<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1998
REGISTRATION NOS.: 811-09059
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. [ ]
----------------
DISCOVER BROKERAGE INDEX SERIES
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this registration statement.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
DISCOVER BROKERAGE INDEX SERIES
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
------ ----------
PART A PROSPECTUS
<S> <C>
1. ............. Cover Page; Back Cover
2. ............. Investment Objective; Principal Investment Strategies;
Principal Risks
3. ............. Fees and Expenses
4. ............. Investment Objective; Principal Investment Strategies;
Principal Risks; Additional Investment Strategy
Information; Additional Risk Information
5. ............. Not Applicable
6. ............. Fund Management
7. ............. Pricing Fund Shares; Buying and Selling Shares; How
to Buy Shares; How to Sell Shares; Distributions;
Tax Consequences
8. ............. N/A
9. ............. Not Applicable
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
PART B
Information required to be included in Part B is set forth under the
appropriate caption in Part B of this Registration Statement.
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
DISCOVER BROKERAGE
S&P 500 FUND
(an investment portfolio of Discover Brokerage Index Series)
Prospectus
, 1998
Discover Brokerage S&P 500 Fund is a no-load stock mutual fund that seeks
to provide investment results that, before expenses, correspond to the total
return of the Standard & Poor's (Registered Trademark) 500 Composite Stock
Price Index.
The Securities and Exchange Commission has not approved these securities
or passed upon the adequacy of this Prospectus. Any representation to the
contrary is a criminal offense.
<PAGE>
CONTENTS
<TABLE>
<S> <C>
The Fund .............................................. 1
Investment Objective ................................ 1
Principal Investment Strategies ..................... 1
Principal Risks ..................................... 1
Fees and Expenses ................................... 3
Additional Investment Strategy Information .......... 5
Additional Risk Information ......................... 5
Fund Management ....................................... 7
Pricing Fund Shares ................................... 8
Buying and Selling Shares ............................. 8
How to Buy Shares ................................... 9
How to Sell Shares .................................. 10
Distributions ......................................... 12
Tax Consequences ...................................... 12
Taxes on Distributions .............................. 13
Taxes on Sales (Redemptions) ........................ 13
</TABLE>
Along with this Prospectus, please consult the Fund's Statement of
Additional Information for information about the Fund.
<PAGE>
Fund Category: Growth & Income
THE FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Discover Brokerage S&P 500 Fund (the "Fund") is a no-load stock mutual
fund that seeks to provide investment results that, before expenses, correspond
to the total return of the Standard & Poor's (Registered Trademark) 500
Composite Stock Price Index. There is no guarantee that the Fund will achieve
this objective.
PRINCIPAL INVESTMENT STRATEGIES
The Fund will invest at least 80% of its assets in common stocks included
in the S&P 500 Index, under normal market conditions. The Fund's "Investment
Manager," Morgan Stanley Dean Witter Advisors "passively" manages the Fund's
assets by investing in stocks in approximately the same proportion as they are
represented in the Index. For example, if the common stock of a specific
company represents five percent of the Index, the Investment Manager typically
will invest the same percentage of the Fund's assets in that stock. The S&P 500
Index is a well-known stock market index that includes common stocks of 500
companies representing a significant portion of the market value of all common
stocks publicly traded in the United States.
Common stock is a share ownership or equity interest in a corporation. It
may or may not pay dividends. Some companies reinvest all of their profits back
into their businesses, while others pay out some of their profits to
shareholders as dividends.
In addition to common stocks, the Fund may make other investments. For
more information about these investments, see the "Additional Investment
Strategy Information" section.
The Fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's, a division of The McGraw Hill Companies.
PRINCIPAL RISKS
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.
1
<PAGE>
A principal risk of investing in the Fund is associated with its common
stock investments. In general, stock values fluctuate in response to activities
specific to the issuer, as well as general market, economic and political
conditions. Stock prices can fluctuate widely in response to these factors.
Another risk of investing in the Fund arises from its operation as a
"passively" managed index fund. As such, the adverse performance of a
particular stock ordinarily will not result in the elimination of the stock
from the Fund's portfolio. The Fund will remain invested in common stocks even
when stock prices are generally falling. Ordinarily, the Investment Manager
will not sell the Fund's portfolio securities except to reflect additions or
deletions of the stocks that comprise the S&P 500 Index, or as may be necessary
to raise cash to pay Fund shareholders who sell (redeem) Fund shares.
The performance of the S&P 500 is a hypothetical number which does not
take into account brokerage commissions and other transaction costs, custody
and other costs of investing which will be borne by the Fund and any
incremental operating costs borne by the Fund (e.g., management fee, transfer
agency and accounting costs).
The performance of the Fund will depend on how successfully the Investment
Manager pursues the Fund's investment strategy, including the Investment
Manager's ability to manage cash flows (primarily from purchases and
redemptions, and distributions from the Fund's investments), and there is no
assurance that the Investment Manager will be successful in this regard. The
Fund is also subject to risks from its other permissible investments. For more
information about these risks, see the "Additional Risk Information" section.
2
<PAGE>
FEES AND EXPENSES
The table below briefly describes the Fund's fees and expenses.
Shareholder fees are paid directly from your investment, and annual Fund
operating expenses are deducted from Fund assets. The Fund does not charge
account or exchange fees.
<TABLE>
<S> <C>
SHAREHOLDER FEES
Sales charge (load) imposed on purchases (as
a percent of offering price) ................. None
Deferred sales charge (load) (based on the
offering price or net asset value at
redemption)* ................................. None
ANNUAL PORTFOLIO OPERATING EXPENSES
Management fee ................................ %
Distribution and service (12b-1) fees ......... %
Other expenses ................................ %
Total annual Fund operating expenses .......... %
</TABLE>
* Investors should note that a $25 fee will be charged by Discover
Brokerage if shares are held less than 30 days.
3
<PAGE>
EXAMPLE
This example shows you what expenses you could pay over time, whether you
redeemed your shares at the end of each period or left your shares invested.
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. Your
actual costs may be higher or lower. Your costs based on these assumptions
would be:
<TABLE>
<S> <C> <C> <C>
1 year 3 years 5 years 10 years
$ $ $ $
</TABLE>
4
<PAGE>
ADDITIONAL INVESTMENT STRATEGY INFORMATION
This section provides additional information concerning the Fund's
principal strategies.
Common Stock. As discussed in the "Principal Investment Strategies"
section, the Fund seeks to achieve its investment objective by investing, under
normal circumstances, at least 80% of its assets in common stocks included in
the S&P 500.
Options and Futures. The Fund may invest in put and call options and
futures with respect to the S&P 500 as well as financial instruments, stock and
interest rate indexes, and foreign currencies. Options and futures will be used
to increase or decrease the Fund's exposure to the stock or bond markets, to
generate income, or to seek to protect against decline in securities prices or
increases in prices of securities that may be purchased. Generally, the
Investment Manager expects to employ stock index futures to provide liquidity
necessary to meet anticipated redemptions or for day-to-day operating purposes.
Standard & Poor's Depository Receipts ("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.
Foreign Securities. The Fund may purchase common stocks, including
American Depository Receipts, of foreign corporations represented in the S&P
500 Index. The securities of these foreign corporations may be listed on the
New York Stock Exchange, the American Stock Exchange or the NASDAQ Market
System.
Temporary Investments. The Fund also may invest up to 20% of its assets
temporarily in money market instruments when the Fund has received cash from
the sale of its shares pending investment of the cash, and to have investments
that are easily converted to cash to pay Fund shareholders who sell (redeem)
Fund shares.
ADDITIONAL RISK INFORMATION
As discussed in the "Principal Risks" section, a principal risk of
investing in the Fund is associated with its common stock investments. This
section provides additional information regarding the principal risks of
investing in the Fund.
5
<PAGE>
Options and Futures. The Fund's participation in the options and futures
markets involves investment risks to which the Fund would not be subject absent
the use of these strategies. If the Investment Manager's predictions of
movements in the direction of the stock, currency or interest rate markets are
inaccurate, the adverse consequences to the Fund (e.g., a reduction in the
Fund's net asset value or a reduction in the amount of income available for
distribution) may leave the Fund in a worse position than if these strategies
were not used. Other risks inherent in the use of options and futures include,
for example, the possible imperfect correlation between the price of options
and futures contracts and movements in the prices of the securities being
hedged, and the possible absence of a liquid secondary market for any
particular instrument. Certain options may be over-the-counter options, which
are options negotiated with dealers; there is no secondary market for these
investments.
SPDRs. SPDRs, which the Fund may hold, have many of 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.
Foreign Securities. The Fund's investments in the common stocks of foreign
corporations (including American Depository Receipts) may involve risks in
addition to the risks associated with domestic securities. Foreign securities
are affected by changes in currency rates. U.S. dollars are generally converted
to the local currency to purchase a foreign security; however, the price of
Fund shares is quoted and redemption proceeds are paid in U.S. dollars. Because
exchange rates fluctuate constantly, the dollar value of an investment can
decrease even if the security's price remains unchanged.
Foreign securities also have risks related to political and economic
developments abroad, including possible expropriations or 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. Securities of foreign issuers also may be less
liquid than comparable securities of U.S. issuers and, as such, their price
changes may be more volatile.
6
<PAGE>
Year 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of the Investment Manager, the Fund's
other service providers and the markets and individual 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 and
its affiliates are working hard to avoid any problems and to obtain assurances
from service providers, market participants and individual and governmental
issuers that they are taking similar steps.
FUND MANAGEMENT
The Fund has retained the Investment Manager--Morgan Stanley Dean Witter
Advisors--to provide administrative services, manage its business affairs and
invest its 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. The Investment Manager is widely
recognized as a leader in the mutual fund industry--with more than $
billion in assets under management or administration. Its main business office
is located at Two World Trade Center, New York, New York 10048.
The Fund is managed within the Investment Manager's Growth Group. Kenton
J. Hinchliffe, Senior Vice President of the Investment Manager and a member of
the Investment Manager's Growth and Income Group, is the primary portfolio
manager of the Fund and has been a portfolio manager with the Investment
Manager for over five years. Mr. Hinchliffe is assisted by Kevin Jung, a Vice
President of the Investment Manager, who has been a portfolio manager of the
Investment Manager since September, 1997. Prior to joining the Investment
Manager, Mr. Jung was a portfolio manager with UBS Asset Management, Inc.
The Fund pays the Investment Manager a monthly management fee at an annual
rate of % as full compensation for the services and facilities furnished to
the Fund, and for Fund expenses assumed by the Investment Manager. The fee is
based on the Fund's average daily net assets.
7
<PAGE>
PRICING FUND SHARES
Net Asset Value. The price of Fund shares, called net asset value, is
based on the value of the Fund's portfolio securities. The net asset value is
calculated every business day at the close of trading on the New York Stock
Exchange, normally at 4 p.m. Eastern Standard Time. Shares will not be priced
on days that the New York Stock Exchange is closed.
The value of the Fund's 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 determines 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.
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, unless the cost does not reflect the securities' market value,
in which case these securities will be valued at their fair value.
BUYING AND SELLING SHARES
Opening and Maintaining a Discover Brokerage Account. You may purchase
shares only if you have an account with Discover Brokerage Direct ("Discover
Brokerage"). If you do not have a Discover Brokerage account you must open one
prior to or in connection with your purchase order. You may open a Discover
Brokerage account by completing and signing an account application. The minimum
account size is generally $2,000 but will be reduced for accounts opened in
connection with an investment in the Fund to the minimum initial investments
described below. Mail the account application together with your check and any
other required documents to the address indicated on the application.
Purchase Price. You pay no sales charge to invest in the Fund. Your order
will be priced at the next net asset value calculated after your order is
accepted by Discover Brokerage. Existing Discover Brokerage investors must have
sufficient assets in their Discover Brokerage account to buy shares in the
Fund.
8
<PAGE>
Initial Investments. The minimum initial investment in the Fund is
generally $1,000. The minimum initial investment is $500 for (i) IRA and other
Discover Brokerage sponsored-retirement plans and custodial accounts and (ii)
investments under an Automatic Investment Plan (described later in this
section) that will exceed $1,000 in purchases during the first 12 months.
Subsequent Investments. Additional investments must be at least $100.
HOW TO BUY SHARES
Through your Discover Brokerage account you may use the following methods
to purchase shares:
By Telephone:
o Call (888) 543-9194
o Provide the Required Purchase Information (described later in this
section)
By Mail:
o Write a letter of instruction that includes:
o The Required Purchase Information (described later in this section)
o The signature of each owner as it appears on the account
o Make your check payable to Discover Brokerage Direct
o Mail to:
Discover Brokerage Direct
P.O. Box 7037
San Francisco, CA 94120-7037
For overnight deliveries:
Discover Brokerage Direct
333 Market Street
Suite 2500
San Francisco, CA 94105
Once you mail your letter, you may not modify or cancel your instructions.
Over the Internet:
o Access your account at
http://www.discoverbrokerage.com
o Provide the Required Purchase Information (described later in this
section)
9
<PAGE>
o Refer to the Discover Brokerage Internet Trading Guide for details
Required Purchase Information. You must provide the following information
in connection with any purchase by telephone, mail or over the Internet:
o Your Discover Brokerage account number
o The name of the Fund in which you wish to invest
o The amount you wish to invest
o The distribution option you have selected
Discover Brokerage's Automatic Investment Plan. You can elect to make
automatic investments in any amount from $100 to $5,000. Under the Automatic
Investment Plan provided by Discover Brokerage, investments may be made
monthly, quarterly or semi-annually. You may elect to use the uninvested cash
in your Discover Brokerage account to make these investments or use the
proceeds of redemption of shares of the money market fund linked to your
Discover Brokerage account.
Selecting a Distribution Option. You may select from the three
distribution options listed below when you first become a shareholder in the
Fund. If you already are a shareholder and wish to change your distribution
option, please call (888) 543-9194.
1) Automatic Reinvestment: Both income and dividends and any capital gains
distributions will be reinvested in additional shares of the Fund. This option
will be selected automatically unless you specify another option. If you are
purchasing shares through Discover Brokerage's Automatic Investment Plan, you
must choose this distribution option.
2) Cash Dividends, Reinvested Capital Gains: Income dividends will be paid
in cash, and any capital gains will be reinvested in additional shares of your
Fund.
3) All Cash: Income dividends and any capital gains distribution will both
be paid in cash.
HOW TO SELL SHARES
You may sell (redeem) your shares at any time. Your shares will be sold at
the net asset value next calculated after your sell order is accepted by
Discover Brokerage. A $25 fee will be charged by Discover Brokerage if shares
are held less than 30 days. You may use the following methods to sell your
shares:
10
<PAGE>
By Telephone:
o Call (888) 543-9194
o Provide the Required Redemption Information (described later in this
section)
By Mail:
o Write a letter of instruction that includes:
o The Required Redemption Information (described later in this section)
o The signature of each owner as it appears on the account
o Mail to:
Discover Brokerage Direct
P.O. Box 7037
San Francisco, CA 94120-7037
For overnight deliveries:
Discover Brokerage Direct
333 Market Street
Suite 2500
San Francisco, CA 94105
Once you mail your letter, you may not modify or cancel your instructions.
Over the Internet:
o Access your account at:
http://www.discoverbrokerage.com
o Provide the Redemption Information
o Refer to the Discover Brokerage Internet Trading Guide for details
Required Redemption Information. You must provide the following
information in connection with any redemption by telephone, mail or over the
Internet:
o Your Discover Brokerage account number
o The name of the Fund
o The number of shares you want to sell
Payment for Sold (Redeemed) Shares. Payment for redeemed shares will be
credited directly to your Discover
11
<PAGE>
Brokerage account no later than 7 days after Discover Brokerage Direct receives
your sell instructions in proper form. Proceeds will then be held in your
Discover Brokerage account or mailed to you depending on the account standing
instructions you have selected. For information on how to wire funds from the
Discover Brokerage account to your bank, call (888) 543-9194.
Payment may be postponed or the right of redemption suspended under
unusual circumstances. If you request to sell shares that were recently
purchased by check, payment of the sale proceeds may be delayed for the minimum
time needed to verify that the check has been honored (usually not more than
fifteen days).
DISTRIBUTIONS
As a Fund shareholder, you are entitled to your share of the Fund's income
and gains on its investments. The Fund passes substantially all of its net
earnings 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 are passed
along as "capital gain distributions."
Normally, income dividends and short-term capital gains are distributed to
shareholders at least annually. Any other capital gains are distributed in
December; if a second capital gain distribution is necessary, it is paid in the
following year. The Fund, however, may retain and reinvest any long-term
capital gains.
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.
12
<PAGE>
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:
o The Fund makes distributions, and
o You sell (redeem) Fund shares.
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 other capital gain distributions are
taxable at different rates depending upon the length of time the Fund holds its
portfolio securities, 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 (REDEMPTIONS)
Your sale (redemption) 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.
When you open your Fund account, you should provide your Social Security
or tax identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax
of thirty-one percent on taxable distributions and redemption proceeds. Any
withheld amount would be sent to the IRS as an advance tax payment.
ADDITIONAL INFORMATION
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
13
<PAGE>
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, please call:
(888) 543-9194 (toll-free)
You also may obtain information about the Fund by visiting our Internet
site at:
HTTP://WWW.DISCOVERBROKERAGE.COM
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 at http://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.
Discover Brokerage Index Series--Discover Brokerage S&P 500 Fund; Investment
Company Act file no. 811-09059)
14
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
, 1998
DISCOVER BROKERAGE
S&P 500 FUND
(AN INVESTMENT PORTFOLIO
OF DISCOVER BROKERAGE
INDEX SERIES)
- -----------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated , 1998) for the Discover Brokerage S&P 500 Fund (the
"Fund"), may be obtained without charge from the Fund at its address or
telephone numbers listed below or from .
Discover Brokerage S&P 500 Fund
Two World Trade Center
New York, New York 10048
(Insert Phone Numbers)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<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 ................................... 8
III. Management of the Fund...................................................... 9
A. Board of Trustees........................................................ 9
B. Management Information .................................................. 9
C. Compensation ............................................................ 12
IV. Control Persons and Principal Holders of Securities ........................ 12
V. Investment Management and Other Services ................................... 12
A. Investment Manager ...................................................... 12
B. Principal Underwriter ................................................... 13
C. Services Provided by the Investment Manager and Fund Expenses Paid by
Third Parties .......................................................... 13
D. Other Service Providers ................................................. 14
VI. Brokerage Allocation and Other Practices.................................... 15
A. Brokerage Transactions .................................................. 15
B. Commissions.............................................................. 15
C. Brokerage Selection ..................................................... 15
VII. Capital Stock............................................................... 15
VIII. Purchase of Shares and Offering Price....................................... 16
A. Purchase of Shares....................................................... 16
B. Offering Price .......................................................... 16
C. Tax Considerations ...................................................... 17
IX. Underwriters ............................................................... 19
X. Calculation of Performance Data ............................................ 19
XI. Financial Statements........................................................ 19
</TABLE>
2
<PAGE>
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).
"Dean Witter Reynolds" -- Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW & Co.
"Discover Brokerage Direct" -- Discover Brokerage Direct, Inc., a
wholly-owned broker-dealer subsidiary of MSDW & Co.
"Distributor" -- Morgan Stanley Dean Witter Distributors Inc., a wholly-owned
broker-dealer subsidiary of MSDW & Co.
"Financial Advisors" -- Dean Witter Reynolds authorized financial services
representatives.
"Fund" -- Morgan Stanley Dean Witter American Value Fund, a registered
open-end investment company.
"Investment Manager" -- Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW & Co.
"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 & Co.
"Morgan Stanley Dean Witter Funds" -- Mutual funds and closed-end funds for
which the Investment Manager serves as the investment advisor.
"MSDW & Co." -- Morgan Stanley Dean Witter & Co., a preeminent global
financial services firm.
"Services Company" -- Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned fund services subsidiary of the Investment Manager.
"Transfer Agent" -- Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW & Co.
"Trustees" -- The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
- -----------------------------------------------------------------------------
Discover Brokerage Index Series (the "Trust"), was organized as a
Massachusetts business trust under a Declaration of Trust on October 13, 1998.
Discover Brokerage S&P 500 Fund (the "Fund") is the first investment
portfolio of the Trust. Additional investment portfolios may be offered in
the future.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- -----------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is a no-load, open-end, diversified management investment company
whose investment objective is to provide investment results that, before
expenses, correspond to the total return of the Standard & Poor's 500
Composite Stock Price Index.
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."
ADDITIONAL INFORMATION CONCERNING THE S&P 500 INDEX. The Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's
makes no representation or warranty, express or implied, to the owners of
shares of the Fund or any member of the public regarding the advisability of
investing in securities generally or in the Fund particularly or the ability
of the S&P 500 Index to track general stock market performance. Standard &
Poor's only relationship to the Fund is the licensing of certain trademarks
and trade names of Standard & Poor's and of the S&P 500 Index which is
determined, composed and calculated by Standard & Poor's without regard to
the Fund. Standard & Poor's has no obligation to take the needs of the Fund
or the owners of shares of the Fund into consideration in determining,
composing or calculating the S&P 500 Index. Standard & Poor's is not
responsible for and has not participated in the determination of the prices
and amount of the Fund or the timing of the issuance of sale of shares of the
Fund. Standard & Poor's has no obligation or liability in connection with the
administration, marketing or trading of the Fund.
Standard & Poor's does not guarantee the accuracy and/or the completeness
of the S&P 500 Index or any data included therein and Standard & Poor's shall
have no liability for any errors, omissions, or interruptions therein.
Standard & Poor's makes no warranty, express or implied, as to results to be
obtained by the Fund, owners of shares of the Fund, or any other person or
entity from the use of the S&P 500 Index or any data included therein.
Standard & Poor's makes no express or implied warranties, and expressly
disclaims all warranties of merchantability or fitness for a particular
purpose or use with respect to the S&P 500 Index or any data included
therein. Without limiting any of the foregoing, in no event shall Standard &
Poor's have any liability for any special, punitive, indirect, or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
STOCK INDEX FUTURES CONTRACTS. As discussed in the Prospectus, the Fund
may invest in stock index futures contracts. An index futures contract sale
creates an obligation by the Fund, as seller, to deliver cash at a specified
future time. An index futures contract purchase would create an obligation by
the Fund, as purchaser, to take delivery of cash at a specified future time.
Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures. Currently, the initial margin
requirements range from 3% to 10% of the contract amount for index futures.
In addition, due to current industry practice, daily variations in gains and
losses on open contracts are required to be reflected in cash in the form of
variation margin payments. The Fund may be required to make additional margin
payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A
4
<PAGE>
final determination of variation margin is then made, additional cash is
required to be paid by or released to the Fund and the Fund realizes a loss
or a gain.
Stock index futures contracts provide for the delivery of an amount of
cash equal to a specified dollar amount times the difference between the
stock index value at the open or close of the last trading day of the
contract and the futures contract price. A futures contract sale is closed
out by effecting a futures contract purchase for the same aggregate amount of
the specific type of equity security and the same delivery date. If the sales
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
and the same delivery date. If the offsetting sale price exceeds the purchase
price, the purchaser would realize a loss. There is no assurance that the
Fund will be able to enter into a closing transaction.
LIMITATIONS ON FUTURES CONTRACTS. The Fund may not enter into futures
contracts if, immediately thereafter, the amount committed to initial margin
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.
However, there is no overall limitation on the percentage of the Fund's
assets which may be subject to a hedge position. Except as described above
and in the Prospectus, there are no other limitations on the use of futures
by the Fund.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS. The Fund may sell a futures
contract to protect against the decline in the value of securities held by
the Fund. However, it is possible that the futures market may advance and the
value of securities held in the portfolio of the Fund may decline. If this
occurred, the Fund would lose money on the futures contract and also
experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction
as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Investment Manager may determine not to invest in the
securities as planned and will realize a loss on the futures contract that is
not offset by a reduction in the price of the securities.
If the Fund maintains a short position in a futures contract, it will
cover this position by holding, in a segregated account, 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 index).
In addition, if the Fund holds a long position in a futures contract, it
will hold cash, U. S. Government securities or other liquid portfolio
securities equal to the purchase price of the contract or the exercise price
of the put option (less the amount of initial or variation margin on deposit)
in a segregated account. 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.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. 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.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in futures, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through
5
<PAGE>
the broker and/or incur a loss of all or part of its margin deposits with the
broker. Transactions are entered into by the Fund only with brokers or
financial institutions deemed creditworthy by the Investment Manager.
There may exist an imperfect correlation between the price movements of a
futures contract purchased by the Fund and the movements in the prices of the
securities which are the subject of the contract. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the securities and futures markets could result.
Price distortions in the normal relationship between the securities and
futures markets could result. Price distortions could also result if
investors in futures contracts opt to make or take delivery of underlying
securities rather than engage in closing transactions due to the resultant
reduction in the liquidity of the futures market. In addition, due the fact
that, from the point of view of speculators, the deposit requirements in the
futures markets are less onerous than margin requirements in the cash market,
increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in
the futures market and because of the imperfect correlation between movements
in the prices of securities and movements in the prices of futures contracts,
a correct forecast of stock price of interest rate trends by the Investment
Manager may still not result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for
futures contracts in which the Fund may invest. In the event a liquid market
does not exist, it may not be possible to close out a futures position and,
in the event of adverse price movements, the Fund would continue to be
required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Fund from closing out a
contract which may result in reduced gain or increased loss to the Fund. The
absence of a liquid market in futures contracts might cause the Fund to make
or take delivery of the underlying securities at a time when it may be
disadvantageous to do so.
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRS"). SPDRs are interests in a
unit investment trust ("UIT") that may be obtained from the UIT or purchased
in the secondary market as SPDRs listed on the American Stock Exchange.
The UIT will issue SPDRs in aggregations of 50,000 known as "Creation
Units" in exchange for a "Fund Deposit" consisting of (a) a portfolio of
securities substantially similar to the component securities (Index
Securities") of the S&P 500 Index, (b) a cash payment equal to a pro rata
portion of the dividends accrued on the UIT's portfolio securities since the
last dividend payment by the UIT, net of expenses and liabilities, and (c) a
cash payment or credit ("Balancing Amount") designed to equalize the net
asset value of the S&P 500 Index and the net asset value of a Fund Deposit.
SPDRs are not individually redeemable, except upon termination of the UIT.
To redeem, the Fund must accumulate enough SPDRs to reconstitute a Creation
Unit. The liquidity of small holdings of SPDRs, therefore, will depend upon
the existence of a secondary market. Upon redemption of a Creation Unit, the
Fund will receive Index Securities and cash identical to the Fund Deposit
required of an investor wishing to purchase a Creation Unit that day.
The price of SPDRs is derived from and based upon the securities held by
the UIT. Accordingly, the level of risk involved in the purchase or sale of a
SPDR is similar to the risk involved in the purchase or sale of traditional
common stock, with the exception that the pricing mechanism for SPDRs is
based on a basket of stocks. Disruptions in the markets for the securities
underlying SPDRs purchased or sold by the Fund could result in losses on
SPDRs.
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
6
<PAGE>
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 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.
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.
A loan may be terminated by the borrower on one business day's notice, or
by the Fund on four business days' notice. If the borrower fails to deliver
the loaned securities within four days after receipt of notice, the Fund
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and, in some
cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities
will only be made to firms deemed by the Fund's management to be creditworthy
and when the income which can be earned from such loans justifies the
attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price
during the loan period would inure to the Fund.
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.
7
<PAGE>
At the time the Fund makes the commitment to purchase or sell securities
on a when-issued, delayed delivery or forward commitment basis, it will
record the transaction and thereafter reflect the value, each day, of such
securities 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 segregate 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 Fund of the
Fund until the Investment Manager 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 segregate cash or cash equivalents 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 10% of the value of the Fund's net assets at the time
the initial commitment to purchase such securities is made. An increase in
the percentage of the Fund's assets committed to the purchase of securities
on a "when, as and if issued" basis may increase the volatility of its net
asset value. The Fund may also sell securities on a "when, as and if issued"
basis provided that the issuance of the security will result automatically
from the exchange or conversion of a security owned by the Fund at the time
of sale.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment 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
Fund.
The Fund may not:
1. With respect 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).
2. With respect to 75% of its total assets, purchase more than 10% of all
outstanding voting securities or any class of securities of any one
issuer.
3. Invest more than 25% 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 or to cash equivalents.
4. Purchase or sell real estate or interests therein (including limited
partnership interests), 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 or sell commodities except that the Fund may purchase or sell
(write) futures contracts and related options.
8
<PAGE>
6. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% (taken at the lower
of cost or current value) of its total assets (not including the amount
borrowed).
7. Pledge its assets or assign or otherwise encumber them except to secure
borrowings effected within the limitations set forth in restriction
(10). For the purpose of this restriction, collateral arrangements with
respect to the writing of options and collateral arrangements with
respect to initial or variation margin for futures are not deemed to be
pledges of assets.
8. Issue senior securities as defined in the Investment Company Act except
insofar as the Fund may be deemed to have issued a senior security by
reason of: (a) entering into any repurchase agreement; (b) borrowing
money in accordance with restrictions described above; or (c) lending
portfolio securities, (d) purchasing or selling options and futures,
(e) purchasing securities on a when-issued or forward commitment basis.
9. Make loans of money or securities, except: (a) by the purchase of debt
obligations in which the Fund may invest consistent with its investment
objective and policies; (b) by investment in repurchase agreements; or
(c) by lending its portfolio securities.
10. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the
purchase of a security on margin.
11. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act in disposing of
a portfolio security.
12. Purchase securities of other investment companies (including SPDRS)
unless if immediately thereafter not more than (a) 5% of the Fund's
total assets would be invested in such company; and (b) 10% of the
Fund's total assets would be invested in such securities. Investments
in connection with a merger, consolidation, reorganization or
acquisition of assets are not subject to this restriction.
As a non-fundamental policy the Fund may not:
1. Invest for the purpose of exercising control or management of any other
issuer.
2. Make short sales.
Notwithstanding any other investment policy or restriction, 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.
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 ( )
Trustees.]
9
<PAGE>
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 are shown below:
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- -------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (65)................ Chairman, Director or Trustee, President and Chief Executive
Chairman of the Board, President, Officer of the Morgan Stanley Dean Witter Funds; Chairman,
Chief Executive Officer and Trustee Chief Executive Officer and Trustee of the TCW/DW Funds;
Two World Trade Center formerly Chairman, Chief Executive Officer and Director of
New York, New York the Investment Manager, the Distributor and Services Company,
Executive Vice President and Director of Dean Witter Reynolds,
Chairman and Director of the Transfer Agent, and Director
and/or officer of various MSDW subsidiaries (until June,
1998).
Barry Fink (43)............................. Senior Vice President (since March, 1997), Secretary and
Vice President, Secretary General Counsel (since February, 1997) and Director (since
and General Counsel July, 1998) of the Investment Manager and Services Company;
Two World Trade Center Senior Vice President (since March, 1997) and Assistant
New York, New York 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
and the TCW/DW Funds (since February, 1997); previously First
Vice President (June, 1993-February, 1997), Vice President
(until June, 1993) and Assistant Secretary and Assistant
General Counsel of the Investment Manager and Services Company
and Assistant Secretary of the Morgan Stanley Dean Witter
Funds and the TCW/DW Funds.
Thomas F. Caloia (52)....................... First Vice President and Assistant Treasurer of the Investment
Treasurer Manager and Services Company; Treasurer of the Morgan Stanley
Two World Trade Center Dean Witter Funds and the TCW/DW Funds.
New York, New York
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Trust, as defined in
the Investment Company Act of 1940, as amended.
In addition, Mitchell M. Merin, President, Chief Executive Officer and
Director of the Investment Manager and Services Company, Chairman and
Director of the Distributor and the Transfer Agent, Executive Vice President
and Director of DWR, and Director of SPS Transaction Services, Inc. and
various other Morgan Stanley Dean Witter subsidiaries, Robert M. Scanlan,
President, Chief Operating Officer and Director of the Investment Manager and
Services Company, Executive Vice President of the Distributor and the
Transfer Agent and Director of the Transfer Agent, Ronald E. Robison,
Executive Vice President and Chief Administrative Officer of MSDW Advisors,
Robert S. Giambrone, Senior Vice President of the Investment Manager,
Services Company, the Distributor and the Transfer Agent and Director of the
Transfer Agent, and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer
Agent, and Kenton J. Hinchliffe, Ira N.
10
<PAGE>
Ross, Paul D. Vance, Senior Vice Presidents of the Investment Manager and
Michelle Kaufman, Vice President of the Investment Manager, are Vice
Presidents of the Fund. In addition, Marilyn K. Cranney and Carsten Otto,
First Vice Presidents and Assistant General Counsels of the Investment
Manager and Services Company, Frank Bruttomesso, Lou Anne D. McInnis and Ruth
Rossi, Vice Presidents and Assistant General Counsels of the Investment
Manager and Services Company, and Todd Lebo, a staff attorney with the
Investment Manager, are Assistant Secretaries of the Fund.
INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Fund
seeks as Independent Trustees individuals of distinction and experience in
business and finance, government service or academia; these are people whose
advice and counsel are in demand by others and for whom there is often
competition. To accept a position on the Fund's Board, such individuals may
reject other attractive assignments because the Fund makes substantial
demands on their time. Indeed, by serving on the Fund's Board, certain
Trustees who would otherwise be qualified and in demand to serve on bank
boards would be prohibited by law from doing so. All of the Independent
Trustees serve as members of the Audit Committee. of them also serve as
members of the Derivatives Committee. In addition, of the Trustees,
including Independent Trustees, serve as members of the Insurance
Committee.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1
plans and distribution and underwriting agreements; continually reviewing
Fund performance; checking on the pricing of Fund securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule
12b-1 plan of distribution.
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 Funds' 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.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund,
except as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund
property for satisfaction of claims arising in connection with the affairs of
the Fund. With the exceptions stated, the Declaration of Trust provides that
a Trustee, officer, employee or agent is entitled to be indemnified against
all liability in connection with the affairs of the Fund.
11
<PAGE>
C. COMPENSATION
It is estimated that the compensation paid to each Independent Trustee
during the first fiscal year of the Fund 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>
............................... $
...............................
...............................
...............................
...............................
...............................
...............................
</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 Morgan Stanley Dean Witter Funds.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
FOR SERVICE AS COMMITTEES OF
DIRECTOR OR INDEPENDENT
TRUSTEE AND DIRECTORS/TRUSTEES TOTAL CASH
COMMITTEE AND AUDIT COMPENSATION
MEMBER OF COMMITTEES FOR SERVICES
MORGAN STANLEY OF MORGAN TO MORGAN
NAME OF DEAN WITTER STANLEY DEAN STANLEY DEAN
INDEPENDENT TRUSTEE FUNDS WITTER FUNDS WITTER FUNDS
- ----------------------- ------------------ ---------------------- ----------------
<S> <C> <C> <C>
....................... $ -- $
....................... --
....................... $
....................... --
....................... --
....................... --
....................... --
.......................
</TABLE>
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
The Investment Manager of 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
Morgan Stanley Dean Witter & Co., a Delaware corporation ("MSDW & Co."). MSDW
& Co. 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.
12
<PAGE>
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 investment of the
Fund's assets, including the placing of orders for the purchase and sale of
Fund securities. The Fund pays the Investment Manager monthly compensation
calculated daily by applying the following annual rates to the net assets of
the Fund determined as of the close of each business day: % of average
daily net assets.
The Investment Manager has retained its wholly-owned subsidiary, 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 Discover Brokerage Direct, Inc. 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 & Co.
The Trustees, including a majority of the Independent Trustees, approved
the current Distribution Agreement appointing the Distributor as exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement has an initial term ending and will remain in effect from
year to year thereafter if approved by the Trustees.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. 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 FUND EXPENSES PAID BY
THIRD PARTIES
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of Fund securities.
The Investment Manager 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, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, 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.
13
<PAGE>
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. Such
expenses include, but are not limited to: 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 (not including compensation or expenses of attorneys who
are employees of the Investment Manager); 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 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 has an initial term ending and will
remain in effect from year to year thereafter, 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. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
The Transfer Agent 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. Discover Brokerage Direct maintains an
omnibus account with the Transfer Agent and performs sub-accounting services
with respect thereto. The principal business address of Discover Brokerage
Direct is 333 Market Street, Suite 2500, San Francisco, CA 94105.
(2) CUSTODIAN AND ACCOUNTANTS
The Bank of New York 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
Both the Transfer Agent and Discover Brokerage Direct are affiliates of
the Investment Manager, and of the Distributor. As Transfer Agent and Dividend
Disbursing Agent, the Transfer Agent's responsibilities include disbursing cash
dividends and reinvesting dividends, and handling purchase and redemption
transactions. For these services, the Transfer Agent receives a per account fee
from the Fund.
14
<PAGE>
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- -----------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
is 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
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. Options and futures transactions
will usually be effected through a broker and a commission will be charged.
On occasion, the Fund may also purchase certain money market instruments
directly from an issuer, in which case no commissions or discounts are paid.
B. COMMISSIONS
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 Fund 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.
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 Fund management and preclude the Fund and the Investment Manager
from obtaining a high quality of brokerage and research services. In seeking
to determine the reasonableness of brokerage commissions paid in any
transaction, the Investment Manager relies upon its experience and knowledge
regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. These determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment
Manager believes provide the most favorable prices and are capable of
providing efficient executions. If the Investment Manager believes 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. 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 from brokers and dealers may be of benefit to the Investment Manager
in the management of accounts of some of its other clients and may not in all
cases benefit the Fund directly.
15
<PAGE>
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act
as investment manager or advisor to others. It is the practice of the
Investment Manager 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 Fund 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 portfolio of the Fund and other client accounts.
In the case of certain initial and secondary public offerings, the Investment
Manager may utilize a pro rata allocation process based on the size of the
funds involved and the number of shares available from the public offering.
VII. CAPITAL STOCK
- -----------------------------------------------------------------------------
The Declarations 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 funds) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). However, the Trustees have
not presently authorized any such additional series or classes of shares.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by action of
the Trustees or by the shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Fund, requires that notice of such Fund obligations include such disclaimer,
and provides for indemnification out of the Fund's property for any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be
unable to meet its obligations. Given the above limitations on shareholder
personal liability, and the nature of the Fund's assets and operations, the
possibility of the Fund being unable to meet its obligations is remote and
thus, in the opinion of Massachusetts counsel to the Fund, the risk to Fund
shareholders of personal liability is remote.
VIII. PURCHASE OF SHARES AND OFFERING PRICE
- -----------------------------------------------------------------------------
A. PURCHASE OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed) is provided in the Fund's Prospectus.
B. OFFERING PRICE
The price of Fund shares, called net asset value, is based on the value of
the Fund's portfolio securities.
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 latest bid and asked prices. Unlisted options on debt securities and
all options on equity securities are valued at the mean between their latest
bid and asked prices. Futures are valued at the latest sale price on the
commodities exchange on which they trade unless the Trustees determine such
price does not reflect their market value, in which case they will be valued
at their fair value as determined in good faith under procedures established
by and under the supervision of the Trustees.
16
<PAGE>
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.
C. TAX CONSIDERATIONS
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.
TAXATION OF THE FUND. 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 and shareholders at year-end will
be able to claim their share of the income tax paid by the Fund as a credit
against their individual federal income tax.
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 Fund securities
if necessary. If a distribution of cash necessitates the liquidation of Fund
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 shareholders may
receive a larger capital gain distribution, if any, than they would in the
absence of such transactions.
17
<PAGE>
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have
to pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends
and distributions, to the extent that they are derived from net investment
income or short-term capital gains, are taxable to the shareholder as
ordinary income regardless of whether the shareholder receives such payments
in additional shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. The Taxpayer Relief Act of 1997
reduced the maximum tax on long-term capital gains applicable to individuals
from 28% to 20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed.
However, if any such dividends or distributions are declared in December and
paid in January then such amounts will be treated for tax purposes as
received by the shareholders on December 31.
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.
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 OF FUND SHARES. Any dividend or capital gains
distribution received by a shareholder from any investment company will have
the effect of reducing the net asset value of the shareholder's stock in that
company by the exact amount of the dividend or capital gains distribution.
Furthermore, such dividends and capital gains distributions are subject to
federal income taxes. If the net asset value of the shares should be reduced
below a shareholder's cost as a result of the payment of dividends or the
distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor
should consider the tax implications of purchasing Fund shares immediately
prior to a distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the
length of time the shares were held. A redemption of a shareholder's Fund
shares is normally treated as a sale for tax purposes. Fund shares held for a
period of one year or less will, for tax purposes, generally result in
short-term gains or losses and those held for more than one year generally
result in long-term gain or loss. Any loss realized by shareholders upon a
redemption of shares within six months of the date of their purchase will be
treated as a long-term capital loss to the extent of any distributions of net
long-term capital gains with respect to such shares during the six-month
period.
Gain or loss on the sale or redemption of shares in the Fund is measured
by the difference between the amount received and the tax basis of the
shares. Shareholders should keep records of investments made (including
shares acquired through reinvestment of dividends and distributions) so they
can compute the tax basis of their shares. Under certain circumstances a
shareholder may compute and use an average cost basis in determining the gain
or loss on the sale or redemption of shares.
If a shareholder realizes a loss on the redemption or exchange of the 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.
18
<PAGE>
IX. 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."
X. CALCULATION OF PERFORMANCE DATA
- -----------------------------------------------------------------------------
From time to time, the Fund may quote its "total return" in advertisements
and sales literature. 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 the
purpose of this calculation, it is assumed that all dividends and
distributions are reinvested. The formula for computing the average annual
total return involves a percentage obtained by dividing the ending redeemable
value by the amount of the initial investment, taking a root of the quotient
(where the root is equivalent to the number of years in the period) and
subtracting 1 from the result.
In addition, the Fund may advertise its total return for over different
periods of time by means of aggregate, average, year-by-year or other types
of total return figures.
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without
reduction for any sales charge) by the initial $1,000 investment and
subtracting 1 from the result.
The fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding the sum of all
distributions on 10,000, 50,000 or 100,000 shares of the Fund since inception
to $10,000, $50,000 and $100,000, as the case may be.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations.
XI. FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
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
* * * * *
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.
19
<PAGE>
DISCOVER BROKERAGE INDEX SERIES
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
None
b) Exhibits:
1. -- Declaration of Trust of Registrant
2. -- By-Laws of the Registrant
3. -- None
4. -- Not Applicable
5. -- Form of Investment Management Agreement between Registrant
and Morgan Stanley Dean Witter Advisors Inc.*
6.(a)-- Form of Distribution Agreement between Registrant and Morgan
Stanley Dean Witter Distributors Inc. *
(b)-- Form of Selected Dealer Agreement*
(c)-- None
7. -- None
8.(a)-- Form of Custodian Agreement.*
(b)-- Form of Transfer Agency and Service Agreement between
Registrant and Morgan Stanley Dean Witter Trust FSB.*
9. -- Form of Services Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services
Company Inc.*
10.(a)-- Opinion of Barry Fink, Esq. *
(b)-- Opinion of Lane Altman & Owens LLP *
<PAGE>
11. -- Consent of Independent Accountants *
12. -- None
13. -- Investment Letter of Morgan Stanley Dean Witter Advisors Inc.*
14. -- None
15. -- None
16. -- Schedules for Computation of Performance Quotations - to be
filed with the first Post-Effective Amendment
27. -- Financial Data Schedules *
Other (a) -- Powers of Attorney *
- --------------
* To be filed by amendment.
Item 25. Persons Controlled by or Under Common Control With Registrant.
Prior to the effectiveness of this Registration Statement, the
Registrant will sell 10,000 of its shares of beneficial interest to Morgan
Stanley Dean Witter Advisors Inc., a Delaware corporation. Morgan Stanley Dean
Witter Advisors Inc. is a wholly-owned subsidiary of Morgan Stanley Dean Witter
& Co., a Delaware corporation, that is a balanced financial services
organization providing a broad range of nationally marketed credit and
investment products.
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at , 1998
-------------- ------------------------
Share of Beneficial Interest
Item 27. Indemnification
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the
<PAGE>
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.
<PAGE>
Item 28. Business and Other Connections of Investment Advisor
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment advisor. The following information is given
regarding officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW
Advisors"). MSDW Advisors is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co. The principal address of the Fund is Two World Trade Center, New
York, New York 10048.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
- -------------------------------
(1) Dean Witter Government Income Trust
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) InterCapital California Insured Municipal Income Trust
(6) InterCapital California Quality Municipal Securities
(7) InterCapital Income Securities Inc.
(8) InterCapital Insured California Municipal Securities
(9) InterCapital Insured Municipal Bond Trust
(10) InterCapital Insured Municipal Income Trust
(11) InterCapital Insured Municipal Securities
(12) InterCapital Insured Municipal Trust
(13) InterCapital New York Quality Municipal Securities
(14) InterCapital Quality Municipal Income Trust
(15) InterCapital Quality Municipal Investment Trust
(16) InterCapital Quality Municipal Securities
(17) Municipal Income Opportunities Trust
(18) Municipal Income Opportunities Trust II
(19) Municipal Income Opportunities Trust III
(20) Municipal Income Trust
(21) Municipal Income Trust II
(22) Municipal Income Trust III
(23) Municipal Premium Income Trust
(24) Morgan Stanley Dean Witter Prime Income Trust
Open-end Investment Companies
- -----------------------------
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
<PAGE>
(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
(23) Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
(33) Morgan Stanley Dean Witter International SmallCap Fund
(34) Morgan Stanley Dean Witter Japan 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 Growth Fund
(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 Pacific Growth Fund Inc.
(45) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(46) Morgan Stanley Dean Witter S&P 500 Index Fund
(47) Morgan Stanley Dean Witter S&P 500 Select Fund
(48) Morgan Stanley Dean Witter Select Dimensions Investment Series
(49) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(50) Morgan Stanley Dean Witter Short-Term Bond Fund
(51) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(52) Morgan Stanley Dean Witter Special Value Fund
(53) Morgan Stanley Dean Witter Strategist Fund
(54) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(55) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(56) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(57) Morgan Stanley Dean Witter U.S. Government Securities Trust
(58) Morgan Stanley Dean Witter Utilities Fund
(59) Morgan Stanley Dean Witter Value-Added Market Series
(60) Morgan Stanley Dean Witter Value Fund
(61) Morgan Stanley Dean Witter Variable Investment Series
(62) Morgan Stanley Dean Witter World Wide Income Trust
<PAGE>
The term "TCW/DW Funds" refers to the following registered
investment companies:
Open-End Investment Companies
- -----------------------------
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
Closed-End Investment Companies
- -------------------------------
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- -----------------------------------------------------
Mitchell M. Merin Chairman and Director of Morgan Stanley Dean Witter
President, Chief Distributors Inc. ("MSDW Distributors") and Morgan
Executive Officer and Stanley Dean Witter Trust FSB ("MSDW Trust");
Director President, Chief Executive Officer and Director of
Morgan Stanley Dean Witter Services Company Inc.
("MSDW Services"); Executive Vice President and
Director of Dean Witter Reynolds Inc. ("DWR");
Director of SPS Transaction Services, Inc. and
various other Morgan Stanley Dean Witter & Co.
("MSDW") subsidiaries.
Thomas C. Schneider Executive Vice President and Chief Strategic and
Executive Vice Administrative Officer of MSDW; Executive Vice
President and Chief President and Chief Financial Officer of MSDW
Financial Officer Services; Director of DWR and MSDW.
Robert M. Scanlan President, Chief Operating Officer and Director of
President, Chief MSDW Services, Executive Vice President of MSDW
Operating Officer Distributors; Executive Vice President and Director
and Director of MSDW Trust; Vice President of the Morgan Stanley
Dean Witter Funds and the TCW/DW Funds.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds and Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison
Executive Vice President
and Chief Administrative
Officer
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- -----------------------------------------------------
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
Counsel and Director and Assistant General Counsel of MSDW Distributors;
Vice President, Secretary and General Counsel of the
Morgan Stanley Dean Witter Funds and the TCW/DW
Funds.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW
Trust; Vice President of the Morgan Stanley Dean
Witter Funds and the TCW/DW Funds.
Rajesh Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- -----------------------------------------------------
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
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.
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jayne M. Stevlingson Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Ronald J. Worobel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Douglas Brown
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of MSDW
First Vice President Services; Assistant Treasurer of MSDW Distributors;
and Assistant Treasurer and Chief Financial Officer of the Morgan
Treasurer Stanley Dean Witter Funds and the TCW/DW Funds.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of the Morgan Stanley Dean Witter Funds and
the TCW/DW Funds.
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- -----------------------------------------------------
Salvatore DeSteno Vice President of MSDW Services.
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
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of the Morgan Stanley
and Assistant Secretary Dean Witter Funds and the TCW/DW Funds.
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Frank Bruttomesso Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley
Assistant Secretary Dean Witter Funds and the TCW/DW Funds.
Ronald Caldwell
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- -----------------------------------------------------
Joseph Cardwell
Vice President
Philip Casparius
Vice President
David Dineen Vice President of Dean Witter Global Asset Allocation
Vice President Fund.
Bruce Dunn
Vice President
Michael Durbin
Vice President
Sheila Finnerty
Vice President
Jeffrey D. Geffen
Vice President
Michael Geringer
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Sandra Grossman
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- -----------------------------------------------------
Christopher Jones
Vice President
Kevin Jung
Vice President
Carol Espejo Kane
Vice President
James P. Kastberg
Vice President
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Thomas Lawlor
Vice President
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Login
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley
Assistant Secretary Dean Witter Funds and the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- -----------------------------------------------------
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Richard Norris
Vice President
George Paoletti
Vice President
Anne Pickrell Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Michael Roan
Vice President
John Roscoe
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Ruth Rossi Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley
Assistant Secretary Dean Witter Funds and the TCW/DW Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Robert Stearns
Vice President
Julie Morrone
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- -----------------------------------------------------
Naomi Stein
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Marybeth Swisher
Vice President
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
Item 29. 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 American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation 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
<PAGE>
(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 Short-Term Income Fund Inc.
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
(33) Morgan Stanley Dean Witter International SmallCap Fund
(34) Morgan Stanley Dean Witter Japan 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 Growth Fund
(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 Pacific Growth Fund Inc.
(45) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(46) Morgan Stanley Dean Witter Prime Income Trust
(47) Morgan Stanley Dean Witter S&P 500 Index Fund
(48) Morgan Stanley Dean Witter S&P 500 Select Fund
(49) Morgan Stanley Dean Witter Short-Term Bond Fund
(50) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(51) Morgan Stanley Dean Witter Special Value Fund
(52) Morgan Stanley Dean Witter Strategist Fund
(53) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(54) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(55) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(56) Morgan Stanley Dean Witter U.S. Government Securities Trust
(57) Morgan Stanley Dean Witter Utilities Fund
(58) Morgan Stanley Dean Witter Value-Added Market Series
(59) Morgan Stanley Dean Witter Value Fund
(60) Morgan Stanley Dean Witter Variable Investment Series
(61) Morgan Stanley Dean Witter World Wide Income Trust
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
<PAGE>
(b) The following information is given regarding directors and officers of
MSDW Distributors not listed in Item 28 above. The principal address of
MSDW Distributors is Two World Trade Center, New York, New York 10048.
Except for Mr. Purcell, none of the following persons has any position
or office with the Registrant. Mr. Purcell is a Trustee of the
Registrant.
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
Richard M. DeMartini Director
Christine Edwards Executive Vice President, Secretary, Director and
Chief Legal Officer.
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 Vidala Senior Vice President and Financial Principal
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained by
the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and the State of New York on the 14th
day of October, 1998.
DISCOVER BROKERAGE INDEX SERIES
By: /s/ Barry Fink
-----------------------------
Barry Fink
Trustee, Vice President
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signatures Title Date
- ---------- ----- ----
By: /s/ Charles A. Fiumefreddo Chairman, President, 10/14/98
--------------------------- Trustee and Chief
Charles A. Fiumefreddo Executive Officer
By: /s/ Robert S. Giambrone Trustee 10/14/98
---------------------------
Robert S. Giambrone
By: /s/ Barry Fink Trustee, Vice President 10/14/98
--------------------------- and Secretary
Barry Fink
By: /s/ Thomas F. Caloia Trustee, Chief Financial 10/14/98
--------------------------- Officer and Chief
Thomas F. Caloia Accounting Officer
<PAGE>
DISCOVER BROKERAGE INDEX SERIES
-------------------------------
EXHIBIT INDEX
-------------
1. -- Declaration of Trust of Registrant
2. -- By-Laws of the Registrant
3. -- None
4. -- Not Applicable
5. -- Form of Investment Management Agreement between Registrant
and Morgan Stanley Dean Witter Advisors Inc.*
6.(a)-- Form of Distribution Agreement between Registrant and Morgan
Stanley Dean Witter Distributors Inc. *
(b)-- Form of Selected Dealer Agreement*
(c)-- None
7. -- None
8.(a)-- Form of Custodian Agreement.*
(b)-- Form of Transfer Agency and Service Agreement between
Registrant and Morgan Stanley Dean Witter Trust FSB.*
9. -- Form of Services Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services
Company Inc.*
10.(a)-- Opinion of Barry Fink, Esq. *
(b)-- Opinion of Lane Altman & Owens LLP *
11. -- Consent of Independent Accountants *
12. -- None
13. -- Investment Letter of Morgan Stanley Dean Witter Advisors Inc.*
14. -- None
<PAGE>
15. -- None
16. -- Schedules for Computation of Performance Quotations - to be
filed with the first Post-Effective Amendment
27. -- Financial Data Schedules *
Other (a) -- Powers of Attorney *
- --------------
* To be filed by amendment.
<PAGE>
DISCOVER BROKEAGE
INDEX SERIES
TWO WORLD TRADE CENTER
NEW YORK, NY 10048
DECLARATION OF TRUST
DATED: OCTOBER 13, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I--Name and Definitions ........................................... 2
Section 1.1 Name .......................................................... 2
Section 1.2 Definitions ................................................... 2
ARTICLE II--Trustees ...................................................... 3
Section 2.1 Number of Trustees ............................................ 3
Section 2.2 Election and Term ............................................. 3
Section 2.3 Resignation and Removal ....................................... 3
Section 2.4 Vacancies ..................................................... 3
Section 2.5 Delegation of Power to Other Trustees ......................... 4
ARTICLE III--Powers of Trustees ........................................... 4
Section 3.1 General ....................................................... 4
Section 3.2 Investments ................................................... 4
Section 3.3 Legal Title ................................................... 5
Section 3.4 Issuance and Repurchase of Securities ......................... 5
Section 3.5 Borrowing Money; Lending Trust Assets ......................... 5
Section 3.6 Delegation; Committees ........................................ 5
Section 3.7 Collection and Payment ........................................ 5
Section 3.8 Expenses ...................................................... 5
Section 3.9 Manner of Acting; By-Laws ..................................... 5
Section 3.10 Miscellaneous Powers ......................................... 6
Section 3.11 Principal Transactions ....................................... 6
Section 3.12 Litigation ................................................... 6
ARTICLE IV--Investment Adviser, Distributor, Custodian and
Transfer Agent ............................................... 6
Section 4.1 Investment Adviser ............................................ 6
Section 4.2 Administrative Services ....................................... 7
Section 4.3 Distributor ................................................... 7
Section 4.4 Transfer Agent ................................................ 7
Section 4.5 Custodian ..................................................... 7
Section 4.6 Parties to Contract ........................................... 7
ARTICLE V--Limitations of Liability of Shareholders,
Trustees and Others ........................................... 8
Section 5.1 No Personal Liability of Shareholders, Trustees, etc. ........ 8
Section 5.2 Non-Liability of Trustees, etc. ............................... 8
Section 5.3 Indemnification ............................................... 8
Section 5.4 No Bond Required of Trustees .................................. 8
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. ............................................ 8
Section 5.6 Reliance on Experts, etc....................................... 9
ARTICLE VI--Shares of Beneficial Interest ................................. 9
Section 6.1 Beneficial Interest ........................................... 9
Section 6.2 Rights of Shareholders ........................................ 9
Section 6.3 Trust Only .................................................... 10
Section 6.4 Issuance of Shares ............................................ 10
Section 6.5 Register of Shares ............................................ 10
Section 6.6 Transfer of Shares ............................................ 10
Section 6.7 Notices ....................................................... 10
i
<PAGE>
PAGE
----
Section 6.8 Voting Powers ................................................. 11
Section 6.9 Series or Classes of Shares ................................... 11
ARTICLE VII--Redemptions .................................................. 13
Section 7.1 Redemptions ................................................... 13
Section 7.2 Redemption at the Option of the Trust ......................... 13
Section 7.3 Effect of Suspension of Determination of Net Asset Value ..... 13
Section 7.4 Suspension of Right of Redemption ............................. 14
ARTICLE VIII--Determination of Net Asset Value, Net Income and
Distributions .............................................. 14
Section 8.1 Net Asset Value ............................................... 14
Section 8.2 Distributions to Shareholders ................................. 14
Section 8.3 Determination of Net Income ................................... 15
Section 8.4 Power to Modify Foregoing Procedures .......................... 15
ARTICLE IX--Duration; Termination of Trust; Amendment; Mergers, etc. ..... 15
Section 9.1 Duration ...................................................... 15
Section 9.2 Termination of Trust .......................................... 15
Section 9.3 Amendment Procedure ........................................... 16
Section 9.4 Merger, Consolidation and Sale of Assets ...................... 16
Section 9.5 Incorporation ................................................. 17
ARTICLE X--Reports to Shareholders ........................................ 17
ARTICLE XI--Miscellaneous ................................................. 17
Section 11.1 Filing ....................................................... 17
Section 11.2 Resident Agent ............................................... 17
Section 11.3 Governing Law ................................................ 17
Section 11.4 Counterparts ................................................. 17
Section 11.5 Reliance by Third Parties .................................... 17
Section 11.6 Provisions in Conflict with Law or Regulations ............... 18
Section 11.7 Use of the Name "Discover Brokerage" ......................... 18
Section 11.8 Principal Place of Business................................... 18
SIGNATURE PAGE ............................................................ 19
ii
<PAGE>
DECLARATION OF TRUST
OF
DISCOVER BROKERAGE INDEX SERIES
DATED: OCTOBER 13, 1998
THE DECLARATION OF TRUST of Discover Brokerage Index Series is made the
13th day of October, 1998 by the parties signatory hereto, as trustees (such
persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as trustees in accordance with
the provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed
thereto; and
WHEREAS, it is provided that the beneficial interest in the trust assets
be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
1
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is the "Discover
Brokerage Index Series," and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever herein used) shall
refer to the Trustees as Trustees, and not as individuals, or personally, and
shall not refer to the officers, agents, employees or Shareholders of the
Trust. Should the Trustees determine that the use of such name is not
advisable, they may use such other name for the Trust as they deem proper and
the Trust may hold its property and conduct its activities under such other
name.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof, as from
time to time amended.
(b) the terms "Commission," "Affiliated Person" and "Interested Person,"
have the meanings given them in the 1940 Act.
(c) "Class" means any division of Shares within a Series, which Class is
or has been established pursuant to Section 6.1 hereof.
(d) "Declaration" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(e) "Distributor" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(f) "Fundamental Policies" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional
Information and designated as fundamental policies therein.
(g) "Investment Adviser" means any party, other than the Trust, to a
contract described in Section 4.1 hereof.
(h) "Majority Shareholder Vote" means the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares
represented in person or by proxy and entitled to vote at a meeting of
Shareholders at which a quorum, as determined in accordance with the By-Laws,
is present; (ii) a majority of Shares issued and outstanding and entitled to
vote when action is taken by written consent of Shareholders; and (iii) a
"majority of the outstanding voting securities," as the phrase is defined in
the 1940 Act, when any action is required by the 1940 Act by such majority as
so defined.
(i) "1940 Act" means the Investment Company Act of 1940 and the rules and
regulations thereunder as amended from time to time.
(j) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(k) "Prospectus" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust
under the Securities Act of 1933 as such Prospectus and Statement of
Additional Information may be amended or supplemented and filed with the
Commission from time to time.
(l) "Series" means one of the separately managed components of the Trust
(or, if the Trust shall have only one such component, then that one) as set
forth in Section 6.1 hereof or as may be established and designated from time
to time by the Trustees pursuant to that section.
(m) "Shareholder" means a record owner of outstanding Shares.
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(n) "Shares" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the
shares of any and all series or classes which may be established by the
Trustees, and includes fractions of Shares as well as whole Shares.
(o) "Transfer Agent" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(p) "Trust" means the Discover Brokerage Index Series.
(q) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(r) "Trustees" means the persons who have signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed,
qualified and serving as Trustees in accordance with the provisions hereof,
and reference herein to a Trustee or the Trustees shall refer to such person
or persons in their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by
a majority of the Trustees, provided, however, that the number of Trustees
shall in no event be less than three (3) nor more than fifteen (15).
Section 2.2. Election and Term. The Trustees shall be elected by a vote of
a majority of the outstanding voting securities, as defined by the 1940 Act,
held by the initial shareholder(s) (i.e., the person(s) that supplied the
seed capital required under Section 14(a) of the 1940 Act). The Trustees
shall have the power to set and alter the terms of office of the Trustees,
and they may at any time lengthen or lessen their own terms or make their
terms of unlimited duration, subject to the resignation and removal
provisions of Section 2.3 hereof. Subject to Section 16(a) of the 1940 Act,
the Trustees may elect their own successors and may, pursuant to Section 2.4
hereof, appoint Trustees to fill vacancies. The Trustees shall adopt By-Laws
not inconsistent with this Declaration or any provision of law to provide for
election of Trustees by Shareholders at such time or times as the Trustees
shall determine to be necessary or advisable.
Section 2.3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall
be effective upon such delivery, or at a later date according to the terms of
the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than the number
required by Section 2.1 hereof) by the action of two-thirds of the remaining
Trustees or by the action of the Shareholders of record of not less than
two-thirds of the Shares outstanding (for purposes of determining the
circumstances and procedures under which such removal by the Shareholders may
take place, the provisions of Section 16(c) of the 1940 Act or of the
corporate or business statute of any state in which shares of the Trust are
sold, shall be applicable to the same extent as if the Trust were subject to
the provisions of that Section). Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any Trust
Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute
and deliver on his behalf such documents as the remaining Trustees shall
require as provided in the preceding sentence.
Section 2.4. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the provisions of Section
16(a) of the 1940 Act, the remaining Trustees shall fill such vacancy by the
appointment of
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such other person as they or he, in their or his discretion, shall see fit,
made by a written instrument signed by a majority of the remaining Trustees.
Any such appointment shall not become effective, however, until the person
named in the written instrument of appointment shall have accepted in writing
such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the
number of Trustees. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in this Section 2.4, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by the
Declaration. A written instrument certifying the existence of such vacancy
signed by a majority of the Trustees shall be conclusive evidence of the
existence of such vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted
to the Trustees under the Declaration except as herein otherwise expressly
provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the
same extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the Commonwealth of
Massachusetts. In any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities
wheresoever in the world they may be located as they deem necessary, proper
or desirable in order to promote the interests of the Trust although such
things are not herein specifically mentioned. Any determination as to what is
in the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Investments. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute, lend or
otherwise deal in or dispose of negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, options, commodities, commodity futures contracts and related
options, currencies, currency futures and forward contracts, and other
securities, investment contracts and other instruments of any kind,
including, without limitation, those issued, guaranteed or sponsored by any
and all Persons including, without limitation, states, territories and
possessions of the United States, the District of Columbia and any of the
political subdivisions, agencies or instrumentalities thereof, and by the
United States Government or its agencies or instrumentalities, foreign or
international instrumentalities, or by any bank or savings institution, or
by any corporation or organization organized under the laws of the United
States or of any state, territory or possession thereof, and of corporations
or organizations organized under foreign laws, or in "when issued" contracts
for any such securities, or retain Trust assets in cash and from time to
time change the investments of the assets of the Trust; and to exercise any
and all rights, powers and privileges of ownership or interest in respect of
any and all such investments of every kind and description, including,
without limitation, the right
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to consent and otherwise act with respect thereto, with power to designate
one or more persons, firms, associations or corporations to exercise any of
said rights, powers and privileges in respect of any of said instruments;
and the Trustees shall be deemed to have the foregoing powers with respect
to any additional securities in which the Trust may invest should the
Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by
any law limiting the investments which may be made by fiduciaries.
Section 3.3. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name
of any other Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each Person who may hereafter become a Trustee. Upon
the resignation, removal or death of a Trustee he shall automatically cease
to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed
and delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares
and, subject to the provisions set forth in Articles VII, VIII and IX and
Section 6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 3.5. Borrowing Money; Lending Trust Assets. Subject to the
Fundamental Policies, the Trustee shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust assets.
Section 3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of
the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient.
Section 3.7. Collection and Payment. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which
any property is owed to the Trust; and to enter into releases, agreements and
other instruments.
Section 3.8. Expenses. Subject to Section 6.9 hereof, the Trustees shall
have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust
to themselves as Trustees. the Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken
by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, or by written consents of all the Trustees. The Trustees may adopt
By-Laws not inconsistent with this Declaration to provide for the conduct of
the business of the Trust and may amend or repeal such By-Laws to the extent
such power is not reserved to the Shareholders.
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Section 3.10. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust or any Series thereof; (b)
enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their
number, elect and remove such officers and appoint and terminate such agents
or employees as they consider appropriate, and appoint from their own number,
and terminate, any one or more committees which may exercise some or all of
the power and authority of the Trustees as the Trustees may determine; (d)
purchase, and pay for out of Trust Property or the property of the
appropriate Series of the Trust, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers or independent contractors of the Trust
against all claims arising by reason of holding any such position or by
reason of any action taken or omitted to be taken by any such Person in such
capacity, whether or not constituting negligence, or whether or not the Trust
would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents
of the Trust; (f) to the extent permitted by law, indemnify any person with
whom the Trust or any Series thereof has dealings, including any Investment
Adviser, Distributor, Transfer Agent and selected dealers, to such extent as
the Trustees shall determine; (g) guarantee indebtedness or contractual
obligations of others; (h) determine and change the fiscal year of the Trust
or any Series thereof and the method by which its accounts shall be kept; and
(i) adopt a seal for the Trust but the absence of such seal shall not impair
the validity of any instrument executed on behalf of the Trust.
Section 3.11. Principal Transactions. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, or effected to implement the provisions of any
agreement to which the Trust is a party, the Trustees shall not, on behalf of
the Trust, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Trust or any Series thereof
to, any Trustee or officer of the Trust or any firm of which any such Trustee
or officer is a member acting as principal, or have any such dealings with
any Investment Adviser, Distributor or Transfer Agent or with any Affiliated
Person of such Person; but the Trust or any Series thereof may employ any
such Person, or firm or company in which such Person is an Interested Person,
as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
Section 3.12. Litigation. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series
thereof to pay or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such power shall
include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business
judgment, to dismiss any action, suit, proceeding, dispute, claim, or demand,
derivative or otherwise, brought by any person, including a Shareholder in
its own name or the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Section 4.1. Investment Adviser. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time
enter into one or more investment advisory or management contracts or, if the
Trustees establish multiple Series, separate investment advisory or
management contracts with respect to one or more Series whereby the other
party or parties to any such contracts shall undertake to furnish the Trust
or such Series such management, investment advisory, administration,
accounting, legal, statistical and research facilities and services,
promotional or marketing activities, and such other facilities and services,
if any, as the Trustees shall from time to time consider desirable and all
upon such terms and conditions as the Trustees may in their discretion
determine. The vote of the initial shareholder(s) shall constitute "majority
shareholder vote" if such
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agreements are entered into prior to a public offering of Shares of the
Trust. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Advisers, or any of them, under any such contracts
(subject to such general or specific instructions as the Trustees may from
time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities and other investments of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of such
Investment Advisers, or any of them (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees. the Trustees may, in the their
sole discretion, call a meeting of Shareholders in order to submit to a vote
of Shareholders at such meeting the approval or continuance of any such
investment advisory or management contract. If the Shareholders of any one or
more of the Series of the Trust should fail to approve any such investment
advisory or management contract, the Investment Adviser may nonetheless serve
as Investment Adviser with respect to any Series whose Shareholders approve
such contract.
Section 4.2. Administrative Services. The Trustees may in their discretion
from time to time contract for administrative personnel and services whereby
the other party shall agree to provide the Trustees or the Trust
administrative personnel and services to operate the Trust on a daily or
other basis, on such terms and conditions as the Trustees may in their
discretion determine. Such services may be provided by one or more persons or
entities.
Section 4.3. Distributor. The Trustees may in their discretion from time
to time enter into one or more contracts, providing for the sale of Shares to
net the Trust or the applicable Series of the Trust not less than the net
asset value per Share (as described in Article VIII hereof) and pursuant to
which the Trust may either agree to sell the Shares to the other parties to
the contracts, or any of them, or appoint any such other party its sales
agent for such Shares. In either case, any such contract shall be on such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of Article IV, including, without
limitation, the provision for the repurchase or sale of shares of the Trust
by such other party as principal or as agent of the Trust.
Section 4.4. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or
more Persons.
Section 4.5. Custodian. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least
five million dollars ($5,000,000) to serve as Custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in the By-Laws of the Trust.
Section 4.6. Parties To Contract. Any contract of the character described
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other
contract may be entered into with any Person, although one or more of the
Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence
of such relationship; nor shall any Person holding such relationship be
liable merely by reason of such relationship for any loss or expense to the
Trust under or by reason of such contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was not inconsistent with the provisions of this Article IV. The
same Person may be the other party to any contracts entered into pursuant to
Sections 4.1, 4.2, 4.3, 4.4 or 4.5 above or otherwise, and any individual may
be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.6.
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ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs
of the Trust. No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than the
Trust or its Shareholders, in connection with the Trust Property or the
affairs of the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard for his duty to such
Person; and all such Persons shall look solely to the Trust Property, or to
the Property of one or more specific Series of the Trust if the claim arises
from the conduct of such Trustee, officer, employee or agent with respect to
only such Series, for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee or agent, as such, of the Trust is made to any suit or
proceeding to enforce any such liability, he shall not, on account thereof,
be held to any personal liability. the Trust shall indemnify out of the
property of the Trust and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability; provided that, in the event the
Trust shall consist of more than one Series, Shareholders of a particular
Series who are faced with claims or liabilities solely by reason of their
status as Shareholders of that Series shall be limited to the assets of that
Series for recovery of such loss and related expenses. The rights accruing to
a Shareholder under this Section 5.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically
provided herein.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to
any Shareholder, Trustee, officer, employee, or agent thereof for any action
or failure to act (including without limitation the failure to compel in any
way any former or acting Trustee to redress any breach of trust) except for
this own bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties.
Section 5.3. Indemnification. (a) the Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any
person who is, or has been, a Trustee, officer, employee or agent of the
Trust against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been a Trustee, officer, employee or agent and against amounts paid or
incurred by him in the settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
Section 5.4. No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent
or be liable for the application of money or property paid, loaned or
delivered to or on the order of the Trustees or of said officer, employee or
agent. Every obligation, contract, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking, and every other act
or thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only
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in their capacity as officers, employees or agents of the Trust or a Series
thereof. Every written obligation, contract, instrument, certificate, Share,
other security of the Trust or undertaking made or issued by the Trustees
shall recite that the same is executed or made by them not individually, but
as Trustees under the Declaration, and that the obligations of the Trust or a
Series thereof under any such instrument are not binding upon any of the
Trustees or Shareholders, individually, but bind only the Trust Estate (or,
in the event the Trust shall consist of more than one Series, in the case of
any such obligation which relates to a specific Series, only the Series which
is a party thereto), and may contain any further recital which they or he may
deem appropriate, but the omission of such recital shall not affect the
validity of such obligation, contract instrument, certificate, Share,
security or undertaking and shall not operate to bind the Trustees or
Shareholders individually. The Trustees shall at all times maintain insurance
for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
Section 5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser,
Distributor, Transfer Agent, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or
expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The beneficial interest in the Trust
shall be evidenced by transferable Shares of one or more Series, each of
which may be divided into one or more separate and distinct Classes. The
number of Shares of the Trust and of each Series and Class is unlimited and
each Share shall have a par value of $0.01 per Share. All Shares issued
hereunder shall be fully paid and nonassessable. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust. The Trustees shall have full power and
authority, in their sole discretion and without obtaining Shareholder
approval: to issue original or additional Shares and fractional Shares at
such times and on such terms and conditions as they deem appropriate; to
establish and to change in any manner Shares of any Series or Classes with
such preferences, terms of conversion, voting powers, rights and privileges
as the Trustees may determine (but the Trustees may not change outstanding
Shares in a manner materially adverse to the Shareholders of such Shares); to
divide or combine the Shares of any Series or Classes into a greater or
lesser number without thereby changing the proportionate beneficial interests
in that Series or Class; to classify or reclassify any unissued Shares of any
Series or Classes into one or more Series or Classes of Shares; to abolish
any one or more Series or Classes of Shares; to issue Shares to acquire other
assets (including assets subject to, and in connection with, the assumption
of liabilities) and businesses; and to take such other action with respect to
the Shares as the Trustees may deem desirable.
Section 6.2. Rights of Shareholders. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by
their Shares, and they shall have no right to call for any partition of
division of any property, profits, rights or interests of the Trust nor can
they be called upon to assume any losses of the Trust or suffer an assessment
of any kind by virtue of their ownership of Shares. The Shares shall be
personal property giving only the rights in the Declaration specifically set
forth. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may
determine with respect to any series of Shares.
Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustees and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock
association,
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corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders,
either by themselves or with the Trustees, partners or members of a joint
stock association.
Section 6.4. Issuance of Shares. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares of any
Series or Class, in addition to the then issued and outstanding Shares and
Shares held in the treasury, to such party or parties and for such amount and
type of consideration, including cash or property, at such time or times and
on such terms as the Trustees may deem best, and may in such manner acquire
other assets (including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares.
Contributions to the Trust may be accepted for, and Shares shall be redeemed
as, whole Shares and/or fractions of a Share as described in the Prospectus.
Section 6.5. Register of Shares. A register shall be kept in respect of
each Series and Class at the principal office of the Trust or at an office of
the Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares of each Series and Class held by them
respectively and a record of all transfers thereof. Such register may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled
to receive dividends or distributions or otherwise to exercise or enjoy the
rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or
in the By-Laws provided, until he has given his address to the Transfer Agent
or such other officer or agent of the Trustees as shall keep the said
register for entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate appropriate rules
and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder or by his agent thereunto duly
authorized in writing, upon delivery to the Trustees or the Transfer Agent of
a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent or registrar nor
any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the
Transfer Agent, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder
and neither the Trustees nor any Transfer Agent or registrar nor any officer
or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law, except as may
otherwise be provided by the laws of the Commonwealth of Massachusetts.
Section 6.7. Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust. Annual reports
and proxy statements need not be sent to a shareholder if: (i) an annual
report and proxy statement for two consecutive annual meetings, or (ii) all,
and at least two, checks (if sent by first class mail) in payment of
dividends or interest and shares during a twelve month period have been
mailed to such shareholder's address and have been returned undelivered.
However, delivery of such annual reports and proxy statements shall resume
once a Shareholder's current address is determined.
Section 6.8. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof, (ii) for
the removal of Trustees as provided in Section 2.3 hereof, (iii) with respect
to any investment advisory or management contract as provided in Section 4.1,
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(iv) with respect to termination of the Trust as provided in Section 9.2, (v)
with respect to any amendment of the Declaration to the extent and as
provided in Section 9.3, (vi) with respect to any merger, consolidation or
sale of assets as provided in Section 9.4, (vii) with respect to
incorporation of the Trust to the extent and as provided in Section 9.5,
(viii) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should
or should not be brought or maintained derivatively or as a class action on
behalf of the Trust or the Shareholders (provided that Shareholders of a
Series or Class are not entitled to vote in connection with the bringing of a
derivative or class action with respect to any matter which only affects
another Series or Class or its Shareholders), (ix) with respect to any plan
adopted pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act and
(x) with respect to such additional matters relating to the Trust as may be
required by law, the Declaration, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as and
when the Trustee may consider necessary or desirable. Each whole Share shall
be entitled to one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust as of the record date,
as determined in accordance with the By-Laws, shall not be voted. On any
matter submitted to a vote of Shareholders, all Shares shall be voted by
individual Series or Class except (1) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual Series or Class; and
(2) when the Trustees have determined that the matter affects only the
interests of one or more Series or Class, then only the Shareholders of such
Series or Class shall be entitled to vote thereon. the Trustees may, in
conjunction with the establishment of any further Series or classes of
Shares, establish conditions under which the several series or classes of
Shares shall have separate voting rights or no voting rights. There shall be
no cumulative voting in the election of Trustees. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration or the By-Laws to be taken by Shareholders.
The By-Laws may include further provisions for Shareholders' votes and
meetings and related matters.
Section 6.9. Series or Classes of Shares. The following provisions are
applicable regarding the Shares of the Trust established in Section 6.1
hereof and shall be applicable if the Trustees shall establish additional
Series or shall divide the shares of any Series into Classes, also as
provided in Section 6.1 hereof, and all provisions relating to the Trust
shall apply equally to each Series and Class thereof except as the context
requires:
(a) The number of authorized shares and the number of shares of each
Series or of each Class that may be issued shall be unlimited. The Trustees
may classify or reclassify any unissued shares or any shares previously
issued and reacquired of any Series or Class into one or more Series or one
or more Classes that may be established and designated from time to time.
The Trustees may hold as treasury shares (of the same or some other Series
or Class), reissue for such consideration and on such terms as they may
determine, or cancel any shares of any Series or any Class reacquired by the
Trust at their discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to any one
or more Series which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional Series and the
power of the Trustees to invest and reinvest assets applicable to any other
Series shall be as set forth in the instrument of the Trustees establishing
such Series which is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular Series or Class together with all assets in which
such consideration is invested or reinvested, all income, earnings, profits,
and proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series or Class for all purposes, subject only to
the rights of creditors, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payment which are not readily
identifiable as belonging to any particular Series or Class, the Trustee
shall allocate them among any one or more of the Series or Classes
established and designated from time to time in such manner and on such
basis as they, in their sole discretion,
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deem fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series or classes for
all purposes. No holder of Shares of any Series or Class shall have any
claim on or right to any assets allocated or belonging to any other Series
or Class.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses,
costs, charges and reserves attributable to that Series. The liabilities,
expenses, costs, charges and reserves so charged to a Series are sometimes
herein referred to as "liabilities belonging to" that Series. Except as
provided in the next sentence or otherwise required or permitted by
applicable law or any rule or order of the Commission, each Class of a
Series shall bear a pro rata portion of the "liabilities belonging to" such
Series. To the extent permitted by rule or order of the Commission, the
Trustees may allocate all or a portion of any liabilities, expenses, costs,
charges and reserves belonging to a Series to a particular Class or Classes
as the Trustees may from time to time determine is appropriate. Without
limitation of the foregoing provisions, and subject to the right of the
Trustees in their sole discretion to allocate general liabilities, costs,
expenses, charges or reserves as hereinafter provided, all expenses and
liabilities incurred or arising in connection with a particular Series, or
in connection with the management thereof, shall be payable solely out of
the assets of that Series and creditors of a particular Series shall be
entitled to look solely to the property of such Series for satisfaction of
their claims. Any general liabilities, expenses, costs, charges or reserves
of the Trust which are not readily identifiable as belonging to any
particular Series shall be allocated and charged by the Trustees to and
among any one or more of the series established and designated from time to
time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive
and binding upon the holders of all Series and Classes and no Shareholder or
former Shareholder of any Series or Class shall have a claim on or any right
to any assets allocated or belonging to any other Series or Class for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 8.2 of this Declaration with respect to any one
or more Series or Classes which represents the interests in the assets of
the Trust immediately prior to the establishment of any additional Series or
Classes. With respect to any other Series or Class, dividends and
distributions on shares of a particular Series or Class may be paid with
such frequency as the Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustee may determine, to the holders of
shares of that Series or Class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that Series or Class, as
the Trustees may determine, after providing for actual and accrued
liabilities belonging to that Series or Class. All dividends and
distributions on shares of a particular Series or Class shall be distributed
pro rata to the holders of that Series or Class in proportion ot the number
of shares of that Series or Class held by such holders at the date and time
of record established for the payment of such dividends or distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and
dividend rights, of each Class and Series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of
any Series or class shall have the right to convert or exchange said Shares
into Shares of one or more Series or Classes of Shares in accordance with
such requirements and procedures as may be established by the Trustees.
(h) The establishment and designation of any Series or Class of shares in
addition to those established in Section 6.1 hereof shall be effective upon
the execution by a majority of the then Trustees of an instrument setting
forth such establishment and designation and the relative rights,
preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and
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conditions of redemption of such Series or Class, or as otherwise provided
in such instrument. At any time that there are no shares outstanding of any
particular Series or Class previously established or designated, the Trustee
may by an instrument executed by a majority of their number abolish that
Series or Class and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an
amendment to this Declaration.
(i) Shareholders of a Series or Class shall not be entitled to participate
in a derivative or class action with respect to any matter which only
affects another Series or Class or its Shareholders.
(j) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of distributions of income
and capital gains made with respect to such Series. In the event of the
liquidation of a particular Series, the Shareholders of that Series which
has been established and designated and which is being liquidated shall be
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to that Series over the liabilities belonging to that
Series. The holders of Shares of any Series shall not be entitled hereby to
any distribution upon liquidation of any other Series. The assets so
distributable to the Shareholders of any Series shall be distributed among
such Shareholders in proportion to the number of Shares of that Series held
by them and recorded on the books of the Trust. The liquidation of any
particular Series in which there are Shares then outstanding may be
authorized by an instrument in writing, without a meeting, signed by a
majority of the Trustees then in office, subject to the approval of a
majority of the outstanding voting securities of that Series, as that phrase
is defined in the 1940 Act.
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions. Each Shareholder of a particular Series or Class
shall have the right at such times as may be permitted by the Trust to
require the Trust to redeem all or any part of his Shares of that Series or
Class, upon and subject to the terms and conditions provided in this Article
VII. The Trust shall, upon application of any Shareholder or pursuant to
authorization from any Shareholder, redeem or repurchase from such
Shareholder outstanding shares for an amount per share determined by the
Trustees in accordance with any applicable laws and regulations; provided
that (a) such amount per share shall not exceed the cash equivalent of the
proportionate interest of each share or of any class or Series of shares in
the assets of the Trust at the time of the redemption or repurchase and (b)
if so authorized by the Trustees, the Trust may, at any time and from time to
time charge fees for effecting such redemption or repurchase, at such rates
as the Trustees may establish, as and to the extent permitted under the 1940
Act and the rules and regulations promulgated thereunder, and may, at any
time and from time to time, pursuant to such Act and such rules and
regulations, suspend such right of redemption. The procedures for effecting
and suspending redemption shall be as set forth in the Prospectus from time
to time. Payment will be made in such manner as described in the Prospectus.
Section 7.2. Redemption at the Option of the Trust. Each Share of the
Trust or any Series or Class thereof of the Trust shall be subject to
redemption at the option of the Trust at the redemption price which would be
applicable if such Shares were then being redeemed by the Shareholder
pursuant to Section 7.1: (i) at any time, if the Trustees determine in their
sole discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or of any Series or
Class, or (ii) upon such other conditions with respect to maintenance of
Shareholder accounts of a minimum amount as may from time to time be
determined by the Trustees and set forth in the then current Prospectus of
the Trust. Upon such redemption the holders of the Shares so redeemed shall
have no further right with respect thereto other than to receive payment of
such redemption price.
Section 7.3. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 7.4 hereof, the Trustees shall declare a suspension
of the determination of net asset value with respect to Shares of the Trust
or of any Series thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 7.1 hereof but who
shall not yet have received payment) to have Shares redeemed and paid for by
the Trust or a Series thereof shall be suspended until
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the termination of such suspension is declared. Any record holder who shall
have his redemption right so suspended may, during the period of such
suspension, by appropriate written notice of revocation at the office or
agency where application was made, revoke any application for redemption not
honored and withdraw any certificates on deposit. The redemption price of
Shares for which redemption applications have not been revoked shall be the
net asset value of such Shares next determined as set forth in Section 8.1
after the termination of such suspension, and payment shall be made within
seven (7) days after the date upon which the application was made plus the
period after such application during which the determination of net asset
value was suspended.
Section 7.4. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which
disposal by the Trust or a Series thereof of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust or a
Series thereof fairly to determine the value of its net assets, or (iv)
during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the rights of
redemption or postponement of the date of payment or redemption; provided
that applicable rules and regulations of the Commission shall govern as to
whether the conditions prescribed in (ii), (iii) or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of
redemption or payment on redemption until the Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event
on the first day on which said stock exchange shall have reopened or the
period specified in (ii) or (iii) shall have expired (as to which in the
absence of an official ruling by the Commission, the determination of the
Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination
of the suspension.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1. Net Asset Value. The net asset value of each outstanding
Share of each Series of the Trust shall be determined on such days and at
such time or times as the Trustees may determine. The method of determination
of net asset value shall be determined by the Trustees and shall be as set
forth in the Prospectus. The power and duty to make the daily calculations
may be designated by the Trustees to any Investment Adviser, the Custodian,
the Transfer Agent or such other person as the Trustees by resolution may
determine. The Trustees may suspend the daily determination of net asset
value to the extent permitted by the 1940 Act.
Section 8.2. Distributions to Shareholders. The Trustees shall from time
to time distribute ratably among the Shareholders of the Trust or of any
Series such proportion of the net income, earnings, profits, gains, surplus
(including paid-in surplus), capital, or assets of the Trust or of such
Series held by the Trustees as they may deem proper. Such distribution may be
made in cash or property (including without limitation any type of
obligations of the Trust or of such Series or any assets thereof), and the
Trustees may distribute ratably among the Shareholders of the Trust or of
that Series additional Shares issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem proper. Such distributions
may be among the Shareholders of record (determined in accordance with the
Prospectus) of the Trust or of such Series at the time of declaring a
distribution or among the Shareholders of record of the Trust or of such
Series at such later date as the Trustees shall determine. The Trustees may
always retain from the net income, earnings, profits or gains of the Trust or
of such Series such amount as they may deem necessary to pay the debts or
expenses of the Trust or of such Series or to meet obligations of the Trust
or of such Series, or as they may deem desirable to use in the conduct of its
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affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders of the Trust or of any
Series such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
Section 8.3. Determination of Net Income. The Trustees shall have the
power to determine the net income of any Series of the Trust and from time to
time to distribute such net income ratably among the Shareholders as
dividends in cash or additional Shares of such Series issuable hereunder. The
determination of net income and the resultant declaration of dividends shall
be as set forth in the Prospectus. The Trustees shall have full discretion to
determine whether any cash or property received by any Series of the Trust
shall be treated as income or as principal and whether any item of expense
shall be charged to the income or the principal account, and their
determination made in good faith shall be conclusive upon the Shareholders.
In the case of stock dividends received, the Trustees shall have full
discretion to determine, in the light of the particular circumstances, how
much, if any, of the value thereof shall be treated as income, the balance,
if any, to be treated as principal.
Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or
desirable to enable the Trust to comply with any provision of the 1940 Act,
or any rule or regulation thereunder, including any rule or regulation
adopted pursuant to Section 22 of the 1940 Act by the Commission or any
securities association registered under the Securities Exchange Act of 1934,
or any order of exemption issued by said Commission, all as in effect now or
hereafter amended or modified. Without limiting the generality of the
foregoing, the Trustees may establish classes or additional Series of Shares
in accordance with Section 6.9.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.
Section 9.2. Termination of Trust. (a) the Trust or any Series may be
terminated (i) by a Majority Shareholder Vote at any meeting of Shareholders
of the Trust or the appropriate Series thereof, (ii) by an instrument in
writing, without a meeting, signed by a majority of the Trustees, or by such
other vote as may be established by the Trustees with respect to any class or
Series of Shares, or (iii) with respect to a Series as provided in Section
6.9(h). Upon the termination of the Trust or the Series:
(i) The Trust or the Series shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustee shall proceed to wind up the affairs of the Trust or the
Series and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including
the power to fulfill or discharge the contracts of the Trust or the Series,
collect its assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property or Trust Property
allocated or belonging to such Series to one or more persons at public or
private sale for consideration which may consist in whole or in part of
cash, securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property or Trust Property
allocated or belonging to such Series shall require Shareholder approval in
accordance with Section 9.4 hereof.
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(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property allocated or
belonging to such Series, in cash or in kind or partly each, among the
Shareholders of the Trust according to their respective rights.
Section 9.3. Amendment Procedure. (a) This Declaration may be amended by a
Majority Shareholder Vote, at a meeting of Shareholders, or by written
consent without a meeting. The Trustees may also amend this Declaration
without the vote or consent of Shareholders (i) to change the name of the
Trust or any Series or classes of Shares, (ii) to supply any omission, or
cure, correct or supplement any ambiguous, defective or inconsistent
provision hereof, (iii) if they deem it necessary to conform this Declaration
to the requirements of applicable federal or state laws or regulations or the
requirements of the Internal Revenue Code, or to eliminate or reduce any
federal, state or local taxes which are or may be payable by the Trust or the
Shareholders, but the Trustees shall not be liable for failing to do so, or
(iv) for any other purpose which does not adversely affect the rights of any
Shareholder with respect to which the amendment is or purports to be
applicable.
(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust or of any Series of the Trust
by reducing the amount payable thereon upon liquidation of the Trust or of
such Series of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders of
two-thirds of the Shares of the Trust or of such Series outstanding and
entitled to vote, or by such other vote as may be established by the
Trustees with respect to any Series or class of Shares. Nothing contained in
this Declaration shall permit the amendment of this Declaration to impair
the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment and
reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a
majority of the Trustees or certified by the Secretary or any Assistant
Secretary of the Trust, shall be conclusive evidence of such amendment when
lodged among the records of the Trust. Unless such amendment or such
certificate sets forth some later time for the effectiveness of such
amendment, such amendment shall be effective when lodged among the records
of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by
the affirmative vote of a majority of the Trustees or by an instrument signed
by a majority of the Trustees.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or Trust Property allocated or
belonging to such Series, including its good will, upon such terms and
conditions and for such consideration when and as authorized, at any meeting
of Shareholders called for the purpose, by the affirmative vote of the
holders of not less than two-thirds of the Shares of the Trust or such Series
outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of not less than
two-thirds of such Shares, or by such other vote as may be established by the
Trustees with respect to any series or class of Shares; provided, however,
that, if such merger, consolidation, sale, lease or exchange is recommended
by the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange
shall be deemed for all purposes to have been accomplished under and pursuant
to the laws of the Commonwealth of Massachusetts.
Section 9.5. Incorporation. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to
any Series or class of Shares, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
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jurisdiction or any other trust, partnership, association or other
organization to take over all of the Trust Property or the Trust Property
allocated or belonging to such Series or to carry on any business in which
the Trust shall directly or indirectly have any interest, and to sell, convey
and transfer the Trust Property or the Trust Property allocated or belonging
to such Series to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise,
and to lend money to, subscribe for the shares or securities of, and enter
into any contracts with any such corporation, trust, partnership, association
or organization in which the Trust or such Series holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to
the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organization or entities.
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the officers of
the Trust to submit to the Shareholders a written financial report of each
Series of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of Massachusetts and
may also be filed or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee or by the Secretary or any Assistant
Secretary of the Trust stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees
and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
Section 11.2. Resident Agent. Corporation Service Company, 84 State
Street, Boston, Massachusetts 02109 is the resident agent of the Trust in the
Commonwealth of Massachusetts.
Section 11.3. Governing Law. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof and the rights of all parties and the validity and construction
of every provision hereof shall be subject to and construed according to the
laws of said State.
Section 11.4. Counterparts. The Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument,
which shall be sufficiently evidenced by any such original counterpart.
Section 11.5. Reliance By Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a
Trustee hereunder, or Secretary or Assistant Secretary of the Trust,
certifying to: (a) the number or identity of Trustees or Shareholders, (b)
the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the
fact that the number of Trustees or Shareholders present at any meeting or
executing any written instrument satisfies the requirements of this
Declaration, (e) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with
the Trustees and their successors.
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Section 11.6. Provisions In Conflict with Law Or Regulations. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of
the Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation
to the extent necessary to eliminate such conflict; provided, however, that
such determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any
manner affect such provision in any other jurisdiction or any other provision
of the Declaration in any jurisdiction.
Section 11.7. Use of the name "Discover Brokerage." Discover Brokerage
Direct, Inc. ("Discover Brokerage") has consented to the use by the Trust of
the identifying name "Discover Brokerage," which is a property right of
Discover Brokerage. The Trust will only use the name "Discover Brokerage" as
a component of its name and for no other purpose, and will not purport to
grant to any third party the right to use the name "Discover Brokerage" for
any purpose. Discover Brokerage, or any corporate affiliate of the parent of
Discover Brokerage, may use or grant to others the right to use the name
"Discover Brokerage", or any combination or abbreviation thereof, as all or a
portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company. At the
request of Discover Brokerage or its parent, the Trust will take such action
as may be required to provide its consent to the use by Discover Brokerage or
its parent, or any corporate affiliate of Discover Brokerage's parent, or by
any person to whom Discover Brokerage or its parent or an affiliate of
Discover Brokerage's parent shall have granted the right to the use, of the
name "Discover Brokerage," or any combination or abbreviation thereof. Upon
the termination of any investment advisory or investment management agreement
into which Discover Brokerage and the Trust may enter, the Trust shall, upon
request by Discover Brokerage or its parent, cease to use the name "Discover
Brokerage" as a component of its name, and shall not use the name, or any
combination or abbreviation thereof or for any other commercial purpose, and
shall cause its officers, trustees and shareholders to take any and all
actions which Discover Brokerage or its parent may request to effect the
foregoing and to reconvey to DWR or its parent any and all rights to such
name.
Section 11.8. Principal Place of Business. The principal place of business
of the Trust shall be Two World Trade Center, New York, New York 10048, or
such other location as the Trustees may designate from time to time.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Declaration of
Trust this 13th day of October, 1998.
/s/ Charles A. Fiumefreddo /s/ Robert S. Giambrone
- --------------------------------- ---------------------------------
Charles A. Fiumefreddo, as Robert S. Giambrone, as
Trustee and not individually Trustee and not individually
Two World Trade Center Two World Trade Center
New York, New York 10048 New York, New York 10048
/s/ Barry Fink
- ---------------------------------
Barry Fink, as Trustee
and not individually
Two World Trade Center
New York, New York 10048
STATE OF NEW YORK |
| ss.:
COUNTY OF NEW YORK |
On this 13th day of October, 1998, CHARLES A. FIUMEFREDDO, BARRY FINK and
ROBERT S. GIAMBRONE, known to me and known to be the individuals described in
and who executed the foregoing instrument, personally appeared before me and
they severally acknowledged the foregoing instrument to be their free act and
deed.
/s/ Todd Lebo
-------------------------------------
Notary Public
My commission expires:
19
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument this 13th
day of October, 1998.
/s/ Joseph Mazzella
-----------------------------------
Joseph Mazzella
, as Trustee
and not individually
101 Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
Then personally appeared before me the above-named Joseph Mazzella
who acknowledged the foregoing instrument to be his free act and deed.
/s/ Katherine Kozub
-----------------------------------
Notary Public
My commission expires:
M6167
20
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BY-LAWS
OF
DISCOVER BROKERAGE
INDEX SERIES
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 Discover
Brokerage Index Series dated October 13, 1998.
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
<PAGE>
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, executed in writing by the Shareholder or his
duly authorized attorney-in-fact or other agent, for each Share of beneficial
interest of the Trust and for the fractional portion of one vote for each
fractional Share entitled to vote so registered in his name on the records of
the Trust on the date fixed as the record date for the determination of
Shareholders entitled to vote at such meeting. Fax or telecopy signatures
shall be deemed valid and binding to the same extent as the original. No
written evidence of authority of a Shareholder attorney in-fact or agent
shall be required. No proxy shall be valid after eleven months from its date,
unless otherwise provided in the proxy. At all meetings of Shareholders,
unless the voting is conducted by inspectors, all questions relating to the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the meeting. Pursuant
to a resolution of a majority of the Trustees, proxies may be solicited in
the name of one or more Trustees or Officers of the Trust. Proxy
solicitations may be made in writing or by using telephonic or other
electronic solicitation procedures which include appropriate methods of
verifying the identity of the Shareholder and confirming any instructions
given hereby.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Corporations Law of the
State of Massachusetts.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
2
<PAGE>
SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
3
<PAGE>
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940
("disabling conduct"). A person shall be deemed not liable by reason of
disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
4
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(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present
5
<PAGE>
at any meeting, whether or not they constitute a quorum, may appoint a
Trustee to act in place of such absent member. Each such committee shall keep
a record of its proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
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SECTION 6.6. The Chairman. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7. The President. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
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ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of the
Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
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(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii)
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. The
record date, in any case, shall not be more than one hundred eighty (180)
days, and in the case of a meeting of Shareholders not less than ten (10)
days, prior to the date on which such meeting is to be held or the date on
which such other particular action requiring determination of Shareholders is
to be taken, as the case may be. In the case of a meeting of Shareholders,
the meeting date set forth in the notice to Shareholders accompanying the
proxy statement shall be the date used for purposes of calculating the 180
day or 10 day period, and any adjourned meeting may be reconvened without a
change in record date. In lieu of fixing a record date, the Trustees may
provide that the transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the transfer books are closed
for the purpose of determining Shareholders entitled to notice of a vote at a
meeting of Shareholders, such books shall be closed for at least ten (10)
days immediately preceding the meeting.
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SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Discover Brokerage Index Series,
dated October 13, 1998, a copy of which is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name
Discover Brokerage Index Series 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 Discover Brokerage Index
Series 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 Discover Brokerage Index
Series, but the Trust Estate only shall be liable.
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