<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1999
REGISTRATION NO. 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. [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [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.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[X] on September 28, 1999 pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS SEPTEMBER , 1999
Morgan Stanley Dean Witter
EQUITY FUND
[GRAPHIC]
A MUTUAL FUND THAT SEEKS TOTAL RETURN
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE> 3
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
THE FUND Investment Objective ......................................... 1
Principal Investment Strategies .............................. 1
Principal Risks .............................................. 2
Past Performance ............................................. 3
Fees and Expenses ............................................ 4
Additional Investment Strategy Information ................... 5
Additional Risk Information .................................. 5
Fund Management .............................................. 7
SHAREHOLDER INFORMATION Pricing Fund Shares .......................................... 9
How to Buy Shares ............................................ 9
How to Exchange Shares ....................................... 11
How to Sell Shares ........................................... 13
Distributions ................................................ 14
Tax Consequences ............................................. 15
Share Class Arrangements ..................................... 16
FINANCIAL HIGHLIGHTS .................................................................... 24
OUR FAMILY OF FUNDS ..................................................... INSIDE BACK COVER
</TABLE>
This Prospectus contains important information about
the Fund. Please read it carefully and keep it for
future reference.
<PAGE> 4
THE FUND
[TARGET GRAPHIC]
INVESTMENT OBJECTIVE
Morgan Stanley Dean Witter Equity Fund seeks total return.
[CHESS GRAPHIC]
PRINCIPAL INVESTMENT STRATEGIES
The Fund will normally invest at least 65% of its total assets in common stock
and other equity securities. The Fund's "Sub-Adviser," Miller Anderson &
Sherrerd, invests the Fund's assets by pursuing an investing strategy that
combines both value and growth styles. The Fund has two teams of portfolio
managers: 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
participates in administering the value/growth style-tilt of the portfolio and
monitors certain other oversight functions.
TOTAL RETURN
An investment objective having the goal of selecting securities with the
potential to rise in price and pay out income.
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 sectors.
Individual securities are selected based on, among other things, quantitative
screens and fundamental research by in-house industry analysts.
Common stock is a share ownership or equity interest in a corporation. It may or
may not pay dividends, as some companies reinvest all of their profits back into
their businesses, while others pay out some of their profits to shareholders as
dividends. A depository receipt is generally issued by a bank or financial
institution and represents an ownership interest in the Common Stock or other
equity securities of a foreign Company.
In addition, the Fund may invest up to 25% of its total assets in foreign
securities. The Fund also may invest in convertible and fixed-income securities.
This percentage limitation, however does not apply to securities of foreign
companies (including depository receipts) that are listed in the U.S. on a
national securities exchange.
In pursuing the Fund's investment objective, the Sub-Adviser has considerable
leeway in deciding which investments it buys, holds or sells on a day-to-day
basis -- and which trading strategies it uses. For example, the Sub-Adviser in
its discretion may determine to use some permitted trading strategies while not
using others.
[SCALE GRAPHIC]
PRINCIPAL RISKS
There is no assurance that the Fund will achieve its investment objective. The
Fund's share price will fluctuate with changes in the market value of the Fund's
portfolio securities. When you sell Fund shares, they may be worth less than
what you paid for them and, accordingly, you can lose money investing in this
Fund.
COMMON STOCKS. A principal risk of investing in the Fund is associated with its
common stock investments. In general, stock values fluctuate in response to
activi-
1
<PAGE> 5
ties specific to the company as well as general market, economic and
political conditions. Stock prices can fluctuate widely in response to these
factors.
FOREIGN SECURITIES. The Fund's investments in foreign securities (including
depository receipts) may involve risks in addition to the risks associated with
domestic securities. One additional risk is currency risk. While the price of
Fund shares is quoted in U.S. dollars, the Fund generally converts U.S. dollars
to a foreign market's local currency to purchase a security in that market. If
the value of that local currency falls relative to the U.S. dollar, the U.S.
dollar value of the foreign security will decrease. This is true even if the
foreign security's local price remains unchanged.
Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation, exchange
control regulation, limitations on the use or transfer of Fund assets and any
effects of foreign social, economic or political instability. Foreign companies,
in general, are not subject to the regulatory requirements of U.S. companies
and, as such, there may be less publicly available information about these
companies. Moreover, foreign accounting, auditing and financial reporting
standards generally are different from those applicable to U.S. companies.
Finally, in the event of a default of any foreign debt obligations, it may be
more difficult for the Fund to obtain or enforce a judgment against the issuers
of the securities.
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 U.S. counterparts. In
addition, differences in clearance and settlement procedures in foreign markets
may occasion delays in settlements of the Fund's trades effected in those
markets and could result in losses to the Fund due to subsequent declines in the
value of the securities subject to the trades.
Many European countries have adopted or are in the process of adopting a single
European currency, referred to as the "euro." The consequences of the euro
conversion for foreign exchange rates, interest rates and the value of European
securities the Fund may purchase are presently unclear. The consequences may
adversely affect the value and/or increase the volatility of securities held by
the Fund.
OTHER RISKS. The performance of the Fund also will depend on whether the
Sub-Adviser is successful in pursuing the Fund's investment strategy. The Fund
is subject to other risks from its permissible investments including the risks
associated with convertible and fixed-income securities. For more information
about these risks, see the "Additional Risk Information" section.
Shares of the Fund are not bank deposits and are not guaranteed or insured by
the FDIC or any other government agency.
2
<PAGE> 6
[CALENDAR GRAPHIC]
PAST PERFORMANCE
The table below provides some indication of the risks of investing in the Fund.
The Fund's past performance does not indicate how the Fund will perform in the
future.
AVERAGE ANNUAL
TOTAL RETURNS
This table compares the Fund's average annual returns with those of a broad
measure of market performance over time, as well as with an index of funds with
similar investment objectives. The Fund's returns include the maximum applicable
sales charge for each Class and assume you sold your shares at the end of each
period.
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
- --------------------------------------------------------------------------------
LIFE OF FUND
(SINCE 7/29/98)
- --------------------------------------------------------------------------------
Class A -1.55
- --------------------------------------------------------------------------------
Class B -1.50
- --------------------------------------------------------------------------------
Class C 2.50
- --------------------------------------------------------------------------------
Class D 4.0
- --------------------------------------------------------------------------------
S&P 500 Index(1) 10.08
- --------------------------------------------------------------------------------
Lipper Growth Fund Index(2) 9.76
- --------------------------------------------------------------------------------
1 The Standard & Poor's(R) 500 Composite Stock Price Index is a
broad-based index, the performance of which is based on the average performance
of 500 widely held common stocks. The performance of the Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
2 The Lipper Growth Funds Index is an equity-weighted performance index
of the largest-qualifying funds (based on net assets) in the Lipper Growth Funds
objective. The Index, which is adjusted for capital gains distributions and
income dividends, is unmanaged and should not be considered an investment. There
are currently 30 funds represented in this index.
3
<PAGE> 7
[MONEY GRAPHIC]
FEES AND EXPENSES
The table below briefly describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund offers four classes of shares: Classes
A, B, C and D. Each Class has a different combination of fees, expenses and
other features. The Fund does not charge account or exchange fees. See the
"Share Class Arrangements" section for further fee and expense information.
SHAREHOLDER FEES
These fees are paid directly from your investment.
ANNUAL FUND
OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the period July 29, 1998 through May 31, 1999.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.25%(1) None None None
- -------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or net asset value at redemption) None(2) 5.00%(3) 1.00%(4) None
- -------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------------------------------------------------
Management fee 0.85% 0.85% 0.85% 0.85%
- -------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25% 1.00% 0.78% None
- -------------------------------------------------------------------------------------------------------------
Other expenses(5) 0.28% 0.28% 0.28% 0.28%
- -------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.38% 2.13% 1.91% 1.13%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of
purchase are subject to a contingent deferred sales charge ("CDSC") of
1.00% that will be imposed if you sell your shares within one year
after purchase, except for certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of
the CDSC.
4 Only applicable if you sell your shares within one year after purchase.
5 "Other Expenses" are estimated based on expenses anticipated for the
first complete fiscal year of the Fund.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, the tables below show your costs at
the end of each period based on these assumptions depending upon whether or not
you sell your shares at the end of each period.
4
<PAGE> 8
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
------------------------------------- --------------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
- ------------------------------------------------- --------------------------
<S> <C> <C> <C> <C>
Class A $658 $939 $658 $939
- ------------------------------------------------- --------------------------
Class B $716 $967 $216 $667
- ------------------------------------------------- --------------------------
Class C $294 $601 $194 $601
- ------------------------------------------------- --------------------------
Class D $115 $360 $115 $360
- ------------------------------------------------- --------------------------
</TABLE>
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
[CHESS GRAPHIC]
ADDITIONAL INVESTMENT STRATEGY INFORMATION
This section provides additional information relating to the Fund's principal
strategies.
CONVERTIBLE AND FIXED-INCOME SECURITIES. The Fund may invest up to 35% of its
total assets in (i) convertible securities (which may be rated below investment
grade commonly known as "junk bonds"), (ii) investment grade fixed-income
securities of domestic and foreign companies and governments and international
organizations, and (iii) U.S. government securities.
DEFENSIVE INVESTING. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its total assets in cash or money market instruments in a defensive
posture when the Investment Manager believes it is advisable to do so. Although
taking a defensive posture is designed to protect the Fund from an anticipated
market downturn, it could have the effect of reducing the benefit from any
upswing in the market.
PORTFOLIO TURNOVER. The Fund may engage in active and frequent trading of
portfolio securities to achieve its principal investment strategies. The
portfolio turnover rate is not expected to exceed 200% annually under normal
circumstances. A high turnover rate will increase Fund brokerage costs. It also
may increase the Fund's capital gains, which are passed along to Fund
shareholders as distributions. This, in turn, may increase your tax liability as
a Fund shareholder. See the sections on "Distributions" and "Tax Consequences."
The percentage limitations relating to the composition of the Fund's portfolio
apply at the time the Fund acquires an investment and refer to the Fund's net
assets unless otherwise noted. Subsequent percentage changes that result from
market fluctuations will not require the Fund to sell any portfolio security.
The Fund may change its principal investment strategies without shareholder
approval; however, you would be notified of any changes.
5
<PAGE> 9
[SCALE GRAPHIC]
ADDITIONAL RISK INFORMATION
This section provides additional information relating to the principal risks of
investing in the Fund.
CONVERTIBLE SECURITIES. The Fund's investments in convertible securities subject
the Fund to the risks associated with both fixed-income securities and common
stocks. To the extent that a convertible security's investment value is greater
than its conversion value, its price will likely increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security. If
the conversion value exceeds the investment value, the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security. The convertible securities in which the Fund may invest may be below
investment grade. Securities below investment grade are commonly known as "junk
bonds" and have speculative characteristics.
FIXED-INCOME SECURITIES. All fixed-income securities are subject to two types of
risk: credit risk and interest rate risk. Credit risk refers to the possibility
that the issuer of a security will be unable to make interest payments and/or
repay the principal on its debt. While the Fund invests in investment grade
fixed-income securities, certain of these securities have speculative
characteristics.
Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When the
general level of interest rate goes up, the prices of most fixed-income
securities goes down. When the general level of interest rates goes down, the
prices of most fixed-income securities goes up. Accordingly, a rise in the
general level of interest rates may cause the price of the Fund's fixed-income
securities to fall substantially.
YEAR 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of the Fund's "Investment Manager," Morgan
Stanley Dean Witter Advisors, Inc., the Sub-Adviser, the Fund's other service
providers and the markets and corporate and governmental issuers in which the
Fund invests do not properly process and calculate date-related information from
and after January 1, 2000. While year 2000-related computer problems could have
a negative effect on the Fund, the Investment Manager, the Sub-Adviser and their
affiliates are working hard to avoid any problems and to obtain assurances from
their service providers that they are taking similar steps.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and
6
<PAGE> 10
governmental data processing errors also may result in production
problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs,
which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Fund's investments may
be adversely affected.
[FACES GRAPHIC] FUND MANAGEMENT
The Fund has retained the Investment Manager -- Morgan Stanley
Dean Witter Advisors Inc. -- to provide administrative
services and manage its business affairs. The Investment
Manager has, in turn, contracted with the Sub-Adviser --
Miller Anderson & Sherrerd, LLP - to invest the Fund's assets,
including the placing of orders for the purchase and sale of
portfolio securities. The Investment Manager is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co., a preeminent
global financial services firm that maintains leading market
positions in each of its three primary businesses: securities,
asset management and credit services. Its main business office
is located at Two World Trade Center, New York, New York
10048.
The Sub-Adviser manages assets of approximately $62.4 billion
as of March 31, 1999 for investment companies, employee
benefit plans, endowments, foundation and other institutional
investors. The Sub-Adviser is an indirect subsidiary of Morgan
Stanley Dean Witter & Co. The Sub-Adviser's address is One
Tower Bridge, West Conshohocken, Pennsylvania.
The portfolio managers, currently six in total, are divided
into two teams: a value team and a growth team. Each team has
three members: one member of each team serves as the
designated team leader. The value team includes Nicholas J.
Kovich, James Jolinger and Robert J. Marcin. The growth team
includes Arden C. Armstrong, Brian Kramp and Gary G.
Schlarbaum. Mr. Kovich and Mr. Kramp are the respective team
leaders. 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 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 to that 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 to that he was an
analyst/portfolio manager with Meridian Investment Company
(1984-1997).
MORGAN STANLEY DEAN
WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the
mutual fund industry and together with Morgan Stanley Dean
Witter Services Company Inc., its wholly-owned subsidiary, has
more than $_____ billion in assets under management or
administration as of August 31, 1999.
7
<PAGE> 11
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for Fund
expenses assumed by the Investment Manager. The fee is calculated at the annual
rate of 0.85%. The Investment Manager pays the Sub-Adviser compensation equal to
40% of its compensation for services and facilities furnished to the Fund.
8
<PAGE> 12
Shareholder Information
[MONEY SIGN
GRAPHIC] PRICING FUND SHARES
The price of Fund shares (excluding sales charges), called
"net asset value," is based on the value of the Fund's
portfolio securities. While the assets of each Class are
invested in a single portfolio of securities, the net asset
value of each Class will differ because the Classes have
different ongoing distribution fees.
The net asset value per share of the Fund is determined once
daily at 4:00 p.m. Eastern time, on each day that the New York
Stock Exchange is open (or, on days when the New York Stock
Exchange closes prior to 4:00 p.m., at such earlier time).
Shares will not be priced on days that the New York Stock
Exchange is closed.
The value of the Fund's portfolio securities is based on the
securities' market price when available. When a market price
is not readily available, including circumstances under which
the Investment Manager and/or Sub-Adviser determine that a
security's market price is not accurate, a portfolio security
is valued at its fair value, as determined under procedures
established by the Fund's Board of Trustees. In these cases,
the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price. In
addition, if the Fund holds securities primarily listed on
foreign exchanges, the value of the Fund's portfolio
securities may change on days when you will not be able to
purchase or sell your shares.
An exception to the Fund's general policy of using market
prices concerns its short-term debt portfolio securities. Debt
securities with remaining maturities of sixty days or less at
the time of purchase are valued at amortized cost. However, if
the cost does not reflect the securities' market value, these
securities will be valued at their fair value.
[HANDSHAKE
GRAPHIC] HOW TO BUY SHARES
You may open a new account to buy Fund shares or buy
additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest
in the Fund. You may also purchase shares directly by calling
the Fund's transfer agent and requesting an application.
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter
Family of Funds and would like to contact a Financial
Advisor, call (800) THE-DEAN for the telephone number
of the Morgan Stanley Dean Witter office nearest you.
You may also access our office locator on our
Internet site at: www.deanwitter.com/funds
Because every investor has different immediate
financial needs and long-term investment goals, the
Fund offers investors four Classes of shares: Classes
A, B, C and D. Class D shares are only offered to a
limited group of investors. Each Class of shares
offers a distinct structure of sales charges,
distribution and service fees, and other features
that are designed to address a variety of needs. Your
Financial Advisor or other authorized financial
9
<PAGE> 13
representative can help you decide which Class may be
most appropriate for you. When purchasing Fund
shares, you must specify which Class of shares you
wish to purchase.
When you buy Fund shares, the shares are purchased at
the next share price calculated, less any applicable
front-end sales charge, after we receive your
purchase order. Your payment is due on the third
business day after you place your purchase order. We
reserve the right to reject any order for the
purchase of Fund shares.
EASYINVEST(SM)
A purchase plan that allows you to transfer money
automatically from your checking or savings account
or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan
Stanley Dean Witter Financial Advisor for further
information about this service.
<TABLE>
<CAPTION>
Minimum Investment Amounts
-----------------------------------------------------------------------
Minimum Investment
----------------------
Investment Options Initial Additional
-----------------------------------------------------------------------
<S> <C> <C>
Regular Accounts $1,000 $100
-----------------------------------------------------------------------
Individual Retirement
Accounts: Regular IRAs $1,000 $100
Education IRAs $500 $100
-----------------------------------------------------------------------
EasyInvest(SM) (Automatically from
your checking or
savings account or
Money Market Fund) $100* $100*
-----------------------------------------------------------------------
* Provided your schedule of investments totals $1,000 in twelve months.
</TABLE>
There is no minimum investment amount if you purchase Fund
shares through: (1) the Investment Manager's mutual fund asset
allocation plan, (2) a program, approved by the Fund's
distributor, in which you pay an asset-based fee for advisory,
administrative and/or brokerage services, or (3)
employer-sponsored employee benefit plan accounts.
Investment Options For Certain Institutional And Other
Investors/Class D Shares. To be eligible to purchase Class D
shares, you must qualify under one of the investor categories
specified in the "Share Class Arrangements" section of this
Prospectus.
Subsequent Investments Sent Directly To The Fund. In addition
to buying additional Fund shares for an existing account by
contacting your Morgan Stanley Dean Witter Financial Advisor,
you may send a check directly to the Fund. To buy additional
shares in this manner:
- Write a "letter of instruction" to the Fund specifying
the name(s) on the account, the account number, the
social security or tax identification number, the Class
of shares you wish to purchase, and the investment amount
(which would include any applicable front-end sales
charge). The letter must be signed by the account
owner(s).
10
<PAGE> 14
- Make out a check for the total amount payable to: Morgan
Stanley Dean Witter Equity Fund.
- Mail the letter and check to Morgan Stanley Dean Witter
Trust FSB at P.O. Box 1040, Jersey City, NJ 07303.
[ARROWS GRAPHIC] HOW TO EXCHANGE SHARES
Permissible Fund Exchanges. You may exchange shares of any
Class of the Fund for the same Class of any other continuously
offered Multi-Class Fund, or for shares of a No-Load Fund,
Money Market Fund, North American Government Income Trust or
Short-Term U.S. Treasury Trust, without the imposition of an
exchange fee. See the inside back cover of this Prospectus for
each Morgan Stanley Dean Witter Fund's designation as a
Multi-Class Fund, No-Load Fund or Money Market Fund. If a
Morgan Stanley Dean Witter Fund is not listed, consult the
inside back cover of that Fund's Prospectus for its
designation. For purposes of exchanges, shares of FSC Funds
(subject to a front-end sales charge) are treated as Class A
shares of a Multi-Class Fund.
Exchanges may be made after shares of the Fund acquired by
purchase have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or
dividend reinvestment. The current prospectus for each fund
describes its investment objective(s), policies and investment
minimum, and should be read before investment.
Exchange Procedures. You can process an exchange by contacting
your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative. Otherwise, you must
forward an exchange privilege authorization form to the Fund's
transfer agent -- Morgan Stanley Dean Witter Trust FSB -- and
then write the transfer agent or call (800) 869-NEWS to place
an exchange order. You can obtain an exchange privilege
authorization form by contacting your Financial Advisor or
other authorized financial representative or by calling (800)
869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share
certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a
Money Market Fund) is made on the basis of the next calculated
net asset values of the Funds involved after the exchange
instructions are accepted. When exchanging into a Money Market
Fund, the Fund's shares are sold at their next calculated net
asset value and the Money Market Fund's shares are purchased
at their net asset value on the following business day.
The Fund may terminate or revise the exchange privilege upon
required notice. Certain services normally available to
shareholders of Money Market Funds, including the check
writing privilege, are not available for Money Market Fund
shares you acquire in an exchange.
11
<PAGE> 15
Telephone Exchanges. For your protection when calling Morgan
Stanley Dean Witter Trust FSB, we will employ reasonable
procedures to confirm that exchange instructions communicated
over the telephone are genuine. These procedures may include
requiring various forms of personal identification such as
name, mailing address, social security or other tax
identification number. Telephone instructions also may be
recorded.
Telephone instructions will be accepted if received by the
Fund's transfer agent between 9:00 a.m. and 4:00 p.m. Eastern
time, on any day the New York Stock Exchange is open for
business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures
may be difficult to implement, although this has not been the
case with the Fund in the past.
Margin Accounts. If you have pledged your Fund shares in a
margin account, contact your Morgan Stanley Dean Witter
Financial Advisor or other authorized financial representative
regarding restrictions on the exchange of such shares.
Tax Considerations Of Exchanges. If you exchange shares of the
Fund for shares of another Morgan Stanley Dean Witter Fund
there are important tax considerations. For tax purposes, the
exchange out of the Fund is considered a sale of the Fund's
shares -- and the exchange into the other Fund is considered a
purchase. As a result, you may realize a capital gain or loss.
You should review the "Tax Consequences" section and consult
your own tax professional about the tax consequences of an
exchange.
Frequent Exchanges. A pattern of frequent exchanges may result
in the Fund limiting or prohibiting, at its discretion,
additional purchases and/or exchanges. The Fund will notify
you in advance of limiting your exchange privileges.
CDSC Calculations On Exchanges. See the "Share Class
Arrangements" section of this Prospectus for a discussion of
how applicable contingent deferred sales charges (CDSCs) are
calculated for shares of one Morgan Stanley Dean Witter Fund
that are exchanged for shares of another.
For further information regarding exchange privileges, you
should contact your Morgan Stanley Dean Witter Financial
Advisor or call (800) 869-NEWS.
12
<PAGE> 16
[HANDSHAKE
GRAPHIC] HOW TO SELL SHARES
You can sell some or all of your Fund shares at any time. If
you sell Class A, Class B or Class C shares, your net sale
proceeds are reduced by the amount of any applicable CDSC.
Your shares will be sold at the next price calculated after we
receive your order to sell as described below.
<TABLE>
<CAPTION>
Options Procedures
--------------------------------------------------------------
<S> <C>
Contact Your To sell your shares, simply call your Morgan
Financial Stanley Dean Witter or Financial Advisor or
Advisor other authorized financial representative.
--------------------------------------------
[PHONE Payment will be sent to the address to which
GRAPHIC] the account is registered or deposited in
your brokerage account.
--------------------------------------------------------------
By Letter You can also sell your shares by writing a
"letter of instruction" that includes:
[LETTER - your account number;
GRAPHIC] - the dollar amount or the number of
shares you wish to sell;
- the Class of shares you wish to sell;
and
- the signature of each owner as it
appears on the account.
--------------------------------------------
If you are requesting payment to anyone
other than the registered owner(s) or that
payment be sent to any address other than
the address of the registered owner(s) or
pre-designated bank account, you will need a
signature guarantee. You can obtain a
signature guarantee from an eligible
guarantor acceptable to Morgan Stanley Dean
Witter Trust FSB. (You should contact Morgan
Stanley Dean Witter Trust FSB at (800)
869-NEWS for a determination as to whether a
particular institution is an eligible
guarantor.) A notary public cannot provide a
signature guarantee. Additional
documentation may be required for shares
held by a corporation, partnership, trustee
or executor.
--------------------------------------------
Mail the letter to Morgan Stanley Dean
Witter Trust FSB at P.O. Box 983, Jersey
City, New Jersey 07303. If you hold share
certificates, you must return the
certificates, along with the letter and any
required additional documentation.
--------------------------------------------
A check will be mailed to the name(s) and
address in which the account is registered,
or otherwise according to your instructions.
- --------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan
Withdrawal Plan Stanley Dean Witter Family of Funds has a
[ARROW GRAPHIC] total market value of at least $10,000, you
may elect to withdraw amounts of $25 or
more, or in any whole percentage of a Fund's
balance (provided the amount is at least
$25), on a monthly, quarterly, semi-annual
or annual basis, from any Fund with a
balance of at least $1,000. Each time you
add a Fund to the plan, you must meet the
plan requirements.
--------------------------------------------
Amounts withdrawn are subject to any
applicable CDSC. A CDSC may be waived under
certain circumstances. See the Class B
waiver categories listed in the "Share Class
Arrangements" section of this Prospectus.
--------------------------------------------
To sign up for the systematic withdrawal
plan, contact your Morgan Stanley Dean
Witter Financial Advisor or call (800)
869-NEWS. You may terminate or suspend your
plan at any time. Please remember that
withdrawals from the plan are sales of
shares, not Fund "distributions," and
ultimately may exhaust your account balance.
The Fund may terminate or revise the plan at
any time.
--------------------------------------------------------------
</TABLE>
Payment for Sold Shares. After we receive your complete
instructions to sell as described above, a check will be
mailed to you within seven days, although we will attempt to
make payment within one business day. Payment may also be sent
to your brokerage account.
Payment may be postponed or the right to sell your shares
suspended under unusual circumstances. If you request to sell
shares that were recently purchased by check,
13
<PAGE> 17
payment of the sale proceeds may be delayed for the minimum
time needed to verify that the check has been honored (not
more than fifteen days from the time we receive the check).
Tax Considerations. Normally, your sale of Fund shares is
subject to federal and state income tax. You should review the
"Tax Consequences" section of this Prospectus and consult your
own tax professional about the tax consequences of a sale.
Reinstatement Privilege. If you sell Fund shares and have not
previously exercised the reinstatement privilege, you may,
within 35 days after the date of sale, invest any portion of
the proceeds in the same Class of Fund shares at their net
asset value and receive a pro rata credit for any CDSC paid in
connection with the sale.
Involuntary Sales. The Fund reserves the right, on sixty days'
notice, to sell the shares of any shareholder (other than
shares held in an IRA or 403(b) Custodial Account) whose
shares, due to sales by the shareholder, have a value below
$100, or in the case of an account opened through
EasyInvest(SM), if after 12 months the shareholder has
invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we
will notify you and allow you sixty days to make an additional
investment in an amount that will increase the value of your
account to at least the required amount before the sale is
processed. No CDSC will be imposed on any involuntary sale.
Margin Accounts. If you have pledged your Fund shares in a
margin account, contact your Morgan Stanley Dean Witter
Financial Advisor or other authorized financial representative
regarding restrictions on the sale of such shares.
[CHECKMARK
GRAPHIC] DISTRIBUTIONS
The Fund passes substantially all of its earnings from income
and capital gains along to its investors as "distributions."
The Fund earns income from stocks and interest from
fixed-income investments. These amounts are passed
along to Fund shareholders as "income dividend
distributions." The Fund realizes capital gains
whenever it sells securities for a higher price than
it paid for them. These amounts may be passed along
as "capital gain distributions."
TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another Morgan Stanley Dean Witter Fund
that you own. Contact your Morgan Stanley Dean Witter Financial Advisor for
further information about this service.
The Fund declares income dividends separately for
each Class. Distributions paid on Class A and Class D
shares will be higher than for Class B and Class C
because distribution fees that Class B and Class C
pay are higher. Normally, income dividends are
distributed annually. Capital gains, if any, are
usually distributed in December.
14
<PAGE> 18
The Fund, however, may retain and reinvest any long-term
capital gains. The Fund may at times make payments from
sources other than income or capital gains that represent a
return of a portion of your investment.
Distributions are reinvested automatically in additional
shares of the same Class and automatically credited to your
account, unless you request in writing that all distributions
be paid in cash. If you elect the cash option, the Fund will
mail a check to you no later than seven business days after
the distribution is declared. No interest will accrue on
uncashed checks. If you wish to change how your distributions
are paid, your request should be received by the Fund's
transfer agent, Morgan Stanley Dean Witter Trust FSB, at least
five business days prior to the record date of the
distributions.
[1040 GRAPHIC] TAX CONSEQUENCES
As with any investment, you should consider how your Fund
investment will be taxed. The tax information in this
Prospectus is provided as general information. You should
consult your own tax professional about the tax consequences
of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need to
be aware of the possible tax consequences when:
- The Fund makes distributions; and
- You sell Fund shares, including an exchange to another
Morgan Stanley Dean Witter Fund.
Taxes on Distributions. Your distributions are normally
subject to federal and state income tax when they are paid,
whether you take them in cash or reinvest them in Fund shares.
A distribution also may be subject to local income tax. Any
income dividend distributions and any short-term capital gain
distributions are taxable to you as ordinary income. Any
long-term capital gain distributions are taxable as long-term
capital gains, no matter how long you have owned shares in the
Fund.
Every January, you will be sent a statement (IRS Form
1099-DIV) showing the taxable distributions paid to you in the
previous year. The statement provides full information on your
dividends and capital gains for tax purposes.
Taxes on Sales. Your sale of Fund shares normally is subject
to federal and state income tax and may result in a taxable
gain or loss to you. A sale also may be subject to local
income tax. Your exchange of Fund shares for shares of another
Morgan Stanley Dean Witter Fund is treated for tax purposes
like a sale of your original shares and
15
<PAGE> 19
a purchase of your new shares. Thus, the exchange may, like a
sale, result in a taxable gain or loss to you and will give
you a new tax basis for your new shares.
When you open your Fund account, you should provide your
Social Security or tax identification number on your
investment application. By providing this information, you
will avoid being subject to a federal backup withholding tax
of 31% on taxable distributions and redemption proceeds. Any
withheld amount would be sent to the IRS as an advance tax
payment.
[ABCD GRAPHIC] SHARE CLASS ARRANGEMENTS
The Fund offers several Classes of shares having different
distribution arrangements designed to provide you with
different purchase options according to your investment needs.
Your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative can help you decide which
Class may be appropriate for you.
The general public is offered three Classes: Class A shares,
Class B shares and Class C shares, which differ principally in
terms of sales charges and ongoing expenses. A fourth Class,
Class D shares, is offered only to a limited category of
investors. Shares that you acquire through reinvested
distributions will not be subject to any front-end sales
charge or CDSC -- contingent deferred sales charge. Sales
personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class
provide for the distribution financing of shares of that
Class.
The chart below compares the sales charge and the maximum
annual 12b-1 fees applicable to each Class:
<TABLE>
<CAPTION>
Maximum
Class Sales Charge Annual 12b-1 Fee
----- ------------ ----------------
<S> <C> <C>
A Maximum 5.25% initial sales charge reduced for purchase of
$25,000 or more; shares sold without an initial sales charge are
generally subject to a 1.0% CDSC during first year. 0.25%
B Maximum 5.0% CDSC during the first year decreasing to 0%
after six years. 1.0%
C 1.0% CDSC during first year 1.0%
D None None
</TABLE>
CLASS A SHARES Class A shares are sold at net asset value plus
an initial sales charge of up to 5.25%. The initial sales
charge is reduced for purchases of $25,000 or more according
to the schedule below. Investments of $1 million or more are
not subject to an initial sales charge, but are generally
subject to a contingent deferred sales charge, or CDSC, of
1.0% on sales made within one year after the last day of the
month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B shares.
Class A shares are also subject to a distribution (12b-1) fee
of up to 0.25% of the average daily net assets of the Class.
16
<PAGE> 20
The offering price of Class A shares includes a sales charge
(expressed as a percentage of the offering price) on a single
transaction as shown in the following table:
FRONT-END SALES CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges - the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
<TABLE>
<CAPTION>
Front-End Sales Charge
-------------------------------------------------------
Percentage of Approximate Percentage
Amount of Single Transaction Public Offering Price of Amount Invested
---------------------------- --------------------- ----------------------
<S> <C> <C>
Less than $25,000 5.25% 5.54%
$25,000 but less than $50,000 4.75% 4.99%
$50,000 but less than $100,000 4.00% 4.17%
$100,000 but less than $250,000 3.00% 3.09%
$250,000 but less than $1 million 2.00% 2.04%
$1 million and over 0 0
</TABLE>
The reduced sales charge schedule is applicable to purchases
of Class A shares in a single transaction by:
- A single account (including an individual, trust or
fiduciary account).
- Family member accounts (limited to husband, wife and
children under the age of 21).
- Pension, profit sharing or other employee benefit plans
of companies and their affiliates.
- Tax-exempt organizations.
- Groups organized for a purpose other than to buy mutual
fund shares.
Combined Purchase Privilege. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares
of the Fund in a single transaction with purchases of Class A
shares of other Multi-Class Funds and shares of FSC Funds.
Right of Accumulation. You also may benefit from a reduction
of sales charges, if the cumulative net asset value of Class A
shares of the Fund purchased in a single transaction, together
with shares of other Funds you currently own which were
previously purchased at a price including a front-end sales
charge (including shares acquired through reinvestment of
distributions), amounts to $25,000 or more. Also, if you have
a cumulative net asset value of all your Class A and Class D
shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase
Class D shares of any Fund subject to the Fund's minimum
initial investment requirement.
You must notify your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative, (or
Morgan Stanley Dean Witter Trust FSB if you
17
<PAGE> 21
purchase directly through the Fund) at the time a purchase order is placed, that
the purchase qualifies for the reduced charge under the Right of Accumulation.
Similar notification must be made in writing when an order is placed by mail.
The reduced sales charge will not be granted if: (i) notification is not
furnished at the time of the order; or (ii) a review of the records of Dean
Witter Reynolds or other authorized dealer of Fund shares or the Fund's transfer
agent does not confirm your represented holdings.
LETTER OF INTENT. The schedule of reduced sales charges for larger purchases
also will be available to you if you enter into a written "letter of intent." A
letter of intent provides for the purchase of Class A shares of the Fund or
other Multi-Class Funds or shares of FSC Funds within a thirteen-month period.
The initial purchase under a letter of intent must be at least 5% of the stated
investment goal. To determine the applicable sales charge reduction, you may
also include: (1) the cost of shares of other Morgan Stanley Dean Witter Funds
which were previously purchased at a price including a front-end sales charge
during the 90-day period prior to the distributor receiving the letter of
intent, and (2) the cost of shares of other Funds you currently own acquired in
exchange for shares of Funds purchased during that period at a price including a
front-end sales charge. You can obtain a letter of intent by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve the stated
investment goal within the thirteen-month period, you are required to pay the
difference between the sales charges otherwise applicable and sales charges
actually paid, which may be deducted from your investment.
OTHER SALES CHARGE WAIVERS. In addition to investments of $1 million or more,
your purchase of Class A shares is not subject to a front-end sales charge (or a
CDSC upon sale) if your account qualifies under one of the following categories:
- - A trust for which Morgan Stanley Dean Witter Trust FSB provides discretionary
trustee services.
- - Persons participating in a fee-based investment program (subject to all of its
terms and conditions, including mandatory sale or transfer restrictions on
termination) approved by the Fund's distributor pursuant to which they pay an
asset based fee for investment advisory, administrative and/or brokerage
services.
- - Employer-sponsored employee benefit plans, whether or not qualified under the
Internal Revenue Code, for which Morgan Stanley Dean Witter Trust FSB serves
as trustee or Dean Witter Reynolds' Retirement Plan Services serves as
recordkeeper under a written Recordkeeping Services Agreement ("MSDW Eligible
Plans") which have at least 200 eligible employees.
- - A MSDW Eligible Plan whose Class B shares have converted to Class A shares,
regardless of the plan's asset size or number of eligible employees.
18
<PAGE> 22
- - A client of a Morgan Stanley Dean Witter Financial Advisor who joined us from
another investment firm within six months prior to the date of purchase of
Fund shares, and you used the proceeds from the sale of shares of a
proprietary mutual fund of that Financial Advisor's previous firm that imposed
either a front-end or deferred sales charge to purchase Class A shares,
provided that: (1) you sold the shares not more than 60 days prior to
purchase, and (2) the sale proceeds were maintained in the interim in cash or
a money market fund.
- - Current or retired Directors/Trustees of the Morgan Stanley Dean Witter Funds,
such persons' spouses and children under the age of 21, and trust accounts for
which any of such persons is a beneficiary.
- - Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries, such persons' spouses and children
under the age of 21, and trust accounts for which any of such persons is a
beneficiary.
CLASS B SHARES Class B shares are offered at net asset value with no initial
sales charge but are subject to a contingent deferred sales charge, or CDSC, as
set forth in the table below. For the purpose of calculating the CDSC, shares
are deemed to have been purchased on the last day of the month during which they
were purchased.
CONTINGENT DEFERRED
SALES CHARGE OR CDSC
A fee you pay when you sell shares of certain Morgan Stanley Dean Witter Funds
purchased without an initial sales charge. This fee declines the longer you hold
your shares as set forth in the table.
<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>
Each time you place an order to sell or exchange shares, shares with no CDSC
will be sold or exchanged first, then shares with the lowest CDSC will be sold
or exchanged next. For any shares subject to a CDSC, the CDSC will be assessed
on an amount equal to the lesser of the current market value or the cost of the
shares being sold.
CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the case of:
- - Sales of shares held at the time you die or become disabled (within the
definition in Section 72(m)(7) of the Internal Revenue Code which relates to
the ability to engage in gainful employment), if the shares are: (i)
registered either in your name
19
<PAGE> 23
(not a trust) or in the names of you and your spouse as joint tenants with
right of survivorship; or (ii) held in a qualified corporate or self-employed
retirement plan, IRA or 403(b) Custodial Account, provided in either case that
the sale is requested within one year of your death or initial determination
of disability.
- - Sales in connection with the following retirement plan "distributions": (i)
lump-sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or, in the case of a "key employee" of a
"top heavy" plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age 59 1/2; or
(iii) a tax-free return of an excess IRA contribution (a "distribution" does
not include a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee).
- - Sales of shares held for you as a participant in a MSDW Eligible Plan.
- - Sales of shares in connection with the Systematic Withdrawal Plan of up to 12%
annually of the value of each Fund from which plan sales are made. The
percentage is determined on the date you establish the Systematic Withdrawal
Plan and based on the next calculated share price. You may have this CDSC
waiver applied in amounts up to 1% per month, 3% per quarter, 6% semi-annually
or 12% annually. Shares with no CDSC will be sold first, followed by those
with the lowest CDSC. As such, the waiver benefit will be reduced by the
amount of your shares that are not subject to a CDSC. If you suspend your
participation in the plan, you may later resume plan payments without
requiring a new determination of the account value for the 12% CDSC waiver.
All waivers will be granted only following the Fund's distributor receiving
confirmation of your entitlement. If you believe you are eligible for a CDSC
waiver, please contact your Financial Advisor or call (800) 869-NEWS.
DISTRIBUTION FEE. Class B shares are subject to an annual 12b-1 fee of 1.0% of
the net assets of Class B.
CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales charge. The
ten year period runs from the last day of the month in which the shares were
purchased, or in the case of Class B shares acquired through an exchange, from
the last day of the month in which the original Class B shares were purchased;
the shares will convert to Class A shares based on their relative net asset
values in the month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically reinvested
distributions will convert to Class A shares on the same basis. (Class B shares
acquired in exchange for shares of another Morgan Stanley Dean Witter Fund
originally purchased before May 1, 1997, however, will convert to Class A shares
in May 2007.)
20
<PAGE> 24
In the case of Class B shares held in a MSDW Eligible Plan, the plan is treated
as a single investor and all Class B shares will convert to Class A shares on
the conversion date of the Class B shares of a Morgan Stanley Dean Witter Fund
purchased by that plan.
Currently, the Class B share conversion is not a taxable event; the conversion
feature may be cancelled if it is deemed a taxable event in the future by the
Internal Revenue Service.
If you exchange your Class B shares for shares of a Money Market Fund, a No-Load
Fund, North American Government Income Trust or Short-Term U.S. Treasury Trust,
the holding period for conversion is frozen as of the last day of the month of
the exchange and resumes on the last day of the month you exchange back into
Class B shares.
EXCHANGING SHARES SUBJECT TO A CDSC. There are special considerations when you
exchange Fund shares that are subject to a CDSC. When determining the length of
time you held the shares and the corresponding CDSC rate, any period (starting
at the end of the month) during which you held shares of a fund that does not
charge a CDSC will not be counted. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a fund that does
not charge a CDSC.
For example, if you held Class B shares of the Fund for one year, exchanged to
Class B of another Morgan Stanley Dean Witter Multi-Class Fund for another year,
then sold your shares, a CDSC rate of 4% would be imposed on the shares based on
a two year holding period - one year for each Fund. However, if you had
exchanged the shares of the Fund for a Money Market Fund (which does not charge
a CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC rate of
5% would be imposed on the shares based on a one year holding period. The one
year in the Money Market Fund would not be counted. Nevertheless, if shares
subject to a CDSC are exchanged for a fund that does not charge a CDSC, you will
receive a credit when you sell the shares equal to the distribution (12b-1) fees
you paid on those shares while in that Fund up to the amount of any applicable
CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley Dean Witter
Fund subject to a higher CDSC rate will be subject to the higher rate, even if
the shares are re-exchanged into a Fund with a lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no initial sales
charge but are subject to a CDSC of 1.0% on sales made within one year after the
last day of the month of purchase. The CDSC will be assessed in the same manner
and with the same CDSC waivers as with Class B shares.
21
<PAGE> 25
DISTRIBUTION FEE. Class C shares are subject to an annual distribution (12b-1)
fee of up to 1.0% of the average daily net assets of that Class. The Class C
shares' distribution fee may cause that Class to have higher expenses and pay
lower dividends than Class A or Class D shares. Unlike Class B shares, Class C
shares have no conversion feature and, accordingly, an investor that purchases
Class C shares may be subject to distribution (12b-1) fees applicable to Class C
shares for an indefinite period.
CLASS D Class D shares are offered without any sales charge on purchases or
sales and without any distribution (12b-1) fee. Class D shares are offered only
to investors meeting an initial investment minimum of $5 million ($25 million
for MSDW Eligible Plans) and the following categories of investors:
- - Investors participating in the Investment Manager's mutual fund asset
allocation program (subject to all of its terms and conditions, including
mandatory sale or transfer restrictions on termination) pursuant to which they
pay an asset-based fee.
- - Persons participating in a fee-based investment program (subject to all of its
terms and conditions, including mandatory sale or transfer restrictions on
termination) approved by the Fund's distributor pursuant to which they pay an
asset based fee for investment advisory, administrative and/or brokerage
services.
- - Employee benefit plans maintained by Morgan Stanley Dean Witter & Co. or any
of its subsidiaries for the benefit of certain employees of Morgan Stanley
Dean Witter & Co. and its subsidiaries.
- - Certain unit investment trusts sponsored by Dean Witter Reynolds.
- - Certain other open-end investment companies whose shares are distributed by
the Fund's distributor.
- - Investors who were shareholders of the Dean Witter Retirement Series on
September 11, 1998 for additional purchases for their former Dean Witter
Retirement Series accounts.
MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million ($25 million for
MSDW Eligible Plans) initial investment to qualify to purchase Class D shares
you may combine: (1) purchases in a single transaction of Class D shares of the
Fund and other Morgan Stanley Dean Witter Multi-Class Funds and/or (2) previous
purchases of Class A and Class D shares of Multi-Class Funds and shares of FSC
Funds you currently own, along with shares of Morgan Stanley Dean Witter Funds
you currently own that you acquired in exchange for those shares.
22
<PAGE> 26
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash payment
representing an income dividend or capital gain and you reinvest that amount in
the applicable Class of shares by returning the check within 30 days of the
payment date, the purchased shares would not be subject to an initial sales
charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12 B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company Act of
1940 with respect to the distribution of Class A, Class B and Class C shares.
The Plan allows the Fund to pay distribution fees for the sale and distribution
of these shares. It also allows the Fund to pay for services to shareholders of
Class A, Class B and Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase the cost
of your investment in these Classes and may cost you more than paying other
types of sales charges.
23
<PAGE> 27
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the period July 29, 1998 through May 31, 1999. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD JULY 29, 1998*
THROUGH MAY 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA++:
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
===========================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.07)
Net realized and unrealized gain 1.76
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.69
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.69
===========================================================================================================================
TOTAL RETURN+(1) 16.90%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- ---------------------------------------------------------------------------------------------------------------------------
Expenses 2.13%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.68)%
- ---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $273,345
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(1) 80%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
24
<PAGE> 28
<TABLE>
<CAPTION>
CLASS A
- ------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD JULY 29, 1998*
THROUGH MAY 31, 1999
- ------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA++:
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
==================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.01
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.75
- ------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.76
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.76
==================================================================================================================
TOTAL RETURN+(1) 17.60%
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- ------------------------------------------------------------------------------------------------------------------
Expenses 1.38%
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.07%
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $7,933
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(1) 80%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
25
<PAGE> 29
<TABLE>
<CAPTION>
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD JULY 29, 1998*
THROUGH MAY 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA++:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
===========================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.04)
Net realized and unrealized gain 1.74
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.70
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.70
===========================================================================================================================
TOTAL RETURN+(1) 17.10%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- ---------------------------------------------------------------------------------------------------------------------------
Expenses 1.91%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.46)%
- ---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $15,744
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(1) 80%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
26
<PAGE> 30
<TABLE>
<CAPTION>
CLASS D
- -------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD JULY 29, 1998*
THROUGH MAY 31, 1999
- -------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA++:
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
===================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.03
Net realized and unrealized gain 1.76
- -------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.79
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.79
===================================================================================================================
TOTAL RETURN+(1) 17.90%
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- -------------------------------------------------------------------------------------------------------------------
Expenses 1.13%
- -------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.32%
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $69
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(1) 80%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
27
<PAGE> 31
Notes
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
28
<PAGE> 32
Morgan Stanley Dean Witter
Family of Funds
The Morgan Stanley Dean Witter Family of Funds offers investors a wide range of
investment choices. Come on in and meet the family!
Growth Funds GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Equity Fund
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Special Value Fund
Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
Small Cap Growth Fund
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas" Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
Growth & Income Funds Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Return Trust
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
Income Funds GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund(NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust(FSC)
Limited Term Municipal Trust(NL)
Multi-State Municipal Series Trust(FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
Money Market Funds TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund(MM)
U.S. Government Money Market Trust(MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust(MM)
New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
There may be Funds created after this Prospectus was published. Please consult
the inside front cover of a new Fund's prospectus for its designations, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
Short-Term U.S. Treasury Trust, is a Multi-Class Fund. A Multi-Class Fund is a
mutual fund offering multiple Classes of shares. The other types of Funds are:
NL -- No-Load (Mutual) Fund; MM -- Money Market Fund; FSC -- A mutual fund sold
with a front-end sales charge and a distribution (12b-1) fee.
<PAGE> 33
PROSPECTUS SEPTEMBER , 1999
Morgan Stanley Dean Witter
EQUITY FUND
[GRAPHIC]
A MUTUAL FUND THAT
SEEKS TOTAL RETURN
Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this Prospectus). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
www.deanwitter.com/funds
Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
DC 20549-6009.
TICKER SYMBOLS:
Class A: EQUAX Class C: EQUCX
---------------- ----------------
Class B: EQUBX Class D: EQUDX
---------------- ----------------
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-49585)
<PAGE> 34
<TABLE>
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY
DEAN WITTER
SEPTEMBER , 1999 EQUITY FUND
</TABLE>
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated September , 1999) for the Morgan Stanley Dean Witter Equity
Fund may be obtained without charge from the Fund at its address or telephone
number listed below or from Dean Witter Reynolds at any of its branch offices.
Morgan Stanley Dean Witter
Equity Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE> 35
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
I. Fund History................................................ 4
II. Description of the Fund and Its Investments and Risks....... 4
A. Classification..................................... 4
B. Investment Strategies and Risks.................... 4
C. Fund Policies/Investment Restrictions.............. 12
III. Management of the Fund...................................... 14
A. Board of Trustees.................................. 14
B. Management Information............................. 14
C. Compensation....................................... 19
IV. Control Persons and Principal Holders of Securities......... 21
V. Investment Management and Other Services.................... 21
A. Investment Manager and Sub-Adviser................. 21
B. Principal Underwriter.............................. 22
C. Services Provided by the Investment Manager and the
Sub-Adviser and Fund Expenses Paid by Third
Parties............................................ 22
D. Dealer Reallowances................................ 23
E. Rule 12b-1 Plan.................................... 23
F. Other Service Providers............................ 27
VI. Brokerage Allocation and Other Practices.................... 27
A. Brokerage Transactions............................. 27
B. Commissions........................................ 28
C. Brokerage Selection................................ 28
D. Directed Brokerage................................. 29
E. Regular Broker-Dealers............................. 29
VII. Capital Stock and Other Securities.......................... 30
VIII. Purchase, Redemption and Pricing of Shares.................. 30
A. Purchase/Redemption of Shares...................... 30
B. Offering Price..................................... 31
IX. Taxation of the Fund and Shareholders....................... 32
X. Underwriters................................................ 34
XI. Calculation of Performance Data............................. 34
XII. Financial Statements........................................ 35
</TABLE>
2
<PAGE> 36
GLOSSARY OF SELECTED DEFINED TERMS
The terms defined in this glossary are frequently used in this Statement of
Additional Information (other terms used occasionally are defined in the text of
the document).
"Custodian"--The Bank of New York.
"Dean Witter Reynolds"--Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"Distributor"--Morgan Stanley Dean Witter Distributors Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"Financial Advisors"--Morgan Stanley Dean Witter authorized financial
services representatives.
"Fund"--Morgan Stanley Dean Witter Equity Fund, a registered open-end
investment company.
"Investment Manager"--Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.
"Independent Trustees"--Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.
"Morgan Stanley & Co."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"Morgan Stanley Dean Witter Funds"--Registered investment companies (i) for
which the Investment Manager serves as the investment advisor; and (ii) that
hold themselves out to investors as related companies for investment and
investor services.
"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.
"MSDW Services Company"--Morgan Stanley Dean Witter Services Company Inc.,
a wholly-owned fund services subsidiary of the Investment Manager.
"Sub-Adviser"--Miller Anderson & Sherrerd, LLP, an indirect subsidiary of
MSDW.
"Transfer Agent"--Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.
"Trustees"--The Board of Trustees of the Fund.
3
<PAGE> 37
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on April 6, 1998.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end management investment company whose investment
objective is total return.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information" and "Additional Risk Information."
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") as a hedge
against fluctuations in future foreign exchange rates. The Fund may conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large, commercial and investment banks) and their
customers. Forward contracts only will be entered into with United States banks
and their foreign branches, insurance companies and other dealers whose assets
total $1 billion or more, 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.
The Sub-Adviser also may from time to time utilize forward contracts to
hedge a foreign security held in the portfolio or a security which pays out
principal tied to an exchange rate between the U.S. dollar and a foreign
currency, against a decline in value of the applicable foreign currency. They
also may be used to lock in the current exchange rate of the currency in which
those securities anticipated to be purchased are denominated. At times, the Fund
may enter into "cross-currency" hedging transactions involving currencies other
than those in which securities are held or proposed to be purchased are
denominated.
The Fund will not enter into forward currency contracts or maintain a net
exposure to these 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.
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.
The Fund may be limited in its ability to enter into hedging transactions
involving forward contracts by the Internal Revenue Code requirements relating
to qualification as a regulated investment company.
Forward currency contracts may limit gains on portfolio securities that
could otherwise be realized had they not been utilized and could result in
losses. The contracts also may increase the Fund's volatility and may involve a
significant amount of risk relative to the investment of cash.
4
<PAGE> 38
OPTIONS AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed and OTC options on eligible portfolio securities and stock indexes.
Listed options are issued or guaranteed by the exchange on which they are traded
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) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then have
the obligation to sell to the OCC (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 put 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.
Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities and on the U.S. dollar and foreign currencies in which
they are denominated, without limit.
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 (or currencies) alone.
Moreover, the premium received will offset a portion of the potential loss
incurred by the Fund if the securities (or currencies) underlying the option
decline in value.
The Fund may be required, at any time during the option period, to deliver
the underlying security (or currency) against payment of the exercise price on
any calls it has written. 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.
A call option is "covered" if the Fund owns the underlying security subject
to the option or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional consideration (in cash,
Treasury bills or other liquid portfolio securities) held in a segregated
account on the Fund's books) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund holds a call on
the same security as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written or (ii)
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, Treasury bills or other liquid portfolio
securities in a segregated account on the Fund's books.
Options written by the Fund normally have expiration dates of from 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. The Fund may purchase listed and OTC call
and put options in amounts equaling up to 5% of its total assets. The purchase
of a call option would enable the Fund, in return for the premium paid to lock
in a purchase price for a security or currency during the term of the option.
The purchase of a put option would enable the Fund, in return for a premium
paid, to lock in a price at which it may sell a security or currency during the
term of the option.
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.
OTC Options. 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. The Fund will engage in OTC
option
5
<PAGE> 39
transactions only with member banks of the Federal Reserve Bank System or
primary dealers in U.S. Government securities or with affiliates of such banks
or dealers.
Stock Index Options. The Fund may invest in options on stock indexes.
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 writer of the
option is obligated, in return for the premium received, to make delivery of
this amount.
Risks of Options Transactions. The successful use of options depends on
the ability of the Sub-Adviser to forecast correctly interest rates, currency
exchange rates and/or market movements. 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. 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 covered put
writer also retains the risk of loss should the market value of the underlying
security decline below the exercise price of the option less the premium
received on the sale of the option. In both cases, the writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Prior to exercise or expiration, an option position can only be
terminated by entering into a closing purchase or sale transaction. 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.
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.
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. In the case of OTC
options, if the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, due to insolvency or otherwise, the Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which 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.
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.
There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time.
6
<PAGE> 40
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. 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.
Futures Contracts. The Fund may purchase and sell interest rate, currency
and index futures contracts that are traded on U.S. and foreign commodity
exchanges on such underlying securities as U.S. Treasury bonds, notes, bills and
GNMA Certificates and/or any foreign government fixed-income security, on
various currencies and on such indexes of U.S. and foreign securities as may
exist or come into existence.
A futures contract purchaser 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. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Fund, during the term of the contract, to lock in a price
at which it may purchase a security or currency and protect against a rise in
prices pending purchase of portfolio securities. The sale of a futures contract
enables the Fund to lock in a price at which it may sell a security or currency
and protect against declines in the value of portfolio securities.
Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of 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.
Margin. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges on
which futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make
7
<PAGE> 41
subsequent deposits of cash or U.S. Government securities, called "variation
margin," which are reflective of price fluctuations in the futures contract.
Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid), and the writer
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an option
on a futures contract are included in initial margin deposits.
Limitations on Futures Contracts and Options on Futures. The 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 net
assets which may be subject to a hedge position.
Risks of Transactions in Futures Contracts and Related Options. 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). Also, prices of futures contracts may not move in tandem with the
changes in prevailing interest rates, market movements and/or currency exchange
rates against which the Fund seeks a hedge. A correlation may also be distorted
(a) temporarily, by short-term traders' seeking to profit from the difference
between a contract or security price objective and their cost of borrowed funds;
(b) by investors in futures contracts electing to close out their contracts
through offsetting transactions rather than meet margin deposit requirements;
(c) by investors in futures contracts opting to make or take delivery of
underlying securities rather than engage in closing transactions, thereby
reducing liquidity of the futures market; and (d) temporarily, by speculators
who view the deposit requirements in the futures markets as less onerous than
margin requirements in the cash market. Due to the possibility of price
distortion in the futures market and because of the possible imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of interest rate, currency
exchange rate and/or market movement trends by the Investment Manager may still
not result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts 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.
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
8
<PAGE> 42
would continue to be required to make daily cash payments of variation margin on
open futures positions. In these situations, if the Fund has insufficient cash,
it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. 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.
MONEY MARKET SECURITIES. The Fund may invest in various money market
securities for cash management purposes or when assuming a temporary defensive
position, which among others may include commercial paper, bank acceptances,
bank obligations, corporate debt securities, certificates of deposit, U.S.
Government securities, obligations of savings institutions and repurchase
agreements. Such securities are limited to:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 15% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate; and
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the 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 AAA by S&P or Aaa by Moody's; and
Repurchase Agreements. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the
9
<PAGE> 43
Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although this
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager and/or Sub-Adviser subject to procedures established by the Trustees. In
addition, as described above, the value of the collateral underlying the
repurchase agreement will be at least equal to the repurchase price, including
any accrued interest earned on the repurchase agreement. In the event of a
default or bankruptcy by a selling financial institution, the Fund will seek to
liquidate such collateral. However, the exercising of the Fund's right to
liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss. It
is the current policy of the Fund not to invest in repurchase agreements that do
not mature within seven days if any such investment, together with any other
illiquid assets held by the Fund, amounts to more than 15% of its net assets.
INVESTMENT COMPANIES. Any Fund investment in an investment company is
subject to the underlying risk of that investment company's portfolio
securities. For example, if the investment company held common stocks, the Fund
also would be exposed to the risk of investing in common stocks. In addition,
the Fund would bear its share of the investment company's fees and expenses.
SPDRS. The Fund may invest in securities referred to as SPDRs (known as
"spiders") that are designed to track the S&P 500 Index. SPDRs represent an
ownership interest in the SPDR Trust, which holds a portfolio of common stocks
that closely tracks the price performance and dividend yield of the S&P 500
Index. SPDRs trade on the American Stock Exchange like shares of common stock.
SPDRs have the same risks as direct investments in common stocks. The
market value of SPDRs is expected to rise and fall as the S&P 500 Index rises
and falls. If the Fund invests in SPDRs, it would, in addition to its own
expenses, indirectly bear its ratable share of the SPDRs' expenses.
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.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to brokers, dealers and other financial institutions, provided that the loans
are callable at any time by the Fund, and are at all
10
<PAGE> 44
times secured by cash or cash equivalents, which are maintained in a segregated
account pursuant to applicable regulations and that are equal to at least 100%
of the market value, determined daily, of the loaned securities. The advantage
of these loans is that the Fund continues to receive the income on the loaned
securities while at the same time earning interest on the cash amounts deposited
as collateral, which will be invested in short-term obligations. The Fund will
not lend more than 25% of the value of its total assets.
As with any extensions of credit, there are risks of delay in recovery and,
in some cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Fund's management to be creditworthy and
when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of the rights
if the matters involved would have a material effect on the Fund's investment in
the loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time the Fund may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment basis.
When these transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the settlement
date, if it is deemed advisable. The securities so purchased or sold are subject
to market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date.
At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase securities
on a when-issued, delayed delivery or forward commitment basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Sub-Adviser determines that issuance of the security is probable. At that
time, the Fund will record the transaction and, in determining its net asset
value, will reflect the value of the security daily. At that time, the Fund will
also establish a segregated account on the Fund's books in which it will
maintain cash or cash equivalents, U.S. Government securities or other liquid
portfolio securities equal in value to recognized commitments for such
securities.
An increase in the percentage of the Fund's total assets committed to the
purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Fund may also sell securities on a "when,
as and if issued" basis provided that the issuance of the security will result
automatically from the exchange or conversion of a security owned by the Fund at
the time of sale.
PRIVATE PLACEMENTS. The Fund may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for resale
11
<PAGE> 45
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 these
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering the securities for resale and the risk of
substantial delays in effecting the registration.
Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Sub-Adviser, pursuant to procedures
adopted by the Trustees, will make a determination as to the liquidity of each
restricted security purchased by the Fund. If a restricted security is
determined to be "liquid," the security will not be included within the category
"illiquid securities," which may not exceed 15% of the Fund's net assets.
However, investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent the Fund, at a particular point in
time, may be unable to find qualified institutional buyers interested in
purchasing such securities.
WARRANTS AND SUBSCRIPTION RIGHTS. The Fund may invest in warrants and
subscription rights. 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. The Fund may acquire warrants attached to other
securities without reference to the foregoing limitations.
A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the common
stock. A subscription right is freely transferable.
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 to their own
computer systems to prepare for the year 2000 and expect that their systems will
be adapted before that date, but there can be no assurance that they will be
successful, or that interaction with other non-complying computer systems will
not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
12
<PAGE> 46
The Fund will:
1. Seek total return.
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.
4. 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.
5. 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.
6. 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).
7. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. For the purpose of this restriction,
collateral arrangements the writing of options by the Fund and collateral
arrangements with respect to initial or variation margin for futures are
not deemed to be pledges of assets.
8. Issue senior securities as defined in the Investment Company Act
except insofar as the Fund may be deemed to have issued a senior security
by reason of (a) entering into any repurchase agreement; (b) borrowing
money; or (c) lending portfolio securities.
9. 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.)
10. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or sell interest rate, currency and stock and bond
index futures contracts or options thereon.
11. 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.
12. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts is not considered the purchase of a security on margin.
13. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act in disposing of
a portfolio security.
13
<PAGE> 47
14. Invest for the purpose of exercising control or management of any
other issuer.
In addition, as a non-fundamental policy, the Fund will not invest in other
investment companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or
12(d)(1)(J) of the Investment Company Act.
III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided to
the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "management Trustees") are
affiliated with the Investment Manager. All of the Trustees also serve as
Trustees of "Discover Brokerage Index Series," a mutual fund for which the
Investment Manager is the investment advisor.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the 90 Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Michael Bozic (58) Vice Chairman of Kmart Corporation (since December,
Trustee 1998); Director or Trustee of the Morgan Stanley
c/o Kmart Corporation Dean Witter Funds and Discover Brokerage Index
3100 West Big Beaver Road Series; formerly Chairman and Chief Executive
Troy, Michigan Officer of Levitz Furniture Corporation (November,
1995-November, 1998) and President and Chief
Executive Officer of Hills Department Stores (May,
1991-July, 1995); formerly variously Chairman,
Chief Executive Officer, President and Chief
Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.;
Director of Eaglemark Financial Services, Inc. and
Weirton Steel Corporation.
</TABLE>
14
<PAGE> 48
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (66) Chairman, Director or Trustee and Chief Executive
Chairman of the Board, Chief Officer of the Morgan Stanley Dean Witter Funds and
Executive Officer and Trustee Discover Brokerage Index Series; formerly Chairman,
Two World Trade Center Chief Executive Officer and Director of the
New York, New York Investment Manager, the Distributor and MSDW
Services Company; Executive Vice President and
Director of Dean Witter Reynolds; Chairman and
Director of the Transfer Agent; formerly Director
and/or officer of various MSDW subsidiaries (until
June, 1998).
Edwin J. Garn (66) Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds and Discover Brokerage Index Series;
c/o Huntsman Corporation formerly United States Senator (R-Utah)(1974-1992)
500 Huntsman Way and Chairman, Senate Banking Committee (1980-1986);
Salt Lake City, Utah formerly Mayor of Salt Lake City, Utah (1971-1974);
formerly Astronaut, Space Shuttle Discovery (April
12-19, 1985); Vice Chairman, Huntsman Corporation
(chemical company); Director of Franklin Covey
(time management systems), BMW Bank of North
America, Inc. (industrial loan corporation), United
Space Alliance (joint venture between Lockheed
Martin and the Boeing Company) and Nuskin Asia
Pacific (multilevel marketing); member of the board
of various civic and charitable organizations.
Wayne E. Hedien (65) Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds and Discover Brokerage Index
Mayer, Brown & Platt Series; Director of The PMI Group, Inc. (private
Counsel to the Independent Trustees mortgage insurance); Trustee and Vice Chairman of
1675 Broadway The Field Museum of Natural History; formerly
New York, New York associated with the Allstate Companies (1966-1994),
most recently as Chairman of The Allstate
Corporation (March,1993-December, 1994) and
Chairman and Chief Executive Officer of its
wholly-owned subsidiary, Allstate Insurance Company
(July, 1989-December, 1994); director of various
other business and charitable organizations.
</TABLE>
15
<PAGE> 49
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (50) 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; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds and Discover Brokerage
Index Series; Director of Greenwich Capital
Markets, Inc. (broker-dealer) and NVR, Inc. (home
construction); Chairman and Trustee of the
Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System (1986-1990)
and Assistant Secretary of the U.S. Treasury.
Michael E. Nugent (63) General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds and Discover Brokerage
New York, New York Index Series; formerly Vice President, Bankers
Trust Company and BT Capital Corporation (1984-
1988); director of various business organizations.
Philip J. Purcell* (55) Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds and
1585 Broadway Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds and Discover Brokerage
Index Series; Director and/or officer of various
MSDW subsidiaries.
John L. Schroeder (68) Retired; Chairman of the Derivatives Committee and
Trustee Director or Trustee of the Morgan Stanley Dean
Mayer, Brown & Platt Witter Funds and Discover Brokerage Index Series;
Counsel to the Independent Trustees Director of Citizens Utilities Company
1675 Broadway (telecommunications, gas, electric and water
New York, New York utilities company); formerly Executive Vice
President and Chief Investment Officer of the Home
Insurance Company (August, 1991 September, 1995).
</TABLE>
16
<PAGE> 50
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Mitchell M. Merin (45) President and Chief Operating Officer of Asset
President Management of MSDW (since December, 1998);
Two World Trade Center President and Director (since April, 1997) and
New York, New York Chief Executive Officer (since June, 1998) of the
Investment Manager and MSDW Services Company;
Chairman, Chief Executive Officer and Director of
the Distributor (since June, 1998); Chairman and
Chief Executive Officer (since June, 1998) and
Director (since January, 1998) of the Transfer
Agent; Director of various MSDW subsidiaries;
President of the Morgan Stanley Dean Witter Funds
and Discover Brokerage Index Series (since May,
1999); previously Chief Strategic Officer of the
Investment Manager and MSDW Services Company and
Executive Vice President of the Distributor (April,
1997-June, 1998), Vice President of the Morgan
Stanley Dean Witter Funds and Discover Brokerage
Index Series (May, 1997-April, 1999), and Executive
Vice President of Dean Witter, Discover & Co.
Barry Fink (44) Senior Vice President (since March, 1997) and
Vice President, Secretary and General Counsel (since February,
Secretary and General Counsel 1997) and Director (since July, 1998) of the
Two World Trade Center Investment Manager and MSDW Services Company;
New York, New York Senior Vice President (since March, 1997) and
Assistant Secretary and Assistant General Counsel
(since February, 1997) of the Distributor;
Assistant Secretary of Dean Witter Reynolds (since
August, 1996); Vice President, Secretary and
General Counsel of the Morgan Stanley Dean Witter
Funds (since February, 1997); Vice President,
Secretary and General Counsel of Discover Brokerage
Index Series; previously First Vice President
(June, 1993-February, 1997), Vice President and
Assistant Secretary and Assistant General Counsel
of the Investment Manager and MSDW Services Company
and Assistant Secretary of the Morgan Stanley Dean
Witter Funds.
Thomas F. Caloia (53) First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan Stanley
New York, New York Dean Witter Funds and Discover Brokerage Index
Series
</TABLE>
- ------------------------------
* A Trustee who is an "interested person" of the Fund, as defined in the
Investment Company Act.
17
<PAGE> 51
In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer Agent,
are Vice Presidents of the Fund.
In addition, Frank Bruttomesso, Marilyn K. Cranney, Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, First Vice Presidents and Assistant General
Counsels of the Investment Manager and MSDW Services Company, and Todd Lebo,
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.
INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Morgan
Stanley Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; these are people whose advice and counsel are in demand by others and
for whom there is often competition. To accept a position on the Funds' Boards,
such individuals may reject other attractive assignments because the Funds make
substantial demands on their time. All of the Independent Trustees serve as
members of the Audit Committee. In addition, three of the Trustees, including
two Independent Trustees, serve as members of the Derivatives Committee and the
Insurance Committee.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill any
Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1 plan
of distribution. Most of the Morgan Stanley Dean Witter Funds have a Rule 12b-1
plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
The Board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.
Finally, the Board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL
MORGAN STANLEY DEAN WITTER FUNDS. The Independent Trustees and the Funds'
management believe that having the same Independent Trustees for each of the
Morgan Stanley Dean Witter Funds avoids the duplication of effort that would
arise from having different groups of individuals serving as Independent
Trustees for each of the Funds or even of sub-groups of Funds. They believe that
having the same individuals serve as Independent Trustees of all the Funds tends
to increase their knowledge and expertise regarding matters which affect the
Fund complex generally and enhances their ability to negotiate on behalf of each
Fund with the Fund's service providers. This arrangement also precludes the
possibility of separate groups of Independent Trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to obtain,
at modest cost to each separate Fund, the services of Independent Trustees, of
the caliber, experience
18
<PAGE> 52
and business acumen of the individuals who serve as Independent Trustees of the
Morgan Stanley Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund for their services as Trustee. Dr. Johnson 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 Morgan Stanley
Dean Witter Funds during the calendar year ended December 31, 1998, 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............................................... $ 350
Edwin J. Garn............................................... 350
Wayne E. Hedien............................................. 400
Dr. Manuel H. Johnson....................................... 350
Michael E. Nugent........................................... 350
John L. Schroeder........................................... 350
</TABLE>
19
<PAGE> 53
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 90 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1998. No compensation was paid to the Fund's Independent Trustees by
Discover Brokerage Index Series for the calendar year ended December 31, 1998.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
TOTAL CASH COMPENSATION
FOR SERVICES TO 90
MORGAN STANLEY
NAME OF INDEPENDENT TRUSTEE DEAN WITTER FUNDS
--------------------------- -----------------------
<S> <C>
Michael Bozic........................................... $120,150
Edwin J. Garn........................................... 132,450
Wayne E. Hedien......................................... 132,350
Dr. Manuel H. Johnson................................... 155,681
Michael E. Nugent....................................... 159,731
John L. Schroeder....................................... 160,731
</TABLE>
As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, not including the Fund, have adopted a
retirement program under which an Independent Trustee who retires after serving
for at least five years (or such lesser period as may be determined by the
Board) as an Independent Director or Trustee of any Morgan Stanley Dean Witter
Fund that has adopted the retirement program (each such Fund referred to as an
"Adopting Fund" and each such Trustee referred to as an "Eligible Trustee") is
entitled to retirement payments upon reaching the eligible retirement age
(normally, after attaining age 72). Annual payments are based upon length of
service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages may
be changed by the Board(1). "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are accrued as expenses on the books of
the Adopting Funds. Such funds not secured or funded by the Adopting Funds.
- ------------------------------
(1) An Eligible Trustee may elect alternative payments of his or her retirement
benefits based upon the combined life expectancy of the Eligible Trustee and
his or her spouse on the date of such Eligible Trustee's retirement. In
addition, the Eligible Trustee may elect that the surviving spouse's
periodic payment of benefits will be equal to a lower percentage of the
periodic amount when both spouses were alive. The amount estimated to be
payable under this method, through the remainder of the later of the lives
of the Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit.
20
<PAGE> 54
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the calendar year ended December 31, 1998, and the
estimated retirement benefits for the Independent Trustees, to commence upon
their retirement, from the 55 Morgan Stanley Dean Witter Funds as of the
calendar year ended December 31, 1998.
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
RETIREMENT ESTIMATED
BENEFITS ANNUAL
ESTIMATED ACCRUED AS BENEFITS UPON
CREDITED YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
--------------------------- -------------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Michael Bozic................................ 10 60.44% $22,377 $52,250
Edwin J. Garn................................ 10 60.44 35,225 52,250
Wayne E. Hedien.............................. 9 51.37 41,979 44,413
Dr. Manuel H. Johnson........................ 10 60.44 14,047 52,250
Michael E. Nugent............................ 10 60.44 25,336 52,250
John L. Schroeder............................ 8 50.37 45,117 44,343
</TABLE>
- ---------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
[5% ownership list]
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1% of the Fund's shares of beneficial
interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------
A. INVESTMENT MANAGER AND SUB-ADVISER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New York,
New York 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
The Sub-Adviser is Miller Anderson & Sherrerd, LLP, a Pennsylvania limited
liability partnership founded in 1969, and is wholly owned by indirect
subsidiaries of Morgan Stanley Dean Witter & Co. The Sub-Adviser is located at
One Tower Bridge, West Conshohocken, Pennsylvania 19428.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
provide administrative services and manage the business affairs of the Fund. The
Fund pays the Investment Manager monthly compensation calculated daily by
applying the annual rate of 0.85% to the Fund's average daily net assets. The
management fee is allocated among the Classes pro rata based on the net assets
of the Fund attributable to each Class. For the period July 29, 1998 through May
31, 1999, the Investment Manager accrued total compensation under the Management
Agreement in the amount of $1,692,914.
Pursuant to a sub-advisory agreement (the "Sub-Advisory Agreement") between
the Investment Manager and the 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
21
<PAGE> 55
the Fund's portfolio. As compensation for its service, the Investment Manager
pays the Sub-Adviser compensation equal to 40% of its monthly compensation. For
the period July 29, 1998 through May 31, 1999, the Sub-Adviser accrued total
compensation under the Sub-Advisory Agreement in the amount of $677,165.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. These expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to Financial Advisors.
The Distributor also pays certain expenses in connection with the distribution
of the Fund's shares, including the costs of preparing, printing and
distributing advertising or promotional materials, and the costs of printing and
distributing prospectuses and supplements thereto used in connection with the
offering and sale of the Fund's shares. The Fund bears the costs of initial
typesetting, printing and distribution of prospectuses and supplements thereto
to shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws and pays filing fees in
accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND THE SUB-ADVISER AND FUND
EXPENSES PAID BY THIRD PARTIES
The Investment Manager manages the Fund's business affairs and supervises
the investment of the Fund's assets. The Sub-Adviser manages the investment of
the Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Sub-Adviser obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management Agreement, the Investment Manager
maintains certain of the Fund's books and records and furnishes, at its own
expense, the office space, facilities, equipment, clerical help, bookkeeping and
certain legal services as the Fund may reasonably require in the conduct of its
business, including the preparation of prospectuses, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). In addition, the Investment Manager pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone service, heat,
light, power and other utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement, the Sub-Adviser under the Sub-Advisory Agreement or the
Distributor, will be paid by the Fund. These expenses will be allocated among
the four Classes of shares pro rata based on the net assets of the
22
<PAGE> 56
Fund attributable to each Class, except as described below. Such expenses
include, but are not limited to: expenses of the Plan of Distribution pursuant
to Rule 12b-1; charges and expenses of any registrar, custodian, stock transfer
and dividend disbursing agent; brokerage commissions; taxes; engraving and
printing share certificates; registration costs of the Fund and its shares under
federal and state securities laws; the cost and expense of printing, including
typesetting, and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any outside
service used for pricing of the Fund's shares; fees and expenses of legal
counsel, including counsel to the Trustees who are not interested persons of the
Fund or of the Investment Manager or the Sub-Adviser (not including compensation
or expenses of attorneys who are employees of the Investment Manager or the
Sub-Adviser); fees and expenses of the Fund's independent accountants;
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Fund which inure to its benefit; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's operation.
The 12b-1 fees relating to a particular Class will be allocated directly to that
Class. In addition, other expenses associated with a particular Class (except
advisory or custodial fees) may be allocated directly to that Class, provided
that such expenses are reasonably identified as specifically attributable to
that Class and the direct allocation to that Class is approved by the Trustees.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.
E. RULE 12B-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act (the "Plan") pursuant to which each Class, other than
Class D, pays the Distributor compensation accrued daily and payable monthly at
the following annual rates: 0.25%, 1.0% and 1.0% of the average daily net assets
of Class A, Class B and Class C, respectively.
The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the period July 29, 1998
through
23
<PAGE> 57
May 31, 1999 in approximate amounts as provided in the table below (the
Distributor did not retain any of these amounts).
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 29, 1998
THROUGH
MAY 31, 1999
-----------------------------
<S> <C> <C>
Class A..................................................... FSCs:(1) $ 49,580
CDSCs: $ 1,059
Class B..................................................... CDSCs: $531,731
Class C..................................................... CDSCs: $ 19,126
</TABLE>
- ---------------
(1) FSCs apply to Class A only.
The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. For the period July 29, 1998 through May 31,
1999 Class A, Class B and Class C shares of the Fund accrued payments under the
Plan amounting to $14,950, $1,820,482 and $86,747, respectively, which amounts
are equal to 0.25%, 1.00% and 0.78% of the average daily net assets of Class A,
Class B and Class C, respectively, for the fiscal period.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.
With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value of
the respective accounts for which they are the Financial Advisors or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored employee benefit
plans, whether or not qualified under the Internal Revenue Code, for which the
Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement ("MSDW Eligible Plans"), the Investment Manager compensates Financial
Advisors by paying them, from its own funds, a gross sales credit of 1.0% of the
amount sold.
With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.
24
<PAGE> 58
With respect to Class D shares other than shares held by participants in
the Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds's Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year and
a chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Investment Manager also compensates Dean Witter
Reynolds's Financial Advisors by paying them, from its own funds, an annual
residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund asset
allocation program).
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds's
Fund-associated distribution-related expenses, including sales compensation, and
overhead and other branch office distribution-related expenses including (a) the
expenses of operating Dean Witter Reynolds's branch offices in connection with
the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund sales.
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on behalf
of the Fund and, in the case of Class B shares, opportunity costs, such as the
gross sales credit and an assumed interest charge thereon ("carrying charge").
In the Distributor's reporting of the distribution expenses to the Fund, in the
case of Class B shares, such assumed interest (computed at the "broker's call
rate") has been calculated on the gross credit as it is reduced by amounts
received by the Distributor under the Plan and any contingent deferred sales
charges received by the Distributor upon redemption of shares of the Fund. No
other interest charge is included as a distribution expense in the Distributor's
calculation of its distribution costs for this purpose. The broker's call rate
is the interest rate charged to securities brokers on loans secured by
exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 1.0%, in the case of Class C, of the average net assets of the respective
Class during the month. No interest or other financing charges, if any, incurred
on any distribution expenses on behalf of Class A and Class C will be
reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to Financial Advisors and other authorized financial
representatives, such amounts shall be determined at the beginning of each
calendar quarter by the Trustees, including, a majority of the Independent
Trustees. Expenses representing the service fee (for Class A) or a gross sales
credit or a residual to Financial Advisors and other authorized financial
representatives (for Class C) may be reimbursed without prior determination. In
the event that the Distributor proposes that monies shall be reimbursed for
other than such expenses, then in making quarterly determinations of the amounts
that may be reimbursed by the Fund, the Distributor will provide and the
Trustees will review a quarterly budget of projected distribution expenses to be
incurred on behalf of the Fund, together with a report explaining the purposes
and anticipated benefits of incurring such expenses. The Trustees will determine
which particular expenses, and the portions thereof, that may be borne by the
Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's Class A and
Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the period July 29, 1998 through May 31, 1999 to the Distributor.
The Distributor and Dean Witter Reynolds estimate that they have spent, pursuant
to the Plan, $14,505,777 on behalf of Class B since the inception of the Plan.
It is estimated that this amount was spent in approximately the following
25
<PAGE> 59
ways: (i) 12.69% ($1,840,969)--advertising and promotional expenses; (ii) 0.64%
($92,912)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 86.67% ($12,571,896)--other expenses, including the
gross sales credit and the carrying charge, of which 3.39% ($426,109) represents
carrying charges, 40.00% ($5,028,356) represents commission credits to Dean
Witter Reynolds branch offices and other selected broker-dealers for payments of
commissions to Financial Advisors and other authorized financial
representatives, and 56.61% ($7,117,431) represents overhead and other branch
office distribution-related expenses. The amounts accrued by Class A and a
portion of the amounts accrued by Class C under the Plan during the fiscal year
ended May 31, 1999 were service fees. The remainder of the amounts accrued by
Class C were for expenses which relate to compensation of sales personnel and
associated overhead expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $12,174,612 as of December 31, 1998 (the end of
the calendar year), which was equal to 4.45% of the net assets of Class B on
such date. Because there is no requirement under the Plan that the Distributor
be reimbursed for all distribution expenses with respect to Class B shares or
any requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan and the proceeds of CDSCs paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees or
CDSCs, may or may not be recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales commission credited to Morgan Stanley Dean Witter Financial
Advisors and other authorized financial representatives at the time of sale may
be reimbursed in the subsequent calendar year. The Distributor has advised the
Fund that unreimbursed expenses representing a gross sales commission credited
to Morgan Stanley Dean Witter Financial Advisors and other authorized financial
representatives at the time of sale totaled $91,876 in the case of Class C at
December 31, 1998 (the end of the calendar year), which amount was equal to
0.67% of the net assets of Class C on such date, and that there were no such
expenses that may be reimbursed in the subsequent year in the case of Class A on
such date. No interest or other financing charges will be incurred on any Class
A or Class C distribution expenses incurred by the Distributor under the Plan or
on any unreimbursed expenses due to the Distributor pursuant to the Plan.
No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Investment Manager, Dean Witter Reynolds, MSDW Services Company
or certain of their employees may be deemed to have such an interest as a result
of benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Fund.
On an annual basis the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtaining
26
<PAGE> 60
and would be likely to obtain under the Plan, including that: (a) the Plan is
essential in order to give Fund investors a choice of alternatives for payment
of distribution and service charges and to enable the Fund to continue to grow
and avoid a pattern of net redemptions which, in turn, are essential for
effective investment management; and (b) without the compensation to individual
brokers and the reimbursement of distribution and account maintenance expenses
of Dean Witter Reynolds's branch offices made possible by the 12b-1 fees, Dean
Witter Reynolds could not establish and maintain an effective system for
distribution, servicing of Fund shareholders and maintenance of shareholder
accounts; and (3) what services had been provided and were continuing to be
provided under the Plan to the Fund and its shareholders. Based upon their
review, the Trustees, including each of the Independent Trustees, determined
that continuation of the Plan would be in the best interest of the Fund and
would have a reasonable likelihood of continuing to benefit the Fund and its
shareholders. In the Trustees' quarterly review of the Plan, they will consider
its continued appropriateness and the level of compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.
F. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, New Jersey 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
PricewaterhouseCoopers LLP serves as the independent accountants of the
Fund. The independent accountants are responsible for auditing the annual
financial statements of the Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, the
Sub-Adviser and of the Distributor. As Transfer Agent and Dividend Disbursing
Agent, the Transfer Agent's responsibilities include maintaining shareholder
accounts, disbursing cash dividends and reinvesting dividends, processing
account registration changes, handling purchase and redemption transactions,
mailing prospectuses and reports, mailing and tabulating proxies, processing
share certificate transactions, and maintaining shareholder records and lists.
For these services, the Transfer Agent receives a per shareholder account fee
from the Fund and is reimbursed for its out-of-pocket expenses in connection
with such services.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
and the Sub-Adviser are responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. Purchases and sales of
27
<PAGE> 61
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. The Fund also expects that securities will be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession or
discount. On occasion, the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or discounts
are paid.
For the period July 29, 1998 through May 31, 1999, the Fund paid a total of
$585,960 in brokerage commissions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government and
government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will be
effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers.
During the period July 29, 1998 through May 31, 1999, the Fund did not
effect any principal transactions with Dean Witter Reynolds.
Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds, Morgan
Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time. This standard would allow the
affiliated broker or dealer to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees, including the Independent
Trustees, have adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to an affiliated broker or
dealer are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by any amount of the brokerage
commissions it may pay to an affiliated broker or dealer.
During the period July 29, 1998 through May 31, 1999, the Fund paid a total
of $0 in brokerage commissions to Dean Witter Reynolds. During the period July
29, 1998 through May 31, 1999, the brokerage commissions paid to Dean Witter
Reynolds represented approximately 0% of the total brokerage commissions paid by
the Fund during the year and were paid on account of transactions having an
aggregate dollar value equal to approximately 0% of the aggregate dollar value
of all portfolio transactions of the Fund during the year for which commissions
were paid.
During the period July 29, 1998 through May 31, 1999, the brokerage
commissions paid to Morgan Stanley & Co. represented approximately 0% of the
total brokerage commissions paid by the Fund for this period and were paid on
account of transactions having an aggregate dollar value equal to approximately
0% of the aggregate dollar value of all portfolio transactions of the Fund
during the period for which commissions were paid.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that
28
<PAGE> 62
a requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Investment Manager
and/or 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/or the Sub-Adviser rely upon
its experience and knowledge regarding commissions generally charged by various
brokers and on its judgment in evaluating the brokerage and research services
received from the broker effecting the transaction. These determinations are
necessarily subjective and imprecise, as in most cases an exact dollar value for
those services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed commissions
on such transactions are generally higher than negotiated commissions on
domestic transactions. There is also generally less government supervision and
regulation of foreign securities exchanges and brokers than in the United
States.
In seeking to implement the Fund's policies, the Investment Manager and/or
the Sub-Adviser effect transactions with those brokers and dealers who the
Investment Manager and/or 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 the prices and executions are obtainable
from more than one broker or dealer, it may give consideration to placing
portfolio transactions with those brokers and dealers who also furnish research
and other services to the Fund or the Investment Manager or the Sub-Adviser. The
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. The information
and services received by the Investment Manager and the Sub-Adviser from brokers
and dealers may be of benefit to them in the management of accounts of some of
their other clients and may not in all cases benefit the Fund directly.
The Investment Manager and the Sub-Adviser currently serve as investment
manager to a number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is the practice of
the Investment Manager 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 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 client funds involved and the number of shares available from the
public offering.
D. DIRECTED BROKERAGE
During the period July 29, 1998 through May 31, 1999, the Fund paid $0 in
brokerage commissions in connection with transactions in the aggregate amount of
$0 to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the period July 29, 1998 through May 31, 1999, the Fund did not
purchase securities issued by brokers or dealers that were among the ten brokers
or the ten dealers that executed transactions for or with the Fund in the
largest dollar amounts during the year. At May 31, 1999, the Fund did not own
any securities issued by any of these issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of
29
<PAGE> 63
beneficial interest of the Fund are of $0.01 par value and are equal as to
earnings, assets and voting privileges except that each Class will have
exclusive voting privileges with respect to matters relating to distribution
expenses borne solely by such Class or any other matter in which the interests
of one Class differ from the interests of any other Class. In addition, Class B
shareholders will have the right to vote on any proposed material increase in
Class A's expenses, if such proposal is submitted separately to Class A
shareholders. Also, Class A, Class B and Class C bear expenses related to the
distribution of their respective shares.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
Prospectus.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances the Trustees may be removed by action of the
Trustees. The shareholders also have the right under certain circumstances to
remove the Trustees in accordance with the provisions of Section 16(c) of the
Investment Company Act. The voting rights of shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
The Trustees themselves have the power to alter the number and the terms of
office of the Trustees (as provided for in the Declaration of Trust), and they
may at any time lengthen or shorten their own terms or make their terms of
unlimited duration and appoint their own successors, provided that always at
least a majority of the Trustees has been elected by the shareholders of the
Fund. Under certain circumstances the Trustees may be removed by action of the
Trustees. The shareholders also have the right under certain circumstances to
remove the Trustees in accordance with the provisions of Section 16(c) of the
Investment Company Act of 1940. 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.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The
30
<PAGE> 64
Fund shall not be liable for any default or negligence of the Transfer Agent,
the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
Morgan Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transactions pursuant to the exchange
privilege.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Fund shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to a 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.
B. OFFERING PRICE
The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Investment Management and Other Services--E. Rule 12b-1 Plan."
The price of Fund shares, called "net asset value," is based on the value
of the Fund's portfolio securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Fund's securities and
other assets attributable to that Class, less the liabilities attributable to
that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange, prior to the
time when assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where a security is traded on more than
one exchange, the security is valued on the exchange designated as the primary
market pursuant to procedures adopted by the Trustees); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including circumstances under which it is determined by the
Investment Manager and/or the 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.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events which may affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the New York Stock Exchange and will therefore not be reflected in the
31
<PAGE> 65
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.
Listed options on debt securities are valued at the latest sale price on
the exchange on which they are listed unless no sales of such options have taken
place that day, in which case, they will be valued at the mean between their
closing bid and asked prices. Unlisted options on debt securities are valued at
the mean between their latest bid and asked price. Futures are valued at the
latest sale price on the commodities exchange on which they trade unless the
Board of Trustees determines that such price does not reflect their fair value,
in which case they will be valued at their fair market value as determined by
the Board of 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 Board of Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the Fund
are not generally a consideration for shareholders such as tax exempt entities
and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding specific
questions as to federal, state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.
Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more than
one year. Gains or losses on the sale of securities with a tax holding period of
one year or less will be short-term gains or losses.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.
Under certain tax rules, the Fund may be required to accrue a portion of
any discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year. To
the extent that the Fund invests in such securities, it would be required to pay
out such accrued discount as an income distribution in each year in order to
avoid taxation at the Fund level. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its
32
<PAGE> 66
shareholders may receive a larger capital gain distribution, if any, than they
would in the absence of such transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have
to pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income or
short-term capital gains, are taxable to the shareholder as ordinary income
regardless of whether the shareholder receives such payments in additional
shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. The Taxpayer Relief Act of 1997 reduced the
maximum tax on long-term capital gains applicable to individuals from 28% to
20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Subject to certain exceptions, a corporate shareholder may be eligible for
a 70% dividends received deduction to the extent that the Fund earns and
distributes qualifying dividends from its investments. Distributions of net
capital gains by the Fund will not be eligible for the dividends received
deduction.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.
After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the amount of any dividends eligible for the federal
dividends received deduction for corporations.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Any loss realized by shareholders upon a redemption of shares within
six months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains with
respect to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.
33
<PAGE> 67
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plans."
XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time, the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period from the date of
commencement of operations, if shorter than any of the foregoing.
For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, 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 distribution are reinvested.
The formula for computing aggregate total return involves a percentage obtained
by dividing the ending value (without reduction for any sale charge) by the
initial $1,000 investment and subtracting 1 from the result. Based on the
foregoing calculation, the total returns of Class A, Class B, Class C and Class
D for the period July 29, 1998 (commencement of operations) through May 31, 1999
was 17.60%, 16.90%, 17.10% and 17.90%, respectively.
The Fund may also advertise the growth of hypothetical investment of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date (expressed as a decimal and without
taking into account the effect of any applicable CDSC) and multiplying by
$9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 in each Class of shares of the Fund by adding 1 to the
Fund's aggregate total return to date (expressed as a decimal and without taking
into account the effect of any applicable CDSC) and multiplying by $9,475,
$48,000 and $97,000 in the case of Class A (investments of $10,000, $50,000 and
$100,000 adjusted for the initial sales charge) or by $10,000, $50,000 and
$100,000 in the case of each of Class B, Class C and Class D, as the case may
be. Investments of $10,000, $50,000 and $100,000 in each Class at inception of
the Class would have declined to the following amounts at May 31, 1999:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ----------------------------
CLASS DATE: $10,000 $50,000 $100,000
----- --------- ------- ------- --------
<S> <C> <C> <C> <C>
Class A............................................ 7/29/98 $11,143 $56,448 $114,072
Class B............................................ 7/29/98 11,690 58,450 116,900
Class C............................................ 7/29/98 11,710 58,550 117,100
Class D............................................ 7/29/98 11,790 58,950 117,900
</TABLE>
34
<PAGE> 68
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the period July 29, 1998
through May 31, 1999 are included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, and on the authority of
that firm as experts in auditing and accounting.
* * * * *
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from the
SEC.
35
<PAGE> 69
MORGAN STANLEY DEAN WITTER EQUITY FUND
PORTFOLIO OF INVESTMENTS May 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (95.7%)
Accident & Health Insurance (1.0%)
53,100 UNUM Corp. .................. $ 2,857,444
------------
Airlines (0.4%)
20,400 AMR Corp.*................... 1,327,275
------------
Alcoholic Beverages (0.7%)
28,500 Anheuser-Busch Companies,
Inc......................... 2,082,281
------------
Auto Parts: O.E.M. (0.9%)
31,400 Dana Corp. .................. 1,621,025
56,404 Delphi Automotive Systems
Corp.*...................... 1,106,922
------------
2,727,947
------------
Beverages - Non-Alcoholic (1.2%)
36,600 Coca Cola Co. ............... 2,500,237
31,400 PepsiCo, Inc. ............... 1,124,512
------------
3,624,749
------------
Broadcasting (1.5%)
31,900 Clear Channel Communications,
Inc.*....................... 2,107,394
88,800 Infinity Broadcasting Corp.
(Series A)*................. 2,269,950
------------
4,377,344
------------
Building Materials (1.7%)
127,500 Owens Corning................ 5,020,312
------------
Building Materials/DIY Chains (0.5%)
27,700 Lowe's Companies, Inc. ...... 1,438,669
------------
Building Products (1.0%)
71,100 York International Corp. .... 2,999,531
------------
Cable Television (0.9%)
36,400 MediaOne Group Inc.*......... 2,689,050
------------
Cellular Telephone (1.3%)
29,000 AirTouch Communications,
Inc.*....................... 2,914,500
18,350 Sprint Corp. (PCS Group)*.... 825,750
------------
3,740,250
------------
Computer Communications (1.8%)
49,550 Cisco Systems, Inc.*......... 5,397,853
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Computer Hardware (2.6%)
47,300 Compaq Computer Corp. ....... $ 1,120,419
25,600 Dell Computer Corp.*......... 880,000
17,600 Hewlett-Packard Co. ......... 1,659,900
34,000 International Business
Machines Corp. ............. 3,954,625
------------
7,614,944
------------
Computer/Video Chains (1.3%)
48,300 Tandy Corp. ................. 3,984,750
------------
Computer Software (4.3%)
159,400 Microsoft Corp.*............. 12,861,587
------------
Construction/Agricultural Equipment/ Trucks
(2.3%)
85,200 Case Corp. .................. 4,004,400
55,800 Cummins Engine Co., Inc. .... 2,824,875
------------
6,829,275
------------
Discount Chains (2.9%)
44,500 Consolidated Stores Corp.*... 1,529,687
28,400 Dayton Hudson Corp. ......... 1,789,200
53,650 Dollar General Corp. ........ 1,425,078
90,600 Wal-Mart Stores, Inc. ....... 3,861,825
------------
8,605,790
------------
Diversified Financial Services (0.8%)
35,350 Citigroup Inc. .............. 2,341,937
------------
Drugstore Chains (0.9%)
60,900 CVS Corp. ................... 2,801,400
------------
Electric Utilities (1.5%)
37,700 Carolina Power & Light
Co. ........................ 1,649,375
47,600 Energy East Corp. ........... 1,320,900
33,200 PECO Energy Co. ............. 1,624,725
------------
4,595,000
------------
Electronic Data Processing (0.7%)
57,000 Unisys Corp.*................ 2,162,437
------------
Environmental Services (1.8%)
54,700 Allied Waste Industries,
Inc.* 1,018,787
81,400 Waste Management, Inc. ...... 4,304,025
------------
5,322,812
------------
Finance Companies (1.2%)
80,400 Household International,
Inc. ....................... 3,487,350
------------
Fluid Controls (0.6%)
43,400 Parker-Hannifin Corp. ....... 1,896,037
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE> 70
MORGAN STANLEY DEAN WITTER EQUITY FUND
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Food Chains (1.2%)
27,100 Kroger Co.*.................. $ 1,587,044
39,500 Safeway Inc.*................ 1,836,750
------------
3,423,794
------------
Generic Drugs (0.4%)
44,600 Mylan Laboratories, Inc. .... 1,131,725
------------
Hospital/Nursing Management (0.3%)
75,200 Health Management Associates,
Inc. (Class A)*............. 977,600
------------
Insurance Brokers/Services (0.7%)
48,300 Aon Corp. ................... 2,076,900
------------
Integrated Oil Companies (3.4%)
21,700 Atlantic Richfield Co. ...... 1,816,019
12,000 Chevron Corp. ............... 1,112,250
104,700 Royal Dutch Petroleum Co.
(ADR) (Netherlands)......... 5,922,094
17,600 Texaco, Inc. ................ 1,152,800
------------
10,003,163
------------
Internet Services (2.2%)
30,300 America Online, Inc.*........ 3,617,062
12,800 At Home Corp. (Series A)*.... 1,621,600
9,500 Excite, Inc.*................ 1,262,312
------------
6,500,974
------------
Major Banks (5.2%)
74,400 Bank of America Corp. ....... 4,812,750
60,100 Bank One Corp. .............. 3,399,406
45,100 BankBoston Corp. ............ 2,136,612
43,300 KeyCorp...................... 1,504,675
24,200 PNC Bank Corp. .............. 1,385,450
54,500 Wells Fargo & Co. ........... 2,180,000
------------
15,418,893
------------
Major Chemicals (1.3%)
68,700 Rohm & Haas Co. ............. 2,756,587
52,800 Solutia, Inc. ............... 1,184,700
------------
3,941,287
------------
Major Pharmaceuticals (5.9%)
40,600 Abbott Laboratories.......... 1,834,612
44,000 Baxter International,
Inc. ....................... 2,840,750
44,700 Bristol-Myers Squibb Co. .... 3,067,537
22,900 Lilly (Eli) & Co. ........... 1,635,919
61,000 Merck & Co., Inc. ........... 4,117,500
17,700 Pfizer, Inc. ................ 1,893,900
33,300 Warner-Lambert Co. .......... 2,064,600
------------
17,454,818
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Major U.S. Telecommunications (7.8%)
41,500 Ameritech Corp. ............. $ 2,731,219
80,259 AT&T Corp. .................. 4,454,374
112,502 MCI WorldCom, Inc.*.......... 9,710,329
47,700 SBC Communications, Inc. .... 2,438,663
33,700 Sprint Corp. (FON Group)..... 3,799,675
------------
23,134,260
------------
Managed Health Care (1.2%)
37,900 Aetna Inc. .................. 3,441,794
------------
Media Conglomerates (2.7%)
54,548 AT&T Corp. - Liberty Media
Group (Class A)*............ 3,624,033
72,400 Fox Entertainment Group
(Class A)*.................. 1,846,200
37,800 Time Warner, Inc. ........... 2,572,763
------------
8,042,996
------------
Medical/Nursing Services (0.5%)
56,600 Lincare Holdings, Inc.*...... 1,386,700
------------
Military/Gov't/Technical (0.2%)
39,500 Loral Space & Communications
Ltd. (Bermuda)*............. 656,688
------------
Motor Vehicles (3.0%)
59,900 Ford Motor Co. .............. 3,418,044
80,700 General Motors Corp. ........ 5,568,300
------------
8,986,344
------------
Multi-Line Insurance (1.1%)
86,900 Allstate Corp. .............. 3,166,419
------------
Multi-Sector Companies (0.1%)
14,500 Tenneco, Inc. ............... 338,031
------------
Oil Refining/Marketing (1.6%)
52,300 Tosco Corp. ................. 1,336,919
57,100 Total S.A. (ADR) (France).... 3,472,394
------------
4,809,313
------------
Oil/Gas Transmission (1.4%)
106,000 Coastal Corp. ............... 4,087,625
------------
Oilfield Services/Equipment (0.8%)
36,700 BJ Services Co.*............. 1,011,544
30,900 Halliburton Co. ............. 1,278,488
------------
2,290,032
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE> 71
MORGAN STANLEY DEAN WITTER EQUITY FUND
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Package Goods/Cosmetics (1.4%)
52,300 Gillette Co. ................ $ 2,667,300
17,300 Procter & Gamble Co. ........ 1,615,388
------------
4,282,688
------------
Packaged Foods (0.7%)
26,100 General Mills, Inc. ......... 2,097,788
------------
Property - Casualty Insurers (2.0%)
55,800 Everest Reinsurance Holdings,
Inc. ....................... 1,834,425
105,400 Travelers Property Casualty
Corp. (Class A)............. 4,163,300
------------
5,997,725
------------
Railroads (0.5%)
50,400 Burlington Northern Santa Fe
Corp. ...................... 1,562,400
------------
Rental/Leasing Companies (0.9%)
58,900 Ryder System, Inc. .......... 1,413,600
43,400 United Rentals, Inc. ........ 1,302,000
------------
2,715,600
------------
Retail - Specialty (0.5%)
4,100 Best Buy Co., Inc.*.......... 186,550
60,100 Office Depot, Inc.*.......... 1,254,588
------------
1,441,138
------------
Semiconductors (1.3%)
69,200 Intel Corp. ................. 3,758,425
------------
Specialty Chemicals (2.7%)
52,800 Air Products & Chemicals,
Inc......................... 2,164,800
148,200 Engelhard Corp. ............. 3,001,050
163,400 Grace (W. R.) & Co.*......... 2,910,563
------------
8,076,413
------------
Specialty Insurers (4.1%)
69,800 Ace, Ltd. (Bermuda).......... 2,128,900
52,800 Ambac Financial Group,
Inc. ....................... 3,078,900
60,100 MBIA, Inc. .................. 4,105,581
48,200 XL Capital Ltd. (Class A).... 2,931,163
------------
12,244,544
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Telecommunications Equipment (5.7%)
34,800 ADC Telecommunications,
Inc.*....................... $ 1,696,500
48,100 General Instrument Corp.*.... 1,860,869
45,200 Motorola, Inc. .............. 3,743,125
26,000 Nortel Networks Corp. ....... 1,950,000
43,800 QUALCOMM Inc.*............... 4,256,813
56,600 Tellabs, Inc.*............... 3,311,100
------------
16,818,407
------------
Tobacco (1.1%)
101,700 RJR Nabisco Holdings
Corp. ...................... 3,146,344
------------
TOTAL COMMON STOCKS
(Identified Cost
$240,898,764)................ 284,196,852
------------
PREFERRED STOCK (0.8%)
Media Conglomerates
81,500 News Corporation Ltd. (The)
(ADR) (Australia)
(Identified Cost
$2,480,656)................. 2,480,656
------------
PRINCIPAL
AMOUNT IN
THOUSANDS
- --------
SHORT-TERM INVESTMENT (3.8%)
REPURCHASE AGREEMENT
$ 11,382 The Bank of New York 4.50%
due 06/01/99 (dated
05/28/99; proceeds
$11,388,081) (a)
(Identified Cost
$11,382,389) 11,382,389
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $254,761,809)
(b).............................. 100.3% 298,059,897
LIABILITIES IN EXCESS
OF OTHER ASSETS.................. (0.3) (969,714)
------ ------------
NET ASSETS....................... 100.0% $297,090,183
======= ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $9,052,686 U.S. Treasury Bond
8.75% due 05/15/17 valued at $11,611,176.
(b) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$49,170,398 and the aggregate gross unrealized
depreciation is $5,872,310, resulting in net
unrealized appreciation of $43,298,088.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE> 72
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $254,761,809)............................. $298,059,897
Receivable for:
Investments sold........................................ 1,765,473
Shares of beneficial interest sold...................... 856,858
Dividends............................................... 294,828
Deferred offering costs..................................... 17,458
Prepaid expenses and other assets........................... 82,320
------------
TOTAL ASSETS............................................ 301,076,834
------------
LIABILITIES:
Payable for:
Investments purchased................................... 3,328,726
Plan of distribution fee................................ 247,154
Investment management fee............................... 214,019
Shares of beneficial interest repurchased............... 61,105
Offering costs.............................................. 14,820
Accrued expenses............................................ 120,827
------------
TOTAL LIABILITIES....................................... 3,986,651
------------
NET ASSETS.............................................. $297,090,183
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $252,460,556
Net unrealized appreciation................................. 43,298,088
Undistributed net realized gain............................. 1,331,539
------------
NET ASSETS.............................................. $297,090,183
============
CLASS A SHARES:
Net Assets.................................................. $7,932,667
Shares Outstanding (unlimited authorized, $.01 par value)... 674,526
NET ASSET VALUE PER SHARE............................... $11.76
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $12.41
============
CLASS B SHARES:
Net Assets.................................................. $273,344,542
Shares Outstanding (unlimited authorized, $.01 par value)... 23,389,925
NET ASSET VALUE PER SHARE............................... $11.69
============
CLASS C SHARES:
Net Assets.................................................. $15,744,308
Shares Outstanding (unlimited authorized, $.01 par value)... 1,345,094
NET ASSET VALUE PER SHARE............................... $11.70
============
CLASS D SHARES:
Net Assets.................................................. $68,666
Shares Outstanding (unlimited authorized, $.01 par value)... 5,826
NET ASSET VALUE PER SHARE............................... $11.79
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE> 73
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the period July 29, 1998* through May 31, 1999
NET INVESTMENT LOSS:
INCOME
Dividends (net of $25,641 foreign withholding tax).......... $ 2,339,522
Interest.................................................... 542,741
-----------
TOTAL INCOME............................................ 2,882,263
-----------
EXPENSES
Plan of distribution fee (Class A shares)................... 14,950
Plan of distribution fee (Class B shares)................... 1,820,482
Plan of distribution fee (Class C shares)................... 86,747
Investment management fee................................... 1,692,914
Transfer agent fees and expenses............................ 246,712
Offering costs.............................................. 108,387
Registration fees........................................... 90,876
Professional fees........................................... 56,842
Custodian fees.............................................. 29,075
Shareholder reports and notices............................. 15,692
Trustees' fees and expenses................................. 9,910
Other....................................................... 2,904
-----------
TOTAL EXPENSES.......................................... 4,175,491
-----------
NET INVESTMENT LOSS..................................... (1,293,228)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 2,324,956
Net unrealized appreciation................................. 43,298,088
-----------
NET GAIN................................................ 45,623,044
-----------
NET INCREASE................................................ $44,329,816
===========
</TABLE>
- ---------------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE> 74
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C>
FOR THE PERIOD
JULY 29, 1998*
THROUGH
MAY 31, 1999
<CAPTION>
- ----------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (1,293,228)
Net realized gain........................................... 2,324,956
Net unrealized appreciation................................. 43,298,088
------------
NET INCREASE............................................ 44,329,816
Net increase from transactions in shares of beneficial
interest................................................... 252,660,367
------------
NET INCREASE............................................ 296,990,183
NET ASSETS:
Beginning of period......................................... 100,000
------------
END OF PERIOD........................................... $297,090,183
============
</TABLE>
- ---------------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE> 75
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Equity Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is total
return. The Fund seeks to achieve its objective by investing at least 65% of its
total assets in equity securities. The Fund was organized as a Massachusetts
business trust on April 6, 1998 and had no operations other than those relating
to organizational matters and the issuance of 2,500 shares of beneficial
interest by each class for $25,000 of each class to Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), to effect the Fund's initial
capitalization. The Fund commenced operations on July 29, 1998.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price;
(2) all other portfolio securities for which over-the-counter market quotations
are readily available are valued at the latest available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
including circumstances under which it is determined by the Investment Manager
or Miller Anderson & Sherrerd, LLP (the "Sub-Advisor"), an affiliate of the
Investment Manager, that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Trustees (valuation of debt securities for which market quotations are
not readily available may be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); and (4) short-term debt securities
42
<PAGE> 76
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
having a maturity date of more than sixty days at time of purchase are valued on
a mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
F. OFFERING COSTS -- The Investment Manager incurred offering costs on behalf of
the Fund in the amount of approximately $126,000 which will be reimbursed for
the full amount thereof. Such expenses were deferred and are being amortized by
the Fund on the straight-line method over the period of benefit of approximately
one year or less from the commencement of operations.
43
<PAGE> 77
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.85% to the net assets of the Fund determined as of the close of
each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
Under a Sub-Advisory Agreement between the Sub-Advisor and the Investment
Manager, the Sub-Advisor provides the Fund with investment advice and portfolio
management relating to the Fund's investments in securities, subject to the
overall supervision of the Investment Manager. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager pays the
Sub-Advisor compensation equal to 40% of its monthly compensation.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
average daily net assets of Class B; and (iii) Class C -- up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts paid
under the Plan are paid to the Distributor for services provided. In the case of
Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for (1) services provided and the expenses borne by it and others in
the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who engage
in or support distribution of the shares or who service shareholder accounts,
including overhead and telephone expenses; (2) printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and (3) preparation, printing and distribution
of sales
44
<PAGE> 78
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
literature and advertising materials. In addition, the Distributor may utilize
fees paid pursuant to the Plan, in the case of Class B shares, to compensate
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other selected broker-dealers for their opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $12,174,612 at May 31, 1999.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the period ended May 31, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
0.78%, respectively.
The Distributor has informed the Fund that for the period ended May 31, 1999, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $1,059, $531,731 and
$19,126, respectively and received $49,580 in front-end sales charges from sales
of the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the period ended May 31, 1999 aggregated
$422,810,841 and $181,765,046, respectively.
45
<PAGE> 79
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At May 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $2,300.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 29, 1998*
THROUGH
MAY 31, 1999
-------------------------
SHARES AMOUNT
---------- ------------
<S> <C> <C>
CLASS A SHARES
Sold........................................................ 986,023 $ 9,815,933
Redeemed.................................................... (313,997) (3,248,973)
---------- -----------
Net increase - Class A...................................... 672,026 6,566,960
---------- -----------
CLASS B SHARES
Sold........................................................ 26,743,761 266,671,820
Redeemed.................................................... (3,356,336) (33,876,428)
---------- -----------
Net increase - Class B...................................... 23,387,425 232,795,392
---------- -----------
CLASS C SHARES
Sold........................................................ 1,753,484 17,458,304
Redeemed.................................................... (410,890) (4,196,497)
---------- -----------
Net increase - Class C...................................... 1,342,594 13,261,807
---------- -----------
CLASS D SHARES
Sold........................................................ 3,326 36,208
---------- -----------
Net increase in Fund........................................ 25,405,371 $252,660,367
========== ===========
</TABLE>
- ---------------------
* Commencement of operations.
6. FEDERAL INCOME TAX STATUS
As of May 31, 1999, the Fund had permanent book/tax differences attributable to
a net operating loss and nondeductible expenses. To reflect reclassifications
arising from these differences, paid-in-capital was charged $299,811,
undistributed net realized gain was charged $993,417 and net investment loss was
credited $1,293,228.
46
<PAGE> 80
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a beneficial interest outstanding
throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD JULY 29, 1998* THROUGH MAY 31, 1999
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
SHARES SHARES SHARES SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA++:
Net asset value, beginning of period........................ $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)............................... 0.01 (0.07) (0.04) 0.03
Net realized and unrealized gain........................... 1.75 1.76 1.74 1.76
------ ------ ------ ------
Total income from investment operations..................... 1.76 1.69 1.70 1.79
------ ------ ------ ------
Net asset value, end of period.............................. $11.76 $11.69 $11.70 $11.79
====== ====== ====== ======
TOTAL RETURN+(1)............................................ 17.60% 16.90% 17.10% 17.90%
RATIOS TO AVERAGE NET ASSETS(2)(3):
Expenses.................................................... 1.38% 2.13% 1.91% 1.13%
Net investment income (loss)................................ 0.07% (0.68)% (0.46)% 0.32%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $7,933 $273,345 $15,744 $69
Portfolio turnover rate(1).................................. 80% 80% 80% 80%
</TABLE>
- ---------------------
* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE> 81
MORGAN STANLEY DEAN WITTER EQUITY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER EQUITY FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Equity
Fund (the "Fund") at May 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the period July 29,
1998 (commencement of operations) through May 31, 1999, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at May 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 6, 1999
48
<PAGE> 82
MORGAN STANLEY DEAN WITTER EQUITY FUND
PART C OTHER INFORMATION
ITEM 23. EXHIBITS
<TABLE>
<C> <S> <C> <C>
1. -- Declaration of Trust of the Registrant, dated April 6, 1998,
is incorporated by reference to Exhibit 1 to the
Registration Statement on Form N-1A, filed on April 17,
1998.
2. -- Amended and Restated By-Laws of the Registrant, dated May 1,
1999, filed herein.
3. -- Not Applicable.
4. -- Investment Management Agreement between the Registrant and
Morgan Stanley Dean Witter Advisors Inc., dated April 30,
1998 is incorporated by reference to Exhibit 5(a) of
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A, filed on May 15, 1998.
5. (a) -- Amended Distribution Agreement between Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean Witter
Distributors Inc., dated June 22, 1998, filed herein.
5. (b) -- Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and Dean Witter Reynolds Inc., dated April
30, 1998 is incorporated by reference to Exhibit 6(b) of
Pre-Effective No. 1 to the Registration Statement on Form
N-1A, filed on May 15, 1998.
5. (c) -- Omnibus Selected Dealer Agreement between Morgan Stanley
Dean Witter Distributors Inc. and National Financial
Services Corporation, dated October 17, 1998, filed herein.
6. -- Not Applicable.
7. -- Custody Agreement between the Registrant and The Bank of New
York, dated April 30, 1998, is incorporated by reference to
Exhibit 8(a) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on May 15, 1998.
8. (a) -- Amended and Restated Transfer Agency and Service Agreement
between the Registrant and Morgan Stanley Dean Witter Trust
FSB, dated June 22, 1998, filed herein.
8. (b) -- Amended Services Agreement between Morgan Stanley Dean
Witter Advisors and Morgan Stanley Dean Witter Services
Company Inc., dated June 22, 1998, filed herein.
9. (a) -- Opinion of Barry Fink, Esq., dated May 15, 1998, is
incorporated by reference to Exhibit 10(a) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A,
filed on May 15, 1998.
9. (b) -- Opinion of Lane, Altman & Owens, LLP, Massachusetts Counsel,
dated May 15, 1998, is incorporated by reference to Exhibit
10(b) to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A, filed on May 15, 1998.
10. -- Consent of Independent Accountants.
11. -- Not Applicable.
12. -- Not Applicable.
13. -- Plan of Distribution pursuant to Rule 12b-1 is incorporated
by reference to Exhibit 15 of Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A, filed on May 15,
1998.
14. -- Amended Multi-Class Plan pursuant to Rule 18f-3, dated June
22, 1998, filed herein.
Other -- Powers of Attorney of Trustees are incorporated by reference
to Exhibit (Other) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on May 15, 1998.
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
None
<PAGE> 83
ITEM 25. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment advisor. The following information is given regarding officers
of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW Advisors is
a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
<PAGE> 84
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
CLOSED-END INVESTMENT COMPANIES
<TABLE>
<S> <C>
(1) Morgan Stanley Dean Witter California Insured Municipal
Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal
Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal
Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities
Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities
Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities
Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal
Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment
Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
</TABLE>
OPEN-END INVESTMENT COMPANIES
<TABLE>
<S> <C>
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income
Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best
Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities
Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
</TABLE>
<PAGE> 85
<TABLE>
<S> <C>
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Real Estate Fund
(48) Morgan Stanley Dean Witter S&P 500 Index Fund
(49) Morgan Stanley Dean Witter S&P 500 Select Fund
(50) Morgan Stanley Dean Witter Select Dimensions Investment Series
(51) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(52) Morgan Stanley Dean Witter Short-Term Bond Fund
(53) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(54) Morgan Stanley Dean Witter Small Cap Growth Fund
(55) Morgan Stanley Dean Witter Special Value Fund
(56) Morgan Stanley Dean Witter Strategist Fund
(57) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(58) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(59) Morgan Stanley Dean Witter Total Return Trust
(60) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(61) Morgan Stanley Dean Witter U.S. Government Securities Trust
(62) Morgan Stanley Dean Witter Utilities Fund
(63) Morgan Stanley Dean Witter Value-Added Market Series
(64) Morgan Stanley Dean Witter Value Fund
(65) Morgan Stanley Dean Witter Variable Investment Series
(66) Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
NAME AND POSITION
MORGAN STANLEY OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT, INCLUDING
DEAN WITTER ADVISORS INC. NAME, PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ------------------------- -------------------------------------------------------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset Management of Morgan
President, Chief Stanley Dean Witter & Co. ("MSDW"); Chairman, Chief Executive Officer and
Executive Officer and Director of Morgan Stanley Dean Witter Distributors Inc. ("MSDW
Director Distributors") and Morgan Stanley Dean Witter Trust FSB ("MSDW Trust");
President, Chief Executive Officer and Director of Morgan Stanley Dean
Witter Services Company Inc. ("MSDW Services"); President of the Morgan
Stanley Dean Witter Funds and Discover Brokerage Index Series; Executive
Vice President and Director of Dean Witter Reynolds Inc. ("DWR");
Director of various MSDW subsidiaries.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds and Discover
Executive Vice President Brokerage Index Series; Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison President MSDW Trust; Executive Vice President, Chief Administrative
Executive Vice President, Officer and Director of MSDW Services; Vice President of the Morgan
Chief Administrative Stanley Dean Witter Funds and Discover Brokerage Index Series.
Officer and Director
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice President, Secretary, General
Senior Vice President, Secretary, Counsel and Director of MSDW Services; Senior Vice President, Assistant
General Counsel and Director Secretary and Assistant General Council of MSDW Distributors; Vice
President, Secretary and General Counsel of the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
and Director of the High Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
Douglas Brown
Senior Vice President
Rosalie Clough
Senior Vice President and Director of
Marketing
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW Distributors and MSDW Trust
Senior Vice President and Director of MSDW Trust; Vice President of the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series.
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
NAME AND POSITION
MORGAN STANLEY OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT, INCLUDING
DEAN WITTER ADVISORS INC. NAME, PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ------------------------- -------------------------------------------------------------------------
<S> <C>
Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President, Director of
the Taxable Fixed Income Group and
Chief Administrative Officer-
Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter Funds and Discover
Senior Vice President Brokerage Index Series.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President and Director of
Sector Rotation
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President and Director of
the Money Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President and Director of
the Growth Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
James Solloway
Senior Vice President
Jayne M. Stevlingson Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
Paul D. Vance Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President and Director of
the Growth and Income Group
Elizabeth A. Vetell
Senior Vice President and Director of
Shareholder Communication
James F. Willison Vice President of various Morgan Stanley Dean Witter Funds.
Senior Vice President
and Director of the Tax-Exempt Fixed
Income Group
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
NAME AND POSITION
MORGAN STANLEY OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT, INCLUDING
DEAN WITTER ADVISORS INC. NAME, PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ------------------------- -------------------------------------------------------------------------
<S> <C>
Frank Bruttomesso First Vice President and Assistant Secretary of MSDW Services; Assistant
First Vice President and Secretary of MSDW Distributors, the Morgan Stanley Dean Witter Funds and
Assistant Secretary Discover Brokerage Index Series.
Thomas F. Caloia First Vice President and Assistant Treasurer of MSDW Services; Assistant
First Vice President Treasurer of MSDW Distributors; Treasurer and Chief Financial and
and Assistant Accounting Officer of the Morgan Stanley Dean Witter Funds and Discover
Treasurer Brokerage Index Series.
Thomas Chronert
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and Assistant Secretary
First Vice President of MSDW Services; Assistant Secretary of MSDW Distributors, the Morgan
and Assistant Secretary Stanley Dean Witter Funds and Discover Brokerage Index Series.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First V
Michael Interrante First Vice President and Controller of MSDW Services; Assistant Treasurer
First Vice President of MSDW Distributors; First Vice President and Treasurer of MSDW Trust.
and Controller
David Johnson
First Vice President
Stanley Kapica
First Vice President
Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW Services; Assistant
First Vice President and Secretary of MSDW Distributors, the Morgan Stanley Dean Witter Funds and
Assistant Secretary Discover Brokerage Index Series.
Carsten Otto First Vice President and Assistant Secretary of MSDW Services; Assistant
First Vice President Secretary of MSDW Distributors, the Morgan Stanley Dean Witter Funds and
and Assistant Secretary Discover Brokerage Index Series.
Ruth Rossi First Vice President and Assistant Secretary of MSDW Services; Assistant
First Vice President and Secretary of MSDW Distributors, the Morgan Stanley Dean Witter Funds and
Assistant Secretary Discover Brokerage Index Series.
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
NAME AND POSITION
MORGAN STANLEY OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT, INCLUDING
DEAN WITTER ADVISORS INC. NAME, PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ------------------------- -------------------------------------------------------------------------
<S> <C>
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Armon Bar-Tur
Vice President
Raymond Basile
Vice President
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Dale Boettcher
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Aaron Clark
Vice President
William Connerly
Vice President
David Dineen
Vice President
Sheila Finnerty Vice President of Morgan Stanley Dean Witter Prime Income Trust.
Vice President
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
NAME AND POSITION
MORGAN STANLEY OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT, INCLUDING
DEAN WITTER ADVISORS INC. NAME, PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ------------------------- -------------------------------------------------------------------------
<S> <C>
Trey Hancock
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Peter Hermann Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
David T. Hoffman
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
Doug Ketterer
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Todd Lebo Vice President and Assistant Secretary of MSDW Services; Assistant
Vice President and Secretary of MSDW Distributors, the Morgan Stanley Dean Witter Funds and
Assistant Secretary Discover Brokerage Index Series.
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter Natural Resource Development
Vice President Securities Inc.
Albert McGarity
Vice President
Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P 500 Select Fund.
Vice President
Mark Mitchell
Vice President
Julie Morrone
Vice President
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
NAME AND POSITION
MORGAN STANLEY OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT, INCLUDING
DEAN WITTER ADVISORS INC. NAME, PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ------------------------- -------------------------------------------------------------------------
<S> <C>
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural Resource Development
Vice President Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter Real Estate Fund.
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal Securities Trust.
Vice President
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Robert Stearns
Vice President
Naomi Stein
Vice President
Michael Strayhorn
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Robert Vanden Assem
Vice President
David Walsh
Vice President
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
NAME AND POSITION
MORGAN STANLEY OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT, INCLUDING
DEAN WITTER ADVISORS INC. NAME, PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ------------------------- -------------------------------------------------------------------------
<S> <C>
Alice Weiss Vice President of various Morgan Stanley Dean Witter Funds.
Vice President
John Wong
Vice President
</TABLE>
The principal address of MSDW Advisors, MSDW Services, MSDW Distributors,
DWR, the Morgan Stanley Dean Witter Funds, the TCW/DW Funds and Discover
Brokerage Index Series is Two World Trade Center, New York, New York 10048. The
principal address of MSDW is 1585 Broadway, New York, New York 10036. The
principal address of MSDW Trust is 2 Harborside Financial Center, Jersey City,
New Jersey 07311.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
<TABLE>
<S> <C>
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
Morgan Stanley Dean Witter California Tax-Free Daily Income
(9) Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
Morgan Stanley Dean Witter Competitive Edge Fund, "Best
(12) Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
Morgan Stanley Dean Witter Developing Growth Securities
(14) Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
</TABLE>
<PAGE> 93
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
Morgan Stanley Dean Witter Mid-Cap Dividend Growth
(38) Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
Morgan Stanley Dean Witter Multi-State Municipal Series
(40) Trust
Morgan Stanley Dean Witter Natural Resource Development
(41) Securities Inc.
Morgan Stanley Dean Witter New York Municipal Money Market
(42) Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
Morgan Stanley Dean Witter North American Government Income
(44) Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
Morgan Stanley Dean Witter Precious Metals and Minerals
(46) Trust
(47) Morgan Stanley Dean Witter Prime Income Trust
(48) Morgan Stanley Dean Witter Real Estate Fund
(49) Morgan Stanley Dean Witter S&P 500 Index Fund
(50) Morgan Stanley Dean Witter S&P 500 Select Fund
(51) Morgan Stanley Dean Witter Short-Term Bond Fund
(52) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(53) Morgan Stanley Dean Witter Small Cap Growth Fund
(54) Morgan Stanley Dean Witter Special Value Fund
(55) Morgan Stanley Dean Witter Strategist Fund
(56) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(57) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(58) Morgan Stanley Dean Witter Total Return Trust
Morgan Stanley Dean Witter U.S. Government Money Market
(59) Trust
(60) Morgan Stanley Dean Witter U.S. Government Securities Trust
(61) Morgan Stanley Dean Witter Utilities Fund
(62) Morgan Stanley Dean Witter Value-Added Market Series
(63) Morgan Stanley Dean Witter Value Fund
(64) Morgan Stanley Dean Witter Variable Investment Series
(65) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of
MSDW Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICE WITH MSDW DISTRIBUTORS
- ---- ------------------------------------------------------------
<S> <C>
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
Fredrick K. Kubler Senior Vice President, Assistant Secretary and Chief
Compliance Officer.
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which
<PAGE> 94
are maintained by the Registrant's Transfer Agent, at its place of business as
shown in the prospectus.
ITEM 29. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service contract.
ITEM 30. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 23rd day of July, 1999.
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
Post-Effective Amendment No. 1 has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
(1) Principal Executive Officer Chief Executive Officer, 07/23/99
By: /s/ CHARLES A. FIUMEFREDDO Trustee and Chairman
-------------------------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal Accounting 07/23/99
By: /s/ THOMAS F. CALOIA Officer
-------------------------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By: /s/ BARRY FINK 07/23/99
-------------------------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By: /s/ DAVID M. BUTOWSKY 07/23/99
-------------------------------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE> 96
MORGAN STANLEY DEAN WITTER EQUITY FUND
EXHIBIT INDEX
<TABLE>
<C> <S> <C> <C>
2. -- Amended and Restated By-Laws of the Registrant, dated May 1,
1999.
5. (a) -- Amended Distribution Agreement between Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean Witter
Distributors Inc., dated June 22, 1998.
5. (c) -- Omnibus Selected Dealer Agreement between Morgan Stanley
Dean Witter Distributors Inc. and National Financial
Services Corporation, dated October 17, 1998.
8. (a) -- Amended and Restated Transfer Agency and Service Agreement
between the Registrant and Morgan Stanley Dean Witter Trust
FSB, dated June 22, 1998.
8. (b) -- Amended Services Agreement between Morgan Stanley Dean
Witter Advisors and Morgan Stanley Dean Witter Services
Company Inc., dated June 22, 1998.
10. -- Consent of Independent Accountants.
14. -- Amended Multi-Class Plan pursuant to Rule 18f-3.
</TABLE>
<PAGE> 1
EXHIBIT 2
BY-LAWS
OF
MORGAN STANLEY DEAN WITTER EQUITY FUND
AMENDED AND RESTATED AS OF MAY 1, 1999
ARTICLE I
DEFINITIONS
The terms "Commission," "Declaration," "Distributor," "Investment Adviser,"
"Majority Shareholder Vote," "1940 Act," "Shareholder," "Shares," "Transfer
Agent," "Trust," "Trust Property," and "Trustees" have the respective meanings
given them in the Declaration of Trust of Morgan Stanley Dean Witter Equity Fund
dated April 6, 1998, as amended from time to time.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and without
the Commonwealth as the Trustees may from time to time designate or the business
of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the provisions
of Section 16(a) of the 1940 Act, for that purpose. Meetings of Shareholders
shall also be called by the Secretary upon the written request of the holders of
Shares entitled to vote as otherwise required by Section 16(c) of the 1940 Act
and to the extent required by the corporate or business statute of any state in
which the Shares of the Trust are sold, as made applicable to the Trust by the
provisions of Section 2.3 of the Declaration. Such request shall state the
purpose or purposes of such meeting and the matters proposed to be acted on
thereat. Except to the extent otherwise required by Section 16(c) of the 1940
Act, as made applicable to the Trust by the provisions of Section 2.3 of the
Declaration, the Secretary shall inform such Shareholders of the reasonable
estimated cost of preparing and mailing such notice of the meeting, and upon
payment to the Trust of such costs, the Secretary shall give notice stating the
purpose or purposes of the meeting to all entitled to vote at such meeting. No
meeting need be called upon the request of the holders of Shares entitled to
cast less than a majority of all votes entitled to be cast at such meeting, to
consider any matter which is substantially the same as a matter voted upon at
any meeting of Shareholders held during the preceding twelve months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety (90)
days before such meeting to each Shareholder entitled to vote at such meeting.
Such notice shall be deemed to be given when deposited in the United States
<PAGE> 2
mail, postage prepaid, directed to the Shareholder at his address as it appears
on the records of the Trust.
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders, the holders of a majority of the Shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum for the transaction of business. In the
absence of a quorum, the Shareholders present or represented by proxy and
entitled to vote thereat shall have the power to adjourn the meeting from time
to time. The Shareholders present in person or represented by proxy at any
meeting and entitled to vote thereat also shall have the power to adjourn the
meeting from time to time if the vote required to approve or reject any proposal
described in the original notice of such meeting is not obtained (with proxies
being voted for or against adjournment consistent with the votes for and against
the proposal for which the required vote has not been obtained). The affirmative
vote of the holders of a majority of the Shares then present in person or
represented by proxy shall be required to adjourn any meeting. Any adjourned
meeting may be reconvened without further notice or change in record date. At
any reconvened meeting at which a quorum shall be present, any business may be
transacted that might have been transacted at the meeting as originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy for each Share of beneficial interest of the Trust
and for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his or her name on the records of the Trust on the date
fixed as the record date for the determination of Shareholders entitled to vote
at such meeting. Without limiting the manner in which a Shareholder may
authorize another person or persons to act for such Shareholder as proxy
pursuant hereto, the following shall constitute a valid means by which a
Shareholder may grant such authority.
(i) A Shareholder may execute a writing authorizing another person or
persons to act for such Shareholder as proxy. Execution may be accomplished
by the Shareholder or such Shareholder's authorized officer, director,
employee, attorney-in-fact or another agent signing such writing or causing
such person's signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile or telecopy signature. No
written evidence of authority of a Shareholder's authorized officer,
director, employee, attorney-in-fact or other agent shall be required; and
(ii) A Shareholder may authorize another person or persons to act for
such Shareholder as proxy by transmitting or authorizing the transmission
of a telegram or cablegram or by other means of telephonic, electronic or
computer transmission to the person who will be the holder of the proxy or
to a proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram or cablegram or
other means of telephonic, electronic or computer transmission must either
set forth or be submitted with information from which it can be determined
that the telegram, cablegram or other transmission was authorized by the
Shareholder.
No proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. At all meetings of Shareholders, unless the voting is
conducted by inspectors, all questions relating to the qualification of voters
and the validity of proxies and the acceptance or rejection of votes shall be
decided by the chairman of the meeting. In determining whether a telegram,
cablegram or other electronic transmission is valid, the chairman or inspector,
as the case may be, shall specify the information upon which he or she relied.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or Officers of the Trust. Proxy
solicitations may be made in writing or by using telephonic or other electronic
solicitation
2
<PAGE> 3
procedures that include appropriate methods of verifying the identity of the
Shareholder and confirming any instructions given thereby.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Shareholders. On request of
the chairman of the meeting, or of any Shareholder or his proxy, the Inspectors
of Election shall make a report in writing of any challenge or question or
matter determined by them and shall execute a certificate of any facts found by
them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as are
granted to Shareholders under Section 32 of the Business Corporation Law of the
Commonwealth of Massachusetts.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other electronic
means.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall be
called by the President or the Secretary upon the written request of any two (2)
Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Trustee at his address as it appears on the records of the Trust. Subject to
the provisions of the 1940 Act, notice or waiver of notice need not specify the
purpose of any special meeting.
3
<PAGE> 4
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such committee,
as the case may be, by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of a majority of the Trustees present shall be the act of the
Trustees, unless the concurrence of a greater proportion is expressly required
for such action by law, the Declaration or these By-Laws. If at any meeting of
the Trustees there be less than a quorum present, the Trustees present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have been obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of the Trustees may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all of the Trustees entitled to vote
upon the action and such written consent is filed with the minutes of
proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and each
Trustee who is not an officer or employee of the Trust or of its investment
manager or underwriter or of any corporate affiliate of any of said persons
shall receive for services rendered as a Trustee of the Trust such compensation
as may be fixed by the Trustees. Nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other capacity and receiving
compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all checks,
notes, drafts and other obligations for the payment of money by the Trust shall
be signed, and all transfer of securities standing in the name of the Trust
shall be executed, by the Chairman, the President, any Vice President or the
Treasurer or by any one or more officers or agents of the Trust as shall be
designated for that purpose by vote of the Trustees; notwithstanding the above,
nothing in this Section 4.7 shall be deemed to preclude the electronic
authorization, by designated persons, of the Trust's Custodian (as described
herein in Section 9.1) to transfer assets of the Trust, as provided for herein
in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Trustee, officer, employee, or agent of the Trust. The
indemnification shall be against expenses, including attorneys' fees, judgments,
fines, and amounts paid in settlement, actually and reasonably incurred by him
in connection with the action, suit, or proceeding, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust to obtain a
4
<PAGE> 5
judgment or decree in its favor by reason of the fact that he is or was a
Trustee, officer, employee, or agent of the Trust. The indemnification shall be
against expenses, including attorneys' fees actually and reasonably incurred by
him in connection with the defense or settlement of the action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust; except that no indemnification shall
be made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the action
or suit was brought, or a court of equity in the county in which the Trust has
its principal office, determines upon application that, despite the adjudication
of liability but in view of all circumstances of the case, the person is fairly
and reasonably entitled to indemnity for those expenses which the court shall
deem proper, provided such Trustee, officer, employee or agent is not adjudged
to be liable by reason of his willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsection (a) or (b) or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall be
entitled to indemnification for any liability, whether or not there is an
adjudication of liability, arising by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of duties as described in Section 17(h)
and (i) of the Investment Company Act of 1940 ("disabling conduct"). A person
shall be deemed not liable by reason of disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either --
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the action, suit or proceeding, or
(B) an independent legal counsel in a written opinion.
5
<PAGE> 6
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition thereof
if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by the
Trust; and
(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately will
be found entitled to indemnification, is made by either --
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding the office, and shall continue as to a person who has ceased to be
a Trustee, officer, employee, or agent and inure to the benefit of the heirs,
executors and administrators of such person; provided that no person may satisfy
any right of indemnity or reimbursement granted herein or to which he may be
otherwise entitled except out of the property of the Trust, and no Shareholder
shall be personally liable with respect to any claim for indemnity or
reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust purchase
insurance to indemnify any officer or Trustee against liability for any act for
which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the Trustees
of the Trust and may delegate to such committees, in the intervals between
meetings of the Trustees, any or all of the powers of the Trustees in the
management of the business and affairs of the Trust. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
6
<PAGE> 7
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees at
the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity. The executive officers of the Trust shall be elected annually by the
Trustees and each executive officer so elected shall hold office until his
successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the Chairman the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any officer
or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. Powers and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to these
By-Laws or, to the extent not so provided, as may be prescribed by the Trustees;
provided that no rights of any third party shall be affected or impaired by any
such By-Law or resolution of the Trustees unless such third party has knowledge
thereof.
7
<PAGE> 8
SECTION 6.6. The Chairman. The Chairman shall be the chief executive
officer of the Trust, shall preside at all meetings of the Shareholders and of
the Trustees, shall have general and active management of the business of the
Trust, shall see that all orders and resolutions of the Trustees are carried
into effect and, in connection therewith, shall be authorized to delegate to the
President or to one or more Vice Presidents such of his or her powers and duties
at such times and in such manner as he or she may deem advisable, shall be a
signatory on all Annual and Semi-Annual Reports as may be sent to Shareholders,
and shall perform such other duties as the Trustees may from time to time
prescribe.
SECTION 6.7. The President. The President shall perform such duties as the
Trustees and the Chairman may from time to time prescribe and shall, in the
absence or disability of the Chairman, exercise the powers and perform the
duties of the Chairman. The President shall be authorized to delegate to one or
more Vice Presidents such of his or her powers and duties at such times and in
such manner as he or she may deem advisable.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there shall be more than one, the Vice
Presidents in such order as may be determined from time to time by the Trustees
or the Chairman, shall, in the absence or disability of the President, exercise
the powers and perform the duties of the President, and shall perform such other
duties as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there shall be more than one, the Assistant Vice Presidents in such order
as may be determined from time to time by the Trustees or the Chairman, shall
perform such duties and have such powers as may be assigned them from time to
time by the Trustees or the Chairman.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the proceedings
of the meetings of the Shareholders and of the Trustees in a book to be kept for
that purpose, and shall perform like duties for the standing committees when
required. He or she shall give, or cause to be given, notice of all meetings of
the Shareholders and special meetings of the Trustees, and shall perform such
other duties and have such powers as the Trustees or the Chairman may from time
to time prescribe. He or she shall keep in safe custody the seal of the Trust
and affix or cause the same to be affixed to any instrument requiring it, and,
when so affixed, it shall be attested by his or her signature or by the
signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there shall be more than one, the Assistant Secretaries in such order as may be
determined from time to time by the Trustees or the Chairman, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such duties and have such other powers
as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He or she shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and he
or she shall render to the Trustees and the Chairman, whenever any of them
require it, an account of his or her transactions as Treasurer and of the
financial condition of the Trust; and he or she shall perform such other duties
as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in such order as may be
determined from time to time by the Trustees or the Chairman, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Trustees or the Chairman may from time to time prescribe.
8
<PAGE> 9
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
Inasmuch as the computation of net income and net profits from the sales of
securities or other properties for federal income tax purposes may vary from the
computation thereof on the records of the Trust, the Trustees shall have power,
in their discretion, to distribute as income dividends and as capital gain
distributions, respectively, amounts sufficient to enable the Trust to avoid or
reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such form
and design at any time or from time to time, and shall be entered in the records
of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number of
full Shares owned by such holder; shall be signed by or in the name of the Trust
by the President, or a Vice President, and countersigned by the Secretary or an
Assistant Secretary or the Treasurer and an Assistant Treasurer of the Trust;
shall be sealed with the seal; and shall contain such recitals as may be
required by law. Where any certificate is signed by a Transfer Agent or by a
Registrar, the signature of such officers and the seal may be facsimile, printed
or engraved. The Trust may, at its option, determine not to issue a certificate
or certificates to evidence Shares owned of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Trust, such certificate or certificates shall,
nevertheless, be adopted by the Trust and be issued and delivered as though the
person or persons who signed such certificate or certificates or whose facsimile
signature or signatures shall appear therein had not ceased to be such officer
or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give to
the Trust and to such Registrar, Transfer Agent and/or Transfer Clerk as may be
authorized or required to countersign such new certificate or certificates, a
bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be against
them or any of them on account of or in connection with the alleged loss, theft
or destruction of any such certificate.
9
<PAGE> 10
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at least
five million dollars ($5,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, whether before or after the
holding thereof, or actual attendance at the meeting of shareholders, Trustees
or committee, as the case may be, in person, shall be deemed equivalent to the
giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting
10
<PAGE> 11
of Shareholders, or (ii) receive payment of any dividend or the allotment of any
rights, or in order to make a determination of Shareholders for any other proper
purpose. The record date, in any case, shall not be more than one hundred eighty
(180) days, and in the case of a meeting of Shareholders not less than ten (10)
days, prior to the date on which such meeting is to be held or the date on which
such other particular action requiring determination of Shareholders is to be
taken, as the case may be. In the case of a meeting of Shareholders, the meeting
date set forth in the notice to Shareholders accompanying the proxy statement
shall be the date used for purposes of calculating the 180 day or 10 day period,
and any adjourned meeting may be reconvened without a change in record date. In
lieu of fixing a record date, the Trustees may provide that the transfer books
shall be closed for a stated period but not to exceed, in any case, twenty (20)
days. If the transfer books are closed for the purpose of determining
Shareholders entitled to notice of a vote at a meeting of Shareholders, such
books shall be closed for at least ten (10) days immediately preceding the
meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from time
to time provide. The seal of the Trust may be affixed to any document, and the
seal and its attestation may be lithographed, engraved or otherwise printed on
any document with the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time to
time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer or
officers or such other person or persons as the Trustees may from time to time
designate, or as may be specified in or pursuant to the agreement between the
Trust and the bank or trust company appointed as Custodian of the securities and
funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided,
however, that no By-Law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to law, the Declaration,
or these By-Laws, a vote of the Shareholders. The Trustees shall in no event
adopt By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
11
<PAGE> 12
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Morgan Stanley Dean Witter Equity
Fund, dated April 6, 1998, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name Morgan Stanley Dean Witter 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 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.
12
<PAGE> 1
EXHIBIT 5(A)
MORGAN STANLEY DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 28th day of July, 1997, and amended as of June
22, 1998, between each of the open-end investment companies to which Morgan
Stanley Dean Witter Advisors Inc. acts as investment manager, that are listed on
Schedule A, as may be amended from time to time (each, a "Fund" and
collectively, the "Funds"), and Morgan Stanley Dean Witter Distributors Inc., a
Delaware corporation (the "Distributor").
WITNESSETH:
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
<PAGE> 2
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").
(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.
2
<PAGE> 3
(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer agent
of the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the shareholders, or
at the discretion of the Distributor. The Distributor shall promptly transmit to
the transfer agent of the Fund, for redemption, all such orders for repurchase
of Shares. Payment for Shares repurchased may be made by a Fund to the
Distributor for the account of the shareholder. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.
(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.
SECTION 5. Duties of the Fund.
(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including one
certified copy, upon request by the Distributor, of all financial statements
prepared by the Fund and examined by independent accountants. Each Fund shall,
at the expense of the Distributor, make available to the Distributor such number
of copies of its Prospectus as the Distributor shall reasonably request.
(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.
(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.
SECTION 6. Duties of the Distributor.
(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Financial Advisors, and
shall devote reasonable time and effort
3
<PAGE> 4
to promote sales of the Shares, but shall not be obligated to sell any specific
number of Shares. The services of the Distributor hereunder are not exclusive
and it is understood that the Distributor may act as principal underwriter for
other registered investment companies, so long as the performance of its
obligations hereunder is not impaired thereby. It is also understood that
Selected Dealers, including DWR, may also sell shares for other registered
investment companies.
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.
(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.
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.
4
<PAGE> 5
SECTION 9. Indemnification.
(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended and
supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of a Fund in 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
5
<PAGE> 6
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
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 remain in force until April 30, 1999, and thereafter, but only so long as
such continuance is specifically approved at least annually by (i) the Board of
Directors/Trustees of each Fund, or by the vote of a majority of the outstanding
voting securities of the Fund, cast in person or by proxy, and (ii) a majority
of those Directors/Trustees who are not parties to this Agreement or interested
persons of any such party and who have no direct or indirect financial interest
in this Agreement or in the operation of the Fund's Rule 12b-1 Plan or in any
agreement related thereto, cast in person at a meeting called for the purpose of
voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of a
majority of the outstanding voting securities of a Fund, or by the
6
<PAGE> 7
Distributor, on sixty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding voting
securities of a Fund, and (ii) a majority of those Directors/ Trustees of a Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.
SECTION 12. Additional Funds. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
SECTION 13. Governing Law. This Agreement shall be construed in
accordance with the law of the State of New York and the applicable provisions
of the 1940 Act. To the extent the applicable law of the State of New York, or
any of the provisions herein, conflicts with the applicable provisions of the
1940 Act, the latter shall control.
SECTION 14. Personal Liability. With respect to any Fund that is
organized as an unincorporated business trust under the laws of the Commonwealth
of Massachusetts, its Declaration of the Trust (each, a "Declaration") is on
file in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of any Fund shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of any Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.
ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO
By:
------------------------------------
MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.
By:
------------------------------------
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT JUNE 25, 1999
<TABLE>
<C> <S>
1. Morgan Stanley Dean Witter Aggressive Equity Fund
2. Morgan Stanley Dean Witter American Opportunities Fund
3. Morgan Stanley Dean Witter Balanced Growth Fund
4. Morgan Stanley Dean Witter Balanced Income Fund
5. Morgan Stanley Dean Witter California Tax-Free Income Fund
6. Morgan Stanley Dean Witter Capital Growth Securities
7. Morgan Stanley Dean Witter Competitive Edge Fund, "Best
Ideas" Portfolio
8. Morgan Stanley Dean Witter Convertible Securities Trust
9. Morgan Stanley Dean Witter Developing Growth Securities
Trust
10. Morgan Stanley Dean Witter Diversified Income Trust
11. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
12. Morgan Stanley Dean Witter Equity Fund
13. Morgan Stanley Dean Witter European Growth Fund Inc.
14. Morgan Stanley Dean Witter Federal Securities Trust
15. Morgan Stanley Dean Witter Financial Services Trust
16. Morgan Stanley Dean Witter Fund of Funds
17. Morgan Stanley Dean Witter Global Dividend Growth Securities
18. Morgan Stanley Dean Witter Global Utilities Fund
19. Morgan Stanley Dean Witter Growth Fund
20. Morgan Stanley Dean Witter Health Sciences Trust
21. Morgan Stanley Dean Witter High Yield Securities Inc.
22. Morgan Stanley Dean Witter Income Builder Fund
23. Morgan Stanley Dean Witter Information Fund
24. Morgan Stanley Dean Witter Intermediate Income Securities
25. Morgan Stanley Dean Witter International Fund
26. Morgan Stanley Dean Witter International SmallCap Fund
27. Morgan Stanley Dean Witter Japan Fund
28. Morgan Stanley Dean Witter Latin American Growth Fund
29. Morgan Stanley Dean Witter Managers Focus Fund
30. Morgan Stanley Dean Witter Market Leader Trust
31. Morgan Stanley Dean Witter Mid-Cap Dividend Growth
Securities
32. Morgan Stanley Dean Witter Mid-Cap Equity Trust
33. Morgan Stanley Dean Witter Natural Resource Development
Securities Inc.
34. Morgan Stanley Dean Witter New York Tax-Free Income Fund
35. Morgan Stanley Dean Witter North American Government Income
Trust
36. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
37. Morgan Stanley Dean Witter Precious Metals and Minerals
Trust
38. Morgan Stanley Dean Witter Real Estate Fund
39. Morgan Stanley Dean Witter Small Cap Growth Fund
40. Morgan Stanley Dean Witter Special Value Fund
41. Morgan Stanley Dean Witter S&P 500 Index Fund
42. Morgan Stanley Dean Witter S&P 500 Select Fund
43. Morgan Stanley Dean Witter Strategist Fund
44. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
45. Morgan Stanley Dean Witter Total Return Trust
46. Morgan Stanley Dean Witter U.S. Government Securities Trust
47. Morgan Stanley Dean Witter Utilities Fund
48. Morgan Stanley Dean Witter Value-Added Market Series
49. Morgan Stanley Dean Witter Value Fund
50. Morgan Stanley Dean Witter Worldwide High Income Fund
51. Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>
8
<PAGE> 1
EXHIBIT 5(C)
MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
OMNIBUS SELECTED DEALER AGREEMENT, INC.
Dear Sir or Madam:
We, Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") have a
distribution agreement (the "Distribution Agreement") with each of the open-end
investment companies listed in Schedule A attached hereto (each, a "Fund"),
pursuant to which we act as the Distributor for the sale of each Fund's shares
of common stock or beneficial interest, as the case may be, (the "Shares").
Under the Distribution Agreement, we have the right to distribute Shares for
resale.
Each Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended (the
"Securities Act"). You have received a copy of the Distribution Agreements
between us and each Fund and reference is made herein to certain provisions of
such Distribution Agreements. The terms used herein, including "Prospectus" and
"Registration Statement" of each Fund and "Selected Dealer" shall have the same
meaning in this Agreement as in the Distribution Agreements. As principal, we
offer to sell all Shares to your customers, upon the following terms and
conditions:
1. In all sales of Shares to the public you shall act on behalf of your
customers which for purposes of this Agreement are limited to customers for
which Nations Banc Investments, Inc. is the Introducing Broker, and in no
transaction shall you have any authority to act as agent for a Fund, for us or
for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the public offering price applicable to each order, as set forth in the
applicable current Prospectus. The procedure relating to the handling of orders
shall be subject to written instructions which we or the applicable Fund shall
forward from time to time to you. All orders are subject to acceptance or
rejection by us or a Fund in the sole discretion of either. The Distributor of
the Fund will promptly notify you in writing of any such rejection.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable public offering price
and subject to the terms hereof and of the applicable Distribution Agreement and
Prospectus. In connection herewith, you agree to abide by the terms of the
applicable Distribution Agreement and Prospectus to the extent required
hereunder. Furthermore, you agree that (i) you will offer or sell any of the
Shares only under circumstances that will result in compliance with all
applicable Federal and state securities laws; (ii) you will not furnish or cause
to be furnished to any person any information relating to the Shares which is
inconsistent in any respect with the information contained in the applicable
Prospectus (as then amended or supplemented) or cause any advertisements to be
published by radio or television or in any newspaper or posted in any public
place or use any sales promotional material without our consent and the consent
of the applicable Fund; and (iii) you will endeavor to obtain proxies from
purchasers of Shares. You also agree that you will be liable to Distributor for
payment of the purchase price for Shares purchased by customers and that you
shall make payment for such shares when due.
4. We will compensate you for sales of shares of the Funds and personal
services to Fund shareholders by paying you a sales charge and/or other
commission (which may be in the form of a gross sales credit and/or an annual
residual commission) and/or a service fee, each as separately agreed by you and
us with respect to each Fund.
5. If any Shares sold to your customers under the terms of this Agreement
are repurchased by us for the account of a Fund or are tendered for redemption
within seven business days after the
<PAGE> 2
date of the confirmation of the original purchase by you, it is agreed that you
shall forfeit your right to, and refund to us, any commission received by you
with respect to such Shares.
6. No person is authorized to make any representations concerning the
Shares or the Funds except those contained in the current applicable Prospectus
and in such printed information subsequently issued by us or a Fund as
information supplemental to such Prospectus. In selling Shares, you shall rely
solely on the representations contained in the applicable Prospectus and
supplemental information mentioned above. Any printed information which we
furnish you other than the Prospectus and the Funds' periodic reports and proxy
solicitation materials are our sole responsibility and not the responsibility of
the Funds, and you agree that the Funds shall have no liability or
responsibility to you in these respects unless expressly assumed in connection
therewith.
7. You are hereby authorized (i) to place orders directly with a Fund or
its agent for shares of the Fund to be sold by us subject to the applicable
terms and conditions governing the placement of orders for the purchase of Fund
Shares, as set forth in the Distribution Agreement, and (ii) to tender Shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in the Distribution Agreement. We will provide you with
copies of any updates to the Distribution Agreement.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely. Each party hereto has the right to
cancel this agreement with respect to one or more Funds upon fifteen days prior
written notice to the other party.
9. I. You shall indemnify and hold us harmless from and against any and all
losses, costs, (including reasonable attorney's fees) claims, damages and
liabilities which arise as a result of action taken pursuant to instructions
from you, or on your behalf to: (a)(i) place orders for Shares of a Fund with
the Fund's transfer agent or direct the transfer agent to receive instructions
for the order of Shares, and (ii) accept monies or direct that the transfer
agent accept monies as payment for the order of such Shares, all as contemplated
by and in accordance with Section 3 of the applicable Distribution Agreement;
(b)(i) place orders for the redemption of Shares of a Fund with the Fund's
transfer agent or direct the transfer agent to receive instruction for the
redemption of such Shares and (ii) to pay redemption proceeds or to direct that
the transfer agent pay redemption proceeds in connection with orders for the
redemption of Shares, all as contemplated by and in accordance with Section 4 of
the applicable Distribution Agreement; Distributor agrees to indemnify and hold
harmless you and your affiliates, officers, directors, control persons and
employees from and against any and all losses, costs (including reasonable
attorney's fees), claims, damages and liabilities which arise as a result of
Distributor's failure to fulfill its obligations hereunder and from any alleged
inaccuracy, omission or misrepresentation contained in any prospectus or any
advertising, or sales literature prepared by Distributor or the Fund provided,
however, that in no case, (i) is this indemnity in favor of you or us and any of
other party's such controlling persons to be deemed to protect us or any such
controlling persons against any liability to which we or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of our duties or by reason of reckless
disregard of our obligations and duties under this Agreement or the applicable
Distribution Agreement; or (ii) are you to be liable under the indemnity
agreement contained in this paragraph with respect to any claim made against us
or any such controlling persons, unless we or any such controlling persons, as
the case may be, shall have notified you in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon us or such controlling persons (or
after we or such controlling persons shall have received notice of such service
on any designated agent), notwithstanding the failure to notify you of any such
claim shall not relieve you from any liability which you may have to the person
against whom such action is brought otherwise than on account of the indemnity
agreement contained in this paragraph.
II. You will be entitled to participate at your own expense in the defense,
or, if you so elect, to assume the defense, of any suit brought to enforce any
such liability, but if you elect to assume the
2
<PAGE> 3
defense, such defense shall be conducted by counsel chosen by you and reasonably
satisfactory to us or such controlling person or persons, defendant or
defendants in the suit. In the event you elect to assume the defense of any such
suit and retain such counsel, we or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case you do not elect to assume the
defense of any such suit, you will reimburse us or such controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. Each party shall promptly notify the
other party to this Agreement of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection with
the issuance or sale of the Shares pursuant to this Agreement.
III. If the indemnification provided for in this Section 9 is unavailable
or insufficient to hold harmless the Distributor, as provided above in respect
of any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to herein, then you shall contribute to the amount paid or
payable by us as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by you on the one hand and us on the
other from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law, then you
shall contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative benefits but
also your relative fault on the one hand and our relative fault on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. You and we agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by us
as a result of the losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by us in connection with investigating or
defending any such claim. Notwithstanding the provisions of this subsection
(III), you shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares distributed by you to the
public were offered to the public exceeds the amount of any damages which you
have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
IV. Notwithstanding the provisions of subsections (I), (II) and (III), we
shall indemnify, defend and hold harmless you and your officers, directors,
employees, affiliates, agents, successors and assigns from and against any and
all claims and all related losses, expenses, damages, cost and liabilities
including reasonable attorneys' fees and expenses incurred in investigation or
defense, arising out of or related to any breach of any representation, warranty
or covenant by us contained in Section 15 of this Agreement.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Shares. Neither party shall be under any liability to the other
party except for lack of good faith and for obligations expressly assumed
herein. Nothing contained in this paragraph is intended to operate as, and the
provisions of this paragraph shall not in any way whatsoever constitute, a
waiver by you of compliance with any provision of the Securities Act, or of the
rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. Each party represents that it is a member in good standing of the
National Association of Securities Dealers, Inc. and with respect to any sales
in the United States, each party hereby agrees to abide by the Rules of Fair
Practice of such Association relating to the performance of the obligations
hereunder.
3
<PAGE> 4
13. We will inform you in writing as to the states in which we believe the
Shares have been qualified for sale under, or are exempt from the requirements
of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. Notwithstanding any other provision of this Agreement to the contrary,
we represent and warrant that the names and addresses of your customers (or
customers of your affiliates) which have or which may come to our attention in
connection with this Agreement are confidential and are your exclusive property
and shall not be utilized by us except in connection with the functions
performed by us in connection with this Agreement. Notwithstanding the
foregoing, should a customer request, that we or an organization affiliated with
us, provide services to such customer, we or such affiliated organization shall
in no way violate this representation and warranty, nor be considered in breach
of this Agreement.
15. We represent, warrant, and covenant to you that the marketing
materials, any communications distributed to the public and training materials
designed by us or our agents relating to the product sold under this Agreement
are true and accurate and do not omit to state a fact necessary to make the
information contained therein not misleading and comply with applicable federal
and state laws. We further represent, warrant, and covenant to you that the
performance by us of our obligations under this Agreement in no way constitutes
an infringement on or other violation of copyright, trade secret, trademark,
proprietary information or non-disclosure rights of any other party.
16. We shall maintain a contingency disaster recovery plan, and, in the
event you are so required by any regulatory or governmental agency, we shall
make such plan available to you for inspection at your office upon reasonable
advance notice by you. Each party agrees that it will at all times conduct its
activities under this Agreement in an equitable, legal and professional manner.
17. We understand that the performance of your and our obligations under
this Agreement is subject to examination during business hours by your
authorized representatives and auditors and by federal and state regulatory
agencies, and we agree that upon being given reasonable notice and proper
identification we shall submit or furnish at a reasonable time and place to any
such representative or regulatory agency reports, information, or other data
relating to this Agreement as may reasonably be required or requested by you. We
shall maintain and make available to you upon reasonable notice all material,
data, files, and records relating to this Agreement for a period of not less
than three years after the termination of this Agreement.
18. The sales, advertising and promotional materials designed by either
party or its agents relating to products sold under this Agreement shall comply
with applicable federal and state laws. Each party agrees that the sales,
advertising and promotional materials shall be made available to the other party
prior to distribution to your employees or customers.
19. Any controversy or claim between or among the parties hereto arising
out of or relating to this Agreement, including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in accordance
with the rules of the National Association of Securities Dealers, Inc. Judgment
upon any arbitration award may be entered in any court having jurisdiction. Any
party to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which this
Agreement applies in any court having jurisdiction over such action.
4
<PAGE> 5
20. All notices or other communications under this Agreement shall be in
writing and given as follows:
<TABLE>
<S> <C>
If to us: Morgan Stanley Dean Witter Distributors Inc.
Attn: Barry Fink,
Two World Trade Center
New York, NY 10048
If to you: National Financial
Services Corporation
Attn: Robert Massburg
4201 Congress Street, Suite 245
Boston, MA
</TABLE>
or such other address as the parties may hereafter specify in writing. Each such
notice to any party shall be either hand-delivered or transmitted, postage
prepaid, by registered or certified United States mail with return receipt
requested, and shall be deemed effective only upon receipt.
21. This Agreement shall become effective as of the date of your acceptance
hereof, provided that you return to us promptly a signed and dated copy.
MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.
By
------------------------------------
(Authorized Signature)
Please return one signed
copy of this agreement to:
Morgan Stanley Dean Witter
Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name:
----------------------------
By:
---------------------------------
Address:
- --------------------------------------
Date: October 17, 1998
--------------------------------
5
<PAGE> 6
SCHEDULE A
Dean Witter Global Asset Allocation Fund
Morgan Stanley Dean Witter American Value Fund
Morgan Stanley Dean Witter Balanced Growth Fund
Morgan Stanley Dean Witter Balanced Income Fund
Morgan Stanley Dean Witter California Tax-Free Income Fund
Morgan Stanley Dean Witter Capital Appreciation-Fund
Morgan Stanley Dean Witter Capital Growth Securities
Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas" Portfolio
Morgan Stanley Dean Witter Convertible Securities Trust
Morgan Stanley Dean Witter Developing Growth Securities Trust
Morgan Stanley Dean Witter Diversified Income Trust
Morgan Stanley Dean Witter Dividend Growth Securities Inc.
Morgan Stanley Dean Witter Equity Fund
Morgan Stanley Dean Witter European Growth Fund Inc.
Morgan Stanley Dean Witter Federal Securities Trust
Morgan Stanley Dean Witter Financial Services Trust
Morgan Stanley Dean Witter Fund of Funds
Morgan Stanley Dean Witter Global Dividend Growth Securities
Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
Morgan Stanley Dean Witter Global Utilities Fund
Morgan Stanley Dean Witter Growth Fund
Morgan Stanley Dean Witter Hawaii Municipal Trust
Morgan Stanley Dean Witter Health Sciences Trust
Morgan Stanley Dean Witter High Yield Securities Inc.
Morgan Stanley Dean Witter Income Builder Fund
Morgan Stanley Dean Witter Information Fund
Morgan Stanley Dean Witter Intermediate Income Securities Inc.
Morgan Stanley Dean Witter International SmallCap Fund
Morgan Stanley Dean Witter Japan Fund
Morgan Stanley Dean Witter Limited Term Municipal Trust
Morgan Stanley Dean Witter Market Leader Trust
Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
Morgan Stanley Dean Witter Mid-Cap Growth Fund
Morgan Stanley Dean Witter Multi-State Municipal Series Trust
Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
Morgan Stanley Dean Witter New York Tax-Free Income Fund
Morgan Stanley Dean Witter Pacific Growth Fund Inc.
Morgan Stanley Dean Witter Precious Metals and Minerals Trust
Morgan Stanley Dean Witter S&P 500 Index Fund
Morgan Stanley Dean Witter S&P 500 Select Fund
Morgan Stanley Dean Witter Short-Term Bond Fund
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
Morgan Stanley Dean Witter Special Value Fund
Morgan Stanley Dean Witter Strategist Fund
Morgan Stanley Dean Witter Tax-Exempt Securities Trust
Morgan Stanley Dean Witter U.S. Government Securities Trust
Morgan Stanley Dean Witter Utilities Fund
Morgan Stanley Dean Witter Value-Added Market Series
Morgan Stanley Dean Witter Value Fund
Morgan Stanley Dean Witter World Wide Income Trust
A-1
<PAGE> 1
EXHIBIT 8(a)
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
MORGAN STANLEY DEAN WITTER TRUST FSB
[open-end funds]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1 Terms of Appointment........................................ 1
Article 2 Fees and Expenses........................................... 3
Article 3 Representations and Warranties of MSDW TRUST................ 3
Article 4 Representations and Warranties of the Fund.................. 3
Article 5 Duty of Care and Indemnification............................ 4
Article 6 Documents and Covenants of the Fund and MSDW TRUST.......... 5
Article 7 Duration and Termination of Agreement....................... 6
Article 8 Assignment.................................................. 6
Article 9 Affiliations................................................ 7
Article 10 Amendment................................................... 7
Article 11 Applicable Law.............................................. 7
Article 12 Miscellaneous............................................... 7
Article 13 Merger of Agreement......................................... 8
Article 14 Personal Liability.......................................... 8
</TABLE>
<PAGE> 3
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 22nd day of June, 1998 by and
between each of the Funds listed on the signature pages hereof, each of such
Funds acting severally on its own behalf and not jointly with any of such other
Funds (each such Fund hereinafter referred to as the "Fund"), each such Fund
having its principal office and place of business at Two World Trade Center, New
York, New York, 10048, and MORGAN STANLEY DEAN WITTER TRUST FSB ("MSDW TRUST"),
a federally chartered savings bank, having its principal office and place of
business at Harborside Financial Center, Plaza Two, Jersey City, New Jersey
07311.
WHEREAS, the Fund desires to appoint MSDW TRUST as its transfer agent,
dividend disbursing agent and shareholder servicing agent and MSDW TRUST desires
to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF MSDW TRUST
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints MSDW TRUST to act as, and MSDW TRUST agrees to
act as, the transfer agent for each series and class of shares of the Fund,
whether now or hereafter authorized or issued ("Shares"), dividend disbursing
agent and shareholder servicing agent in connection with any accumulation,
open-account or similar plans provided to the holders of such Shares
("Shareholders") and set out in the currently effective prospectus and statement
of additional information ("prospectus") of the Fund, including without
limitation any periodic investment plan or periodic withdrawal program.
1.2 MSDW TRUST agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and MSDW TRUST, MSDW TRUST shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor
to the custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in
book form in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor
to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(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
<PAGE> 4
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934
("1934 Act") a record of the total number of Shares of the Fund
which are authorized, based upon data provided to it by the
Fund, and issued and outstanding. MSDW TRUST shall also provide
to the Fund on a regular basis the total number of Shares that
are authorized, issued and outstanding and shall notify the Fund
in case any proposed issue of Shares by the Fund would result in
an overissue. In case any issue of Shares would result in an
overissue, MSDW TRUST shall refuse to issue such Shares and
shall not countersign and issue any certificates requested for
such Shares. When recording the issuance of Shares, MSDW TRUST
shall have no obligation to take cognizance of any Blue Sky laws
relating to the issue of sale of such Shares, which functions
shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), MSDW TRUST shall:
(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing
agent in connection with dividend reinvestment, accumulation,
open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program),
including but not limited to, maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies,
receiving and tabulating proxies, mailing shareholder reports and
prospectuses to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing and filing
appropriate forms required with respect to dividends and
distributions by federal tax authorities for all Shareholders,
preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders and providing Shareholder account information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the total
number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to MSDW TRUST in writing those transactions and assets
to be treated as exempt from Blue Sky reporting for each State;
and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor
the daily purchases and sales for shareholders in each State.
The responsibility of MSDW TRUST for the Fund's status under the
securities laws of any State or other jurisdiction is limited to
the inclusion on the system of each State as to which the Fund
has informed MSDW TRUST that shares may be sold in compliance
with state securities laws and the reporting of purchases and
sales in each such State to the Fund as provided above and as
agreed from time to time by the Fund and MSDW TRUST.
(d) MSDW TRUST shall provide such additional services and functions
not specifically described herein as may be mutually agreed between MSDW
TRUST and the Fund. Procedures applicable to such services may be
established from time to time by agreement between the Fund and MSDW TRUST.
2
<PAGE> 5
ARTICLE 2 FEES AND EXPENSES
2.1 For performance by MSDW TRUST pursuant to this Agreement, each Fund
agrees to pay MSDW TRUST an annual maintenance fee for each Shareholder account
and certain transactional fees, if applicable, as set out in the respective fee
schedule attached hereto as Schedule A. Such fees and out-of-pocket expenses and
advances identified under Section 2.2 below may be changed from time to time
subject to mutual written agreement between the Fund and MSDW TRUST.
2.2 In addition to the fees paid under Section 2.1 above, the Fund agrees
to reimburse MSDW TRUST for out of pocket expenses in connection with the
services rendered by MSDW TRUST hereunder. In addition, any other expenses
incurred by MSDW TRUST at the request or with the consent of the Fund will be
reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to MSDW TRUST by the Fund
upon request prior to the mailing date of such materials.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF MSDW TRUST
MSDW TRUST represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is in
New Jersey.
3.2 It is and will remain registered with the U.S. Securities and Exchange
Commission ("SEC") as a Transfer Agent pursuant to the requirements of Section
17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to MSDW TRUST that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Delaware or Maryland or a trust duly organized and existing
and in good standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into and
perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the "1933
Act") is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Fund being offered for sale.
3
<PAGE> 6
ARTICLE 5 DUTY OF CARE AND INDEMNIFICATION
5.1 MSDW TRUST shall not be responsible for, and the Fund shall indemnify
and hold MSDW TRUST harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of MSDW TRUST or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by MSDW TRUST or its agents or
subcontractors of information, records and documents which (i) are received
by MSDW TRUST or its agents or subcontractors and furnished to it by or on
behalf of the Fund, and (ii) have been prepared and/or maintained by the
Fund or any other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by MSDW TRUST or its agents
or subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that notice of offering of such
Shares in such State or other jurisdiction or in violation of any stop
order or other determination or ruling by any federal agency or any State
or other jurisdiction with respect to the offer or sale of such Shares in
such State or other jurisdiction.
5.2 MSDW TRUST shall indemnify and hold the Fund harmless from or against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by MSDW TRUST as a result of the lack of good faith, negligence
or willful misconduct of MSDW TRUST, its officers, employees or agents.
5.3 At any time, MSDW TRUST may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by MSDW TRUST
under this Agreement, and MSDW TRUST and its agents or subcontractors shall not
be liable and shall be indemnified by the Fund for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such counsel.
MSDW TRUST, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided to MSDW TRUST or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. MSDW TRUST, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
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.
4
<PAGE> 7
5.6 In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
ARTICLE 6 DOCUMENTS AND COVENANTS OF THE FUND AND MSDW TRUST
6.1 The Fund shall promptly furnish to MSDW TRUST the following, unless
previously furnished to Dean Witter Trust Company, the prior transfer agent of
the Fund:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of MSDW TRUST and the
execution and delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of
the Fund and signature cards bearing the signature of any officer
of the Fund or any other person authorized to sign written
instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the
Secretary of the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of MSDW TRUST and the
execution and delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of
the Fund and signature cards bearing the signature of any officer
of the Fund or any other person authorized to sign written
instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the
Secretary of the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service
offered or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as MSDW TRUST deems
to be appropriate or necessary for the proper performance of its duties.
5
<PAGE> 8
6.2 MSDW TRUST hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.3 MSDW TRUST shall prepare and keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws and regulations. To the extent required by Section
31 of the 1940 Act, and the rules and regulations thereunder, MSDW TRUST agrees
that all such records prepared or maintained by MSDW TRUST relating to the
services performed by MSDW TRUST hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such Section 31
of the 1940 Act, and the rules and regulations thereunder, and will be
surrendered promptly to the Fund on and in accordance with its request.
6.4 MSDW TRUST and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to any other person
except as may be required by law or with the prior consent of MSDW TRUST and the
Fund.
6.5 In case of any request or demands for the inspection of the Shareholder
records of the Fund, MSDW TRUST will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection. MSDW
TRUST reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to exhibit the Shareholder records to such person.
ARTICLE 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect until August 1,
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written notice,
and by MSDW TRUST on 90 days written notice, to the other party without payment
of any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, MSDW TRUST reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
ARTICLE 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.3 MSDW TRUST may, in its sole discretion and without further consent by
the Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with MSDW TRUST; provided, however,
that such person or entity has and maintains the qualifications, if any,
required to perform such obligations and duties, and that MSDW TRUST 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.
6
<PAGE> 9
ARTICLE 9 AFFILIATIONS
9.1 MSDW TRUST may now or hereafter, without the consent of or notice to
the Fund, function as transfer agent and/or shareholder servicing agent for any
other investment company registered with the SEC under the 1940 Act and for any
other issuer, including without limitation any investment company whose adviser,
administrator, sponsor or principal underwriter is or may become affiliated with
Morgan Stanley Dean Witter & Co. or any of its direct or indirect subsidiaries
or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the case
may be), officers, employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the Fund's investment
adviser and/or distributor, are or may be interested in MSDW TRUST as directors,
officers, employees, agents and shareholders or otherwise, and that the
directors, officers, employees, agents and shareholders of MSDW TRUST may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
ARTICLE 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors or the Board of Trustees (as the case may be) of the Fund.
ARTICLE 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
ARTICLE 12 MISCELLANEOUS
12.1 In the event that one or more additional investment companies managed
or administered by Morgan Stanley Dean Witter Advisors Inc. or any of its
affiliates ("Additional Funds") desires to retain MSDW TRUST to act as transfer
agent, dividend disbursing agent and/or shareholder servicing agent, and MSDW
TRUST desires to render such services, such services shall be provided pursuant
to a letter agreement, substantially in the form of Exhibit A hereto, between
MSDW TRUST and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to MSDW TRUST an affidavit of loss or non-receipt by
the holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to MSDW TRUST and the
Fund issued by a surety company satisfactory to MSDW TRUST, except that MSDW
TRUST may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as MSDW
TRUST deems appropriate indemnifying MSDW TRUST and the Fund for the issuance of
a replacement certificate, in cases where the alleged loss is in the amount of
$1,000 or less.
12.3 In the event that any check or other order for payment of money on the
account of any Shareholder or new investor is returned unpaid for any reason,
MSDW TRUST will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as MSDW TRUST may, in its sole
discretion, deem appropriate or as the Fund and, if applicable, the Distributor
may instruct MSDW TRUST.
12.4 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or to MSDW TRUST shall be
sufficiently given if addressed to that party and
7
<PAGE> 10
received by it at its office set forth below or at such other place as it may
from time to time designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To MSDW TRUST:
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
ARTICLE 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
ARTICLE 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts business trust, a
copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
MORGAN STANLEY DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Morgan Stanley Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
8
<PAGE> 11
8. Morgan Stanley Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
EQUITY FUNDS
10. Morgan Stanley Dean Witter American Value Fund
11. Morgan Stanley Dean Witter Mid-Cap Growth Fund
12. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13. Morgan Stanley Dean Witter Capital Growth Securities
14. Morgan Stanley Dean Witter Global Dividend Growth Securities
15. Morgan Stanley Dean Witter Income Builder Fund
16. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
17. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
18. Morgan Stanley Dean Witter Developing Growth Securities Trust
19. Morgan Stanley Dean Witter Health Sciences Trust
20. Morgan Stanley Dean Witter Capital Appreciation Fund
21. Morgan Stanley Dean Witter Information Fund
22. Morgan Stanley Dean Witter Value-Added Market Series
23. Morgan Stanley Dean Witter European Growth Fund Inc.
24. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
25. Morgan Stanley Dean Witter International SmallCap Fund
26. Morgan Stanley Dean Witter Japan Fund
27. Morgan Stanley Dean Witter Utilities Fund
28. Morgan Stanley Dean Witter Global Utilities Fund
29. Morgan Stanley Dean Witter Special Value Fund
30. Morgan Stanley Dean Witter Financial Services Trust
31. Morgan Stanley Dean Witter Market Leader Trust
32. Morgan Stanley Dean Witter Fund of Funds
33. Morgan Stanley Dean Witter S&P 500 Index Fund
34. Morgan Stanley Dean Witter Competitive Edge Fund
35. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
36. Morgan Stanley Dean Witter Equity Fund
37. Morgan Stanley Dean Witter Growth Fund
38. Morgan Stanley Dean Witter S&P 500 Select Fund
BALANCED FUNDS
39. Morgan Stanley Dean Witter Balanced Growth Fund
40. Morgan Stanley Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
41. Morgan Stanley Dean Witter Strategist Fund
42. Dean Witter Global Asset Allocation Fund
FIXED INCOME FUNDS
43. Morgan Stanley Dean Witter High Yield Securities Inc.
44. Morgan Stanley Dean Witter High Income Securities
45. Morgan Stanley Dean Witter Convertible Securities Trust
46. Morgan Stanley Dean Witter Intermediate Income Securities
47. Morgan Stanley Dean Witter Short-Term Bond Fund
48. Morgan Stanley Dean Witter World Wide Income Trust
49. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
50. Morgan Stanley Dean Witter Diversified Income Trust
9
<PAGE> 12
51. Morgan Stanley Dean Witter U.S. Government Securities Trust
52. Morgan Stanley Dean Witter Federal Securities Trust
53. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
54. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
55. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
56. Morgan Stanley Dean Witter Limited Term Municipal Trust
57. Morgan Stanley Dean Witter California Tax-Free Income Fund
58. Morgan Stanley Dean Witter New York Tax-Free Income Fund
59. Morgan Stanley Dean Witter Hawaii Municipal Trust
60. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
61. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
SPECIAL PURPOSE FUNDS
62. Dean Witter Retirement Series
63. Morgan Stanley Dean Witter Variable Investment Series
64. Morgan Stanley Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
65. TCW/DW North American Government Income Trust
66. TCW/DW Latin American Growth Fund
67. TCW/DW Income and Growth Fund
68. TCW/DW Small Cap Growth Fund
69. TCW/DW Total Return Trust
70. TCW/DW Global Telecom Trust
71. TCW/DW Mid-Cap Equity Trust
72. TCW/DW Emerging Markets Opportunities Trust
By:
------------------------------------
Barry Fink
Vice President and General Counsel
ATTEST:
- ----------------------------------------------------
Assistant Secretary
MORGAN STANLEY DEAN WITTER TRUST FSB
By: /s/ JOHN VAN HEUVELEN
------------------------------------
John Van Heuvelen
President
ATTEST:
- ----------------------------------------------------
Executive Vice President
10
<PAGE> 13
EXHIBIT A
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (inset name of investment company) a (Massachusetts
business trust/ Maryland corporation) (the "Fund"), desires to employ and
appoint Morgan Stanley Dean Witter Trust FSB ("MSDW TRUST") to act as transfer
agent for each series and class of shares of the Fund, whether now or hereafter
authorized or issued ("Shares"), dividend disbursing agent and shareholder
servicing agent, registrar and agent in connection with any accumulation,
open-account or similar plan provided to the holders of Shares, including
without limitation any periodic investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the Fund
to MSDW TRUST of fees as set out in the fee schedule attached hereto as Schedule
A, MSDW TRUST shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate MSDW TRUST's acceptance of employment and appointment by
the Fund in the capacities set forth above by so indicating in the space
provided below.
Very truly yours,
(name of fund)
By: /s/ BARRY FINK
------------------------------------
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
- ----------------------------------------------------
Its:
- ----------------------------------------------------
Date:
- --------------------------------------------------
11
<PAGE> 14
SCHEDULE A
Fund: Morgan Stanley Dean Witter Equity Fund
<TABLE>
<C> <S>
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.
</TABLE>
<PAGE> 1
EXHIBIT 8(b)
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995, and amended as of June
22, 1998, by and between Morgan Stanley Dean Witter Advisors Inc., a Delaware
corporation (herein referred to as "MSDW Advisors"), and Morgan Stanley Dean
Witter Services Company Inc., a Delaware corporation (herein referred to as
"MSDW Services").
WHEREAS, MSDW Advisors has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which MSDW Advisors is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, MSDW Advisors desires to retain MSDW Services to perform the
administrative services as described below; and
WHEREAS, MSDW Services desires to be retained by MSDW Advisors to perform
such administrative services:
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. MSDW Services agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, MSDW
Services shall (i) administer the Fund's business affairs and supervise the
overall day-to-day operations of the Fund (other than rendering investment
advice); (ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts and
other records required under the Investment Company Act of 1940, as amended (the
"Act"), the notification to the Fund and MSDW Advisors of available funds for
investment, the reconciliation of account information and balances among the
Fund's custodian, transfer agent and dividend disbursing agent and MSDW
Advisors, and the calculation of the net asset value of the Fund's shares; (iii)
provide the Fund with the services of persons competent to perform such
supervisory, administrative and clerical functions as are necessary to provide
effective operation of the Fund; (iv) oversee the performance of administrative
and professional services rendered to the Fund by others, including its
custodian, transfer agent and dividend disbursing agent, as well as accounting,
auditing and other services; (v) provide the Fund with adequate general office
space and facilities; (vi) assist in the preparation and the printing of the
periodic updating of the Fund's registration statement and prospectus (and, in
the case of an open-end Fund, the statement of additional information), tax
returns, proxy statements, and reports to its shareholders and the Securities
and Exchange Commission; and (vii) monitor the compliance of the Fund's
investment policies and restrictions.
In the event that MSDW Advisors enters into an Investment Management
Agreement with another investment company, and wishes to retain MSDW Services to
perform administrative services hereunder, it shall notify MSDW Services in
writing. If MSDW Services is willing to render such services, it shall notify
MSDW Advisors in writing, whereupon such other Fund shall become a Fund as
defined herein.
2. MSDW Services shall, at its own expense, maintain such staff and employ
or retain such personnel and consult with such other persons as it shall from
time to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of MSDW Services shall be deemed to include
officers of MSDW Services and persons employed or otherwise retained by MSDW
Services (including officers and employees of MSDW Advisors, with the consent of
MSDW Advisors) to furnish services, statistical and other factual data,
information with respect to technical and scientific
<PAGE> 2
developments, and such other information, advice and assistance as MSDW Services
may desire. MSDW Services shall maintain each Fund's records and books of
account (other than those maintained by the Fund's transfer agent, registrar,
custodian and other agencies). All such books and records so maintained shall be
the property of the Fund and, upon request therefor, MSDW Services shall
surrender to MSDW Advisors or to the Fund such of the books and records so
requested.
3. MSDW Advisors will, from time to time, furnish or otherwise make
available to MSDW Services such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as MSDW Services
may reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by MSDW Services, MSDW Advisors shall pay to MSDW Services
monthly compensation calculated daily (in the case of an open-end Fund) or
weekly (in the case of a closed-end Fund) by applying the annual rate or rates
set forth on Schedule B to the net assets of each Fund. Except as hereinafter
set forth, (i) in the case of an open-end Fund, compensation under this
Agreement shall be calculated by applying 1/365th of the annual rate or rates to
the Fund's or the Series' daily net assets determined as of the close of
business on that day or the last previous business day and (ii) in the case of a
closed-end Fund, compensation under this Agreement shall be calculated by
applying the annual rate or rates to the Fund's average weekly net assets
determined as of the close of the last business day of each week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth on Schedule B. Subject to the
provisions of paragraph 5 hereof, payment of MSDW Services' compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to MSDW Advisors pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof imposed
by state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Morgan Stanley Dean Witter Variable Investment Series or any
Series thereof, the expense limitation specified in the Fund's Investment
Management Agreement, the fee payable hereunder shall be reduced on a pro rata
basis in the same proportion as the fee payable by the Fund under the Investment
Management Agreement is reduced.
6. MSDW Services shall bear the cost of rendering the administrative
services to be performed by it under this Agreement, and shall, at its own
expense, pay the compensation of the officers and employees, if any, of the Fund
employed by MSDW Services, and such clerical help and bookkeeping services as
MSDW Services shall reasonably require in performing its duties hereunder.
7. MSDW Services will use its best efforts in the performance of
administrative activities on behalf of each Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, MSDW Services shall not be liable to the Fund or any of
its investors for any error of judgment or mistake of law or for any act or
omission by MSDW Services or for any losses sustained by the Fund or its
investors. It is understood that, subject to the terms and conditions of the
Investment Management Agreement between each Fund and MSDW Advisors, MSDW
Advisors shall retain ultimate responsibility for all services to be performed
hereunder by MSDW Services. MSDW Services shall indemnify MSDW Advisors and hold
it
2
<PAGE> 3
harmless from any liability that MSDW Advisors may incur arising out of any act
or failure to act by MSDW Services in carrying out its responsibilities
hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, MSDW Services, and in any person
controlling, controlled by or under common control with MSDW Services, and that
MSDW Services and any person controlling, controlled by or under common control
with MSDW Services may have an interest in the Fund. It is also understood that
MSDW Services and any affiliated persons thereof or any persons controlling,
controlled by or under common control with MSDW Services have and may have
advisory, management, administration service or other contracts with other
organizations and persons, and may have other interests and businesses, and
further may purchase, sell or trade any securities or commodities for their own
accounts or for the account of others for whom they may be acting.
9. This Agreement shall continue until April 30, 1999, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the event that the Investment Management
Agreement between any Fund and MSDW Advisors is terminated, this Agreement will
automatically terminate with respect to such Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
11. This Agreement may be assigned by either party with the written consent
of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.
MORGAN STANLEY DEAN WITTER
ADVISORS INC.
By:
------------------------------------
Attest:
- --------------------------------------
MORGAN STANLEY DEAN WITTER SERVICES
COMPANY INC.
By:
------------------------------------
Attest:
- --------------------------------------
3
<PAGE> 4
SCHEDULE A
MORGAN STANLEY DEAN WITTER FUNDS
AS AMENDED AS OF JUNE 25, 1999
<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. Morgan Stanley Dean Witter Aggressive Equity Fund
6. Morgan Stanley Dean Witter American Opportunities Fund
7. Morgan Stanley Dean Witter Balanced Growth Fund
8. Morgan Stanley Dean Witter Balanced Income Fund
9. Morgan Stanley Dean Witter California Tax-Free Daily Income
Trust
10. Morgan Stanley Dean Witter California Tax-Free Income Fund
11. Morgan Stanley Dean Witter Capital Growth Securities
12. Morgan Stanley Dean Witter Competitive Edge Fund, "Best
Ideas" Portfolio
13. Morgan Stanley Dean Witter Convertible Securities Trust
14. Morgan Stanley Dean Witter Developing Growth Securities
Trust
15. Morgan Stanley Dean Witter Diversified Income Trust
16. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
17. Morgan Stanley Dean Witter Equity Fund
18. Morgan Stanley Dean Witter European Growth Fund Inc.
19. Morgan Stanley Dean Witter Federal Securities Trust
20. Morgan Stanley Dean Witter Financial Services Trust
21. Morgan Stanley Dean Witter Fund of Funds
</TABLE>
<TABLE>
<C> <S> <C>
(i) Domestic Portfolio
(ii) International Portfolio
</TABLE>
<TABLE>
<C> <S>
22. Morgan Stanley Dean Witter Global Dividend Growth Securities
23. Morgan Stanley Dean Witter Global Utilities Fund
24. Morgan Stanley Dean Witter Growth Fund
25. Morgan Stanley Dean Witter Hawaii Municipal Trust
26. Morgan Stanley Dean Witter Health Sciences Trust
27. Morgan Stanley Dean Witter High Yield Securities Inc.
28. Morgan Stanley Dean Witter Income Builder Fund
29. Morgan Stanley Dean Witter Information Fund
30. Morgan Stanley Dean Witter Intermediate Income Securities
31. Morgan Stanley Dean Witter International Fund
32. Morgan Stanley Dean Witter International SmallCap Fund
33. Morgan Stanley Dean Witter Japan Fund
34. Morgan Stanley Dean Witter Latin American Growth Fund
35. Morgan Stanley Dean Witter Limited Term Municipal Trust
36. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
37. Morgan Stanley Dean Witter Managers Focus Fund
38. Morgan Stanley Dean Witter Market Leader Trust
39. Morgan Stanley Dean Witter Mid-Cap Dividend Growth
Securities
40. Morgan Stanley Dean Witter Mid-Cap Equity Trust
41. Morgan Stanley Dean Witter Multi-State Municipal Series
Trust
42. Morgan Stanley Dean Witter Natural Resource Development
Securities Inc.
</TABLE>
A-1
<PAGE> 5
<TABLE>
<C> <S>
43. Morgan Stanley Dean Witter New York Municipal Money Market
Trust
44. Morgan Stanley Dean Witter New York Tax-Free Income Fund
45. Morgan Stanley Dean Witter North American Government Income
Trust
46. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
47. Morgan Stanley Dean Witter Precious Metals and Minerals
Trust
48. Morgan Stanley Dean Witter Real Estate Fund
49. Morgan Stanley Dean Witter Select Dimensions Investment
Series
</TABLE>
<TABLE>
<C> <S> <C>
(i) American Opportunities Portfolio
(ii) Balanced Growth Portfolio
(iii) Developing Growth Portfolio
(iv) Diversified Income Portfolio
(v) Dividend Growth Portfolio
(vi) Emerging Markets Portfolio
(vii) Global Equity Portfolio
(viii) Growth Portfolio
(ix) Mid-Cap Growth Portfolio
(x) Money Market Portfolio
(xi) North American Government Securities Portfolio
(xii) Utilities Portfolio
(xiii) Value-Added Market Portfolio
</TABLE>
<TABLE>
<C> <S>
50. Morgan Stanley Dean Witter Select Municipal Reinvestment
Fund
51. Morgan Stanley Dean Witter Short-Term Bond Fund
52. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
53. Morgan Stanley Dean Witter Small Cap Growth Fund
54. Morgan Stanley Dean Witter Special Value Fund
55. Morgan Stanley Dean Witter Strategist Fund
56. Morgan Stanley Dean Witter S&P 500 Index Fund
57. Morgan Stanley Dean Witter S&P 500 Select Fund
58. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
59. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
60. Morgan Stanley Dean Witter Total Return Trust
61. Morgan Stanley Dean Witter U.S. Government Securities Trust
62. Morgan Stanley Dean Witter U.S. Government Money Market
Trust
63. Morgan Stanley Dean Witter Utilities Fund
64. Morgan Stanley Dean Witter Value Fund
65. Morgan Stanley Dean Witter Value-Added Market Series
66. Morgan Stanley Dean Witter Variable Investment Series
</TABLE>
<TABLE>
<C> <S> <C>
(i) Aggressive Equity Portfolio
(ii) Capital Growth Portfolio
(iii) Competitive Edge 'Best Ideas' Portfolio
(iv) Dividend Growth Portfolio
(v) Equity Portfolio
(vi) European Growth Portfolio
(vii) Global Dividend Growth Portfolio
(viii) High Yield Portfolio
(ix) Income Builder Portfolio
(x) Money Market Portfolio
(xi) Quality Income Plus Portfolio
</TABLE>
A-2
<PAGE> 6
<TABLE>
<C> <S> <C>
(xii) Pacific Growth Portfolio
(xiii) S&P 500 Index Portfolio
(xiv) Short-Term Bond Portfolio
(xv) Strategist Portfolio
(xvi) Utilities Portfolio
</TABLE>
<TABLE>
<C> <S>
67. Morgan Stanley Dean Witter World Wide Income Trust
68. Morgan Stanley Dean Witter Worldwide High Income Fund
CLOSED-END FUNDS
69. Morgan Stanley Dean Witter High Income Advantage Trust
70. Morgan Stanley Dean Witter High Income Advantage Trust II
71. Morgan Stanley Dean Witter High Income Advantage Trust III
72. Morgan Stanley Dean Witter Income Securities Inc.
73. Morgan Stanley Dean Witter Government Income Trust
74. Morgan Stanley Dean Witter Insured Municipal Bond Trust
75. Morgan Stanley Dean Witter Insured Municipal Trust
76. Morgan Stanley Dean Witter Insured Municipal Income Trust
77. Morgan Stanley Dean Witter California Insured Municipal
Income Trust
78. Morgan Stanley Dean Witter Insured Municipal Securities
79. Morgan Stanley Dean Witter Insured California Municipal
Securities
80. Morgan Stanley Dean Witter Quality Municipal Investment
Trust
81. Morgan Stanley Dean Witter Quality Municipal Income Trust
82. Morgan Stanley Dean Witter Quality Municipal Securities
83. Morgan Stanley Dean Witter California Quality Municipal
Securities
84. Morgan Stanley Dean Witter New York Quality Municipal
Securities
</TABLE>
A-3
<PAGE> 7
SCHEDULE B
MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF JUNE 25, 1999
Monthly compensation calculated daily by applying the following annual
rates to a fund's daily net assets:
FIXED INCOME FUNDS
Morgan Stanley Dean Witter
Balanced Income Fund 0.060% of the daily net assets.
Morgan Stanley 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.
Morgan Stanley 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.
Morgan Stanley Dean Witter
Diversified Income Trust 0.040% of the daily net assets.
Morgan Stanley 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.
Morgan Stanley Dean Witter
Hawaii Municipal Trust 0.035% of the daily net assets.
B-1
<PAGE> 8
Morgan Stanley 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 exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $2 billion; 0.0325% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.030% of the portion of daily net assets
exceeding $3 billion.
Morgan Stanley Dean Witter
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.
Morgan Stanley Dean Witter
Limited Term Municipal Trust 0.050% of the daily net assets.
Morgan Stanley Dean Witter
Multi-State Municipal Series
Trust
(10 Series) 0.035% of the daily net assets.
Morgan Stanley 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.
Morgan Stanley Dean Witter
North American Government
Income Trust 0.039% of the portion of the daily net assets
not exceeding $3 billion; and 0.036% of the
portion of the daily net assets exceeding $3
billion.
Morgan Stanley Dean Witter
Select Dimensions Investment
Series--Diversified Income
Portfolio 0.040% of the daily net assets.
North American Government
Securities Portfolio 0.039% of the daily net assets.
Morgan Stanley Dean Witter
Select Municipal Reinvestment
Fund 0.050% of the daily net assets.
Morgan Stanley Dean Witter
Short-Term Bond Fund 0.070% of the daily net assets.
Morgan Stanley Dean Witter
Short-Term U.S. Treasury
Trust 0.035% of the daily net assets.
Morgan Stanley 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.
B-2
<PAGE> 9
Morgan Stanley 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 exceeding $1
billion but not exceeding $1.5 billion;
0.045% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2
billion; 0.0425% of the portion of the daily
net assets exceeding $2 billion but not
exceeding $2.5 billion; 0.040% of the portion
of the daily net assets exceeding $2.5
billion but not exceeding $5 billion; 0.0375%
of the portion of the daily net assets
exceeding $5 billion but not exceeding $7.5
billion; 0.035% of the portion of the daily
net assets exceeding $7.5 billion but not
exceeding $10 billion; 0.0325% of the portion
of the daily net assets exceeding $10 billion
but not exceeding $12.5 billion; and 0.030%
of the portion of the daily net assets
exceeding $12.5 billion.
Morgan Stanley Dean Witter
Variable Investment Series--
High Yield Portfolio 0.050% of the portion of the daily net assets
not exceeding $500 million; and 0.0425% of
the daily net assets exceeding $500 million.
Quality Income Plus Portfolio 0.050% of the portion of the daily the net
assets up to $500 million; and 0.045% of the
portion of the daily net assets exceeds $500
million.
Short-Term Bond Portfolio 0.045% of the daily net assets.
Morgan Stanley 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 of the
exceeding $500 million but not exceeding $750
million; 0.040% of the portion of the daily
net assets exceeding $750 million but not
exceeding $1 billion; and 0.030% of the
portion of the daily net assets exceeding $1
billion.
Morgan Stanley Dean Witter
Worldwide High Income Fund 0.060% of the daily net assets.
EQUITY FUNDS
Morgan Stanley Dean Witter
Aggressive Equity Fund 0.075% of the daily net assets.
Morgan Stanley Dean Witter
American Opportunities 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.
Morgan Stanley Dean Witter
Balanced Growth Fund 0.060% of the portion of the daily net assets
not exceeding $500 million; and 0.0575% of
the portion of the daily net assets exceeding
$500 million.
B-3
<PAGE> 10
Morgan Stanley 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.
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
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.
Morgan Stanley 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.
Morgan Stanley Dean Witter
Equity Fund 0.051% of the daily net assets.
Morgan Stanley Dean Witter
European Growth Fund Inc. 0.057% of the portion of the daily net assets
not exceeding $500 million; 0.054% of the
portion of the daily net assets exceeding
$500 million but not exceeding $2 billion;
and 0.051% of the portion of the daily net
assets exceeding $2 billion.
Morgan Stanley Dean Witter
Financial Services Trust 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.
Morgan Stanley Dean Witter Fund
of Funds --
Domestic Portfolio None
International Portfolio None
Morgan Stanley 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
B-4
<PAGE> 11
but not exceeding $2.5 billion; 0.0675% of
the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3.5 billion;
0.0650% of the portion of the daily net
assets exceeding $3.5 billion but not
exceeding $4.5 billion; and 0.0625% of the
portion of the daily net assets exceeding
$4.5 billion.
Morgan Stanley Dean Witter
Global Utilities Fund 0.065% of the portion of the daily net assets
not exceeding $500 million; 0.0625% of the
portion of the daily net assets exceeding
$500 million but not exceeding $1 billion;
and 0.060% of the portion of the daily net
assets exceeding $1 billion.
Morgan Stanley Dean Witter
Growth Fund 0.048% of the portion of 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
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.
Morgan Stanley 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.
Morgan Stanley 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.
Morgan Stanley Dean Witter
International Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter
International SmallCap Fund 0.069% of the daily net assets.
Morgan Stanley Dean Witter
Japan Fund 0.057% of the daily net assets.
Morgan Stanley Dean Witter
Latin American 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.
Morgan Stanley Dean Witter
Managers Focus Fund 0.0625% of the daily net assets.
Morgan Stanley Dean Witter
Market Leader Trust 0.075% of the daily net assets.
Morgan Stanley Dean Witter
Mid-Cap Dividend
Growth Securities 0.075 of the daily net assets.
Morgan Stanley Dean Witter
Mid-Cap
Equity Trust 0.035% of the portion of the daily net assets
not exceeding $500 million; and 0.0325% of
the portion of the daily net assets exceeding
$500 million.
B-5
<PAGE> 12
Morgan Stanley Dean Witter
Natural Resources 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.
Morgan Stanley Dean Witter
Pacific Growth Fund Inc. 0.057% of the portion of the daily net assets
not exceeding $1 billion; 0.054% of the
portion of the daily net assets exceeding $1
billion but not exceeding $2 billion; and
0.051% of the portion of the daily net assets
exceeding $2 billion.
Morgan Stanley Dean Witter
Precious Metals and
Minerals Trust 0.080% of the daily net assets.
Morgan Stanley Dean Witter Real
Estate Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter
Select Dimensions Investment
Series--American Opportunities
Portfolio 0.0625% of the portion of the daily net
assets not exceeding $500 million; and 0.060%
of the portion of the daily net assets
exceeding $500 million.
Balanced Growth Portfolio 0.065% of the daily net assets.
Developing Growth Portfolio 0.050% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net
assets not exceeding $500 million; 0.050% of
the portion of the daily net assets exceeding
$500 million but not exceeding $1 billion;
and 0.0475% of the portion of the daily net
assets exceeding $1 billion.
Emerging Markets Portfolio 0.075% of the daily net assets.
Global Equity Portfolio 0.10% of the daily net assets.
Growth Portfolio 0.048% of the daily net assets.
Mid-Cap Growth Portfolio 0.075% of the daily net assets.
Utilities Portfolio 0.065% of the daily net assets.
Value-Added Market Portfolio 0.050% of the daily net assets.
Morgan Stanley Dean Witter
Small Cap Growth Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter
Special Value Fund 0.075% of the portion of the daily net assets
not exceeding $500 million; and 0.0725% of
the portion of daily net assets exceeding
$500 million.
Morgan Stanley 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.
Morgan Stanley Dean Witter
S&P 500 Index Fund 0.040% of the portion of the daily net assets
not exceeding $1.5 billion; 0.0375% of the
portion of daily net assets
B-6
<PAGE> 13
exceeding $1.5 billion but not exceeding $3
billion; and 0.035% of the portion of daily
net assets exceeding $3 billion.
Morgan Stanley Dean Witter
S&P 500 Select Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter
Return Trust 0.045% of the daily net assets.
Morgan Stanley 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.
Morgan Stanley Dean Witter
Value Fund 0.060% of the daily net assets.
Morgan Stanley 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.
Morgan Stanley Dean Witter
Variable Investment Series--
Aggressive Equity Portfolio
0.075% of the daily net assets.
Capital Growth Portfolio 0.065% of the daily net assets.
Competitive Edge "Best Ideas"
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; 0.050% of
the portion of the daily net assets exceeding
$500 million but not exceeding $1 billion;
0.0475% of the portion of the daily net
assets exceeding $1.0 billion but not
exceeding $2.0 billion; 0.045% of the portion
of the daily net assets exceeding $2 billion
but not exceeding $3 billion; and 0.0425% of
the portion of the daily net assets exceeding
$3 billion.
Equity Portfolio 0.050% of the portion of the daily net assets
not exceeding $1 billion; and 0.0475% of the
portion of the daily net assets exceeding $1
billion.
European Growth Portfolio 0.057% of the portion of the daily net assets
not exceeding $500 million; and 0.054% of the
portion of the daily net assets exceeding
$500 million.
B-7
<PAGE> 14
Global Dividend Growth
Portfolio 0.075% of the portion of the daily net assets
not exceeding $1 billion; and 0.0725% of the
portion of daily net assets exceeding $1
billion.
Income Builder Portfolio 0.075% of the daily net assets.
Pacific Growth Portfolio 0.057% of the daily net assets.
S&P 500 Index Portfolio 0.040% of the daily net assets.
Strategist Portfolio 0.050% of the portion of the daily net assets
not exceeding $1.5 billion; and 0.0475% of
the portion of the daily net assets exceeding
$1.5 billion.
Utilities Portfolio 0.065% of the portion of the daily net assets
not exceeding $500 million; 0.055% of the
portion of the daily net assets exceeding
$500 million but not exceeding $1 billion;
and 0.0525% of the portion of the daily net
assets exceeding $1 billion.
MONEY MARKET FUNDS
Active Assets Trust:
(1) Active Assets Tax-Free
Trust
(2) Active Assets California
Tax-Free Trust
(3) 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
Trust $3 billion.
(4) Active Assets Money Trust 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; 0.025% of the portion
of the daily net assets exceeding $3 billion
but not exceeding $15 billion; 0.0249% of the
portion of the daily net assets exceeding $15
billion but not exceeding $17.5 billion; and
0.0248% of the portion of the daily net
assets exceeding $17.5 billion.
Morgan Stanley 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;
B-8
<PAGE> 15
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Morgan Stanley Dean Witter
Liquid 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.
Morgan Stanley 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.
Morgan Stanley Dean Witter
Select Dimensions Investment
Series--Money Market Portfolio 0.050% of the daily net assets.
Morgan Stanley 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
B-9
<PAGE> 16
billion; 0.030% of the portion of the daily
net assets exceeding $2 billion but not
exceeding $2.5 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net
assets exceeding $3 billion.
Morgan Stanley Dean Witter U.S.
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.
Morgan Stanley Dean Witter
Variable Investment Series--
Money Market Portfolio 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;
and 0.0375% of the portion of the daily net
assets exceeding $750 million.
Monthly compensation calculated weekly by applying the following annual
rates to a fund's weekly net assets:
CLOSED-END FUNDS
Morgan Stanley Dean Witter
Government Income Trust 0.060% of the average weekly net assets.
Morgan Stanley Dean Witter
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.
Morgan Stanley Dean Witter
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.
Morgan Stanley Dean Witter
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
B-10
<PAGE> 17
weekly net assets exceeding $250 million and
not exceeding $500 million; 0.050% of the
portion of average weekly net assets
exceeding $500 million and not exceeding $750
million; 0.040% of the portion of the average
weekly net assets exceeding $750 million and
not exceeding $1 billion; and 0.030% of the
portion of average weekly net assets
exceeding $1 billion.
Morgan Stanley Dean Witter
Income Securities Inc. 0.050% of the average weekly net assets.
Morgan Stanley Dean Witter
Insured Municipal Bond Trust 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
Insured Municipal Trust 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
Insured Municipal Income
Trust 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
California Insured Municipal
Income Trust 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
Quality Municipal Investment
Trust 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
New York Quality Municipal
Securities 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
Quality Municipal Income
Trust 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
Quality Municipal Securities 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
California Quality Municipal
Securities 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
Insured Municipal Securities 0.035% of the average weekly net assets.
Morgan Stanley Dean Witter
Insured California Municipal
Securities 0.035% of the average weekly net assets.
B-11
<PAGE> 1
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated July
6, 1999, relating to the financial statements and financial highlights 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 "Custodian and Independent
Accountants" and "Experts" in such Statement of Additional Information and to
the reference to us under the heading "Financial Highlights" in such Prospectus.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 23, 1999
<PAGE> 1
EXHIBIT 14
MORGAN STANLEY DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18F-3
INTRODUCTION
This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), effective as of
July 28, 1997, and amended as of June 22, 1998. The Plan relates to shares of
the open-end investment companies to which Morgan Stanley Dean Witter Advisors
Inc. acts as investment manager, that are listed on Schedule A, as may be
amended from time to time (each, a "Fund" and collectively, the "Funds"). The
Funds are distributed pursuant to a system (the "Multiple Class System") in
which each class of shares (each, a "Class" and collectively, the "Classes") of
a Fund represents a pro rata interest in the same portfolio of investments of
the Fund and differs only to the extent outlined below.
I. DISTRIBUTION ARRANGEMENTS
One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition, pursuant
to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan of
Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described below.
1. Class A Shares
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under which
the sales charges are subject to reduction are set forth in each Fund's current
prospectus. As stated in each Fund's current prospectus, Class A shares may be
purchased at net asset value (without a FESL): (i) in the case of certain large
purchases of such shares; and (ii) by certain limited categories of investors,
in each case, under the circumstances and conditions set forth in each Fund's
current prospectus. Class A shares purchased at net asset value may be subject
to a contingent deferred sales charge ("CDSC") on redemptions made within one
year of purchase. Further information relating to the CDSC, including the manner
in which it is calculated, is set forth in paragraph 6 below. Class A shares are
also subject to payments under each Fund's 12b-1 Plan to reimburse Morgan
Stanley Dean Witter Distributors Inc., Dean Witter Reynolds Inc. ("DWR"), its
affiliates and other broker-dealers for distribution expenses incurred by them
specifically on behalf of the Class, assessed at an annual rate of up to 0.25%
of average daily net assets. The entire amount of the 12b-1 fee represents a
service fee within the meaning of National Association of Securities Dealers,
Inc. ("NASD") guidelines.
2. Class B Shares
Class B shares are offered without a FESL, but will in most cases be
subject to a six-year declining CDSC which is calculated in the manner set forth
in paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The schedule
of CDSC charges applicable to each Fund is set forth in each Fund's current
prospectus. With the exception of certain of the Funds which have a different
formula described below (Morgan Stanley Dean Witter American Value Fund, Morgan
Stanley Dean Witter Natural Resource Development Securities Inc., Morgan Stanley
Dean Witter Strategist Fund and Morgan Stanley Dean Witter
<PAGE> 2
Dividend Growth Securities Inc.)(1), Class B shares are also subject to a fee
under each Fund's respective 12b-1 Plan, assessed at the annual rate of up to
1.0% of either: (a) the lesser of (i) the average daily aggregate gross sales of
the Fund's Class B shares since the inception of the Fund (not including
reinvestment of dividends or capital gains distributions), less the average
daily aggregate net asset value of the Fund's Class B shares redeemed since the
Fund's inception upon which a CDSC has been imposed or waived, or (ii) the
average daily net assets of Class B; or (b) the average daily net assets of
Class B. A portion of the 12b-1 fee equal to up to 0.25% of the Fund's average
daily net assets is characterized as a service fee within the meaning of the
NASD guidelines and the remaining portion of the 12b-1 fee, if any, is
characterized as an asset-based sales charge. Also, Class B shares have a
conversion feature ("Conversion Feature") under which such shares convert to
Class A shares after a certain holding period. Details of the Conversion Feature
are set forth in Section IV below.
3. Class C Shares
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse Morgan Stanley Dean Witter Distributors Inc., DWR,
its affiliates and other broker-dealers for distribution expenses incurred by
them specifically on behalf of the Class, assessed at the annual rate of up to
1.0% of the average daily net assets of the Class. A portion of the 12b-1 fee
equal to up to 0.25% of the Fund's average daily net assets is characterized as
a service fee within the meaning of NASD guidelines. Unlike Class B shares,
Class C shares do not have the Conversion Feature.
4. Class D Shares
Class D shares are offered without imposition of a FESL, CDSC or a 12b-1
fee for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of investors,
in each case, as may be approved by the Boards of Directors/ Trustees of the
Funds and as disclosed in each Fund's current prospectus.
- ---------------
(1)The payments under the 12b-1 Plan for each of Morgan Stanley Dean Witter
American Value Fund, Morgan Stanley Dean Witter Natural Resource Development
Securities Inc. and Morgan Stanley Dean Witter Dividend Growth Securities Inc.
are assessed at the annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B shares since the inception of the
Fund's Plan (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Plan's inception upon which a contingent
deferred sales charge has been imposed or waived, or (b) the average daily net
assets of Class B attributable to shares issued, net of related shares
redeemed, since inception of the Plan. The payments under the 12b-1 Plan for
the Morgan Stanley Dean Witter Strategist Fund are assessed at the annual rate
of: (i) 1% of the lesser of (a) the average daily aggregate gross sales of the
Fund's Class B shares since the effectiveness of the first amendment of the
Plan on November 8, 1989 (not including reinvestment of dividends or capital
gains distributions), less the average daily aggregate net asset value of the
Fund's Class B shares redeemed since the effectiveness of the first amended
Plan, upon which a contingent deferred sales charge has been imposed or waived,
or (b) the average daily net assets of Class B attributable to shares issued,
net of related shares redeemed, since the effectiveness of the first amended
Plan; plus (ii) 0.25% of the average daily net assets of Class B attributable
to shares issued, net of related shares redeemed, prior to effectiveness of the
first amended Plan.
2
<PAGE> 3
5. Additional Classes of Shares
The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 under the 1940 Act.
6. Calculation of the CDSC
Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase in share value due to capital
appreciation and shares acquired through the reinvestment of dividends or
capital gains distributions. The CDSC schedule applicable to a Fund and the
circumstances in which the CDSC is subject to waiver are set forth in each
Fund's prospectus.
II. EXPENSE ALLOCATIONS
Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each Class,
except that 12b-1 fees relating to a particular Class are allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees), may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Fund's Board of Directors/Trustees.
III. CLASS DESIGNATION
All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate, SPS
Transaction Services, Inc., shares of Funds offered with a FESL, and shares of
Morgan Stanley Dean Witter Balanced Growth Fund and Morgan Stanley Dean Witter
Balanced Income Fund) have been designated Class B shares. Shares held prior to
July 28, 1997 by such employee benefit plans have been designated Class D
shares. Shares held prior to July 28, 1997 of Funds offered with a FESL have
been designated Class D shares. In addition, shares of Morgan Stanley Dean
Witter American Value Fund purchased prior to April 30, 1984, shares of Morgan
Stanley Dean Witter Strategist Fund purchased prior to November 8, 1989 and
shares of Morgan Stanley Dean Witter Natural Resource Development Securities
Inc. and Morgan Stanley Dean Witter Dividend Growth Securities Inc. purchased
prior to July 2, 1984 (with respect to such shares of each Fund, including such
proportion of shares acquired through reinvestment of dividends and capital
gains distributions as the total number of shares acquired prior to each of the
preceding dates in this sentence bears to the total number of shares purchased
and owned by the shareholder of that Fund) have been designated Class D shares.
Shares of Morgan Stanley Dean Witter Balanced Growth Fund and Morgan Stanley
Dean Witter Balanced Income Fund held prior to July 28, 1997 have been
designated Class C shares except that shares of Morgan Stanley Dean Witter
Balanced Growth Fund and Morgan Stanley Dean Witter Balanced Income Fund held
prior to July 28, 1997 that were acquired in exchange for shares of an
investment company offered with a CDSC have been designated Class B shares and
those that were acquired in exchange for shares of an investment company offered
with a FESL have been designated Class A shares.
IV. THE CONVERSION FEATURE
Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which were purchased before July 28, 1997
by trusts for which Morgan Stanley Dean Witter Trust FSB ("MSDW Trust") provides
discretionary trustee services converted to Class A shares on August 29, 1997
(the CDSC was not applicable to such shares upon the conversion). In all other
instances, Class B shares of each Fund will automatically convert to Class A
shares, based on the relative net asset values of the shares of the two Classes
on the conversion date, which will be approximately ten (10) years after the
date of the original purchase.
3
<PAGE> 4
Conversions will be effected once a month. The 10 year period will be calculated
from the last day of the month in which the shares were purchased or, in the
case of Class B shares acquired through an exchange or a series of exchanges,
from the last day of the month in which the original Class B shares were
purchased, provided that shares originally purchased before May 1, 1997 will
convert to Class A shares in May, 2007. Except as set forth below, the
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a 401(k) plan or other plan qualified under Section
401(a) of the Internal Revenue Code (the "Code") and for which MSDW Trust serves
as Trustee or DWR's Retirement Plan Services serves as recordkeeper pursuant to
a written Recordkeeping Services Agreement, all Class B shares will convert to
Class A shares on the conversion date of the first shares of a Fund purchased by
that plan. In the case of Class B shares previously exchanged for shares of an
"Exchange Fund" (as such term is defined in the prospectus of each Fund), the
period of time the shares were held in the Exchange Fund (calculated from the
last day of the month in which the Exchange Fund shares were acquired) is
excluded from the holding period for conversion. If those shares are
subsequently re-exchanged for Class B shares of a Fund, the holding period
resumes on the last day of the month in which Class B shares are reacquired.
Effectiveness of the Conversion Feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that (i) the conversion of shares does not constitute a
taxable event under the Code; (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion; and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The Conversion Feature may be suspended if the Ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B fees under the applicable Fund's 12b-1 Plan.
V. EXCHANGE PRIVILEGES
Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements of
additional information of the Funds. The exchange privilege of each Fund may be
terminated or revised at any time by the Fund upon such notice as may be
required by applicable regulatory agencies as described in each Fund's
prospectus.
VI. VOTING
Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the right
to vote on any proposed material increase in Class A's expenses, including
payments under the Class A 12b-1 Plan, if such proposal is submitted separately
to Class A shareholders. If the amount of expenses, including payments under the
Class A 12b-1 Plan, is increased materially without the approval of Class B
shareholders, the Fund will establish a new Class A for Class B shareholders
whose shares automatically convert on the same terms as applied to Class A
before the increase. In addition, each Class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one Class
differ from the interests of any other Class.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
SCHEDULE A
AT JUNE 25, 1999
<TABLE>
<C> <S>
1. Morgan Stanley Dean Witter Aggressive Equity Fund
2. Morgan Stanley Dean Witter American Opportunities Fund
3. Morgan Stanley Dean Witter Balanced Growth Fund
4. Morgan Stanley Dean Witter Balanced Income Fund
5. Morgan Stanley Dean Witter California Tax-Free Income Fund
6. Morgan Stanley Dean Witter Capital Growth Securities
7. Morgan Stanley Dean Witter Competitive Edge Fund, "Best
Ideas" Portfolio
8. Morgan Stanley Dean Witter Convertible Securities Trust
9. Morgan Stanley Dean Witter Developing Growth Securities
Trust
10. Morgan Stanley Dean Witter Diversified Income Trust
11. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
12. Morgan Stanley Dean Witter Equity Fund
13. Morgan Stanley Dean Witter European Growth Fund Inc.
14. Morgan Stanley Dean Witter Federal Securities Trust
15. Morgan Stanley Dean Witter Financial Services Trust
16. Morgan Stanley Dean Witter Fund of Funds
17. Morgan Stanley Dean Witter Global Dividend Growth Securities
18. Morgan Stanley Dean Witter Global Utilities Fund
19. Morgan Stanley Dean Witter Growth Fund
20. Morgan Stanley Dean Witter Health Sciences Trust
21. Morgan Stanley Dean Witter High Yield Securities Inc.
22. Morgan Stanley Dean Witter Income Builder Fund
23. Morgan Stanley Dean Witter Information Fund
24. Morgan Stanley Dean Witter Intermediate Income Securities
25. Morgan Stanley Dean Witter International Fund
26. Morgan Stanley Dean Witter International SmallCap Fund
27. Morgan Stanley Dean Witter Japan Fund
28. Morgan Stanley Dean Witter Latin American Growth Fund
29. Morgan Stanley Dean Witter Managers Focus Fund
30. Morgan Stanley Dean Witter Market Leader Trust
31. Morgan Stanley Dean Witter Mid-Cap Dividend Growth
Securities
32. Morgan Stanley Dean Witter Mid-Cap Equity Trust
33. Morgan Stanley Dean Witter Natural Resource Development
Securities Inc.
34. Morgan Stanley Dean Witter New York Tax-Free Income Fund
35. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
36. Morgan Stanley Dean Witter Precious Metals and Minerals
Trust
37. Morgan Stanley Dean Witter Real Estate Fund
38. Morgan Stanley Dean Witter Small Cap Growth Fund
39. Morgan Stanley Dean Witter Special Value Fund
40. Morgan Stanley Dean Witter S&P 500 Index Fund
41. Morgan Stanley Dean Witter S&P 500 Select Fund
42. Morgan Stanley Dean Witter Strategist Fund
43. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
44. Morgan Stanley Dean Witter Total Return Trust
45. Morgan Stanley Dean Witter U.S. Government Securities Trust
46. Morgan Stanley Dean Witter Utilities Fund
47. Morgan Stanley Dean Witter Value-Added Market Series
48. Morgan Stanley Dean Witter Value Fund
49. Morgan Stanley Dean Witter Worldwide High Income Fund
50. Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>
5
