futures contracts.
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 such 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.
The Fund will also establish a segregated account with its custodian bank 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 such time, the Fund will record
the transaction and, in determining its net asset value, will reflect the value
of the security daily. At such time, the Fund will also establish a segregated
account with its custodian bank in which it will maintain cash or cash
equivalents or other liquid portfolio securities equal in value to recognized
commitments for such securities. The value of the Fund's commitments to
purchase the securities of any one issuer, together with the value of all
securities of such issuer owned by the Fund, may not exceed 5% of the value of
the Fund's total assets at the time the initial commitment to purchase such
securities is made (see "Investment Restrictions"). 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.
RULE 144A SECURITIES
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. The procedures require that the following factors be taken into account
in making a liquidity determination: (1) the frequency of trades and price
quotes for the security; (2) the number of dealers and other potential
purchasers who have issued quotes on the security; (3) any dealer undertakings
to make a market in the security; and (4) the nature of the security and the
nature of the marketplace trades (the time needed to
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dispose of the security, the method of soliciting offers, and the mechanics of
transfer). If a restricted security is determined to be "liquid," such security
will not be included within the category "illiquid securities," which under
current policy may not exceed 15% of the Fund's net assets.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to
notice provisions described below), 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 the market value,
determined daily, of the loaned securities. The advantage of such 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. A loan may be terminated by the borrower
on one business day's notice, or by the Fund on four business days' notice. If
the borrower fails to deliver the loaned securities within four days after
receipt of notice, the Fund could use the collateral to replace the securities
while holding the borrower liable for any excess of replacement cost over
collateral. 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 loan 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. The creditworthiness of firms to which
the Fund lends its portfolio securities will be monitored on an ongoing basis
by the Investment Manager pursuant to procedures adopted and reviewed, on an
ongoing basis, by the Board of Trustees of 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 such
rights if the matters involved would have a material effect on the Fund's
investment in such loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.
NEW INSTRUMENTS
New financial products and various combinations thereof continue to be
developed. The Fund may invest in any such products as may be developed, to the
extent conistent with its investment objective and applicable regulatory
requirements.
PORTFOLIO TURNOVER
It is anticipated that the Fund's portfolio turnover rate will not exceed
100%. A 100% turnover rate would occur, for example, if 100% of the securities
held in the Fund's portfolio (excluding all securities whose maturities at
acquisition were one year or less) were sold and replaced within one year. For
the period April 28, 1997 (commencement of operations) through August 31, 1997
and for the fiscal year ended August 31, 1998, the portfolio turnover rates
were approximately 22% and 68%, respectively.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined 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
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<PAGE>
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 may not:
1. 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.
2. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or sell index futures contracts.
3. 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 such
programs.
4. 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).
5. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(6).
6. Issue senior securities as defined in the 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 futures
contracts or options; (c) borrowing money in accordance with restrictions
described above; (d) purchasing any securities on a when-issued or delayed
delivery basis; or (e) lending portfolio securities.
7. Make loans of money or securities, except: (a) by the purchase of debt
obligations in which the Fund may invest consistent with its investment
objective and policies; (b) by investment in repurchase agreements; or (c)
by lending its portfolio securities.
8. Make short sales of securities.
9. Purchase securities on margin, except for such 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 is not considered the purchase of a security
on margin.
10. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
11. Invest for the purpose of exercising control or management of any
other issuer, 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 as the Fund.
As a non-fundamental policy, the Fund will not invest in other investment
companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or 12(d)(1)(J) of
the Act.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision of the Board of 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 are usually effected through a
broker and a
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<PAGE>
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. During the period April 28, 1997 (commencement of
operations) through August 31, 1997, and the fiscal year ended August 31, 1998,
the Fund paid a total of $72,892 and $207,999, respectively, in brokerage
commissions.
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 adviser 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 utilizes 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.
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. Such
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.
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 such 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. Such 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 investments;
wire services; and appraisals or evaluations of portfolio securities. During
the fiscal year ended August 31, 1998, the Fund paid $152,052 in brokerage
commissions in connection with transactions in the aggregate amount of
$104,425,001 to brokers because of research services provided.
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. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of research
or services otherwise performed by the Investment Manager and thereby reduce
its expenses, it is of indeterminable value and the management fee paid to the
Investment Manager is not reduced by any amount that may be attributable to the
value of such services.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR, Morgan Stanley & Co. Incorporated ("MS & Co.") and
other affiliated brokers and dealers. In order for an affiliated broker or
dealer to effect any portfolio transactions for the Fund, the commissions, fees
or other remuneration
21
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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 Board of
Trustees of the Fund, including a majority of the Trustees who are not
"interested" persons of the Fund, as defined in the Act, 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 April 28, 1997
through August 31, 1997 and the fiscal year ended August 31, 1998, the Fund
paid $31,455 and $41,162, respectively, in brokerage commissions to DWR. The
commissions paid to DWR represented approximately 19.79% of the total brokerage
commissions paid by the Fund for the fiscal year ended August 31, 1998 and were
paid on account of transactions having an aggregate dollar value equal to
approximately 28.75% of the aggregate dollar value of all portfolio
transactions of the Fund during the period for which commissions were paid.
During the period June 1, 1997 through August 31, 1997 and during the fiscal
year ended August 31, 1998, the Fund paid a total of $0 and $10,725,
respectively, in brokerage commissions to MS & 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 August 31, 1998, the brokerage commissions paid to MS & Co.
represented approximately 5.16% 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 4.48% of the aggregate dollar
value of all portfolio transactions of the Fund during the year for which
commissions were paid. During the fiscal year ended August 31, 1998, the Fund
purchased stock issued by Merrill Lynch & Co. Inc., which issuer was among the
ten brokers or ten dealers which executed transactions for or with the Fund in
the largest dollar amounts during the period. At August 31, 1998, the Fund held
stock issued by Merrill Lynch & Co. Inc., with a market value of $1,320,000.
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with DWR.
The Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers. During the period April 28, 1997 (commencement of
operations) through August 31, 1997 and the fiscal year ended August 31, 1998,
the Fund did not effect any principal transactions with DWR.
THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor"). The
Distributor has entered into a selected dealer agreement with DWR, which
through its own sales organization sells shares of the Fund. In addition, the
Distributor may enter into selected dealer agreements with other selected
broker-dealers. The Distributor, a Delaware corporation, is a wholly-owned
subsidiary of MSDW. The Board of Trustees of the Fund including a majority of
the Trustees who are not, and were not at the time they voted, interested
persons of the Fund, as defined in the Act ( the "Independent Trustees"),
approved, at their meeting held on June 30, 1997, a Distribution Agreement
appointing the Distributor as exclusive distributor of the Fund's shares and
providing for the Distributor to bear distribution expenses not borne by the
Fund. By its terms, the Distribution Agreement had an initial term ending April
30, 1998, and will remain in effect from year to year thereafter if approved by
the Board. At their meeting held on April 30, 1998, the Trustees of the Fund,
including a majority of the Independent Trustees, approved the continuation of
the Distribution Agreement until April 30, 1999.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to Morgan
Stanley Dean Witter Financial Advisors and other Selected
22
<PAGE>
broker-dealer representatives. 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 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 of 1933, as amended. 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.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the 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 and of contingent deferred sales charges imposed on
certain redemptions of shares, which are separate and apart from payments made
pursuant to the Plan (see "Purchase of Fund Shares" in the Prospectus). The
Distributor has informed the Fund that it and/or DWR received (a) approximately
$67,679 and $347,509 in contingent deferred sales charges from Class B for the
fiscal period April 28, 1997 (commencement of operations) through August 31,
1997 and for the fiscal year ended August 31, 1998, respectively, (b)
approximately $0 and $1,156 in contingent deferred sales charges from Class C
for the fiscal period April 28, 1997 (commencement of operations) through
August 31, 1997 and for the fiscal year ended August 31, 1998, respectively,
and (c) approximately $7,325 and $6,308 in front-end sales charges from Class A
for the fiscal period April 28, 1997 (commencement of operations) through
August 31, 1997 and for the fiscal year ended August 31, 1998, respectively,
none of which was retained by the Distributor. No contingent deferred sales
charges were received from Class A shares for the fiscal period April 28, 1997
(commencement of operations) through August 31, 1997 and for the fiscal year
ended August 31, 1998.
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's average daily net assets
are currently each characterized as a "service fee" under the Rules of the
Association 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 aforementioned Rules of
the Association.
The Plan was adopted by a vote of the Trustees of the Fund on December 3,
1996 at a meeting of the Trustees called for the purpose of voting on such
Plan. The vote included the vote of a majority of the Trustees of the Fund who
are not "interested persons" of the Fund (as defined in the Act) and who have
no direct or indirect financial interest in the operation of the Plan (the
"Independent 12b-1 Trustees"). In making their decision to adopt the Plan, the
Trustees requested from the Distributor and received such information as they
deemed necessary to make an informed determination as to whether or not
adoption of the Plan was in the best interests of the shareholders of the Fund.
After due consideration of the information received, the Trustees, including
the Independent 12b-1 Trustees, determined that adoption of the Plan would
benefit the shareholders of the Fund. MSDW Advisors, as then sole shareholder
of the Fund, approved the Plan on December 3, 1996, whereupon the Plan went
into effect. At their meeting held on June 30, 1997, the Trustees, including a
majority of the Independent 12b-1 Trustees, approved amendments to the Plan to
reflect the multiple-class structure for the Fund, which took effect on July
28, 1997.
23
<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. Class B shares of the Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
year ended August 31, 1998, of $1,378,923. This amount is equal to 1.0% of the
Fund's average daily net assets of Class B for the fiscal year and was
calculated pursuant to clauses (i)(a) and (ii) of the compensation formula
under the Plan. This amount is treated by the Fund as an expense in the year it
is accrued. For the fiscal year ended August 31, 1998, Class A and Class C
shares of the Fund accrued payments under the Plan amounting to $1,019 and
$9,052, 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 of shares, each with a different distribution arrangement as set forth
in the Prospectus.
With respect to Class A shares, DWR compensates its Financial Advisors by
paying them, from proceeds of the front-end sales charge, 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 401(k) and
other plans qualified under Section 401(a) of the Internal Revenue Code
("Qualified Retirement Plans") for which Morgan Stanley Dean Witter Trust FSB
("MSDW Trust") serves as Trustee or DWR's Retirement Plan Services serves as
recordkeeper pursuant to a written Recordkeeping Services Agreement, the
Investment Manager compensates DWR's 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, DWR 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 of the respective
accounts for which they are the account executives of record in all cases. In
the case of Class B shares purchased on or after July 28, 1997 by Qualified
Retirement Plans for which MSDW Trust serves as Trustee or DWR's Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement, DWR 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, DWR 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 a residual of 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 MSDW Advisors mutual fund asset allocation program, the Investment Manager
compensates DWR'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 DWR's Financial Advisors by
paying them, from its own funds, an annual residual commission, currently a
residual of 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 MSDW Advisors mutual fund asset allocation program).
The gross sales credit is a charge which reflects commissions paid by DWR
to its Financial Advisors and Fund associated distribution-related expenses,
including sales compensation and overhead and other branch office
distribution-related expenses including: (a) the expenses of operating DWR'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
24
<PAGE>
coordinators to promote the sale of Fund shares; and (d) other expenses
relating to branch promotion of Fund shares sales. 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 sales 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 a Morgan Stanley Dean Witter
Financial Advisor or other selected broker-dealer representative, such amounts
shall be determined at the beginning of each calendar quarter by the Trustees,
including, a majority of the Independent 12b-1 Trustees. Expenses representing
the service fee (for Class A) or a gross sales credit or a residual to a Morgan
Stanley Dean Witter Financial Advisor or other selected broker-dealer
representative (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
the Class for the fiscal year ended August 31, 1998 to the Distributor. The
Distributor and DWR estimate that they have spent, pursuant to the Plan,
$8,112,920 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)
15.88% ($1,288,723)--advertising and promotional expenses; (ii) 1.90%
($154,414)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 82.22% ($6,669,782)--other expenses, including the
gross sales credit and the carrying charge, of which 4.66% ($310,946)
represents carrying charges, 38.99% ($2,600,764) represents commission credits
to DWR branch offices and other selected broker-dealers for payments of
commissions to Morgan Stanley Dean Witter Financial Advisors or other selected
broker-dealer representatives and 56.35% ($3,758,072) represents overhead and
other branch office distribution-related expenses. The amounts accrued by Class
A and Class C for distribution during the fiscal year ended August 31, 1998
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 in
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
contingent deferred sales charges paid by investors upon redemption of shares.
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 DWR which 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, totalled $6,051,552 as of
August 31, 1998. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses
25
<PAGE>
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 distribution
expenses in excess of payments made under the Plan and the proceeds of
contingent deferred sales charges 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 contingent
deferred sales charges, may or may not be recovered through future distribution
fees or contingent deferred sales charges.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor, MSDW Advisors, MSDW Services, DWR 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.
Under its terms, the Plan had an initial term ending April 30, 1997 and
will continue from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above. The
most recent continuance of the Plan for one year, until April 30, 1999, was
approved by the Board of Trustees of the Fund, including a majority of the
Independent 12b-1 Trustees, at a Board meeting held on April 30, 1998. Prior to
approving the 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; 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 of the Fund, including each of the
Independent 12b-1 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 of the shareholders of the
affected Class or Classes of the Fund, and all material amendments of 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 of the Independent 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Act) or 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 12b-1 Trustees
shall be committed to the discretion of the Independent 12b-1 Trustees.
DETERMINATION OF NET ASSET VALUE
As stated in the Prospectus, short-term 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. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day 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.
All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds,
United States government securities and money market instruments, is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of such securities used in computing the net
asset
26
<PAGE>
value of the Fund's shares are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the New York
Stock Exchange. Occasionally, events which may affect the values of such
securities and such exchange rates may occur between the times at which they
are determined and the close of the New York Stock Exchange and will therefore
not be reflected in the computation of the Fund's net asset value. If events
that may affect the value of such securities occur during such period, then
these securities may be valued at their fair value as determined in good faith
under procedures established by and under the supervision of the Trustees.
The net asset value per share for each Class of shares of the Fund is
determined once daily at 4:00 p.m. New York time (or, on days when the New York
Stock Exchange closes prior to 4:00 p.m., at such earlier time), on each day
that the New York Stock Exchange is open. The New York Stock Exchange currently
observes the following holidays: New Year's Day; Reverend Dr. Martin Luther
King, Jr. Day; Presidents Day; Good Friday; Memorial Day; Independence Day;
Labor Day; Thanksgiving Day; and Christmas Day.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.
Right of Accumulation. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class A
shares of the Fund and/or other Morgan Stanley Dean Witter Funds that are
multiple class funds ("Morgan Stanley Dean Witter Multi-Class Funds") or shares
of other Morgan Stanley Dean Witter Funds sold with a front-end sales charge
purchased at a price including a front-end sales charge having a current value
of $5,000, and purchases $20,000 of additional shares of the Fund, the sales
charge applicable to the $20,000 purchase would be 4.75% of the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder 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 by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if:
(a) such notification is not furnished at the time of the order; or (b) a
review of the records of the Distributor or Morgan Stanley Dean Witter Trust
FSB (the "Transfer Agent") fails to confirm the investor's represented
holdings.
Letter of Intent. As discussed in the Prospectus, reduced sales charges
are available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the Fund
from the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment
goal to be achieved by any number of purchases over a thirteen-month period.
Each purchase of Class A shares made during the period will receive the reduced
sales commission applicable to the amount represented by the goal, as if it
were a single purchase. A number of shares equal in value to 5% of the dollar
amount of the Letter of Intent will be held in escrow by the Transfer Agent, in
the name of the shareholder. The initial purchase under a Letter of Intent must
be equal to at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
27
<PAGE>
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level,
the sales charge on the entire amount of the purchase that results in passing
that level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation,"
but there will be no retroactive reduction of sales charges on previous
purchases. For the purpose of determining whether the investor is entitled to a
further reduced sales charge applicable to purchases at or above a sales charge
level which exceeds the stated goal of a Letter of Intent, the cumulative
current net asset value of any shares owned by the investor in any other Morgan
Stanley Dean Witter Funds held by the shareholder which were previously
purchased at a price including a front-end sales charge (including shares of
the Fund and other Morgan Stanley Dean Witter Funds acquired in exchange for
those shares, and including in each case shares acquired through reinvestment
of dividends and distributions) will be added to the cost or net asset value of
shares of the Fund owned by the investor. However, shares of "Exchange Funds"
(see "Shareholder Services--Exchange Privilege") and the purchase of shares of
other Morgan Stanley Dean Witter Funds will not be included in determining
whether the stated goal of a Letter of Intent has been reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction.
The 5% escrow and minimum purchase requirements will be applicable to the new
stated goal. Investors electing to purchase shares of the Fund pursuant to a
Letter of Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to
a CDSC payable upon most redemptions within six years after purchase. As stated
in the Prospectus, a CDSC will be imposed on any redemption by an investor if
after such redemption the current value of the investor's Class B shares of the
Fund is less than the dollar amount of all payments by the shareholder for the
purchase of Class B shares during the preceding six years (or, in the case of
shares held by certain Qualified Retirement Plans, three years). However, no
CDSC will be imposed to the extent that the net asset value of the shares
redeemed does not exceed: (a) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption, plus (b) the current
net asset value of shares purchased through reinvestment of dividends or
distributions of the Fund or another Morgan Stanley Dean Witter Fund (see
"Shareholder Services--Targeted Dividends"), plus (c) the current net asset
value of shares acquired in exchange for (i) shares of Morgan Stanley Dean
Witter front-end sales charge funds, or (ii) shares of other Morgan Stanley
Dean Witter Funds for which shares of front-end sales charge funds have been
exchanged (see "Shareholder Services--Exchange Privilege"), plus (d) increases
in the net asset value of the investor's shares above the total amount of
payments for the purchase of Fund shares made during the preceding six (three)
years. The CDSC will be paid to the Distributor.
In determining the applicability of the CDSC to each redemption, the
amount which represents an increase in the net asset value of the investor's
shares above the amount of the total payments for the purchase of shares within
the last six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) will be redeemed first. In the event the
redemption amount exceeds such increase in value, the next portion of the
amount redeemed will be the amount which represents the net asset value of the
investor's shares purchased more than six (three) years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
and/or shares acquired in exchange for shares of Morgan Stanley Dean Witter
front-end sales charge funds, or for shares of other Morgan Stanley Dean Witter
Funds for which shares of front-end sales charge funds have been exchanged. A
portion of the amount redeemed which exceeds an amount which represents both
such increase in value
28
<PAGE>
and the value of shares purchased more than six years (or, in the case of
shares held by certain Qualified Retirement Plans, three years) prior to the
redemption and/or shares purchased through reinvestment of dividends or
distributions and/or shares acquired in the above-described exchanges will be
subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number
of years from the time of any payment for the purchase of shares, all payments
made during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC
applicable to most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE 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>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund purchased on or after July 28, 1997 by Qualified Retirement
Plans for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services
serves as recordkeeper pursuant to a written Recordkeeping Services Agreement:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
------------ ------------------
<S> <C>
First ......................... 2.0%
Second ........................ 2.0%
Third ......................... 1.0%
Fourth and thereafter ......... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
of purchase which are in excess of these amounts and which redemptions do not
qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC
of 1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
29
<PAGE>
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by the
Transfer Agent. This is an open account in which shares owned by the investor
are credited by the Transfer Agent in lieu of issuance of a share certificate.
If a share certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares and may be
redeposited in the account at any time. There is no charge to the investor for
issuance of a certificate. Whenever a shareholder instituted transaction takes
place in the Shareholder Investment Account, the shareholder will be mailed a
confirmation of the transaction from the Fund or from DWR or other selected
broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of the
Fund, unless the shareholder requests that they be paid in cash. Each purchase
of shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and capital gains distributions on shares owned by the investor. Such
dividends and distributions will be paid, at the net asset value per share, in
shares of the applicable Class of the Fund (or in cash if the shareholder so
requests) as of the close of business on the record date. At any time an
investor may request the Transfer Agent, in writing, to have subsequent
dividends and/or capital gains distributions paid to him or her in cash rather
than shares. To assure sufficient time to process the change, such request
should be received by the Transfer Agent at least five business days prior to
the record date of the dividend or distribution. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payments will be made to DWR or other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions. It has been and remains the Fund's policy and practice
that, if checks for dividends or distributions paid in cash remain uncashed, no
interest will accrue on amounts represented by such uncashed checks.
Targeted DividendsSM. In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of any Class of an open-end Morgan Stanley
Dean Witter Fund other than Morgan Stanley Dean Witter Market Leader Trust or
in another Class of Morgan Stanley Dean Witter Market Leader Trust. Such
investment will be made as described above for automatic investment in shares
of the applicable Class of the Fund, at the net asset value per share of the
selected Morgan Stanley Dean Witter Fund as of the close of business on the
payment date of the dividend or distribution and will begin to earn dividends,
if any, in the selected Morgan Stanley Dean Witter Fund the next business day.
To participate in the Targeted Dividends program, shareholders should contact.
Morgan Stanley Dean Witter Financial Advisor or other selected broker-dealer
representative or the Transfer Agent. Shareholders of the Fund must be
shareholders of the selected Class of the Morgan Stanley Dean Witter Fund
targeted to receive investments from dividends at the time they enter the
Targeted Dividends program. Investors should review the prospectus of the
targeted Morgan Stanley Dean Witter Fund before entering the program.
EasyInvestSM. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Morgan Stanley Dean Witter money market fund, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for investment
in shares of the Fund. Shares purchased through EasyInvest will be added to the
shareholder's existing account at the net asset value calculated the same
business day the transfer of funds is effected (subject to any applicable sales
charges). Shares of the Morgan Stanley Dean Witter money market funds redeemed
in connection with EasyInvest are redeemed on the business day preceding the
transfer of funds. For further information or to subscribe to EasyInvest,
shareholders should contact their Morgan Stanley Dean Witter Financial Advisor
or other selected broker-dealer representative or the Transfer Agent.
Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution in shares of
the applicable Class at net asset value, without the imposition of a
30
<PAGE>
CDSC upon redemption, by returning the check or the proceeds to the Transfer
Agent within thirty days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset
value per share next determined after receipt of the check or proceeds by the
Transfer Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders whose
shares of Morgan Stanley Dean Witter Funds have an aggregate value of $10,000
or more. Shares of any Fund from which redemptions will be made pursuant to the
Plan must have a value of $1,000 or more (referred to as a "SWP Fund"). The
required share values are determined on the date the shareholder establishes
the Withdrawal Plan. The Withdrawal Plan provides for monthly, quarterly,
semi-annual or annual payments in any amount not less than $25, or in any whole
percentage of the value of the SWP Funds' shares, on an annualized basis. Any
applicable Contingent Deferred Sales Charge ("CDSC") will be imposed on shares
redeemed under the Withdrawal Plan (see "Purchase of Fund Shares"), except that
the CDSC, if any, will be waived on redemptions under the Withdrawal Plan of up
to 12% annually of the value of each SWP Fund account, based on the share
values next determined after the shareholder establishes the Withdrawal Plan.
Redemptions for which this CDSC waiver policy applies may be in amounts up to
1% per month, 3% per quarter, 6% semi-annually or 12% annually. Under this CDSC
waiver policy, amounts withdrawn each period will be paid by first redeeming
shares not subject to a CDSC because the shares were purchased by the
reinvestment of dividends or capital gains distributions, the CDSC period has
elapsed or some other waiver of the CDSC applies. If shares subject to a CDSC
must be redeemed, shares held for the longest period of time will be redeemed
first and continuing with shares held the next longest period of time until
shares held the shortest period of time are redeemed. Any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable CDSC) to the
shareholder will be the designated monthly, quarterly, semi-annual or annual
amount.
A shareholder may suspend or terminate participation in the Withdrawal
Plan at any time. A shareholder who has suspended participation may resume
payments under the Withdrawal Plan, without requiring a new determination of
the account value for the 12% CDSC waiver. The Withdrawal Plan may be
terminated or revised at any time by the Fund.
Prior to adding an additional SWP Fund to an existing Withdrawal Plan, the
required $10,000/$1,000 share values must be met, to be calculated on the date
the shareholder adds the additional SWP Fund. However, the addition of a new
SWP Fund will not change the account value for the 12% CDSC waiver for the SWP
Funds already participating in the Withdrawal Plan.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of
the relevant month, quarter, or semi-annual or annual period and normally a
check for the proceeds will be mailed by the Transfer Agent, or amounts
credited to a shareholder's Dean Witter Reynolds Inc. or other selected
broker-dealer brokerage account, or amounts deposited electronically into the
shareholder's bank account via the Automated Clearing House, within five
business days after the date of redemption.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Each withdrawal constitutes a
redemption of shares and any gain or loss realized must be recognized for
federal income tax purposes. Although a shareholder may make additional
investments while participating in the Withdrawal Plan, withdrawals made
concurrently with purchases of additional shares are inadvisable because of
sales charges applicable to purchases or redemptions of shares (see "Purchase
of Fund Shares" in the Prospectus).
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Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her Morgan Stanley Dean Witter Financial Advisor or other selected
broker-dealer representative or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature
guarantees required in the manner described above. The shareholder may also
terminate the Withdrawal Plan at any time by written notice to the Transfer
Agent. In the event of such termination, the account will be continued as a
regular Shareholder Investment Account. The shareholder may also redeem all or
part of the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in any Class of shares of the
Fund at any time by sending a check in any amount, not less than $100, payable
to Morgan Stanley Dean Witter Market Leader Trust, and indicating the selected
Class, directly to the Fund's Transfer Agent. In the case of Class A shares,
after deduction of any applicable sales charge, the balance will be applied to
the purchase of Fund shares, and, in the case of shares of the other Classes,
the entire amount will be applied to the purchase of Fund shares, at the net
asset value per share next computed after receipt of the check or purchase
payment by the Transfer Agent. The shares so purchased will be credited to the
investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of each Class of shares
of the Fund may exchange their shares for shares of the same Class of shares of
any other Morgan Stanley Dean Witter Multi-Class Fund without the imposition of
any exchange fee. Shares may also be exchanged for shares of any of the
following funds: Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust,
Morgan Stanley Dean Witter Limited Term Municipal Trust, Morgan Stanley Dean
Witter Short-Term Bond Fund and five Morgan Stanley Dean Witter Funds which are
money market funds (the foregoing eight funds are hereinafter referred to as
the "Exchange Funds"). Class A shares may also be exchanged for shares of
Morgan Stanley Dean Witter Multi-State Municipal Series Trust and Morgan
Stanley Dean Witter Hawaii Municipal Trust, which are Morgan Stanley Dean
Witter Funds sold with a front-end sales charge ("FSC Funds"). Class B shares
may also be exchanged for shares of Morgan Stanley Dean Witter Global
Short-Term Income Fund Inc. ("Global Short-Term") which is a Morgan Stanley
Dean Witter Fund offered with a CDSC. Exchanges may be made after the shares of
the Fund acquired by purchase (not by exchange or dividend reinvestment) have
been held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares,
on which the shareholder may realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a Morgan Stanley
Dean Witter Multi-Class Fund or Global Short-Term are exchanged for shares of
an
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Exchange Fund, the exchange is executed at no charge to the shareholder,
without the imposition of the CDSC at the time of the exchange. During the
period of time the shareholder remains in the Exchange Fund (calculated from
the last day of the month in which the Exchange Fund shares were acquired), the
holding period or "year since purchase payment made" is frozen. When shares are
redeemed out of the Exchange Fund, they will be subject to a CDSC which would
be based upon the period of time the shareholder held shares in a Morgan
Stanley Dean Witter Multi-Class Fund or in Global Short-Term. However, in the
case of shares exchanged into an Exchange Fund on or after April 23, 1990, upon
a redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the Exchange
Fund 12b-1 distribution fees incurred on or after that date which are
attributable to those shares. Shareholders acquiring shares of an Exchange Fund
pursuant to this exchange privilege may exchange those shares back into a
Morgan Stanley Dean Witter Multi-Class Fund or Global Short-Term from the
Exchange Fund, with no CDSC being imposed on such exchange. The holding period
previously frozen when shares were first exchanged for shares of the Exchange
Fund resumes on the last day of the month in which shares of a Morgan Stanley
Dean Witter Multi-Class Fund or of Global Short-Term are reacquired. A CDSC is
imposed only upon an ultimate redemption, based upon the time (calculated as
described above) the shareholder was invested in a Morgan Stanley Dean Witter
Multi-Class Fund or in Global Short-Term. In the case of exchanges of Class A
shares which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in a FSC Fund.
When shares initially purchased in a Morgan Stanley Dean Witter
Multi-Class Fund or in Global Short-Term are exchanged for shares of a Morgan
Stanley Dean Witter Multi-Class Fund, shares of Global Short-Term, shares of a
FSC Fund, or shares of an Exchange Fund, the date of purchase of the shares of
the fund exchanged into, for purposes of the CDSC upon redemption, will be the
last day of the month in which the shares being exchanged were originally
purchased. In allocating the purchase payments between funds for purposes of
the CDSC, the amount which represents the current net asset value of shares at
the time of the exchange which were (i) purchased more than one, three or six
years (depending on the CDSC schedule applicable to the shares) prior to the
exchange, (ii) originally acquired through reinvestment of dividends or
distributions and (iii) acquired in exchange for shares of FSC Funds, or for
shares of other Morgan Stanley Dean Witter Funds for which shares of FSC Funds
have been exchanged (all such shares called "Free Shares"), will be exchanged
first. After an exchange, all dividends earned on shares in an Exchange Fund
will be considered Free Shares. If the exchanged amount exceeds the value of
such Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time (except that, with respect to Class
B shares, if shares held for identical periods of time but subject to different
CDSC schedules are held in the same Exchange Privilege account, the shares of
that block that are subject to a lower CDSC rate will be exchanged prior to the
shares of that block that are subject to a higher CDSC rate). Shares equal to
any appreciation in the value of non-Free Shares exchanged will be treated as
Free Shares, and the amount of the purchase payments for the non-Free Shares of
the fund exchanged into will be equal to the lesser of (a) the purchase
payments for, or (b) the current net asset value of, the exchanged non-Free
Shares. If an exchange between funds would result in exchange of only part of a
particular block of non-Free Shares, then shares equal to any appreciation in
the value of the block (up to the amount of the exchange) will be treated as
Free Shares and exchanged first, and the purchase payment for that block will
be allocated on a pro rata basis between the non-Free Shares of that block to
be retained and the non-Free Shares to be exchanged. The prorated amount of
such purchase payment attributable to the retained non-Free Shares will remain
as the purchase payment for such shares, and the amount of purchase payment for
the exchanged non-Free Shares will be equal to the lesser of (a) the prorated
amount of the purchase payment for, or (b) the current net asset value of,
those exchanged non-Free Shares. Based upon the procedures described in the
Prospectus under the caption "Purchase of Fund Shares," any applicable CDSC
will be imposed upon the ultimate redemption of shares of any fund, regardless
of the number of exchanges since those shares were originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
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selected 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 selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and
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 fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $5,000 for Morgan Stanley Dean
Witter Liquid Asset Fund Inc., Morgan Stanley Dean Witter Tax-Free Daily Income
Trust, Morgan Stanley Dean Witter California Tax-Free Daily Income Trust and
Morgan Stanley Dean Witter New York Municipal Money Market Trust, although
those funds may, in their discretion, accept initial investments of as low as
$1,000. The minimum initial investment for the Exchange Privilege account of
each Class is $10,000 for Morgan Stanley Dean Witter Short-Term U.S. Treasury
Trust, although that fund, in its discretion, may accept initial purchases of
as low as $5,000. The minimum initial investment for the Exchange Privilege
account of each Class is $5,000 for Morgan Stanley Dean Witter Special Value
Fund. The minimum initial investment for the Exchange Privilege account of each
Class of all other Morgan Stanley Dean Witter Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of those funds, including the check writing feature, will not be
available for funds held in that account.
The Fund and each of the other Morgan Stanley Dean Witter Funds may limit
the number of times this Exchange Privilege may be exercised by any investor
within a specified period of time. Also, the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any of the Morgan Stanley
Dean Witter Funds for which shares of the Fund have been exchanged, upon such
notice as may be required by applicable regulatory agencies (presently sixty
days' prior written notice for termination or material revision), provided that
six months' prior written notice of termination will be given to the
shareholders who hold shares of Exchange Funds, pursuant to the Exchange
Privilege, and provided further that the Exchange Privilege may be terminated
or materially revised without notice at times (a) when the New York Stock
Exchange is closed for other than customary weekends and holidays, (b) when
trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, (d) during any other period when the
Securities and Exchange Commission by order so permits (provided that
applicable rules and regulations of the Securities and Exchange Commission
shall govern as to whether the conditions prescribed in (b) or (c) exist) or
(e) if the Fund would be unable to invest amounts effectively in accordance
with its investment objective, policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their Morgan Stanley Dean Witter Financial Advisor or other
selected broker-dealer representative or the Transfer Agent.
REDEMPTIONS AND REPURCHASES
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Redemption. As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption. The share certificate, or
an accompanying stock power, and the request for redemption, must be signed by
the shareholder or
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shareholders exactly as the shares are registered. Each request for redemption,
whether or not accompanied by a share certificate, must be sent to the Fund's
Transfer Agent, which will redeem the shares at their net asset value next
computed (see "Purchase of Fund Shares") after it receives the request, and
certificate, if any, in good order. Any redemption request received after such
computation will be redeemed at the next determined net asset value. The term
"good order" means that the share certificate, if any, and request for
redemption are properly signed, accompanied by any documentation required by
the Transfer Agent, and bear signature guarantees when required by the Fund or
the Transfer Agent. If redemption is requested by a corporation, partnership,
trust or fiduciary, the Transfer Agent may require that written evidence of
authority acceptable to the Transfer Agent be submitted before such request is
accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other
than the Distributor or a selected broker-dealer for the account of the
shareholder), partnership, trust or fiduciary, or sent to the shareholder at an
address other than the registered address, signatures must be guaranteed by an
eligible guarantor acceptable to the Transfer Agent (shareholders should
contact the Transfer Agent for a determination as to whether a particular
institution is such an eligible guarantor). A stock power may be obtained from
any dealer or commercial bank. The Fund may change the signature guarantee
requirements from time to time upon notice to shareholders, which may be by
means of a supplement to the prospectus.
Repurchase. As stated in the Prospectus, DWR and other selected
broker-dealers are authorized to repurchase shares represented by a share
certificate which is delivered to any of their offices. Shares held in a
shareholder's account without a share certificate may also be repurchased by
DWR and other selected broker-dealers upon the telephonic request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer reduced
by any applicable CDSC.
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such 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.
Reinstatement Privilege. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within 35 days after the redemption
or repurchase, reinstate any portion or all of the proceeds of such redemption
or repurchase in shares of the Fund in the same Class at the net asset value
next determined after a reinstatement request, together with the proceeds, is
received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax and state income tax treatment of any gain or loss realized upon the
redemption or repurchase, except that if the redemption or repurchase resulted
in a loss and reinstatement is made in shares of the Fund, some or all of the
loss, depending on the amount reinstated, will not be allowed as a deduction
for federal income tax and state personal income tax purposes but will be
applied to adjust the cost basis of the shares acquired upon reinstatement.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares of any Class presented for repurchase or
redemption will be made by check within seven days after receipt by the
Transfer Agent of the certificate and/or written request in good order. Such
payment may be postponed or the right of redemption suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on that Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the
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value of its net assets, or (d) during any other period when the Securities and
Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist. If the shares to be
redeemed have recently been purchased by check, payment of the redemption
proceeds may be delayed for the minimum time needed to verify that the check
used for investment has been honored (not more than fifteen days from the time
of receipt of the check by the Transfer Agent). It has been and remains the
Fund's policy and practice that, if checks for redemption proceeds remain
uncashed, no interest will accrue on amounts represented by such uncashed
checks. Shareholders maintaining margin accounts with DWR or another selected
broker-dealer are referred to their Morgan Stanley Dean Witter Financial
Advisor or other selected broker-dealer representative regarding restrictions
on redemption of shares of the Fund pledged in the margin account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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As discussed in the Prospectus under "Dividends, Distributions and Taxes,"
the Fund will determine either to distribute or to retain all or part of any
net long-term capital gains in any year for reinvestment. If any such gains are
retained, the Fund will pay federal income tax thereon, and shareholders at
year-end will be able to claim their share of the tax paid by the Fund as a
credit against their individual federal income tax. Shareholders will increase
their tax basis of Fund shares owned by an amount equal, under current law, to
65% of the amount of undistributed capital gains.
The Fund, however, intends to distribute substantially all of its net
investment income and net capital gains to shareholders and otherwise qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code. It is not expected that the Fund will be required to pay any federal
income tax. Shareholders will normally have to pay federal income taxes, and
any state income taxes, on the dividends and distributions they receive from
the Fund. Such dividends and distributions, to the extent that they are derived
from the net investment income or net 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. Any dividends declared
in the last quarter of any calendar year which are paid in the following year
prior to February 1 will be deemed received by the shareholder in the prior
calendar year. Dividend payments will be eligible for the federal dividends
received deduction available to the Fund's corporate shareholders only to the
extent the aggregate dividends received by the Fund would be eligible for the
deduction if the Fund were the shareholder claiming the dividends received
deduction. The amount of dividends paid by the Fund which may qualify for the
dividends received deduction is limited to the aggregate amount of qualifying
dividends which the Fund derives from its portfolio investments which the Fund
has held for a minimum period, usually 46 days within a 90 day period beginning
45 days before the ex-dividend date of each qualifying dividend. Shareholders
must meet a similar holding period requirement with respect to their shares to
claim the dividends received deduction with respect to any distribution of
qualifying dividends. Any long-term capital gain distributions will also not be
eligible for the dividends received deduction. The ability to take the
dividends received deduction will also be limited in the case of a Fund
shareholder which incurs or continues indebtedness which is directly
attributable to its investment in the Fund.
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 reduces
the maximum tax on long-term capital gains from 28% to 20%. Additionally,
the maximum capital gain rate for assets that are held more than 5 years and
that are acquired after December 31, 2000 is 18%.
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 twelve months. Gains or losses on the sale of securities with a tax
holding period of twelve months or less will be short-term capital gains or
losses.
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After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
the portion taxable as long-term capital gains, and the amount of dividends
eligible for the Federal dividends received deduction available to
corporations. To avoid being subject to a 31% Federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of redemptions
and repurchases, shareholders' taxpayer identification numbers must be
furnished and certified as to their accuracy.
Under current federal tax law, the Fund will receive net investment income
in the form of interest by virtue of holding Treasury bills, notes and bonds,
and will recognize income attributable to it from holding zero coupon Treasury
securities. 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 payment in cash on the security during the year.As an investment
company, the Fund must pay out substantially all of its net investment income
each year. Accordingly, the Fund, to the extent it invests in zero coupon
Treasury securities, may be required to pay out as an income distribution each
year an amount which is greater than the total amount of cash receipts of
interest the Fund actually received. 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.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and some
portion of the dividends 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 capital 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.
Shareholders are urged to consult their attorneys or tax advisors
regarding specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
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As discussed in the Prospectus, 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 the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value
is reduced by any CDSC at the end of the one, five or 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, 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. The average annual total return of Class B for
the fiscal year ended August 31, 1998 and for the period April 28, 1997
(commencement of operations) through August 31, 1998 was -14.12% and -4.66%,
respectively. The average annual total returns of Class A for the fiscal year
ended August 31, 1998 and for the period July 28, 1997 (inception of the Class)
through August 31, 1998 were -13.76% and -13.26%, respectively. The average
annual total returns of Class C for the fiscal year ended August 31, 1998 and
for the period July 28, 1997 (inception of the Class) through August 31, 1998
were -10.52% and -9.54%, respectively. The average annual total returns of
Class D
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for the fiscal year ended August 31, 1998 and for the period July 28, 1997
(inception of the Class) through August 31, 1998 were -8.81% and -8.72%,
respectively.
In addition to the foregoing, 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. Such 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,
average annual total return of Class B for the fiscal year ended August 31,
1998, and for the period April 28, 1997 (commencement of operations) through
August 31, 1998 was -9.65%, and -1.74%, respectively. Based on this
calculation, the average annual total returns of Class A for the fiscal year
ended August 31, 1998 and for the period July 28, 1997 through August 31, 1998
were -8.98% and -8.87%, respectively, the average annual total returns of Class
C for the fiscal year ended August 31, 1998 and for the period July 28, 1997
through August 31, 1998 were -9.63% and -9.54%, respectively, and the average
annual total returns of Class D for the fiscal year ended August 31, 1998 and
for the period July 28, 1997 through August 31, 1998 were -8.81% and -8.72%,
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 the reduction for any sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on this calculation, the
Fund's total return of Class B for the fiscal year ended August 31, 1998 and
for the period April 28, 1997 (commencement of operations) through August 31,
1998 was -9.65%, and -2.33%, respectively. Based on the foregoing calculations,
the total returns for Class A for the fiscal year ended August 31, 1998 and for
the period July 28, 1997 through August 31, 1998 were -8.98% and -9.65%,
respectively, the total returns of Class C for the fiscal year ended August 31,
1998 and for the period July 28, 1997 through August 31, 1998 were -9.63% and
- -10.38%, respectively, and the total returns of Class D for the fiscal year
ended August 31, 1998 and for the period July 28, 1997 through August 31, 1998
were -8.81% and -9.48%, respectively.
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. Based on this calculation, 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 August 31, 1998:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ---------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Class A ......... 7/28/97 $8,560 $43,368 $87,640
Class B ......... 4/28/97 9,767 48,835 97,670
Class C ......... 7/28/97 8,962 44,810 89,620
Class D ......... 7/28/97 9,052 45,260 90,520
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indices compiled by independent organizations.
38
<PAGE>
SHARES OF THE FUND
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. 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. Under certain circumstances the
Trustees may be removed by action of the Trustees. The shareholders also have
the right under certain circumstances to remove the Trustees. 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.
The 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 authorized any such additional series
or classes of shares other than as set forth in the Prospectus.
The Declaration of Trust further 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.
The Fund is authorized to issue an unlimited number of shares of
beneficial interest. The Fund shall be of unlimited duration subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders or the Trustees.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 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.
Such balances may, at times, be substantial.
Morgan Stanley Dean Witter Trust FSB, ("MSDW Trust"), Harborside Financial
Center, Plaza Two, Jersey City, New Jersey 07311 is the Transfer Agent of the
Fund's shares and Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various
investment plans described herein. Morgan Stanley Dean Witter Trust FSB is an
affiliate of Morgan Stanley Dean Witter Advisors Inc., the Fund's Investment
Manager and Morgan Stanley Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, MSDW Trust'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
MSDW Trust receives a per shareholder account fee from the Fund.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP serves as the independent accountants of the
Fund. The independent accountants are responsible for auditing the annual
financial statements of the Fund.
39
<PAGE>
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent account- ants, will be
sent to shareholders each year.
The Fund's fiscal year ends on August 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The Financial Statements of the Fund for the fiscal year ended August 31,
1998 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 PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
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 Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
40
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PORTFOLIO OF INVESTMENTS August 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------ ------------------
<S> <C> <C>
COMMON STOCKS (87.5%)
Aerospace (1.7%)
28,000 United Technologies Corp. ..................... $ 2,031,750
------------
Biotechnology (3.2%)
45,000 Amgen Inc.* ................................... 2,745,000
35,000 Centocor, Inc.* ............................... 1,137,500
------------
3,882,500
------------
Broadcasting (1.5%)
30,000 Jacor Communications, Inc.* ................... 1,766,250
------------
Building Products (0.8%)
40,000 Masco Corp. ................................... 920,000
------------
Capital Goods (1.6%)
65,000 JLG Industries, Inc. .......................... 954,687
60,000 Roper Industries, Inc. ........................ 1,020,000
------------
1,974,687
------------
Computer Software (0.8%)
10,000 Microsoft Corp.* .............................. 959,375
------------
Computer Communications (5.7%)
30,000 3Com Corp.* ................................... 710,625
60,000 Cisco Systems, Inc.* .......................... 4,912,500
30,000 FORE Systems, Inc.* ........................... 517,500
80,000 Pairgain Technologies, Inc.* .................. 707,500
------------
6,848,125
------------
Diversified Commercial Services (1.0%)
135,000 CheckFree Holdings Corp.* ..................... 1,155,937
------------
Electronic Data Processing (6.8%)
32,000 COMPAQ Computer Corp. ......................... 894,000
55,000 EMC Corp.* .................................... 2,485,312
85,000 First Data Corp. .............................. 1,758,437
45,000 Hewlett-Packard Co. ........................... 2,185,312
40,000 Storage Technology Corp.* ..................... 870,000
------------
8,193,061
------------
Electronic Production Equipment (0.9%)
95,000 Photronics, Inc.* ............................. 1,140,000
------------
Finance Companies (3.4%)
47,000 Fannie Mae .................................... 2,670,187
45,000 Newcourt Credit Group, Inc.
(Canada) ...................................... 1,479,375
------------
4,149,562
------------
Integrated Oil Companies (2.0%)
20,000 Chevron Corp. ................................. 1,481,250
30,000 Unocal Corp. .................................. 939,375
------------
2,420,625
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------ ------------------
<S> <C> <C>
Investment Bankers/Brokers/Services (3.9%)
50,000 Hambrecht & Quist Group* ...................... $ 1,012,500
20,000 Lehman Brothers Holdings, Inc. ................ 787,500
20,000 Merrill Lynch & Co., Inc. ..................... 1,320,000
45,000 Paine Webber Group, Inc. ...................... 1,563,750
------------
4,683,750
------------
Major Banks (3.9%)
50,000 Chase Manhattan Corp. ......................... 2,650,000
19,000 Citicorp ...................................... 2,054,375
------------
4,704,375
------------
Major Chemicals (1.2%)
25,000 Du Pont (E.I.) de Nemours &
Co., Inc. ..................................... 1,442,187
------------
Major Pharmaceuticals (9.6%)
50,000 American Home Products Corp. .................. 2,506,250
20,000 Bristol-Myers Squibb Co. ...................... 1,957,500
20,000 Johnson & Johnson ............................. 1,380,000
33,000 Merck & Co., Inc. ............................. 3,825,938
20,000 Pfizer, Inc. .................................. 1,860,000
------------
11,529,688
------------
Major U.S. Telecommunications (2.1%)
30,000 AT&T Corp. .................................... 1,503,750
25,000 WorldCom, Inc.* ............................... 1,021,875
------------
2,525,625
------------
Medical Specialties (2.1%)
50,000 Becton, Dickinson & Co. ....................... 1,665,625
45,000 Intelligent Polymers Ltd. (Units)++* .......... 877,500
------------
2,543,125
------------
Medical/Nursing Services (0.9%)
55,000 HEALTHSOUTH Corp.* ............................ 1,041,563
------------
Miscellaneous (1.4%)
120,000 USEC Inc.* .................................... 1,755,000
------------
Multi-Line Insurance (2.6%)
40,500 American International Group, Inc. ............ 3,131,156
------------
Oil & Gas Production (0.8%)
65,000 Snyder Oil Corp. .............................. 966,875
------------
Oil Refining/Marketing (1.0%)
35,000 Sun Co., Inc. ................................. 1,157,188
------------
Oil/Gas Transmission (1.5%)
80,000 Williams Companies, Inc. ...................... 1,840,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PORTFOLIO OF INVESTMENTS August 31, 1998, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ --------------
<S> <C> <C>
Oilfield Services/Equipment (3.6%)
40,000 BJ Services Co.* ....................... $ 505,000
56,000 Halliburton Co. ........................ 1,487,500
75,000 Noble Drilling Corp.* .................. 825,000
35,000 Schlumberger, Ltd ...................... 1,533,438
-----------
4,350,938
-----------
Other Consumer Services (0.9%)
90,000 Cendant Corp.* ......................... 1,040,625
-----------
Restaurants (2.1%)
45,000 McDonald's Corp. ....................... 2,522,813
-----------
Retail (7.9%)
33,000 Consolidated Stores Corp.* ............. 1,039,500
94,000 Proffitt's, Inc.* ...................... 2,397,000
70,000 Rite Aid Corp. ......................... 2,533,125
160,000 TJX Companies, Inc. .................... 3,570,000
-----------
9,539,625
-----------
Semiconductors (3.9%)
47,000 Intel Corp. ............................ 3,345,813
50,000 Vitesse Semiconductor Corp.* ........... 1,346,875
-----------
4,692,688
-----------
Specialty Steel (2.9%)
65,000 Nucor Corp. ............................ 2,335,938
25,000 Phelps Dodge Corp. ..................... 1,118,750
-----------
3,454,688
-----------
Telecommunications (5.8%)
30,000 CIENA Corp.* ........................... 840,000
25,000 Cincinnati Bell, Inc. .................. 587,500
30,000 ICG Communications, Inc.* .............. 536,250
15,000 Motorola, Inc. ......................... 645,938
60,000 Nextel Communications, Inc.
(Class A)* ............................. 1,080,000
50,000 Nokia Corp. (ADR) (Finland) ............ 3,340,625
-----------
7,030,313
-----------
TOTAL COMMON STOCKS
(Identified Cost $114,106,467).......... 105,394,094
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------- ---------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (8.4%)
U.S. GOVERNMENT AGENCIES (a) (8.2%)
$ 4,500 Federal Home Loan Mortgage
Corp. 5.46% due 09/11/98 ............ $ 4,493,175
5,400 Federal Home Loan Mortgage
Corp. 5.70% due 09/01/98 ............ 5,400,000
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $9,893,175).......... 9,893,175
------------
REPURCHASE AGREEMENT (0.2%)
194 The Bank of New York 5.75%
due 09/01/98 (dated 08/31/98;
proceeds $193,922) (b)
(Identified Cost $193,891) .......... 193,891
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $10,087,066)................... 10,087,066
------------
TOTAL INVESTMENTS
(Identified Cost $124,193,533) (c)..... 95.9% 115,481,160
OTHER ASSETS IN EXCESS
OF LIABILITIES ........................ 4.1 4,926,286
---- ------------
NET ASSETS ............................ 100.0% $120,407,446
===== ============
</TABLE>
- --------------------------------
ADR American Depository Receipt.
* Non-income producing security.
++ Consists of more than one class of securities traded together as a unit;
stocks with attached warrants.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $151,277 U.S. Treasury Bond 7.875% due 02/15/21 valued
at $197,769.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $11,432,976 and the
aggregate gross unrealized depreciation is $20,145,349, resulting in net
unrealized depreciation of $8,712,373.
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
<TABLE>
<S> <C>
ASSETS :
Investments in securities, at value
(identified cost $124,193,533)................................... $115,481,160
Receivable for:
Investments sold ............................................... 7,697,478
Shares of beneficial interest sold ............................. 169,355
Dividends ...................................................... 117,649
Deferred organizational expenses .................................. 48,643
Prepaid expenses and other assets ................................. 91,960
------------
TOTAL ASSETS ................................................... 123,606,245
------------
LIABILITIES :
Payable for:
Investments purchased .......................................... 2,607,638
Shares of beneficial interest repurchased ...................... 290,211
Plan of distribution fee ....................................... 118,647
Investment management fee ...................................... 91,013
Accrued expenses .................................................. 91,290
------------
TOTAL LIABILITIES .............................................. 3,198,799
------------
NET ASSETS ..................................................... $120,407,446
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................... $129,292,629
Net unrealized depreciation ....................................... (8,712,373)
Distributions in excess of net realized gain ...................... (172,810)
------------
NET ASSETS ..................................................... $120,407,446
============
CLASS A SHARES :
Net Assets ........................................................ $ 318,652
Shares Outstanding (unlimited authorized, $.01 par value) ......... 32,761
NET ASSET VALUE PER SHARE ...................................... $ 9.73
=============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) .............. $ 10.27
=============
CLASS B SHARES :
Net Assets ........................................................ $116,692,554
Shares Outstanding (unlimited authorized, $.01 par value) ......... 12,060,344
NET ASSET VALUE PER SHARE ...................................... $ 9.68
=============
CLASS C SHARES :
Net Assets ........................................................ $ 937,188
Shares Outstanding (unlimited authorized, $.01 par value) ......... 96,953
NET ASSET VALUE PER SHARE ...................................... $ 9.67
=============
CLASS D SHARES :
Net Assets ........................................................ $ 2,459,052
Shares Outstanding (unlimited authorized, $.01 par value) ......... 252,580
NET ASSET VALUE PER SHARE ...................................... $ 9.74
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended August 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME :
INCOME
Dividends (net of $5,071 foreign withholding tax) ......... $ 978,103
Interest .................................................. 781,066
-------------
TOTAL INCOME ........................................... 1,759,169
-------------
EXPENSES
Plan of distribution fee (Class A shares) ................. 1,019
Plan of distribution fee (Class B shares) ................. 1,378,923
Plan of distribution fee (Class C shares) ................. 9,052
Investment management fee ................................. 1,054,688
Transfer agent fees and expenses .......................... 214,409
Registration fees ......................................... 80,063
Professional fees ......................................... 38,688
Shareholder reports and notices ........................... 37,050
Trustees' fees and expenses ............................... 22,197
Custodian fees ............................................ 17,898
Organizational expenses ................................... 16,414
Other ..................................................... 3,205
-------------
TOTAL EXPENSES ......................................... 2,873,606
-------------
NET INVESTMENT LOSS .................................... (1,114,437)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) :
Net realized gain ......................................... 489,937
Net change in unrealized appreciation ..................... (12,924,249)
-------------
NET LOSS ............................................... (12,434,312)
-------------
NET DECREASE .............................................. $ (13,548,749)
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR APRIL 28, 1997*
ENDED THROUGH
AUGUST 31, 1998 AUGUST 31, 1997**
--------------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS :
OPERATIONS :
Net investment income (loss) ......................... $ (1,114,437) $ 322,836
Net realized gain .................................... 489,937 434,680
Net change in unrealized appreciation ................ (12,924,249) 4,211,876
------------- ------------
NET INCREASE (DECREASE) ........................... (13,548,749) 4,969,392
------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM :
Net investment income
Class A shares ..................................... (2,346) --
Class B shares ..................................... (371,207) --
Class C shares ..................................... (3,451) --
Class D shares ..................................... (1,350) --
Net realized gain
Class A shares ..................................... (2,408) --
Class B shares ..................................... (791,200) --
Class C shares ..................................... (5,177) --
Class D shares ..................................... (1,210) --
------------- ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (1,178,349) --
------------- ------------
Net increase from transactions in shares of beneficial
interest ........................................... 27,225,224 102,839,928
------------- ------------
NET INCREASE ...................................... 12,498,126 107,809,320
NET ASSETS :
Beginning of period .................................. 107,909,320 100,000
------------- ------------
END OF PERIOD
(Including a undistributed net investment income
of $0 and $378,348, respectively) .................. $ 120,407,446 $107,909,320
============= ============
</TABLE>
- ---------------------
* Commencement of operations.
** Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Market Leader Trust (the "Fund"), formerly Dean
Witter Market Leader Trust, is registered under the Investment Company Act of
1940, as amended (the "Act"), as a diversified, open-end management investment
company. The Fund's investment objective is long-term growth of capital. The
Fund seeks to achieve its investment objective by investing at least 65% of its
assets in equity securities issued by companies that are established leaders in
their respective fields in growing industries in domestic and foreign markets.
The Fund was organized as a Massachusetts business trust on November 4, 1996
and had no other operations other than those relating to organizational matters
and the issuance of 10,000 shares of beneficial interest for $100,000 to Morgan
Stanley Dean Witter Advisors Inc. (the "Investment Manager"), formerly Dean
Witter InterCapital Inc., to effect the Fund's initial capitalization. The Fund
commenced operations on April 28, 1997. On July 28, 1997, the Fund commenced
offering three additional classes of shares, with the then current shares
designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign 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 securities are 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); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at
the latest available bid price prior to the time of valuation; (3) 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
46
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1998, continued
Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); (4) certain portfolio securities may be valued by
an outside pricing service approved by the Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the portfolio securities
valued by such pricing service; and (5) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date
such items are recognized. Distribution fees are charged directly to the
respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized
47
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1998, continued
capital gains. To the extent they exceed net investment income and net realized
capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $71,000, of which
approximately $70,000 have been reimbursed. The
balance was absorbed by the Investment Manager. Such expenses have been
deferred and are being amortized on the straight-line method over a period not
to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.75% to the net assets of the Fund determined as of the close
of each business day.
Under the terms of the 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, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and 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 services,
heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
(the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
average daily net assets of Class B; and (iii) Class C - up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts
paid under the Plan are paid to the Distributor for services provided. In the
case of Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for services provided and the expenses borne by it and others in
the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter financial advisors and others who
engage in or support distribution of the shares or who service shareholder
accounts, including overhead and telephone expenses, printing and distribution
of prospectuses and reports used in connection with the offering of these
shares to other than current shareholders and the
48
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1998, continued
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan, in the case of Class B shares, to compensate Dean Witter Reynolds Inc.
("DWR") and other selected broker-dealers for their opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses.
In the case of Class B Shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. 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 contingent deferred sales charges 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. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $6,051,552 at August 31, 1998.
In the case of Class A shares 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 credit to Morgan Stanley Dean Witter financial advisors or other
selected broker-dealer representative may be reimbursed in the subsequent
calendar year. For the year ended August 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended August 31, 1998,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $347,509 and $1,156, respectively
and received $6,308 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense
of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended August 31, 1998 aggregated
$130,572,627 and $84,185,077, respectively.
For the year ended August 31, 1998, the Fund incurred $41,162 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
49
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1998, continued
For the year ended August 31, 1998, the Fund incurred brokerage commissions of
$10,725 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At August 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $17,900.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR APRIL 28, 1997*
ENDED THROUGH
AUGUST 31, 1998 AUGUST 31, 1997**
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................................ 19,166 $ 222,348 26,664 $ 291,830
Reinvestment of dividends and distributions ......... 356 3,757 -- --
Redeemed ............................................ (13,425) (161,666) -- --
------- ------------- ------ -------------
Net increase - Class A .............................. 6,097 64,439 26,664 291,830
------- ------------- ------ -------------
CLASS B SHARES
Sold ................................................ 4,268,628 48,133,147 10,228,061 105,571,003
Reinvestment of dividends and distributions ......... 103,104 1,088,780 -- --
Redeemed ............................................ (2,239,034) (25,726,473) (310,415) (3,349,122)
---------- ------------- ---------- -------------
Net increase - Class B .............................. 2,132,698 23,495,454 9,917,646 102,221,881
---------- ------------- ---------- -------------
CLASS C SHARES
Sold ................................................ 85,684 979,787 30,204 330,257
Reinvestment of dividends and distributions ......... 801 8,447 -- --
Redeemed ............................................ (18,464) (215,453) (1,272) (14,053)
---------- ------------- ---------- -------------
Net increase - Class C .............................. 68,021 772,781 28,932 316,204
---------- ------------- ---------- -------------
CLASS D SHARES
Sold ................................................ 293,504 3,408,442 919 10,013
Reinvestment of dividends and distributions ......... 36 384 -- --
Redeemed ............................................ (41,879) (516,276) -- --
---------- ------------- ---------- -------------
Net increase - Class D .............................. 251,661 2,892,550 919 10,013
---------- ------------- ---------- -------------
Net increase in Fund ................................ 2,458,477 $ 27,225,224 9,974,161 $ 102,839,928
========== ============= ========== =============
</TABLE>
- ---------------
* Commencement of operations.
** For Class A, C and D shares, for the period July 28, 1997 (issue date)
through August 31, 1997.
50
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1998, continued
6. FEDERAL INCOME TAX STATUS
At August 31, 1998, the Fund had temporary book/tax differences attributable to
capital loss deferrals on wash sales and permanent book/tax differences
primarily attributable to a net operating loss. To
reflect reclassifications arising from the permanent differences,
paid-in-capital was charged $817,011, distributions in excess of net realized
gain was charged $297,432 and undistributed net investment income was credited
$1,114,443.
51
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR APRIL 28, 1997*
ENDED THROUGH
AUGUST 31, 1998++ AUGUST 31, 1997**
------------------- ----------------------
<S> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE :
Net asset value, beginning of period ............ $ 10.81 $ 10.00
----------- ---------------
Net investment income (loss) .................... (0.09) 0.04
Net realized and unrealized gain (loss) ......... (0.95) 0.77
----------- ---------------
Total from investment operations ................ (1.04) 0.81
----------- ---------------
Less dividends and distributions from:
Net investment income .......................... (0.03) --
Net realized gain .............................. (0.06) --
----------- ---------------
Total dividends and distributions ............... (0.09) --
----------- ---------------
Net asset value, end of period .................. $ 9.68 $ 10.81
=========== ===============
TOTAL INVESTMENT RETURN+ ........................ (9.65)% 8.10%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 2.06 %(4) 2.34%(2)(3)
Net investment income (loss) .................... (0.81)%(4) 1.21%(2)(3)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ......... $116,693 $107,298
Portfolio turnover rate ......................... 68 % 22%(1)
</TABLE>
- -------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived
by the Investment Manager, the annualized expense and net investment
income ratios would have been 2.47% and 1.08%, respectively.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
AUGUST 31, 1998++ AUGUST 31, 1997
------------------- ------------------
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE :
Net asset value, beginning of period ............ $10.82 $10.90
------ ------
Net investment income (loss) .................... (0.01) 0.01
Net realized and unrealized loss ................ (0.96) (0.09)
------ ------
Total from investment operations ................ (0.97) (0.08)
------ ------
Less dividends and distributions from:
Net investment income .......................... (0.06) --
Net realized gain .............................. (0.06) --
------ ------
Total dividends and distributions ............... (0.12) --
------ ------
Net asset value, end of period .................. $ 9.73 $10.82
====== ======
TOTAL INVESTMENT RETURN+ ........................ (8.98)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 1.31 %(3) 1.89 %(2)
Net investment income (loss) .................... (0.06)%(3) 1.30 %(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ......... $ 319 $ 288
Portfolio turnover rate ......................... 68 % 22 %(1)
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE :
Net asset value, beginning of period ............ $10.81 $10.90
------ ------
Net investment income (loss) .................... (0.10) 0.01
Net realized and unrealized loss ................ (0.94) (0.10)
------ ------
Total from investment operations ................ (1.04) (0.09)
------ ------
Less dividends and distributions from:
Net investment income .......................... (0.04) --
Net realized gain .............................. (0.06) --
------ ------
Total dividends and distributions ............... (0.10) --
------ ------
Net asset value, end of period .................. $ 9.67 $10.81
====== ======
TOTAL INVESTMENT RETURN+ ........................ (9.63)% (0.83)%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 2.06 %(3) 2.54 %(2)
Net investment income (loss) .................... (0.81)%(3) 0.61 %(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ......... $ 937 $ 313
Portfolio turnover rate ......................... 68 % 22 %(1)
</TABLE>
- -------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
AUGUST 31, 1998++ AUGUST 31, 1997
------------------- ------------------
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $10.82 $10.90
------ ------
Net investment income ........................... -- 0.02
Net realized and unrealized loss ................ (0.95) (0.10)
------ ------
Total from investment operations ................ (0.95) (0.08)
------ ------
Less dividends and distributions from:
Net investment income .......................... (0.07) --
Net realized gain .............................. (0.06) --
------ ------
Total dividends and distributions ............... (0.13) --
------ ------
Net asset value, end of period .................. $ 9.74 $10.82
====== ======
TOTAL INVESTMENT RETURN+ ........................ (8.81)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 1.06 %(3) 1.43 %(2)
Net investment income ........................... 0.19 %(3) 1.81 %(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ......... $2,459 $ 10
Portfolio turnover rate ......................... 68 % 22 %(1)
</TABLE>
- -------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Market
Leader Trust (the "Fund"), formerly Dean Witter Market Leader Trust, at August
31, 1998, the results of its operations for the year then ended, and the
changes in its net assets and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at August 31, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
October 9, 1998
---------------------------------------------------------------------
1998 FEDERAL TAX NOTICE
For the year ended August 31, 1998, the Fund paid to its shareholders
$0.01 per share from long-term capital gains.
---------------------------------------------------------------------
55
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
FIXED-INCOME SECURITY RATINGS
<TABLE>
<S> <C>
Aaa Fixed-income securities which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa Fixed-income securities which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade fixed-
income securities. They are rated lower than the best fixed-income securities because margins
of protection may not be as large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A Fixed-income securities which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa Fixed-income securities which are rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such fixed-income securities lack
outstanding investment characteristics and in fact have speculative characteristics as well.
Fixed-income securities rated Aaa, Aa, A and Baa are considered investment grade.
Ba Fixed-income securities which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and principal payments
may be very moderate, and therefore not well safeguarded during both good and bad times in
the future. Uncertainty of position characterizes bonds in this class.
B Fixed-income securities which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa Fixed-income securities which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or interest.
Ca Fixed-income securities which are rated Ca present obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C Fixed-income securities which are rated C are the lowest rated class of fixed-income securities,
and issues so rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
</TABLE>
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal
fixed-income security rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and a modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
56
<PAGE>
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. The ratings apply to Municipal Commercial Paper as well as taxable
Commercial Paper. Moody's employs the following three designa- tions, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
FIXED-INCOME SECURITY RATINGS
A Standard & Poor's fixed-income security rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
<TABLE>
<S> <C>
AAA Fixed-income securities rated "AAA" have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Fixed-income securities rated "AA" have a very strong capacity to pay interest and repay
principal and differs from the highest-rate issues only in small degree.
A Fixed-income securities rated "A" have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than fixed-income securities in higher-rated categories.
BBB Fixed-income securities rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for fixed-income securities in this category than for
fixed-income securities in higher-rated categories.
Fixed-income securities rated AAA, AA, A and BBB are considered investment grade.
BB Fixed-income securities rated "BB" have less near-term vulnerability to default than other
speculative grade fixed-income securities. However, it faces major ongoing uncertainties or
exposures to adverse business, financial or economic conditions which could lead to inadequate
capacity or willingness to pay interest and repay principal.
B Fixed-income securities rated "B" have a greater vulnerability to default but presently have the
capacity to meet interest payments and principal repayments. Adverse business, financial or
economic conditions would likely impair capacity or willingness to pay interest and repay
principal.
</TABLE>
57
<PAGE>
<TABLE>
<S> <C>
CCC Fixed-income securities rated "CCC" have a current identifiable vulnerability to default, and are
dependent upon favorable business, financial and economic conditions to meet timely payments
of interest and repayments of principal. In the event of adverse business, financial or economic
conditions, they are not likely to have the capacity to pay interest and repay principal.
CC The rating "CC" is typically applied to fixed-income securities subordinated to senior debt which
is assigned an actual or implied "CCC" rating.
C The rating "C" is typically applied to fixed-income securities subordinated to senior debt which
is assigned an actual or implied "CCC-" rating.
CI The rating "Cl" is reserved for fixed-income securities on which no interest is being paid.
NR Indicates that no rating has been requested, that there is insufficient information on which to
base a rating or that Standard & Poor's does not rate a particular type of obligation as a matter
of policy.
Fixed-income securities rated "BB," "B," "CCC," "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to pay interest and repay
principal. "BB" indicates the least degree of speculation and "C" the highest degree of
speculation. While such fixed-income securities will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified by the addition of a plus
or minus sign to show relative standing within the major ratings categories.
</TABLE>
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to purchase
or sell a security. The ratings are based upon current information furnished by
the issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2, and 3 to indicate the relative degree of safety.
<TABLE>
<S> <C>
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is strong. However, the
relative degree of safety is not as overwhelming as for issues designated "A-1."
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying this designation are,
however, somewhat more vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations.
</TABLE>
FITCH INVESTORS SERVICE, INC. ("FITCH")
BOND RATINGS
The Fitch Bond Ratings provides a guide to investors in determining the
investment risk associated with a particular security. The rating represents
its assessment of the issuer's ability to meet the obligations of a specific
debt issue or class of debt in a timely manner. Fitch bond ratings are not
recommendations to buy, sell or hold securities since they incorporate no
information on market price or yield relative to other debt instruments.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the record of the issuer and
of any guarantor, as well as the political and economic environment that might
affect the future financial strength and credit quality of the issuer.
58
<PAGE>
Bonds which have the same rating are of similar but not necessarily
identical investment quality since the limited number of rating categories
cannot fully reflect small differences in the degree of risk. Moreover, the
character of the risk factor varies from industry to industry and between
corporate, health care and municipal.
In assessing credit risk, Fitch Investors Service relies on current
information furnished by the issuer and/or guarantor and other sources which it
considers reliable. Fitch does not perform an audit of the financial statements
used in assigning a rating.
Ratings may be changed, withdrawn or suspended at any time to reflect
changes in the financial condition of the issuer, the status of the issue
relative to other debt of the issuer, or any other circum- stances that Fitch
considers to have a material effect on the credit of the obligor.
<TABLE>
<S> <C>
AAA rated bonds are considered to be investment grade and of the highest credit quality. The obligor
has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
AA rated bonds are considered to be investment grade and of very high credit quality. The obligor's
ability to pay interest and repay principal, while very strong, is somewhat less than for AAA rated
securities or more subject to possible change over the term of the issue.
A rated bonds are considered to be Investment grade and of high credit quality. The obligor's ability
to pay interest and repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB rated bonds are considered to be investment grade and of satisfactory credit quality. The
obligor's ability to pay interest and repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however, are more likely to weaken this
ability than bonds with higher ratings.
BB rated bonds are considered speculative and of low investment grade. The obligor's ability to pay
interest and repay principal is not strong and is considered likely to be affected over time by
adverse economic changes.
B rated bonds are considered highly speculative. Bonds in this class are lightly protected as to the
obligor's ability to pay interest over the life of the issue and repay principal when due.
CCC rated bonds may have certain identifiable characteristics which, if not remedied, could lead to the
possibility of default in either principal or interest payments.
CC rated bonds are minimally protected. Default in payment of interest and/or principal seems
probable.
C rated bonds are in imminent default in payment of interest and/or principal.
</TABLE>
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium- term notes, and municipal
and investment notes. Although the credit analysis is similar to Fitch's bond
rating analysis, the short-term rating places greater emphasis on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
Fitch's short-term ratings are as follows:
<TABLE>
<S> <C>
Fitch-1+ (Exceptionally Strong Credit Quality) Issues assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
Fitch-1 (Very Strong Credit Quality) Issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated Fitch-1+.
Fitch-2 (Good Credit Quality) Issues assigned this rating have a satisfactory degree of assurance for
timely payment but the margin of safety is not as great as the two higher categories.
</TABLE>
59
<PAGE>
<TABLE>
<S> <C>
Fitch-3 (Fair Credit Quality) Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, however, near-term adverse change is
likely to cause these securities to be rated below investment grade.
Fitch-S (Weak Credit Quality) Issues assigned this rating have characteristics suggesting a minimal
degree of assurance for timely payment and are vulnerable to near term adverse changes in
financial and economic conditions.
D (Default) Issues assigned this rating are in actual or imminent payment default.
LOC This symbol LOC indicates that the rating is based on a letter of credit issued by a commercial
bank.
</TABLE>
DUFF & PHELPS, INC.
LONG-TERM RATINGS
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and
expertise. The projected viability of the obligor at the trough of the cycle is
a critical determination.
Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security classes
in the capital structure, the overall credit strength of the issuer, and the
nature of covenant protection. Review of indenture restrictions is important to
the analysis of a company's operating and financial constraints.
The Credit Rating Committee formally reviews all ratings once per quarter
(more frequently, if necessary).
<TABLE>
<CAPTION>
RATING SCALE DEFINITION
<S> <C>
AAA Highest credit quality. The risk factors are negligible, being only slightly more than risk-
free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest, but may vary slightly
AA from time to time because of economic conditions.
AA-
A+ Protection factors are average but adequate. However, risk factors are more variable
A and greater in periods of economic stress.
A-
BBB+ Below average protection factors but still considered sufficient for prudent investment.
BBB Considerable variability in risk during economic cycles.
BBB-
BB+ Below investment grade but deemed likely to meet obligations when due. Present or
BB prospective financial protection factors fluctuate according to industry conditions or
BB- company fortunes. Overall quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will not be met when due.
B Financial protection factors will fluctuate widely according to economic cycles, industry
B- conditions and/or company fortunes. Potential exists for frequent changes in the quality
rating within this category or into a higher or lower quality rating grade.
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
CCC Well below investment grade securities. May be in default or considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic/ industry
conditions, and/or with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal and/or interest
payments.
DP Preferred stock with dividend arrearages.
</TABLE>
SHORT-TERM RATINGS
Duff & Phelps' short-term ratings are consistent with the rating criteria
utilized by money market participants. The ratings apply to all obligations
with maturities of under one year, including commercial paper, the uninsured
portion of certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed com- mercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds, including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
<TABLE>
<S> <C>
A. CATEGORY 1: HIGH GRADE
Duff 1+ Highest certainty of timely payment. Short-term liquidity, including internal
operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are excellent and
supported by good fundamental protection factors. Risk factors are minor.
Duff- High certainty of timely payment. Liquidity factors are strong and supported
by good fundamental protection factors. Risk factors are very small.
B. CATEGORY 2: GOOD GRADE
Duff 2 Good certainty of timely payment. Liquidity factors and company fundamentals
are sound. Although ongoing funding needs may enlarge total financing
requirements, access to capital markets is good. Risk factors are small.
C. CATEGORY 3: SATISFACTORY GRADE
Duff 3 Satisfactory liquidity and other protection factors qualify issue as to investment
grade. Risk factors are larger and subject to more variation. Nevertheless,
timely payment is expected.
D. CATEGORY 4: NON-INVESTMENT GRADE
Duff 4 Speculative investment characteristics. Liquidity is not sufficient to insure
against disruption in debt service. Operating factors and market access
may be subject to a high degree of variation.
E. CATEGORY 5: DEFAULT
Duff 5 Issuer failed to meet scheduled principal and/or interest payments.
</TABLE>
61
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A):
Page in
Prospectus
----------
Financial Highlights for the period April 28,
1997(commencement of operations) through August 31,
1997 and for the fiscal year ended August 31, 1998 (
Class B)................................................ 7
Financial Highlights for the period July 28, 1997
through August 31, 1997 and for the fiscal year ended
August 31, 1998 (Classes A, C and D).................... 8
(2) Financial statements included in the Statement of
Additional Information (Part B):
Page In
SAI
---
Portfolio of Investments at August 31, 1998................ 41
Statement of Assets and Liabilities at August 31,1998...... 43
Statement of Operations for the year ended August 31, 1998. 44
Statement of Changes in Net Assets for the period April
28, 1997 (commencement of operations) through August
31, 1997 and for the fiscal year ended August 31, 1998..... 45
Notes to Financial Statements at August 31, 1998........... 46
Financial Highlights for the period April 28,
1997(commencement of operations) through August 31,
1997 and for the fiscal year ended August 31, 1998
(Class B).................................................. 52
Financial Highlights for the period July 28, 1997
through August 31, 1997 and for the fiscal year ended
August 31, 1998 (Classes A, C and D)....................... 53
(3) Financial statements included in Part C:
None
<PAGE>
b) Exhibits:
---------
1. Form of Amendment to the Declaration of Trust of the Registrant.
2. Amended and Restated By-Laws of the Registrant dated October 23, 1997.
5. Form of Amended Investment Management Agreement between the Registrant
and Morgan Stanley Dean Witter Advisors Inc.
6. Form of Amended Distribution Agreement between Registrant and Morgan
Stanley Dean Witter Distributors Inc.
8. Form of Amended and Restated Transfer Agency and Service Agreement
between the Registrant and Morgan Stanley Dean Witter Trust FSB
9. Form of Amended Services Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services Company Inc.
11. Consent of Independent Accountants.
16. Schedules for Computations of Performance Quotations.
18. Amended Multiple-Class Plan pursuant to Rule 18f-3.
27. Financial Data Schedules as of August 31, 1998.
- ----------------------------------------------------------------
All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference.
Item 25. Persons Controlled by or Under Common Control With Registrant.
--------------------------------------------------------------
None
Item 26. Number of Holders of Securities.
--------------------------------
(1) (2)
Number of Record Holders
Title of Class at September 30, 1998
-------------- ---------------------
Share of Beneficial Interest
Class A 39
Class B 13,915
Class C 195
Class D 9
2
<PAGE>
Item 27. 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 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.
3
<PAGE>
Item 28. 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 principal address of the Morgan Stanley Dean Witter Funds is
Two World Trade Center, New York, New York 10048.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
- -------------------------------
(1) Dean Witter Government Income Trust
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) InterCapital California Insured Municipal Income Trust
(6) InterCapital California Quality Municipal Securities
(7) InterCapital Income Securities Inc.
(8) InterCapital Insured California Municipal Securities
(9) InterCapital Insured Municipal Bond Trust
(10) InterCapital Insured Municipal Income Trust
(11) InterCapital Insured Municipal Securities
(12) InterCapital Insured Municipal Trust
(13) InterCapital New York Quality Municipal Securities
(14) InterCapital Quality Municipal Income Trust
(15) InterCapital Quality Municipal Investment Trust
(16) InterCapital Quality Municipal Securities
(17) Municipal Income Opportunities Trust
(18) Municipal Income Opportunities Trust II
(19) Municipal Income Opportunities Trust III
(20) Municipal Income Trust
(21) Municipal Income Trust II
(22) Municipal Income Trust III
(23) Municipal Premium Income Trust
(24) Morgan Stanley Dean Witter Prime Income Trust
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 American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation 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
4
<PAGE>
(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 Short-Term Income Fund Inc.
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Limited Term Municipal Trust
(35) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(36) Morgan Stanley Dean Witter Market Leader Trust
(37) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(38) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(39) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(40) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(41) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(42) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(43) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(44) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(45) Morgan Stanley Dean Witter S&P 500 Index Fund
(46) Morgan Stanley Dean Witter S&P 500 Select Fund
(47) Morgan Stanley Dean Witter Select Dimensions Investment Series
(48) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(49) Morgan Stanley Dean Witter Short-Term Bond Fund
(50) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(51) Morgan Stanley Dean Witter Special Value Fund
(52) Morgan Stanley Dean Witter Strategist Fund
(53) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(54) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(55) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(56) Morgan Stanley Dean Witter U.S. Government Securities Trust
(57) Morgan Stanley Dean Witter Utilities Fund
(58) Morgan Stanley Dean Witter Value-Added Market Series
(59) Morgan Stanley Dean Witter Value Fund
(60) Morgan Stanley Dean Witter Variable Investment Series
(61) Morgan Stanley Dean Witter World Wide Income Trust
5
<PAGE>
The term "TCW/DW Funds" refers to the following registered
investment companies:
Open-End Investment Companies
- -----------------------------
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
Closed-End Investment Companies
- -------------------------------
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------------
<S> <C>
Mitchell M. Merin Chairman and Director of Morgan Stanley Dean Witter
President, Chief Distributors Inc. ("MSDW Distributors") and Morgan
Executive Officer and Stanley Dean Witter Trust FSB ("MSDW Trust"); President,
Director Chief Executive Officer and Director of Morgan Stanley
Dean Witter Services Company Inc. ("MSDW Services");
Executive Vice President and Director of Dean Witter
Reynolds Inc. ("DWR"); Director of various other
Morgan Stanley Dean Witter & Co. ("MSDW") subsidiaries.
Thomas C. Schneider Executive Vice President and Chief Strategic and
Executive Vice Administrative Officer of MSDW; Executive Vice President
President and Chief and Chief Financial Officer of MSDW Services;
Financial Officer Director of DWR and MSDW.
Robert M. Scanlan President, Chief Operating Officer and Director of MSDW
President, Chief Services, Executive Vice President of MSDW Distributors;
Operating Officer Executive Vice President and Director of MSDW Trust; and
Director Vice President of the Morgan Stanley Dean Witter Funds
and the TCW/DW Funds.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds
Executive Vice President and Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison
Executive Vice President
and Chief Administrative
Officer
6
<PAGE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------------
<S> <C>
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 Secretary and
Counsel and Director Assistant General Counsel of MSDW Distributors; Vice
President, Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds and the TCW/DW Funds.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President 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 the TCW/DW Funds.
Rajesh Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
7
<PAGE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------------
<S> <C>
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jayne M. Stevlingson Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Ronald J. Worobel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Douglas Brown
First Vice President
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 Officer of the
Treasurer Morgan Stanley Dean Witter Funds and the TCW/DW Funds.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
8
<PAGE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------------
<S> <C>
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of the Morgan Stanley Dean Witter Funds and
the TCW/DW Funds.
Salvatore DeSteno Vice President of MSDW Services.
First Vice President
Michael Interrante First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of the Morgan Stanley
and Assistant Secretary Dean Witter Funds and the TCW/DW Funds.
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
9
<PAGE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------------
<S> <C>
Frank Bruttomesso Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley Dean
Assistant Secretary Witter Funds and the TCW/DW Funds.
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
David Dineen Vice President of Dean Witter Global Asset Allocation
Vice President Fund.
Bruce Dunn
Vice President
Michael Durbin
Vice President
Sheila Finnerty
Vice President
Jeffrey D. Geffen
Vice President
Michael Geringer
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Sandra Grossman
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
10
<PAGE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------------
<S> <C>
Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
Kevin Jung
Vice President
Carol Espejo Kane
Vice President
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Thomas Lawlor
Vice President
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Login
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
11
<PAGE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------------
<S> <C>
LouAnne D. McInnis Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley Dean
Assistant Secretary Witter Funds and the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Richard Norris
Vice President
George Paoletti
Vice President
Anne Pickrell Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Michael Roan
Vice President
John Roscoe
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Ruth Rossi Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley Dean
Assistant Secretary Witter Funds and the TCW/DW Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
12
<PAGE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------------
<S> <C>
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Robert Stearns
Vice President
Julie Morrone
Vice President
Naomi Stein
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Marybeth Swisher
Vice President
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
</TABLE>
Item 29. 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 American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation Fund
13
<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 Short-Term Income Fund Inc.
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Limited Term Municipal Trust
(35) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(36) Morgan Stanley Dean Witter Market Leader Trust
(37) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(38) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(39) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(40) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(41) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(42) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(43) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(44) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(45) Morgan Stanley Dean Witter Prime Income Trust
(46) Morgan Stanley Dean Witter S&P 500 Index Fund
(47) Morgan Stanley Dean Witter S&P 500 Select Fund
(48) Morgan Stanley Dean Witter Short-Term Bond Fund
(49) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(50) Morgan Stanley Dean Witter Special Value Fund
(51) Morgan Stanley Dean Witter Strategist Fund
(52) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(53) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(54) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(55) Morgan Stanley Dean Witter U.S. Government Securities Trust
(56) Morgan Stanley Dean Witter Utilities Fund
(57) Morgan Stanley Dean Witter Value-Added Market Series
(58) Morgan Stanley Dean Witter Value Fund
(59) Morgan Stanley Dean Witter Variable Investment Series
(60) Morgan Stanley Dean Witter World Wide Income Trust
(1) TCW/DW Emerging Markets Opportunities Trust
14
<PAGE>
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
(b) The following information is given regarding directors and officers of
MSDW Distributors not listed in Item 28 above. The principal address of
MSDW Distributors is Two World Trade Center, New York, New York 10048.
None of the following persons has any position or office with the
Registrant.
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
Richard M. DeMartini Director
Christine Edwards Executive Vice President, Secretary,
Director and Chief Legal Officer.
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 Vidala Senior Vice President and Financial
Principal
Item 30. 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 31. Management Services
Registrant is not a party to any such management-related service
contract.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and 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 28th day of October, 1998
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
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. 3 has been signed below by the following persons
in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 10/28/98
------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 10/28/98
------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 10/28/98
------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien
By /s/ David M. Butowsky 10/28/98
------------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
----------------------------------------------
EXHIBIT INDEX
-------------
1. Form of Amendment to the Declaration of Trust of the Registrant.
2. Amended and Restated By-Laws of the Registrant dated October 23, 1997.
5. Form of Amended Investment Management Agreement between the Registrant
and Morgan Stanley Dean Witter Advisors Inc.
6. Form of Amended Distribution Agreement between Registrant and Morgan
Stanley Dean Witter Distributors Inc.
8. Form of Amended and Restated Transfer Agency and Service Agreement
between the Registrant and Morgan Stanley Dean Witter Trust FSB
9. Form of Amended Services Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services Company Inc.
11. Consent of Independent Accountants.
16. Schedules for Computations of Performance Quotations.
18. Amended Multiple-Class Plan pursuant to Rule 18f-3.
27. Financial Data Schedules as of August 31, 1998.
<PAGE>
CERTIFICATE
The undersigned hereby certifies that he is the Secretary of Dean
Witter Market Leader Trust (the "Trust"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, that annexed
hereto is an Amendment to the Declaration of Trust of the Trust adopted by the
Trustees of the Trust on April 30, 1998 as provided in Section 9.3 of the said
Declaration, said Amendment to take effect on June 22, 1998, and I do hereby
further certify that such amendment has not been amended and is on the date
hereof in full force and effect.
Dated this 22nd day of June, 1998.
/s/ Barry Fink
--------------------------------
Barry Fink
Secretary
<PAGE>
AMENDMENT
Dated: June 22, 1998
To be Effective: June 22, 1998
TO
DEAN WITTER MARKET LEADER TRUST
DECLARATION OF TRUST
DATED
NOVEMBER 4, 1996
<PAGE>
Amendment dated June 22, 1998 to the Declaration of Trust
(the "Declaration") of Dean Witter Market Leader Trust (the "Trust")
dated November 4, 1996
WHEREAS, the Trust was established by the Declaration on the date
hereinabove set forth under the laws of the Commonwealth of Massachusetts; and
WHEREAS, the Trustees of the Trust have deemed it advisable to
change the name of the Trust to "Morgan Stanley Dean Witter Market Leader
Trust," such change to be effective on June 22,1998;
NOW, THEREFORE:
1. Section 1.1 of Article I of the Declaration is hereby amended so that
that Section shall read in its entirety as follows:
"Section 1.1. Name. The name of the Trust created hereby is the
Morgan Stanley Dean Witter Market Leader Trust and so far as may be
practicable the Trustees shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which name
(and the word "Trust" whenever herein used) shall refer to the
Trustees as Trustees, and not as individuals, or personally, and
shall not refer to the officers, agents, employees or Shareholders
of the Trust. Should the Trustees determine that the use of such
name is not advisable, they may use such other name for the Trust as
they deem proper and the Trust may hold its property and conduct its
activities under such other name."
2. Subsection(o) of Section 1.2 of Article I of the Declaration is
hereby amended so that that subsection shall read in its entirety as
follows:
"Section 1.2. Definitions...
"(o) "Trust" means the Morgan Stanley Dean Witter Market Leader
Trust."
3. Section 11.7 of Article XI of the Declaration is hereby amended so
that that section shall read as follows:
"Section 11.7. Use of the name "Morgan Stanley Dean Witter." Morgan
Stanley Dean Witter & Co. ("MSDW") has consented to the use by the
Trust of the identifying name "Morgan Stanley Dean Witter," which is
a property right of MSDW. The Trust will only use the name "Morgan
Stanley Dean Witter" as a component of its name and for no other
purpose, and will not purport to grant to any third party the right
to use the name "Morgan Stanley Dean Witter" for any purpose. MSDW,
or any corporate affiliate of MSDW, may use or grant to others the
right to use
<PAGE>
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. At the request of MSDW or any
corporate affiliate of MSDW, the Trust 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. Upon the termination of any investment advisory
agreement into which a corporate affiliate of MSDW and the Trust may
enter, the Trust 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 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."
4. The Trustees of the Trust hereby reaffirm the Declaration, as
amended, in all respects.
5. This Amendment may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
<PAGE>
IN WITNESS WHEREOF, the undersigned, the Trustees of the Trust, have executed
this instrument this 22nd day of June, 1998.
/s/ Michael Bozic /s/ Manuel H. Johnson
- ------------------------ ---------------------
Michael Bozic, as Trustee Manuel H. Johnson, as Trustee
and not individually and not individually
c/o Levitz Furniture Corp. c/o Johnson Smick International Inc.
6111 Broken Sound Parkway, NW 1133 Connecticut Avenue, NW
Boca Raton, FL 33487 Washington, D.C. 20036
/s/ Charles A. Fiumefreddo /s/ Michael E. Nugent
- ------------------------ ---------------------
Charles A. Fiumefreddo, as Trustee Michael E. Nugent, as Trustee
and not individually and not individually
Two World Trade Center c/o Triumph Capital, L.P.
New York, NY 10048 237 Park Avenue
New York, NY 10017
/s/ Edwin J. Garn /s/ Philip J. Purcell
- ------------------------ ---------------------
Edwin J. Garn, as Trustee Philip J. Purcell, as Trustee
and not individually and not individually
c/o Huntsman Corporation 1585 Broadway
500 Huntsman Way New York, NY 10036
Salt Lake City, UT 84111
/s/ John R. Haire /s/ John L. Schroeder
- ------------------------ ---------------------
John R. Haire, as Trustee John L. Schroeder, as Trustee
and not individually and not individually
Two World Trade Center c/o Gordon Altman Butowsky Weitzen
New York, NY 10048 Shalov & Wein
Counsel to the Independent Trustees
114 West 47th Street
New York, NY 10036
/s/ Wayne E. Hedien
- ------------------------
Wayne E. Hedien, as Trustee
and not individually
c/o Gordon Altman Butowsky Weitzen
Shalov & Wein
Counsel to the Independent Trustees
114 West 47th Street
New York, NY 10036
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On this 22nd day of June, 1998, MICHAEL BOZIC, CHARLES A. FIUMEFREDDO, EDWIN J.
GARN, JOHN R. HAIRE, WAYNE E. HEDIEN, MANUEL H. JOHNSON, MICHAEL E. NUGENT,
PHILIP J. PURCELL and JOHN L. SCHROEDER, known to me to be the individuals
described in and who executed the foregoing instrument, personally appeared
before me and they severally acknowledged the foregoing instrument to be their
free act and deed.
/s/ Marilyn K. Cranney
----------------------
Notary Public
MARILYN K. CRANNEY
NOTARY PUBLIC, State of New York
No. 24-4795538
Qualified in Kings County
Commission Expires May 31, 1999
<PAGE>
BY-LAWS
OF
DEAN WITTER MARKET LEADER TRUST
Amended and Restated as of October 23, 1997
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 Dean Witter Market Leader
Trust dated November 4, 1996.
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, executed in writing by the Shareholder or his duly
authorized attorney-in-fact, 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 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. 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. 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.
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 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 Corporations Law of the
State 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.
2
<PAGE>
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.
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.
3
<PAGE>
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.
(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
4
<PAGE>
(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 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
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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, 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
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 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. Power 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 he has
knowledge thereof.
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SECTION 6.6. The Chairman. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders and
of the Trustees; he 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 powers
and duties at such times and in such manner as he may deem advisable; he shall
be a signatory on all Annual and Semi-Annual Reports as may be sent to
Shareholders, and he shall perform such other duties as the Trustees may from
time to time prescribe.
(b) In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the Shareholders and the Board of Trustees.
SECTION 6.7. The President. The President shall perform such duties as the
Board of Trustees and the Chairman may from time to time prescribe.
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 be more than one, the Vice
Presidents in the order of their seniority 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
he or they 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 be more than one, the Assistant Vice Presidents, 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 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 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 signature or by
the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined 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 shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and he
shall render to the Trustees and the Chairman, whenever any of them require it,
an account of his transactions as Treasurer and of the financial condition of
the Trust; and he 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 the order determined
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.
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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 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:
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(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.
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.
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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.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Market Leader Trust
Fund, dated November 4, 1996, a copy of which is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Market Leader Trust 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 Dean Witter Market Leader Trust
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 Dean Witter Market Leader Trust, but the
Trust Estate only shall be liable.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997, and amended as of April 30,
1998, by and between Dean Witter Market Leader Trust, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter called the "Fund"), and Dean Witter InterCapital 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.
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
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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 annual rate
of 0.75% to the Fund's daily net assets. 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 as promptly as possible for
the preceding month. 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.
7. 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.
8. 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.
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9. This Agreement shall remain in effect until April 30, 1998 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.
10. 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.
11. 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.
12. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right of
Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will only
use the name "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
"Dean Witter" for any purpose, (iii) the Investment Manager or its parent,
Morgan Stanley Dean Witter & Co., or any corporate affiliate of the Investment
Manager's parent, may use or grant to others the right to use the name "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 the
Investment Manager or its parent, the Fund will take such action as may be
required to provide its consent to the use of the name "Dean Witter," or any
combination or abbreviation thereof, by the Investment Manager or its parent or
any corporate affiliate of the Investment Manager's parent, or by any person to
whom the Investment Manager or its parent or any corporate affiliate of the
Investment Manager's parent shall have granted the right to such use, and (v)
upon the termination of any investment advisory agreement into which the
Investment Manager and the Fund may enter, or upon termination of affiliation
of the Investment Manager with its parent, the Fund shall, upon request by the
Investment Manager or its parent, cease to use the name "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 the Investment Manager or its parent may request to
effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.
13. The Declaration of Trust establishing Dean Witter Market Leader Trust,
dated November 4, 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 Dean Witter Market Leader
Trust 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 Dean Witter Market Leader Trust 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 Dean Witter Market Leader Trust, but the Trust Estate only
shall be liable.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on April 30, 1998 in New York, New York.
DEAN WITTER MARKET LEADER TRUST
By: /s/ Barry Fink
---------------------------
Attest:
/s/ Frank Bruttomesso
- ---------------------------------
DEAN WITTER INTERCAPITAL INC.
By: /s/ Charles A. Fiumefreddo
---------------------------
Attest:
/s/ Marilyn K. Cranney
- ---------------------------------
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MORGAN STANLEY DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 28th day of July, 1997, and amended as of June 22,
1998, between each of the open-end investment companies to which Morgan Stanley
Dean Witter Advisors Inc. acts as investment manager, that are listed on
Schedule A, as may be amended from time to time (each, a "Fund" and
collectively, the "Funds"), and Morgan Stanley Dean Witter Distributors Inc., a
Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and it is in the
interest of each Fund to offer its shares for sale continuously, and
WHEREAS, each Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each Fund's transferable
shares, of $0.01 par value (the "Shares"), to commence on the date listed
above, in order to promote the growth of each Fund and facilitate the
distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Distributor.
(a) Each Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell Shares to the public on the terms set forth
in this Agreement and that Fund's prospectus and the Distributor hereby accepts
such appointment and agrees to act hereunder. Each Fund, during the term of
this Agreement, shall sell Shares to the Distributor upon the terms and
conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from each Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate
of the Distributor, upon the terms described herein and in that Fund's
prospectus (the "Prospectus") and statement of additional information included
in the Fund's registration statement (the "Registration Statement") most
recently filed from time to time with the Securities and Exchange Commission
(the "SEC") and effective under the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act or as the Prospectus may be otherwise amended or
supplemented and filed with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2 Exclusive Nature of Duties. The Distributor shall be the exclusive
principal underwriter and distributor of each Fund, except that the exclusive
rights granted to the Distributor to sell the Shares shall not apply to Shares
issued by each Fund: (i) in connection with the merger or consolidation of any
other investment company or personal holding company with the Fund or the
acquisition by purchase or otherwise of all (or substantially all) the assets
or the outstanding shares of any such company by the Fund; (ii) pursuant to
reinvestment of dividends or capital gains distributions; or (iii) pursuant to
the reinstatement privilege afforded redeeming shareholders.
SECTION 3. Purchase of Shares from each Fund. The Shares are offered in four
classes (each, a "Class"), as described in the Prospectus, as amended or
supplemented from time to time.
(a) The Distributor shall have the right to buy from each Fund the Shares of
the particular class needed, but not more than the Shares needed (except for
clerical errors in transmission), to fill unconditional orders for Shares of
the applicable class placed with the Distributor by investors or securities
dealers. The price which the Distributor shall pay for the Shares so purchased
from the Fund shall be the net asset value, determined as set forth in the
Prospectus, used in determining the public offering price on which such orders
were based.
(b) The Shares are to be resold by the Distributor at the public offering
price of Shares of the applicable class as set forth in the Prospectus, to
investors or to securities dealers, including DWR, who have entered into
selected dealer agreements with the Distributor upon the terms and conditions
set forth in Section 7 hereof ("Selected Dealers").
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(c) Each Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(f) hereof. Each Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of a Fund, makes it impracticable to sell its Shares.
(d) Each Fund, or any agent of a Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by a Fund; provided, however, that a
Fund will not arbitrarily or without reasonable cause refuse to accept orders
for the purchase of Shares. The Distributor will confirm orders upon their
receipt, and each Fund (or its agent) upon receipt of payment therefor and
instructions will deliver share certificates for such Shares or a statement
confirming the issuance of Shares. Payment shall be made to the Fund in New
York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct each Fund's transfer agent to receive instructions
directly from the Selected Dealer on behalf of the Distributor as to
registration of Shares in the names of investors and to confirm issuance of the
Shares to such investors. The Distributor is also authorized to instruct the
transfer agent to receive payment directly from the Selected Dealer on behalf
of the Distributor, for prompt transmittal to each Fund's custodian, of the
purchase price of the Shares. In such event the Distributor shall obtain from
the Selected Dealer and maintain a record of such registration instructions and
payments.
SECTION 4. Repurchase or Redemption of Shares.
(a) Any of the outstanding Shares of a Fund may be tendered for redemption
at any time, and each Fund agrees to redeem its Shares so tendered in
accordance with the applicable provisions set forth in its Prospectus. The
price to be paid to redeem the Shares shall be equal to the net asset value
determined as set forth in the Prospectus less any applicable contingent
deferred sales charge ("CDSC"). Upon any redemption of Shares the Fund shall
pay the total amount of the redemption price in New York Clearing House funds
in accordance with applicable provisions of the Prospectus.
(b) The redemption by a Fund of any of its Class A Shares purchased by or
through the Distributor will not affect the applicable front-end sales charge
secured by the Distributor or any Selected Dealer in the course of the original
sale, except that if any Class A Shares are tendered for redemption within
seven business days after the date of the confirmation of the original
purchase, the right to the applicable front-end sales charge shall be forfeited
by the Distributor and the Selected Dealer which sold such Shares.
(c) The proceeds of any redemption of Class A, Class B or Class C Shares
shall be paid by each Fund as follows: (i) any applicable CDSC shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of the Association of the National Association of Securities Dealers,
Inc. ("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions
of its Prospectus in New York Clearing House funds. The Distributor is
authorized to direct a Fund to pay directly to the Selected Dealer any CDSC
payable by a Fund to the Distributor in respect of Class A, Class B, or Class C
Shares sold by the Selected Dealer to the redeeming shareholders.
(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer
agent of the Fund for redemption all Shares so delivered. The Distributor shall
be responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the shareholders,
or at the discretion of the Distributor. The Distributor shall promptly
transmit to the
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transfer agent of the Fund, for redemption, all such orders for repurchase of
Shares. Payment for Shares repurchased may be made by a Fund to the Distributor
for the account of the shareholder. The Distributor shall be responsible for
the accuracy of instructions transmitted to the Fund's transfer agent in
connection with all such repurchases.
(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.
(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and
to instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.
SECTION 5. Duties of the Fund.
(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including
one certified copy, upon request by the Distributor, of all financial
statements prepared by the Fund and examined by independent accountants. Each
Fund shall, at the expense of the Distributor, make available to the
Distributor such number of copies of its Prospectus as the Distributor shall
reasonably request.
(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.
(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.
SECTION 6. Duties of the Distributor.
(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Financial Advisors, and
shall devote reasonable time and effort to promote sales of the Shares, but
shall not be obligated to sell any specific number of Shares. The services of
the Distributor hereunder are not exclusive and it is understood that the
Distributor may act as principal underwriter for other registered investment
companies, so long as the performance of its obligations hereunder is not
impaired thereby. It is also understood that Selected Dealers, including DWR,
may also sell shares for other registered investment companies.
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.
(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.
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SECTION 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealer
agreements with Selected Dealers for the sale of Shares. In making agreements
with Selected Dealers, the Distributor shall act only as principal and not as
agent for a Fund. Shares sold to Selected Dealers shall be for resale by such
dealers only at the public offering price set forth in the Prospectus. With
respect to Class A Shares, in such agreement the Distributor shall have the
right to fix the portion of the applicable front-end sales charge which may be
allocated to the Selected Dealers.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by each
Fund, for the confirmation of sales of its Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. Payment of Expenses.
(a) Each Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors/Trustees
of each Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(b) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement including the payment to
Selected Dealers of any sales commissions, service fees and other expenses for
sales of a Fund's Shares (except such expenses as are specifically undertaken
herein by a Fund) incurred or paid by Selected Dealers, including DWR. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor or
furnished by it for use by Selected Dealers in connection with the offering of
the Shares for sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor. It is understood
and agreed that, so long as a Fund's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act ("Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid in accordance with the terms
of such Rule 12b-1 Plan.
(c) Each Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying each Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. Indemnification.
(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damage or expense and reasonable
counsel fees incurred in connection therewith) arising by reason of any person
acquiring any Shares, which may be based upon the 1933 Act, or on any other
statute or at common law, on the ground that the Registration Statement or
related Prospectus and Statement of Additional Information, as from time to
time amended and supplemented, or the annual or interim reports to shareholders
of a Fund, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made
in reliance upon, and in conformity with, information furnished to the Fund in
connection therewith by or on behalf of the Distributor; provided, however,
that in no case (i) is the indemnity of a Fund in
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favor of the Distributor and any such controlling persons to be deemed to
protect the Distributor or any such controlling persons thereof against any
liability to a Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is a Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Fund 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 the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. Each Fund will be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense, of any
such suit brought to enforce any such liability, but if a Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor 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
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor 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 Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors/Trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless each Fund and each
of its Directors/ Trustees and officers and each person, if any, who controls
the Fund against any loss, liability, claim, damage, or expense described in
the indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to a Fund in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus and Statement of Additional Information, as from time to time
amended, or the annual or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which
arise as a result of actions taken pursuant to instructions from, or on behalf
of, the Distributor to: (1) redeem all or a part of shareholder accounts in the
Fund pursuant to Section 4(g) hereof and pay the proceeds to, or as directed
by, the Distributor for the account of each shareholder whose Shares are so
redeemed; and (2) register Shares in the names of investors, confirm the
issuance thereof and receive payment therefor pursuant to Section 3(e) hereof.
(iii) In case any action shall be brought against a Fund or any person
so indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights
and duties given to the Distributor, by the provisions of subsection (a) of
this Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party 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 a Fund on the one hand and the Distributor 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 each
indemnifying party 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 the relative fault of a Fund on the one hand and the
Distributor on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses (or actions
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in respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by a Fund on the one hand and the Distributor on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Fund
bear to the total compensation received by the Distributor, in each case as set
forth in the Prospectus. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by a Fund or the Distributor and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. Each Fund and the Distributor 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 an indemnified party 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 such
indemnified party in connection with investigating or defending any such claim.
Notwithstanding the provisions of this subsection (c), the Distributor shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Shares distributed by it to the public were offered to
the public exceeds the amount of any damages which it has 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 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 10. Duration and Termination of this Agreement. This Agreement shall
remain in force until April 30, 1999, and thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Board of
Directors/Trustees of each Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, cast in person or by proxy, and (ii)
a majority of those Directors/Trustees who are not parties to this Agreement or
interested persons of any such party and who have no direct or indirect
financial interest in this Agreement or in the operation of the Fund's Rule
12b-1 Plan or in any agreement related thereto, cast in person at a meeting
called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of
a majority of the outstanding voting securities of a Fund, or by the
Distributor, on sixty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding
voting securities of a Fund, and (ii) a majority of those Directors/Trustees of
a Fund who are not parties to this Agreement or interested persons of any such
party and who have no direct or indirect financial interest in this Agreement
or in any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a
meeting called for the purpose of voting on such approval.
SECTION 12. Additional Funds. If at any time another Fund desires to appoint
the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
SECTION 13. Governing Law. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
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 1940 Act,
the latter shall control.
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SECTION 14. Personal Liability. With respect to any Fund that is organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts, its Declaration of the Trust (each, a "Declaration") is on file
in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the 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 any 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 any Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.
ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO
By: ....................................
MORGAN STANLEY DEAN WITTER DISTRIBUTORS
INC.
By: ....................................
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<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT JULY 22, 1998
1) Morgan Stanley Dean Witter American Value Fund
2) Morgan Stanley Dean Witter Balanced Growth Fund
3) Morgan Stanley Dean Witter Balanced Income Fund
4) Morgan Stanley Dean Witter California Tax-Free Income Fund
5) Morgan Stanley Dean Witter Capital Appreciation Fund
6) Morgan Stanley Dean Witter Capital Growth Securities
7) Morgan Stanley Dean Witter Competitive Edge Fund
8) Morgan Stanley Dean Witter Convertible Securities Trust
9) Morgan Stanley Dean Witter Developing Growth Securities Trust
10) Morgan Stanley Dean Witter Diversified Income Trust
11) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
12) Morgan Stanley Dean Witter Equity Fund
13) Morgan Stanley Dean Witter European Growth Fund Inc.
14) Morgan Stanley Dean Witter Federal Securities Trust
15) Morgan Stanley Dean Witter Financial Services Trust
16) Morgan Stanley Dean Witter Fund of Funds
17) Dean Witter Global Asset Allocation Fund
18) Morgan Stanley Dean Witter Global Dividend Growth Securities
19) Morgan Stanley Dean Witter Global Utilities Fund
20) Morgan Stanley Dean Witter Growth Fund
21) Morgan Stanley Dean Witter Health Sciences Trust
22) Morgan Stanley Dean Witter High Yield Securities Inc.
23) Morgan Stanley Dean Witter Income Builder Fund
24) Morgan Stanley Dean Witter Information Fund
25) Morgan Stanley Dean Witter Intermediate Income Securities
26) Morgan Stanley Dean Witter International SmallCap Fund
27) Morgan Stanley Dean Witter Japan Fund
28) Morgan Stanley Dean Witter Market Leader Trust
29) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
30) Morgan Stanley Dean Witter Mid-Cap Growth Fund
31) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
32) Morgan Stanley Dean Witter New York Tax-Free Income Fund
33) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
34) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
35) Morgan Stanley Dean Witter Research Fund
36) Morgan Stanley Dean Witter Special Value Fund
37) Morgan Stanley Dean Witter S&P 500 Index Fund
38) Morgan Stanley Dean Witter S&P 500 Select Fund
39) Morgan Stanley Dean Witter Strategist Fund
40) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
41) Morgan Stanley Dean Witter U.S. Government Securities Trust
42) Morgan Stanley Dean Witter Utilities Fund
43) Morgan Stanley Dean Witter Value-Added Market Series
44) Morgan Stanley Dean Witter Value Fund
45) Morgan Stanley Dean Witter Worldwide High Income Fund
46) Morgan Stanley Dean Witter World Wide Income Trust
8
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AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
MORGAN STANLEY DEAN WITTER TRUST FSB
[open-end funds]
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 Terms of Appointment....................................... 1
Article 2 Fees and Expenses.......................................... 5
Article 3 Representations and Warranties of MSDW TRUST............... 6
Article 4 Representations and Warranties of the Fund................. 7
Article 5 Duty of Care and Indemnification........................... 7
Article 6 Documents and Covenants of the Fund and MSDW TRUST......... 10
Article 7 Duration and Termination of Agreement...................... 13
Article 8 Assignment................................................. 14
Article 9 Affiliations............................................... 14
Article 10 Amendment.................................................. 15
Article 11 Applicable Law............................................. 15
Article 12 Miscellaneous.............................................. 15
Article 13 Merger of Agreement........................................ 17
Article 14 Personal Liability......................................... 17
-i-
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
----------------------------------------------------------
AMENDED AND RESTATED AGREEMENT made as of the 22nd day of June,
1998 by and between each of the Funds listed on the signature pages hereof,
each of such Funds acting severally on its own behalf and not jointly with any
of such other Funds (each such Fund hereinafter referred to as the "Fund"),
each such Fund having its principal office and place of business at Two World
Trade Center, New York, New York, 10048, and MORGAN STANLEY DEAN WITTER TRUST
FSB ("MSDW TRUST"), a federally chartered savings bank, having its principal
office and place of business at Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311.
WHEREAS, the Fund desires to appoint MSDW TRUST as its transfer
agent, dividend disbursing agent and shareholder servicing agent and MSDW TRUST
desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of MSDW TRUST
------------------------------------------
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints MSDW TRUST to act as, and MSDW
TRUST agrees to act as, the transfer agent for each series and class of shares
of the Fund, whether now or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent in
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connection with any accumulation, open-account or similar plans provided to the
holders of such Shares ("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund,
including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 MSDW TRUST agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and MSDW TRUST, MSDW TRUST shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book form in the
appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the redeeming
Shareholders;
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(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding. MSDW
TRUST shall also provide to the Fund on a regular basis the total number of
Shares that are authorized, issued and outstanding and shall notify the Fund in
case any proposed issue of Shares by the Fund would result in an overissue. In
case any issue of Shares would result in an overissue, MSDW TRUST shall refuse
to issue such Shares and shall not countersign and issue any certificates
requested for such Shares. When recording the issuance of Shares, MSDW TRUST
shall have no obligation to take cognizance of any Blue Sky laws relating to
the issue of sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), MSDW TRUST shall:
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(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing agent in
connection with dividend reinvestment, accumulation, open-account or similar
plans (including without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to, maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with respect to
dividends and distributions by federal tax authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity statements
for Shareholders and providing Shareholder account information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the
total number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to MSDW TRUST in writing those transactions and
assets to be treated as exempt from Blue Sky reporting for each State; and
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(ii) verify the inclusion on the system prior to activation of
each State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of MSDW
TRUST for the Fund's status under the securities laws of any State or other
jurisdiction is limited to the inclusion on the system of each State as to
which the Fund has informed MSDW TRUST that shares may be sold in compliance
with state securities laws and the reporting of purchases and sales in each
such State to the Fund as provided above and as agreed from time to time by the
Fund and MSDW TRUST.
(d) MSDW TRUST shall provide such additional services and
functions not specifically described herein as may be mutually agreed between
MSDW TRUST and the Fund. Procedures applicable to such services may be
established from time to time by agreement between the Fund and MSDW TRUST.
Article 2 Fees and Expenses
-----------------
2.1 For performance by MSDW TRUST pursuant to this Agreement, each
Fund agrees to pay MSDW TRUST an annual maintenance fee for each Shareholder
account and certain transactional fees, if applicable, as set out in the
respective fee schedule attached hereto as Schedule A. Such fees and
out-of-pocket expenses and advances identified under Section 2.2 below may be
changed from time to time subject to mutual written agreement between the Fund
and MSDW TRUST.
2.2 In addition to the fees paid under Section 2.1 above, the Fund
agrees to reimburse MSDW TRUST for out of pocket expenses in connection with
the services rendered
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by MSDW TRUST hereunder. In addition, any other expenses incurred by MSDW TRUST
at the request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time following the mailing of the respective
billing notice. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced to MSDW TRUST by
the Fund upon request prior to the mailing date of such materials.
Article 3 Representations and Warranties of MSDW TRUST
--------------------------------------------
MSDW TRUST represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal
office is in New Jersey.
3.2 It is and will remain registered with the U.S. Securities and
Exchange Commission ("SEC") as a Transfer Agent pursuant to the requirements of
Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
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Article 4 Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to MSDW TRUST that:
4.1 It is a corporation duly organized and existing and in good
standing under the laws of Delaware or Maryland or a trust duly organized and
existing and in good standing under the laws of Massachusetts, as the case may
be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter
into and perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the
"1933 Act") is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
Article 5 Duty of Care and Indemnification
--------------------------------
5.1 MSDW TRUST shall not be responsible for, and the Fund shall
indemnify and hold MSDW TRUST harmless from and against, any and all losses,
damages, costs,
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charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of MSDW TRUST or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by MSDW TRUST or its agents or
subcontractors of information, records and documents which (i) are received by
MSDW TRUST or its agents or subcontractors and furnished to it by or on behalf
of the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by MSDW TRUST or its
agents or subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that notice of offering of such Shares
in such State or other jurisdiction or in violation of any stop order or other
determination or ruling by any federal agency or any State or other
jurisdiction with respect to the offer or sale of such Shares in such State or
other jurisdiction.
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5.2 MSDW TRUST shall indemnify and hold the Fund harmless from or
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by MSDW TRUST as a result of the lack of good faith,
negligence or willful misconduct of MSDW TRUST, its officers, employees or
agents.
5.3 At any time, MSDW TRUST may apply to any officer of the Fund
for instructions, and may consult with legal counsel to the Fund, with respect
to any matter arising in connection with the services to be performed by MSDW
TRUST under this Agreement, and MSDW TRUST and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund for any action taken
or omitted by it in reliance upon such instructions or upon the opinion of such
counsel. MSDW TRUST, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records
or documents provided to MSDW TRUST or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by the
Fund, and shall not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund. MSDW TRUST, its
agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the proper
manual or facsimile signature of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
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5.4 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to
the other for any damages resulting from such failure to perform or otherwise
from such causes.
5.5 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for
any act or failure to act hereunder.
5.6 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in
any case in which the other party may be required to indemnify it except with
the other party's prior written consent.
Article 6 Documents and Covenants of the Fund and MSDW TRUST
--------------------------------------------------
6.1 The Fund shall promptly furnish to MSDW TRUST the following,
unless previously furnished to Dean Witter Trust Company, the prior transfer
agent of the Fund:
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(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of MSDW TRUST and the execution and
delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws
of the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the
form approved by the Board of Directors, with a certificate of the Secretary of
the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of MSDW TRUST and the execution and
delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of
the Fund and all amendments thereto;
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(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the
form approved by the Board of Trustees, with a certificate of the Secretary of
the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the 1933
Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered or
to be offered by the Fund; and
(e) Such other certificates, documents or opinions as MSDW TRUST
deems to be appropriate or necessary for the proper performance of its duties.
6.2 MSDW TRUST hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
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6.3 MSDW TRUST shall prepare and keep records relating to the
services to be performed hereunder, in the form and manner as it may deem
advisable and as required by applicable laws and regulations. To the extent
required by Section 31 of the 1940 Act, and the rules and regulations
thereunder, MSDW TRUST agrees that all such records prepared or maintained by
MSDW TRUST relating to the services performed by MSDW TRUST hereunder are the
property of the Fund and will be preserved, maintained and made available in
accordance with such Section 31 of the 1940 Act, and the rules and regulations
thereunder, and will be surrendered promptly to the Fund on and in accordance
with its request.
6.4 MSDW TRUST and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the prior consent of
MSDW TRUST and the Fund.
6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, MSDW TRUST will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. MSDW TRUST reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 7 Duration and Termination of Agreement
-------------------------------------
7.1 This Agreement shall remain in full force and effect until
August 1,
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2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days
written notice, and by MSDW TRUST on 90 days written notice, to the other party
without payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and other
materials will be borne by the Fund. Additionally, MSDW TRUST reserves the
right to charge for any other reasonable fees and expenses associated with such
termination.
Article 8 Assignment
----------
8.1 Except as provided in Section 8.3 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
8.3 MSDW TRUST may, in its sole discretion and without further
consent by the Fund, subcontract, in whole or in part, for the performance of
its obligations and duties hereunder with any person or entity including but
not limited to companies which are affiliated with MSDW TRUST; provided,
however, that such person or entity has and maintains the qualifications, if
any, required to perform such obligations and duties, and that MSDW TRUST
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shall be as fully responsible to the Fund for the acts and omissions of any
agent or subcontractor as it is for its own acts or omissions under this
Agreement.
Article 9 Affiliations
------------
9.1 MSDW TRUST may now or hereafter, without the consent of or
notice to the Fund, function as transfer agent and/or shareholder servicing
agent for any other investment company registered with the SEC under the 1940
Act and for any other issuer, including without limitation any investment
company whose adviser, administrator, sponsor or principal underwriter is or
may become affiliated with Morgan Stanley Dean Witter & Co. or any of its
direct or indirect subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as
the case may be), officers, employees, agents and shareholders of the Fund, and
the directors, officers, employees, agents and shareholders of the Fund's
investment adviser and/or distributor, are or may be interested in MSDW TRUST
as directors, officers, employees, agents and shareholders or otherwise, and
that the directors, officers, employees, agents and shareholders of MSDW TRUST
may be interested in the Fund as Directors or Trustees (as the case may be),
officers, employees, agents and shareholders or otherwise, or in the investment
adviser and/or distributor as directors, officers, employees, agents,
shareholders or otherwise.
Article 10 Amendment
---------
10.1 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Directors or the Board of Trustees (as the case may be) of the
Fund.
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Article 11 Applicable Law
--------------
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
Article 12 Miscellaneous
-------------
12.1 In the event that one or more additional investment companies
managed or administered by Morgan Stanley Dean Witter Advisors Inc. or any of
its affiliates ("Additional Funds") desires to retain MSDW TRUST to act as
transfer agent, dividend disbursing agent and/or shareholder servicing agent,
and MSDW TRUST desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between MSDW TRUST and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to MSDW TRUST an affidavit of loss or non-receipt by
the holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to MSDW TRUST and the
Fund issued by a surety company satisfactory to MSDW TRUST, except that MSDW
TRUST may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as MSDW
TRUST deems appropriate indemnifying MSDW TRUST and the Fund for the issuance
of a replacement certificate, in cases where the alleged loss is in the amount
of $1,000 or less.
12.3 In the event that any check or other order for payment of
money on the
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account of any Shareholder or new investor is returned unpaid for any reason,
MSDW TRUST will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as MSDW TRUST may, in its sole
discretion, deem appropriate or as the Fund and, if applicable, the Distributor
may instruct MSDW TRUST.
12.4 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or to MSDW TRUST shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To MSDW TRUST:
-----------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 Merger of Agreement
-------------------
13.1 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
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Article 14 Personal Liability
------------------
14.1 In the case of a Fund organized as a Massachusetts business
trust, a copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
MORGAN STANLEY DEAN WITTER FUNDS
--------------------------------
MONEY MARKET FUNDS
------------------
1. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Morgan Stanley Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
8. Morgan Stanley Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
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EQUITY FUNDS
------------
10. Morgan Stanley Dean Witter American Value Fund
11. Morgan Stanley Dean Witter Mid-Cap Growth Fund
12. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13. Morgan Stanley Dean Witter Capital Growth Securities
14. Morgan Stanley Dean Witter Global Dividend Growth Securities
15. Morgan Stanley Dean Witter Income Builder Fund
16. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
17. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
18. Morgan Stanley Dean Witter Developing Growth Securities Trust
19. Morgan Stanley Dean Witter Health Sciences Trust
20. Morgan Stanley Dean Witter Capital Appreciation Fund
21. Morgan Stanley Dean Witter Information Fund
22. Morgan Stanley Dean Witter Value-Added Market Series
23. Morgan Stanley Dean Witter European Growth Fund Inc.
24. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
25. Morgan Stanley Dean Witter International SmallCap Fund
26. Morgan Stanley Dean Witter Japan Fund
27. Morgan Stanley Dean Witter Utilities Fund
28. Morgan Stanley Dean Witter Global Utilities Fund
29. Morgan Stanley Dean Witter Special Value Fund
30. Morgan Stanley Dean Witter Financial Services Trust
31. Morgan Stanley Dean Witter Market Leader Trust
32. Morgan Stanley Dean Witter Fund of Funds
33. Morgan Stanley Dean Witter S&P 500 Index Fund
34. Morgan Stanley Dean Witter Competitive Edge Fund
35. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
36. Morgan Stanley Dean Witter Equity Fund
37. Morgan Stanley Dean Witter Growth Fund
BALANCED FUNDS
--------------
38. Morgan Stanley Dean Witter Balanced Growth Fund
39. Morgan Stanley Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
----------------------
40. Morgan Stanley Dean Witter Strategist Fund
41. Dean Witter Global Asset Allocation Fund
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FIXED INCOME FUNDS
------------------
42. Morgan Stanley Dean Witter High Yield Securities Inc.
43. Morgan Stanley Dean Witter High Income Securities
44. Morgan Stanley Dean Witter Convertible Securities Trust
45. Morgan Stanley Dean Witter Intermediate Income Securities
46. Morgan Stanley Dean Witter Short-Term Bond Fund
47. Morgan Stanley Dean Witter World Wide Income Trust
48. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
49. Morgan Stanley Dean Witter Diversified Income Trust
50. Morgan Stanley Dean Witter U.S. Government Securities Trust
51. Morgan Stanley Dean Witter Federal Securities Trust
52. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
53. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
54. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
55. Morgan Stanley Dean Witter Limited Term Municipal Trust
56. Morgan Stanley Dean Witter California Tax-Free Income Fund
57. Morgan Stanley Dean Witter New York Tax-Free Income Fund
58. Morgan Stanley Dean Witter Hawaii Municipal Trust
59. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
60. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
SPECIAL PURPOSE FUNDS
---------------------
61. Dean Witter Retirement Series
62. Morgan Stanley Dean Witter Variable Investment Series
63. Morgan Stanley Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
------------
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
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68. TCW/DW Total Return Trust
69. TCW/DW Global Telecom Trust
70. TCW/DW Mid-Cap Equity Trust
71. TCW/DW Emerging Markets Opportunities Trust
By:___________________________________
Barry Fink
Vice President and General Counsel
ATTEST:
_____________________________
Assistant Secretary
MORGAN STANLEY DEAN WITTER TRUST FSB
By:___________________________________
John Van Heuvelen
President
ATTEST:
_____________________________
Executive Vice President
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Exhibit A
---------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (inset name of investment company) a
(Massachusetts business trust/Maryland corporation) (the "Fund"), desires to
employ and appoint Morgan Stanley Dean Witter Trust FSB ("MSDW TRUST") to act
as transfer agent for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend disbursing agent and
shareholder servicing agent, registrar and agent in connection with any
accumulation, open-account or similar plan provided to the holders of Shares,
including without limitation any periodic investment plan or periodic
withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by
the Fund to MSDW TRUST of fees as set out in the fee schedule attached hereto
as Schedule A, MSDW TRUST shall provide such services to the Fund pursuant to
the terms and conditions set forth in the Transfer Agency and Service Agreement
annexed hereto, as if the Fund was a signatory thereto.
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Please indicate MSDW TRUST's acceptance of employment and
appointment by the Fund in the capacities set forth above by so indicating in
the space provided below.
Very truly yours,
(name of fund)
By:__________________________________
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
MORGAN STANLEY DEAN WITTER TRUST FSB
By:_______________________
Its:______________________
Date:_____________________
Secs\Allfnds\MSDWtrans2/6/98
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SCHEDULE A
Fund: Morgan Stanley Dean Witter Market Leader Trust
Fees: (1) Annual maintenance fee of $12.65 per shareholder account, payable
monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for providing
Forms 1099 for accounts closed during the year, payable following the
end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement shall
be as negotiated between the parties.
f:\schedA\81
<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 JULY 22, 1998
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. Dean Witter Retirement Series
6. Morgan Stanley Dean Witter American Value 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 Appreciation Fund
12. Morgan Stanley Dean Witter Capital Growth Securities
13. Morgan Stanley Dean Witter Competitive Edge Fund,
"Best Ideas" Portfolio
14. Morgan Stanley Dean Witter Convertible Securities Trust
15. Morgan Stanley Dean Witter Developing Growth Securities Trust
16. Morgan Stanley Dean Witter Diversified Income Trust
17. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
18. Morgan Stanley Dean Witter Equity Fund
19. Morgan Stanley Dean Witter European Growth Fund Inc.
20. Morgan Stanley Dean Witter Federal Securities Trust
21. Morgan Stanley Dean Witter Financial Services Trust
22. Morgan Stanley Dean Witter Fund of Funds
(i) Domestic Portfolio
(ii) International Portfolio
23. Morgan Stanley Dean Witter Global Dividend Growth Securities
24. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
25. Morgan Stanley Dean Witter Global Utilities Fund
26. Morgan Stanley Dean Witter Growth Fund
27. Morgan Stanley Dean Witter Hawaii Municipal Trust
28. Morgan Stanley Dean Witter Health Sciences Trust
29. Morgan Stanley Dean Witter High Yield Securities Inc.
30. Morgan Stanley Dean Witter Income Builder Fund
31. Morgan Stanley Dean Witter Information Fund
32. Morgan Stanley Dean Witter Intermediate Income Securities
33. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
34. Morgan Stanley Dean Witter International SmallCap Fund
35. Morgan Stanley Dean Witter Japan Fund
36. Morgan Stanley Dean Witter Limited Term Municipal Trust
37. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
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 Growth Fund
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
45. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
46. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
47. Morgan Stanley Dean Witter Select Dimensions Investment Series
(i) American Value 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
48. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
49. Morgan Stanley Dean Witter U.S. Government Money Market Trust
50. Morgan Stanley Dean Witter Utilities Fund
A-1
<PAGE>
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 Special Value Fund
54. Morgan Stanley Dean Witter Strategist Fund
55. Morgan Stanley Dean Witter S&P 500 Index Fund
56. Morgan Stanley Dean Witter S&P 500 Select 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 U.S. Government Securities Trust
60. Morgan Stanley Dean Witter Value Fund
61. Morgan Stanley Dean Witter Value-Added Market Series
62. Morgan Stanley Dean Witter Variable Investment Series
(i) Capital Appreciation 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) Strategist Portfolio
(xv) Utilities Portfolio
63. Morgan Stanley Dean Witter World Wide Income Trust
64. Morgan Stanley Dean Witter Worldwide High Income Fund
65. Dean Witter Global Asset Allocation Fund
CLOSED-END FUNDS
66. High Income Advantage Trust
67. High Income Advantage Trust II
68. High Income Advantage Trust III
69. InterCapital Income Securities Inc.
70. Dean Witter Government Income Trust
71. InterCapital Insured Municipal Bond Trust
72. InterCapital Insured Municipal Trust
73. InterCapital Insured Municipal Income Trust
74. InterCapital California Insured Municipal Income Trust
75. InterCapital Insured Municipal Securities
76. InterCapital Insured California Municipal Securities
77. InterCapital Quality Municipal Investment Trust
78. InterCapital Quality Municipal Income Trust
79. InterCapital Quality Municipal Securities
80. InterCapital California Quality Municipal Securities
81. InterCapital New York Quality Municipal Securities
A-2
<PAGE>
SCHEDULE B
MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF JULY 22, 1998
Monthly compensation calculated daily by applying the following annual
rates to a fund's daily net assets:
FIXED INCOME FUNDS
- -------------------
<TABLE>
<CAPTION>
<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 $500
California Tax-Free Income Fund 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 $750
Convertible Securities Trust 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 Federal 0.055% of the portion of the daily net assets not exceeding $1
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 Global 0.055% of the portion of the daily net assets not exceeding $500
Short-Term Income Fund Inc. million; and 0.050% of the portion of the daily net assets exceeding
$500 million.
Morgan Stanley Dean Witter Hawaii 0.035% of the daily net assets.
Municipal Trust
B-1
<PAGE>
<S> <C>
Morgan Stanley Dean Witter High 0.050% of the portion of the daily net assets not exceeding $500
Yield Securities Inc. 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 $500
Intermediate Income Securities 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 0.035% of the daily net assets.
Intermediate Term
U.S. Treasury Trust
Morgan Stanley Dean Witter Limited 0.050% of the daily net assets.
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 New 0.055% of the portion of the daily net assets not exceeding $500
York Tax-Free Income Fund million; and 0.0525% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.065% of the daily net assets.
Retirement Series-Intermediate
Income Securities Series
U.S. Government Securities Series 0.065% of the daily net assets.
Morgan Stanley Dean Witter Select 0.039% of the daily net assets.
Dimensions Investment Series-North
American Government 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
B-2
<PAGE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding $500
Tax-Exempt Securities Trust 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.
Morgan Stanley Dean Witter U.S. 0.050% of the portion of the daily net assets not exceeding $1
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
Variable Investment Series-
High Yield Portfolio 0.050% of the portion of the daily net assets not exceeding $500
million; and 0.0425% of the daily net assets exceeding $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.
Morgan Stanley Dean Witter World 0.075% of the portion of the daily net assets up to $250 million;
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
milliion; 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 0.0625% of the portion of the daily net assets not exceeding $250
American Value Fund 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.
B-3
<PAGE>
<S> <C>
Morgan Stanley Dean Witter 0.060% of the daily net assets.
Balanced Growth Fund
Morgan Stanley Dean Witter Capital 0.075% of the portion of the daily net assets not exceeding $500
Appreciation Fund million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Capital 0.065% of the portion of the daily net assets not exceeding $500
Growth Securities 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 $500
Developing Growth Securities 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 $250
Dividend Growth Securities Inc. 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 0.060% of the portion of the daily net assets not exceeding $500
European Growth Fund Inc. million; 0.057% of the portion of the daily net assets exceeding
$500 million but not exceeding $2 billion; and 0.054% of the portion
of the daily net assets exceeding $2 billion.
Morgan Stanley Dean Witter 0.075% of the daily net assets.
Financial Services Trust
Morgan Stanley Dean Witter Fund
of Funds-
Domestic Portfolio None
International Portfolio None
Dean Witter Global Asset 0.070% of the daily net assets.
Allocation Fund
B-4
<PAGE>
<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 Global 0.065% of the portion of the daily net assets not exceeding $500
Utilities Fund million; and 0.0625% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.048% of the portion of daily net assets not exceeding $750
Growth Fund 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 Health 0.10% of the portion of daily net assets not exceeding $500 million;
Sciences Trust and 0.095% of the portion of daily net assets exceeding $500
million.
Morgan Stanley Dean Witter Income 0.075% of the portion of the net assets not exceeding $500 million;
Builder Fund 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 $500
Information Fund million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.075% of the daily net assets.
International SmallCap Fund
Morgan Stanley Dean Witter Japan Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter Market 0.075% of the daily net assets.
Leader Trust
Morgan Stanley Dean Witter 0.075% of the daily net assets.
Mid-Cap Dividend Growth
Securities
Morgan Stanley Dean Witter Mid-Cap 0.075% of the portion of the daily net assets not exceeding $500
Growth Fund million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Natural 0.0625% of the portion of the daily net assets not exceeding $250
Resource Development Securities Inc. million and 0.050% of the portion of the daily net assets exceeding
$250 million.
Morgan Stanley Dean Witter Pacific 0.060% of the portion of the daily net assets not exceeding $1
Growth Fund Inc. billion; 0.057% of the portion of the daily net assets exceeding $1
billion but not exceeding $2 billion; and 0.054% of the portion of
the daily net assets exceeding $2 billion.
Morgan Stanley Dean Witter Precious 0.080% of the daily net assets.
Metals and Minerals Trust
B-5
<PAGE>
<S> <C>
Dean Witter Retirement Series-
American Value Series 0.085% of the daily net assets.
Capital Growth Series 0.085% of the daily net assets.
Dividend Growth Series 0.075% of the daily net assets.
Global Equity Series 0.10% of the daily net assets.
Strategist Series 0.085% of the daily net assets.
Utilities Series 0.075% of the daily net assets.
Value Added Market Series 0.050% of the daily net assets.
Morgan Stanley Dean Witter Select
Dimensions Investment Series-
American Value Portfolio 0.0625% of the daily net assets.
Balanced Growth Portfolio 0.065% of the daily net assets.
Developing Growth Portfolio 0.050% of the daily net assets.
Diversified Income Portfolio 0.040% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding $500
million; and 0.050% of the portion of the daily net assets exceeding
$500 million.
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 Special 0.075% of the daily net assets.
Value Fund
Morgan Stanley Dean Witter Strategist 0.060% of the portion of the daily net assets not exceeding $500
Fund 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.
Morgan Stanley Dean Witter S&P 500 0.040% of the daily net assets.
Index Fund
Morgan Stanley Dean Witter S&P 500 0.060% of the daily net assets.
Select Fund
Morgan Stanley Dean Witter Utilities 0.065% of the portion of the daily net assets not exceeding $500
Fund 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 0.10% of the daily net assets.
Value Fund
B-6
<PAGE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding $500
Value-Added Market Series 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-
Capital Appreciation 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; and 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; and 0.045% of the portion of the daily net assets exceeding
$2 billion.
Equity Portfolio 0.050% of the net assets 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 0.060% of the portion of the daily net assets not exceeding $500
million; and 0.057% of the portion of the daily net assets exceeding
$500 million.
Income Builder Portfolio 0.075% of the daily net assets.
S&P 500 Index Portfolio 0.040% of the daily net assets.
Strategist Portfolio 0.050% of the daily net assets.
Utilities Portfolio 0.065% of the portion of the daily net assets not exceeding $500
million and 0.055% of the portion of the daily net assets exceeding
$500 million.
MONEY MARKET FUNDS
- -------------------
Active Assets Trusts: 0.050% of the portion of the daily net assets not exceeding $500
(1) Active Assets Money Trust million; 0.0425% of the portion of the daily net assets exceeding
(2) Active Assets Tax-Free Trust $500 million but not exceeding $750 million; 0.0375% of the portion
(3) Active Assets California of the daily net assets exceeding $750 million but not exceeding $1
Tax-Free Trust billion; 0.035% of the portion of the daily net assets exceeding $1
(4) Active Assets Government billion but not exceeding $1.5 billion; 0.0325% of the portion of
Securities Trust 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.
B-7
<PAGE>
<S> <C>
Morgan Stanley Dean Witter California 0.050% of the portion of the daily net assets not exceeding $500
Tax-Free Daily Income Trust 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 Liquid 0.050% of the portion of the daily net assets not exceeding $500
Asset Fund Inc. 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 ssets 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 New York 0.050% of the portion of the daily net assets not exceeding $500
Municipal Money Market Trust 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.
Dean Witter Retirement Series-
Liquid Asset Series 0.050% of the daily net assets.
U.S. Government Money 0.050% of the daily net assets.
Market Series
Morgan Stanley Dean Witter Select
Dimensions Investment Series-
Money Market Portfolio 0.050% of the daily net assets.
B-8
<PAGE>
<S> <C>
Morgan Stanley Dean Witter Tax-Free 0.050% of the portion of the daily net assets not exceeding $500
Daily Income Trust 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 $500
Government Money Market Trust 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 Variable 0.050% of the daily net assets.
Investment Series-
Money Market Portfolio
Monthly compensation calculated weekly by applying the following annual
rates to a fund's weekly net assets:
CLOSED-END FUNDS
- -----------------
Dean Witter Government IncomeTrust 0.060% of the average weekly net assets.
High Income Advantage Trust 0.075% of the portion of the average weekly net assets not
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.
High Income Advantage Trust II 0.075% of the portion of the average weekly net assets not
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.
B-9
<PAGE>
<S> <C>
High Income Advantage Trust III 0.075% of the portion of the average weekly net assets not
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.
InterCapital Income Securities Inc. 0.050% of the average weekly net assets.
InterCapital Insured Municipal Bond 0.035% of the average weekly net assets.
Trust
InterCapital Insured Municipal Trust 0.035% of the average weekly net assets.
InterCapital Insured Municipal Income 0.035% of the average weekly net assets.
Trust
InterCapital California Insured 0.035% of the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% of the average weekly net assets.
Investment Trust
InterCapital New York Quality Municipal 0.035% of the average weekly net assets.
Securities
InterCapital Quality Municipal Income 0.035% of the average weekly net assets.
Trust
InterCapital Quality Municipal 0.035% of the average weekly net assets.
Securities
InterCapital California Quality 0.035% of the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% of the average weekly net assets.
Securities
InterCapital Insured California 0.035% of the average weekly net assets.
Municipal Securities
</TABLE>
B-10
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 3 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
October 9, 1998, relating to the financial statements and financial highlights
of Morgan Stanley Dean Witter Market Leader Trust, formerly Dean Witter Market
Leader Trust, which appears in such Statement of Additional Information, and to
the incorporation by reference of our report into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
references to us under the headings "Independent Accountants" and "Experts"
in such Statement of Additional Information and to the reference to us under
the heading "Financial Highlights" in such Prospectus.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
October 27, 1998
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
MARKET LEADER TRUST (A)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| | | |
| /\ n | ERV |
T = | \ | ------------- | -1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL CUMULATIVE
INVESTED - P 31-Aug-98 YEARS - n COMPOUND RETURN - T TOTAL RETURN
- ------------ --------- --------- ------------------- ------------
31-Aug-97 $862.40 1.00 -13.76% -13.76%
28-Jul-97 $856.00 1.09 -13.26% -14.40%
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE (NON STANDARD
COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| | | |
| /\ n | EV |
t = | \ | ------------- | -1
| \ | P |
| \| |
|_ _|
EV
TR = --------- -1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Aug-97 $910.20 -8.98% 1.00 -8.98%
28-Jul-97 $903.50 -9.65% 1.09 -8.87%
(D) GROWTH OF $10,000*
(E) GROWTH OF $50,000*
(F) GROWTH OF $100,000*
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 195.15 $8,560 $43,368 $87,640
</TABLE>
*INITIAL INVESTMENT $9,475, $48,000 & 97,000 RESPECTIVELY REFLECTS A 5.25%, 4%
& 3% SALES CHARGE
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
MARKET LEADER TRUST (B)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL CUMULATIVE
INVESTED - P 31-Aug-98 YEARS - n COMPOUND RETURN - T TOTAL RETURN
- ------------ --------- --------- ------------------- ------------
31-Aug-97 $858.80 1.00 -14.12% -14.12%
28-Apr-97 $938.00 1.34 -4.66% -6.20%
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Aug-97 $903.50 -9.65% 1.00 -9.65%
28-Apr-97 $976.70 -2.33% 1.34 -1.74%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- -------------------- -----------------------
<S> <C> <C> <C> <C> <C>
28-Apr-97 -2.33 $9,767 $48,835 $97,670
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
MARKET LEADER TRUST (C)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL CUMULATIVE
INVESTED - P 31-Aug-98 YEARS - n COMPOUND RETURN - T TOTAL RETURN
- ------------ --------- --------- ------------------- ------------
31-Aug-97 $894.80 1.00 -10.52% -10.52%
28-Jul-97 $896.20 1.09 -9.54% -10.38%
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN (NO DEDUCTION FOR APPLICABLE
SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Aug-97 $903.70 -9.63% 1.00 -9.63%
28-Jul-97 $896.20 -10.38% 1.09 -9.54%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 -10.38 $8,962 $44,810 $89,620
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
MARKET LEADER TRUST (D)
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- -1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
RINVESTED - P 31-Aug-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Aug-97 $911.90 -8.81% 1.00 -8.81%
28-Jul-97 $905.20 -9.48% 1.09 -8.72%
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
28-Jul-97 -9.48 $9,052 $45,260 $90,520
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18F-3
INTRODUCTION
This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), effective as of
July 28, 1997, and amended as of June 22, 1998. The Plan relates to shares of
the open-end investment companies to which Morgan Stanley Dean Witter
Advisors Inc. acts as investment manager, that are listed on Schedule A, as
may be amended from time to time (each, a "Fund" and collectively, the
"Funds"). The Funds are distributed pursuant to a system (the "Multiple Class
System") in which each class of shares (each, a "Class" and collectively, the
"Classes") of a Fund represents a pro rata interest in the same portfolio of
investments of the Fund and differs only to the extent outlined below.
I. DISTRIBUTION ARRANGEMENTS
One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition,
pursuant to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan
of Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described
below.
1. Class A Shares
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under
which the sales charges are subject to reduction are set forth in each Fund's
current prospectus. As stated in each Fund's current prospectus, Class A
shares may be purchased at net asset value (without a FESL): (i) in the case
of certain large purchases of such shares; and (ii) by certain limited
categories of investors, in each case, under the circumstances and conditions
set forth in each Fund's current prospectus. Class A shares purchased at net
asset value may be subject to a contingent deferred sales charge ("CDSC") on
redemptions made within one year of purchase. Further information relating to
the CDSC, including the manner in which it is calculated, is set forth in
paragraph 6 below. Class A shares are also subject to payments under each
Fund's 12b-1 Plan to reimburse Morgan Stanley Dean Witter Distributors Inc.,
Dean Witter Reynolds Inc. ("DWR"), its affiliates and other broker-dealers
for distribution expenses incurred by them specifically on behalf of the
Class, assessed at an annual rate of up to 0.25% of average daily net assets.
The entire amount of the 12b-1 fee represents a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines.
2. Class B Shares
Class B shares are offered without a FESL, but will in most cases be
subject to a six-year declining CDSC which is calculated in the manner set
forth in paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The
schedule of CDSC charges applicable to each Fund is set forth in each Fund's
current prospectus. With the exception of certain of the Funds which have a
different formula described below (Morgan Stanley Dean Witter American Value
Fund, Morgan Stanley Dean Witter Natural Resource Development Securities
Inc., Morgan Stanley Dean Witter
1
<PAGE>
Strategist Fund and Morgan Stanley Dean Witter Dividend Growth Securities
Inc.) (1), Class B shares are also subject to a fee under each Fund's
respective 12b-1 Plan, assessed at the annual rate of up to 1.0% of either:
(a) the lesser of (i) the average daily aggregate gross sales of the Fund's
Class B shares since the inception of the Fund (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate
net asset value of the Fund's Class B shares redeemed since the Fund's
inception upon which a CDSC has been imposed or waived, or (ii) the average
daily net assets of Class B; or (b) the average daily net assets of Class B.
A portion of the 12b-1 fee equal to up to 0.25% of the Fund's average daily
net assets is characterized as a service fee within the meaning of the NASD
guidelines and the remaining portion of the 12b-1 fee, if any, is
characterized as an asset-based sales charge. Also, Class B shares have a
conversion feature ("Conversion Feature") under which such shares convert to
Class A shares after a certain holding period. Details of the Conversion
Feature are set forth in Section IV below.
3. Class C Shares
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph
6 below. In addition, Class C shares, under each Fund's 12b-1 Plan, are
subject to 12b-1 payments to reimburse Morgan Stanley Dean Witter
Distributors Inc., DWR, its affiliates and other broker-dealers for
distribution expenses incurred by them specifically on behalf of the Class,
assessed at the annual rate of up to 1.0% of the average daily net assets of
the Class. A portion of the 12b-1 fee equal to up to 0.25% of the Fund's
average daily net assets is characterized as a service fee within the meaning
of NASD guidelines. Unlike Class B shares, Class C shares do not have the
Conversion Feature.
4. Class D Shares
Class D shares are offered without imposition of a FESL, CDSC or a 12b-1
fee for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of
investors, in each case, as may be approved by the Boards of
Directors/Trustees of the Funds and as disclosed in each Fund's current
prospectus.
5. Additional Classes of Shares
The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in
accordance with Rule 18f-3 under the 1940 Act.
6. Calculation of the CDSC
Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase
- ------------
(1)The payments under the 12b-1 Plan for each of Morgan Stanley Dean Witter
American Value Fund, Morgan Stanley Dean Witter Natural Resource Development
Securities Inc. and Morgan Stanley Dean Witter Dividend Growth Securities
Inc. are assessed at the annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's Class B shares since the
inception of the Fund's Plan (not including reinvestment of dividends or
capital gains distributions), less the average daily aggregate net asset
value of the Fund's Class B shares redeemed since the Plan's inception upon
which a contingent deferred sales charge has been imposed or waived, or (b)
the average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since inception of the Plan. The payments under the
12b-1 Plan for the Morgan Stanley Dean Witter Strategist Fund are assessed at
the annual rate of: (i) 1% of the lesser of (a) the average daily aggregate
gross sales of the Fund's Class B shares since the effectiveness of the first
amendment of the Plan on November 8, 1989 (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate
net asset value of the Fund's Class B shares redeemed since the effectiveness
of the first amended Plan, upon which a contingent deferred sales charge has
been imposed or waived, or (b) the average daily net assets of Class B
attributable to shares issued, net of related shares redeemed, since the
effectiveness of the first amended Plan; plus (ii) 0.25% of the average daily
net assets of Class B attributable to shares issued, net of related shares
redeemed, prior to effectiveness of the first amended Plan.
2
<PAGE>
in share value due to capital appreciation and shares acquired through the
reinvestment of dividends or capital gains distributions. The CDSC schedule
applicable to a Fund and the circumstances in which the CDSC is subject to
waiver are set forth in each Fund's prospectus.
II. EXPENSE ALLOCATIONS
Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each
Class, except that 12b-1 fees relating to a particular Class are 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 Fund's Board of Directors/Trustees.
III. CLASS DESIGNATION
All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate,
SPS Transaction Services, Inc., shares of Funds offered with a FESL, and
shares of Morgan Stanley Dean Witter Balanced Growth Fund and Morgan Stanley
Dean Witter Balanced Income Fund) have been designated Class B shares. Shares
held prior to July 28, 1997 by such employee benefit plans have been
designated Class D shares. Shares held prior to July 28, 1997 of Funds
offered with a FESL have been designated Class D shares. In addition, shares
of Morgan Stanley Dean Witter American Value Fund purchased prior to April
30, 1984, shares of Morgan Stanley Dean Witter Strategist Fund purchased
prior to November 8, 1989 and shares of Morgan Stanley Dean Witter Natural
Resource Development Securities Inc. and Morgan Stanley Dean Witter Dividend
Growth Securities Inc. purchased prior to July 2, 1984 (with respect to such
shares of each Fund, including such proportion of shares acquired through
reinvestment of dividends and capital gains distributions as the total number
of shares acquired prior to each of the preceding dates in this sentence
bears to the total number of shares purchased and owned by the shareholder of
that Fund) have been designated Class D shares. Shares of Morgan Stanley Dean
Witter Balanced Growth Fund and Morgan Stanley Dean Witter Balanced Income
Fund held prior to July 28, 1997 have been designated Class C shares except
that shares of Morgan Stanley Dean Witter Balanced Growth Fund and Morgan
Stanley Dean Witter Balanced Income Fund held prior to July 28, 1997 that
were acquired in exchange for shares of an investment company offered with a
CDSC have been designated Class B shares and those that were acquired in
exchange for shares of an investment company offered with a FESL have been
designated Class A shares.
IV. THE CONVERSION FEATURE
Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which were purchased before July 28,
1997 by trusts for which Dean Witter Trust FSB ("MSDW Trust") provides
discretionary trustee services converted to Class A shares on August 29, 1997
(the CDSC was not applicable to such shares upon the conversion). In all
other instances, Class B shares of each Fund will automatically convert to
Class A shares, based on the relative net asset values of the shares of the
two Classes on the conversion date, which will be approximately ten (10)
years after the date of the original purchase. Conversions will be effected
once a month. The 10 year period will be calculated 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 or a series of exchanges, from the last day of
the month in which the original Class B shares were purchased, provided that
shares originally purchased before May 1, 1997 will convert to Class A shares
in May, 2007. Except as set forth below, the conversion of shares purchased
on or after May 1, 1997 will take place in the month following the tenth
anniversary of the purchase. There will also be converted at that time such
proportion of Class B shares acquired through automatic reinvestment of
dividends owned by the shareholder as the total number of his or her Class B
shares converting at the time bears to the total number of outstanding Class
B shares purchased and owned by the shareholder. In the case of Class B
shares held by a 401(k) plan or other plan qualified under Section 401(a) of
the Internal Revenue Code (the "Code") and for which MSDW Trust serves as
Trustee or DWR's Retirement Plan Services serves as recordkeeper pursuant to
a written Recordkeeping Services Agreement, all Class B
3
<PAGE>
shares will convert to Class A shares on the conversion date of the first
shares of a Fund purchased by that plan. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (as such term is
defined in the prospectus of each Fund), the period of time the shares were
held in the Exchange Fund (calculated from the last day of the month in which
the Exchange Fund shares were acquired) is excluded from the holding period
for conversion. If those shares are subsequently re-exchanged for Class B
shares of a Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
Effectiveness of the Conversion Feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that (i) the conversion of shares does not constitute a
taxable event under the Code; (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion; and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The Conversion Feature may be suspended if the
Ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B fees under the applicable Fund's 12b-1
Plan.
V. EXCHANGE PRIVILEGES
Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements
of additional information of the Funds. The exchange privilege of each Fund
may be terminated or revised at any time by the Fund upon such notice as may
be required by applicable regulatory agencies as described in each Fund's
prospectus.
VI. VOTING
Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses,
including payments under the Class A 12b-1 Plan, if such proposal is
submitted separately to Class A shareholders. If the amount of expenses,
including payments under the Class A 12b-1 Plan, is increased materially
without the approval of Class B shareholders, the Fund will establish a new
Class A for Class B shareholders whose shares automatically convert on the
same terms as applied to Class A before the increase. In addition, each Class
shall have separate voting rights on any matter submitted to shareholders in
which the interests of one Class differ from the interests of any other
Class.
4
<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
SCHEDULE A
AT JULY 22, 1998
1) Morgan Stanley Dean Witter American Value Fund
2) Morgan Stanley Dean Witter Balanced Growth Fund
3) Morgan Stanley Dean Witter Balanced Income Fund
4) Morgan Stanley Dean Witter California Tax-Free Income Fund
5) Morgan Stanley Dean Witter Capital Appreciation Fund
6) Morgan Stanley Dean Witter Capital Growth Securities
7) Morgan Stanley Dean Witter Competitive Edge Fund
8) Morgan Stanley Dean Witter Convertible Securities Trust
9) Morgan Stanley Dean Witter Developing Growth Securities Trust
10) Morgan Stanley Dean Witter Diversified Income Trust
11) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
12) Morgan Stanley Dean Witter Equity Fund
13) Morgan Stanley Dean Witter European Growth Fund Inc.
14) Morgan Stanley Dean Witter Federal Securities Trust
15) Morgan Stanley Dean Witter Financial Services Trust
16) Morgan Stanley Dean Witter Fund of Funds
17) Dean Witter Global Asset Allocation Fund
18) Morgan Stanley Dean Witter Global Dividend Growth Securities
19) Morgan Stanley Dean Witter Global Utilities Fund
20) Morgan Stanley Dean Witter Growth Fund
21) Morgan Stanley Dean Witter Health Sciences Trust
22) Morgan Stanley Dean Witter High Yield Securities Inc.
23) Morgan Stanley Dean Witter Income Builder Fund
24) Morgan Stanley Dean Witter Information Fund
25) Morgan Stanley Dean Witter Intermediate Income Securities
26) Morgan Stanley Dean Witter International SmallCap Fund
27) Morgan Stanley Dean Witter Japan Fund
28) Morgan Stanley Dean Witter Market Leader Trust
29) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
30) Morgan Stanley Dean Witter Mid-Cap Growth Fund
31) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
32) Morgan Stanley Dean Witter New York Tax-Free Income Fund
33) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
34) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
35) Morgan Stanley Dean Witter Research Fund
36) Morgan Stanley Dean Witter Special Value Fund
37) Morgan Stanley Dean Witter S&P 500 Index Fund
38) Morgan Stanley Dean Witter S&P 500 Select Fund
39) Morgan Stanley Dean Witter Strategist Fund
40) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
41) Morgan Stanley Dean Witter U.S. Government Securities Trust
42) Morgan Stanley Dean Witter Utilities Fund
43) Morgan Stanley Dean Witter Value-Added Market Series
44) Morgan Stanley Dean Witter Value Fund
45) Morgan Stanley Dean Witter Worldwide High Income Fund
46) Morgan Stanley Dean Witter World Wide Income Trust
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST: CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 124,193,533
<INVESTMENTS-AT-VALUE> 115,481,160
<RECEIVABLES> 7,984,482
<ASSETS-OTHER> 140,603
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,606,245
<PAYABLE-FOR-SECURITIES> 2,607,638
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 591,161
<TOTAL-LIABILITIES> 3,198,799
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129,292,629
<SHARES-COMMON-STOCK> 32,761
<SHARES-COMMON-PRIOR> 26,664
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (172,810)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,712,373)
<NET-ASSETS> 318,652
<DIVIDEND-INCOME> 978,103
<INTEREST-INCOME> 781,066
<OTHER-INCOME> 0
<EXPENSES-NET> 2,873,606
<NET-INVESTMENT-INCOME> (1,114,437)
<REALIZED-GAINS-CURRENT> 489,937
<APPREC-INCREASE-CURRENT> (12,924,249)
<NET-CHANGE-FROM-OPS> (13,548,749)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,346
<DISTRIBUTIONS-OF-GAINS> 2,408
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,166
<NUMBER-OF-SHARES-REDEEMED> 13,425
<SHARES-REINVESTED> 356
<NET-CHANGE-IN-ASSETS> 12,498,126
<ACCUMULATED-NII-PRIOR> 378,348
<ACCUMULATED-GAINS-PRIOR> 434,680
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,054,688
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,873,606
<AVERAGE-NET-ASSETS> 411,855
<PER-SHARE-NAV-BEGIN> 10.82
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> (0.96)
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.73
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST: CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 124,193,533
<INVESTMENTS-AT-VALUE> 115,481,160
<RECEIVABLES> 7,984,482
<ASSETS-OTHER> 140,603
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,606,245
<PAYABLE-FOR-SECURITIES> 2,607,638
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 591,161
<TOTAL-LIABILITIES> 3,198,799
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129,292,629
<SHARES-COMMON-STOCK> 12,060,344
<SHARES-COMMON-PRIOR> 9,927,646
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (172,810)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,712,373)
<NET-ASSETS> 116,692,554
<DIVIDEND-INCOME> 978,103
<INTEREST-INCOME> 781,066
<OTHER-INCOME> 0
<EXPENSES-NET> 2,873,606
<NET-INVESTMENT-INCOME> (1,114,437)
<REALIZED-GAINS-CURRENT> 489,937
<APPREC-INCREASE-CURRENT> (12,924,249)
<NET-CHANGE-FROM-OPS> (13,548,749)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 371,207
<DISTRIBUTIONS-OF-GAINS> 791,200
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,268,628
<NUMBER-OF-SHARES-REDEEMED> 2,239,034
<SHARES-REINVESTED> 103,104
<NET-CHANGE-IN-ASSETS> 12,498,126
<ACCUMULATED-NII-PRIOR> 378,348
<ACCUMULATED-GAINS-PRIOR> 434,680
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,054,688
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,873,606
<AVERAGE-NET-ASSETS> 137,892,329
<PER-SHARE-NAV-BEGIN> 10.81
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> (0.95)
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> 2.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST: CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 124,193,533
<INVESTMENTS-AT-VALUE> 115,481,160
<RECEIVABLES> 7,984,482
<ASSETS-OTHER> 140,603
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,606,245
<PAYABLE-FOR-SECURITIES> 2,607,638
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 591,161
<TOTAL-LIABILITIES> 3,198,799
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129,292,629
<SHARES-COMMON-STOCK> 96,953
<SHARES-COMMON-PRIOR> 28,932
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (172,810)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,712,373)
<NET-ASSETS> 937,188
<DIVIDEND-INCOME> 978,103
<INTEREST-INCOME> 781,066
<OTHER-INCOME> 0
<EXPENSES-NET> 2,873,606
<NET-INVESTMENT-INCOME> (1,114,437)
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<NET-CHANGE-FROM-OPS> (13,548,749)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,451
<DISTRIBUTIONS-OF-GAINS> 5,177
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 85,684
<NUMBER-OF-SHARES-REDEEMED> 18,464
<SHARES-REINVESTED> 801
<NET-CHANGE-IN-ASSETS> 12,498,126
<ACCUMULATED-NII-PRIOR> 378,348
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,054,688
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,873,606
<AVERAGE-NET-ASSETS> 905,236
<PER-SHARE-NAV-BEGIN> 10.81
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> (0.94)
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> (0.06)
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<PER-SHARE-NAV-END> 9.67
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST: CLASS D
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 124,193,533
<INVESTMENTS-AT-VALUE> 115,481,160
<RECEIVABLES> 7,984,482
<ASSETS-OTHER> 140,603
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<PAYABLE-FOR-SECURITIES> 2,607,638
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 591,161
<TOTAL-LIABILITIES> 3,198,799
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129,292,629
<SHARES-COMMON-STOCK> 252,580
<SHARES-COMMON-PRIOR> 919
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (172,810)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,712,373)
<NET-ASSETS> 2,459,052
<DIVIDEND-INCOME> 978,103
<INTEREST-INCOME> 781,066
<OTHER-INCOME> 0
<EXPENSES-NET> 2,873,606
<NET-INVESTMENT-INCOME> (1,114,437)
<REALIZED-GAINS-CURRENT> 489,937
<APPREC-INCREASE-CURRENT> (12,924,249)
<NET-CHANGE-FROM-OPS> (13,548,749)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,350
<DISTRIBUTIONS-OF-GAINS> 1,210
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 293,504
<NUMBER-OF-SHARES-REDEEMED> 41,879
<SHARES-REINVESTED> 36
<NET-CHANGE-IN-ASSETS> 12,498,126
<ACCUMULATED-NII-PRIOR> 378,348
<ACCUMULATED-GAINS-PRIOR> 434,680
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,054,688
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,873,606
<AVERAGE-NET-ASSETS> 1,415,635
<PER-SHARE-NAV-BEGIN> 10.82
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (0.95)
<PER-SHARE-DIVIDEND> (0.07)
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</TABLE>
