<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1997
REGISTRATION NO.:
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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. / /
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. / /
------------------
DEAN WITTER FUND OF FUNDS
(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 the effective date of this registration statement.
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT 1940, REGISTRANT HEREBY
ELECTS TO REGISTER AN INDEFINITE NUMBER OF ITS SHARES OF BENEFICIAL INTEREST
WITH $0.01 PAR VALUE.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
DEAN WITTER FUND OF FUNDS
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- -------------------------------------- --------------------------------------
<S> <C>
PART A PROSPECTUS
1. ................................. Cover Page
2. ................................. Prospectus Summary; Summary of Fund
Expenses
3. ................................. Performance Information
4. ................................. Investment Objective and Policies; 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
8. ................................. 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; The
Distributor; Shareholder Services;
Custodian and Transfer Agent;
Independent Accountants
17. ................................. Portfolio Transactions and Brokerage
18. ................................. Description of Shares
19. ................................. The Distributor; Purchase of Fund
Shares; Redemptions and Repurchases;
Statement of Assets and Liabilities;
Shareholder Services
20. ................................. Dividends, Distributions and Taxes
21. ................................. Purchase of Fund Shares
22. ................................. Dividends, Distributions and Taxes
23. ................................. Performance Information
</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>
DEAN WITTER
FUND OF FUNDS
PROSPECTUS--SEPTEMBER , 1997
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DEAN WITTER FUND OF FUNDS (THE "FUND") IS AN OPEN-END, NON-DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY CURRENTLY CONSISTING OF TWO SEPARATE PORTFOLIOS
(INDIVIDUALLY A "PORTFOLIO" AND COLLECTIVELY THE "PORTFOLIOS") WHICH SEEK TO
ACHIEVE THEIR INVESTMENT OBJECTIVES BY INVESTING IN SHARES OF OTHER OPEN-END
MANAGEMENT INVESTMENT COMPANIES THAT ARE EITHER MEMBERS OF THE DEAN WITTER
FAMILY OF FUNDS OR MANAGED BY AN INVESTMENT ADVISER THAT IS AN AFFILIATE OF DEAN
WITTER INTERCAPITAL INC. (INDIVIDUALLY, AN "UNDERLYING FUND" AND COLLECTIVELY,
THE "UNDERLYING FUNDS"). THE INTERNATIONAL EQUITY PORTFOLIO HAS AN INVESTMENT
OBJECTIVE OF LONG-TERM CAPITAL APPRECIATION AND INVESTS IN A SELECTION OF
UNDERLYING FUNDS WHICH INVEST THEIR ASSETS PRIMARILY IN THE INTERNATIONAL EQUITY
MARKETS. THE DOMESTIC EQUITY PORTFOLIO HAS AN INVESTMENT OBJECTIVE OF LONG-TERM
CAPITAL APPRECIATION AND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
IN A SELECTION OF UNDERLYING FUNDS WHICH INVEST PRIMARILY IN THE U.S. EQUITY
MARKETS. SEE "INVESTMENT OBJECTIVE AND POLICIES".
INITIAL OFFERING--Shares are being offered in an underwriting by Dean Witter
Distributors Inc. at $10.00 per share for Class B, Class C and Class D shares
with all proceeds going to the Fund and at $10.00 per share plus a sales charge
for Class A shares with the sales charge paid to the Underwriter and the net
asset value of $10.00 per share going to the Fund. All expenses in connection
with the organization of the Fund and this offering will be paid by the
Investment Manager and Underwriter except for a maximum of $250,000 of
organizational expenses to be reimbursed by the Fund. The initial offering will
run from approximately , 1997 through , 1997.
CONTINUOUS OFFERING--A continuous offering will commence approximately two weeks
after the closing date of the initial offering which is anticipated for
, 1997. Class B, Class C and Class D shares will be priced at the net asset
value per share and Class A shares will be priced at the net asset value per
share plus a sales charge, in each case as next determined following receipt of
an order.
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.")
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Prospectus Summary................................ 2
Summary of Fund Expenses.......................... 4
The Fund and its Management....................... 6
Investment Objective and Policies................. 7
Risk Considerations............................. 18
Investment Restrictions........................... 25
Purchase of Fund Shares........................... 26
Shareholder Services.............................. 32
Redemptions and Repurchases....................... 34
Dividends, Distributions and Taxes................ 35
Performance Information........................... 36
Additional Information............................ 36
</TABLE>
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 September , 1997, 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.
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.
DEAN WITTER
FUND OF FUNDS
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 or
(800) 869-NEWS (toll free)
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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 OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC., DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
THE FUND The Fund is an open-end, non-diversified management investment company currently consisting of two
separate Portfolios: The International Equity Portfolio and the Domestic Equity Portfolio. The
International Equity Portfolio currently invests in a selection of the following Underlying Funds:
Dean Witter European Growth Fund, Dean Witter International SmallCap Fund, Dean Witter Japan Fund,
Dean Witter Pacific Growth Fund and Dean Witter World Wide Investment Trust. The Domestic Equity
Portfolio currently invests in a selection of the following Underlying Funds: Dean Witter American
Value Fund, Dean Witter Capital Appreciation Fund, Dean Witter Capital Growth Securities, Dean
Witter Developing Growth Securities, Dean Witter Dividend Growth Securities, Dean Witter Market
Leader Trust, Dean Witter Mid-Cap Growth Fund, Dean Witter Special Value Fund and Dean Witter
Value-Added Market Series/Equity Portfolio. The Underlying Funds in which each Portfolio may
invest may be changed from time to time and additional or different Underlying Funds may be added
or substituted.
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page 28). The Fund offers four Classes of
shares, each with a different combination of sales charges, ongoing fees and other features (see
pages ).
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INITIAL Shares are being offered in an underwriting by Dean Witter Distributors Inc. at $10.00 per share.
OFFERING The minimum purchase for Class A, Class B and Class C is 100 shares ($1,000 for Class B and Class
C and $ for Class A). Class D shares are only available to persons investing $5 million or
more and to certain other limited categories of investors. The initial offering will run
approximately from September , 1997 through , 1997. The closing will take place on
, 1997 or such other date as may be agreed upon by Dean Witter Distributors Inc. and
the Fund (the "Closing Date"). Shares will not be issued and dividends will not be declared by the
Fund until after the Closing Date. If any orders received during the initial offering period are
accompanied by payment, such payment will be returned unless an accompanying request for
investment in a Dean Witter money market fund is received at the time the payment is made. Any
purchase order may be cancelled at any time prior to the Closing Date.
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CONTINUOUS A continuous offering, if any, will commence within approximately two weeks after the Closing
OFFERING/ Date. The minimum initial investment for each Class is $1,000 ($100 if the account is opened
MINIMUM through EasyInvest-SM-). Class D shares are only available to persons investing $5 million or more
PURCHASE and to certain other limited categories of investors. For the purpose of meeting the minimum $5
million investment for Class D shares, and subject to the $1,000 minimum initial investment for
each Class of each Portfolio of the Fund, an investor's existing holdings of Class A shares and
shares of funds for which Dean Witter InterCapital serves as investment manager ("Dean Witter
Funds") that are sold with a front-end sales charge, and concurrent investments in Class D shares
of the Fund and other Dean Witter Funds that are multiple class funds will be aggregated. The
minimum subsequent investment is $100 (see page ).
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INVESTMENT The investment objective of the Investment Equity Portfolio is long-term capital appreciation. The
OBJECTIVE investment objective of the Domestic Equity Portfolio is long-term capital appreciation (see page
).
- -------------------------------------------------------------------------------------------------------
INVESTMENT Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its
MANAGER wholly-owned subsidiary, Dean Witter Services Company Inc., serve in various investment
management, advisory, management and administrative capacities to 100 investment companies and
other portfolios with assets of approximately $95.6 billion at May 31, 1997.
- -------------------------------------------------------------------------------------------------------
MANAGEMENT The Fund pays no management fee. However, the Fund, through its investments in the Underlying
FEE Funds, will pay its pro rata share of the management or advisory or sub-advisory fees to the
Investment Manager and/or Sub-Advisors or Advisor of the Underlying Funds (see pages 5-7).
- -------------------------------------------------------------------------------------------------------
UNDERWRITER AND Dean Witter Distributors Inc. (the "Distributor") is the Fund's Underwriter and Distributor. The
DISTRIBUTOR Fund has adopted a distribution plan pursuant to Rule 12b-1 under the Investment Company Act (the
AND "12b-1 Plan") with respect to the distribution fees paid by the Class A, Class B and Class C
DISTRIBUTION FEE shares of each Portfolio 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 and ).
Each Portfolio of the Fund will invest in the Class D shares of the Underlying Funds set forth
below and accordingly will not pay any sales load or 12b-1 service or distribution fees in
connection with its investments in shares of the Underlying Funds.
- -------------------------------------------------------------------------------------------------------
ALTERNATIVE Four classes of shares are offered:
PURCHASE
ARRANGEMENTS - 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, on behalf of each Portfolio, is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of each Portfolio's Class A shares and
</TABLE>
2
<PAGE>
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<TABLE>
<S> <C>
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 of each respective Portfolio (see pages and ).
- 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 the average daily net assets of Class B of each respective Portfolio.
Class B shares convert to Class A shares approximately ten years after the date of the original
purchase (see pages and ).
- 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, on behalf of each
Portfolio, is authorized to reimburse the Distributor for specific expenses incurred in promoting
the distribution of each Portfolio'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 of each respective Portfolio (see
pages and ).
- Class D shares are offered only to investors meeting an initial investment minimum of $5 million
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 and ).
- -------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income and distributions from net capital gains, if any, are paid at
CAPITAL GAINS least once per year. Each Portfolio of the Fund may, however, determine to retain all or part of
DISTRIBUTIONS any net 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
and ).
- -------------------------------------------------------------------------------------------------------
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 EasyInvest-SM-, if after twelve
months the shareholder has invested less than $1,000 in the account (see page ).
- -------------------------------------------------------------------------------------------------------
RISK The net asset value of each Portfolio's shares will fluctuate with changes in the market value of
CONSIDERATIONS its portfolio securities, and each Portfolio's investment performance will reflect the performance
of the Underlying Funds and the investment selections made by the Fund's Investment Manager.
Investment in either Portfolio of the Fund involves the same risks as an investment in the
Underlying Funds in which each such Portfolio invests. Investing in lesser known, smaller and
medium sized capitalization companies may involve greater risk of volatility in the Underlying
Funds which invests in such companies and consequently in net asset value of each Portfolio than
is customarily associated with investing in larger, more established companies. To the extent that
the International Equity Portfolio invests in Underlying Funds which concentrate their investments
in particular geographical regions or countries (i.e., Latin America, the Pacific Rim, Japan) the
Portfolio will be subject risks of adverse social, political or economic events which occur in or
affect those regions or countries. These may include the risk of expropriation, nationalization or
confiscation of assets or the imposition of restrictions on foreign investment or repatriation of
capital invested, political and social uncertainties, high levels of inflation and non-uniform
corporate disclosure standards and governmental regulation which may lead to less publicly
available and less reliable information than is generally the case for U.S. issuers. Additionally,
it should be recognized that certain foreign securities and markets may pose different and greater
risks than those customarily associated with domestic securities and their markets such as
fluctuations in foreign currency exchange rates (i.e., if a substantial portion of an Underlying
Fund's assets is denominated in foreign currencies which decrease in value with respect to the
U.S. dollar, the value of the investor's shares and the distributions made on those shares will,
likewise, decrease in value), foreign securities exchange controls and foreign tax rates. Certain
of the Underlying Funds in which each Portfolio may invest may enter into repurchase agreements,
reverse repurchase agreements and dollar rolls, may purchase securities on a when-issued, delayed
delivery or forward commitment basis or on a "when, as and if issued" basis which entail certain
risks and may utilize certain investment techniques including options and futures transactions and
forward foreign currency exchange transactions which may be considered speculative in nature and
may involve greater risks than those customarily assumed by other investment companies which do
not utilize such instruments.
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
3
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of each
Portfolio of the Fund will incur. The estimated expenses and fees set forth in
the table are based on the expenses and fees for the fiscal period ending
.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS D
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
<S> <C> <C> <C> <C>
Management Fees.......................................... % % % %
12b-1 Fees (5) (6)....................................... 0.25% 1.00% 1.00% None
Other Expenses........................................... % % % %
Total Fund Operating Expenses (7)........................ % % % %
</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 annually 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) 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 of each Portfolio 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 each Portfolio of the Fund's
shares (see "Purchase of Fund Shares--Plan of Distribution").
(6) 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").
(7) "Total Fund Operating Expenses," as shown above with respect to each Class,
are based upon the sum of 12b-1 Fees, Management Fees and estimated "Other
Expenses."
EXPENSE RATIOS OF THE UNDERLYING FUNDS
The Portfolios will invest only in the Class D shares of the Underlying Funds
and, accordingly, will not pay any sales load or 12b-1 service or distribution
fees in connection with their investments in shares of the Underlying Funds. The
Portfolios, however, will indirectly bear their pro rata share of the fees and
expenses incurred by the Underlying Funds that are applicable to Class D
shareholders. The investment returns of the respective Portfolios, therefore,
will be net of the expenses of the Underlying Funds in which they are invested.
The following charts shows the expense ratios applicable to the Class D
shareholders of each Underlying Fund held by a Portfolio, based on operating
expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO--EXPENSE RATIOS OF MANAGEMENT OTHER TOTAL
UNDERLYING FUNDS FEES 12B-1 FEE EXPENSES EXPENSES
- ------------------------------------------------------------ ----------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Dean Witter European Growth Fund............................ % 0% % %
Dean Witter Pacific Growth Fund............................. % 0% % %
Dean Witter International SmallCap Fund..................... % 0% % %
Dean Witter Japan Fund...................................... % 0% % %
Dean Witter World Wide Investment Trust..................... % 0% % %
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE 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.......................................................... $ $ $ $
Class B.......................................................... $ $ $ $
Class C.......................................................... $ $ $ $
Class D.......................................................... $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
DOMESTIC EQUITY PORTFOLIO--EXPENSE RATIOS MANAGEMENT OTHER TOTAL
OF UNDERLYING FUNDS FEES 12B-1 FEE EXPENSES EXPENSES
- ------------------------------------------------------------ ----------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Dean Witter American Value Fund............................. % 0% % %
Dean Witter Capital Appreciation Fund....................... % 0% % %
Dean Witter Capital Growth Securities....................... % 0% % %
Dean Witter Developing Growth Securities.................... % 0% % %
Dean Witter Dividend Growth Securities...................... % 0% % %
Dean Witter Market Leader Trust............................. % 0% % %
Dean Witter Mid-Cap Growth Fund............................. % 0% % %
Dean Witter Special Value Fund.............................. % 0% % %
Dean Witter Value-Added Market Series/Equity Portfolio...... % 0% % %
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Class A.......................................................... $ $ $ $
Class B.......................................................... $ $ $ $
Class C.......................................................... $ $ $ $
Class D.......................................................... $ $ $ $
</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.
5
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Fund of Funds (the "Fund") is an open-end, non-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 July 3, 1997.
Dean Witter InterCapital Inc. ("InterCapital 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, which was incorporated in July,
1992, is a wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover &
Co. ("MSDWD"), a preeminent global financial services firm that maintains
leading market positions in each of its three primary businesses--securities,
asset management and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 100 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$92.3 billion as of May 31, 1997. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $3.3 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, which includes the allocation of each Portfolio's assets among the
Underlying Funds. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund. The Fund's
Board of Trustees reviews the various services provided by or under the
direction of the Investment Manager to ensure that each Portfolio'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.
The Investment Manager does not receive a management fee from either
Portfolio of the Fund for providing the aforementioned investment management
services. However, each Portfolio, through its investments in the Class D shares
of the Underlying Funds, will pay its pro rata share of the management fees and
certain other expenses of the Underlying Funds. The Fund's actual expenses are
expected to include certain legal and auditing fees, transfer agency fees,
custodian fees, compensation to the Independent Trustees and printing and
out-of-pocket expenses relating to the Fund's operations which expenses will be
allocated to each Portfolio on the basis of asset size of each Portfolio.
In addition to serving as the Fund's Investment Manager, InterCapital also
serves as Investment Manager to the following Underlying Funds in which the Fund
may invest: Dean Witter American Value Fund, Dean Witter Capital Appreciation
Fund, Dean Witter Capital Growth Securities, Dean Witter Developing Growth
Securities, Dean Witter Dividend Growth Securities, Dean Witter European Growth
Fund, Dean Witter International SmallCap Fund, Dean Witter Japan Fund, Dean
Witter Market Leader Trust, Dean Witter Mid-Cap Growth Fund, Dean Witter Pacific
Growth Fund, Dean Witter Special Value Fund--contingent upon a "re-opening",
Dean Witter Value-Added Market Series/Equity Portfolio and Dean Witter World
Wide Investment Trust. Under Sub-Advisory Agreements between Morgan Grenfell
Investment Services Limited ("Morgan Grenfell") and the Investment Manager,
Morgan Grenfell provides investment advice and portfolio management to Dean
Witter European Growth Fund, Dean Witter International SmallCap Fund, Dean
Witter Japan Fund, Dean Witter Pacific Growth Fund, and Dean Witter World Wide
Investment Trust subject to the overall supervision of the Investment Manager.
Morgan Grenfell, whose address is 20 Finsbury Circus, London, England,
manages, as of May 31, 1997, assets of approximately $ billion for U.S.
corporate and public employee benefit plans, investment companies, endowments
and foundations. Morgan Grenfell is an indirect subsidiary of Deutsche Bank AG,
the largest commercial bank in Germany.
Set forth below is the compensation received by the Investment Manager, and
Morgan Grenfell for their management, investment advisory services or
sub-advisory services to the aforementioned Underlying Funds set forth below. As
full compensation for the services and facilities furnished to the fund and for
expenses of the fund assumed by the Investment Manager, the fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates:
DEAN WITTER AMERICAN VALUE FUND. 0.625% to the portion of daily net assets not
exceeding $250 million; 0.50% to such assets exceeding $250 million but not
exceeding $2.5 billion and scaled down at various asset levels to 0.45% on such
assets exceeding $3.5 billion.
DEAN WITTER CAPITAL APPRECIATION FUND. 0.75% to the Fund's average daily net
assets not exceeding $500 million; and 0.725% to such assets exceeding $500
million.
DEAN WITTER CAPITAL GROWTH SECURITIES. 0.65% to the Fund's average daily net
assets not exceeding $500 million scaled down at various asset levels to 0.475%
on such assets exceeding $1.5 billion.
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DEAN WITTER DEVELOPING GROWTH SECURITIES. 0.50% to the Fund's average daily net
assets not exceeding $500 million and 0.475% to such assets exceeding $500
million.
DEAN WITTER DIVIDEND GROWTH SECURITIES. 0.625% to the Fund's average daily net
assets up to $250 million, scaled down at various asset levels to 0.30% on such
assets over $10 billion and 0.275% on such assets over $15 billion.
DEAN WITTER EUROPEAN GROWTH FUND. 1.0% to the portion of the daily net assets
not exceeding $500 million and scaled down at various asset levels to 0.90% to
such assets exceeding $2 billion. As compensation for its services provided
pursuant to the Sub-Advisory Agreement, the Investment Manager pays to Morgan
Grenfell 40% of its monthly compensation.
DEAN WITTER INTERNATIONAL SMALLCAP FUND. 1.25% to the Fund's average daily net
assets. As compensation for its services provided pursuant to the Sub-Advisory
Agreement, the Investment Manager pays to Morgan Grenfell 40% of its monthly
compensation.
DEAN WITTER JAPAN FUND. 1.0% to the Fund's average daily net assets. As
compensation for its services provided pursuant to the Sub-Advisory Agreement,
the Investment Manager pays 40% of its monthly compensation to Morgan Grenfell.
DEAN WITTER MARKET LEADER TRUST. 0.75% to the Fund's average daily net assets.
DEAN WITTER MID-CAP GROWTH FUND. 0.75% to the Fund's average daily net assets.
DEAN WITTER PACIFIC GROWTH FUND. 1.0% to the portion of the Fund's average
daily net assets not exceeding $500 million and scaled down at various asset
levels to 0.90% of the portion to such assets exceeding $2 billion. As
compensation for its services provided pursuant to the Sub-Advisory Agreement,
the Investment Manager pays to Morgan Grenfell 40% of its monthly compensation.
DEAN WITTER SPECIAL VALUE FUND. 0.75% to the Fund's average daily net assets.
DEAN WITTER VALUE-ADDED MARKET SERIES--EQUITY PORTFOLIO. 0.50% to the Fund's
average daily net assets up to $500 million, scaled down at various asset levels
to 0.425% on such assets exceeding $1 billion.
DEAN WITTER WORLD WIDE INVESTMENT TRUST. 1.0% to the Fund's average daily net
assets not exceeding $500 million and 0.95% to the portion of such assets
exceeding $500 million. As compensation for its services provided pursuant to
the Sub-Advisory Agreement, the Investment Manager pays to Morgan Grenfell 40%
of its monthly compensation.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund currently consists of two Portfolios: the International Equity
Portfolio and the Domestic Equity Portfolio. The investment objective of both
Portfolios is long-term capital appreciation. The investment objective of the
International Equity Portfolio and the investment objective of the Domestic
Equity Portfolio are fundamental policies and may not be changed without
shareholder approval of each respective Portfolio. There is no assurance that
the objective of each Portfolio will be achieved.
The International Equity Portfolio seeks to achieve its investment objective
by currently investing, under normal circumstances, at least 65% of its total
assets in the following Dean Witter Underlying Funds: Dean Witter European
Growth Fund, Dean Witter International SmallCap Fund, Dean Witter Japan Fund,
Dean Witter Pacific Growth Fund, and Dean Witter World Wide Investment Trust.
These Underlying Funds have been selected in order to give the International
Equity Portfolio as well as investors the opportunity for broad international
exposure. The Investment Manager will allocate that Portfolio's assets among the
selected Underlying Funds in accordance with the Portfolio's investment
objective, the Investment Manager's outlook for the various economies and
financial markets worldwide and the relative market valuation of the selected
Underlying Funds.
The Domestic Equity Portfolio seeks to achieve its investment objective by
currently investing, under normal circumstances, at least 65% of its total
assets in the following Dean Witter Underlying Funds: Dean Witter American Value
Fund, Dean Witter Capital Appreciation Fund, Dean Witter Capital Growth
Securities, Dean Witter Developing Growth Securities, Dean Witter Dividend
Growth Securities, Dean Witter Market Leader Trust, Dean Witter Mid-Cap Growth
Fund, Dean Witter Special Value Fund (contingent upon a "re-opening") and Dean
Witter Value-Added Market Series/Equity Portfolio. These Underlying Funds have
been selected in order to give the Domestic Equity Portfolio as well as
investors the opportunity for broad exposure to the U.S. equity markets. The
Portfolio will invest in those Underlying Funds which are representative of the
small, medium and large capitalization domestic equity markets. The Investment
Manager will allocate the Portfolio's assets among the selected Underlying Funds
in accordance with the Portfolio's investment objective, the Investment
Manager's outlook for the U.S. economy and financial markets and the relative
market valuation of the selected Underlying Funds.
The Investment Manager may vary the relative portions of each Portfolio's
assets invested in the Underlying Funds in response to changes in economic
conditions and international and/or domestic markets and therefore the
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percentages of each Portfolio's assets invested in any one Underlying Fund as
well as the number of the Underlying Funds in which each Portfolio may invest
may vary at any time. There are no minimum or maximum percentages in which each
Portfolio may invest in any Underlying Fund. Additionally, the Underlying Funds
in which each Portfolio may invest may be changed from time to time and
additional or different Underlying Funds may be added or substituted if such
Underlying Funds are deemed appropriate for investment by each respective
Portfolio.
Each Portfolio may invest up to 35% of its total assets in money market
instruments or cash. The money market instruments in which the Fund may invest
are securities issued or guaranteed by the U.S. Government (Treasury bills,
notes and bonds (including zero coupon securities)) American bank obligations;
Eurodollar certificates of deposit; obligations of American savings
institutions; fully insured certificates of deposit; and commercial paper of
American issuers rated within the two highest grades by Moody's Investors
Service Inc. ("Moody's") or Standard & Poor's Corporation ("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.
There may be periods during which 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 greater than 35% of each
Portfolio's net assets are invested in cash or money market instruments.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of either Portfolio of
the Fund and, as such, may be changed without shareholder approval.
INVESTMENT OBJECTIVES AND POLICIES OF THE UNDERLYING FUNDS
Set forth below are brief descriptions of the Investment Objectives and Policies
of the Underlying Funds in which the Portfolios of the Fund may invest.
Shareholders, or those who wish to invest in the Underlying Fund directly, are
referred to the Prospectuses of those funds for more detailed information.
DEAN WITTER AMERICAN VALUE FUND. The investment objective of this fund is
long-term capital growth consistent with an effort to reduce volatility. The
fund seeks to achieve its investment objective by investing in a diversified
portfolio of securities consisting principally of common stocks. The fund
utilizes an investment process that places primary emphasis on seeking to
identify industries, rather than individual companies, as prospects for capital
appreciation and whereby the Investment Manager seeks to invest assets of the
fund in industries it considers to be undervalued at the time of purchase and to
sell those it considers overvalued.
After selection of the fund's target industries, specific company
investments are selected. In this process, the Investment Manager seeks to
identify companies whose prospects are deemed attractive on the basis of an
evaluation of valuation screens and prospective company fundamentals.
Following selection of the fund's specific investments, the Investment
Manager will attempt to allocate the assets of the fund so as to reduce the
volatility of its portfolio. In doing so, the fund may hold a portion of its
portfolio in fixed-income securities (including zero coupon securities) in an
effort to moderate extremes of price fluctuations. The fund may invest up to 35%
of its portfolio in common stocks of non-U.S. companies, in companies in
non-classified industries, and in convertible debt securities, convertible
preferred securities, U.S. Government securities (securities issued or
guaranteed as to principal and interest by the United States or its agencies and
instrumentalities) and investment grade corporate debt securities when, in the
opinion of the Investment Manager, the projected total return on such securities
is equal to or greater than the expected total return on common stocks, or when
such holdings might be expected to reduce the volatility of the portfolio, and
in money market instruments under any one or more of the following
circumstances: (i) pending investment of proceeds of sale of fund shares or of
portfolio securities; (ii) pending settlement of purchases of portfolio
securities; or (iii) to maintain liquidity for the purpose of meeting
anticipated redemptions. Greater than 35% of the fund's total assets may be
invested in money market instruments to maintain, temporarily, a "defensive"
posture when, in the opinion of the Investment Manager, it is advisable to do so
because of economic or market conditions.
Because prices of stocks fluctuate from day to day, the value of an
investment in the fund will vary based upon the fund's investment performance.
The Fund's emphasis on "undervalued" industries reflects investment views which
are frequently contrary to general market assessments and which may involve
risks associated with departure from general investment opinions.
SPECIFIC INVESTMENT POLICIES
The fund has adopted the following specific policies which are not fundamental
investment policies and may be changed by the Board of Trustees.
1. At least 65% of the fund's total assets will be invested in common
stocks of U.S. companies which, at the time of purchase, were in undervalued
or moderately valued industries as determined by the Investment Manager,
except as stated in Paragraph (3) below.
2. Up to 35% of the value of the fund's total assets may be invested in:
(a) common stocks of non-U.S. companies, or companies in non-classified
industries, including American Depository Receipts (which are custody
receipts with respect to foreign securities)
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(the fund's investments in unlisted foreignsecurities are deemed to be
illiquid securities, which under the fund's current investment policies may
not in the aggregate amount to more than 15% of the fund's net assets); (b)
convertible debt securities (bonds, debentures, corporate notes, preferred
stock and other securities) which are convertible into common stock; (c)
U.S. Government securities and investment grade corporate debt securities,
when, in the opinion of the Investment Manager, the projected total return
on such securities is equal to or greater than the expected total return on
equity securities, or when such holdings might be expected to reduce the
volatility of the portfolio; and (d) money market instruments under any one
or more of the following circumstances: (i) pending investment of proceeds
of sale of shares of the fund or of portfolio securities; (ii) pending
settlement of purchases of portfolio securities; or (iii) to maintain
liquidity for the purpose of meeting anticipated redemptions.
3. Notwithstanding any of the foregoing limitations, the fund may invest
more than 35% of the fund's total assets in money market instruments to
maintain, temporarily, a "defensive" posture when, in the opinion of the
Investment Manager, it is advisable to do so because of economic or market
conditions, including, for example, times during which the Investment
Manager believes the risk, or volatility, relative to expected returns of
the securities it monitors, is excessive.
The foregoing limitations apply at the time of acquisition based on the last
determined market value of the fund's assets, and any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total assets will not require elimination of any security from the portfolio.
DEAN WITTER CAPITAL APPRECIATION FUND. The investment objective of this fund is
long-term capital appreciation. The fund seeks to achieve its investment
objective by investing, under normal circumstances, at least 65% of its total
assets in the common stocks of U.S. companies that, in the opinion of the
Investment Manager, offer the potential for either superior earnings growth
and/or appear to be undervalued.
The Investment Manager will base the selection of stocks for the fund's
portfolio on research and analysis, taking into account, among other factors, a
company's price/earnings ratio (that is whether the current stock price appears
undervalued in relation to earnings, projected cash flow, or asset value per
share; or the price-to-earnings ratio is attractive relative to the company's
underlying earnings growth rate), growth in sales, market-to-book ratio, the
quality of a company's balance sheet, sales-per-share and profitability in order
to determine whether the current market valuation is less than the Investment
Manager's view of a company's intrinsic value. Also, when reviewing investments
for selection, the Investment Manager will consider the following
characteristics of a company: capable management; attractive business niches;
pricing flexibility; sound financial and accounting practices and a demonstrated
ability or prospects to consistently grow revenues, earnings and cash flow.
Stocks may also be selected on the basis of whether the Investment Manager
believes that the potential exists for some catalyst (such as increased investor
attention, asset sales, a new product/innovation, or a change in management) to
cause the stock's price to rise. Such factors are part of the Investment
Manager's overall investment selection process.
The Investment Manager has no general criteria as to asset size, earnings or
industry type which would make an investment unsuitable for purchase by the
fund. In addition, since the Investment Manager is seeking investments in
companies whose securities may appear to be undervalued, there is no limitation
on the stock price of any particular investment. However, as a result of the
selection process, which focuses on fundamentals in relation to prices, such
review of investments will include companies with low-priced stocks. In this
category are large companies with low-priced stocks (so called "fallen angels")
which, in the opinion of the Investment Manager, may appear to be undervalued
because they are overlooked by many investors; may not be closely followed
through investment research and/or their prices may reflect pessimism about the
companies' (and/or their industries') outlook. Such companies, by virtue of
their stock price, may be takeover candidates. Low-priced stocks are also
associated with smaller companies whose securities' value may reflect a discount
because of smaller size and lack of research coverage, emerging growth companies
and private companies undergoing their initial public offering. The fund will
invest in companies of all sizes. For a discussion of the risks of investing in
the securities of such companies, see "Risk Considerations and Investment
Practices of the Underlying Funds" below.
Consequently, the fund looks for quality businesses with an investment
outlook based upon a mix of growth potential, financial strength and fundamental
value. The focus on price and fundamentals sets the fund apart from pure
"growth" or pure "value" funds. The fund's holdings will be widely diversified
by industry and company and under most circumstances, at the time of initial
purchase, the average position will be less than 1.5% of the fund's net assets.
In addition to U.S. common stock, up to 35% of the fund's total assets may
be invested in debt or preferred equity securities convertible into or
exchangeable for equity securities, rights and warrants, when considered by the
Investment Manager to be consistent with the fund's investment objective. (For a
discussion of the risks of investing in each of these securities, see "Risk
Considerations and Investment Practices of the Underlying Funds" below.)
The fund may also invest in other debt securities without regard to quality
or rating, if in the opinion of the Investment Manager such securities meet the
investment criteria of the fund. The fund will not purchase a non-investment
grade debt security (or junk bond) if, immediately after such purchase, the fund
would have more than 5% of its total assets invested in such securities.
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The fund may invest up to 10% of its assets in foreign securities, including
non-dollar denominated securities traded outside of the U.S. and U.S.
dollar-denominated securities such as American Depository Receipts ("ADRs").
(For a discussion of the risks of investing in foreign securities, see "Risk
Considerations" below.)
There may be periods during which, in the opinion of the Investment Manager,
market conditions warrant a reduction of some or all of the fund's securities
holdings. During such periods, the fund may adopt a temporary "defensive"
posture in which greater than 35% of its total assets is invested in money
market instruments or cash, including obligations issued or guaranteed as to
principal or interest by the United States Government, its agencies or
instrumentalities, certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of $1 billion or more, and
short-term commercial paper of corporations organized under the laws of any
state or political subdivision of the United States.
The securities in which the fund invests may or may not be listed on a
national stock exchange, but if they are not so listed, will generally have an
established over-the-counter market.
DEAN WITTER CAPITAL GROWTH SECURITIES. The investment objective of this fund is
long-term capital growth. The fund seeks to achieve its investment objective by
investing, under normal circumstances, at least 65% of its total assets in
common stocks. As part of its management of the fund, the Investment Manager
utilizes a two-stage computerized screening process. The first stage of the
process involves the screening of a database of approximately 3,000 companies
for those companies demonstrating a history of consistent growth in earnings and
revenues for the past several years. If further refinement of the list of
companies obtained from the first screen is required, those companies are then
applied against two additional screens designed to measure current earnings
momentum and current price valuations, respectively, in order to further refine
the list of companies for potential investment by the fund, which investment may
be on an equally-weighted basis. (Current earnings momentum refers to the rate
of change in earnings growth over the prior four quarters and current price
valuations refers to the current price of a company's stock in relation to a
theoretical value based upon current dividends, projected growth rates and the
rate of inflation.) Subject to the fund's investment objective, the Investment
Manager, without notice, may modify the foregoing screening process and/or may
utilize additional or different screening processes in connection with the
investment of the fund's assets. Dividend income will not be a consideration in
the selection of stocks for purchase.
Although the fund invests primarily in common stocks, the fund may invest up
to 35% of its total assets (taken at current value and subject to any
restrictions appearing elsewhere in this Prospectus), in any combination of the
following: (a) U.S. Government securities (securities issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities) and investment grade fixed-income securities; (b) convertible
securities; (c) money market instruments; (d) options on equity and debt
securities; and (e) futures contracts and related options thereon, as described
below. The fund may also purchase unit offerings (where corporate debt
securities are offered as a unit with convertible securities, preferred or
common stocks, warrants, or any combination thereof). U.S. Government securities
in which the fund may invest include zero coupon securities. Convertible
securities in which the fund may invest include bonds, debentures, corporate
notes, preferred stock and other securities. The fund may also purchase
securities on a when-issued or delayed delivery basis, may purchase or sell
securities on a forward commitment basis, and may purchase securities on a
"when, as and if issued" basis.
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 greater than 35% of its total assets are invested in cash or
money market instruments. Money market instruments in which the fund may invest
are securities issued or guaranteed by the U.S. Government (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 two highest
grades by Moody's or S&P or, if not rated, are issued by a company having an
outstanding debt issue rated at least AA by S&P or Aa by Moody's.
The fund may invest in securities of foreign companies. However, the fund
will not invest more than 25% of the value of its total assets, at the time of
purchase, in foreign securities (other than securities of Canadian issuers
registered under the Securities Exchange Act of 1934 or American Depository
Receipts, on which there is no such limit). The fund's investments in unlisted
foreign securities are subject to the overall restrictions applicable to
investments in illiquid securities (see "Investment Restrictions"). For a
discussion of the risks of investing in foreign securities, see "Risk
Considerations and Investment Practices" below.
DEAN WITTER DEVELOPING GROWTH SECURITIES. The Investment objective of this fund
is long-term capital growth. The fund seeks to achieve capital growth which
significantly exceeds the historical total return of common stocks as measured
by the Standard & Poor's 500 index. The primary emphasis is on the securities of
smaller and medium-sized companies that, in the opinion of the Investment
Manager, have the potential to grow much more rapidly than the economy; at
times, investments may also be made in the securities of larger, established
companies which also have such growth potential. The fund will normally invest
at least 65% of its total assets in the securities of such companies. In
addition to common stock, this portion of the portfolio may also include
convertible securities, preferred stocks and warrants.
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The Investment Manager attempts to identify companies whose earnings growth
will be significantly higher than the average. Dividend income is not generally
a consideration in the selection of stocks for purchase.
The Investment Manager focuses its stock selection for the fund upon a
diversified group of emerging growth companies which have moved beyond the
difficult and extremely risky "start-up" phase and which at the time of
selection show positive earnings with the prospects of achieving significant
further profit gains in at least the next two-to-three years after acquisition.
New technologies, techniques, products or services, cost-reducing measures,
changes in management, capitalization or asset deployment, changes in government
regulations or favorable shifts in other external circumstances may all
contribute to the anticipated phase of growth.
The application of the fund's Investment policies is basically dependent
upon the judgment of the Investment Manager. The proportions of the fund's
assets invested in particular industries will shift from time to time in
accordance with the judgment of the Investment Manager.
The fund may invest up to 35% of its total assets in corporate debt
securities which are rated at the time of purchase Baa or better by Moody's or
BBB or better by S&P or which, if not rated, are deemed to be of comparable
quality by the Investment Manager, and money market instruments. There may be
periods during which, in the opinion of the Investment Manager, general 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
greater than 35% of its total assets are invested in cash or money market
instruments, including obligations issued or guaranteed as to principal or
interest by the United States Government, its agencies or instrumentalities,
certificates of deposit, bankers' acceptances and other obligations of domestic
banks having total assets of $1 billion or more, and short-term commercial paper
of corporations organized under the laws of any state or political subdivision
of the United States.
The securities in which the fund invests may or may not be listed on a
national stock exchange, but if they are not so listed, will generally have an
established over-the-counter market.
The fund may invest in foreign securities, real estate investment trusts and
private placements, enter into repurchase agreements, borrow money for the
purpose of leveraging its investments, purchase securities on a when-issued or
delayed delivery basis, purchase or sell securities on a forward commitment
basis, purchase securities on a "when, as and if issued" basis, and lend its
portfolio securities, as discussed under "Risk Considerations and Investment
Practices of the Underlying Funds" below.
DEAN WITTER DIVIDEND GROWTH SECURITIES. The investment objective of the fund is
to provide reasonable current income and long-term growth of income and capital.
The fund seeks to achieve its investment objective primarily through investments
in common stock of companies with a record of paying dividends and the potential
for increasing dividends. Net asset value of the fund's shares will fluctuate
with changes in market values of portfolio securities. The fund will attempt to
avoid speculative securities or those with speculative characteristics.
SPECIFIC INVESTMENT POLICIES
This fund has adopted the following specific policies which are not fundamental
investment policies and which may be changed by the fund's Board of Directors:
1. Up to 30% of the value of the fund's total assets may be invested in:
(a) convertible debt securities, convertible preferred securities, U.S.
Government securities (securities issued or guaranteed as to principal and
interest by the United States or its agencies and instrumentalities),
investment grade corporate debt securities and/or money market instruments
when, in the opinion of the Investment Manager, the projected total return
on such securities is equal to or greater than the expected total return on
equity securities or when such holdings might be expected to reduce the
volatility of the portfolio (for purposes of this provision, the term "total
return" means the difference between the cost of a security and the
aggregate of its market value and income earned); or (b) in money market
instruments under any one or more of the following circumstances: (i)
pending investment of proceeds of sale of fund shares or of portfolio
securities; (ii) pending settlement of purchases of portfolio securities; or
(iii) to maintain liquidity for the purpose of meeting anticipated
redemptions.
2. Notwithstanding any of the foregoing limitations, the fund may invest
more than 30% of its total assets in money market instruments to maintain,
temporarily, a "defensive" posture when, in the opinion of the Investment
Manager, it is advisable to do so because of economic or market conditions.
The foregoing limitations will apply at the time of acquisition based on the
last determined value of the fund's assets. Any subsequent change in any
applicable percentage resulting from fluctuations in value or other change in
total assets will not require elimination of any security from the portfolio.
The fund may purchase securities on a when-issued or delayed delivery basis, may
purchase or sell securities on a forward commitment basis and may purchase
securities on a "when, as and if issued" basis.
DEAN WITTER EUROPEAN GROWTH FUND. The investment objective of this fund is to
maximize capital appreciation. The fund seeks to achieve its investment
objective by investing at least 65% of its total assets in securities issued by
issuers located in countries located in Europe. Such issuers will include
companies (i) which are organized under the laws of a European country and have
a principal office in a European country, or (ii) which derive 50% or more of
their total revenues from
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business in Europe, or (iii) the equity securities of which are traded
principally on a stock exchange in Europe. The securities invested in will
primarily consist of equity securities issued by companies based in European
countries, but may also include fixed-income securities issued or guaranteed by
European governments (including zero coupon treasury securities), when it is
deemed that such investments are consistent with the fund's investment
objective. The principal countries in which such issuers will be located are
France; the United Kingdom; Germany; the Netherlands; Spain; Sweden; Switzerland
and Italy. The fund currently intends to invest more than 25% of its total
assets in the United Kingdom. As such, the investment performance of the fund
will be subject to social, political and economic events occurring in the United
Kingdom to a greater extent than those occurring in other European countries.
The remainder of the fund's portfolio equalling, at times, up to 35% of its
total assets, may be invested in equity and/or government and convertible
securities issued by issuers located anywhere in the world, including the United
States, subject to its investment objective. In addition, this portion of its
portfolio will consist of various other financial instruments such as forward
foreign exchange contracts, futures contracts and options (see below).
It is anticipated that the securities held by the fund in its portfolio will
be denominated, principally, in liquid European currencies. Such currencies
include the German mark, French franc, British pound, Dutch guilder, Swiss
franc, Swedish krona, Italian lira, and Spanish peseta. In addition, the fund
may hold securities denominated in the European Currency Unit (a weighted
composite of the currencies of member states of the European Monetary System).
Securities of issuers within a given country may be denominated in the currency
of a different country.
The fund may also invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs) or
other similar securities convertible into securities of foreign issuers (as
described below).
DEAN WITTER INTERNATIONAL SMALLCAP FUND. The investment objective of this fund
is long-term growth of capital. The fund seeks to achieve its investment
objective by investing, under normal circumstances, at least 65% of its total
assets in equity securities of "small capitalization" companies located outside
of the United States. A "small capitalization" company is defined as being, at
the time of purchase of its equity securities by the fund, among the smallest
capitalized companies (where capitalization is calculated by multiplying the
total number of outstanding shares of common stock of the company by their
market price and by ranking the resulting companies from smallest to largest
capitalization) principally located in a given country, whose aggregate
capitalizations comprise no more than 25% of the total market capitalization of
the country. Equity securities in which the fund may invest include common
stocks, rights or warrants to purchase common stocks and securities convertible
into common stocks. The fund will invest in securities issued by issuers located
in at least three countries outside of the U.S. An issuer of a security will be
considered to be located in a given country if it: (i) is organized under the
laws of the country; (ii) derives at least 50% of its revenues from goods
produced or sold, investments made, or services performed in the country; (iii)
maintains at least 50% of its assets in the country; or (iv) has securities
which are principally traded on a stock exchange in the country. The fund
currently intends to invest, from time to time, more than 25% of its total
assets in securities issued by issuers located in each of the United Kingdom and
Japan.
The remainder of the fund's portfolio equalling, at times, up to 35% of the
fund's total assets, may be invested in (i) securities issued by companies whose
market capitalizations place them outside the fund's definition of "small
capitalization" and/or (ii) fixed-income securities issued or guaranteed by
foreign governments. In addition, this portion of the fund's portfolio will
consist of various other financial instruments such as forward foreign exchange
contracts, futures contracts and options (see below).
The fund may also invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs) or
other similar securities convertible into securities of foreign issuers (as
described below).
DEAN WITTER JAPAN FUND. The investment objective of this fund is long-term
capital appreciation. The fund seeks to achieve its investment objective by
investing, under normal circumstances, at least 65% of its total assets in
equity securities issued by issuers located in Japan. Such issuers will include
companies (i) which are organized under the laws of Japan and have a principal
office in Japan; (ii) which derive 50% or more of their total revenues from
operating business(es) in Japan; or (iii) the equity securities of which are
traded principally on a stock exchange in Japan. Equity securities in which the
fund may invest include common and preferred stocks and rights or warrants to
purchase common stocks. The fund may invest up to 25% of its total assets in
equity securities of Japanese companies traded on the Second Sections of the
Main Japanese exchanges and in the over-the-counter market. These would
generally be smaller companies with above-average growth potential.
The remainder of the fund's portfolio equalling, at times, up to 35% of the
fund's total assets, may be invested in fixed-income and convertible securities
of issuers located in Japan or guaranteed by the Japanese government when it is
deemed that such investments are consistent with the fund's investment
objective. This remainder may also include equity, government, fixed-income and
convertible securities issued by issuers located in developed economies in Asia,
Europe and North America, including the United States, subject to the fund's
investment objective. Although the fund may invest up to 35% of its net assets
in fixed-income and convertible
secu-
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rities which are either not rated or rated below investment grade, the fund has
no current intention of investing in excess of 10% of its net assets in unrated
or lower rated convertible securities nor in excess of 5% of its net assets in
unrated or lower rated non-convertible debt securities. In addition, this
portion of the fund's portfolio will consist of various other financial
instruments such as forward foreign exchange contracts, futures contracts and
options (see below).
The fund may also invest in securities of Japanese and other foreign issuers
in the form of American Depository Receipts (ADRs), European Depository Receipts
(EDRs) or other similar securities convertible into securities of foreign
issuers (as described below).
DEAN WITTER MARKET LEADER TRUST. The investment objective of this fund is
long-term growth of capital. 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 excess 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 of the Underlying Funds" 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 this 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, 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 this 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
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; Euro-dollar certificates of deposit; obligations of savings
institutions; fully insured certificates of deposit; and
commer-
13
<PAGE>
cial 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.
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 this 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 of the Underlying Funds" 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.
This 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 of the Underlying Funds" below.
DEAN WITTER MID-CAP GROWTH FUND. The investment objective of this fund is
long-term capital growth. This fund seeks to achieve its investment objective by
investing, under normal circumstances, at least 65% of its total assets in a
diversified portfolio of domestic and foreign equity securities of "mid-cap"
companies. A mid-cap company is a company whose market capitalization falls
within the range of $250 million to $5 billion. The fund may invest up to 35% of
its total assets in (i) U.S. Government Securities and investment grade
corporate debt securities; or (ii) equity securities of companies with market
capitalizations which fall outside of the range of $250 million to $5 billion at
the time of purchase as long as such investments are consistent with the fund's
investment objective. The fund may invest up to 35% of its total assets in the
equity securities of non-U.S. companies, including American or other Depository
Receipts, rights, warrants, and the direct purchase of foreign securities.
Equity securities in which the fund may invest include common stocks and
securities convertible into common stocks. The fund utilizes an investment
process that places primary emphasis on seeking to identify industries, rather
than individual companies, as prospects for capital appreciation and whereby the
Investment Manager seeks to invest assets of the fund in industries it considers
to be attractive at the time of purchase and to sell those it considers
overvalued. The Investment Manager will invest principally in those mid-cap
companies that in the opinion of the Investment Manager have above-average
relative growth potential. Mid-cap companies typically have a better growth
potential than their large-cap counterparts because they are still in the early
and more dynamic period of their corporate existences. Often mid-size companies
and the industries in which they are focused are still evolving as opposed to
the more mature industries served by large-cap companies. Moreover, mid-cap
companies are not considered "emerging" stocks, nor are they as volatile as
small-cap firms. This is due to the fact that mid-cap companies have increased
liquidity, attributable to their larger market capitalization as well as longer
and more established track records, and a stronger market presence and dominance
than small-cap firms. Consequently, because of the better growth inherent in
these companies and their industries, mid-cap companies offer superior return
potential to large-cap companies, yet owing to their relatively larger size and
better recognition in the investment community, they have a reduced risk profile
compared to smaller, emerging or micro-cap companies.
In selecting stocks within the mid-cap universe, the Investment Manager will
use an industry approach that seeks to diversify the assets of the fund in
approximately 18 to 35 industries. The fund will hold less than 5% of its net
assets in any one security and will hold less than 10% of its net assets in any
one industry. Companies will be selected based on at least three-year track
records, and purchases will be primarily focused on companies that: (1) have the
potential for above-average relative earnings growth; (2) are focused in
industries that are rapidly expanding or have the potential to see increasing
sales or earnings; (3) historically have had well-defined and recurring
revenues; or (4) are attractive based on an assessment of private market or
franchise values.
After selection of the fund's target industries, specific company
investments are selected. In this process, the Investment Manager seeks to
identify companies whose prospects are deemed attractive on the basis of an
evaluation
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<PAGE>
of valuation screens and prospective company fundamentals. From the total of all
companies included in the industry valuation process, the Investment Manager
selects a limited number from each industry as representative of that industry.
Such selections are made on the basis of various criteria, including size and
quality of a company, the visibility of its earnings and various valuation
parameters. Valuation screens may include dividend discount model values,
price-to-book ratios, price-to-cash flow values, relative and absolute
price-to-earnings ratios and ratios of price-earnings multiples to earnings
growth. Price and earnings momentum ratings derived from external sources are
also factored into the stock selection decision. Those companies which the
Investment Manager believes to be attractive investments are finally selected
for inclusion in the fund. For a discussion of the risks of mid-cap stocks, see
"Risk Considerations" below.
Common stocks, particularly those sought for possible capital appreciation,
have historically experienced a great amount of price fluctuation. The
Investment Manager believes it is desirable to attempt to reduce the risks of
extreme price fluctuations even if such an attempt results, as it likely will at
times, in reducing the probabilities of obtaining greater capital appreciation.
Accordingly, the Investment Manager's investment process incorporates elements
which may reduce, although certainly not eliminate, the volatility of a
portfolio. The fund may hold a portion of its portfolio in investment grade
fixed-income securities, including convertible securities, in an effort to
moderate extremes of price fluctuation. The determination of the appropriate
asset allocation as between equity and fixed-income investments will be made by
the Investment Manager in its discretion, based upon its evaluation of economic
and market conditions.
DEAN WITTER PACIFIC GROWTH FUND. The investment objective of this fund is to
maximize capital appreciation. The fund seeks to achieve its investment
objective by investing at least 65% of its total assets in securities issued by
issuers located in Asia, Australia and New Zealand. Such issuers will include
companies which are organized under the laws of an Asian country, Australia or
New Zealand and have a principal office in an Asian country, Australia or New
Zealand, or which derive 50% or more of their total revenues from business in an
Asian country, Australia or New Zealand. The securities invested in will
primarily consist of equity securities issued by companies based in Asian
countries, Australia and New Zealand which the Investment Manager and/or
Sub-Adviser believe are most likely to help the fund meet its investment
objective, but may also include fixed-income securities issued or guaranteed by
(or the direct obligations of) the governments of such countries (including zero
coupon treasury securities), when it is deemed by the Investment Manager or
Sub-Adviser that such investments are consistent with the fund's investment
objective. The principal countries in which such issuers will be located are
Japan, Australia, Malaysia, Singapore, Hong Kong, Thailand, the Philippines,
Indonesia, Taiwan and South Korea. The fund may invest more than 25% of its
total assets in Japan, reflecting the dominance of the Japanese stock market in
the Pacific basin. The fund also may invest over 25% of its total assets in
securities issued by issuers located in Hong Kong. The fund may also purchase
securities issued by various agencies and instrumentalities of the U.S.
Government and may invest up to 10% of its total assets in securities issued by
other investment companies in order to participate in certain foreign markets
where foreigners are prohibited from investing directly in the securities of
foreign issuers.
The remainder of the fund's portfolio equalling, at times, up to 35% of the
fund's total assets, may be invested in equity and/or fixed-income and
convertible securities issued by issuers located anywhere in the world,
including the United States, subject to the fund's investment objective. In
addition, this portion of the fund's portfolio will consist of various other
financial instruments such as forward foreign exchange contracts, futures
contracts and options (see below).
It is anticipated that the securities held by the fund in its portfolio will
be denominated, principally, in the liquid Asian currencies and the Australian
dollar. Such currencies include the Japanese yen, Malaysian ringgit, Singapore
dollar, Hong Kong dollar, Thai baht, Philippine peso, Indonesia rupiah, Taiwan
dollar and South Korean won. Securities of issuers within a given country may be
denominated in the currency of a different country.
The fund may also invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs) or other similar securities convertible into
securities of foreign issuers (as described below).
DEAN WITTER SPECIAL VALUE FUND. The investment objective of this fund is
long-term capital appreciation. This fund seeks to achieve its objectives by
investing primarily in equity securities issued by companies whose equity market
capitalization, at the time of purchase, falls within the range of $100 million
to $1 billion and that, in the opinion of the Investment Manager, appear
undervalued relative to the marketplace or to investments in similar companies.
Under normal market conditions, the fund will invest at least 65% of its total
assets in common stocks issued by these small-sized companies. Up to 35% of the
fund's total assets may be invested in common stocks not meeting the foregoing
small company equity market parameters, in debt or preferred equity securities
convertible into or exchangeable for equity securities, in non-convertible debt
or preferred equity securities, and in rights and warrants.
The Investment Manager intends to pursue a value-oriented approach in
selecting securities for the fund's portfolio. This approach seeks to identify
securities whose market value, in the Investment Manager's view, is less than
their intrinsic value. The Investment Manager believes that securities of
certain small companies often trade at a discount from their intrinsic value
(sometimes also referred to as "business value" or "investment worth").
15
<PAGE>
Stocks of small companies are often under-researched and not widely
recognized by stock analysts or the financial press and, as a result, may be
less efficiently priced than larger, better-known companies. In addition, small
companies may have other unique attributes which make them relatively
undervalued in the market place compared to other similar larger companies. The
Investment Manager will attempt to identify and invest in such securities for
the fund with the expectation that the "value discount" may narrow over time and
lead to capital appreciation for the fund.
As part of the value-oriented approach, the Investment Manager, based on
research and analysis, will seek to identify companies with attributes which the
Investment Manager believes provide growth opportunities but are not fairly
valued in the market place. Such attributes may include, among other things, one
or more of the following: valuable franchises or other intangibles; ownership of
valuable trademarks or trade names; control of distribution networks or of other
market share for particular products; ownership of real estate, the value of
which is understated; underutilized liquidity and other factors that would
identify the issuer as a potential takeover target or turnaround candidate.
In addition to, or instead of, seeking companies with attributes such as
those described above, the Investment Manager may select securities for
investment by the fund on the basis of the Investment Manager's belief that the
potential exists for some catalyst to cause a stock's price to rise. Such a
catalyst might include, among other things, one or more of the following:
increased investor attention, asset sales, corporate restructurings or
reorganizations, a cyclical turnaround of a depressed business or industry, a
new product/innovation, or significant changes in management and regulatory or
environmental shifts.
In its security selection process, the Investment Manager will focus
initially on securities with market-to-book ratios and price-earnings ratios
which are lower than those of the general market averages or those of securities
of similar companies, although the fund is not restricted to selecting only
securities with those characteristics if other indicators of a value discount
exist. In evaluating a company as a potential investment of the fund, the
Investment Manager will consider factors such as the company's dividend yield
(if any), growth in sales, balance sheet, average sales-per-share, cash flow per
share, management capabilities, attractiveness of business opportunities,
pricing flexibility, financial and accounting practices and an ability or
prospects to increase revenues, earning and cash flow, and profitability, in an
effort to determine whether the company's intrinsic value is greater than its
market price.
The fund's strategy of investing in small companies will involve investment
in a large number of portfolio securities which may be volatile and long-term in
nature. Such investments may include "micro-cap" companies (generally, companies
with equity market capitalization of less than $150 million) which represent
some of the smallest and least liquid equity securities in the U.S. markets. An
investment in the fund, therefore, should be considered a long-term holding and
not a complete investment program and may not be suitable for all investors, For
a further discussion of the risks of investing in smaller companies, see "Risk
Considerations and Investment Practices of the Underlying Funds" below.
Fixed-income securities in which the fund may invest include corporate notes
and bonds and obligations issued or guaranteed by the U.S. 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
NRSRO including Moody's, 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.
This fund also may invest up to 20% of its total assets in convertible
fixed-income securities rated below investment grade or, if unrated, of
comparable quality as determined by the Investment Manager. In addition, the
fund may invest up to 5% of its total assets in non-convertible fixed-income
securities rated below investment grade or, if unrated, of comparable quality as
determined by the Investment Manager. Securities below investment grade are the
equivalent of high yield, high risk bonds (commonly known as " junk bonds"). The
fund will not invest in fixed-income securities that are in default in payment
of principal or interest. In the event that the fund's investments in securities
rated below investment grade, including downgraded securities, constitute more
than 20% (in the case of convertible fixed-income securities) or 5% (in the case
of non-convertible fixed-income securities) 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 of
the Underlying Funds" 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.
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<PAGE>
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, 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 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); securities issued by the 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 of 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.
The fund may invest in American Depository Receipts and securities of
Canadian issuers registered under the Securities Act of 1934, but under current
policy the fund will not otherwise invest in foreign securities. 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 of the Underlying Funds" below.
DEAN WITTER VALUE-ADDED MARKET SERIES--EQUITY PORTFOLIO. The investment
objective of the Equity Portfolio, currently this fund's single investment
portfolio, is to achieve a high level of total return on its assets through a
combination of capital appreciation and current income. The fund will seek to
attain the Equity Portfolio's investment objective by investing on an
equally-weighted basis in a diversified portfolio of common stocks of the
companies which are included in the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500 Index"). The S&P 500 Index consists of 500 common stocks
selected by S&P, most of which are listed on the New York Stock Exchange.
Inclusion of a stock in the S&P 500 Index implies no opinion by S&P as to the
quality of the stock as an investment. The S&P 500 Index is determined, composed
and calculated by S&P without regard to the fund. S&P is neither a sponsor of,
nor in any way affiliated with, the fund, and S&P makes no representation or
warranty, express or implied, on the advisability of investing in the fund or as
to the ability of the S&P Index to track general stock market performance, and
S&P disclaims all warranties of merchantability or fitness for a particular
purpose or use with respect to the S&P Index or any data included therein. S&P
has no connection with the fund other than the licensing to the Investment
Manager of the use of the S&P 500 Index in connection with the fund.
The fund invests in the stocks included in the S&P 500 Index on an
equally-weighted basis; that is, to the extent practicable and subject to the
specific investment policies and restrictions described below, an equal portion
of the fund's assets is invested in each of the 500 securities in the S&P 500
Index. This differs from the S&P 500 Index and nearly all other major indexes,
which generally are weighted on a market-capitalization basis. For example, the
50 largest capitalization issuers in the S&P 500 Index represent approximately
45% of the S&P 500 Index. However, in accordance with its investment policies,
the fund will strive to maintain each stock holding equally, so that, subject to
the specific investment policies and investment restrictions described below,
approximately 0.20 of 1% of the fund's total invested assets will be invested in
each of the 500 companies included in the S&P 500 Index. The equal-weighting
technique is based on the Investment Manager's statistical analysis that most
portfolio performance is usually generated by only one-quarter to one-third of
the portfolio. Since there is no certainty that any specific company or industry
selection, even within a broad-based index such as the S&P 500 Index, will
achieve superior performance, the Investment Manager believes equal-weighting
may benefit the fund in seeking to attain its investment objective.
The holdings of the fund will be adjusted by the Investment Manager not less
than quarterly to reflect changes in the fund's asset levels and in the relative
values of the common stocks in the fund's portfolio so that following each
adjustment the value of the fund's investment in each security will be equal to
the extent practicable. In addition, whenever a company is eliminated from or
added to the S&P 500 Index, the fund will sell or purchase the stock of such
company, as the case may be, as soon as practicable. Accordingly, securities may
be purchased and sold by the fund when such purchases and sales would not be
made under traditional investment criteria.
In addition, the Investment Manager may eliminate one or more securities (or
elect not to increase the fund's position in such securities), notwithstanding
the continued listing of such securities in the S&P 500 Index, in the
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following circumstances: (a) the stock is no longer publicly traded, such as in
the case of a leveraged buyout or merger; (b) an unexpected adverse development
with respect to a company, such as bankruptcy or insolvency; (c) in the view of
the Investment Manager, there is a high degree of risk with respect to a company
that bankruptcy or insolvency will occur; or (d) in the view of the Investment
Manager, based on its consideration of the price of a company's securities, the
depth of the market in those securities and the amount of those securities held
or to be held by the fund, retaining shares of a company or making any
additional purchases would be inadvisable because of liquidity risks. The
Investment Manager will monitor on an ongoing basis all companies falling within
any of the circumstances described in this paragraph, and will return such
company's shares to the fund's portfolio, or recommence purchases, when and if
those conditions cease to exist.
DEAN WITTER WORLD WIDE INVESTMENT TRUST. The investment objective of this fund
is to seek to obtain total return on its assets primarily through long-term
capital growth and to a lesser extent from income. The fund will seek to achieve
such objective through investments in all types of common stocks and equivalents
(such as convertible debt securities and warrants), preferred stocks and bonds
and other debt obligations of domestic and foreign companies and governments and
international organizations. There is no limitation on the percent or amount of
the fund's assets which may be invested for growth or income.
The application of the fund's investment policies is basically dependent
upon the judgment of the Investment Manager and the Sub-Adviser. As a
fundamental policy, the fund will maintain a flexible investment policy and,
based on a worldwide investment strategy, will invest in a diversified portfolio
of securities of companies and governments located throughout the world.
The percentage of the fund's assets invested in particular geographic areas
will shift from time to time in accordance with the judgment of the Investment
Manager and the Sub-Adviser. The Investment Manager will meet with the
Sub-Adviser, at least quarterly, to discuss the fund's overall strategy and the
geographic distribution of the fund's assets between the United States and the
rest of the world. The final determination of such geographic distribution will
be made by the Investment Manager. Once the determination of such geographic
distribution has been made, each of the Investment Manager and the Sub-Adviser
will be responsible for the individual security selection within its geographic
areas of responsibility and will act on behalf of the fund in the purchase, sale
and disposition of assets in such areas.
Notwithstanding the fund's investment objective of seeking total return, the
fund may, for defensive purposes, without limitation, invest in: obligations of
the United States Government, its agencies or instrumentalities; cash and cash
equivalents in major currencies; repurchase agreements; money market
instruments; and high quality commercial paper.
The fund may also invest in securities of foreign issuers in the form of
ADRs, EDRs 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. EDRs are European receipts evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
United States securities markets and EDRs, in bearer form, are designed for use
in European securities markets.
The fund may also invest in repurchase agreements, private placements, zero
coupon securities, foreign investment companies and real estate investment
trusts, may purchase securities on a when-issued or delayed delivery 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 of the Underlying Funds" below.
To hedge against adverse price movements in the securities held in its
portfolio and the currencies in which they are denominated (as well as in the
securities it might wish to purchase and their denominated currencies) the fund
may engage in transactions in forward foreign currency exchange contracts,
options on securities and currencies, and futures contracts on securities,
currencies and indexes and options on such futures contracts. The fund may also
write (sell) put and call options on securities to aid in achieving its
investment objective. A discussion of these transactions follows under "Risk
Considerations and Investment Practices of the Underlying Funds" below and is
supplemented by further disclosure in the Statement of Additional Information.
RISK CONSIDERATIONS AND INVESTMENT PRACTICES OF THE UNDERLYING FUNDS
The net asset value of each Portfolio 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. At times,
purchases or redemptions of the Underlying Funds by the Fund of Funds could
adversely impact the Underlying Fund. An Underlying Fund may be required to sell
securities at inopportune times to fund redemption requests. In addition, there
may be tax consequences associated with sales of securities and such sales may
also increase transaction costs. The Adviser will seek to minimize the impact of
allocation decisions on the Underlying Funds and may, at times, allocate or
re-allocate assets in greater or lesser amounts among funds than it
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otherwise would have had the Adviser not taken such factors into account. A
general description and the risks involved of the various investment practices
and techniques which some or all of the Underlying Funds (in this section "fund"
or "funds") may engage in is set forth below. A more detailed discussion can be
found in the Fund's Statement of Additional Information as well as in the
Prospectus and Statement of Additional Information of each Underlying Fund.
FOREIGN SECURITIES. 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 a fund's investments.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of a funds' 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.
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 a
fund's assets and any effects of foreign social, economic or political
instability. Political and economic developments in Asia may have profound
effects upon the value of a large segment of a fund's portfolio. 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 fund trades effected in such markets. Inability to dispose of
portfolio securities due to settlement delays could result in losses to a 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.
The foreign securities in which the Fund will be investing through its
investments in the Underlying Funds may be issued by issuers located in
developing countries. Compared to the United States and other developed
countries, developing countries may have relatively unstable governments,
economies based on only a few industries, and securities markets which trade a
small number of securities. Prices of these securities tend to be especially
volatile and, in the past, securities in these countries have offered greater
potential for gain (as well as loss) than securities of companies located in
developed countries.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Certain Underlying Funds may enter
into forward foreign currency exchange contracts ("forward contracts") in
connection with their 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.
A fund may enter into forward contracts as a hedge against fluctuations in
future foreign exchange rates.
A fund will enter into forward contracts under various circumstances. When a
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, a fund's Investment Manager or Adviser or
Sub-Adviser believe that the currency of a particular foreign country 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, a 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.
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This method of hedging, called "cross-hedging," will be selected by the
Investment Manager or Adviser or Sub-Adviser 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 a fund's Investment Manager or Adviser or Sub-Adviser
anticipate 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 a fund's
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. A 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 or Adviser or Sub-Adviser. A 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. A fund may be
limited in its ability to enter into hedging transactions involving forward
contracts by the Internal Revenue Code requirements relating to qualification as
a regulated investment company.
OPTIONS AND FUTURES TRANSACTIONS. Certain of the Underlying Funds may purchase
and sell (write) call and put options on (i) portfolio securities which are
denominated in either U.S. dollars or foreign currencies; (ii) stock indexes;
and (iii) the U.S. dollar and foreign currencies. Such options are or may in the
future be listed on several U.S. and foreign securities exchanges or may be
traded in over-the-counter transactions ("OTC options"). OTC options are
purchased from or sold (written) to dealers or financial institutions which have
entered into direct agreements with the fund.
A fund is permitted to write covered call options on portfolio securities
and the U.S. dollar and foreign currencies, without limit, in order to hedge
against the decline in the value of a security or currency in which such
security is denominated (although such hedge is limited to the value of the
premium received) and to close out long call option positions. A fund may write
covered put options, under which the fund incurs an obligation to buy the
security (or currency) underlying the option from the purchaser of the put at
the option's exercise price at any time during the option period, at the
purchaser's election.
A fund may purchase listed and OTC call and put options in amounts equalling
up to 5% of its total assets. A fund may purchase call options to close out a
covered call position or to protect against an increase in the price of a
security it anticipates purchasing or, in the case of call options on a foreign
currency, to hedge against an adverse exchange rate change of the currency in
which the security it anticipates purchasing is denominated vis-a-vis the
currency in which the exercise price is denominated. A fund may purchase put
options on securities which it holds in its portfolio to protect itself against
a decline in the value of the security and to close out written put positions in
a manner similar to call option closing purchase transactions. There are no
other limits on a fund's ability to purchase call and put options other than
compliance with the foregoing policies.
A fund may purchase and sell futures contracts that are currently traded, or
may in the future be traded, on U.S. and foreign commodity exchanges on
underlying portfolio securities, on any currency ("currency" futures), on U.S.
and foreign fixed-income securities ("interest rate" futures) and on such
indexes of U.S. or foreign equity or fixed-income securities as may exist or
come into being ("index" futures). A fund may purchase or sell interest rate
futures contracts for the purpose of hedging some or all of the value of its
portfolio securities (or anticipated portfolio securities) against changes in
prevailing interest rates. A fund may purchase or sell index futures contracts
for the purpose of hedging some or all of its portfolio (or anticipated
portfolio) securities against changes in their prices. A fund may purchase or
sell currency futures contracts to hedge against an anticipated rise or decline
in the value of the currency in which a portfolio security is denominated
vis-a-vis another currency. As a futures contract purchaser, a fund incurs an
obligation to take delivery of a specified amount of the obligation underlying
the contract at a specified time in the future for a specified price. As a
seller of a futures contract, a fund incurs an obligation to deliver the
specified amount of the underlying obligation at a specified time in return for
an agreed upon price.
A fund also may purchase and write call and put options on futures contracts
which are traded on an exchange and enter into closing transactions with respect
to such options to terminate an existing position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. A fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
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RISKS OF OPTIONS AND FUTURES TRANSACTIONS. A fund may close out its position as
writer of an option, or as a buyer or seller of a futures contract, only if a
liquid secondary market exists for options or futures contracts of that series.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options may generally only be closed out by entering into a
closing purchase transaction with the purchasing dealer. 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 and options transactions 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 or Adviser or Sub-Adviser 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. For example,
if a fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the fund would lose money on the sale. Another risk
which will arise in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities, currencies
and indexes subject to futures contracts (and thereby the futures contract
prices) may correlate imperfectly with the behavior of the U.S. dollar cash
prices of a fund's portfolio securities and their denominated currencies. See
the Statement of Additional Information for a further discussion of these risks.
REPURCHASE AGREEMENTS. Certain Underlying Funds may enter into repurchase
agreements, which may be viewed as a type of secured lending, and which
typically involve the acquisition by a 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, a fund follows procedures to minimize such risks. These procedures
include effecting repurchase transactions only with large, well-capitalized and
well-established financial institutions and maintaining adequate
collateralization.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Certain Underlying Funds may
also use reverse repurchase agreements and dollar rolls as part of their
investment strategy. Reverse repurchase agreements involve sales by a fund of
portfolio assets concurrently with an agreement by that fund to repurchase the
same assets at a later date at a fixed price. A fund may enter into dollar rolls
in which the fund sells securities and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. Reverse repurchase agreements and dollar rolls involve the risk that the
market value of the securities the fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the fund's use of proceeds of the agreement may
be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the fund's obligation to repurchase the securities.
Reverse repurchase agreements and dollar rolls are speculative techniques
involving leverage, and are considered borrowings by a fund.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From time
to time, in the ordinary course of business, certain of the Underlying Funds 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. There
is no overall limit on the percentage of the fund's assets which may be
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis. 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 a fund's net asset
value.
WHEN, AS AND IF ISSUED SECURITIES. Certain Underlying Funds 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. There is no overall limit on the
percentage of a fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage of
a 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.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased by
certain Underlying Funds may be zero coupon securities. Such securities are
purchased at a discount from their face amount, giving the purchaser the right
to receive their full value at maturity. The interest earned on such securities
is, implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner of
a zero coupon security will be
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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 a 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.
PRIVATE PLACEMENTS. Certain Underlying Funds may invest up to either 5% or 10%
of their 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 not readily marketable.
(Securities eligible for resale pursuant to Rule 144A under the Securities Act,
and determined to be liquid pursuant to the procedures discussed in the
following paragraph, are not subject to the foregoing restriction.) These
securities are 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 a fund from disposing of them
promptly at reasonable prices. A 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 a fund to sell restricted securities to qualified
institutional buyers without limitation. The Investment Manager, pursuant to
procedures adopted by the Trustees of each Underlying Fund, will make a
determination as to the liquidity of each restricted security purchased by that
fund. If a restricted security is determined to be of "liquid," such security
will not be included within the category "illiquid securities," which under
current policy may not exceed 15% of each Underlying Fund's net assets.
CONVERTIBLE SECURITIES. Certain Underlying Funds may acquire, through purchase
or a distribution by the issuer of a security held in its portfolio, a
fixed-income security which is convertible into common stock of the issuer.
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).
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, will 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 fixed-income and convertible securities in which certain
Underlying Funds may invest are not rated; when rated, such ratings will
generally be below investment grade. Securities below investment grade are the
equivalent of high yield, high risk bonds, 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"). However, the aforementioned funds will not
invest in debt securities that are in default in payment of principal or
interest.
Because of the special nature of investments in lower rated debt securities,
a fund's Investment Manager or Adviser or Sub-Adviser must take account of
certain special considerations in assessing the risks associated with such
investments. The prices of lower rated 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 a
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 securities and a
corresponding volatility in the net asset value of a share of a fund holding
such securities.
RIGHTS AND WARRANTS. Certain Underlying Funds 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, options 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.
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INVESTMENT IN OTHER INVESTMENT VEHICLES. Certain Underlying Funds may invest a
small portion of their total assets in securities issued by other investment
companies. Such investments may be necessary in order to participate in certain
foreign markets where foreigners are prohibited from investing directly in the
securities of individual issuers. Each fund will incur any indirect expenses
incurred through investment in an investment company, such as the payment of a
management fee (which may result in the payment of an additional advisory fee).
Furthermore, it should be noted that foreign investment companies are not
subject to the U.S. securities laws and may be subject to fewer or less
stringent regulations than U.S. investment companies.
SECURITIES RECEIPTS. Certain Underlying Funds may also invest in securities of
foreign issuers in the form of American Depository Receipts (ADRs), European
Depository Receipts (EDRs) 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. EDRs are European
receipts evidencing a similar arrangement. Generally, ADRs, in registered form,
are designed for use in the United States securities markets and EDRs, in bearer
form, are designed for use in European securities markets.
INVESTMENTS IN EUROPEAN SECURITIES. The Dean Witter European Growth Fund
invests its assets primarily in the securities of European issuers. Political
and economic developments in Europe, especially as they relate to changes in the
structure of the European Economic Community and the anticipated development of
a unified common market, may have profound effects upon the value of a large
segment of that fund's portfolio. Continued progress in the evolution of, for
example, a united European common market may be slowed by unanticipated
political or social events and may, therefore, adversely affect the value of
certain of the securities held in that fund's portfolio. 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.
The Dean Witter International SmallCap Fund may invest more than 25% of its
total assets in British issuers and that fund's investment performance may be
affected by social, political and economic events occurring in the United
Kingdom.
SMALL-CAP STOCKS. Certain Underlying Funds invest primarily in small
capitalization foreign or U.S. equity securities. Investing in lesser-known,
smaller capitalized companies may involve greater risk of volatility of a fund's
net asset value than is customarily associated with investing in larger, more
established companies. There is typically less publicly available information
concerning foreign and smaller companies than for domestic and larger, more
established companies. Some small companies have limited product lines,
distribution channels and financial and managerial resources and tend to
concentrate on fewer geographic markets than do larger companies. Also, because
smaller companies normally have fewer shares outstanding than larger companies
and trade less frequently, it may be more difficult for the fund to buy and sell
significant amounts of such shares without an unfavorable impact on prevailing
market prices. Some of the companies in which the fund may invest may
distribute, sell or produce products which have recently been brought to market
and may be dependent on key personnel with varying degrees of experience.
MID-CAP STOCKS. Investing in medium-sized market capitalization companies may
involve greater risk of volatility of the Fund's net asset value than is
customarily associated with investing in larger, more established companies.
Often mid-size companies and the industries in which they are focused are still
evolving and while this may offer better growth potential than larger,
established companies it also may make them more sensitive to changing market
conditions. Because prices of stocks, including mid-cap stocks, fluctuate from
day to day, the value of an investment in the Fund will vary based upon the
Fund's investment performance.
INVESTMENTS IN ASIAN AND PACIFIC RIM SECURITIES. Dean Witter Pacific Growth
Fund, Dean Witter International SmallCap Fund and Dean Witter World Wide
Investment Trust may invest all or large portions of their assets in Asian and
Pacific Rim securities. Certain Asian and Pacific Rim countries may be subject
to a greater degree of economic, political and social instability than is the
case in the United States and Western European countries. Such instability may
result from, among other things, the following: (i) authoritarian governments or
military involvement in political and economic decision-making, including
changes in government through extra-constitutional means; (ii) popular unrest
associated with demands for improved political, economic and social conditions;
(iii) internal insurgencies; (iv) hostile relations with neighboring countries;
and (v) ethnic, religious and racial disaffection. Such social, political and
economic instability could disrupt the principal financial markets in which the
Underlying Funds invest and adversely affect the value of the assets of these
Underlying Funds.
During the past decade, countries in the Asian region have experienced real
economic growth rates exceeding those experienced by many Western industrialized
countries. Certain economic conditions which presently exist in the Asian region
may offer the potential for long-term capital appreciation from investment in
equity securities of Asian issuers. Among these conditions, are the following:
the increasing industrialization of Asian economies, favorable demographics and
competitive wage rates, high rates of domestic savings available to fund
investment, particularly in the area of infrastructure, the ability to attract
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foreign direct investment, the emergence of a regional trading zone and rising
per capita incomes available to support local markets for consumer goods. The
rapid ongoing shift from primary industries into industrial manufacturing has
contributed to high rates of economic activity. Between 1970 and 1991, there was
a significant shift in the percentage of gross domestic product ("GDP")
accounted for by the agricultural sector in these markets and a marked increase
in output by the industrial sector, most markedly in Indonesia, Malaysia and
Thailand. Generally, in the Asian countries there is still potential for further
industrialization so as to reach the levels presently attained by the countries
of the industrialized world.
INVESTMENTS IN JAPANESE SECURITIES. Dean Witter Pacific Growth Fund, Dean
Witter International SmallCap Fund and Dean Witter Japan Fund all may invest
large portions of their assets in Japanese Securities. The concentration of
assets in Japanese issuers will subject these funds to the risks of adverse
social, political or economic events which occur in Japan. Specifically,
investments in the Japanese stock market may entail a higher degree of risk than
investments in other markets as, by fundamental measures of corporate valuation,
such as its high price-earnings ratios and low dividend yields, the Japanese
market as a whole may appear expensive relative to other world stock markets
(I.E., the prices of Japanese stocks may be relatively high). In addition, the
prices of securities traded on the Japanese markets may be more volatile than
many other markets.
Overall, Japanese securities markets have declined significantly since 1989
which has contributed to a weakness in the Japanese economy and the impact of a
further decline cannot be ascertained. The common stocks of many Japanese
companies continue, as they have historically, to trade at high price-earnings
ratios in comparison with those in the U.S., even after the recent market
decline. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially the United States.
The Japanese economy experienced its worst recession since World War II in
the 1990s. While Japan's Economic Planning Agency claims the recession ended in
October 1993, the economy has been largely stagnant since then. In addition,
asset deflation, both financial and in real estate, has exerted a continuous
drag on the economy. The Japanese government has called for a transformation of
the economy away from its high dependency on export-led growth towards greater
stimulation of the domestic economy. The plan calls for direct government
spending on public works and includes measures to support weak land prices and
to revitalize Japan's stagnating financial markets. There is no assurance that
this package, however, will succeed in fueling economic growth. Japan is largely
dependent upon foreign economies for raw materials. International trade is
important to Japan's economy, as exports provide the means to pay for many of
the raw materials it must import. Because of the concentration of Japanese
exports in highly visible products such as automobiles, machine tools and
semiconductors, and the large trade surpluses ensuing therefrom, Japan has
entered a difficult phase in its relations with its trading partners,
particularly with respect to the United States, with whom the trade imbalance is
the greatest. It is possible that differences over trade policy may lead the
U.S. to take actions which may have an adverse effect on the Japanese economy.
INVESTMENTS IN LATIN AMERICAN SECURITIES. The securities markets of Latin
American countries are substantially smaller, less developed, less liquid and
more volatile than the major securities markets in the United States. The
limited size of many Latin American securities markets and limited trading
volume in issuers compared to volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the quality of
the securities. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of portfolio securities, especially in these
markets.
Latin American 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, Latin American companies are not subject to
uniform accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Also, certain Latin American
countries may impose unusually high withholding taxes on dividends payable to
the fund, thereby effectively reducing the fund's investment income.
In addition, Latin American exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions, custodial
expenses and other transaction costs may be higher in foreign markets than in
the U.S.
Political and economic developments in Latin America may have profound
effects upon the value of the fund's portfolio. In the event of expropriation,
nationalization or other complication, a fund could lose its entire investment
in any one country. In addition, individual Latin American countries may place
restrictions on the ability of foreign entities such as the fund to invest in
particular segments of the local economies. Certain Latin American countries are
among the largest debtors to commercial banks and foreign governments. At times
certain Latin American countries have declared moratoria on the payment of
principal and/or interest on external debt. Most Latin American countries have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have very negative effects on the economies and securities
markets of certain Latin American countries.
24
<PAGE>
In addition, many of the currencies of Latin American countries have
experienced steady devaluations relative to the U.S. dollar, and major
devaluations have historically occurred in certain countries. Any devaluations
in the currencies in which the fund's portfolio securities are denominated may
have a detrimental impact on a fund. Some Latin American countries also may have
managed currencies which are not free floating against the U.S. dollar. In
addition, there is a risk that certain Latin American countries may restrict the
free conversion of their currencies into other currencies. Further, certain
Latin American currencies may not be internationally traded.
See the Statement of Additional Information for additional information
regarding the risks of the Underlying Funds' investment policies.
PORTFOLIO MANAGEMENT
The Fund's portfolio is managed by its Investment Manager with a view to
achieving the Fund's investment objective. In determining the selection of the
Underlying Funds for each Portfolio of the Fund, the Investment Manager will
rely on information from various sources, including research, analysis and
appraisals of brokers and dealers, the views of Trustees of the Fund and others
regarding economic developments and interest rate trends, and the Investment
Manager's own analysis of factors it deems relevant. The Fund's primary
portfolio manager is Mr. .
Each of the Underlying Funds incurs expenses relating to their portfolio
management which costs include custodial costs, brokerage commissions and other
transaction charges related to investing in foreign securities markets which
costs are generally higher than in the United States.
The portfolio turnover rate for each Portfolio (i.e. the rate at which each
Portfolio buys and sells shares of the Underlying Funds) is expected to be under
100%.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which have
been adopted by the Fund as fundamental policies of the Portfolios. Under the
Investment Company Act of 1940, as amended (the "Act"), a fundamental policy may
not be changed with respect to a Portfolio, without the vote of a majority of
the outstanding voting securities of that Portfolio, 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.
Each Portfolio of the Fund may not:
1. 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 the Portfolio's investments in the mutual fund industry by
virtue of its investments in the Underlying Dean Witter Funds or investment
companies managed by an adviser that is an affiliate of the Investment
Manager. This restriction also does not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities or investments in shares of management investment
companies.
2. Borrow money except a bank for temporary or emergency purposes,
including the meeting of redemption requests in an amount not exceeding
33 1/3% of the value of each Portfolio's total assets (including the amount
borrowed) valued at market less liabilities (not including the amount
borrowed) at the time the borrowing is made.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective[s] by investing all or substantially
all of its assets in another investment company having substantially the same
investment objective[s] and policies as the Fund.
UNDERWRITING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up to
10,000,000 shares from the Fund, which number may be increased or decreased in
accordance with the Underwriting Agreement. The initial offering will run
approximately from , 1997 through , 1997. The Underwriting
Agreement provides that the obligation of the Underwriter is subject to certain
conditions precedent and that the Underwriter will be obligated to purchase the
shares on , 1997, or such other date as may be agreed upon by the
Underwriter and the Fund (the "Closing Date"). Shares will not be issued and
dividends will not be declared by the Fund until after the Closing Date. For
this reason, payment is not required to be made prior to the Closing Date. If
any orders received during the initial offering period are accompanied by
payment, such payment will be returned unless an accompanying request for
investment in a Dean Witter money market fund is received at the time the
payment is made. Prospective investors in money market funds should request and
read the money market fund prospectus prior to investing.
25
<PAGE>
All such funds received and invested in a Dean Witter money market fund will be
automatically invested in the Fund on the Closing Date without any further
action by the investor. Any investor may cancel his or her purchase of Fund
shares without penalty at any time prior to the Closing Date.
The Underwriter will purchase Class B, Class C and Class D shares from the
Fund at $10.00 per share with all proceeds going to the Fund and will purchase
Class A shares at $10.00 per share plus a sales charge with the sales charge
paid to the Underwriter and the net asset value of $10.00 per share going to the
Fund. The Underwriter may, however, receive contingent deferred sales charges
from
future redemptions of Class A, Class B and Class C shares (see "Purchase of Fund
Shares--Continuous Offering").
The Underwriter shall, regardless of its expected underwriting commitment,
be entitled and obligated to purchase only the number of shares for which
purchase orders have been received by the Underwriter prior to 2:00 p.m., New
York time, on the third business day preceding the Closing Date, or such other
date as may be agreed to between the parties.
The minimum number of Fund shares which may be purchased by any shareholder
pursuant to this offering is 100 shares. Certificates for shares purchased will
not be issued unless requested by the shareholder in writing.
PURCHASE OF FUND SHARES--CONTINUOUS OFFERING
- --------------------------------------------------------------------------------
Each Portfolio of 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 Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, shares of each Portfolio of the Fund are distributed by the
Distributor and offered by DWR and other dealers which have entered into
agreements with the Distributor ("Selected Broker-Dealers"). The principal
executive office of the Distributor is located at Two World Trade Center, New
York, New York 10048.
Each Portfolio of 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
employer-sponsored benefit 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, 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 or more and to
certain other limited categories of investors. For the purpose of meeting the
minimum $5 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 Dean Witter Funds that
are multiple class funds ("Dean Witter Multi-Class Funds") and shares of Dean
Witter Funds sold with a front-end sales charge ("FSC Funds") and concurrent
investments in Class D shares of the Fund and other Dean Witter Multi-Class
Funds will be aggregated. Subsequent purchases of $100 or more may be made by
sending a check, payable to Dean Witter Fund of Funds, directly to Dean Witter
Trust Company (the "Transfer Agent") at P.O. Box 1040, Jersey City, NJ 07303 or
by contacting an account executive of DWR or other Selected Broker-Dealer. When
purchasing shares of the Fund, investors must specify which Portfolio they wish
to invest in and 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 EasyInvest, 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. In the case of investments pursuant to Systematic Payroll
Deduction Plans (including Individual Retirement Plans), the Fund, in its
discretion, may accept investments without regard to any minimum amounts which
would otherwise be required, if the Fund 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.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment
26
<PAGE>
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 distributions. Sales personnel of a Selected Broker-Dealer are
compensated for selling shares of the Fund at the time of their sale 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
Each Portfolio of 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 each Portfolio of the
Fund represents an identical interest in the respective 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 of a Portfolio that are imposed on
Class A, Class B and Class C shares will be imposed directly against those
Classes of that Portfolio 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 employer-sponsored benefit 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 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
27
<PAGE>
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 minimum investment amount for
Class D shares, holdings of Class A shares in all Dean Witter Multi-Class Funds,
shares of FSC Funds and shares of 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:
<TABLE>
<CAPTION>
<C> <S> <C> <C>
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
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% CDSC 1.0% B shares
during the first convert to A
year decreasing to 0 shares
after six years automatically
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 AMOUNT
TRANSACTION PRICE 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
28
<PAGE>
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 organizations 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 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 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 Dean Witter Funds previously
purchased at a price including a front-end sales charge (including shares of the
Fund and other 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 equal to at least $5 million, 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 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 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 Dean Witter Trust Company ("DWTC") or Dean Witter
Trust FSB ("DWTFSB") (each of 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 such persons pay an asset based fee for
services in the nature of investment advisory or administrative services
(such investments are subject to all of the terms and conditions of such
programs, which may include termination fees and restrictions on
transferability of Fund shares);
(3) retirement plans qualified under Section 401(k) of the Internal
Revenue Code ("401(k) plans") and other employer-sponsored plans qualified
under Section 401(a) of the Internal Revenue Code with at least 200 eligible
employees and for which DWTC or DWTFSB serves as Trustee or the 401(k)
Support Services Group of DWR serves as recordkeeper;
(4) 401(k) plans and other employer-sponsored plans qualified under
Section 401(a) of the Internal Revenue Code for which DWTC or DWTFSB serves
as Trustee or the 401(k) Support Services Group of DWR serves as
recordkeeper 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 Dean Witter account executive who
joined Dean Witter from another investment firm within six months prior to
the date of purchase of Fund shares by such investors, if
29
<PAGE>
the shares are being purchased with the proceeds from a redemption of shares
of an open-end proprietary mutual fund of the account executive'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 employer-sponsored benefit 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 CDSC AS A
PURCHASE PERCENTAGE OF
PAYMENT MADE 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>
In the case of Class B shares of the Fund held by 401 (k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue
Code for which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services
Group of DWR serves as recordkeeper, 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 CDSC AS A
PURCHASE PERCENTAGE OF
PAYMENT MADE 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 employer-sponsored benefit 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 employer-sponsored benefit
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 other open-end investment
companies for which InterCapital serves as investment manager (collectively,
with the Fund, the "Dean Witter Funds") sold with a front-end sales charge or of
other 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, no CDSC will be imposed on redemptions of shares which are
attributable to reinvestment of dividends or distributions from, or the proceeds
of, certain Unit Investment Trusts.]
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;
30
<PAGE>
(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; and
(3) all redemptions of shares held for the benefit of a participant in a
401(k) plan or other employer-sponsored plan qualified under Section 401(a)
of the Internal Revenue Code which offers investment companies managed by
the Investment Manager or its subsidiary, Dean Witter Services Company Inc.,
as self-directed investment alternatives and for which DWTC or DWTFSB serves
as Trustee or the 401(k) Support Services Group of DWR serves as
recordkeeper ("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.
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.
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 applicable 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 and the following categories of
investors: (i) investors participating in the InterCapital 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 or administrative services (subject to all of the terms
and conditions of such programs, which may include termination fees and
restrictions on transferability of Fund shares); (iii) 401(k) plans established
by DWR and SPS Transaction Services, Inc. (an affiliate of DWR) for their
employees; (iv) certain Unit Investment Trusts sponsored by DWR; (v) certain
other open-end investment companies whose shares are distributed by the
Distributor; and (vi) 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 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 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 minimum
investment amount, Class A shares in all Dean Witter Multi-Class Funds, shares
of FSC Funds and shares of 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 each
Portfolio of the Fund. In the case of Class A and Class C shares, the Plan
provides that the Fund will, on behalf of each Portfolio, 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 each Portfolio of 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, on behalf of each Portfolio, will pay the Distributor a fee, which is
accrued
31
<PAGE>
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 each Portfolio of 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 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 DWR's account executives
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.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of each Portfolio of the Fund may be in excess of
the total of (i) the payments made by a Portfolio of the Fund pursuant to the
Plan, and (ii) the proceeds of CDSCs paid by investors upon the redemption of
Class B shares of that Portfolio. 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. 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 that Portfolio of the Fund. Although there is no legal obligation for a
Portfolio of 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 of any Portfolio, 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 a Portfolio of the Fund through payments in any subsequent year,
except that expenses representing a gross sales commission credited to account
executives at the time of sale may be reimbursed in the subsequent calendar
year. 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 each Portfolio is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is open (or,
on days when the New York Stock Exchange closes prior to 4:00 p.m., at such
earlier time) by taking the net assets of each Portfolio of the Fund, dividing
by the respective number of shares outstanding and adjusting to the nearest
cent. The assets of each Portfolio, 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 of each Portfolio, 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.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
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 each respective Portfolio of the Fund (or, if
specified by the shareholder in shares of any other open-end "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 AND 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 per share 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 are not subject to the imposition of a front-end sales charge or a CDSC
(see "Redemptions and Repurchases").
32
<PAGE>
EASYINVEST-SM-. 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 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").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable CDSC
will be imposed on shares redeemed under the Withdrawal Plan (see "Purchase of
Fund Shares"). Therefore, 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 or quarterly amount.
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.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive 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 adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected Dealer
account executive or the Transfer Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any other
Dean Witter Multi-Class Fund without the imposition of any exchange fee. Shares
may also be exchanged for shares of the following funds: Dean Witter Short-Term
U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean Witter
Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust and five
Dean Witter funds which are money market funds (the "Exchange Funds"). Class A
shares may also be exchanged for shares of Dean Witter Multi-State Municipal
Series Trust and Dean Witter Hawaii Municipal Trust, which are Dean Witter Funds
sold with a front-end sales charge ("FSC Funds"). Class B shares may also be
exchanged for shares of Dean Witter Global Short-Term Income Fund Inc., Dean
Witter High Income Securities and Dean Witter National Municipal Trust, which
are Dean Witter Funds offered with a CDSC ("CDSC Funds"). 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 Dean Witter Multi-Class Fund, any FSC Fund, any CDSC
Fund 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 the net asset value determined the following business day.
Subsequent exchanges between any of the Dean Witter Multi-Class Funds, FSC Funds
or CDSC Funds 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 Dean Witter Multi-Class
Fund or shares of a CDSC Fund, the holding period previously frozen when the
first exchange was made resumes on the last day of the month in which shares of
a Dean Witter Multi-Class Fund or shares of a CDSC Fund are reacquired. Thus,
the CDSC is based upon the time (calculated as described above) the shareholder
was invested in shares of a Dean Witter Multi-Class Fund or in shares of a CDSC
Fund (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. 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. (Exchange Fund 12b-1
distribution fees are described in the prospectuses
33
<PAGE>
for those funds.) Class B shares of the Fund acquired in exchange for Class B
shares of another Dean Witter Multi-Class Fund or shares of a CDSC 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 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 restriction will be made by the Fund on a prospective basis
only, upon notice of 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 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
account executive 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 examine 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 any 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 may realize 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 Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders 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 DWR or other Selected
Broker-Dealer account executive, 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 with the Dean
Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of each Class of each Portfolio 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
34
<PAGE>
written request for redemption sent to the Fund's Transfer Agent at P.O. Box
983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder(s), the shares may be redeemed by surrendering the certificates with
a written request for redemption, along with any additional information 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 next computed (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 by either the Fund, the
Distributor or DWR or other Selected Broker-Dealer. The offer by DWR and other
Selected Broker-Dealers to repurchase shares may be suspended without notice by
the Distributor at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth above under "Redemption."
The Fund is not subject to any contingent deferred sales charges at any time
with respect to its investments in the Underlying Funds.
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
Broker-Dealer are referred to their account executive 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 and Portfolio from which such shares were redeemed or
repurchased at their 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, on 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 Trustees or, in the case of an account opened through EasyInvest-SM-, 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 him or her sixty days to make an
additional investment in an amount which will increase the value of his or her
account to at least the applicable amount before the redemption is processed. No
CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. Each Portfolio of the Fund to distribute
substantially all of its net investment income and distribute capital gains, if
any, once each year. Each Portfolio may, however, determine either to distribute
or to retain all or part of any 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 and/or distributions 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 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 on
any such income and capital gains. Shareholders 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.
35
<PAGE>
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 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.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes.
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.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and makes the appropriate election with the Internal Revenue Service, the Fund
will report annually to its shareholders the amount per share of such taxes to
enable shareholders to claim United States foreign tax credits or deductions
with respect to such taxes. In the absence of such an election, the Fund would
deduct foreign tax in computing the amount of its distributable income.
Shareholders should consult their tax advisers 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 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 the life of the Fund, if less than any of the foregoing.
Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the Fund's assets, 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, and
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.
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 of each Portfolio 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 of each Portfolio 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
circumstances, be held personally liable as partners for 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 Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of
36
<PAGE>
expenses 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, in the opinion of Massachusetts counsel to the
Fund, the risk to shareholders of personal liability is remote.
CODE OF ETHICS. Directors, officers and employees of the Investment Manager,
Dean Witter Services Company Inc. and the Distributor 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 advance
clearance process to monitor that no 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 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.
The Fund's Sub-Adviser also has a Code of Ethics which complies with
regulatory requirements and, insofar as it relates to persons associated with
the Fund, 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[s] by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective[s] 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.
The Investment Manager provided the initial capital for the Fund by
purchasing 1,250 shares each of Class A, Class B, Class C and Class D of each
Portfolio for $12,500, respectively, on , 1997. As of the date of
this Prospectus, the Investment Manager owned 100% of the outstanding shares of
the Fund. The Investment Manager may be deemed to control the Fund until such
time as it owns less than 25% of the outstanding shares of the Fund.
37
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
DEAN WITTER RETIREMENT
SERIES
Dean Witter Liquid Asset Fund
Inc.
Liquid Asset Series
Dean Witter U.S. Government Money Market
Trust
U.S. Government Money
Market Series
Dean Witter Tax-Free Daily Income
Trust
U.S. Government
Securities Series
Dean Witter California Tax-Free Daily Income
Trust
Intermediate Income
Securities Series
Dean Witter New York Municipal Money Market
Trust
American Value Series
Capital Growth Series
EQUITY FUNDS
Dividend Growth Series
Dean Witter American Value Fund
Strategist Series
Dean Witter Natural Resource Development Securities Inc.
Utilities Series
Dean Witter Dividend Growth Securites Inc.
Value-Added Market
Series
Dean Witter Developing Growth Securities Trust
Global Equity Series
Dean Witter World Wide Investment Trust
Dean Witter Value-Added Market
Series
DEAN WITTER FUND OF
FUNDS
Dean Witter Utilities
Fund
International Equity
Portfolio
Dean Witter Capital Growth
Securities
Domestic Equity
Portfolio
Dean Witter European Growth Fund Inc.
ASSET ALLOCATION FUNDS
Dean Witter Precious Metals and Minerals Trust
Dean Witter Strategist
Fund
Dean Witter Pacific Growth Fund Inc.
Dean Witter Global
Asset Allocation Fund
Dean Witter Health Sciences Trust
ACTIVE ASSETS ACCOUNT
PROGRAM
Dean Witter Global Dividend Growth Securities
Active Assets Money
Trust
Dean Witter Global Utilities Fund
Active Assets Tax-Free
Trust
Dean Witter International SmallCap Fund
Active Assets
California Tax-Free Trust
Dean Witter Mid-Cap Growth Fund
Active Assets
Government Securities Trust
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
Dean Witter Japan Fund
Dean Witter Income Builder Fund
Dean Witter Special Value Fund
Dean Witter Financial Services Trust
Dean Witter Market Leader Trust
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Intermediate Term U.S. Treasury Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
<PAGE>
DEAN WITTER
FUND OF FUNDS
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
[ ]
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
<PAGE>
STATEMENT OF ADDITIONAL DEAN WITTER
INFORMATION FUND OF FUNDS
SEPTEMBER , 1997
- --------------------------------------------------------------------------------
Dean Witter Fund of Funds (the "Fund") is an open-end, non-diversified
management investment company currently consisting of two separate portfolios
(individually a "Portfolio" and collectively the "Portfolios") which seek to
achieve their investment objectives by investing in shares of other open-end
management investment companies that are either members or affiliates of the
Dean Witter Family of Funds (individually, an "Underlying Fund" and
collectively, the "Underlying Funds"). THE INTERNATIONAL EQUITY PORTFOLIO has an
investment objective of long-term capital appreciation and invests in a
selection of Underlying Funds which invest their assets primarily in the
international equity markets. THE DOMESTIC EQUITY PORTFOLIO has an investment
objective of long-term capital appreciation and seeks to achieve its investment
objective by investing in a selection of Underlying Funds which invest primarily
in the U.S. equity markets.
A Prospectus for the Fund dated September , 1997, 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, 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 you
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
Fund of Funds
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.................................................................. 6
Investment Practices and Policies...................................................... 7
Investment Restrictions................................................................ 25
Portfolio Transactions and Brokerage................................................... 26
The Distributor........................................................................ 27
Determination of Net Asset Value....................................................... 30
Purchase of Fund Shares................................................................ 31
Shareholder Services................................................................... 33
Redemptions and Repurchases............................................................ 38
Dividends, Distributions and Taxes..................................................... 39
Performance Information................................................................ 40
Description of Shares of The Fund...................................................... 41
Custodian and Transfer Agent........................................................... 41
Independent Accountants................................................................ 42
Reports to Shareholders................................................................ 42
Legal Counsel.......................................................................... 42
Experts................................................................................ 42
Registration Statement................................................................. 42
Statement of Assets and Liabilities at ,1997 .............................. 43
Report of Independent Accountants......................................................
</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
March 23, 1994
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York, 10048, is the Fund's investment manager. InterCapital is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), a Delaware
corporation. In an internal reorganization which took place in January, 1993,
InterCapital assumed the investment advisory, administrative and management
activities previously performed by the InterCapital Division of Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As
hereinafter used in this Statement of Additional Information, the terms
"InterCapital" and "Investment Manager" refer to DWR's InterCapital Division
prior to the internal reorganization and Dean Witter InterCapital Inc.
thereafter.) 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."
InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc., InterCapital
Income Securities Inc., Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Value-Added Market Series, Dean Witter
Tax-Exempt Securities Trust, Dean Witter Natural Resource Development Securities
Inc., Dean Witter Dividend Growth Securities Inc., Dean Witter American Value
Fund, Dean Witter U.S. Government Money Market Trust, Dean Witter Variable
Investment Series, Dean Witter World Wide Investment Trust, Dean Witter Select
Municipal Reinvestment Fund, Dean Witter U.S. Government Securities Trust, Dean
Witter California Tax-Free Income Fund, Dean Witter New York Tax-Free Income
Fund, Dean Witter Convertible Securities Trust, Dean Witter Federal Securities
Trust, High Income Advantage Trust, High Income Advantage Trust II, High Income
Advantage Trust III, Dean Witter Government Income Trust, Dean Witter Utilities
Fund, Dean Witter California Tax-Free Daily Income Trust, Dean Witter Strategist
Fund, Dean Witter World Wide Income Trust, Dean Witter Intermediate Income
Securities, Dean Witter New York Municipal Money Market Trust, Dean Witter
Capital Growth Securities, Dean Witter European Growth Fund Inc., Dean Witter
Precious Metals and Minerals Trust, Dean Witter Global Short-Term Income Fund
Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Multi-State Municipal
Series Trust, Dean Witter Short-Term U.S. Treasury Trust, InterCapital Insured
Municipal Bond Trust, InterCapital Insured Municipal Trust, InterCapital Insured
Municipal Income Trust, InterCapital California Insured Municipal Income Trust,
InterCapital Quality Municipal Investment Trust, InterCapital Quality Municipal
Income Trust, InterCapital Quality Municipal Securities, InterCapital California
Quality Municipal Securities, InterCapital New York Quality Municipal
Securities, Dean Witter Diversified Income Trust, Dean Witter Health Sciences
Trust, Dean Witter Retirement Series, Dean Witter Global Dividend Growth
Securities, Dean Witter Limited Term Municipal Trust, InterCapital Insured
Municipal Securities, InterCapital Insured California Municipal Securities, Dean
Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter
National Municipal Trust, Dean Witter High Income Securities, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter Select
Dimensions Investment Series, Dean Witter Balanced Growth Fund, Dean Witter
Balanced Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter Capital
Appreciation Fund, Dean Witter Information Fund, Dean Witter Intermediate Term
U.S. Treasury Trust, Dean Witter Capital Appreciation Fund, Dean Witter
Information Fund, Dean Witter Japan Fund, Dean Witter Income Builder Fund, Dean
Witter Special Value Fund, Dean Witter Financial Services Trust, Dean Witter
Market Leader Trust, Active Assets Money Trust, Active Assets Tax-Free Trust,
Active Assets California Tax-Free Trust, Active Assets Government Securities
Trust, Municipal Income Trust, Municipal Income Trust II, Municipal Income Trust
III, Municipal
3
<PAGE>
Income Opportunities Trust, Municipal Income Opportunities Trust II, Municipal
Income Opportunities Trust III, Municipal Premium Income Trust and Prime Income
Trust. The foregoing investment companies, together with the Fund, are
collectively referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is the investment adviser: TCW/DW Core Equity
Trust, TCW/DW North American Government Income Trust, TCW/DW Latin American
Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth Fund, TCW/DW
Balanced Fund, TCW/DW Total Return Trust, TCW/DW Mid-Cap Equity Trust, TCW/DW
Global Telecom Trust, TCW/DW Strategic Income Trust, TCW/DW Emerging Markets
Opportunities Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002 and TCW/DW
Term Trust 2003 (the "TCW/ DW Funds"). InterCapital also serves as: (i)
administrator of The BlackRock Strategic Term Trust Inc., a closed-end
investment company; and (ii) sub-administrator of MassMutual Participation
Investors and Templeton Global Governments Income Trust, closed-end investment
companies.
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 and policies. The Investment Manager does not receive a
management fee from either Portfolio of the Fund for providing the
aforementioned investment management services. However, through its investments
in the Class D Shares of the Underlying Funds, each Portfolio will pay its pro
rata share of the management fees and certain other expenses of the Underlying
Funds.
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, bookkeeping and certain legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, proxy statements and reports required to be filed with federal and
state securities commissions (except insofar as the participation or assistance
of independent accountants and attorneys is, in the opinion of the Investment
Manager, necessary or desirable). In addition, the Investment Manager pays the
salaries of all personnel, including officers of the Fund, who are employees of
the Investment Manager. The Investment Manager also bears the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
Each Portfolio pays all expenses incurred in its operation and a portion of
the Fund's general administrative expenses allocated on the basis of asset size
of the respective Portfolio. Expenses not expressly assumed by the Investment
Manager under the Agreement or by the Distributor of the Fund's shares, Dean
Witter Distributors Inc. ("Distributors" or the "Distributor") (see "The
Distributor"), will be paid by the Fund. These expenses will be allocated among
the four classes of shares of each Portfolio of the Fund (each, a "Class") pro
rata based on the net assets of each Portfolio of the Fund attributable to each
Class, except as described below. The expenses borne by each Portfolio of the
Fund 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, share transfer and dividend disbursing
agent; brokerage commissions; taxes; engraving and printing share certificates;
registration costs of the Fund and its shares under federal and state securities
laws; the cost and expenses of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
mailing 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; any
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
4
<PAGE>
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; depending upon the
nature of the legal claim, liability or lawsuit, the costs of litigation,
payment of legal claims or liabilities or indemnification relating thereto may
be directly applicable to a particular Portfolio or may be proportionately
allocated on the basis of the size of each Portfolio. The Trustees have
determined that this is an appropriate method of allocation of such expenses);
and all other costs of the Fund's operation properly payable by the Fund and
allocable on the basis of size of the respective Portfolio. The 12b-1 fees
relating to a particular Class of a particular Portfolio will be allocated
directly to that Class. In addition, other expenses associated with a particular
Class of a particular Portfolio (except custodial fees) may be allocated
directly to that Class, provided that such expenses are reasonably identified as
specifically attributable to that Class and the direct allocation to that Class
is approved by the Trustees.
The Investment Manager will pay 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, in an amount of up to a
maximum of $250,000. 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 Fund pays no management fee to the Investment Manager. However, the
Fund, through its investments in the Underlying Funds, will pay its pro rata
share of the management or advisory or sub-advisory fees to the Investment
Manager and/or Sub-Advisor or Advisor of the Underlying Funds.
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 adviser to others.
The Agreement was initially approved by the Board of Trustees on
, 1997 and by InterCapital, as the then sole shareholder, on ,
1997. The Agreement may be terminated with respect to any Portfolio, at any
time, without penalty, on thirty days' notice by the Board of Trustees of the
Fund, by the holders of a majority, as defined in the Investment Company Act of
1940 (the "Act"), of the outstanding shares of the respective Portfolio of the
Fund, 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 remain in effect from year to year thereafter with respect to each
Portfolio, provided continuance of the Agreement is approved at least annually
by the vote of the holders of a majority, as defined in the Act, of the
outstanding shares of each Portfolio of the Fund, or by the Board of 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 Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use or, at any time,
permit others to use, the name "Dean Witter." The Fund has also agreed that in
the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate the
name "Dean Witter" from its name if DWR or its parent company shall so request.
5
<PAGE>
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
InterCapital, and with the 83 Dean Witter Funds and the 14 TCW/DW Funds are
shown below:
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (64) Chairman, Chief Executive Officer and Director of
Chairman, President InterCapital, DWSC and Distributors; Executive Vice
Chief Executive Officer and Trustee President and Director of DWR; Chairman, Director or
Two World Trade Center Trustee, President and Chief Executive Officer of the Dean
New York, New York Witter Funds; Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Chairman and Director of Dean
Witter Trust Company ("DWTC"); Director and/or officer of
various MSDWD subsidiaries; formerly Executive Vice Presi-
dent and Director of Dean Witter, Discover & Co. (until
February, 1993).
Barry Fink (42) Senior Vice President (since March, 1997) and Secretary
Vice President, Secretary and General Counsel (since February, 1997) of InterCapital
and General Counsel and DWSC; Senior Vice President (since March, 1997) and
Two World Trade Center Assistant Secretary and Assistant General Counsel (since
New York, New York February, 1997) of Distributors; Assistant Secretary of
DWR (since August, 1996); Vice President, Secretary and
General Counsel of the Dean Witter Funds and the TCW/DW
Funds (since February, 1997); previously First Vice
President (June, 1993-February, 1997), Vice President
(until June, 1993) and Assistant Secretary and Assistant
General Counsel of InterCapital and DWSC and Assistant
Secretary of the Dean Witter Funds and the TCW/DW Funds.
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Executive Vice President and Director of DWR, Director of SPS
Transaction Services, Inc. and various other MSDWD subsidiaries, Joseph J.
McAlinden, Executive Vice President and Chief Investment Officer of
InterCaptial, and Director of DWTC, Robert S. Giambrone, Senior Vice President
of InterCapital, DWSC, Distributors and DWTC and a Director of DWTC, and
Senior Vice Presidents of InterCapital, are
Vice Presidents of the Fund, and Marilyn K. Cranney, First Vice President and
Assistant General Counsel of InterCapital and DWSC, and Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Frank Bruttomesso, a Staff Attorney with
InterCapital, are Assistant Secretaries of the Fund.
[copy to come]
6
<PAGE>
INVESTMENT PRACTICES AND POLICIES OF THE UNDERLYING FUNDS
- --------------------------------------------------------------------------------
Set forth below are brief descriptions of the investment objectives of the
Underlying Funds in which the Portfolios of the Fund may invest. A description
of the various investment practices and techniques in which certain or all of
the Underlying Funds may engage is set forth below as well as in the Prospectus.
Shareholders, or those who wish to invest in the Underlying Fund directly, are
referred to the Prospectuses of those funds for more detailed information.
- DEAN WITTER AMERICAN VALUE FUND seeks long-term growth consistent with an
effort to reduce volatility by investing principally in common stock of
companies in industries which, at the time of the investment, are believed
to be attractively valued given their above average relative earnings
growth potential at that time.
- DEAN WITTER CAPITAL APPRECIATION FUND seeks long-term capital appreciation
by investing primarily in the common stocks of U.S. companies that offer
the potential for either superior earnings growth and/or appear to be
undervalued.
- DEAN WITTER CAPITAL GROWTH SECURITIES seeks to provide long-term capital
growth by investing principally in common stocks.
- DEAN WITTER DEVELOPING GROWTH SECURITIES seeks long-term capital growth by
investing primarily in common stocks of smaller and medium-sized companies
that, in the opinion of the Investment Manager, have the potential for
growing more rapidly than the economy and which may benefit from new
products or services, technological developments or changes in management.
- DEAN WITTER DIVIDEND GROWTH SECURITIES seeks to provide reasonable current
income and long-term growth of income and capital by investing primarily
in common stock of companies with a record of paying dividends and the
potential for increasing dividends.
- DEAN WITTER EUROPEAN GROWTH FUND seeks to maximize the capital
appreciation of its investments by investing primarily in securities
issued by issuers located in Europe.
- DEAN WITTER INTERNATIONAL SMALL CAP FUND seeks long-term growth of capital
by investing in equity securities of "small capitalization" companies
located outside of the United States.
- DEAN WITTER JAPAN FUND seeks long-term capital appreciation by investing
primarily in securities issued by issuers located in Japan.
- DEAN WITTER MARKET LEADER TRUST seeks long-term growth of capital by
investing primarily in equity securities that, in the opinion of the
Investment Manager, are established leaders in their respective fields in
growing industries in domestic and foreign markets.
- DEAN WITTER MID-CAP GROWTH PORTFOLIO seeks long-term capital growth by
investing principally in equity securities of "mid-cap" companies.
- DEAN WITTER PACIFIC GROWTH FUND seeks to maximize the capital appreciation
of its investments by investing primarily in securities issued by issuers
located in Asia, Australia and New Zealand.
- DEAN WITTER SPECIAL VALUE FUND seeks long-term capital appreciation by
investing primarily in equity securities issued by companies whose equity
market capitalization, at the time of purchase, falls within the range of
$100 million to $1 billion and that, in the opinion of the Investment
Manager, appear undervalued relative to the marketplace or to investments
in similar companies.
- DEAN WITTER VALUE-ADDED MARKET SERIES--EQUITY PORTFOLIO seeks to achieve a
high level of total return on its assets through a combination of capital
appreciation and current income by investing, on an equally weighted
basis, in a diversified portfolio of common stocks of the companies which
are represented in the Standard & Poor's 500 Composite Stock Price Index.
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- DEAN WITTER WORLD WIDE INVESTMENT TRUST seeks to obtain total return on
its assets primarily through long-term capital growth and to a lesser
extent income by investing in all types of common stocks and equivalents,
preferred stocks and bonds and other debt obligations of domestic and
foreign companies and governments and international organizations.
As stated in the Prospectus, the money market instruments which each
Portfolio of the Fund may purchase include U.S. Government securities, bank
obligations, Eurodollar certificates of deposit, obligations of savings
institutions, fully insured certificates of deposit and commercial paper. Such
securities are limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit and
bankers' acceptances) of banks subject to regulation by the U.S. Government and
having total assets of $1,000,000,000 or more, and instruments secured by such
obligations, not including obligations of foreign branches of domestic banks
except to the extent below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks, having total assets of
$1,000,000,000 or more;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1,000,000,000
or more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions, having total assets of less than $1,000,000,000, if the
principal amount of the obligation is insured by the Federal Deposit Insurance
Corporation, limited to $100,000 principal amount per certificate and to 10% or
less of each Portfolio's total assets;
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's (S&P) or the highest grade by Moody's or, if not rated, issue
by a company having an outstanding debt issue rated at least AA by S&P or Aa by
Moody's.
REPURCHASE AGREEMENTS. As discussed in the Prospectus, when cash may be
available for only a few days, it may be invested by the Underlying Funds
("fund" or "funds") 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 securities subject to repurchase agreements are not subject to any
limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Investment Manager
subject to procedures established by the 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,
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including any accrued interest earned on the repurchase agreement. In the event
of a default or bankruptcy by a selling financial institution, the fund will
seek to liquidate such collateral. However, the exercising of the fund's right
to liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the fund could suffer a loss. It
is the current policy of the funds not to invest in repurchase agreements that
do not mature within seven days if any such investment, together with any other
illiquid assets held by a fund, amounts to more than 15% of its net assets. A
fund's investments in repurchase agreements may at times be substantial when, in
the view of the Investment Manager, liquidity, tax or other considerations
warrant.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, a 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. A fund will not
lend its portfolio securities if such loans are not permitted by the laws or
regulations of any state in which its shares are qualified for sale and will not
lend more than 25% of the value of its total assets. A loan may be terminated by
the borrower on one business days' 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 loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the fund. Any gain or loss in the market price during
the loan period would inure to the fund. 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. A fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. As
discussed in the Prospectus, from time to time a 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 a 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 a 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, the 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
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securities equal in value to commitments to purchase securities on a
when-issued, delayed delivery or forward commitment basis. Subject to the
foregoing restrictions, a fund may purchase securities on such basis without
limit.
WHEN, AS AND IF ISSUED SECURITIES. As discussed in the Prospectus, a 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. 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. Once a segregated account has been established,
if the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. The value of a 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" in each fund's Prospectus and
Statement of Additional Information). Subject to the foregoing restrictions, a
fund may purchase securities on such basis without limit. 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. A 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 the sale.
PRIVATE PLACEMENTS. As discussed in the Prospectus, a fund may invest up to
either 5% or 10% 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 not readily marketable. (Securities eligible for resale pursuant to
Rule 144A of the Securities Act, and determined to be liquid pursuant to the
procedures discussed in the following paragraph, are not subject to the
foregoing restriction.) Limitations on the resale of such securities may have an
adverse effect on their marketability, and may prevent a 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 ("SEC") 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 funds, will make a
determination as to the liquidity of each restricted security purchased by a
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 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 the SEC's current policies may not
exceed 15% of a fund's net assets, and will not be subject to the 10% limitation
set out in the preceding paragraph.
The Rule 144A marketplace of sellers and qualified institutional buyers is
new and still developing and may take a period of time to develop into a mature
liquid market. As such, the market for certain private placements purchased
pursuant to Rule 144A may be initially small or may, subsequent to purchase,
become illiquid. Furthermore, the Investment Manager may not posses all the
information concerning an issue of securities that it wishes to purchase in a
private placement to which it would normally have had access, had the
registration statement necessitated by a public offering been filed with the
Securities and Exchange Commission.
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REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. As discussed in the
Prospectus, certain funds may also use reverse repurchase agreements and dollar
rolls as part of its investment strategy. Reverse repurchase agreements involve
sales by a fund of portfolio assets concurrently with an agreement by the fund
to repurchase the same assets at a later date at a fixed price. Generally, the
effect of such a transaction is that the fund can recover all or most of the
cash invested in the portfolio securities involved during the term of the
reverse repurchase agreement, while it will be able to keep the interest income
associated with those portfolio securities. Such transactions are only
advantageous if the interest cost to the fund of the reverse repurchase
transaction is less than the cost of obtaining the cash otherwise.
A fund may enter into dollar rolls in which the fund sells securities for
delivery in the current months and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the fund forgoes principal and interest paid on
the securities. The fund is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale.
A fund will establish a segregated account with its custodian bank in which
it will maintain cash, U.S. Government Securities or other liquid portfolio
securities equal in value to its obligations in respect of reverse repurchase
agreements and dollar rolls. Reverse repurchase agreements and dollar rolls
involve the risk that the market value of the securities the fund is obligated
to repurchase under the agreement may decline below the repurchase price. In the
event the buyer of securities under a reverse repurchase agreement or dollar
roll files for bankruptcy or becomes insolvent, a fund's use of proceeds of the
agreement may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce a fund's obligation to repurchase the
securities. Reverse repurchase agreements and dollar rolls are speculative
techniques involving leverage, and are considered borrowings by a fund.
ZERO COUPON SECURITIES. As discussed in the Prospectus, a portion of the
U.S. Government Securities purchased by a fund may be "zero coupon" Treasury
securities. These are U.S. Treasury bills, notes and bonds which have been
stripped of their unmatured interest coupons and receipts or which are
certificates representing interests in such stripped debt obligations and
coupons. In addition, a portion of the fixed-income securities purchased by such
fund may be "zero coupon" securities. "Zero coupon" securities are purchased at
a discount from their face amount, giving the purchaser the right to receive
their full value at maturity. A zero coupon security pays no interest to its
holder during at least a portion of its life. Its value to an investor consists
of the difference between its face value at the time of maturity and the price
for which it was acquired, which is generally an amount significantly less than
its face value (sometimes referred to as a "deep discount" price).
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon reinvestment of interest if
prevailing interest rates decline, the owner of a zero coupon security will be
unable to participate in higher yields upon reinvestment of interest received if
prevailing interest rates rise. For this reason, zero coupon securities are
subject to substantially greater market price fluctuations during periods of
changing prevailing interest rates than are comparable debt securities which
make current distributions of interest. Current federal tax law requires that a
holder (such as a 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 securities during the year.
Currently, the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).
RIGHTS AND WARRANTS. As stated in the Prospectus, a fund may acquire rights
and warrants which are attached to other securities in its portfolio, or which
are issued as a distribution by the issuer of a
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security held in its portfolio. Warrants are, in effect, an option 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.
CONVERTIBLE SECURITIES. As stated in the Prospectus, certain of the
fixed-income securities purchased by certain funds may be convertible into
common stock of the issuer. 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).
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, will 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. Convertible securities may be purchased by a fund at
varying price levels above their investments values and/or their conversion
values in keeping with the fund's objective.
FOREIGN SECURITIES. As stated in the Prospectus, foreign securities
investments may be affected by changes in currency rates or exchange control
regulations, changes in governmental administration or economic or monetary
policy (in the United States and abroad) or changed circumstances in dealings
between nations. Fluctuations in the relative rates of exchange between the
currencies of different nations will affect the value of a 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 a 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 a
fund will be conducted on a spot basis or through forward contracts or futures
contracts (described in the Statement of Additional Information). A 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 the more
rigorous uniform accounting, auditing and financial reporting standards and
requirements 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 certain 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
advanta-
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geous investments. To the extent a fund purchases Eurodollar certificates of
deposit issued by foreign branches of domestic United States banks,
consideration will be given to their domestic marketability, the lower reserve
requirements normally mandated for overseas banking operations, the possible
impact of interruptions in the flow of international currency transactions, and
future international political and economic developments which might adversely
affect the payment of principal or interest.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. As stated in the Prospectus,
certain funds may enter into forward foreign currency exchange contracts
("forward contracts") as a hedge against fluctuations in future foreign exchange
rates. A 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, insurance companies and other dealers 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 a fund believes that the currency of a particular foreign
country 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.
A 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, a 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, a fund's Investment Manager believes that
the currency of a particular foreign country 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,
a 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 a 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.
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A fund will not enter into 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 relevant
funds 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, a 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 a 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
a fund is obligated to deliver.
If a 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 a 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 a 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. A fund will maintain with its
Custodian at all times, cash, U.S. Government securities, or other 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.
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Although a 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.
In all of the above circumstances, if the currency in which a 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. A 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. A 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. A fund may be limited in its ability
to enter into hedging transactions involving forward contracts by the Internal
Revenue Code (the "Code") requirements relating to qualifications as a regulated
investment company (see "Dividends, Distributions and Taxes").
OPTIONS AND FUTURES TRANSACTIONS
As stated in the Prospectus, a fund may write covered call options against
securities held in its portfolio and covered put options on eligible portfolio
securities and stock indexes and purchase options of the same series to effect
closing transactions, and may hedge against potential changes in the market
value of investments (or anticipated investments) and facilitate the
reallocation of a fund's assets into and out of equities and fixed-income
securities by purchasing put and call options on portfolio (or eligible
portfolio) securities and engaging in transactions involving futures contracts
and options on such contracts. A fund may also hedge against potential changes
in the market value of the currencies in which its investments (or anticipated
investments) are denominated by purchasing put and call options on currencies
and engage in transactions involving currency futures contracts and options on
such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on Exchanges and are written in over-the-counter
transactions ("OTC options"). Listed options are issued by the Options Clearing
Corporation ("OCC") and other clearing entities including foreign exchanges.
Ownership of a listed call option gives a fund the right to buy from the OCC the
underlying security covered by the option at the stated exercise price (the
price per unit of the underlying security) by filing an exercise notice prior to
the expiration date of the option. The writer (seller) of the option would then
have the obligation to sell to the OCC the underlying security at that exercise
price prior to the expiration date of the option, regardless of its then current
market price. Ownership of a listed put option would give the fund the right to
sell the underlying security to the OCC at the stated exercise price. Upon
notice of exercise of the put option, the writer of the put would have the
obligation to purchase the underlying security from the OCC at the exercise
price.
OPTIONS ON TREASURY BONDS AND NOTES. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the exchanges on which such securities trade will not continue indefinitely to
introduce options with new expirations to replace expiring options on particular
issues. Instead, the expirations introduced at the commencement of options
trading on a particular issue will be allowed to run their course, with the
possible addition of a limited number of new expirations as the original ones
expire. Options trading on each issue of bonds or notes will thus be phased out
as new options are listed on more recent issues, and options representing a full
range of expirations will not ordinarily be available for every issue on which
options are traded.
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OPTIONS ON TREASURY BILLS. Because a deliverable Treasury bill changes from
week to week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be
hedged from a risk standpoint by the writing of a call option. For so long as
the call option is outstanding, the Fund will hold the Treasury bills in a
segregated account with its Custodian, so that they will be treated as being
covered.
OPTIONS ON FOREIGN CURRENCIES. A fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, a fund may purchase put options on an amount
of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, a fund would be enabled to sell the foreign
currency for a fixed amount of U.S. dollars, thereby "locking in" the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, a fund may purchase call options on foreign currencies in
which securities it anticipates purchasing are denominated to secure a set U.S.
dollar price for such securities and protect against a decline in the value of
the U.S. dollar against such foreign currency. A fund may also purchase call and
put options to close out written option positions.
A fund may also write call options on foreign currency to protect against
potential declines in its portfolio securities which are denominated in foreign
currencies. If the U.S. dollar value of the portfolio securities falls as a
result of a decline in the exchange rate between the foreign currency in which a
security is denominated and the U.S. dollar, then a loss to a fund occasioned by
such value decline would be ameliorated by receipt of the premium on the option
sold. At the same time, however, the fund gives up the benefit of any rise in
value of the relevant portfolio securities above the exercise price of the
option and, in fact, only receives a benefit from the writing of the option to
the extent that the value of the portfolio securities falls below the price of
the premium received. A fund may also write options to close out long call
option positions.
The markets in foreign currency options are relatively new and a fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the funds will not purchase
or write such options unless and until, in the opinion of the management of the
funds, the market for them has developed sufficiently to ensure that the risks
in connection with such
options are not greater than the risks in connection with the underlying
currency, there can be no assurance that a liquid secondary market will exist
for a particular option at any specific time. In addition, options on foreign
currencies are affected by all of those factors which influence foreign exchange
rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security,
including foreign securities held in a "hedged" investment portfolio. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock
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market. To the extent that the U.S. options markets are closed while the markets
for the underlying currencies remain open, significant price and rate movements
may take place in the underlying markets that are not reflected in the options
market.
OTC OPTIONS. Exchange-listed options are issued by the OCC which assures
that all transactions in such options are properly executed. OTC options are
purchased from or sold (written) to dealers or financial institutions which have
entered into direct agreements with the respective funds. With OTC options, such
variables as expiration date, exercise price and premium will be agreed upon
between a fund and the transacting dealer, without the intermediation of a third
party such as the OCC. If the transacting dealer fails to make or take delivery
of the securities underlying an option it has written, in accordance with the
terms of that option, the fund would lose the premium paid for the option as
well as any anticipated benefit of the transaction. A fund will engage in OTC
option transactions only with primary U.S. Government securities dealers
recognized by the Federal Reserve Bank of New York.
COVERED CALL WRITING. Certain funds is permitted to write covered call
options on portfolio securities and the U.S. dollar and foreign currencies,
without limit. Generally, a call option is "covered" if the Fund owns, or has
the right to acquire, without additional cash consideration (or for additional
cash consideration held for the fund by its Custodian in a segregated account)
the underlying security (currency) subject to the option except that in the case
of call options on U.S. Treasury Bills, a fund might own U.S. Treasury Bills of
a different series from those underlying the call option, but with a principal
amount and value corresponding to the exercise price and a maturity date no
later than that of the securities (currency) deliverable under the call option.
A call option is also covered if a fund holds a call on the same security
(currency) as the underlying security (currency) of the written option, where
the exercise price of the call used for coverage is equal to or less than the
exercise price of the call written or greater than the exercise price of the
call written if the mark to market difference is maintained by the fund in cash,
U.S. Government securities or other liquid portfolio securities which the fund
holds in a segregated account maintained with its Custodian.
A fund will receive from the purchaser, in return for a call it has written,
a "premium"; i.e., the price of the option. Receipt of these premiums may better
enable the fund to achieve a greater total return than would be realized from
holding the underlying securities (currency) alone. Moreover, the income
received from the premium will offset a portion of the potential loss incurred
by the fund if the securities (currency) underlying the option are ultimately
sold (exchanged) by the fund at a loss. The premium received will fluctuate with
varying economic market conditions. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, the Fund may receive less total return from
the portion of its portfolio upon which calls have been written than it would
have had such calls not been written.
As regards listed options and certain OTC options, during the option period,
a fund may be required, at any time, to deliver the underlying security
(currency) against payment of the exercise price on any calls it has written
(exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once a fund
has been assigned an exercise notice, the fund will be unable to effect a
closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option to prevent an underlying security (currency) from
being called, to permit the sale of an underlying security (or the exchange of
the underlying currency) or to enable a fund to write another call option on the
underlying security (currency) with either a different exercise price or
expiration date or both. Also, effecting a closing purchase transaction will
permit the cash or proceeds from the concurrent sale of any securities subject
to the option to be used for other investments by the fund. A fund may realize a
net gain or loss from a closing purchase transaction depending upon whether the
amount of the premium received on the call option is more or less than the cost
of effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be wholly or partially offset by unrealized
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appreciation in the market value of the underlying security (currency).
Conversely, a gain resulting from a closing purchase transaction could be offset
in whole or in part or exceeded by a decline in the market value of the
underlying security (currency).
If a call option expires unexercised, a fund realizes a gain in the amount
of the premium on the option less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security
(currency) during the option period. If a call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received for on the option less the commission paid.
Options written by a fund normally have expiration dates of from up to nine
months (equity securities) to eighteen months (fixed-income securities) from the
date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security (currency) at the time
the option is written. See "Risks of Options and Futures Transactions," below.
COVERED PUT WRITING. As a writer of a covered put option, a fund incurs an
obligation to buy the security underlying the option from the purchaser of the
put, at the option's exercise price at any time during the option period, at the
purchaser's election (certain listed and OTC put options written by the fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if, at all times, the fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
securities or other high grade obligations in an amount equal to at least the
exercise price of the option, at all times during the option period. Similarly,
a short put position could be covered by the fund by its purchase of a put
option on the same security as the underlying security of the written option,
where the exercise price of the purchased option is equal to or more than the
exercise price of the put written or less than the exercise price of the put
written if the mark to market difference is maintained by the fund in cash, U.S.
Government securities or other liquid portfolio securities which the fund holds
in a segregated account maintained at its Custodian. In writing puts, a fund
assumes the risk of loss should the market value of the underlying security
decline below the exercise price of the option (any loss being decreased by the
receipt of the premium on the option written). In the case of listed options,
during the option period, the fund may be required, at any time, to make payment
of the exercise price against delivery of the underlying security. The operation
of and limitations on covered put options in other respects are substantially
identical to those of call options.
A fund will write put options for two purposes: (1) to receive the income
derived from the premiums paid by purchasers; and (2) when the Investment
Manager wishes to purchase the security underlying the option at a price lower
than its current market price, in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought. The potential gain on
a covered put option is limited to the premium received on the option (less the
commissions paid on the transaction) while the potential loss equals the
difference between the exercise price of the option and the current market price
of the underlying securities when the put is exercised, offset by the premium
received (less the commissions paid on the transaction).
PURCHASING CALL AND PUT OPTIONS. A fund may purchase listed and OTC call
and put options in amounts equalling up to 5% of its total assets. A fund may
purchase call options in order to close out a covered call position (see
"Covered Call Writing" above) or purchase call options on securities they intend
to purchase. A fund may also purchase a call option on foreign currency to hedge
against an adverse exchange rate move of the currency in which the security it
anticipates purchasing is denominated vis-a-vis the currency in which the
exercise price is denominated. The purchase of the call option to effect a
closing transaction or a call written over-the-counter may be a listed or an OTC
option. In either case, the call purchased is likely to be on the same
securities (currencies) and have the same terms as the written option. If
purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution which purchased the call written by a fund.
A fund may purchase put options on securities (currency) which it holds (or
has the right to acquire) in its portfolio only to protect itself against a
decline in the value of the security (currency). If the value of
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the underlying security (currency) were to fall below the exercise price of the
put purchased in an amount greater than the premium paid for the option, the
fund would incur no additional loss. A fund may also purchase put options to
close out written put positions in a manner similar to call options closing
purchase transactions. In addition, the fund may sell a put option which it has
previously purchased prior to the sale of the securities (currency) underlying
such option. Such a sale would result in a net gain or loss depending on whether
the amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold. Any such gain or loss
could be offset in whole or in part by a change in the market value of the
underlying security (currency). If a put option purchased by the fund expired
without being sold or exercised, the premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of the
underlying security (or the currency in which it is denominated) increase, but
has retained the risk of loss should the price of the underlying security
(currency) decline. The covered put writer also retains the risk of loss should
the market value of the underlying security (currency) decline below the
exercise price of the option less the premium received on the sale of the
option. In both cases, the writer has no control over the time when it may be
required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver or receive the underlying securities (currency) at the exercise price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to purchase
an offsetting over-the-counter option, it cannot sell the underlying security
until the option expires or the option is exercised. Accordingly, a covered call
option writer may not be able to sell (exchange) an underlying security
(currency) at a time when it might otherwise be advantageous to do so. A covered
put option writer who is unable to effect a closing purchase transaction or to
purchase an offsetting over-the-counter option would continue to bear the risk
of decline in the market price of the underlying security (currency) until the
option expires or is exercised. In addition, a coveredput writer would be unable
to utilize the amount held in cash or U.S. Government or other liquid portfolio
securities as security for the put option for other investment purposes until
the exercise or expiration of the option.
A fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option Exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options will generally only be closed out by entering into
a closing purchase transaction with the purchasing dealer. However, a fund may
be able to purchase an offsetting option which does not close out its position
as a writer but constitutes an asset of equal value to the obligation under the
option written. If the fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be required to maintain
the securities subject to the call, or the collateral underlying the put, even
though it might not be advantageous to do so, until a closing transaction can be
entered into (or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an Exchange; (v) inadequacy of the facilities of an Exchange or
the Options Clearing Corporation ("OCC") to handle current trading volume; or
(vi) a decision by one or more Exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.
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Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, a fund would continue to
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. In addition, the fund may be required
to take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
a fund's ability to effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which a fund engages in
transactions in options, futures or options thereon, the fund could experience
delays and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss of all or part of its margin deposits with the
broker. Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the fund, the fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by the Investment Manager.
Each of the Exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different Exchanges or are held or written on
one or more accounts or through one or more brokers). An Exchange may order the
liquidation of positions found to be in violation of these limits and it may
impose other sanctions or restrictions. These position limits may restrict the
number of listed options which a fund may write.
While the futures contracts and options transactions to be engaged in by a
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 volatility of portfolio securities is that the prices of securities
and 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. Another such risk is that prices of interest rate
futures contracts may not move in tandem with the changes in prevailing interest
rates against which the fund seeks a hedge. A correlation may also be distorted
by the fact that the futures market is dominated by short-term traders seeking
to profit from the difference between a contract or security price objective and
their cost of borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
STOCK INDEX OPTIONS. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the "multiplier"). The multiplier for an index option
performs a function similar to the unit of trading for a stock option. It
determines the total dollar value per contract of each point in the difference
between the exercise price of an option and the current level of the underlying
index. A multiplier of 100 means that a one-point difference will yield $100.
Options on different indexes may have different multipliers. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. Unlike stock options, all settlements are in cash and a gain or
loss depends on price movements in the stock market generally (or in a
particular segment of the market) rather than the price movements in
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individual stocks. Currently, options are traded on the Standard & Poor's 100
Index and the Standard & Poor's 500 Index on the Chicago Board Options Exchange,
the Major Market Index and the Computer Technology Index, Oil Index and
Institutional Index on the American Stock Exchange and the NYSE Index and NYSE
Beta Index on the New York Stock Exchange, The Financial News Composite Index on
the Pacific Stock Exchange and the Value Line Index, National O-T-C Index and
Utilities Index on the Philadelphia Stock Exchange, each of which and any
similar index on which options are traded in the future which include stocks
that are not limited to any particular industry or segment of the market is
referred to as a "broadly based stock market index." Options on stock indexes
provide a fund with a means of protecting a fund against the risk of market wide
price movements. If the Investment Manager anticipates a market decline, the
fund could purchase a stock index put option. If the expected market decline
materialized, the resulting decrease in the value of the fund's portfolio would
be offset to the extent of the increase in the value of the put option. If the
Investment Manager anticipates a market rise, the fund may purchase a stock
index call option to enable the fund to participate in such rise until
completion of anticipated common stock purchases by the fund. Purchases and
sales of stock index options also enable the Investment Manager to more speedily
achieve changes in a fund's equity positions.
A fund will write put options on stock indexes only if such positions are
covered by cash, U.S. Government securities or other liquid portfolio securities
equal to the aggregate exercise price of the puts, which cover is held for the
fund in a segregated account maintained for it by the fund's Custodian. All call
options on stock indexes written by the fund will be covered either by a
portfolio of stocks substantially replicating the movement of the index
underlying the call option or by holding a separate call option on the same
stock index with a strike price no higher than the strike price of the call
option sold by the fund.
RISKS OF OPTIONS ON INDEXES. Because exercises of stock index options are
settled in cash, call writers such as the Fund cannot provide in advance for
their potential settlement obligations by acquiring and holding the underlying
securities. A call writer can offset some of the risk of its writing position by
holding a diversified portfolio of stocks similar to those on which the
underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options. When
an index option is exercised, the amount of cash that the holder is entitled to
receive is determined by the difference between the exercise price and the
closing index level on the date when the option is exercised. As with other
kinds of options, the writer will not learn that it has been assigned until the
next business day, at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
stocks that exactly match the composition of the underlying index, it will not
be able to satisfy its assignment obligations by delivering those stocks against
payment of the exercise price. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; and by the time it
learns that it has been assigned, the index may have declined, with a
corresponding decrease in the value of its stock portfolio. This "timing risk"
is an inherent limitation on the ability of index call writers to cover their
risk exposure by holding stock positions.
A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If such a change causes
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the exercised option to fall out-of-the-money, the exercising holder will be
required to pay the difference between the closing index value and the exercise
price of the option (times the applicable multiplier) to the assigned writer.
If dissemination of the current level of an underlying index is interrupted,
or if trading is interrupted in stocks accounting for a substantial portion of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, an exchange
may impose restrictions prohibiting the exercise of such options.
FUTURES CONTRACTS. Certain funds may purchase and sell interest rate,
currency and stock index futures contracts ("futures contracts") that are traded
on U.S. and foreign commodity exchanges on such underlying securities as U.S.
Treasury bonds, notes and bills ("interest rate" futures), on the U.S. dollar
and foreign currencies, and such indexes as the S&P 500 Index, the Moody's
Investment-Grade Corporate Bond Index and the New York Stock Exchange Composite
Index ("index" futures).
As a futures contract purchaser, a fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the fund incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
A fund will purchase or sell interest rate futures contracts and bond index
futures contracts for the purpose of hedging its fixed-income portfolio (or
anticipated portfolio) securities against changes in prevailing interest rates.
If the Investment Manager anticipates that interest rates may rise and,
concomitantly, the price of fixed-income securities fall, a fund may sell an
interest rate futures contract or a bond index futures contract. If declining
interest rates are anticipated, the fund may purchase an interest rate futures
contract to protect against a potential increase in the price of U.S. Government
securities the fund intends to purchase. Subsequently, appropriate fixed-income
securities may be purchased by the fund in an orderly fashion; as securities are
purchased, corresponding futures positions would be terminated by offsetting
sales of contracts.
A fund will purchase or sell futures contracts on the U.S. dollar and on
foreign currencies to hedge against an anticipated rise or decline in the value
of the U.S. dollar or foreign currency in which a portfolio security of the fund
is denominated vis-a-vis another currency.
A 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 a 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 a fund intends to purchase, the
fund may purchase stock index futures contracts. In addition, interest rate and
stock index futures contracts will be bought or sold in order to close out a
short or long position in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the open or
close of the last trading day of the contract and the futures contract price. A
futures contract sale is closed out by effecting a futures contract purchase for
the same aggregate amount of the specific type of equity security and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of 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.
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INTEREST RATE FUTURES CONTRACTS. When a fund enters into an interest rate
futures contract, it is initially required to deposit with the fund's Custodian,
in a segregated account in the name of the broker performing the transaction, an
"initial margin" of cash or U.S. Government securities or other liquid portfolio
securities equal to approximately 2% of the contract amount. Initial margin
requirements are established by the Exchanges on which futures contracts trade
and may, from time to time, change.
In addition, brokers may establish margin deposit requirements in excess of
those required by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
fund may be required to make subsequent deposits called "variation margin", with
the Fund's Custodian, in the account in the name of the broker, which are
reflective of price fluctuations in the futures contract. Currently, interest
rates futures contracts can be purchased on debt securities such as U.S.
Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6 1/2 and
10 years, GNMA Certificates and Bank Certificates of Deposit.
INDEX FUTURES CONTRACTS. A fund may invest in index futures contracts. 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.
A fund is required to maintain margin deposits with brokerage firms through
which it effects index futures contracts in a manner similar to that described
above for interest rate futures contracts. Currently, the initial margin
requirement is approximately 5% 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, a 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 and 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.
OPTIONS ON FUTURES CONTRACTS. A fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid), and the writer
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
A fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the
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sale of a futures contract (purchase of a put option or sale of a call option),
or to close out a long or short position in futures contracts. If, for example,
the Investment Manager wished to protect against an increase in interest rates
and the resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the Investment Manager seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, augment the total return of the
fund and thereby provide a further hedge against losses resulting from price
declines in portions of the fund's portfolio.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. A fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts 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, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
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 operator, the fund may
only enter into futures contracts and options on futures contracts transactions
for purposes of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the fund would be permitted to write options on 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
and options thereon by the fund.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. A 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 a 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 a fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. Government
securities or other liquid portfolio securities equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or variation margin on deposit) in a segregated account maintained for the fund
by its Custodian. Alternatively, the fund could cover its long position by
purchasing a put option on the same futures contract with an exercise price as
high or higher than the price of the contract held by the fund.
If a fund maintains a short position in a futures contract or has sold a
call option on 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 or the exercise price of the option. Such a position may
also be covered by owning the securities underlying
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the futures contract (in the case of a stock index futures contract a portfolio
of securities substantially replicating the relevant index), or by holding a
call option permitting the fund to purchase the same contract at a price no
higher than the price at which the short position was established.
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.
The extent to which a fund may enter into transactions involving options and
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 and
the Statement of Additional Information.
There may exist an imperfect correlation between the price movements of
futures contracts purchased by a fund and the movements in the prices of the
securities which are the subject of the hedge. If participants in the futures
market elect to close out their contracts through offsetting transactions rather
than meet margin deposit requirements, distortions in the normal relationship
between the debt securities and futures markets could result. Price distortions
could also result if investors in futures contracts opt to make or take delivery
of underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due to
the fact that, from the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions 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 by the Investment Manager may still not result
in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which a 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 absence of a liquid
market in futures contracts might cause the fund to make or take delivery of the
underlying securities at a time when it may be disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to a fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to a fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying securities.
The Investment Manager has substantial experience in the use of the
investment techniques described above under the heading "Options and Futures
Transactions," which techniques require skills different from those needed to
select the portfolio securities underlying various options and futures
contracts.
PORTFOLIO TURNOVER
It is anticipated that the portfolio turnover rate of each Portfolio of the
Fund will not exceed %. A % turnover rate would occur, for example, if
% of the securities held in a Portfolio of the Fund (excluding all securities
whose maturities at acquisition were one year or less) were sold and replaced
within one year.
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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 of the Portfolios, except as otherwise indicated. Under the
Act, a fundamental policy may not be changed with respect to a Portfolio without
the vote of a majority of the outstanding voting securities of that Portfolio,
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 Portfolio are present or represented by proxy
or (b) more than 50% of the outstanding shares of the Portfolio.
Each Portfolio of the Fund may not:
1. Purchase or sell real estate or interests therein, although each
Portfolio may purchase Underlying Funds which purchase securities of issuers
which engage in real estate operations and securities secured by real estate
or interests therein.
2. Borrow money, except that each Portfolio may borrow from a bank for
temporary or emergency purposes in an amount not exceeding 33 1/3% (taken at
the lower of cost or current value) of its total assets (not including the
amount borrowed).
3. Issue senior securities as defined in the Act, except insofar as
permitted in Investment Restriction 2.
4. Make short sales of securities.
5. Engage in the underwriting of securities, except insofar as a
Portfolio or an Underlying Fund may be deemed an underwriter under the
Securities Act of 1933 in disposing of a portfolio security.
6. Invest for the purpose of exercising control or management of any
other issuer.
7. Purchase or sell commodities or commodities contracts except that
each Portfolio may invest in Underlying Funds which may purchase or write
interest rate, currency and stock and bond index futures contracts and
related options thereon.
8. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. (For the purpose of this restriction,
collateral arrangements with respect to the writing of options by the
Underlying Funds and collateral arrangements with respect to initial or
variation margin for futures by the Underlying Funds are not deemed to be
pledges of assets.)
9. Purchase securities on margin (but a Portfolio may obtain short-term
loans as are necessary for the clearance of transactions). The deposit or
payment by an Underlying Fund of initial or variation margin in connection
with futures contracts or related options thereon is not considered the
purchase of a security on margin.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective[s] by investing all or substantially
all of its assets in another investment company having substantially the same
investment objective[s] and policies as the Fund.
Notwithstanding the foregoing investment restrictions, the Underlying Funds
in which the Portfolios may invest have adopted certain investment restrictions
which may be more or less restrictive than those listed above, thereby
permitting a Portfolio to engage in investment strategies indirectly that are
prohibited under the investment restrictions listed above. The investment
restrictions of an Underlying Fund are located in the Prospectus and Statement
of Additional Information of that Underlying Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
The Investment Manager is responsible for decisions to buy and sell
securities for the Portfolios and arranges for the execution of portfolio
security transactions on behalf of the Trusts. Purchases of portfolio
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securities are made from dealers, underwriters and issuers; sales, if any, prior
to maturity, are made to dealers and issuers. The Portfolios do not normally
incur any brokerage commission expense on such transactions. Money market
instruments 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. Securities purchased in
underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased or sold directly from or to an issuer, no
commissions or discounts are paid.
The policy of the Portfolios regarding purchases and sales of securities for
their respective portfolios is that primary consideration will be given to
obtaining the most favorable price and efficient execution of transactions with
those dealers who the Investment Manager believes provide the most favorable
prices and are capable of providing efficient executions. If the Investment
Manager believes such price and execution can be obtained from more than one
dealer, it may give consideration to placing portfolio transactions with those
dealers who also furnish research and other services to the Portfolios 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
purchases or sale; statistical or factual information or opinions pertaining to
investments; wire services; and appraisals or evaluations of portfolio
securities.
The information and services received by the Investment Manager from dealers
may be of benefit to the Investment Manager in the management of accounts of
some or all of its other clients and may not in all cases benefit the Portfolios
directly. While the receipt of such information and services are useful and
important in supplementing its own research and facilities, the Investment
Manager believes the value of such services is not determinable and does not
significantly reduce its expenses.
Pursuant to an order of the Securities and Exchange Commission, the
Portfolios may effect principal transactions in certain money market instruments
with Dean Witter. The Portfolios will limit their transactions with Dean Witter
to U.S. Government and Government Agency Securities, Bank Money Instruments
(i.e., Certificates of Deposit and Banker's Acceptances) and Commercial Paper
(not including Tax-Exempt Municipal Paper). Such transactions will be effected
with Dean Witter only when the price available from Dean Witter is better than
that available from other dealers.
While the Portfolios do not anticipate that they will incur any brokerage
commissions, consistent with the policy described above, brokerage transactions
in securities listed on exchanges or admitted to unlisted trading privileges may
be effected through Dean Witter. In order for Dean Witter to effect portfolio
transactions for any of the Portfolios, the commissions, fees or other
remuneration received by Dean Witter 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 Dean
Witter to receive no more than the remuneration which would be expected to be
received by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Trustees of the Fund, including a majority of the Trustees who
are not "interested" Trustees, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to
Dean Witter are consistent with the foregoing standard.
THE DISTRIBUTOR
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of each Portfolio of the Fund are
distributed by 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 MSDWD. The 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 , 1997, the current
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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 has an
initial term ending April 30, 1998 and will remain in effect from year to year
thereafter if approved by the Board.
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 account executives. The
Distributor also pays certain expenses in connection with the distribution of
each Portfolio 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 each Portfolio 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 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% and 1.0% of the average daily net assets of Class A and
Class C, respectively, and, with respect to Class B, 1.0% of the average daily
net assets of Class B. 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 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 majority vote of the Board of Trustees, including
all 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"), cast in person at a
meeting called for the purpose of voting on the Plan, on , .
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.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method each Portfolio of 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 account executives 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 account executives or dealers of
record in all cases. On orders of
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$1 million or more (for which no sales charge was paid) or net asset value
purchases by 401(k) plans or other employer-sponsored plans qualified under
Section 401(a) of the Internal Revenue Code for which Dean Witter Trust Company
("DWTC") or Dean Witter Trust FSB ("DWTFSB") serves as Trustee or the 401(k)
Support Services Group of DWR serves as recordkeeper, the Investment Manager
compensates DWR's account executives 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 account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 5.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.25% of the current value (not including reinvested
dividends or distributions) of the amount sold in all cases. In the case of
retirement plans qualified under Section 401(k) of the Internal Revenue Code and
other employer-sponsored plans qualified under Section 401(a) of the Internal
Revenue Code for which DWTC or DWTFSB serves as Trustee or the 401(k) Support
Services Group of DWR serves as recordkeeper, and which plans are opened on or
after July 28, 1997, DWR compensates its account executives 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 account executives 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 account executives of record.
With respect to Class D shares other than shares held by participants in
InterCapital's mutual fund asset allocation program, the Investment Manager
compensates DWR's account executives 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 account executives 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 account executives of record (not including accounts of
participants in the InterCapital mutual fund asset allocation program).
The gross sales credit is a charge which reflects commissions paid by DWR to
its account executives and DWR's 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 coordinators to promote the sale of Fund shares and (d) other
expenses relating to branch promotion of Fund 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 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
29
<PAGE>
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 of each Portfolio 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 account executives, 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 account executives (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 each Portfolio 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 each Portfolio of 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.
At any given time, the expenses of distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. Because there is no requirement under the
Plan that the Distributor be reimbursed for all distribution expenses with
respect to Class B shares or any requirement that the Plan be continued from
year to year, this excess amount does not constitute a liability of the Fund.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
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 financial
interest in the operation of the Plan except to the extent that the Distributor,
InterCapital, DWR, DWSC 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 , 19 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 Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of each Portfolio of the Fund, and all material
amendments to the Plan must also be approved by the Trustees in the manner
described above. The Plan may be terminated at any time, without payment of any
penalty, by vote of a majority of the Independent 12b-1 Trustees or by a vote of
a majority of the outstanding voting securities of each Portfolio of the Fund
(as defined in the Act) on not more than thirty days' written notice to any
other party to the Plan. So long as the Plan is in effect, the election and
nomination of Independent 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
30
<PAGE>
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.
The net asset value per share for each Class of shares of each Portfolio of
the Fund is determined once daily as of 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; 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 Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") or shares of other 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 Dean Witter Trust Company (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
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.
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<PAGE>
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 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 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 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 employer-sponsored benefit 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
employer-sponsored benefit 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 Dean Witter Fund (see
"Shareholder Services-- Targeted Dividends"), plus (c) the current net asset
value of shares acquired in exchange for (i) shares of Dean Witter front-end
sales charge funds, or (ii) shares of other 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 addition, no CDSC will be imposed on redemptions of shares
which are attributable to reinvestment of dividends or distributions from, or
the proceeds of, certain Unit Investment Trusts.]
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 employer-sponsored
benefit 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 Dean Witter front-end sales charge funds, or
for shares of other 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 and the value of shares
purchased more than six years (or, in the case of shares held by certain
employer-sponsored
32
<PAGE>
benefit 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 OF
PAYMENT MADE 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 held by 401(k) plans or other employer-sponsored plans
qualified under Section 401(a) of the Internal Revenue Code for which DWTC or
DWTFSB serves as Trustee or the 401(k) Support Services Group of DWR serves as
recordkeeper and whose accounts are opened on or after July 28, 1997:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE 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 employer-sponsored benefit 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.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of each Portfolio 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.
33
<PAGE>
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.
TARGETED DIVIDENDS.-SM- 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 Dean Witter Fund
other than Dean Witter Fund of Funds or in another Class of Dean Witter Fund of
Funds. 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 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 Dean Witter Fund the next business day. To participate in the Targeted
Dividends program, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent. Shareholders of the Fund
must be shareholders of the selected Class of the 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 Dean Witter Fund
before entering the program.
EASYINVEST.-SM- 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 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. For further information or to subscribe to
EasyInvest, shareholders should contact their DWR or other selected
broker-dealer account executive 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 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 the proceeds by the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount, not
less
34
<PAGE>
than $25, or in any whole percentage of the account balance, on an annualized
basis. Any applicable CDSC will be imposed on shares redeemed under the
Withdrawal Plan (see "Purchase of Fund Shares"). Therefore, 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 or quarterly amount.
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 or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent, or amounts credited to a shareholder's DWR or other
selected broker-dealer brokerage account, within five business days after the
date of redemption. The Withdrawal Plan may be terminated at any time by the
Fund.
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 the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
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 account executive 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,
shareholders may make additional investments in any Class of shares of any
Portfolio of the Fund for which they qualify at any time by sending a check in
any amount, not less than $100, payable to Dean Witter Fund of Funds, and
indicating the selected Class and Portfolio, 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 any
Portfolio of the Fund may exchange their shares for shares of the same Class of
shares of any other Portfolio of the Fund or any other 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: Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond
Fund, Dean Witter Intermediate Term U.S. Treasury Trust and five Dean Witter
Funds which are money market funds (the foregoing nine funds are hereinafter
35
<PAGE>
referred to as the "Exchange Funds"). Class A shares may also be exchanged for
shares of Dean Witter Multi-State Municipal Series Trust and Dean Witter Hawaii
Municipal Trust, which are Dean Witter Funds sold with a front-end sales charge
("FSC Funds"). Class B shares may also be exchanged for shares of Dean Witter
Global Short-Term Income Fund Inc., Dean Witter High Income Securities and Dean
Witter National Municipal Trust, which are Dean Witter Funds offered with a CDSC
("CDSC Funds"). 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 Dean Witter
Multi-Class Fund or any CDSC Fund are exchanged for shares of an 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 Dean Witter Multi-Class Fund or
in a CDSC Fund. 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 Dean Witter Multi-Class Fund or a CDSC Fund 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 Dean Witter
Multi-Class Fund or of a CDSC Fund 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 Dean Witter Multi-Class Fund or in a CDSC Fund. 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 Dean Witter Multi-Class Fund or in a
CDSC Fund are exchanged for shares of a Dean Witter Multi-Class Fund, shares of
a CDSC Fund, 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 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,
36
<PAGE>
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 any Portfolio 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 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
Portfolio or 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 Dean Witter Liquid Asset
Fund Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter California
Tax-Free Daily Income Trust and 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 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 Dean Witter Special Value Fund. The minimum initial
investment for the Exchange Privilege account of each Class of all other 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 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 Dean Witter funds for
whichshares 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
37
<PAGE>
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 DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of each Class of each
Portfolio 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 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" in the Prospectus) 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.
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 new
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.
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. 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. 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 value of its net assets, or (d) during any other
38
<PAGE>
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 (including a
certificate or bank cashier's check), payment of 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 broker-dealer are referred to their account executive
regarding restrictions on redemption of shares of the Fund pledged in the margin
account.
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 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 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 at the net
asset value next determined after a reinstatement request, together with such
proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal 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 purposes
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, each Portfolio of 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, each Portfolio
will pay federal income tax thereon, and will notify shareholders that,
following an election by the Portfolio, the shareholders will be required to
include such undistributed gains in determining their taxable income and may
claim their share of the tax paid by the Portfolio as a credit against their
individual federal income tax.
Because each Portfolio of the Fund intends to distribute all of its net
investment income and capital gains to shareholders and otherwise continue to
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
each Portfolio of the Fund. Such dividends and distributions, to the extent that
they are derived from net investment income or short-term capital gains, are
taxable to the shareholder as ordinary income regardless of whether the
shareholder receives such payments in additional shares or in cash. 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.
Gains or losses on the sales of securities by each Portfolio of the Fund
will be long-term capital gains or losses if the securities have been held by
the Portfolio for more than one year. Gains or losses on the sale of securities
held for one year or less will be short-term capital gains or losses.
39
<PAGE>
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.
Any ordinary income dividends or capital gains distributions received by a
shareholder from any investment company will have the effect of reducing the net
asset value of the shareholder's shares in that company by the exact amount of
the dividend or capital gains distribution. Furthermore, capital gains
distributions and ordinary income 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 realized long-term capital
gains, such payment would be in part a return of the shareholder's investment to
the extent of such reduction below the shareholder's cost, but nonetheless would
be taxable to the shareholder. Therefore, an investor should consider the tax
implications of purchasing Fund shares immediately prior to a dividend or
distribution record date.
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. Any distributions made by the Fund will
not be eligible for the dividends received deduction with respect to shares
which are held by the shareholder for 45 days or less. 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.
After the end of the 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 portion eligible for the dividends received
deduction. 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 are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time each Portfolio of 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. Each Portfolio's "average annual total return" represents an
annualization of that Portfolio's total return over a specified 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 Portfolio'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.
In addition to the foregoing, each Portfolio 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
40
<PAGE>
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 each Portfolio may be calculated in the manner described in the
preceding paragraph, but without deduction for any applicable sales charge.
In addition, each Portfolio may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate which
will result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result.
Each Portfolio may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the respective
Portfolio by adding 1 to the respective Portfolio'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.
Each Portfolio from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations.
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
held. The Trustees themselves have the power to alter the number and the terms
of office of the Trustees, and they may at any time lengthen 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 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 above, 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.
41
<PAGE>
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
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.
Dean Witter Trust Company, 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. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager, and of Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company'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
Dean Witter Trust Company receives a per shareholder account fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
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 accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on . 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 included in this Statement of Assets
and Liabilities and incorporated by reference in the Prospectus has been so
included and incorporated in reliance on the report of
,independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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.
42
<PAGE>
DEAN WITTER FUND OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES AT , 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO DOMESTIC EQUITY PORTFOLIO
CLASS A CLASS B CLASS C CLASS D CLASS A CLASS B CLASS C CLASS D
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash.............................. $ $ $ $ $ $ $ $
Deferred organizational expenses
(Note 1).........................
--------- --------- --------- --------- --------- --------- --------- ---------
Total Assets..................
LIABILITIES:
Organizational expenses payable
(Note 1).........................
Commitments (Notes 1 and 2).......
--------- --------- --------- --------- --------- --------- --------- ---------
Net Assets.................... $ $ $ $ $ $ $ $
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Shares of Beneficial Interest
(unlimited authorized Shares of
beneficial interest of $.01 par
value).............................
Net Asset Value Per Share........... $ $ $ $ $ $ $ $
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------
NOTE 1--Dean Witter Fund of Funds (the "Trust") was organized as a Massachusetts
business trust on July , 1997. To date the Fund has had no transactions other
than those relating to organizational matters and the sale of 10,000 shares of
beneficial interest for $100,000 to Dean Witter InterCapital Inc. (the
"Investment Manager"). The Fund is registered under the Investment Company Act
of 1940, as amended (the "Act"), as a non-diversified, open-end management
investment company. Organizational expenses of the Fund incurred prior to the
offering of the Fund's shares will be paid by the Investment Manager. It is
currently estimated that the Investment Manager will incur, and be reimbursed by
the Fund for, approximately $ in organizational expenses. Actual expenses
could differ from these estimates. These expenses will be deferred and amortized
by the Fund on the straight-line method over a period not to exceed five years
from the date of commencement of the Fund's operations. In the event that, at
any time during the five year period beginning with the date of commencement of
operations, the initial shares acquired by the Investment Manager prior to such
date are redeemed, by any holder thereof, the redemption proceeds payable in
respect of such shares will be reduced by the pro rata share (based on the
proportionate share of the initial shares redeemed to the total number of
original shares outstanding at the time of redemption) of the then unamortized
deferred organizational expenses as of the date of such redemption. In the event
that the Fund liquidates before the deferred organizational expenses are fully
amortized, the Investment Manager shall bear such unamortized deferred
organizational expenses.
NOTE 2--The Fund has entered into an investment management agreement with the
Investment Manager. Certain officers and/or trustees of the Fund are officers
and/or directors of 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. Under the terms of the
Investment Management Agreement, the Investment Manager maintains certain of the
Fund's books and records and furnishes, at its own expense, such office space,
facilities, equipment, supplies, clerical help and bookkeeping and certain legal
services as the Fund may reasonably require in the conduct of its business. 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 the Fund's telephone service, heat,
light, power and other utilities.
The Investment Manager does not receive a management fee from any Portfolio
of the Fund for providing the aforementioned investment management services.
However, each Portfolio, through its investments in the Class D shares of the
Underlying Funds, will pay its pro rata share of the management fees and certain
other expenses of the Underlying Funds.
Shares of each Portfolio of the Fund will be distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan"). The Plan provides that the Distributor will bear the expense of
all promotional and distribution related activities on behalf of each Portfolio
of the Fund, including the payment of commissions for sales of the Fund's shares
and incentive compensation to and expenses of Dean Witter Reynolds Inc., an
affiliate of the Investment Manager and the Distributor, account executives 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.
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 A. Class B shares are also subject to a
12b-1 fee assessed at the annual rate of 1.0% of the average daily net assets of
Class B. Class B shares convert to Class A shares
43
<PAGE>
approximately ten years after the date of the original 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 C. Class D shares are offered only to investors
meeting an initial investment minimum of $5 million 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. With respect to the Class
A, Class B and Class C shares of each Portfolio, the Distributor receives the
proceeds of contingent deferred sales charges imposed on certain redemptions of
shares, which are separate and apart from payments made pursuant to the Plan.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
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.
Dean Witter Trust Company, an affiliate of the Investment Manager and the
Distributor, is the transfer agent of the Fund's shares, dividend disbursing
agent for payment of dividends and distributions on Fund shares and agent for
shareholders under various investment plans.
The Investment Manager has undertaken, with respect to each Portfolio of the
Fund, to assume all operating expenses (except for the Plan fee and brokerage
fees) and to waive the compensation provided for in its investment management
agreement for services rendered until such time as a Portfolio has $50 million
of net assets or until six months from the date of commencement of the Fund's
operations, whichever occurs first.
44
<PAGE>
DEAN WITTER FUND OF FUNDS
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
None
(b) EXHIBITS:
1. -- Declaration of Trust of Registrant
2. -- By-Laws of Registrant
3. -- None
4. -- Not Applicable
5. -- Form of Investment Management Agreement between Registrant and
Dean Witter InterCapital Inc.*
6.(a) -- Form of Distribution Agreement between Registrant and
Dean Witter Distributors Inc.*
(b) -- Forms of Selected Dealer Agreements*
(c) -- Form of Underwriting Agreement between Registrant and Dean Witter
Distributors Inc.*
7. -- None
8.(a) -- Form of Custodian Agreement *
(b) -- Form of Transfer Agency and Services Agreement between Registrant
and Dean Witter Trust Company*
9. -- Form of Services Agreement between Dean Witter InterCapital Inc.
and Dean Witter Services Company Inc.*
10.(a) -- Opinion of Barry Fink, Esq.*
(b) -- Opinion of Lane Altman & Owens LLP*
11. -- Consent of Independent Accountants*
12. -- None
13. -- Investment Letter of Dean Witter InterCapital Inc.*
14. -- None
<PAGE>
15. -- Form of Plan of Distribution between Registrant and Dean Witter
Distributors Inc.*
16. -- Schedule for Computation of Performance Quotations - to be filed
with the first post-effective amendment
27. -- Financial Data Schedule *
Other -- Powers of Attorney*
- -----------------------------
* To be filed by amendment.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Prior to the effectiveness of this Registration Statement, the Registrant
will sell 10,000 of its shares of beneficial interest to Dean Witter
InterCapital Inc., a Delaware corporation. Dean Witter InterCapital Inc. is a
wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co., a
Delaware corporation, that is a balanced financial services organization
providing a broad range of nationally marketed credit and investment products.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at , 1997
-------------- ------------------------
Shares of Beneficial Interest
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
2
<PAGE>
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 ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. The principal address
of the Dean Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
OPEN-END INVESTMENT COMPANIES:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
4
<PAGE>
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Mid-Cap Growth Fund
(48) Dean Witter Select Dimensions Investment Series
(49) Dean Witter Balanced Growth Fund
(50) Dean Witter Balanced Income Fund
(51) Dean Witter Hawaii Municipal Trust
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
(57) Dean Witter Special Value Fund
(58) Dean Witter Financial Services Trust
(59) Dean Witter Market Leader Trust
5
<PAGE>
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10)TCW/DW Strategic Income Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of
Chairman, Chief Dean Witter Reynolds Inc. ("DWR"); Chairman,
Executive Officer and Chief Executive Officer and Director of Dean
Director Witter Distributors Inc. ("Distributors")
and Dean Witter Services Company Inc.
("DWSC"); Chairman and Director of Dean
Witter Trust Company ("DWTC"); Chairman,
Director or Trustee, President and Chief
Executive Officer of the Dean Witter Funds
and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Director and/or
officer of various Morgan Stanley, Dean
Witter, Discover & Co. ("MSDWD")
subsidiaries; Formerly
Executive Vice President and Director of
Dean Witter, Discover & Co.
Philip J. Purcell Chairman, Chief Executive Officer and
Director of Director of MSDWD and DWR; Director of
DWSC and Distributors; Director or Trustee
of the Dean Witter Funds; Director and/or
officer of various MSDWD subsidiaries.
Richard M. DeMartini President and Chief Operating Officer
Director of Dean Witter Capital, a division of DWR;
Director of DWR, DWSC, Distributors
and DWTC; Trustee of the TCW/DW Funds.
James F. Higgins President and Chief Operating Officer of
Director Dean Witter Financial; Director of DWR,
DWSC, Distributors and DWTC.
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
VOCATION WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
ADDRESS INTERCAPITAL INC. AND NATURE OF CONNECTION
- ------------------------- --------------------------------------------
Thomas C. Schneider Executive Vice President and Chief Strategic
Executive Vice and Administrative Officer of MSDWD;
President, Chief Executive Vice President and Chief Financial
Financial Officer and Officer of DWSC and Distributors; Director
Director of DWR, DWSC and Distributors.
Christine A. Edwards Executive Vice President, Chief Legal
Director Officer and Secretary of MSDWD; Executive
Vice President, Secretary and Chief Legal
Officer of Distributors; Director of DWR,
DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of
President and Chief DWSC, Executive Vice President of
Operating Officer Distributors; Executive Vice President and
Director ofDWTC; Vice President of the Dean
Witter Funds and the TCW/DW Funds.
Mitchell M. Merin President and Chief Strategic Officer of
President and Chief DWSC, Executive Vice President of
Strategic Officer Distributors; Executive Vice President and
Director of DWTC; Executive Vice President
and Director of DWR; Director of SPS
Transaction Services, Inc. and
various other MSDWD subsidiaries.
John B. Van Heuvelen President, Chief Operating Officer and
Executive Vice Director of DWTC.
President
Joseph J. McAlinden
Executive Vice President
and Chief Investment Vice President of the Dean Witter Funds and
Officer Director of DWTC.
Barry Fink Assistant Secretary of DWR; Senior Vice
Senior Vice President, President, Secretary and General Counsel of
Secretary and General DWSC; Senior Vice President, Assistant
Counsel Secretary and Assistant General Counsel of
Distributors; Vice President, Secretary and
General Counsel of the Dean Witter Funds
and the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Edward F. Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWTC and Director of DWTC; Vice President of
the Dean Witter Funds and the TCW/DW Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita H. Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
Rafael Scolari Vice President of Prime Income Trust.
Senior Vice President
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Jayne M. Stevlingston Vice President of various Dean Witter Funds.
Senior Vice President
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Douglas Brown
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Kirk Balzer
Vice President Vice President of Various Dean Witter Funds.
Nancy Belza
Vice President
Dale Boettcher
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Michael Geringer
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of Dean Witter
Vice President Variable Investment Series
Peter Hermann
Vice President Vice President of various Dean Witter Funds
Elizabeth Hinchman
Vice President
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
David Hoffman
Vice President
Christopher Jones
Vice President
James P. Kastberg
Vice President
Michelle Kaufman
Vice President Vice President of various Dean Witter Funds
Michael Knox
Vice President Vice President of various Dean Witter Funds
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard J. Lian
Vice President Vice President of various Dean Witter Funds.
Catherine Maniscalco Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
11
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
James Nash
Vice President
Richard Norris
Vice President
Carsten Otto Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
George Paoletti
Vice President
Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.
Michael Roan
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metal and
Vice President Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Naomi Stein
Vice President
Kathleen H. Stromberg
Vice President Vice President of various Dean Witter Funds.
Marybeth Swisher
Vice President
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Robert Vanden Assem
Vice President
12
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Katherine Wickham
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
13
<PAGE>
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Variable Investment Series
(51) Dean Witter Capital Appreciation Fund
(52) Dean Witter Intermediate Term U.S. Treasury Trust
(53) Dean Witter Information Fund
(54) Dean Witter Japan Fund
(55) Dean Witter Income Builder Fund
(56) Dean Witter Special Value Fund
(57) Dean Witter Financial Services Trust
(58) Dean Witter Market Leader Trust
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
---- --------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
14
<PAGE>
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.
Item 32. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to file a post- effective
amendment, using financial statements which need not be audited, within four to
six months from the effective date of the Registrant's Registration Statement
under the Securities Act of 1933.
The undersigned Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 with regard to
facilitating shareholder communications in the event the requisite percentage of
shareholders so requests, to the same extent as if Registrant were subject to
the provisions of that Section.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and the State of New York on the 3rd
day of July, 1997.
DEAN WITTER FUND OF FUNDS
By: /s/Barry Fink
------------------------------------------
Barry Fink
Trustee, Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer Chairman, President,
Trustee and Chief
Executive Officer
By: /s/Charles A. Fiumefreddo 07/03/97
-----------------------------
Charles A. Fiumefreddo
By: /s/Robert S. Giambrone Trustee 07/03/97
-----------------------------
Robert S. Giambrone
By: /s/Barry Fink Trustee, Vice 07/03/97
----------------------------- President and
Barry Fink Secretary
By: /s/Thomas F. Caloia Treasurer, Chief 07/03/97
----------------------------- Financial Officer
Thomas F. Caloia and Chief Accounting
Officer
<PAGE>
DEAN WITTER FUND OF FUNDS
EXHIBIT INDEX
1. -- Declaration of Trust of Registrant
2. -- By-Laws of Registrant
3. -- None
4. -- Not Applicable
5. -- Form of Investment Management Agreement between Registrant and
Dean Witter InterCapital Inc.*
6.(a) -- Form of Distribution Agreement between Registrant and Dean
Witter Distributors Inc.*
(b) -- Forms of Selected Dealer Agreements*
(c) -- Form of Underwriting Agreement between Registrant and Dean Witter
Distributors Inc.*
7. -- None
8.(a) -- Form of Custodian Agreement*
(b) -- Form of Transfer Agency and Services Agreement between Registrant
and Dean Witter Trust Company*
9. -- Form of Services Agreement between Dean Witter InterCapital Inc.
and Dean Witter Services Company Inc.*
10.(a) -- Opinion of Barry Fink, Esq.*
(b) -- Opinion of Lane Altman & Owens LLP*
11. -- Consent of Independent Accountants*
12. -- None
13. -- Investment Letter of Dean Witter InterCapital Inc.*
14. -- None
15. -- Form of Plan of Distribution between Registrant and Dean Witter
Distributors Inc.*
16. -- Schedule for Computation of Performance Quotations - to be filed
with the first Post-Effective Amendment
<PAGE>
27. -- Financial Data Schedule*
Other -- Powers of Attorney*
- -----------------------
* To be filed by amendment.
<PAGE>
DEAN WITTER
FUND OF FUNDS
TWO WORLD TRADE CENTER
NEW YORK, NY 10048
DECLARATION OF TRUST
DATED: JULY 3, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C> <C>
ARTICLE I -- NAME AND DEFINITIONS......................................................................... 2
Section 1.1 Name..................................................................................... 2
Section 1.2 Definitions.............................................................................. 2
ARTICLE II -- TRUSTEES.................................................................................... 3
Section 2.1 Number of Trustees....................................................................... 3
Section 2.2 Election and Term........................................................................ 3
Section 2.3 Resignation and Removal.................................................................. 3
Section 2.4 Vacancies................................................................................ 4
Section 2.5 Delegation of Power to Other Trustees.................................................... 4
ARTICLE III -- POWERS OF TRUSTEES......................................................................... 4
Section 3.1 General.................................................................................. 4
Section 3.2 Investments.............................................................................. 4
Section 3.3 Legal Title.............................................................................. 5
Section 3.4 Issuance and Repurchase of Securities.................................................... 5
Section 3.5 Borrowing Money; Lending Trust Assets.................................................... 5
Section 3.6 Delegation; Committees................................................................... 5
Section 3.7 Collection and Payment................................................................... 5
Section 3.8 Expenses................................................................................. 6
Section 3.9 Manner of Acting; By-Laws................................................................ 6
Section 3.10 Miscellaneous Powers..................................................................... 6
Section 3.11 Principal Transactions................................................................... 6
Section 3.12 Litigation............................................................................... 6
ARTICLE IV -- INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT............................... 7
Section 4.1 Investment Adviser....................................................................... 7
Section 4.2 Administrative Services.................................................................. 7
Section 4.3 Distributor.............................................................................. 7
Section 4.4 Transfer Agent........................................................................... 7
Section 4.5 Custodian................................................................................ 7
Section 4.6 Parties to Contract...................................................................... 7
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS................................ 8
Section 5.1 No Personal Liability of Shareholders, Trustees, etc..................................... 8
Section 5.2 Non-Liability of Trustees, etc........................................................... 8
Section 5.3 Indemnification.......................................................................... 8
Section 5.4 No Bond Required of Trustees............................................................. 9
Section 5.5 No Duty of Investigation; Notice in Trust Instruments, etc............................... 9
Section 5.6 Reliance on Experts, etc................................................................. 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C> <C>
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST............................................................... 9
Section 6.1 Beneficial Interest...................................................................... 9
Section 6.2 Rights of Shareholders................................................................... 10
Section 6.3 Trust Only............................................................................... 10
Section 6.4 Issuance of Shares....................................................................... 10
Section 6.5 Register of Shares....................................................................... 10
Section 6.6 Transfer of Shares....................................................................... 10
Section 6.7 Notices.................................................................................. 11
Section 6.8 Voting Powers............................................................................ 11
Section 6.9 Series or Classes of Shares.............................................................. 11
ARTICLE VII -- REDEMPTIONS................................................................................ 13
Section 7.1 Redemptions.............................................................................. 13
Section 7.2 Redemption at the Option of the Trust.................................................... 14
Section 7.3 Effect of Suspension of Determination of Net Asset Value................................. 14
Section 7.4 Suspension of Right of Redemption........................................................ 14
ARTICLE VIII -- DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS............................ 15
Section 8.1 Net Asset Value.......................................................................... 15
Section 8.2 Distributions to Shareholders............................................................ 15
Section 8.3 Determination of Net Income.............................................................. 15
Section 8.4 Power to Modify Foregoing Procedures..................................................... 15
ARTICLE IX -- DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC..................................... 16
Section 9.1 Duration................................................................................. 16
Section 9.2 Termination of Trust..................................................................... 16
Section 9.3 Amendment Procedure...................................................................... 16
Section 9.4 Merger, Consolidation and Sale of Assets................................................. 17
Section 9.5 Incorporation............................................................................ 17
ARTICLE X -- REPORTS TO SHAREHOLDERS...................................................................... 17
ARTICLE XI -- MISCELLANEOUS............................................................................... 18
Section 11.1 Filing................................................................................... 18
Section 11.2 Resident Agent........................................................................... 18
Section 11.3 Governing Law............................................................................ 18
Section 11.4 Counterparts............................................................................. 18
Section 11.5 Reliance by Third Parties................................................................ 18
Section 11.6 Provisions in Conflict with Law or Regulations........................................... 18
Section 11.7 Use of the Name "Dean Witter"............................................................ 18
Section 11.8 Principal Place of Business.............................................................. 19
SIGNATURE PAGE............................................................................................ 19
</TABLE>
ii
<PAGE>
DECLARATION OF TRUST
OF
DEAN WITTER FUND OF FUNDS
DATED: JULY 3, 1997
THE DECLARATION OF TRUST of Dean Witter Fund of Funds is made the 3rd day of
July, 1997 by the parties signatory hereto, as trustees (such persons, so long
as they shall continue in office in accordance with the terms of this
Declaration of Trust, and all other persons who at the time in question have
been duly elected or appointed as trustees in accordance with the provisions of
this Declaration of Trust and are then in office, being hereinafter called the
"Trustees").
WITNESSETH:
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is provided that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
1
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. NAME. The name of the trust created hereby is the "Dean
Witter Fund of Funds," 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" wherever 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.
Section 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "BY-LAWS" means the By-Laws referred to in Section 3.9 hereof, as
from time to time amended.
(b) the terms "COMMISSION," "AFFILIATED PERSON" and "INTERESTED PERSON,"
have the meanings given them in the 1940 Act.
(c) "CLASS" means any division of Shares within a Series, which Class is
or has been established pursuant to Section 6.1 hereof.
(d) "DECLARATION" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "DECLARATION," "HEREOF,"
"HEREIN" and "HEREUNDER" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(e) "DISTRIBUTOR" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(f) "FUNDAMENTAL POLICIES" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional
Information and designated as fundamental policies therein.
(g) "INVESTMENT ADVISER" means any party, other than the Trust, to a
contract described in Section 4.1 hereof.
(h) "MAJORITY SHAREHOLDER VOTE" means the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares
represented in person or by proxy and entitled to vote at a meeting of
Shareholders at which a quorum, as determined in accordance with the
By-Laws, is present; (ii) a majority of Shares issued and outstanding and
entitled to vote when action is taken by written consent of Shareholders;
and (iii) a "majority of the outstanding voting securities," as the phrase
is defined in the 1940 Act, when any action is required by the 1940 Act by
such majority as so defined.
(i) "1940 ACT" means the Investment Company Act of 1940 and the rules
and regulations thereunder as amended from time to time.
(j) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
(k) "PROSPECTUS" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust
under the Securities Act of 1933 as such Prospectus and Statement of
Additional Information may be amended or supplemented and filed with the
Commission from time to time.
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(l) "SERIES" means one of the separately managed components of the
Trust (or, if the Trust shall have only one such component, then that one)
as set forth in Section 6.1 hereof or as may be established and designated
from time to time by the Trustees pursuant to that section.
(m) "SHAREHOLDER" means a record owner of outstanding Shares.
(n) "SHARES" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the
shares of any and all series or classes which may be established by the
Trustees, and includes fractions of Shares as well as whole Shares.
(o) "TRANSFER AGENT" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(p) "TRUST" means the Dean Witter Fund of Funds.
(q) "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(r) "TRUSTEES" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof,
and all other persons who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and reference herein to a Trustee or the Trustees shall
refer to such person or persons in their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15).
Section 2.2. ELECTION AND TERM. The Trustees shall be elected by a vote of
a majority of the outstanding voting securities, as defined by the 1940 Act,
held by the initial shareholder(s) (i.e., the person(s) that supplied the seed
capital required under Section 14(a) of the 1940 Act). The Trustees shall have
the power to set and alter the terms of office of the Trustees, and they may at
any time lengthen or lessen their own terms or make their terms of unlimited
duration, subject to the resignation and removal provisions of Section 2.3
hereof. Subject to Section 16(a) of the 1940 Act, the Trustees may elect their
own successors and may, pursuant to Section 2.4 hereof, appoint Trustees to fill
vacancies. The Trustees shall adopt By-Laws not inconsistent with this
Declaration or any provision of law to provide for election of Trustees by
Shareholders at such time or times as the Trustees shall determine to be
necessary or advisable.
Section 2.3. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) by the action of two-thirds of the remaining Trustees or by
the action of the Shareholders of record of not less than two-thirds of the
Shares outstanding (for purposes of determining the circumstances and procedures
under which such removal by the Shareholders may take place, the provisions of
Section 16(c) of the 1940 Act or of the corporate or business statute of any
state in which shares of the Trust are sold, shall be applicable to the same
extent as if the Trust were subject to the provisions of that Section). Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
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Section 2.4. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, the remaining Trustees shall fill such vacancy by the
appointment of such other person as they or he, in their or his discretion,
shall see fit, made by a written instrument signed by a majority of the
remaining Trustees. Any such appointment shall not become effective, however,
until the person named in the written instrument of appointment shall have
accepted in writing such appointment and agreed in writing to be bound by the
terms of the Declaration. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of retirement,
resignation or increase in the number of Trustees, provided that such
appointment shall not become effective prior to such retirement, resignation or
increase in the number of Trustees. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in this Section 2.4, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
Section 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts.
In any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities wheresoever in the world they may be
located as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
the Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, lend or
otherwise deal in or dispose of negotiable or nonnegotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, options, commodities, commodity futures contracts and related
options, currencies, currency futures and forward contracts, and other
securities, investment contracts and other instruments of any kind,
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including, without limitation, those issued, guaranteed or sponsored by any
and all Persons including, without limitation, states, territories and
possessions of the United States, the District of Columbia and any of the
political subdivisions, agencies or instrumentalities thereof, and by the
United States Government or its agencies or instrumentalities, foreign or
international instrumentalities, or by any bank or savings institution, or
by any corporation or organization organized under the laws of the United
States or of any state, territory or possession thereof, and of corporations
or organizations organized under foreign laws, or in "when issued" contracts
for any such securities, or retain Trust assets in cash and from time to
time change the investments of the assets of the Trust; and to exercise any
and all rights, powers and privileges of ownership or interest in respect of
any and all such investments of every kind and description, including,
without limitation, the right to consent and otherwise act with respect
thereto, with power to designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and privileges in
respect of any of said instruments; and the Trustees shall be deemed to have
the foregoing powers with respect to any additional securities in which the
Trust may invest should the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by any
law limiting the investments which may be made by fiduciaries.
Section 3.3. LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is appropriately protected. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
Section 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust, whether capital or
surplus or otherwise, to the full extent now or hereafter permitted by the laws
of the Commonwealth of Massachusetts governing business corporations.
Section 3.5. BORROWING MONEY; LENDING TRUST ASSETS. Subject to the
Fundamental Policies, the Trustee shall have power to borrow money or otherwise
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Trust, to endorse, guarantee, or
undertake the performance of any obligation, contract or engagement of any other
Person and to lend Trust assets.
Section 3.6. DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Trustees or otherwise as the Trustees may deem expedient.
Section 3.7. COLLECTION AND PAYMENT. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
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Section 3.8. EXPENSES. Subject to Section 6.9 hereof, the Trustees shall
have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
Section 3.9. MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of all the Trustees. The Trustees may adopt By-Laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-Laws to the extent such power is not
reserved to the Shareholders.
Section 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) remove Trustees or fill vacancies in or add to their number, elect and
remove such officers and appoint and terminate such agents or employees as they
consider appropriate, and appoint from their own number, and terminate, any one
or more committees which may exercise some or all of the power and authority of
the Trustees as the Trustees may determine; (d) purchase, and pay for out of
Trust Property or the property of the appropriate Series of the Trust, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust against all claims arising by reason of holding any such position
or by reason of any action taken or omitted to be taken by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust or any Series thereof has dealings, including any Investment Adviser,
Distributor, Transfer Agent and selected dealers, to such extent as the Trustees
shall determine; (g) guarantee indebtedness or contractual obligations of
others; (h) determine and change the fiscal year of the Trust or any Series
thereof and the method by which its accounts shall be kept; and (i) adopt a seal
for the Trust but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
Section 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, or effected to implement the provisions of any
agreement to which the Trust is a party, the Trustees shall not, on behalf of
the Trust, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Trust or any Series thereof
to, any Trustee or officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such dealings with any
Investment Adviser, Distributor or Transfer Agent or with any Affiliated Person
of such Person; but the Trust or any Series thereof may employ any such Person,
or firm or company in which such Person is an Interested Person, as broker,
legal counsel, registrar, transfer agent, dividend disbursing agent or custodian
upon customary terms.
Section 3.12. LITIGATION. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to dismiss any
action, suit, proceeding, dispute, claim, or demand, derivative or otherwise,
brought by any person, including a Shareholder in its own name or the name of
the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust.
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ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Section 4.1. INVESTMENT ADVISER. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time enter
into one or more investment advisory or management contracts or, if the Trustees
establish multiple Series, separate investment advisory or management contracts
with respect to one or more Series whereby the other party or parties to any
such contracts shall undertake to furnish the Trust or such Series such
management, investment advisory, administration, accounting, legal, statistical
and research facilities and services, promotional or marketing activities, and
such other facilities and services, if any, as the Trustees shall from time to
time consider desirable and all upon such terms and conditions as the Trustees
may in their discretion determine. The vote of the initial shareholder(s) shall
constitute "majority shareholder vote" if such agreements are entered into prior
to a public offering of Shares of the Trust. Notwithstanding any provisions of
the Declaration, the Trustees may authorize the Investment Advisers, or any of
them, under any such contracts (subject to such general or specific instructions
as the Trustees may from time to time adopt) to effect purchases, sales, loans
or exchanges of portfolio securities and other investments of the Trust on
behalf of the Trustees or may authorize any officer, employee or Trustee to
effect such purchases, sales, loans or exchanges pursuant to recommendations of
such Investment Advisers, or any of them (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees. The Trustees may, in the their sole
discretion, call a meeting of Shareholders in order to submit to a vote of
Shareholders at such meeting the approval or continuance of any such investment
advisory or management contract. If the Shareholders of any one or more of the
Series of the Trust should fail to approve any such investment advisory or
management contract, the Investment Adviser may nonetheless serve as Investment
Adviser with respect to any Series whose Shareholders approve such contract.
Section 4.2. ADMINISTRATIVE SERVICES. The Trustees may in their discretion
from time to time contract for administrative personnel and services whereby the
other party shall agree to provide the Trustees or the Trust administrative
personnel and services to operate the Trust on a daily or other basis, on such
terms and conditions as the Trustees may in their discretion determine. Such
services may be provided by one or more persons or entities.
Section 4.3. DISTRIBUTOR. The Trustees may in their discretion from time
to time enter into one or more contracts, providing for the sale of Shares to
net the Trust or the applicable Series of the Trust not less than the net asset
value per Share (as described in Article VIII hereof) and pursuant to which the
Trust may either agree to sell the Shares to the other parties to the contracts,
or any of them, or appoint any such other party its sales agent for such Shares.
In either case, any such contract shall be on such terms and conditions as the
Trustees may in their discretion determine not inconsistent with the provisions
of Article IV, including, without limitation, the provision for the repurchase
or sale of shares of the Trust by such other party as principal or as agent of
the Trust.
Section 4.4. TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
Section 4.5. CUSTODIAN. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least five
million dollars ($5,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-Laws of the Trust.
Section 4.6. PARTIES TO CONTRACT. Any contract of the character described
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other contract
may be entered into with any Person, although one or
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more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
such relationship; nor shall any Person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of such contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article IV. The same Person may be the
other party to any contracts entered into pursuant to Sections 4.1, 4.2, 4.3,
4.4 or 4.5 above or otherwise, and any individual may be financially interested
or otherwise affiliated with Persons who are parties to any or all of the
contracts mentioned in this Section 4.6.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with the Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property, or to the Property of one or more specific Series
of the Trust if the claim arises from the conduct of such Trustee, officer,
employee or agent with respect to only such Series, for satisfaction of claims
of any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee or agent, as such, of the Trust is made
to any suit or proceeding to enforce any such liability, he shall not, on
account thereof, be held to any personal liability. The Trust shall indemnify
out of the property of the Trust and hold each Shareholder harmless from and
against all claims and liabilities, to which such Shareholder may become subject
by reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability; provided that, in the event the
Trust shall consist of more than one Series, Shareholders of a particular Series
who are faced with claims or liabilities solely by reason of their status as
Shareholders of that Series shall be limited to the assets of that Series for
recovery of such loss and related expenses. The rights accruing to a Shareholder
under this Section 5.1 shall not exclude any other right to which such
Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for this own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties.
Section 5.3. INDEMNIFICATION. (a) The Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any person
who is, or has been, a Trustee, officer, employee or agent of the Trust against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a
Trustee, officer, employee or agent and against amounts paid or incurred by him
in the settlement thereof, in such manner as the Trustees may provide from time
to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
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Section 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or a Series thereof or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as
officers, employees or agents of the Trust or a Series thereof. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees shall recite that the same
is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust or a Series thereof under any
such instrument are not binding upon any of the Trustees or Shareholders,
individually, but bind only the Trust Estate (or, in the event the Trust shall
consist of more than one Series, in the case of any such obligation which
relates to a specific Series, only the Series which is a party thereto), and may
contain any further recital which they or he may deem appropriate, but the
omission of such recital shall not affect the validity of such obligation,
contract instrument, certificate, Share, security or undertaking and shall not
operate to bind the Trustees or Shareholders individually. The Trustees shall at
all times maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
Section 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. BENEFICIAL INTEREST. The beneficial interest in the Trust
shall be evidenced by transferable Shares of one or more Series, each of which
may be divided into one or more separate and distinct Classes. The number of
Shares of the Trust and of each Series and Class is unlimited and each Share
shall have a par value of $0.01 per Share. All Shares issued hereunder shall be
fully paid and nonassessable. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities issued by the
Trust. The Trustees shall have full power and authority, in their sole
discretion and without obtaining Shareholder approval: to issue original or
additional Shares and fractional Shares at such times and on such terms and
conditions as they deem appropriate; to establish and to change in any manner
Shares of any Series or Classes with such preferences, terms of conversion,
voting powers, rights and privileges as the Trustees may determine (but the
Trustees may not change outstanding Shares in a manner materially adverse to the
Shareholders of such Shares); to divide or combine the Shares of any Series or
Classes into a greater or lesser number without thereby changing the
proportionate beneficial interests in that Series or Class; to classify or
reclassify any unissued Shares of any Series or Classes into one or more Series
or Classes of Shares; to abolish any one or more Series or Classes of Shares; to
issue Shares to acquire other assets (including assets subject to, and in
connection with, the assumption of liabilities) and businesses; and to take such
other action with respect to the Shares as the Trustees may deem desirable.
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The Trustees hereby establish and designate the following Series: the
International Equity Portfolio and the Domestic Equity Portfolio. Additionally,
the Trustees hereby establish and designate the following initial four classes
of Shares of the Trust: Class A, Class B, Class C and Class D. The Trustees may
change the name of the Trust, or any Series or Class without shareholder
approval.
Section 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition of division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Declaration specifically set forth. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with respect to any series
of Shares.
Section 6.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustees and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustee to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4. ISSUANCE OF SHARES. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares of any Series
or Class, in addition to the then issued and outstanding Shares and Shares held
in the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or fractions
of a Share as described in the Prospectus.
Section 6.5. REGISTER OF SHARES. A register shall be kept in respect of
each Series and Class at the principal office of the Trust or at an office of
the Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares of each Series and Class held by them
respectively and a record of all transfers thereof. Such register may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein or in the
By-Laws provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.
Section 6.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder or by his agent thereunto duly
authorized in writing, upon delivery to the Trustees or the Transfer Agent of a
duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as
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the holder of such Shares upon production of the proper evidence thereof to the
Trustees or the Transfer Agent, but until such record is made, the Shareholder
of record shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent or registrar nor any
officer or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law, except as may otherwise
be provided by the laws of the Commonwealth of Massachusetts.
Section 6.7. NOTICES. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust. Annual reports and proxy
statements need not be sent to a shareholder if: (i) an annual report and proxy
statement for two consecutive annual meetings, or (ii) all, and at least two,
checks (if sent by first class mail) in payment of dividends or interest and
shares during a twelve month period have been mailed to such shareholder's
address and have been returned undelivered. However, delivery of such annual
reports and proxy statements shall resume once a Shareholder's current address
is determined.
Section 6.8. VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof, (ii) for the
removal of Trustees as provided in Section 2.3 hereof, (iii) with respect to any
investment advisory or management contract as provided in Section 4.1, (iv) with
respect to termination of the Trust as provided in Section 9.2, (v) with respect
to any amendment of the Declaration to the extent and as provided in Section
9.3, (vi) with respect to any merger, consolidation or sale of assets as
provided in Section 9.4, (vii) with respect to incorporation of the Trust to the
extent and as provided in Section 9.5, (viii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders
(provided that Shareholders of a Series or Class are not entitled to vote in
connection with the bringing of a derivative or class action with respect to any
matter which only affects another Series or Class or its Shareholders), (ix)
with respect to any plan adopted pursuant to Rule 12b-1 (or any successor rule)
under the 1940 Act and (x) with respect to such additional matters relating to
the Trust as may be required by law, the Declaration, the By-Laws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as and when the Trustee may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote, except that Shares held in the treasury of the Trust as of the
record date, as determined in accordance with the By-Laws, shall not be voted.
On any matter submitted to a vote of Shareholders, all Shares shall be voted by
individual Series or Class except (1) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual Series or Class; and (2)
when the Trustees have determined that the matter affects only the interests of
one or more Series or Class, then only the Shareholders of such Series or Class
shall be entitled to vote thereon. The Trustees may, in conjunction with the
establishment of any further Series or classes of Shares, establish conditions
under which the several series or classes of Shares shall have separate voting
rights or no voting rights. There shall be no cumulative voting in the election
of Trustees. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, the Declaration or the
By-Laws to be taken by Shareholders. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters.
Section 6.9. SERIES OR CLASSES OF SHARES. The following provisions are
applicable regarding the Shares of the Trust established in Section 6.1 hereof
and shall be applicable if the Trustees shall establish additional Series or
shall divide the shares of any Series into Classes, also as provided in Section
6.1 hereof, and all provisions relating to the Trust shall apply equally to each
Series and Class thereof except as the context requires:
(a) The number of authorized shares and the number of shares of each
Series or of each Class that may be issued shall be unlimited. The Trustees
may classify or reclassify any unissued shares or any shares previously
issued and reacquired of any Series or Class into one or more Series or one
or more Classes that may be established and designated from time to time.
The Trustees may
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hold as treasury shares (of the same or some other Series or Class), reissue
for such consideration and on such terms as they may determine, or cancel
any shares of any Series or any Class reacquired by the Trust at their
discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to any one
or more Series which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional Series and the
power of the Trustees to invest and reinvest assets applicable to any other
Series shall be as set forth in the instrument of the Trustees establishing
such Series which is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular Series or Class together with all assets in which
such consideration is invested or reinvested, all income, earnings, profits,
and proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series or Class for all purposes, subject only to
the rights of creditors, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payment which are not readily
identifiable as belonging to any particular Series or Class, the Trustee
shall allocate them among any one or more of the Series or Classes
established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable. Each such
allocation by the Trustees shall be conclusive and binding upon the
shareholders of all Series or classes for all purposes. No holder of Shares
of any Series or Class shall have any claim on or right to any assets
allocated or belonging to any other Series or Class.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses,
costs, charges and reserves attributable to that Series. The liabilities,
expenses, costs, charges and reserves so charged to a Series are sometimes
herein referred to as "liabilities belonging to" that Series. Except as
provided in the next sentence or otherwise required or permitted by
applicable law or any rule or order of the Commission, each Class of a
Series shall bear a pro rata portion of the "liabilities belonging to" such
Series. To the extent permitted by rule or order of the Commission, the
Trustees may allocate all or a portion of any liabilities, expenses, costs,
charges and reserves belonging to a Series to a particular Class or Classes
as the Trustees may from time to time determine is appropriate. Without
limitation of the foregoing provisions, and subject to the right of the
Trustees in their sole discretion to allocate general liabilities, costs,
expenses, charges or reserves as hereinafter provided, all expenses and
liabilities incurred or arising in connection with a particular Series, or
in connection with the management thereof, shall be payable solely out of
the assets of that Series and creditors of a particular Series shall be
entitled to look solely to the property of such Series for satisfaction of
their claims. Any general liabilities, expenses, costs, charges or reserves
of the Trust which are not readily identifiable as belonging to any
particular Series shall be allocated and charged by the Trustees to and
among any one or more of the series established and designated from time to
time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive
and binding upon the holders of all Series and Classes and no Shareholder or
former Shareholder of any Series or Class shall have a claim on or any right
to any assets allocated or belonging to any other Series or Class for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 8.2 of this Declaration with respect to any one
or more Series or Classes which represents the interests in the assets of
the Trust immediately prior to the establishment of any additional Series or
Classes. With respect to any other Series or Class, dividends and
distributions on shares of a particular Series or Class may be paid with
such frequency as the Trustees may determine, which
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may be daily or otherwise, pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustee may determine, to
the holders of shares of that Series or Class, from such of the income and
capital gains, accrued or realized, from the assets belonging to that Series
or Class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Series or Class. All dividends and
distributions on shares of a particular Series or Class shall be distributed
pro rata to the holders of that Series or Class in proportion ot the number
of shares of that Series or Class held by such holders at the date and time
of record established for the payment of such dividends or distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and
dividend rights, of each Class and Series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of
any Series or class shall have the right to convert or exchange said Shares
into Shares of one or more Series or Classes of Shares in accordance with
such requirements and procedures as may be established by the Trustees.
(h) The establishment and designation of any Series or Class of shares
in addition to those established in Section 6.1 hereof shall be effective
upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights,
preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of such Series or
Class, or as otherwise provided in such instrument. At any time that there
are no shares outstanding of any particular Series or Class previously
established or designated, the Trustee may by an instrument executed by a
majority of their number abolish that Series or Class and the establishment
and designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
(i) Shareholders of a Series or Class shall not be entitled to
participate in a derivative or class action with respect to any matter which
only affects another Series or Class or its Shareholders.
(j) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of distributions of income
and capital gains made with respect to such Series. In the event of the
liquidation of a particular Series, the Shareholders of that Series which
has been established and designated and which is being liquidated shall be
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to that Series over the liabilities belonging to that
Series. The holders of Shares of any Series shall not be entitled hereby to
any distribution upon liquidation of any other Series. The assets so
distributable to the Shareholders of any Series shall be distributed among
such Shareholders in proportion to the number of Shares of that Series held
by them and recorded on the books of the Trust. The liquidation of any
particular Series in which there are Shares then outstanding may be
authorized by an instrument in writing, without a meeting, signed by a
majority of the Trustees then in office, subject to the approval of a
majority of the outstanding voting securities of that Series, as that phrase
is defined in the 1940 Act.
ARTICLE VII
REDEMPTIONS
Section 7.1. REDEMPTIONS. Each Shareholder of a particular Series or Class
shall have the right at such times as may be permitted by the Trust to require
the Trust to redeem all or any part of his Shares of that Series or Class, upon
and subject to the terms and conditions provided in this Article VII. The Trust
shall, upon application of any Shareholder or pursuant to authorization from any
Shareholder, redeem or repurchase from such Shareholder outstanding shares for
an amount per share determined by the Trustees in accordance with any applicable
laws and regulations; provided that (a) such amount per share shall not exceed
the cash equivalent of the proportionate interest of each share or of any class
or Series of shares in the assets of the Trust at the time of the redemption or
repurchase and (b) if so
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authorized by the Trustees, the Trust may, at any time and from time to time
charge fees for effecting such redemption or repurchase, at such rates as the
Trustees may establish, as and to the extent permitted under the 1940 Act and
the rules and regulations promulgated thereunder, and may, at any time and from
time to time, pursuant to such Act and such rules and regulations, suspend such
right of redemption. The procedures for effecting and suspending redemption
shall be as set forth in the Prospectus from time to time. Payment will be made
in such manner as described in the Prospectus.
Section 7.2. REDEMPTION AT THE OPTION OF THE TRUST. Each Share of the
Trust or any Series or Class thereof of the Trust shall be subject to redemption
at the option of the Trust at the redemption price which would be applicable if
such Shares were then being redeemed by the Shareholder pursuant to Section 7.1:
(i) at any time, if the Trustees determine in their sole discretion that failure
to so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Series or Class, or (ii) upon such other
conditions with respect to maintenance of Shareholder accounts of a minimum
amount as may from time to time be determined by the Trustees and set forth in
the then current Prospectus of the Trust. Upon such redemption the holders of
the Shares so redeemed shall have no further right with respect thereto other
than to receive payment of such redemption price.
Section 7.3. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE. If,
pursuant to Section 7.4 hereof, the Trustees shall declare a suspension of the
determination of net asset value with respect to Shares of the Trust or of any
Series thereof, the rights of Shareholders (including those who shall have
applied for redemption pursuant to Section 7.1 hereof but who shall not yet have
received payment) to have Shares redeemed and paid for by the Trust or a Series
thereof shall be suspended until the termination of such suspension is declared.
Any record holder who shall have his redemption right so suspended may, during
the period of such suspension, by appropriate written notice of revocation at
the office or agency where application was made, revoke any application for
redemption not honored and withdraw any certificates on deposit. The redemption
price of Shares for which redemption applications have not been revoked shall be
the net asset value of such Shares next determined as set forth in Section 8.1
after the termination of such suspension, and payment shall be made within seven
(7) days after the date upon which the application was made plus the period
after such application during which the determination of net asset value was
suspended.
Section 7.4. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Series
thereof of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Trust or a Series thereof fairly to determine the
value of its net assets, or (iv) during any other period when the Commission may
for the protection of security holders of the Trust by order permit suspension
of the rights of redemption or postponement of the date of payment or
redemption; provided that applicable rules and regulations of the Commission
shall govern as to whether the conditions prescribed in (ii), (iii) or (iv)
exist. Such suspension shall take effect at such time as the Trust shall specify
but not later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
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ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1. NET ASSET VALUE. The net asset value of each outstanding
Share of each Series of the Trust shall be determined on such days and at such
time or times as the Trustees may determine. The method of determination of net
asset value shall be determined by the Trustees and shall be as set forth in the
Prospectus. The power and duty to make the daily calculations may be designated
by the Trustees to any Investment Adviser, the Custodian, the Transfer Agent or
such other person as the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value to the extent permitted by
the 1940 Act.
Section 8.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from time
to time distribute ratably among the Shareholders of the Trust or of any Series
such proportion of the net income, earnings, profits, gains, surplus (including
paid-in surplus), capital, or assets of the Trust or of such Series held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust or
of such Series or any assets thereof), and the Trustees may distribute ratably
among the Shareholders of the Trust or of that Series additional Shares issuable
hereunder in such manner, at such times, and on such terms as the Trustees may
deem proper. Such distributions may be among the Shareholders of record
(determined in accordance with the Prospectus) of the Trust or of such Series at
the time of declaring a distribution or among the Shareholders of record of the
Trust or of such Series at such later date as the Trustees shall determine. The
Trustees may always retain from the net income, earnings, profits or gains of
the Trust or of such Series such amount as they may deem necessary to pay the
debts or expenses of the Trust or of such Series or to meet obligations of the
Trust or of such Series, or as they may deem desirable to use in the conduct of
its affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders of the Trust or of any Series
such dividend reinvestment plans, cash dividend payout plans or related plans as
the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
Section 8.3. DETERMINATION OF NET INCOME. The Trustees shall have the
power to determine the net income of any Series of the Trust and from time to
time to distribute such net income ratably among the Shareholders as dividends
in cash or additional Shares of such Series issuable hereunder. The
determination of net income and the resultant declaration of dividends shall be
as set forth in the Prospectus. The Trustees shall have full discretion to
determine whether any cash or property received by any Series of the Trust shall
be treated as income or as principal and whether any item of expense shall be
charged to the income or the principal account, and their determination made in
good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much, if any, of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 8.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Trust to comply with any provision of the 1940 Act, or any rule or
regulation thereunder, including any rule or regulation adopted pursuant to
Section 22 of the 1940 Act by the Commission or any securities association
registered under the Securities Exchange Act of 1934, or any order of exemption
issued by said Commission, all as in effect now or hereafter amended or
modified. Without limiting the generality of
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the foregoing, the Trustees may establish classes or additional Series of Shares
in accordance with Section 6.9.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. DURATION. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.
Section 9.2. TERMINATION OF TRUST. (a) The Trust or any Series may be
terminated (i) by a Majority Shareholder Vote at any meeting of Shareholders of
the Trust or the appropriate Series thereof, (ii) by an instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to by a
Majority Shareholder Vote of the Trust or the appropriate Series thereof, or by
such other vote as may be established by the Trustees with respect to any class
or Series of Shares, or (iii) with respect to a Series as provided in Section
6.9(h). Upon the termination of the Trust or the Series:
(i) The Trust or the Series shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustee shall proceed to wind up the affairs of the Trust or
the Series and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust or
the Series, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property or
Trust Property allocated or belonging to such Series to one or more persons
at public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property or Trust Property
allocated or belonging to such Series shall require Shareholder approval in
accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property allocated or
belonging to such Series, in cash or in kind or partly each, among the
Shareholders of the Trust according to their respective rights.
Section 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended by a
Majority Shareholder Vote, at a meeting of Shareholders, or by written consent
without a meeting. The Trustees may also amend this Declaration without the vote
or consent of Shareholders (i) to change the name of the Trust or any Series or
classes of Shares, (ii) to supply any omission, or cure, correct or supplement
any ambiguous, defective or inconsistent provision hereof, (iii) if they deem it
necessary to conform this Declaration to the requirements of applicable federal
or state laws or regulations or the requirements of the Internal Revenue Code,
or to eliminate or reduce any federal, state or local taxes which are or may by
the Trust or the Shareholders, but the Trustees shall not be liable for failing
to do so, or (iv) for any other purpose which does not adversely affect the
rights of any Shareholder with respect to which the amendment is or purports to
be applicable.
(b) No amendment may be made under this Section 9.3 which would change
any rights with respect to any Shares of the Trust or of any Series of the
Trust by reducing the amount payable thereon upon liquidation of the Trust
or of such Series of the Trust or by diminishing or eliminating any voting
rights pertaining thereto, except with the vote or consent of the holders of
two-thirds of the Shares of the Trust or of such Series outstanding and
entitled to vote, or by such other vote as may be established by the
Trustees with respect to any Series or class of Shares. Nothing contained in
this Declaration shall permit the amendment of this Declaration to impair
the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
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(c) A certificate signed by a majority of the Trustees or by the
Secretary or any Assistant Secretary of the Trust, setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by
the Trustees as aforesaid or a copy of the Declaration, as amended, and
executed by a majority of the Trustees or certified by the Secretary or any
Assistant Secretary of the Trust, shall be conclusive evidence of such
amendment when lodged among the records of the Trust. Unless such amendment
or such certificate sets forth some later time for the effectiveness of such
amendment, such amendment shall be effective when lodged among the records
of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or any
Series thereof may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property or Trust Property allocated or belonging to such
Series, including its good will, upon such terms and conditions and for such
consideration when and as authorized, at any meeting of Shareholders called for
the purpose, by the affirmative vote of the holders of not less than two-thirds
of the Shares of the Trust or such Series outstanding and entitled to vote, or
by an instrument or instruments in writing without a meeting, consented to by
the holders of not less than two-thirds of such Shares, or by such other vote as
may be established by the Trustees with respect to any series or class of
Shares; provided, however, that, if such merger, consolidation, sale, lease or
exchange is recommended by the Trustees, a Majority Shareholder Vote shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the laws of the Commonwealth of Massachusetts.
Section 9.5. INCORPORATION. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to any
Series or class of Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Trust Property or the Trust Property allocated or belonging to such
Series or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property or the Trust Property allocated or belonging to such Series to any such
corporation, trust, partnership, association or organization in exchange for the
shares or securities thereof or otherwise, and to lend money to, subscribe for
the shares or securities of, and enter into any contracts with any such
corporation, trust, partnership, association or organization in which the Trust
or such Series holds or is about to acquire shares or any other interest. The
Trustees may also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organization or entities.
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the officers of
the Trust to submit to the Shareholders a written financial report of each
Series of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
17
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.1. FILING. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee or by the Secretary or any Assistant Secretary of the
Trust stating that such action was duly taken in a manner provided herein. A
restated Declaration, integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative, may be executed from
time to time by a majority of the Trustees and shall, upon filing with the
Secretary of the Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration and the various amendments thereto.
Section 11.2. RESIDENT AGENT. The Prentice-Hall Corporation System, Inc.,
84 State Street, Boston, Massachusetts 02109 is the resident agent of the Trust
in the Commonwealth of Massachusetts.
Section 11.3. GOVERNING LAW. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State.
Section 11.4. COUNTERPARTS. The Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 11.5. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Trust, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization of
the execution of any instrument or writing, (c) the form of any vote passed at a
meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees and their successors.
Section 11.6. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that nay of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation to
the extent necessary to eliminate such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
Section 11.7. USE OF THE NAME "DEAN WITTER." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the name
"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 "Dean Witter" for
any purpose. DWR, or any corporate affiliate of the parent of DWR, 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
18
<PAGE>
for any commercial purpose, including a grant of such right to any other
investment company. At the request of DWR or its parent, the Trust will take
such action as may be required to provide its consent to the use by DWR or its
parent, or any corporate affiliate of DWR's parent, or by any person to whom DWR
or its parent or an affiliate of DWR's parent shall have granted the right to
the use, of the name "Dean Witter," or any combination or abbreviation thereof.
Upon the termination of any investment advisory or investment management
agreement into which DWR and the Trust may enter, the Trust shall, upon request
by DWR 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 or
for any other commercial purpose, and shall cause its officers, trustees and
shareholders to take any and all actions which DWR or its parent may request to
effect the foregoing and to reconvey to DWR or its parent any and all rights to
such name.
Section 11.8. PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the Trust shall be Two World Trade Center, New York, New York 10048, or such
other location as the Trustees may designate from time to time.
19
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Declaration of Trust
this day of , 1997.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Charles A. Fiumefreddo, as Robert S. Giambrone, as
Trustee and not individually Trustee and not individually
Two World Trade Center Two World Trade Center
New York, New York 10048 New York, New York 10048
- --------------------------------------------
Barry Fink, as Trustee
and not individually
Two World Trade Center
New York, New York 10048
</TABLE>
<TABLE>
<S> <C>
STATE OF NEW YORK ss.:
COUNTY OF NEW YORK
</TABLE>
On this day of , 1997, ROBERT S. GIAMBRONE, CHARLES A.
FIUMEFREDDO and BARRY FINK, known to me and known 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.
______________________________________
Notary Public
My commission expires: _____________________
20
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument this
day of , 1997.
--------------------------------------
Joseph F. Mazzella, as Trustee
and not individually
101 Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
[____________], 199[_]
Then personally appeared before me the above-named
[________________________] who acknowledged the foregoing instrument to be his
free act and deed.
______________________________________
Notary Public
My commission expires: _____________________
M6167
21
<PAGE>
BY-LAWS
OF
DEAN WITTER FUND OF FUNDS
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
Fund of Funds dated July 3, 1997.
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.
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
<PAGE>
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 power to adjourn the meeting from time to
time. Any adjourned meeting may be held as adjourned without further notice.
At any adjourned meeting at which a quorum shall be present, any business may
be transacted as if the meeting had been held 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 or other agent, 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. Fax or telecopy Signatures
shall be deemed valid and binding to the same extent as the original. No
Written evidence of authority of a Shareholder Attorney in-fact or agent
shall be required. 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. Proxy
solicitations may be made in writing or by using telephonic or other
electronic solicitation procedures which include appropriate methods of
verifying the identity of the Shareholder and confirming any instructions
given hereby.
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.
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.
2
<PAGE>
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 President and shall
be called by the President 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.
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
3
<PAGE>
(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
(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--
4
<PAGE>
(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 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.
5
<PAGE>
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 President 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 President to
the extent provided by the Trustees with respect to officers appointed by the
President.
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.
SECTION 6.6. THE CHAIRMAN. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, 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.
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SECTION 6.7. THE PRESIDENT. (a) The President shall be the chief executive
officer of the Trust; 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 one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees 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 President, 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
President 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 President.
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
President, 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 President, 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
President 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 President, 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 President, 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 President, 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 President, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
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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 holder's 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 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 times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
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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 Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
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. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. 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 such meeting.
SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
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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 Fund of Funds, dated
July 3, 1997, a copy of which is on file in the office of the Secretary of
the Commonwealth of Massachusetts, provides that the name Dean Witter Fund of
Funds 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 Fund of Funds 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 Fund of Funds, but the Trust Estate only shall be
liable.
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