<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1998
FILE NOS.: 333-49585
811-8739
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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]
------------------------
MORGAN STANLEY DEAN WITTER EQUITY 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
------------------------
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.
================================================================================
<PAGE> 2
MORGAN STANLEY DEAN WITTER EQUITY FUND
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
---- -------
<C> <S> <C>
PART
A
PROSPECTUS
1. ................................................ Cover Page
2. ................................................ Prospectus Summary; Summary of Fund Expenses
3. ................................................ Performance Information
4. ................................................ Prospectus Summary; Investment Objective and
Policies; Risk Considerations; The Fund and its
Management; Cover Page; Investment Restrictions
5. ................................................ The Fund and Its Management; Back Cover;
Investment Objective and Policies
6. ................................................ Dividends, Distributions and Taxes; Additional
Information
7. ................................................ Underwriting; Purchase of Fund Shares;
Shareholder Services; Prospectus Summary
8. ................................................ Purchase of Fund Shares; Redemptions and
Repurchases; Shareholder Services
9. ................................................ Not Applicable
PART B
STATEMENT OF ADDITIONAL INFORMATION
10. ................................................ Cover Page
11. ................................................ Table of Contents
12. ................................................ The Fund and Its Management
13. ................................................ Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and
Brokerage
14. ................................................ The Fund and Its Management; Trustees and
Officers
15. ................................................ The Fund and Its Management; 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 of the Fund
19. ................................................ Underwriting; The Distributor; Purchase of Fund
Shares; Redemptions and Repurchases; Financial
Statements; Shareholder Services
20. ................................................ Dividends, Distributions and Taxes; Financial
Statements
21. ................................................ Not applicable
22. ................................................ Performance Information
23. ................................................ Experts; Financial Statements
PART
C
</TABLE>
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> 3
PROSPECTUS
JUNE , 1998
Morgan Stanley Dean Witter Equity Fund (the "Fund") is an
open-end, diversified management investment company whose investment objective
is total return. The Fund seeks to achieve this objective by investing primarily
in a diversified portfolio of equity securities.
INITIAL OFFERING--Shares of the Fund 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. The
initial offering will run from approximately June 24, 1998 through July 24,
1998.
CONTINUOUS OFFERING--A continuous offering of the shares of
the Fund will commence approximately two weeks after the closing date of the
initial offering which is anticipated for July 29, 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 Fund offers four classes of shares (each, a "Class"),
each with a different combination of sales charges, ongoing fees and other
features. The different distribution arrangements permit an investor to choose
the method of purchasing shares that the investor believes is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other relevant circumstances. (See "Purchase of Fund
Shares--Alternative Purchase Arrangements.")
This Prospectus sets forth concisely the information you
should know before investing in the Fund. It should be read and retained for
future reference. Additional information about the Fund is contained in the
Statement of Additional Information, dated June , 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.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/5
The Fund and its Management/7
Investment Objective and Policies/8
Risk Considerations and Investment Practices/9
Investment Restrictions/20
Underwriting/21
Purchase of Fund Shares/22
Shareholder Services/32
Redemptions and Repurchases/35
Dividends, Distributions and Taxes/36
Performance Information/37
Additional Information/38
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Morgan Stanley Dean Witter Equity Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE> 4
PROSPECTUS SUMMARY
================================================================================
<TABLE>
<S> <C>
The The Fund is organized as a Trust commonly known as a
Fund Massachusetts business trust, and is an open-end,
diversified management investment company investing
primarily in a diversified portfolio of equity securities.
- ----------------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page
38). The Fund offers four Classes of shares, each with a
different combination of sales charges, ongoing fees and
other features (see pages 22-30).
- ----------------------------------------------------------------------------------------
Initial Shares of the Fund are being offered in an underwriting by
Offering Dean 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 June 24, 1998 through July 24, 1998. The closing will
take place on July 29, 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 Fund until after the
Closing Date. If any orders received during the initial
offering period are accompanied by payment, such payment
will be returned unless an accompanying request for
investment in a Dean Witter money market fund is received at
the time the payment is made. Any purchase order may be
cancelled at any time prior to the Closing Date.
- ----------------------------------------------------------------------------------------
Continuous A continuous offering of shares of the Fund will commence
Offering/ within approximately two weeks after the Closing Date. The
Minimum minimum initial investment for each Class is $1,000 ($100 if
Purchase the account is opened through EasyInvest (SM)). Class D
shares are only available to persons investing $5 million
($25 million for certain qualified plans) or more and to
certain other limited categories of investors. For the
purpose of meeting the minimum $5 million (or $25 million)
investment for Class D shares, and subject to the $1,000
minimum initial investment for each Class of the Fund, an
investor's existing holdings of Class A shares and shares of
funds for which Dean Witter InterCapital Inc. serves as
investment manager ("Dean Witter Funds") that are sold with
a front-end sales charge, and concurrent investments in
Class D shares of the Fund and other Dean Witter Funds that
are multiple class funds, will be aggregated. The minimum
subsequent investment is $100 (see page 21).
- ----------------------------------------------------------------------------------------
Investment The investment objective of the Fund is total return (see
Objective page 8).
Investment Dean Witter InterCapital Inc., the Investment Manager of the
Manager and Fund, and its wholly-owned subsidiary, Dean Witter Services
Sub-Adviser Company Inc., serve in various investment management,
advisory, management and administrative capacities to 101
investment companies and other portfolios with net assets
under management of approximately $113.8 billion at April
30, 1998. It is anticipated that on or about June 22, 1998,
Dean Witter InterCapital Inc. will change its name to Morgan
Stanley Dean Witter Advisors Inc. Miller Anderson &
Sherrerd, LLP has been retained by the Investment Manager as
Sub-Adviser to provide investment advice and manage the
Fund's portfolio. Miller Anderson & Sherrerd, LLP currently
provides investment services to investment companies,
employee benefit plans, endowment funds, foundations and
other institutional investors and as of March 31, 1998 had
in excess of $67 billion in assets under management (see
page 7).
- ----------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee from the Fund
Fee at the annual rate of 0.85% of daily net assets. The
Sub-Adviser receives a monthly fee from the Investment
Manager equal to 40% of the Investment Manager's monthly fee
(see page 7).
- ----------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant
and to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution
Distribution fees paid by the Class A, Class B and Class C shares of the Fund to the Distributor. The entire 12b-1
Fee fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B and Class C equal to
0.25% of the average daily net assets of the Class are currently each characterized as a service fee
within the meaning of the National Association of Securities Dealers, Inc. guidelines. The remaining
portion of the 12b-1 fee, if any, is characterized as an asset-based sales charge (see pages 22 and
30).
- -------------------------------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase - Class A shares are offered with a front-end sales charge, starting at 5.25% and reduced for larger
Arrangements purchases. Investments of $1 million or more (and investments by certain other limited categories of
investors) are not subject to any sales charge at the time of purchase but a contingent deferred
sales charge ("CDSC") of 1.0% may be imposed on redemptions within one year of purchase. The Fund is
authorized to reimburse the Distributor for specific expenses incurred in promoting the distribution
of the Fund's Class A shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments at an annual rate of 0.25% of
average daily net assets of the Class (see pages 22, 25 and 30).
- Class B shares are offered without a front-end sales charge, but will in most cases be subject to a
CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate current value of a Class B
account with the Fund falls below the aggregate amount of the investor's purchase payments made
during the six years preceding the redemption. A different CDSC schedule applies to investments by
certain qualified plans. Class B shares are also subject to a 12b-1 fee assessed at the annual rate
of 1.0% of the average daily net assets of Class B. Class B shares convert to Class A shares
approximately ten years after the date of the original purchase (see pages 22, 27 and 30).
- Class C shares are offered without a front-end sales charge, but will in most cases be subject to a
CDSC of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the
Distributor for specific expenses incurred in promoting the distribution of the Fund's Class C shares
and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event
exceed an amount equal to payments at an annual rate of 1.0% of average daily net assets of the Class
(see pages 22 and 30).
- Class D shares are offered only to investors meeting an initial investment minimum of $5 million
($25 million for certain qualified plans) and to certain other limited categories of investors. Class
D shares are offered without a front-end sales charge or CDSC and are not subject to any 12b-1 fee
(see pages 22 and 30).
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income and distributions from net capital gains, if any, are paid at
Capital Gains least once each year. The Fund may, however, determine to retain all or part of any net long-term
Distributions 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 32 and 36).
- -------------------------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A,
Class B or Class C shares. An account may be involuntarily redeemed if the total value of the account
is less than $100 or, if the account was opened through EasyInvest (SM), if after twelve months the
shareholder has invested less than $1,000 in the account (see page 35).
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Risk The net asset value of the Fund's shares will fluctuate with changes in the market value of its
Considerations portfolio securities. The market value of the Fund's portfolio securities and, therefore, the Fund's
net asset value per share, will increase or decrease due to a variety of economic, market or
political factors which cannot be predicted. Foreign securities and markets in which the Fund may
invest pose different and greater risks than those customarily associated with domestic securities
and markets, including fluctuations in foreign currency exchange rates, foreign securities exchange
controls and foreign tax rates as well as risks associated with transactions in forward currency
contracts. The Fund may invest in lower-rated convertible fixed-income securities, may enter into
repurchase agreements, may purchase securities on a when-issued, delayed delivery or forward
commitment basis, may purchase securities on a "when, as and if issued" basis, may lend its portfolio
securities and may utilize certain investment techniques including options and futures transactions
and stock index futures which may be considered speculative in nature and may involve greater risks
than those customarily assumed by other investment companies which do not invest in such instruments.
(See pages 9-19 under "Risk Considerations and Investment Practices" in the Prospectus).
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
4
<PAGE> 7
SUMMARY OF FUND EXPENSES
The following table illustrates all estimated expenses and fees that a
shareholder of the Fund will incur. The expenses and fees set forth in the table
are based on the expenses and fees estimated for the fiscal year ending May 31,
1999.
<TABLE>
<CAPTION>
Class A Class B Class C Class D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
- -----------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................ 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments....... None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price
or redemption proceeds)............................ None(2) 5.00%(3) 1.00%(4) None
Redemption Fees...................................... None None None None
Exchange Fee......................................... None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
- -----------------------------------------------------
Management Fees *.................................... 0.85% 0.85% 0.85% 0.85%
12b-1 Fees (5) (6)................................... 0.25% 1.00% 1.00% None
Other Expenses *..................................... 0.29% 0.29% 0.29% 0.29%
Total Fund Operating Expenses* (7)................... 1.39% 2.14% 2.14% 1.14%
</TABLE>
- ---------------
* The Investment Manager has agreed to assume all operating expenses (except
for brokerage and 12b-1 fees) and waive the compensation provided in its
investment management agreement until such time as the Fund has $50 million
of net assets or until six months from the date of commencement of the
Fund's operations, whichever occurs first.
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(2) Investments that are not subject to any sales charge at the time of purchase
are subject to a CDSC of 1.00% that will be imposed on redemptions made
within one year after purchase, except for certain specific circumstances
(see "Purchase of Fund Shares--Initial Sales Charge Alternative--Class A
Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1 fee
payable by Class A and a portion of the 12b-1 fee payable by each of Class B
and Class C equal to 0.25% of the average daily net assets of the Class are
currently each characterized as a service fee within the meaning of National
Association of Securities Dealers, Inc. ("NASD") guidelines and are payments
made for personal service and/or maintenance of shareholder accounts. The
remainder of the 12b-1 fee, if any, is an asset-based sales charge, and is a
distribution fee paid to the Distributor to compensate it for the services
provided and the expenses borne by the Distributor and others in the
distribution of the Fund's shares (see "Purchase of Fund Shares--Plan of
Distribution").
(6) Upon conversion of Class B shares to Class A shares, such shares will be
subject to the lower 12b-1 fee applicable to Class A shares. No sales charge
is imposed at the time of conversion of Class B shares to Class A shares.
Class C shares do not have a conversion feature and, therefore, are subject
to an ongoing 1.00% distribution fee (see "Purchase of Fund
Shares--Alternative Purchase Arrangements").
(7) "Total Fund Operating Expenses," as shown above, are based upon the sum of
12b-1 Fees, Management Fees and estimated "Other Expenses."
5
<PAGE> 8
<TABLE>
<CAPTION>
Examples 1 Year 3 Years 5 Years 10 Years
-------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the
end of
each time period:
Class A................................................ $66 $94 $125 $211
Class B................................................ $72 $97 $135 $247
Class C................................................ $32 $67 $115 $247
Class D................................................ $12 $36 $ 63 $139
You would pay the following expenses on the same $1,000
investment
assuming no redemption at the end of the period:
Class A................................................ $66 $94 $125 $211
Class B................................................ $22 $67 $115 $247
Class C................................................ $22 $67 $115 $247
Class D................................................ $12 $36 $ 63 $139
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"Purchase of Fund Shares--Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of the
maximum front-end sales charges permitted by the NASD.
6
<PAGE> 9
THE FUND AND ITS MANAGEMENT
================================================================================
Morgan Stanley Dean Witter Equity 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 April 6, 1998.
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 & 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. It is anticipated that on or about June 22, 1998, the
Investment Manager's name will be changed to Morgan Stanley Dean Witter Advisors
Inc.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 101 investment companies (the "Dean Witter Funds"),
28 of which are listed on the New York Stock Exchange, with combined assets of
approximately $109.5 billion at April 30, 1998. The Investment Manager also
manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $4.3 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and supervise the investment of the Fund's
assets. InterCapital has retained Dean Witter Services Company Inc. to perform
the aforementioned administrative services for the Fund.
Under a Sub-Advisory Agreement between Miller Anderson & Sherrerd, LLP (the
"Sub-Adviser") and the Investment Manager, the Sub-Adviser provides the Fund
with investment advice and portfolio management subject to the overall
supervision of the Investment Manager. The Fund's Trustees review the various
services provided by the Investment Manager and the Sub-Adviser to ensure that
the Fund's general investment policies and programs are being properly carried
out and that administrative services are being provided to the Fund in a
satisfactory manner.
The Sub-Adviser, whose address is One Tower Bridge, West Conshohocken,
Pennsylvania, as of March 31, 1998, manages assets of approximately $67 billion
for investment companies, employee benefit plans, endowments, foundations and
other institutional investors. The Sub-Adviser is an indirect subsidiary of
Morgan Stanley Dean Witter & Co.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.85% to the Fund's daily net assets. As compensation for its
services provided pursuant to the Sub-Advisory Agreement, the Investment Manager
pays the Sub-Adviser monthly compensation equal to 40% of its monthly
compensation. The Fund'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 Fund'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) and waive the
compensation provided for in its investment management agreement until such time
as the Fund has $50 million of net assets or until six months from commencement
of the Fund's operations, whichever occurs first.
7
<PAGE> 10
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is total return. There is no assurance
that the objective will be achieved. This objective is fundamental and may not
be changed without shareholder approval. The following policies may be changed
by the Board of Trustees without shareholder approval.
The Fund seeks to achieve its investment objective by investing at least
65% of its total assets in equity securities. The Sub-Adviser invests the Fund's
assets by pursuing an investing strategy that is a disciplined combination of
value and growth styles, backed by fundamental quantitative and qualitative
analyses, and executed within a multiple-manager, team system. Individual
securities are selected based on a sequence of objective, quantitative screens,
focused fundamental research by in-house industry analysts, and concluded with
buy/sell decisions by individual portfolio managers.
The portfolio managers, currently six in total, are divided into two teams:
a value team and a growth team. Each manager works independently within the
style of his or her specific team. Each team has a team leader who performs
certain oversight functions with respect to overall portfolio structure.
Research is aligned to complement and support the growth and value components of
the portfolio.
The Sub-Adviser's investment process is designed to identify growing
companies whose stock in the Sub-Adviser's opinion is attractively valued and
has low but rising expectations, and to diversify holdings across all market
economic sectors to preserve return while reducing risk. Strategic decisions are
a function of the stock selections made by the portfolio managers. However, team
leaders administer the value/growth style-tilt of the portfolio. They also
monitor the stock position limits and the sector-representation weightings.
The equity securities in which the Fund may invest include common stocks,
preferred stocks, rights and warrants and equity securities of foreign issuers.
The Fund may invest up to 25% of its total assets in foreign equity or
fixed-income securities denominated in a foreign currency and traded primarily
in non-U.S. markets.
Up to 35% of the Fund's total assets may be invested in (i) convertible
securities (which may or may not be rated below investment grade), (ii)
investment grade fixed-income securities of domestic companies, (iii) investment
grade fixed-income securities of foreign companies and governments and
international organizations, (iv) U.S. Government securities and (v) money
market instruments. (For a discussion of the risks of investing in each of these
securities, see "Risk Considerations and Investment Practices" below.) In
addition, this portion of the Fund's portfolio will consist of various other
financial instruments such as forward foreign exchange contracts, futures
contracts and options as set forth below.
Fixed-income securities in which the Fund may invest include domestic and
foreign corporate notes and bonds, obligations issued or guaranteed by the
United States Government, its agencies and instrumentalities and obligations of
foreign governments and international organizations. The non-governmental debt
securities in which the Fund will invest will include: (a) domestic and foreign
corporate debt securities, including bonds, notes and commercial paper, rated in
the four highest categories by a nationally recognized statistical rating
organization ("NRSRO") including Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), Duff and Phelps, Inc. and Fitch Investors
Service, Inc., or, if unrated, of comparable quality as determined by the
Investment Manager and Sub-Adviser; and (b) bank obligations, including CDs,
banker's acceptances and time deposits, issued by banks with a long-term CD
rating in one of the four highest categories by a NRSRO. Investments in
securities rated within the four highest rating categories by a NRSRO are
considered "investment grade." However, such securities rated
8
<PAGE> 11
within the fourth highest rating category by a NRSRO have speculative
characteristics and, therefore, changes in economic conditions or other
circumstances are more likely to weaken the capacity of their issuers to make
principal and interest payments than would be the case with investments in
securities with higher credit ratings. Where a fixed-income security is not
rated by a NRSRO, the Investment Manager and Sub-Adviser will make a
determination of its creditworthiness and may deem it to be investment grade. If
a fixed-income non-convertible security held by the Fund is subsequently
downgraded by a rating agency below investment grade, the Fund will sell such
securities as soon as practicable without undue market or tax consequences to
the Fund. See the Appendix to the Statement of Additional Information for a
discussion of ratings of fixed-income securities.
The U.S. Government securities in which the Fund may invest include
securities which are direct obligations of the United States Government, such as
United States treasury bills, notes and bonds (including zero coupon bonds), and
which are backed by the full faith and credit of the United States; securities
which are backed by the full faith and credit of the United States but which are
obligations of a United States Government agency or instrumentality (e.g.,
obligations of the Government National Mortgage Association); securities issued
by a United States agency or instrumentality which has the right to borrow, to
meet its obligations, from an existing line of credit with the United States
Treasury (e.g., obligations of the Federal National Mortgage Association); and
securities issued by a United States Government agency or instrumentality which
is backed by the credit of the issuing agency or instrumentality (e.g.,
obligations of the Federal Farm Credit System).
There may be periods during which market conditions warrant reduction of
some or all of the Fund's securities holdings. During such periods, the Fund may
adopt a temporary "defensive" posture in which greater than 35% of its net
assets are invested in cash or money market instruments. Under such
circumstances, the money market instruments in which the Fund may invest are
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (Treasury bills, notes and bonds, including zero coupon
securities); bank obligations; Eurodollar certificates of deposit; obligations
of savings institutions; fully insured certificates of deposit; and commercial
paper rated within the two highest grades by Moody's or S&P or, if not rated,
issued by a company having an outstanding debt issue rated at least AA by S&P or
Aa by Moody's. Such securities may be used to invest uncommitted cash balances.
During such "defensive" periods, up to 100% of the Fund's total assets may be
invested in money market instruments or cash.
The Fund may also purchase or sell futures contracts and listed and
over-the-counter options contracts on securities and indices, may enter into
repurchase agreements, purchase private placements, zero coupon securities and
securities of other investment companies, purchase securities on a when-issued,
delayed delivery or forward commitment basis, purchase securities on a "when, as
and if issued" basis, and lend its portfolio securities, as discussed under
"Risk Considerations and Investment Practices" below.
RISK CONSIDERATIONS AND INVESTMENT PRACTICES
The net asset value of the Fund's shares will fluctuate with changes in the
market value of the Fund's portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. While the Sub-Advisor's
strategy is designed to preserve return while reducing risk, there can be no
assurance that the strategy will be successful.
Foreign Securities. 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
9
<PAGE> 12
nations will affect the value of the Fund's investments. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S. dollar
value of the Fund's assets denominated in that currency and thereby impact upon
the Fund's total return on such assets. When purchasing foreign securities, the
Fund will generally enter into foreign currency exchange transactions or forward
foreign exchange contracts to facilitate settlement. The Fund will utilize
forward foreign exchange contracts in these instances as an attempt to limit the
effect of changes in the relationship between the U.S. dollar and the foreign
currency during the period between the trade date and settlement date for the
transaction.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot basis or through forward contracts or
futures contracts (see below). The Fund may incur certain costs in connection
with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of Fund trades effected in such markets. Inability to dispose of
portfolio securities due to settlement delays could result in losses to the Fund
due to subsequent declines in value of such securities and the inability of the
Fund to make intended security purchases due to settlement problems could result
in a failure of the Fund to make potentially advantageous investments.
Depository Receipts. The Fund may invest in securities of foreign issuers
in the form of ADRs, including ADRs sponsored by persons other than the
underlying issuers ("unsponsored ADRs"), European Depository Receipts ("EDRs"),
Global Depository Receipts ("GDRs") or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying securities. Generally, issuers of
the stock of unsponsored ADRs are not obligated to distribute material
information in the United States and, therefore, there may not be a correlation
between such information and the market value of such ADRs. EDRs are issued by a
European bank and GDRs are issued by a foreign bank or trust company and both
evidence ownership of the underlying foreign security. Generally, ADRs, in
registered form, are designated for use in the United States securities markets,
EDRs, in bearer form, are designated for use in European securities markets and
GDRs, in bearer form, are designated for use in European and other foreign
securities markets.
10
<PAGE> 13
Convertible Securities. The Fund may invest in convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail less
risk than the corporation's common stock. The value of a convertible security is
a function of its "investment value" (its value as if it did not have a
conversion privilege), and its "conversion value" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege).
Lower Rated or Unrated Convertible Securities. To the extent that a
convertible security's investment value is greater than its conversion value,
its price will be primarily a reflection of such investment value and its price
will be likely to increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security (the credit standing of the issuer
and other factors may also have an effect on the convertible security's value).
If the conversion value exceeds the investment value, the price of the
convertible security will rise above its investment value and, in addition, may
sell at some premium over its conversion value. (This premium represents the
price investors are willing to pay for the privilege of purchasing a
fixed-income security with a possibility of capital appreciation due to the
conversion privilege.) At such times the price of the convertible security will
tend to fluctuate directly with the price of the underlying equity security.
The convertible securities in which the Fund may invest may be rated below
investment grade. Securities below investment grade are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds." Investment grade is
generally considered to be debt securities rated BBB or higher by S&P or Baa or
higher by Moody's. Fixed-income securities rated Baa by Moody's or BBB by S&P
have speculative characteristics greater than those of more highly rated
securities, while fixed-income securities rated Ba or BB or lower by Moody's and
S&P, respectively, are considered to be speculative investments. The Fund will
not invest in convertible securities that are rated lower than B by S&P or
Moody's or, if not rated, determined to be of comparable quality by the
Investment Manager and Sub-Adviser. The Fund will not invest in debt securities
that are in default in payment of principal or interest. The ratings of
fixed-income securities by Moody's and S&P are a generally accepted barometer of
credit risk. However, as the creditworthiness of issuers of lower-rated
fixed-income securities is more problematic than that of issuers of higher-
rated fixed-income securities, the achievement of the Fund's investment
objective will be more dependent upon the Sub-Adviser's own credit analysis than
would be the case with a mutual fund investing primarily in higher quality
bonds. The Sub-Adviser will utilize a security's credit rating as simply one
indication of an issuer's creditworthiness and will principally rely upon its
own analysis of any security currently held by the Fund or potentially
purchasable by the Fund for its portfolio. See the Appendix to the Statement of
Additional Information for a discussion of ratings of fixed-income securities.
Because of the special nature of the Fund's permitted investments in lower
rated or unrated convertible securities, the Investment Manager and Sub-Adviser
must take account of certain special considerations in assessing the risks
associated with such investments. The prices of lower rated or unrated
securities have been found to be less sensitive to changes in prevailing
interest rates than higher rated investments, but are likely to be more
sensitive to adverse economic changes or individual corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress which would adversely
affect their ability to service their principal and interest payment
obligations, to meet their projected business goals or to obtain additional
financing. If the issuer of a fixed-income security owned by the Fund defaults,
11
<PAGE> 14
the Fund may incur additional expenses to seek recovery. In addition, periods of
economic uncertainty and change can be expected to result in an increased
volatility of market prices of lower rated or unrated securities and a
corresponding volatility in the net asset value of a share of the Fund.
Corporate Notes and Bonds. Values and yield of corporate bonds will
fluctuate with changes in prevailing interest rates and other factors.
Generally, as prevailing interest rates rise, the value of corporate notes and
bonds held by the Fund will fall. Securities with longer maturities generally
tend to produce higher yields and are subject to greater market fluctuation as a
result of changes in interest rates than debt securities with shorter
maturities. The Fund is not limited as to the maturities of the debt securities
in which it may invest.
All fixed-income securities are subject to two types of risks; the credit
risk and the interest rate risk. The credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they come due. The
interest rate risk refers to the fluctuations in the net asset value of any
portfolio of fixed-income securities resulting from the inverse relationship
between price and yield of fixed-income securities; that is, when the general
level of interest rates rises, the prices of outstanding fixed-income securities
decline, and when interest rates fall, prices rise.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract ("forward contract") involves an obligation to purchase or
sell a currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase 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, it is believed that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar or some other foreign currency, the Fund may enter into a forward
contract to sell, for a fixed amount of dollars or other currency, the amount of
foreign currency approximating the value of some or all of the Fund's portfolio
securities (or securities which the Fund has purchased for its portfolio)
denominated in such foreign currency. Under identical circumstances, the Fund
may enter into a forward contract to sell, for a fixed amount of U.S. dollars or
other currency, an amount of foreign currency other than the currency in which
the securities to be hedged are denominated approximating the value of some or
all of the portfolio securities to be hedged. This method of hedging, called
"cross-hedging," will be selected when it is determined that the foreign
currency in which the portfolio securities are denominated has insufficient
liquidity or is trading at a discount as compared with some other foreign
currency with which it tends to move in tandem.
In addition, when the Fund 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, it may enter into a forward contract to purchase an amount of
currency equal to some or all of the value of the anticipated purchase, for a
fixed amount of U.S. dollars or other currency. The Fund may, however, close out
the forward contract
12
<PAGE> 15
without purchasing the security which was the subject of the "anticipatory"
hedge.
Lastly, the Fund is permitted to enter into forward contracts with respect
to currencies in which certain of its portfolio securities are denominated and
on which options have been written (see "Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Fund's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Fund is
not required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager and/or Sub-Adviser.
The Fund generally will not enter into a forward contract with a term of
greater than one year, although it may enter into forward contracts for periods
of up to five years. To the extent that the Fund enters into forward foreign
currency contracts to hedge against a decline in the value of portfolio holdings
denominated in a particular foreign currency resulting from currency
fluctuations, there is a risk that the Fund may nevertheless realize a gain or
loss as a result of currency fluctuations after such portfolio holdings are sold
if the Fund is unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. The Fund may be limited in its
ability to enter into hedging transactions involving forward contracts by the
Internal Revenue Code of 1986 (the "Code") requirements relating to
qualifications as a regulated investment company (see "Dividends, Distributions
and Taxes").
Options and Futures Transactions. Call and put options on U.S. Treasury
notes, bonds and bills, on various foreign currencies and on equity securities
are listed on several U.S. and foreign securities exchanges and are written in
over-the-counter transactions ("OTC Options"). Listed options are issued or
guaranteed by the exchange on which they trade or by a clearing corporation such
as the Options Clearing Corporation ("OCC"). Ownership of a listed call option
gives the Fund the right to buy from the OCC (in the U.S.) or other clearing
corporation or exchange, the underlying security or currency covered by the
option at the stated exercise price (the price per unit of the underlying
security or currency) 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, on the OCC (in the U.S.) or other clearing corporation or exchange, the
underlying security or currency at that exercise price prior to the expiration
date of the option, regardless of its then current market price. Ownership of a
listed put option would give the Fund the right to sell the underlying security
or currency to the OCC (in the U.S.) or other clearing corporation or exchange
at the stated exercise price. Upon notice of exercise of the put option, the
writer of the option would have the obligation to purchase the underlying
security or currency from the OCC (in the U.S.) or other clearing corporation or
exchange at the exercise price.
OTC Options. Exchange-listed options are issued by the OCC (in the U.S.)
or other clearing corporation or exchange 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 Fund. With OTC options, such variables as expiration date,
exercise price and premium will be agreed upon between the Fund and the
transacting dealer, without the intermediation of a third party such as the OCC.
If the transacting dealer fails to make or take delivery of the securities or
amount of foreign currency underlying an option it has written, in accordance
with the terms of that option, the Fund would lose the pre-
13
<PAGE> 16
mium paid for the option as well as any anticipated benefit of the transaction.
The Fund will engage in OTC option transactions only with member banks of the
Federal Reserve System or primary dealers in U.S. Government securities or with
affiliates of such banks or dealers which have capital of at least $50 million
or whose obligations are guaranteed by an entity having capital of at least $50
million.
Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities which are denominated in either U.S. dollars or foreign
currencies and on the U.S. dollar and foreign currencies, without limit, in
order to hedge against the decline in the value of a security or currency and to
close out long call option positions. Generally, a call option is "covered" if
the Fund owns the security or the currency underlying the option it has written,
holds a call option on the same underlying security or currency with a similar
exercise price or maintains a sufficient amount of cash, cash equivalents or
liquid securities to purchase the underlying security or to exchange for the
underlying currency. As a writer of a call option, the Fund has the obligation,
upon notice of exercise of the option, to deliver the security or amount of
currency underlying the option (certain listed and OTC call options written by
the Fund will be exercisable by the purchaser only on a specific date).
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. The premium received will
offset a portion of the potential loss incurred by the Fund if the securities
underlying the option are ultimately sold by the Fund at a loss. Furthermore, a
premium received on a call written on a foreign currency will ameliorate any
potential loss of value on the portfolio security due to a decline in the value
of the currency. However, 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 exchange rate of the currency in which it is denominated)
increase, but has retained the risk of loss should the price of the underlying
security (or the exchange rate of the currency in which it is denominated)
decline. The size of premiums will fluctuate with varying market conditions.
Purchasing Call and Put Options. The Fund may purchase listed and OTC call
and put options in amounts equalling up to 5% of its total assets. The Fund may
purchase call options to close out a covered call position or to protect against
an increase in the price of a security it anticipates purchasing or, in the case
of call options on a foreign currency, to hedge against an adverse exchange rate
change of the currency in which the security it anticipates purchasing is
denominated vis-a-vis the currency in which the exercise price is denominated.
The Fund may purchase put options on securities which it holds in its portfolio
only to protect itself against a decline in the value of the security. If the
value of the underlying security were to fall below the exercise price of the
put purchased in an amount greater than the premium paid for the option, the
Fund would incur no additional loss. Similarly, the Fund may purchase put
options on currencies in which securities which it holds are denominated only to
protect itself against a decline in value of such currency vis-a-vis the
currency in which the exercise price is denominated. If the value of the
currency underlying the option were to fall below the exercise price of the put
purchased in an amount greater than the premium paid for the option, the Fund
would incur no additional loss. There are no other limits on the Fund's ability
to purchase call and put options.
Futures Contracts. The Fund may purchase and sell futures contracts that
are currently traded, or may in the future be traded, on U.S. and foreign
commodity exchanges on common stocks, such underlying fixed-income securities as
U.S. Treasury bonds, notes, and bills and/or any foreign government fixed-income
security ("interest rate" futures), on various currencies ("currency" futures)
and on such indexes of U.S. or foreign equity and fixed-income securities as may
exist or come into being, such as the Standard & Poor's 500 Composite Stock
Price Index or the Financial Times Equity Index ("index" futures). As a futures
contract pur-
14
<PAGE> 17
chaser, the Fund incurs an obligation to take delivery of a specified amount of
the obligation underlying the contract at a specified time in the future for a
specified price. As a seller of a futures contract, the Fund incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price.
The Fund will 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.
If it is anticipated that interest rates may rise and, concomitantly, the price
of certain of its portfolio securities fall, the Fund may sell an interest rate
futures contract. If declining interest rates are anticipated, the Fund may
purchase an interest rate futures contract to protect against a potential
increase in the price of securities the Fund intends to purchase. Subsequently,
appropriate securities may be purchased by the Fund in an orderly fashion; as
securities are purchased, corresponding futures positions would be terminated by
offsetting sales of contracts.
Rather than actually purchasing a financial asset (e.g., a long- or
short-term treasury security) or all of the securities contained in a specific
index (e.g., the S&P 500), the Fund may choose to purchase a futures contract
which reflects the value of such securities or index. For example, an S&P 500
futures contract reflects the value of the underlying companies that comprise
the S&P 500 Composite Stock Price Index. If the aggregate market value of the
index securities increases or decreases during the contract period of an S&P 500
futures contract, the amount of cash to be paid to the contract holder at the
end of the period would correspondingly increase or decrease. As a result, the
Fund is able to expose to the market that is held by the Fund to meet
anticipated redemptions or for future investment opportunities. Because futures
contracts generally settle more quickly than their underlying securities, the
Fund believes that the use of futures and options thereon may allow the Fund to
be fully invested while maintaining the needed liquidity.
The Fund may purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) against changes
in their prices. If it is anticipated that the prices of securities held by the
Fund may fall, the Fund may sell an index futures contract. Conversely, if the
Fund wishes to hedge against anticipated price rises in those securities which
the Fund intends to purchase, the Fund may purchase an index futures contract.
The Fund may purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated for
the purposes of hedging against anticipated changes in currency exchange rates.
The Fund will enter into currency futures contracts for the same reasons as set
forth above for entering into forward foreign currency contracts; namely, to
"lock-in" the value of a security purchased or sold in a given currency
vis-a-vis a different currency or to hedge against an adverse currency exchange
rate movement of a portfolio security's (or anticipated portfolio security's)
denominated currency vis-a-vis a different currency.
In addition to the above, interest rate, index and currency futures may be
bought or sold in order to close out a short or long position maintained by the
Fund in a corresponding futures contract.
Options on Futures Contracts. The Fund 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. An option on a futures contract gives the purchaser the right (in
return for the premium paid) 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
15
<PAGE> 18
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 Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option) 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 or Sub-Adviser
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 or Sub-Adviser seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, provide a further hedge against
losses resulting from price declines in portions of the Fund's portfolio.
Limitations on Futures Contracts and Options on Futures. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's assets
which may be committed to a hedge position. Except as described above, there are
no other limitations on the use of futures and options thereon by the Fund.
Risks of Options and Futures Transactions. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract,
only if a liquid secondary market exists for options or futures contracts of
that series. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options will generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer.
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.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Code's requirements for
qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Taxes."
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk is that the Fund's management 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 Fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Fund would lose money on the sale.
Another risk which may 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 the Fund's portfolio securities and their denominated
currencies. 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
16
<PAGE> 19
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 Fund, by entering into transactions in foreign futures and options
markets, will also incur risks similar to those discussed above under the
section entitled "Foreign Securities."
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when a purchase of a
call or put option on a futures contract would result in a loss to the Fund when
the purchase or sale of a futures contract would not result in a loss, such as
when there is no movement in the prices of the underlying securities. The
writing of a put or call option on a futures contract involves risks similar to
those relating to transactions in futures contracts, as are described above.
Investment in Other Investment Vehicles. Under the Investment Company Act
of 1940, as amended (the "Act"), the Fund generally may invest up to 10% of its
total assets in the aggregate in shares of other investment companies and up to
5% of its total assets in any one investment company, as long as that investment
does not represent more than 3% of the voting stock of the acquired investment
company at the time such shares are purchased. Notwithstanding the foregoing,
the Fund may invest all or substantially all of its assets in another registered
investment company having the same investment objective and policies and
substantially the same investment restrictions as the Fund. (See "Additional
Information--Master/Feeder Conversion.") Investment in other investment
companies or vehicles may be the sole or most practical means by which the Fund
can participate in certain foreign markets. Such investment may involve the
payment of substantial premiums above the value of such issuers' portfolio
securities, and is subject to limitations under the Act and market availability.
In addition, special tax considerations may apply. The Fund does not intend to
invest in such vehicles or funds unless, in the judgment of the Investment
Manager, the potential benefits of such investment justify the payment of any
applicable premium or sales charge. As a shareholder in an investment company,
the Fund would bear its ratable share of that investment company's expenses,
including its advisory and administration fees. At the same time the Fund would
continue to pay its own management fees and other expenses, as a result of which
the Fund and its shareholders in effect will be absorbing duplicate levels of
advisory fees with respect to investments in such other investment companies.
Standard & Poor's Depositary Receipts ("SPDRs"). The Fund may purchase
interests in a unit investment trust holding a portfolio of securities linked to
the S&P 500 Index. SPDRs closely track the underlying portfolio of securities,
trade like a share of common stock and pay periodic dividends proportionate to
those paid by the portfolio of stocks that comprise the S&P 500 Index. The Fund
will not invest in excess of 10% of its total assets in the aggregate in SPDRs
and up to 5% of its total assets in SPDRs issued by a single unit investment
trust. As a holder of interests in a unit investment trust, the Fund would
indirectly bear its ratable share of that unit investment trust's expenses. At
the same time the Fund would continue to pay its own management and advisory
fees and other expenses, as a result of which the Fund and its shareholders in
effect will be absorbing duplicate levels of fees with respect to investments in
such unit investment trusts. The liquidity of small holdings of SPDRs will
depend upon the existence and liquidity of a secondary market. See the Statement
of Additional Information for a further discussion of SPDRs.
Rights and Warrants. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect,
17
<PAGE> 20
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.
Private Placements and Restricted Securities. The Fund may invest up to 15%
of its net assets in securities which are subject to restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or which are otherwise restricted. (Securities
eligible for resale pursuant to Rule 144A under the Securities Act, and
determined to be liquid pursuant to the procedures discussed in the following
paragraph, are not subject to the foregoing restriction.) These securities are
generally referred to as private placements or restricted securities.
Limitations on the resale of such securities may have an adverse effect on their
marketability, and may prevent the Fund from disposing of them promptly at
reasonable prices. The Fund may have to bear the expense of registering such
securities for resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid," such security will
not be included within the category "illiquid securities," which under current
policy may not exceed 15% of the Fund's net assets. However, investing in Rule
144A securities could have the effect of increasing the level of Fund
illiquidity to the extent the Fund, at a particular point in time, may be unable
to find qualified institutional buyers interested in purchasing such securities.
Repurchase Agreements. The Fund may enter into repurchase agreements,
which may be viewed as a type of secured lending by the Fund, and which
typically involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
at a specified price and at a fixed time in the future, usually not more than
seven days from the date of purchase. While repurchase agreements involve
certain risks not associated with direct investments in debt securities,
including the risks of default or bankruptcy of the selling financial
institution, the Fund follows procedures to minimize such risks. These
procedures include effecting repurchase transactions only with large,
well-capitalized and well-established financial institutions and maintaining
adequate collateralization.
Zero Coupon Securities. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive their
full value at maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at a
constant rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received on interest-paying securities if prevailing interest rates
rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
18
<PAGE> 21
When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. There is no overall
limit on the percentage of the Fund's assets which may be committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis may increase the volatility of the Fund's net asset value.
When, As and If Issued Securities. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. There is no overall limit on the
percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage of
the Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are at least equal to the market value, determined daily,
of the loaned securities.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as such,
may be changed without shareholder approval.
Year 2000. The investment management services provided to the Fund by the
Investment Manager and the Sub-Adviser and the services provided to shareholders
by the Distributor and the Transfer Agent depend on the smooth functioning of
their computer systems. Many computer software systems in use today cannot
recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services. The Investment Manager, the Sub-Adviser, the Distributor and the
Transfer Agent have been actively working on necessary changes in their own
computer systems to prepare for the year 2000 and expect that their systems will
be adapted before that date, but there can be no assurance that they will be
successful, or that interaction with other non-complying computer systems will
not impair their services at that time. In addition, it is possible that the
markets for securities in which the Fund invests may be detrimentally affected
by computer failures throughout the financial services industry beginning
January 1, 2000. Improperly functioning trading systems may result in settlement
problems and liquidity issues. In addition, corporate and governmental data
processing errors may result in production problems for individual companies and
overall economic uncertainties. Earnings of individual issuers will be affected
by remediation costs, which may be substantial and may be reported
inconsistently in U.S. and foreign financial statements. Accordingly, the Fund's
investments may be adversely affected.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager and the
Sub-Adviser with a view to achieving the Fund's investment objective. In
determining which securities to purchase for the
19
<PAGE> 22
Fund or hold in the Fund's portfolio, the Investment Manager and the Sub-Adviser
will rely on information from various sources, including research, analysis and
appraisals of brokers and dealers, including Dean Witter Reynolds Inc. ("DWR"),
Morgan Stanley & Co. Incorporated and other broker-dealer affiliates of the
Investment Manager, and the Investment Manager's and Sub-Adviser's own analysis
of factors they deem relevant.
The Sub-Adviser employs a multiple-manager, team system for the day-to-day
management of the Fund's portfolio. Currently, there are six portfolio managers
who are divided into two teams: a value team and a growth team. Each team has
three members, although there is no strategic necessity that the teams have
equal membership or that there be a certain number of managers in total. Each
manager works independently within his or her team style. Each team has a
designated team leader. Team leaders administer the value/growth style-tilt of
the portfolio. They also monitor the stock position limits and the
sector-representation weightings. The value team is comprised of Nicholas J.
Kovich, James Jolinger and Robert J. Marcin with Mr. Kovich acting as team
leader; the growth team is comprised of Arden C. Armstrong, Brian Kramp and Gary
G. Schlarbaum with Mr. Kramp acting as team leader. Ms. Armstrong, Mr. Kovich,
Mr. Marcin and Mr. Schlarbaum are Managing Directors of the Sub-Adviser and have
been managing portfolios for the Sub-Adviser which have a similar investment
approach to that of the Fund for over five years. Mr. Jolinger is a Principal of
the Sub-Adviser and the Director of Research; he has been associated with the
Sub-Adviser since 1994 and prior thereto was an equity analyst with Oppenheimer
Capital (1987-1994). Mr. Kramp is a Vice President of the Sub-Adviser and has
been affiliated with the Sub-Adviser since 1997. Prior thereto he was an
analyst/portfolio manager with Meridian Investment Company (1985-1997).
Personnel of the Investment Manager and Sub-Adviser have 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.
Orders for transactions in portfolio securities and commodities may be
placed for the Fund with a number of brokers and dealers, including DWR, Morgan
Stanley & Co. Incorporated and other broker-dealer affiliates of the Investment
Manager or the Sub-Adviser. Pursuant to an order of the Securities and Exchange
Commission, the Fund may effect principal transactions in certain money market
instruments with DWR. In addition, the Fund may incur brokerage commissions on
transactions conducted through DWR, Morgan Stanley & Co. Incorporated and other
brokers and dealers that are affiliates of the Investment Manager or the Sub-
Adviser.
It is not anticipated that the portfolio trading engaged in by the Fund
will result in its portfolio turnover rate exceeding 200% in any one year. The
Fund is expected to incur higher than normal brokerage commission costs due to
its portfolio turnover rate. Short-term gains and losses taxable at ordinary
income rates may result from such portfolio transactions. See "Dividends,
Distributions and Taxes" for a full discussion of the tax implications of the
Fund's trading policy. A more extensive discussion of the Fund's portfolio
brokerage policies is set forth in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the Act. For purposes of the following limitations: (i)
all percentage limitations apply immediately after a purchase or initial
investment, and (ii) any subse-
20
<PAGE> 23
quent change in any applicable percentage resulting from market fluctuations or
other changes in total or net assets does not require elimination of any
security from the portfolio.
The Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (other than obligations issued,
or guaranteed by, the United States Government, its agencies or
instrumentalities) except that the Fund may seek to achieve its investment
objective by investing all or substantially all of its assets in another
investment company having substantially the same investment objective and
policies as the Fund (a "Qualifying Portfolio").
2. As to 75% of its total assets, purchase more than 10% of all outstanding
voting securities or any class of securities of any one issuer, except that the
Fund may invest all or substantially all of its assets in a Qualifying
Portfolio.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.
UNDERWRITING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up
to 10,000,000 shares from the Fund, which number may be increased or decreased
in accordance with the Underwriting Agreement. The initial offering will run
approximately from June 24, 1998 through July 24, 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 July 29, 1998, or such other date as may be agreed upon by the
Underwriter and the Fund (the "Closing Date"). Shares will not be issued and
dividends will not be declared by the Fund until after the Closing Date. For
this reason, payment is not required to be made prior to the Closing Date. If
any orders received during the initial offering period are accompanied by
payment, such payment will be returned unless an accompanying request for
investment in a Dean Witter money market fund is received at the time the
payment is made. Prospective investors in money market funds should request and
read the money market fund prospectus prior to investing. 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
Fund at $10.00 per share with all proceeds going to the Fund and will purchase
Class A shares at $10.00 per share plus a sales charge with the sales charge
paid to the Underwriter and the net asset value of $10.00 per share going to the
Fund. The Underwriter may, however, receive contingent deferred sales charges
from future redemptions of Class A, Class B and Class C shares (see "Purchase of
Fund Shares--Continuous Offering").
The Underwriter shall, regardless of its expected underwriting commitment,
be entitled and obligated to purchase only the number of shares for which
purchase orders have been received by the Underwriter prior to 2:00 p.m., New
York time, on the third business day preceding the Closing Date, or such other
date as may be agreed to between the parties.
The minimum number of Fund shares which may be purchased by any shareholder
pursuant to this offering is 100 shares. Certificates for shares purchased will
not be issued unless requested by the shareholder in writing.
21
<PAGE> 24
PURCHASE OF FUND SHARES--CONTINUOUS OFFERING
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and Dean
Witter Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers which have entered into selected dealer 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 Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales charge
are subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified plans are subject
to a CDSC scaled down from 2.0% to 1.0% if redeemed within three years after
purchase.) Class C shares are sold without an initial sales charge but are
subject to a CDSC of 1.0% on most redemptions made within one year after
purchase. Class D shares are sold without an initial sales charge or CDSC and
are available only to investors meeting an initial investment minimum of $5
million ($25 million for certain qualified plans), and to certain other limited
categories of investors. At the discretion of the Board of Directors of the
Fund, Class A shares may be sold to categories of investors in addition to those
set forth in this prospectus at net asset value without a front-end sales
charge, and Class D shares may be sold to certain other categories of investors,
in each case as may be described in the then current prospectus of the Fund. See
"Alternative Purchase Arrangements--Selecting a Particular Class" for a
discussion of factors to consider in selecting which Class of shares to
purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25 million
for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million)
initial investment for Class D shares, and subject to the $1,000 minimum initial
investment for each Class of the Fund, an investor's existing holdings of Class
A shares of the Fund and other Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") and shares of Dean Witter Funds sold with a
front-end sales charge ("FSC Funds") and concurrent investments in Class D
shares of the Fund and other Dean Witter Multi-Class Funds will be aggregated.
Subsequent purchases of $100 or more may be made by sending a check, payable to
Morgan Stanley Dean Witter Equity Fund, directly to Morgan Stanley Dean Witter
Trust FSB (the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040, Jersey City,
NJ 07303 or by contacting an account executive of DWR or other Selected
Broker-Dealer. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A, Class B, Class C or Class D shares. If no
Class is specified, the Transfer Agent will not process the transaction until
the proper Class is identified. The minimum initial purchase, in the case of
investments through 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
22
<PAGE> 25
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, administrative and/or
brokerage services, the Fund, in its discretion, may accept investments without
regard to any minimum amounts which would otherwise be required, provided, in
the case of Systematic Payroll Deduction Plans, that the Distributor if the Fund
has reason to believe that additional investments will increase the investment
in all accounts under such Plans to at least $1,000. Certificates for shares
purchased will not be issued unless a request is made by the shareholder in
writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment 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 gain distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. Sales personnel of a Selected Broker-Dealer are compensated for
selling shares of the Fund at the time of their sale by the Distributor or any
of its affiliates and/or the Selected Broker-Dealer. In addition, some sales
personnel of the Selected Broker-Dealer will receive various types of non-cash
compensation as special sales incentives, including trips, educational and/or
business seminars and merchandise. The Fund and the Distributor reserve the
right to reject any purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their needs.
The general public is offered three Classes of shares: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales charges
and rate of expenses to which they are subject. A fourth Class of shares, Class
D shares, is offered only to limited categories of investors (see "No Load
Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs resulting
from the CDSC applicable to shares of those Classes. The ongoing distribution
fees that are imposed on Class A, Class B and Class C shares will be imposed
directly against those Classes and not against all assets of the Fund and,
accordingly, such charges against one Class will not affect the net asset value
of any other Class or have any impact on investors choosing another sales charge
option. See "Plan of Distribution" and "Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and the
factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charges at the
time of purchase but are subject to a CDSC of 1.0% on redemptions made within
one year after purchase, except for certain specific circumstances. Class A
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the
23
<PAGE> 26
Class. See "Initial Sales Charge Alternative--Class A Shares."
Class B Shares. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 1.0% of
the average daily net assets of Class B. The Class B shares' distribution fee
will cause that Class to have higher expenses and pay lower dividends than Class
A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time. See
"Contingent Deferred Sales Charge Alternative--Class B Shares."
Class C Shares. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They are
subject to an annual 12b-1 fee of up to 1.0% of the average daily net assets of
the Class C shares. The Class C shares' distribution fee may cause that Class to
have higher expenses and pay lower dividends than Class A or Class D shares. See
"Level Load Alternative--Class C Shares."
Class D Shares. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares are
sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
Selecting a Particular Class. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly lower
CDSC upon redemptions, they do not, unlike Class B shares, convert into Class A
shares after approximately ten years, and, therefore, are subject to an ongoing
12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A shares) for
an indefinite period of time. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks. Other
investors, however, may elect to purchase Class C shares if, for example, they
determine that they do not wish to be subject to a front-end sales charge and
they are uncertain as to the length of time they intend to hold their shares.
24
<PAGE> 27
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all 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
<CAPTION>
<C> <S> <C> <C>
A Maximum 5.25% 0.25% No
initial sales
charge reduced
for purchases of
$25,000 and
over; shares
sold without an
initial sales
charge generally
subject to a
1.0% CDSC during
first year.
B Maximum 5.0% 1.0% B shares convert
CDSC during the to A shares
first year automatically
decreasing to 0 after
after six years approximately
ten years
C 1.0% CDSC during 1.0% No
first year......
D None None No
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets of
the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value" below), plus a sales charge
25
<PAGE> 28
(expressed as a percentage of the offering price) on a single transaction as
shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT INVESTED
- ------------------------- --------------- ---------------
<S> <C> <C>
Less than $25,000........ 5.25% 5.54%
$25,000 but less
than $50,000........ 4.75% 4.99%
$50,000 but less
than $100,000....... 4.00% 4.17%
$100,000 but less
than $250,000....... 3.00% 3.09%
$250,000 but less
than $1 million..... 2.00% 2.04%
$1 million and over...... 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her
spouse and their children under the age of 21 purchasing shares for his, her or
their own accounts; (c) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account; (d) a pension, profit-sharing
or other employee benefit plan qualified or non-qualified under Section 401 of
the Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of
Section 2(a)(3)(c) of the Act; and for investments in Individual Retirement
Accounts of employees of a single employer through Systematic Payroll Deduction
plans; or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has
some purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The sales
charge payable on the purchase of the Class A shares of the Fund, the Class A
shares of the other Dean Witter Multi-Class Funds and the shares of the FSC
Funds will be at their respective rates applicable to the total amount of the
combined concurrent purchases of such shares.
Right of Accumulation. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Dean Witter Funds previously
purchased at a price including a front-end sales charge (including shares of the
Fund and other Dean Witter Funds acquired in exchange for those shares, and
including in each case shares acquired through reinvestment of dividends and
distributions), which are held at the time of such transaction, amounts to
$25,000 or more. If such investor has a cumulative net asset value of shares of
FSC Funds and Class A and Class D shares that, together with the current
investment amount, is equal to at least $5 million ($25 million for certain
qualified plans), such investor is eligible to purchase Class D shares subject
to the $1,000 minimum initial investment requirement of that Class of the Fund.
See "No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the dealer or shareholder when such an
26
<PAGE> 29
order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Selected Broker-Dealer or the Transfer Agent fails to confirm
the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares of
the Fund from DWR or other Selected Broker-Dealers. The cost of Class A shares
of the Fund or shares of other Dean Witter Funds which were previously purchased
at a price including a front-end sales charge during the 90-day period prior to
the date of receipt by the Distributor of the Letter of Intent, or of Class A
shares of the Fund or shares of other Dean Witter Funds acquired in exchange for
shares of such funds purchased during such period at a price including a
front-end sales charge, which are still owned by the shareholder, may also be
included in determining the applicable reduction.
Additional Net Asset Value Purchase Options. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value by
the following:
(1) trusts for which MSDW Trust (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, administrative and/or brokerage services
(such investments are subject to all of the terms and conditions of such
programs, which may include termination fees mandatory redemption upon
termination and such other circumstances as specified in the programs'
aggreements, and restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section
401(a) of the Internal Revenue Code ("Qualified Retirement Plans") with at least
200 eligible employees and for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;
(4) Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible employees;
(5) investors who are clients of a Dean Witter account executive who joined
Dean Witter from another investment firm within six months prior to the date of
purchase of Fund shares by such investors, if the shares are being purchased
with the proceeds from a redemption of shares of an open-end proprietary mutual
fund of the account executive's previous firm which imposed either a front-end
or deferred sales charge, provided such purchase was made within sixty days
after the redemption and the proceeds of the redemption had been maintained in
the interim in cash or a money market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--
CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares
27
<PAGE> 30
redeemed within six years after purchase. The CDSC will be imposed on any
redemption of shares if after such redemption the aggregate current value of a
Class B account with the Fund falls below the aggregate amount of the investor's
purchase payments for Class B shares made during the six years (or, in the case
of shares held by certain Qualified Retirement Plans, three years) preceding the
redemption. In addition, Class B shares are subject to an annual 12b-1 fee of
1.0% of the average daily net assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any CDSC upon redemption.
Shares redeemed earlier than six years after purchase may, however, be subject
to a CDSC which will be a percentage of the dollar amount of shares redeemed and
will be assessed on an amount equal to the lesser of the current market value or
the cost of the shares being redeemed. The size of this percentage will depend
upon how long the shares have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE CDSC AS A
PURCHASE PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
------------ ---------------
<S> <C>
First........................ 5.0%
Second....................... 4.0%
Third........................ 3.0%
Fourth....................... 2.0%
Fifth........................ 2.0%
Sixth........................ 1.0%
Seventh and thereafter....... None
</TABLE>
In the case of Class B shares of the Fund purchased by Qualified Retirement
Plans for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services
serves as recordkeeper pursuant to a written Recordkeeping Services Agreement,
shares held for three years or more after purchase (calculated as described in
the paragraph above) will not be subject to any CDSC upon redemption. However,
shares redeemed earlier than three years after purchase may be subject to a CDSC
(calculated as described in the paragraph above), the percentage of which will
depend on how long the shares have been held, as set forth in the following
table:
<TABLE>
<CAPTION>
YEAR SINCE 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 Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption; and (iii) the current
net asset value of shares purchased through reinvestment of dividends or
distributions and/or shares acquired in exchange for shares of FSC Funds or of
other 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;
28
<PAGE> 31
(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
Qualified Retirement Plan 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 MSDW Trust serves as Trustee
or DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement ("Eligible Plan"), provided that either: (A)
the plan continues to be an Eligible Plan after the redemption; or (B) the
redemption is in connection with the complete termination of the plan involving
the distribution of all plan assets to participants.
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.
Conversion to Class A Shares. Class B shares will convert automatically to
Class A shares, based on the relative net asset values of the shares of the two
Classes on the conversion date, which will be approximately ten (10) years after
the date of the original purchase. The ten year period is calculated from the
last day of the month in which the shares were purchased or, in the case of
Class B shares acquired through an exchange or a series of exchanges, from the
last day of the month in which the original Class B shares were purchased,
provided that shares acquired in exchange for shares of another fund originally
purchased before May 1, 1997 will convert to Class A shares in May, 2007. The
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends and distributions owned by the shareholder
as the total number of his or her Class B shares converting at the time bears to
the total number of outstanding Class B shares purchased and owned by the
shareholder. In the case of Class B shares held by a Qualified Retirement Plan
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement, the plan
is treated as a single investor and all Class B shares will convert to Class A
shares on the conversion date of the first shares of a Dean Witter Multi-Class
Fund purchased by that plan. In the case of Class B shares previously exchanged
for shares of an "Exchange Fund" (see "Shareholder Services--Exchange
Privilege"), the period of time the shares were held in the Exchange Fund
(calculated from the last day of the month in which the Exchange Fund shares
were acquired) is excluded from the holding period for conversion. If those
shares are subsequently re-exchanged for Class B shares of a Dean Witter
Multi-Class Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that are
not received by the Transfer Agent at least one week prior to any conversion
date will be converted into Class A shares on the next scheduled conversion date
after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the
29
<PAGE> 32
Internal Revenue Service or an opinion of counsel that (i) the conversion of
shares does not constitute a taxable event under the Internal Revenue Code, (ii)
Class A shares received on conversion will have a basis equal to the
shareholder's basis in the converted Class B shares immediately prior to the
conversion, and (iii) Class A shares received on conversion will have a holding
period that includes the holding period of the converted Class B shares. The
conversion feature may be suspended if the ruling or opinion is no longer
available. In such event, Class B shares would continue to be subject to Class B
12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of that
section shall mean one year in the case of Class C shares. Class C shares are
subject to an annual 12b-1 fee of up to 1.0% of the average daily net assets of
the Class. Unlike Class B shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject to 12b-1
fees applicable to Class C shares for an indefinite period subject to annual
approval by the Fund's Board of Directors and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors: (i)
investors participating in the 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, administrative and/or brokerage services (subject to all of
the terms and conditions of such programs referred to in (i) and (ii) above,
which may include termination fees mandatory redemptions upon termination and
such other circumstance 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 (or $25 million) minimum initial investment to qualify to
purchase Class D shares may satisfy that requirement by investing that amount in
a single transaction in Class D shares of the Fund and other Dean Witter
Multi-Class Funds, subject to the $1,000 minimum initial investment required for
that Class of the Fund. In addition, for the purpose of meeting the $5 million
(or $25 million) minimum investment amount, holdings of Class A shares in all
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 Fund. In the case of Class A and Class C shares, the Plan provides that
the Fund will
30
<PAGE> 33
reimburse the Distributor and others for the expenses of certain activities and
services incurred by them specifically on behalf of those shares. Reimbursements
for these expenses will be made in monthly payments by the Fund to the
Distributor, which will in no event exceed amounts equal to payments at the
annual rates of 0.25% and 1.0% of the average daily net assets of Class A and
Class C, respectively. In the case of Class B shares, the Plan provides that the
Fund will pay the Distributor a fee, which is accrued daily and paid monthly, at
the annual rate of 1.0% of the net assets of Class B. The fee is treated by the
Fund as an expense in the year it is accrued. In the case of Class A shares, the
entire amount of the fee currently represents a service fee within the meaning
of the NASD guidelines. In the case of Class B and Class C shares, a portion of
the fee payable pursuant to the Plan, equal to 0.25% of the average daily net
assets of each of these Classes, is currently characterized as a service fee. A
service fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of DWR's account executives
and others who engage in or support distribution of shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders; and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan in the case of Class B
shares to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs
paid by investors upon the redemption of Class B shares. For example, if $1
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. Because there is no requirement under the Plan
that the Distributor be reimbursed for all distribution expenses or any
requirement that the Plan be continued from year to year, such excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan, and the proceeds of CDSCs paid by investors upon
redemption of shares, if for any reason the Plan is terminated the Trustees will
consider at that time the manner in which to treat such expenses. Any cumulative
expenses incurred, but not yet recovered through distribution fees or CDSCs, may
or may not be recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales commission credited to 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 is determined once daily at 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to
31
<PAGE> 34
4:00 p.m., at such earlier time), on each day that the New York Stock Exchange
is open by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the Class
A, Class B, Class C and Class D shares will be invested together in a single
portfolio. The net asset value of each Class, however, will be determined
separately by subtracting each Class's accrued expenses and liabilities. The net
asset value per share will not be determined on Good Friday and on such other
federal and non-federal holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued (if there were no sales that
day, the security is valued at the latest bid price); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest available bid price prior to the time of
valuation. When market quotations are not readily available, including
circumstances under which it is determined by the Investment Manager or
Sub-Adviser that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of the
Fund's Trustees. For valuation purposes, quotations of foreign portfolio
securities, other assets and liabilities and forward contracts stated in foreign
currency are translated into U.S. dollar equivalents at the prevailing market
rates prior to the close of the New York Stock Exchange. Dividends receivable
are accrued as of the ex-dividend date or as of the time that the relevant
ex-dividend date and amounts become known.
Short-term debt securities with remaining maturities of sixty days or less
to maturity at the time of purchase are valued at amortized cost, unless the
Trustees determine such does not reflect the securities' market value, in which
case these securities will be valued at their fair value as determined by the
Trustees.
Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
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 Fund (or, if specified by the shareholder,
in shares of any other open-end Dean Witter Fund), unless the shareholder
requests that they be paid in cash. Shares so acquired are acquired at net asset
value and are not subject to the imposition of a front-end sales charge or a
CDSC (see "Redemption 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 Fund (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution in shares of the
applicable Class at the net
32
<PAGE> 35
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 and
are not subject to the imposition of a front-end sales charge or a CDSC (see
"Redemptions and Repurchases").
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable CDSC
will be imposed on shares redeemed under the Withdrawal Plan (see "Purchase of
Fund Shares"). Therefore, any shareholder participating in the Withdrawal Plan
will have sufficient shares redeemed from his or her account so that the
proceeds (net of any applicable CDSC) to the shareholder will be the designated
monthly or quarterly amount. Withdrawal plan payments should not be considered
as dividends, yields or income. If periodic withdrawal plan payments
continuously exceed net investment income and net capital gains, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Each withdrawal constitutes a redemption of shares and any gain or
loss realized must be recognized for federal income tax purposes.
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.
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.
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 Fund,
shares of the Fund are redeemed out of the Fund at their next calculated net
asset value and the proceeds of the redemption are used to purchase shares of
the money market fund at their net asset value determined the following business
day. Subsequent exchanges between any of the money market funds and any of the
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 invested
33
<PAGE> 36
in an Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period (for the purpose of
determining the rate of the CDSC) is frozen. If those shares are subsequently
re-exchanged for shares of a Dean Witter Multi-Class Fund or shares of 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 for shares of an Exchange Fund on or after
April 23, 1990, upon a redemption of shares which results in a CDSC being
imposed, a credit (not to exceed the amount of the CDSC) will be given in an
amount equal to the Exchange Fund 12b-1 distribution fees incurred on or after
that date which are attributable to those shares. (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.) Class B
shares of the Fund acquired in exchange for shares of Global Short-Term or Class
B shares of another Dean Witter Multi-Class Fund or shares of a CDSC Fund having
a different CDSC schedule than that of this Fund will be subject to the higher
CDSC schedule, even if such shares are subsequently re-exchanged for shares of
the fund with the lower CDSC schedule.
Additional Information Regarding Exchanges. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional purchases
and/or exchanges from the investor. Although the Fund does not have any specific
definition of what constitutes a pattern of frequent exchanges, and will
consider all relevant factors in determining whether a particular situation is
abusive and contrary to the best interests of the Fund and its other
shareholders, investors should be aware that the Fund and each of the other Dean
Witter Funds may in their discretion limit or otherwise restrict the number of
times this Exchange Privilege may be exercised by any investor. Any such
restriction will be made by the Fund on a prospective basis only, upon notice to
the shareholder not later than ten days following such shareholder's most recent
exchange. Also, the Exchange Privilege may be terminated or revised at any time
by the Fund and/or any of such Dean Witter Funds for which shares of the Fund
have been exchanged, upon such notice as may be required by applicable
regulatory agencies. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement of
each Class of shares and any other conditions imposed by each fund. In the case
of a shareholder holding a share certificate or certificates, no exchanges may
be made until all applicable share certificates have been received by the
Transfer Agent and deposited in the shareholder's account. 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
34
<PAGE> 37
purchased. The Exchange Privilege is only available in states where an exchange
may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or another Selected Broker-Dealer but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Distributor, to initiate an exchange.
If the Authorization Form is used, exchanges may be made in writing or by
contacting the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. Telephone exchange
instructions will be accepted if received by the Transfer Agent between 9:00
a.m. and 4:00 p.m. New York time, on any day the New York Stock Exchange is
open. Any shareholder wishing to make an exchange who has previously filed an
Exchange Privilege Authorization Form and who is unable to reach the Fund by
telephone should contact his or her DWR or other Selected Broker-Dealer account
executive, if appropriate, or make a written exchange request. Shareholders are
advised that during periods of drastic economic or market changes, it is
possible that the telephone exchange procedures may be difficult to implement,
although this has not been the case with the Dean Witter Funds in the past.
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. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see "Purchase
of Fund Shares"). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a
written request for redemption, along with any additional documentation required
by the Transfer Agent.
Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the net
asset value next computed (see "Purchase of Fund Shares") after such repurchase
order is received by DWR or other Selected Broker-Dealer reduced by any
applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund or the
Distributor. The offers by DWR and other Selected Broker-Dealers to repurchase
shares may be suspended without notice by them at any time. In that event,
shareholders may redeem
35
<PAGE> 38
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 (including a government, certified or bank cashier's check), payment of
the redemption proceeds may be delayed for the minimum time needed to verify
that the check used for investment has been honored (not more than fifteen days
from the time of receipt of the check by the Transfer Agent). Shareholders
maintaining margin accounts with DWR or another Selected Broker-Dealer are
referred to their account executive regarding restrictions on redemption of
shares of the Fund pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund in the same Class from which such shares were redeemed or
repurchased, at net asset value next determined after a reinstatement request,
together with the proceeds, is received by the Transfer Agent and receive a pro-
rata credit for any CDSC paid in connection with such redemption or repurchase.
Involuntary Redemption. The Fund reserves the right to redeem, on sixty
days' notice and at net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the 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 Directors or, in the case of an account opened through EasyInvest, if
after twelve months the shareholder has invested less than $1,000 in the
account. However, before the Fund redeems such shares and sends the proceeds to
the shareholder, it will notify the shareholder that the value of the shares is
less than the applicable amount and allow the shareholder sixty days to make an
additional investment in an amount which will increase the value of the account
to at least the applicable amount before the redemption is processed. No CDSC
will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends separately for
each Class of shares and intends to declare and pay dividends and to distribute
substantially all of the Fund's net investment income and net realized
short-term and long-term capital gains, if any, at least once each year. The
Fund may, however, determine either to distribute or to retain all or part of
any long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends and/or distributions be paid
in cash. Shares acquired by dividend and distribution reinvestments will not be
subject to any front-end sales charge or CDSC. Class B shares acquired through
dividend and distribution reinvestments will become eligible for conversion to
Class A shares on a pro rata basis. Distributions paid on Class A and Class D
shares will be higher than for Class B and Class C shares because distribution
fees paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions.")
Taxes. Because the Fund intends to continue to distribute all of its net
investment income and any
36
<PAGE> 39
net short-term capital gains to shareholders and otherwise qualify as a
regulated investment company under Subchapter M of the Code, it is not expected
that the Fund will be required to pay any federal income tax on such income and
capital gains.
Gains or losses on the Fund's transactions in certain listed options on
securities and on futures and options on futures generally are treated as 60%
long-term gain or loss and 40% short-term gain or loss. When the Fund engages in
options and futures transactions, various tax regulations applicable to the Fund
may have the effect of causing the Fund to recognize a gain or loss for tax
purposes before that gain or loss is realized, or to defer recognition of a
realized loss for tax purposes. Recognition, for tax purposes, of an unrealized
loss may result in a lesser amount of the Fund's realized net gains being
available for distribution.
Shareholders will normally have to pay federal income taxes, and any
applicable state and/or local income taxes, on the dividends and distributions
they receive from the Fund. Such dividends and distributions, to the extent that
they are derived from net investment income and net short-term capital gains,
are taxable to the shareholder as ordinary dividend income regardless of whether
the shareholder receives such distributions in additional shares or in cash. Any
dividends declared in the last quarter of any calendar year which are paid in
the following calendar year prior to February 1, will be deemed, for tax
purposes, to have been received by the shareholder in the calendar prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. It is anticipated that only a small portion, if
any, of the Fund's distributions will be eligible for the dividends received
deduction to corporate shareholders.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return of
a portion of each shareholder's investment. All, or a portion, of such payments
will not be taxable to shareholders.
After the end of the year, shareholders will receive full information on
their dividends and capital gains distributions for tax purposes. Shareholders
will also be notified of their proportionate share of long-term capital gains
distributions that are eligible for a reduced rate of tax under the Taxpayer
Relief Act of 1997.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and has made the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes, to enable shareholders to deduct their pro rata portion of such taxes
from their taxable income or claim United States foreign tax credits with
respect to such taxes. In the absence of such an election, the Fund would deduct
foreign tax in computing the amount of its distributable income.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject to
state and local taxes; therefore, each shareholder is advised to consult his or
her own tax adviser.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The total
37
<PAGE> 40
return of the Fund is based on historical earnings and is not intended to
indicate future performance. The "average annual total return" of the Fund
refers to a figure reflecting the average annualized percentage increase (or
decrease) in the value of an initial investment in a Class of the Fund of $1,000
over a period of one year and five years, as well as over the life of the Fund.
Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the Fund's assets, all expenses incurred by the
applicable Class and all sales charges which would be incurred by shareholders,
for the stated periods. It also assumes reinvestment of all dividends and
distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average, and
year-by-year or other types of total return figures. The Fund may also advertise
the growth of hypothetical investments of $10,000, $50,000 and $100,000 in each
Class of shares of the Fund. Such calculations may or may not reflect the
deduction of any sales charge which, if reflected, would reduce the performance
quoted. The Fund from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations (such as mutual fund performance rankings of Lipper Analytical
Services, Inc.).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges except that
each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other matter
in which the interests of one Class differ from the interests of any other
Class. In addition, Class B shareholders will have the right to vote on any
proposed material increase in Class A's expenses, if such proposal is submitted
separately to Class A shareholders. Also, as discussed herein, Class A, Class B
and Class C bear the expenses related to the distribution of their respective
shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
Shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
Code of Ethics. Trustees, officers and employees of InterCapital, 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
38
<PAGE> 41
the companies be subject to an advance clearance process to monitor that no Dean
Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within thirty days before or after any transaction in any Dean Witter
Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
The Fund's Sub-Adviser also has a Code of Ethics which complies with
regulatory requirements and, insofar as it relates to persons associated with
the Fund, the 1994 report by the Investment Company Institute Advisory Group on
Personal Investing.
Master/Feeder Conversion. The Fund reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to the Fund.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
The Investment Manager provided the initial capital for the Fund by
purchasing 2,500 shares each of Class A, Class B, Class C and Class D of the
Fund for $25,000, respectively, on April 30, 1998. As of the date of this
Prospectus, the Investment Manager owned 100% of the outstanding shares of the
Fund. The Investment Manager may be deemed to control the Fund until such time
as it owns less than 25% of the outstanding shares of the Fund.
39
<PAGE> 42
Morgan Stanley
Dean Witter Equity Fund
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
SUB-ADVISER
Miller Anderson & Sherrerd, LLP
MORGAN STANLEY
DEAN WITTER
EQUITY FUND
[ARTWORK HERE]
PROSPECTUS -- JUNE , 1998
<PAGE> 43
<TABLE>
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY
DEAN WITTER
JUNE , 1998 EQUITY FUND
</TABLE>
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter Equity Fund (the "Fund") is an open-end,
diversified management investment company, whose investment objective is total
return. The Fund seeks to achieve its investment objective by investing
primarily in a diversified portfolio of equity securities.
A Prospectus for the Fund dated June , 1998, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Morgan Stanley Dean Witter Equity Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE> 44
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management................................. 3
Trustees and Officers....................................... 6
Investment Practices and Policies........................... 12
Investment Restrictions..................................... 26
Portfolio Transactions and Brokerage........................ 27
Underwriting................................................ 29
The Distributor............................................. 29
Determination of Net Asset Value............................ 32
Purchase of Fund Shares..................................... 33
Shareholder Services........................................ 36
Redemptions and Repurchases................................. 40
Dividends, Distributions and Taxes.......................... 41
Performance Information..................................... 43
Description of Shares of the Fund........................... 44
Custodian and Transfer Agent................................ 44
Independent Accountants..................................... 45
Reports to Shareholders..................................... 45
Legal Counsel............................................... 45
Experts..................................................... 45
Registration Statement...................................... 45
Statement of Assets and Liabilities at May 12, 1998......... 46
Report of Independent Accountants........................... 48
</TABLE>
2
<PAGE> 45
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
April 6, 1998.
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 & Co. ("MSDW"), 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. The daily management of the
Fund is conducted by or under the direction of officers of the Fund and of the
Investment Manager and Sub-Adviser, 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."
The Investment Manager 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 Developing Growth
Securities Trust, Dean Witter American Value Fund, Dean Witter Dividend Growth
Securities Inc., Dean Witter Natural Resource Development Securities Inc., Dean
Witter U.S. Government Money Market Trust, Dean Witter California Tax-Free
Income Fund, 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 New York Tax-Free Income Fund,
Dean Witter Convertible Securities Trust, Dean Witter Federal Securities Trust,
Dean Witter Value-Added Market Series, High Income Advantage Trust, High Income
Advantage Trust II, High Income Advantage Trust III, Dean Witter Government
Income Trust, Dean Witter California Tax-Free Daily Income Trust, Dean Witter
Utilities Fund, Dean Witter Strategist Fund, Dean Witter World Wide Income
Trust, Dean Witter Intermediate Income Securities, Dean Witter Capital Growth
Securities, Dean Witter European Growth Fund Inc., Dean Witter Pacific Growth
Fund Inc., Dean Witter Precious Metals and Minerals Trust, Dean Witter Global
Short-Term Income Fund Inc., Dean Witter Multi-State Municipal Series Trust,
Dean Witter New York Municipal Money Market Trust, InterCapital Quality
Municipal Investment Trust, Dean Witter Short-Term U.S. Treasury Trust,
InterCapital Insured Municipal Bond Trust, InterCapital Insured Municipal Trust,
InterCapital Quality Municipal Income Trust, Dean Witter Diversified Income
Trust, Dean Witter Health Sciences Trust, Dean Witter Retirement Series,
InterCapital Quality Municipal Securities, InterCapital California Quality
Municipal Securities, InterCapital New York Quality Municipal Securities, Dean
Witter Global Dividend Growth Securities, Dean Witter Global Utilities Fund,
Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean
Witter International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter
Select Dimensions Series, Dean Witter Balanced Growth Fund, Dean Witter Balanced
Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter Capital
Appreciation Fund, Dean Witter Intermediate Term U.S. Treasury Trust, 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, Morgan Stanley Dean Witter Competitive Edge Fund -- "Best Ideas"
Portfolio, Morgan Stanley Dean Witter Growth Fund, Morgan Stanley Dean Witter
Mid-Cap Dividend Growth Securities, InterCapital Insured Municipal Securities,
InterCapital Insured California Municipal Securities, InterCapital Insured
Municipal Income Trust, InterCapital California Insured Municipal Income Trust,
Active Assets Money Trust, Active Assets California Tax-Free Trust, Active
Assets Tax-Free Trust, Active Assets Government Securities Trust, Municipal
Income Trust, Municipal Income Trust II, Municipal Income Trust III, Municipal
Income Opportunities Trust, Municipal Income Opportunities Trust II, Municipal
Income Opportunities Trust III, Municipal Premium Income Trust and Prime Income
Trust.
3
<PAGE> 46
The foregoing investment companies, together with the Fund, are collectively
referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is the investment adviser: TCW/DW 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 Total Return Trust,
TCW/DW Mid-Cap Equity Trust, TCW/DW Global Telecom, TCW/DW Term Trust 2000,
TCW/DW Term Trust 2002, TCW/DW Term Trust 2003 and TCW/DW Emerging Markets
Opportunities Trust (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 Templeton Global Governments
Income Trust, a closed-end investment company; and (iii) investment advisor of
Offshore Dividend Growth Fund and Offshore Money Market Fund, mutual funds
established under the laws of the Cayman Islands and available only to investors
who are participants in DWR's International Active Asset Account program and are
neither citizens nor residents of the United States.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the investment Manager to
supervise the investment of the Fund's assets. The Investment Manager, through
consultation with Miller Anderson & Sherrerd, LLP (the "Sub-Adviser"), and
through its own portfolio management staff, obtains and evaluates such
information and advice relating to the economy, securities markets, and specific
securities as it considers necessary or useful to continuously oversee the
management of the assets of the Fund in a manner consistent with its investment
objective.
Under the terms of the Management Agreement, the Investment Manager also
maintains certain of the Fund's books and records and furnishes, at its own
expense, such office space, facilities, equipment, clerical help and bookkeeping
and certain legal services as the Fund may reasonably require in the conduct of
its business, including the preparation of prospectuses, statements of
additional information, proxy statements and reports required to be filed with
federal and state securities commissions (except insofar as the participation or
assistance of independent accountants and attorneys is, in the opinion of the
Investment Manager, necessary or desirable). In addition, the Investment Manager
pays the salaries of all personnel, including officers of the Fund, who are
employees of the Investment Manager. The Investment Manager also bears the cost
of telephone service, heat, light, power and other utilities provided to the
Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement, by the Sub-Adviser pursuant to the Sub-Advisory Agreement
(see below), or by the Distributor of the Fund's shares, Dean Witter
Distributors Inc. ("Distributors" or the "Distributor") (see "The Distributor")
will be paid by the Fund. These expenses will be allocated among the four
classes of shares of the Fund (each, a "Class") pro rata based on the net assets
of the Fund attributable to each Class, except as described below. Such expenses
include, but are not limited to: expenses of the Plan of Distribution pursuant
to Rule 12b-1 (the "12b-1 fee") (see "The Distributor"), charges and expenses of
any registrar, custodian, stock transfer and dividend disbursing agent;
brokerage commissions; taxes; engraving and printing of share certificates;
registration costs of the Fund and its shares under federal and state securities
laws; the cost and expense of printing, including typesetting, and distributing
Prospectuses and Statements of Additional Information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of directors or
members of any advisory board or committee who are not employees of the
Investment Manager or Sub-Adviser or any corporate affiliate of the Investment
Manager or Sub-Adviser; all expenses incident to any dividend, withdrawal or
redemption options; charges and expenses of any outside service used for pricing
of the Fund's shares; fees and expenses of the Fund's legal counsel, including
counsel to the directors who are not interested persons of the Fund or of the
Investment Manager or Sub-Adviser (not including compensation or expenses of
attorneys who are employees of the Investment Manager) and independent
accountants; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and directors) of the Fund which inure
4
<PAGE> 47
to its benefit; extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification relating
thereto); and all other costs of the Fund's operation. The 12b-1 fees relating
to a particular Class will be allocated directly to that Class. In addition,
other expenses associated with a particular Class (except advisory or custodial
fees) may be allocated directly to that Class, provided that such expenses are
reasonably identified as specifically attributable to that Class and the direct
allocation to that Class is approved by the Trustees.
The Investment Manager has agreed to assume all Fund operating expenses
(except for brokerage and 12b-1 fees) and waive the compensation provided for in
its investment management agreement until 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.
The Investment Manager will absorb the organizational expenses of the Fund
incurred prior to the offering of its shares which is estimated to be
approximately $17,000. The offering costs of the Fund will be deferred and
amortized on the straight line method over a period of benefit of approximately
one year or less from the date of commencement of the Fund's operations.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the annual
rate of 0.85% to the Fund's daily net assets.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors. The Management Agreement in no
way restricts the Investment Manager from acting as investment manager or
adviser to others.
Pursuant to a Sub-Advisory Agreement between the Investment Manager and
Sub-Adviser, the Sub-Adviser has been retained, subject to the overall
supervision of the Investment Manager and the Trustees of the Fund, to
continuously furnish investment advice concerning individual security
selections, asset allocations and overall economic trends and to manage the
Fund's portfolio subject to the supervision of the Investment Manager.
Miller Anderson & Sherrerd, LLP, is a Pennsylvania limited liability
partnership founded in 1969, wholly owned by indirect subsidiaries of Morgan
Stanley Dean Witter & Co., and is located at One Tower Bridge, West
Conshohocken, PA 19428. The Sub-Adviser provides investment services to employee
benefit plans, endowment funds, foundations and other institutional investors
and as of March 31, 1998 had in excess of $67 billion in assets under
management.
Both the Investment Manager and the Sub-Adviser have authorized any of
their directors, officers and employees who have been elected as Trustees or
officers of the Fund to serve in the capacities in which they have been elected.
Services furnished by the Investment Manager and the Sub-Adviser may be
furnished by directors, officers and employees of the Investment Manager and the
Sub-Adviser. In connection with the services rendered by the Sub-Adviser, the
Sub-Adviser bears the following expenses: (a) the salaries and expenses of its
personnel; and (b) all expenses incurred by it in connection with performing the
services provided by it as Sub-Adviser, as described above.
As full compensation for the services and facilities furnished to the Fund
and the Investment Manager and expenses of the Fund and the Investment Manager
assumed by the Sub-Adviser, the Investment Manager pays the Sub-Adviser monthly
compensation equal to 40% of the Investment Manager's monthly compensation
payable under the Management Agreement.
The Management Agreement and the Sub-Advisory Agreement (the "Agreements")
were initially approved by the Board of Trustees on April 30, 1998 and by the
sole shareholder of the Fund on April 30, 1998. The Agreements may be terminated
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 Fund, or by the Investment
Manager and/or
5
<PAGE> 48
Sub-Adviser. The Agreements will automatically terminate in the event of their
assignment (as defined in the Act).
Under their terms, the Agreements have an initial term ending April 30,
2000, and they will continue in effect from year to year thereafter, provided
continuance of the Agreements is approved at least annually by the vote of the
holders of a majority, as defined in the Act, of the outstanding shares 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 Agreements or "interested persons" (as
defined in the Act) of any such party (the "Independent Trustees"), which votes
must be cast in person at a meeting called for the purpose of voting on such
approval.
The Fund has acknowledged that the name "Morgan Stanley Dean Witter" is a
property right of MSDW. The Fund has agreed that MSDW, or any corporate
affiliate of MSDW, may use, or at any time permit others to use, the name
"Morgan Stanley Dean Witter." The Fund has also agreed that in the event the
investment management contract between InterCapital and the Fund is terminated,
or if the affiliation between InterCapital and its parent company is terminated,
the Fund will eliminate the name "Morgan Stanley Dean Witter" from its name if
MSDW, or any corporate affiliate of MSDW, shall so request.
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 86 Dean Witter Funds and the 11 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 (57) Chairman and Chief Executive Officer of Levitz
Trustee Furniture Corporation (since November, 1995);
c/o Levitz Furniture Corporation Director or Trustee of the Dean Witter Funds;
7887 N. Federal Highway formerly President and Chief Executive Officer of
Boca Raton, Florida Hills Department Stores (May, 1991-July, 1995);
formerly variously Chairman, Chief Executive
Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of
Sears, Roebuck and Co.; Director of Eaglemark
Financial Services, Inc. and Weirton Steel
Corporation.
Charles A. Fiumefreddo* (65) Chairman, Director or Trustee, President and Chief
Chairman of the Board, President Executive Officer of the Dean Witter Funds;
Chief Executive Officer and Trustee Chairman, Chief Executive Officer and Trustee of
Two World Trade Center the TCW/DW Funds; formerly Chairman, Chief
New York, New York Executive Officer and Director of InterCapital,
Dean Witter Distributors Inc. ("Distributors") and
Dean Witter Services Company Inc. ("DWSC"),
Executive Vice President and Director of Dean
Witter Reynolds Inc. ("DWR"), Chairman and Director
of Morgan Stanley Dean Witter Trust FSB ("MSDW
Trust"), and Director and/or officer of various
MSDW subsidiaries (until May, 1998).
</TABLE>
6
<PAGE> 49
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Edwin J. Garn (65) Director or Trustee of the Dean Witter Funds;
Trustee formerly United States Senator (R-Utah) (1974-1992)
c/o Huntsman Corporation and Chairman, Senate Banking Committee (1980-1986);
500 Huntsman Way formerly Mayor of Salt Lake City, Utah (1972-1974);
Salt Lake City, Utah formerly Astronaut, Space Shuttle Discovery (April
12-19, 1985); Vice Chairman, Huntsman Corpora-
tion; Director of Franklin Covey (time management
systems) and John Alden Financial Corp. (health
insurance); United Space Alliance (joint venture
between Lockheed Martin and Boeing Company) and
Nuskin Asia (multilevel marketing); member of the
board of various civic and charitable
organizations.
John R. Haire (73) Chairman of the Audit Committee and Director or
Trustee Trustee of the Dean Witter Funds; Chairman of the
Two World Trade Center Audit Committee and Trustee of the TCW/DW Funds;
New York, New York formerly Chairman of the Independent Directors or
Trustees of the Dean Witter Funds and the TCW/DW
Funds (until June, 1998); formerly President,
Council for Aid to Education (1978-1989) and
Chairman and Chief Executive Officer of Anchor
Corporation, an Investment Adviser (1964-1978).
Wayne E. Hedien (64) Retired, Director or Trustee of the Dean Witter
Trustee Funds; Director of The PMI Group, Inc. (private
c/o Gordon Altman Butowsky mortgage insurance); Trustee and Vice Chairman of
Weitzen Shalov & Wein The Field Museum of Natural History; formerly
Counsel to the Independent Trustees associated with the Allstate Companies (1966-1994),
114 West 47th Street most recently as Chairman of The Allstate
New York, New York Corporation (March, 1993-December, 1994) and
Chairman and Chief Executive Officer of its
wholly-owned subsidiary, Allstate Insurance Company
(July, 1989-December, 1994); director of various
other business and charitable organizations.
Dr. Manuel H. Johnson (49) Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of the
c/o Johnson Smick International, Inc. Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Trustee of the TCW/DW Funds;
Washington, DC Director of Greenwich Capital Markets, Inc.
(broker-dealer) and NVR Inc. (home construction);
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).
</TABLE>
7
<PAGE> 50
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Michael E. Nugent (62) General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Director or Trustee of the
c/o Triumph Capital, L.P. Dean Witter Funds; Trustee of the TCW/DW Funds;
237 Park Avenue formerly Vice President, Bankers Trust Company and
New York, New York BT Capital Corporation (1984-1988); director of
various business organizations.
Philip J. Purcell* (54) Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, DWR and Novus Credit
1585 Broadway Services Inc.; Director of InterCapital, DWSC and
New York, New York Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
MSDW subsidiaries.
John L. Schroeder (67) Retired; Director or Trustee of the Dean Witter
Trustee Funds; Trustee of the TCW/DW Funds; Director of
c/o Gordon Altman Butowsky Weitzen Shalov & Wein Citizens Utilities Company; formerly Executive Vice
Counsel to the Independent Trustees President and Chief Investment Officer of the Home
114 West 47th Street Insurance Company (August, 1991-September, 1995).
New York, New York
Barry Fink (43) Senior Vice President (since March, 1997) and
Vice President, Secretary Secretary and General Counsel (since February,
and General Counsel 1997) of InterCapital and DWSC; Senior Vice
Two World Trade Center President (since March, 1997) and Assistant
New York, New York Secretary and Assistant General Counsel (since
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.
Thomas F. Caloia (52) First Vice President and Assistant Treasurer of
Treasurer InterCapital and DWSC; Treasurer of the Dean Witter
Two World Trade Center Funds and 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, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and MSDW Trust
and Director of MSDW Trust, Executive Vice President and Director of DWR, and
Director of SPS Transaction Services, Inc. and various other MSDW subsidiaries,
Robert M. Scanlan, President and Chief Operating Officer, of InterCapital and
DWSC, Executive Vice President of Distributors and MSDW Trust and Director of
MSDW Trust, Robert S. Giambrone, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and Director
of MSDW Trust and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of InterCapital and Director of MSDW Trust, are Vice
Presidents of the Fund. Marilyn K. Cranney, First Vice President and Assistant
General Counsel of InterCapital and DWSC, and
8
<PAGE> 51
Lou Anne D. McInnis, Ruth Rossi and Carsten Otto, 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 86 Dean Witter Funds, comprised of
130 portfolios. As of April 30, 1998, the Dean Witter Funds had total net assets
of approximately $105.4 billion and more than six 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, MSDW. These
are the "disinterested" or "independent" Trustees. Four of the seven independent
Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee.
Three of them also serve as members of the Derivatives Committee. During the
calendar year ended December 31, 1997, the Audit Committee, the Derivatives
Committee and the Independent Trustees held a combined total of seventeen
meetings.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill any
Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1 plan
of distribution. Most of the 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; and reviewing the adequacy of the Fund's system of internal
controls.
Finally, the Board of each Fund has formed a Derivatives Committee to
approve parameters for and monitor the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
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
9
<PAGE> 52
Funds tends to increase their knowledge and expertise regarding matters which
affect the Fund complex generally and enhances their ability to negotiate on
behalf of each Fund with the Fund's service providers. This arrangement also
precludes the possibility of separate groups of Independent Trustees arriving at
conflicting decisions regarding operations and management of the Funds and
avoids the cost and confusion that would likely ensue. Finally, having the same
Independent Trustees serve on all Fund Boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of Independent
Trustees of the caliber, experience and business acumen of the individuals who
serve as Independent Trustees of the 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, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund intends to pay the Chairman of the Audit Committee an additional annual fee
of $750). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund 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 for their services as Trustee. 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. Mr. Haire
currently serves as Chairman of the Audit Committee.
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 meetings of the Board, the
Independent Trustees and the Committees as were held by the other Dean Witter
Funds during the calendar year ended December 31, 1997, 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............................................... $1,600
Edwin J. Garn............................................... 1,600
John R. Haire............................................... 2,350
Wayne E. Hedien............................................. 1,600
Dr. Manuel H. Johnson....................................... 1,600
Michael E. Nugent........................................... 1,600
John L. Schroeder........................................... 1,600
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1997 for services
to the 84 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1997.
Mr. Haire serves as Chairman of the Audit Committee of each Dean Witter Fund and
each TCW/DW Fund and, prior to June 1, 1998, also served as Chairman of the
Independent Directors or Trustees of those Funds. With respect to Messrs. Haire,
Johnson, Nugent and Schroeder, the TCW/DW Funds are included solely because of a
limited exchange privilege between those Funds and five Dean Witter Money Market
Funds. Mr. Hedien's term as Director or Trustee of each Dean Witter Fund
commenced on September 1, 1997.
10
<PAGE> 53
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OR FOR SERVICE AS
FOR SERVICE AS INDEPENDENT CHAIRMAN OR
DIRECTOR OR DIRECTORS/ INDEPENDENT TOTAL CASH
TRUSTEE AND FOR SERVICE AS TRUSTEES AND TRUSTEES COMPENSATION
COMMITTEE TRUSTEE AND AUDIT AND AUDIT FOR SERVICES TO
MEMBER OF 84 COMMITTEE COMMITTEES COMMITTEES 84 DEAN WITTER
DEAN WITTER MEMBER OF 14 OF 84 DEAN OF 14 FUNDS AND 14
NAME OF INDEPENDENT TRUSTEE FUNDS TCW/DW FUNDS WITTER FUNDS TCW/DW FUNDS TCW/DW FUNDS
--------------------------- -------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael Bozic................ $133,602 -- -- -- $133,602
Edwin J. Garn................ 149,702 -- -- -- 149,702
John R. Haire................ 149,702 $73,725 $157,463 $25,350 406,240
Wayne E. Hedien.............. 39,010 -- -- -- 39,010
Dr. Manuel H. Johnson........ 145,702 71,125 -- -- 216,827
Michael E. Nugent............ 149,702 73,725 -- -- 223,427
John L. Schroeder............ 149,702 73,725 -- -- 223,427
</TABLE>
As of the date of this Statement of Additional Information, 57 of the 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 29.41% of his or
her Eligible Compensation plus 0.4901667% of such Eligible Compensation for each
full month of service as an Independent Director or Trustee of any Adopting Fund
in excess of five years up to a maximum of 58.82% after ten years of service.
The foregoing percentages may be changed by the Board.(1) "Eligible
Compensation" is one-fifth of the total compensation earned by such Eligible
Trustee for service to the Adopting Fund in the five year period prior to the
date of the Eligible Trustee's retirement. Benefits under the retirement program
are not secured or funded by the Adopting Funds.
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, 1997, 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, 1997.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
RETIREMENT ESTIMATED
ESTIMATED BENEFITS ANNUAL
CREDITED ACCRUED AS BENEFITS
YEARS ESTIMATED EXPENSES UPON
OF SERVICE AT PERCENTAGE OF BY ALL RETIREMENT
RETIREMENT ELIGIBLE ADOPTING FROM ALL
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS ADOPTING
--------------------------- ------------- ------------- ---------- FUNDS(2)
<S> <C> <C> <C> <C>
Michael Bozic.................................. 10 58.82% $ 20,499 $ 55,026
Edwin J. Garn.................................. 10 58.82 30,878 55,026
John R. Haire.................................. 10 58.82 (19,823)(3) 132,002
Wayne E. Hedien................................ 9 50.00 0 46,772
Dr. Manuel H. Johnson.......................... 10 58.82 12,832 55,026
Michael E. Nugent.............................. 10 58.82 22,546 55,026
John L. Schroeder.............................. 8 49.02 39,350 46,123
</TABLE>
- ---------------
(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,
11
<PAGE> 54
increases or decreases the previous periodic amount so that the resulting
payments will be the actuarial equivalent of the Regular Benefit.
(2)Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
(3)This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until May 1, 1999.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
===============================================================================
Private Placements. As stated in the Prospectus, the Fund may invest up to
15% of its net assets in securities which are subject to restrictions on resale
because they have not been registered under the Securities Act of 1933, 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.) These securities are
generally referred to as private placements or restricted securities.
Limitations on the resale of such securities may have an adverse effect on their
marketability, and may prevent the Fund from disposing of them promptly at
reasonable prices. The Fund may have to bear the expense of registering such
securities for resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. 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 is limited by the Fund's investment
restrictions to 15% of the Fund'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 possess 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.
Convertible Securities. The Fund may invest in fixed-income securities
which are convertible into common stock. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail less
risk than the corporation's common stock. The value of a convertible security is
a function of its "investment value" (its value as if it did not have a
conversion privilege), and its "conversion value" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, will sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security
12
<PAGE> 55
with a possibility of capital appreciation due to the conversion privilege.) At
such times the price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security. Convertible securities may be
purchased by the Fund at varying price levels above their investment values
and/or their conversion values in keeping with the Fund's objective.
Standard & Poor's Depositary Receipts ("SPDRs"). SPDRs are interests in a
unit investment trust ("UIT") that may be obtained from the UIT or purchased in
the secondary market as SPDRs listed on the American Stock Exchange.
The UIT will issue SPDRs in aggregations of 50,000 known as "Creation
Units" in exchange for a "Portfolio Deposit" consisting of (a) a portfolio of
securities substantially similar to the component securities ("Index
Securities") of the S&P 500 Index, (b) a cash payment equal to a pro rata
portion of the dividends accrued on the UIT's portfolio securities since the
last dividend payment by the UIT, net of expenses and liabilities, and (c) a
cash payment or credit ("Balancing Amount") designed to equalize the net asset
value of the S&P 500 Index and the net asset value of a Portfolio Deposit.
SPDRs are not individually redeemable, except upon termination of the UIT.
To redeem, the Fund must accumulate enough SPDRs to reconstitute a Creation
Unit. The liquidity of small holdings of SPDRs, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the Fund
will receive Index Securities and cash identical to the Portfolio Deposit
required of an investor wishing to purchase a Creation Unit that day.
The price of SPDRs is derived from and based upon the securities held by
the UIT. Accordingly, the level of risk involved in the purchase or sale of a
SPDR is similar to the risk involved in the purchase or sale of traditional
common stock, with the exception that the pricing mechanism for SPDRs is based
on a basket of stocks. Disruptions in the markets for the securities underlying
SPDRs purchased or sold by the Fund could result in losses on SPDRs.
Rights and Warrants. As stated in the Prospectus, the Fund may acquire
rights and warrants which are attached to other securities in its portfolio or
which are issued as a distribution by the issuer of a 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
corporations issuing them.
U.S. Government Securities. Securities issued by the U.S. Government, its
agencies or instrumentalities in which the Fund may invest include:
(1) U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years), all of which are direct
obligations of the U.S. Government and, as such, are backed by the "full
faith and credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
Neither the value nor the yield of the U.S. Government securities which may
be invested in by the Fund are guaranteed by the U.S. Government. Such values
and yield will fluctuate with changes in prevailing interest rates and other
factors. Generally, as prevailing interest rates rise, the value of any U.S.
Government securities held by the Fund will fall. Such securities with longer
maturities generally tend to produce higher yields and are subject to greater
market fluctuation as a result of changes in interest rates than debt securities
with shorter maturities.
Zero Coupon Treasury Securities. A portion of the U.S. Government
securities purchased by the Fund may be "zero coupon" Treasury securities. These
are U.S. Treasury bills, notes and bonds which
13
<PAGE> 56
have been stripped of their unmatured interest coupons and receipts or which are
certificates representing interests in such stripped debt obligations and
coupons. Such securities are purchased at a discount from their face amount,
giving the purchaser the right to receive their full value at maturity. A zero
coupon security pays no interest to its holder during its life. Its value to an
investor consists of the difference between its face value at the time of
maturity and the price for which it was acquired, which is generally an amount
significantly less than its face value (sometimes referred to as a "deep
discount" price). The Fund intends to invest in such zero coupon treasury
securities as STRIPS, Treasury Receipts, Physical Coupons, and Proprietary
Receipts.
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon reinvestment of interest if
prevailing interest rates decline, the owner of a zero coupon security will be
unable to participate in higher yields upon reinvestment of interest received if
prevailing interest rates rise. For this reason, zero coupon securities are
subject to substantially greater market price fluctuations during periods of
changing prevailing interest rates than are comparable debt securities which
make current distributions of interest. Current federal tax law requires that a
holder (such as the Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year even though the
Fund receives no interest payments in cash on the security during the year.
Currently the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).
As stated in the Prospectus, the money market instruments which the Fund
may purchase include U.S. Government securities, bank obligations, Eurodollar
certificates of deposit, obligations of savings institutions, fully insured
certificates of deposit and commercial paper. Such securities are limited to:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit and
bankers' acceptances) of banks subject to regulation by the U.S. Government and
having total assets of $1,000,000,000 or more, and instruments secured by such
obligations, not including obligations of foreign branches of domestic banks
except to the extent below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of
$1,000,000,000 or more;
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1,000,000,000
or more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1,000,000,000, if
the principal amount of the obligation is insured by the Federal Deposit
Insurance Corporation, limited to $100,000 principal amount per certificate and
to 15% or less of the Fund's total assets in all such obligations and in all
illiquid assets, in the aggregate;
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's ("S&P") or the highest grade by Moody's Investors Service Inc.
("Moody's") or, if not rated, issued by a company having an outstanding debt
issue rated at least AA by S&P or Aa by Moody's.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As discussed in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. The
14
<PAGE> 57
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward contracts to purchase or sell foreign
currencies. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks and investment
banks) and their customers. Such forward contracts will only be entered into
with United States banks and their foreign branches or foreign banks whose
assets total $1 billion or more. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades.
When management of the Fund believes that the currency of a particular
foreign country may suffer a substantial movement against the U.S. dollar, it
may enter into a forward contract to purchase or sell, for a fixed amount of
dollars or other currency, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The Fund will also not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the management of the Fund believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of the Fund will be served. The Fund's custodian bank will place
cash, U.S. Government securities or other appropriate liquid portfolio
securities in a segregated account of the Fund in an amount equal to the value
of the Fund's total assets committed to the consummation of forward contracts
entered into under the circumstances set forth above. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign fixed-income securities denominated in a foreign currency against
adverse exchange rate moves vis-a-vis the U.S. dollar, at the maturity of the
forward contract for delivery by the Fund of a foreign currency, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency. It is impossible to forecast the market value of
portfolio securities at the expiration of the contract. Accordingly, it may be
necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio securities
if its market value exceeds the amount of foreign currency the Fund is obligated
to deliver.
If the Fund retains the portfolio securities and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
15
<PAGE> 58
forward contract to sell an amount of the relevant foreign currency equal to
some or all of the principal value of the security.
At times when the Fund has written a call option on a fixed-income security
or the currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a greater
extent than the value of the premium received for the option. The Fund will
maintain with its Custodian at all times cash, U.S. Government securities and
liquid portfolio securities in a segregated account equal in value to all
forward contract obligations and option contract obligations entered into in
hedge situations such as this.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, the Fund may write covered call options
against securities held in its portfolio and purchase options of the same series
to effect closing transactions, and may hedge against potential changes in the
market value of its investments (or anticipated investments) by purchasing put
and call options on portfolio (or eligible portfolio) securities (and the
currencies in which they are denominated) and engaging in transactions involving
futures contracts and options on such contracts.
Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Fund would be enabled to sell the foreign
currency for a fixed amount of U.S. dollars, thereby "locking in" the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Fund may purchase call options on foreign currencies
in which securities it anticipates purchasing are denominated to secure a set
U.S. dollar price for such securities and protect against a decline in the value
of the U.S. dollar against such foreign currency. The Fund may also purchase
call and put options to close out written option positions.
The Fund may also write call options on foreign currency to protect against
potential declines in its portfolio securities which are denominated in foreign
currencies. If the U.S. dollar value of the portfolio securities falls as a
result of a decline in the exchange rate between the foreign currency in which
it is denominated and the U.S. dollar, then a loss to the Fund occasioned by
such value decline would be ameliorated by receipt of the premium on the option
sold. At the same time, however, the Fund gives up the benefit of any rise in
value of the relevant portfolio securities above the exercise price of the
option and, in fact, only receives a benefit from the writing of the option to
the extent that the value of the portfolio securities falls below the price of
the premium received. The Fund may also write options to close out long call
option positions.
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not purchase or
write such options unless and until, in the opinion of the management of the
Fund, 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.
16
<PAGE> 59
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.
Covered Call Writing. As stated in the Prospectus, the Fund is permitted
to write covered call options on portfolio securities and on the U.S. Dollar and
foreign currencies, without limit, in order to aid in achieving its investment
objectives. Generally, a call option is "covered" if the Fund owns, or has the
right to acquire, without additional cash consideration (or for additional cash
consideration held for the Fund by its Custodian in a segregated account) the
underlying security (currency) subject to the option except that in the case of
call options on U.S. Treasury Bills, the Fund might own U.S. Treasury Bills of a
different series from those underlying the call option, but with a principal
amount and value corresponding to the exercise price and a maturity date no
later than that of the security (currency) deliverable under the call option. A
call option is also covered if the Fund holds a call on the same security as the
underlying security (currency) of the written option, where the exercise price
of the call used for coverage is equal to or less than the exercise price of the
call written or greater than the exercise price of the call written if the
mark-to-market difference is maintained by the Fund in cash, U.S. Government
securities or other liquid portfolio securities which the Fund holds in a
segregated account maintained with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (currencies) alone. Moreover,
the premium received will offset a portion of the potential loss incurred by the
Fund if the securities (currencies) underlying the option are ultimately sold
(exchanged) by the Fund at a loss. The premium received will fluctuate with
varying economic market conditions. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, the Fund may receive a lower 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 over-the-counter ("OTC") options,
during the option period, the Fund may be required, at any time, to deliver the
underlying security (currency) against payment of the exercise price on any
calls it has written (exercise of certain listed and OTC options may be limited
to specific expiration dates). This obligation is terminated upon the expiration
of the option period or at such earlier time when the writer effects a closing
purchase transaction. A closing purchase transaction is accomplished by
purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option, to prevent an underlying security (currency) from
being called, to permit the sale of an underlying security (or the exchange of
the underlying currency) or to enable the Fund to write another call option on
the underlying security (currency) with either a different exercise price or
expiration date or
17
<PAGE> 60
both. The Fund may realize a net gain or loss from a closing purchase
transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be wholly
or partially offset by unrealized 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 Fund realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised, the
Fund realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received for the option less the commission paid.
Options written by the Fund will normally have expiration dates of up to
eighteen months 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
at the time the option is written.
Purchasing Call and Put Options. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options in amounts equalling up to 5% of
its total assets. The Fund may purchase a call option in order to close out a
covered call position (see "Covered Call Writing" above), to protect against an
increase in price of a security it anticipates purchasing or, in the case of 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 on 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 Fund.
The Fund may purchase put options on securities (currencies) which it holds
in its portfolio only to protect itself against a decline in the value of the
security. 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 Fund would incur no additional loss. In addition, the
Fund may sell a put option which it has previously purchased prior to the sale
of the securities (currencies) 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. And such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security (currency). If a put
option purchased by the Fund expired without being sold or exercised, the
premium would be lost.
Risks of Options Transactions. The successful use of options depends on
the ability of the Investment Manager to forecast correctly interest rates and
market movements. If the market value of the portfolio securities upon which
call options have been written increases, the Fund may receive a lower total
return from the portion of its portfolio upon which calls have been written than
it would have had such calls not been written. In writing puts, the Fund assumes
the risk of loss should the market value of the underlying securities decline
below the exercise price of the option (any loss being decreased by the receipt
of the premium on the option written). 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 value of its denominated currency)
increase, but has retained the risk of loss should the price of the underlying
security (or the value of its denominated currency) decline. The writer has no
control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver or receive the underlying
securities at the exercise price.
18
<PAGE> 61
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 OTC 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 an underlying security at a time when it might
otherwise be advantageous to do so.
As discussed in the Prospectus, the Fund's ability to close out its
position as a writer of an option is dependent upon the existence of a liquid
secondary market on Option Exchanges. There is no assurance that such a market
will exist, particularly in the case of OTC options, as such options will
generally only be closed out by entering into a closing purchase transaction
with the purchasing dealer. However, the Fund may be able to purchase an
offsetting option which does not close out its position as a writer but
constitutes an asset of equal value to the obligation under the option written.
If the Fund is not able to either enter into a closing purchase transaction or
purchase an offsetting position, it will be required to maintain the securities
subject to the call, or the collateral underlying the put, even though it might
not be advantageous to do so, until a closing transaction can be entered into
(or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange or
the Options Clearing Corporation ("OCC") to handle current trading volume; or
(vi) a decision by one or more exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
OCC as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Fund's management.
Each of the exchanges has established limitations governing the maximum
number of 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 exchange 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 the Fund may write.
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
19
<PAGE> 62
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 the Fund against the
risk of market wide price movements. If the Investment Manager or Sub-Adviser
anticipates a market decline, the Fund could purchase a stock index put option.
If the expected market decline materialized, the resulting decrease in the value
of the Fund's portfolio would be offset to the extent of the increase in the
value of the put option. If the Investment Manager or Sub-Adviser anticipates a
market rise, the Fund may purchase a stock index call option to enable the Fund
to participate in such rise until completion of anticipated common stock
purchases by the fund. Purchases and sales of stock index options also enable
the Investment Manager or Sub-Adviser to more speedily achieve changes in a
fund's equity positions.
The Fund will write put options on stock indexes only if such positions are
covered by cash, U.S. Government securities or other liquid portfolio securities
equal to the aggregate exercise price of the puts, which cover is held for the
Fund in a segregated account maintained for it by the Fund's Custodian. All call
options on stock indexes written by the Fund will be covered either by a
portfolio of stocks substantially replicating the movement of the index
underlying the call option or by holding a separate call option on the same
stock index with a strike price no higher than the strike price of the call
option sold by the Fund.
Risks of Options on Indexes. Because exercises of stock index options are
settled in cash, call writers such as the Fund cannot provide in advance for
their potential settlement obligations by acquiring and holding the underlying
securities. A call writer can offset some of the risk of its writing position by
holding a diversified portfolio of stocks similar to those on which the
underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options. When
an index option is exercised, the amount of cash that the holder is entitled to
receive is determined by the difference between the exercise price and the
closing index level on the date when the option is exercised. As with other
kinds of options, the writer will not learn that it has been assigned until the
next business day, at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
stocks that exactly match the composition of the underlying index, it will not
be able to satisfy its assignment obligations by delivering those stocks against
payment of the exercise price. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; and by the time it
learns that it has been assigned, the index may have declined, with a
corresponding decrease in the value of its stock portfolio. This "timing risk"
is an inherent limitation on the ability of index call writers to cover their
risk exposure by holding stock positions.
20
<PAGE> 63
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. As stated in the Prospectus, the Fund may purchase and
sell interest rate, currency, and 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 and/or any foreign government
fixed-income security ("interest rate" futures), on various currencies
("currency futures") and on such indexes of U.S. and foreign securities as may
exist or come into being ("index" futures).
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. A futures contract
sale is closed out by effecting a futures contract purchase for the same
aggregate amount of the specific type of security (currency) and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of security (currency) 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 Fund enters into an interest
rate futures contract, it is initially required to deposit with the Fund's
Custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or other
liquid portfolio securities equal to approximately 3% 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.
In addition, if the Fund holds a long position in a futures contract it
will hold cash, U.S. Government securities or other liquid portfolio securities
equal to the purchase price of the contract (less the amount of initial or
variation margin on deposit) in a segregated account maintained for the Fund by
its Custodian. Alternatively, the Fund could cover its long position by
purchasing a put option on the same futures contract with an exercise price as
high or higher than the price of the contract held by the Fund.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities called "variation margin," with the Fund's futures contract clearing
broker, which are reflective of price fluctuations in the futures contract.
Currently, interest rate 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.
Currency Futures. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the delivery date, for a
set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and under
the same circumstances as forward foreign currency exchange contracts. The
Investment Manager will
21
<PAGE> 64
assess such factors as cost spreads, liquidity and transaction costs in
determining whether to utilize futures contracts or forward contracts its in
foreign currency transactions and hedging strategy. Currently, currency futures
exist for, among other foreign currencies, the Japanese yen, German marks,
Canadian dollars, British pound, Swiss franc and European currency unit.
Purchasers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Fund must accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign restrictions or regulation regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery which
are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain
additional risks. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. To reduce
this risk, the Fund will not purchase or write options on foreign currency
futures contracts unless and until, in the Investment Manager's opinion, the
market for such options has developed sufficiently that the risks in connection
with such options are not greater than the risks in connection with transactions
in the underlying foreign currency futures contracts.
Index Futures Contracts. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future time.
An index futures contract purchase would create an obligation by the Fund, as
purchaser, to take delivery of cash at a specified future time. Futures
contracts on indexes do not require the physical delivery of securities, but
provide for a final cash settlement on the expiration date which reflects
accumulated profits and losses credited or debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in the
form of variation margin payments. The Fund may be required to make additional
margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or gain.
Options on Futures Contracts. 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.
Risks of Transactions in Futures Contracts and Related Options. The
successful use of futures and related options depends on the ability of the
Investment Manager to accurately predict market and interest rate movements. As
stated in the Prospectus, the Fund may sell a futures contract to protect
against the decline in the value of securities (or the currency in which they
are denominated) held by the Fund. However, it is possible that the futures
market may advance and the value of securities (or the currency in which they
are denominated) held in the portfolio of the Fund may decline. If this
occurred, the Fund would lose money on the futures contract and also experience
a decline in value of its portfolio securities. However, while this could occur
for a very brief period or to a very small degree, over time the value of a
diversified portfolio will tend to move in the same direction as the futures
contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities
22
<PAGE> 65
(currencies) decreases, then the Fund may determine not to invest in the
securities as planned and will realize a loss on the futures contract that is
not offset by a reduction in the price of the securities.
In order to assure that the Fund is entering into transactions in futures
contracts for hedging purposes as such is defined by the Commodity Futures
Trading Commission either: 1) a substantial majority (i.e., approximately 75%)
of all anticipatory hedge transactions (transactions in which the Fund does not
own at the time of the transaction, but expects to acquire, the securities
underlying the relevant futures contract) involving the purchase of futures
contracts will be completed by the purchase of securities which are the subject
of the hedge or 2) the underlying value of all long positions in futures
contracts will not exceed the total value of a) all short-term debt obligations
held by the Fund; b) cash held by the Fund; c) cash proceeds due to the Fund on
investments within thirty days; d) the margin deposited on the contracts; and e)
any unrealized appreciation in the value of the contracts.
If the Fund 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 (currencies) underlying the futures contract or the
exercise price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract, 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 limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin on open
futures positions. In such situations, if the Fund has insufficient cash, it may
have to sell portfolio securities to meet daily variation margin requirements at
a time when it may be disadvantageous to do so. In addition, the Fund may be
required to take or make delivery of the instruments underlying interest rate
futures contracts it holds at a time when it is disadvantageous to do so. The
inability to close out options and futures positions could also have an adverse
impact on the Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on
foreign commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by the Investment Manager.
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities (and the currencies in which they
are denominated) is that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's portfolio securities (and the
currencies in which they are denominated). 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
23
<PAGE> 66
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.
As stated in the Prospectus, there may exist an imperfect correlation
between the price movements of futures contracts purchased by the Fund and the
movements in the prices of the securities (currencies) 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
or currency markets and futures markets could result. Price distortions could
also result if investors in futures contracts opt to make or take delivery of
underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due to
the fact that, from the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities and movements in the prices of futures contracts, a correct
forecast of interest rate trends may still not result in a successful hedging
transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be possible
to close out a futures position, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In addition, limitations imposed by an exchange or board of trade on
which futures contracts are traded may compel or prevent the Fund from closing
out a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to make
or take delivery of the underlying securities (currencies) 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 the 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 the 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 (currencies).
Repurchase Agreements. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. A
repurchase agreement may be viewed as a type of secured lending by the Fund
which typically involves the acquisition by the Fund of government securities
from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Fund will sell
back to the institution, and that the institution will repurchase, the
underlying security ("collateral") at a specified price and at a fixed time in
the future, usually not more than seven days from the date of purchase. The
collateral will be maintained in a segregated account and will be
marked-to-market daily to determine that the full value of the collateral, as
specified in the agreement, is always at least equal to the purchase price plus
accrued interest. If required, additional collateral will be added to the
account to maintain full collateralization. In the event the original seller
defaults on its obligations to repurchase, as a result of its bankruptcy or
otherwise, the Fund will seek to sell the collateral, which action could involve
costs or delays. In such case, the Fund's ability to dispose of the collateral
to recover its investment may be restricted or delayed.
The Fund will accrue interest from the institution until the time when the
repurchase is to occur. Although such date is deemed by the Fund to be the
maturity date of a repurchase agreement, the maturities of securities subject to
repurchase agreements are not subject to any limits and may exceed one year.
24
<PAGE> 67
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. Repurchase agreements will be transacted only with large,
well-capitalized and well-established financial institutions whose financial
condition will be continuously monitored by the management of the Fund subject
to procedures established by the Trustees. The procedures also require that the
collateral underlying the agreement be specified. The Fund does not intend to
enter into repurchase agreements so that more than 10% of the Fund's net assets
are subject to such agreements.
When-Issued and Delayed Delivery Securities and Forward Commitments. As
discussed in the Prospectus, from time to time, in the ordinary course of
business, the Fund may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis. When
such transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period. While
the Fund will only purchase securities on a when-issued, delayed delivery or
forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. At the time the Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security in determining the net
asset value of the Fund. At the time of delivery of the securities, the value
may be more or less than the purchase price. The Fund will also establish a
segregated account with the Fund's custodian bank in which it will continuously
maintain cash or U.S. Government securities or other liquid portfolio securities
equal in value to commitments for such when-issued or delayed delivery
securities; subject to this requirement, the Fund may purchase securities on
such basis without limit. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued or delayed delivery
basis may increase the volatility of the Fund's net asset value.
When, As and If Issued Securities. As discussed in the Prospectus, the
Fund may purchase securities on a "when, as and if issued" basis under which the
issuance of the security depends upon the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization, leveraged buyout or debt
restructuring. The commitment for the purchase of any such security will not be
recognized in the portfolio of the Fund until the Investment Manager determines
that issuance of the security is probable. At such time, the Fund will record
the transaction and, in determining its net asset value, will reflect the value
of the security daily. At such time, the Fund will also establish a segregated
account with its custodian bank in which it will continuously maintain cash or
U.S. Government securities or other liquid portfolio securities equal in value
to recognized commitments for such securities. Settlement of the trade will
occur within five business days of the occurrence of the subsequent event.
Subject to the foregoing restrictions and restrictions under the Act (see
"Investment Restrictions" below and in the Prospectus), the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Fund may
also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to notice provisions described below), and are at all times
secured by cash or appropriate high-grade debt obligations, which are maintained
in a segregated account pursuant to applicable regulations and that are at least
equal to the market value, determined daily, of the loaned securities. The
advantage of such loans is that the Fund continues to receive the income on the
loaned securities while at the same time earning interest on the cash amounts
deposited as collateral, which will be invested in short-term obligations. The
Fund will not lend 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 two
business days' notice. If the borrower fails to deliver the loaned securities
within two days after receipt of notice, the Fund could
25
<PAGE> 68
use the collateral to replace the securities while holding the borrower liable
for any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail financially.
However, these loans of portfolio securities will only be made to firms deemed
by the Fund's management to be creditworthy and when the income which can be
earned from such loans justifies the attendant risks. Upon termination of the
loan, the borrower is required to return the securities to the Fund. Any gain or
loss in the market price during the loan period would inure to the Fund. The
creditworthiness of firms to which the Fund lends its portfolio securities will
be monitored on an ongoing basis by the Fund's management pursuant to procedures
adopted and reviewed, on an ongoing basis, by the Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities. The Fund has not
to date nor does it presently intend to lend any of its portfolio securities.
New Instruments. New financial products and various combinations thereof
continue to be developed. The Fund may invest in any such products as may be
developed, to the extent consistent with its investment objective and applicable
regulatory requirements.
Portfolio Turnover. It is anticipated that the portfolio turnover rate of
the Fund will not exceed 200%. A 200% turnover rate would occur, for example, if
200% 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
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.
The Fund may not:
1. Purchase or sell real estate or interests therein, although the
Fund may purchase securities of issuers which engage in real estate
operations and securities secured by real estate or interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
3. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).
4. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) borrowing money in accordance
with restrictions described above; or (c) lending portfolio securities.
26
<PAGE> 69
5. Make loans of money or securities, except by investment in
repurchase agreements. (For the purpose of this restriction, lending of
portfolio securities by the Fund is not deemed to be a loan).
6. Make short sales of securities or maintain a short position, unless
at all times when a short position is open it either owns an equal amount
of such securities or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the
same issue as, and equal in amount to, the securities sold short.
7. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
8. Invest for the purpose of exercising control or management of any
other issuer.
9. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or write interest rate, currency and stock and bond
index futures contracts and related options thereon.
10. 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 Fund
and collateral arrangements with respect to initial or variation margin for
futures by the Fund are not deemed to be pledges of assets.)
11. Purchase securities on margin (but the Fund may obtain short-term
loans as are necessary for the clearance of transactions). The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
As a nonfundamental policy, the Fund will not invest in other investment
companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or 12(d)(1)(J) of the
Act.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Fund's Trustees, the Investment
Manager and the Sub-Adviser are responsible for decisions to buy and sell
securities of the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services. In the over-the-counter market,
securities are generally traded on a "net" basis with non-affiliated dealers
acting as principal for their own accounts without a stated commission, although
the price of the security usually includes a profit to the dealer. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred to
as the underwriter's concession or discount. In the underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation equal to the underwriter's concession. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
The Investment Manager and the Sub-Adviser currently serve as investment
advisors 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 each the Investment Manager and the Sub-Adviser to cause purchase and sale
transactions to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, various factors may be considered, including the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held and the opinions of the persons
responsible for
27
<PAGE> 70
managing the portfolios of the Fund and other client accounts. In the case of
certain initial and secondary public offerings, the Investment Manager and the
Sub-Adviser utilize a pro rata allocation process based on the size of the Dean
Witter Funds or other funds and client accounts involved and the number of
shares available from the public offering.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager and the Sub-Adviser 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 and the Sub-Adviser rely upon their experience and knowledge regarding
commissions generally charged by various brokers and on their 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.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on such
transactions are generally higher than negotiated commissions on domestic
transactions. There is also generally less government supervision and regulation
of foreign securities exchanges and brokers than in the United States.
In seeking to implement the Fund's policies, the Investment Manager and the
Sub-Adviser effect transactions with those brokers and dealers who the
Investment Manager and the Sub-Adviser believe provide the most favorable prices
and are capable of providing efficient executions. If the Investment Manager
and/or the Sub-Adviser believe such prices and executions are obtainable from
more than one broker or dealer, they may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager and/or the Sub-Adviser. 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 investment; wire
services; and appraisals or evaluations of portfolio securities.
The information and services received by the Investment Manager and the
Sub-Adviser from brokers and dealers may be of benefit to the Investment Manager
and the Sub-Adviser in the management of accounts of some of their other clients
and may not in all cases benefit the Fund directly. While the receipt of such
information and services is useful in varying degrees and would generally reduce
the amount of research or services otherwise performed by the Investment Manager
and the Sub-Adviser and thereby reduce their expenses, it is of indeterminable
value and the fees paid to the Investment Manager and the Sub-Adviser are 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 Fund
may effect principal transactions in certain money market instruments with DWR.
The Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR, Morgan Stanley and Co. Incorporated and other affiliated
brokers and dealers. In order for an affiliated broker or dealer to effect any
portfolio transactions for the Fund, the commissions, fees or other remuneration
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
28
<PAGE> 71
Trustees of the Fund, including a majority of the Trustees who are not
"interested" persons of the Fund, as defined in the Act, have adopted procedures
which are reasonably designed to provide that any commissions, fees or other
remuneration paid to an affiliated broker or dealer are consistent with the
foregoing standard. The Fund does not reduce the management fee it pays to the
Investment Manager by any amount of the brokerage commissions it may pay to an
affiliated broker or dealer.
UNDERWRITING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up
to 10,000,000 shares from the Fund, which number may be increased or decreased
in accordance with the Underwriting Agreement. The 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 Fund on
July 29, 1998, or such other date as may be agreed upon between the Underwriter
and the Fund and to purchase shares of the Fund 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
Fund at $10.00 per share with all proceeds going to the Fund and will purchase
Class A shares at $10.00 per share plus a sales charge with the sales charge
paid to the Underwriter and the $10.00 per share going to the Fund.
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 Fund 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 Fund 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 Fund will bear the cost of initial
typesetting, printing and distribution of Prospectuses and Statements of
Additional Information and supplements thereto to shareholders. The Fund 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 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 MSDW. 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 Directors"), approved, at their meeting held on April 30, 1998, 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
29
<PAGE> 72
Distribution Agreement has an initial term ending April, 1999 and will remain in
effect from year to year thereafter if approved by the Board.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal securities laws and pays filing fees in accordance with
state securities laws. The Fund and the Distributor have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. Under the Distribution Agreement, the
Distributor uses its best efforts in rendering services to the Fund, but in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations, the Distributor is not liable to the Fund or any
of its shareholders for any error of judgment or mistake of law or for any act
or omission or for any losses sustained by the Fund or its shareholders.
Plan of Distribution. The Fund has adopted a Plan of Distribution pursuant
to Rule 12b-1 under the Act (the "Plan") pursuant to which each Class, other
than Class D, pays the Distributor compensation accrued daily and payable
monthly at the following annual rates: 0.25%, 1.0% and 1.0% of the average daily
net assets of Class A, Class B and Class C, respectively. The Distributor also
receives the proceeds of front-end sales charges and of contingent deferred
sales charges imposed on certain redemptions of shares, which are separate and
apart from payments made pursuant to the Plan (see "Purchase of Fund Shares" in
the Prospectus).
The Distributor has informed the Fund that 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 defined in 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 April 30, 1998 and by
InterCapital, as sole shareholder of the Fund on April 30, 1998.
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 by the Distributor 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 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 employer-sponsored 401(k) and other
plans qualified under Section 401(a) of the Internal Revenue Code ("Qualified
Retirement Plans") for which Morgan Stanley Dean Witter Trust FSB ("MSDW Trust"
or "Transfer Agent") serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper
30
<PAGE> 73
pursuant to a written Recordkeeping Services Agreement, the Investment Manager
compensates DWR's account executives by paying them, from its own funds, a gross
sales credit of 1.0% of the amount sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 5.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.25% of the current value (not including reinvested
dividends or distributions) of the amount sold in all cases. In the case of
Class B shares purchased by Qualified Retirement Plans for which MSDW Trust
serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement, DWR compensates its
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 share sales. The distribution fee
that the Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses incurred 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
its distribution expenses to the Fund, in the case of Class B shares, such
assumed interest (computed at the "broker's call rate") has been calculated on
the gross sales credit as it is reduced by amounts received by the Distributor
under the Plan and any contingent deferred sales charges received by the
Distributor upon redemption of shares of the Fund. No other interest charge is
included as a distribution expense in the Distributor's calculation of its
distribution costs for this purpose. The broker's call rate is the interest rate
charged to securities brokers on loans secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 1.0%, in the case of Class C, of the average net assets of the respective
Class during the month. No interest or other financing charges, if any, incurred
on any distribution expenses on behalf of Class A and Class C will be
reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to account executives,
31
<PAGE> 74
such amounts shall be determined at the beginning of each calendar quarter by
the Trustees, including a majority of the Independent 12b-1 Trustees. Expenses
representing the service fee (for Class A) or a gross sales credit or a residual
to account executives (for Class C) may be reimbursed without prior
determination. In the event that the Distributor proposes that monies shall be
reimbursed for other than such expenses, then in making quarterly determinations
of the amounts that may be reimbursed by the Fund, the Distributor will provide
and the Trustees will review a quarterly budget of projected distribution
expenses to be incurred on behalf of the Fund, together with a report explaining
the purposes and anticipated benefits of incurring such expenses. The Trustees
will determine which particular expenses, and the portions thereof, that may be
borne by the Fund, and in making such a determination shall consider the scope
of the Distributor's commitment to promoting the distribution of the Fund's
Class A and Class C shares.
With respect to Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan and (ii) the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses with respect to Class B shares or any
requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses 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
future distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales charges.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR, DWSC or certain of its 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, 1999, and it
will remain in effect 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 of the shareholders of the
affected Class or Classes of the Fund, and all material amendments of the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Act) on not more
than thirty days' written notice to any other party to the Plan. So long as the
Plan is in effect, the election and nomination of Independent Trustees shall be
committed to the discretion of the Independent Trustees.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share for each Class of shares of the Fund is
determined once daily at 4:00 p.m., New York time (or, on days when the New York
Stock Exchange closes prior to 4:00 p.m., at such earlier time) on each day that
the New York Stock Exchange is open. The New York Stock Exchange currently
observes the following holidays: New Year's Day, Reverend Dr. Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' fair value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Other
32
<PAGE> 75
short-term debt securities will be valued on a mark-to-market basis until such
time as they reach a remaining maturity of 60 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' fair value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Options are valued at the mean between their latest bid and asked prices.
Futures are valued at the last sale price as of the close of the commodities
exchange on which they trade unless the Trustees determine that such price does
not reflect their market value, in which case they will be valued at their fair
value as determined by the Trustees. All other securities and other assets are
valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds,
United States government securities and money market instruments, is
substantially completed each day at various times prior to 4:00 p.m., New York
time. The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
are also generally determined prior to 4:00 p.m., New York time. Occasionally,
events which may affect the values of such securities and such exchange rates
may occur between the times at which they are determined and 4:00 p.m., New York
time, and will therefore not be reflected in the computation of the Fund's net
asset value. If events that may affect the value of such securities occur during
such period, then these securities may be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.
Right of Accumulation. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class A
shares of the Fund and/or other Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") or shares of other Dean Witter Funds sold with
a front-end sales charge purchased at a price including a front-end sales charge
having a current value of $5,000, and purchases $20,000 of additional shares of
the Fund, the sales charge applicable to the $20,000 purchase would be 4.75% of
the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Distributor or Morgan Stanley Dean Witter Trust FSB (the
"Transfer Agent") fails to confirm the investor's represented holdings.
Letter of Intent. As discussed in the Prospectus, reduced sales charges
are available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the Fund
from the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase of Class A shares made during the period will receive the reduced sales
commission applicable to the amount represented by the goal, as if it were a
single purchase. A number of shares equal in value to 5% of the dollar amount of
the Letter of
33
<PAGE> 76
Intent will be held in escrow by the Transfer Agent, in the name of the
shareholder. The initial purchase under a Letter of Intent must be equal to at
least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation," but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in any other Dean Witter Funds
held by the shareholder which were previously purchased at a price including a
front-end sales charge (including shares of the Fund and other Dean Witter Funds
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions) will be added to
the cost or net asset value of shares of the Fund owned by the investor.
However, shares of "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") and the purchase of shares of other Dean Witter Funds will not be
included in determining whether the stated goal of a Letter of Intent has been
reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of
Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to
a CDSC payable upon most redemptions within six years after purchase. As stated
in the Prospectus, a CDSC will be imposed on any redemption by an investor if
after such redemption the current value of the investor's Class B shares of the
Fund is less than the dollar amount of all payments by the shareholder for the
purchase of Class B shares during the preceding six years (or, in the case of
shares held by certain Qualified Retirement Plans, three years). However, no
CDSC will be imposed to the extent that the net asset value of the shares
redeemed does not exceed: (a) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans three years) prior to the redemption, plus (b) the current net
asset value of shares purchased through reinvestment of dividends or
distributions of the Fund or another Dean Witter Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) the current net asset value of shares
acquired in exchange for (i) shares of Dean Witter front-end sales charge funds,
or (ii) shares of other Dean Witter Funds for which shares of front-end sales
charge funds have been exchanged (see "Shareholder Services--Exchange
Privilege"), plus (d) increases in the net asset value of the investor's shares
above the total amount of payments for the purchase of Fund shares made during
the preceding six (three) years. The CDSC will be paid to the Distributor.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years (or, in the case of shares held by certain Qualified Retirement
Plans, three years) will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net
34
<PAGE> 77
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 Qualified Retirement Plans, three years) prior to the
redemption and/or shares purchased through reinvestment of dividends or
distributions and/or shares acquired in the above-described exchanges will be
subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last day
of the month. The following table sets forth the rates of the CDSC applicable to
most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
------------ --------------------
<S> <C>
First....................................................... 5.0%
Second...................................................... 4.0%
Third....................................................... 3.0%
Fourth...................................................... 2.0%
Fifth....................................................... 2.0%
Sixth....................................................... 1.0%
Seventh and thereafter...................................... None
</TABLE>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund purchased by Qualified Retirement Plans for which MSDW Trust
serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
------------ --------------------
<S> <C>
First....................................................... 2.0%
Second...................................................... 2.0%
Third....................................................... 1.0%
Fourth and thereafter....................................... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within the
applicable six-year or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
of purchase which are in excess of these amounts and which redemptions do not
qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC of
1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
35
<PAGE> 78
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by the
Transfer Agent. This is an open account in which shares owned by the investor
are credited by the Transfer Agent in lieu of issuance of a share certificate.
If a share certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares and may be redeposited
in the account at any time. There is no charge to the investor for issuance of a
certificate. Whenever a shareholder instituted transaction takes place in the
Shareholder Investment Account, the shareholder will be mailed a confirmation of
the transaction from the Fund or from DWR or other selected broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of the
Fund, unless the shareholder requests that they be paid in cash. Each purchase
of shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and capital gains distributions on shares owned by the investor. Such
dividends and distributions will be paid, at the net asset value per share in
shares of the applicable Class of the Fund (or in cash if the shareholder so
requests) as of the close of business on the record date. At any time an
investor may request the Transfer Agent, in writing, to have subsequent
dividends and/or capital gains distributions paid to him or her in cash rather
than shares. To assure sufficient time to process the change, such request
should be received by the Transfer Agent at least five business days prior to
the record date of the dividend or distribution. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payments will be made to DWR or other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions. It has been and remains the Fund's policy and practice
that, if checks for dividends or distributions paid in cash remain uncashed, no
interest will accrue on amounts represented by such uncashed checks.
Targeted 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 Morgan Stanley Dean Witter Equity Fund or in another Class of Morgan
Stanley Dean Witter Equity Fund. Such investment will be made as described above
for automatic investment in shares of the applicable Class of the Fund, at the
net asset value per share of the selected Dean Witter Fund as of the close of
business on the payment date of the dividend or distribution and will begin to
earn dividends, if any, in the selected Dean Witter Fund the next business day.
To participate in the Targeted Dividends program, shareholders should contact
their DWR or other selected broker-dealer account executive or the Transfer
Agent. Shareholders of the Fund must be shareholders of the selected Class of
the Dean Witter Fund targeted to receive investments from dividends at the time
they enter the Targeted Dividends program. Investors should review the
prospectus of the targeted Dean Witter Fund before entering the program.
Easyinvest (SM). Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected. Shares of the Dean Witter Money Market Funds
redeemed in connection with EasyInvest are redeemed on the business day
preceding transfer of funds (subject to any applicable sales charges). 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 the net asset value next determined after
36
<PAGE> 79
receipt by the Transfer Agent, without the imposition of a CDSC upon redemption,
by returning the check or the proceeds to the Transfer Agent within 30 days
after the payment date. If the shareholder returns the proceeds of a dividend or
distribution, such funds must be accompanied by a signed statement indicating
that the proceeds constitute a dividend or distribution to be invested. Such
investment will be made at the net asset value per share next determined after
receipt of the check or proceeds by the Transfer Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, a withdrawal
plan (the "Withdrawal Plan") is available for shareholders who own or purchase
shares of the Fund having a minimum value of $10,000 based upon the then current
net asset value. The Withdrawal Plan provides for monthly or quarterly (March,
June, September and December) checks in any dollar amount, not less than $25, or
in any whole percentage of the account balance, on an annualized basis. Any
applicable CDSC will be imposed on shares redeemed under the Withdrawal Plan
(see "Purchase of Fund Shares"). Therefore, any shareholder participating in the
Withdrawal Plan will have sufficient shares redeemed from his or her account so
that the proceeds (net of any applicable CDSC) to the shareholder will be the
designated monthly or quarterly amount.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent within five business days after the date of redemption.
The Withdrawal Plan may be terminated at any time by the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic Withdrawal Plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by a commercial bank or trust company (not a savings bank), or by a
member of a national securities exchange. 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.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholders may make additional investments in any Class of shares of the
Fund for which they qualify at any time by sending a check in any amount, not
less than $100, payable to Morgan Stanley Dean Witter Equity Fund, and
indicating the selected Class, directly to the Fund's Transfer Agent. In the
case of Class A shares, after deduction of any applicable sales charge, the
balance will be applied to the purchase of Fund shares, and, in the case of
shares of the other Classes, the entire amount will be applied to the purchase
of Fund shares, at the net asset value per share next computed after receipt of
the check or purchase payment by the Transfer Agent. The shares so purchased
will be credited to the investor's account.
37
<PAGE> 80
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of each Class of shares
of the Fund may exchange their shares for shares of the same Class of shares of
any other 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 non-CDSC funds are referred to hereinafter as "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 will be treated for federal income tax purposes the same as a
repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a Dean Witter
Multi-Class Fund or 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
in Global Short-Term. However, in the case of shares exchanged for shares of 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 the 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 money market fund, with no CDSC being imposed on such
exchange. The investment 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 Global Short-Term, shares of a FSC Fund, or for 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
38
<PAGE> 81
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. Shares of Dean Witter Strategist Fund acquired prior to November 8, 1989,
shares of Dean Witter American Value Fund acquired prior to April 30, 1984, and
shares of Dean Witter Dividend Growth Securities Inc. and Dean Witter Natural
Resource Development Securities Inc. acquired prior to July 2, 1984, will be the
first Free Shares to be exchanged. After an exchange, all dividends earned on
shares in an Exchange Fund will be considered Free Shares. If the exchanged
amount exceeds the value of such Free Shares, an exchange is made, on a
block-by-block basis, of non-Free Shares held for the longest period of time
(except that, with respect to Class B shares, if shares held for identical
periods of time but subject to different CDSC schedules are held in the same
Exchange Privilege account, the shares of that block that are subject to a lower
CDSC rate will be exchanged prior to the shares of that block that are subject
to a higher CDSC rate). Shares equal to any appreciation in the value of
non-Free Shares exchanged will be treated as Free Shares, and the amount of the
purchase payments for the non-Free Shares of the fund exchanged into will be
equal to the lesser of (a) the purchase payments for, or (b) the current net
asset value of, the exchanged non-Free Shares. If an exchange between funds
would result in exchange of only part of a particular block of non-Free Shares,
then shares equal to any appreciation in the value of the block (up to the
amount of the exchange) will be treated as Free Shares and exchanged first, and
the purchase payment for that block will be allocated on a pro-rata basis
between the non-Free Shares of that block to be retained and the non-Free Shares
to be exchanged. The prorated amount of such purchase payment attributable to
the retained non-Free Shares will remain as the purchase payment for such
shares, and the amount of purchase payment for the exchanged non-Free Shares
will be equal to the lesser of (a) the prorated amount of the purchase payment
for, or (b) the current net asset value of, those exchanged non-Free Shares.
Based upon the procedures described in the Prospectus under the caption
"Purchase of Fund Shares," any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $5,000 for Dean Witter Liquid Asset
Fund Inc., Dean Witter New York Municipal Money Market Trust, Dean Witter
Tax-Free Daily Income Trust and Dean Witter California Tax-Free Daily Income
Trust although those funds may, at 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 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 for all other Dean Witter Funds for
which the Exchange Privilege is available is $1,000.)
39
<PAGE> 82
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 money market
funds, including the check writing feature, will not be available for funds held
in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days for termination or material
revision), provided that six months' prior written notice of termination will be
given to the shareholders who hold shares of Exchange Funds, pursuant to the
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised without notice at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, (d) during any other period when the Securities and
Exchange Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist) or (e) if the Fund would be
unable to invest amounts effectively in accordance with its investment
objective(s), 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 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") after it receives the request, and
certificate, if any, in good order. Any redemption request received after such
computation will be redeemed at the next determined net asset value. The term
"good order" means that the share certificate, if any, and request for
redemption are properly signed, accompanied by any documentation required by the
Transfer Agent, and bear signature guarantees when required by the Fund or the
Transfer Agent. If redemption is requested by a corporation, partnership, trust
or fiduciary, the Transfer Agent may require that written evidence of authority
acceptable to the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a supplement
to the prospectus or 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
40
<PAGE> 83
held in a shareholder's account without a share certificate may also be
repurchased by DWR and other selected broker-dealers upon the telephonic request
of the shareholder. The repurchase price is the net asset value next computed
after such purchase order is received by DWR or other selected broker-dealer
reduced by any applicable CDSC.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares of any Class presented for repurchase or
redemption will be made by check within seven days after receipt by the Transfer
Agent of the certificate and/or written request in good order. The term good
order means that the share certificate, if any, and request for redemption are
properly signed, accompanied by any documentation required by the Transfer
Agent, and bear signature guarantees when required by the Fund or the Transfer
Agent. Such payment may be postponed or the right of redemption suspended at
times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) during any
other 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 certified or bank cashier's check), payment of the redemption
proceeds may be delayed for the minimum time needed to verify that the check
used for investment has been honored (not more than fifteen days from the time
of receipt of the check by the Transfer Agent). It has been and remains the
Fund's policy and practice that, if checks for redemption proceeds remain
uncashed, no interest will accrue on amounts represented by such uncashed
checks. Shareholders maintaining margin accounts with DWR or another selected
broker-dealer are referred to their 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 of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.
Reinstatement Privilege. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within 35 days after the date of
redemption or repurchase reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund in the same Class at the net
asset value next determined after a reinstatement request, together with such
proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes,
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment. If any such gains are retained, the Fund will pay federal
income tax thereon, and, if the Fund makes an election, the shareholders would
include such undistributed gains in their income and shareholders will be able
to claim their share of the tax paid by the Fund as a credit against their
individual federal income tax.
41
<PAGE> 84
Gains or losses on sales of securities by the Fund will generally be
long-term capital gains or losses if the securities have been held by the Fund
for more than twelve months. Gains or losses on the sale of securities held for
twelve months or less will be generally short-term gains or losses.
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%.
The Fund intends to remain qualified as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986 (the "Code"). As such,
the Fund will not be subject to federal income tax on its net investment income
and capital gains, if any, realized during any fiscal year in which it
distributes such income and capital gains to its shareholders.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized net long-term capital gains, such
payment or distribution 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 fully taxable. Therefore, an investor should consider the
tax implications of purchasing Fund shares immediately prior to a distribution
record date.
Dividends, interest and capital gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Investors may be entitled to claim United States foreign tax credits with
respect to such taxes, subject to certain provisions and limitations contained
in the Code. If more than 50% of the Fund's total assets at the close of its
fiscal year consist of securities of foreign corporations, the Fund would be
eligible and would determine whether or not to file an election with the
Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their respective pro rata portions of such withholding taxes
in their United States income tax returns as gross income, treat such respective
pro rata portions as taxes paid by them, and deduct such respective pro rata
portions in computing their taxable income or, alternatively, use them as
foreign tax credits against their United States income taxes. If the Fund does
elect to file the election with the Internal Revenue Service, the Fund will
report annually to its shareholders the amount per share of such withholding.
Special Rules for Certain Foreign Currency Transactions. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies are currently considered to be qualifying
income for purposes of determining whether the Fund qualifies as a regulated
investment company. It is currently unclear, however, who will be treated as the
issuer of certain foreign currency instruments or how foreign currency options,
futures, or forward foreign currency contracts will be valued for purposes of
the regulated investment company diversification requirements applicable to the
Fund.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (i.e.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from forward contracts, from futures
contracts that are not "regulated futures contracts", and from unlisted options
will be treated as ordinary income or loss under Code Section 988. Also, certain
foreign exchange gains or losses derived with
42
<PAGE> 85
respect to foreign fixed-income securities are also subject to Section 988
treatment. In general, therefore, Code Section 988 gains or losses will increase
or decrease the amount of the Fund's investment company taxable income available
to be distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. Additionally, if Code
Section 988 losses exceed other investment company taxable income during a
taxable year, the Fund would not be able to make any ordinary dividend
distributions.
The Fund may be subject to taxes in foreign countries in which it invests.
In addition, if the Fund were deemed to be a resident of the United Kingdom for
United Kingdom tax purposes or if the Fund were treated as being engaged in a
trading activity through an agent in the United Kingdom, there is a risk that
the United Kingdom would attempt to tax all or a portion of the Fund's gains or
income. In light of the structure of the Fund and the terms and conditions of
the Investment Management and Sub-Advisory Agreements, it is believed that any
such risk is minimal.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of certain
technical tax provisions applying to such companies could result in the
imposition of federal income tax with respect to such investments at the Fund
level which could not be eliminated by distributions to shareholders. The
Taxpayer Relief Act of 1997 establishes a mark-to-market regime which allows
taxpayers investing in PFIC's to avoid most, if not all of the difficulties
posed by the PFIC rules. In any event, it is not anticipated that any taxes on
the Fund with respect to investments in PFIC's would be significant.
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 the Fund may quote its
"total return" in advertisements and sales literature. These figures are
computed for Class A, Class B, Class C, and Class D shares. The Fund's "average
annual total return" represents an annualization of the Fund's total return over
a particular period and is computed by finding the annual percentage rate which
will result in the ending redeemable value of a hypothetical $1,000 investment
made at the beginning of a one, five or ten year period, or for the period from
the date of commencement of the Fund's operations, if shorter than any of the
foregoing. The ending redeemable value is reduced by any CDSC at the end of the
one, five or ten year or other period. For the purpose of this calculation, it
is assumed that all dividends and distributions are reinvested. The formula for
computing the average annual total return involves a percentage obtained by
dividing the ending redeemable value by the amount of the initial investment,
taking a root of the quotient (where the root is equivalent to the number of
years in the period) and subtracting 1 from the result.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the imposition of the maximum front-end sales charge for Class A
or the deduction of the CDSC for each of Class B and Class C which, if
reflected, would reduce the performance quoted. For example, the average annual
total return of the Fund may be calculated in the manner described above, but
without deduction for any applicable sales charge.
In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without the reduction for any sales charge) by the initial $1,000
investment and subtracting 1 from the result.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date (expressed as a decimal and without
taking into account the effect of any applicable CDSC) and
43
<PAGE> 86
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.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share held. The Trustees themselves have the power to alter the number and the
terms of office of the Trustees, and they may at any time lengthen their own
terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund. Under certain circumstances the
Trustees may be removed by action of the Trustees. The shareholders also have
the right under certain circumstances to remove the Trustees. The voting rights
of shareholders are not cumulative, so that holders of more than 50 percent of
the shares voting can, if they choose, elect all Trustees being selected, while
the holders of the remaining shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series. The Trustees have not authorized any such additional series
or classes of shares other than as set forth in the Prospectus.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any Trustee,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his/her or its own
bad faith, willful misfeasance, gross negligence, or reckless disregard of
his/her or its duties. It also provides that all third persons shall look solely
to the Fund property for satisfaction of claims arising in connection with the
affairs of the Fund. With the exceptions stated above, the Declaration of Trust
provides that a Trustee, officer, employee or agent is entitled to be
indemnified against all liability in connection with the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of beneficial
interest. The Fund shall be of unlimited duration, subject to the provisions in
the Declaration of Trust concerning termination by action of the shareholders.
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 in the United States and around the world. As
Custodian, The Bank of New York has contracted with various foreign banks and
depositaries to hold portfolio securities of non-U.S. issuers on behalf of the
Fund. Any of the Fund's cash balances with the Custodian in excess of $100,000
are unprotected by federal deposit insurance. Such balances may, at times, be
substantial.
Morgan Stanley Dean Witter Trust FSB ("MSDW Trust"), Harborside Financial
Center, Plaza Two, Jersey City, New Jersey 07311 is the Transfer Agent of the
Fund's shares and Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans described herein. MSDW Trust is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, MSDW
Trust's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services
MSDW Trust receives a per shareholder account fee.
44
<PAGE> 87
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on May 31. The financial statements of the Fund
must be audited at least once a year by independent accountants whose selection
is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The Statement of Assets and Liabilities of the Fund at May 12, 1998
included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in reliance
on the report of 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.
45
<PAGE> 88
MORGAN STANLEY DEAN WITTER EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES AT MAY 12, 1998
===============================================================================
<TABLE>
<S> <C>
ASSETS:
Cash...................................................... $100,000
Deferred offering costs (Note 1).......................... 124,820
--------
Total Assets.......................................... 224,820
--------
LIABILITIES:
Offering costs payable (Note 1)........................... 124,820
Commitments (Notes 1 and 2)............................... --
--------
Net Assets............................................ $100,000
========
CLASS A SHARES:
Net Assets.................................................. $ 25,000
Shares Outstanding (unlimited authorized, $.01 par value)... 2,500
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.................................................. $ 25,000
Shares Outstanding (unlimited authorized, $.01 par value)... 2,500
NET ASSET VALUE PER SHARE............................... $ 10.00
========
CLASS C SHARES:
Net Assets.................................................. $ 25,000
Shares Outstanding (unlimited authorized, $.01 par value)... 2,500
NET ASSET VALUE PER SHARE............................... $ 10.00
========
CLASS D SHARES:
Net Assets.................................................. $ 25,000
Shares Outstanding (unlimited authorized, $.01 par value)... 2,500
NET ASSET VALUE PER SHARE............................... $ 10.00
========
</TABLE>
- ---------------
NOTE 1--Morgan Stanley Dean Witter Equity Fund (the "Fund") was organized as a
Massachusetts business trust on April 6, 1998. To date the Fund has had no
transactions other than those relating to organizational matters and the sale of
2,500 shares of beneficial interest for $25,000 of each class of the Fund to
Dean Witter InterCapital Inc. (the "Investment Manager"), a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"). The Fund is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The investment objective of
the Fund is total return. Estimated organizational expenses of the Fund in the
amount of approximately $17,000 incurred prior to the offering of the Fund's
shares will be absorbed by the Investment Manager. It is currently estimated
that the Investment Manager will incur, and be reimbursed, approximately
$124,820 by the Fund in offering costs. Actual costs could differ from these
estimates. Offering costs will be deferred and amortized by the Fund on the
straight-line method over the period of benefit of approximately one year or
less from the date of commencement of operations.
NOTE 2--The Fund has entered into an investment management agreement with the
Investment Manager. The Investment Manager has entered into a Sub-Advisory
Agreement with Miller Anderson & Sherrerd, LLP (the "Sub-Adviser"), an indirect
subsidiary of MSDW. The Sub-Adviser will provide investment advice and portfolio
management relating to the Fund's investments in securities, subject to the
overall supervision of the Investment Manager. Certain officers and/or trustees
of the Fund are officers and/or directors of the Investment Manager and Sub-
Adviser. The Fund has retained the Investment Manager to supervise the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. Under the terms of the Investment
Management Agreement, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, such office space,
facilities, equipment, supplies, clerical help and bookkeeping and certain legal
services as the Fund may reasonably require in the conduct of its business. In
addition, the Investment Manager pays the salaries of all personnel, including
officers of the Fund, who are employees of the Investment Manager. The
Investment Manager also bears the cost of the Fund's telephone service, heat,
light, power and other utilities.
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 0.85% to the Fund's daily net assets. As compensation for the
services to be provided
46
<PAGE> 89
pursuant to the Sub-Advisory Agreement, the Investment Manager will pay the
Sub-Adviser monthly compensation equal to 40% of its monthly compensation.
Shares 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 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 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 Fund's
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 the Fund 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 Fund 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.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and the Distributor, is the transfer agent of the Fund's shares, dividend
disbursing agent for payment of dividends and distributors on Fund shares and
agent for shareholders under various investment plans.
The Investment Manager has undertaken to assume all operating expenses
(except for the Plan fee and brokerage fees) and to waive the compensation
provided for in its Investment Management Agreement until such time as the Fund
has $50 million of net assets or until six months from the date of commencement
of the Fund's operations, whichever occurs first.
47
<PAGE> 90
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholder and Trustees of
Morgan Stanley Dean Witter Equity Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Morgan Stanley Dean
Witter Equity Fund (hereafter referred to as the "Fund") at May 12, 1998, in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Fund's management; our responsibility is
to express an opinion on this financial statement based on our audit. We
conducted our audit of this financial statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 13, 1998
48
<PAGE> 91
MORGAN STANLEY DEAN WITTER EQUITY FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Statement of Additional Information:
Page 46 - Statement of Assets and Liabilities at May 12, 1998. All other
financial statements and schedules are not required or are not applicable or
the required information is included in the financial statement and notes
thereto.
(b) Exhibits:
1. -- Declaration of Trust of Registrant.*
2. -- By-Laws of Registrant. *
3. -- None
4. -- Not Applicable
5. (a) -- Form of Investment Management Agreement between Registrant and
Dean Witter InterCapital Inc.
(b) -- Form of Sub-Advisory Agreement between Dean Witter InterCapital
Inc. and Miller Anderson & Sherrerd, LLP.
6. (a) -- Form of Distribution Agreement between Registrant
and Dean Witter Distributors Inc.
(b) -- Forms of Selected Dealer Agreements.
(c) -- Form of Underwriting Agreement between Registrant and Dean Witter
Distributors Inc.
7. -- None
8. (a) -- Form of Custodian Agreement between Registrant and The Bank of
New York.
(b) -- Form of Transfer Agency and Services Agreement between Registrant
and Morgan Stanley 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.
(b) -- Opinion of Lane Altman & Owens LLP.
<PAGE> 92
11. -- Consent of Independent Accountants.
12. -- None
13. -- Investment Letter of Dean Witter InterCapital Inc.
14. -- None
15. -- Form of Plan of Distribution pursuant to Rule 12b-1.
16. -- Schedule for Computation of Performance Quotations.**
27. -- Financial Data Schedules.
Other. -- Powers of Attorney.
Other. -- Form of Multiple-Class Plan pursuant to Rule 18f-3.
________________________
*Previously filed in Form N-1A.
**To be filed with first post-effective amendment.
Item 25. Persons Controlled by or Under Common Control With Registrant.
Prior to the effectiveness of this Registration Statement, the Registrant
sold 2,500 shares each of each of Class A, Class B, Class C and Class D shares
of beneficial interest to Dean Witter InterCapital Inc., a Delaware corporation.
Dean Witter InterCapital Inc. is a wholly-owned subsidiary of Morgan Stanley
Dean Witter & Co., a Delaware corporation, a preeminent global financial
services firm that maintains leading market positions in each of its three
primary businesses -- securities, asset management and credit services.
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at April 30, 1998
-------------- -------------------
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,
2
<PAGE> 93
indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
3
<PAGE> 94
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 & 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) Dean Witter Government Income Trust
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) InterCapital California Insured Municipal Income Trust
(6) InterCapital California Quality Municipal Securities
(7) InterCapital Income Securities Inc.
(8) InterCapital Insured California Municipal Securities
(9) InterCapital Insured Municipal Bond Trust
(10) InterCapital Insured Municipal Income Trust
(11) InterCapital Insured Municipal Securities
(12) InterCapital Insured Municipal Trust
(13) InterCapital New York Quality Municipal Securities
(14) InterCapital Quality Municipal Income Trust
(15) InterCapital Quality Municipal Investment Trust
(16) InterCapital Quality Municipal Securities
(17) Municipal Income Opportunities Trust
(18) Municipal Income Opportunities Trust II
(19) Municipal Income Opportunities Trust III
(20) Municipal Income Trust
(21) Municipal Income Trust II
(22) Municipal Income Trust III
(23) Municipal Premium Income Trust
(24) Prime Income Trust
Open-end Investment Companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) 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
4
<PAGE> 95
(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 Financial Services Trust
(19) Dean Witter Fund of Funds
(20) Dean Witter Global Asset Allocation Fund
(21) Dean Witter Global Dividend Growth Securities
(22) Dean Witter Global Short-Term Income Fund Inc.
(23) Dean Witter Global Utilities Fund
(24) Dean Witter Hawaii Municipal Trust
(25) Dean Witter Health Sciences Trust
(26) Dean Witter High Yield Securities Inc.
(27) Dean Witter Income Builder Fund
(28) Dean Witter Information Fund
(29) Dean Witter Intermediate Income Securities
(30) Dean Witter Intermediate Term U.S. Treasury Trust
(31) Dean Witter International SmallCap Fund
(32) Dean Witter Japan Fund
(33) Dean Witter Limited Term Municipal Trust
(34) Dean Witter Liquid Asset Fund Inc.
(35) Dean Witter Market Leader Trust
(36) Dean Witter Mid-Cap Growth Fund
(37) Dean Witter Multi-State Municipal Series Trust
(38) Dean Witter Natural Resource Development Securities Inc.
(39) Dean Witter New York Municipal Money Market Trust
(40) Dean Witter New York Tax-Free Income Fund
(41) Dean Witter Pacific Growth Fund Inc.
(42) Dean Witter Precious Metals and Minerals Trust
(43) Dean Witter Retirement Series
(44) Dean Witter Select Dimensions Investment Series
(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 S&P 500 Index Fund
(49) Dean Witter Special Value Fund
(50) Dean Witter Strategist Fund
(51) Dean Witter Tax-Exempt Securities Trust
(52) Dean Witter Tax-Free Daily Income Trust
(53) Dean Witter U.S. Government Money Market Trust
(54) Dean Witter U.S. Government Securities Trust
(55) Dean Witter Utilities Fund
(56) Dean Witter Value-Added Market Series
(57) Dean Witter Variable Investment Series
(58) Dean Witter World Wide Income Trust
(59) Dean Witter World Wide Investment Trust
(60) Morgan Stanley Dean Witter Competitive Edge Fund
5
<PAGE> 96
"Best Ideas Portfolio"
(61) Morgan Stanley Dean Witter Growth Fund
(62) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
The term "TCW/DW Funds" refers to the following registered investment companies:
Open-End Investment Companies
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
Closed-End Investment Companies
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
Charles A. Fiumefreddo Executive Vice President and Director of
Chairman, Chief Executive Dean Witter Reynolds Inc. ("DWR"); Chairman,
Officer and Director Chief Executive Officer and Director of Dean
Witter Distributors Inc. ("Distributors")
and Dean Witter Services Company Inc.
("DWSC"); Chairman and Director of Morgan
Stanley Dean Witter Trust FSB ("MSDW
Trust"); 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 & Co. ("MSDW")
subsidiaries.
Chairman, Chief Executive Officer and
Philip J. Purcell Director of MSDW and DWR; Director of DWSC
Director and Distributors; Director or Trustee of the
Dean Witter Funds; Director and/or officer
of various MSDW subsidiaries.
Richard M. DeMartini President and Chief Operating Officer of
Director Dean Witter Capital, a division of DWR;
Director of DWR, DWSC, Distributors and MSDW
Trust; 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 MSDW Trust.
6
<PAGE> 97
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
Thomas C. Schneider Executive Vice President and Chief Strategic
Executive Vice and Administrative Officer of MSDW;
President, Chief Executive Vice President and Chief Financial
Financial Officer and Officer of DWSC and Distributors; Director
Director of DWR, DWSC, Distributors and MSDW.
Christine A. Edwards Executive Vice President, Chief Legal
Director Officer and Secretary of MSDW; Executive
Vice President, Secretary and Chief Legal
Officer of Distributors; Director of DWR,
DWSC and Distributors.
Mitchell M. Merin President and Chief Strategic Officer of
President and Chief DWSC, Executive Vice President of
Strategic Officer Distributors; Executive Vice President and
Director of MSDW Trust; Executive Vice
President and Director of DWR; Director of
SPS Transaction Services, Inc. and various
other MSDW subsidiaries.
Robert M. Scanlan President and Chief Operating Officer of
President and Chief DWSC, Executive Vice President of
Operating Officer Distributors; Executive Vice President and
Director of MSDW Trust; Vice President of
the Dean Witter Funds and the TCW/DW Funds.
John B. Van Heuvelen President, Chief Operating Officer and
Executive Vice Director of MSDW Trust.
President
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of MSDW Trust.
and Chief Investment
Officer
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice
Senior Vice President, President, Secretary and General Counsel of
Secretary and General DWSC; Senior Vice President, Assistant
General Secretary and Assistant General Counsel of
Counsel the Dean Witter Funds and the TCW/DW Funds.
7
<PAGE> 98
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
Peter M. Avelar Vice President of various Dean Witter Funds.
Senior Vice President
Mark Bavoso Vice President of various Dean Witter Funds.
Senior Vice President
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Dean Witter Funds.
Senior Vice President
Robert S. Giambrone Senior Vice President of DWSC, Distributors and
Senior Vice President MSDW Trust and Director of MSDW Trust;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
Rajesh Gupta Vice President of various Dean Witter Funds.
Senior Vice President
Kenton J. Hinchcliffe Vice President of various Dean Witter Funds.
Senior Vice President
Kevin Hurley Vice President of various Dean Witter Funds.
Senior Vice President
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III President of Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Dean Witter Funds.
Senior Vice President
Jonathan R. Page Vice President of various Dean Witter Funds.
Senior Vice President
Ira N. Ross Vice President of various Dean Witter Funds.
Senior Vice President
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
8
<PAGE> 99
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
Rochelle G. Siegel Vice President of various Dean Witter Funds.
Senior Vice President
Jayne M. Stevlingson Vice President of various Dean Witter Funds.
Senior Vice President
Paul D. Vance Vice President of various Dean Witter Funds.
Senior Vice President
Elizabeth A. Vetell
Senior Vice President
James F. Willison Vice President of various Dean Witter Funds.
Senior Vice President
Ronald J. Worobel Vice President of various Dean Witter Funds.
Senior Vice President
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
and First Vice President Assistant Secretary of DWSC; Assistant Secretary
Secretary of and Assistant the Dean Witter Funds and the
TCW/DW Funds.
Salvatore DeSteno Vice President of DWSC.
First Vice President
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
9
<PAGE> 100
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
Stanley Kapica
First Vice President
Carsten Otto 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.
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Dean Witter
Funds.
Vice President
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Frank Bruttomesso Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
10
<PAGE> 101
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
David Dineen
Vice President
Bruce Dunn
Vice President
Michael Durbin
Vice President
Sheila Finnerty
Vice President
Jeffrey D. Geffen
Vice President
Michael Geringer
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Sandra Grossman
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of Dean Witter
Vice President Variable Investment Series.
Peter Hermann Vice President of various Dean Witter Funds.
Vice President
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
11
<PAGE> 102
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
Kevin Jung
Vice President
Carol Espejo Kane
Vice President
James P. Kastberg
Vice President
Michelle Kaufman Vice President of various Dean Witter Funds.
Vice President
Paula LaCosta Vice President of various Dean Witter Funds.
Vice President
Thomas Lawlor
Vice President
Gerard J. Lian Vice President of various Dean Witter Funds.
Vice President
Nancy Login
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
12
<PAGE> 103
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Richard Norris
Vice President
George Paoletti
Vice President
Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.
Michael Roan
Vice President
John Roscoe
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
Deborah Santaniello
Vice President
Peter J. Seeley Vice President of various Dean Witter Funds.
Vice President
Robert Stearns
Vice President
Naomi Stein
Vice President
Kathleen H. Stromberg Vice President of various Dean Witter Funds.
Vice President
13
<PAGE> 104
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
Marybeth Swisher
Vice President
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss Vice President of various Dean Witter Funds.
Vice President
John Wong
Vice President
Item 29. Principal Underwriters
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) 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 Financial Services Trust
(19) Dean Witter Fund of Funds
(20) Dean Witter Global Asset Allocation Fund
(21) Dean Witter Global Dividend Growth Securities
(22) Dean Witter Global Short-Term Income Fund Inc.
(23) Dean Witter Global Utilities Fund
14
<PAGE> 105
(24) Dean Witter Hawaii Municipal Trust
(25) Dean Witter Health Sciences Trust
(26) Dean Witter High Yield Securities Inc.
(27) Dean Witter Income Builder Fund
(28) Dean Witter Information Fund
(29) Dean Witter Intermediate Income Securities
(30) Dean Witter Intermediate Term U.S. Treasury Trust
(31) Dean Witter International SmallCap Fund
(32) Dean Witter Japan Fund
(33) Dean Witter Limited Term Municipal Trust
(34) Dean Witter Liquid Asset Fund Inc.
(35) Dean Witter Market Leader Trust
(36) Dean Witter Mid-Cap Growth Fund
(37) Dean Witter Multi-State Municipal Series Trust
(38) Dean Witter Natural Resource Development Securities Inc.
(39) Dean Witter New York Municipal Money Market Trust
(40) Dean Witter New York Tax-Free Income Fund
(41) Dean Witter Pacific Growth Fund Inc.
(42) Dean Witter Precious Metals and Minerals Trust
(43) Dean Witter Retirement Series
(44) Dean Witter Short-Term Bond Fund
(45) Dean Witter Short-Term U.S. Treasury Trust
(46) Dean Witter S&P 500 Index Fund
(47) Dean Witter Special Value Fund
(48) Dean Witter Strategist Fund
(49) Dean Witter Tax-Exempt Securities Trust
(50) Dean Witter Tax-Free Daily Income Trust
(51) Dean Witter U.S. Government Money Market Trust
(52) Dean Witter U.S. Government Securities Trust
(53) Dean Witter Utilities Fund
(54) Dean Witter Value-Added Market Series
(55) Dean Witter Variable Investment Series
(56) Dean Witter World Wide Income Trust
(57) Dean Witter World Wide Investment Trust
(58) Morgan Stanley Dean Witter Competitive Edge Fund
"Best Ideas Portfolio"
(59) Morgan Stanley Dean Witter Growth Fund
(60) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(61) Prime Income Trust
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
15
<PAGE> 106
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.
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
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
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.
16
<PAGE> 107
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
the 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 15th day of May, 1998.
MORGAN STANLEY DEAN WITTER EQUITY FUND
By: /s/ Barry Fink
------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signatures Title Date
By: /s/ Charles A. Fiumefreddo Chairman, President, 05/15/98
-------------------------- Chief Executive
Charles A. Fiumefreddo Officer and Trustee
By:/s/ Thomas E. Larkin, Jr. Trustee 05/15/98
---------------------------
Thomas E. Larkin, Jr.
By:/s/ Richard M. DeMartini Trustee 05/15/98
---------------------------
Richard M. DeMartini
By:/s/ John C. Argue Trustee 05/15/98
---------------------------
John C. Argue
By:/s/ John R. Haire Trustee 05/15/98
---------------------------
John R. Haire
By:/s/ Manuel H. Johnson Trustee 05/15/98
---------------------------
Manuel H. Johnson
By:/s/ Michael E. Nugent Trustee 05/15/98
---------------------------
Michael E. Nugent
By:/s/ John L. Schroeder Trustee 05/15/98
---------------------------
John L. Schroeder
By:/s/ Marc I. Stern Trustee 05/15/98
---------------------------
Marc I. Stern
By:/s/ Thomas F. Caloia Treasurer, Chief 05/15/98
--------------------------- Financial Officer and
Thomas F. Caloia Chief Accounting Officer
<PAGE> 108
MORGAN STANLEY DEAN WITTER EQUITY FUND
EXHIBIT INDEX
1. -- Declaration of Trust of Registrant.*
2. -- By-Laws of Registrant.*
3. -- None
4. -- Not Applicable
5. (a) -- Form of Investment Management Agreement between Registrant
and Dean Witter InterCapital Inc.
(b) -- Form of Sub-Advisory Agreement between Dean Witter
InterCapital Inc. and Miller Anderson & Sherrerd, LLP.
6. (a) -- Form of Distribution Agreement between Registrant and
Dean Witter Distributors Inc.
(b) -- Forms of Selected Dealer Agreements.
(c) -- Form of Underwriting Agreement between Registrant and Dean
Witter Distributors Inc.
7. -- None
8. (a) -- Form of Custodian Agreement between Registrant and The Bank
of New York.
(b) -- Form of Transfer Agency and Service Agreement between
Registrant and Morgan Stanley 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.
(b) -- Opinion of Lane Altman & Owens LLP.
11. -- Consent of Independent Accountants.
12. -- None
13. -- Investment Letter of Dean Witter InterCapital Inc.
14. -- None
<PAGE> 109
15. -- Form of Plan of Distribution pursuant to Rule 12b-1.
16. -- Schedules for Computation of Performance Quotations.**
27. -- Financial Data Schedules.
Other. (a) -- Powers of Attorney.
(b) -- Form of Multiple-Class Plan pursuant to Rule 18f-3.
* Previously filed in Form N1-A.
** To be filed with first post-effective amendment.
<PAGE> 1
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of April, 1998 by and between Morgan
Stanley Dean Witter Equity 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.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Manager shall be deemed to
include persons employed or otherwise retained by the Investment Manager to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Manager may
desire. The Investment Manager shall, as agent for the Fund, maintain the Fund's
records and books of account (other than those maintained by the Fund's transfer
agent, registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, the
Investment Manager shall surrender to the Fund such of the books and records so
requested.
3. The Fund will, from time to time, furnish or otherwise make available to
the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
Y10002
<PAGE> 2
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and
employees, if any, of the Fund who are also directors, officers or employees of
the Investment Manager, and provide such office space, facilities and equipment
and such clerical help and bookkeeping services as the Fund shall reasonably
require in the conduct of its business. The Investment Manager shall also bear
the cost of telephone service, heat, light, power and other utilities provided
to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses of
the Fund, including without limitation, fees pursuant to any plan of
distribution that the Fund may adopt; the charges and expenses of any registrar,
any custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities or commodities and other property, and any stock
transfer or dividend agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio transactions to which the
Fund is a party; all taxes, including securities or commodities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the Securities and Exchange Commission and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the cost and expense of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders; fees and travel expenses of
trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Trustees of the Fund who are not interested
persons (as defined in the Act) of the Fund or the Investment Manager, and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Trustees) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the Investment
Manager monthly compensation determined by applying the annual rate of 0.85% to
the Fund's daily net assets. Except as hereinafter set forth, compensation under
this Agreement shall be calculated and accrued daily and the amounts of the
daily accruals shall be paid monthly as promptly as possible for the preceding
month. Such calculations shall be made by applying 1/365ths of the annual rates
to the Fund's net assets each day determined as of the close of business on that
day or the last previous business day. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above.
7. The Investment Manager will use its best efforts in the supervision and
management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund or
any of its investors for any error of judgment or mistake of law or for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors.
8. Nothing contained in this Agreement shall prevent the Investment Manager
or any affiliated person of the Investment Manager from acting as investment
adviser or manager for any other person, firm or corporation and shall not in
any way bind or restrict the Investment Manager or any such affiliated person
from buying, selling or trading any securities or commodities for their own
accounts or for the account of others for whom they may be acting. Nothing in
this Agreement shall limit or restrict
2
<PAGE> 3
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 provided such continuance is approved at least annually by
the vote of holders of a majority, as defined in the Investment Company Act of
1940, as amended (the "Act"), of the outstanding voting securities of the Fund
or by the Trustees of the Fund; provided, that in either event such continuance
is also approved annually by the vote of a majority of the Trustees of the Fund
who are not parties to this Agreement or "interested persons" (as defined in the
Act) of any such party, which vote must be cast in person at a meeting called
for the purpose of voting on such approval; provided, however, that (a) the Fund
may, at any time and without the payment of any penalty, terminate this
Agreement upon thirty days' written notice to the Investment Manager, either by
majority vote of the Trustees of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund; (b) this Agreement shall immediately
terminate in the event of its assignment (to the extent required by the Act and
the rules thereunder) unless such automatic terminations shall be prevented by
an exemptive order of the Securities and Exchange Commission; and (c) the
Investment Manager may terminate this Agreement without payment of penalty on
thirty days' written notice to the Fund. Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed post-paid, to the other
party at the principal office of such party.
10. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision hereof, or if
they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the Investment
Manager shall be liable for failing to do so.
11. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
12. The Investment Manager and the Fund each agree that the name "Morgan
Stanley Dean Witter," which comprises a component of the Fund's name, is a
property right of Morgan Stanley Dean Witter & Co. ("MSDW"), the parent of the
Investment Manager. The Fund agrees and consents that (i) it will only use the
name "Morgan Stanley Dean Witter" as a component of its name and for no other
purpose, (ii) it will not purport to grant to any third party the right to use
the name "Morgan Stanley Dean Witter" for any purpose, (iii) MSDW, or any
corporate affiliate of MSDW, may use or grant to others the right to use the
name "Morgan Stanley Dean Witter," or any combination or abbreviation thereof,
as all or a portion of a corporate or business name or for any commercial
purpose, including a grant of such right to any other investment company, (iv)
at the request of MSDW or any corporate affiliate of MSDW, the Fund will take
such action as may be required to provide its consent to the use of the name
"Morgan Stanley Dean Witter," or any combination or abbreviation thereof, by
MSDW or any corporate affiliate of MSDW, or by any person to whom MSDW or a
corporate affiliate of MSDW shall have granted the right to such use, and (v)
upon the termination of any investment advisory agreement into which a corporate
affiliate of MSDW and the Fund may enter, or upon termination of affiliation of
the Investment Manager with its parent, the Fund shall, upon request of MSDW or
any corporate affiliate of MSDW, cease to use the name "Morgan Stanley Dean
Witter" as a component of its name, and shall not use the name, or any
combination or abbreviation thereof, as a part of its name or for any other
commercial purpose, and shall cause its officers, trustees and shareholders to
take any and all actions which MSDW or any corporate affiliate of MSDW, may
request to effect the foregoing and to reconvey to MSDW any and all rights to
such name.
14. The Declaration of Trust establishing Morgan Stanley Dean Witter Equity
Fund, dated April 6, 1998, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Morgan Stanley Dean Witter
Equity Fund refers to the Trustees under the Declaration collectively as
Trustees, but not as
3
<PAGE> 4
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of Morgan Stanley Dean Witter Equity Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Morgan Stanley Dean Witter Equity 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>
MORGAN STANLEY DEAN WITTER EQUITY FUND
By:
---------------------------------------------------
Attest:
- -----------------------------------------------------
DEAN WITTER INTERCAPITAL INC.
By:
---------------------------------------------------
Attest:
- -----------------------------------------------------
</TABLE>
4
<PAGE> 1
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 30th day of April, 1998 by and between Dean Witter
InterCapital Inc., a Delaware corporation (herein referred to as the "Investment
Manager"), and Miller Anderson & Sherrerd, LLP, a Delaware Corporation, (herein
referred to as the "Sub-Adviser").
WHEREAS, Morgan Stanley Dean Witter Equity Fund (herein referred to as the
"Fund") is engaged in business as an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Investment Manager has entered into an Investment Management
Agreement with the Fund (the "Investment Management Agreement") wherein the
Investment Manager has agreed to provide investment management services to the
Fund; and
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as an
investment adviser; and
WHEREAS, the Investment Manager desires to retain the services of the
Sub-Adviser to render investment advisory services for the Fund in the manner
and on the terms and conditions hereinafter set forth; and
WHEREAS, the Sub-Adviser desires to be retained by the Investment Manager
to perform services on said terms and conditions:
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. Subject to the supervision of the Fund, its officers and Trustees, and
the Investment Manager, and in accordance with the investment objectives,
policies and restrictions set forth in the then-current Registration Statement
relating to the Fund, and such investment objectives, policies and restrictions
from time to time prescribed by the Trustees of the Fund and communicated by the
Investment Manager to the Sub-Adviser, the Sub-Adviser agrees to provide the
Fund with investment advisory services with respect to the Fund's investments to
obtain and evaluate such information and advice relating to the economy,
securities markets and securities as it deems necessary or useful to discharge
its duties hereunder; to continuously manage the assets of the Fund in a manner
consistent with the investment objective and policies of the Fund; to make
decisions as to foreign currency matters and make determinations as to forward
foreign exchange contracts and options and futures contracts in foreign
currencies; shall determine the securities to be purchased, sold or otherwise
disposed of by the Fund and the timing of such purchases, sales and
dispositions; to take such further action, including the placing of purchase and
sale orders on behalf of the Fund, as it shall deem necessary or appropriate; to
furnish to or place at the disposal of the Fund and the Investment Manager such
of the information, evaluations, analyses and opinions formulated or obtained by
it in the discharge of its duties as the Fund and the Investment Manager may,
from time to time, reasonably request. The Investment Manager and the Sub-
Adviser shall each make its officers and employees available to the other from
time to time at reasonable times to review investment policies of the Fund and
to consult with each other.
2. The Sub-Adviser 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 Sub-Adviser shall be deemed to include
persons employed or otherwise retained by the Sub-Adviser 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 Sub-Adviser shall maintain whatever records as may be required to be
maintained by it under the Act. All such records so maintained shall be made
available to the Fund, upon the request of the Investment Manager or the Fund.
Y10002
<PAGE> 2
3. The Fund will, from time to time, furnish or otherwise make available to
the Sub-Adviser such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as the Sub-Adviser may
reasonably require in order to discharge its duties and obligations hereunder or
to comply with any applicable law and regulations and the investment objectives,
policies and restrictions from time to time prescribed by the Trustees of the
Fund.
4. The Sub-Adviser shall bear the cost of rendering the investment advisory
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 the Sub-Adviser, and such clerical help and bookkeeping
services as the Sub-Adviser shall reasonably require in performing its duties
hereunder.
5. The Fund assumes and shall pay or cause to be paid all other expenses of
the Fund, including, without limitation: any fees paid to the Investment
Manager; fees pursuant to any plan of distribution that the Fund may adopt; the
charges and expenses of any registrar, any custodian, sub-custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities 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 securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies or pursuant to any
foreign laws; 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 or
pursuant to any foreign laws (including filing fees and legal fees and
disbursements of counsel); the cost and expense of printing (including
typesetting) and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing 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
Sub-Adviser; 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, the Investment Manager
or the Sub-Adviser, 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 Sub-Adviser, the Investment Manager shall pay to the
Sub-Adviser monthly compensation equal to 40% of its monthly compensation
receivable pursuant to the Investment Management Agreement. Any subsequent
change in the Investment Management Agreement which has the effect of raising or
lowering the compensation of the Investment Manager will have the concomitant
effect of raising or lowering the fee payable to the Sub-Adviser under this
Agreement. In addition, if the Investment Manager has undertaken in the Fund's
Registration Statement as filed under the Act (the "Registration Statement") or
elsewhere to waive all or part of its fee under the Investment Management
Agreement, the Sub-Adviser's fee payable under this Agreement will be
proportionately waived in whole or in part. The calculation of the fee payable
to the Sub-Adviser pursuant to this Agreement will be made, each month, at the
time designated for the monthly calculation of the fee payable to the Investment
Manager pursuant to the Investment Management Agreement. 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 the part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fee as set forth above. Subject to the provisions of
paragraph 7 hereof, payment of the Sub-Adviser's compensation for the preceding
month shall be made as promptly as possible after completion of the computations
contemplated by paragraph 7 hereof.
2
<PAGE> 3
7. The Sub-Adviser will use its best efforts in the performance of
investment activities on behalf of the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Sub-Adviser shall not be liable to the Investment
Manager or the Fund or any of its investors for any error of judgment or mistake
of law or for any act or omission by the Sub-Adviser or for any losses sustained
by the Fund or its investors.
8. It is understood that any of the shareholders, Trustees, officers and
employees of the Fund may be a shareholder, director, officer or employee of, or
be otherwise interested in, the Sub-Adviser, and in any person controlled by or
under common control with the Sub-Adviser, and that the Sub-Adviser and any
person controlled by or under common control with the Sub-Adviser may have an
interest in the Fund. It is also understood that the Sub-Adviser and any
affiliated persons thereof or any persons controlled by or under common control
with the Sub-Adviser have and may have advisory, management 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 remain in effect until April 30, 1999 and from year
to year thereafter provided such continuance is approved at least annually by
the vote of holders of a majority, as defined in the Act, of the outstanding
voting securities of the Fund or by the Trustees of the Fund; provided, that in
either event such continuance is also approved annually by the vote of a
majority of the Trustees of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party, which vote must
be cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that (a) the Fund may, at any time and without the
payment of any penalty, terminate this Agreement upon thirty days' written
notice to the Investment Manager and the Sub-Adviser, either by majority vote of
the Trustees of the Fund or by the vote of a majority of the outstanding voting
securities of the Fund; (b) this Agreement shall immediately terminate in the
event of its assignment (within the meaning of the Act) unless such automatic
termination shall be prevented by an exemptive order of the Securities and
Exchange Commission; (c) this Agreement shall immediately terminate in the event
of the termination of the Investment Management Agreement; (d) the Investment
Manager may terminate this Agreement without payment of penalty on thirty days'
written notice to the Fund and the Sub-Adviser and; (e) the Sub-Adviser may
terminate this Agreement without the payment of penalty on thirty days' written
notice to the Fund and the Investment Manager. Any notice under this Agreement
shall be given in writing, addressed and delivered, or mailed post-paid, to the
other party at the principal office of such party.
10. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision hereof, or if
they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund, the Investment
Manager nor the Sub-Adviser shall be liable for failing to do so.
11. This Agreement shall be construed in accordance with the law 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.
3
<PAGE> 4
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.
DEAN WITTER INTERCAPITAL INC.
By: ..................................
Attest: ..............................
MILLER ANDERSON & SHERRERD, LLP
By: ..................................
Attest: ..............................
Accepted and agreed to as of the
day and year first above written:
MORGAN STANLEY DEAN WITTER
EQUITY FUND
By: ..................................
Attest: ..............................
4
<PAGE> 1
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 have entered into
selected dealer agreements with the Distributor upon the terms and conditions
set forth in Section 7 hereof ("Selected Dealers").
Y10002
<PAGE> 2
(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.
<PAGE> 3
(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.
<PAGE> 4
(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,
<PAGE> 5
which may be based upon the 1933 Act, or on any other statute or at common law,
on the ground that the Registration Statement or related Prospectus and
Statement of Additional Information, as from time to time amended and
supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of a Fund in favor of the Distributor and any such
controlling persons to be deemed to protect the Distributor or any such
controlling persons thereof against any liability to a Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement; or (ii) is a Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or any such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. Each Fund will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense,
of any such suit brought to enforce any such liability, but if a Fund elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
Each Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or
Directors/Trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless each Fund and
each of its Directors/ Trustees and officers and each person, if any, who
controls the Fund against any loss, liability, claim, damage, or expense
described in the indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to a Fund in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus and Statement of Additional Information, as from time to time
amended, or the annual or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which arise
as a result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(g) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e) hereof.
(iii) In case any action shall be brought against a Fund or any person
so indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor, by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
<PAGE> 6
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by a Fund on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of a Fund on the one hand and the
Distributor on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by a Fund on the one hand and the Distributor on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Fund bear to the
total compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by a Fund or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Fund and the Distributor agree that it would not be
just and equitable if contribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 10. Duration and Termination of this Agreement. This Agreement
shall 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.
<PAGE> 7
SECTION 12. Additional Funds. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
SECTION 13. Governing Law. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the State of New York, or any of the
provisions herein, conflicts with the applicable provisions of the 1940 Act, the
latter shall control.
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:
--------------------------------------
<PAGE> 8
DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT APRIL 30, 1998
<TABLE>
<C> <S>
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) Morgan Stanley 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) Morgan Stanley Dean Witter Equity Fund
13) Dean Witter European Growth Fund Inc.
14) Dean Witter Federal Securities Trust
15) Dean Witter Financial Services Trust
16) Dean Witter Fund of Funds
17) Dean Witter Global Asset Allocation Fund
18) Dean Witter Global Dividend Growth Securities
19) Dean Witter Global Utilities Fund
20) Morgan Stanley Dean Witter Growth Fund
21) Dean Witter Health Sciences Trust
22) Dean Witter High Yield Securities Inc.
23) Dean Witter Income Builder Fund
24) Dean Witter Information Fund
25) Dean Witter Intermediate Income Securities
26) Dean Witter International SmallCap Fund
27) Dean Witter Japan Fund
28) Dean Witter Market Leader Trust
29) Morgan Stanley Dean Witter Mid-Cap Dividend Growth
Securities
30) Dean Witter Mid-Cap Growth Fund
31) Dean Witter Natural Resource Development Securities Inc.
32) Dean Witter New York Tax-Free Income Fund
33) Dean Witter Pacific Growth Fund Inc.
34) Dean Witter Precious Metals and Minerals Trust
35) Morgan Stanley Dean Witter Research Fund
36) Dean Witter Special Value Fund
37) Dean Witter S&P 500 Index Fund
38) Dean Witter Strategist Fund
39) Dean Witter Tax-Exempt Securities Trust
40) Dean Witter U.S. Government Securities Trust
41) Dean Witter Utilities Fund
42) Dean Witter Value-Added Market Series
43) Morgan Stanley Dean Witter World Wide High Income Fund
44) Dean Witter World Wide Income Trust
45) Dean Witter World Wide Investment Trust
</TABLE>
<PAGE> 9
MORGAN STANLEY DEAN WITTER EQUITY FUND
Two World Trade Center
New York, NY 10048
April 30, 1998
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,
MORGAN STANLEY DEAN WITTER
EQUITY FUND
by: ________________________
Dean Witter Distributors Inc. hereby notifies Morgan Stanley Dean Witter
Equity Fund of its willingness to serve as the Fund's principal underwriter
and distributor under the Agreement.
DEAN WITTER DISTRIBUTORS INC.
by: ___________________________
<PAGE> 1
MORGAN STANLEY DEAN WITTER EQUITY FUND
SELECTED DEALERS AGREEMENT
Gentlemen:
Dean Witter Distributors Inc. (the "Distributor") has a distribution
agreement (the "Distribution Agreement") with Morgan Stanley Dean Witter Equity
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.
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
Y10002
<PAGE> 2
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.
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.
<PAGE> 3
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: Dean Witter Reynolds Inc.
By:
- --------------------------------------
Charles A. Fiumefreddo
Address: Two World Trade Center
New York, NY 10048
Date: April 30, 1998
<PAGE> 1
MORGAN STANLEY DEAN WITTER EQUITY FUND
SHARES OF BENEFICIAL INTEREST
$.01 PER VALUE
UNDERWRITING AGREEMENT
April 30, 1998
DEAN WITTER DISTRIBUTORS INC.
2 World Trade Center
New York, New York 10048
Dear Sirs:
1. Introductory. Morgan Stanley Dean Witter Equity 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, $.01 par value, subject to increase or decrease as provided in this
Agreement. Such shares are hereinafter referred to 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 public
offering price, for reoffering by the Selected Dealers to the public at the
public offering price.
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
Y10002
<PAGE> 2
Regulations thereunder and will conform in all 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 diversified 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 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> 3
(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. 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 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 the 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 deposits receipts issued by the Morgan Stanley
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 July 29, 1998 or such
later time and date as may be agreed upon between the Underwriter and the Fund
(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> 4
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
4
<PAGE> 5
Statement, as many copies of any Preliminary Prospectus as the Underwriter
may reasonably request. The Fund will deliver or mail to or 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.
5
<PAGE> 6
(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 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 security
holders 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.
6
<PAGE> 7
(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.
(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 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 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,
covenants, 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:
7
<PAGE> 8
(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
compiled with to the reasonable satisfaction of the Underwriter.
(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 LLP 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 Day, 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
8
<PAGE> 9
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 diversified management investment company;
(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 know 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
present the information required to be shown.
As to all matters of Massachusetts law, 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;
9
<PAGE> 10
(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;
(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
statement 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 Underwriter 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 time 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.
10
<PAGE> 11
(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.
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 Morgan Stanley Dean Witter Equity 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
11
<PAGE> 12
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.
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 Morgan
Stanley Dean Witter Equity Fund, dated April 6, 1998, a copy of which, together
with all other amendments thereto ("Declaration"), is on file in the office of
The Commonwealth of Massachusetts, provides that the name Morgan Stanley Dean
Witter Equity Fund refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally, and not Trustees, shareholder,
officer, employee or agent of Morgan Stanley Dean Witter Equity Fund shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise, in
connection with the affairs of said Morgan Stanley Dean Witter Equity 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,
MORGAN STANLEY DEAN WITTER EQUITY 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> 1
Exhibit 8a
CUSTODY AGREEMENT
Agreement made as of this day of , 1998, between MORGAN STANLEY
DEAN WITTER EQUITY 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> 2
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 Officers, 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 letter 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, currency, 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 identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits
therein by the Custodian.
- 2 -
<PAGE> 3
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 commission merchant or a
Clearing Member (a "Margin Account Agreement"), 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
- 3 -
<PAGE> 4
withdrawn from, a Margin Account upon the Custodian's effecting 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 Corporation, 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 Securities, to sell such
instruments, currency, or Securities to the writer thereof for the
exercise price.
- 4 -
<PAGE> 5
27. "Reverse Repurchase Agreement" shall mean an agreement
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 Options, 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 recordation or otherwise,
within the custody account in which certain Securities and/or other
assets of the Fund specifically allocated 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 Agreement 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> 6
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 assets 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 on-going 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> 7
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 on-going 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 confirmations 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 on-going 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 Securities 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;
- 7 -
<PAGE> 8
(b) Pursuant to Resolutions of the Fund's Board of Trustees
certified by an Officer and by the Secretary or Assistant Secretary
of the Fund setting forth the name and address 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
- 8 -
<PAGE> 9
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, proxies,
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> 10
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 authority 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 connection with the
reorganization, refinancing, merger, consolidation, 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 possession 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, closing-out or
writing of Futures Contracts, Options, or Futures Contract Options by
making payments or deliveries
- 10 -
<PAGE> 11
specified in 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 futures 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 Written 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
- 11 -
<PAGE> 12
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 Securities 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 specifying 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
- 12 -
<PAGE> 13
purchased. The Custodian shall pay, upon receipt of a Clearing
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 payable
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 Clearing 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 specifying 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,
- 13 -
<PAGE> 14
the Fund shall deliver to the Custodian a Certificate specifying 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 Option 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 specifying 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 Options 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
- 14 -
<PAGE> 15
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 issuer 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 payable 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 specifying 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
Securities, 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 Securities 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 specifying: (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 allocated 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 Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar document
issued by the Custodian
- 15 -
<PAGE> 16
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 specifying 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 Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in
which such account 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
- 16 -
<PAGE> 17
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 Account
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.
- 17 -
<PAGE> 18
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 commission 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 accordance 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 commission, 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 Agreement.
(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,
- 18 -
<PAGE> 19
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 accordance 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 allocated 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.
- 19 -
<PAGE> 20
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 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 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 or 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 Option 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
Securities 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
- 20 -
<PAGE> 21
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 allocated; (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 commission 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 previously written Futures
Contract Option described in this Article in order to liquidate its
position as a writer of such
- 21 -
<PAGE> 22
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 Futures 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 Option 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 withdrawals 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 accordance 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
- 22 -
<PAGE> 23
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 issuer 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 payable 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 withdrawals 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
- 23 -
<PAGE> 24
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 Agreement
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
termination; (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 Securities 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 Agreement 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
- 24 -
<PAGE> 25
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 collateral 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
payment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certified 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 Securities: (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 Account 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
- 25 -
<PAGE> 26
Custodian into, or withdrawn from, a Senior Securities Account, 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 statement. In the event such then
market value is indicated to be
- 26 -
<PAGE> 27
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 additional cash and/or
Securities to be deposited in such Collateral 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 Instructions, or a Certificate
setting forth the date of the declaration 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
- 27 -
<PAGE> 28
(b) The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated 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 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 from the Transfer Agent of an advice 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 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.
6. Notwithstanding the above provisions regarding the redemption
of any Shares, whenever any Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by the
Fund, the Custodian, unless otherwise instructed by a Certificate,
shall, upon receipt of an advice from the Fund or its agent setting
forth that the redemption is in good form for redemption in
accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money
held in the separate account of the Series of the Shares being
redeemed.
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
- 28 -
<PAGE> 29
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 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 effective 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 borrowing, 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 borrowing,
which may be set forth by incorporating by reference an
- 29 -
<PAGE> 30
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
borrowing date specified in a Certificate the specified collateral
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
- 30 -
<PAGE> 31
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 (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 of
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
- 31 -
<PAGE> 32
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 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 represents, 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
- 32 -
<PAGE> 33
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.
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.
- 33 -
<PAGE> 34
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 Agreement,
except for any such loss or damage arising out of its own negligence,
bad faith, or willful misconduct or that of 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 Securities, 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
- 34 -
<PAGE> 35
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
obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to 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 termination 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 interest 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
- 35 -
<PAGE> 36
shall the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or
late crediting by a Depository of any amount payable 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 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 obligation 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 obligation 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
- 36 -
<PAGE> 37
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 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 obligation (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,
- 37 -
<PAGE> 38
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 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 liability to the Fund in acting upon Oral
Instructions or Written 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 accordance 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
- 38 -
<PAGE> 39
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 regulations. 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 reasonable request of the
Fund, the Custodian shall provide in hard 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 accounting 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 investment 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 Agreement, 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 prevailing from time to time among
brokers or dealers in such Securities 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
- 39 -
<PAGE> 40
responsibilities as are specifically set forth in this Agreement, 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 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.
- 40 -
<PAGE> 41
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 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 Officers 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
- 41 -
<PAGE> 42
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.
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
- 42 -
<PAGE> 43
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.
- 43 -
<PAGE> 44
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.
MORGAN STANLEY DEAN WITTER
EQUITY FUND
[SEAL] By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
________________________
- 44 -
<PAGE> 45
APPENDIX A
I, ____________________________________, President and I,
________________________, _______________________ of MORGAN STANLEY
DEAN WITTER EQUITY 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 Instructions 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> 46
APPENDIX B
I, ____________________________________, President and I,
________________________, _______________________ of MORGAN STANLEY
STANLEY DEAN WITTER EQUITY 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 positions with
the Fund and each has been duly elected or appointed 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> 47
APPENDIX C
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of MORGAN STANLEY DEAN WITTER EQUITY
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
, 1998, 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 , 1998 (the "Custody Agreement") is authorized
and instructed on a continuous and on-going 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
MORGAN STANLEY DEAN WITTER EQUITY FUND, as of the
day of , 1998.
[SEAL] ____________________________
<PAGE> 48
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> 49
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> 50
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 , 1998, 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 , 1998, (the "Custody Agreement") is authorized and
instructed on a continuous and on-going basis to deposit in the
Book-Entry System, 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 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 , 1998.
[SEAL]
<PAGE> 51
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 , 1998, 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 , 1998, (the "Custody Agreement") is authorized and
instructed on a continuous and on-going basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
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 , 1998.
[SEAL]
<PAGE> 52
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 , 1998, 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 , 1998 (the "Custody Agreement") is authorized and
instructed on a continuous and on-going basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
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
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 ,
1998.
[SEAL]
<PAGE> 53
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 , 1998,
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 , 1998, (the "Custody Agreement") is authorized and
instructed on a continuous and on-going basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
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 , 1998.
[SEAL]
<PAGE> 1
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
Y10002
<PAGE> 2
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.................................................. 6
Article 9 Affiliations................................................ 6
Article 10 Amendment................................................... 6
Article 11 Applicable Law.............................................. 6
Article 12 Miscellaneous............................................... 6
Article 13 Merger and Agreement........................................ 7
Article 14 Personal Liability.......................................... 7
</TABLE>
<PAGE> 3
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
1
<PAGE> 4
Shares 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
2
<PAGE> 5
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.
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.
3
<PAGE> 6
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that notice of offering of such
Shares in such State or other jurisdiction or in violation of any stop
order or other determination or ruling by any federal agency or any State
or other jurisdiction with respect to the offer or sale of such Shares in
such State or other jurisdiction.
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
4
<PAGE> 7
officer of the Fund or any other person authorized to sign written
instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the
form approved by the Board of Directors, with a certificate of the
Secretary of the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of 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.
5
<PAGE> 8
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.
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 appro-
6
<PAGE> 9
priate 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.
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
<TABLE>
<C> <S>
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
</TABLE>
7
<PAGE> 10
<TABLE>
<C> <S>
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.
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
</TABLE>
8
<PAGE> 11
<TABLE>
<C> <S>
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
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
</TABLE>
9
<PAGE> 12
EXHIBIT A
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, Morgan Stanley Dean Witter Equity Fund a Massachusetts
business trust (the "Fund"), desires to employ and appoint Morgan Stanley Dean
Witter Trust FSB ("MSDW Trust") to act as transfer agent for each series and
class of shares of the Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder servicing agent, registrar
and agent in connection with any accumulation, open-account or similar plan
provided to the holders of Shares, including without limitation any periodic
investment plan or periodic withdrawl plan.
The Fund hereby agrees that, in consideration for the payment by the Fund
to MSDW Trust of fes as set out in the fee schedule attached hereto as Schedule
A, MSDW Trust shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate MSDW Trust's acceptance of employment and appointment by
the Fund in the capacities set forth above by so indicating in the space
provided below.
Very truly yours,
MORGAN STANLEY DEAN WITTER
EQUITY FUND
By:
--------------------------------------
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
- --------------------------------------
Its:
- --------------------------------------
Date:
- --------------------------------------
10
<PAGE> 13
SCHEDULE A
Fund: Morgan Stanley Dean Witter Equity 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> 1
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 Agree-
Y10002
<PAGE> 2
ment or to comply with any applicable law and regulation or request of the Board
of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by 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
activities 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
2
<PAGE> 3
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.
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
- --------------------------------------
LouAnne McInnis
DEAN WITTER SERVICES COMPANY INC.
By: /s/ CHARLES A. FIUMEFREDDO
------------------------------------
Charles A. Fiumefreddo
Attest:
/s/ BARRY FINK
- --------------------------------------
Barry Fink
3
<PAGE> 4
SCHEDULE A
DEAN WITTER FUNDS
AS AMENDED AS OF MAY 1, 1998
<TABLE>
<C> <S>
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 Financial Services Trust
19. Dean Witter Fund of Funds
(i) Domestic Portfolio
(ii) International Portfolio
20. Dean Witter Global Asset Allocation Fund
21. Dean Witter Global Dividend Growth Securities
22. Dean Witter Global Short-Term Income Fund Inc.
23. Dean Witter Global Utilities Fund
24. Dean Witter Hawaii Municipal Trust
25. Dean Witter Health Sciences Trust
26. Dean Witter High Yield Securities Inc.
27. Dean Witter Income Builder Fund
28. Dean Witter Information Fund
29. Dean Witter Intermediate Income Securities
30. Dean Witter Intermediate Term U.S. Treasury Trust
31. Dean Witter International SmallCap Fund
32. Dean Witter Japan Fund
33. Dean Witter Limited Term Municipal Trust
34. Dean Witter Liquid Asset Fund Inc.
35. Dean Witter Market Leader Trust
36. Dean Witter Mid-Cap Growth Fund
37. Dean Witter Multi-State Municipal Series Trust
38. Dean Witter Natural Resource Development Securities Inc.
39. Dean Witter New York Municipal Money Market Trust
40. Dean Witter New York Tax-Free Income Fund
41. Dean Witter Pacific Growth Fund Inc.
</TABLE>
A-1
<PAGE> 5
<TABLE>
<C> <S>
42. Dean Witter Precious Metals and Minerals Trust
43. Dean Witter Retirement Series
44. Dean Witter Select Dimensions Investment Series
(i) American Value Portfolio
(ii) Balanced Growth Portfolio
(iii) Developing Growth Portfolio
(iv) Diversified Income Portfolio
(v) Dividend Growth Portfolio
(vi) Emerging Markets Portfolio
(vii) Global Equity Portfolio
(viii) Growth Portfolio
(ix) Mid-Cap Growth Portfolio
(x) Money Market Portfolio
(xi) North American Government Securities Portfolio
(xii) Utilities Portfolio
(xiii) Value-Added Market Portfolio
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 S&P 500 Index Fund
51. Dean Witter Tax-Exempt Securities Trust
52. Dean Witter Tax-Free Daily Income Trust
53. Dean Witter U.S. Government Money Market Trust
54. Dean Witter U.S. Government Securities Trust
55. Dean Witter Utilities Fund
56. Dean Witter Value-Added Market Series
57. Dean Witter Variable Investment Series
(i) Capital Appreciation Portfolio
(ii) Capital Growth Portfolio
(iii) Competitive Edge "Best Ideas" Portfolio
(iv) Dividend Growth Portfolio
(v) Equity Portfolio
(vi) European Growth Portfolio
(vii) Global Dividend Growth Portfolio
(viii) High Yield Portfolio
(ix) Income Builder Portfolio
(x) Money Market Portfolio
(xi) Quality Income Plus Portfolio
(xii) Pacific Growth Portfolio
(xiii) S&P Index Portfolio
(xiv) Strategist Portfolio
(xiv) Strategist Portfolio
(xv) Utilities Portfolio
58. Dean Witter World Wide Income Trust
59. Dean Witter World Wide Investment Trust
Morgan Stanley Dean Witter Competitive Edge Fund, "Best
60. Ideas" Portfolio
61. Morgan Stanley Dean Witter Equity Fund
62. Morgan Stanley Dean Witter Growth Fund
</TABLE>
A-2
<PAGE> 6
<TABLE>
<C> <S>
63. Morgan Stanley Dean Witter Worldwide High Income Fund
Morgan Stanley Dean Witter Mid-Cap Dividend Growth
64. Securities
CLOSED-END FUNDS
65. High Income Advantage Trust
66. High Income Advantage Trust II
67. High Income Advantage Trust III
68. InterCapital Income Securities Inc.
69. Dean Witter Government Income Trust
70. InterCapital Insured Municipal Bond Trust
71. InterCapital Insured Municipal Trust
72. InterCapital Insured Municipal Income Trust
73. InterCapital California Insured Municipal Income Trust
74. InterCapital Insured Municipal Securities
75. InterCapital Insured California Municipal Securities
76. InterCapital Quality Municipal Investment Trust
77. InterCapital Quality Municipal Income Trust
78. InterCapital Quality Municipal Securities
79. InterCapital California Quality Municipal Securities
80. InterCapital New York Quality Municipal Securities
</TABLE>
A-3
<PAGE> 7
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF MAY 1, 1998
Monthly compensation calculated daily by applying the following annual
rates to a fund's daily net assets:
FIXED INCOME FUNDS
Dean Witter Balanced Income
Fund 0.060% of the daily net assets.
Dean Witter California Tax-Free
Income Fund 0.055% of the portion of the daily net 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 Trust 0.060% of the portion of the daily net assets
not exceeding $750 million; 0.055% of the
portion of the daily net assets exceeding
$750 million but not exceeding $1 billion;
0.050% of the portion of the daily net assets
of the exceeding $1 billion but not exceeding
$1.5 billion; 0.0475% of the portion of the
daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.045% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.0425% of the portion of the daily net
assets exceeding $3 billion.
Dean Witter Diversified
Income Trust 0.040% of the daily net assets.
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
Income Fund Inc. 0.055% of the portion of the daily net assets
not exceeding $500 million; and 0.050% of the
portion of the daily net assets exceeding
$500 million.
Dean Witter Hawaii Municipal
Trust 0.035% of the daily net assets.
Dean Witter High Yield
Securities Inc. 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets
B-1
<PAGE> 8
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
Income Securities 0.060% of the portion of the daily net assets
not exceeding $500 million; 0.050% of the
portion of the daily net assets exceeding
$500 million but not exceeding $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
U.S. Treasury Trust 0.035% of the daily net assets.
Dean Witter Limited Term
Municipal Trust 0.050% of the daily net assets.
Dean Witter Multi-State
Municipal
Series Trust (10 Series) 0.035% of the daily net assets.
Dean Witter New York Tax-Free
Income Fund 0.055% of the portion of the daily net assets
not exceeding $500 million; and 0.0525% of
the portion of the daily net assets exceeding
$500 million.
Dean Witter Retirement
Series -- Intermediate Income
Securities Series 0.065% of the daily net assets.
U.S. Government Securities
Series 0.065% of the daily net assets.
Dean Witter Select Dimensions
Investment Series -- North
American Government
Securities Portfolio 0.039% of the daily net assets.
Dean Witter Select Municipal
Reinvestment Fund 0.050% of the daily net assets.
Dean Witter Short-Term Bond
Fund 0.070% of the daily net assets.
Dean Witter Short-Term
U.S. Treasury Trust 0.035% of the daily net assets.
Dean Witter Tax-Exempt
Securities Trust 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 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.
Dean Witter U.S. Government
Securities Trust 0.050% of the portion of the daily net assets
not exceeding $1 billion; 0.0475% of the
portion of the daily net assets
B-2
<PAGE> 9
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
Series -- High Yield
Portfolio 0.050% of the portion of the daily net assets
not exceeding $500 million; and 0.0425% of
the daily net assets exceeding $500 million.
Quality Income Plus Portfolio 0.050% of the portion of the daily net assets
up to $500 million; and 0.045% of the portion
of the daily net assets exceeds $500 million.
Dean Witter World Wide
Income Trust 0.075% of the portion of the daily net 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 exceeding
$500 million but not exceeding $750 million;
0.040% of the portion of the daily net assets
exceeding $750 million but not exceeding $1
billion; and 0.030% of the portion of the
daily net assets exceeding $1 billion.
Morgan Stanley Dean Witter
Worldwide High Income Fund 0.060% of the daily net assets.
EQUITY FUNDS
Dean Witter American Value Fund 0.0625% of the portion of the daily net
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; 0.0450% of the
portion of the daily net assets exceeding
$3.5 billion but not exceeding $4.5 billion;
and 0.0425% of the portion of the daily net
assets exceeding $4.5 billion.
Dean Witter Balanced
Growth Fund 0.060% of the daily net assets.
Dean Witter Capital
Appreciation 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 Capital
Growth Securities 0.065% of the portion of the daily net 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.
B-3
<PAGE> 10
Dean Witter Developing Growth
Securities Trust 0.050% of the portion of the daily net assets
not exceeding $500 million; and 0.0475% of
the portion of the daily net assets exceeding
$500 million.
Dean Witter Dividend Growth
Securities Inc. 0.0625% of the portion of the daily net
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
Fund Inc. 0.060% of the portion of the daily net assets
not exceeding $500 million; 0.057% of the
portion of the daily net assets exceeding
$500 million but not exceeding $2 billion;
and 0.054% of the portion of the daily net
assets exceeding $2 billion.
Dean Witter Financial
Services Trust 0.075% of the daily net assets.
Dean Witter Fund of Funds --
Domestic Portfolio None
International Portfolio None
Dean Witter Global Asset
Allocation Fund 0.070% of the daily net assets.
Dean Witter Global Dividend
Growth Securities 0.075% of the portion of the daily net 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; 0.0650% of the
portion of the daily net assets exceeding
$3.5 billion but not exceeding $4.5 billion;
and 0.0625% of the portion of the daily net
assets exceeding $4.5 billion.
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.
B-4
<PAGE> 11
Dean Witter Income
Builder Fund 0.075% of the portion of the net assets not
exceeding $500 million; and 0.0725% of the
portion of daily net assets exceeding $500
million.
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
SmallCap Fund 0.075% of the daily net assets.
Dean Witter Japan Fund 0.060% of the daily net assets.
Dean Witter Market Leader Trust 0.075% of the daily 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.
Dean Witter Natural
Resource Development
Securities Inc. 0.0625% of the portion of the daily net
assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Pacific Growth Fund
Inc. 0.060% of the portion of the daily net assets
not exceeding $1 billion; 0.057% of the
portion of the daily net assets exceeding $1
billion but not exceeding $2 billion; and
0.054% of the portion of the daily net assets
exceeding $2 billion.
Dean Witter Precious Metals and
Minerals Trust 0.080% of the daily net assets.
Dean Witter Retirement
Series --
American Value Series 0.085% of the daily net assets.
Capital Growth Series 0.085% of the daily net assets.
Dividend Growth Series 0.075% of the daily net assets.
Global Equity Series 0.10% of the daily net assets.
Strategist Series 0.085% of the daily net assets.
Utilities Series 0.075% of the daily net assets.
Value Added Market Series 0.050% of the daily net assets.
Dean Witter Select Dimensions
Investment Series --
American Value Portfolio 0.0625% of the daily net assets.
Balanced Growth Portfolio 0.065% of the daily net assets.
Developing Growth Portfolio 0.050% of the daily net assets.
Diversified Income Portfolio 0.040% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net
assets not exceeding $500 million; and 0.050%
of the portion of the daily net assets
exceeding $500 million.
Emerging Markets Portfolio 0.075% of the daily net assets.
Global Equity Portfolio 0.10% of the daily net assets.
B-5
<PAGE> 12
Growth Portfolio 0.048% of the daily net assets.
Mid-Cap Growth Portfolio 0.075% of the daily net assets.
Utilities Portfolio 0.065% of the daily net assets.
Value-Added Market Portfolio 0.050% of the daily net assets.
Dean Witter Special Value Fund 0.075% of the daily 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; 0.0475% of the portion of the daily
net assets exceeding $1.5 billion but not
exceeding $2.0 billion; and 0.045% of the
portion of the daily net assets exceeding
$2.0 billion.
Dean Witter S&P 500 Index Fund 0.040% of the daily net assets.
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 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 Series 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.45% of the
portion of the daily net assets exceeding
$500 million but not exceeding $1 billion;
0.0425% of the portion of the daily net
assets exceeding $1.0 billion but not
exceeding $2.0 billion; and 0.040% of the
portion of the daily net assets exceeding $2
billion.
Dean Witter Variable Investment
Series -- Capital
Appreciation
Portfolio 0.075% of the daily net assets.
Capital Growth Portfolio 0.065% of the daily net assets.
Competitive Edge
"Best Ideas" Portfolio 0.065% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net
assets not exceeding $500 million; and 0.050%
of the portion of the daily net assets
exceeding $500 million but not exceeding $1
billion; 0.0475% of the portion of the daily
net assets exceeding $1.0 billion but not
exceeding $2.0 billion; and 0.045% of the
portion of the daily net assets exceeding $2
billion.
Equity Portfolio 0.050% of the net assets of the portion of
the daily net assets not exceeding $1
billion; and 0.0475% of the portion of the
daily net assets exceeding $1 billion.
B-6
<PAGE> 13
European Growth Portfolio 0.060% of the portion of the daily net assets
not exceeding $500 million; and 0.057% of the
portion of the daily net assets exceeding
$500 million.
Income Builder Portfolio 0.075% of the daily net assets.
S&P 500 Index Portfolio 0.040% of the daily net assets.
Strategist Portfolio 0.050% of the daily net assets.
Utilities Portfolio 0.065% of the portion of the daily net assets
not exceeding $500 million and 0.055% of the
portion of the daily net assets exceeding
$500 million.
Dean Witter World Wide
Investment Trust 0.055% of the portion of the daily net assets
not exceeding $500 million; and 0.05225% of
the portion of the daily net assets exceeding
$500 million.
Morgan Stanley Dean Witter
Competitive Edge Fund,
"Best Ideas" Portfolio 0.065% of the portion of the daily net assets
not exceeding $1.5 billion; and 0.0625% of
the portion of the daily net assets exceeding
$1.5 billion.
Morgan Stanley Dean Witter
Equity Fund 0.051% of the daily net assets.
Morgan Stanley Dean Witter
Growth Fund 0.048% of the portion of the daily net assets
not exceeding $750 million; 0.045% of the
portion of daily net assets exceeding $750
million but not exceeding $1.5 billion; and
0.042% of the portion of daily net assets
exceeding $1.5 billion.
Morgan Stanley Dean Witter
Mid-Cap
Dividend Growth Fund 0.075% of the daily net assets.
MONEY MARKET FUNDS
Active Asset Trusts:
(1) Active Assets Money Trust
(2) Active Assets Tax-Free
Trust
(3) Active Assets California
Tax-Free Trust
(4) Active Assets Government
Securities Trust 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter California Tax-Free
Daily
Income Trust 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
B-7
<PAGE> 14
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 Fund
Inc. 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.35 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 Money Market Trust 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Retirement
Series --
Liquid Asset Series 0.050% of the daily net assets.
U.S. Government Money
Market Series 0.050% of the daily net assets.
Dean Witter Select Dimensions
Investment Series -- Money
Market Portfolio 0.050% of the daily net assets.
Dean Witter Tax-Free Daily
Income Trust 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
B-8
<PAGE> 15
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
Money Market Trust 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Variable
Investment Series -- Money
Market Portfolio 0.050% of the daily net assets.
Monthly compensation calculated weekly by applying the following annual
rates to a fund's weekly net assets:
CLOSED-END FUNDS
Dean Witter Government
Income Trust 0.060% of the average weekly net assets.
High Income Advantage Trust 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of average weekly net assets
exceeding $750 million and not exceeding $1
billion, and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
High Income Advantage Trust II 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of average weekly net assets
exceeding $750 million and not exceeding $1
billion; and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
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
B-9
<PAGE> 16
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.
InterCapital Income Securities,
Inc. 0.050% of the average weekly net assets.
InterCapital Insured Municipal
Bond Trust 0.035% of the average weekly net assets.
InterCapital Insured Municipal
Trust 0.035% of the average weekly net assets.
InterCapital Insured Municipal
Income Trust 0.035% of the average weekly net assets.
InterCapital California Insured
Municipal Income Trust 0.035% of the average weekly net assets.
InterCapital Quality Municipal
Investment Trust 0.035% of the average weekly net assets.
InterCapital New York Quality
Municipal Securities 0.035% of the average weekly net assets.
InterCapital Quality Municipal
Income Trust 0.035% of the average weekly net assets.
InterCapital Quality Municipal
Securities 0.035% of the average weekly net assets.
InterCapital California Quality
Municipal Securities 0.035% of the average weekly net assets.
InterCapital Insured Municipal
Securities 0.035% of the average weekly net assets.
InterCapital Insured California
Municipal Securities 0.035% of the average weekly net assets.
B-10
<PAGE> 17
DEAN WITTER INTERCAPITAL INC.
Two World Trade Center
New York, New York 10048
April 30, 1998
Dean Witter Services Company Inc.
Two World Trade Center
New York, New York 10048
Re: MORGAN STANLEY DEAN WITTER EQUITY 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> 1
MORGAN STANLEY DEAN WITTER EQUITY FUND
Two World Trade Center
New York, New York 10048
May 15, 1998
Morgan Stanley Dean Witter Equity Fund
Two World Trade Center
New York, New York 10048
Dear Sirs:
With respect to the Registration Statement on Form N-1A (File No.
333-49585) (the "Registration Statement") filed by Morgan Stanley Dean Witter
Equity 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 May 14, 1998.
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> 1
Exhibit 10b
[LANE ALTMAN & OWENS LLP STATIONERY]
May 15, 1998
Barry Fink, Vice President
and General Counsel
Dean Witter InterCapital, Inc.
Two World Trade Center
New York, NY 10048
RE: MORGAN STANLEY DEAN WITTER EQUITY FUND
Dear Barry:
We understand that the trustees (the "Trustees") of Morgan Stanley Dean
Witter Equity Fund, a Massachusetts business trust (the "Trust"), intend, on or
about May 15, 1998, to cause to be filed on behalf of the Trust a Pre-effective
Amendment No. 1 to Registration Statement No. 333-49585 (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 April 6, 1998
(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 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
<PAGE> 2
[LANE ALTMAN & OWENS LLP STATIONERY]
Barry Fink, Vice President and
General Counsel and
May 15, 1998
Page 2
Commonwealth of Massachusetts dated May 13, 1998 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, and 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 fully paid and
non-assessable by the Trust.
<PAGE> 3
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,
/s/ Lane Altman & Owens LLP
---------------------------
LANE ALTMAN & OWENS LLP
<PAGE> 1
Exhibit 11
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 May
13, 1998, relating to the statement of assets and liabilities of Morgan Stanley
Dean Witter Equity 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
May 13, 1998
<PAGE> 1
Exhibit 13
[DEAN WITTER INTERCAPITAL INC. STATIONERY]
April 30, 1998
Morgan Stanley Dean Witter Equity Fund
Two World Trade Center
New York, NY 10048
Gentlemen:
We are purchasing from you today 2,500 shares of your beneficial
interest, of $0.01 par value, of each of your Class A, Class B, Class C and
Class D shares 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 base 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> 1
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
OF
MORGAN STANLEY DEAN WITTER EQUITY FUND
WHEREAS, Morgan Stanley Dean Witter Equity 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 and Dean Witter Distributors Inc. (the "Distributor")
have entered into a separate Distribution Agreement as of April 30, 1998,
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 the Fund:
1(a)(i). With respect to Class A and Class C shares 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 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 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 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 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
the Fund, and in making such determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund'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 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 the Fund pursuant to this Plan, such Class will
not reimburse the Distributor, DWR, its affiliates or other broker-dealers for
such expenses through payments accrued pursuant to this Plan
Y10002
<PAGE> 2
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 the Fund, the Fund 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. 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, 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 the Fund's shares, including personal services to shareholders
with respect to their holdings of Fund shares, and may be spend by the
Distributor, DWR, its affiliates and such broker-dealers on any activities or
expenses related to the distribution 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, 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, 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, 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
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 until
April 30, 1999, 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 made. In this regard,
the Trustees shall request the Distributor to specify such items of expenses
2
<PAGE> 3
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 by vote
of a majority of the Rule 12b-1 Trustees, or by vote of a majority of the
outstanding voting securities of the Fund. The Plan may remain in effect with
the respect to a particular Class even if the Plan has been terminated in
accordance with this paragraph 6 with respect to any other Class. 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, 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 to increase
materially the amount each Class 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 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 Morgan Stanley Dean Witter Equity
Fund, dated April 6, 1998, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Morgan Stanley Dean Witter
Equity Fund refers to the Trustees under the Declaration collectively as
Trustees but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of Morgan Stanley Dean Witter Equity 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 Morgan Stanley Dean Witter Equity 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: April 30, 1998
<TABLE>
<S> <C>
Attest: MORGAN STANLEY DEAN WITTER EQUITY FUND
- -----------------------------------------------------
By:
---------------------------------------------------
Attest: DEAN WITTER DISTRIBUTORS INC.
- -----------------------------------------------------
By:
---------------------------------------------------
</TABLE>
3
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> MORGAN STANLEY DEAN WITTER EQUITY FUND CLASS A
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> MAY-12-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 224,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 224,820
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124,820
<TOTAL-LIABILITIES> 124,820
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,000
<SHARES-COMMON-STOCK> 2,500
<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> 25,000
<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> 2,500
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<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> 25,000
<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>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> MORGAN STANLEY DEAN WITTER EQUITY FUND CLASS B
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> MAY-12-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 224,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 224,820
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124,820
<TOTAL-LIABILITIES> 124,820
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,000
<SHARES-COMMON-STOCK> 2,500
<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> 25,000
<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> 2,500
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<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> 25,000
<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>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> MORGAN STANLEY DEAN WITTER EQUITY FUND CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> MAY-12-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 224,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 224,820
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124,820
<TOTAL-LIABILITIES> 124,820
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,000
<SHARES-COMMON-STOCK> 2,500
<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> 25,000
<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> 2,500
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<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> 25,000
<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>
<ARTICLE> 6
<SERIES>
<NUMBER> 004
<NAME> MORGAN STANLEY DEAN WITTER EQUITY FUND CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> MAY-12-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 224,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 224,820
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124,820
<TOTAL-LIABILITIES> 124,820
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,000
<SHARES-COMMON-STOCK> 2,500
<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> 25,000
<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> 2,500
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<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> 25,000
<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> 1
Exhibit Other (a)
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, 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 MORGAN STANLEY DEAN WITTER
EQUITY 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: April 30, 1998
/s/ Charles A. Fiumefreddo
--------------------------
Charles A. Fiumefreddo
<PAGE> 2
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 any 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 MORGAN
STANLEY DEAN WITTER EQUITY 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 any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: April 30, 1998
/s/ John R. Haire
-----------------
John R. Haire
<PAGE> 3
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 any 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 MORGAN
STANLEY DEAN WITTER EQUITY 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 any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: April 30, 1998
/s/ Manuel H. Johnson
---------------------
Manuel H. Johnson
<PAGE> 4
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 any 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 MORGAN
STANLEY DEAN WITTER EQUITY 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 any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: April 30, 1998
/s/ Michael E. Nugent
---------------------
Michael E. Nugent
<PAGE> 5
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 any 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 MORGAN
STANLEY DEAN WITTER EQUITY 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 any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: April 30, 1998
/s/ Edwin J. Garn
-----------------
Edwin J. Garn
<PAGE> 6
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 any 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 MORGAN
STANLEY DEAN WITTER EQUITY 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 any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: April 30, 1998
/s/ Michael Bozic
-----------------
Michael Bozic
<PAGE> 7
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 any 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 MORGAN
STANLEY DEAN WITTER EQUITY 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 any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: April 30, 1998
/s/ John L. Schroeder
---------------------
John L. Schroeder
<PAGE> 8
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 MORGAN STANLEY DEAN WITTER EQUITY
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: April 30, 1998
/s/ Philip J. Purcell
---------------------
Philip J. Purcell
<PAGE> 9
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 any 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 MORGAN
STANLEY DEAN WITTER EQUITY 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 any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: April 30, 1998
/s/ Wayne E. Hedien
-------------------
Wayne E. Hedien
<PAGE> 1
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
Y10002
<PAGE> 2
Growth Securities Inc.)(1), Class B shares are also subject to a fee under each
Fund's respective 12b-1 Plan, assessed at the annual rate of up to 1.0% of
either: (a) the lesser of (i) the average daily aggregate gross sales of the
Fund's Class B shares since the inception of the Fund (not including
reinvestment of dividends or capital gains distributions), less the average
daily aggregate net asset value of the Fund's Class B shares redeemed since the
Fund's inception upon which a CDSC has been imposed or waived, or (ii) the
average daily net assets of Class B; or (b) the average daily net assets of
Class B. A portion of the 12b-1 fee equal to up to 0.25% of the Fund's average
daily net assets is characterized as a service fee within the meaning of the
NASD guidelines and the remaining portion of the 12b-1 fee, if any, is
characterized as an asset-based sales charge. Also, Class B shares have a
conversion feature ("Conversion Feature") under which such shares convert to
Class A shares after a certain holding period. Details of the Conversion Feature
are set forth in Section IV below.
3. Class C Shares
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse 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.
- ------------------------------
(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.
<PAGE> 3
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 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
<PAGE> 4
(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.
<PAGE> 5
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
SCHEDULE A
AT APRIL 30, 1998
<TABLE>
<C> <S>
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) Morgan Stanley 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) Morgan Stanley Dean Witter Equity Fund
13) Dean Witter European Growth Fund Inc.
14) Dean Witter Federal Securities Trust
15) Dean Witter Financial Services Trust
16) Dean Witter Fund of Funds
17) Dean Witter Global Asset Allocation Fund
18) Dean Witter Global Dividend Growth Securities
19) Dean Witter Global Utilities Fund
20) Morgan Stanley Dean Witter Growth Fund
21) Dean Witter Health Sciences Trust
22) Dean Witter High Yield Securities Inc.
23) Dean Witter Income Builder Fund
24) Dean Witter Information Fund
25) Dean Witter Intermediate Income Securities
26) Dean Witter International SmallCap Fund
27) Dean Witter Japan Fund
28) Dean Witter Market Leader Trust
29) Morgan Stanley Dean Witter Mid-Cap Dividend Growth
Securities
30) Dean Witter Mid-Cap Growth Fund
31) Dean Witter Natural Resource Development Securities Inc.
32) Dean Witter New York Tax-Free Income Fund
33) Dean Witter Pacific Growth Fund Inc.
34) Dean Witter Precious Metals and Minerals Trust
35) Morgan Stanley Dean Witter Research Fund
36) Dean Witter Special Value Fund
37) Dean Witter S&P 500 Index Fund
38) Dean Witter Strategist Fund
39) Dean Witter Tax-Exempt Securities Trust
40) Dean Witter U.S. Government Securities Trust
41) Dean Witter Utilities Fund
42) Dean Witter Value-Added Market Series
43) Morgan Stanley Dean Witter World Wide High Income Fund
44) Dean Witter World Wide Income Trust
45) Dean Witter World Wide Investment Trust
</TABLE>
