<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1999
REGISTRATION NOS. 333-58643
811-08861
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
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 VALUE 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:
STUART M. STRAUSS, 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 November 30, 1999 pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS
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<PAGE> 2
PROSPECTUS - NOVEMBER 30, 1999
Morgan Stanley Dean Witter
VALUE 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>
<S> <C> <C>
The Fund Investment Objective........................................ 1
Principal Investment Strategies............................. 1
Principal Risks............................................. 1
Fees and Expenses........................................... 3
Additional Investment Strategy Information.................. 4
Additional Risk Information................................. 5
Fund Management............................................. 6
Shareholder Information Pricing Fund Shares......................................... 8
How to Buy Shares........................................... 8
How to Exchange Shares...................................... 10
How to Sell Shares.......................................... 12
Distributions............................................... 13
Tax Consequences............................................ 14
Share Class Arrangements.................................... 15
Financial Highlights ............................................................ 23
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 ICON] INVESTMENT OBJECTIVE
- ---------------------------------------
Morgan Stanley Dean Witter Value Fund seeks total return.
[CHESS ICON] PRINCIPAL INVESTMENT STRATEGIES
- -------------------------------------------------
The Fund will normally invest at least 65% of its total assets in common stock
and other equity securities that the Fund's "Sub-Advisor," Miller Anderson &
Sherrerd, believes are undervalued relative to the stock market in general. In
deciding which securities to buy, hold or sell, the Sub-Advisor primarily
considers price/earnings ratios, as well as price/book ratios and various other
value measures. It pursues a disciplined value approach, backed by fundamental
quantitative and qualitative analyses. Individual securities are selected based
on a sequence of quantitative screens and qualitative research by in-house
industry analysts.
[SIDEBAR] TOTAL RETURN
AN INVESTMENT OBJECTIVE HAVING THE GOAL OF SELECTING SECURITIES WITH THE
POTENTIAL TO RISE IN PRICE AND PAY OUT INCOME. [SIDEBAR]
The portfolio managers are part of a multiple-manager, team system. Each manager
works independently within the value style of the Fund. The team has a team
leader who performs certain oversight functions with respect to the overall
portfolio structure.
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.
The Fund may invest up to 25% of its total assets in foreign securities. In
addition, the Fund may invest in convertible and fixed-income securities.
In pursuing the Fund's investment objective, the Sub-Advisor 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-Advisor in
its discretion may determine to use some permitted trading strategies while not
using others.
[SCALE ICON] 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
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activities 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 long-term consequences of the
euro conversion for foreign exchange rates, interest rates and the value of
European securities the Fund may purchase are 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-
Advisor 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
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[CASH ICON] 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.
[SIDEBAR] SHAREHOLDER FEES
THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT. [SIDEBAR]
[SIDEBAR] ANNUAL FUND
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE FUND'S ASSETS AND ARE BASED ON EXPENSES
PAID FOR THE PERIOD NOVEMBER 25, 1998 THROUGH SEPTEMBER 30, 1999. [SIDEBAR]
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
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<S> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
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Maximum sales charge (load) imposed
on purchases (as a percentage of
offering price) 5.25%(1) None None None
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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
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ANNUAL FUND OPERATING EXPENSES
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Management fee 1.00% 1.00% 1.00% 1.00%
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Distribution and service (12b-1) fees 0.25% 1.00% 1.00% None
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Other expenses % % % %
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Total annual fund operating expenses % % % %
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</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.
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.
3
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<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A $ $ $ $ $ $ $ $
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CLASS B $ $ $ $ $ $ $ $
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CLASS C $ $ $ $ $ $ $ $
- ------------------------------------------------------------------------ --------------------------------------------------
CLASS D $ $ $ $ $ $ $ $
- ------------------------------------------------------------------------ --------------------------------------------------
</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 National Association of Securities
Dealers.
[CHESS ICON] 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, 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 Sub-Advisor 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. When the Fund takes a defensive position, it may not achieve its
investment objective.
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, such as 200%, 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. 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.
4
<PAGE> 8
[SCALE ICON] 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 rates 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.
JUNK BONDS. Fund investments in convertible securities rated lower than
investment grade (commonly known as "junk bonds") pose significant risks. The
prices of junk bonds are likely to be more sensitive to adverse economic changes
or individual corporate developments than higher rated securities. During an
economic downturn or substantial period of rising interest rates, junk bond
issuers and, in particular, highly leveraged issuers may experience financial
stress that would adversely affect their ability to service their principal and
interest payment obligations, to meet their projected business goals or to
obtain additional financing. In the event of a default, the Fund may incur
additional expenses to seek recovery. The secondary market for junk bonds may be
less liquid than the markets for higher quality securities and, as such, may
have an adverse effect on the market prices of certain securities. The
illiquidity of the market may also adversely affect the ability of the Fund's
Trustees to arrive at a fair value for certain junk bonds at certain times and
could make it difficult for the Fund to sell certain securities. In addition,
periods of economic uncertainty and change probably would result in an
5
<PAGE> 9
increased volatility of market prices of high yield securities and a
corresponding volatility in the Fund's net asset value.
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-Advisor, 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-Advisor 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.
Corporate and 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.
[PEOPLE ICON] FUND MANAGEMENT
- -----------------------------------
[SIDEBAR] 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 $136.3 BILLION IN ASSETS UNDER
MANAGEMENT OR ADMINISTRATION AS OF AUGUST 31, 1999. [SIDEBAR]
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-Advisor --
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-Advisor manages assets of approximately $ billion as of 1999
for investment companies, employee benefit plans, endowments, foundation and
other institutional investors. The Sub-Advisor is an indirect subsidiary of
Morgan Stanley Dean Witter & Co. The Sub-Advisor's address is One Tower Bridge,
West Conshohocken, Pennsylvania 19428.
The portfolio managers, currently three in total, are Nicholas J. Kovich,
Richard M. Behler and Robert J. Marcin. Mr. Marcin is the Team Leader. Mr.
Kovich and
6
<PAGE> 10
Mr. Marcin are Managing Directors of the Sub-Advisor and have been managing
portfolios for the Sub-Advisor for over five years. Mr. Behler is a Principal of
the Sub-Advisor; he has been associated with the Sub-Advisor since 1995 and
prior to that was a portfolio manager with Moore Capital Management (1992-1995).
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 1.0%. The Investment Manager pays the Sub-Advisor compensation equal to
40% of its compensation for services and facilities furnished to the Fund.
7
<PAGE> 11
SHAREHOLDER INFORMATION
[DOLLAR ICON] 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-Advisor 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.
[HANDS ICON] HOW TO BUY SHARES
- ----------------------------------------
[SIDEBAR] 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.MSDW.COM/INDIVIDUAL/FUNDS [SIDEBAR]
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.
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 representative can
help you decide which Class may be most appropriate for
8
<PAGE> 12
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 for Class A shares) 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.
[SIDEBAR] 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. [SIDEBAR]
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
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MINIMUM INVESTMENT
-------------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
-------------------------------------------------------------------------------------------
<S> <C> <C> <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*
-------------------------------------------------------------------------------------------
</TABLE>
* Provided your schedule of investments totals $1,000 in
twelve months.
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).
- - Make out a check for the total amount payable to: Morgan Stanley Dean Witter
Value Fund.
- - Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O. Box
1040, Jersey City, NJ 07303.
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[ARROWS ICON] 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, a 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. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds, exchanges are not
available into any new Morgan Stanley Dean Witter Fund during its initial
offering period, or when shares of a particular Morgan Stanley Dean Witter Fund
are not being offered for purchase.
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.
The check writing privilege is not available for Money Market Fund shares you
acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley Dean Witter
Trust FSB, we will employ reasonable procedures to confirm that exchange
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<PAGE> 14
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.
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<PAGE> 15
[HANDS ICON] 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 Stanley Dean
Financial Advisor Witter Financial Advisor or other authorized financial
[PHONE ICON] representative.
------------------------------------------------------------
Payment will be sent to the address to which the account is
registered or deposited in your brokerage account.
- ---------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of
[LETTER ICON] instruction" that includes:
- your account number;
- 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 Stanley Dean Witter
Withdrawal Plan Family of Funds has a total market value of at least
[ARROWS ICON] $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
12
<PAGE> 16
check, 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.
[CHECK BOX ICON] DISTRIBUTIONS
- -------------------------------------------
[SIDEBAR] 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. [SIDEBAR]
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."
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. The Fund, however, may retain and reinvest any
long-term capital gains. The Fund may at times
13
<PAGE> 17
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 ICON] 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 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.
14
<PAGE> 18
[ABCD ICON] 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.
15
<PAGE> 19
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:
[SIDEBAR] 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. [SIDEBAR]
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
--------------------------------------------------
PERCENTAGE OF APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION PUBLIC OFFERING PRICE OF NET AMOUNT INVESTED
--------------------------------------------------------------------------------------
<S> <C> <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.
16
<PAGE> 20
You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative, (or Morgan Stanley Dean Witter Trust FSB if
you 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.
17
<PAGE> 21
- - 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.
[SIDEBAR] 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. [SIDEBAR]
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
---------------------------------------------------------------------------------
<S> <C> <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 (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
18
<PAGE> 22
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.)
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
19
<PAGE> 23
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.
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
20
<PAGE> 24
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 SHARES 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.
21
<PAGE> 25
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 12b-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.
22
<PAGE> 26
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the period November 25, 1998 through September 30,
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 , 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 A
- ---------------------------------------------------------------------------------------------------
FOR THE PERIOD NOVEMBER 25, 1998*
THROUGH SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA++:
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
Net realized and unrealized gain
- ---------------------------------------------------------------------------------------------------
Total income from investment operations
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN+(1) %
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- ---------------------------------------------------------------------------------------------------
Expenses %
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) %
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate(1) %
- ---------------------------------------------------------------------------------------------------
</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.
23
<PAGE> 27
<TABLE>
<CAPTION>
CLASS B
- ---------------------------------------------------------------------------------------------------
FOR THE PERIOD NOVEMBER 25, 1998*
THROUGH SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA++:
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
Net realized and unrealized gain
- ---------------------------------------------------------------------------------------------------
Total income from investment operations
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN+(1) %
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- ---------------------------------------------------------------------------------------------------
Expenses %
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) %
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate(1) %
- ---------------------------------------------------------------------------------------------------
</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 C
- ---------------------------------------------------------------------------------------------------
FOR THE PERIOD NOVEMBER 25, 1998*
THROUGH SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA++:
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
Net realized and unrealized gain
- ---------------------------------------------------------------------------------------------------
Total income from investment operations
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN+(1) %
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- ---------------------------------------------------------------------------------------------------
Expenses %
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) %
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate(1) %
- ---------------------------------------------------------------------------------------------------
</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 D
- ---------------------------------------------------------------------------------------------------
FOR THE PERIOD NOVEMBER 25, 1998*
THROUGH SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA++:
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
Net realized and unrealized gain
- ---------------------------------------------------------------------------------------------------
Total income from investment operations
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN+(1) %
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- ---------------------------------------------------------------------------------------------------
Expenses %
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) %
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate(1) %
- ---------------------------------------------------------------------------------------------------
</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
Notes
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!
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
GROWTH FUNDS GROWTH FUNDS Information Fund
Aggressive Equity Fund Natural Resource Development Securities
American Opportunities Fund Precious Metals and Minerals Trust
Capital Growth Securities Small Cap Growth Fund
Developing Growth Securities GLOBAL/INTERNATIONAL FUNDS
Growth Fund Competitive Edge Fund - "Best Ideas"
Market Leader Trust Portfolio
Mid-Cap Equity Trust European Growth Fund
Small Cap Growth Fund Fund of Funds - International Portfolio
Special Value Fund International Fund
THEME FUNDS International SmallCap Fund
Financial Services Trust Japan Fund
Health Sciences Trust Latin American Growth Fund
Pacific Growth Fund
- -----------------------------------------------------------------------------------------------------------------------
GROWTH & INCOME FUNDS Balanced Growth Fund Total Market Index Fund
Balanced Income Fund Total Return Trust
Convertible Securities Trust Value Fund
Dividend Growth Securities Value-Added Market Series/Equity
Equity Fund Portfolio
Fund of Funds - Domestic Portfolio THEME FUNDS
Income Builder Fund Global Utilities Fund
Mid-Cap Dividend Growth Securities Real Estate Fund
S&P 500 Index Fund Utilities Fund
S&P 500 Select Fund GLOBAL FUNDS
Strategist Fund Global Dividend Growth Securities
- -----------------------------------------------------------------------------------------------------------------------
INCOME FUNDS GOVERNMENT INCOME FUNDS GLOBAL INCOME FUNDS
Federal Securities Trust North American Government Income Trust
Short-Term U.S. Treasury Trust World Wide Income Trust
U.S. Government Securities Trust TAX-FREE INCOME FUNDS
DIVERSIFIED INCOME FUNDS California Tax-Free Income Fund
Diversified Income Trust Hawaii Municipal Trust(FSC)
CORPORATE INCOME FUNDS Limited Term Municipal Trust(NL)
High Yield Securities Multi-State Municipal Series Trust(FSC)
Intermediate Income Securities New York Tax-Free Income Fund
Short-Term Bond Fund(NL) Tax-Exempt Securities Trust
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Liquid Asset Fund(MM) California Tax-Free Daily Income
U.S. Government Money Market Trust(MM)
Trust(MM) New York Municipal Money Market
Trust(MM)
Tax-Free Daily Income Trust(MM)
</TABLE>
There may be Funds created after this Prospectus was published. Please consult
the inside back 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
North American Government Income Trust and 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
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.msdw.com/individual/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: VLUAX CLASS C: VLUCX
CLASS B: VLUBX CLASS D: VLUDX
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-8861)
PROSPECTUS - NOVEMBER 30, 1999
Morgan Stanley Dean Witter
VALUE FUND
[GRAPHIC]
A MUTUAL FUND THAT
SEEKS TOTAL RETURN
<PAGE> 34
<TABLE>
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY
DEAN WITTER
NOVEMBER 30, 1999 VALUE FUND
</TABLE>
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated November 30, 1999) for the Morgan Stanley Dean Witter Value
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 Value 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.............. 13
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-Advisor................. 21
B. Principal Underwriter.............................. 22
C. Services Provided by the Investment Manager and the
Sub-Advisor 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 Value 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-Advisor"--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 June 9, 1998.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is a diversified, 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 Fund may enter into forward contracts under various circumstances. The
typical use of a forward contract is to "lock in" the price of a security in
U.S. dollars or some other foreign currency which the Fund is holding in its
portfolio. By entering into a forward contract for the purchase or sale, for a
fixed amount of dollars or other currency, of the amount of foreign currency
involved in the underlying security transactions, the Fund may be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar or other currency which is being used for
the security purchase and the foreign currency in which the security is
denominated during the period between the date on which the security is
purchased or sold and the date on which payment is made or received.
The Sub-Advisor 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
4
<PAGE> 38
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.
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.
Covered Put Writing. A writer of a covered put option incurs an obligation
to buy the security underlying the option from the purchaser of the put, at the
option's exercise price at any time during the option period, at the purchaser's
election. Through the writing of a put option, the Fund would receive income
from the premium paid by purchasers. The potential gain on a covered put option
is limited to the premium received on the option (less the commissions paid on
the transaction). During the option
5
<PAGE> 39
period, the Fund may be required, at any time, to make payment of the exercise
price against delivery of the underlying security. The aggregate value of the
obligations underlying puts may not exceed 50% of the Fund's assets. A put
option is "covered" if the Fund maintains cash, Treasury bills or other liquid
portfolio securities with a value equal to the exercise price in a segregated
account on the Fund's books, or holds a put on the same security as the put
written where the exercise price of the put held is equal to or greater than the
exercise price of the put written. The operation of and limitations on covered
put options in other respects are substantially identical to those of call
options.
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 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.
Risks of Options Transactions. The successful use of options depends on
the ability of the Sub-Advisor 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
6
<PAGE> 40
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.
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,
7
<PAGE> 41
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 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.
8
<PAGE> 42
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. 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 also limit the amount by which the price of a futures contract
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin on
open futures positions. In 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.
If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in a
segregated account maintained on the books of the Fund, cash, U.S. government
securities or other liquid portfolio securities equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the option.
Such a position may also be covered by owning the securities underlying the
futures contract (in the case of a stock index futures contract a portfolio of
securities substantially replicating the relevant index), or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. government
securities or other liquid portfolio securities equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or variation margin on deposit) in a segregated account maintained on the books
of the Fund. Alternatively, the Fund could cover its long position by purchasing
a put option on the same futures contract with an exercise price as high or
higher than the price of the contract held by the Fund.
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
9
<PAGE> 43
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;
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 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-Advisor 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.
10
<PAGE> 44
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 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
11
<PAGE> 45
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-Advisor 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.
The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made.
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
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-Advisor, 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.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the Sub-Advisor 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
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<PAGE> 46
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-Advisor, 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.
Corporate and 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.
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.
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).
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<PAGE> 47
7. 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.
8. 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.)
9. 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.
10. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
11. Invest for the purpose of exercising control or management of any
other issuer, except that the Fund may invest all or substantially all of
its assets in a Qualifying Portfolio.
12. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or write interest rate, currency and stock and bond
index futures contracts and related options thereon.
13. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. (For the purpose of this restriction,
collateral arrangements with respect to the writing of options by the Fund
and collateral arrangements with respect to initial or variation margin for
futures by the Fund are not deemed to be pledges of assets.)
14. Purchase securities on margin (but the Fund may obtain short-term
loans as are necessary for the clearance of transactions). The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
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
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<PAGE> 48
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 91 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.
Charles A. Fiumefreddo* (66) Chairman, Director or Trustee and Chief Executive
Chairman of the Board, Officer of the Morgan Stanley Dean Witter Funds and
Chief 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 (67) 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.
</TABLE>
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<PAGE> 49
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Wayne E. Hedien (65) Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds and Discover Brokerage Index
c/o 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.
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* (56) 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.
</TABLE>
16
<PAGE> 50
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
John L. Schroeder (69) Retired; Chairman of the Derivatives Committee and
Trustee Director or Trustee of the Morgan Stanley Dean
c/o 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).
Mitchell M. Merin (46) 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.
</TABLE>
17
<PAGE> 51
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
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>
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, 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, Todd Lebo, Vice President and Assistant
General Counsel of the Investment Manager and MSDW Services Company, and Natasha
Kassian, a Staff Attorney with the Investment Manager, are Assistant Secretaries
of the Fund.
INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/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 directors/trustees serve as members of the Audit
Committee. In addition, three of the directors/trustees, including two
independent directors/trustees, serve as members of the Derivatives Committee
and the Insurance Committee.
- ------------------------------
* A Trustee who is an "interested person" of the Fund, as defined in the
Investment Company Act.
18
<PAGE> 52
The independent directors/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 directors/trustees are required to select and nominate individuals
to fill any independent directors/trustees 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 DIRECTORS/TRUSTEES FOR
ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees and
the Funds' management believe that having the same independent
directors/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 directors/trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals serve
as independent directors/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 directors/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
directors/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
directors/trustees, of the caliber, experience and business acumen of the
individuals who serve as independent directors/trustees of the Morgan Stanley
Dean Witter Funds.
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.
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
19
<PAGE> 53
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............................................... $1,650
Edwin J. Garn............................................... 1,650
Wayne E. Hedien............................................. 1,650
Dr. Manuel H. Johnson....................................... 2,400
Michael E. Nugent........................................... 2,150
John L. Schroeder........................................... 2,150
</TABLE>
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 director/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/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 director/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/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 by 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) on
page 21.
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-ADVISOR
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-Advisor 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-Advisor 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 1.0% 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 November 25, 1998
(commencement of operations) through September 30, 1999, the Investment Manager
accrued total compensation under the Management Agreement in the amount of
$ .
Pursuant to a sub-advisory agreement (the "Sub-Advisory Agreement") between
the Investment Manager and the Sub-Advisor, the Sub-Advisor has been retained,
subject to the overall supervision of the Investment Manager and the Trustees of
the Fund, to continuously furnish investment advice
21
<PAGE> 55
concerning individual security selections, asset allocations and overall
economic trends and to manage the Fund's portfolio. As compensation for its
service, the Investment Manager pays the Sub-Advisor compensation equal to 40%
of its monthly compensation. For the period November 25, 1998 through September
30, 1999, the Sub-Advisor accrued total compensation under the Sub-Advisory
Agreement in the amount of $ .
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-ADVISOR 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-Advisor manages the investment of
the Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Sub-Advisor 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-Advisor under the Sub-Advisory Agreement or the
Distributor, will be paid by the Fund. These
22
<PAGE> 56
expenses will be allocated among the four Classes of shares pro rata based on
the net assets of the Fund attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1; 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-Advisor
(not including compensation or expenses of attorneys who are employees of the
Investment Manager or the Sub-Advisor); 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 November 25,
1998
23
<PAGE> 57
(commencement of operations) through September 30, 1999 in approximate amounts
as provided in the table below (the Distributor did not retain any of these
amounts).
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 25, 1998
THROUGH
SEPTEMBER 30, 1999
------------------------------
<S> <C> <C>
Class A..................................................... FSCs:(1) $
CDSCs: $
Class B..................................................... CDSCs: $
Class C..................................................... CDSCs: $
</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 November 25, 1998
(commencement of operations) through September 30, 1999, Class A, Class B and
Class C shares of the Fund accrued payments under the Plan amounting to
$ , $ and $ , respectively, which amounts are equal to
%, % and % 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 ended September 30, 1999 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $ ___ on behalf of Class B since the inception of the Plan. It is
estimated that this amount was spent in approximately the following ways: (i)
___ % ($ ___ )--adver-
25
<PAGE> 59
tising and promotional expenses; (ii) ___ % ($ ___ )--printing of prospectuses
for distribution to other than current shareholders; and (iii) ___ %
($ ___ )--other expenses, including the gross sales credit and the carrying
charge, of which ___ % ($ ___ ) represents carrying charges, ___ % ($ ___ )
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 ___ % ($ ___ ) 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 period ended September 30, 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 $ ___ as of December 31, 1998 (the end of the
calendar year), which was equal to ___ % 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 $62,048 in the case of Class C at
December 31, 1998 (end of the calendar year), which amount was equal to .91% 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
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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, 100 Church 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.
__________ 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-Advisor 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-Advisor 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
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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 November 25, 1998 (commencement of operations) through
September 30, 1999, the Fund paid a total of $ ___ 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 November 25, 1998 (commencement of operations) through
September 30, 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 ended September 30, 1999, the Fund paid a total of $ ___
in brokerage commissions to Dean Witter Reynolds which represented approximately
___ % 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 ___ % of the aggregate dollar value of all portfolio transactions
of the Fund during the year for which commissions were paid.
During the period ended September 30, 1999, the Fund paid a total of $ ___
in brokerage commissions to Morgan Stanley & Co., which represented
approximately ___ % 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 ___ % 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 a requirement always to seek the
lowest possible commission cost could impede effective portfolio
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management and preclude the Fund and the Investment Manager and/or the
Sub-Advisor 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-Advisor 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-Advisor effect transactions with those brokers and dealers who the
Investment Manager and/or the Sub-Advisor believe provide the most favorable
prices and are capable of providing efficient executions. If the Investment
Manager and/or the Sub-Advisor 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-Advisor. 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-Advisor 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-Advisor currently serve as investment
advisors 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 each of the Investment Manager and the Sub-Advisor 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-Advisor 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 November 25, 1998 (commencement of operations) through
September 30, 1999, the Fund paid $ in brokerage commissions in
connection with transactions in the aggregate amount of $ to brokers
because of research services provided.]
E. REGULAR BROKER-DEALERS
[During the period November 25, 1998 (commencement of operations) through
September 30, 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 September 30, 1999, the Fund did not own any securities issued by any of
these issuers.]
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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 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. In addition, under certain circumstances the shareholders may call a
meeting to remove Trustees and the Fund is required to provide assistance in
communicating with shareholders about such a meeting. 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.
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
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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-Advisor 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.
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
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determined in good faith under procedures established by and under the
supervision of the Board of 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
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.
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
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<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 maximum tax on long-term capital gains
applicable to individuals is 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. Under current law, the maximum tax rate on long-term capital gains is
20%. Any loss realized by shareholders upon a sale or 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.
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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 November 25, 1998 (commencement of operations) through
September 30, 1999 was --%, --%, --% and --%, 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 September 30, 1999:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ----------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----- --------- ------- ------- --------
<S> <C> <C> <C> <C>
Class A............................................ 11/25/98 $ $ $
Class B............................................ 11/25/98
Class C............................................ 11/25/98
Class D............................................ 11/25/98
</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 November 25,
1998 (commencement of operations) through September 30, 1999 included in this
Statement of Additional Information and incorporated by reference in the
Prospectus have been so included and incorporated in reliance on the report of
, 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 VALUE FUND
PART C OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits
- -------- --------------------------------------------------------------------
<S> <C>
1. Declaration of Trust of the Registrant, dated June 9, 1998, is
incorporated by reference to Exhibit 1 of the Registration
Statement on Form N-1A, filed on July 7, 1998.
2. Amended and Restated By-Laws of the Registrant dated May 1, 1999,
filed herein.
3. Not applicable.
4(a). Investment Management Agreement between the Registrant and Morgan
Stanley Dean Witter Advisors Inc., dated July 22, 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
September 3, 1998.
4(b). Sub-Advisory Agreement between the Registrant and Morgan Stanley
Dean Witter Advisors Inc., dated July 22, 1998, is incorporated by
reference to Exhibit 5 (b) of Pre-Effective Amendment No. 1 to the
Registration Statement Form N-1A, filed on September 3, 1998.
5(a). Amended Distribution Agreement between the Registrant and Morgan
Stanley Dean Witter Distributors Inc., dated June 22, 1998, is
incorporated by reference to Exhibit 6 (a) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on September 3, 1998.
5(b). Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and Dean Witter Reynolds Inc., dated July 22,
1998, is incorporated by reference to Exhibit 6(b) of
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on September 3, 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(a). Custodian Agreement between The Bank of New York and the Registrant,
dated July 22, 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 September 3, 1998.
</TABLE>
<PAGE> 70
<TABLE>
<S> <C>
8(a). Amended and Restated Transfer Agency Agreement between the
Registrant and Morgan Stanley Dean Witter Trust FSB, dated June 22,
1998, is incorporated by reference to Exhibit 8 (b) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed on
September 3, 1998.
8(b). Amended Services Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services Company Inc.,
dated June 22, 1998, is incorporated by reference to Exhibit 9 of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on September 3, 1998.
9(a). Opinion of Barry Fink, Esq., dated September 3, 1998, is
incorporated by reference to Exhibit 10 (a) of Pre-Effective
Amendment No.1 to the Registration Statement on Form N-1A, filed on
September 3, 1998.
9(b). Opinion of Lane, Altman & Owens LLP, Massachusetts Counsel, is
incorporated by reference to Exhibit 10 (b) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed on
September 3, 1998.
10. Not applicable.
11. Not applicable.
12. Not applicable.
13. Plan of Distribution pursuant to Rule 12b-1 between the
Registrant and Morgan Stanley Dean Witter Distributors Inc.,
dated July 22, 1998, is incorporated by reference to exhibit 15
of Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on September 3, 1998.
14. Multiple Class Plan Pursuant to Rule 18f-3, dated June 22, 1998, is
incorporated by reference to Exhibit (other) (b) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed on
September 3, 1998.
Other. Powers of Attorney of Trustees are incorporated by reference to
Exhibit (Other) (a) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on September 3, 1998.
</TABLE>
Item 24. Persons Controlled by or Under Common Control with the Fund.
None
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
<PAGE> 71
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
<PAGE> 72
Morgan Stanley Dean Witter & Co. The term "Morgan Stanley Dean Witter Funds"
refers to the following registered investment companies:
Closed-End Investment Companies
(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
Open-end Investment Companies
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter 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
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
<PAGE> 73
(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 Market Index Fund
(60) Morgan Stanley Dean Witter Total Return Trust
(61) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(62) Morgan Stanley Dean Witter U.S. Government Securities Trust
(63) Morgan Stanley Dean Witter Utilities Fund
(64) Morgan Stanley Dean Witter Value-Added Market Series
(65) Morgan Stanley Dean Witter Value Fund
(66) Morgan Stanley Dean Witter Variable Investment Series
(67) Morgan Stanley Dean Witter World Wide Income Trust
<PAGE> 74
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive of Morgan Stanley
Officer and Director Dean Witter Distributors Inc. ("MSDW Distributors")
Director 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
Executive Vice President and Discover Brokerage Index Series; Director of MSDW
and Chief Investment Officer Trust.
Ronald E. Robison President MSDW Trust; Executive Vice President, Chief
Executive Vice President, Administrative Officer and Director of MSDW Services;
Chief Administrative Vice President of the Morgan Stanley Dean Witter Funds
Officer and Director and Discover Brokerage Index Series.
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant Secretary and
Counsel and Director Assistant General Counsel of MSDW Distributors; Vice
President, Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds and Discover Brokerage Index
Series.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------
<S> <C>
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of Sector
Rotation
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Money
Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
James Solloway
Senior Vice President
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
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
Senior Vice President Funds.
and Director of the
Tax-Exempt Fixed
Income Group
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------
<S> <C>
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and
Accounting Treasurer Officer of the Morgan Stanley Dean Witter Funds
and Discover Brokerage Index Series.
Thomas Chronert
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors, the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
Michael Interrante First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors, the
and Assistant Secretary Morgan Stanley Dean Witter Funds and Discover Brokerage
Index Series.
Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.
James P. Wallin
First Vice President
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------
<S> <C>
Robert Abreu
Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Armon Bar-Tur Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
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
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------
<S> <C>
David Dineen
Vice President
Sheila Finnerty Vice President of Morgan Stanley Dean Witter Prime
Vice President Income Trust
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
Trey Hancock
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
David T. Hoffman
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------
<S> <C>
Doug Ketterer
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Albert McGarity
Vice President
Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P 500
Vice President Select Fund.
Mark Mitchell
Vice President
Julie Morrone Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Mary Beth Mueller
Vice President
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------
<S> <C>
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell
Vice President
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Robert Stearns
Vice President
Naomi Stein
Vice President
Michael Strayhorn
Vice President
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------
<S> <C>
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Robert Vanden Assem
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
</TABLE>
The principal address of MSDW Advisors, MSDW Services, MSDW
Distributors, DWR, the Morgan Stanley Dean Witter 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:
(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.
<PAGE> 82
(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
(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 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 Market Index Fund
(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
<PAGE> 83
(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 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> 84
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 29th day of September, 1999.
MORGAN STANLEY DEAN WITTER VALUE 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
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer Chairman, Chief Executive
Officer,
and Trustee
By: /s/ CHARLES A. FIUMEFREDDO 09/29/99
---------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By: /s/ THOMAS F. CALOIA 09/29/99
---------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By: /s/ BARRY FINK 09/29/99
---------------------------------
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 09/29/99
---------------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE> 85
MORGAN STANLEY DEAN WITTER VALUE FUND
EXHIBIT INDEX
2. Amended and Restated By-Laws of the Registrant dated May 1, 1999.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley
Dean Witter Distributors Inc. and National Financial Services
Corporation, dated October 17, 1998.
<PAGE> 1
EXHIBIT 2
BY-LAWS
OF
MORGAN STANLEY DEAN WITTER VALUE 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 Value Fund dated June 9, 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 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
1
<PAGE> 2
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 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
2
<PAGE> 3
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.
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
3
<PAGE> 4
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 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.
4
<PAGE> 5
(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.
(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
5
<PAGE> 6
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.
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,
6
<PAGE> 7
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 or her 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 or her 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.
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.
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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.
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
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delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall appear therein
had not ceased to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
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.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii)
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. The
record date, in any case, shall not be more than one hundred eighty (180)
days, and in the case of a meeting of Shareholders not less than ten (10)
days, prior to the date on which such meeting is to be held or the date on
which such other particular action requiring determination of Shareholders is
to be taken, as the case may be. In the case of a meeting of Shareholders,
the meeting date set forth in the notice to Shareholders accompanying the
proxy statement shall be the date used for purposes of calculating the 180
day or 10 day period, and any adjourned meeting may be reconvened without a
change in record date. In lieu of fixing a record date, the Trustees may
provide that the transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the transfer books are closed
for the purpose of determining Shareholders entitled to notice of a vote at a
meeting of Shareholders, such books shall be closed for at least ten (10)
days immediately preceding the meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Morgan Stanley Dean Witter Value
Fund, dated June 9, 1998, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of the
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Commonwealth of Massachusetts, provides that the name Morgan Stanley Dean
Witter Value 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 Value
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
Value Fund, but the Trust Estate only shall be liable.
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EXHIBIT 5(c)
MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
OMNIBUS SELECTED DEALER AGREEMENT
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 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
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 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 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
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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 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.
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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.
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
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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.
20. All notices or other communications under this Agreement shall be in
writing and given as follows:
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 Masabug
4201 Congress Street, Suite
245
Boston, MA
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.
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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 [SIG]
------------------------------------
(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
-------------------------------------
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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 Balance 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
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