<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4, 1997
REGISTRATION NO.: 333-38297
811-08455
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. 1 /X/
POST-EFFECTIVE AMENDMENT NO. / /
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 1 /X/
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DEAN WITTER "COMPETITIVE EDGE" FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this registration statement.
-------------------
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 "COMPETITIVE EDGE" FUND
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- -------------------------------------- --------------------------------------
<S> <C>
PART A PROSPECTUSES
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. ................................. Underwriting; Purchase of Portfolio
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 Portfolio
Shares; Redemptions and Repurchases;
Statement of Assets and Liabilities;
Shareholder Services
20. ................................. Dividends, Distributions and Taxes
21. ................................. Purchase of Portfolio 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
"COMPETITIVE EDGE" FUND
-- "BEST IDEAS" PORTFOLIO
PROSPECTUS-- , 1998
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DEAN WITTER "COMPETITIVE EDGE" FUND (THE "FUND") IS AN OPEN-END, DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY CURRENTLY CONSISTING OF TWO SEPARATE PORTFOLIOS:
THE "BEST IDEAS" PORTFOLIO AND THE "COMPETITIVE EDGE" PORTFOLIO. THE PORTFOLIO
COVERED IN THIS PROSPECTUS, THE "BEST IDEAS" PORTFOLIO (THE " 'BEST IDEAS'
PORTFOLIO" OR THE "PORTFOLIO"), HAS AN INVESTMENT OBJECTIVE OF LONG-TERM CAPITAL
GROWTH AND INVESTS PRIMARILY IN THE COMMON STOCKS OF U.S. AND NON-U.S. COMPANIES
INCLUDED IN THE "BEST IDEAS" SUBGROUP (THE " 'BEST IDEAS' LIST") OF "GLOBAL
INVESTING: THE COMPETITIVE EDGE," A RESEARCH COMPILATION ASSEMBLED AND
MAINTAINED BY MORGAN STANLEY DEAN WITTER EQUITY RESEARCH ("MSDW EQUITY
RESEARCH"). SEE "INVESTMENT OBJECTIVES AND POLICIES."
INITIAL OFFERING--Shares of the "Best Ideas" Portfolio 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 , 1998 through 1998.
Shares of the "Competitive Edge" Portfolio are not being offered to investors at
this time.
CONTINUOUS OFFERING--A continuous offering of the shares of the "Best Ideas"
Portfolio will commence approximately two weeks after the closing date of the
initial offering which is anticipated for , 1998. 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 "Best Ideas" Portfolio offers four classes of shares (each, a "Class"), each
with a different combination of sales charges, ongoing fees and other features.
The different distribution sarrangements 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 Portfolio
Shares--Alternative Purchase Arrangements.")
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Prospectus Summary................................ 2
Summary of Fund Expenses.......................... 4
The Fund and its Management....................... 5
Investment Objective and Policies................. 5
Risk Considerations............................. 7
Investment Restrictions........................... 10
Underwriting...................................... 11
Purchase of Portfolio Shares...................... 11
Shareholder Services.............................. 18
Redemptions and Repurchases....................... 20
Dividends, Distributions and Taxes................ 21
Performance Information........................... 21
Additional Information............................ 21
</TABLE>
This Prospectus sets forth concisely the information you should know before
investing in the "Best Ideas" Portfolio of the Fund. It should be read and
retained for future reference. Additional information about the "Best Ideas"
Portfolio of the Fund is contained in the Statement of Additional Information,
dated , 1998, which has been filed with the Securities and Exchange
Commission, and which is available at no charge upon request of the Fund at the
address or telephone numbers listed on this page. The Statement of Additional
Information is incorporated herein by reference.
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
"COMPETITIVE EDGE" FUND
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, diversified management investment company currently consisting
of two separate portfolios. The portfolio covered by this Prospectus, the "Best Ideas"
Portfolio (the " 'Best Ideas' Portfolio" or the "Portfolio"), invests primarily in the
common stocks of U.S. and non-U.S. companies included in the "Best Ideas" subgroup (the
" 'Best Ideas' List") of "Global Investing: The Competitive Edge," a research
compilation assembled and maintained by Morgan Stanley Dean Witter Equity Research
("MSDW Equity Research").
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SHARES OFFERED Shares of beneficial interest with $0.01 par value of the "Best Ideas" Portfolio (see
page 21). The Portfolio offers four Classes of shares, each with a different combination
of sales charges, ongoing fees and other features (see page 11).
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INITIAL Shares of the "Best Ideas" Portfolio are being offered in an underwriting by Dean Witter
OFFERING Distributors Inc. at $10.00 per share for each of Class B, Class C and Class D and
$10.00 per share plus a sales charge for Class A. The minimum purchase for each Class is
100 shares; however, Class D shares are only available to persons who are otherwise
qualified to purchase such shares. The initial offering will run approximately from
, 1998 through , 1998. The closing will take place on ,
1998 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 Portfolio 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 of shares of the "Best Ideas" Portfolio, if any, will commence
OFFERING/ within approximately two weeks after the Closing Date. The minimum initial investment
MINIMUM for each Class is $1,000 ($100 if the account is opened through EasyInvest-SM-). Class D
PURCHASE 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
investment for Class D shares, and subject to the $1,000 minimum initial investment for
each Class of the Portfolio, 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 Portfolio and other Dean Witter Funds that are multiple class
funds will be aggregated. The minimum subsequent investment is $100 (see page 11).
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INVESTMENT The investment objective of the "Best Ideas" Portfolio is long-term capital growth. (see
OBJECTIVE page 5).
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INVESTMENT Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and
MANAGER its 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 $ billion at
, 1997.
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MANAGEMENT The Investment Manager receives a monthly fee at the annual rate of 0.65% of the
FEE Portfolio's average daily net assets (see page 5).
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UNDERWRITER Dean Witter Distributors Inc. (the "Distributor") is the Fund's Underwriter and
AND Distributor. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
DISTRIBUTOR Investment Company Act (the "12b-1 Plan") with respect to the distribution fees paid by
AND the Class A, Class B and Class C shares of the Portfolio to the Distributor. The entire
DISTRIBUTION 12b-1 fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B
FEE 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 11 and 17).
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ALTERNATIVE Four classes of shares of the "Best Ideas" Portfolio 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 the
Portfolio, is authorized to reimburse the Distributor for specific expenses incurred in
promoting the distribution of the Portfolio'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 of the Portfolio (see pages 11, 14 and 17).
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</TABLE>
2
<PAGE>
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<TABLE>
<S> <C>
- 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 Portfolio 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 the Portfolio. Class B shares convert
to Class A shares approximately ten years after the date of the original purchase (see
pages 11, 15 and 17).
- 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 the Portfolio, is authorized to reimburse the Distributor for specific
expenses incurred in promoting the distribution of the 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 the Portfolio (see pages 11, 16 and 17).
- 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 11, 16 and 17).
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DIVIDENDS AND Dividends from net investment income and distributions from net capital gains, if any,
CAPITAL GAINS are paid at least once per year. The Portfolio may, however, determine to retain all or
DISTRIBUTIONS part of 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 18 and 21).
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REDEMPTION Shares of the Portfolio 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 20).
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RISK An investment in the "Best Ideas" Portfolio should be considered a long-term holding and
CONSIDERATIONS subject to all the risks associated with investing in a relatively small universe of
equity securities of companies in domestic and foreign markets. The net asset value of
the Portfolio's shares will fluctuate with changes in the market value of its portfolio
securities, and therefore, will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. There can be no assurance that
the securities contained in the "Best Ideas" List, which currently consists of only 40
companies, will perform as anticipated by MSDW Equity Research. Past performance of
securities and issuers included in the "Best Ideas" List cannot be used to predict
future results of the Portfolio, which is actively managed by the Investment Manager and
the results of which are expected to vary from the performance of the "Best Ideas" List.
It should be recognized that foreign securities and markets in which the Portfolio may
invest 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 the Portfolio'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. The Portfolio may
enter into repurchase agreements 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. (See pages 7-10).
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</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 the
Portfolio will incur. The expenses and fees set forth in the table are based on
the fees and estimated other expenses for the first full fiscal year of the
Portfolio.
<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 PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
<S> <C> <C> <C> <C>
Management Fees*......................................... 0.65% 0.65% 0.65% 0.65%
12b-1 Fees (5) (6)....................................... 0.25% 1.00% 1.00% None
Other Expenses*.......................................... 0.32% 0.32% 0.32% 0.32%
Total Fund Operating Expenses* (7)....................... 1.22% 1.97% 1.97% 0.97%
</TABLE>
- ------------------------------
* The Investment Manager has undertaken to assume all operating expenses
(except for brokerage and 12b-1 fees) and to waive the compensation provided
for in its Management Agreement for the Portfolio until such time as the
Portfolio has $50 million of net assets or until six months from commencement
of the Portfolio's operations, whichever occurs first. The fees and expenses
disclosed above do not reflect the assumption of any expenses or the waiver
of any compensation by the Investment Manager.
(1) Reduced for purchases of $25,000 and over (see "Purchase of Portfolio
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 Portfolio Shares--Initial Sales Charge Alternative--Class
A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Portfolio 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 the 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 the Portfolio of the Fund's
shares (see "Purchase of Portfolio 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 Portfolio
Shares--Alternative Purchase Arrangements").
(7) "Total Fund Operating Expenses," as shown above with respect to each Class,
are based upon the sum of Management and 12b-1 Fees, and estimated "Other
Expenses."
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment in the Portfolios assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
Class A............................................................................ $ 64 $ 89
Class B............................................................................ $ 70 $ 92
Class C............................................................................ $ 30 $ 62
Class D............................................................................ $ 10 $ 31
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
You would pay the following expenses on the same $1,000 investment in the Portfolios
assuming no redemption at the end of the period:
Class A............................................................................ $ 64 $ 89
Class B............................................................................ $ 20 $ 62
Class C............................................................................ $ 20 $ 62
Class D............................................................................ $ 10 $ 31
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE PORTFOLIO 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 Portfolio will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Portfolio 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.
4
<PAGE>
THE FUND AND ITS MANAGEMENT
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Dean Witter "Competitive Edge" Fund (the "Fund") is an open-end, diversified
management investment company. The Fund is a trust of the type commonly known as
a "Massachusetts business trust" and was organized under the laws of the
Commonwealth of Massachusetts on , 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., 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
$ billion as of , 1997. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $ 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 the Portfolio's assets principally
among the securities on the "Best Ideas" List. 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.
As full compensation for the services and facilities furnished to the
Portfolio and for expenses of the Portfolio incurred by the Investment Manager,
the Fund pays the Investment Manager monthly compensation calculated daily by
applying the annual rate of 0.65% of the Portfolio's net assets. The Portfolio's
expenses include: the fee of the Investment Manager, the fee pursuant to the
Plan of Distribution (see "Purchase of Portfolio Shares"); taxes; transfer agent
and custodian fees, auditing fees; and certain legal fees, and printing and
other expenses relating to the Portfolio's operations which are not expressly
assumed by the Investment Manager under its Investment Management Agreement with
the Fund. The Investment Manager has agreed to assume all operating expenses
(except for brokerage and 12b-1 fees) for the Portfolio until such time as the
Portfolio has $50 million of net assets or until six months from commencement of
the Portfolio's operations, whichever occurs first.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund currently consists of two separate portfolios, each of which is
operated as an open-end, diversified management investment company. The
investment objective of the portfolio contained in this Prospectus, the "Best
Ideas" Portfolio (the " 'Best Ideas' Portfolio" or the "Portfolio"), is
long-term capital growth. The objective of the Portfolio is a fundamental policy
and may not be changed without shareholder approval. There is no assurance that
the objective of the Portfolio will be achieved.
The "Best Ideas" Portfolio seeks to achieve its investment objective by
investing, under normal circumstances, at least 80% of its net assets in the
common stock (including depository receipts, such as ADRs or EDRs) of U.S. and
non-U.S. companies included in the "Best Ideas" subgroup (the " 'Best Ideas'
List") of "Global Investing: The Competitive Edge," a research compilation
assembled and maintained by Morgan Stanley Dean Witter Equity Research ("MSDW
Equity Research") (the "Competitive Edge List") and such Supplemental Securities
(as defined below) chosen by the Investment Manager from the Competitive Edge
List.
MSDW EQUITY RESEARCH. MSDW Equity Research is recognized as a world leader in
global financial research and provides comprehensive research and in-depth
knowledge about general markets and specific companies from around the world. It
believes that companies with a sustainable competitive edge in the operations of
their businesses are worth more than their weaker competitors. Through its on-
going research and analysis, MSDW Equity Research has developed and undertaken a
comprehensive study which it calls "Global Investing: The Competitive Edge"
which represents the list of those companies.
Specifically, MSDW Equity Research group's research analysts and strategists
presently evaluate approximately 2,000 companies in 21 industry sectors
worldwide. The initial comprehensive review for the Competitive Edge List was
conducted in October 1996 and identified 238 companies from the MSDW Equity
Research companies under coverage (then nearly 1,650) as having a long-term
sustainable competitive advantage in the global arena. While the criteria used
to select companies that have a global
competitive advantage vary according to industry sector, these companies
typically are large capitalization
compa-
5
<PAGE>
nies, have strong management and/or have a global presence. The Competitive Edge
List is currently updated annually. Principally from this group, it then
assembled its "Best Ideas" List, a subgroup of 40 companies which it considered
at that time to be the most attractive investment opportunities of the companies
evaluated by MSDW Equity Research. When selecting the companies for its "Best
Ideas" List, MSDW Equity Research may not necessarily take into account country
or currency risk, and country or industry sector diversification concerns and,
accordingly, the Portfolio may be highly concentrated in any one industry or
country. In accordance with the Portfolio's investment restrictions described
below, however, the Portfolio will not invest 25% or more of the value of its
total assets in any one industry. In addition, as the Portfolio principally
invests in the securities of companies on the "Best Ideas" List, which currently
consists of 40 companies, the Portfolio will invest in a relatively small
universe of securities. Although the "Best Ideas" List is not a fixed number,
MSDW Equity Research presently intends to attempt to keep the number of "Best
Ideas" common stocks at approximately 40 companies. A list of the companies
contained on the "Best Ideas" List as of September 30, 1997 is set forth in the
Statement of Additional Information. The "Best Ideas" List is currently updated
quarterly.
The Portfolio intends to invest in all the companies on the "Best Ideas"
List generally on an equally-weighted basis; that is, to the extent practicable
and subject to the specific investment policies and restrictions described
below, an approximately equal portion of the Portfolio's assets is invested in
each security included on the "Best Ideas" List. However, the weightings may
fluctuate based on the price appreciation or depreciation of each security and
based on the decision of the Investment Manager to vary the weighting of certain
holdings in response to its perception of changes in economic conditions and
international and/or domestic markets provided that, under normal circumstances,
at least 1% and not more than 5% of the Portfolio's net assets will be invested
in each company on the "Best Ideas" List, determined at the time of investment.
Notwithstanding the above restrictions, the Investment Manager may eliminate
or reduce its holdings in one or more securities on the "Best Ideas" List below
1% of the Portfolio's net assets, in the following circumstances: (a) the stock
is no longer publicly traded, such as in the case of a leveraged buyout or
merger; (b) in the view of the Investment Manager, there is a material adverse
development with respect to a company, including but not limited to the
downgrading of the company's rating by MSDW Equity Research; (c) concerns that,
in view of the price of the company's securities, the depth of the market in
those securities and the amount of those securities held or to be held by the
Portfolio, retaining shares of that company or making additional purchases would
be inadvisable because of liquidity concerns; or (d) the diversification and
other requirements that apply to registered investment companies. The Investment
Manager will monitor on an ongoing basis all companies falling within any of the
circumstances described in this paragraph, and will increase such company's
shares to the Portfolio's holdings when and if those conditions cease to exist.
The Portfolio will purchase any security which is added to the "Best Ideas"
List, and will sell the stock of a company which is eliminated from the "Best
Ideas" List, and any related Supplemental Security (as defined below), as soon
as practicable. Accordingly, securities may be purchased and sold by the
Portfolio when such purchases and sales would not be made under traditional
investment criteria.
While the Portfolio intends to invest in securities on the "Best Ideas"
List, if a security on the "Best Ideas" List is weighted under 5% in the
Portfolio or eliminated from the Portfolio, the Portfolio may purchase one or
more supplemental securities ("Supplemental Securities") that are not included
on the "Best Ideas" List but are on the Competitive Edge List and are rated
"Strong Buy" or "Outperform" by MSDW Equity Research. Supplemental Securities
will generally be selected by the Investment Manager from the same or similar
industry sector as the security which they are supplementing or replacing.
Accordingly, the Portfolio's holdings may not be limited to those on the "Best
Ideas" List. While there is no limit on the total number of Supplemental
Securities that the Portfolio may hold, Supplemental Securities and any other
securities that are not on the "Best Ideas" List will not exceed 35% of the
Portfolio's total assets. In addition, each security on the "Best Ideas" List
which is supplemented or replaced, together with its corresponding Supplemental
Securities, will have a combined weighting of no more than 5% of the Portfolio,
determined at the time of investment.
The Portfolio may invest up to 20% 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 Portfolio's securities holdings. During such periods, the
Portfolio may adopt a temporary "defensive" posture in which up to 100% of each
Portfolio's net assets are invested in cash or money market instruments.
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<PAGE>
RISK CONSIDERATIONS AND INVESTMENT PRACTICES
The net asset value of the Portfolio's shares will fluctuate with changes in the
market value of its portfolio securities. The market value of the Portfolio's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. A general description and
the risks involved of the various investment practices and techniques which the
Portfolio may engage in is set forth below. A more detailed discussion can be
found in this Fund's Statement of Additional Information.
"BEST IDEAS" SELECTION. The net asset value of the Portfolio will fluctuate
depending upon, among other things, the performance of the securities included
on the "Best Ideas" List, which currently consists of 40 companies and which is
only updated quarterly. The Portfolio is subject to all the risks associated
with investing in a small universe of securities. There can be no assurance that
the securities contained in the "Best Ideas" List will perform as anticipated by
MSDW Equity Research. The selection of companies on the "Best Ideas" List is a
subjective determination by MSDW Equity Research. Past performance of the
securities and issuers included in the "Best Ideas" List cannot be used to
predict future results of the Portfolio, which is actively managed by the
Investment Manager and the results of which are expected to vary from the
performance of the "Best Ideas" List.
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. 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 Portfolio will be investing in 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. The Portfolio 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
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<PAGE>
on which the security is purchased or sold and the date on which payment is made
or received.
At other times, when, for example, the 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 Portfolio 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 Portfolio's securities holdings (or securities which the Portfolio has
purchased for its portfolio) denominated in such foreign currency. Under
identical circumstances, the Portfolio may enter into a forward contract to
sell, for a fixed amount of U.S. dollars or other currency, an amount of foreign
currency other than the currency in which the securities to be hedged are
denominated approximating the value of some or all of the portfolio securities
to be hedged. This method of hedging, called "cross-hedging," will be selected
by the Investment Manager when it is determined that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or is
trading at a discount as compared with some other foreign currency with which it
tends to move in tandem.
In addition, when the 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 Portfolio 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
Portfolio may, however, close out the forward contract without purchasing the
security which was the subject of the "anticipatory" hedge.
In all of the above circumstances, if the currency in which the Portfolio'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 Portfolio will have realized fewer gains than had it not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Portfolio
is not required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager. The Portfolio generally will not enter into a forward
contract with a term of greater than one year, although it may enter into
forward contracts for periods of up to five years. The Portfolio 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. The Portfolio 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 Portfolio.
The Portfolio 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. The Portfolio may
write covered put options, under which the Portfolio 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.
The Portfolio may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Portfolio 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. The Portfolio
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 the Portfolio's ability to purchase
call and put options other than compliance with the foregoing policies.
The Portfolio 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). The Portfolio 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. The Portfolio 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. The Portfolio
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, the
Portfolio incurs
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<PAGE>
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 Portfolio incurs an obligation to deliver
the specified amount of the underlying obligation at a specified time in return
for an agreed upon price.
The Portfolio 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. The Portfolio 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.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Portfolio 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 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 the Portfolio 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 Portfolio 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. The Portfolio may enter into repurchase agreements,
which may be viewed as a type of secured lending, and which typically involve
the acquisition by the Portfolio of debt securities, from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Portfolio will sell back to the institution, and
that the institution will repurchase, the underlying security at a specified
price and at a fixed time in the future, usually not more than seven days from
the date of purchase. While repurchase agreements involve certain risks not
associated with direct investments in debt securities, including the risks of
default or bankruptcy of the selling financial institution, the Portfolio
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. It is the
current policy of the Portfolio 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 the Portfolio, amounts to more than 15% of the
Portfolio's net assets in keeping with its policy on illiquid securities.
PRIVATE PLACEMENTS. The Portfolio may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, 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. The
Portfolio 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 the Fund, will make a determination as to
the liquidity of each restricted security purchased by the Portfolio. If a
restricted security is determined to be "liquid," such security will not be
included within the category "illiquid securities," which under current policy
may not exceed 15% of the Portfolio's net assets. However, investing in Rule
144A securities could have the effect of increasing the level of Portfolio
illiquidity to the extent the Portfolio, at a particular point in time, may be
unable to find qualified institutional buyers interested in purchasing such
securities.
RIGHTS AND WARRANTS. The Portfolio 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.
9
<PAGE>
SECURITIES RECEIPTS. The Portfolio 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.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions, provided that such loans are callable
at any time by the Portfolio (subject to certain notice provisions described in
the Statement of Additional Information), and are at all times secured by cash
or money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail financially.
However, loans of portfolio securities will only be made to firms deemed by the
Investment Manager to be creditworthy and when the income which can be earned
from such loans justifies the attendant risks.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" section of the Prospectus and to the "Investment Practices and
Policies" section of the Statement of Additional Information.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Portfolio or the Fund and,
as such, may be changed without shareholder approval.
PORTFOLIO MANAGEMENT
The "Best Ideas" Portfolio is managed by the Investment Manager with a view to
achieving the Portfolio's investment objective. The assets of the Portfolio are
managed within InterCapital's Growth Group, which manages 32 equity funds and
fund portfolios with approximately $ billion in assets as of , 1997.
Mark Bavoso, Senior Vice President of InterCapital, is the primary portfolio
manager of the Portfolio and has been a portfolio manager at InterCapital for
over five years.
Although the Portfolio does not intend to engage in short-term trading of
portfolio securities as a means of achieving its investment objective, it may
sell portfolio securities without regard to the length of time they have been
held whenever such sale will in the Investment Manager's opinion strengthen the
Portfolio's position and contribute to its investment objective.
Substantially all of the orders for transactions in portfolio securities and
commodities listed on exchanges are expected to be placed for the Portfolio with
broker-dealers affiliated with the Investment Manager including Morgan Stanley &
Co., Inc., ("Morgan Stanley") and Dean Witter Reynolds Inc. ("DWR"). In addition
to Morgan Stanley and DWR, the Portfolio may place such orders with a number of
brokers and dealers, including other brokers and dealers that are affiliates of
the Investment Manager. The Fund may incur brokerage commissions on transactions
conducted through such affiliates. Transactions effected through Morgan Stanley
and other affiliates are effected pursuant to procedures adopted by the Fund's
Board of Trustees that are designed to ensure that the commissions paid to such
affiliated brokers or dealers are not more than the commissions expected to be
paid to unaffiliated brokers or dealers in a commensurate arms-length
transaction. Pursuant to an order of the Securities and Exchange Commission, the
Fund may effect principal transactions in certain money market instruments with
DWR. It is not anticipated that the portfolio trading will result in the
Portfolio's portfolio turnover rate exceeding 100% in any one year. The
Portfolio will incur brokerage costs commensurate with its portfolio turnover
rate. See "Dividends, Distributions and Taxes" for a discussion of the tax
implications of the Portfolio's trading policy.
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. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (other than obligations issued,
or guaranteed by, the United States Government, its agencies or
instrumentalities), except that the Portfolio may invest all or
substan-
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tially all of its assets in another registered investment company having the
same investment objective and policies and substantially the same investment
restrictions as the Portfolio (a "Qualifying Portfolio").
2. As to 75% of its total assets, purchase more than 10% of all outstanding
voting securities or any class of securities of any one issuer, except that the
Portfolio may invest all or substantially all of its assets in a Qualifying
Portfolio.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.
UNDERWRITING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up to
10,000,000 shares from the "Best Ideas" Portfolio, which number may be increased
or decreased in accordance with the Underwriting Agreement. The initial offering
will run approximately from , 1998 through , 1998. 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 , 1998, or such other date as
may be agreed upon by the Underwriter and the Portfolio (the "Closing Date").
Shares will not be issued and dividends will not be declared by the Portfolio
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. All such funds received and invested in a Dean Witter money market
fund will be automatically invested in the Portfolio on the Closing Date without
any further action by the investor. Any investor may cancel his or her purchase
of Portfolio 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
Portfolio at $10.00 per share with all proceeds going to the Portfolio 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 Portfolio. The Underwriter may, however, receive contingent deferred
sales charges from future redemptions of Class A, Class B and Class C shares
(see "Purchase of Portfolio 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 PORTFOLIO SHARES--CONTINUOUS OFFERING
- --------------------------------------------------------------------------------
GENERAL
The "Best Ideas" 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 the 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.
The "Best Ideas" 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
cur-
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rent prospectus of the Portfolio. 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 Portfolio, an investor's
existing holdings of Class A shares of the Portfolio 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 Portfolio 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 "Competitive Edge"
Trust--"Best Ideas" Portfolio, directly to Dean Witter Trust FSB (the "Transfer
Agent" or "DWT") 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 Portfolio, 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-SM-, an automatic purchase plan (see "Shareholder
Services"), is $100, provided that the schedule of automatic investments will
result in investments totalling at least $1,000 within the first twelve months.
The minimum initial purchase in the case of an "Education IRA" is $500, if the
Distributor has reason to believe that additional investments will increase the
investment in the account to $1,000 within three years. In the case of
investments pursuant to (i) Systematic Payroll Deduction Plans (including
Individual Retirement Plans), (ii) the InterCapital mutual fund asset allocation
program and (iii) fee-based programs approved by the Distributor, pursuant to
which participants pay an asset based fee for services in the nature of
investment advisory or administrative services, the Portfolio, in its
discretion, may accept investments without regard to any minimum amounts which
would otherwise be required, provided, in the case of Systematic Payroll
Deduction Plans, that the Distributor has reason to believe that additional
investments will increase the investment in all accounts under such Plans to at
least $1,000. Certificates for shares purchased will not be issued unless a
request is made by the shareholder in writing to the Transfer Agent.
Shares of the Portfolio are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such 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 Portfolio and the Distributor reserve the right to reject any
purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The "Best Ideas" 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 the Portfolio represents
an identical interest in the Portfolio 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 the
Portfolio that are imposed on Class A, Class B and Class C shares will be
imposed directly against those Classes of the 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
12
<PAGE>
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 Portfolio shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Portfolio. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Portfolio'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>
13
<PAGE>
See "Purchase of Portfolio 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 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 Portfolio 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 Portfolio, 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 Portfolio and other Dean Witter Funds previously
purchased at a price including a front-end sales charge (including shares of the
Portfolio 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
14
<PAGE>
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 Portfolio
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the
Portfolio 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 Portfolio 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 DWT (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, mandatory redemption upon termination and
such other circumstances as specified in the programs' agreements, and
restrictions on transferability of Portfolio 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 DWT 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(k) of the Internal Revenue Code for which DWT 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 Portfolio shares by such investors, if the shares are being
purchased with the proceeds from a redemption of shares of an open-end
proprietary mutual fund of the 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 Portfolio. 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 Portfolio 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 Portfolio 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 Portfolio held by 401 (k) plans or
other employer-sponsored plans qualified under Section 401(a) of the Internal
Revenue Code for
15
<PAGE>
which DWT 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, 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 Portfolio, 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, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2); (B)
distributions from an IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (C) a tax-free return of an excess contribution to an IRA; 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 DWT 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
16
<PAGE>
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 referred to in (i) and (ii) above, which may include
termination fees, mandatory redemption upon termination and such other
circumstances as specified in the programs' agreements, and restrictions on
transferability of Fund shares); (iii) 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 Portfolio 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,
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. If a shareholder
redeems Class A shares and purchases Class D shares, such redemption may be a
taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
with respect to the distribution of Class A, Class B and Class C shares of the
Portfolio of the Fund. In the case of Class A and Class C shares, the Plan
provides that the Fund will, on behalf of the 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 the 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 the Portfolio, will pay the Distributor a fee, which is
accrued daily and paid monthly, at the annual rate of 1.0% of the average daily
net assets of Class B. The fee is treated by the 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 Portfolio'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 the Portfolio may be in excess of the total of
(i) the payments made by the 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 the Portfolio. For example, if $1 million in expenses in distributing
Class B shares of the Portfolio 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 the Distributor be reimbursed for
all distribution expenses or any requirement that the Plan be continued from
year to year, such excess amount does not constitute a liability of the
Portfolio of the Fund. Although there is no legal obligation for the 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 the 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 the 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.
17
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the 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 the Portfolio, dividing by the
respective number of shares outstanding and adjusting to the nearest cent. The
assets of the 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 the 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.
In the calculation of the Portfolio's net asset value; (1) an equity
portfolio security listed or traded on the New York or American Stock Exchange
or other stock exchange is valued at its latest sale price on that exchange
prior to the time assets are valued; if there were no sales that day, the
security is valued at the latest bid price (in cases where a security is traded
on more than one exchange, the security is valued on the exchange designated as
the primary market pursuant to procedures adopted by the Trustees); (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest bid price; (3) when market quotations
are not readily available, including circumstances under which it is determined
by the Investment Manager that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Fund's Trustees (valuation of debt securities for which
market quotations are not readily available may be based upon current market
prices of securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); (4) the value of short-term debt
securities which mature at a date less than sixty days subsequent to valuation
date will be determined on an amortized cost or amortized value basis; and (5)
the value of other assets will be determined in good faith at fair value under
procedures established by and under the general supervision of the Fund's
Trustees. Dividends receivable are accrued as of the ex-dividend date. Interest
income is accrued daily. Certain securities in the Portfolio's portfolio may be
valued by an outside pricing service approved by the Fund's Trustees.
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 the Portfolio (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").
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
Portfolio. (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 Portfolio
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.
18
<PAGE>
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., ("Global
Short-Term") which is a Dean Witter Fund offered with a CDSC. Exchanges may be
made after the shares of the Fund acquired by purchase (not by exchange or
dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, Global
Short-Term or any Exchange Fund that is not a money market fund is on the basis
of the next calculated net asset value per share of each fund after the exchange
order is received. When exchanging into a money market fund from the Portfolio,
shares of the Portfolio are redeemed out of the Portfolio 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, Global Short-Term or any Exchange Fund that is not
a money market fund can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the
shareholder remains in an Exchange Fund (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period (for
the purpose of determining the rate of the CDSC) is frozen. If those shares are
subsequently re-exchanged for shares of a Dean Witter Multi-Class Fund or Global
Short-Term, the holding period previously frozen when the first exchange was
made resumes on the last day of the month in which shares of a Dean Witter
Multi-Class Fund or shares of Global Short-Term are reacquired. Thus, the CDSC
is based upon the time (calculated as described above) the shareholder was
invested in shares of a Dean Witter Multi-Class Fund or in shares of Global
Short-Term (see "Purchase of Fund Shares"). In the case of exchanges of Class A
shares which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in shares of a FSC
Fund. In the case of shares exchanged into an Exchange Fund on or after April
23, 1990, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount equal
to the Exchange Fund 12b-1 distribution fees incurred on or after that date
which are attributable to those shares. (Exchange Fund 12b-1 distribution fees
are described in the prospectuses for those funds.) Class B shares of the
Portfolio acquired in exchange for Class B shares of another Dean Witter Multi-
Class Fund or shares of Global Short-Term 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 Portfolio's other shareholders
and, at the Investment Manager's discretion, may be limited by the Portfolio's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Portfolio 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 Portfolio and its other shareholders, investors should be aware
that the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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
condi-
19
<PAGE>
tions 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 the 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 Portfolio Shares"). If shares are held in a shareholder's
account without a share certificate, a 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 Portfolio 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 Portfolio or
the Distributor. 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."
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 Portfolio pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not
previ-
20
<PAGE>
ously 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 Portfolio in the same Class 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 Portfolio 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 Portfolio 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. The Portfolio of the Fund intends to distribute
substantially all of its net investment income and distribute capital gains, if
any, once each year. The 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 Portfolio 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 Portfolio. 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 Portfolio'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.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Portfolio 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 Portfolio is based on
historical earnings and is not intended to indicate future performance.
The "average annual total return" of the Portfolio refers to a figure
reflecting the average annualized percentage increase (or decrease) in the value
of an initial investment in a Class of the Portfolio of $1,000 over periods of
one, five and ten years, or the life of the Portfolio, if less than any of the
foregoing. Average annual total return reflects all income earned by the
Portfolio, any appreciation or depreciation of the Portfolio'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 Portfolio.
In addition to the foregoing, the Portfolio may advertise its total return
for each Class over different
21
<PAGE>
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 Portfolio may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Portfolio. The
Portfolio 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 Portfolio are of $0.01
par value and are equal as to earnings, assets and voting privileges except
that each Class of the 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 Portfolio is not required to hold Annual Meetings of Shareholders and,
in ordinary circumstances, the Portfolio 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 Portfolio. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Portfolio, requires
that Portfolio obligations include such disclaimer, and provides for
indemnification and reimbursement of expenses out of the Portfolio'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 Portfolio itself
would be unable to meet its obligations. Given the above limitations on
shareholder personal liability, and the nature of the Portfolio's assets and
operations, in the opinion of Massachusetts counsel to the Portfolio, 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.
MASTER/FEEDER CONVERSION. The Portfolio reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to the Portfolio.
SHAREHOLDER INQUIRIES. All inquiries regarding the Portfolio should be
directed to the Portfolio at the telephone numbers or address set forth on the
front cover of this Prospectus.
The Investment Manager provided the initial capital for the Portfolio by
purchasing 1,250 shares each of Class A, Class B, Class C and Class D of each
Portfolio for $12,500, respectively, on November 6, 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 Portfolio.
22
<PAGE>
DEAN WITTER
"COMPETITIVE EDGE" FUND
- -- "BEST IDEAS" PORTFOLIO
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mark Bavoso
Vice President
Barry Fink
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
<PAGE>
DEAN WITTER
"COMPETITIVE EDGE" FUND
-- "COMPETITIVE EDGE" PORTFOLIO
PROSPECTUS-- , 1998
- -------------------------------------------------------------------------------
DEAN WITTER "COMPETITIVE EDGE" FUND (THE "FUND") IS AN OPEN-END, DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY CURRENTLY CONSISTING OF TWO SEPARATE PORTFOLIOS:
THE "COMPETITIVE EDGE" PORTFOLIO AND THE "BEST IDEAS" PORTFOLIO. THE PORTFOLIO
COVERED IN THIS PROSPECTUS, THE "COMPETITIVE EDGE" PORTFOLIO (THE " 'COMPETITIVE
EDGE' PORTFOLIO" OR THE "PORTFOLIO"), HAS AN INVESTMENT OBJECTIVE OF LONG-TERM
CAPITAL GROWTH AND INVESTS PRIMARILY IN THE COMMON STOCKS OF U.S. AND NON-U.S.
COMPANIES INCLUDED IN "GLOBAL INVESTING: THE COMPETITIVE EDGE,"(THE "COMPETITIVE
EDGE LIST") A RESEARCH COMPILATION ASSEMBLED AND MAINTAINED BY MORGAN STANLEY
DEAN WITTER EQUITY RESEARCH ("MSDW EQUITY RESEARCH"). SEE "INVESTMENT OBJECTIVES
AND POLICIES."
INITIAL OFFERING--Shares of the "Competitive Edge" Portfolio 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 , 1998 through
1998.
CONTINUOUS OFFERING--A continuous offering of the shares of the "Competitive
Edge" Portfolio will commence approximately two weeks after the closing date of
the initial offering which is anticipated for , 1998. 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 "Competitive Edge" Portfolio 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
Portfolio Shares--Alternative Purchase Arrangements.")
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Prospectus Summary................................ 2
Summary of Fund Expenses.......................... 4
The Fund and its Management....................... 5
Investment Objective and Policies................. 5
Risk Considerations............................. 6
Investment Restrictions........................... 10
Underwriting...................................... 10
Purchase of Portfolio Shares...................... 11
Shareholder Services.............................. 17
Redemptions and Repurchases....................... 19
Dividends, Distributions and Taxes................ 20
Performance Information........................... 21
Additional Information............................ 21
</TABLE>
This Prospectus sets forth concisely the information you should know before
investing in the "Competitive Edge" Portfolio of the Fund. It should be read and
retained for future reference. Additional information about the "Competitive
Edge" Portfolio of the Fund is contained in the Statement of Additional
Information, dated , 1998, which has been filed with the Securities and
Exchange Commission, and which is available at no charge upon request of the
Fund at the address or telephone numbers listed on this page. The Statement of
Additional Information is incorporated herein by reference.
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
"COMPETITIVE EDGE" FUND
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, diversified management investment company currently consisting
of two separate portfolios (collectively the "Portfolios"). The portfolio covered by
this Prospectus, the " Competitive Edge" Portfolio (the " 'Competitive Edge' Portfolio"
or the "Portfolio") invests primarily in the common stocks of U.S. and non-U.S.
companies included in "Global Investing: The Competitive Edge," (the "Competitive Edge"
List") a research compilation assembled and maintained by Morgan Stanley Dean Witter
Equity Research ("MSDW Equity Research").
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SHARES OFFERED Shares of beneficial interest with $0.01 par value of the "Competitive Edge" Portfolio
(see page 21). The Portfolio offers four Classes of shares, each with a different
combination of sales charges, ongoing fees and other features (see page 11).
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INITIAL Shares of the "Competitive Edge" Portfolio are being offered in an underwriting by Dean
OFFERING Witter Distributors Inc. at $10.00 per share for each of Class B, Class C and Class D
and $10.00 per share plus a sales charge for Class A. The minimum purchase for each
Class is 100 shares; however, Class D shares are only available to persons who are
otherwise qualified to purchase such shares. The initial offering will run approximately
from , 1998 through , 1998. The closing will take place on
, 1998 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 Portfolio 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 of shares of the "Competitive Edge" Portfolio, if any, will
OFFERING/ commence within approximately two weeks after the Closing Date. The minimum initial
MINIMUM investment for each Class is $1,000 ($100 if the account is opened through
PURCHASE EasyInvest-SM-). 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 investment for Class D shares, and subject to the $1,000 minimum
initial investment for each Class of the Portfolio, 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 Portfolio and other Dean Witter
Funds that are multiple class funds will be aggregated. The minimum subsequent
investment is $100 (see page 11).
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INVESTMENT The investment objective of the "Competitive Edge" Portfolio is long-term capital
OBJECTIVE growth. (see page 5).
- -------------------------------------------------------------------------------------------------------
INVESTMENT Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and
MANAGER its 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 $ billion at
, 1997.
- -------------------------------------------------------------------------------------------------------
MANAGEMENT The Investment Manager receives a monthly fee at the annual rate of 0.75% of the
FEE Portfolio's average daily net assets (see page 5).
- -------------------------------------------------------------------------------------------------------
UNDERWRITER Dean Witter Distributors Inc. (the "Distributor") is the Fund's Underwriter and
AND Distributor. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
DISTRIBUTOR Investment Company Act (the "12b-1 Plan") with respect to the distribution fees paid by
AND the Class A, Class B and Class C shares of the Portfolio to the Distributor. The entire
DISTRIBUTION 12b-1 fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B
FEE 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 10 and 16).
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ALTERNATIVE Four classes of shares of the "Competitive Edge" Portfolio 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 the
Portfolio, is authorized to reimburse the Distributor for specific expenses incurred in
promoting the distribution of the Portfolio'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 of the Portfolio (see pages 11, 13 and 16).
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</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- 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 Portfolio 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 the Portfolio. Class B shares convert
to Class A shares approximately ten years after the date of the original purchase (see
pages 11, 15 and 16).
- 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 the Portfolio, is authorized to reimburse the Distributor for specific
expenses incurred in promoting the distribution of the 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 the Portfolio (see pages 11 and 16).
- 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 11 and 16).
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DIVIDENDS AND Dividends from net investment income and distributions from net capital gains, if any,
CAPITAL GAINS are paid at least once per year. The Portfolio may, however, determine to retain all or
DISTRIBUTIONS part of 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 17 and 20).
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REDEMPTION Shares of the Portfolio 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 19).
- -------------------------------------------------------------------------------------------------------
RISK An investment in the "Competitive Edge" Portfolio should be considered a long-term
CONSIDERATIONS holding and subject to all the risks associated with investing in equity securities of
companies in domestic and foreign markets. The net asset value of the Portfolio's shares
will fluctuate with changes in the market value of its portfolio securities, and
therefore, will increase or decrease due to a variety of economic, market or political
factors which cannot be predicted. There can be no assurance that the securities
contained in the "Competitive Edge" List will perform as anticipated by MSDW Equity
Research. Past performance of securities and issuers included in the "Competitive Edge"
List cannot be used to predict future results of the Portfolio, which is actively
managed by the Investment Manager and the results of which are expected to vary from the
performance of the "Competitive Edge" List. It should be recognized that foreign
securities and markets in which the Portfolio may invest 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
the Portfolio'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. The Portfolio may enter into repurchase agreements 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. (See pages
6-9).
- -------------------------------------------------------------------------------------------------------
</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 the
Portfolio will incur. The expenses and fees set forth in the table are based on
the fees and estimated other expenses for the first full fiscal year of the
Portfolio.
<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 PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
<S> <C> <C> <C> <C>
Management Fees*......................................... 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (5) (6)....................................... 0.25% 1.00% 1.00% None
Other Expenses*.......................................... 0.32% 0.32% 0.32% 0.32%
Total Fund Operating Expenses* (7)....................... 1.32% 2.07% 2.07% 1.07%
</TABLE>
- ------------------------------
* The Investment Manager has undertaken to assume all operating expenses
(except for brokerage and 12b-1 fees) and to waive the compensation provided
for in the Management Agreement for the Portfolio until such time as the
Portfolio has $50 million of net assets or until six months from commencement
of the Portfolio's operations, whichever occurs first. The fees and expenses
disclosed above do not reflect the assumption of any expenses or the waiver
of any compensation by the Investment Manager.
(1) Reduced for purchases of $25,000 and over (see "Purchase of Portfolio
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 Portfolio Shares--Initial Sales Charge Alternative--Class
A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Portfolio 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 the 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 the Portfolio of the Fund's
shares (see "Purchase of Portfolio 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 Portfolio
Shares--Alternative Purchase Arrangements").
(7) "Total Fund Operating Expenses," as shown above with respect to each Class,
are based upon the sum of Management and 12b-1 Fees, and estimated "Other
Expenses."
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment in the Portfolios assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
Class A............................................................................ $ 65 $ 92
Class B............................................................................ $ 71 $ 95
Class C............................................................................ $ 31 $ 65
Class D............................................................................ $ 11 $ 34
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
You would pay the following expenses on the same $1,000 investment in the Portfolios
assuming no redemption at the end of the period:
Class A............................................................................ $ 65 $ 92
Class B............................................................................ $ 21 $ 65
Class C............................................................................ $ 21 $ 65
Class D............................................................................ $ 11 $ 34
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE PORTFOLIO 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 Portfolio will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Portfolio 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.
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter "Competitive Edge" Fund (the "Fund") is an open-end, diversified
management investment company. The Fund is a trust of the type commonly known as
a "Massachusetts business trust" and was organized under the laws of the
Commonwealth of Massachusetts on , 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., 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
$ billion as of , 1997. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $ 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 the Portfolio's assets among the
securities on the "Competitive Edge" List. 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.
As full compensation for the services and facilities furnished to the
Portfolio and for expenses of the Portfolio incurred by the Investment Manager,
the Fund pays the Investment Manager monthly compensation calculated daily by
applying the annual rate of 0.75% of the Portfolio's net assets. The Portfolio's
expenses include: the fee of the Investment Manager, the fee pursuant to the
Plan of Distribution (see "Purchase of Fund Shares"); taxes; transfer agent and
custodian fees, auditing fees; and certain legal fees, and printing and other
expenses relating to the Portfolio's operations which are not expressly assumed
by the Investment Manager under its Investment Management Agreement with the
Fund. The Investment Manager has agreed to assume all operating expenses (except
for brokerage and 12b-1 fees) for the Portfolio until such time as the Portfolio
has $50 million of net assets or until six months from commencement of the
Portfolio's operations, whichever occurs first.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund currently consists of two separate portfolios, each of which is
operated as an open-end, diversified management investment company. The
investment objective of the portfolio contained in this Prospectus, the
"Competitive Edge" Portfolio (the " 'Competitive Edge' Portfolio" or the
"Portfolio"), is long-term capital growth. The objective of the Portfolio is a
fundamental policy and may not be changed without shareholder approval. There is
no assurance that the objective of the Portfolio will be achieved.
The "Competitive Edge" Portfolio seeks to achieve its investment objective
by investing, under normal circumstances, at least 80% of its total assets in
the common stock (including depository receipts, such as ADRs or EDRs) of U.S.
and non-U.S. companies included in "Global Investing: The Competitive Edge," a
research compilation assembled and maintained by Morgan Stanley Dean Witter
Equity Research ("MSDW Equity Research").
MSDW EQUITY RESEARCH. MSDW Equity Research is recognized as a world leader in
global financial research and provides comprehensive research and in-depth
knowledge about general markets and specific companies from around the world. It
believes that companies with a sustainable competitive edge in the operations of
their businesses are worth more than their weaker competitors. Through its on-
going research and analysis, MSDW Equity Research has developed and undertaken a
comprehensive study which it calls "Global Investing: The 'Competitive Edge' "
which represents the list of those companies (the " 'Competitive Edge' List").
Specifically, MSDW Equity Research group's research analysts and strategists
presently evaluate approximately 2,000 companies in 21 industry sectors
worldwide. The initial comprehensive review for the "Competitive Edge" List was
conducted in October 1996 and identified 238 companies from the MSDW Equity
Research companies under coverage (then nearly 1,650) as having a long-term
sustainable competitive advantage in the global arena. While the criteria used
to select companies that have a global competitive advantage vary according to
industry sector, these companies typically are large capitalization companies,
have strong management and/or have a global presence. Although the "Competitive
Edge" List is not a fixed number, MSDW Equity Research presently intends to
attempt to keep the number of common stocks at approximately 238 companies. MSDW
Equity Research currently updates the "Competitive Edge" List annually.
5
<PAGE>
The Portfolio may invest in any company on the "Competitive Edge" List;
provided that, under normal circumstances, not more than 5% of the Portfolio's
net assets will be invested in any one company and not less than 20% of the
Portfolio's net assets will be invested in U.S. companies. In selecting
companies on the "Competitive Edge" List, the Investment Manager attempts to
identify companies whose securities demonstrate growth potential. The Portfolio
will sell any security which is removed from the "Competitive Edge" List as soon
as practicable.
The Portfolio may invest up to 20% 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 Portfolio's securities holdings. During such periods, the
Portfolio may adopt a temporary "defensive" posture in which up to 100% of each
Portfolio's net assets are invested in cash or money market instruments.
RISK CONSIDERATIONS AND INVESTMENT PRACTICES
The net asset value of the Portfolio's shares will fluctuate with changes in the
market value of its portfolio securities. The market value of the Portfolio's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. A general description and
the risks involved of the various investment practices and techniques which the
Portfolio may engage in is set forth below. A more detailed discussion can be
found in this Fund's Statement of Additional Information.
"COMPETITIVE EDGE" SELECTION. The net asset value of the Portfolio will
fluctuate depending upon the performance of the securities included on the
"Competitive Edge" List. There can be no assurance that the securities contained
in the "Competitive Edge" List will perform as anticipated by MSDW Equity
Research. The selection of companies on the "Competitive Edge" List is a
subjective determination by the MSDW Research group. Past performance of the
securities and issuers included in the "Competitive Edge" List cannot be used to
predict future results of the Portfolio, which is actively managed by the
Investment Manager and the results of which are expected to vary from the
performance of the "Competitive Edge" List.
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 Portfolio will be investing in 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
6
<PAGE>
have offered greater potential for gain (as well as loss) than securities of
companies located in developed countries.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Portfolio 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, the 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 Portfolio 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 Portfolio's securities holdings (or securities which the Portfolio has
purchased for its portfolio) denominated in such foreign currency. Under
identical circumstances, the Portfolio may enter into a forward contract to
sell, for a fixed amount of U.S. dollars or other currency, an amount of foreign
currency other than the currency in which the securities to be hedged are
denominated approximating the value of some or all of the portfolio securities
to be hedged. This method of hedging, called "cross-hedging," will be selected
by the Investment Manager when it is determined that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or is
trading at a discount as compared with some other foreign currency with which it
tends to move in tandem.
In addition, when the 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 Portfolio 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
Portfolio may, however, close out the forward contract without purchasing the
security which was the subject of the "anticipatory" hedge.
In all of the above circumstances, if the currency in which the Portfolio'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 Portfolio will have realized fewer gains than had it not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Portfolio
is not required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager. The Portfolio generally will not enter into a forward
contract with a term of greater than one year, although it may enter into
forward contracts for periods of up to five years. The Portfolio 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. The Portfolio 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 Portfolio.
The Portfolio 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. The Portfolio may
write covered put options, under which the Portfolio 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.
The Portfolio may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Portfolio 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
7
<PAGE>
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. The Portfolio 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 the Portfolio's ability to purchase call and put options other than
compliance with the foregoing policies.
The Portfolio 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). The Portfolio 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. The Portfolio 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. The Portfolio
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, the
Portfolio 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 Portfolio incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price.
The Portfolio 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. The Portfolio 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.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Portfolio 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 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 the Portfolio 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 Portfolio 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. The Portfolio may enter into repurchase agreements,
which may be viewed as a type of secured lending, and which typically involve
the acquisition by the Portfolio of debt securities, from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Portfolio will sell back to the institution, and
that the institution will repurchase, the underlying security at a specified
price and at a fixed time in the future, usually not more than seven days from
the date of purchase. While repurchase agreements involve certain risks not
associated with direct investments in debt securities, including the risks of
default or bankruptcy of the selling financial institution, the Portfolio
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. It is the
current policy of the Portfolio 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 the Portfolio, amounts to more than 15% of the
Portfolio's net assets in keeping with its policy on illiquid securities.
PRIVATE PLACEMENTS. The Portfolio may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, 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
8
<PAGE>
have an adverse effect on their marketability, and may prevent a fund from
disposing of them promptly at reasonable prices. The Portfolio 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 the Fund, will make a determination as to
the liquidity of each restricted security purchased by the Portfolio. If a
restricted security is determined to be "liquid," such security will not be
included within the category "illiquid securities," which under current policy
may not exceed 15% of the Portfolio's net assets. However, investing in Rule
144A securities could have the effect of increasing the level of Portfolio
illiquidity to the extent the Portfolio, at a particular point in time, may be
unable to find qualified institutional buyers interested in purchasing such
securities.
RIGHTS AND WARRANTS. The Portfolio 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.
SECURITIES RECEIPTS. The Portfolio 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.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions, provided that such loans are callable
at any time by the Portfolio (subject to certain notice provisions described in
the Statement of Additional Information), and are at all times secured by cash
or money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail financially.
However, loans of portfolio securities will only be made to firms deemed by the
Investment Manager to be creditworthy and when the income which can be earned
from such loans justifies the attendant risks.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" section of the Prospectus and to the "Investment Practices and
Policies" section of the Statement of Additional Information.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Portfolio or the Fund and,
as such, may be changed without shareholder approval.
PORTFOLIO MANAGEMENT
The "Competitive Edge" Portfolio is managed by the Investment Manager with a
view to achieving the Portfolio's investment objective. The assets of the
Portfolio are managed within InterCapital's Growth Group, which manages 32
equity funds and fund portfolios with approximately $ billion in assets as of
, 1997. Mark Bavoso, Senior Vice President of InterCapital, is the
primary portfolio manager of the Portfolio and has been a portfolio manager at
InterCapital for over five years.
Although the Portfolio does not intend to engage in short-term trading of
portfolio securities as a means of achieving its investment objective, it may
sell portfolio securities without regard to the length of time they have been
held whenever such sale will in the Investment Manager's opinion strengthen the
Portfolio's position and contribute to its investment objective.
Substantially all of the Orders for transactions in portfolio securities and
commodities listed on exchanges are expected to be placed for the Portfolio with
broker-dealers affiliated with the Investment Manager including Morgan Stanley &
Co., Inc., ("Morgan Stanley") and Dean Witter Reynolds Inc. ("DWR"), Investment
Manager. In addition to Morgan Stanley and DWR, the Portfolio may place such
orders with a number of brokers and dealers, including other brokers and dealers
that are affiliates of the Investment Manager. The Fund may incur brokerage
commissions on transactions conducted through such affiliates. Transactions
effected through Morgan Stanley and other affiliates are effected pursuant to
procedures adopted by the Fund's Board of Trustees that are designed to ensure
that the commissions paid to such affiliated brokers or dealers are not more
than the commissions expected to be paid to unaffiliated brokers or dealers in a
commensurate arms-length transaction. Pursuant to an order of the Securities and
Exchange Commission, the Fund may effect principal transactions in certain money
market instruments with DWR. It is not anticipated that the portfolio trading
will result in the Portfolio's portfolio turnover rate exceeding 100% in any one
year. The Portfolio will incur brokerage costs commensurate with its portfolio
turnover rate. See "Dividends, Distributions and Taxes" for a discussion of the
tax implications of the Portfolio's trading policy.
9
<PAGE>
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. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (other than obligations issued,
or guaranteed by, the United States Government, its agencies or
instrumentalities), except that the Portfolio may invest all or substantially
all of its assets in another registered investment company having the same
investment objective and policies and substantially the same investment
restrictions as the Portfolio (a "Qualifying Portfolio").
2. As to 75% of its total assets, purchase more than 10% of all outstanding
voting securities or any class of securities of any one issuer, except that the
Portfolio may invest all or substantially all of its assets in a Qualifying
Portfolio.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by
the United States Government or its agencies or instrumentalities.
UNDERWRITING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up to
10,000,000 shares from the "Competitive Edge" Portfolio, which number may be
increased or decreased in accordance with the Underwriting Agreement. The
initial offering will run approximately from , 1998 through
, 1998. 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 , 1998, or
such other date as may be agreed upon by the Underwriter and the Portfolio (the
"Closing Date"). Shares will not be issued and dividends will not be declared by
the Portfolio 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. All such funds received and invested in a Dean Witter money
market fund will be automatically invested in the Portfolio on the Closing Date
without any further action by the investor. Any investor may cancel his or her
purchase of Portfolio 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
Portfolio at $10.00 per share with all proceeds going to the Portfolio 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 Portfolio. The Underwriter may, however, receive contingent deferred
sales charges from future redemptions of Class A, Class B and Class C shares
(see "Purchase of Portfolio 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.
10
<PAGE>
PURCHASE OF PORTFOLIO SHARES--CONTINUOUS OFFERING
- --------------------------------------------------------------------------------
GENERAL
The "Competitive Edge" 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 the 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.
The "Competitive Edge" 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
Portfolio. 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 Portfolio, an investor's
existing holdings of Class A shares of the Portfolio 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 Portfolio 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 "Competitive Edge"
Trust--"Competitive Edge" Portfolio, directly to Dean Witter Trust FSB (the
"Transfer Agent" or "DWT") 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 Portfolio, 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-SM-, an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. The minimum initial purchase in the case of an
"Education IRA" is $500, if the Distributor has reason to believe that
additional investments will increase the investment in the account to $1,000
within three years. In the case of investments pursuant to (i) Systematic
Payroll Deduction Plans (including Individual Retirement Plans), (ii) the
InterCapital mutual fund asset allocation program and (iii) fee-based programs
approved by the Distributor, pursuant to which participants pay an asset based
fee for services in the nature of investment advisory or administrative
services, the Portfolio, in its discretion, may accept investments without
regard to any minimum amounts which would otherwise be required, provided, in
the case of Systematic Payroll Deduction Plans, that the Distributor has reason
to believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares purchased
will not be issued unless a request is made by the shareholder in writing to the
Transfer Agent.
Shares of the Portfolio are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such 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 Portfolio and the Distributor reserve the right to reject
any purchase orders.
11
<PAGE>
ALTERNATIVE PURCHASE ARRANGEMENTS
The "Competitive Edge" 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 the Portfolio represents
an identical interest in the Portfolio 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 the
Portfolio that are imposed on Class A, Class B and Class C shares will be
imposed directly against those Classes of the 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 Portfolio shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Portfolio. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Portfolio'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
12
<PAGE>
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 Portfolio 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 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
13
<PAGE>
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 Portfolio 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 Portfolio, 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 Portfolio and other Dean Witter Funds previously
purchased at a price including a front-end sales charge (including shares of the
Portfolio 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 Portfolio
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the
Portfolio 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 Portfolio 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 DWT (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, mandatory redemption upon termination and
such other circumstances as specified in the programs' agreements, and
restrictions on transferability of Portfolio 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 DWT 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(k) of the Internal Revenue Code for which DWT 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 Portfolio shares by such investors, if the shares are being
purchased with the proceeds from a redemption of shares of an open-end
proprietary mutual fund of the 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.
14
<PAGE>
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 Portfolio. 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 Portfolio 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 Portfolio 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 Portfolio held by 401 (k) plans or
other employer-sponsored plans qualified under Section 401(a) of the Internal
Revenue Code for which DWT 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, 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 Portfolio, 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, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (a) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2); (b)
distributions from an IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (c) a tax-free return of an excess contribution to an IRA; 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 DWT 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
15
<PAGE>
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 referred to in (i) and (ii) above, which may
include termination fees, mandatory redemption upon termination and such other
circumstances as specified in the programs' agreements, and restrictions on
transferability of Fund shares); (iii) 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 Portfolio 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,
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. If a shareholder
redeems Class A shares and purchases Class D shares, such redemption may be a
taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
with respect to the distribution of Class A, Class B and Class C shares of the
Portfolio of the Fund. In the case of Class A and Class C shares, the Plan
provides that the Fund will, on behalf of the 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 the 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 the Portfolio, will pay the Distributor a fee, which is
accrued daily and paid monthly, at the annual rate of 1.0% of the average daily
net assets of Class B. The fee is treated by the 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 Portfolio's shares to other than current shareholders; and preparation,
printing and distribution of sales literature and
16
<PAGE>
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 the Portfolio may be in excess of the total of
(i) the payments made by the 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 the Portfolio. For example, if $1 million in expenses in distributing
Class B shares of the Portfolio 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 the Distributor be reimbursed for
all distribution expenses or any requirement that the Plan be continued from
year to year, such excess amount does not constitute a liability of the
Portfolio of the Fund. Although there is no legal obligation for the 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 the 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 the 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 the 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 the Portfolio, dividing by the
respective number of shares outstanding and adjusting to the nearest cent. The
assets of the 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 the 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.
In the calculation of the Portfolio's net asset value; (1) an equity
portfolio security listed or traded on the New York or American Stock Exchange
or other stock exchange is valued at its latest sale price on that exchange
prior to the time assets are valued; if there were no sales that day, the
security is valued at the latest bid price (in cases where a security is traded
on more than one exchange, the security is valued on the exchange designated as
the primary market pursuant to procedures adopted by the Trustees); (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest bid price; (3) when market quotations
are not readily available, including circumstances under which it is determined
by the Investment Manager that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Fund's Trustees (valuation of debt securities for which
market quotations are not readily available may be based upon current market
prices of securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); (4) the value of short-term debt
securities which mature at a date less than sixty days subsequent to valuation
date will be determined on an amortized cost or amortized value basis; and (5)
the value of other assets will be determined in good faith at fair value under
procedures established by and under the general supervision of the Fund's
Trustees. Dividends receivable are accrued as of the ex-dividend date. Interest
income is accrued daily. Certain securities in the Portfolio's portfolio may be
valued by an outside pricing service approved by the Fund's Trustees.
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 the Portfolio (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").
17
<PAGE>
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").
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
Portfolio. (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 Portfolio
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. ("Global
Short-Term"), which is a Dean Witter Fund offered with a CDSC. Exchanges may be
made after the shares of the Fund acquired by purchase (not by exchange or
dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, Global
Short-Term or any Exchange Fund that is not a money market fund is on the basis
of the next calculated net asset value per share of each fund after the exchange
order is received. When exchanging into a money market fund from the Portfolio,
shares of the Portfolio are redeemed out of the Portfolio 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, Global Short-Term or any Exchange Fund that is not
a money market fund can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a Dean Witter Multi-Class
Fund or Global Short-Term, the holding period previously frozen when the first
exchange was made resumes on the last day of the month in which shares of a Dean
Witter Multi-Class Fund or shares of Global Short-Term are reacquired. Thus, the
CDSC is based upon the time (calculated as described above) the shareholder was
invested in shares of a Dean Witter Multi-Class Fund or in shares of Global
Short-Term (see "Purchase of Fund Shares"). In the case of exchanges of Class A
shares which
18
<PAGE>
are subject to a CDSC, the holding period also includes the time (calculated as
described above) the shareholder was invested in shares of a FSC Fund. In the
case of shares exchanged into an Exchange Fund on or after April 23, 1990, upon
a redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the Exchange
Fund 12b-1 distribution fees incurred on or after that date which are
attributable to those shares. (Exchange Fund 12b-1 distribution fees are
described in the prospectuses for those funds.) Class B shares of the Portfolio
acquired in exchange for Class B shares of another Dean Witter Multi-Class Fund
or shares of Global Short-Term 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 Portfolio's other shareholders
and, at the Investment Manager's discretion, may be limited by the Portfolio's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Portfolio 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 Portfolio and its other shareholders, investors should be aware
that the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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.
19
<PAGE>
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of each Class of the 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 Portfolio Shares"). If shares are held in a shareholder's
account without a share certificate, a 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 Portfolio 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 Portfolio or
the Distributor. 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."
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 Portfolio 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 Portfolio in the same Class 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 Portfolio 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 Portfolio 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. The Portfolio of the Fund intends to distribute
substantially all of its net investment income and distribute capital gains, if
any, once each year. The 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 Portfolio intends to distribute all of its net investment
income and net short-term capital gains to
20
<PAGE>
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
Portfolio. 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 Portfolio'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.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Portfolio 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 Portfolio is based on
historical earnings and is not intended to indicate future performance.
The "average annual total return" of the Portfolio refers to a figure
reflecting the average annualized percentage increase (or decrease) in the value
of an initial investment in a Class of the Portfolio of $1,000 over periods of
one, five and ten years, or the life of the Portfolio, if less than any of the
foregoing. Average annual total return reflects all income earned by the
Portfolio, any appreciation or depreciation of the Portfolio'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 Portfolio.
In addition to the foregoing, the Portfolio 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 Portfolio may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in each Class of
shares of the Portfolio. The Portfolio 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 Portfolio are of $0.01
par value and are equal as to earnings, assets and voting privileges except that
each Class of the 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 Portfolio is not required to hold Annual Meetings of Shareholders and,
in ordinary circumstances, the Portfolio 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
Portfolio. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Portfolio, requires that
Portfolio obligations include such disclaimer, and provides for indemnification
and reimbursement of expenses out of the Portfolio'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 Portfolio itself would be
unable to meet its obligations. Given the above limitations on shareholder
personal liability, and the nature of the Portfolio's assets and operations, in
the opinion of Massachusetts counsel to the Portfolio, the risk to shareholders
of personal liability is remote.
21
<PAGE>
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.
MASTER/FEEDER CONVERSION. The Portfolio reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to the Portfolio.
SHAREHOLDER INQUIRIES. All inquiries regarding the Portfolio should be directed
to the Portfolio at the telephone numbers or address set forth on the front
cover of this Prospectus.
The Investment Manager provided the initial capital for the Portfolio by
purchasing 1,250 shares each of Class A, Class B, Class C and Class D of each
Portfolio for $12,500, respectively, on November 6, 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 Portfolio.
22
<PAGE>
DEAN WITTER
"COMPETITIVE EDGE" FUND
- -- "COMPETITIVE EDGE" PORTFOLIO
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mark Bavoso
Vice President
Barry Fink
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
<PAGE>
STATEMENT OF ADDITIONAL DEAN WITTER
INFORMATION "COMPETITIVE EDGE" FUND
, 1998
- --------------------------------------------------------------------------------
Dean Witter "Competitive Edge" Fund (the "Fund") is an open-end, diversified
management investment company currently consisting of two separate portfolios
(individually a "Portfolio" and collectively the "Portfolios"). The "BEST IDEAS"
PORTFOLIO has an investment objective of long-term capital growth and invests
primarily in common stocks of U.S. and non-U.S. companies included in the "Best
Ideas" subgroup (the " 'Best Ideas' List") of "Global Investing--The Competitive
Edge" (the " 'Competitive Edge' List"), a research compilation assembled and
maintained by Morgan Stanley Dean Witter Equity Research ("MSDW Equity
Research"). The "COMPETITIVE EDGE" PORTFOLIO has an investment objective of
long-term capital growth and invests primarily in common stocks of U.S. and
non-U.S. companies included in The Competitive Edge List.
A Prospectus for the "Best Ideas" Portfolio of the Fund dated ,
1998, which provides the basic information you should know before investing in
that Portfolio, 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. The "Competitive Edge" Portfolio is not being offered to investors at
this time. 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 of each Portfolio. It is intended to provide you additional
information regarding the activities and operations of the respective Portfolio,
and should be read in conjunction with each Portfolio's Prospectus.
Dean Witter
"Competitive Edge" Fund
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 of the Portfolios.................................... 12
Investment Restrictions................................................................ 28
Portfolio Transactions and Brokerage................................................... 29
Underwriting........................................................................... 31
The Distributor........................................................................ 31
Determination of Net Asset Value....................................................... 34
Purchase of Portfolio Shares........................................................... 35
Shareholder Services................................................................... 37
Redemptions and Repurchases............................................................ 42
Dividends, Distributions and Taxes..................................................... 43
Performance Information................................................................ 44
Description of Shares of The Fund...................................................... 45
Custodian and Transfer Agent........................................................... 46
Independent Accountants................................................................ 46
Reports to Shareholders................................................................ 46
Legal Counsel.......................................................................... 46
Experts................................................................................ 46
Registration Statement................................................................. 46
Statements of Assets and Liabilities at December 3, 1997 ............................. 47
Report of Independent Accountants...................................................... 50
Appendix--Ratings of Investments.......................................................
</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
October 16, 1997.
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 each
Portfolio of the Fund 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
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, Dean Witter S&P 500 Index Fund, Dean Witter Fund of Funds,
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
Income Opportunities
3
<PAGE>
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" or the "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.
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 Portfolio's shares,
Dean Witter Distributors Inc. ("Distributors" or the "Distributor") (see "The
Distributor"), will be paid by the Portfolio. These expenses will be allocated
among the four classes of shares of the Portfolio of the Fund (each, a "Class")
pro rata based on the net assets of the Portfolio of the Fund attributable to
each Class, except as described below. Such expenses include, but are not
limited to: expenses of the Plan of Distribution pursuant to Rule 12b-1 (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
Portfolio and its shares under federal and state securities laws; the cost and
expenses of printing, including typesetting, and distributing prospectuses of
the Portfolio and supplements thereto to the Portfolio'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 Portfolio's
shares; fees and expenses of legal counsel, including counsel to the Trustees
who are not interested persons of the Fund, the Portfolio 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 Portfolio borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the
Portfolio which inure to its benefit; extraordinary
4
<PAGE>
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 the Portfolio or may be proportionately allocated on
the basis of the size of the Portfolio. The Trustees have determined that this
is an appropriate method of allocation of such expenses); and all other costs of
the Portfolio'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 the 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 has agreed to assume all operating expenses (except
for brokerage and 12b-1 fees) for each Portfolio until such time as the
respective Portfolio has $50 million of net assets or six months from the date
of commencement of the respective Portfolio's operations, whichever occurs
first.
The Investment Manager will pay the organizational expenses of each
Portfolio incurred prior to the offering of its shares. Each Portfolio 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 each
Portfolio have been deferred by the Portfolio and are being amortized on the
straight line method over a period not to exceed five years from the date of
commencement of each Portfolio's operations.
As full compensation for the services and facilities furnished to each
Portfolio of the Fund and expenses of each Portfolio assumed by the Investment
Manager, the Fund pays the Investment Manager monthly compensation calculated
daily by applying the annual rate of 0.65% to the daily net assets of the "Best
Ideas" Portfolio and 0.75% to the daily net assets of the "Competitive Edge"
Portfolio. The management fee is allocated among the Classes of each Portfolio
pro rata based on the net assets of the respective Portfolio attributable to
each Class.
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 November 6,
1997 and by InterCapital, as the then sole shareholder, on November 6, 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 85 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>
Michael Bozic (56) ................................... Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief
6111 Broken Sound Parkway, N.W. Executive Officer of Hills Department Stores (May,
Boca Raton, Florida 1991-July, 1995); formerly variously Chairman, Chief
Executive Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of Sears,
Roebuck and Co.; Director of Eaglemark Financial Services,
Inc., the United Negro College Fund and Weirton Steel
Corporation.
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 FSB ("DWT"); Director and/or officer of
various MSDWD subsidiaries; formerly Executive Vice
President and Director of Dean Witter, Discover & Co.
(until February, 1993).
Edwin J. Garn (65) ................................... Director or Trustee of the Dean Witter Funds; formerly
Trustee United States Senator (R-Utah) (1974-1992) and Chairman,
c/o Huntsman Corporation Senate Banking Committee (1980-1986); formerly Mayor of
500 Huntsman Way Salt Lake City, Utah (1972-1974); formerly Astronaut,
Salt Lake City, Utah Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Corporation (since January, 1993);
Director of Franklin Covey (time management systems) and
John Alden Financial Corp. (health insurance); United
Space Alliance (joint venture between Lockheed Martin and
the Boeing Company) and Nuskin Asia Pacific (Multilevel
Marketing); member of the board of various civic and
charitable organizations.
John R. Haire (72) ................................... Chairman of the Audit Committee and Chairman of the
Trustee Committee of the Independent Directors or Trustees and
Two World Trade Center Director or Trustee of the Dean Witter Funds; Chairman of
New York, New York the Audit Committee and Chairman of the Committee of the
Independent Trustees and Trustee of the TCW/DW Funds;
formerly President, Council for Aid to Education
(1978-1989) and Chairman and Chief Executive Officer of
Anchor Corporation, an Investment Adviser (1964-1978);
Director of Washington National Corporation (insurance).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
Wayne E. Hedien (63) ................................. Retired, Director or Trustee of the Dean Witter Funds;
Trustee Director of The PMI Group, Inc. (private mortgage
c/o Gordon Altman Butowsky insurance); Trustee and Vice Chairman of The Field Museum
Weitzen Shalov & Wein of Natural History; formerly associated with the Allstate
Counsel to the Independent Trustees Companies (1966-1994), most recently as Chairman of The
114 West 47th Street Allstate Corporation (March, 1993-December, 1994) and
New York, New York Chairman and Chief Executive Officer of its wholly-owned
subsidiary, Allstate Insurance Company (July,
1989-December, 1994); director of various other business
and charitable organizations.
<S> <C>
Dr. Manuel H. Johnson (48) ........................... Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc. Seven Council (G7C), an international economic commission;
1133 Connecticut Avenue, N.W. Trustee of the TCW/DW Funds; Director of Greenwich Capital
Washington, DC Markets, Inc. (broker-dealer); Director of NASDAQ (since
June, 1995); Chairman and Trustee of the Financial
Accounting Foundation (oversight organization for the
Financial Accounting Standards Board); formerly Vice
Chairman of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary of the U.S.
Treasury (1982-1986).
Michael E. Nugent (61) ............................... General Partner, Triumph Capital, L.P., a private in-
Trustee vestment partnership; Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital
New York, New York Corporation (1984-1988); director of various business
organizations.
Philip J. Purcell* (54) .............................. Chairman of the Board of Directors and Chief Executive
Trustee Officer of MSDWD, DWR and Novus Credit Services Inc.;
1585 Broadway Director of InterCapital, DWSC and Distributors; Director
New York, New York or Trustee of the Dean Witter Funds; Director and/or
officer of various MSDWD subsidiaries.
John L. Schroeder (67) ............................... Retired; Director or Trustee of the Dean Witter Funds;
Trustee Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Weitzen Utilities Company; formerly Executive Vice President and
Shalov & Wein Chief Investment Officer of the Home Insurance Company
Counsel to the Independent Trustees (August, 1991-September, 1995).
114 West 47th Street
New York, New York
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
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.
<S> <C>
Thomas F. Caloia (51) ................................ First Vice President and Assistant Treasurer of Inter-
Treasurer Capital and DWSC; Treasurer of the Dean Witter Funds and
Two World Trade Center the TCW/DW Funds.
New York, New York
</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 DWT and
Director of DWT, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Executive Vice President, Chief Administrative Officer and
Director of DWR and Director of SPS Transaction Services, Inc. and various other
MSDWD subsidiaries, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of InterCapital and Director of DWT, Robert S. Giambrone,
Senior Vice President of InterCapital, DWSC, Distributors and DWT and a Director
of DWT, and Paul D. Vance and Guy D. Rutherford, Jr., 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, Lou Anne
D. McInnis, Carsten Otto and Ruth Rossi, Vice Presidents and Assistant General
Counsels of InterCapital and DWSC, and Frank Bruttomesso and Todd Lebo, Staff
Attorneys with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same individuals
also serve as directors or trustees for all of the Dean Witter Funds, and are
referred to in this section as Trustees. As of the date of this Statement of
Additional Information, there are a total of 85 Dean Witter Funds, comprised of
128 portfolios. As of September 30, 1997, the Dean Witter Funds had total net
assets of approximately $93.2 billion and more than five million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, MSDWD. These
are the "disinterested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with InterCapital. Four of the seven
Independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds'
8
<PAGE>
Boards, such individuals may reject other attractive assignments because the
Funds make substantial demands on their time. Indeed, by serving on the Funds'
Boards, certain Trustees who would otherwise be qualified and in demand to serve
on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1996,
the three Committees held a combined total of sixteen meetings. The Committees
hold some meetings at InterCapital's offices and some outside InterCapital.
Management Trustees or officers do not attend these meetings unless they are
invited for purposes of furnishing information or making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Most of the Dean Witter Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Trustees to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts and consults with them in
advance of meetings to help refine reports and to focus on critical issues.
Members of the Committees believe that the person who serves as Chairman of both
Committees and guides their efforts is pivotal to the effective functioning of
the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee
9
<PAGE>
and, since July 1, 1996, as Chairman of the Committee of the Independent
Trustees and the Audit Committee of the TCW/DW Funds. The current Committee
Chairman has had more than 35 years experience as a senior executive in the
investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Trustees serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Trustees, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund intends to pay each Independent Trustee an annual fee of $800 plus
a per meeting fee of $50 for meetings of the Board of Trustees or committees of
the Board of Trustees attended by the Trustee (the Fund intends to pay the
Chairman of the Audit Committee an annual fee of $750 and the Chairman of the
Committee of the Independent Trustees an additional annual fee of $1,200). If a
Board meeting and a Committee meeting, or more than one Committee Meeting, take
place on a single day, the Trustees are paid a single meeting fee by the Fund.
The Fund will also reimburse such Trustees for travel and other out-of-pocket
expenses incurred by them in connection with attending such meetings. Trustees
and officers of the Fund who are or have been employed by the Investment Manager
or an affiliated company will receive no compensation or expense reimbursement
from the Fund. Payments will commence as of the time the Fund begins paying
management fees, which, pursuant to an undertaking by the Investment Manager,
will be at such time as the Fund has $50 million of net assets or six months
from the date of commencement of the Fund's operations, whichever occurs first.
At such time as the Fund has been in operation, and has paid fees to the
Independent Trustees, for a full fiscal year, and assuming that during such
fiscal year the Fund holds the same number of Board and committee meetings as
were held by the other Dean Witter Funds during the calendar year ended December
31, 1996, it is estimated that the compensation paid to each Independent Trustee
during such fiscal year will be the amount shown in the following table:
FUND COMPENSATION (ESTIMATED)
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,900
Edwin J. Garn................................................. 1,900
John R. Haire................................................. 3,850
Wayne E. Hedien............................................... 1,900
Dr. Manuel H. Johnson......................................... 1,900
Michael E. Nugent............................................. 1,900
John L. Schroeder............................................. 1,900
</TABLE>
10
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1996 for services
to the 82 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1996.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Dean Witter Money Market Funds. Mr. Hedien's term as Director or
Trustee of each Dean Witter Fund commenced on September 1, 1997.
COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE AS
CHAIRMAN OF CHAIRMAN OF TOTAL
COMMITTEES OF COMMITTEES OF COMPENSATION
FOR SERVICE AS INDEPENDENT INDEPENDENT PAID FOR
DIRECTOR OR FOR SERVICE AS DIRECTORS/ TRUSTEES SERVICES TO
TRUSTEE AND TRUSTEE AND TRUSTEES AND AND AUDIT 82 DEAN
COMMITTEE MEMBER COMMITTEE MEMBER AUDIT COMMITTEES COMMITTEES WITTER FUNDS
OF 82 DEAN OF 14 TCW/DW OF 82 DEAN OF 14 AND 14 TCW/DW
NAME OF INDEPENDENT TRUSTEE WITTER FUNDS FUNDS WITTER FUNDS TCW/DW FUNDS FUNDS
- --------------------------- ---------------- ---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Michael Bozic.............. $138,850 -- -- -- $138,850
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $ 64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, not including the Fund, have adopted a retirement program under
which an Independent Trustee who retires after serving for at least five years
(or such lesser period as may be determined by the Board) as an Independent
Director or Trustee of any Dean Witter Fund that has adopted the retirement
program (each such Fund referred to as an "Adopting Fund" and each such Trustee
referred to as an "Eligible Trustee") is entitled to retirement payments upon
reaching the eligible retirement age (normally, after attaining age 72). Annual
payments are based upon length of service. Currently, upon retirement, each
Eligible Trustee is entitled to receive from the Adopting Fund, commencing as of
his or her retirement date and continuing for the remainder of his or her life,
an annual retirement benefit (the "Regular Benefit") equal to 25.0% of his or
her Eligible Compensation plus 0.4166666% of such Eligible Compensation for each
full month of service as an Independent Director or Trustee of any Adopting Fund
in excess of five years up to a maximum of 50.0% after ten years of service. The
foregoing percentages may be changed by the Board.(1)"Eligible Compensation" is
one-fifth of the total compensation earned by such Eligible Trustee for service
to the Adopting Fund in the five year period prior to the date of the Eligible
Trustee's retirement. Benefits under the retirement program are not secured or
funded by the Adopting Funds.
- ---------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
11
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 57 Dean Witter Funds (not including the Fund)
for the year ended December 31, 1996, and the estimated retirement benefits for
the Fund's Independent Trustees, to commence upon their retirement, from the 57
Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
RETIREMENT ANNUAL
BENEFITS BENEFITS
ESTIMATED ACCRUED AS UPON
CREDITED YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- ----------------------------------------------------- ------------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Michael Bozic........................................ 10 50.0% $ 20,147 $ 51,325
Edwin J. Garn........................................ 10 50.0 27,772 51,325
John R. Haire........................................ 10 50.0 46,952 129,550
Dr. Manuel H. Johnson................................ 10 50.0 10,926 51,325
Michael E. Nugent.................................... 10 50.0 19,217 51,325
John L. Schroeder.................................... 8 41.7 38,700 42,771
</TABLE>
- ---------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
"BEST IDEAS" LIST. As of September 30, 1997, the list of companies in the
"Best Ideas" subgroup as published in "Global Industry -- The Competitive Edge"
Update -- October 1997 were as follows: AT&T, AES Corp., Asia Pulp & Paper, BMW,
Boeing, Cisco, Citicorp, Coca-Cola, Coca-Cola Enterprises, Corning, Dresser
Industries, DuPont, Emerson Electric, Federal Express, Four Seasons, Freeport
McMoRan Copper & Gold, General Electric, General Re, Grand Met, Holderbank,
Intel, Lilly (Eli), Lockheed Martin, MAN, Manpower, Mattel, Microsoft, Novartis,
Praxair, Proctor & Gamble, Sandvik, Sankyo, SAP, Schlumberger, Sealed Air,
SGS-Thompson, Sony, Siebe, Time Warner, and Unilever plc. This list is updated
quarterly.
A description of the various investment practices and techniques in which
certain or all of the Portfolios may engage is set forth below as well as in the
Prospectus of each Portfolio. Shareholders are referred to the Prospectuses of
those Portfolios for more detailed information.
MONEY MARKET INSTRUMENTS. As stated in the Prospectus for each Portfolio,
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;
12
<PAGE>
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.
FOREIGN SECURITIES. As stated in the Prospectuses for the Portfolio,
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 the Portfolio'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 Portfolio's assets denominated in that currency and thereby impact upon the
Portfolio'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). The Portfolio
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
Portfolio 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 Portfolio trades effected in such markets. Inability to
dispose of portfolio securities due to settlement delays could result in losses
to the Portfolio due to subsequent declines in value of such securities and the
inability of the Portfolio to make intended security purchases due to settlement
problems could result in a failure of the Portfolio to make potentially
advantageous investments. To the extent the Portfolio 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.
13
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. As stated in the Prospectuses
for the Global Best Ideas Portfolio and the Global Competitive Edge Portfolio,
the Portfolios may enter into forward foreign currency exchange contracts
("forward contracts") as a hedge against fluctuations in future foreign exchange
rates. A Portfolio 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 the Portfolio 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 Portfolio's portfolio securities denominated in such
foreign currency.
The Portfolio will enter into forward contracts under various circumstances.
When the Portfolio 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
Portfolio 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 Portfolio 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
Portfolio or the counterparty) and the foreign currency in which the security is
denominated during the period between the date on which the security is
purchased or sold and the date on which payment is made or received.
At other times, when, for example, the Portfolio'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
Portfolio 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 Portfolio's securities holdings (or securities which
the fund has purchased for its portfolio) denominated in such foreign currency.
Under identical circumstances, the Portfolio may enter into a forward contract
to sell, for a fixed amount of U.S. dollars or other currency, an amount of
foreign currency other than the currency in which the securities to be hedged
are denominated approximating the value of some or all of the portfolio
securities to be hedged. This method of hedging, called "cross-hedging," will be
selected by the Investment Manager when it is determined that the foreign
currency in which the portfolio securities are denominated has insufficient
liquidity or is trading at a discount as compared with some other foreign
currency with which it tends to move in tandem.
In addition, when the 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 Portfolio 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
Portfolio may, however, close out the forward contract without purchasing the
security which was the subject of the "anticipatory" hedge.
The Portfolio will not enter into forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of the
value of the Portfolio'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,
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the management of the relevant Portfolio believes that it is important to have
the flexibility to enter into such forward contracts when it determines that the
best interests of the Portfolio will be served. The Portfolio's custodian bank
will place cash, U.S. Government securities or other appropriate liquid
portfolio securities in a segregated account of the Portfolio in an amount equal
to the value of the Portfolio'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 Portfolio's commitments with
respect to such contracts.
Where, for example, the Portfolio 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 Portfolio of a foreign currency, the Portfolio may either
sell the portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency (however, the ability of the fund to terminate a contract
is contingent upon the willingness of the currency trader with whom the contract
has been entered into to permit an offsetting transaction). It is impossible to
forecast the market value of portfolio securities at the expiration of the
contract. Accordingly, it may be necessary for the Portfolio 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 the Portfolio retains the portfolio securities and engages in an
offsetting transaction, the Portfolio will incur a gain or loss to the extent
that there has been movement in spot or forward contract prices. If the
Portfolio 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 Portfolio'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 Portfolio 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 Portfolio will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
If the Portfolio purchases a fixed-income security which is denominated in
U.S. dollars but which will pay out its principal based upon a formula tied to
the exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell an amount of the relevant foreign currency equal to
some or all of the principal value of the security.
At times when the Portfolio has written a call option on a security or the
currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a greater
extent than the value of the premium received for the option. The Portfolio 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.
Although the Portfolio 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
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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 the Portfolio
securities holdings (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Portfolio will have realized fewer gains than had the fund not entered into
the forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Portfolio
is not required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager. The Portfolio generally will not enter into a forward
contract with a term of greater than one year, although it may enter into
forward contracts for periods of up to five years. The Portfolio 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").
REPURCHASE AGREEMENTS. As discussed in each Portfolio's Prospectus, when
cash may be available for only a few days, it may be invested by the Portfolio
in repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Portfolio. These agreements, which may be
viewed as a type of secured lending by the Portfolio, typically involve the
acquisition by the Portfolio of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Portfolio 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 Portfolio 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 Portfolio follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager subject to procedures established by the Board of Trustees of the fund.
In addition, as described above, the value of the collateral underlying the
repurchase agreement will be at least equal to the repurchase price, including
any accrued interest earned on the repurchase agreement. In the event of a
default or bankruptcy by a selling financial institution, the Portfolio will
seek to liquidate such collateral. However, the exercising of the Portfolio'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 Portfolio could suffer a
loss. It is the current policy of the Portfolios 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 Portfolio, amounts to more than 15% of
its net assets. A Portfolio'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, each Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions, provided that such loans are callable
at any time by the Portfolio (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
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securities. The advantage of such loans is that the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio'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 Portfolio. Any gain or loss in the market price during the loan period would
inure to the Portfolio. The creditworthiness of firms to which the Portfolio
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 Portfolio 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 Portfolio will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.
PRIVATE PLACEMENTS. As discussed in each Portfolio's Prospectus, the
Portfolio may invest up to 15% of its net assets in securities which are subject
to restrictions on resale because they have not been registered under the
Securities Act of 1933, 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 Portfolio from
disposing of them promptly at reasonable prices. The Portfolio 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 Portfolio to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Portfolio. 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 current policies may not exceed
15% of the Portfolio's net assets.
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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RIGHTS AND WARRANTS. As stated in each Portfolio's Prospectus, the
Portfolio 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
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.
OPTIONS AND FUTURES TRANSACTIONS As stated in the Prospectus, each
Portfolio 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
Portfolio 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 Portfolio 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
Portfolio 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.
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 Portfolio 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 Portfolio 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. The Portfolio 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, the Portfolio may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Portfolio 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, the Portfolio may purchase call options on foreign
currencies in which securities it
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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. The Portfolio may also purchase call and put
options to close out written option positions.
The Portfolio 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 Portfolio 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. The Portfolio may also write
options to close out long call option positions.
The markets in foreign currency options are relatively new and the
Portfolio's ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market. Although the Portfolio
will not purchase or write such options unless and until, in the opinion of the
management of the Portfolio, 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 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 Portfolio. With OTC options,
such variables as expiration date, exercise price and premium will be agreed
upon between a Portfolio 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 Portfolio would lose the premium
paid for the option as well as any anticipated benefit of the transaction. A
Portfolio 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. The Portfolio 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 Portfolio owns, or
has the right to acquire, without additional cash consideration (or for
additional cash consideration held for the Portfolio 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
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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 the
Portfolio 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 Portfolio in cash, U.S. Government
securities or other liquid portfolio securities which the fund holds in a
segregated account maintained with its Custodian.
The Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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,
the Portfolio 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 the
Portfolio has been assigned an exercise notice, it 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 the Portfolio 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 Portfolio. The Portfolio
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 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, the Portfolio 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
Portfolio 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 the Portfolio 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, the Portfolio
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 Portfolio will be exercisable by the purchaser only on a specific
date). A put is "covered" if, at all times,
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the Portfolio maintains, in a segregated account maintained on its behalf at the
Portfolio'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 Portfolio 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 Portfolio in cash, U.S. Government securities or
other liquid portfolio securities which the Portfolio holds in a segregated
account maintained at its Custodian. In writing puts, the Portfolio 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 Portfolio 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.
The Portfolio 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. The Portfolio may purchase listed and OTC
call and put options in amounts equalling up to 5% of its total assets. The
Portfolio 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. The Portfolio 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 the Portfolio.
The Portfolio 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 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
Portfolio would incur no additional loss. A Portfolio may also purchase put
options to close out written put positions in a manner similar to call options
closing purchase transactions. In addition, the Portfolio 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 Portfolio
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
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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.
The Portfolio'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, the Portfolio 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 Portfolio 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.
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 Portfolio 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 Portfolio 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 Portfolio's ability to effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which a Portfolio engages
in transactions in options, futures or options thereon, the Portfolio 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 Portfolio, the Portfolio could experience a loss of
all or part of the value of the option. Transactions are entered into by the
Portfolio only with brokers or financial institutions deemed creditworthy by the
Investment Manager.
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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 the
Portfolio for the purpose of hedging the Portfolio'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 Portfolio'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 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 Portfolio against the risk of market wide price movements. If
the Investment Manager anticipates a market decline, the Portfolio could
purchase a stock index put option. If the expected market decline materialized,
the resulting decrease in the value of the Portfolio'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 Portfolio may purchase a stock index call
option to enable the Portfolio 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.
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The Portfolio 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 Portfolio in a segregated account maintained for it by the fund's
Custodian. All call options on stock indexes written by the Portfolio 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 Portfolio 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 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. Each Portfolio 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 Portfolio 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 Portfolio incurs an obligation to deliver the specified amount of
the underlying obligation at a specified time in return for an agreed upon
price.
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The Portfolio 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 Portfolio may purchase an interest rate
futures contract to protect against a potential increase in the price of U.S.
Government securities the Portfolio intends to purchase. Subsequently,
appropriate fixed-income securities may be purchased by the Portfolio in an
orderly fashion; as securities are purchased, corresponding futures positions
would be terminated by offsetting sales of contracts.
The Portfolio 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.
The Portfolio will purchase or sell stock index futures contracts for the
purpose of hedging its equity portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that the
prices of stock held by the Portfolio 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 Portfolio 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.
INTEREST RATE FUTURES CONTRACTS. When the Portfolio enters into an interest
rate futures contract, it is initially required to deposit with the Portfolio'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 Portfolio upon the proper termination of
the futures contract. The margin deposits made are marked to market daily and
the Portfolio may be required to make subsequent deposits called "variation
margin", with the Portfolio'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. The Portfolio may invest in index futures
contracts. An index futures contract sale creates an obligation by the
Portfolio, as seller, to deliver cash at a specified future time. An
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index futures contract purchase would create an obligation by the Portfolio, as
purchaser, to take delivery of cash at a specified future time. Futures
contracts on indexes do not require the physical delivery of securities, but
provide for a final cash settlement on the expiration date which reflects
accumulated profits and losses credited or debited to each party's account.
The Portfolio 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, the Portfolio 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 Portfolio and the Portfolio 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. The Portfolio 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.
The Portfolio 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 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 Portfolio's holdings.
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. The Portfolio 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 Portfolio'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)
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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
Portfolio'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 Portfolio 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 Portfolio would be
permitted to write options on futures contracts for purposes other than hedging
the Portfolio's investments without CFTC registration, the Portfolio 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. The
Portfolio 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
Portfolio may decline. If this occurred, the Portfolio would lose money on the
futures contract and also experience a decline in value of its portfolio
securities. However, while this could occur for a very brief period or to a very
small degree, over time the value of a diversified portfolio will tend to move
in the same direction as the futures contracts.
If the Portfolio 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 Portfolio may determine not to invest in the securities as
planned and will realize a loss on the futures contract that is not offset by a
reduction in the price of the securities.
In addition, if the Portfolio 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 Portfolio.
If the Portfolio 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 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 the Portfolio 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 the Portfolio 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
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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 Portfolio 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 Portfolio. 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.
NEW INSTRUMENTS. New financial products and various combinations thereof
continue to be developed. The Fund may invest in any such products as may be
developed, to the extent consistent with its investment objective and applicable
regulatory requirements.
PORTFOLIO TURNOVER. It is anticipated that the portfolio turnover rate of
each Portfolio of the Fund will not exceed 100%. A 100% turnover rate would
occur, for example, if 100% 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.
INVESTMENT RESTRICTIONS
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In addition to the investment restrictions enumerated in each Portfolio's
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 (including limited
partnership interests), although each Portfolio may 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 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).
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3. Issue senior securities as defined in the Act, except insofar as
permitted in Investment Restriction 2 and except insofar as each Portfolio
may be deemed to have issued a senior security by reason of entering into
repurchase agreements.
4. Make short sales of securities.
5. Engage in the underwriting of securities, except insofar as a
Portfolio 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 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
Portfolio and collateral arrangements with respect to initial or variation
margin for futures by the Portfolio 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 a Portfolio of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
10. Make loans of money or securities, except by investment in
repurchase agreements. (For the purpose of this restriction, lending of
Portfolio securities by the Portfolio are not deemed to be loans).
Notwithstanding any other investment policy or restriction, each Portfolio
of the Fund may seek to achieve its investment objectives by investing all or
substantially all of its assets in another investment company having
substantially the same investment objectives and policies as the respective
Portfolio.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision of the Board of Trustees, the Investment
Manager is responsible for decisions to buy and sell securities for the
Portfolios, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. The Investment Manager
currently intends to effect substantially all such transactions through
broker-dealers affiliated with the Investment Manager, including Morgan Stanley
& Co., Inc. ("Morgan Stanley"), and Dean Witter Reynolds Inc. ("DWR"), subject
to the policies and procedures applicable for affiliated brokers or dealers
described below. Purchases and sales of securities on a stock exchange are
effected through brokers who charge a commission for their services. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. The
Portfolios also expect that securities will be purchased at times in
underwritten offerings where the price includes a fixed amount of compensation,
generally referred to as the underwriter's concession or discount. Futures
transactions are usually effected through a broker and a commission will be
charged. On occasion, the Portfolio may also purchase certain money market
instruments directly from an issuer, in which case no commissions or discounts
are paid.
The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the
Portfolios and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Portfolios and other client
accounts, various factors may be considered, including the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held and
29
<PAGE>
the opinions of the persons responsible for managing the Portfolio and other
client accounts. In the case of certain initial and secondary public offerings,
the Investment Manager may utilize a pro rata allocation process based on the
size of the Dean Witter Funds involved and the number of shares available from
the public offering.
The policy of the Portfolios regarding purchases and sales of securities for
its portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Portfolios' policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible commissions
are paid in all circumstances. The Portfolios believe that a requirement always
to seek the lowest possible commission cost could impede effective portfolio
management and preclude the Portfolios and the Investment Manager from obtaining
a high quality of brokerage and research services. In seeking to determine the
reasonableness of brokerage commissions paid in any transaction, the Investment
Manager relies upon its experience and knowledge regarding commissions generally
charged by various brokers and on its judgment in evaluating the brokerage and
research services received from the broker effecting the transaction. Such
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.
In seeking to implement the Portfolios' policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment Manager
believes provide the most favorable prices and are capable of providing
efficient executions. If the Investment Manager believes such prices and
executions are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the 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 purchase 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 brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the
Portfolios directly. While the receipt of such information and services is
useful in varying degrees and would generally reduce the amount of research or
services otherwise performed by the Investment Manager and thereby reduce its
expenses, it is of indeterminable value and the management fee paid to the
Investment Manager is not reduced by any amount that may be attributable to the
value of such services.
Pursuant to an order of the Securities and Exchange Commission, the
Portfolios may effect principal transactions in certain money market instruments
with DWR. The Portfolios will limit their transactions with DWR to U.S.
Government and Government Agency Securities, Bank Money Instruments (i.e.,
Certificates of Deposit and Bankers' Acceptances) and Commercial Paper. Such
transactions will be effected with DWR only when the price available from DWR is
better than that available from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through Morgan Stanley, DWR and other affiliated brokers and dealers.
In order for an affiliated broker or dealer to effect any portfolio transactions
for the Portfolios, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time. This standard would allow the
affiliated broker or dealer to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Board of Trustees of the Fund,
including a majority of the Trustees who are not "interested" persons of the
Fund, as defined in the Act, have adopted procedures which are reasonably
designed to provide that
30
<PAGE>
any commissions, fees or other remuneration paid to an affiliated broker or
dealer are consistent with the foregoing standard. The Portfolios do not reduce
the management fee they pay to the Investment Manager by any amount of the
brokerage commissions they may pay to an affiliated broker or dealer.
UNDERWRITING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up
to 10,000,000 shares from each of the "Best Ideas" Portfolio and the
"Competitive Edge" Portfolio of the Fund, which number may be increased or
decreased in accordance with the Underwriting Agreement. The Underwriting
Agreement provides that the obligation of the Underwriter is subject to certain
conditions precedent (such as the filing of certain forms and documents required
by various federal and state agencies and the rendering of certain opinions of
counsel) and that the Underwriter will be obligated to purchase the shares of
the "Best Ideas" Portfolio on , 1998, or such other date as may be
agreed upon between the Underwriter and the Fund and to purchase shares of the
"Competitive Edge" Portfolio at a later date to be agreed upon between the
Underwriter and the Fund (each a "Closing Date"). Shares will not be issued and
dividends will not be declared by the Fund until after the Closing Date.
The Underwriter will purchase Class B, Class C and Class D shares from the
Portfolio at $10.00 per share with all proceeds going to the Portfolio 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 $10.00 per share going to the Portfolio.
The Underwriter may, however, receive contingent deferred sales charges for
future redemptions of Class A, Class B and Class C shares (see "Purchase of Fund
Shares--Continuous Offering" in the Prospectus).
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 Portfolio shares which may be purchased pursuant to
this offering is 100 shares. Certificates for shares purchased will not be
issued unless requested by the shareholder in writing.
The Underwriter has agreed to pay certain expenses of the initial offering
and the subsequent Continuous Offering of the Portfolio's shares. The Portfolio
has agreed to pay certain compensation to the Underwriter pursuant to a Plan of
Distribution pursuant to Rule 12b-1 under the Act, to compensate the Underwriter
for services it renders and the expenses it bears under the Underwriting
Agreement (see "The Distributor"). The Portfolio will bear the cost of initial
typesetting, printing and distribution of Prospectuses and Statements of
Additional Information and supplements thereto to shareholders. The Portfolio
has agreed to indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
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 November 6, 1997, the current 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.
31
<PAGE>
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 of each Portfolio, other than
Class D, pays the Distributor compensation accrued daily and payable monthly at
the following annual rates: 0.25%, 1.0% and 1.0% of the average daily net assets
of Class A, Class B and Class C, respectively. The Distributor also receives the
proceeds of front-end sales charges and of contingent deferred sales charges
imposed on certain redemptions of shares, which are separate and apart from
payments made pursuant to the Plan (see "Purchase of Fund Shares" in the
Prospectus).
The Distributor has informed the Fund that 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 November 6, 1997.
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 $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 FSB ("DWT") 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.
32
<PAGE>
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 DWT 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.
Each Portfolio is authorized to reimburse expenses incurred or to be
incurred in promoting the distribution of the Portfolio's Class A and Class C
shares and in servicing shareholder accounts. Reimbursement will be made through
payments at the end of each month. The amount of each monthly payment may in no
event exceed an amount equal to a payment at the annual rate of 0.25%, in the
case of Class A, and 1.0%, in the case of Class C, of the average net assets of
the respective Class 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
33
<PAGE>
(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 a Portfolio may be
more or less than the total of (i) the payments made by the Portfolio 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
Portfolio. Although there is no legal obligation for the Portfolio 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 has an initial term ending April 30, 1998 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
- --------------------------------------------------------------------------------
The procedures for valuing securities held in each Portfolio are set forth
in the Portfolio's Prospectus. As stated in each Portfolio's Prospectus,
short-term securities with remaining maturities of sixty days or less at the
time of purchase are valued at amortized cost, unless the Trustees determine
such does not reflect the securities' market value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Other short-term debt securities will be valued on a mark-to-market basis until
such time as they reach a remaining maturity of sixty days, whereupon they will
be valued at amortized cost using their value on the 61st day unless the
Trustees determine such does not reflect the securities' market value, in which
case these securities will be valued at their fair value as determined by the
Trustees. All other securities and other assets are valued at their fair value
as determined in good faith under procedures established by and under the
supervision of the Trustees.
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<PAGE>
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; Reverend Dr.
Martin Luther King, Jr. Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
PURCHASE OF PORTFOLIO SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus of each Portfolio, each Portfolio of 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 Portfolio 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 Portfolio 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 Portfolio, 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 FSB (the "Transfer Agent")
fails to confirm the investor's represented holdings.
LETTER OF INTENT. As discussed in the Prospectus, reduced sales charges are
available to investors who enter into a written Letter of Intent providing for
the purchase, within a thirteen-month period, of Class A shares of the Portfolio
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
Portfolio 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.
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
35
<PAGE>
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 Portfolio 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 Portfolio 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 Portfolio 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
Portfolio 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 Portfolio 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
Portfolio 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 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 Portfolio
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
36
<PAGE>
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 Portfolio:
<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 Portfolio held by 401(k) plans or other employer-sponsored plans
qualified under Section 401(a) of the Internal Revenue Code for which DWT 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 a Portfolio, a Shareholder Investment Account
is opened for the investor on the books of the 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. 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 of each Portfolio, all income dividends and capital gains
distributions are automatically paid in full and fractional shares of
37
<PAGE>
the applicable Class of the Portfolio, unless the shareholder requests that they
be paid in cash. Each purchase of shares of the Portfolio 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 Portfolio (or in
cash if the shareholder so requests) as of the close of business on the record
date. At any time an investor may request the Transfer Agent, in writing, to
have subsequent dividends and/or capital gains distributions paid to him or her
in cash rather than shares. To assure sufficient time to process the change,
such request should be received by the Transfer Agent at least five business
days prior to the record date of the dividend or distribution. In the case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions. It is the Portfolio's policy and practice that, if checks
for dividends or distributions paid in cash remain uncashed, no interest will
accrue on amounts represented by such uncashed checks.
TARGETED 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 or Portfolio 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 Portfolio 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 (subject to any applicable sales charges). Shares
of the Dean Witter Money Market Funds redeemed in connection with EasyInvest are
redeemed on the business day preceding the transfer of funds. For further
information or to subscribe to EasyInvest, shareholders should contact their 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 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 Portfolio
38
<PAGE>
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
Portfolio 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 Portfolio.
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 Research Series Trust,
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 Portfolio shares, and, in
the case of shares of the other Classes, the entire amount will be applied to
the purchase of Portfolio 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, each Portfolio 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 referred to as the "Exchange Funds"). Class A shares may also be
exchanged for shares of Dean Witter
39
<PAGE>
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. ("Global Short-Term") which are Dean Witter Funds offered with a CDSC.
Exchanges may be made after the shares of the Fund acquired by purchase (not by
exchange or dividend reinvestment) have been held for thirty days. There is no
waiting period for exchanges of shares acquired by exchange or dividend
reinvestment. An exchange will be treated for federal income tax purposes the
same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the caption "Purchase of
Portfolio 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 Global Short-Term 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 Global Short-Term. However, in the case of shares exchanged into an
Exchange Fund on or after April 23, 1990, upon a redemption of shares which
results in a CDSC being imposed, a credit (not to exceed the amount of the CDSC)
will be given in an amount equal to the Exchange Fund 12b-1 distribution fees
incurred on or after that date which are attributable to those shares.
Shareholders acquiring shares of an Exchange Fund pursuant to this exchange
privilege may exchange those shares back into a Dean Witter Multi-Class Fund or
Global Short-Term from the Exchange Fund, with no CDSC being imposed on such
exchange. The holding period previously frozen when shares were first exchanged
for shares of the Exchange Fund resumes on the last day of the month in which
shares of a Dean Witter Multi-Class Fund or Global Short-Term are reacquired. A
CDSC is imposed only upon an ultimate redemption, based upon the time
(calculated as described above) the shareholder was invested in a Dean Witter
Multi-Class Fund or in Global Short-Term. In the case of exchanges of Class A
shares which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in a FSC Fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or in
Global Short-Term 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, 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
40
<PAGE>
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 Portfolio 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
Portfolio 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 Portfolio 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 Portfolios 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 Portfolios and/or any of the Dean Witter funds for
which shares of the Portfolios have been exchanged, upon such notice as may be
required by applicable regulatory agencies (presently sixty days' prior written
notice for termination or material revision), provided that six months' prior
written notice of termination will be given to the shareholders who hold shares
of Exchange Funds pursuant to the Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock
41
<PAGE>
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 Portfolio of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Portfolio 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. The term "good order" means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary, the
Transfer Agent may require that written evidence of authority acceptable to the
Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a 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. 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 Portfolio of
42
<PAGE>
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 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). It is the Portfolio's policy and
practice that, if checks for redemption proceeds remain uncashed, no interest
will accrue on amounts represented by such uncashed checks. Shareholders
maintaining margin accounts with DWR or another selected broker-dealer are
referred to their 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 Portfolio 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 Portfolio 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.
43
<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. The Treasury has announced that it will issue
regulations or other guidance to permit shareholders to take into account their
proportionate share of the Fund's capital gains distributions that will be
subject to a reduced rate under the Taxpayer Relief Act of 1997. The Taxpayer
Relief Act reduces the maximum tax on long-term capital gains from 28% to 20%;
however, it also lengthens the required holding period to obtain the lower rate
from more than 12 months to more than 18 months. The lower rates do not apply to
collectibles and certain other assets. Additionally, the maximum capital gain
rate for assets that are held more than 5 years and that are acquired after
December 31, 2000 is 18%.
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 Portfolio's corporate shareholders only to the extent
the aggregate dividends received by the Portfolio would be eligible for the
deduction if the Portfolio were the shareholder claiming the dividends received
deduction. The amount of dividends paid by the Portfolio 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 Portfolio has held for a minimum period, usually 46 days within a 90 day
period beginning 45 days before the ex dividend date of each qualifying
dividend. Shareholders must meet a similar holding period requirement with
respect to their shares to claim the dividends received deduction with respect
to any distribution of qualifying dividends. Any long-term capital gain
distributions will also not be eligible for the dividends received deduction.
The ability to take the dividends received deduction will also be limited in the
case of a Portfolio shareholder which incurs or continues indebtedness which is
directly attributable to its investment in the Portfolio.
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
44
<PAGE>
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 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 each Portfolio 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.
45
<PAGE>
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.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust FSB, Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311 is the Transfer Agent of the Portfolio's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Portfolio shares
and Agent for shareholders under various investment plans described herein. Dean
Witter Trust FSB 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
FSB'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
FSB receives a per shareholder account fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of each Portfolio
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 Portfolio of 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 statement of the Portfolios included in this Statement of
Additional Information and incorporated by reference in the Prospectus has been
so included and incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
46
<PAGE>
DEAN WITTER "COMPETITIVE EDGE" FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 3, 1997
- --------------------------------------------------------------------------------
"BEST IDEAS" PORTFOLIO
<TABLE>
<S> <C>
ASSETS:
Cash.................................................................................................... $ 50,000
Deferred organizational expenses (Note 1)............................................................... 141,225
---------
Total Assets........................................................................................ 191,225
---------
LIABILITIES:
Organizational expenses payable (Note 1)................................................................ 141,225
Commitments (Notes 1 and 2).............................................................................
---------
Net Assets.......................................................................................... $ 50,000
---------
---------
CLASS A SHARES:
Net Assets................................................................................................ $ 12,500
Shares Outstanding (unlimited authorized, $.01 par value)................................................. 1,250
NET ASSET VALUE PER SHARE............................................................................. $ 10.00
---------
---------
MAXIMUM OFFERING PRICE
(net asset value plus 5.5% of net asset value)....................................................... $ 10.55
---------
---------
CLASS B SHARES:
Net Assets................................................................................................ $ 12,500
Shares Outstanding (unlimited authorized, $.01 par value)................................................. 1,250
NET ASSET VALUE PER SHARE............................................................................. $ 10.00
---------
---------
CLASS C SHARES:
Net Assets................................................................................................ $ 12,500
Shares Outstanding (unlimited authorized, $.01 par value)................................................. 1,250
NET ASSET VALUE PER SHARE............................................................................. $ 10.00
---------
---------
CLASS D SHARES:
Net Assets................................................................................................ $ 12,500
Shares Outstanding (unlimited authorized, $.01 par value)................................................. 1,250
NET ASSET VALUE PER SHARE............................................................................. $ 10.00
---------
---------
</TABLE>
See Notes to Financial Statements
47
<PAGE>
DEAN WITTER "COMPETITIVE EDGE" FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 3, 1997
- --------------------------------------------------------------------------------
"COMPETITIVE EDGE" PORTFOLIO
<TABLE>
<S> <C>
ASSETS:
Cash.................................................................................................... $ 50,000
Deferred organizational expenses (Note 1)............................................................... 141,225
---------
Total Assets........................................................................................ 191,225
---------
LIABILITIES:
Organizational expenses payable (Note 1)................................................................ 141,225
Commitments (Notes 1 and 2).............................................................................
---------
Net Assets.......................................................................................... $ 50,000
---------
---------
CLASS A SHARES:
Net Assets................................................................................................ $ 12,500
Shares Outstanding (unlimited authorized, $.01 par value)................................................. 1,250
NET ASSET VALUE PER SHARE............................................................................. $ 10.00
---------
---------
MAXIMUM OFFERING PRICE
(net asset value plus 5.5% of net asset value)....................................................... $ 10.55
---------
---------
CLASS B SHARES:
Net Assets................................................................................................ $ 12,500
Shares Outstanding (unlimited authorized, $.01 par value)................................................. 1,250
NET ASSET VALUE PER SHARE............................................................................. $ 10.00
---------
---------
CLASS C SHARES:
Net Assets................................................................................................ $ 12,500
Shares Outstanding (unlimited authorized, $.01 par value)................................................. 1,250
NET ASSET VALUE PER SHARE............................................................................. $ 10.00
---------
---------
CLASS D SHARES:
Net Assets................................................................................................ $ 12,500
Shares Outstanding (unlimited authorized, $.01 par value)................................................. 1,250
NET ASSET VALUE PER SHARE............................................................................. $ 10.00
---------
---------
</TABLE>
- ------------
NOTE 1--Dean Witter "Competitive Edge" Fund (the "Fund") was organized as a
Massachusetts business trust on October 16, 1997. To date the Fund has had no
transactions other than those relating to organizational matters and the sale of
1,250 shares of beneficial interest for $12,500 of each class of the "Best
Ideas" Portfolio and the "Competitive Edge" Portfolio (the "Portfolios") 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. The investment
objective of the Portfolios is long-term capital appreciation. 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, approximately $141,225 by each Portfolio
in organizational expenses. Actual expenses could differ from these estimates.
These expenses will be deferred and amortized by each Portfolio on the
straight-line method over a period not to exceed five years from the date of
commencement of each Portfolio'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 Portfolio shares redeemed to the total number
of original Portfolio 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 Portfolio 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
48
<PAGE>
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.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund incurred by the Investment Manager, the Fund will pay
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.65% for the "Best Ideas" Portfolio and 0.75% for the
"Competitive Edge" Portfolio to the respective Portfolio's daily net assets.
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") with respect to the distribution of Class A, Class B and Class C
shares of each Portfolio of the Fund. The Plan provides that the Distributor
will bear the expense of all promotional and distribution related activities on
behalf of those shares of each Portfolio of the Fund, including the payment of
commissions for sales of such shares and incentive compensation to and expenses
of Dean Witter Reynolds Inc. ("DWR"), 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 Portfolios' shares to other than
current shareholders; and preparation, printing and distribution of sales
literature and advertising materials. In addition, with respect to Class B, the
Distributor may utilize fees paid pursuant to the Plan to compensate DWR and
others for their opportunity costs in advancing such amounts, which compensation
would be in the form of a carrying charge on any unreimbursed distribution
expenses incurred.
To compensate the Distributor for the services provided and for the expenses
borne by the Distributor and others under the Plan, Class A, Class B and Class C
of each Portfolio will pay the Distributor compensation accrued daily and
payable monthly at the annual rate of 0.25% of the average daily net assets of
Class A and 1.0% of the average daily net assets of each of Class B and Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Portfolio
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. With respect to Class B, 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. In the case of Class A shares and Class C shares,
expenses incurred pursuant to the Plan in any calendar year in excess of 0.25%
or 1.00% of the average daily net assets of Class A or Class C, respectively,
will not be reimbursed by the Fund through payments in any subsequent year,
except that expenses representing a gross sales credit to account executives may
be reimbursed in the subsequent calendar year.
Dean Witter Trust FSB, an affiliate of the Investment Manager and the
Distributor, is the transfer agent of the Portfolios' shares, dividend
disbursing agent for payment of dividends and distributions on Portfolio 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 its compensation provided for in its Management Agreement
until such time as each Portfolio has $50 million of net assets or until six
months from the date of commencement of the Portfolio's operations, whichever
occurs first.
49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholder and Trustees of
Dean Witter "Competitive Edge" Fund
In our opinion, the accompanying statements of assets and liabilities present
fairly, in all material respects, the financial position of the "Best Ideas"
Portfolio and the "Competitive Edge" Portfolio (constituting Dean Witter
"Competitive Edge" Fund, hereafter referred to as the "Fund") at December 3,
1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
December 4, 1997
50
<PAGE>
DEAN WITTER "COMPETITVE EDGE" FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
Statement of Additional Information:
Page 47 - Statement of Assets and Liabilities at December 1,1997.
All other financial statements and Schedules are not
required or not applicable or the required information is
included in the financial statement and notes thereto.
(b) EXHIBITS:
1.(a) -- Declaration of Trust of the Registrant*
1.(b) -- Amended and Restated Declaration of Trust dated
November 5, 1997
1.(c) -- Amended and Restated Declaration of Trust dated
October 28, 1997
2. -- Amended and Restated 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.
6.(b) -- Forms of Selected Dealer Agreements
6 (c) -- Form of Underwriting Agreement between Registrant and
Dean Witter Distributors Inc.
7. -- None
8.(a) -- Form of Custodian Agreement Between the Registrant
and The Bank of New York
8.(b) -- Form of Transfer Agency and Services Agreement between
Registrant and Dean Witter Trust FSB
9 -- Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company
Inc.
10.(a) -- Opinion of Barry Fink, Esq.
10.(b) -- Opinion of Lane Altman & Owens LLP
11. -- Consent of Independent Accountants
<PAGE>
12. -- None
13. -- Investment Letter of Dean Witter InterCapital Inc.
14. -- None
15. -- Form of Plan of Distribution between Registrant
and Dean Witter Distributors I Inc.
16. -- Schedule for Computation of Performance Quotations
- to be filed with the first post-effective
amendment
18. -- Form of Multiple-Class plan Pursuant to Rule 18f-3
27. -- Financial Data Schedules
Other -- Powers of Attorney
- -----------------------------
* Previously filed as an exhibit to the Registrant's Initial Registration
Statement (file No. 333- 38297) filed on October 20, 1997
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 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 December 2, 1997
-------------- ------------------------
Shares of Beneficial Interest Class A 1
Class B 1
Class C 1
Class D 1
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
2
<PAGE>
established in such litigation. The Registrant may also advance money for these
expenses provided that they give their undertakings to repay the Registrant
unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
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
3
<PAGE>
(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.
(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.
4
<PAGE>
(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 International SmallCap Fund
(45) Dean Witter Mid-Cap Growth Fund
(46) Dean Witter Select Dimensions Investment Series
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Capital Appreciation Fund
(51) Dean Witter Intermediate Term U.S. Treasury Trust
(52) Dean Witter Information Fund
(53) Dean Witter Japan Fund
(54) Dean Witter Income Builder Fund
(55) Dean Witter Special Value Fund
(56) Dean Witter Financial Services Trust
(57) Dean Witter Market Leader Trust
(58) Dean Witter S&P 500 Index Fund
(59) Dean Witter Fund of Funds
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
5
<PAGE>
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ---------------------- -------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Executive Witter Reynolds Inc. ("DWR"); Chairman, Chief
Officer and Director Executive Officer and Director of Dean Witter
Distributors Inc. ("Distributors") and Dean Witter
Services Company Inc. ("DWSC"); Chairman and
Director of Dean Witter Trust FSB ("DWT");
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
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 DWT.
Thomas C. Schneider Executive Vice President and Chief Strategic
Executive Vice and Administrative Officer of MSDWD; Executive
President, Chief Vice President and Chief Financial Officer of
Financial Officer and DWSC and Distributors; Director of DWR,
Director DWSC and Distributors.
Christine A. Edwards Executive Vice President, Chief Legal Officer
Director 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 DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWT;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
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
- ---------------------- -------------------------------------------------
Mitchell M. Merin President and Chief Strategic Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Strategic Officer Executive Vice President and Director of DWT;
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 Director
Executive Vice of DWT.
President
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of DWT.
and Chief Investment
Officer
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel 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
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 DWT and Director of DWT; 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.
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
- ---------------------- -------------------------------------------------
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
Margaret Iannuzzi
Senior Vice President
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
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.
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
- ---------------------- -------------------------------------------------
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 DWT.
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.
Kirk Balzer
Vice President VicePresident 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
- ---------------------- -------------------------------------------------
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
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
- ---------------------- -------------------------------------------------
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
Kevin Jung
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
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
- ---------------------- -------------------------------------------------
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
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 Wide Income
Vice President Trust
Naomi Stein
Vice President
Kathleen H. Stromberg
Vice President Vice President of various Dean Witter Funds.
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
- ---------------------- -------------------------------------------------
Marybeth Swisher
Vice President
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
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
13
<PAGE>
(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
(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 International SmallCap Fund
(45) Dean Witter Balanced Growth Fund
(46) Dean Witter Balanced Income Fund
(47) Dean Witter Hawaii Municipal Trust
(48) Dean Witter Variable Investment Series
(49) Dean Witter Capital Appreciation Fund
(50) Dean Witter Intermediate Term U.S. Treasury Trust
(51) Dean Witter Information Fund
(52) Dean Witter Japan Fund
(53) Dean Witter Income Builder Fund
(54) Dean Witter Special Value Fund
(55) Dean Witter Financial Services Trust
(56) Dean Witter Market Leader Trust
(57) Dean Witter S&P 500 Index Fund
(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.
14
<PAGE>
Name Positions and Office with Distributors
- ---- --------------------------------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
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 the 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 Amendment to
its 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 December, 1997.
Dean Witter "Competitive Edge" Fund
By:\s\ Barry Fink
--------------------------------
Barry Fink
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 has been signed below by the following persons the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 12/3/97
---------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 12/3/97
---------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 12/3/97
---------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien
By /s/ David M. Butowsky 12/3/97
---------------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
1(a) -- Declaration of Trust of the Registrant*
1(b) -- Amendment to the Declaration of Trust of the Registrant
dated November 5, 1997
1(c) -- Amendment to the Declaration of Trust of the Registrant
dated October 28, 1997
2. -- Amended and Restated 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.
6.(b) -- Forms of Selected Dealer Agreements
6 (c) -- Form of Underwriting Agreement between Registrant and Dean
Witter Distributors Inc.
7. -- None
8.(a) -- Form of Custodian Agreement
8.(b) -- Form of Transfer Agency and Services Agreement between
Registrant and Dean Witter Trust FSB
9 -- Form of Services Agreement between Dean Witter InterCapital
Inc. and Dean Witter Services Company Inc.
10.(a) -- Opinion of Barry Fink, Esq.
10.(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
18 -- Form of Muliple-Class plan Pursuant to Rule 18f-3
27. -- Financial Data Schedules
Other -- Powers of Attorney
- ------------------------------
* Previously filed as an exhibit to the Registrant's Initial Registration
Statement (file No. 333-38297) filed on October 20,1 997
<PAGE>
AMENDMENT
Dated: November 5, 1997
To be Effective: November 5, 1997
TO
DEAN WITTER "COMPETITIVE EDGE" TRUST
DECLARATION OF TRUST
OCTOBER 16, 1997
97NYC13448
<PAGE>
Amendment dated November 5, 1997 to the Declaration of Trust
(the "Declaration") of Dean Witter "Competitive Edge" Trust (the
"Trust") dated October 16, 1997
WHEREAS, the Trust was established by the Declaration on the date
hereinabove set forth under the laws of the commonwealth of Massachusetts; and
1. Section 1.1 of Article I of the Declaration is hereby amended so that the
Section shall read in its entirety as follows:
"Section 1.1 NAME. The name of the Trust created hereby is the "Dean
Witter 'Competitive Edge' Fund," and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and
sue or be sued under that name, which name (and the word "Trust" whenever
herein used) shall refer to the Trustees as Trustees, and not as
individuals, or personally, and shall not refer to the officers, agents,
employees or Shareholders of the Trust. Should the Trustees determine that
the use of such name is not advisable, they may use such other name for
the Trust as they deem proper and the Trust may hold its property and
conduct its activities under such other name."
2. Subsection (p) of Section 1.2 of Article I of the Declaration is hereby
amended so that the Subsection shall read in its entirety as follows:
"Section 1.2 DEFINITIONS...
(p) "TRUST" means the Dean Witter "Competitive Edge" Fund."
3. The Trustees of the Trust hereby reaffirm the Declaration, as amended, in
all respects.
4. This Amendment may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this amendment to the
Declaration of Trust this 5th day of November, 1997.
<TABLE>
<S> <C>
/s/ CHARLES A. FIUMEFREDDO /s/ ROBERT S. GIAMBRONE
- -------------------------------------------- --------------------------------------------
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
/s/ BARRY FINK
- --------------------------------------------
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 5th day of November, 1997, CHARLES A. FIUMEFREDDO, ROBERT S.
GIAMBRONE 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.
/s/ DOREEN HUGHES
--------------------------------------
Notary Public
My commission expires: December 6, 1997
<PAGE>
AMENDMENT
Dated: October 28, 1997
To be Effective: October 29, 1997
TO
DEAN WITTER "COMPETITIVE EDGE" TRUST
DECLARATION OF TRUST
OCTOBER 16, 1997
97NYC14985
<PAGE>
Amendment dated October 28, 1997 to the Declaration of Trust
(the "Declaration") of Dean Witter "Competitive Edge" Trust (the
"Trust") dated October 16, 1997
WHEREAS, the Trust was established by the Declaration on the date
hereinabove set forth under the laws of the commonwealth of Massachusetts; and
WHEREAS, the Trustees of the Trust have deemed it advisable to change the
definition of the Trust to Dean Witter "Competitive Edge" Trust to be effective
October 29, 1997;
1. Subsection (p) of Section 1.2 of Article I of the Declaration is hereby
amended so that the Subsection shall read in its entirety as follows:
"Section 1.2 DEFINITIONS...
(p) "TRUST" means the Dean Witter "Competitive Edge" Trust.
2. The Trustees of the Trust hereby reaffirm the Declaration, as amended, in
all respects.
3. This Amendment may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this amendment to the
Declaration of Trust this 28th day of October, 1997.
<TABLE>
<S> <C>
/s/ CHARLES A. FIUMEFREDDO /s/ ROBERT S. GIAMBRONE
- -------------------------------------------- --------------------------------------------
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
/s/ BARRY FINK
- --------------------------------------------
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 28th day of October, 1997, CHARLES A. FIUMEFREDDO, ROBERT S.
GIAMBRONE 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.
/s/ DOREEN HUGHES
--------------------------------------
Notary Public
My commission expires: December 6, 1997
<PAGE>
BY-LAWS
OF
DEAN WITTER "COMPETITIVE EDGE" FUND
AMENDED AND RESTATED AS OF NOVEMBER 5, 1997
ARTICLE I
DEFINITIONS
THE TERMS "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT
ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES",
"TRANSFER AGENT", "TRUST", "TRUST PROPERTY", and "TRUSTEES" have the
respective meanings given them in the Declaration of Trust of Dean Witter
"Competitive Edge" Fund dated October 16, 1997, and as amended from time to
time.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote as otherwise required by Section
16(c) of the 1940 Act and to the extent required by the corporate or business
statute of any state in which the Shares of the Trust are sold, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
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
1
<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 the power to adjourn the meeting from
time to time. The Shareholders present in person or represented by proxy at
any meeting and entitled to vote thereat also shall have the power to adjourn
the meeting from time to time if the vote required to approve or reject any
proposal described in the original notice of such meeting is not obtained
(with proxies being voted for or against adjournment consistent with the
votes for and against the proposal for which the required vote has not been
obtained). The affirmative vote of the holders of a majority of the Shares
then present in person or represented by proxy shall be required to adjourn
any meeting. Any adjourned meeting may be reconvened without further notice
or change in record date. At any reconvened meeting at which a quorum shall
be present, any business may be transacted that might have been transacted at
the meeting as originally called.
SECTION 3.5. VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact 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.
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SECTION 3.10. PRESENCE AT MEETINGS. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the 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.
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SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940
("disabling conduct"). A person shall be deemed not liable by reason of
disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
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(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit
or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present
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at any meeting, whether or not they constitute a quorum, may appoint a
Trustee to act in place of such absent member. Each such committee shall keep
a record of its proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the 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.
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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.
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.
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ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the 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:
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(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. LOCATION OF BOOKS AND RECORDS. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii)
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. The
record date, in any case, shall not be more than one hundred eighty (180)
days, and in the case of a meeting of Shareholders not less than ten (10)
days, prior to the date on which such meeting is to be held or the date on
which such other particular action requiring determination of Shareholders is
to be taken, as the case may be. In the case of a meeting of Shareholders,
the meeting date set forth in the notice to Shareholders accompanying the
proxy statement shall be the date used for purposes of calculating the 180
day or 10 day period, and any adjourned meeting may be reconvened without a
change in record date. In lieu of fixing a record date, the Trustees may
provide that the transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the transfer books are closed
for the purpose of determining Shareholders entitled to notice of a vote at a
meeting of Shareholders, such books shall be closed for at least ten (10)
days immediately preceding the meeting.
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SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter "Competitive Edge" Fund,
dated October 16, 1997, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name Dean Witter "Competitive Edge" Fund
refers to the Trustees under the Declaration collectively as Trustees, but
not as individuals or personally; and no Trustee, Shareholder, officer,
employee or agent of Dean Witter "Competitive Edge" Fund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Dean Witter "Competitive Edge" Fund, but the Trust Estate
only shall be liable.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 6th day of November, 1997 by and between Dean
Witter "Competitive Edge" Fund, a Massachusetts business trust (hereinafter
called the "Fund"), and Dean Witter InterCapital Inc., a Delaware corporation
(hereinafter called the "Investment Manager"):
WHEREAS, The Fund intends to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Board of Trustees, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously manage
the assets of the Fund in a manner consistent with the investment objectives and
policies of the Fund; shall determine the securities and commodities to be
purchased, sold or otherwise disposed of by the Fund and the timing of such
purchases, sales and dispositions; and shall take such further action, including
the placing of purchase and sale orders on behalf of the Fund, as the Investment
Manager shall deem necessary or appropriate. The Investment Manager shall also
furnish to or place at the disposal of the Fund such of the information,
evaluations, analyses and opinions formulated or obtained by the Investment
Manager in the discharge of its duties as the Fund may, from time to time,
reasonably request.
In the event the Fund establishes additional Portfolios other than the
current Portfolios with respect to which it desires to retain the Investment
Manager to render investment advisory services hereunder, it shall notify the
Investment Manager in writing. If the Investment Manager is willing to render
such services, it shall notify the Fund in writing, whereupon such other
Portfolios shall become a Portfolio hereunder.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Manager shall be deemed to
include persons employed or otherwise retained by the Investment Manager to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Manager may
desire. The Investment Manager shall, as agent for the Fund, maintain the Fund's
records and books of account (other than those maintained by the Fund's transfer
agent, registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, the
Investment Manager shall surrender to the Fund such of the books and records so
requested.
97NYC13426
<PAGE>
3. The Fund will, from time to time, furnish or otherwise make available to
the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and
employees, if any, of the Fund, and provide such office space, facilities and
equipment and such clerical help and bookkeeping services as the Fund shall
reasonably require in the conduct of its business. The Investment Manager shall
also bear the cost of telephone service, heat, light, power and other utilities
provided to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses of
the Fund, including without limitation, fees pursuant to any plan of
distribution that the Fund may adopt; the charges and expenses of any registrar,
any custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities or commodities and other property, and any stock
transfer or dividend agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio transactions to which the
Fund is a party; all taxes, including securities or commodities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the Securities and Exchange Commission and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the cost and expense of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders; fees and travel expenses of
trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Trustees of the Fund who are not interested
persons (as defined in the Act) of the Fund or the Investment Manager, and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Trustees) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the Investment
Manager monthly compensation determined by applying the annual rate of 0.65% to
the Fund's daily net assets of its "Best Ideas" Portfolio and 0.75% to the
Fund's daily net assets of its "Competitive Edge" Portfolio. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly as
promptly as possible for the preceding month. Such calculations shall be made by
applying 1/365ths of the annual rates to the Fund's net assets each day
determined as of the close of business on that day or the last previous business
day. If this Agreement becomes effective subsequent to the first day of a month
or shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fees as set forth above.
7. The Investment Manager will use its best efforts in the supervision and
management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund or
any of its investors for any error of judgment or mistake of law or for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors.
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8. Nothing contained in this Agreement shall prevent the Investment Manager
or any affiliated person of the Investment Manager from acting as investment
adviser or manager for any other person, firm or corporation and shall not in
any way bind or restrict the Investment Manager or any such affiliated person
from buying, selling or trading any securities or commodities for their own
accounts or for the account of others for whom they may be acting. Nothing in
this Agreement shall limit or restrict the right of any Director, officer or
employee of the Investment Manager to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business whether of a similar or dissimilar nature.
9. This Agreement shall remain in effect until April 30, 1999 and from year
to year thereafter with respect to each Portfolio provided such continuance with
respect to a Portfolio is approved at least annually by the vote of holders of a
majority, as defined in the Investment Company Act of 1940, as amended (the
"Act"), of the outstanding voting securities of such Portfolio or by the
Trustees of the Fund; provided, that in either event such continuance is also
approved annually by the vote of a majority of the Trustees of the Fund who are
not parties to this Agreement or "interested persons" (as defined in the Act) of
any such party, which vote must be cast in person at a meeting called for the
purpose of voting on such approval; provided, however, that (a) the Fund may, at
any time and without the payment of any penalty, terminate this Agreement upon
thirty days' written notice to the Investment Manager, either by majority vote
of the Trustees of the Fund or, with respect to a Portfolio, by the vote of a
majority of the outstanding voting securities of such Portfolio; (b) this
Agreement shall immediately terminate in the event of its assignment (to the
extent required by the Act and the rules thereunder) unless such automatic
terminations shall be prevented by an exemptive order of the Securities and
Exchange Commission; and (c) the Investment Manager may terminate this Agreement
without payment of penalty on thirty days' written notice to the Fund. Any
notice under this Agreement shall be given in writing, addressed and delivered,
or mailed post-paid, to the other party at the principal office of such party.
Any approval of this Agreement by the holders of a majority of the
outstanding voting securities of any Portfolio shall be effective to continue
this Agreement with respect to such Portfolio notwithstanding (a) that this
Agreement has not been approved by the holders of a majority of the outstanding
voting securities of any other Portfolio or (b) that this Agreement has not been
approved by the vote of a majority of the outstanding voting securities of the
Fund, unless such approval shall be required by any other applicable law or
otherwise.
10. This Agreement may be amended by the parties without the vote or consent
of the shareholders of the Fund to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or if they
deem it necessary to conform this Agreement to the requirements of applicable
federal laws or regulations, but neither the Fund nor the Investment Manager
shall be liable for failing to do so.
11. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
12. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right of
Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will only use
the name "Dean Witter" as a component of its name and for no other purpose, (ii)
it will not purport to grant to any third party the right to use the name "Dean
Witter" for any purpose, (iii) the Investment Manager or its parent, Morgan
Stanley, Dean Witter, Discover & Co., or any corporate affiliate of the
Investment Manager's parent, may use or grant to others the right to use the
name "Dean Witter," or any combination or abbreviation thereof, as all or a
portion of a corporate or business name or for any commercial purpose, including
a grant of such right to any other investment company, (iv) at the request of
the Investment Manager or its parent, the Fund will take such action as may be
required to provide its consent to the use of the name "Dean Witter," or any
combination or abbreviation thereof, by the Investment Manager or its parent or
any corporate affiliate of the Investment Manager's parent, or by any person to
whom the Investment Manager or its parent or any corporate affiliate of the
Investment Manager's parent shall have granted the right to such use, and (v)
upon the termination of any investment advisory
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agreement into which the Investment Manager and the Fund may enter, or upon
termination of affiliation of the Investment Manager with its parent, the Fund
shall, upon request by the Investment Manager or its parent, cease to use the
name "Dean Witter" as a component of its name, and shall not use the name, or
any combination or abbreviation thereof, as a part of its name or for any other
commercial purpose, and shall cause its officers, trustees and shareholders to
take any and all actions which the Investment Manager or its parent may request
to effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.
13. The Declaration of Trust establishing Dean Witter "Competitive Edge"
Fund, dated October 16, 1997, a copy of which, together with all amendments
thereto (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Dean Witter "Competitive
Edge" Fund refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of Dean Witter "Competitive Edge" Fund shall be held
to any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Dean Witter "Competitive Edge" Fund, but the Trust Estate only
shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
<TABLE>
<S> <C>
DEAN WITTER "COMPETITIVE EDGE" FUND
By:
...................................
Attest:
..................................
DEAN WITTER INTERCAPITAL INC.
By:
...................................
Attest:
..................................
</TABLE>
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DEAN WITTER "COMPETITIVE EDGE" FUND
Two World Trade Center
New York, NY 10048
November 6, 1997
To: Dean Witter Distributors Inc.:
The Distribution Agreement made as of July 28, 1997 between you and various
open-end investment companies to which Dean Witter InterCapital Inc. acts as
investment manager (the "Agreement") provides that if at any time another such
investment company (a "Fund") desires to appoint you to serve as its principal
underwriter and distributor under the Agreement, it shall notify you in writing,
and further provides that if you are willing to serve as the Fund's principal
underwriter and distributor under the Agreement, you shall notify the Fund in
writing, whereupon such other Fund shall become a Fund under the Agreement.
This Fund hereby informs you that it desires to retain you as its principal
underwriter and distributor under the Agreement.
Very truly yours,
DEAN WITTER "COMPETITIVE
EDGE" FUND
by:
--------------------------------
Dean Witter Distributors Inc. hereby notifies Dean Witter "Competitive Edge"
Fund of its willingness to serve as the Fund's principal underwriter and
distributor under the Agreement.
DEAN WITTER DISTRIBUTORS INC.
by:
--------------------------------
<PAGE>
DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 28th day of July, 1997 between each of the
open-end investment companies to which Dean Witter InterCapital Inc. acts as
investment manager, that are listed on Schedule A, as may be amended from time
to time (each, a "Fund" and collectively, the "Funds"), and Dean Witter
Distributors Inc., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and it is in the
interest of each Fund to offer its shares for sale continuously, and
WHEREAS, each Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each Fund's transferable
shares, of $0.01 par value (the "Shares"), to commence on the date listed above,
in order to promote the growth of each Fund and facilitate the distribution of
its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR.
(a) Each Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell Shares to the public on the terms set forth
in this Agreement and that Fund's prospectus and the Distributor hereby accepts
such appointment and agrees to act hereunder. Each Fund, during the term of this
Agreement, shall sell Shares to the Distributor upon the terms and conditions
set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from each Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in that Fund's prospectus
(the "Prospectus") and statement of additional information included in the
Fund's registration statement (the "Registration Statement") most recently filed
from time to time with the Securities and Exchange Commission (the "SEC") and
effective under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act or as the Prospectus may be otherwise amended or supplemented and filed
with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of each Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by each Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; (ii)
pursuant to reinvestment of dividends or capital gains distributions; or (iii)
pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM EACH FUND. The Shares are offered in
four classes (each, a "Class"), as described in the Prospectus, as amended or
supplemented from time to time.
(a) The Distributor shall have the right to buy from each Fund the Shares of
the particular class needed, but not more than the Shares needed (except for
clerical errors in transmission), to fill unconditional orders for Shares of the
applicable class placed with the Distributor by investors or securities dealers.
The price which the Distributor shall pay for the Shares so purchased from the
Fund shall be the net asset value, determined as set forth in the Prospectus,
used in determining the public offering price on which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price of Shares of the applicable class as set forth in the Prospectus, to
investors or to securities dealers, including DWR, who
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have entered into selected dealer agreements with the Distributor upon the terms
and conditions set forth in Section 7 hereof ("Selected Dealers").
(c) Each Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(f) hereof. Each Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of a Fund, makes it impracticable to sell its Shares.
(d) Each Fund, or any agent of a Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by a Fund; provided, however, that a Fund
will not arbitrarily or without reasonable cause refuse to accept orders for the
purchase of Shares. The Distributor will confirm orders upon their receipt, and
each Fund (or its agent) upon receipt of payment therefor and instructions will
deliver share certificates for such Shares or a statement confirming the
issuance of Shares. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct each Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to each Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES.
(a) Any of the outstanding Shares of a Fund may be tendered for redemption
at any time, and each Fund agrees to redeem its Shares so tendered in accordance
with the applicable provisions set forth in its Prospectus. The price to be paid
to redeem the Shares shall be equal to the net asset value determined as set
forth in the Prospectus less any applicable contingent deferred sales charge
("CDSC"). Upon any redemption of Shares the Fund shall pay the total amount of
the redemption price in New York Clearing House funds in accordance with
applicable provisions of the Prospectus.
(b) The redemption by a Fund of any of its Class A Shares purchased by or
through the Distributor will not affect the applicable front-end sales charge
secured by the Distributor or any Selected Dealer in the course of the original
sale, except that if any Class A Shares are tendered for redemption within seven
business days after the date of the confirmation of the original purchase, the
right to the applicable front-end sales charge shall be forfeited by the
Distributor and the Selected Dealer which sold such Shares.
(c) The proceeds of any redemption of Class A, Class B or Class C Shares
shall be paid by each Fund as follows: (i) any applicable CDSC shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of the Association of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
its Prospectus in New York Clearing House funds. The Distributor is authorized
to direct a Fund to pay directly to the Selected Dealer any CDSC payable by a
Fund to the Distributor in respect of Class A, Class B, or Class C Shares sold
by the Selected Dealer to the redeeming shareholders.
(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer agent
of the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
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(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the shareholders, or
at the discretion of the Distributor. The Distributor shall promptly transmit to
the transfer agent of the Fund, for redemption, all such orders for repurchase
of Shares. Payment for Shares repurchased may be made by a Fund to the
Distributor for the account of the shareholder. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.
(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.
SECTION 5. DUTIES OF THE FUND.
(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including one
certified copy, upon request by the Distributor, of all financial statements
prepared by the Fund and examined by independent accountants. Each Fund shall,
at the expense of the Distributor, make available to the Distributor such number
of copies of its Prospectus as the Distributor shall reasonably request.
(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.
(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.
SECTION 6. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Account Executives, and
shall devote reasonable time and effort to promote sales of the Shares, but
shall not be obligated to sell any specific number of Shares. The services of
the Distributor hereunder are not exclusive and it is understood that the
Distributor may act as principal underwriter for other registered investment
companies, so long as the performance of its obligations hereunder is not
impaired thereby. It is also understood that Selected Dealers, including DWR,
may also sell shares for other registered investment companies.
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<PAGE>
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.
(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS.
(a) The Distributor shall have the right to enter into selected dealer
agreements with Selected Dealers for the sale of Shares. In making agreements
with Selected Dealers, the Distributor shall act only as principal and not as
agent for a Fund. Shares sold to Selected Dealers shall be for resale by such
dealers only at the public offering price set forth in the Prospectus. With
respect to Class A Shares, in such agreement the Distributor shall have the
right to fix the portion of the applicable front-end sales charge which may be
allocated to the Selected Dealers.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by each
Fund, for the confirmation of sales of its Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. PAYMENT OF EXPENSES.
(a) Each Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors/Trustees
of each Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(b) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement including the payment to
Selected Dealers of any sales commissions, service fees and other expenses for
sales of a Fund's Shares (except such expenses as are specifically undertaken
herein by a Fund) incurred or paid by Selected Dealers, including DWR. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor or
furnished by it for use by Selected Dealers in connection with the offering of
the Shares for sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor. It is understood
and agreed that, so long as a Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid in accordance with the terms
of such Rule 12b-1 Plan.
(c) Each Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying each Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION.
(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended
4
<PAGE>
and supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of a Fund in favor of the Distributor and any such
controlling persons to be deemed to protect the Distributor or any such
controlling persons thereof against any liability to a Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement; or (ii) is a Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or any such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Distributor or uch controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. Each Fund will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense,
of any such suit brought to enforce any such liability, but if a Fund elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
Each Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or
Directors/Trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless each Fund and each
of its Directors/ Trustees and officers and each person, if any, who controls
the Fund against any loss, liability, claim, damage, or expense described in the
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to a Fund in writing by or on behalf of the Distributor
for use in connection with the Registration Statement or related Prospectus and
Statement of Additional Information, as from time to time amended, or the annual
or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which arise
as a result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(g) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e) hereof.
(iii) In case any action shall be brought against a Fund or any person
so indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor, by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by a Fund on the one hand and the Distributor on the other
from the
5
<PAGE>
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of a Fund on the one hand and the Distributor on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by a Fund on the one hand and the Distributor on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by a Fund or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Fund and the Distributor agree that it would not be
just and equitable ifcontribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective with respect to a Fund as of the date first above written
and shall remain in force until April 30, 1998, and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the Board
of Directors/Trustees of each Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, cast in person or by proxy, and (ii)
a majority of those Directors/Trustees who are not parties to this Agreement or
interested persons of any such party and who have no direct or indirect
financial interest in this Agreement or in the operation of the Fund's Rule
12b-1 Plan or in any agreement related thereto, cast in person at a meeting
called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/ Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of a
majority of the outstanding voting securities of a Fund, or by the Distributor,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding voting
securities of a Fund, and (ii) a majority of those Directors/Trustees of a Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.
SECTION 12. ADDITIONAL FUNDS. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
SECTION 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the
6
<PAGE>
State of New York, or any of the provisions herein, conflicts with the
applicable provisions of the 1940 Act, the latter shall control.
SECTION 14. PERSONAL LIABILITY. With respect to any Fund that is organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts, its Declaration of the Trust (each, a "Declaration") is on file
in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of any Fund shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of any Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO
By: ..................................
DEAN WITTER DISTRIBUTORS INC.
By: ..................................
7
<PAGE>
DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT NOVEMBER 6, 1997
<TABLE>
<S> <C>
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter "Competitive Edge" Fund
8) Dean Witter Convertible Securities Trust
9) Dean Witter Developing Growth Securities Trust
10) Dean Witter Diversified Income Trust
11) Dean Witter Dividend Growth Securities Inc.
12) Dean Witter European Growth Fund Inc.
13) Dean Witter Federal Securities Trust
14) Dean Witter Financial Services Trust
15) Dean Witter Fund of Funds
16) Dean Witter Global Asset Allocation Fund
17) Dean Witter Global Dividend Growth Securities
18) Dean Witter Global Utilities Fund
19) Dean Witter Health Sciences Trust
20) Dean Witter High Yield Securities Inc.
21) Dean Witter Income Builder Fund
22) Dean Witter Information Fund
23) Dean Witter Intermediate Income Securities
24) Dean Witter International SmallCap Fund
25) Dean Witter Japan Fund
26) Dean Witter Managers' Select Fund
27) Dean Witter Market Leader Trust
28) Dean Witter Mid-Cap Growth Fund
29) Dean Witter Natural Resource Development Securities Inc.
30) Dean Witter New York Tax-Free Income Fund
31) Dean Witter Pacific Growth Fund Inc.
32) Dean Witter Precious Metals and Minerals Trust
33) Dean Witter Research Fund
34) Dean Witter Special Value Fund
35) Dean Witter S&P 500 Index Fund
36) Dean Witter Strategist Fund
37) Dean Witter Tax-Exempt Securities Trust
38) Dean Witter U.S. Government Securities Trust
39) Dean Witter Utilities Fund
40) Dean Witter Value-Added Market Series
41) Dean Witter World Wide Income Trust
42) Dean Witter World Wide Investment Trust
</TABLE>
8
<PAGE>
DEAN WITTER "COMPETITIVE EDGE" FUND
SELECTED DEALERS AGREEMENT
Gentlemen:
Dean Witter Distributors Inc. (the "Distributor") has a distribution
agreement (the "Distribution Agreement") with Dean Witter "Competitive Edge"
Fund, a Massachusetts business trust (the "Fund"), pursuant to which it acts as
the Distributor for the sale of the Fund's shares of common stock, par value
$0.01 per share (the "Shares"). Under the Distribution Agreement, the
Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended. You have
received a copy of the Distribution Agreement between us and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms used herein, including "Prospectus" and "Registration Statement" of
the Fund and "Selected Dealer" shall have the same meaning in this Agreement as
in the Distribution Agreement. As principal, we offer to sell shares to you, as
a Selected Dealer, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act as dealer for your own
account, and in no transaction shall you have any authority to act as agent for
the Fund, for us or for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf only
at the net asset value applicable to each order, as set forth in the current
Prospectus. The procedure relating to the handling of orders shall be subject to
instructions which we or the Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either.
3. You shall not place orders for any Shares unless you have already received
purchase orders for such Shares at the applicable net asset values and subject
to the terms hereof and of the Distribution Agreement and the Prospectus. You
agree that you will not offer or sell any of the Shares except under
circumstances that will result in compliance with the applicable Federal and
state securities laws and that in connection with sales and offers to sell
Shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus (as then amended or supplemented) and will not furnish to
any person any information relating to the Shares, which is inconsistent in any
respect with the information contained in the Prospectus (as then amended or
supplemented) or cause any advertisement to be published by radio or television
or in any newspaper or posted in any public place or use any sales promotional
material without our consent and the consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a sales charge and/or other
commissions, which may be in the form of a gross sales credit and/or an annual
residual commission) and/or a service fee, under the terms and in the percentage
amounts as may be in effect from time to time by the Distributor.
5. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding; e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
<PAGE>
6. If any Shares sold to you under the terms of this Agreement are
repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any commission received by you with respect to such Shares.
7. No person is authorized to make any representations concerning the Shares
or the Fund except those contained in the current Prospectus and in such printed
information subsequently issued by us or the Fund as information supplemental to
such Prospectus. In purchasing Shares through us you shall rely solely on the
representations contained in the Prospectus and supplemental information above
mentioned. Any printed information which we furnish you other than the
Prospectus and the Fund's periodic reports and proxy solicitation material are
our sole responsibility and not the responsibility of the Fund, and you agree
that the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
8. You agree to deliver to each of the purchasers from you a copy of the then
current Prospectus at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus, annual or interim reports and proxy solicitation materials of the
Fund will be supplied to you in reasonable quantities upon request.
9. You are hereby authorized (i) to place orders directly with the Fund or
its agent for shares of the Fund to be sold by us subject to the applicable
terms and conditions governing the placement of orders for the purchase of Fund
shares, as set forth in the Distribution Agreement, and (ii) to tender shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in the Distribution Agreement.
10. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely. Each party hereto has the right to
cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable
in respect of all matters pertaining to the distribution and redemption of Fund
shares. We shall be under no liability to you except for lack of good faith and
for obligations expressly assumed by us herein. Nothing contained in this
paragraph is intended to operate as, and the provisions of this paragraph shall
not in any way whatsoever constitute, a waiver by you of compliance with any
provision of the Securities Act of 1933, as amended, or of the rules and
regulations of the Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such association.
13. Upon application to us, we will inform you as to the states in which we
believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
<PAGE>
14. All communications to us should be sent to the address shown below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. This Agreement shall become effective as of the date of your acceptance
hereof, provided that you return to us promptly a signed and dated copy.
Dean Witter Distributors Inc.
By
----------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
---------------------
Firm Name:
--------------------
By:
---------------------------
Address:
----------------------
Date:
-------------------------
<PAGE>
DEAN WITTER "COMPETITIVE EDGE" FUND
SHARES OF BENEFICIAL INTEREST
$0.01 PAR VALUE
UNDERWRITING AGREEMENT
November 6, 1997
DEAN WITTER DISTRIBUTORS INC.
Two World Trade Center
New York, New York 10048
Dear Sirs:
1. INTRODUCTORY. Dean Witter "Competitive Edge" Fund, an unincorporated
business trust organized under the laws of The Commonwealth of Massachusetts
(the "Fund"), proposes to sell, pursuant to the terms of this Agreement, to you
(the "Underwriter") up to 10,000,000 shares of its shares of beneficial
interest, $0.01 par value of its "Best Ideas" Portfolio and its "Competitive
Edge" Portfolio, respectively, subject to increase or decrease as provided in
this Agreement. Such shares are hereinafter referred to individually as the
"Best Ideas" Portfolio Shares and the "Competitive Edge" Portfolio Shares, and
collectively as the "Shares."
The Underwriter may sell such of the Shares purchased by it, as it may
elect, to dealers chosen by it (the "Selected Dealers"), at their net asset
value, reoffering by the Selected Dealers to the public at net asset value.
It is proposed that Dean Witter InterCapital Inc. (the "Manager") will act
as investment manager for the Fund.
2. REPRESENTATION AND WARRANTIES OF THE FUND AND THE MANAGER. (a) The Fund
represents and warrants to, and agrees with, the Underwriter that:
(i) A registration statement on Form N-1A, including a preliminary
prospectus, copies of which have heretofore been delivered to you, has been
carefully prepared by the Fund in conformity with the requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), and the published rules
and regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under such Acts, and has been filed with the
Commission under both such Acts; and the Fund has so prepared and proposed
so to file prior to the effective date under the 1933 Act of such
registration statement an amendment to such registration statement including
the final form of prospectus and the statement of additional information.
Such registration statement (including all exhibits), as finally amended and
supplemented at the time such registration statement becomes effective under
the 1933 Act, and the prospectus and statement of additional information
forming part of such registration statement, or, if different in any
respect, the prospectus in the form first filed with the Commission pursuant
to Rule 497(c) under the 1933 Act, are herein respectively referred to as
the "Registration Statement" and the "Prospectus", and each preliminary
prospectus is herein referred to as a "Preliminary Prospectus". Reference to
the Prospectus and Preliminary Prospectus herein shall encompass both the
prospectus and statement of additional information.
(ii) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and, at its date of issue, each
Preliminary Prospectus conformed in all material respects with the
requirements of the 1933 Act and the Rules and Regulations thereunder and
did not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made
not misleading; and, when the Registration Statement becomes effective under
the 1933 Act and at all times subsequent thereto up to and including the
Closing Date (as herein defined). The Registration Statement and the
Prospectus and any amendments or supplements thereto, and the Notification
of Registration on Form N-8A will contain all material statements and
information required to be included therein by the 1933 Act, the 1940 Act
and the Rules and Regulations thereunder and will conform in all
<PAGE>
material respects to the requirements of the 1933 Act, the 1940 Act and the
Rules and Regulations and will not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing representations, warranties and
agreements shall not apply to information contained in or omitted from any
Preliminary Prospectus or the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon, and in conformity with,
written information furnished to the Fund by or on behalf of the
Underwriter, or by or on behalf of the Manager specifically for use in the
preparation thereof.
(iii) The Statement of Assets and Liabilities of the Fund set forth in
the Statement of Additional Information fairly presents the financial
position of the Fund as of the date indicated and has been prepared in
accordance with generally accepted accounting principles. Price Waterhouse
LLP, who have expressed their opinion on said Statement, are independent
accountants as required by the 1933 Act and Rules and Regulations
thereunder.
(iv) Subsequent to the dates as of which information is given in the
Registration Statement and Prospectus, and except as set forth or
contemplated in the Prospectus, the Fund has not incurred any material
liabilities or obligations, direct or contingent, or entered into any
material transactions not in the ordinary course of business, and there has
not been any material adverse change in the financial position of the Fund,
or any change in the authorized or outstanding shares of beneficial interest
of the Fund or any issuance of options to purchase shares of beneficial
interest of the Fund.
(v) Except as set forth in the Prospectus, there is no action, suit or
proceeding before or by any court or governmental agency or body pending, or
to the knowledge of the Fund threatened, which might result in any material
adverse change in the condition (financial or otherwise), business or
prospects of the Fund, or which would materially and adversely affect its
properties or assets.
(vi) The Fund has been duly established and is validly existing as an
unincorporated business trust under the laws of The Commonwealth of
Massachusetts, with power and authority to own its property and conduct its
business as described in the Prospectus; the Fund is duly qualified to do
business in all jurisdictions in which the conduct of its business requires
such qualification; and the Fund has no subsidiaries.
(vii) The Fund is registered with the Commission under the 1940 Act as an
open-end management investment company.
(viii) The Fund has an authorized capitalization as set forth in the
Registration Statement, and all outstanding shares of beneficial interest of
the Fund conform to the description thereof in the Prospectus and are duly
and validly authorized and issued, fully paid and nonassessable; and the
Shares, upon the issuance thereof in accordance with this Agreement, will
conform to the description thereof contained in the Prospectus, and will be
duly and validly authorized and issued, fully paid and nonassessable
(although shareholders of the Fund may be liable for certain obligations of
the Fund as set forth under the caption "Additional Information" in the
Prospectus).
(ix) The Fund has full legal right, power and authority to enter into
this Agreement, and the execution and delivery of this Agreement by the
Fund, the consummation of the transactions herein contemplated and
fulfillment of the terms hereof by the Fund will be in compliance with all
applicable legal requirements to which the Fund is subject and will not
conflict with the terms or provisions of any order of the Commission, the
Declaration of Trust or By-Laws of the Fund, or any agreement or instrument
to which the Fund is a party or by which it is bound.
(x) The Fund has adopted a Plan of Distribution (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Pursuant to Rule 12b-1, the Plan has been
approved by the Fund's sole shareholder and by the Trustees of the Fund,
including a majority of the Trustees who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation
of the Plan, cast in person at a meeting called for the purpose of voting on
such Plan.
2
<PAGE>
(xi) The Fund has full legal right, power and authority to enter into
the Distribution Agreement, the Custodian Agreement, the Transfer Agency and
Service Agreement and the Investment Management Agreement referred to in the
Registration Statement and the execution and delivery of the Distribution
Agreement, Custodian Agreement, the Transfer Agency and Service Agreement,
Management Agreement and the Advisory Agreement, the consummation of the
transactions therein contemplated and fulfillment of the terms thereof, will
be in compliance with all applicable legal requirements to which the Fund is
subject and will not conflict with the terms or provisions of any order of
the Commission, the Declaration of Trust or By-Laws of the Fund, or any
agreement or instrument to which the Fund is a party or by which it is
bound.
(b) The Manager represents and warrants to, and agrees with, the Fund that:
(i) The Manager is an investment adviser registered under the Investment
Advisers Act of 1940.
(ii) The Manager has full legal right, power and authority to enter into
this Agreement and the Investment Management Agreement, and the execution
and delivery of this Agreement and the Investment Management Agreement, the
consummation of the transactions herein and therein contemplated and the
fulfillment of the terms hereof and thereof, will be in compliance with all
applicable legal requirements to which it is subject and will not conflict
with the terms or provisions of, or constitute a default under, its articles
of incorporation or by-laws or any agreement or instrument to which it is a
party or by which it is bound.
(iii) The description of the Manager in the Registration Statement is
true and correct and does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; and is hereby
deemed to be furnished in writing to the Fund for the purposes of Section
2(a)(ii) hereof.
3. PURCHASE BY, AND SALE TO, THE UNDERWRITER. The Fund agrees to sell to
the Underwriter, and upon the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions of this
Agreement, the Underwriter agrees to purchase from the Fund, up to 10,000,000
Shares (which number of Shares may be increased or decreased as provided below),
at a price of $10.00 per Share of each of the "Best Ideas" Portfolio and the
"Competitive Edge" Portfolio. It is understood and agreed that the Underwriter
may be compensated by the Fund for its services under this Agreement in
accordance with the provisions of the Plan.
The number of Shares of each Portfolio which the Underwriter may purchase
pursuant hereto shall, upon written agreement between the Underwriter and the
Fund not later than 10:00 A.M., New York time, on the third business day
preceding each Portfolio's Closing Date (the "Notification Time"), be increased
or decreased to such greater or lesser number of Shares as the Fund and the
Underwriter may agree upon, in which case the number of Shares set forth in the
preceding paragraph shall for all purposes hereof be increased or decreased to
such greater or lesser number of Shares. The Underwriter shall, in any event, be
entitled and obligated to purchase only the number of shares for which purchase
orders have been received by the Underwriter prior to the Notification Time.
The Fund is advised that the Underwriter proposes to make a public offering
of the Shares as soon after the Registration Statement shall have become
effective under the 1933 Act as it deems advisable, at the public offering price
and upon the terms and conditions set forth in the Prospectus.
4. DELIVERY AND PAYMENT. Delivery of the Shares or, at the election of the
Underwriter, non-negotiable share deposit receipts issued by the Dean Witter
Trust FSB as transfer and dividend disbursing agent, acknowledging the deposit
of the Shares ("deposit receipts") and payment therefor, shall be made at 10:00
A.M., New York time, at the office of Dean Witter Distributors Inc., Two World
Trade Center, New York, New York 10048, on , 1998 or such later time and
date as may be agreed upon between the Underwriter and the Fund for the "Best
Ideas" Portfolio and at such later time and date to be agreed upon between the
Underwriter and the Fund for the "Competitive Edge" Portfolio (each such date
and time being herein referred to as the "Closing Date"). The place of delivery
of the payment for the shares may be varied by agreement between the Underwriter
and the Fund.
3
<PAGE>
On the Closing Date, the certificates or deposit receipts for the Shares
which are subject to purchase orders received by the Underwriter prior to the
Notification Time (registered in such names and for such denominations as you
shall have requested in writing prior to the Closing Date), shall be delivered
by the Fund to the Underwriter for the account of the Underwriter, against
payment of the purchase price therefor by a wire transfer in federal funds. Such
certificates or deposit receipts shall be made available for checking and
packaging at the New York office of Dean Witter Distributors Inc. on or prior to
the Closing Date.
On the Closing Date, the Underwriter agrees to purchase and pay for the
Shares for which it received purchase orders prior to the Notification Time as
specified above, provided that the Underwriter shall not have any obligation to
purchase and pay for any Shares as to which purchase orders are not in effect on
the Closing Date.
The Fund agrees to calculate and report to the Underwriter daily, upon
request, the net asset value of the Fund during the first 60 days after the
Closing Date.
5. COVENANTS AND AGREEMENTS OF THE FUND. The Fund agrees with the
Underwriter that:
(i) The Fund will use its best efforts to cause the Registration
Statement to become effective under the 1933 Act, will advise the
Underwriter promptly as to the time at which the Registration Statement
becomes so effective, will advise the Underwriter promptly of the issuance
by the Commission of any stop order suspending such effectiveness of the
Registration Statement or of the institution of any proceedings for that
purpose, and will use its best efforts to prevent the issuance of any such
stop order and to obtain as soon as possible the lifting thereof, if issued.
The Fund will advise the Underwriter promptly of any request by the
Commission for any amendment of or supplement to the Registration Statement
or the Prospectus or for additional information, and will not at any time
file any amendment to the Registration Statement or supplement to the
Prospectus which shall not have been submitted to the Underwriter a
reasonable time prior to the proposed filing thereof and to which the
Underwriter shall reasonably object in writing promptly following receipt of
such amendment or supplement or which is not in compliance with the 1933
Act, the 1940 Act or the Rules and Regulations thereto.
(ii) The Fund will prepare and file with the Commission, promptly upon
the request of the Underwriter, any amendments or supplements to the
Registration Statement which in the opinion of the Underwriter may be
necessary to enable the Underwriter to continue the distribution of the
Shares and will use its best efforts to cause the same to become effective
as promptly as possible.
(iii) If at any time after the effective date under the 1933 Act of the
Registration Statement when a prospectus relating to the Shares is required
to be delivered under the 1933 Act, any event relating to or affecting the
Fund occurs as a result of which the Prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact, or omit
to state any material fact necessary to make the statements therein in light
of the circumstances under which they were made not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the 1933 Act,
the Fund will promptly notify the Underwriter thereof and will prepare an
amended or supplemented prospectus which will correct such statement or
omission; and, in case the Underwriter is required to deliver a prospectus
relating to the Shares nine months or more after such effective date of the
Registration Statement, the Fund upon the request of the Underwriter will
prepare promptly such prospectus or prospectuses as may be necessary to
permit compliance with the requirements of Section 10(a)(3) of the 1933 Act.
(iv) The Fund will deliver to the Underwriter, at or before the Closing
Date, two signed copies of the Registration Statement and all amendments
thereto including all financial statements and exhibits thereto, and the
Notification of Registration on Form N-8A filed by the Fund pursuant to the
1940 Act and will deliver to the Underwriter such number of copies of the
Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Fund will deliver or mail to or upon the order of the
Underwriter, from time to time until the effective date under the 1933 Act
of the Registration Statement, as many copies of any Preliminary Prospectus
as the Underwriter may reasonably request. The Fund will deliver or mail to
or
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upon the order of the Underwriter on the date of the initial public
offering, and thereafter from time to time during the period when delivery
of a prospectus relating to the Shares is required under the 1933 Act, as
many copies of the Prospectus, in final form or as thereafter amended or
supplemented as the Underwriter may reasonably request.
(v) As soon as is practicable after the effective date under the 1933
Act of the Registration Statement, the Fund will make generally available to
its security holders an earnings statement which will be in reasonable
detail (but which need not be audited) and will comply with Section 11(a) of
the 1933 Act, covering a period of at least twelve months beginning after
such effective date of the Registration Statement.
(vi) The Fund will cooperate with the Underwriter to enable the Shares
to be qualified for sale under the securities laws of such jurisdictions as
the Underwriter may designate and at the request of the Underwriter will
make such applications and furnish such information as may be required of it
as the issuer of the Shares for that purpose; provided, however, that the
Fund shall not be required to qualify to do business or to file a general
consent to service of process in any such jurisdiction. The Fund will, from
time to time, prepare and file such statements and reports as are or may be
required of it as the issuer of the Shares to continue such qualifications
in effect for so long a period as the Underwriter may reasonably request for
the distribution of the Shares.
(vii) The Fund will furnish to its shareholders annual reports containing
financial statements examined by independent accountants and with
semi-annual summary financial information which may be unaudited. During the
period of one year from the date hereof, the Fund will deliver to the
Underwriter, at Dean Witter Distributors Inc., Two World Trade Center, New
York, New York 10048, Attention: Law Department, (a) copies of each annual
report of the Fund to its shareholders, (b) as soon as they are available,
copies of any other reports (financial or other) which the Fund shall
publish or otherwise make available to any of its security holders as such,
and (c) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission.
6. PAYMENT OF EXPENSES.
(a) The Fund will pay its organization expenses, which, for purposes of this
Agreement shall include: all costs and expenses in connection with the
establishment of the Fund and its qualification to do business in any state, the
qualification of Shares for sale under the Blue Sky or securities laws of the
several jurisdictions (including, without limitation, filing fees); the
preparation, printing and reproduction of the Declaration of Trust and By-Laws
of the Fund, this Agreement, the Distribution Agreement, the Investment
Management Agreement, the Custodian Agreement, the Transfer Agency and Service
Agreement, the Plan and other documents in quantities sufficient for filing
under the 1933 Act, the 1940 Act and the Blue Sky or securities laws of any
jurisdiction; and filing fees and fees and disbursements of counsel related to
Blue Sky matters; all costs and expenses in connection with printing any
certificates representing the Shares; fees and disbursements of counsel and
independent accountants for the Fund and of counsel for Trustees who are not
interested persons of the Fund or the Manager; registration fees under the 1933
Act and the 1940 Act; any taxes on the issue and delivery of the Shares on the
Closing Date to the Underwriter and the fees of the Fund's transfer agent. The
Manager will pay the organization expenses of the Fund incurred prior to the
closing date of the initial offering of the Fund's shares whether or not the
amount of any such expense is then ascertainable. The Fund will reimburse the
Manager for such expenses not to exceed $250,000. Any balance of organization
expenses not paid by the Fund shall be paid by the Manager. In the event the
transactions contemplated hereunder are not consummated, the Manager will pay
all the organization expenses which the Fund would have paid if such
transactions were consummated. Whether or not the transactions contemplated
hereunder are consummated, the Manager will pay all expenses in connection with
the activity and travel of officers, Trustees and counsel for the Fund and the
cost of preparing and making sales presentations to the personnel of the
Manager, including costs of travel of officers and Trustees of the Fund to
locations where such presentations are made.
(b) Subject to the provisions of the Plan, the Underwriter will pay: its
internal expenses in connection with marketing and meetings, including expenses
of its own personnel and costs of travel of its personnel to the locations where
sales presentations to its personnel and to Selected Dealers are made; all costs
and
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expenses in connection with printing and distributing the Registration
Statement, the Prospectus and the Blue Sky Surveys in quantities sufficient for
offering and sale of the Shares by the Underwriter; all costs in connection with
the sale of Shares, including costs of preparing, printing and distributing
sales literature relating to the Shares, all advertising and fees and expenses
of public relations counsel; and fees and expenses of legal counsel for the
Underwriter (except in respect of qualification of the Shares for sale under the
Blue Sky or securities laws of any jurisdiction).
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Fund shall indemnify and hold harmless the Underwriter and each
person, if any, who controls the Underwriter against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended and
supplemented, or the annual or interim reports to shareholders of the Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Underwriter; provided, however, that in no case
(i) is the indemnity of the Fund in favor of the Underwriter and any such
controlling persons to be deemed to protect the Underwriter or any such
controlling persons thereof against any liability to the Fund or its
securityholders to which the Underwriter or any such controlling persons would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under this Agreement; or (ii) is the Fund to be
liable under its indemnity agreement contained in this paragraph with respect to
any claim made against the Underwriter or any such controlling persons, unless
the Underwriter or any such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Underwriter or such controlling persons (or after the
Underwriter or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense,
of any suit brought to enforce any such liability, but if the Fund elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Underwriter or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Underwriter or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Underwriter or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Fund shall promptly notify the Underwriter of the commencement of any
litigation or proceedings against it or any of its officers or trustees in
connection with the issuance or sale of the Shares.
(b) (i) The Underwriter shall indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in
conformity with, information furnished to the Fund in writing by or on
behalf of the Underwriter for use in connection with the Registration
Statement or related Prospectus and Statement of Additional Information, as
from time to time amended, or the annual or interim reports to shareholders.
(ii) In case any action shall be brought against the Fund or any person
to be indemnified by this subsection 7(b) in respect of which indemnity may
be sought against the Underwriter, the Underwriter shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall
have the rights and duties given to the Underwriter by the provisions of
subsection (a) of this Section 7.
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(c) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Fund on the one hand and the Underwriter on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Fund on the one hand and
the Underwriter on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Fund on the one hand and
the Underwriter on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Fund bear to the total compensation received by the Underwriter, in each case as
set forth in the Prospectus. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Fund or the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Fund and the Underwriter agree that it
would not be just and equitable if contribution were determined by pro rate
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such claim.
Notwithstanding the provisions of this subsection (c), the Underwriter shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Shares distributed by it to the public were offered to the
public exceeds the amount of any damages which it has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(d) Nothing contained in this Section 7 shall be construed to provide for
indemnification or contribution in violation of Section 17(i) of the 1940 Act.
8. SURVIVAL OF INDEMNITIES, WARRANTIES, ETC. The respective indemnities,
convenants, agreements, representations, warranties, certificates and other
statements of the Fund, the Manager and the Underwriter, as set forth in this
Agreement or made by them, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriter, the Fund, the Manager, or any of their officers or trustees or
directors, or any controlling person, and shall survive delivery of and payment
for the Shares.
9. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter hereunder shall be subject to the accuracy of (except as otherwise
stated herein), as of the date hereof and on and as of the Closing Date (except
with respect to representations and warranties in respect of each Preliminary
Prospectus which are in each case as of its date of issuance), the
representations and warranties of the Manager and the Fund and the compliance on
and as of the Closing Date by the Fund and the Manager with their respective
covenants and agreements herein contained and other provisions hereof to be
satisfied at or prior to the Closing Date and to the following additional
conditions:
(i) Prior to the Closing Date the Registration Statement shall have
become effective under the 1933 Act, and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the Fund or the
Underwriter, threatened by the Commission, and any request for additional
information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of the Underwriter.
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<PAGE>
(ii) Prior to the Closing Date no event shall have occurred to cause the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, to contain an untrue statement of fact which, in the opinion of the
Underwriter, is material, or omit to state a fact which, in the opinion of
the Underwriter, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(iii) The Underwriter shall have received from Price Waterhouse a letter,
dated the Closing Date, confirming that they are independent accountants
within the meaning of the 1933 Act, the 1940 Act and the Rules and
Regulations, and stating in effect that:
(a) In their opinion, the Statement of Assets and Liabilities
reported on by them and included in the Registration Statement complies
as to form in all material respects with the applicable accounting
requirements of the 1933 Act, the 1940 Act and the Rules and Regulations;
and
(b) On the basis of the procedures specified in their letter, nothing
has come to their attention which caused them to believe that, except as
set forth in or contemplated by the Prospectus, during the period from
the date on which the Fund's Registration Statement is declared effective
by the Commission under the 1933 Act to a specified date not more than
three business days prior to the delivery of such letter, there was any
change in the authorized or outstanding shares of beneficial interest of
the Fund or any creation of long-term debt or short-term notes of the
Fund or any decrease in the net asset value per share of beneficial
interest from that set forth in the Prospectus or that the Fund did not
have a net worth of at least $100,000.
(iv) The Underwriter shall have received from Lane Altman & Owens LLP,
Massachusetts counsel for the Fund, an opinion or opinions, dated the
Closing Date, to the following effect:
(a) The Fund has been duly established and is validly existing in
conformity with the laws of The Commonwealth of Massachusetts as an
unincorporated business trust, has made all filings required to be made
by a business trust under the Massachusetts General Laws, and has the
power and authority to own its properties and conduct its business as
described in the Prospectus;
(b) The Fund has authorized shares of beneficial interest as set
forth in the Registration Statement, and all of the issued shares of
beneficial interest of the Fund, including the Shares, have been duly
paid and non-assessable; and the Shares conform to the description of the
shares of beneficial interest contained in the Prospectus; and
(c) As to all matters of Massachusetts law and the documents
described therein, the information set forth under the caption
"Additional Information" in the Prospectus and under the caption
"Description of Shares" in all material respects and fairly presents the
information required to be shown.
(v) The Underwriter shall have received from the General Counsel of the
Fund, an opinion or opinions, dated the Closing Date, to the following
effect:
(a) This Agreement has been duly authorized, executed and delivered
by the Fund;
(b) The Registration Statement has become effective under the 1933
Act; to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that or a
similar purpose have been instituted or are pending or contemplated by
the Commission;
(c) The notification of registration under the 1940 Act and any
amendments or supplements thereto comply as to form in all material
respects with the requirements of the 1940 Act and the rules and
regulations thereunder;
(d) The Fund is registered with the Commission under the 1940 Act as
an open-end management investment company;
8
<PAGE>
(e) Such counsel is familiar with all contracts filed or incorporated
by reference as exhibits to the Registration Statement and does not know
of any contracts required to be so filed or incorporated which are not so
filed or incorporated;
(f) The issuance of the Shares and the sale of the Shares in
accordance with this Agreement do not result in a breach or violation of
any of the terms or provisions of, or constitute a default under any
indenture, mortgage, deed of trust, note agreement or other agreement or
instrument know to such counsel to which the Fund is a party or by which
the Fund is bound, or the Fund's Declaration of Trust or By-Laws;
(g) The Distribution Agreement, the Custodian Agreement, the Transfer
Agency and Service Agreement, the Plan and the Investment Management
Agreement referred to in the Registration Statement have been duly
authorized, pursuant to the requirements of the laws of The Commonwealth
of Massachusetts and the 1940 Act and executed and delivered by the Fund
and each constitutes the valid and binding obligation of the Fund in
accordance with its terms;
(h) There are pending no legal or governmental proceedings known to
such counsel to which the Fund is a party or to which property of the
Fund may be subject other than as set forth in the Prospectus and, to the
best of the knowledge of such counsel, no such proceedings are
contemplated;
(i) No authorization, consent, approval, permit or license of, or
filing with, any governmental or public body is required to authorize, or
is required in connection with, the execution, delivery and performance
of this Agreement or the issuance or sale of the Shares hereunder, except
as has been obtained under the 1933 Act and the 1940 Act or as may be
required under the securities or Blue Sky laws of the several states; and
(j) The Registration Statement and the Prospectus, as of the
effective date of the Registration Statement, appeared on their face to
be appropriately responsive in all material respects to the requirements
of the 1933 Act, the 1940 Act and the applicable Rules and Regulations;
such counsel does not believe that the Registration Statement or the
Prospectus, on such effective date, contained any untrue statement of
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading
(except that such counsel shall express no opinion as to the financial
statements); the description in the Registration Statement and Prospectus
of contracts, other documents, statutes, regulations and governmental
proceeding is accurate in all material respects and fairly presents the
information required to be shown.
As to all matters of Massachusetts law, the General Counsel of the Fund may
rely upon the opinion or opinions delivered pursuant to paragraph (iv) of this
Section 9.
(vi) The Underwriter shall have received an opinion, dated the Closing
Date, to the following effect:
(a) The Underwriter has been duly organized and is a validly existing
corporation under the laws of the State of Delaware; and
(b) The Underwriting Agreement has been duly authorized, executed and
delivered by the Underwriter and is a valid and legally binding
obligation of the Underwriter;
(vii) The Underwriter shall have received from Counsel of the Manager, an
opinion, dated the Closing Date, to the following effect:
(a) The Adviser has been duly organized and is a validly existing
corporation under the laws of the State of Delaware with full power and
authority to transact business as the Manager of the Fund as contemplated
by the Prospectus;
(b) The Investment Management Agreement has been duly authorized,
executed and delivered by the Manager and is a valid and legally binding
obligation of the Manager;
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(c) The Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is registered as an
investment adviser in such states as may be required for operation of the
Fund;
(d) The Manager has full legal right, power and authority to enter
into the Investment Management Agreement, and the execution and delivery
of the Investment Management Agreement, the consummation of the
transactions therein contemplated and fulfillment of the terms thereof
will not conflict with any applicable legal requirement by which the
Manager is bound, nor will they conflict with the terms or provisions of,
or constitute a default under its Certificate of Incorporation or By-Laws
or any agreement or instrument to which it is a party or by which it is
bound; and
(e) The description of the Manager in the Prospectus and Statement of
Additional Information is true and correct and does not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading.
(viii) The Underwriter shall have received certificates, dated the Closing
Date, of the President or other Executive Officer competent to act on behalf
of the Manager and the chief financial or accounting officer of the Fund to
the effect that:
(a) No stop order suspending the effectiveness of the Registration
Statement has been issued, and, to the best of the knowledge of the
signers after reasonable investigation, no proceedings for that purpose
have been instituted or are pending or contemplated under the 1933 Act;
(b) Neither any Preliminary Prospectus, as of its date, nor the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as of the time when the Registration Statement became
effective under the 1933 Act and at all times subsequent thereto up to
the delivery of such certificate, included any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(c) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Fund has not
incurred any material liabilities or obligations, direct or contingent,
nor entered into any material transaction, not in the ordinary course of
business, and there has not been any material adverse change in the
condition (financial or otherwise), business, prospects or results of
operations of the Fund, or any change in the capitalization of the Fund;
and
(d) to the best of the knowledge of the signers after reasonable
investigation, the representations and warranties of the Fund and the
Manager, as the case may be, in this Agreement are true and correct at
and as of the Closing Date (except with respect to representations and
warranties in respect of each Preliminary Prospectus which are in each
case as of its date of issuance) and the Fund and the Manager, as the
case may be, have each complied with all the agreements and satisfied all
the conditions on their respective parts to be performed or satisfied at
or prior to the Closing Date.
(ix) The Fund and the Manager shall have furnished to the Underwriter
such additional certificates as the Underwriter may have reasonably
requested as to the accuracy, at and as of the Closing Date, of the
representations and warranties herein, as to the performance of their
obligations hereunder and as to other conditions concurrent and precedent to
the obligations of the Underwriter hereunder.
If any of the conditions hereinabove provided for in this Section shall not
have been fulfilled when and as required by this Agreement, this Agreement may
be terminated by the Underwriter by notifying the Fund of such termination in
writing or by telegram at or prior to the Closing Date, but the Underwriter
shall be entitled to waive any of such conditions.
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10. EFFECTIVE DATE. This Agreement shall become effective at 11:00 A.M.,
New York time, on the first full business day following the effective date under
the 1933 Act of the Registration Statement, or at such earlier time after such
effective date of the Registration Statement as the Underwriter in its
discretion shall first release the Shares for offering to the public; provided,
however, that the provisions of Section 6 and 7 shall at all time be effective.
For the purpose of this Section 10, the Shares shall be deemed to have been
released to the public upon release by the underwriter of the publication of a
newspaper advertisement relating to the Shares or upon release of telegrams or
letters offering the Shares for sale to securities dealers, whichever shall
first occur.
11. TERMINATION. This Agreement may be terminated by the Fund at any time
before it becomes effective in accordance with Section 10 by notice from the
Fund to the Underwriter and may be terminated by the Underwriter at any time
before it becomes effective in accordance with Section 10 by notice from the
Underwriter to the Fund. In the event of any termination of this Agreement under
this or any other provision of this Agreement, there shall be no liability of
any party to this Agreement to any other party, other than as provided in
Sections 6 and 7.
This Agreement may be terminated after it becomes effective by the
Underwriter by notice to the Fund (i) if at or prior to the Closing Date trading
in securities on the New York or American Stock Exchanges shall have been
suspended or minimum or maximum price shall have been established on either
exchange, or a banking moratorium shall have been declared by State of New York
or United States authorities; (ii) if at or prior to the Closing Date there
shall have been an outbreak of hostilities between the United States and any
foreign power, or of any other insurrection or armed conflict involving the
United States which, in the judgment of the Underwriter, makes it impracticable
or inadvisable to offer or sell the Shares; (iii) if there shall have been any
material adverse development or prospective development involving particularly
the business of the Fund or the transactions contemplated by this Agreement,
which in the judgment of the Underwriter, makes it impracticable or inadvisable
to offer or deliver the Shares on the terms contemplated by the Prospectus; (iv)
if there shall be any litigation, pending or threatened, which in the judgment
of the Underwriter makes it impracticable or inadvisable to offer or deliver the
Shares on the terms contemplated by the Prospectus; or (v) if at or prior to the
Closing Date there has been a material adverse change in the levels of equity
securities prices as reflected by the recognized indices of such prices, as
compared with such levels available as of the date of this Agreement. Any such
termination shall be without liability of any party to any party except as
provided in Sections 6 and 7 hereof.
12. NOTICES. All communications hereunder shall be in writing and, if sent
to the Underwriter shall be mailed, delivered or telegraphed and confirmed to
you, at Dean Witter Distributors Inc., Two World Trade Center, New York, New
York 10048, or, if sent to the Fund, shall be mailed, delivered or telegraphed
and confirmed to Dean Witter "Competitive Edge" Fund, Two World Trade Center,
New York, New York 10048, Attention: General Counsel, or, if sent to the Manager
shall be mailed, delivered or telegraphed and confirmed to Dean Witter
InterCapital Inc., Two World Trade Center, New York, New York 10048, Attention:
General Counsel.
13. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Fund, the Manager and the Adviser and their
respective successors and legal representatives. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person other
than the persons mentioned in the preceding sentence any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties
and indemnities of the Fund, the Manager and the Adviser contained in this
Agreement shall also be for the benefit of the person or persons, if any, who
control the Underwriter within the meaning of Section 15 of the 1933 Act, their
respective successors and legal representatives, and the indemnities of the
Underwriter shall also be for the benefit of each Trustee of the Fund, each of
the officers of the Fund who has signed the Registration Statement and the
Manager and the Adviser and the person or persons, if any, who control the Fund
and the Manager within the meaning of Section 15 of the 1933 Act.
11
<PAGE>
14. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15. PERSONAL LIABILITY. The Declaration of Trust establishing Dean Witter
"Competitive Edge" Fund, dated October 16, 1997, a copy of which, together with
all other amendments thereto (the "Declaration"), is on file in the office of
The Commonwealth of Massachusetts, provides that the name Dean Witter
"Competitive Edge" Fund refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally, and no Trustees,
shareholder, officer, employee or agent of Dean Witter "Competitive Edge" Fund
shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise,
in connection with the affairs of Dean Witter "Competitive Edge" Fund, but the
Trust Estate only shall be liable.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose in a
counterpart of this letter, whereupon this letter and your acceptance in such
counterpart shall constitute a binding agreement between us.
Very truly yours,
DEAN WITTER "COMPETITIVE EDGE" FUND
By: ..................................
DEAN WITTER INTERCAPITAL INC.,
as Manager
By: ..................................
Accepted and delivered in New York, New York
as of the date first above written.
DEAN WITTER DISTRIBUTORS INC.
By: ..................................
12
<PAGE>
CUSTODY AGREEMENT
Agreement made as of this day of , 1997,
between DEAN WITTER "COMPETITIVE EDGE" FUND, a Massachusetts
business trust organized and existing under the laws of the
Commonwealth of Massachusetts, having its principal office and
place of business at 2 World Trade Center, New York, New York
10048 (hereinafter called the "Fund"), and THE BANK OF NEW
YORK, a New York corporation authorized to do a banking
business, having its principal office and place of business at
48 Wall Street, New York, New York 10286 (hereinafter called
the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as
follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, shall have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all
Appendices and Certifications described in the Exhibits
delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether
or not such person is an Officer or employee of the Fund, duly
authorized by the Board of Trustees of the Fund to give Oral
Instructions and Written Instructions on behalf of the Fund
and listed in the Certificate annexed hereto as Appendix A or
such other Certificate as may be received by the Custodian
from time to time, provided that each person who is designated
in any such Certificate as an "Officer of DWTC" shall be an
Authorized Person only for purposes of Articles XII and XIII
hereof.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
<PAGE>
4. "Call Option" shall mean an exchange traded option
with respect to Securities other than Index, Futures
Contracts, and Futures Contract Options entitling the holder,
upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the
specified underlying instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually
received (irrespective of constructive receipt) by the
Custodian and signed on behalf of the Fund by any two Offic-
ers, and the term Certificate shall also include Instructions.
6. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or
any broker-dealer reasonably believed by the Custodian to be
such a clearing member.
7. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of any Put Option guarantee let-
ter or similar document described in paragraph 8 of Article V
herein.
8. "Composite Currency Unit" shall mean the European
Currency Unit or any other composite unit consisting of the
aggregate of specified amounts of specified Currencies as such
unit may be constituted from time to time.
9. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment
of the exercise price, as specified therein, to purchase from
the writer thereof the specified underlying instruments, cur-
rency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
10. "Currency" shall mean money denominated in a lawful
currency of any country or the European Currency Unit.
11. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its
nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identi-
fied in a certified copy of a resolution of the Fund's Board
of Trustees specifically approving deposits therein by the
Custodian.
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<PAGE>
12. "Financial Futures Contract" shall mean the firm
commitment to buy or sell financial instruments on a U.S. com-
modities exchange or board of trade at a specified future time
at an agreed upon price.
13. "Futures Contract" shall mean a Financial Futures
Contract and/or Index Futures Contracts.
14. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
15. "FX Transaction" shall mean any transaction for the
purchase by one party of an agreed amount in one Currency
against the sale by it to the other party of an agreed amount
in another Currency.
16. "Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
index at the close of the last business day of the contract
and the price at which the futures contract is originally
struck.
17. "Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference
between the exercise price and the value of the index on the
date of exercise.
18. "Instructions" shall mean instructions
communications transmitted by electronic or telecommunications
media including S.W.I.F.T., computer-to-computer interface,
dedicated transmission line, facsimile transmission (which may
be signed by an Officer or unsigned) and tested telex.
19. "Investment Company Act of 1940" shall mean the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
20. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or
a Clearing Member, or in the name of the Fund for the benefit
of a broker, dealer, futures commission merchant, or Clearing
Member, or otherwise, in accordance with an agreement between
the Fund, the Custodian and a broker, dealer, futures commis-
sion merchant or a Clearing Member (a "Margin Account Agree-
ment"), separate and distinct from the custody account, in
which certain Securities and/or money of the Fund shall be
deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or a
Depository shall be deemed to have been deposited in, or
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<PAGE>
withdrawn from, a Margin Account upon the Custodian's effect-
ing an appropriate entry in its books and records.
21. "Money Market Security" shall mean all instruments
and obligations commonly known as a money market instruments,
where the purchase and sale of such securities normally
requires settlement in federal funds on the same day as such
purchase or sale, including, without limitation, certain
Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and/or principal by the government
of the United States or agencies or instrumentalities thereof,
any tax, bond or revenue anticipation note issued by any state
or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase
agreements with respect to Securities and bank time deposits.
22. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.
23. "Officers" shall mean the President, any Vice
President, the Secretary, the Clerk, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Clerk, any
Assistant Treasurer, and any other person or persons, whether
or not any such other person is an officer or employee of the
Fund, but in each case only if duly authorized by the Board of
Trustees of the Fund to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund and listed in
the Certificate annexed hereto as Appendix B or such other
Certificate as may be received by the Custodian from time to
time; provided that each person who is designated in any such
Certificate as holding the position of "Officer of DWTC" shall
be an Officer only for purposes of Articles XII and XIII
hereof.
24. "Option" shall mean a Call Option, Covered Call Op-
tion, Index Option and/or a Put Option.
25. "Oral Instructions" shall mean verbal instructions
actually received (irrespective of constructive receipt) by
the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized
Person.
26. "Put Option" shall mean an exchange traded option
with respect to instruments, currency, or Securities other
than Index Options, Futures Contracts, and Futures Contract
Options entitling the holder, upon timely exercise and tender
of the specified underlying instruments, currency, or Securi-
ties, to sell such instruments, currency, or Securities to the
writer thereof for the exercise price.
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<PAGE>
27. "Reverse Repurchase Agreement" shall mean an agree-
ment pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date
and price.
28. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Op-
tions, Index Options, Index Futures Contracts, Index Futures
Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, over
the counter options on Securities, common stocks and other
securities having characteristics similar to common stocks,
preferred stocks, debt obligations issued by state or
municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds,
industrial bonds and industrial development bonds), bonds,
debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights
or interest therein, or rights to any property or assets.
29. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the
terms of this Agreement as a segregated account, by recorda-
tion or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may
from time to time determine.
30. "Series" shall mean the various portfolios, if any,
of the Fund as described from time to time in the current and
effective prospectus for the Fund, except that if the Fund
does not have more than one portfolio, "Series" shall mean the
Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only
one portfolio.
31. "Shares" shall mean the shares of beneficial inter-
est of the Fund and its Series.
32. "Transfer Agent" shall mean Dean Witter Trust
Company, a New Jersey limited purpose trust company, its suc-
cessors and assigns.
33. "Transfer Agent Account" shall mean any account in
the name of the Transfer Agent maintained with The Bank of New
York pursuant to a Cash Management and Related Services Agree-
ment between The Bank of New York and the Transfer Agent.
34. "Written Instructions" shall mean written communica-
tions actually received (irrespective of constructive receipt)
-5-
<PAGE>
by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized
Person by telex or any other such system whereby the receiver
of such communications is able to verify by codes or otherwise
with a reasonable degree of certainty the identity of the
sender of such communication.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of the Securities and money at any time
owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to
be delivered to the Custodian all Securities and all money
owned by it, at any time during the period of this Agreement,
and shall specify with respect to such Securities and money
the Series to which the same are specifically allocated, and
the Custodian shall not be responsible for any Securities or
money not so delivered. The Custodian shall physically
segregate, keep and maintain the Securities of the Series
separate and apart from each other Series and from other as-
sets held by the Custodian. Except as otherwise expressly
provided in this Agreement, the Custodian will not be
responsible for any Securities and money not actually received
by it, unless the Custodian has been negligent or has engaged
in willful misconduct with respect thereto. The Custodian
will be entitled to reverse any credits of money made on the
Fund's behalf where such credits have been previously made and
money are not finally collected, unless the Custodian has been
negligent or has engaged in willful misconduct with respect
thereto. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially
in the form of Exhibit A hereto, approving, authorizing and
instructing the Custodian on a continuous and ongoing basis to
deposit in the Book-Entry System all Securities eligible for
deposit therein, regardless of the Series to which the same
are specifically allocated and to utilize the Book-Entry
System to the extent possible in connection with its
-6-
<PAGE>
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of
Securities, loans of Securities and deliveries and returns of
Securities collateral. Prior to a deposit of Securities
specifically allocated to a Series in any Depository, the Fund
shall deliver to the Custodian a certified resolution of the
Board of Trustees of the Fund, substantially in the form of
Exhibit B hereto, approving, authorizing and instructing the
Custodian on a continuous and ongoing basis until instructed
to the contrary by a Certificate to deposit in such Depository
all Securities specifically allocated to such Series eligible
for deposit therein, and to utilize such Depository to the
extent possible with respect to such Securities in connection
with its performance hereunder, including, without limitation,
in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and money deposited in
either the Book-Entry System or a Depository will be
represented in accounts which include only assets held by the
Custodian for customers, including, but not limited to,
accounts in which the Custodian acts in a fiduciary or
representative capacity and will be specifically allocated on
the Custodian's books to the separate account for the
applicable Series. Prior to the Custodian's accepting,
utilizing and acting with respect to Clearing Member confirma-
tions for Options and transactions in Options for a Series as
provided in this Agreement, the Custodian shall have received
a certified resolution of the Fund's Board of Trustees,
substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and
ongoing basis, until instructed to the contrary by a
Certificate, to accept, utilize and act in accordance with
such confirmations as provided in this Agreement with respect
to such Series. All securities are to be held or disposed of
by the Custodian for, and subject at all times to the
instructions of, the Fund pursuant to the terms of this
Agreement. The Custodian shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement,
and shall have the sole power to release and deliver Securi-
ties held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all money received by it for
the account of the Fund with respect to such Series. Such
money will be held in such manner and account as the Fund and
the Custodian shall agree upon in writing from time to time.
Money credited to a separate account for a Series shall be
subject only to drafts, orders, or charges of the Custodian
pursuant to this Agreement and shall be disbursed by the
Custodian only:
(a) As hereinafter provided;
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<PAGE>
(b) Pursuant to Resolutions of the Fund's Board of
Trustees certified by an Officer and by the Secretary or As-
sistant Secretary of the Fund setting forth the name and ad-
dress of the person to whom the payment is to be made, the
Series account from which payment is to be made, the purpose
for which payment is to be made, and declaring such purpose to
be a proper corporate purpose; provided, however, that amounts
representing dividends or distributions with respect to
Shares shall be paid only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series and authorized by this Agreement; or
(d) Pursuant to Certificates to pay interest,
taxes, management fees or operating expenses (including,
without limitation thereto, Board of Trustees' fees and
expenses, and fees for legal accounting and auditing
services), which Certificates set forth the name and address
of the person to whom payment is to be made, state the purpose
of such payment and designate the Series for whose account the
payment is to be made.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary, on a per Series basis, of all transfers to or from
the account of the Fund for a Series, either hereunder or with
any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are
transferred to the account of the Fund for a Series but held
in a Depository, the Custodian shall upon such transfer also
by book-entry or otherwise identify such Securities as
belonging to such Series in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or
shown on the Custodian's account on the books of the
Book-Entry System or the Depository. At least monthly and
from time to time, the Custodian shall furnish the Fund with a
detailed statement, on a per Series basis, of the Securities
and money held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the
Custodian hereunder, which are issued or issuable only in
bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that
form; all other Securities held hereunder may be registered in
the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry
System or a Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in
the name of its registered nominee or in the name of the
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<PAGE>
Book-Entry System or a Depository any Securities which it may
hold hereunder and which may from time to time be registered
in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not
held in the Book-Entry System or in a Depository in a separate
account in the name of such Series physically segregated at
all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with
preceding paragraph 4:
(a) Promptly collect all income and dividends due
or payable;
(b) Promptly give notice to the Fund and promptly
present for payment and collect the amount of money or other
consideration payable upon such Securities which are called,
but only if either (i) the Custodian receives a written notice
of such call, or (ii) notice of such call appears in one or
more of the publications listed in Appendix D annexed hereto,
which may be amended at any time by the Custodian without the
prior consent of the Fund, provided the Custodian gives prior
notice of such amendment to the Fund;
(c) Promptly present for payment and collect for
the Fund's account the amount payable upon all Securities
which mature;
(d) Promptly surrender Securities in temporary form
in exchange for definitive Securities;
(e) Promptly execute, as custodian, any necessary
declarations or certificates of ownership under the Federal
Income Tax Laws or the laws or regulations of any other taxing
authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System
or the Depository with respect to Securities therein
deposited, for the account of a Series, all rights and similar
securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, prox-
ies, proxy soliciting materials, consents and other written
information (including, without limitation, notices of tender
offers and exchange offers, pendency of calls, maturities of
Securities and expiration of rights) relating to Securities
held pursuant to this Agreement which are actually received by
the Custodian, such proxies and other similar materials to be
-9-
<PAGE>
executed by the registered holder (if Securities are
registered otherwise than in the name of the Fund), but
without indicating the manner in which proxies or consents are
to be voted.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:
(a) Promptly execute and deliver to such persons as
may be designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby the author-
ity of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder
for the Series specified in such Certificate in exchange for
other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any right, warrant or conversion privilege and
receive and hold hereunder specifically allocated to such
Series any cash or other Securities received in exchange;
(c) Promptly deliver any Securities held hereunder
for the Series specified in such Certificate to any protective
committee, reorganization committee or other person in connec-
tion with the reorganization, refinancing, merger, consolida-
tion, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such
Series in exchange therefor such certificates of deposit,
interim receipts or other instruments or documents as may be
issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the
amount payable upon Securities which may be called as
specified in the Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain posses-
sion of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until
after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments
or certificates are available. The Fund shall deliver to the
Custodian such a Certificate no later than the business day
preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall
comply with Section 17(f) of the Investment Company Act of
1940 in connection with the purchase, sale, settlement, clos-
ing out or writing of Futures Contracts, Options, or Futures
Contract Options by making payments or deliveries specified in
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<PAGE>
Certificates in connection with any such purchase, sale,
writing, settlement or closing out upon its receipt from a
broker, dealer, or futures commission merchant of a statement
or confirmation reasonably believed by the Custodian to be in
the form customarily used by brokers, dealers, or future
commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be,
confirming that such Security is held by such broker, dealer
or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from
the Margin Account and payments with respect to Securities to
which a Margin Account relates, shall be made in accordance
with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision
in this Agreement to the contrary, make payment for any
Futures Contract, Option, or Futures Contract Option for which
such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or
such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such
certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of
Securities by the Fund, other than a purchase of an Option, a
Futures Contract, or a Futures Contract Option, the Fund shall
deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate, Oral Instructions or Writ-
ten Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the
title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d)
the date of purchase and settlement; (e) the purchase price
per unit; (f) the total amount payable upon such purchase; (g)
the name of the person from whom or the broker through whom
the purchase was made, and the name of the clearing broker, if
any; and (h) the name of the broker to whom payment is to be
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<PAGE>
made. The Custodian shall, upon receipt of such Securities
purchased by or for the Fund, pay to the broker specified in
the Certificate out of the money held for the account of such
Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set
forth in such Certificate, Oral Instructions or Written
Instructions.
2. Promptly after each execution of a sale of Securi-
ties by the Fund, other than a sale of any Option, Futures
Contract, Futures Contract Option, or any Reverse Repurchase
Agreement, the Fund shall deliver such to the Custodian (i)
with respect to each sale of Securities which are not Money
Market Securities, a Certificate, and (ii) with respect to
each sale of Money Market Securities, a Certificate, Oral
Instructions or Written Instructions, specifying with respect
to each such sale: (a) the Series to which such Securities
were specifically allocated; (b) the name of the issuer and
the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest, if any; (d) the
date of sale and settlement; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the
name of the broker through whom or the person to whom the sale
was made, and the name of the clearing broker, if any; and (h)
the name of the broker to whom the Securities are to be
delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series
to the broker in accordance with generally accepted street
practices and as specified in the Certificate upon receipt of
the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set
forth in such Certificate, Oral Instructions or Written
Instructions.
ARTICLE V.
OPTIONS
1. Promptly after each execution of a purchase of any
Option by the Fund other than a closing purchase transaction
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to each Option purchased: (a) the Series to
which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or
Security underlying such Option and the number of Options, or
the name of the in the case of an Index Option, the index to
which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the total amount
payable by the Fund in connection with such purchase; and (h)
the name of the Clearing Member through whom such Option was
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purchased. The Custodian shall pay, upon receipt of a Clear-
ing Member's statement confirming the purchase of such Option
held by such Clearing Member for the account of the Custodian
(or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of money held for
the account of the Series to which such Option is to be
specifically allocated, the total amount payable upon such
purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount pay-
able as set forth in such Certificate.
2. Promptly after the execution of a sale of any Option
purchased by the Fund, other than a closing sale transaction,
pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which such Option was specifically
allocated; (b) the type of Option (put or call); (c) the
instrument, currency, or Security underlying such Option and
the number of Options, or the name of the issuer and the title
and number of shares subject to such Option or, in the case of
a Index Option, the index to which such Option relates and the
number of Index Options sold; (d) the date of sale; (e) the
sale price; (f) the date of settlement; (g) the total amount
payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian
shall consent to the delivery of the Option sold by the Clear-
ing Member which previously supplied the confirmation
described in preceding paragraph 1 of this Article with
respect to such Option against payment to the Custodian of the
total amount payable to the Fund, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Call Option: (a) the Series to which
such Call Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the
Call Option; (c) the expiration date; (d) the date of exercise
and settlement; (e) the exercise price per share; (f) the
total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call
Option was exercised. The Custodian shall, upon receipt of
the Securities underlying the Call Option which was exercised,
pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total
amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the
total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof,
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<PAGE>
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Put Option: (a) the Series to which
such Put Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the
Put Option; (c) the expiration date; (d) the date of exercise
and settlement; (e) the exercise price per share; (f) the
total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Op-
tion was exercised. The Custodian shall, upon receipt of the
amount payable upon the exercise of the Put Option, deliver or
direct a Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the
amount payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Index
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Index Option: (a) the Series to which
such Index Option was specifically allocated; (b) the type of
Index Option (put or call); (c) the number of Options being
exercised; (d) the index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the total amount
to be received by the Fund in connection with such exercise;
and (h) the Clearing Member from whom such payment is to be
received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series for which such Covered Call Option was written; (b) the
name of the issuer and the title and number of shares for
which the Covered Call Option was written and which underlie
the same; (c) the expiration date; (d) the exercise price; (e)
the premium to be received by the Fund; (f) the date such
Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received.
The Custodian shall deliver or cause to be delivered, in
exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Op-
tions and shall impose, or direct a Depository to impose, upon
the underlying Securities specified in the Certificate
specifically allocated to such Series such restrictions as may
be required by such receipts. Notwithstanding the foregoing,
the Custodian has the right, upon prior written notification
to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
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<PAGE>
the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the is-
suer and the title and number of shares subject to the Covered
Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount pay-
able to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6
of this Article, the Custodian shall deliver, or direct a
Depository to deliver, the underlying Securities as specified
in the Certificate against payment of the amount to be
received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing with respect to such Put Option: (a) the Series for which
such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Put Option is written; (g) the name of
the Clearing Member through whom the premium is to be received
and to whom a Put Option guarantee letter is to be delivered;
(h) the amount of cash, and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and
(i) the amount of cash and/or the amount and kind of Securi-
ties specifically allocated to such Series to be deposited
into the Collateral Account for such Series. The Custodian
shall, after making the deposits into the Collateral Account
specified in the Certificate, issue a Put Option guarantee
letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member
specified in the Certificate against receipt of the premium
specified in said Certificate. Notwithstanding the foregoing,
the Custodian shall be under no obligation to issue any Put
Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject
to the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the total amount
payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically al-
located to such Series to be withdrawn from the Collateral
Account for such Series and (f) the amount of cash and/or the
amount and kind of Securities, specifically allocated to such
Series, if any, to be withdrawn from the Senior Security Ac-
count. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian
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<PAGE>
in connection with such Put Option, the Custodian shall pay
out of the money held for the account of the Series to which
such Put Option was specifically allocated the total amount
payable to the Clearing Member specified in the Certificate as
set forth in such Certificate, against delivery of such
Securities, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes an Index Option, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing with respect to such Index Option: (a) the Series for
which such Index Option was written; (b) whether such Index
Option is a put or a call; (c) the number of options written;
(d) the index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through
whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series
to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be
deposited in a Margin Account, and the name in which such ac-
count is to be or has been established. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such
receipts, if any, which the Custodian has specifically agreed
to issue, which are in accordance with the customs prevailing
among Clearing Members in Index Options and make the deposits
into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever an Index Option written by the Fund and
described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Index Option: (a)
the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option
being exercised; (c) the Clearing Member through whom such
Index Option is being exercised; (d) the total amount payable
upon such exercise, and whether such amount is to be paid by
or to the Fund; (e) the amount of cash and/or amount and kind
of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from
the Collateral Account for such Series. Upon the return
and/or cancellation of the receipt, if any, delivered pursuant
to the preceding paragraph of this Article, the Custodian
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<PAGE>
shall pay out of the money held for the account of the Series
to which such Stock Index Option was specifically allocated to
the Clearing Member specified in the Certificate the total
amount payable, if any, as specified therein.
12. Promptly after the execution of a purchase or sale
by the Fund of any Option identical to a previously written
Option described in paragraphs, 6, 8 or 10 of this Article in
a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall
promptly deliver to the Custodian a Certificate specifying
with respect to the Option being purchased: (a) that the
transaction is a Closing Purchase Transaction or a Closing
Sale Transaction; (b) the Series for which the Option was
written; (c) the instrument, currency, or Security subject to
the Option, or, in the case of an Index Option, the index to
which such Option relates and the number of Options held; (d)
the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g)
the type of Option (put or call); (h) the date of such
purchase or sale; (i) the name of the Clearing Member to whom
the premium is to be paid or from whom the amount is to be
received; and (j) the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the
Collateral Account, a specified Margin Account, or the Senior
Security Account for such Series. Upon the Custodian's
payment of the premium or receipt of the amount, as the case
may be, specified in the Certificate and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8
or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction or the
Closing Sale Transaction, the Custodian shall remove, or
direct a Depository to remove, the previously imposed
restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option
purchased or written by the Fund and described in this
Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3
Article III herein, and upon the return and/or cancellation of
any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, and the Margin Ac-
count and/or the Senior Security Account as may be specified
in a Certificate received in connection with such expiration,
exercise, or consummation.
14. Securities acquired by the Fund through the exercise
of an Option described in this Article shall be subject to
Article IV hereof.
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<PAGE>
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract,
(or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is
being entered; (b) the category of Futures Contract (the name
of the underlying index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the
delivery or settlement date of the Futures Contract(s); (e)
the date the Futures Contract(s) was (were) entered into and
the maturity date; (f) whether the Fund is buying (going long)
or selling (going short) such Futures Contract(s); (g) the
amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such
Series; (h) the name of the broker, dealer, or futures commis-
sion merchant through whom the Futures Contract was entered
into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian
shall make the deposits, if any, to the Margin Account in ac-
cordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commis-
sion, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash
and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or
futures commission merchant with respect to an outstanding
Futures Contract shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agree-
ment.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the
Fund with respect to an outstanding Futures Contract shall be
received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver to
the Custodian prior to the delivery or settlement date a
Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index
Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract,
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<PAGE>
the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission
merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be
withdrawn from the Senior Security Account for such Series.
The Custodian shall make the payment or delivery specified in
the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a
Certificate specifying: (a) the items of information required
in a Certificate described in paragraph 1 of this Article, and
(b) the Futures Contract being offset. The Custodian shall
make payment out of the money specifically allocated to such
Series of the fee or commission, if any, specified in the
Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3
of Article III herein, and make such withdrawals from the
Senior Security Account for such Series as may be specified in
such Certificate. The withdrawals, if any, to be made from
the Margin Account shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any
Futures Contract Option by the Fund, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series to which such Option
is specifically allocated; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the amount of
premium to be paid by the Fund upon such purchase; (h) the
name of the broker or futures commission merchant through whom
such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made.
The Custodian shall pay out of the money specifically al-
located to such Series the total amount to be paid upon such
purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
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<PAGE>
2. Promptly after the execution of a sale of any
Futures Contract Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically
allocated; (b) the type of Future Contract Option (put or
call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures
Contract underlying the Futures Contract Option; (d) the date
of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h)
the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being closed
against payment to the Custodian of the total amount payable
to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the
Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Op-
tion was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d)
the date of exercise; (e) the name of the broker or futures
commission merchant through whom the Futures Contract Option
is exercised; (f) the net total amount, if any, payable by the
Fund; (g) the amount, if any, to be received by the Fund; and
(h) the amount of cash and/or the amount and kind of Securi-
ties to be deposited in the Senior Security Account for such
Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments
of money, if any, and the deposits of Securities, if any, into
the Senior Security Account as specified in the Certificate.
The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a)
the Series for which such Futures Contract Option was written;
(b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the expiration date; (e) the
exercise price; (f) the premium to be received by the Fund;
(g) the name of the broker or futures commission merchant
through whom the premium is to be received; and (h) the amount
of cash and/or the amount and kind of Securities, if any, to
be deposited in the Senior Security Account for such Series.
The Custodian shall, upon receipt of the premium specified in
the Certificate, make out of the money and Securities
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<PAGE>
specifically allocated to such Series the deposits into the
Senior Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the name of the broker or futures
commission merchant through whom such Futures Contract Option
was exercised; (e) the net total amount, if any, payable to
the Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited
in the Senior Security Account for such Series. The Custodian
shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in such Certificate make the payments,
if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any,
to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which such Option was specifically al-
located; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commis-
sion merchant through whom such Futures Contract Option is
exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount and
kind of Securities and/or cash to be withdrawn from or
deposited in, the Senior Security Account for such Series, if
any. The Custodian shall, upon its receipt of the net total
amount payable to the Fund, if any, specified in the
Certificate, make out of the money and Securities specifically
allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Promptly after the execution by the Fund of a
purchase of any Futures Contract Option identical to a previ-
ously written Futures Contract Option described in this
Article in order to liquidate its position as a writer of such
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<PAGE>
Futures Contract Option, the Fund shall deliver to the
Custodian a Certificate specifying with respect to the Futures
Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is
a closing transaction; (c) the type of Future Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d)
the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h)
the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for
such Series. The Custodian shall effect the withdrawals from
the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Op-
tion written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdraw-
als from and/or in the case of an exercise such deposits into
the Senior Security Account as may be specified in a
Certificate. The deposits to and/or withdrawals from the
Margin Account, if any, shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this
Article shall be subject to Article VI hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after the execution of any short sales of
Securities by any Series of the Fund, the Fund shall deliver
to the Custodian a Certificate specifying: (a) the Series for
which such short sale was made; (b) the name of the issuer and
the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest or dividends, if
any; (d) the dates of the sale and settlement; (e) the sale
price per unit; (f) the total amount credited to the Fund upon
such sale, if any, (g) the amount of cash and/or the amount
and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has
been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in
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<PAGE>
a Senior Security Account, and (i) the name of the broker
through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon
such sale, if any, as specified in the Certificate is held by
such broker for the account of the Custodian (or any nominee
of the Custodian) as custodian of the Fund, issue a receipt or
make the deposits into the Margin Account and the Senior
Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to
close-out any short sale of Securities, the Fund shall
promptly deliver to the Custodian a Certificate specifying
with respect to each such closing out: (a) the Series for
which such transaction is being made; (b) the name of the is-
suer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if
any, required to effect such closing-out to be delivered to
the broker; (d) the dates of closing-out and settlement; (e)
the purchase price per unit; (f) the net total amount payable
to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of
cash and the amount and kind of Securities to be withdrawn, if
any, from the Margin Account; (i) the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account; and (j) the name of the
broker through whom the Fund is effecting such closing-out.
The Custodian shall, upon receipt of the net total amount pay-
able to the Fund upon such closing-out, and the return and/or
cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of
the money held for the account of the Fund to the broker the
net total amount payable to the broker, and make the withdraw-
als from the Margin Account and the Senior Security Account,
as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement
is a Money Market Security, a Certificate, Oral Instructions,
or Written Instructions specifying: (a) the Series for which
the Reverse Repurchase Agreement is entered; (b) the total
amount payable to the Fund in connection with such Reverse
Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with
whom the Reverse Repurchase Agreement is entered; (d) the
amount and kind of Securities to be delivered by the Fund to
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such broker, dealer, or financial institution; (e) the date of
such Reverse Repurchase Agreement; and (f) the amount of cash
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of
the total amount payable to the Fund specified in the
Certificate, Oral Instructions, or Written Instructions make
the delivery to the broker, dealer, or financial institution
and the deposits, if any, to the Senior Security Account,
specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall promptly deliver a Certificate or, in the event
such Reverse Repurchase Agreement is a Money Market Security,
a Certificate, Oral Instructions, or Written Instructions to
the Custodian specifying: (a) the Reverse Repurchase Agreement
being terminated and the Series for which same was entered;
(b) the total amount payable by the Fund in connection with
such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series
in connection with such termination; (d) the date of termina-
tion; (e) the name of the broker, dealer, or financial
institution with whom the Reverse Repurchase Agreement is to
be terminated; and (f) the amount of cash and/or the amount
and kind of Securities to be withdrawn from the Senior Securi-
ties Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by
the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make the payment to the broker, dealer,
or financial institution and the withdrawals, if any, from the
Senior Security Account, specified in such Certificate, Oral
Instructions, or Written Instructions.
3. The Certificates, Oral Instructions, or Written
Instructions described in paragraphs 1 and 2 of this Article
may with respect to any particular Reverse Repurchase Agree-
ment be combined and delivered to the Custodian at the time of
entering into such Reverse Repurchase Agreement.
ARTICLE X.
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian
hereunder, the Fund shall deliver or cause to be delivered to
the Custodian a Certificate specifying with respect to each
such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
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title of the Securities, (c) the number of shares or the
principal amount loaned, (d) the date of loan and delivery,
(e) the total amount to be delivered to the Custodian against
the loan of the Securities, including the amount of cash col-
lateral and the premium, if any, separately identified, and
(f) the name of the broker, dealer, or financial institution
to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the
total amount designated in the Certificate as to be delivered
against the loan of Securities. The Custodian may accept pay-
ment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certi-
fied or bank cashier's check payable to the order of the Fund
or the Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with
respect to each such loan termination and return of Securi-
ties: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities to be returned, (c) the number of
shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities
minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned
from the broker, dealer, or financial institution to which
such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the
total amount payable upon such return of Securities as set
forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Ac-
count and from time to time make such deposits thereto, or
withdrawals therefrom, as specified in a Certificate. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior
Security Account for such Series. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and the number of shares or the principal
amount of any particular Securities to be deposited by the
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Custodian into, or withdrawn from, a Senior Securities Ac-
count, the Custodian shall be under no obligation to make any
such deposit or withdrawal and shall promptly notify the Fund
that no such deposit has been made.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose
benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any
Margin Account shall be dealt with in accordance with the
terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by
the Custodian in any Collateral Account described herein. In
accordance with applicable law the Custodian may enforce its
lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option
guarantee letter or similar document or any receipt issued
hereunder by the Custodian. In the event the Custodian should
realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency
shall be a debt owed the Custodian by the Fund within the
scope of Article XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close
of business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker,
dealer, or futures commission merchant specified in the name
of a Margin Account a copy of the statement furnished the Fund
with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account
and from time to time shall make such deposits thereto as may
be specified in a Certificate. Promptly after the close of
business on each business day in which cash and/or Securities
are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect
to such Collateral Account specifying the amount of cash
and/or the amount and kind of Securities held therein. No
later than the close of business next succeeding the delivery
to the Fund of such statement, the Fund shall furnish to the
Custodian a Certificate or Written Instructions specifying the
then market value of the Securities described in such state-
ment. In the event such then market value is indicated to be
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less than the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar document,
the Fund shall promptly specify in a Certificate the ad-
ditional cash and/or Securities to be deposited in such Col-
lateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of
the resolution of the Board of Trustees of the Fund, certified
by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, either (i) setting forth with respect to the
Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall
be determined, the amount payable per Share of such Series to
the shareholders of record as of that date and the total
amount payable to the Dividend Agent and any sub-dividend
agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein
and the declaration of dividends and distributions thereon
the Custodian to rely on Oral Instructions, Written Instruc-
tions, or a Certificate setting forth the date of the declara-
tion of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of
such Series to the shareholders of record as of that date and
the total amount payable to the Dividend Agent on the payment
date.
2. Upon the payment date specified in such resolution,
Oral Instructions, Written Instructions, or Certificate, as
the case may be, the Custodian shall pay to the Transfer Agent
Account out of the money held for the account of the Series
specified therein the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the
Fund with respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver or cause to be delivered, to the Custodian a
Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
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(b) The amount of money to be received by the
Custodian for the sale of such Shares and specifically al-
located to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account
in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series the
Custodian shall pay, out of the money held for the account of
such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish, or cause to be furnished, to the
Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in
good form for redemption, the Custodian shall make payment to
the Transfer Agent Account out of the money held in the
separate account in the name of the Series the total amount
specified in the Certificate issued pursuant to the foregoing
paragraph 4 of this Article.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion
advance funds on behalf of any Series which results in an
overdraft because the money held by the Custodian in the
separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a
Certificate, Oral Instructions, or Written Instructions or
which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series,
(except a borrowing for investment or for temporary or
emergency purposes using Securities as collateral pursuant to
a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness
shall be deemed to be a loan made by the Custodian to the Fund
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for such Series payable on demand and shall bear interest from
the date incurred at a rate per annum (based on a 360-day year
for the actual number of days involved) equal to the Federal
Funds Rate plus 1/2%, such rate to be adjusted on the effec-
tive date of any change in such Federal Funds Rate but in no
event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien,
security interest, and security entitlement in and to any
property including any investment property or any financial
asset specifically allocated to such Series at any time held
by it for the benefit of such Series or in which the Fund may
have an interest which is then in the Custodian's possession
or control or in possession or control of any third party
acting in the Custodian's behalf. The Fund authorizes the
Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due
thereon against any money balance of account standing to such
Series' credit on the Custodian's books. In addition, the
Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/
or otherwise borrow from a third party, or which next succeeds
a Business Day on which at the close of business the Fund had
outstanding a Reverse Repurchase Agreement or such a borrow-
ing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify
the Series to which the same relates, and shall not incur any
indebtedness, including pursuant to any Reverse Repurchase
Agreement, not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such
borrowing: (a) the Series to which such borrowing relates; (b)
the name of the bank, (c) the amount and terms of the borrow-
ing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other
loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan
becomes due and payable, (f) the total amount payable to the
Fund on the borrowing date, (g) the market value of Securities
to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a
statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
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borrowing date specified in a Certificate the specified col-
lateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may,
at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such
Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities
released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in a Certificate the
Series, the name of the issuer, the title and number of shares
or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, to any such bank,
the Custodian shall not be under any obligation to deliver any
Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the
Custodian to a Fund in order for the Fund to transmit
Instructions to the Custodian (the "Software"), the Custodian
grants to such Fund a personal, nontransferable and
nonexclusive license to use the Software solely for the
purpose of transmitting Instructions to, and receiving
communications from, the Custodian in connection with its
account(s). The Fund agrees not to sell, reproduce, lease or
otherwise provide, directly or indirectly, the Software or any
portion thereof to any third party without the prior written
consent of the Custodian.
2. The Fund shall obtain and maintain at its own cost
and expense all equipment and services, including but not
limited to communications services, necessary for it to
utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the
reliability, compatibility with the Software or availability
of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data
bases made available to the Fund by utilizing the Software
(other than data bases relating solely to the assets of the
Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation
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(other than which are or become part of the public domain or
are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep
the Information confidential by using the same care and
discretion that the Fund uses with respect to its own
confidential property and trade secrets and shall neither make
nor permit any disclosure without the prior written consent of
the Custodian. Upon termination of this Agreement or the
Software license granted hereunder for any reason, the Fund
shall return to the Custodian all copies of the Information
which are in its possession or under its control or which the
Fund distributed to third parties.
4. The Custodian reserves the right to modify the
Software from time to time upon reasonable prior notice and
the Fund shall install new releases of the Software as the
Custodian may direct. The Fund agrees not to modify or
attempt to modify the Software without the Custodian's prior
written consent. The Fund acknowledges that any modifications
to the Software, whether by the Fund or the Custodian and
whether with or without the Custodian's consent, shall become
the property of the Custodian.
5. The Custodian makes no warranties or representations
of any kind with regard to the Software or the method(s) by
which the Fund may transmit Instructions to the Custodian,
express or implied, including but not limited to any implied
warranties or merchantability or fitness for a particular
purpose.
6. Where the method for transmitting Instructions by
the Fund involves an automatic systems acknowledgment by the
Custodian of its receipt of such Instructions, then in the
absence of such acknowledgment the Custodian shall not be
liable for any failure to act pursuant to such Instructions,
the Fund may not claim that such Instructions were received by
the Custodian, and the Fund shall deliver a Certificate by
some other means.
7. (a) The Fund agrees that where it delivers to the
Custodian Instructions hereunder, it shall be the Fund's sole
responsibility to ensure that only persons duly authorized by
the Fund transmit such Instructions to the Custodian. The
Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes,
passwords and authentication keys with extreme care, and
irrevocably authorizes the Custodian to act in accordance with
and rely upon Instructions received by it pursuant hereto.
(b) The Fund hereby represents, acknowledges and
agrees that it is fully informed of the protections and risks
associated with the various methods of transmitting
Instructions to the Custodian and that there may be more
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secure methods of transmitting instructions to the Custodian
than the method(s) selected by the Fund. The Fund hereby
agrees that the security procedures (if any) to be followed in
connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection
in light of its particular needs and circumstances.
8. The Fund hereby presents, warrants and covenants to
the Custodian that this Agreement has been duly approved by a
resolution of its Board of Trustees, and that its transmission
of Instructions pursuant hereto shall at all times comply with
the Investment Company Act of 1940, as amended.
9. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of,
its ability to send Instructions as promptly as practicable,
and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care
and (iii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being
agreed that discovery and receipt of notice may only occur on
a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or
interruption in, or delay or unavailability of, the Fund's
ability to send Instructions.
ARTICLE XVI.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX
Transaction, the Fund shall promptly deliver to the Custodian
a Certificate or Oral Instructions specifying with respect to
such FX Transaction: (a) the Series to which such FX
Transaction is specifically allocated; (b) the type and amount
of Currency to be purchased by the Fund; (c) the type and
amount of Currency to be sold by the Fund; (d) the date on
which the Currency to be purchased is to be delivered; (e) the
date on which the Currency to be sold is to be delivered; and
(f) the name of the person from whom or through whom such
currencies are to be purchased and sold. Unless otherwise
instructed by a Certificate or Oral Instructions, the
Custodian shall deliver, or shall instruct a Foreign Sub-
Custodian to deliver, the Currency to be sold on the date on
which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-
Custodian to receive, the Currency to be purchased on the date
as set forth in the Certificate.
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2. Where the Currency to be sold is to be delivered on
the same day as the Currency to be purchased, as specified in
the Certificate or Oral Instructions, the Custodian or a
Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and
such receipt and delivery may not be completed simultaneously.
The Fund assumes all responsibility and liability for all
credit risks involved in connection with such receipts and
deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been
received in full.
3. Any FX Transaction effected by the Custodian in
connection with this Agreement may be entered with the
Custodian, any office, branch or subsidiary of The Bank of New
York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels.
The Fund may issue a standing Certificate with respect to FX
Transaction but the Custodian may establish rules or
limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of
investing in Securities or holding Currency. Without limiting
the foregoing, the Fund shall bear the risks that rules or
procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws,
rules, regulations or orders shall prohibit or impose burdens
or costs on the transfer to, by or for the account of the Fund
of Securities or any cash held outside the Fund's jurisdiction
or denominated in Currency other than its home jurisdiction or
the conversion of cash from one Currency into another
currency. The Custodian shall not be obligated to substitute
another Currency for a Currency (including a Currency that is
a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been
affected by such law, regulation, rule or procedure. Neither
the Custodian nor any Foreign Sub-Custodian shall be liable to
the Fund for any loss resulting from any of the foregoing
events.
ARTICLE XVII.
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the
performance of its duties hereunder, and, except as
hereinafter provided, neither the Custodian nor its nominee
shall be liable for any loss or damage, including counsel
fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agree-
ment, except for any such loss or damage arising out of its
own negligence, bad faith, or willful misconduct or that of
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its officers, employees, or agents. The Custodian may, with
respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and
opinion of counsel to the Fund, at the expense of the Fund,
or of its own counsel, at its own expense, and shall be fully
protected with respect to anything done or omitted by it in
good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful
misconduct on the part of the Custodian or any of its
employees or agents.
2. Notwithstanding the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be li-
able for:
(a) The validity (but not the authenticity) of the
issue of any Securities purchased, sold, or written by or for
the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received
therefor, as specified in a Certificate, Oral Instructions, or
Written Instructions;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor, as specified in a Certificate;
(c) The legality of the declaration or payment of
any dividend by the Fund, as specified in a resolution,
Certificate, Oral Instructions, or Written Instructions;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securi-
ties, nor shall the Custodian be under any duty or obligation
to see to it that the cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any
time as a result of such loan of portfolio Securities of the
Fund is adequate collateral for the Fund against any loss it
might sustain as a result of such loan, except that this sub-
paragraph shall not excuse any liability the Custodian may
have for failing to act in accordance with Article X hereof or
any Certificate, Oral Instructions, or Written Instructions
given in accordance with this Agreement. The Custodian
specifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obliga-
tion to see that any broker, dealer or financial institution
to which portfolio Securities of the Fund are lent pursuant to
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Article X of this Agreement makes payment to it of any
dividends or interest which are payable to or for the account
of the Fund during the period of such loan or at the termina-
tion of such loan, provided, however, that the Custodian shall
promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of
money and/or Securities held in any Margin Account, Senior
Security Account or Collateral Account in connection with
transactions by the Fund, except that this sub-paragraph shall
not excuse any liability the Custodian may have for failing to
establish, maintain, make deposits to or withdrawals from such
accounts in accordance with this Agreement. In addition, the
Custodian shall be under no duty or obligation to see that any
broker, dealer, futures commission merchant or Clearing Member
makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from
such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from
any broker, dealer, futures commission merchant or Clearing
Member is the amount the Fund is entitled to receive, or to
notify the Fund of the Custodian's receipt or non-receipt of
any such payment.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented
by any check, draft, or other instrument for the payment of
money, received by it on behalf of the Fund until the
Custodian actually receives such money directly or by the
final crediting of the account representing the Fund's inter-
est at the Book-Entry System or the Depository.
4. With respect to Securities held in a Depository,
except as otherwise provided in paragraph 5(b) of Article III
hereof, the Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls,
conversions, exchange offers, tenders, interest rate changes
or similar matters relating to such Securities, unless the
Custodian shall have actually received timely notice from the
Depository in which such Securities are held. In no event
shall the Custodian have any responsibility or liability for
the failure of a Depository to collect, or for the late col-
lection or late crediting by a Depository of any amount pay-
able upon Securities deposited in a Depository which may
mature or be redeemed, retired, called or otherwise become
payable. However, upon receipt of a Certificate from the Fund
of an overdue amount on Securities held in a Depository the
Custodian shall make a claim against the Depository on behalf
of the Fund, except that the Custodian shall not be under any
obligation to appear in, prosecute or defend any action suit
or proceeding in respect to any Securities held by a
Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all
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<PAGE>
expense and liability be furnished as often as may be
required, or alternatively, the Fund shall be subrogated to
the rights of the Custodian with respect to such claim against
the Depository should it so request in a Certificate. This
paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral
Instructions, or Written Instructions given in accordance with
this Agreement.
5. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount due to
the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount if the
Securities upon which such amount is payable are in default,
or if payment is refused after the Custodian has timely and
properly, in accordance with this Agreement, made due demand
or presentation, unless and until (i) it shall be directed to
take such action by a Certificate and (ii) it shall be assured
to its satisfaction of reimbursement of its costs and expenses
in connection with any such action, but the Custodian shall
have such a duty if the Securities were not in default on the
payable date and the Custodian failed to timely and properly
make such demand for payment and such failure is the reason
for the non-receipt of payment.
7. The Custodian may appoint one or more banking
institutions as sub-custodian or sub-custodians, or as
co-custodian or co-custodians including, but not limited to,
banking institutions located in foreign countries, of
Securities and money at any time owned by the Fund, upon such
terms and conditions as may be approved in a Certificate or
contained in an agreement executed by the Custodian, the Fund
and the appointed institution.
8. (a) The Custodian will use reasonable care with
respect to its obligations under this Agreement and the
safekeeping of Securities and money owned by the Fund. The
Custodian shall be liable to the Fund for any loss which shall
occur as the result of the failure of a sub-custodian which is
a banking institution located in a foreign country and
identified on Schedule A attached hereto and as amended from
time to time upon mutual agreement of the parties (each, a
"Sub-custodian") to exercise reasonable care with respect to
the safekeeping of such securities and money to the same
extent that the Custodian would be liable to the Fund if the
Custodian were holding such Securities and money in New York.
In the event of any loss to the Fund by reason of the failure
of the Custodian or a Sub-custodian to utilize reasonable
care, the Custodian shall be liable to the Fund only to the
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<PAGE>
extent of the Fund's direct damages, to be determined based on
the market value of the Securities and money which are the
subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances.
(b) The Custodian shall not be liable for any loss
which results from (i) the general risk of investing, or (ii)
investing or holding Securities and money in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; or market
conditions which prevent the orderly execution of securities
transactions or affect the value of Securities or money.
(c) Neither party shall be liable to the other for
any loss due to forces beyond its control including, but not
limited to, strikes or work stoppages, acts of war or
terrorism, insurrection, revolution, nuclear fusion, fission
or radiation, or acts of God.
9. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time
delivered to, or held by it, for the account of the Fund and
specifically allocated to a Series are such as properly may be
held by the Fund or such Series under the provisions of its
then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the
Custodian, are such transactions as may properly be engaged in
by the Fund.
10. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all reasonable
out-of-pocket expenses and such compensation as may be agreed
upon from time to time between the Custodian and the Fund.
The Custodian may charge such compensation, and any such
expenses with respect to a Series incurred by the Custodian in
the performance of its duties under this Agreement against any
money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it
for the account of a Series the amount of any loss, damage,
liability or expense, including counsel fees, for which it
shall be entitled to reimbursement under the provisions of
this Agreement attributable to, or arising out of, its serving
as Custodian for such Series. The expenses for which the
Custodian shall be entitled to reimbursement hereunder shall
include, but are not limited to, the expenses of sub-
custodians and foreign branches of the Custodian incurred in
settling outside of New York City transactions involving the
purchase and sale of Securities of the Fund. Notwithstanding
the foregoing or anything else contained in this Agreement to
the contrary, the Custodian shall, prior to effecting any
charge for compensation, expenses, or any overdraft or
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<PAGE>
indebtedness or interest thereon, submit an invoice therefor
to the Fund.
11. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing, Oral
Instructions, or Written Instructions received by the
Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming Oral Instructions
or Written Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian,
whether by hand delivery, telecopier or other similar device,
or otherwise, by the close of business of the same day that
such Oral Instructions or Written Instructions are given to
the Custodian. The Fund agrees that the fact that such
confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions thereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no li-
ability to the Fund in acting upon Oral Instructions or Writ-
ten Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear
to have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian
and reasonably believed by the Custodian to be given in ac-
cordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and
shall not be liable for, the accuracy of any statements or
representations contained in any such instrument or other
notice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission
merchant or Clearing Member. This paragraph shall not excuse
any failure by the Custodian to have acted in accordance with
any Margin Agreement it has executed or any Certificate, Oral
Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as
described in Appendix E hereto, which are in the possession of
the Custodian shall be the property of the Fund. Such books
and records shall be prepared and maintained by the Custodian
as required by the Investment Company Act of 1940, as amended,
and other applicable securities laws and rules and regula-
tions. The Fund, or the Fund's authorized representatives,
shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the
Custodian its expenses of providing such copies. Upon reason-
able request of the Fund, the Custodian shall provide in hard
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<PAGE>
copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by
the Custodian on a computer disc, or are similarly maintained,
and the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
14. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, each Depository or O.C.C.,
and with such reports on its own systems of internal account-
ing control as the Fund may reasonably request from time to
time.
15. The Custodian shall furnish upon request annually to
the Fund a letter prepared by the Custodian's accountants with
respect to the Custodian's internal systems and controls in
the form generally provided by the Custodian to other invest-
ment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees,
howsoever arising out of, or related to, the Custodian's
performance of its obligations under this Agreement, except
for any such liability, claim, loss and demand arising out of
the Custodian's own negligence, bad faith, or willful
misconduct or that of its officers, employees, or agents.
17. Subject to the foregoing provisions of this Agree-
ment, the Custodian shall deliver and receive Securities, and
receipts with respect to such Securities, and shall make and
receive payments only in accordance with the customs prevail-
ing from time to time among brokers or dealers in such Securi-
ties and, except as may otherwise be provided by this
Agreement or as may be in accordance with such customs, shall
make payment for Securities only against delivery thereof and
deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or
responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agree-
ment, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
ARTICLE XVIII.
TERMINATION
1. Except as provided in paragraph 3 of this Article,
this Agreement shall continue until terminated by either the
Custodian giving to the Fund, or the Fund giving to the
Custodian, a notice in writing specifying the date of such
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<PAGE>
termination, which date shall be not less than 60 days after
the date of the giving of such notice. In the event such
notice or a notice pursuant to paragraph 3 of this Article is
given by the Fund, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Fund, certified by
an Officer and the Secretary or an Assistant Secretary of the
Fund, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be
eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act
of 1940. In the event such notice is given by the Custodian,
the Fund shall, on or before the termination date, deliver to
the Custodian a copy of a resolution of the Board of Trustees
of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, designating a
successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus and
undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and the Custodian shall upon
receipt of a notice of acceptance by the successor custodian
on that date deliver directly to the successor custodian all
Securities and money then owned by the Fund and held by it as
Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall
then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding
paragraph, the Fund shall upon the date specified in the
notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held
in the Book-Entry System which cannot be delivered to the
Fund) and money then owned by the Fund be deemed to be its own
custodian and the Custodian shall thereby be relieved of all
duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book
Entry System which cannot be delivered to the Fund to hold
such Securities hereunder in accordance with this Agreement.
3. Notwithstanding the foregoing, the Fund may
terminate this Agreement upon the date specified in a written
notice in the event of the "Bankruptcy" of The Bank of New
York. As used in this sub-paragraph, the term "Bankruptcy"
shall mean The Bank of New York's making a general assignment,
arrangement or composition with or for the benefit of its
creditors, or instituting or having instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or
the entry of a order for relief under any applicable
bankruptcy law or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or if a petition is presented for the winding up or
liquidation of the party or a resolution is passed for its
-40-
<PAGE>
winding up or liquidation, or it seeks, or becomes subject to,
the appointment of an administrator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all of its assets or its taking any action in
furtherance of, or indicating its consent to approval of, or
acquiescence in, any of the foregoing.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present
Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that
any such present Authorized Person ceases to be an Authorized
Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new Certificate
shall be received, the Custodian shall be entitled to rely and
to act upon Oral Instructions, Written Instructions, or
signatures of the present Authorized Persons as set forth in
the last delivered Certificate to the extent provided by this
Agreement.
2. Annexed hereto as Appendix B is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present Of-
ficers of the Fund. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event any
such present Officer ceases to be an Officer of the Fund, or
in the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the
Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered
Certificate to the extent provided by this Agreement.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, other than any Certificate or Written Instructions,
shall be sufficiently given if addressed to the Custodian and
mailed or delivered to it at its offices at 90 Washington
Street, New York, New York 10286, or at such other place as
the Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Fund shall be sufficiently given if addressed to the Fund and
mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund
may from time to time designate in writing.
-41-
<PAGE>
5. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Trustees of the Fund, except that
Appendices A and B may be amended unilaterally by the Fund
without such an approving resolution.
6. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian or The Bank of New York without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Trustees. For purposes of
this paragraph, no merger, consolidation, or amalgamation of
the Custodian, The Bank of New York, or the Fund shall be
deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to
conflict of laws principles thereof. Each party hereby
consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any
dispute arising hereunder and hereby waives its right to trial
by jury.
8. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
9. A copy of the Declaration of Trust of the Fund is on
file with the Secretary of The Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed on
behalf of the Board of Trustees of the Fund as Trustees and
not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property
of the Fund; provided, however, that the Declaration of Trust
of the Fund provides that the assets of a particular Series of
the Fund shall under no circumstances be charged with li-
abilities attributable to any other Series of the Fund and
that all persons extending credit to, or contracting with or
having any claim against a particular Series of the Fund shall
look only to the assets of that particular Series for payment
of such credit, contract or claim.
-42-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers,
thereunto duly authorized and their respective seals to be
hereunto affixed, as of the day and year first above written.
DEAN WITTER "COMPETITIVE
EDGE" FUND
[SEAL] By:
-----------------------
Attest:
-----------------------
THE BANK OF NEW YORK
[SEAL] By:
-----------------------
Attest:
-----------------------
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<PAGE>
APPENDIX A
I, , President and I,
, of DEAN WITTER
"COMPETITIVE EDGE" FUND, a Massachusetts business trust (the
"Fund"), do hereby certify that:
The following individuals have been duly authorized by
the Board of Trustees of the Fund in conformity with the
Fund's Declaration of Trust and By-Laws to give Oral Instruc-
tions and Written Instructions on behalf of the Fund, except
that those persons designated as being an "Officer of DWTC"
shall be an Authorized Person only for purposes of Articles
XII and XIII. The signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
----------------- ---------------- -----------------
<PAGE>
APPENDIX B
I, , President and I,
, of DEAN WITTER
"COMPETITIVE EDGE" FUND, a Massachusetts business trust (the
"Fund"), do hereby certify that:
The following individuals for whom a position other than
"Officer of DWTC" is specified serve in the following posi-
tions with the Fund and each has been duly elected or ap-
pointed by the Board of Trustees of the Fund to each such
position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws. With respect to the
following individuals for whom a position of "Officer of DWTC"
is specified, each such individual has been designated by a
resolution of the Board of Trustees of the Fund to be an
Officer for purposes of the Fund's Custody Agreement with The
Bank of New York, but only for purposes of Articles XII and
XIII thereof and a certified copy of such resolution is
attached hereto. The signatures of each individual below set
forth opposite their respective names are their true and
correct signatures:
Name Position Signature
-------------------- ------------------- -----------------
<PAGE>
APPENDIX C
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of DEAN WITTER "COMPETITIVE EDGE"
FUND, a Massachusetts business trust (the "Fund"), further
certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on
, 1997, at which a quorum was at all times
present and that such resolutions have not been modified or
rescinded and are in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to the Custody Agreement between The Bank of New
York and the Fund dated as of , 1997 (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to act in accordance with,
and to rely on Instructions (as defined in the Custody
Agreement).
RESOLVED, that the Fund shall establish access codes
and grant use of such access codes only to Officers of
the Fund as defined in the Custody Agreement, shall
establish internal safekeeping procedures to safeguard
and protect the confidentiality and availability of user
and access codes, passwords and authentication keys, and
shall use Instructions only in a manner that does not
contravene the Investment Company Act of 1940, as
amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of DEAN WITTER "COMPETITIVE EDGE" FUND, as of the
day of , 1997.
[SEAL]
<PAGE>
APPENDIX D
I, Vincent M. Blazewicz, a Vice President with THE BANK
OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall
be prepared and maintained by the Custodian and shall be the
property of the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of
, a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting
duly held on , 1997, at which a quorum was at all
times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1997, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securi-
ties eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and
to utilize the Book-Entry System to the extent possible
in connection with its performance thereunder, including,
without limitation, in connection with settlements of
purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of , as of the day of , 1997.
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business Trust
(the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at
a meeting duly held on , 1997, at which a quorum
was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of
the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1997, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in The Depository Trust
Company ("DTC"), as a "Depository" as defined in the
Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are
specifically allocated, and to utilize DTC to the extent
possible in connection with its performance thereunder,
including, without limitation, in connection with
settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of , as of the day of , 1997.
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business
Trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at
a meeting duly held on , 1997, at which a quorum
was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of
the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1997 (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Participants
Trust Company as a Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are
specifically allocated, and to utilize the Participants
Trust Company to the extent possible in connection with
its performance thereunder, including, without limita-
tion, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of , as of the day of ,
1997.
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting
duly held on , 1997, at which a quorum was at all
times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1997, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary, to accept, utilize and act with
respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which
the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the
Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of , as of the day of , 1997.
[SEAL]
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
[open-end funds]
97NYC13142
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1 Terms of Appointment................................... 1
Article 2 Fees and Expenses...................................... 2
Article 3 Representations and Warranties of DWTFSB............... 3
Article 4 Representations and Warranties of the Fund............. 3
Article 5 Duty of Care and Indemnification....................... 3
Article 6 Documents and Covenants of the Fund and DWTFSB......... 4
Article 7 Duration and Termination of Agreement.................. 5
Article 8 Assignment............................................. 5
Article 9 Affiliations........................................... 6
Article 10 Amendment.............................................. 6
Article 11 Applicable Law......................................... 6
Article 12 Miscellaneous.......................................... 6
Article 13 Merger of Agreement.................................... 7
Article 14 Personal Liability..................................... 7
</TABLE>
i
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 23rd day of October, 1997 by
and between each of the Funds listed on the signature pages hereof, each of such
Funds acting severally on its own behalf and not jointly with any of such other
Funds (each such Fund hereinafter referred to as the "Fund"), each such Fund
having its principal office and place of business at Two World Trade Center, New
York, New York, 10048, and DEAN WITTER TRUST FSB ("DWTFSB"), a federally
chartered savings bank, having its principal office and place of business at
Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311.
WHEREAS, the Fund desires to appoint DWTFSB as its transfer agent, dividend
disbursing agent and shareholder servicing agent and DWTFSB desires to accept
such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF DWTFSB
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints DWTFSB to act as, and DWTFSB agrees to act as,
the transfer agent for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend disbursing agent and
shareholder servicing agent in connection with any accumulation, open-account or
similar plans provided to the holders of such Shares ("Shareholders") and set
out in the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 DWTFSB agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and DWTFSB, DWTFSB shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book form
in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934 Act")
a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding.
DWTFSB shall also provide to the Fund on a regular basis the total number
of Shares that are authorized, issued and outstanding and shall notify
the Fund in case any proposed issue of Shares by the Fund would result in
an overissue. In case any issue of Shares
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would result in an overissue, DWTFSB shall refuse to issue such Shares
and shall not countersign and issue any certificates requested for such
Shares. When recording the issuance of Shares, DWTFSB shall have no
obligation to take cognizance of any Blue Sky laws relating to the issue
of sale of such Shares, which functions shall be the sole responsibility
of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), DWTFSB shall:
(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing agent
in connection with dividend reinvestment, accumulation, open-account or
similar plans (including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited to,
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and
filing appropriate forms required with respect to dividends and
distributions by federal tax authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account
information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the total
number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to DWTFSB in writing those transactions and assets to be
treated as exempt from Blue Sky reporting for each State; and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of
DWTFSB for the Fund's status under the securities laws of any State or
other jurisdiction is limited to the inclusion on the system of each
State as to which the Fund has informed DWTFSB that shares may be sold in
compliance with state securities laws and the reporting of purchases and
sales in each such State to the Fund as provided above and as agreed from
time to time by the Fund and DWTFSB.
(d) DWTFSB shall provide such additional services and functions not
specifically described herein as may be mutually agreed between DWTFSB and
the Fund. Procedures applicable to such services may be established from
time to time by agreement between the Fund and DWTFSB.
Article 2 FEES AND EXPENSES
2.1 For performance by DWTFSB pursuant to this Agreement, each Fund agrees
to pay DWTFSB an annual maintenance fee for each Shareholder account and certain
transactional fees, if applicable, as set out in the respective fee schedule
attached hereto as Schedule A. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time subject to
mutual written agreement between the Fund and DWTFSB.
2.2 In addition to the fees paid under Section 2.1 above, the Fund agrees to
reimburse DWTFSB for out of pocket expenses in connection with the services
rendered by DWTFSB hereunder. In addition, any other expenses incurred by DWTFSB
at the request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to DWTFSB by the Fund
upon request prior to the mailing date of such materials.
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Article 3 REPRESENTATIONS AND WARRANTIES OF DWTFSB
DWTFSB represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is in
New Jersey.
3.2 It is and will remain registered with the U.S. Securities and Exchange
Commission ("SEC") as a Transfer Agent pursuant to the requirements of Section
17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to DWTFSB that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Delaware or Maryland or a trust duly organized and existing
and in good standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into and
perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the "1933
Act") is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Fund being offered for sale.
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 DWTFSB shall not be responsible for, and the Fund shall indemnify and
hold DWTFSB harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTFSB or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by DWTFSB or its agents or subcontractors of
information, records and documents which (i) are received by DWTFSB or its
agents or subcontractors and furnished to it by or on behalf of the Fund,
and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTFSB or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that notice of
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offering of such Shares in such State or other jurisdiction or in violation
of any stop order or other determination or ruling by any federal agency or
any State or other jurisdiction with respect to the offer or sale of such
Shares in such State or other jurisdiction.
5.2 DWTFSB shall indemnify and hold the Fund harmless from or against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission to
act by DWTFSB as a result of the lack of good faith, negligence or willful
misconduct of DWTFSB, its officers, employees or agents.
5.3 At any time, DWTFSB may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTFSB
under this Agreement, and DWTFSB and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund for any action taken or omitted by
it in reliance upon such instructions or upon the opinion of such counsel.
DWTFSB, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided to DWTFSB or its agents or subcontractors by machine readable input,
telex, CRT data entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. DWTFSB, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
5.4 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Article 5
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND DWTFSB
6.1 The Fund shall promptly furnish to DWTFSB the following, unless
previously furnished to Dean Witter Trust Company, the prior transfer agent of
the Fund:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund
and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary
of the Fund as to such approval;
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(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund
and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary of
the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered
or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTFSB deems to be
appropriate or necessary for the proper performance of its duties.
6.2 DWTFSB hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of Share certificates, check
forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices.
6.3 DWTFSB shall prepare and keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws and regulations. To the extent required by Section
31 of the 1940 Act, and the rules and regulations thereunder, DWTFSB agrees that
all such records prepared or maintained by DWTFSB relating to the services
performed by DWTFSB hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.4 DWTFSB and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential and shall not be voluntarily disclosed to any other person except
as may be required by law or with the prior consent of DWTFSB and the Fund.
6.5 In case of any request or demands for the inspection of the Shareholder
records of the Fund, DWTFSB will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection.
DWTFSB reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to exhibit the Shareholder records to such person.
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect until August 1,
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written notice,
and by DWTFSB on 90 days written notice, to the other party without payment of
any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, DWTFSB reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
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8.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.3 DWTFSB may, in its sole discretion and without further consent by the
Fund, subcontract, in whole or in part, for the performance of its obligations
and duties hereunder with any person or entity including but not limited to
companies which are affiliated with DWTFSB; PROVIDED, HOWEVER, that such person
or entity has and maintains the qualifications, if any, required to perform such
obligations and duties, and that DWTFSB shall be as fully responsible to the
Fund for the acts and omissions of any agent or subcontractor as it is for its
own acts or omissions under this Agreement.
Article 9 AFFILIATIONS
9.1 DWTFSB may now or hereafter, without the consent of or notice to the
Fund, function as transfer agent and/or shareholder servicing agent for any
other investment company registered with the SEC under the 1940 Act and for any
other issuer, including without limitation any investment company whose adviser,
administrator, sponsor or principal underwriter is or may become affiliated with
Morgan Stanley, Dean Witter, Discover & Co. or any of its direct or indirect
subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the case
may be), officers, employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the Fund's investment
adviser and/or distributor, are or may be interested in DWTFSB as directors,
officers, employees, agents and shareholders or otherwise, and that the
directors, officers, employees, agents and shareholders of DWTFSB may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors or the Board of Trustees (as the case may be) of the Fund.
Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment companies managed
or administered by Dean Witter InterCapital Inc. or any of its affiliates
("Additional Funds") desires to retain DWTFSB to act as transfer agent, dividend
disbursing agent and/or shareholder servicing agent, and DWTFSB desires to
render such services, such services shall be provided pursuant to a letter
agreement, substantially in the form of Exhibit A hereto, between DWTFSB and
each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTFSB an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to DWTFSB and the Fund issued by a
surety company satisfactory to DWTFSB, except that DWTFSB may accept an
affidavit of loss and indemnity agreement executed by the registered holder (or
legal representative) without surety in such form as DWTFSB deems appropriate
indemnifying DWTFSB and the Fund for the issuance of a replacement certificate,
in cases where the alleged loss is in the amount of $1,000 or less.
12.3 In the event that any check or other order for payment of money on the
account of any Shareholder or new investor is returned unpaid for any reason,
DWTFSB will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTFSB may, in its sole discretion,
deem appropriate or as the Fund and, if applicable, the Distributor may instruct
DWTFSB.
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12.4 Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or to DWTFSB shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTFSB:
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts business trust, a
copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated
Agreement to be executed in their names and on their behalf by and through their
duly authorized officers, as of the day and year first above written.
DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Dean Witter California Tax-Free Daily Income Trust
8. Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Mid-Cap Growth Fund
12. Dean Witter Dividend Growth Securities Inc.
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13. Dean Witter Capital Growth Securities
14. Dean Witter Global Dividend Growth Securities
15. Dean Witter Income Builder Fund
16. Dean Witter Natural Resource Development Securities Inc.
17. Dean Witter Precious Metals and Minerals Trust
18. Dean Witter Developing Growth Securities Trust
19. Dean Witter Health Sciences Trust
20. Dean Witter Capital Appreciation Fund
21. Dean Witter Information Fund
22. Dean Witter Value-Added Market Series
23. Dean Witter World Wide Investment Trust
24. Dean Witter European Growth Fund Inc.
25. Dean Witter Pacific Growth Fund Inc.
26. Dean Witter International SmallCap Fund
27. Dean Witter Japan Fund
28. Dean Witter Utilities Fund
29. Dean Witter Global Utilities Fund
30. Dean Witter Special Value Fund
31. Dean Witter Financial Services Trust
32. Dean Witter Market Leader Trust
33. Dean Witter Managers' Select Fund
34. Dean Witter Fund of Funds
35. Dean Witter S&P 500 Index Fund
BALANCED FUNDS
36. Dean Witter Balanced Growth Fund
37. Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
38. Dean Witter Strategist Fund
39. Dean Witter Global Asset Allocation Fund
FIXED INCOME FUNDS
40. Dean Witter High Yield Securities Inc.
41. Dean Witter High Income Securities
42. Dean Witter Convertible Securities Trust
43. Dean Witter Intermediate Income Securities
44. Dean Witter Short-Term Bond Fund
45. Dean Witter World Wide Income Trust
46. Dean Witter Global Short-Term Income Fund Inc.
47. Dean Witter Diversified Income Trust
48. Dean Witter U.S. Government Securities Trust
49. Dean Witter Federal Securities Trust
50. Dean Witter Short-Term U.S. Treasury Trust
51. Dean Witter Intermediate Term U.S. Treasury Trust
52. Dean Witter Tax-Exempt Securities Trust
53. Dean Witter National Municipal Trust
55. Dean Witter Limited Term Municipal Trust
55. Dean Witter California Tax-Free Income Fund
56. Dean Witter New York Tax-Free Income Fund
57. Dean Witter Hawaii Municipal Trust
58. Dean Witter Multi-State Municipal Series Trust
59. Dean Witter Select Municipal Reinvestment Fund
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SPECIAL PURPOSE FUNDS
60. Dean Witter Retirement Series
61. Dean Witter Variable Investment Series
62. Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
63. TCW/DW Core Equity Trust
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Balanced Fund
69. TCW/DW Total Return Trust
70. TCW/DW Global Telecom Trust
71. TCW/DW Strategic Income Trust
72. TCW/DW Mid-Cap Equity Trust
By: __________________________________
Barry Fink
Vice President and General Counsel
ATTEST:
_____________________________
Assistant Secretary
DEAN WITTER TRUST FSB
By: __________________________________
John Van Heuvelen
President
ATTEST:
_____________________________
Executive Vice President
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EXHIBIT A
Dean Wittter Trust FSB
Harborside Financial Center, Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, Dean Witter "Competitive Edge" Fund, a Massachusetts
business trust (the "Fund"), desires to employ and appoint Dean Witter Trust FSB
("DWTFSB") to act as transfer agent for each series and class of shares of the
Fund, whether now or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent, registrar and agent in
connection with any accumulation, open-account or similar plan provided to the
holders of Shares, including without limitation any periodic investment plan or
periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the Fund
to DWTFSB of fees as set out in the fee schedule attached hereto as Schedule A,
DWTFSB shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate DWTFSB's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
Dean Witter "Competitive Edge" Fund
By:/s/ Barry Fink
--------------
Barry Fink
Vice President and
General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST FSB
By:
---------------------------
Its:
--------------------------
Date:
-------------------------
<PAGE>
SCHEDULE A
Fund: Dean Witter "Competitive Edge" Fund
Fees: (1) Annual Maintenance fee of $12.65 per shareholder account, payable
monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement
(4) Fees for additional services not set forth in this Agreement shall
be as negotiated between the parties.
<PAGE>
DEAN WITTER INTERCAPITAL INC.
Two World Trade Center
New York, New York 10048
December 2, 1997
Dean Witter Services Company Inc.
Two World Trade Center
New York, New York 10048
Re: DEAN WITTER "COMPETITIVE EDGE" FUND
Dear Sirs:
Please be advised that, having entered into an Investment Management
Agreement with the Fund, we wish to retain you to perform administrative
services in respect of the Fund under our Services Agreement with you, dated
April 17, 1995 (attached hereto). It is agreed that no compensation will be
paid by the Fund for such services.
Your Execution of this letter, where indicated, shall constitute
notification to us of your willingness to render administrative services in
respect to the Fund under the attached Services Agreement, in consideration of
the above-stated compensation.
Very Truly Yours,
DEAN WITTER INTERCAPITAL INC.
By:
-------------------------
ACCEPTED: DEAN WITTER SERVICES COMPANY INC.
By:
----------------------------------------
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean Witter
InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware corporation
(herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which InterCapital is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice); (ii)
provide the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the "Act"), the
notification to the Fund and InterCapital of available funds for investment, the
reconciliation of account information and balances among the Fund's custodian,
transfer agent and dividend disbursing agent and InterCapital, and the
calculation of the net asset value of the Fund's shares; (iii) provide the Fund
with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or
retain such personnel and consult with such other persons as it shall from time
to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of DWS shall be deemed to include officers of
DWS and persons employed or otherwise retained by DWS (including officers and
employees of InterCapital, with the consent of InterCapital) to furnish
services, statistical and other factual data, information with respect to
technical and scientific developments, and such other information, advice and
assistance as DWS may desire. DWS shall maintain each Fund's records and books
of account (other than those maintained by the Fund's transfer agent, registrar,
custodian and other agencies). All such books and records so maintained shall be
the property of the Fund and, upon request therefor, DWS shall surrender to
InterCapital or to the Fund such of the books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as DWS may reasonably require
in order to discharge its duties and obligations to the Fund under this
Agreement or to comply with any applicable law and regulation or request of the
Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of a
closed-end Fund) by applying the annual rate or rates set forth on Schedule B to
the net assets of each Fund. Except as hereinafter set forth, (i) in the case of
an open-end Fund, compensation under this Agreement shall be calculated by
applying 1/365th of the annual rate or rates to the Fund's or the Series' daily
net assets determined as of the close of business on that day or the last
previous business day and (ii) in the case of a closed-end Fund, compensation
under this Agreement shall be calculated by applying the annual rate or rates to
the Fund's average weekly net assets determined as of the close of the last
business day of each week. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth on
Schedule B. Subject to the provisions of paragraph 5 hereof, payment of DWS'
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund and/or any Series thereof imposed by
state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Dean Witter Variable Investment Series or any Series thereof,
the expense limitation specified in the Fund's Investment Management Agreement,
the fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by DWS,
and such clerical help and bookkeeping services as DWS shall reasonably require
in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an interest
in the Fund. It is also understood that DWS and any affiliated persons thereof
or any persons controlling, controlled by or under common control with DWS have
and may have advisory, management, administration service or other contracts
with other organizations and persons, and may have other interests and
businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party within
30 days of the expiration of the then-existing period. Notwithstanding the
foregoing, this Agreement may be terminated at any time, by either party on 30
days' written notice delivered to the other party. In the event that the
Investment Management Agreement between any Fund and InterCapital is terminated,
this Agreement will automatically terminate with respect to such Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: /s/ Sheldon Curtis
-----------------------------------
Sheldon Curtis
Attest:
/s/ LouAnne McInnis
- -----------------------------------
LouAnn McInnis DEAN WITTER SERVICES COMPANY INC.
By: /s/ Charles A. Fiumefreddo
-----------------------------------
Charles A. Fiumefreddo
Attest:
/s/ Barry Fink
- -----------------------------------
Barry Fink
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AS AMENDED AS OF OCTOBER 25, 1996
OPEN-END FUNDS
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Appreciation Fund
11. Dean Witter Capital Growth Securities
12. Dean Witter Convertible Securities Trust
13. Dean Witter Developing Growth Securities Trust
14. Dean Witter Diversified Income Trust
15. Dean Witter Dividend Growth Securities Inc.
16. Dean Witter European Growth Fund Inc.
17. Dean Witter Federal Securities Trust
18. Dean Witter Global Asset Allocation Fund
19. Dean Witter Global Dividend Growth Securities
20. Dean Witter Global Short-Term Income Fund Inc.
21. Dean Witter Global Utilities Fund
22. Dean Witter Hawaii Municipal Trust
23. Dean Witter Health Sciences Trust
24. Dean Witter High Income Securities
25. Dean Witter High Yield Securities Inc.
26. Dean Witter Income Builder Fund
27. Dean Witter Information Fund
28. Dean Witter Intermediate Income Securities
29. Dean Witter Intermediate Term U.S. Treasury Trust
30. Dean Witter International SmallCap Fund
31. Dean Witter Japan Fund
32. Dean Witter Limited Term Municipal Trust
33. Dean Witter Liquid Asset Fund Inc.
34. Dean Witter Mid-Cap Growth Fund
35. Dean Witter Multi-State Municipal Series Trust
36. Dean Witter National Municipal Trust
37. Dean Witter Natural Resource Development Securities Inc.
38. Dean Witter New York Municipal Money Market Trust
39. Dean Witter New York Tax-Free Income Fund
40. Dean Witter Pacific Growth Fund Inc.
41. Dean Witter Precious Metals and Minerals Trust
42. Dean Witter Premier Income Trust
43. Dean Witter Retirement Series
44. Dean Witter Select Dimensions Investment Series
(i) American Value Portfolio
(ii) Balanced Portfolio
(iii) Core Equity Portfolio
(iv) Developing Growth Portfolio
(v) Diversified Income Portfolio
(vi) Dividend Growth Portfolio
(vii) Emerging Markets Portfolio
(viii) Global Equity Portfolio
(ix) Mid-Cap Growth Portfolio
(x) Money Market Portfolio
(xi) North American Government Securities Portfolio
(xii) Utilities Portfolio
(xiii) Value-Added Market Portfolio
45. Dean Witter Select Municipal Reinvestment Fund
46. Dean Witter Short-Term Bond Fund
47. Dean Witter Short-Term U.S. Treasury Trust
48. Dean Witter Special Value Fund
49. Dean Witter Strategist Fund
50. Dean Witter Tax-Exempt Securities Trust
51. Dean Witter Tax-Free Daily Income Trust
52. Dean Witter U.S. Government Money Market Trust
A-1
<PAGE>
53. Dean Witter U.S. Government Securities Trust
54. Dean Witter Utilities Fund
55. Dean Witter Value-Added Market Series
56. Dean Witter Variable Investment Series
(i) Capital Appreciation Portfolio
(ii) Capital Growth Portfolio
(iii) Dividend Growth Portfolio
(iv) Equity Portfolio
(v) European Growth Portfolio
(vi) Global Dividend Growth Portfolio
(vii) High Yield Portfolio
(viii) Income Builder Portfolio
(ix) Money Market Portfolio
(x) Quality Income Plus Portfolio
(xi) Pacific Growth Portfolio
(xii) Strategist Portfolio
(xiii) Utilities Portfolio
57. Dean Witter World Wide Income Trust
58. Dean Witter World Wide Investment Trust
CLOSED-END FUNDS
59. High Income Advantage Trust
60. High Income Advantage Trust II
61. High Income Advantage Trust III
62. InterCapital Income Securities Inc.
63. Dean Witter Government Income Trust
64. InterCapital Insured Municipal Bond Trust
65. InterCapital Insured Municipal Trust
66. InterCapital Insured Municipal Income Trust
67. InterCapital California Insured Municipal Income Trust
68. InterCapital Insured Municipal Securities
69. InterCapital Insured California Municipal Securities
70. InterCapital Quality Municipal Investment Trust
71. InterCapital Quality Municipal Income Trust
72. InterCapital Quality Municipal Securities
73. InterCapital California Quality Municipal Securities
74. InterCapital New York Quality Municipal Securities
A-2
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF MAY 1, 1997
Monthly compensation calculated daily by applying the following annual
rates to a fund's net assets:
FIXED INCOME FUNDS
- ------------------
Dean Witter Balanced Income Fund 0.060% to the net assets.
Dean Witter California Tax-Free 0.055% of the portion of the daily net
Income Fund assets not exceeding $500 million; 0.0525%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.050% of the portion of the
daily net assets exceeding $750 million
but not exceeding $1 billion; 0.0475% of
the portion of the daily net assets
exceeding $1 billion but not exceeding
$1.25 billion; and 0.045% of the portion
of the daily net assets exceeding $1.25
billion.
Dean Witter Convertible Securities 0.060% of the portion of the daily net
Securities Trust assets not exceeding $750 million; .055%
of the portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.050% of the portion of the
daily net assets of the exceeding $1
billion but not exceeding $1.5 billion;
0.0475% of the portion of the daily net
assets exceeding $1.5 billion but not
exceeding $2 billion; 0.045% of the
portion of the daily net assets exceeding
$2 billion but not exceeding $3 billion;
and 0.0425% of the portion of the daily
net assets exceeding $3 billion.
Dean Witter Diversified 0.040% of the net assets.
Income Trust
Dean Witter Federal Securities Trust 0.055% of the portion of the daily net
assets not exceeding $1 billion; 0.0525%
of the portion of the daily net assets
exceeding $1 billion but not exceeding
$1.5 billion; 0.050% of the portion of the
daily net assets exceeding $1.5 billion
but not exceeding $2 billion; 0.0475% of
the portion of the daily net assets
exceeding $2 billion but not exceeding
$2.5 billion; 0.045% of the portion of the
daily net assets exceeding $2.5 billion
but not exceeding $5 billion; 0.0425% of
the portion of the daily net assets
exceeding $5 billion but not exceeding
$7.5 billion; 0.040% of the portion of the
daily net assets exceeding $7.5 billion
but not exceeding $10 billion; 0.0375% of
the portion of the daily net assets
exceeding $10 billion but not exceeding
$12.5 billion; and 0.035% of the portion
of the daily net assets exceeding $12.5
billion.
Dean Witter Global Short-Term 0.055% of the portion of the daily net
Income Fund Inc. assets not exceeding $500 million; and
0.050% of the portion of the daily net
assets exceeding $500 million.
Dean Witter Hawaii Municipal 0.035% to the net assets.
Trust
Dean Witter High Income 0.050% of the portion of the daily net
Securities assets not exceeding $500 million; and
0.0425% of the portion of the daily net
assets exceeding $500 million.
B-1
<PAGE>
Dean Witter High Yield 0.050% of the portion of the daily net
Securities Inc. assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of
the daily net assets exceeding $750
million but not exceeding $1 billion;
0.035% of the portion of the daily net
assets exceeding $1 billion but not
exceeding $2 billion; 0.0325% of the
portion of the daily net assets exceeding
$2 billion but not exceeding $3 billion;
and 0.030% of the portion of daily net
assets exceeding $3 billion.
Dean Witter Intermediate 0.060% of the portion of the daily net
Income Securities assets not exceeding $500 million; 0.050%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.040% of the portion of the
daily net assets exceeding $750 million
but not exceeding $1 billion; and 0.030%
of the portion of the daily net assets
exceeding $1 billion.
Dean Witter Intermediate Term 0.035% to the net assets.
U.S. Treasury Trust
Dean Witter Limited Term 0.050% to the net assets.
Municipal Trust
Dean Witter Multi-State Municipal 0.035% to the net assets.
Series Trust (10 Series)
Dean Witter National 0.035% to the net assets.
Municipal Trust
Dean Witter New York Tax-Free 0.055% of the portion of the daily net
Income Fund assets not exceeding $500 million; and
0.0525% of the portion of the daily net
assets exceeding $500 million.
Dean Witter Premier 0.050% to the net assets.
Income Trust
Dean Witter Retirement Series- 0.065% to the net assets.
Intermediate Income Securities
Series
Dean Witter Retirement Series- 0.065% to the net assets.
U.S. Government Securities Series
Dean Witter Select Dimensions 0.039% to the net assets.
Investment Series-North American
Government Securities Portfolio
Dean Witter Short-Term 0.070% to the net assets.
Bond Fund
Dean Witter Short-Term U.S. 0.035% to the net assets.
Treasury Trust
Dean Witter Tax-Exempt 0.050% of the portion of the daily net
Securities Trust assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of
the daily net assets exceeding $750
million but not exceeding $1 billion; and
0.035% of the portion of the daily net
assets exceeding $1 billion but not
exceeding $1.25 billion; .0325% of the
portion of the daily net assets exceeding
$1.25 billion.
B-2
<PAGE>
Dean Witter U.S. Government 0.050% of the portion of the daily net
Securities Trust assets not exceeding $1 billion; 0.0475%
of the portion of the daily net assets
exceeding $1 billion but not exceeding
$1.5 billion; 0.045% of the portion of the
daily net assets exceeding $1.5 billion
but not exceeding $2 billion; 0.0425% of
the portion of the daily net assets
exceeding $2 billion but not exceeding
$2.5 billion; 0.040% of the portion of the
daily net assets exceeding $2.5 billion
but not exceeding $5 billion; 0.0375% of
the portion of the daily net assets
exceeding $5 billion but not exceeding
$7.5 billion; 0.035% of the portion of the
daily net assets exceeding $7.5 billion
but not exceeding $10 billion; 0.0325% of
the portion of the daily net assets
exceeding $10 billion but not exceeding
$12.5 billion; and 0.030% of the portion
of the daily net assets exceeding $12.5
billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-High Yield Portfolio
Dean Witter Variable Investment 0.050% to the net assets.
Series-Quality Income Plus
Portfolio
Dean Witter World Wide Income 0.075% of the portion of the daily net
Trust assets up to $250 million; 0.060% of the
portion of the daily net assets exceeding
$250 million but not exceeding $500
million; 0.050% of the portion of the
daily net assets of the exceeding $500
million but not exceeding $750 milliion;
0.040% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; and 0.030% of the
portion of the daily net assets exceeding
$1 billion.
Dean Witter Select Municipal 0.050% to the net assets.
Reinvestment Fund
EQUITY FUNDS
- ------------
Dean Witter American Value 0.0625% of the portion of the daily net
Fund assets not exceeding $250 million; 0.050%
of the portion of the daily net assets
exceeding $250 million but not exceeding
$2.25 billion; 0.0475% of the portion of
the daily net assets exceeding $2.25
billion but not exceeding $3.5 billion;
and 0.0450% of the portion of the daily
net assets exceeding $3.5 billion.
Dean Witter Balanced Growth Fund 0.060% to the net assets.
Dean Witter Capital Appreciation 0.075% of the portion of the daily net
Fund assets not exceeding $500 million; and
0.0725% of the portion of the daily net
assets exceeding $500 million.
Dean Witter Capital Growth 0.065% to the portion of the daily net
Securities assets not exceeding $500 million; 0.055%
of the portion exceeding $500 million but
not exceeding $1 billion; 0.050% of the
portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion;
and 0.0475% of the portion of the daily
net assets exceeding $1.5 billion.
Dean Witter Developing Growth 0.050% of the portion of the daily net
Securities Trust assets not exceeding $500 million; and
0.0475% of the portion of the daily net
assets exceeding $500 million.
B-3
<PAGE>
Dean Witter Dividend Growth 0.0625% of the portion of the daily net
Securities Inc. assets not exceeding $250 million; 0.050%
of the portion of the daily net assets
exceeding $250 million but not exceeding
$1 billion; 0.0475% of the portion of the
daily net assets exceeding $1 billion but
not exceeding $2 billion; 0.045% of the
portion of the daily net assets exceeding
$2 billion but not exceeding $3 billion;
0.0425% of the portion of the daily net
assets exceeding $3 billion but not
exceeding $4 billion; 0.040% of the
portion of the daily net assets exceeding
$4 billion but not exceeding $5 billion;
0.0375% of the portion of the daily net
assets exceeding $5 billion but not
exceeding $6 billion; 0.035% of the
portion of the daily net assets exceeding
$6 billion but not exceeding $8 billion;
0.0325% of the portion of the daily net
assets exceeding $8 billion but not
exceeding $10 billion; 0.030% of the
portion of the daily net assets exceeding
$10 billion but not exceeding $15 billion;
and 0.0275% of the portion of the daily
net assets exceeding $15 billion.
Dean Witter European Growth 0.10% of the portion of the daily net
Fund Inc. assets not exceeding $500 million; 0.095%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$2 billion; and 0.090% of the portion of
the daily net assets exceeding $2 billion.
Dean Witter Global Asset Allocation 0.040% to the net assets.
Fund
Dean Witter Global Dividend 0.075% of the portion of the daily net
Growth Securities assets not exceeding $1 billion; 0.0725%
of the portion of the daily net assets
exceeding $1 billion but not exceeding
$1.5 billion; 0.070% of the portion of the
daily net assets exceeding $1.5 billion
but not exceeding $2.5 billion; 0.0675% of
the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3.5 billion; and 0.0650% of the portion
of the daily net assets exceeding $3.5
billion.
Dean Witter Global Utilities Fund 0.065% of the portion of the daily net
assets not exceeding $500 million; and
0.0625% of the portion of the daily net
assets exceeding $500 million.
Dean Witter Health Sciences Trust 0.10% of the portion of daily net assets
not exceeding $500 million; and 0.095% of
the portion of daily net assets exceeding
$500 million.
Dean Witter Income 0.075% to the net assets.
Builder Fund
Dean Witter Information Fund 0.075% of the portion of the daily net
assets not exceeding $500 million; and
0.0725% of the portion of the daily net
assets exceeding $500 million.
Dean Witter International 0.075% to the net assets.
SmallCap Fund
Dean Witter Japan Fund 0.060% to the net assets.
Dean Witter Mid-Cap Growth Fund 0.075% of the portion of the daily net
assets not exceeding $500 million; and
0.0725% of the portion of the daily net
assets exceeding $500 million.
B-4
<PAGE>
Dean Witter Natural Resource 0.0625% of the portion of the daily net
Development Securities Inc. assets not exceeding $250 million and
0.050% of the portion of the daily net
assets exceeding $250 million.
Dean Witter Pacific Growth 0.10% of the portion of the daily net
Fund Inc. assets not exceeding $1 billion; 0.095% of
the portion of the daily net assets
exceeding $1 billion but not exceeding $2
billion; and 0.090% of the portion of the
daily net assets exceeding $2 billion.
Dean Witter Precious Metals 0.080% to the net assets.
and Minerals Trust
Dean Witter Retirement Series- 0.085% to the net assets.
American Value Series
Dean Witter Retirement Series- 0.085% to the net assets.
Capital Growth Series
Dean Witter Retirement Series- 0.075% to the net assets.
Dividend Growth Series
Dean Witter Retirement Series- 0.10% to the net assets.
Global Equity Series
Dean Witter Retirement Series- 0.085% to the net assets.
Strategist Series
Dean Witter Retirement Series- 0.075% to the net assets.
Utilities Series
Dean Witter Retirement Series- 0.050% to the net assets.
Value Added Market Series
Dean Witter Select Dimensions
Investment Series-
American Value Portfolio 0.0625% to the net assets.
Balanced Portfolio 0.045% to the net assets.
Core Equity Portfolio 0.051% to the net assets.
Developing Growth Portfolio 0.050% to the net assets.
Diversified Income Portfolio 0.040% to the net assets.
Dividend Growth Portfolio 0.0625% to the net assets.
Emerging Markets Portfolio 0.075% to the net assets.
Global Equity Portfolio 0.10% to the net assets.
Mid-Cap Growth Portfolio 0.075% to the net assets
Utilities Portfolio 0.065% to the net assets.
Value-Added Market Portfolio 0.050% to the net assets.
Dean Witter Special Value Fund 0.075% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of the daily net
assets not exceeding $500 million; 0.055%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$1 billion; 0.050% of the portion of the
daily net assets exceeding $1 billion but
not exceeding $1.5 billion; and 0.0475% of
the portion of the daily net assets
exceeding $1.5 billion.
Dean Witter Utilities Fund 0.065% of the portion of the daily net
assets not exceeding $500 million; 0.055%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$1 billion; 0.0525% of the portion of the
daily net assets exceeding $1 billion but
not exceeding $1.5 billion; 0.050% of the
portion of the daily net
B-5
<PAGE>
assets exceeding $1.5 billion but not
exceeding $2.5 billion; 0.0475% of the
portion of the daily net assets exceeding
$2.5 billion but not exceeding $3.5
billion; 0.045% of the portion of the
daily net assets exceeding $3.5 but not
exceeding $5 billion; and 0.0425% of the
daily net assets exceeding $5 billion.
Dean Witter Value-Added Market 0.050% of the portion of the daily net
Series assets not exceeding $500 million; 0.45%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$1 billion; and 0.0425% of the portion of
the daily net assets exceeding $1 billion.
Dean Witter Variable Investment 0.075% to the net assets.
Series-Capital Appreciation
Portfolio
Dean Witter Variable Investment 0.065% to the net assets.
Series-Capital Growth Portfolio
Dean Witter Variable Investment 0.0625% of the portion of the daily net
Series-Dividend Growth Portfolio assets not exceeding $500 million; and
0.050% of the portion of the daily net
assets exceeding $500 million but not
exceeding $1 billion; and 0.0475% of the
portion of the daily net assets exceeding
$1 billion.
Dean Witter Variable Investment 0.050% to the net assets of the portion
Series-Equity Portfolio of the daily net assets not exceeding $1
billion; and 0.0475% of the portion of the
daily net assets exceeding $1 billion.
Dean Witter Variable Investment 0.060% to the net assets.
Series-European Growth Portfolio
Dean Witter Variable Investment 0.075% to the net assets.
Series-Income Builder Portfolio
Dean Witter Variable Investment 0.050% to the net assets.
Series-Strategist Portfolio
Dean Witter Variable Investment 0.065% of the portion of the daily net
Series-Utilities Portfolio assets exceeding $500 million and 0.055%
of the portion of the daily net assets
exceeding $500 million.
Dean Witter World Wide 0.055% of the portion of the daily net
Investment Trust assets not exceeding $500 million; and
0.05225% of the portion of the daily net
assets exceeding $500 million.
MONEY MARKET FUNDS
- ------------------
Active Assets Trusts:
(1) Active Assets Money Trust 0.050% of the portion of the daily net
(2) Active Assets Tax-Free Trust assets not exceeding $500 million;
(3) Active Assets California 0.0425% of the portion of the daily net
Tax-Free Trust assets exceeding $500 million but not
(4) Active Assets Government exceeding $750 million; 0.0375% of the
Securities Trust portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion but
not exceeding $1.5 billion; 0.0325% of the
portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.5 billion but not exceeding
B-6
<PAGE>
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3 billion.
Dean Witter California Tax-Free 0.050% of the portion of the daily net
Daily Income Trust assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of
the daily net assets exceeding $750
million but not exceeding $1 billion;
0.035% of the portion of the daily net
assets exceeding $1 billion but not
exceeding $1.5 billion; 0.0325% of the
portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net
assets exceeding $3 billion.
Dean Witter Liquid Asset 0.050% of the portion of the daily net
Fund Inc. assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of
the daily net assets exceeding $750
million but not exceeding $1 billion;
0.035% of the portion of the daily net
assets exceeding $1 billion but not
exceeding $1.35 billion; 0.0325% of the
portion of the daily net assets exceeding
$1.35 billion but not exceeding $1.75
billion; 0.030% of the portion of the
daily net assets exceeding $1.75 billion
but not exceeding $2.15 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.15 billion but not exceeding
$2.5 billion; 0.025% of the portion of the
daily net assets exceeding $2.5 billion
but not exceeding $15 billion; 0.0249% of
the portion of the daily net assets
exceeding $15 billion but not exceeding
$17.5 billion; and 0.0248% of the portion
of the daily net assets exceeding $17.5
billion.
Dean Witter New York Municipal 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of
the daily net assets exceeding $750
million but not exceeding $1 billion;
0.035% of the portion of the daily net
assets exceeding $1 billion but not
exceeding $1.5 billion; 0.0325% of the
portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net
assets exceeding $3 billion.
Dean Witter Retirement Series- 0.050% of the net assets.
Liquid Asset Series
Dean Witter Retirement Series- 0.050% of the net assets.
U.S. Government Money
Market Series
Dean Witter Select Dimensions 0.050% to the net assets.
Investment Series-
Money Market Portfolio
B-7
<PAGE>
Dean Witter Tax-Free Daily 0.050% of the portion of the daily net
Income Trust assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of
the daily net assets exceeding $750
million but not exceeding $1 billion;
0.035% of the portion of the daily net
assets exceeding $1 billion but not
exceeding $1.5 billion; 0.0325% of the
portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net
assets exceeding $3 billion.
Dean Witter U.S. Government 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of
the daily net assets exceeding $750
million but not exceeding $1 billion;
0.035% of the portion of the daily net
assets exceeding $1 billion but not
exceeding $1.5 billion; 0.0325% of the
portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net
assets exceeding $3 billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Money Market Portfolio
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
CLOSED-END FUNDS
- ----------------
Dean Witter Government Income 0.060% to the average weekly net assets.
Trust
High Income Advantage Trust 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of average
weekly net assets exceeding $250 million
and not exceeding $500 million; 0.050% of
the portion of average weekly net assets
exceeding $500 million and not exceeding
$750 million; 0.040% of the portion of
average weekly net assets exceeding $750
million and not exceeding $1 billion; and
0.030% of the portion of average weekly
net assets exceeding $1 billion.
High Income Advantage Trust II 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of average
weekly net assets exceeding $250 million
and not exceeding $500 million; 0.050% of
the portion of average weekly net assets
exceeding $500 million and not exceeding
$750 million; 0.040% of the portion of
average weekly net assets exceeding $750
million and not exceeding $1 billion; and
0.030% of the portion of average weekly
net assets exceeding $1 billion.
B-8
<PAGE>
High Income Advantage Trust III 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of average
weekly net assets exceeding $250 million
and not exceeding $500 million; 0.050% of
the portion of average weekly net assets
exceeding $500 million and not exceeding
$750 million; 0.040% of the portion of the
average weekly net assets exceeding $750
million and not exceeding $1 billion; and
0.030% of the portion of average weekly
net assets exceeding $1 billion.
InterCapital Income Securities Inc. 0.050% to the average weekly net assets.
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Bond Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital California Insured 0.035% to the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Investment Trust
InterCapital New York Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Securities
InterCapital California Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Securities
InterCapital Insured California 0.035% to the average weekly net assets.
Municipal Securities
B-9
<PAGE>
DEAN WITTER "COMPETITIVE EDGE" FUND
Two World Trade Center
New York, New York 10048
December 3, 1997
Dean Witter "Competitive Edge" Fund
Two World Trade Center
New York, New York 10048
Dear Sirs:
With respect to the Registration Statement on Form N-1A (File No.
333-38297) (the "Registration Statement") filed by Dean Witter "Competitive
Edge" Fund, a Massachusetts business trust (the "Fund"), with the Securities and
Exchange Commission for the purpose of registering under the Securities Act of
1933, as amended, an indefinite number of shares of Beneficial Interest of $0.01
par value of the Fund (the "Shares"), I, as your counsel, have examined such
Fund records, certificates and other documents and reviewed such questions of
law as I have considered necessary or appropriate for the purposes of this
opinion, and on the basis of such examination and review, I advise you that, in
my opinion, proper trust proceedings have been taken by the Fund so that the
Shares have been validly authorized; and when the Shares have been issued and
sold in accordance with the terms of the Underwriting Agreement referred to in
the Registration Statement, the Shares will be validly issued, fully paid and
non-assessable.
As to matters of Massachusetts law contained in the foregoing opinion, I
have relied upon the opinion of Lane Altman & Owens LLP dated December 3, 1997.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Counsel" in the Statement of Additional Information forming a part of the
Registration Statement. In giving this consent, I do not thereby admit that I
am within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Barry Fink
------------------------------------
Barry Fink
Vice President
and General Counsel
<PAGE>
December 3, 1997
Barry Fink, Vice President
and General Counsel
Dean Witter InterCapital, Inc.
Two World Trade Center
New York, NY 10048
RE: DEAN WITTER "COMPETITIVE EDGE" FUND
Dear Barry:
We understand that the trustees (the "Trustees") of Dean Witter
"Competitive Edge" Fund, a Massachusetts business trust (the "Trust"), intend,
on or about December 3, 1997, to cause to be filed on behalf of the Trust a
Pre-effective Amendment No. 1 to Registration Statement No. 333-38297 (as
amended, the "Registration Statement") for the purpose of registering for
sale Shares of Beneficial Interest, $.01 par value, of the Trust (the
"Shares"). We further understand that the Shares will be issued and sold
pursuant to an underwriting agreement (the "Underwriting Agreement") and a
distribution agreement (the "Distribution Agreement") to be entered into
between the Trust and Dean Witter Distributors Inc.
You have requested that we act as special counsel to the Trust regarding
certain matters of Massachusetts law respecting the organization of the Trust,
and in such capacity we are furnishing you with this opinion.
The Trust is organized under a written amended and restated declaration of
trust finally executed and filed in Boston, Massachusetts on October 16, 1997,
and amended by Amendment filed November 6, 1997 (the "Trust Agreement"). The
Trustees (as defined in the Trust Agreement) have the powers set forth in the
Trust Agreement, subject to the terms, provisions and conditions therein
provided.
In connection with the opinions set forth herein, you and the Trust have
provided to us originals, copies or facsimile transmissions of, and we have
reviewed and relied upon, among other things: a copy of the Trust Agreement;
forms of the Underwriting and Distribution Agreements; and the Registration
Statement (including the exhibits thereto). We have assumed
<PAGE>
Barry Fink, Vice President and
General Counsel
December 3, 1997
Page 2
that the by-laws filed as an exhibit to the Registration Statement have been
duly adopted by the Trustees. We have also reviewed and relied upon a
certificate of the Secretary of State of the Commonwealth of Massachusetts
dated December 3, 1997 attesting to the valid existence of the Trust.
In rendering this opinion we have assumed, without independent
verification, (i) the due authority of all individuals signing in
representative capacities and the genuineness of signatures, (ii) the
authenticity, completeness and continued effectiveness of all documents or
copies furnished to us, (iii) that any resolutions provided have been duly
adopted by the Trustees, and (iv) that no amendments, agreements, resolutions
or actions have been approved, executed or adopted which would limit, supersede
or modify the items described above. We have also examined such questions of law
as we have concluded necessary or appropriate for purposes of the opinions
expressed below. Where documents are referred to in resolutions approved by the
Trustees, or in the Registration Statement, we assume such documents are the
same as in the most recent form provided to us, whether as an exhibit to the
Registration Statement, or otherwise. When any opinion set forth below relates
to the existence or standing of the Trust, such opinion is based entirely
upon and is limited by the items referred to above, an we understand that the
foregoing assumptions, limitations and qualifications are acceptable to you.
Based upon the foregoing, and with respect to Massachusetts law only
(except that no opinion is herein expressed with respect to compliance with the
Massachusetts Uniform Securities Act), to the extent that Massachusetts law
may be applicable, and without reference to the laws of any of the other
several states or of the United States of America, including State and Federal
securities laws, we are of the opinion that:
1. The Trust is a business trust with transferable shares, organized in
compliance with the requirements of The Commonwealth of Massachusetts and
the Trust Agreement is legal and valid.
2. The Shares to which the Registration Statement relates and which are
to be registered under the Securities Act of 1933, as amended, will be legally
and validly issued upon receipt by the Trust of consideration determined by the
Trustees in compliance with Article VI, Section 6.4 of the Trust Agreement.
We are further of the opinion that such Shares, when issued, will be
<PAGE>
Barry Fink, Vice President and
General Counsel
December 3, 1997
Page 3
fully paid and non-assessable by the Trust.
We understand that you will rely on this opinion solely in connection with
your opinion to be filed with the Securities and Exchange Commission as an
Exhibit to the Registration Statement. We hereby consent to such use of
this opinion and we also consent to the filing of said opinion with the
Securities and Exchange Commission. In so consenting, we do not thereby
admit to be within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
LANE ALTMAN & OWENS LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 4, 1997, relating the statement of assets and liabilities of
"Competitive Edge" Portfolio and the "Best Ideas" Portfolio constituting the
Dean Witter "Competitive Edge" Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the references to us under the headings "Independent
Accountants" and "Experts" in such Statement of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 4, 1997
<PAGE>
DEAN WITTER INTERCAPITAL INC.
TWO WORLD TRADE CENTER
NEW YORK, NY 10048
November 6, 1997
Dean Witter "Competitive Edge" Fund
Two World Trade Center
New York, NY 10048
Gentlemen:
We are purchasing from you today 1,250 shares of your beneficial interest,
of $0.01 par value, of each of your Class A, Class B, Class C and Class D
shares, of your "Best Ideas" Portfolio and "Competitive Edge" Portfolio, at a
price of $10.00 per share, or an aggregate price of $100,000 to provide the
initial capital you require pursuant to Section 14 of the Investment Company Act
of 1940 in order to make a public offering of your shares.
We hereby represent that we are acquiring said shares for investment and
not for distribution or resale to the public.
We hereby further represent that in the event we redeem such shares prior
to complete amortization by you of your organization expenses, the amount we
receive upon redemption may be reduced by the proportionate amount which the
total unamortized balance bears to the number of shares being redeemed. For
this purpose, the proportionate amount is based on the ratio of the number of
shares originally issued by you in connection with the furnishing of the initial
capital.
Very truly yours,
DEAN WITTER INTERCAPITAL INC.
By: /s/ Charles A. Fiumefreddo
------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER "COMPETITIVE EDGE" FUND
WHEREAS, Dean Witter "Competitive Edge" Fund (the "Fund") intends to engage
in business as an open-end management investment company and is registered as
such under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to Rule
12b-1 under the Act, and the Trustees have determined that there is a reasonable
likelihood that adoption of the Plan of Distribution will benefit the Fund and
its shareholders; and
WHEREAS, the Fund is authorized to issue shares of beneficial interest in
separate portfolios ("Portfolio" or "Portfolios") with each such Portfolio
representing interests in a separate portfolio of securities and other assets;
and
WHEREAS, the Fund and Dean Witter Distributors Inc. (the "Distributor") have
entered into a separate Distribution Agreement as of November 6, 1997, pursuant
to which the Fund has employed the Distributor in such capacity during the
continuous offering of shares of the Fund.
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby agrees to
the terms of, this Plan of Distribution (the "Plan") in accordance with Rule
12b-1 under the Act on the following terms and conditions with respect to the
Class A, Class B and Class C shares of each Portfolio of the Fund:
1(a)(i). With respect to Class A and Class C shares of each Portfolio of the
Fund, the Distributor hereby undertakes to directly bear all costs of rendering
the services to be performed by it under this Plan and under the Distribution
Agreement, except for those specific expenses that the Trustees determine to
reimburse as hereinafter set forth.
1(a)(ii). The Fund is hereby authorized to reimburse the Distributor, Dean
Witter Reynolds Inc. ("DWR"), its affiliates and other broker-dealers for
distribution expenses incurred by them specifically on behalf of Class A and
Class C shares of each Portfolio of the Fund. Reimbursement will be made through
payments at the end of each month. The amount of each monthly payment may in no
event exceed an amount equal to a payment at the annual rate of 0.25%, in the
case of Class A, and 1.0%, in the case of Class C, of the average net assets of
the respective Class of each Portfolio during the month. 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 Trustees who are not "interested persons"
of the Fund, as defined in the Act. 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 the quarterly determinations of the amounts that may be
expended by each Portfolio of the Fund, the Distributor shall provide, and the
Trustees shall review, a quarterly budget of projected distribution expenses to
be incurred by the Distributor, DWR, its affiliates or other broker-dealers on
behalf of each Portfolio of the Fund together with a report explaining the
purposes and anticipated benefits of incurring such expenses. The Trustees shall
determine the particular expenses, and the portion thereof that may be borne by
each Portfolio of the Fund, and in making such determination shall consider the
scope of the Distributor's commitment to promoting the distribution of each
Portfolio's Class A and Class C shares directly or through DWR, its affiliates
or other broker-dealers.
1(a)(iii). If, as of the end of any calendar year, the actual expenses
incurred by the Distributor, DWR, its affiliates and other broker-dealers on
behalf of Class A or Class C shares of each Portfolio of the Fund (including
accrued expenses and amounts reserved for incentive compensation and bonuses)
are less than the amount of payments made by such Class pursuant to this Plan,
the Distributor shall promptly make appropriate reimbursement to the appropriate
Class. If, however, as of the end of any calendar year, the actual expenses
(other than expenses representing a gross sales credit) of the Distributor, DWR,
its affiliates and other broker-dealers are greater than the amount of payments
made by Class A or Class C shares of each Portfolio of the Fund pursuant to this
Plan, such Class will not reimburse the Distributor,
<PAGE>
DWR, its affiliates or other broker-dealers for such expenses through payments
accrued pursuant to this Plan in the subsequent fiscal year. Expenses
representing a gross sales credit may be reimbursed in the subsequent calendar
year.
1(b). With respect to Class B shares of each Portfolio of the Fund, such
Portfolio shall pay to the Distributor, as the distributor of securities of
which the Fund is the issuer, compensation for distribution of its Class B
shares at the rate of 1.0% per annum of the average daily net assets of Class B
of such Portfolio. Such compensation shall be calculated and accrued daily and
paid monthly or at such other intervals as the Trustees shall determine.
The Distributor may direct that all or any part of the amounts receivable by
it under this Plan be paid directly to DWR, its affiliates or other
broker-dealers who provide distribution and shareholder services. All payments
made hereunder pursuant to the Plan shall be in accordance with the terms and
limitations of the Rules of the Association of the National Association of
Securities Dealers, Inc.
2. With respect to expenses incurred by each Class of each Portfolio, the
amount set forth in paragraph 1 of this Plan shall be paid for services of the
Distributor, DWR its affiliates and other broker-dealers it may select in
connection with the distribution of each Portfolio of the Fund's shares,
including personal services to shareholders with respect to their holdings of
Fund shares, and may be spent by the Distributor, DWR, its affiliates and such
broker-dealers on any activities or expenses related to the distribution of each
Portfolio of the Fund's shares or services to shareholders, including, but not
limited to: compensation to, and expenses of, account executives or other
employees of the Distributor, DWR, its affiliates or other broker-dealers;
overhead and other branch office distribution-related expenses and telephone
expenses of persons who engage in or support distribution of shares or who
provide personal services to shareholders; printing of prospectuses and reports
for other than existing shareholders; preparation, printing and distribution of
sales literature and advertising materials and, with respect to Class B of each
Portfolio, opportunity costs in incurring the foregoing expenses (which may be
calculated as a carrying charge on the excess of the distribution expenses
incurred by the Distributor, DWR, its affiliates or other broker-dealers over
distribution revenues received by them, such excess being hereinafter referred
to as "carryover expenses"). The overhead and other branch office
distribution-related expenses referred to in this paragraph 2 may include: (a)
the expenses operating the branch offices of the Distributor or other
broker-dealers, including DWR, in connection with the sale of the 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. Payments may
also be made with respect to distribution expenses incurred in connection with
the distribution of shares, including personal services to shareholders with
respect to holdings of such shares, of an investment company whose assets are
acquired by the Fund in a tax-free reorganization. It is contemplated that, with
respect to Class A shares of each Portfolio, the entire fee set forth in
paragraph 1(a) will be characterized as a service fee within the meaning of the
National Association of Securities Dealers, Inc. guidelines and that, with
respect to Class B and Class C shares of each Portfolio, payments at the annual
rate of 0.25% will be so characterized.
3. This Plan shall not take effect with respect to any particular Class or
Portfolio until it has been approved, together with any related agreements, by
votes of a majority of the Board of Trustees of the Fund and of the Trustees who
are not "interested persons" of the Fund (as defined in the Act) and have no
direct financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
4. This Plan shall continue in effect with respect to each Class and
Portfolio until April 30, 1998, and from year to year thereafter, provided such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in paragraph 3 hereof.
5. The Distributor shall provide to the Trustees of the Fund and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were
2
<PAGE>
made. In this regard, the Trustees shall request the Distributor to specify such
items of expenses as the Trustees deem appropriate. The Trustees shall consider
such items as they deem relevant in making the determinations required by
paragraph 4 hereof.
6. This Plan may be terminated at any time with respect to a Class of any
Portfolio by vote of a majority of the Rule 12b-1 Trustees, or by vote of a
majority of the outstanding voting securities of such Class. The Plan may remain
in effect with the respect to a particular Class of any Portfolio, even if the
Plan has been terminated in accordance with this paragraph 6 with respect to any
other Class of any Portfolio. In the event of any such termination or in the
event of nonrenewal, the Fund shall have no obligation to pay expenses which
have been incurred by the Distributor, DWR, its affiliates or other
broker-dealers in excess of payments made by the Fund pursuant to this Plan.
However, with respect to Class B of any Portfolio, this shall not preclude
consideration by the Trustees of the manner in which such excess expenses shall
be treated.
7. This Plan may not be amended with respect to any Class of any Portfolio
to increase materially the amount each Class of any Portfolio may spend for
distribution provided in paragraph 1 hereof unless such amendment is approved by
a vote of at least a majority (as defined in the Act) of the outstanding voting
securities of that Class, and no material amendment to the Plan shall be made
unless approved in the manner provided for approval in paragraph 3 hereof. Class
B shares of each Portfolio will have the right to vote on any material increase
in the fee set forth in paragraph 1(a) above affecting Class A shares.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Trustees who are not interested persons.
9. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 5 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
10. The Declaration of Trust establishing Dean Witter "Competitive Edge"
Fund, dated October 16, 1997, a copy of which, together with all amendments
thereto (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Dean Witter "Competitive
Edge" Fund refers to the Trustees under the Declaration collectively as Trustees
but not as individuals or personally; and no Trustee, shareholder, officer,
employee or agent of Dean Witter "Competitive Edge" Fund shall be held to any
personal liability, nor shall resort be had to their private property for this
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Dean Witter "Competitive Edge" Fund, but the Trust Estate only
shall be liable.
IN WITNESS WHEREOF, the Fund and the Distributor have executed this Plan of
Distribution as of the day and year set forth below in New York, New York.
Date: November 6, 1997
<TABLE>
<S> <C>
Attest: DEAN WITTER "COMPETITIVE EDGE" FUND
............................................. By: ........................................
Attest: DEAN WITTER DISTRIBUTORS INC.
............................................. By: ........................................
</TABLE>
3
<PAGE>
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
INTRODUCTION
This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and will be
effective as of July 28, 1997. The Plan relates to shares of the open-end
investment companies to which Dean Witter InterCapital Inc. acts as investment
manager, that are listed on Schedule A, as may be amended from time to time
(each, a "Fund" and collectively, the "Funds"). The Funds are distributed
pursuant to a system (the "Multiple Class System") in which each class of shares
(each, a "Class" and collectively, the "Classes") of a Fund represents a pro
rata interest in the same portfolio of investments of the Fund and differs only
to the extent outlined below.
I. DISTRIBUTION ARRANGEMENTS
One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition, pursuant
to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan of
Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described below.
1. CLASS A SHARES
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under which
the sales charges are subject to reduction are set forth in each Fund's current
prospectus. As stated in each Fund's current prospectus, Class A shares may be
purchased at net asset value (without a FESL): (i) in the case of certain large
purchases of such shares; and (ii) by certain limited categories of investors,
in each case, under the circumstances and conditions set forth in each Fund's
current prospectus. Class A shares purchased at net asset value may be subject
to a contingent deferred sales charge ("CDSC") on redemptions made within one
year of purchase. Further information relating to the CDSC, including the manner
in which it is calculated, is set forth in paragraph 6 below. Class A shares are
also subject to payments under each Fund's 12b-1 Plan to reimburse Dean Witter
Distributors Inc., Dean Witter Reynolds Inc. ("DWR"), its affiliates and other
broker-dealers for distribution expenses incurred by them specifically on behalf
of the Class, assessed at an annual rate of up to 0.25% of average daily net
assets. The entire amount of the 12b-1 fee represents a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD") guidelines.
2. CLASS B SHARES
Class B shares are offered without a FESL, but will in most cases be subject
to a six-year declining CDSC which is calculated in the manner set forth in
paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The schedule
of CDSC charges applicable to each Fund is set forth in each Fund's current
prospectus. With the exception of certain of the Funds which have a different
formula described below (Dean Witter American Value Fund, Dean Witter Natural
Resource Development Securities Inc., Dean Witter Strategist Fund and Dean
Witter Dividend Growth Securities Inc.)(1), Class B
- ------------
(1) The payments under the 12b-1 Plan for each of Dean Witter American Value
Fund, Dean Witter Natural Resource Development Securities Inc. and Dean Witter
Dividend Growth Securities Inc. are assessed at the annual rate of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund's Plan (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Plan's inception
upon which a contingent deferred sales charge has been imposed or waived, or (b)
the average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since inception of the Plan. The payments under the
12b-1 Plan for the Dean Witter Strategist Fund are assessed at the annual rate
of: (i) 1% of the lesser of (a) the average daily aggregate gross sales of the
Fund's Class B shares since the effectiveness of the first amendment of the Plan
on November 8, 1989 (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the effectiveness of the first amended Plan, upon
which a contingent deferred sales charge has been imposed or waived, or (b) the
average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since the effectiveness of the first amended Plan; plus
(ii) 0.25% of the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, prior to effectiveness of the first
amended Plan.
1
97NYC13328
<PAGE>
shares are also subject to a fee under each Fund's respective 12b-1 Plan,
assessed at the annual rate of up to 1.0% of either: (a) the lesser of (i) the
average daily aggregate gross sales of the Fund's Class B shares since the
inception of the Fund (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Fund's inception upon which a CDSC has been
imposed or waived, or (ii) the average daily net assets of Class B; or (b) the
average daily net assets of Class B. A portion of the 12b-1 fee equal to up to
0.25% of the Fund's average daily net assets is characterized as a service fee
within the meaning of the NASD guidelines and the remaining portion of the 12b-1
fee, if any, is characterized as an asset-based sales charge. Also, Class B
shares have a conversion feature ("Conversion Feature") under which such shares
convert to Class A shares after a certain holding period. Details of the
Conversion Feature are set forth in Section IV below.
3. CLASS C SHARES
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse Dean Witter Distributors Inc., DWR, its affiliates
and other broker-dealers for distribution expenses incurred by them specifically
on behalf of the Class, assessed at the annual rate of up to 1.0% of the average
daily net assets of the Class. A portion of the 12b-1 fee equal to up to 0.25%
of the Fund's average daily net assets is characterized as a service fee within
the meaning of NASD guidelines. Unlike Class B shares, Class C shares do not
have the Conversion Feature.
4. CLASS D SHARES
Class D shares are offered without imposition of a FESL, CDSC or a 12b-1 fee
for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of investors,
in each case, as may be approved by the Boards of Directors/Trustees of the
Funds and as disclosed in each Fund's current prospectus.
5. ADDITIONAL CLASSES OF SHARES
The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 under the 1940 Act.
6. CALCULATION OF THE CDSC
Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase in share value due to capital
appreciation and shares acquired through the reinvestment of dividends or
capital gains distributions. The CDSC schedule applicable to a Fund and the
circumstances in which the CDSC is subject to waiver are set forth in each
Fund's prospectus.
II. EXPENSE ALLOCATIONS
Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each Class,
except that 12b-1 fees relating to a particular Class are allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees), may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Fund's Board of Directors/Trustees.
III. CLASS DESIGNATION
All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate, SPS
Transaction Services, Inc., shares of Funds offered with a FESL, and shares of
Dean Witter Balanced Growth Fund and Dean Witter Balanced Income Fund) have been
designated Class B shares. Shares held prior to July 28, 1997 by such employee
benefit plans have been designated Class D shares. Shares held prior to July 28,
1997 of Funds offered with a FESL have been designated Class D shares. In
addition, shares of Dean Witter American Value Fund purchased prior to April 30,
1984, shares of Dean Witter Strategist Fund purchased prior to November 8, 1989
and shares of Dean Witter Natural Resource Development Securities Inc. and Dean
Witter Dividend Growth Securities Inc. purchased prior to July 2, 1984 (with
respect to such shares of each Fund, including such proportion of shares
acquired through reinvestment of dividends and capital gains distributions as
the total number of shares acquired prior to each of the preceding dates in this
sentence bears to the total number of shares purchased and owned by the
shareholder of that Fund) have been designated Class D shares. Shares of Dean
Witter Balanced Growth Fund and Dean Witter Balanced Income Fund held prior to
July 28, 1997 have
2
<PAGE>
been designated Class C shares except that shares of Dean Witter Balanced Growth
Fund and Dean Witter Balanced Income Fund held prior to July 28, 1997 that were
acquired in exchange for shares of an investment company offered with a CDSC
have been designated Class B shares and those that were acquired in exchange for
shares of an investment company offered with a FESL have been designated Class A
shares.
IV. THE CONVERSION FEATURE
Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which are purchased before July 28, 1997
by trusts for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust FSB
("DWTFSB") provides discretionary trustee services will convert to Class A
shares on or about August 29, 1997 (the CDSC will not be applicable to such
shares upon the conversion). In all other instances, Class B shares of each Fund
will automatically convert to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase.
Conversions will be effected once a month. The 10 year period will be calculated
from the last day of the month in which the shares were purchased or, in the
case of Class B shares acquired through an exchange or a series of exchanges,
from the last day of the month in which the original Class B shares were
purchased, provided that shares originally purchased before May 1, 1997 will
convert to Class A shares in May, 2007. Except as set forth below, the
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a 401(k) plan or other employer-sponsored plan
qualified under Section 401(a) of the Internal Revenue Code (the "Code") and for
which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of
DWR serves as recordkeeper, all Class B shares will convert to Class A shares on
the conversion date of the first shares of a Fund purchased by that plan. In the
case of Class B shares previously exchanged for shares of an "Exchange Fund" (as
such term is defined in the prospectus of each Fund), the period of time the
shares were held in the Exchange Fund (calculated from the last day of the month
in which the Exchange Fund shares were acquired) is excluded from the holding
period for conversion. If those shares are subsequently re-exchanged for Class B
shares of a Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
Effectiveness of the Conversion Feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that (i) the conversion of shares does not constitute a
taxable event under the Code; (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion; and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The Conversion Feature may be suspended if the Ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B fees under the applicable Fund's 12b-1 Plan.
V. EXCHANGE PRIVILEGES
Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements of
additional information of the Funds. The exchange privilege of each Fund may be
terminated or revised at any time by the Fund upon such notice as may be
required by applicable regulatory agencies as described in each Fund's
prospectus.
VI. VOTING
Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the right
to vote on any proposed material increase in Class A's expenses, including
payments under the Class A 12b-1 Plan, if such proposal is submitted separately
to Class A shareholders. If the amount of expenses, including payments under the
Class A 12b-1 Plan, is increased materially without the approval of Class B
shareholders, the Fund will establish a new Class A for Class B shareholders
whose shares automatically convert on the same terms as applied to Class A
before the increase. In addition, each Class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one Class
differ from the interests of any other Class.
3
<PAGE>
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
SCHEDULE A
AT NOVEMBER 6, 1997
<TABLE>
<S> <C>
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter "Competitive Edge" Fund
8) Dean Witter Convertible Securities Trust
9) Dean Witter Developing Growth Securities Trust
10) Dean Witter Diversified Income Trust
11) Dean Witter Dividend Growth Securities Inc.
12) Dean Witter European Growth Fund Inc.
13) Dean Witter Federal Securities Trust
14) Dean Witter Financial Services Trust
15) Dean Witter Fund of Funds
16) Dean Witter Global Asset Allocation Fund
17) Dean Witter Global Dividend Growth Securities
18) Dean Witter Global Utilities Fund
19) Dean Witter Health Sciences Trust
20) Dean Witter High Yield Securities Inc.
21) Dean Witter Income Builder Fund
22) Dean Witter Information Fund
23) Dean Witter Intermediate Income Securities
24) Dean Witter International SmallCap Fund
25) Dean Witter Japan Fund
26) Dean Witter Managers' Select Fund
27) Dean Witter Market Leader Trust
28) Dean Witter Mid-Cap Growth Fund
29) Dean Witter Natural Resource Development Securities Inc.
30) Dean Witter New York Tax-Free Income Fund
31) Dean Witter Pacific Growth Fund Inc.
32) Dean Witter Precious Metals and Minerals Trust
33) Dean Witter Research Fund
34) Dean Witter Special Value Fund
35) Dean Witter S&P 500 Index Fund
36) Dean Witter Strategist Fund
37) Dean Witter Tax-Exempt Securities Trust
38) Dean Witter U.S. Government Securities Trust
39) Dean Witter Utilities Fund
40) Dean Witter Value-Added Market Series
41) Dean Witter World Wide Income Trust
42) Dean Witter World Wide Investment Trust
</TABLE>
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> DEAN WITTER COMP. EDGE FUND - "BEST IDEAS PORT." CLASS A
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-03-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 191,225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,225
<TOTAL-LIABILITIES> 141,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 12,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,250
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
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<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
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<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> DEAN WITTER COMP. EDGE FUND - "BEST IDEAS PORT." CLASS B
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-03-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 191,225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,225
<TOTAL-LIABILITIES> 141,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 1,250
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,250
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 12,500
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> DEAN WITTER COMP. EDGE FUND - "BEST IDEAS PORT." CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-03-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 191,225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,225
<TOTAL-LIABILITIES> 141,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 1,250
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,250
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 12,500
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> DEAN WITTER COMP. EDGE FUND - "BEST IDEAS PORT." CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-03-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 191,225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,225
<TOTAL-LIABILITIES> 141,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 1,250
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,250
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 12,500
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> DEAN WITTER COMP. EDGE FUND - "COMP. EDGE PORT." CLASS A
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-03-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 191,225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,225
<TOTAL-LIABILITIES> 141,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 1,250
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,250
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 12,500
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> DEAN WITTER COMP. EDGE FUND - "COMP. EDG PORT." CLASS B
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-03-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 191,225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,225
<TOTAL-LIABILITIES> 141,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 1,250
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,250
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 12,500
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> DEAN WITTER COMP. EDGE FUND - "COMP. EDGE PORT." CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-03-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 191,225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,225
<TOTAL-LIABILITIES> 141,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 1,250
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,250
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 12,500
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> DEAN WITTER COMP. EDGE FUND - "COMP. EDGE PORT." CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-03-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 191,225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,225
<TOTAL-LIABILITIES> 141,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 1,250
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,250
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 12,500
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Charles A. Fiumefreddo, whose
signature appears below, constitutes and appoints Marilyn K. Cranney and Barry
Fink, his true and lawful attorneys-in-fact and agents, with full power of
substitution among himself and each of the persons appointed herein, for him and
in his name, place and stead, in any and all capacities, to sign any amendments
to any registration statement of DEAN WITTER "COMPETITIVE EDGE" FUND, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or either of them, may lawfully do
or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ Charles A. Fiumefreddo
----------------------------------
Charles A. Fiumefreddo
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that John R. Haire, whose signature appears
below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and Stuart
M. Strauss or either of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement of DEAN WITTER "COMPETITIVE
EDGE" FUND, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or either of them,
may lawfully do or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ John R. Haire
----------------------------------
John R. Haire
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Manuel H. Johnson, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or either of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DEAN WITTER
"COMPETITIVE EDGE" FUND, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ Manuel H. Johnson
----------------------------------
Manuel H. Johnson
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Michael E. Nugent, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or either of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DEAN WITTER
"COMPETITIVE EDGE" FUND, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ Michael E. Nugent
----------------------------------
Michael E. Nugent
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Edwin J. Garn, whose signature appears
below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and Stuart
M. Strauss, or either of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement of DEAN WITTER "COMPETITIVE
EDGE" FUND, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or either of them,
may lawfully do or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ Edwin J. Garn
----------------------------------
Edwin J. Garn
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Michael Bozic, whose signature appears
below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and Stuart
M. Strauss, or either of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement of DEAN WITTER "COMPETITIVE
EDGE" FUND, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or either of them,
may lawfully do or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ Michael Bozic
----------------------------------
Michael Bozic
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that John L. Schroeder, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or either of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DEAN WITTER
"COMPETITIVE EDGE" FUND, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ John L. Schroeder
----------------------------------
John L. Schroeder
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Philip J. Purcell, whose signature
appears below, constitutes and appoints Marilyn K. Cranney and Barry Fink, or
either of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution among himself and each of the persons appointed herein,
for him and in his name, place and stead, in any and all capacities, to sign any
amendments to any registration statement of DEAN WITTER "COMPETITIVE EDGE"
FUND, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, may
lawfully do or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ Philip J. Purcell
----------------------------------
Philip J. Purcell
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Wayne E. Hedien, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or either of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DEAN WITTER
"COMPETITIVE EDGE" FUND, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Dated: November 6, 1997
/s/ Wayne E. Hedien
----------------------------------
Wayne E. Hedien
